AGREEMENT AND PLAN OF MERGER
AMONG
ANALYTICAL SURVEYS, INC.,
SURVEYS HOLDINGS, INC.
AND THE
SHAREHOLDERS
OF
CARTOTECH, INC.
AS OF JUNE 11, 1998
AGREEMENT AND PLAN OF MERGER
This Merger Agreement (this "Agreement") is entered into as of June
11, 1998, by and among (a) Analytical Surveys, Inc., a Colorado corporation
("ASI"); (b) Surveys Holdings, Inc., a Texas corporation ("Holdings") and a
wholly-owned subsidiary of ASI; and (c) the Cartotech, Inc. Employee Stock
Ownership & 401(k) Trust (the "ESOP") established by Cartotech, Inc. (the
"Company"), the Xxxxx Family Limited Partnership (the "Xxxxx Partnership"),
the Xxxxxxxxx Family Limited Partnership (the "Xxxxxxxxx Partnership") and
Xxxxxx Xxxxxxx III ("Xxxxxxx"). The ESOP, the Xxxxx Partnership, the
Xxxxxxxxx Partnership and Xxxxxxx are each referred to as a "Shareholder" and
collectively as the "Shareholders."
RECITALS
The Company and the Shareholders desire that the Company merge with
and into Holdings (the "Merger"), and ASI and Holdings also desire that the
Company merge with and into Holdings, upon the terms and conditions set forth
in this Agreement and in accordance with the Texas Business Corporation Act
and that all of the issued and outstanding capital stock of the Company (the
"Shares") be converted upon such Merger into the right to receive such number
of shares of common stock, no par value of ASI ("Common Stock") and cash as
is provided in this Agreement.
AGREEMENT
The parties agree as follows:
ARTICLE I.
DEFINITIONS
1.1 For purposes of this Agreement:
ADJUSTED NET WORTH means the assets minus the liabilities as
shown on the Latest Balance Sheet and the Closing Date Balance Sheet, as
applicable.
ADJUSTMENT DATE means the date that is agreed to by the Company
and the Shareholders' Agent, but if no agreement is reached then such date is
the first business day that falls 75 days after the Closing.
ADVERSE CONSEQUENCES means all actions, suits, proceedings,
investigations, complaints, claims, demands, Orders, liabilities, liens,
losses, damages, penalties, fines, settlements, costs (including removal and
remediation costs), expenses and fees (including court costs and reasonable
fees and expenses of counsel and other
experts).
AFFILIATE means any Person controlled by, controlling, or under
common control with another Person.
AFFILIATED GROUP means any affiliated group within the meaning
of Code Section 1504 or any similar group defined under a similar provision
of state, local or foreign law.
ALLOCATED SHARES means the Shares held by the ESOP that are not
Unallocated Shares.
ASI DISCLOSURE DOCUMENTS means the disclosure documents
prepared by ASI and approved by the Company, relating to ASI, the Common
Stock, and the Merger.
ASI INDEMNITEE has the meaning given to such term in Section
9.2.
ASI SHARE VALUE means the average of the closing price of the
Common Stock on Nasdaq on each of the first twenty days on which trading in
the Common Stock occurs on Nasdaq, beginning on May 29, 1998 [ASSUMES A JUNE
12 PUBLIC ANNOUNCEMENT DATE AND JUNE 26 CLOSING, BUT THE SAME DATES WILL
APPLY REGARDLESS OF WHEN THE CLOSING OCCURS; THE CLOSING MUST OCCUR BY JULY
10].
BENEFIT ARRANGEMENT has the meaning given to such term in
Section 4.1(n)(iii).
BUSINESS DAYS means any weekday that is not a national holiday.
CLOSING AND CLOSING DATE have the meanings given to such terms
in Section 7.1.
CLOSING DATE BALANCE SHEET has the meaning given to such term
in Section 2.8.
CODE means the Internal Revenue Code of 1986, as amended.
COMMON STOCK has the meaning given to such term in the Recitals.
COMPANY ESOP DEBT means the Company-to-Bank ESOP Debt and the
Company-to Partnership ESOP Debt.
COMPANY EMPLOYEE BENEFIT PLANS have the meaning given in
Section 4.1(n)(i).
COMPANY-TO-BANK ESOP DEBT means the (i) indebtedness of the
Company under the term note #5101720, payable to NationsBank of Texas, N.A.
("NationsBank") in the outstanding amount of $345,833.21 as of May 31, 1998,
(ii) indebtedness of the Company under the term note #5339221, payable to
NationsBank in the outstanding amount of $86,072.73 as of May 31, 1998, and
(iii) indebtedness of the Company under the term note #5450036, payable to
NationsBank in the outstanding amount of $248,008.20 as of May 31, 1998, all
of which were incurred by the Company in connection with the ESOP's purchase
of Shares.
COMPANY-TO-PARTNERSHIP ESOP DEBT means the indebtedness of the
Company under the two promissory notes with (i) one such note payable to
Xxxxxxxxx Partnership in the outstanding amount of $256,057.76 as of May 31,
1998, and (ii) the other such note payable to the Xxxxx Partnership in the
outstanding amount of $256,057.76 as of May 31, 1998, both of which were
incurred by the Company in connection with the ESOP's purchase of Shares.
COMPANY DISCLOSURE DOCUMENTS means the disclosure documents
prepared by the Company and approved by ASI relating to the Company, the
Shares and the Merger.
CONIC TRANSACTION means the transaction described in Section
2.10.
CONTRACT VALUE means the sum of revenues paid to the Company,
amounts owed to the Company, and amounts to become payable to the Company
upon performance of the services required under a contract, in progress as of
the Closing Date, signed by the Company and the customer but not yet
commenced, or awarded to the Company but not yet signed by both the Company
and the customer.
CREDITED VALUE of the Common Stock on any date will be the average
of the closing price of the Common Stock on each of the 10 trading days ending
one trading day prior to that date as reported by the principal exchange on
which the Common Stock is traded on each such day or, if the Common Stock is not
traded on an exchange on any of such 10 trading days, as reported by Nasdaq. If
the closing price of the Common Stock is not reported for any such day, the
Credited Value of the Common Stock will be the average of the bid and asked
prices for that day as reported by Nasdaq, or, if bid and asked prices are not
reported by Nasdaq on any such day, as reported by the National Quotation
Bureau, Inc. If the Credited Value cannot be determined in any of the ways
described above, the Credited Value will mean the value of the Common Stock as
determined by the Shareholders' Agent and by ASI in any reasonable manner, or,
if they cannot agree, then by arbitration in accordance with
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Section 10.2.
EFFECTIVE DATE has the meaning given in Section 2.3.
EMPLOYEE BENEFIT PLAN means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) qualified defined
benefit retirement plan or arrangement which is an Employee Pension Benefit
Plan (including any Multiemployer Plan) or (d) Employee Welfare Benefit Plan.
EMPLOYEE PENSION BENEFIT PLAN has the meaning given to such
term in ERISA Section 3(2).
EMPLOYEE WELFARE BENEFIT PLAN has the meaning given to such
term in ERISA Section 3(1).
ENCUMBRANCE means any mortgage, pledge, conditional sale
agreement, charge, claim, interest of another Person, lien, security
interest, title defect or other encumbrance.
ENVIRONMENTAL OBLIGATIONS means all present Legal Requirements
and Permits concerning land use, public health, safety, welfare or the
environment, including, without limitation, the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.), as amended, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. Section
9601 et seq.), as amended, and the Occupational Safety and Health Act, as
amended, and any civil liability (under any Legal Requirement or under common
law) to any Person.
ERISA means the Employee Retirement Income Security Act of
1974, as amended, and any regulations, rules or orders promulgated under the
Employee Retirement Income Security Act of 1974, as amended.
ESCROW AGENT will be BankOne Colorado.
ESCROW AGREEMENT means the Escrow Agreement among ASI, the
Shareholders, and the Escrow Agent in the form of EXHIBIT A.
ESOP-TO-COMPANY ESOP DEBT means the indebtedness of the ESOP to
the Company in the outstanding amount of $1,192,029.66 as of May 31, 1998.
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ESOP TRUSTEE means Xxxx Xxxxxx.
GAAP means generally accepted accounting principles as in
effect from time to time in the United States, as consistently applied, and
in accordance with all pronouncements of the Financial Accounting Standards
Board.
GOVERNMENTAL AUTHORITY means the United States of America, any
state, commonwealth, territory or possession of the United States of America,
any political subdivision of any of them (including counties, municipalities,
home-rule cities and the like), and any agency, authority or instrumentality
of any of the foregoing, including, without limitation, any court, tribunal,
department, bureau, commission or board.
INCOME TAX means any federal, state or local Tax based on
income, gross receipts, or profits, including any interest, penalty, or
similar payment obligation arising in connection with such Tax, including the
Texas corporate franchise tax.
INDEPENDENT FIDUCIARY means Consulting Fiduciaries, Inc.
INTELLECTUAL PROPERTY means all trade, corporate, business and
product names, trademarks, trademark rights, service marks, copyrights,
patents, patent rights, trade secrets, and computer software (other than
software not used or useful in the business of the Company and other than
readily available software purchased at a cost of less than $5,000 in the
aggregate for all sites and seats using such software), and all
registrations, licenses and applications pertaining to any of them.
INCENTIVE STOCK OPTION means those incentive stock options
issue by the Company to certain employees of the Company giving the holder of
each such option the right to purchase Shares in accordance with the terms of
the incentive stock option plan and the grant issuing the option to such
employee.
LATEST BALANCE SHEET has the meaning given to such term in
Section 4.1(e).
LEGAL REQUIREMENT means any constitution, statute, ordinance,
code, or other law (including common law), rule, regulation, Order, notice,
standard, procedure or other requirement enacted, adopted, applied or issued
by any Governmental Authority.
LINE OF CREDIT NOTES means the (i) indebtedness of the Company
under the accounts receivable line of credit note #5445044, payable to
NationsBank in the
5
outstanding amount of $300,000.00 as of May 31, 1998, (ii) indebtedness of
the Company under the equipment line of credit note #5194238, payable to
NationsBank in the outstanding amount of $10,490.34 as of May 31, 1998, (iii)
indebtedness of the Company under the equipment line of credit note #5209796,
payable to NationsBank in the outstanding amount of $20,784.98 as of May 31,
1998, (iv) indebtedness of the Company under the equipment line of credit
note #5241195, payable to NationsBank in the outstanding amount of $9,171.24
as of May 31, 1998, and (v) indebtedness of the Company under the equipment
line of credit note #5259825, payable to NationsBank in the outstanding
amount of $10,846.00 as of May 31, 1998.
LIQUIDATION DATE means the later of (i) the date that any
Adverse Consequence becomes a liability of the party suffering the Adverse
Consequence as determined in accordance with GAAP, and (ii) the date that the
party suffering the Adverse Consequence gives the other party notice under
Section 9.4(a).
LOCK-UP AGREEMENT means the Lock-Up Agreement between ASI and
the Shareholders in the form of EXHIBIT B.
MERGER has the meaning given it in the Recitals.
MULTIEMPLOYER PLAN has the meaning given to such term in ERISA
Section 3(37). OPTIONS means the stock options described in Section 4.1(c)
and SCHEDULE 4.1(C).
NON-ESOP SHAREHOLDERS means the Xxxxx Partnership, the
Xxxxxxxxx Partnership and Xxxxxxx.
OPTION BUY OUT AGREEMENT means the agreement entered into
between the Company and each of the Option Holders providing for the
Company's purchase of the Incentive Stock Options, which agreement is in the
form of EXHIBIT C.
OPTION HOLDERS means those employees of the Company identified
in part (iii) of SCHEDULE 4.1(c) holding the right to purchase Shares from
the Company pursuant to the terms of the grant under the Incentive Stock
Option, and identifying which of such Option Holders have options to purchase
Shares (and for how many Shares) at a purchase price of $60.36 per Share and
which (and for how many Shares) at a purchase price of $85.08 per Share.
ORDERS means all judgments, injunctions, orders, rulings,
decrees, directives, notices of violation or other requirements of any
Governmental Authority or
6
arbitrator having jurisdiction in the matter, including a bankruptcy court or
trustee.
OTHER ASI AGREEMENTS means any documents and instruments
executed and delivered by ASI or Holdings at Closing, excluding this
Agreement.
OTHER SHAREHOLDER AGREEMENTS means any documents and
instruments executed and delivered by any of the Shareholders upon the
signing of this Agreement, or at Closing, excluding this Agreement.
PERMITS means all permits, licenses, consents, franchises,
authorizations, approvals, privileges, waivers, exemptions, variances,
exclusionary or inclusionary Orders and other concessions, whether
governmental or private, including, without limitation, those relating to
environmental, public health, welfare or safety matters.
PERMITTED ENCUMBRANCES means: (i) liens for Taxes and other
governmental charges not yet due or delinquent; (ii) mechanics', carriers',
workmen's, repairmen's or other like Encumbrances arising or incurred in the
ordinary course of business with respect to liabilities that are not yet due
or delinquent; (iii) those Encumbrances listed on SCHEDULE 1.1; and (iv)
other Encumbrances, if any, which, individually or in the aggregate, would
not materially detract from the value of the asset to which it relates or
materially impair the ability of the Company to use the asset to which it
relates in substantially the same manner as it was used prior to the Closing;
provided, in the case of each Encumbrance described in (i), (ii) and (iv),
that the liability secured by such Encumbrance is fully reflected on the face
of the Closing Date Balance Sheet and that such liability does not otherwise
constitute a breach of any representation, warranty or covenant of any of the
Shareholders in this Agreement.
PERSON means an individual, partnership, corporation,
association, joint stock company, trust, joint venture, limited liability
company, unincorporated organization or Governmental Authority.
PREMISES means the real property, buildings and improvements on
such real property constituting the business premises of the Company located
at (i) 00000 Xxxxxxxxxx Xxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxx, (ii) 00000
Xxxxxxxxxx Xxxxx, xxxxx 000, Xxx Xxxxxxx, Xxxxx, (iii) 00000 Xxxxxxxxxx
Xxxxx, suites 000, 000 xxx 000, Xxx Xxxxxxx, Xxxxx, (xx) 0000 Xxxxx Xxxxx
Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxx and (v) 0000 X. Xxxxxxx, Xxxxx 000, Xxxxxx
Xxxxx.
PRIME RATE is the prime rate as published, from time to time,
in THE WALL STREET JOURNAL.
PRINCIPAL CUSTOMER has the meaning given to such term in
Section 4.1(p).
7
PRO RATA SHARE means (a) with respect to a Shareholder, an
amount determined by multiplying the number of Shares held by such
Shareholder as of the Effective Date by $112.60, and dividing such product by
the $18,325,000, and (b) with respect to the Option Holders, an amount
determined by dividing the payment to the Option Holder under Section 2.6(b)
by $18,325,000.
QUALIFIED has the meaning given to such term in Section
4.1(n)(vii).
REGISTRATION RIGHTS AGREEMENT #1 means the Registration Rights
Agreement between ASI and the ESOP in the form of EXHIBIT D.
REGISTRATION RIGHTS AGREEMENT #2 means the Registration Rights
Agreement between ASI, the Xxxxx Partnership, the Xxxxxxxxx Partnership and
Xxxxxxx in the form of EXHIBIT E.
RIGHT means any right, property interest, concession, patent,
trademark, trade name, copyright, know-how or other proprietary right of
another Person.
SHAREHOLDER INDEMNITEE has the meaning given to such term in
Section 9.1.
SHAREHOLDERS has the meaning given to such term in the preamble
to this Agreement.
SHAREHOLDERS' AGENT has the meaning given to such term in
Section 3.1.
SHARES has the meaning given to such term in the Recitals.
SERP means the supplemental executive retirement plan adopted
on December 15, 1997, for the benefit of Xxxxxx Xxxxx, a copy of which is
attached as SCHEDULE 4.1(n).
SURVIVAL PERIOD means, with respect to a representation or
warranty, the applicable period after the Closing Date during which such
representation or warranty survives pursuant to Section 11.13.
SURVIVING CORPORATION will be Holdings.
TAX means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties,
8
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, documentary, personal property,
sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, including any
interest, penalty or addition.
TAX RETURN means any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment to any of them, and including any amendment of any of
them.
UNALLOCATED SHARES means the Shares held by the ESOP which have
not been allocated to the accounts of the ESOP participants as of the Closing.
ARTICLE II.
THE MERGER
2.1 THE MERGER. At the Effective Date, the Company will be merged
with and into Holdings on the terms and conditions set forth below as
permitted by and in accordance with the Texas Business Corporation Act. Upon
the Effective Date, the separate existence of the Company will cease;
Holdings, as the Surviving Corporation, will continue to exist under and be
governed by the Texas Business Corporation Act; and the articles of
incorporation and bylaws in the form attached to this Agreement as EXHIBIT
2.1 will become the articles of incorporation and bylaws of Holdings until
further amended in accordance with the provisions of such articles and bylaws
and applicable law.
2.2 ARTICLES OF MERGER. On the Closing Date, the Company and
Holdings will cause the Articles of Merger in the form of EXHIBIT 2.2
attached to this Agreement (the "Articles of Merger") to be executed and
filed with the Secretary of State of the State of Texas as provided in the
Texas Business Corporation Act. The purpose of the Surviving Corporation
will be to engage in any and all business activities in which a corporation
is permitted to engage in accordance with the Texas Business Corporation Act.
2.3 EFFECTIVE DATE OF THE MERGER. The Merger will become effective
immediately upon the filing of the Articles of Merger with the Secretary of
State of the State of Texas or on such other date thereafter as the parties
may agree. The date and time of such effectiveness is sometimes referred to
as the "Effective Date" in this Agreement.
2.4 CERTAIN INTENDED EFFECTS OF THE MERGER. The parties intend that
the Merger be treated as a tax-free "reorganization" under Section
368(a)(1)(A) and (a)(2)(D) of the Internal Revenue Code of 1986, as amended
(the "Code"). The parties agree to report
9
the transaction in such manner.
2.5 DIRECTORS AND OFFICERS.
(a) From and after the Effective Date, the members of the
Board of Directors of the Surviving Corporation will consist of the members
of the Board of Directors of Holdings (as constituted immediately prior to
the Effective Date) until changed in accordance with the articles of
incorporation and bylaws of the Surviving Corporation and applicable law.
(b) From and after the Effective Date, the officers of the
Surviving Corporation will consist of the officers of Holdings (as
constituted immediately prior to the Effective Date) until changed in
accordance with the articles of incorporation and bylaws of the Surviving
Corporation and applicable law.
2.6 CONVERSION.
(a) At Closing, each Share will, without any further action on
the part of ASI or Holdings, on the one hand, or the Company or any of the
Shareholders, on the other hand, be converted into the right to receive
directly from ASI the following:
(i) $51.33 in cash, plus based on $7,700,000, plus the
cash paid for the Conic Transaction under Section
2.10, less the cash needed to fund the payments to
the Option Holders under (b), which sum is to be
divided by 157,096, which is to be the number of
outstanding Shares as of the Effective Date, plus
(ii) shares of Common Stock based on the following
formula:
R = $10,625,000 DIVIDED BY N
-----------
A
Where
A = the ASI Share Value, except that, "A" will be $20 if
the ASI Share Value is less than $20,
and "A" will be $30 if the ASI Share Value is greater than
$30.
N = the number of outstanding shares, and
R = the number of shares of Common Stock to be issued per
10
Share,
such that no more than an aggregate of 531,250 shares of Common
Stock will be issued and no fewer than an aggregate of 354,167
shares of Common Stock will be issued.
[ASI may pay $1,000,000 of the cash consideration one Business Day after the
Closing Date.]
(b) At Closing, each Option Holder will be entitled to
receive in cash from ASI an amount equal to $46.43 per Share covered by an
option, except for the options held by Xxxx Xxxxxxxxxx, for which the payment
will be $21.71 per Share, for a total payment of $636,155, except that ASI
will deposit 7.4% of such cash as Escrowed Property under the Escrow
Agreement.
(c) The Common Stock and cash comprising the Escrowed
Property (as defined in the Escrow Agreement) will be subtracted from the
Common Stock issued and the cash paid to the Shareholders at Closing and will
be deposited into the Escrow Account (as defined in the Escrow Agreement).
Out of the cash consideration paid to the ESOP pursuant to this Agreement
with respect to the Unallocated Shares in the ESOP (after reduction by reason
of the foregoing transfer to the Escrow Account), an amount will be paid in
cash to the Surviving Corporation sufficient to fully retire the
ESOP-to-Company Debt.
(d) All cash payments at Closing that are payable directly
to Shareholders or Option Holders will be made by wire transfer of
immediately available funds to the accounts designated by the Shareholders'
Agent.
(e) The parties desire that the value of the Common Stock be
at least 45% of the total consideration being paid to the Shareholders under
the Merger, based on the closing price of the Common Stock on Nasdaq as of
the Business Day prior to the Closing Date, discounted by 30%. Accordingly,
if the 45% level would not be satisfied, the parties agree that the amount of
cash payable to the Shareholders under Section 2.6(a)(i) will be decreased,
and the number of shares of Common Stock issuable to the Shareholders under
Section 2.6(a)(ii) will be increased until the 45% level is satisfied. The
parties agree that the total consideration for the Shareholders, calculated
as the sum of (i) cash plus (ii) the product of shares of Common Stock
multiplied by the closing price of the Common Stock on Nasdaq as of the
Business Day prior to the Closing Date, discounted by 30%, will not change as
the result of any adjustments made in accordance with this Section 2.6(e).
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2.7 NO FRACTIONAL SHARES. No certificate or scrip representing
fractional shares of Common Stock will be issued to the Shareholders upon
conversion of the Shares pursuant to the Merger, and no dividend, stock split
or interest will relate to any such fractional shares. In lieu of any
fractional share of Common Stock being issued, cash will be paid to or the
Shareholders in respect of such fractional share based on the ASI Share Value.
2.8 CLOSING DATE BALANCE SHEET. Within 30 days after the end of the
month during which the Effective Date occurs, the Shareholders will deliver
to ASI at the Shareholders' expense an internally prepared, unaudited
consolidated balance sheet for the Company as of the end of the month during
which the Effective Date occurs. The Shareholders will also deliver a
schedule reconciling the shareholders' equity accounts ("Reconciliation
Schedule") by determining the pre-tax earnings (or loss) of the Company
during the month in which the Effective Date occurs, pro rating such pre-tax
earnings (or loss) over the Business Days during such month through the
Effective Date, and using on such Reconciliation Schedule such pro rated
pre-tax earnings (or loss) instead of the actual pre-tax earnings (or loss)
for the partial month ended on the Effective Date, and then giving effect to
the estimated income taxes on any such earnings. (Such balance sheet,
together with the Reconciliation Schedule, are referred to as the "Closing
Date Balance Sheet"). Except as provided in the immediately preceding
sentence, the Closing Date Balance Sheet will be prepared in accordance with
GAAP on a basis consistent with the accounting policies applied by the
Company for the December 31, 1997 audited Financial Statements of the
Company. The Closing Date Balance Sheet will reflect the estimated amount of
any excise tax that may become payable by the Company or Surviving
Corporation which is attributable to the disposition of Shares or Common
Stock in connection with the Merger or the subsequent disposition of Common
Stock by the ESOP, as set forth in Section 4.1(g)(vi), the amount of any
unpaid fees and expenses by the Company or the ESOP to their respective
counsel or accountants (but only $7,500, which is one-half of the fee of
Xxxxxxx & Xxxxxx L.L.C. for the rendering of its tax opinion concerning the
Merger), the amount of any unpaid fees and expenses payable to the Seller's
Broker, unpaid appraisal fees for the Conic stock, $23,365.35 (which is the
amount agreed to be borne by the Shareholders to compensate ASI with respect
to certain obligations under the employment agreement for Xxx XxXxxxxx), the
amount payable to Xxxxxx Xxxxx under the SERP, and any other expenses of the
Company incurred in connection with the Merger (other than the buyout of the
options under the Option Buy Out Agreements).
2.9 ADJUSTMENTS; PROCEDURE. Following delivery of the Closing Date
Balance Sheet in accordance with Section 2.8, certain procedures will apply
and adjustments to the amounts payable under Section 2.6 will be made in
accordance with the Pro Rata Shares of the Shareholders and the Option
Holders, as follows:
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(a) ASI will examine the Closing Date Balance Sheet to
determine whether it believes the Closing Date Balance Sheet was prepared in
accordance with the provisions of this Agreement. In connection with that
examination, the Shareholders will provide, and will cause the Company's
accountants to provide, ASI and ASI's accountants with access to such
information as ASI may reasonably request to make that determination,
including access to all work papers and calculations of the Company related
to the preparation of the Closing Date Balance Sheet.
(b) Within 10 days after receipt of the Closing Date Balance
Sheet, ASI will, in a written notice to the Shareholders' Agent, either
accept the Closing Date Balance Sheet or object to it by describing in
reasonable detail any proposed adjustments to the Closing Date Balance Sheet
and the reasons for such proposals. If the Shareholders' Agent has not
received such notice of proposed adjustments within such 10-day period, ASI
will be deemed to have accepted the Closing Date Balance Sheet, but if ASI's
failure to give such notice results from the Shareholders' failure to timely
provide information requested by ASI under Section 2.9(a) and if ASI has so
informed the Shareholders' Agent of such failure during such 10-day period,
the time within which ASI must give such notice will be extended until a
reasonable time after the Shareholders provide the information requested by
ASI.
(c) If any adjustments to the Closing Date Balance Sheet are
proposed, ASI and the Shareholders' Agent will negotiate in good faith to
resolve any dispute, but if the dispute is not resolved within 10 days
following the Shareholders' Agent's receipt of the proposed adjustments, ASI
and the Shareholders' Agent will retain a mutually acceptable nationally
recognized independent public accounting firm to resolve such dispute, which
resolution will be final and binding. The fees and expenses of any such
accounting firm will be shared equally by ASI and the Shareholders and such
accounting firm will be retained by a retention letter executed by the
parties that specifies that the determination by said firm of any such
disputes concerning the Closing Date Balance Sheet will be resolved in
accordance with GAAP on a basis consistent with the accounting policies
applied by the Company in its December 31, 1997 audited Financial Statements.
If ASI and the Shareholders' Agent are unable to agree on a mutually
acceptable independent public accounting firm to resolve such dispute, the
dispute will be resolved by arbitration in accordance with Section 10.2.
(d) On the Adjustment Date (if no dispute occurs), or within
10 business days after the resolution of a dispute (if a dispute occurs and
is to be resolved in accordance with Section 2.9(c)), as the case may be,
then to the extent that the Adjusted Net Worth of the Company as set forth on
the Closing Date Balance Sheet is less than $2,550,000 (before giving effect
to the Conic Transaction, but after giving
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effect to all of the other adjustments described in the last sentence of
Section 2.8, including the tax payable in connection with the Conic
Transaction), the Shareholders and the Option Holders will pay to ASI the
difference between such two amounts (the "Closing Date Deficit"), except that
an amount equal the lesser of the Closing Date Deficit and the estimated
excise tax described in Section 4.1(g)(vi) (the "Xxxxx Surcharge") will be
payable solely by the Xxxxx Partnership out of its share of the Escrow
Account. Except as provided with respect to an Xxxxx Surcharge, any Closing
Date Deficit will be taken from the cash in the Escrow Account based on the
Pro Rata Shares of the Shareholders and the Option Holders. If the cash in
the Escrow Account that is attributable to the Shareholders is insufficient
to pay the Closing Date Deficit, then the Pro Rata Share of the Shareholders
will be taken from the Escrow in the form of Common Stock based on the
Credited Value of the escrowed Common Stock, determined as of the date that
the amount of the claim against the Escrow Account is determined. If any
amounts are taken from the Xxxxx Partnership's share of the Escrow Account as
the result of an Xxxxx Surcharge, and if, as a result, insufficient proceeds
remain in the Escrow Account that are attributable to the Xxxxx Partnership
to cover any Closing Date Deficit or any other claim against the Escrow
Account, then the Xxxxx Partnership will be required, within 10 days after
demand by ASI or any Shareholder, to replenish the Escrow Account with cash
(up to the amount of the Xxxxx Surcharge) sufficient to cause the Xxxxx
Partnership to bear its share of the liability. Any payments due under this
Section 2.9(d) will include interest accrued from the Closing Date to the
date of such payment at the Prime Rate.
2.10 CONIC TRANSACTION. Immediately prior to the consummation of the
Merger, (a) the Non-ESOP Shareholders will pay to the Company cash in the
aggregate amount of $1,000,000 and (b) the Company will transfer to the
Non-ESOP Shareholders all of the common stock of Conic, Inc. held by the
Company and will execute and deliver to the Non-ESOP Shareholders a xxxx of
sale in the form of EXHIBIT 2.10(b).
ARTICLE III.
SHAREHOLDERS' AGENT
3.1 AGENT FOR SHAREHOLDERS. The Shareholders designate Xxxxxx Xxxxx
(the "Shareholders' Agent") as agent to act for and on behalf of all of the
Shareholders with respect to actions to be taken by any of the Shareholders
under the terms of this Agreement. Specifically, each Shareholder hereby
authorizes and irrevocably appoints the Shareholders' Agent as its or his
exclusive agent and attorney-in-fact to act on behalf of each of them (a) to
amend, without notice to or consent of any Shareholder, the provisions of
this Agreement or any Other ASI Agreement or Other Shareholder Agreement (i)
to the extent such amendment does not, in the opinion of the Shareholders'
Agent, materially adversely affect the rights of any Shareholder or (ii) to
cure any ambiguity, defect or inconsistency in any such agreement and (b)
with respect
14
to all matters which are the subject of this Agreement or the Escrow
Agreement, to exercise any and all powers, authority and discretion conferred
upon the Shareholders (other than matters for which the Shareholders do not
have joint and several liability), including, without limitation, (i)
receiving or giving all notices, instructions, other communications, consents
or agreements that may be necessary, required or given with respect to such
matters; (ii) asserting, settling, compromising, or defending, or determining
not to assert, settle, compromise or defend, any claims which any Shareholder
may assert, or have the right to assert, against ASI, or any claims which ASI
may assert, or have the right to assert, against any Shareholder; (iii)
receiving and distributing the Common Stock and cash after the conversion
provided for in Section 2.6; and (iv) making such changes or modifications to
the schedules and this Agreement as it determines are reasonably necessary to
facilitate consummation of the transactions contemplated under this
Agreement. The Shareholders' Agent accepts such authorization and
appointment. ASI and Holdings will have the right to deal with the
Shareholders' Agent exclusively and will be entitled to rely conclusively on
the Shareholders' Agent's determination or action. If the Shareholders'
Agent resigns, dies or becomes disabled, the remaining Shareholders hereby
appoint Xxxxxx Xxxxxxx III as substitute agent for the Shareholders for all
purposes under this Agreement as if such Person was the original
Shareholders' Agent. Upon the receipt of written evidence satisfactory to
ASI to the effect that the Shareholders' Agent has been substituted as agent
of the Shareholders by reason of his death, disability or resignation, ASI
and Holdings will be entitled to rely on such substituted agent to the same
extent as they were theretofore entitled to rely upon the Shareholders' Agent
with respect to the matters covered by this Section. No Shareholder will act
with respect to any of the matters which are the subject of this Agreement
(other than matters for which the Shareholders do not have joint and several
liability, as listed in Section 9.7) except through the Shareholders' Agent.
The Shareholders acknowledge and agree that ASI and Holdings may deal
exclusively with the Shareholders' Agent in respect of such matters. Neither
the Shareholders' Agent nor any of his or its employees or agents will be
liable to the Shareholders for any action taken or omitted to be taken or
suffered in good faith by it under or in connection with this Agreement,
except that the Shareholders' Agent will be liable for his willful
misconduct. The Shareholders' Agent will be responsible for performing the
tasks specifically designated under this Agreement, but the Shareholders'
Agent, in its capacity as such, will not be liable to the Company, Holdings,
ASI, or the other Shareholders in any manner for the effectiveness,
enforceability, collectibility, genuineness, perfection, validity,
sufficiency or the due execution of this Agreement, the Escrow Agreement or
any of the Other ASI Agreements or Other Shareholder Agreements, or for the
due authorization, authenticity or accuracy of the representations and
warranties in this Agreement or in any other certificate, report, notice,
consent, opinion, statement, or other document furnished or to be furnished
under this Agreement, and the Shareholders' Agent will be entitled to rely
upon any of the foregoing believed by it to be genuine and correct and to
15
have been signed and sent or made by the proper Person. This power of
attorney is coupled with an interest and is irrevocable. Each Shareholder
acknowledges that he or it has made such investigation as such Shareholder
deems necessary to inform himself or itself of the affairs of ASI and
Holdings and has made his or its own investigation of the operations and
affairs of ASI and Holdings and that in entering into this Agreement he or it
has not relied and will not rely upon any information or representations
furnished or given by the Shareholders' Agent.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERs. The
Shareholders jointly and severally represent and warrant to ASI and Holdings
as follows, as of the date of this Agreement:
(a) ORGANIZATION, GOOD STANDING, ETC. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas, and is qualified to do business as a foreign
corporation and is in good standing in Rhode Island, Mississippi,
Massachusetts, Delaware, Maryland, New Jersey, Connecticut, Florida, Arkansas
and California which are the only jurisdictions in which such qualification
is necessary and in which the failure to be so qualified would have a
material adverse effect on the business or properties of the Company (and
also is qualified to do business and in good standing in Pennsylvania,
Wisconsin, Illinois, and Louisiana). The Company has all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted. True and complete copies of (i) the
articles of incorporation (certified by the Secretary of State of Texas) and
(ii) the bylaws of the Company, both as currently in effect, have been
delivered to ASI by the Company and the Shareholders, and the Company is not
in violation of any provision of its articles of incorporation or bylaws.
True copies of the minute books, the stock certificate books, and stock
record books of the Company have been delivered to ASI by the Shareholders.
(b) SUBSIDIARIES. Except for the 600 shares of common stock
of Conic Systems and the shares of common stock of CANTEX Conversion
Services, Inc., Inc., the Company does not own, and since January 1, 1994,
has not owned, directly or indirectly, any equity interest in any
corporation, partnership, joint venture or other business entity.
(c) OWNERSHIP AND CAPITALIZATION. Part (i) of SCHEDULE 4.1(c)
sets forth a correct and complete description of the number of shares of
authorized capital stock of the Company and their par value. Each
Shareholder owns, beneficially and of
16
record, free and clear of any Encumbrance, the numbers of Shares set forth
opposite their respective names on part (ii) of SCHEDULE 4.1(c). The Shares
set forth in part (ii) of SCHEDULE 4.1(c) in the aggregate constitute all of
the issued and outstanding capital stock of the Company. Part (iii) of
SCHEDULE 4.1(c) sets forth the number of Shares issuable upon the exercise of
all Incentive Stock Options, the exercise price for the Incentive Stock
Options, the identity of the Option Holders of the Incentive Stock Options
and the number of Shares subject to the options held by each Option Holder.
Except for the issued and outstanding capital stock set forth in SCHEDULE
4.1(c), the Incentive Stock Options disclosed on SCHEDULE 4.1(c), and the
SERP, (i) all of the issued and outstanding shares of the Company's capital
stock have been duly authorized and validly issued and are fully paid and
nonassessable, (ii) there is no authorized or outstanding stock or security
convertible into or exchangeable for, or any authorized or outstanding
option, warrant or other right to subscribe for or to purchase, or convert
any obligation into, any unissued shares of the Company's capital stock or
any treasury stock, and the Company has not agreed to issue any security so
convertible or exchangeable or any such option, warrant or other right, (iii)
there are no authorized or outstanding stock appreciation, phantom stock,
profit participation or similar rights with respect to the Company, (iv)
except as disclosed on SCHEDULE 4.1(c), there are no voting trusts, voting
agreements, proxies or other agreements or understandings with respect to any
capital stock of the Company, (v) except as disclosed on SCHEDULE 4.1(c),
there are no existing rights of first refusal, buy-sell arrangements,
options, warrants, rights, calls, or other commitments or restrictions of any
character relating to any of the Shares, except those restrictions on
transfer imposed by the Securities Act of 1933, as amended, and applicable
state securities laws.
(d) AUTHORITY; NO VIOLATION.
(i) Each Shareholder has full and absolute right,
power, authority and legal capacity to execute, deliver and perform this
Agreement and all Other Shareholder Agreements to which they are a party,
and, assuming the due authorization, execution and delivery of this Agreement
and the Other Shareholder Agreements by the other parties to such agreements,
this Agreement constitutes, and the Other Shareholder Agreements constitute,
the legal, valid and binding obligations of, and will be enforceable in
accordance with their respective terms against, each Shareholder, except as
such enforcement is subject to the effect of (A) any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting
creditors' rights generally and (B) general principles of equity, including,
without limitation, concepts of reasonableness, good faith and fair dealing,
and other similar doctrines affecting the enforceability of agreements
generally (regardless of whether considered in a proceeding in equity or at
law).
17
(ii) The execution, delivery and performance of this
Agreement and the Other Shareholder Agreements by the Shareholders and the
consummation of the transactions contemplated by each such agreement will not
(A) violate any Legal Requirement to which any of the Shareholders is
subject, or (B) except as set forth in SCHEDULE 4.1(d), violate, with or
without the giving of notice or the lapse of time or both, or result in the
breach of any provision of, or constitute a default under, or result in the
creation of any Encumbrance upon any properties, assets or business of any of
the Shareholders, pursuant to, any indenture, mortgage, deed of trust, lien,
lease, license, Permit, agreement, instrument or other arrangement to which
any of the Shareholders is a party or by which any of the Shareholders, or
any of their respective assets and properties is bound or subject, but for
purposes of this representation and warranty, any right on the part of the
other party to such agreement to terminate any such agreement upon the
execution, delivery and performance of this Agreement and the Other
Shareholder Agreements or the consummation of the transactions contemplated
by each such agreement will not constitute a breach of this representation
and warranty (whether or not the agreement is listed on SCHEDULE 4.1(d)).
(iii) The execution, delivery and performance of this
Agreement and the Other Shareholder Agreements by the Company and the
consummation of the transactions contemplated by each such agreement will not
(A) violate (x) any Legal Requirements to which the Company is subject or (y)
any provision of the articles of incorporation or bylaws of the Company, or
(B) except as set forth in SCHEDULE 4.1(d), violate, with or without the
giving of notice or the lapse of time or both, or result in the breach of any
provision of, or constitute a default under, or result in the creation of any
Encumbrance upon any properties, assets or business of the Company pursuant
to, any indenture, mortgage, deed of trust, lien, lease, license, Permit,
agreement, instrument or other arrangement to which the Company is a party or
by which the Company or any of its respective assets and properties is bound
or subject, but for purposes of this representation and warranty, any right
on the part of the other party to such agreement to terminate any such
agreement upon the execution, delivery and performance of this Agreement and
the Other Shareholder Agreements or the consummation of the transactions
contemplated by each such agreement will not constitute a breach of this
representation and warranty (whether or not the agreement is listed on
SCHEDULE 4.1(d).
(iv) Except for notices that have been given and
consents that have been obtained by any of the Shareholders prior to the
execution of this Agreement (which are set forth in SCHEDULE 4.1(d)), neither
the Company nor any of the Shareholders need give any notice to, make any
filing with or obtain any authorization, consent or approval of any
Governmental Authority in order for the parties to consummate the
transactions contemplated by this Agreement and the Other Shareholder
Agreements. Neither any of the Shareholders nor the Company is a party
18
to any litigation or proceeding (and, to the best knowledge of the
Shareholders, no such litigation or proceeding has been threatened), that
seeks to prohibit or delay, or that seeks damages as a result of, the
execution and delivery of this Agreement by any of the Shareholders or the
consummation of the transactions contemplated by this Agreement.
(v) Each Option Holder has full and absolute right,
power, authority and legal capacity to execute, deliver and perform the
Option Buy Out Agreement and, assuming the due authorization, execution and
delivery of the Option Buy Out Agreement by the other parties to such
agreement, the Option Buy Out Agreement constitutes, the legal, valid and
binding obligations of, and will be enforceable in accordance with its terms
against, each Option Holder, except as such enforcement is subject to the
effect of (A) any applicable bankruptcy, insolvency, reorganization or
similar laws relating to or affecting creditors' rights generally and (B)
general principles of equity, including, without limitation, concepts of
reasonableness, good faith and fair dealing, and other similar doctrines
affecting the enforceability of agreements generally (regardless of whether
considered in a proceeding in equity or at law). None of the Option Holders
is a party to any litigation or proceeding (and, to the best knowledge of the
Shareholders, no such litigation or proceeding has been threatened), that
seeks to prohibit or delay, or that seeks damages as a result of, the
execution and delivery of the Option Buy Out Agreement by any of the Option
Holders or the consummation of the transactions contemplated by this
Agreement and by the Option Buy Out Agreement.
(vi) Neither the Xxxxx Partnership nor the Xxxxxxxxx
Partnership has taken any action to cause either of such partnerships to
become a limited liability limited partnership or otherwise to cause the
general partner of either such partnership not to be liable in its capacity
as a general partner of a limited partnership.
(e) FINANCIAL STATEMENTS. The Company has delivered to ASI
complete and correct copies of (i) audited balance sheets and related
statements of income, stockholders' equity and cash flow of the Company as of
and for the years ended December 31, 1997, and 1996 and all notes and
schedules thereto and (ii) the unaudited internally prepared balance sheets
of the Company and the related unaudited statements of income as of April 30,
1998 (collectively, the "Financial Statements"). The Financial Statements
are in accordance with the books and records of the Company and were prepared
in accordance with GAAP and present fairly the Company's financial position,
results of operations and changes in financial position as of the dates and
for the periods indicated, subject in the case of the unaudited Financial
Statements only to standard year-end adjustments (none of which will be
material in amount) and the omission of footnotes. The unaudited balance
sheet as of April 30,
19
1998, is called the "Latest Balance Sheet." At the date of the Latest
Balance Sheet, the Company had no liability or obligation, whether accrued,
absolute, fixed or contingent (including liabilities for taxes or unusual
forward or long-term commitments), required by GAAP to be reflected or
reserved against in that balance sheet that were not fully reflected or
reserved against on the Latest Balance Sheet. The balance sheets included in
the Financial Statements reflect capitalized computer software costs and
capitalized mapping inventory at net realizable value as required by SFAS No.
96. Copies of the financial statements described in clause (i) are attached
as SCHEDULE 4.1(e)(i), and copies of the financial statements described in
clause (ii) of this Section are attached as SCHEDULE 4.1(e)(ii).
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since April 30,
1998, except as disclosed in SCHEDULE 4.1(f), and except for the Conic
Transaction, the Company has not (i) incurred any debt, indebtedness or other
liability, except current liabilities incurred in the ordinary course of
business; (ii) delayed or postponed the payment of accounts payable or other
liabilities or accelerated the collection of any receivable beyond stated,
normal terms except in the ordinary course of business; (iii) sold or
otherwise transferred any of its equipment or other assets or properties,
except in the ordinary course of business and except for equipment no longer
needed in the Company's business that was sold for fair market value; (iv)
canceled, compromised, settled, released, waived, written-off or expensed any
account or note receivable, right, debt or claim involving more than $10,000
in the aggregate, except to the extent that such amount is reserved in the
Closing Date Balance Sheet; (v) changed in any significant manner the way in
which it conducts business; (vi) made or granted any individual wage or
salary increase in excess of 10% or $2.00 per hour, any general wage or
salary increase, or increased employee benefits of any kind or nature; (vii)
entered into any contract or agreement, or made any commitment, involving
more than $50,000; (viii) accelerated, terminated, delayed, modified or
canceled any agreement, contract, lease or license (or series of related
agreements, contracts, leases and licenses) involving more than $50,000; (ix)
suffered any material adverse change to or in its business, assets, financial
condition, or existing relationships with customers or suppliers; (x) made
any payment or transfer to or for the benefit of any of the Shareholders or
permitted any Person, including, without limitation, any of the Shareholders,
to withdraw assets from the Company (except for reimbursements of expenses
and payment of salaries, if made in the ordinary course); (xi) suffered any
other significant occurrence, event, incident, action, failure to act or
transaction outside the ordinary course of business; or (xii) agreed to
incur, take, enter into, make or permit any of the matters described in
clauses (i) through (xi).
(g) TAX MATTERS.
(i) The Company has filed all Income Tax Returns and all
other
20
Tax Returns that it was required to file, except for the 1997 federal
corporate income tax return of the Company, and the 1997 Texas franchise tax
return, as to which extensions until September 15, 1998, were obtained. The
amount of Income Taxes paid by the Company when the Company applied for an
extension for the filing of its 1997 federal corporate income tax return
equals or exceeds the amount of federal corporate income tax payable by the
Company with respect to 1997, except that the payment made in connection with
the extension was late but the Company has incurred no penalty or interest
obligations with respect to such late return, and no amounts are payable in
connection with the 1997 Texas franchise tax return. All such Income Tax
Returns and all other Tax Returns were correct and complete in all material
respects. All Income Taxes and all other Taxes owed by the Company (whether
or not shown on any Tax Return) have been paid. The Company is currently the
beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction where the Company
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Encumbrances on any of the assets of the Company
that arose in connection with any failure (or alleged failure) to pay any Tax.
(ii) The Company withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, any Shareholder or other third
party.
(iii) There is no pending or threatened dispute or claim
concerning any Tax liability of the Company. SCHEDULE 4.1(g)(iii) lists all
federal, state, local and foreign income Tax Returns filed with respect to the
Company for taxable periods ended on or after December 31, 1994, identifies
those Tax Returns that have been audited and identifies those Tax Returns that
currently are the subject of audit. The Company has delivered to ASI correct
and complete copies of all federal income Tax Returns and Texas corporate
franchise Tax Returns, and all examination reports, and statements of
deficiencies filed or assessed against or agreed to by the Company since
December 31, 1994.
(iv) The Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(v) Neither the Company nor any of the Shareholders has
ever filed a consent pursuant to Section 341(f) of the Code relating to
collapsible corporations. The Company has not made any payments, is not
obligated to make any payments and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G. The Company has not been a United States
real property holding corporation within the
21
meaning of Code Section 897(c)(2) during the applicable period specified
in Code Section 897(c)(1)(A)(ii). The Company disclosed on its federal
income Tax Returns all positions taken that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
The Company is not a party to any Tax allocation or sharing agreement. The
Company has not been of an Affiliated Group filing a consolidated federal
income Tax Return (other than a group the common parent of which was the
Company) and have no liability for the Taxes of any Person (other than the
Company) under Treasury Regulation Section 1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or successor, by contract
or otherwise.
(vi) Upon the consummation of the Merger and
disposition of the Common Stock by the ESOP, the Surviving Corporation will
be required to pay an excise tax occasioned by the disposition of the Shares
owned by the ESOP. The excise tax will be in the maximum amount of 10% of
2.1% of the value of all of the Shares as of the date of Closing, will be an
obligation of the Surviving Corporation, and will be reflected as a liability
in the Closing Date Balance Sheet.
(vii) SCHEDULE 4.1(g)(vii) sets forth the following
information with respect to the Company as of the most recent practicable
date: (A) the basis of the Company in its assets; and (B) the amount of any
net operating loss, net capital loss, unused investment or other credit,
unused foreign tax credit or excess charitable contribution allowable to the
Company.
(h) ASSETS AND PROPERTIES.
(i) Except as set forth in SCHEDULE 4.1(h)(i), the
Company has good title to (or, in the case of the assets that are leased,
valid leasehold interests in) all the assets that are used by the Company in
its business, free and clear of all Encumbrances (except for Permitted
Encumbrances). Such assets consist of the tangible and intangible assets of
the Company in existence as of the Closing Date. Such assets are all of the
tangible and intangible assets used by the Company in its business as
conducted by the Company since January 1, 1998. Such assets and any
equipment leased by the Company from third parties encompass all equipment
used by the Company to generate the income reflected in the financial
statements attached as SCHEDULE 4.1(e)(i). SCHEDULE 4.1(h)(i) lists all the
third party equipment leased by the Company as of the date of this Agreement.
The Company does not lease any equipment from any of the Shareholders. All
of the Company's tangible assets are located on the Premises, except for
field equipment used on job sites in the ordinary course of business.
22
(ii) The Premises constitute all of the real property,
buildings and improvements used by the Company in its business. The Premises
are supplied with utilities and other services necessary for the operation of
the Premises. To the best knowledge of each Shareholder, the Premises have
received all approvals of Governmental Authorities (including Permits)
required in connection with the occupation and operation of the Premises and
have been occupied, operated and maintained in accordance with applicable
Legal Requirements. Neither any of the Shareholders, nor the Company has
received notice of violation of any Legal Requirement or Permit relating to
the condition or their operation of the Premises which has an adverse effect
on the ability of the Company to utilize the Premises or requires the Company
to incur expense in order to utilize the Premises.
(iii) The Company has received no notice from any party
to any lease with respect to any Premises that such party has repudiated any
provision of such lease, or that there are any disputes, oral agreements or
continuing waivers in effect as to any such lease, and, to the best knowledge
of the Shareholders, no such repudiation, dispute, agreement or waiver has
occurred.
(i) Attached as SCHEDULE 4.1(i) is a list of the following
contracts and agreements not yet substantially performed to which the Company is
a party:
(i) Any agreement (or group of related agreements) for
the sale of goods or the furnishing of services involving reasonably anticipated
total revenues in excess of $200,000;
(ii) Any agreement (or group of related agreements) for
the purchase of goods or services involving reasonably anticipated total
payments in excess of $200,000;
(iii) Any agreement (or group of related agreements) for
the lease of personal property or real property to or from any Person providing
for lease payments in excess of $5,000 per annum, other than agreements that may
be terminated without cause and without penalty by the Company on 30 days or
less notice to such Person;
(iv) All confidentiality and non-competition agreements,
mortgages, deeds of trust, indentures, loan agreements, credit agreements,
promissory notes and guaranties;
(v) Each note or account receivable from, loan or
advance to, and agreement for the purchase, sale or lease of goods or services
to or from, any of the Shareholders, or any Affiliate of the Shareholders, or
any officer, director or
23
employee of the Company; and
(vi) All guaranty, warranty and indemnity agreements
provided or delivered by the Company to any of its customers (but excluding such
agreements included as provisions in the service agreements with customers).
With respect to each such contract and except as disclosed on SCHEDULE 4.1(i):
(A) the contract is valid, in full force and effect, and enforceable in
accordance with its terms, except as such enforcement is subject to the effect
of any applicable bankruptcy, insolvency, reorganization or similar laws
relating to or affecting creditors' rights generally and general principles of
equity, including, without limitation, concepts of reasonableness, good faith
and fair dealing, and other similar doctrines affecting the enforceability of
agreements generally (regardless of whether considered in a proceeding in equity
or at law); (B) no action or claim is pending or, to the best knowledge of the
Shareholders, threatened to revoke, modify, terminate or render invalid any such
contract; and (C) to the best knowledge of the Shareholders, neither the
Company, nor any other party is in breach or default in the performance of any
of its respective obligations under, and, no event exists which, with the giving
of notice or the lapse of time or both, would constitute a breach or default on
the part of a party to, such contract that is continued unremedied, except for
breaches or defaults which will not have a material adverse effect on the
business or properties of the Company. Copies of the contracts delivered to ASI
are true and complete. The prepayment of the Company-to-Bank ESOP Debt,
Company-to- Partnership ESOP Debt and the Line of Credit Notes is not
prohibited and will not result in the imposition of any prepayment penalty or
similar obligation.
Also set forth on SCHEDULE 4.1(i) is a list setting forth the following items:
(vii) All items of equipment, machinery and other tangible
personal property of the Company (including that which, as of the date of this
Agreement, has no book value), and the original cost, depreciation and book
value (with such book value set forth on a projected basis as of December 31,
1998) of all such items which are included in the Latest Balance Sheet;
(viii) All Permits, licenses, Orders, registrations,
certificates and similar rights of the Company;
(ix) The names and current rates of compensation as of
March 31, 1998 of all employees of the Company whose annual rate of compensation
is $40,000 or more;
(x) All items of Intellectual Property owned by the
Company, or
24
which are used by the Company in its business, and in each case where the
Company is not the owner, the name of the owner of the Intellectual Property;
and
(xi) The name of each bank or other financial
institution or entity in which the Company has an account or safe deposit box
(with the identifying account number or symbol) and the names of all persons
authorized to draw on such account or to have access to such safe deposit box.
(j) LITIGATION; COMPLIANCE WITH APPLICABLE LAWS AND RIGHTS.
(i) There is no outstanding Order against, and, except
as set forth on SCHEDULE 4.1(j)(i), there is no litigation, proceeding,
arbitration or investigation by any Governmental Authority or other Person
pending or, to the best knowledge of the Shareholders, threatened against, the
Company, its properties or its business.
(ii) Except as set forth on SCHEDULE 4.1(j)(ii), to the
best knowledge of the Shareholders, the Company and its assets (including its
Premises, facilities, machinery and equipment) are not in violation of any
applicable Legal Requirement. Except as set forth in SCHEDULE 4.1(j)(ii),
neither any of the Shareholders, nor the Company has received notice from any
Governmental Authority or other Person of any violation or alleged violation of
any Legal Requirement which has not been finally resolved on a basis that
involves no continuing obligation or liability to the Company.
(k) ACCOUNTS RECEIVABLE. The accounts receivable of the
Company reflected on the Latest Balance Sheet and on the Closing Date Balance
Sheet have arisen in the ordinary course of business and reflect bona fide
business arrangements; no payor has given any of the Shareholders or the
Company written notice of any inability to pay such account receivable in due
course or of any claim or defense against payment of such account receivable;
to the Shareholders' best knowledge, no oral statements to such effect have
been made to any Shareholder or the Company; to the Shareholders' best
knowledge, no basis exists for any payor to raise any claim or defense
against payment with respect to any such account receivable; and SCHEDULE
4.1(k) sets forth a true and correct statement regarding the aging of such
accounts receivable as of a date within 10 days of the date of this Agreement.
(l) PRODUCT QUALITY, WARRANTY AND LIABILITY. No product or
service provided or delivered by the Company to customers on or prior to the
date of this Agreement is subject to any guaranty, warranty or other indemnity
beyond the terms set forth in the written agreement with such customer or as may
be imposed or required by any Legal Requirement. All product or service
liability claims that have been asserted against the Company since January 1,
1998, or, regardless, of when it was asserted,
25
which remains unresolved or which is the subject of an agreement by the
Company to correct, whether covered by insurance or not and whether
litigation has resulted or not, other than those listed and summarized on
SCHEDULE 4.1(j)(i), are listed and summarized on SCHEDULE 4.1(l).
(m) INSURANCE. The Company has policies of insurance
(i) covering risk of loss on the Company's assets, (ii) covering products and
services liability and liability for fire, property damage, personal injury and
workers' compensation coverage and (iii) for business interruption, all of which
are set forth in SCHEDULE 4.1(k), which also includes the dates of coverage of
such insurance. All such insurance policies are valid, in full force and effect
and enforceable in accordance with their respective terms and no party has
repudiated any provision of such policies. To the best of Shareholders'
knowledge neither the Company nor any other party to any such policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices) in the performance of any of their respective obligations
under any such policy; no insurer under any such insurance policy has denied
coverage or reserved against coverage concerning any claim made by the Company;
and, to the best knowledge of the Shareholders, no event exists which, with the
giving of notice or the lapse of time or both, would constitute a breach,
default or event of default, or permit termination, modification or acceleration
under any such policy. All premiums which are due on such policies as of the
date of this Agreement have been paid on such policies as of the date of this
Agreement. All claims made during such five-year period with respect to any
insurance coverage of the Company, other than claims made by or on behalf of
employees of the Company or under the Company's health insurance policy and
other than those described on SCHEDULE 4.1(l), are set forth on SCHEDULE 4.1(m).
(n) PENSION AND EMPLOYEE BENEFIT MATTERS.
(i) SCHEDULE 4.1(n) lists each Employee Benefit Plan of
the Company and each entity which is a member of the controlled group with the
Company (as defined under ERISA Section 4001(a)(14)) (the "Company Employee
Benefit Plans") that: (A) is subject to any provision of ERISA; (B) is
maintained, administered or contributed to by the Company or any controlled
group member; (C) covers any employee or former employee of the Company or any
controlled group entity; or (D) under which the Company or any controlled group
entity has any liability to make contributions or pay benefits. Copies of the
current versions of all such plans, summary plan descriptions, and, if
applicable, related trust agreements, and all amendments of such plans have been
delivered by the Shareholders to ASI and attached to this Agreement as part of
SCHEDULE 4.1(n), and the Shareholders have delivered to ASI the three most
recent annual reports (Form 5500 including Schedule B if applicable) and summary
annual reports prepared in connection with each such plan required to file an
annual report.
26
(ii) The only Company Employee Benefit Plans that
individually or collectively would constitute Employee Pension Benefit Plans
are identified in SCHEDULE 4.1(n). No Company Employee Benefit Plan is
subject to the Plan Termination Insurance provisions of Title IV of ERISA.
The Company and each controlled group member have not incurred any liability
under Title IV of ERISA arising in connection with the termination of any
plan covered or previously covered by Title IV of ERISA.
(iii) The Shareholders have delivered to ASI a current,
complete and correct copy of the Company's Employee Manual (the "Manual").
Except as otherwise set forth in SCHEDULE 4.1(n) the Manual lists each
written, and to the best knowledge of the Shareholders, each oral,
employment, severance or other similar contract, arrangement or policy and
each plan or arrangement providing for insurance coverage (including any
self-insured arrangements), disability benefits, supplemental unemployment
benefits, vacation benefits, retirement benefits, deferred compensation,
profit sharing, bonuses, stock options, stock appreciation rights or other
forms of incentive compensation, reduced interest or interest free loans,
mortgages, relocation assistance or post-retirement insurance, compensation
or other benefits that: (A) is not an Employee Benefit Plan; (B) is entered
into, maintained or contributed to, by the Company and each controlled group
member and (C) covers any employee or former employee of the Company or any
controlled group member. Such contracts, plans and arrangements as are
described in this Section are referred to collectively as the "Benefit
Arrangements." Copies of each of these Benefit Arrangements either are set
forth in full in the Manual or have been made available to ASI or are listed
as "Other Benefit Arrangements" on SCHEDULE 4.1(n). The Company has no
liability under any other Benefit Arrangements that no longer are in effect.
(iv) Except as set forth in any Company Employee
Benefit Plan or Benefit Arrangement identified in SCHEDULE 4.1(n) and except
as provided by a Legal Requirement or any collective bargaining agreement or
any employment contract identified on SCHEDULE 4.1(n), the employment of all
persons presently employed or retained by the Company is terminable at will.
(v) Except as expressly so identified in SCHEDULE
4.1(n), no Company Employee Benefit Plan is a "Multiemployer Plan."
(vi) No Company Employee Benefit Plan is maintained in
connection with any trust described in Section 501(c)(9) of the Code. Any
assets of any Company Employee Benefit Plan that are subject to the trust
requirement of ERISA Section 403 are held in trust in compliance with ERISA
Section 403.
27
(vii) Each Company Employee Benefit Plan that is an
Employer Pension Benefit Plan is intended to be qualified within the meaning of
Section 401(a) of the Code ("Qualified") is so Qualified, has been so Qualified
during the period from its adoption to date, has been administered in a manner
that would not adversely affect its Qualified status and has received a
currently effective determination letter (or a determination letter has been
timely requested) from the Internal Revenue Service that the Plan is (or
continues to be) currently Qualified for federal income tax purposes. The
Company has delivered to ASI copies of such determination letters and any
pending applications, and copies of such letters and applications have been
attached to this Agreement as part of SCHEDULE 4.1(n). Each trust in which the
assets of any such Employee Pension Benefit Plan are held is exempt from tax
pursuant to Section 501(a) of the Code.
(viii) There have been no prohibited transactions with
respect to any Company Employee Benefit Plan. No "Fiduciary" (as defined in
Section 3(21) of ERISA) has any liability for breach of fiduciary duty or any
other failure to act or comply in connection with the administration or
investment of the assets of any such Company Employee Benefit Plan. No action,
suit, proceeding, hearing or investigation with respect to the administration or
the investment of the assets of any Company Employee Benefit Plan (other than
routine claims for benefits) is pending or, to the best knowledge of the
Shareholders is threatened. To the best knowledge of the Shareholders, there is
no basis for any such action, suit, proceeding, hearing or investigation.
(ix) Except as set forth in SCHEDULE 4.1(n) The Company
and each controlled group member do not maintain and have never maintained nor
contribute, or ever have contributed, or ever have been required to contribute,
to any Company Employee Benefit Plan providing health or medical benefits for
current or future retired or terminated employees, their spouses or their
dependents (other than in accordance with Code Section 4980B). No condition
exists that would prevent the Company or any controlled group member from
amending or terminating any Company Employee Benefit Plan or Benefit Arrangement
providing health or medical benefits in respect of any active or retired
employees of the Company or any controlled group member (other than in
accordance with Code Section 4980B).
(x) Each Company Employee Benefit Plan and Benefit
Arrangement has been maintained and administered in compliance with its terms
and with the requirements prescribed by any and all Legal Requirements,
including but not limited to ERISA and the Code, that are applicable to such
Plans. Nothing done or omitted to be done and no transaction or holding of any
asset under or in connection
28
with any Company Employee Benefit Plan or Benefit Arrangement has made or
will make the Company, any controlled group member, any officer or director
of the Company or of any controlled group member subject to any liability
under Title I of ERISA or any liability for any Tax under Section 4971, 4972,
4974 or Section 4975 through 4980B, inclusive, of the Code.
(xi) Any Company Employee Benefit Plan that is a
"group health plan" (as defined in Code Section 5000(b)(l)) has been
administered in accordance with the requirements of Part 6 of Subtitle B of
Title I of ERISA and Code Section 4980B and nothing done or omitted to be
done in connection with maintenance or administration of any Company Employee
Benefit Plan that is a "group health plan" has made or will make the Company
or any controlled group member subject to any liability under Title I of
ERISA, excise Tax liability under Code Section 4980B or has resulted or will
result in any loss of income exclusion for a participant under Code Sections
105(h) or 106.
(xii) There is no contract, agreement, plan or
arrangement covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount
that would not be deductible pursuant to the terms of Section 280G or
162(a)(l) of the Code.
(xiii) The Company and each controlled group member have
made, before the date of this Agreement, all required contributions and
premium payments under each Company Employee Benefit Plan and Benefit
Arrangement for all completed fiscal years including contributions that may
not by law have otherwise been required to be made until the due date for
filing the Tax Return for any completed fiscal year.
(xiv) Except as disclosed in SCHEDULE 4.1(n), there has
not been with respect to the Company's or any controlled group member's
active or retired employees, any amendment to, written interpretation or
announcement (whether or not written) by the Company relating to, or change
in employee participation or coverage under, any Company Employee Benefit
Plan or Benefit Arrangement that would increase the expense of maintaining or
funding benefits under such Company Employee Benefit Plan or Benefit
Arrangement above the level of the expense incurred in respect of such for
the fiscal year ended on December 31, 1997, except as set forth in SCHEDULE
4.1(n).
(xv) No condition (other than pursuant to a Legal
Requirement) exists that would have prevented the Company from terminating
any Company Employee Benefit Plan, prior to the date of this Agreement other
than the imposition of an excise tax that will arise from the sale of the
Common Stock by the ESOP. Except
29
as otherwise provided in this Agreement or any employment contract
entered into upon the Closing of the transactions contemplated by this
Agreement, the Shareholders acknowledge that ASI will have no obligation to
any of the Shareholders (other than pursuant to a Legal Requirement) to
employ any employee of the Company or to continue any Company Employee
Benefit Plan, and will have no liability to any of the Shareholders under any
plan or arrangement maintained by the Company for the benefit of any employee.
(xvi) Except as set forth in SCHEDULE 4.1(n) There are
no retired employees of the Company or any controlled group member who are
receiving or are entitled to receive any payments from the Company or any
controlled group member which are not fully funded by an Employee Pension
Benefit Plan of the Company or a controlled group member.
(o) EMPLOYEES AND LABOR. Since April 30, 1998, the Company
has not received any notice, and to the best knowledge of the Shareholders,
there is no reason to believe that any executive or key employee of the
Company, or any group of employees of the Company, has any plans to terminate
his, her or its employment with the Company, except as set forth in SCHEDULE
4.1(o). No executive or key employee is subject to any agreement,
obligation, Order or other legal hindrance that impedes or might impede such
executive or key employee from devoting his or her full business time to the
affairs of the Company, and, if such person becomes an employee of ASI, to
the affairs of ASI after the date of this Agreement. The Company will not be
required to give any notice under the Worker Adjustment and Retraining
Notification Act, as amended, or any similar Legal Requirement as a result of
this Agreement, the Other Shareholder Agreements or the transactions
contemplated by them. Except as set forth in SCHEDULE 4.1(o), the Company
does not have any pending, or to the best of Shareholders' knowledge,
threatened labor relations problems or disputes, and the Company has not
experienced any strikes, grievances, claims of unfair labor practices or
other collective bargaining disputes. The Company is not a party to and is
not bound by any collective bargaining agreement, there is no union or
collective bargaining unit at the Company's facilities, and no union
organization effort has been threatened, initiated or is in progress with
respect to any employees of the Company.
(p) CUSTOMER RELATIONSHIPS. SCHEDULE 4.1(p) lists each
customer (the "Principal Customers") that individually or with its Affiliates
accounted for a Contract Value of $300,000 or more. To the best knowledge of
the Shareholders and except as set forth in SCHEDULE 4.1(p), the Company has
good commercial working relationships with the Principal Customers. Since
December 31, 1997, no Principal Customer has canceled or otherwise terminated
its relationship with the Company, materially decreased or limited its
contribution of revenue to the Company, or indicated an intention to take any
such action. Except as set forth in SCHEDULE 4.1(p), none of the
30
Shareholders has any basis to anticipate any material problems with the
Company's customer, supplier or business relationships. None of the
Shareholders have received written or oral communication from a Principal
Customer that the execution and delivery of this Agreement by either party or
the consummation of the transactions contemplated by this Agreement will
cause such Principal Customer to terminate or materially reduce the service
provided by the Company under its agreements with such Principal Customer
after the date of this Agreement (other than in connection with normal
rundowns in services provided as a result of the completion of services
contemplated in such Agreements).
(q) ENVIRONMENTAL MATTERS. The Company has complied with
and is in compliance with all Environmental Laws, except to the extent that
noncompliance with any Environmental Laws, either singly or in the aggregate,
(i) has not had and will not have any material Adverse Consequences, and (ii)
will not necessitate any material expenditure by or on behalf of the Company.
The Company has obtained and adhered to all necessary permits and other
approvals necessary to treat, transport, store, dispose of and otherwise
handle hazardous wastes, hazardous materials and hazardous substances (as
those terms and any similar terms are defined in any Environmental Law, and
which are referred to in this Agreement as "Hazardous Wastes, Hazardous
Materials and Hazardous Substances"), a list of all of which permits and
approvals is set forth on SCHEDULE 4.1(q), and has reported to the
appropriate authorities, to the extent required by all Environmental Laws,
all past and present sites owned and operated by the Company where Hazardous
Wastes, Hazardous Materials or Hazardous Substances have been treated,
stored, disposed of or otherwise handled. There have been no releases or
threats of releases (as defined in Environmental Laws) at, from, in or on any
property owned or operated by the Company except as permitted by
Environmental Laws. There is no on-site or offsite location to which the
Company has transported or disposed of Hazardous Wastes, Hazardous Materials
or Hazardous Substances or arranged for the transportation of Hazardous
Wastes, Hazardous Materials or Hazardous Substances which is the subject of
any federal, state, local or foreign enforcement action or any other
investigation which could lead to any claim against the Company, ASI or the
Surviving Corporation for any clean-up cost, remedial work, damage to natural
resources, property damage or personal injury. The Company does not have any
contingent liability in connection with any release of any Hazardous Waste,
Hazardous Material or Hazardous Substance into the environment.
(r) INTELLECTUAL PROPERTY. The Company owns or has the legal
right to use each item of Intellectual Property required to be identified on
SCHEDULE 4.1(i). Except as set forth on SCHEDULE 4.1(r), the sale of the Shares
to ASI will not affect the Company's right to use any such Intellectual
Property. To the best knowledge of the Shareholders, the continued operation of
the business of the Company as currently conducted will not interfere with,
infringe upon, misappropriate or conflict with any
31
Intellectual Property rights of another Person. To the best knowledge of the
Shareholders, no other Person has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual
Property rights of the Company. Except as set forth on SCHEDULE 4.1(i), the
Company has not granted any license, sublicense or permission with respect to
any Intellectual Property owned or used in the Company's business.
(s) BROKERS. The Company retained Xxxxxx-Xxxxx Co.
("Xxxxxx") to act on its behalf in negotiations relative to this Agreement
and the transactions contemplated by this Agreement, and a brokerage fee of
$142,500 is payable to Xxxxxx, which fee is payable by the Company. No other
amounts are payable to Xxxxxx in connection with the Merger or otherwise.
(t) DISCLOSURE. In connection with the Merger and the
conversion of the Shares under this Agreement, each Shareholder has complied
with the requirements of Rule 10b-5 of the Securities and Exchange Commission.
4.2 REPRESENTATIONS AND WARRANTIES OF ASI AND HOLDINGS. ASI and
Holdings jointly and severally represent and warrant to the Shareholders as
follows, as of the date of this Agreement:
(a) ORGANIZATION AND QUALIFICATION, ETC. ASI and Holdings
are corporations duly organized, validly existing and in good standing under
the laws of the State of Colorado and of the State of Texas, respectively,
and have corporate power and authority to own, lease and operate their
properties and assets and to carry on their businesses as they are now being
conducted. ASI and Holdings are duly qualified to do business and are in
good standing in each jurisdiction where the failure to be so qualified would
have a material adverse effect on the business or properties of ASI or
Holdings.
(b) AUTHORITY RELATIVE TO AGREEMENT. ASI and Holdings have
full and absolute right, power and authority to execute, deliver and perform
this Agreement and any Other ASI Agreements to which they are a party, and to
consummate the transactions contemplated on their part by this Agreement and
the Other ASI Agreements. The execution and delivery of this Agreement by
ASI and Holdings, and the consummation by ASI and Holdings of the
transactions contemplated on their part by this Agreement and the Other ASI
Agreements have been duly authorized by ASI's board of directors and
Holdings' board of directors. No other corporate approvals on the part of
the board of directors or shareholders of either ASI or Holdings are
necessary to authorize the execution and delivery of this Agreement and the
Other ASI Agreements. This Agreement and any Other ASI Agreements to which
they are a party have been duly executed and delivered by ASI and Holdings
and, assuming the due
32
authorization, execution and delivery of this Agreement and the Other ASI
Agreements by the other parties to such agreements, are valid and binding
agreements, enforceable against ASI and Holdings in accordance with their
respective terms, except as such enforcement is subject to the effect of (i)
any applicable bankruptcy, insolvency, reorganization or similar laws
relating to or affecting creditors' rights generally and (ii) general
principles of equity, including, without limitation, concepts of
reasonableness, good faith and fair dealing, and other similar doctrines
affecting the enforceability of agreements generally (regardless of whether
considered in a proceeding in equity or at law).
(c) NON-CONTRAVENTION. The execution, delivery and
performance of this Agreement and the Other ASI Agreements and the
consummation of the transactions contemplated by this Agreement and by the
Other ASI Agreements will not, (i) violate any provision of the articles of
incorporation or bylaws of either ASI or Holdings, or (ii) violate, or
result, with the giving of notice or the lapse of time or both, in a
violation of, any provision of, or result in the acceleration of or entitle
any party to accelerate (whether after the giving of notice or lapse of time
or both) any obligation under, or result in the creation or imposition of any
encumbrance upon any of the property of ASI or Holdings pursuant to any
provision of any mortgage or lien or lease, agreement, license or instrument
or any order, arbitration award, judgment or decree to which ASI or Holdings
is a party or by which any of their assets are bound and do not and will not
violate or conflict with any other material restriction of any kind or
character to which either ASI or Holdings is subject or by which any of their
assets may be bound, and the same does not and will not constitute an event
permitting termination of any such mortgage or lien or lease, agreement,
license or instrument to which either ASI or Holdings is a party or (iii)
violate any Legal Requirement to which either ASI or Holdings is subject.
Neither ASI nor Holdings is a party to any litigation or proceeding (and, to
the best knowledge of ASI and Holdings, no such litigation or proceeding has
been threatened), that seeks to prohibit or delay, or that seeks damages as a
result of, the execution and delivery of this Agreement by ASI and Holdings
or the consummation of the transactions contemplated by this Agreement.
(d) GOVERNMENT APPROVALS. No consent, authorization, order
or approval of, or filing or registration with, any governmental commission,
board or other regulatory body is required for or in connection with the
execution and delivery of this Agreement and the Other ASI Agreements by ASI
and Holdings, the execution and delivery of this Agreement by ASI and
Holdings, and the consummation by ASI and Holdings of the transactions
contemplated by this Agreement and the Other ASI Agreements.
(e) SEC REPORTS. ASI has filed (and has provided the Company
with copies of all required forms, reports and documents which it has been
required to file
33
with the Securities and Exchange Commission (the "Commission") since
September 30, 1997 (collectively, the "SEC Reports"), each of which has
complied in all material respects with all applicable requirements of the
Securities Act of 1933, as amended and the Securities Exchange Act of 1934,
as amended. As of their respective dates, the SEC Reports, including,
without limitation, any financial statements or schedules included in such
financial statements, did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated in such financial
statements or necessary in order to make the statements in such financial
statements, in light of the circumstances under which they were made, not
misleading, except, in the case of any SEC Report, any statement or omission
in such SEC Report that has been corrected or otherwise disclosed in a
subsequent SEC Report. The audited financial statements of ASI in its Annual
Report on Form 10-K for the fiscal year ended September 30, 1997, and the
unaudited interim financial statements of ASI in its Quarterly Reports on
Form 10-Q for the fiscal quarters ended December 31, 1997, and March 31,
1998, have been prepared in accordance with GAAP, fairly present the
consolidated financial position of ASI and its subsidiaries as of the dates
of such statements and their consolidated results of operations and changes
in financial position for the periods then ended (subject to normal year-end
adjustments and the absence of certain footnote disclosures in the case of
any unaudited interim financial statements).
(f) CAPITALIZATION OF ASI. As of the date of this
Agreement, the authorized capital stock of ASI consists of 100,000,000 shares
of common stock, of which approximately 6,294,535 shares are validly issued
and outstanding, fully paid and nonassessable, and 2,500,000 shares of
preferred stock, no par value, none of which is outstanding. Except pursuant
to ASI's employee stock option and restricted stock purchase plans, as of the
date of this Agreement, ASI has no commitments to issue or sell any shares of
its capital stock or any securities or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for or acquire
from ASI, any shares of its capital stock and no securities or obligations
evidencing such rights are outstanding.
(g) CAPITALIZATION OF HOLDINGS. As of the date of this
Agreement, the authorized capital stock of Holdings consists of 1,000 shares
of common stock, of which 100 shares are validly issued and outstanding,
fully paid and nonassessable. As of the date of this Agreement, Holdings has
no commitments to issue or sell any shares of its capital stock or any
securities or obligations convertible into or exchangeable for, or giving any
person any right to subscribe for or acquire from Holdings, any shares of its
capital stock and no securities or obligations evidencing such rights are
outstanding.
(h) NASDAQ. The shares of Common Stock to be issued to the
Shareholders at the Closing will be issued in compliance with all requirements
necessary for the shares of Common Stock to be quoted on the NASDAQ national
34
market.
(i) COMMON STOCK ISSUED TO THE SHAREHOLDERS. The shares of
Common Stock to be issued to the Shareholders as consideration in accordance
with Article II have been duly and validly authorized for issuance by ASI
and, when the shares of Common Stock are issued and delivered to the
Shareholders as provided by this Agreement, such shares will have been
validly issued, fully paid and nonassessable, and the issuance of such shares
will not be subject to any preemptive or similar rights. The Common Stock
issued to the ESOP will be freely tradable upon registration in accordance
with the terms of the Registration Rights Agreement.
(j) ABSENCE OF MATERIAL ADVERSE CHANGE. Since April 30,
1998, to the date of this Agreement, ASI has not experienced any material
adverse change to its assets, its business, or its business prospects. As of
the date of this Agreement, there is no existing event or condition as to
which ASI is required to file a Current Report on Form 8-K, and no pending
transactions (other than the transaction contemplated by this Agreement) or
anticipated events or conditions that would require the filing of a Current
Report on Form 8-K, which has not previously been disclosed in the SEC
Reports.
(k) BROKERS. ASI retained Xxxx Xxxxxxxx Incorporated
("Dain") to act on its behalf in negotiations relative to this Agreement and
the transactions contemplated by this Agreement. Any finder's fee, brokerage
commission, or similar payment owed to Dain will be paid by ASI.
4.3 REPRESENTATIONS AS TO KNOWLEDGE. Any representation and
warranty made in Article IV to the "best knowledge" of a party means matters
actually known by such party and matters which would come to such party's
attention in the course of exercising reasonable diligence in the operation
of such party's business ("Constructive Knowledge"), including (i) in the
case of the Shareholders, inquiry of Xxxxxx Xxxxx, Xxxxxx Xxxxxxx III, Xxx
XxXxxxxx, Xxx Xxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxx Xxxxxxxxxx, Xxxxx Xxxx, and
Xxxxx Xxxxxx and (ii) in the case of ASI and Holdings, inquiry of Xxxxxx X.
Xxxxxx, Xxxxx X. Xxxxxx, Xxxx X. Xxxxxx, III, and Xxxxxx X. Xxxx. Any matter
that is within the actual knowledge or Constructive Knowledge of any
Shareholder will be deemed to be within the best knowledge of all of the
Shareholders. Any matter that is within the actual knowledge or Constructive
Knowledge of Xxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx, Xxxx X. Xxxxxx, III, or
Xxxxxx X. Xxxx will be deemed to be within the best knowledge of ASI and
Holding.
ARTICLE V.
ADDITIONAL COVENANTS AND AGREEMENTS
35
5.1 CONDUCT OF BUSINESS. During the period from the date of this
Agreement to the Effective Date, except as otherwise contemplated by this
Agreement and except for changes that the Company reasonably determines to be
necessary and prudent business practice that are not material and as to which
the Company gives prior notice to ASI, the Shareholders will cause the
Company to, and the Company will: conduct its respective operations according
to its ordinary and usual course of business; use its commercially reasonable
efforts to preserve substantially intact its respective business
organization; keep available the services of its officers and employees;
maintain its respective present relationships with licensors, suppliers,
distributors, customers and others having significant business relationships
with it; and confer with representatives of ASI to keep them informed with
respect to the general status of the on-going operations of the business of
the Company.
5.2 ACCESS TO INFORMATION. During the period from the date of this
Agreement to the Effective Date, the Shareholders will cause the Company to,
and the Company will: provide access to ASI to the business and properties of
the Company and information concerning their respective financial and legal
condition, as ASI deems necessary or advisable in connection with the
consummation of the transactions contemplated by this Agreement (but such
access will be during normal business hours and will not interfere with
normal operations of the Company); permit ASI and its authorized
representatives, including its independent accountants and counsel, after the
date of this Agreement and until the Effective Date, full access to the
premises, books and records of the Company during normal business hours; and
furnish ASI with such financial and operating data and other information with
respect to the business and properties of the Company, as ASI from time to
time reasonably requests. During the period from the date of this Agreement
to the Effective Date, ASI will provide the Company with access to any
information relating to ASI's and Holdings' financial and legal condition and
such other information concerning ASI and Holdings as reasonably requested by
the Company in connection with the transactions contemplated by this
Agreement.
5.3 CONSENTS AND AUTHORIZATIONS. As soon as practicable, each of
the parties to this Agreement will commence to take all reasonable action to
obtain all authorizations, consents, orders and approvals of all third
parties and of all federal, state and local regulatory bodies and officials
which may be or become necessary for its execution and delivery of, and the
performance of its obligations pursuant to, this Agreement and will cooperate
fully with the other parties in promptly seeking to obtain all such
authorizations, consents, orders and approvals.
5.4 NON-ASSIGNABLE LICENSES, LEASES AND CONTRACTS. As soon as
practicable, the Shareholders and the Company will use their commercially
reasonable efforts to
36
obtain and deliver to ASI at or prior to the Effective Date such consents,
approvals or waivers as are required in order that any contract listed on
SCHEDULE 4.1(i) (other than the contract with First Energy (Ohio Edison), as
to which the provisions of Section 6.1(m) apply) which would be breached or
violated, or would give any other party the right to cancel the same, as a
result of the occurrence of the Merger under this Agreement, will not be so
breached or violated or result in such right of cancellation.
5.5 VOTE OF ESOP PARTICIPANTS. As soon as practicable, the Company
and each of the Shareholders will cause the Company Disclosure Documents to
be prepared and to be delivered to the Persons who have authority under the
terms of the ESOP to vote the Allocated Shares concerning the approval or
non-approval of the Merger, to deliver the ASI Disclosure Documents to such
Persons, and to cause a vote to occur by such Persons concerning the Merger.
As soon as practicable, ASI will prepare the ASI Disclosure Documents and
will make such filings as are necessary to satisfy the registration
requirements of, or an exemption from, the Securities Act of 1933 and
applicable state law. The Company Disclosure Documents are subject to the
approval of ASI and the ASI Disclosure Documents are subject to the approval
of the Shareholders, such approvals not to be unreasonably withheld. The
Independent Fiduciary prior to the Closing will direct the ESOP Trustee not
to cause the ESOP to exercise dissenters' rights under the Business
Corporation Act, Article 5.11. Xxxxxx Xxxxxxx III prior to the Closing will
instruct the Independent Fiduciary to direct the ESOP Trustee to vote all of
his Shares held by the ESOP in favor of the Merger, and will take any
additional steps as may be necessary with respect to such Shares to cause the
Merger to occur.
5.6 NOTIFICATIONS OF EXCEPTIONS. The Company and each of the
Shareholders will notify ASI, within two business days (and in any event
prior to the Closing Date) after any of them has become aware of such
matters, concerning any exception to any of the representations and
warranties set forth in Section 4.1, to the extent any such exception arises,
or the Company or any such Shareholder otherwise becomes aware of such
exception, from the date of this Agreement through the Closing Date. Such
notice will include a description in reasonable detail of the facts and
circumstances that cause there to be an exception to such representations and
warranties ASI and Holding will notify the Company and the Shareholders
Agent, within two business days (and in any event prior to the Closing Date)
after any of them has become aware of such matters, concerning any exception
to any of the representations and warranties set forth in Section 4.2, to the
extent any such exception arises, or ASI or Holding otherwise becomes aware
of such exception, from the date of this Agreement through the Closing Date.
Such notice will include a description in reasonable detail of the facts and
circumstances that cause there to be an exception to such representations and
warranties.
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5.7 STANDSTILL PROVISIONS. During the period from the date of this
Agreement through the Effective Date, except as otherwise contemplated by this
Agreement, the Shareholders will cause the Company not to, and the Company will
not:
(a) make any change in its articles of incorporation or
by-laws;
(b) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(c) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of its stock;
(d) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except in the normal
course of business consistent with past practice in an amount not in excess of
$25,000;
(e) create or assume any mortgage, pledge or other lien or
encumbrance upon any assets or properties whether now owned or hereafter
acquired, except (i) with respect to purchase money liens incurred in
connection with the acquisition of equipment with an aggregate cost not in
excess of $25,000 necessary or desirable for the conduct of the businesses of
the Company, (ii) (A) liens for taxes either not yet due or being contested
in good faith and by appropriate proceedings (and for which contested taxes
adequate reserves have been established and are being maintained) or (B)
materialmen's, mechanics', workers', repairmen's, employees' or other like
liens arising in the ordinary course of business (the liens set forth in
clause (ii) being referred to in this Agreement as "Statutory Liens");
(f) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(g) negotiate for the acquisition of any business or the
start-up of any new business;
(h) merge or consolidate or agree to merge or consolidate with
or into any other corporation or other entity;
(i) waive any material rights or claims, provided that the
Company may negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice;
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(j) commit a material breach or amend or terminate any material
agreement, permit, license or other right;
(k) enter into any other transaction outside the ordinary
course of its business or prohibited under this Agreement; or
(l) increase or commit to any increase in the salary, bonus,
commission or other compensation of any officer, director, employee or agent
of the Company, except as disclosed on SCHEDULE 5.7(k).
Furthermore, the Company will cause the ESOP not to increase the amount of
ESOP-to-Company ESOP Debt, allocate shares to participants outside the
ordinary course, or take any other action regarding the ESOP outside the
ordinary course.
5.8 NO-SHOP. None of the Shareholders or the Company will, and each
of the Shareholders and the Company will cause each of their agents, officers,
directors, trustees or any representative not to, during the period commencing
on the date of this Agreement and ending with the earlier to occur of the
Effective Date or the termination of this Agreement in accordance with its
terms, directly or indirectly:
(a) solicit or initiate the submission of proposals or offers
from any person for,
(b) participate in any discussions pertaining to, or
(c) furnish any information to any person other than ASI or
its authorized agents relating to, any acquisition or purchase of all or a
material amount of the assets of, or any equity interest in, the Company or a
merger, consolidation or business combination involving the Company. If any
of the Shareholders, the Company, or if any agent, officer, director, trustee
or any representative of any of the foregoing receives a proposal or offer
relating to any acquisition or purchase of all or a material amount of the
assets of, or any equity interest in, the Company or a merger, consolidation
or business combination involving the Company, the Shareholders will
immediately notify ASI and will promptly provide to ASI a copy of any
documents relating to such proposal or offer.
5.9 PRESS RELEASES AND ANNOUNCEMENTS. During the period from the
date of this Agreement to the Effective Date, ASI may issue press releases
and may make such public announcements or filings as it reasonably believes
are required by law. The parties have approved the press release to be
published on June 12, 1998, in the form of EXHIBIT 5.9.
39
5.10 RULE 144 SALES. ASI will provide Shareholders with all
information relating to ASI which may be reasonably necessary in order to
permit the Common Stock to be sold in accordance with the terms of the
Lock-Up Agreement and Rule 144.
5.11 TERMINATION OF ESOP. Immediately prior to the Closing Date,
the Company will terminate the ESOP by appropriate action and will provide
evidence of such termination to ASI. After the Effective Date, ASI will
cause all assets of the ESOP (other than the 401(k) assets of the ESOP) to be
distributed to the participants of the ESOP in accordance with the terms of
the ESOP, and will permit such participants to directly rollover the 401(k)
assets of the ESOP (other than the Common Stock in such accounts) to the
401(k) plan of ASI or to receive a distribution of such 401(k) assets. ASI
will use reasonable efforts to obtain a determination letter from the
Internal Revenue Service concerning such termination, and to cause the
foregoing distributions to be made promptly thereafter.
5.12 PAYMENT OF SERP LIABILITY. ASI will cause Surviving
Corporation, within 180 days after the adjustment Date, to pay to Xxxxxx
Xxxxx the liability owing to Xxxxxx Xxxxx under the SERP, as reflected on the
Closing Date Balance Sheet.
5.13 TAX COVENANT. ASI will continue the Company's historic
business or use at least a significant portion of the Company's historic
business assets in a business, in each case as conducted or held by the
Company at the time of the Merger and in each case within the meaning of
Treasury Regulation 1.368-1(d) under Section 368 of the Code.
5.14 GAINSHARE PROGRAM. ASI will cause the surviving Corporation to
pay the "GainShare" to employees under the Company's gainshare plan for the
first quarter of 1998 in July 1998 and for the second quarter in October,
1998, in the amounts set forth in SCHEDULE 5.7(h); no gainshare will be
accrued for the month of June 1998.
5.15 ASSURANCES. Each party will take all actions reasonably
necessary to consummate the transactions contemplated by this Agreement.
ARTICLE VI.
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ASI. The
obligations of ASI and Holdings to consummate the Merger under this Agreement
are subject to the satisfaction or
40
waiver by ASI prior to or on the Effective Date of each of the following
conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company and the Shareholders contained
in this Agreement or in any closing certificate or document delivered to ASI
pursuant to this Agreement are true and correct at and as of the Effective
Date as though made at and as of that time, other than such representations
and warranties as are specifically made as of another date (which
representations and warranties are true and correct at and as of the date
made), and the Company and the Shareholders will each have delivered to ASI a
certificate to that effect.
(b) COMPLIANCE WITH COVENANTS. The Company and the
Shareholders have performed and complied in all material respects with all
covenants of this Agreement to be performed or complied with by them at or
prior to the Effective Date, and the Company and the Shareholders each have
delivered to ASI a certificate to that effect.
(c) ALL PROCEEDINGS TO BE SATISFACTORY. The Articles of
Merger have been filed and accepted by the Texas Secretary of State. ASI has
received certified or other copies of all documents relating to the Company
and the Shareholders incident to the transactions contemplated by this
Agreement as ASI may reasonably request and such documents are reasonably
satisfactory in form and substance to ASI.
(d) OPINION OF COUNSEL FOR THE COMPANY AND THE SHAREHOLDERS.
ASI has received the favorable opinion of Chucker & Reibach, special counsel
to the Company and the Non-ESOP Shareholders, dated the Effective Date,
substantially in the form and to the effect set forth in EXHIBIT 6.1(d).
(e) OPINION OF COUNSEL FOR THE ESOP. ASI has received the
favorable opinion of Xxxxx & Associates, special counsel to the ESOP, such
opinion dated the Effective Date, and substantially in the form and to the
effect set forth in EXHIBIT 6.1(e).
(f ) LEGAL ACTIONS OR PROCEEDINGS. No legal action or
proceeding has been instituted after the date of this Agreement against the
Company or any Shareholder, or against ASI or Holdings, arising by reason of
the Merger pursuant to this Agreement, which is reasonably likely (i) to
restrain, prohibit or invalidate the consummation of the transactions
contemplated by this Agreement or (ii) to have a material adverse effect on
the Company or ASI.
(g) WAIVER OF DISSENTERS' RIGHTS. Each of the Non-ESOP
Shareholders has delivered to ASI, at the time of the signing of this
Agreement, a letter dated as of
41
the date of this Agreement, in form and substance reasonably satisfactory to
ASI, to the effect that each such Non-ESOP Shareholder waives all dissenters'
rights under the Texas Business Corporation Act, Article 5.11.
(h) INVESTOR REPRESENTATION LETTER. Each of the
Shareholders has delivered to ASI, at the time of the signing of this
Agreement, a letter dated as of the date of this Agreement, in form and
substance reasonably satisfactory to ASI, to the effect that each such
Shareholder is knowledgeable about the business of ASI and of the Company.
(i) REGISTRATION RIGHTS AGREEMENTS. The pertinent parties
have entered into Registration Rights Agreement #1 and Registration Rights
Agreement #2.
(j) SUPPORTING DOCUMENTS. On or prior to the Effective
Date, ASI has received copies of the following supporting documents:
(i) (A) copies of the Articles of Incorporation of
the Company, and all amendments thereto, certified as of a recent date by the
Secretary of State of Texas and (B) a certificate of said Secretary dated as
of a recent date as to the due incorporation and good standing of the Company
and (if available in Texas) listing all documents of the Company on file with
said Secretary; and
(ii) certificates of the Secretary or an Assistant
Secretary of the Company, dated the Effective Date and certifying
substantially to the effect (A) that attached thereto is a true and complete
copy of the By-laws of the Company as in effect on the date of such
certification and at all times since December 31, 1997; (B) that attached
thereto is a true and complete copy of resolutions adopted by the Board of
Directors and the Shareholders of the Company authorizing the execution,
delivery and performance of this Agreement and that all such resolutions are
still in full force and effect and are all the resolutions adopted in
connection with the transactions contemplated by this Agreement; (C) that the
Articles of Incorporation of the Company have not been amended since the date
of the last amendment referred to in the certificate (if any) delivered
pursuant to clause (B) above; and (D) as to the incumbency and specimen
signature of each officer of the Company executing this Agreement and any
certificate or instrument furnished pursuant to this Agreement, and a
certificate by another officer of the Company as to the incumbency and
signature of the officer signing the certificates referred to in this
paragraph (ii).
(k) TAX MATTERS. The Shareholders have delivered to ASI
Colorado Tax Representation Letters, in form of EXHIBIT 6.1(k), and an
affidavit of non-foreign status with respect to each Shareholder and the
Company, in the form required by
42
Section 1445 of the Code and the regulations thereunder, signed under
penalties of perjury. The Shareholders understand that such affidavits will
be retained by ASI and will be made available to the Internal Revenue Service
upon request.
(l) GOVERNMENTAL APPROVALS. All consents and approvals
described in Section 5.3 have been obtained, in form and substance reasonably
satisfactory to ASI.
(m) FIRST ENERGY (OHIO EDISON) LETTER. The Company has
obtained from First Energy (Ohio Edison) an executed letter in the form of
EXHIBIT 6.1(m), with only such changes as are satisfactory to ASI in form and
substance.
(n) ESCROW AGREEMENT. The parties have entered into the
Escrow Agreement.
(o) BUY-OUT OF OPTIONS. The Company and the Option Holders
have entered into the Option Buy Out Agreement.
(p) LOCK-UP AGREEMENT. ASI and the Shareholders have
entered into the Lock-Up Agreement.
(q) RETIREMENT OF ESOP DEBT. The ESOP has committed, in a
manner satisfactory to ASI, to using cash consideration received in the
Merger and allocable to the Unallocated Shares to fully retire the
ESOP-to-Company ESOP Debt.
(r) EMPLOYMENT AND RELATED CONTRACTS. Each of Xxxxxx
Xxxxxxx III, Xxxxxx Xxxxxxxx, Xxx XxXxxxxx, Xxxx Xxxxxxxxxx, and Xxx Xxxxxxxx
has entered into an employment agreement with ASI, Xxxxxx Xxxxx has entered
into a Consulting Agreement with ASI, and Xxxxxxx Xxxxxxxxx has entered into
a covenant not to compete, each of which contracts to be in the form of the
various agreements attached as EXHIBIT 6.1(r).
(s) TAX OPINION. ASI has received from Xxxxxxx & Xxxxxx
L.L.C. an opinion, reasonably satisfactory to ASI, to the effect that the
Merger will qualify as a tax-free "reorganization" under Section 368(a)(1)(A)
and (a)(2)(D) of the Code.
(t) DISSENTERS RIGHTS. The ESOP has waived dissenters
rights under the Texas Business Corporation Act, Article 5.11, in a manner
satisfactory to ASI in its sole discretion.
All such documents must be reasonably satisfactory in form and substance to
ASI.
6.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
43
SHAREHOLDERS. The obligations of the Company and the Shareholders to
consummate the Merger under this Agreement are subject to the satisfaction in
all material respects or waiver by the Shareholders' Agent prior to or on the
Effective Date of each of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of ASI and Holdings contained in this
Agreement or in any closing certificate or document delivered to the Company
and/or the Shareholders pursuant to this Agreement are true and correct on
and as of the Effective Date as though made at and as of that date, other
than such representations and warranties as are specifically made as of
another date (which representations and warranties are true and correct at
and as of the date made), and ASI has delivered to the Shareholders and the
Company a certificate to that effect.
(b) COMPLIANCE WITH COVENANTS. ASI has performed and
complied in all material respects with all covenants of this Agreement to be
performed or complied with by ASI and/or Holdings on or prior to the
Effective Date, and ASI has delivered to the Company and the Shareholders a
certificate to such effect.
(c) ALL PROCEEDINGS TO BE SATISFACTORY. The Company and the
Shareholders have received all such counterpart originals or certified or
other copies of all documents relating to ASI incident to the transactions
contemplated by this Agreement and by the Registration Rights Agreement as
the Company and the Shareholders may reasonably request and such documents
are reasonably satisfactory in form and substance to the Company and the
Shareholders.
(d) OPINION OF COUNSEL FOR ASI. The Company and the
Shareholders have received the favorable opinion of Xxxxxxx & Xxxxxx L.L.C.,
counsel to ASI, dated the Effective Date, substantially in the form and to
the effect set forth in EXHIBIT 6.2(d).
(e) LEGAL ACTIONS OR PROCEEDINGS. No legal action or
proceeding has been instituted that is reasonably likely to (i) restrain,
prohibit, violate or otherwise affect the consummation of the transactions
contemplated by this Agreement or (ii) have a material adverse effect on ASI.
(f ) SUPPORTING DOCUMENTS. On or prior to the Effective
Date, the Company, the Shareholders have received copies of the following
supporting documents:
(i) (A) copies of the Articles of Incorporation of
ASI and Holdings, and all amendments thereto, certified as of a recent date
by the Secretary of
44
State of the State of Colorado, in the case of ASI, or by the Secretary of
State of the State of Texas, in the case of Holdings, and (B) a certificate
of said Secretaries dated as of a recent date as to the due incorporation and
good standing of ASI and Holdings, as the case may be, and listing all
documents of the relevant company on file with said Secretary; and
(ii) a certificate of the Secretary or an Assistant
Secretary of each of ASI and Holdings dated the Effective Date and certifying
substantially to the effect (A) that attached thereto is a true and complete
copy of the By-laws of the particular company as in effect on the date of
such certification and at all times since December 31, 1997 (or since
inception, in the case of Holdings); (B) that attached thereto is a true and
complete copy of resolutions adopted by the Board of Directors of the
particular company authorizing the execution, delivery and performance of
this Agreement, and that all such resolutions are still in full force and
effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement; (C) that the Articles of
Incorporation of the particular corporation have not been amended since the
date of the last amendment referred to in the certificate (if any) delivered
pursuant to clause (B) above; and (D) as to the incumbency and specimen
signature of each officer of the particular company executing this Agreement
and a certification by another officer of such company as to the incumbency
and signature of the officer signing the certificate referred to in this
paragraph (ii).
(g) REGISTRATION RIGHTS AGREEMENTS. The pertinent parties
have entered into Registration Rights Agreement #1 and Registration Rights
Agreement #2.
(h) ESCROW AGREEMENT. The parties have entered into the
Escrow Agreement.
(i) LOCK-UP AGREEMENT. ASI and the Shareholders have
entered into the Lock-Up Agreement.
(j) OPTION BUY OUT AGREEMENT. The Company and the Option
Holders have entered into the Option Buy Out Agreement.
(k) RETIREMENT OF DEBT. ASI has committed, in a manner
satisfactory to Shareholders, to direct the Surviving Corporation to pay the
Company-to-Bank ESOP Debt and the Company-to-Partnership ESOP Debt
immediately following Closing.
(l) LINE OF CREDIT NOTES. The Shareholders' Agent has
received from Surviving Corporation evidence that either (i) the Line of
Credit Notes have been paid in full or provision for such payment at Closing
has been made, or (ii) all personal guarantees of the Line of Credit Notes
have been canceled and delivered to the
45
Shareholder's Agent.
(m) EMPLOYMENT AND RELATED CONTRACTS. ASI has entered into
an employment contract or a consulting agreement with each of Xxxxxx Xxxxxxx
III, Xxxxxx Xxxxxxxx, Xxx XxXxxxxx, Xxxx Xxxxxxxxxx, and Xxx Xxxxxxxx, and
Xxxxxx Xxxxx has entered into a Consulting Agreement with ASI, each of which
contracts to be in the form of the various agreements attached as EXHIBIT
6.1(r).
(n) TAX OPINION. The Company and the Shareholders have
received from Xxxxxxx & Xxxxxx L.L.C. an opinion, reasonably satisfactory to
the Shareholders' Agent, to the effect that the Merger will qualify as a
tax-free "reorganization" under Section 368(a)(1)(A) and (a)(2)(D) of the
Code.
All such documents must be reasonably satisfactory in form and substance to
the Company and the Shareholders.
ARTICLE VII.
CLOSING; TERMINATION
7.1 CLOSING. The consummation of the transactions contemplated by
this Agreement ("Closing") will occur at the offices of the Company on the
date and time specified by ASI by notice given to the Shareholders' Agent
(the "Closing Date"), but such date must be between June 26, 1998, and July
10, 1998, inclusive, and the actual Closing Date must be specified by ASI by
notice to the Shareholders' Agent not later than one business day prior to
the Date of Closing.
7.2 DELIVERY OF CERTIFICATES. At the Closing, (a) the Shareholders
will deliver to ASI the certificates representing the Shares, duly endorsed
in blank by the Shareholders, or accompanied by blank stock powers, and with
all necessary transfer tax and other revenue stamps, acquired at the
Shareholders' expense, affixed and canceled, and (b) ASI will deliver to the
Shareholders certificates representing the Common Stock and ASI's check or
checks in payment of the cash portion of the Merger consideration. Any cash
payments will be wired to the Shareholders pursuant to wiring instructions
provided by the Shareholders' Agent. The Shareholders agree promptly to cure
any deficiencies with respect to the endorsement of the stock certificates or
other documents of conveyance with respect to such Shares or with respect to
the stock powers accompanying any Shares.
7.3 TERMINATION. (a) If the Closing has not occurred by July 10,
1998, any party may terminate this Agreement by notice to the other parties,
but any such termination will not relieve any party (including the
terminating party) from liability for any breach of this Agreement occurring
prior to such termination.
46
(b) If on June 26, 1998, the closing price of the Common Stock on
Nasdaq, when multiplied by the number of shares of Common Stock to be issued
to the ESOP under Section 2.6(a)(ii), plus the cash payable to the ESOP under
Section 2.6(a)(ii), does not equal at least $5,266,123 (such closing price
being referred to as the "Target Price"), then ASI, upon notice to the
Shareholders' Agent (given not later than June 27, 1998), may terminate this
Agreement, without liability (but any such termination will not relieve any
party, including ASI, from liability for any breach of this Agreement
occurring prior to such termination), or ASI may issue such number of
additional shares of Common Stock to the ESOP such that the sum of the shares
of Common Stock to be issued to the ESOP under Section 2.6(a)(ii), plus such
number of additional shares of Common Stock, multiplied by the closing price
of the Common Stock on the Business Day prior to the Closing Date, plus the
cash payable to the ESOP under Section 2.6(a)(i), equals $5,266,123. If,
under the provisions of the first sentence of this Section 7.3(b), ASI does
not elect to terminate this Agreement on June 27, 1998, or to issue such
additional shares of Common Stock, and if on none of the Business Days
between June 26, 1998, and July 9, 1998, inclusive (the "Closing Period"),
the closing price of the Common Stock on Nasdaq equals or exceeds the Target
Price, then ASI, upon notice to the Shareholders' Agent (given not later than
July 10, 1998), may terminate this Agreement, without liability (but any such
termination will not relieve any party, including ASI, from liability for any
breach of this Agreement occurring prior to such termination). If ASI, under
the provisions of the first sentence of this Section 7.3(b), has not elected
to terminate this Agreement on June 27, 1998 or to issue such additional
shares of Common Stock, and if at any time during the Closing Period, the
Target Price is reached, ASI will have no right to terminate this Agreement
under this Section 7.3(b), and, if all the other conditions to ASI's
obligations to consummate the transactions under this Agreement have been
satisfied, ASI will be obligated to consummate the transactions contemplated
by this Agreement on the next Business Day after such Target Price is reached
during the Closing Period. Under any circumstance in which a closing occurs
and the closing price of the Common Stock on Nasdaq on the Business Day prior
to the Closing Date does not equal or exceed the Target Price, then ASI will
issue such number of additional shares of Common Stock such that the sum of
the shares of Common Stock to be issued to the ESOP under Section 2.6(a)(ii),
plus such number of additional shares of Common Stock, multiplied by the
closing price of the Common Stock on Nasdaq on the Business Day prior to the
Closing Date, plus the cash payable to the ESOP under Section 2.6(a)(i),
equals $5,266,123.
ARTICLE VIII.
POST-CLOSING COVENANTS
The parties agree as follows with respect to the period following Closing.
47
8.1 FURTHER ASSURANCES. If after Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of
the parties will take such further action as any other party reasonably may
request, all at the sole cost and expense of the requesting party (unless the
requesting party is entitled to indemnification for such action under Article
IX). Such further action includes, but is not limited to, the execution and
delivery of additional instruments and documents and the use of the
Shareholders' reasonable best efforts to obtain any requested consent or
approval from a Principal Customer.
8.2 COOPERATION. If and for so long as any party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (a) any
transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing
Date involving any of the Company's assets or business, each of the other
parties will cooperate with such party and its counsel in the contest or
defense, make available their personnel, and provide such testimony and
access to their books and records as will be reasonably necessary in
connection with the contest or defense, all at the sole cost and expense of
the contesting or defending party (unless the contesting or defending party
is entitled to indemnification under Article IX).
8.3 POST-CLOSING ANNOUNCEMENTS. Following Closing, the
Shareholders will not issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
approval of ASI and the Shareholders' Agent.
8.4 FINANCIAL STATEMENTS. The Shareholders will, upon request of
ASI, cooperate with ASI to produce such historical and on-going financial
statements and audits concerning the Company as ASI may request, all at the
sole cost and expense of ASI.
8.5 ACCESS TO BOOKS AND RECORDS. Following the Closing, ASI and
Holdings will permit the Shareholders and their authorized representatives,
during normal business hours and upon reasonable notice, to have access to,
and examine and make copies of, all books and records of the Company which
relate to transactions or events occurring on or prior to the Closing Date
and transactions or events occurring subsequent to the Closing Date which are
related to or arise out of transactions or events occurring prior to the
Closing Date, to the extent reasonably necessary for the Shareholders to
defend any claim for indemnification under this Agreement, or to prepare any
tax return or effectively defend any tax audit or claim relating to periods
prior to the Closing.
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8.6 CERTAIN TAX MATTERS.
(a) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. ASI
will prepare or cause to be prepared and filed or caused to be filed all Tax
Returns for the Company for all periods ending on or prior to the Closing
Date which are filed after the Closing Date. Tax returns relating to periods
ending on or prior to the Closing Date will be prepared by KPMG Peat Marwick.
ASI will permit the Shareholders' Agent to review and comment on each such
Tax Return described in the preceding sentence prior to filing. In the event
the Shareholders' Agent does not agree with any Tax Return prepared by ASI,
Shareholders' Agent will notify ASI within 20 days after receipt of such Tax
Return. Upon ASI's receipt of such notice, the parties will endeavor to
reach an agreement on the disputed item(s) in the Tax Return. If ASI and the
Shareholders' Agent are unable to resolve the dispute, then the Shareholders
will reimburse ASI for the Taxes of the Company that Shareholders' Agent
believes are due. Any excess disputed amount will be submitted by ASI as a
claim to the Escrow Agent and will be resolved in accordance with the terms
of the Escrow Agreement. The Shareholders will reimburse ASI for any
undisputed Taxes of the Company and its subsidiaries with respect to such
periods within 15 days after payment by ASI of such Taxes to the extent such
Taxes are not reflected in the reserve for Tax liability (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) shown on the face of the Closing Date Balance Sheet.
(b) COOPERATION ON TAX MATTERS. ASI, Holdings, the
Shareholders, and the Shareholders' Agent will cooperate fully, as and to the
extent reasonably requested by the other parties, in connection with the
filing of Tax Returns pursuant to this Section and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation will include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided under this Subsection. ASI and the Shareholders agree: (i) to
retain all books and records with respect to Tax matters pertinent to the
Company relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the extent
notified by ASI or the Shareholders' Agent, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (ii) to give the other parties
reasonable written notice prior to the transferring, destroying or discarding
of any such books and records, and, if any of the other parties so request,
to allow such other parties to take possession of such books and records.
ASI, the Shareholders, and the Shareholders' Agent further agree, upon
request, to use their best efforts to obtain any certificate or other
document from any governmental authority or any other Person as may be
necessary to mitigate, reduce or
49
eliminate any Tax that could be imposed, including without limitation, with
respect to the transactions contemplated by this Agreement.
8.7 EMPLOYEE MATTERS. The employees of the Company will become
employees of the Surviving Corporation following the Merger, and such
employment will be employment at will or in accordance with contracts in
effect at the Effective Date. Surviving Corporation recognizes that employees
of the Company have accrued unused vacation as of the date of the Merger.
Surviving Corporation acknowledges the liability for accrued unused vacation
and will permit such employees to use such unused vacation time over a
reasonable period after the Closing. Thereafter, for so long as the
employees of the Surviving Corporation are employed by the Surviving
Corporation, and except to the extent that any of them may have written
employment agreements with ASI that provide to the contrary, (a) ASI may
cause them to be paid, depending on their duties and responsibilities, in
accordance with the compensation policies of ASI, with respect to its
employees generally; (b) the Company's employee benefit plans may be
terminated as soon as practicable after the Effective Date; and (c) to the
extent that the Company's employee benefit plans are so terminated, the
employees of the Company will be entitled to participate in the benefit plans
that ASI maintains for its employees generally on substantially the same
terms and conditions as other employees of ASI. For this purpose, each "year
of service" with the Company will be treated as a "year of service" with ASI.
ARTICLE IX.
REMEDIES FOR BREACHES OF THIS AGREEMENT
9.1 INDEMNIFICATION BY ASI. From and after Closing, ASI will
indemnify, defend and hold harmless the Shareholders and their heirs,
personal representatives, successors and permitted assigns (the "Shareholder
Indemnitees") from and against any and all Adverse Consequences resulting or
arising from, relating to or incurred in connection with: (a) any breach of
any representation, warranty or covenant of ASI or Holdings contained in this
Agreement or in any of the Other ASI Agreements, and (b) any broker's or
finder's fee or other commission resulting from any services alleged to have
been rendered to or at the request of ASI or Holdings with respect to this
Agreement or any of the transactions contemplated by this Agreement. The
foregoing indemnification obligations will survive the Closing except to the
extent limited by Section 11.13.
9.2 INDEMNIFICATION BY SHAREHOLDERS. From and after Closing, the
Non-ESOP Shareholders and, subject to Section 9.5(a), the ESOP will
indemnify, defend and hold harmless ASI, Holdings, the Company and their
respective officers, directors and controlling persons (the "ASI
Indemnitees") from and against any and all Adverse Consequences resulting or
arising from, relating to or incurred in connection with: (a)
50
any breach of any representation, warranty, or covenant of any of the
Shareholders contained in this Agreement or in any of the Other Shareholder
Agreements, (b) any broker's or finder's fee or other commission resulting
from any services alleged to have been rendered to or at the request of any
of the Shareholders or the Company with respect to this Agreement or any of
the transactions contemplated by this Agreement (other than the fee payable
to Xxxxxx as described in Section 4.1(s)); and (c) any Environmental
Obligation incurred by any ASI Indemnitee, resulting or arising from,
relating to or incurred in connection with (i) any event, fact, circumstance
or condition (to the extent any such event, fact, circumstance or condition
occurred or existed at or prior to the Closing and even if the Adverse
Consequence manifests itself after the Closing) and (ii) any act or omission
(to the extent such act or omission occurred prior to the Closing Date and
even if the Adverse Consequence manifests itself after the Closing), (d) any
Adverse Consequence incurred by any ASI Indemnitee, resulting or arising
from, relating to or incurred in connection with (i) the Company's purchase,
sale, or ownership of shares of common stock of Conic Systems, Inc. or of
CANTEX Conversion Services, Inc., (ii) the operations, property ownership,
tax obligations, Legal Requirements, management, or contract obligations of
Conic Systems, Inc. or of CANTEX Conversion Services, Inc., including any and
all claims against any ASI Indemnitee by any past or present shareholder,
officer, director, employee, consultant, manager, agent, creditor of Conic
Systems, Inc. or of CANTEX Conversion Services, Inc., whether any event,
fact, circumstance, condition, act or omission, giving rise to such Adverse
Consequence occurs or manifests itself before or after the Closing Date, and
(e) any Adverse Consequence incurred by any ASI Indemnitee, resulting or
arising from, relating to or incurred in connection with any claim made or to
be made after the date of this Agreement by Xxxxxxx X. Xxxxx against any ASI
Indemnitee (the "Xxxxx Claim"), including claims for lost wages and benefits,
attorney's fees, costs of court, interest, exemplary damages, stock, and
stock option rights. The foregoing indemnification obligations will survive
the Closing except to the extent limited by Section 11.13.
9.3 [RESERVED.]
9.4 NOTICE OF CLAIM; RIGHT TO PARTICIPATE IN AND DEFEND THIRD PARTY
CLAIM.
(a) If any indemnified party receives notice of the
assertion of any claim, the commencement of any suit, action or proceeding,
or the imposition of any penalty or assessment by a third party in respect of
which indemnity may be sought under this Agreement (a "Third Party Claim"),
and the indemnified party intends to seek indemnity under this Agreement,
then the indemnified party will promptly provide the indemnifying party with
prompt written notice of such Third Party Claim, but in any event not later
than 30 calendar days after receipt of such notice of Third Party Claim. The
failure by an indemnified party to notify an indemnifying party of a Third
Party Claim will
51
not relieve the indemnifying party of any indemnification responsibility
under this Article, except to the extent, if any, that such failure
prejudices the ability of the indemnifying party to defend such Third Party
Claim.
(b) The indemnifying party will have the right to control
the defense, compromise or settlement of a Third Party Claim with its own
counsel (reasonably satisfactory to the indemnified party) if the
indemnifying party delivers written notice to the indemnified party within
seven days following the indemnifying party's receipt of notice of a Third
Party Claim from the indemnified party which acknowledges its obligations to
indemnify the indemnified party with respect to such Third Party Claim in
accordance with this Article; provided, however, that the indemnifying party
will not enter into any settlement of any Third Party Claim which would
impose or create any obligation or any financial or other liability on the
part of the indemnified party if such liability or obligation (i) requires
more than the payment of a liquidated sum or (ii) is not covered by the
indemnification provided to the indemnified party under this Agreement. In
its defense, compromise or settlement of any Third Party Claim, the
indemnifying party will timely provide the indemnified party with such
information with respect to such defense, compromise or settlement as the
indemnified party may request, and will not assume any position or take any
action that would impose an obligation of any kind on, or restrict the
actions of, the indemnified party. The indemnified party will be entitled
(at the indemnified party's expense) to participate in, but not control, the
defense by the indemnifying party of any Third Party Claim with its own
counsel.
(c) If the indemnifying party does not undertake the
defense, compromise or settlement of a Third Party Claim in accordance with
subsection (b) of this Section, the indemnified party will have the right to
control the defense or settlement of such Third Party Claim with counsel of
its choosing; provided, however, that the indemnified party will not settle
or compromise any Third Party Claim without the indemnifying party's prior
written consent (which consent will not be unreasonably withheld), unless the
terms of such settlement or compromise release the indemnified party or the
indemnifying party from any and all liability with respect to the Third Party
Claim. The indemnifying party will be entitled (at the indemnifying party's
expense) to participate in the defense of any Third Party Claim with its own
counsel.
(d) The indemnified party will assert any indemnifiable
claim under this Agreement that is not a Third Party Claim by promptly
delivering notice of such claim to the indemnifying party. If the
indemnifying party does not respond to such notice within 60 days after its
receipt, it will have no further right to contest the validity of such claim.
(e) Notwithstanding the foregoing provisions, ASI will have
the right to control the prosecution of the declaratory judgment action
involving the Xxxxx Claim and the defense of any claims brought by Xxxxxxx X.
Xxxxx prior to or after the date of
52
this Agreement, with counsel reasonably acceptable to the Shareholders'
Agent, and to settle or compromise the Xxxxx Claim, with the consent of the
Shareholders' Agent, such consent not to be unreasonably withheld. Any costs
incurred by ASI involving the Xxxxx Claim, including attorneys' fees and
costs of settlement will be an indemnifiable expense of the Shareholders.
9.5 LIMITATIONS.
(a) The maximum aggregate amount that the ASI Indemnitees
may recover on account of all Adverse Consequences under this Article IX will
be limited to $9,000,000, and the maximum aggregate amount that the ASI
Indemnitees may recover from the ESOP is that portion of the ESOP's cash and
Common Stock received at Closing that has been deposited into Escrow pursuant
to the terms of the Escrow Agreement.
(b) The indemnification provisions of this Article will
constitute the exclusive remedy by either party against the other arising by
virtue of a breach of any representation, warranty, or covenant under this
Agreement, absent fraud. The foregoing provision is not intended to limit
any party from seeking recourse against the other party under any law that
provides a cause of action that is independent of the rights granted by this
Agreement.
(c) Notwithstanding the provisions of this Article, upon the
Effective Date, the Company will not have any duty, except to the extent
covered by insurance, to indemnify any of the Shareholders (whether in their
capacities as officers, directors or otherwise) or to contribute funds for
the benefit of any of the Shareholders, under the articles of incorporation
or bylaws of the Company, under any resolution, contract, insurance policy,
arrangement or understanding, or under the provisions of any statute
governing the Company, or otherwise, to the extent that the facts,
circumstances, or events that otherwise would give rise to a claim of
indemnification or contribution constitute a breach of a representation,
warranty or covenant under this Agreement, regardless of any limitation
period under Section 11.13(b) or (c).
(d) The amounts for which the indemnifying party is liable
to the indemnified party under this Article will be increased by interest on
the amount of Adverse Consequences, at a rate equal to two percentage points
above the Prime Rate, accrued from the Liquidation Date.
(e) No ASI Indemnitee will be entitled to indemnification
for a breach by any of the Shareholders of a representation and warranty in
Section 4.1 to the extent that (i) any of Xxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx,
Xxxx X. Xxxxxx, III, or Xxxxxx X. Xxxx at or prior to the Closing had actual
knowledge of the fact or circumstance constituting
53
such breach and at or prior to the Closing had actual knowledge that such
fact or circumstance constituted a breach, and (ii) no Shareholder and none
of Xxxxxx Xxxxx, Xxxxxx Xxxxxxx III, and Xxxxx Xxxxxx had actual knowledge of
such fact or circumstances.
9.6 BASKET AND DEDUCTIBLE. Except as provided in the immediately
succeeding sentence, no indemnified party will be entitled to indemnification
from an indemnifying party under Sections 9.1 or 9.2 unless and until the
aggregate amount of Adverse Consequences with respect to which all ASI
Indemnitees or Shareholder Indemnitees, as the case may be, would otherwise
be entitled to assert under Section 9.1 or 9.2, whichever is applicable,
exceeds $200,000, at which point the indemnified party will be entitled to
indemnification for all Adverse Consequences. ASI will be entitled to seek
indemnification with respect to the Xxxxx Claim without regard to the
foregoing provision, and any amount paid to ASI with respect to the Xxxxx
Claim will not count against the $200,000 basket provided for in the
preceding sentence.
9.7 OBLIGATIONS OF SHAREHOLDERS. All of the obligations of the
Shareholders under this Agreement, including obligations arising from any
breach of a representation and warranty under Section 4.1 or Section 4.2 and
indemnification obligations under Section 9.2, are (a) except as provided in
this Section 9.7, joint and several as between the Shareholders as a group on
the one hand, and ASI or Holdings on the other hand, and (b) are pro rata
(based upon the number of Shares owned by such Shareholder over the total
number of Shares owned by all Shareholders) as among the Shareholders, except
that once the ESOP's interest in the Escrow has been exhausted to cover
indemnification claims of ASI Indemnitees, the Non-ESOP Shareholders will be
liable on a joint and several basis as between such Non-ESOP Shareholders
and, as among Non-ESOP Shareholders, will be liable on a pro rata basis
(based on the number of Shares owned by such Non-ESOP Shareholder over the
total number of Shares owned by all Non-ESOP Shareholders (such that the ASI
Indemnitees will be indemnified with respect to all Adverse Consequences
(subject to Sections 9.5(a) and 9.6) even if recourse against the ESOP may be
limited). Notwithstanding the foregoing, the obligations of the Shareholders
are several as to any breach of a representation or warranty set forth in the
first three sentences of Section 4.1(c) and in Section 4.1(d)(i) and (ii).
9.8 SHAREHOLDER WAIVER.
(a) Effective on the Effective Date, without any further
action required by any party, the Shareholders (but with respect to the ESOP
only to the extent not prohibited by section 410 of ERISA) waive (the
"Waiver") any and all obligations, claims, liabilities, actions, suits,
proceedings or demands of any kind or character, including but not limited
to, claims for indemnification, which any of such Shareholders
54
now has or may hereafter have against the Company based upon events, actions
or omissions occurring or claims arising prior to the date of this Agreement,
whether or not such Shareholder has knowledge of such claims (the "Claims").
The Waiver includes, but is not limited to, Claims arising under any (i)
agreement, arrangement, or understanding (whether or not in writing), (ii)
any articles of incorporation, certificate of incorporation, bylaws or other
documents, and (iii) under common law, and any Claims for indemnification
against the Company which might arise as a result of a claim made against any
Shareholder by any third party or by any other Shareholder.
(b) In connection with the Waiver each Shareholder represents
and warrants to the Company as follows:
(i) Such Shareholder has received independent legal
advice from his or its attorneys, to the extent that such Shareholder has deemed
necessary, with respect to the advisability of making the Waiver.
(ii) Except for the representations and warranties
contained in this Section 9.6, neither the Company, nor any agent, employee,
representative or attorney for the Company, has made any statement or
representation to such Shareholder to induce such Shareholder in making the
Waiver, and none of such Shareholders has relied upon any such statement,
representation or promise of the Company, or any agent, employee, representative
or attorney for the Company, in making the Waiver.
(iii) Such Shareholder has made such investigation of the
facts pertaining to the Waiver and of all the matters pertaining to it as he or
it deemed necessary, and no such Shareholder has been induced by any promise or
representation by the Company or any of their respective agents, employees,
representatives or attorneys with respect to any such matter.
(iv) Such Shareholder has read this Section 9.6 and
understands its contents.
(v) In making the Waiver, such Shareholder assumes the
risk of any misrepresentation, concealment or mistake, and if such Shareholder
should subsequently discover that any fact was concealed from him or it, or that
his or its understanding of the facts or of the law was incorrect, such
Shareholder will not be entitled to set aside the Waiver by reason of this
Agreement. The Waiver is intended to be final and binding regardless of any
claims of misrepresentations, promise made without the intention of performance,
concealment of fact, mistake of fact or law, or any other circumstances
whatsoever.
55
(c) Each Shareholder covenants not to commence any action,
lawsuit or other legal proceeding in law or in equity against the Company based
upon or arising out of any fact or matter covered by the Waiver.
(i) Should any Shareholder, at any time after such
Shareholder makes the Waiver, commence any action, lawsuit or other legal
proceeding, in law or in equity or otherwise, in breach of the covenant not to
xxx contained in this Section 9.6, such Shareholder by this Agreement agrees to
indemnify and hold harmless the Company from and against any liability, loss,
cost, expense or judgment arising out of or occasioned by such action, including
but not limited to, the amount of any judgment or settlement entered into in
resolution of said action and attorneys' fees.
(ii) If any Shareholder, at any time after such
Shareholder makes the Waiver, commences any action, lawsuit or other legal
proceeding, in law or in equity or otherwise against any Person, and in
connection with such action, lawsuit or other legal proceeding, such Person
makes a claim for indemnification against the Company, such Shareholder by this
Agreement agrees to indemnify and hold harmless the Company from and against any
liability, loss, cost, expense or judgment arising out of or occasioned by such
action by such Person, including but not limited to, the amount of any judgment
or settlement entered into in resolution of said action and attorneys' fees.
(d) Each Shareholder represents and warrants that he or it has
not prior to the date of this Agreement assigned or transferred or purported to
assign or transfer, to any person or entity, any claims or matters released
pursuant to the Waiver. Each Shareholder further covenants that he or it will
not at any time after the date of this Agreement, assign or transfer or purport
to assign or transfer, to any person or entity, any claims or matters, known or
unknown, released pursuant to the Waiver. Each Shareholder by this Agreement
agrees to indemnify and hold harmless the Company from and against any loss,
cost or expense, including but not limited to, attorneys' fees, arising out of
or occasioned by, or arising in connection with, any such assignment or
transfer, or any purported such assignment or transfer, of any claims or other
matters released pursuant to the Waiver.
(e) The releases made by the Shareholders pursuant to the
Waiver will inure to the benefit of and will be binding upon the heirs, personal
representatives, successors and assigns of the Company.
9.9 ESCROW WITHDRAWAL. The ASI Indemnitees will be required to seek
recourse first against the cash in the Escrow Account and then against the
shares of Common Stock deposited in the Escrow Account before seeking recourse
directly
56
against the Shareholders for any indemnification obligation of the
Shareholders under this Article. The ASI Indemnitees may, however,
immediately seek recourse directly against the Shareholders, other than the
ESOP, if the sum of cash held in the Escrow Account plus the Credited Value
of the escrowed Common Stock, determined as of the Liquidation Date, of any
claim by the ASI Indemnitees, is less than the amount reasonably claimed by
all ASI Indemnitees under all outstanding claims as to which a Liquidation
Date has occurred. Notwithstanding the existence of an Escrow Account,
nothing will prevent the Shareholders from paying cash in satisfaction of
their indemnification obligations under this Article. The ASI Indemnitees
right to seek recourse against the ESOP is limited to the amount of cash and
Common Shares deposited by the ESOP into the Escrow Account.
9.10 SHAREHOLDER ACKNOWLEDGMENT.
TO THE EXTENT THE PROVISIONS OF THIS AGREEMENT MAY PROVIDE FOR INDEMNIFICATION
FOR AN ASI INDEMNITEE'S OWN NEGLIGENT ACTS, EACH SHAREHOLDER ACKNOWLEDGES THAT
IT UNDERSTANDS AND ACCEPTS SUCH PROVISIONS.
ARTICLE X.
ALTERNATIVE DISPUTE RESOLUTION
10.1 MEDIATION. If a dispute arises under or in connection with this
Agreement, including, without limitation, those involving claims for specific
performance or other equitable relief, notice must be given pursuant to Section
11.6. After such notice has been given by one party to the other, the parties
in good faith will attempt to negotiate or mediate a resolution of the dispute
with the aid of a mediator who has been mutually agreed upon by the parties.
10.2 ARBITRATION. If such efforts provided for in Section 10.1 do not
within 30 days resolve the dispute, upon demand of any party, whether made
before or after the institution of any judicial proceeding, the dispute will be
resolved by binding arbitration under the Commercial Arbitration Rules of the
American Arbitration Association. Institution of a judicial proceeding by a
party does not waive the right of that party to demand arbitration under this
Agreement, provided that arbitration is commenced within 70 days after such
judicial proceedings are commenced. Disputes may include, without limitation,
tort claims, counterclaims, claims brought as class actions, claims arising from
documents executed in the future, or claims arising out of or connected with the
transactions contemplated by this Agreement and the Other ASI Agreements and
Other Shareholder Agreements. The American Arbitration Association will choose
one arbitrator to hear the parties and settle any dispute. All arbitration
hearings will be conducted in Kansas City, Missouri. Any pre-trial discovery
and/or depositions will be
57
conducted in the venue of the party against whom discovery is sought or in
the venue of the party being deposed, respectively. All applicable statutes
of limitation will apply to any dispute. The arbitrator will have no power
to award punitive or exemplary damages, to ignore or vary the terms of this
Agreement or any Other ASI Agreement or Other Shareholder Agreement, and will
be bound to apply controlling law. The Shareholders and ASI each will pay
for one-half of the arbitrator's fees and expenses and each such party will
bear its own costs and expenses incurred in connection with the arbitration,
except that the arbitrator will award either party reimbursement of its share
of the costs and expenses of arbitration, such party's costs and expenses
(including attorneys' fees and expenses), and any special or extraordinary
fees or costs incurred by the Escrow Agent in connection with any such
arbitration or dispute, if the other party commences or conducts the
arbitration in bad faith. A judgment upon the award may be entered in any
court having jurisdiction. Notwithstanding anything to the contrary
contained in this Section 10.2, the parties preserve, without diminution,
certain remedies that any of them may employ or exercise freely, either
alone, in conjunction with, or during a dispute. The parties to this
Agreement have the right to proceed in any court of proper jurisdiction or by
self-help to exercise or prosecute the following remedies, as applicable: (i)
all rights of self-help including peaceful occupation of real property and
collection of rents, set off and peaceful possession of personal property;
(ii) obtaining provisional or ancillary remedies including temporary
injunctive relief, sequestration, garnishment, attachment, appointment of a
receiver and filing an involuntary bankruptcy proceeding; and (iii) when
applicable, a judgment by confession of judgment. All awards of permanent
injunctive relief may be awarded only by the arbitrator. Preservation of
these remedies does not limit the power of an arbitrator to grant similar
remedies that may be requested by a party in a dispute.
ARTICLE XI.
MISCELLANEOUS
11.1 NO THIRD-PARTY BENEFICIARIES. This Agreement will not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
11.2 ENTIRE AGREEMENT. This Agreement (including the Other Shareholder
Agreements and Other ASI Agreements) constitutes the entire agreement among the
parties and supersedes any prior understandings, agreements or representations
by or among the parties, written or oral, to the extent they relate in any way
to the subject matter of this Agreement.
11.3 SUCCESSION AND ASSIGNMENT. This Agreement will be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. At or after the Closing, any party may assign his or its
rights under this
58
Agreement as permitted by law, including, without limitation, any assignment
of any claim of indemnification to any debt or equity financing source, but
no assignment will release the assigning party of his or its obligations
under this Agreement.
11.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original and all of which together
will be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the execution
of a counterpart of this Agreement.
11.5 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
11.6 NOTICES. All notices, requests, demands, claims, and other
communications under this Agreement will be in writing. Any notice, request,
demand, claim, or other communication under this Agreement will be deemed duly
given only if it is sent by registered or certified mail, return receipt
requested, postage prepaid, or by courier, telecopy or facsimile, and addressed
to the intended recipient as set forth below:
If to the Shareholders or the
Company, to Shareholders'
Agent at:
Copy to:
Xxxxxx Xxxxx Chucker & Reibach
________________________ 0 0/0 Xxxxx Xxxxxxxx Xxxxxx
________________________ Xxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Telecopy: Telecopy : (000) 000-0000
and to the ESOP at: Copies to:
Consulting Fiduciaries, Inc.
________________________ 0000 Xxxxxxxxxx Xxxx
________________________ Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxx
Telecopy: (000) 000-0000
Xxxxx & Associates
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxx
59
Telecopy: (000) 000-0000
If to ASI or Holdings: Copy to:
Analytical Surveys, Inc. Xxxxxxx & Xxxxxx L.L.C.
000 Xxxxx Xxxxxxxx Xxxxxx 000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, Xxxxxxx 00000 Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx Attn: Xxxxx X. Xxxx, Esq.
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
Notices will be deemed given three Business Days after mailing if sent by
certified mail, when delivered if sent by courier, and one Business Day after
receipt of confirmation by person or machine if sent by telecopy or facsimile
transmission (except that, solely for purposes of the notice provided for in
Sections 7.1 and 7.3(b), a telecopied notice will be deemed given on the same
day it is sent if such day is a Business Day or on the next Business Day if such
day is not a Business Day). Any party may change the address to which notices,
requests, demands, claims and other communications under this Agreement are to
be delivered by giving the other parties notice in the manner set forth in this
Agreement.
11.7 GOVERNING LAW. This Agreement will be governed by and construed
in accordance with the domestic laws of the State of Texas without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Texas or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of Texas.
11.8 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement will be valid unless the same is in writing and signed by ASI,
Holdings and all of the Shareholders (unless signature is only required by the
Shareholders' Agent pursuant to Section 3.1). No waiver by any party of any
default, misrepresentation or breach of warranty or covenant under this
Agreement, whether intentional or not, will be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant under
this Agreement or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence, and no waiver will be effective unless set forth in
writing and signed by the party against whom such waiver is asserted.
11.9 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction will not affect
the validity or enforceability of the remaining terms and provisions of this
Agreement or the validity or
60
enforceability of the offending term or provision in any other situation or
in any other jurisdiction.
11.10 EXPENSES. Except as otherwise provided in this Agreement, ASI,
Holdings, the Company, and each of the Shareholders will each pay any and all
fees and expenses incurred by it, or him or them in connection with the
negotiation, preparation, execution and performance of this Agreement. ASI
acknowledges that the fees and expenses of Chucker & Reibach have been incurred
by the Company and not the Shareholders.
11.11 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement will be construed as if drafted
jointly by the parties and no presumption or burden of proof will arise favoring
or disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. The word "including" will mean including without limitation.
The parties intend that each representation, warranty and covenant contained in
this Agreement will have independent significance. If any party breaches any
representation, warranty or covenant contained in this Agreement in any respect,
the fact that there exists another representation, warranty or covenant relating
to the same subject matter (regardless of the relative levels of specificity)
which the party has not breached will not detract from or mitigate the fact that
the party is in breach of the first representation, warranty or covenant.
11.12 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated in this Agreement by
reference and made a part of this Agreement.
11.13 SURVIVAL. The representations and warranties made in this
Agreement will survive the Closing Date until two years after the Closing Date,
except that:
(a) the representations and warranties of the Shareholders in
Sections 4.1(a), (b), (c), (d)(ii)(A) and d(iii)(A) will survive forever;
(b) the representations and warranties of ASI and Holdings in
Sections 4.2(a), (b), (c) (but only as to clauses (i) and (iii) of Section
4.2(c)), (d), (f), and (i) will survive forever; and
(c) the representations and warranties of the Shareholders in
Sections 4.1(g) and (n) will survive until the expiration of the applicable
statutes of limitations with respect to any such claims that could be brought
regarding such matters (including any extensions of any statutes of
limitations), plus a period of 60 days.
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No party will have any obligation to indemnify any person pursuant to this
Agreement with respect to any breach of a representation or warranty unless a
specific claim has been validly made under this Agreement on or prior to the
applicable period set forth above, except that, if a party has a reasonable
basis to believe that an indemnifiable claim will arise and gives notice to the
other party concerning such matter within the applicable period set forth above,
then all rights of such party to seek indemnification with respect to such
matter will survive.
The parties to this Agreement have executed this Agreement as of the date
first above written.
ASI:
ANALYTICAL SURVEYS, INC.
By:
-----------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
HOLDINGS:
SURVEYS HOLDINGS, INC.
By:
-----------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
SHAREHOLDERS:
EMPLOYEE STOCK OWNERSHIP AND 401(k) TRUST
By:
-----------------------------
Name: Xxxx Xxxxxx
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Title: Trustee
THE XXXXX FAMILY LIMITED PARTNERSHIP
By:
------------------------------------
Xxxxxx Xxxxx, General Partner
By:
------------------------------------
Xxxxxx Xxxxx, General Partner
THE XXXXXXXXX FAMILY LIMITED PARTNERSHIP
By:
----------------------------------------
Xxxxxxx Xxxxxxxxx, General Partner
By:
-------------------------------------
Xxxxxxx Xxxxxxxxx, General Partner
-------------------------------------
Xxxxxx Xxxxxxx, III
-------------------------------------
Xxxxxx Xxxxx, in his individual capacity, has executed on this signature line to
evidence his agreement to the payment of the SERP liability at the time and in
the manner described in Section 5.12.
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TABLE OF CONTENTS
Exhibits: Schedules:
--------- -----------
Exhibit A Schedule 1.1
Exhibit B Schedule 2.6(c)
Exhibit C Schedule 4.1(c)
Exhibit D Schedule 4.1(d)
Exhibit E Schedule 4.1(e)(i)
Exhibit 2.1 Schedule 4.1(e)(ii)
Exhibit 2.2 Schedule 4.1(f)
Exhibit 2.10(b) Schedule 4.1(g)(iii)
Exhibit 5.9 Schedule 4.1(g)(vii)
Exhibit 6.1(d) Schedule 4.1(h)(i)
Exhibit 6.1(e) Schedule 4.1(i)
Exhibit 6.1(m) Schedule 4.1(j)(i)
Exhibit 6.1(r) Schedule 4.1(j)(ii)
Exhibit 6.2(d) Schedule 4.1(k)
Schedule 4.1(l)
Schedule 4.1(m)
Schedule 4.1(n)
Schedule 4.1(o)
Schedule 4.1(p)
Schedule 4.1(q)
Schedule 4.1(r)
Schedule 5.7(k)
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