Exhibit 10.4.1.
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AGREEMENT AND PLAN OF MERGER
AMONG
AMERICAN ECO CORPORATION,
AN ONTARIO, CANADA CORPORATION,
SRS ACQUISITION CORPORATION
A CALIFORNIA CORPORATION,
AND
SEPARATION AND RECOVERY SYSTEMS, INC.
A NEVADA CORPORATION
TABLE OF CONTENTS
Page
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ARTICLE I
ADOPTION OF AGREEMENT AND PLAN OF MERGER . . . . . . . . . . -1-
1.1 The Merger. . . . . . . . . . . . . . . . . . . . . -1-
1.2 Effective Date of the Merger. . . . . . . . . . . . -2-
1.3 Surviving Corporation; Articles of Incorporation
of Surviving Corporation. . . . . . . . . . . . . . -2-
1.4 Merger Consideration; Conversion of SRS Common
Stock; Cancellation of Acquisition Corp. Common
Stock. . . . . . . . . . . . . . . . . . . . . . . -2-
1.5 Exchange of Certificates. . . . . . . . . . . . . . -3-
1.6 No Fractional Shares. . . . . . . . . . . . . . . . -4-
1.7 Certificates in Other Names. . . . . . . . . . . . -5-
1.8 Treatment of Options. . . . . . . . . . . . . . . . -5-
1.9 Appraisal Rights. . . . . . . . . . . . . . . . . . -5-
ARTICLE II
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
2.1 Closing Date. . . . . . . . . . . . . . . . . . . . -6-
2.2 Deliveries at the Closing. . . . . . . . . . . . . -6-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SRS . . . . . . . . . . . . -6-
3.1 Due Incorporation. . . . . . . . . . . . . . . . . -6-
3.2 Due Authorization. . . . . . . . . . . . . . . . . -7-
3.3 Non-Contravention; Consents and Approvals. . . . . -7-
3.4 Capitalization. . . . . . . . . . . . . . . . . . . -8-
3.5 Financial Statements; Undisclosed Liabilities;
Other Documents. . . . . . . . . . . . . . . . . . -9-
3.6 No Material Adverse Effects or Changes. . . . . . . -9-
3.7 Tax Returns and Audits. . . . . . . . . . . . . . -10-
3.8 Litigation. . . . . . . . . . . . . . . . . . . . -12-
3.9 Compliance with Applicable Laws. . . . . . . . . -12-
3.10 Contracts. . . . . . . . . . . . . . . . . . . . -12-
3.11 Real Property. . . . . . . . . . . . . . . . . . -14-
3.12 Personal Property. . . . . . . . . . . . . . . . -14-
3.13 Employees. . . . . . . . . . . . . . . . . . . . -14-
3.14 Insurance. . . . . . . . . . . . . . . . . . . . -15-
3.15 Inventories. . . . . . . . . . . . . . . . . . . -15-
3.16 Accounts Receivable. . . . . . . . . . . . . . . -15-
3.17 Employee Benefits. . . . . . . . . . . . . . . . -15-
3.18 Intellectual Property. . . . . . . . . . . . . . -16-
3.19 Environmental Matters. . . . . . . . . . . . . . -16-
3.20 Books and Records. . . . . . . . . . . . . . . . -16-
3.21 Related Party Transactions. . . . . . . . . . . . -17-
3.22 Fees of Brokers, Consultants and Financial
Advisors. . . . . . . . . . . . . . . . . . . . -17-
3.23 Required Vote. . . . . . . . . . . . . . . . . . -17-
3.24 General Representation and Warranty. . . . . . . -17-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
ACQUISITION CORP. AND ECO . . . . . . . . . . . . . . . . . -18-
4.1 Due Incorporation. . . . . . . . . . . . . . . . -18-
4.2 Due Authorization. . . . . . . . . . . . . . . . -18-
4.3 Non-Contravention; Consents and Approvals. . . . -19-
4.4 Capitalization. . . . . . . . . . . . . . . . . . -19-
4.5 Financial Statements; Undisclosed Liabilities;
Other Documents. . . . . . . . . . . . . . . . . -20-
4.6 Securities Law Filings. . . . . . . . . . . . . . -21-
4.7 No Material Adverse Effects or Changes. . . . . . -21-
4.8 Insurance. . . . . . . . . . . . . . . . . . . . -21-
4.9 Labor Matters. . . . . . . . . . . . . . . . . . -21-
4.10 Tax Returns and Audits. . . . . . . . . . . . . . -22-
4.11 Litigation. . . . . . . . . . . . . . . . . . . . -22-
4.12 Compliance with Applicable Laws. . . . . . . . . -23-
4.13 Contracts; No Defaults. . . . . . . . . . . . . . -23-
4.14 Absence of Certain Changes or Events. . . . . . . -23-
4.15 Fees of Brokers, Finders and Investment Bankers. -24-
4.16 General Representation and Warranty. . . . . . . -24-
ARTICLE V
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . -24-
5.1 Implementing Agreement. . . . . . . . . . . . . . -24-
5.2 Access to Information and Facilities;
Confidentiality. . . . . . . . . . . . . . . . . -24-
5.3 Preservation of Business. . . . . . . . . . . . . -25-
5.4 SRS Stockholder Approval. . . . . . . . . . . . . -26-
5.5 California Permit. . . . . . . . . . . . . . . . -26-
5.6 Consents and Approvals. . . . . . . . . . . . . . -27-
5.7 Periodic Reports. . . . . . . . . . . . . . . . . -27-
5.8 Publicity. . . . . . . . . . . . . . . . . . . . -27-
5.9 No Negotiation. . . . . . . . . . . . . . . . . . -27-
5.10 Listing of Common Stock. . . . . . . . . . . . . -28-
5.11 Blue Sky Approvals. . . . . . . . . . . . . . . . -28-
5.12 Principal Stockholders. . . . . . . . . . . . . . -28-
5.13 Rule 145 Affiliates. . . . . . . . . . . . . . . -28-
5.14 Tax-Free Status. . . . . . . . . . . . . . . . . -28-
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS
OF ACQUISITION CORP. AND ECO . . . . . . . . . . . . . . . -28-
6.1 Warranties True as of Closing Date. . . . . . . . -28-
6.2 Compliance With Agreements and Covenants. . . . . -29-
6.3 SRS Certificate. . . . . . . . . . . . . . . . . -29-
6.4 Secretary's Certificate. . . . . . . . . . . . . -29-
6.5 Good Standing Certificates. . . . . . . . . . . . -29-
6.6 Xx Xxxxxx Employment Agreement. . . . . . . . . . -29-
6.7 Escrow Agreement. . . . . . . . . . . . . . . . . -29-
6.8 Opinion of Counsel. . . . . . . . . . . . . . . . -29-
6.9 Approval of Merger. . . . . . . . . . . . . . . . -29-
6.10 Permit. . . . . . . . . . . . . . . . . . . . . . -29-
6.11 Dissent and Appraisal. . . . . . . . . . . . . . -30-
6.12 Consents and Approvals. . . . . . . . . . . . . . -30-
6.13 Resignations. . . . . . . . . . . . . . . . . . . -30-
6.14 Listing of Common Stock. . . . . . . . . . . . . -30-
6.15 Rule 145 Letters. . . . . . . . . . . . . . . . . -30-
6.16 Actions or Proceedings. . . . . . . . . . . . . . -30-
6.17 Other Closing Documents. . . . . . . . . . . . . -30-
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SRS . . . . . . . . -30-
7.1 Warranties True as of Closing Date. . . . . . . . -30-
7.2 Compliance with Agreements and Covenants. . . . . -31-
7.3 Eco Certificate. . . . . . . . . . . . . . . . . -31-
7.4 Opinion of Counsel. . . . . . . . . . . . . . . . -31-
7.5 Opinion of Tax Counsel. . . . . . . . . . . . . . -31-
7.6 Permit. . . . . . . . . . . . . . . . . . . . . . -31-
7.7 Consents and Approvals. . . . . . . . . . . . . . -31-
7.8 Listing of Common Stock. . . . . . . . . . . . . -31-
7.9 Actions or Proceedings. . . . . . . . . . . . . . -31-
7.10 Other Closing Documents. . . . . . . . . . . . . -31-
ARTICLE VIII
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . -32-
8.1 Termination. . . . . . . . . . . . . . . . . . . -32-
8.2 Effect of Termination and Abandonment. . . . . . -33-
ARTICLE IX
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . -33-
9.1 Indemnification by SRS Stockholders. . . . . . . -33-
9.2 Indemnification by Eco. . . . . . . . . . . . . . -34-
9.3 Procedure. . . . . . . . . . . . . . . . . . . . -34-
9.4 Remedies. . . . . . . . . . . . . . . . . . . . . -35-
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . -35-
10.1 Expenses. . . . . . . . . . . . . . . . . . . . . -35-
10.2 Amendment. . . . . . . . . . . . . . . . . . . . -35-
10.3 Notices. . . . . . . . . . . . . . . . . . . . . -35-
10.4 Waivers. . . . . . . . . . . . . . . . . . . . . -36-
10.5 Interpretation. . . . . . . . . . . . . . . . . . -37-
10.6 Applicable Law. . . . . . . . . . . . . . . . . . -37-
10.7 Assignment. . . . . . . . . . . . . . . . . . . . -37-
10.8 No Third Party Beneficiaries. . . . . . . . . . . -37-
10.9 Enforcement of the Agreement. . . . . . . . . . . -37-
10.10 Severability. . . . . . . . . . . . . . . . . . -37-
10.11 Remedies Cumulative. . . . . . . . . . . . . . . -38-
10.12 Entire Understanding. . . . . . . . . . . . . . -38-
10.13 Waiver of Jury Trial. . . . . . . . . . . . . . -38-
10.14 Counterparts. . . . . . . . . . . . . . . . . . -38-
SCHEDULES
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NUMBER DESCRIPTION
3.1 SRS subsidiaries, joint ventures, etc.
3.3 SRS Non-Contravention; Consents and Approvals.
3.4 SRS Options.
3.5 SRS Changes since February 29, 1996.
3.7 Tax Powers of Attorney.
3.8 SRS Litigation.
3.9 SRS Permits.
3.10 SRS Contracts.
3.12 SRS Personal property valued over $1,000.
3.13 SRS Employees.
3.14 SRS Insurance.
3.16 SRS Accounts receivable.
3.17 SRS Employee Benefits.
3.18 SRS Intellectual Property.
3.20 SRS Corporate.
3.21 SRS Related Party Transactions.
4.4 ECO Derivative Securities.
4.7 Changes to Eco since February 29, 1996.
4.10 Eco Tax Returns.
4.11 Eco Litigation.
4.12 Eco Permits.
4.14 Eco Changes since February 29, 1996.
EXHIBITS
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X. XxXxxxxx Employment Agreement
B. Escrow Agreement.
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of April 26,
1996, among AMERICAN ECO CORPORATION, an Ontario, Canada
corporation ("Eco"), SRS ACQUISITION CORPORATION, a California
corporation ("Acquisition Corp."), and SEPARATION AND RECOVERY
SYSTEMS, INC., a Nevada corporation ("SRS").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Acquisition Corp. is a newly-formed wholly-
owned subsidiary of Eco;
WHEREAS, Eco desires to acquire all of the issued and
outstanding shares of SRS Common Stock, par value $.01 per share
(the "SRS Common Stock"), through the merger of Acquisition Corp.
with and into SRS pursuant to the terms hereinafter set forth
(the "Merger");
WHEREAS, the respective Boards of Directors of American
Eco and Acquisition Corp. deem it advisable and in the best
interests of Eco and Acquisition Corp. that Acquisition Corp. be
merged with and into SRS upon the terms and conditions
hereinafter specified;
WHEREAS, the Board of Directors of SRS deems it
advisable and in the best interests of SRS that Acquisition Corp.
be merged with and into SRS upon the terms and conditions
hereinafter specified;
WHEREAS, for Federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter contained, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
ADOPTION OF AGREEMENT AND PLAN OF MERGER
1.1 The Merger. At the Effective Time (as defined
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in Section 1.2 herein), in accordance with this Agreement and the
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relevant provisions of the Nevada Revised Statutes (the "NRS"),
Acquisition Corp. shall be merged with and into SRS. SRS shall
be the surviving corporation of the Merger and SRS shall
continue, and be deemed to continue, for all purposes after the
Merger, and the existence of Acquisition Corp. shall cease at the
Effective Time.
1.2 Effective Date of the Merger. This Agreement
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shall be submitted to the stockholders of SRS as provided in
Section 5.4 hereof, and to the sole stockholder of Acquisition
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Corp., as provided in Section 5.4 hereof, for approval as soon as
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practicable after the execution of this Agreement. Subject to
the terms and conditions hereof and the authorization, approval
and adoption hereof by the affirmative vote of Eco, in its
capacity as the sole stockholder of Acquisition Corp., and of the
holders of SRS Common Stock entitled to vote thereon holding at
least a majority of the issued and outstanding shares of SRS
Common Stock as provided by the NRS. Articles of Merger (the
"Articles of Merger") meeting the requirements of Chapter 92A,
Section 200 of the NRS shall be executed, verified and
acknowledged as required by the provisions of Chapter 92A,
Section 230 of the NRS and shall be delivered to the Secretary of
State of Nevada for filing (the time of such filing being the
"Effective Time" and the date of such filing being the "Effective
Date").
1.3 Surviving Corporation; Articles of Incorporation
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of Surviving Corporation. Following the Merger, SRS shall
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continue to exist under, and be governed by, the laws of the
State of Nevada, and Eco will own all of the issued and
outstanding SRS Common Stock. The Articles of Incorporation of
SRS, as in effect on the Closing Date, shall continue in full
force and effect as the Articles of Incorporation of SRS.
1.4 Merger Consideration; Conversion of SRS Common
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Stock; Cancellation of Acquisition Corp. Common Stock. (a) At
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the Effective Time, by virtue of the Merger and without any
action on the part of Acquisition Corp., SRS or the holders of
SRS Common Stock, the holders of SRS Common Stock immediately
prior to the Effective Time shall receive one million (1,000,000)
shares of common stock, no par value, of Eco ("Eco Common
Stock"), which shall be the "Merger Consideration" subject to
adjustment as provided in this Section 1.4 and subject to the
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Escrow Agreement, as described in Section 6.7 hereof. Each SRS
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stockholder as of the Effective Date shall be entitled to receive
a number of shares of Eco Common Stock equal to the product of
(x) a fraction, the numerator of which being the number of shares
of SRS Common Stock owned of record by such stockholder on the
Effective Date and the denominator of which shall be the total
issued and outstanding shares of SRS Common Stock on the
Effective Date, multiplied by (y) the Merger Consideration.
Until surrendered in accordance with the provisions of Section
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1.5 hereof, each certificate of SRS Common Stock shall represent,
---
for all purposes, only the right to receive the Merger
Consideration or appraisal rights under Section 1.9 hereof.
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(b) No adjustment shall be made in the Merger
Consideration if the average closing price (the "Average Closing
Price") per share of Eco Common Stock on the Nasdaq National
Market for the five (5) trading days immediately preceding the
Closing Date (as defined in Section 2.1 hereof) is not less than
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Six Dollars ($6.00) and not greater than Seven Dollars ($7.00).
In the event that the Average Closing Price per share is less
than Six Dollars ($6.00), the Merger Consideration shall be
increased to equal that number of shares of Eco Common Stock
which, when multiplied by such Average Closing Price per share,
equals Six Million Dollars ($6,000,000). In the event that the
Average Closing Price per share is greater than Seven Dollars
($7.00), the Merger Consideration shall be decreased to equal
that number of shares of Eco Common Stock which, when multiplied
by such Average Closing Price per share, equals Seven Million
Dollars ($7,000,000). The number of shares of Eco Common Stock
constituting the Merger Consideration is also subject to
reduction for payment of finders' fee on behalf of SRS pursuant
to Section 3.22 herein.
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(c) If between the date of this Agreement and the
Effective Time the outstanding shares of Eco Common Stock shall
have been changed into a different number of shares or a
different class by reason of a stock dividend, subdivision,
reclassification, recapitalization, split-up or combination, the
Merger Consideration and the Nasdaq National Market closing price
for Eco Common Stock shall be appropriately adjusted.
(d) At the Effective Time, all shares of SRS Common
Stock which are owned by SRS as treasury stock shall be canceled
and retired and cease to exist.
(e) At the Effective Time, each share of Acquisition
Corp. Common Stock issued and outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any
action the part of Eco, be canceled and cease to exist.
1.5 Exchange of Certificates. (a) Prior to the
------------------------
Effective Time, Eco shall select an exchange agent (the "Exchange
Agent") reasonably acceptable to SRS to effectuate the delivery
of the Merger Consideration provided for in Section 1.4 hereof to
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holders of SRS Common Stock upon surrender of certificates which
immediately prior to the Effective Time represented outstanding
shares of SRS Common Stock ("Certificates").
(b) As of the Effective Time, Eco shall provide, or
shall take all steps necessary to provide, to the Exchange Agent,
the aggregate number of shares of Eco Common Stock representing
the Merger Consideration. The Exchange Agent shall, pursuant to
irrevocable instructions, make the deliveries of the Merger
Consideration required in respect of the Merger.
(c) Promptly after the Effective Time, the Exchange
Agent shall mail to each record holder of an outstanding
Certificate, determined as of the Effective Date, a form letter
of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange
Agent), advising such holder of the terms of the exchange
effected by the Merger and the procedure for surrendering to the
Exchange Agent such Certificate in exchange such holder's share
of the Merger Consideration.
(d) Upon surrender of a Certificate to the Exchange
Agent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in
exchange therefor such holder's share of Merger Consideration,
less such holders' shares of Eco Common Stock that shall be
delivered to the Escrow Agent to be held under the Escrow
Agreement pursuant to Section 6.7 hereof, and the Certificate so
-----------
surrendered shall forthwith be canceled. Shares of Eco Common
Stock shall be delivered to such holder as promptly as
practicable and (except as hereinafter provided) in no event
later than twenty (20) days after proper delivery of the
applicable Certificates and letters of transmittal to the
Exchange Agent.
(e) All shares of Eco Common Stock issued upon
exchange of the shares of SRS Common Stock in accordance with the
terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of SRS
Common Stock.
(f) Neither Acquisition Corp., Eco nor SRS shall be
liable to any holder of shares of SRS Common Stock for any such
shares of American Eco Common Stock delivered to a public
official pursuant to any abandoned property, escheat or similar
law. Until surrendered in accordance with the provisions of this
Section 1.5, each Certificate shall represent, for all purposes,
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only the right to receive the Merger Consideration or appraisal
rights under Section 1.9 hereof.
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(g) Any shares of Eco Common Stock which remain
undistributed to holders of SRS Common Stock for six (6) months
after the Effective Time shall, except as provided by Section
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1.5(d), be delivered to Eco, upon demand, and any holder of SRS
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Common Stock who has not theretofore complied with this Section
-------
1.5 shall thereafter look to Eco for the Merger Consideration to
---
which he is entitled.
1.6 No Fractional Shares. No certificates or scrip
--------------------
for fractional shares of Eco Common Stock will be issued. In lieu
of issuing any such fractional shares to which a holder of SRS
Common Stock would otherwise be entitled to receive, the Exchange
Agent shall round up or down to the nearest whole share of Eco
Common Stock.
1.7 Certificates in Other Names. If any certificate
---------------------------
evidencing shares of Eco Common Stock is to be issued in a name
other than that in which the Certificate surrendered in exchange
therefore is registered, it shall be a condition of the issuance
thereof that the Certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer and that the
person requesting such exchange pay to the Exchange Agent or to
Eco acting solely in its corporate capacity, as the case may be,
any transfer or other taxes required by reason of the issuance of
a certificate for shares of Eco Common Stock in any name other
than that of the registered holder of the Certificate surrendered
or otherwise required or establish to the satisfaction of the
Exchange Agent or of Eco acting solely in its corporate capacity,
as the case may be, that such tax has been paid or is not
payable.
1.8 Treatment of Options. At the Effective Time, all
--------------------
outstanding options to purchase SRS Common Stock ("SRS Options")
as set forth on Schedule 3.4, shall be canceled, and Eco shall
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grant to such holders options to purchase Eco Common Stock ("Eco
Options"). The Eco Options to be granted pursuant to this Section
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1.8 shall have terms substantially equivalent to the SRS Options,
---
except that all such options shall terminate upon the fifth
anniversary of the Closing Date.
1.9 Appraisal Rights. (a) Notwithstanding Section
---------------- -------
1.4 hereof, shares of SRS Common Stock which are held by a holder
---
of SRS Common Stock ("Dissenting Stockholder") who has properly
preserved and perfected appraisal rights with respect to such
shares pursuant to the applicable provisions of the NRS shall not
be converted into the Merger Consideration pursuant to Section
-------
1.4 hereof, and instead shall be treated in accordance with those
---
provisions of the NRS, as the case may be, unless and until the
right of such Dissenting Stockholder under the applicable
provisions of the NRS to payment for his shares of SRS Common
Stock shall cease.
(b) If any Dissenting Stockholder shall effectively
withdraw or lose (through failure to perfect or otherwise) such
Dissenting Stockholder's right to payment for any of such
Dissenting Stockholder's shares of SRS Common Stock, such shares
shall be automatically converted into the right to receive Merger
Consideration in accordance with Section 1.4 hereof.
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(c) Each Dissenting Stockholder who becomes entitled
to payment of fair market value of any such Dissenting
Stockholder's shares of SRS Common Stock shall receive payment
thereof, less an amount to the product of (x) a fraction, the
numerator of which being the number of shares of SRS Common Stock
owned of record by the Dissenting Stockholder and the denominator
of which shall be the total issued and outstanding shares of SRS
Common Stock on the Effective Date, multiplied by (y) $500,000,
and which withheld amount shall be held under the Escrow
Agreement.
ARTICLE II
CLOSING
2.1 Closing Date. The closing of the Merger (the
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"Closing") shall take place at the offices of Stradling, Yocca,
Xxxxxxx & Xxxxx, 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx
Xxxxx, Xxxxxxxxxx at 11:00 a.m., local time, on that day on which
the last of the conditions set forth in Articles VI and VII shall
have been satisfied or, if permissible, waived (other than those
conditions which by their terms are to occur only at the
Closing), or on and at such other date, time and place as Eco,
Acquisition Corp. and SRS may agree (the date of the Closing
hereinafter being referred to as the "Closing Date").
2.2 Deliveries at the Closing. At the Closing SRS
-------------------------
will deliver to Eco the various certificates, instruments and
document referred to in Article VI, and Eco and Acquisition Corp.
will deliver to SRS the various certificates, instruments and
documents referred to in Article VII.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SRS
SRS hereby represents and warrants to American Eco and
Acquisition Corp. as follows:
3.1 Due Incorporation. (a) SRS is a corporation duly
-----------------
organized, validly existing and in good standing under the laws
of the State of Nevada, with all requisite power and authority to
own, lease and operate its properties and to carry on its
business as they are now being owned, leased, operated and
conducted. SRS is qualified to do business and is in good
standing as a foreign corporation in the State of California
(subject to Section 2115 of the California General Corporation
Law) and Louisiana and Washington, which are the only
jurisdictions where the nature of the properties owned, leased or
operated by it and the business transacted by it require such
qualification. (b) Schedule 3.1 sets forth a complete and
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correct list of all corporations, proprietorships, firms,
partnerships, limited partnerships, limited liability companies,
trusts, associations or other entities in which SRS has any
record or beneficial interest (such entities collectively the
"SRS Companies"). Each of the SRS Companies is duly organized,
validly existing and in good standing in the jurisdiction of its
formation and is duly qualified in all other jurisdiction where
the nature of the properties owned, leased or operated by it and
the nature of the business transacted by it require such
qualification. Other than as set forth on Schedule 3.1, SRS has
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no direct or indirect subsidiaries, either wholly or partially
owned, and SRS does not hold any voting or management interest in
any corporation, proprietorship, firm, partnership, limited
partnership, limited liability company, trust, association,
individual or other entity (a "Person") or own any security
issued by any Person. For purposes of the information provided in
this ARTICLE III and the Schedules furnished hereunder, where
applicable SRS shall include each of the SRS Companies.
3.2 Due Authorization. SRS has full power and
-----------------
authority to enter into this Agreement and the Articles of Merger
(the "Related Agreement") and, subject to obtaining the necessary
approval of this Agreement and the Merger by the stockholders of
SRS, to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance by SRS of this
Agreement and the Related Agreement have been duly and validly
approved and authorized by the Board of Directors of SRS, and,
subject to obtaining the necessary approval of the Merger by the
SRS stockholders, the Related Agreement and the transactions
contemplated hereby and thereby, SRS has duly and validly
executed and delivered this Agreement and will duly and validly
execute and deliver the Related Agreement. Subject to obtaining
the necessary approval of the SRS stockholders, this Agreement
constitutes the legal, valid and binding obligation of SRS and
the Related Agreement to which SRS is a party, will, upon
execution thereof by SRS, constitute the legal, valid and binding
obligation of SRS, in each case enforceable against SRS in
accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, moratorium, reorganization or
other laws from time to time in effect which affect creditors'
rights generally and by general principles of equity (regardless
of whether such enforceability is considered in a proceeding in
equity or at law).
3.3 Non-Contravention; Consents and Approvals. (a)
-----------------------------------------
Except to the extent set forth on Schedule 3.3, the execution and
------------
delivery of this Agreement by SRS does not, and the performance
by SRS of its obligations hereunder and the consummation of the
transactions contemplated hereby will not, conflict with, result
in a violation or breach of, constitute (with or without notice
or lapse of time or both) a default under, result in or give to
any person any right of payment or reimbursement, termination,
cancellation, modification or acceleration of, or result in the
creation or imposition of any lien upon any of the assets or
properties of SRS under, any of the terms, conditions or
provisions of (i) the Articles of Incorporation or By-Laws of
SRS, or (ii) subject to obtaining the necessary approval of this
Agreement and the Merger by the SRS stockholders and the taking
of the actions described in paragraph (b) of this Section 3.3,
------------
(x) any statute, law, rule, regulation or ordinance (together,
"Laws"), or any judgment, decree, order, writ, permit or license,
of any Governmental Entity (as defined in paragraph (b) below),
applicable to SRS or any of its assets or properties, or (y) any
contract, agreement or commitment to which SRS is a party or by
which SRS or any of its assets or properties is bound.
(b) No consent, approval, order or authorization of,
or registration, declaration or filing with any court,
administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a
"Governmental Entity"), or any other Person, is required by SRS
in connection with the execution and delivery of this Agreement
and the Related Agreement or the consummation by SRS of the
transactions contemplated hereby and thereby, except for:
(i) the permit by the California Commissioner of
Corporations approving the Merger after a fairness hearing
thereon;
(ii) the filing of the Articles of Merger with the
Secretary of State of the State of Nevada in accordance with
the requirements of the NRS; and
(iii)if applicable, the filing of the appropriate
documents with the relevant authorities of other states in
which SRS is qualified to transact business.
3.4 Capitalization. (a) The authorized capital stock
--------------
of SRS consists of 5,000,000 shares of SRS Common Stock. On the
date hereof, there are issued and outstanding 3,193,350 shares of
SRS Common Stock. All of the issued and outstanding shares of SRS
Common Stock are validly issued, fully paid and nonassessable and
the issuance thereof was not subject to preemptive rights.
(b) Schedule 3.4 is a correct and complete list of
------------
all outstanding SRS Options. Except for shares issuable pursuant
to SRS Options, there are no shares of SRS Common Stock or other
equity securities (whether or not such securities have voting
rights) of SRS issued or outstanding or any subscriptions,
options, warrants, calls, rights, convertible securities or other
agreements or commitments of any character obligating SRS to
issue, transfer or sell any shares of capital stock or other
securities (whether or not such securities have voting rights) of
SRS, or agreements to enter into any of the foregoing.
3.5 Financial Statements; Undisclosed Liabilities;
---------------------------------------------
Other Documents. (a) For purposes of this Agreement, "SRS
---------------
Financial Statements" shall mean (x) the audited consolidated
financial statements of SRS as of June 30, 1995 and June 30, 1994
and the fiscal years then ended (including all notes thereto),
consisting of the balance sheets at such dates and the related
statements of income, stockholders' equity and cash flows for the
years then ended (the "SRS Audited consolidated Financial
Statements"), and (y) the unaudited consolidated financial
statements of SRS as of February 29, 1996 and February 28, 1995
(including all notes thereto), consisting of the balance sheets
at such dates and the results of operations for the eight months
then ended (the "SRS Interim Financial Statements"). The Audited
SRS Financial Statements have been prepared in accordance with
U.S. GAAP consistently applied (except as may be indicated
therein or in the notes thereto), present fairly the financial
position of SRS as at the dates thereof and the results of
operations, stockholders' equity and cash flows of SRS for the
periods covered thereby (subject, in the case of any unaudited
interim financial statements, to normal year-end adjustments),
and are substantially in accordance with the financial books and
records of SRS. The SRS Interim Financial Statements are in
accordance with the books and records of SRS and have been
prepared on a consistent basis with those of prior years. Except
for the absence of adequate disclosure, relating to the absence
of footnotes, and stockholders' equity and cash flow statements,
the SRS Interim Financial Statements present fairly SRS'
financial position as of the dates of the SRS Interim Financial
Statements and the results of operations for the periods covered
by these statements.
(b) SRS does not have any liabilities or obligations
of any nature, whether accrued, absolute, contingent or
otherwise, which individually or in the aggregate could be
reasonably expected to have an SRS Material Adverse Effect (as
defined below) except (i) as set forth on or reflected in the
balance sheet at February 29, 1996 (the "SRS Interim Balance
Sheet") included in the SRS Financial Statements or (ii)
liabilities and obligations incurred since February 29, 1996 in
the ordinary and usual course of its business.
3.6 No Material Adverse Effects or Changes. Except
--------------------------------------
as listed on Schedule 3.6 or as contemplated by this Agreement,
------------
since February 29, 1996, SRS has not suffered any damage,
destruction or Loss to any of its assets or properties (whether
or not covered by insurance) which is having or could reasonably
be expected to have an SRS Material Adverse Effect. "Loss" shall
mean liabilities, losses, costs, claims, damages (including
consequential damages), penalties and expenses (including
attorneys' fees and expenses and costs of investigation and
litigation). An "SRS Material Adverse Effect" shall mean an
effect on or circumstance involving the business, operations,
assets, liabilities, results of operations, cash flows or
condition (financial or otherwise) of SRS which is materially
adverse to SRS. Except as disclosed in Schedule 3.6 or in the SRS
------------
Financial Statements, since February 29, 1996 SRS has not (i)
declared, set aside or paid any dividend or other distribution in
respect of its capital stock; (ii) made any direct or indirect
redemption, purchase or other acquisition of any shares (other
than purchases in connection with the exercise of options) of its
capital stock or made any payment (other than dividends) to any
of their stockholders (in their capacity as stockholders); (iii)
issued or sold any shares of its capital stock or any options,
warrants or other rights to purchase any such shares or any
securities convertible into or exchangeable for such shares or
taken any action to reclassify or recapitalize or split up their
capital stock; (iv) mortgaged, pledged or subjected to any lien,
lease, security interest, encumbrance or other restriction, any
of their material properties or assets except in the ordinary and
usual course of their business and consistent with past practice;
(v) entered into any acquisition or merger agreement or
commitment, (vi) except in the ordinary and usual course of its
business and consistent with its past practices forgiven or
canceled any material debt or claim, waived any material right;
or (vii) adopted or amended any plan or arrangement (other than
amendments that are not material or that were made to comply with
laws or regulations) for the benefit of any director, officer or
employee or changed the compensation (including bonuses) to be
paid to any director, officer or employee, except for changes
made consistent with the prior practice of SRS.
3.7 Tax Returns and Audits. "Taxes", as used in this
----------------------
Agreement, means any federal, state, county, local or foreign
taxes, charges, fees, levies, or other assessments, including all
net income, gross income, sales and use, ad valorem, transfer,
gains, profits, excise, franchise, real and personal property,
gross receipt, capital stock, production, business and
occupation, disability, employment, payroll, license, estimated,
stamp, custom duties, severance or withholding taxes or charges
imposed by any governmental entity, and includes any interest and
penalties (civil or criminal) on or additions to any such taxes
and any expenses incurred in connection with the determination,
settlement or litigation of any tax liability. "Tax Return", as
----------
used in this Agreement, means a report, return or other
information required to be supplied to a governmental entity with
respect to Taxes, including where permitted or required, combined
or consolidated returns for any group or entities.
(a) Filing of Timely Tax Returns. SRS has duly filed
----------------------------
all Tax Returns required to be filed by it under applicable law
and will file all Tax Returns required to be filed by it at or
prior to the Effective Date under applicable law. All Tax Returns
were in all material respects (and, as to Tax Returns not filed
as of the date hereof, will be) complete and correct and filed on
a timely basis. SRS has not requested any extension of time
within which to file any Tax Return, which Tax Return has not
since been filed.
(b) Payment of Taxes. SRS has, within the time and
----------------
in the manner prescribed by law, paid (and until the Effective
Date will pay within the time and in the manner prescribed by
law) all Taxes that are currently due and payable except for
those contested in good faith and for which adequate reserves
have been taken.
(c) Tax Liens. There are no Tax liens upon the
---------
assets of SRS except liens for Taxes not yet due.
(d) Withholding Taxes. SRS has complied (and until
-----------------
the Effective Date will comply) in all respects with the
provisions of the Code relating to the payment and withholding of
Taxes, including, without limitation, the withholding and
reporting requirements under Sections 1441 through 1464, 3401
through 3606, and 6041 and 6049 of the Code, as well as similar
provisions under any other laws, and has, within the time and in
the manner prescribed by law, withheld from employee wages and
paid over to the proper governmental authorities all amounts
required .
(e) Statute of Limitations. SRS has not executed any
----------------------
outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any
Taxes or Tax Returns. The statute of limitations for the
assessment of all Taxes has expired for all applicable Tax
Returns of SRS or those Tax Returns have been examined by the
appropriate taxing authorities for all periods through the date
hereof, and no deficiency for any Taxes has been proposed,
asserted or assessed against SRS that has not been resolved and
paid in full.
(f) Audit, Administrative and Court Proceedings. No
-------------------------------------------
audits or other administrative proceedings or court proceedings
are presently pending or, to the knowledge of SRS, threatened
with regard to any Taxes or Tax Returns of SRS. Except as
disclosed in Schedule 3.7, no power of attorney currently in
------------
force has been granted by SRS concerning any Tax matter. To the
knowledge of SRS, no facts exist or have existed which would
constitute grounds for the assessment of Taxes on SRS with
respect to periods which have not been audited by the Internal
Revenue Service (the "IRS") or other taxing authorities.
(g) Code Section 341(f). SRS has not filed (and will
-------------------
not file prior to the Closing) a consent pursuant to Code Section
341(f) and has not agreed to have Code Section 341(f)(2) apply to
any disposition of a subsection (f) asset (as that term is
defined in Code Section 341(f)(4)) owned by SRS.
(h) Code Section 168. No property of SRS is property
----------------
that SRS or any party to this transaction is or will be required
to treat as being owned by another person pursuant to the
provisions of Code Section 168(f)(8) (as in effect prior to its
amendment by the Tax Reform Act of 1986) or is "tax-exempt use
property" within the meaning of Code Section 168.
(i) U.S. Real Property Holding Corporation. SRS is
--------------------------------------
not, and has not been, a United States real property holding
corporation (as defined in Section 897(c)(2) of the Code) during
the applicable period specified in section 897(c)(1)(A)(ii) of
the Code.
3.8 Litigation. Except as described on Schedule 3.8,
---------- ------------
there are no actions, suits, arbitrations, regulatory proceedings
or other litigation, proceedings or governmental investigations
pending or, to SRS' knowledge, threatened against or affecting
SRS any of its officers or directors in their capacity as such,
or any of its property or business which could reasonably be
expected to have an SRS Material Adverse Effect. No event has
occurred or circumstance exists that may give rise or serve as a
basis for the commencement of any such proceeding. SRS is not
subject to any order, judgment, decree, injunction, stipulation
or consent order of or with any court or other Governmental
Entity, other than orders of general applicability.
3.9 Compliance with Applicable Laws. SRS holds all
-------------------------------
permits, licenses, variances, exemptions, orders and approvals of
all Governmental Entities which are required in the operation of
its business (the "SRS Permits"), and is in compliance with the
terms of the SRS Permits, except where the failure so to comply
would not have an SRS Material Adverse Effect. Schedule 3.9 is a
------------
complete and correct list of all Permits. The entry into and
consummation of this Agreement and the Merger will not require
any modification, re-application, approval or other consent as to
any SRS Permit. SRS is not in violation of any law, ordinance or
regulation of any Governmental Authority, including environmental
and labor laws and regulations, except for possible violations
which individually and in the aggregate do not, and, insofar as
reasonably can be foreseen by SRS, will not in the future have an
SRS Material Adverse Effect.
3.10 Contracts. (a) Except for the contracts,
---------
agreements, commitments, instruments, bids and proposals to which
SRS is a party listed on Schedule 3.10, SRS is not a party to or
-------------
otherwise bound by any written or oral (i) mortgage, indenture,
note, installment obligation or other instrument relating to the
borrowing of money, (ii) guarantee of any obligation (excluding
endorsements of instruments for collection in the ordinary course
of business of SRS), (iii) letter of credit, bond or other
indemnity, (iv) joint venture, partnership or other agreement
involving the sharing of profits and losses, (v) performance of
services or delivery of goods in an amount exceeding $1,000 or
which would not be completed within three (3) months, (vi)
agreement for the sale or lease by SRS to any person of any
material amount of its assets other than the retirement or other
disposition of assets no longer useful to SRS or the sale of
assets in the ordinary course of the operation of SRS, (vi)
agreement requiring the payment by SRS of more than $1,000 in any
12-month period for the purchase or lease of any machinery,
equipment or other capital assets, (viii) agreement providing for
the lease or sublease by SRS (as lessor, sublessor, lessee or
sublessee) of any real property, (ix) distributor, sales
representative, broker or agent agreement, (x) collective
bargaining agreement, employment or consulting agreement or
agreement providing for severance payments or other additional
rights or benefits (whether or not optional) in the event of the
sale of SRS, (xi) agreement requiring the payment by SRS to any
person of more than $1,000 in any 12-month period for the
purchase of goods or services, (xii) material warranties relating
to products distributed or services provided by SRS, (xiii)
license or sublicense agreement (whether as licensor, licensee,
sublicensor or sublicensee) with respect to any material item of
Intellectual Property owned or licensed by SRS, and (xiv)
agreement imposing non-competition, confidentiality or exclusive
dealing obligations on SRS.
(b) SRS has delivered or made available to Eco
complete and correct copies of each written agreement listed on
Schedule 3.10 each as amended to date and a summary of the terms
-------------
of each oral agreement listed on Schedule 3.10. Each agreement
-------------
listed on Schedule 3.10 is a valid, binding and enforceable
-------------
obligation of SRS and, to SRS' knowledge, the other party or
parties thereto (subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar
Laws affecting creditors' rights and remedies generally and
subject as to enforceability to general principles of equity,
including principles of commercial reasonableness, good faith and
fair dealing) and is in full force and effect. Except as set
forth on Schedule 3.10 (i) neither SRS nor, to SRS' knowledge,
-------------
any other party thereto is in material breach of any material
term of any such agreement or has repudiated any material term of
any such agreement, (ii) no event, occurrence or condition exists
(including the transactions contemplated under this Agreement)
which, with the lapse of time or the giving of notice or both,
would become a default under any such agreement by SRS or, to
SRS' knowledge, any other party thereto, and (iii) SRS has not
released or waived any material right under any contract. SRS is
not required to give any notice to any other person who is a
party to an agreement listed on Schedule 3.10 regarding this
-------------
Agreement or the Merger.
(c) Schedule 3.10 sets forth a correct and complete
-------------
list of the ten largest customers of SRS in terms of net revenues
during each of the 1994 and 1995 fiscal years and the first six
months of fiscal 1996, showing the approximately total net
revenue received in each such period from each such customer.
Except to the extent set forth on Schedule 3.10, since December
31, 1995, there has not been any adverse change in the business
relationship between SRS and any customer listed on such
Schedule.
3.11 Real Property. SRS does not own, nor have any
-------------
right to acquire, any real property.
3.12 Personal Property. Schedule 3.12 is a complete
----------------- -------------
and correct list of all personal property of SRS (other than
inventory) not reflected or any other Schedule hereto and having
a book value exceeding $1,000. Except as set forth on Schedule
--------
3.12, SRS now has and on the Closing Date will have good and
----
marketable title to all personal property purported to be owned
by it, free and clear of all Liens. The material, tangible assets
of SRS taken as a whole, including all machinery and equipment,
are, in all material respects, in good condition and repair,
reasonable wear and tear excepted and have been well maintained.
3.13 Employees. Schedule 3.13 contains a complete and
--------- -------------
correct list of (i) all full-time and part-time employees of SRS,
including their respective salaries, dates of hire, positions and
last salary adjustment and (ii) all bonus, deferred compensation,
severance or termination pay, insurance, medical, dental, drug,
profit sharing, pension, retirement, stock option, stock
purchase, hospitalization insurance or other material plans or
arrangements providing employee benefits to any current or former
director, officer, employee or consultant of SRS and all relevant
vacation policies. SRS is not a party to any union, collective
bargaining or similar agreement, and there are no controversies
pending or, to SRS' knowledge, threatened between SRS and any
current or former employee or any labor or other collective
bargaining unit representing any current or former employee of
SRS that could reasonably be expected to result in a material
labor strike, dispute, slow-down or work stoppage or otherwise
have a material adverse effect on the financial condition of SRS.
SRS is not aware of any organizational effort presently being
made or threatened by or on behalf of any labor union with
respect to employees of SRS. SRS has paid or accrued in full all
wages, salaries, commissions, bonuses and other compensation
(including severance pay and vacation benefits) for all services
performed by its employees and former employees, and has withheld
such amounts as were required to be withheld therefrom and has
paid the withheld amounts to the proper tax and other receiving
officers within the time required under applicable law.
3.14 Insurance. Schedule 3.14 contains a complete and
--------- -------------
correct schedule of coverage and list of all policies of
insurance owned by SRS under which SRS assets, properties,
operations or employees are insured (including amount of
coverage, type of insurance, amount of deductible, if any, the
policy number and expiration date), and all claims made under any
of such policies or prior policies since January 1, 1994. Since
January 1, 1994, SRS has given due and timely notice of any claim
and of any occurrence known to SRS which may be covered by any of
such policies or prior policies. All scheduled policies are in
full force and effect and are in amounts and coverage sufficient
for compliance by SRS with all applicable requirements of Law and
all agreements to which SRS is a party or subject and customary
in its industry. All premiums in connection with such policies
are fully paid. No event has occurred which, with notice or lapse
of time, would constitute a breach or default thereunder or
permit termination, modification or acceleration of any policy,
and no party to any policy has repudiated any provisions thereof.
3.15 Inventories. The amounts at which the
-----------
inventories are carried on the SRS Interim Balance Sheet and on
the books of SRS reflect the normal valuation policy of SRS in
accordance with U.S. GAAP. The amount of repair parts and
supplies maintained by SRS is consistent with its prior
practices. The reserves estimated for obsolescence as of the
Closing Date will be adequate to cover the diminution in value of
inventories due to obsolescence.
3.16 Accounts Receivable. Schedule 3.16 sets forth a
------------------- -------------
complete and correct list of the work-in-process and accounts
receivable of SRS as set forth on the SRS Interim Balance Sheet,
including the degree of completion for each project and the
amounts expended thereon. All accounts receivable which have
arisen subsequent to the SRS Interim Balance Sheet represent
sales or work performed made in the ordinary course of business,
are current and collectible and, to SRS' knowledge, the same will
be collected in full (net of reserve for bad debts) in the
ordinary course of business and are not subject to any claims,
offsets, allowances or adjustments.
3.17 Employee Benefits. (a) Schedule 3.17 is a
----------------- -------------
complete and correct list of each employee benefit plan that SRS
maintains with respect to its current or former employees or to
which SRS contributes or is obligated to contribute with respect
to any of its current or former employees. SRS does not have any
benefit plan subject to the reporting requirements of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Code and other applicable Laws, nor has had such a
plan since January 1, 1991.
3.18 Intellectual Property. Schedule 3.18 is a
--------------------- -------------
complete and correct list of all of the trademarks, tradenames,
service marks, and patents (including any registrations of or
pending applications for any of the foregoing), know-how, data
bases, trade secrets and confidentiality information
(collectively, "Intellectual Property") used by SRS in the
conduct of its business. Except as disclosed on Schedule 3.18:
-------------
(a) all of such Intellectual Property is owned by
SRS free and clear of all liens, and is not subject to any
license, royalty or other agreement;
(b) none of such Intellectual Property has been or
is the subject of any pending or, to the best of SRS' knowledge,
threatened litigation or claim of infringement;
(c) no license or royalty agreement to which SRS is a
party is in breach or default by any party thereto except where
such breach or default would not have an SRS Material Adverse
Effect or is the subject of any notice of termination given or,
to SRS' knowledge, threatened;
(d) to SRS' knowledge, SRS is not breaching or
infringing any Intellectual Property of third parties; and
(e) the Intellectual Property is sufficient for the
conduct of the business of SRS as presently conducted.
3.19 Environmental Matters. The business and
---------------------
operations of SRS, including the transportation, treatment,
storage, handling, transfer, disposition, recycling or receipt of
materials, complies with all applicable environmental statutes,
regulations and decrees, whether federal, state or municipal (the
"Environmental Laws"). SRS has not received any notices to the
effect that the business carried on by SRS or the operation of
any equipment or facilities of SRS (including the transportation,
handling, treatment or storage of hazardous materials thereon) is
not in compliance with the requirements of applicable
Environmental Laws or is subject to any remedial control or
action or any investigation or evaluation as to whether any
remedial action is required to respond to a release or threatened
which forms part of or is adjacent to any premises at which SRS's
business is conducted. SRS has performed its services for
customers in material compliance with all applicable
Environmental Laws.
3.20 Books and Records. SRS has maintained and
-----------------
preserved complete and accurate books and records for its
material transactions. The minute books of SRS include complete
and correct minutes of all meetings of its directors committees
and stockholders. The SRS Articles of Incorporation and By-laws
previously delivered to ECO are current and complete. At the
Closing Date, all of those books and records will be in the
possession of SRS. Schedule 3.20 sets forth a complete and
-------------
correct list of (i) all officers and directors of SRS and (ii)
the name and address of each bank, trust company or other
financial institution in which SRS has an account and the names
of all persons authorized to draw thereon as well as all powers
of attorney granted by SRS.
3.21 Related Party Transactions. Schedule 3.21 sets
-------------------------- -------------
forth a complete and correct list of all transactions, loans,
claims, or agreements between or involving SRS and an officer,
director; employee, consultant or stockholder of SRS (or an
affiliate of any such person) since July 1, 1994.(excluding
employment agreements included on another SRS Schedule to this
Agreement and benefits given to all employees of SRS). All
transactions and agreements listed on Schedule 3.21 were on terms
-------------
to SRS no less favorable than what SRS would have had with
unrelated third parties.
3.22 Fees of Brokers, Consultants and Financial
-------------------------------------------
Advisors. Neither SRS, nor any officer, director, or employee of
--------
SRS, has employed any broker, finder, consultant or investment
banker or incurred any liability for any brokerage or investment
banking fees, commissions or finders, fees in connection with the
transactions contemplated by this Agreement, except to Xxxxxxx
Xxxxxxxx Investment Co. and Xxxxx Xxxxxxx & Co., investment
bankers, whose fees aggregated $380,000 shall be payable from the
Merger Consideration.
3.23 Required Vote. The affirmative vote of the
-------------
holders of a majority of the outstanding shares of SRS Common
Stock, voting together as one class, is the only vote of the SRS
stockholders required to approve this Agreement, the Merger and
the transactions contemplated herein.
3.24 General Representation and Warranty. Neither
-----------------------------------
this Agreement nor any schedule attached hereto or other
documents and written information furnished by or on behalf of
SRS, its attorneys, auditors or insurance agents to Eco in
connection with this Agreement contains any untrue statement of
material fact or omits to state any material fact necessary to
make the statements contained herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
ACQUISITION CORP. AND ECO
Acquisition Corp. and Eco, jointly and severally,
hereby represent and warrant to SRS as follows:
4.1 Due Incorporation. Each of Eco and
-----------------
Acquisition Corp. is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction
of incorporation, with all requisite power and authority to own,
lease and operate its properties and to carry on its business as
now being conducted. Eco is qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where
the nature of the properties owned, leased or operated by it and
the business transacted by it require such qualification, except
where the failure to be so qualified could not have an Eco
Material Adverse Effect (as defined in Section 4.7 herein).
-----------
4.2 Due Authorization. Each of Eco and
-----------------
Acquisition Corp. has full power and authority to enter into this
Agreement and the Related Agreement to which it is a party and to
consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance by Eco of this Agreement has
been duly and validly approved by the Board of Directors of Eco,
and no other actions or proceedings on the part of Eco are
necessary to authorize this Agreement. The execution, delivery
and performance by Acquisition Corp. of this Agreement and the
Related Agreement have been duly and validly approved by the
Board of Directors and the sole stockholder of Acquisition Corp.,
and no other actions or proceedings on the part of Acquisition
Corp. or its stockholder are necessary to authorize this
Agreement and the Related Agreement. Each of Eco and Acquisition
Corp. has duly and validly executed and delivered this Agreement
and Acquisition Corp. has duly and validly executed and delivered
(or will duly and validly execute and deliver on or prior to the
Closing Date) the Related Agreement. This Agreement constitutes
the legal, valid and binding obligations of each of Eco and
Acquisition Corp., and the Related Agreement will, upon
execution, constitute the legal, valid and binding obligation of
Acquisition Corp., in each case enforceable in accordance with
their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent
transfer, moratorium, reorganization or other laws from time to
time in effect which affect creditors' rights generally and by
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
4.3 Non-Contravention; Consents and Approvals. (a)
-----------------------------------------
The execution and delivery of this Agreement by Eco and
Acquisition Corp. does not, and the performance by Eco and
Acquisition Corp. of their obligations hereunder and the
consummation of the transactions contemplated hereby will not,
conflict with, result in a violation or breach of, constitute
(with or without notice or lapse of time or both) a default
under, result in or give to any person any right of payment or
reimbursement, termination, cancellation, modification or
acceleration of, or result in the creation or imposition of any
lien upon any of the assets or properties of any of the American
Eco Companies under, any of the terms, conditions or provisions
of (i) the charter documents or bylaws of each of the American
Eco Companies, or (ii) subject to the taking of the actions
described in paragraph (b) of this Section, (x) any statute, law,
rule, regulation or ordinance (together, "Laws"), or any
judgment, decree, order, writ, permit or license, of any
Governmental Entity, or (y) any contract, agreement or commitment
to which any Eco Company is a party or by which any American Eco
Company or any of their respective assets or properties is bound.
(b) No consent, approval, order or authorization of,
or registration, declaration or filing with any Governmental
Entity is required by Eco or Acquisition Corp. in connection with
the execution and delivery of this Agreement and the Related
Agreement or the consummation by each of Eco and Acquisition
Corp. or each of their respective stockholders of the
transactions contemplated hereby and thereby, except for:
(i) the filing of the Articles of Merger with the
Secretary of State of the State of Nevada in accordance with
the requirements of the NRS;
(ii) filings with various state securities "blue sky"
authorities; and
(iii) the approval of the Toronto Stock Exchange (the
"TSE") of this Agreement and the issuance of the Merger
Consideration.
4.4 Capitalization. (a) The authorized capital
--------------
stock of Eco consists of 700,000 shares of Preferred Stock, no
par value per share ("Eco Preferred Stock") and an unlimited
number of shares of Eco Common Stock. On the date hereof, there
are no shares of Eco Preferred Stock issued and outstanding and
10,551,771 shares of Eco Common Stock issued and outstanding. The
authorized capital stock of Acquisition Corp. consists of 1,000
shares of Acquisition Corp. Common Stock, of which there are 100
shares issued and outstanding on the date hereof. All of the
issued and outstanding shares of Eco and Acquisition Corp. Common
Stock are, and all shares of Eco Common Stock constituting the
Merger Consideration to be issued to SRS stockholders in the
Merger will be, validly issued, fully paid and nonassessable and
the issuances thereof were not and will not be subject to
preemptive rights. Schedule 4.4 is a correct and complete list of
------------
shares of Eco Common Stock reserved for issuance under Eco stock
option plans and warrants (the "Eco Derivative Securities") as of
March 31, 1996.
(b) Except for the Eco Derivative Securities, there
are no shares of Eco Common Stock and Acquisition Corp. Common
Stock or other equity securities (whether or not such securities
have voting rights) of Eco and Acquisition Corp. issued or
outstanding or any subscriptions, options, warrants, calls,
rights, convertible securities or other agreements or commitments
of any character obligating Eco and/or Acquisition Corp. to
issue, transfer or sell any shares of capital stock or other
securities (whether or not such securities have voting rights) of
Eco and Acquisition Corp. There are no outstanding contractual
obligations of Eco or Acquisition Corp. which relate to the
purchase, sale, issuance, repurchase, redemption, acquisition,
transfer, disposition, holding or voting of any shares of capital
stock or other securities of each of Eco and Acquisition Corp.
4.5 Financial Statements; Undisclosed Liabilities;
----------------------------------------------
Other Documents. (a) For purposes of this Agreement, "Eco
---------------
Financial Statements" shall mean (x) the audited consolidated
financial statements of Eco as of November 30, 1995 and November
30, 1994 and for the fiscal years then ended (including all notes
thereto) which are included in the Eco SEC Documents (as defined
in Section 4.6), and (y) the unaudited consolidated financial
------------
statements of Eco as of February 29, 1996 and February 28, 1995
and for the three months then ended consisting of the
consolidated balance sheets at such dates and the related
consolidated statements of operations, stockholders' equity and
cash flows for the periods then ended. The Eco Financial
Statements have been prepared in accordance with Canadian GAAP
(together with notes thereto explaining the differences between
Canadian GAAP and U.S. GAAP) consistently applied, present fairly
the financial position, of Eco as at the dates thereof and the
results of operations and cash flows of Eco for the periods
covered thereby (subject, in the case of any unaudited interim
financial statements, to normal year-end adjustments), and are
substantially in accordance with the financial books and records
of Eco.
(b) Eco does not have any liabilities or obligations
of any nature, whether accrued, contingent, absolute or
otherwise, which individually or in the aggregate could be
reasonably expected to have an Eco Material Adverse Effect (as
defined below) except (i) as set forth in the February 29, 1996
balance sheet (the "Eco Interim Balance Sheet") Eco or (ii)
liabilities or obligations incurred since February 29, 1996 in
the ordinary and usual course of its business.
4.6 Securities Law Filings. The Eco Common Stock
----------------------
is listed on the TSE and the Nasdaq National Market. Eco as a
"foreign private issuer", as defined in the U.S. Securities
Exchange Act of 1934, as amended (the "Exchange Act"), has filed
all required forms, reports and other documents with the U.S.
Securities and Exchange Commission (the "SEC") since December 1,
1994, all of which complied when filed, in all material respects,
with all applicable requirements of the Exchange Act. Eco has
heretofore delivered to SRS complete and correct copies of (i)
its Annual Report on Form 20-F for the year ended November 30,
1994, as filed with the SEC, (ii) its Annual Report to
Stockholders for the 1995 fiscal year, (iii) all information
circulars relating to Eco,s meetings of stockholders (whether
annual or special) since December 1, 1994, and (iv) all other
reports, forms and other documents filed by Eco with the SEC
since December 1, 1994 (together, the "Eco SEC Documents").
4.7 No Material Adverse Effects or Changes.
--------------------------------------
Except as listed on Schedule 4.7, or as disclosed in or reflected
------------
in the Eco Financial Statements included in the Eco SEC
Documents, or as contemplated by this Agreement, since February
29, 1996, neither Eco nor any of its wholly-owned subsidiaries
(ECO and such subsidiaries sometimes collectively, the "Eco
Companies") has suffered any damage, destruction or Loss to any
of its assets or properties (whether or not covered by insurance)
which is having or could be expected to have an Eco Material
Adverse Effect. An "Eco Material Adverse Effect" shall mean an
effect on or circumstances involving the business, operations,
assets, liabilities, results of operations, cash flows or
condition (financial or otherwise) which is materially adverse to
the Eco Companies, taken as a whole.
4.8 Insurance. The Eco Companies are insured
---------
with reputable insurers against all risks and in such amounts
normally insured against by companies of the same type and in the
same line of business as the Eco Companies.
4.9 Labor Matters. Each of the Eco Companies has
-------------
conducted and currently is conducting, its respective business in
full compliance with all laws relating to employment and
employment practices, terms and conditions of employment, wages
and hours and nondiscrimination in employment except where such
failure to be in compliance would not have an Eco Material
Adverse Effect. The relationship of the Eco Companies with its
respective employees is generally satisfactory, and there is, and
during the past three years there has been, no labor strike,
dispute, slow-down, work stoppage or other labor difficulty
pending or, to Eco's knowledge, threatened against or.involving
the Eco Companies. None of the employees of the Eco Companies are
covered by any collective bargaining agreement, no collective
bargaining agreement is currently being negotiated by the Eco
Companies and to Eco's knowledge, no attempt is currently being
made or during the past three years has been made to organize any
employees of the Eco Companies to form or enter a labor union or
similar organization.
4.10 Tax Returns and Audits. Except as set forth
----------------------
on Schedule 4.10, each of the Eco Companies has duly filed all
-------------
Canadian, United States, province, state, local and foreign Tax
Returns required to be filed by it, except where the failure to
so file would not have an Eco Material Adverse Effect. Eco has
duly paid (except for Taxes being contested in good faith) or
made adequate provisions on its books in accordance with Canadian
GAAP for the payment of all Taxes which have been incurred or are
due and payable, by the Eco Companies, and Eco will on or before
the Effective Time of the Merger make adequate provision on its
books in accordance with Canadian GAAP for all Taxes payable for
any period through the Effective Time of the Merger for which no
return is required to be filed prior to the Effective Time. Since
December 1, 1994, the Tax Returns of the Eco Companies have not
been examined by the Canadian tax authorities, the IRS or other
taxing authority, respectively, nor has any of the Eco Companies
granted or given any extensions or waivers of the statute of
limitations with respect to any such federal and state income tax
returns since December 1, 1994. Eco is not aware of any basis for
the assertion of any deficiency against any of the Eco Companies
for Taxes, which, if adversely determined, would have an Eco
Material Adverse Effect.
4.11 Litigation. (a) Except as disclosed in Schedule
---------- --------
4.11, there are no actions, suits, arbitrations, regulatory
----
proceedings or other litigation, proceedings or governmental
investigations pending or, to Eco's knowledge, threatened against
or affecting any of the Eco Companies or any of their respective
officers or directors in their capacity as such, or any of their
respective properties or businesses which could reasonably be
expected to have an Eco Material Adverse Effect. No Eco Company
is subject to any order, judgment, decree, injunction,
stipulation or consent order of or with any court or other
Governmental Entity, other than orders of general applicability.
Since December 1, 1994, none of the Eco Companies has entered
into any agreement to settle or compromise any proceeding pending
or threatened against it which has involved any obligation other
than the payment of money or for which it has any continuing
obligation.
(b) There are no claims, actions, suits,
proceedings, or investigations pending or, to Eco's knowledge,
threatened by or against any of the Eco Companies with respect to
this Agreement or the Related Agreement, or in connection with
the transactions contemplated hereby or thereby.
4.12 Compliance with Applicable Laws. Except as
-------------------------------
disclosed in Schedule 4.12, each of the Eco Companies holds all
-------------
permits, licenses, variances, exemptions, orders and approvals of
all Governmental Entities which are required in the operation of
its respective business (the "Eco Permits") except for those the
failure of which to hold would not have an Eco Material Adverse
Effect. The Eco Companies are in compliance with the terms of the
Eco Permits, except where the failure so to comply would not have
an American Eco Material Adverse Effect. Except as disclosed in
Schedule 4.12, to Eco's knowledge, none of the Eco Companies is
-------------
in violation of any law, ordinance or regulation of any
Governmental Authority, including environmental laws and
regulations, except for possible violations which individually
and in the aggregate do not, and, insofar as reasonably can be
foreseen by Eco, will not in the future have an Eco Material
Adverse Effect.
4.13 Contracts; No Defaults. Neither any Eco Company
----------------------
nor to Eco's knowledge any other party thereto, is in breach or
violation of, or in default in the performance or observance of
any term or provision of, and no event has occurred or by reason
of this Agreement or the Merger would occur which, with notice or
lapse of time or both, could be reasonably expected to result in
a default under, any contract, agreement or commitment to which
any Eco Company is a party or by which any Eco Company or any of
its assets or properties is bound, except for breaches,
violations and defaults which are not having and could not be
reasonably expected to have an American Eco Material Adverse
Effect. None of the Eco Companies is required to give any notice
to any person regarding this Agreement or the Related Agreement
or the transactions contemplated hereby or thereby.
4.14 Absence of Certain Changes or Events. Except as
------------------------------------
disclosed in the Eco SEC Documents filed prior to the date of
this Agreement or in Schedule 4.14 hereto, since February 29,
-------------
1996, Eco has not (i) declared, set aside or paid any dividend or
other distribution in respect of its capital stock; (ii) made any
direct or indirect redemption, purchase or other acquisition of
any shares (other than purchases in connection with the exercise
of options) of its capital stock or made any payment (other than
dividends) to any of their stockholders (in their capacity as
stockholders); (iii) issued or sold any shares of its capital
stock or any options, warrants or other rights to purchase any
such shares or any securities convertible into or exchangeable
for such shares or taken any action to reclassify or recapitalize
or split up their capital stock; (iv) mortgaged, pledged or
subjected to any lien, lease, security interest, encumbrance or
other restriction, any of their material properties or assets
\except in the ordinary and usual course of their business and
consistent with past practice; (v) entered into any acquisition
or merger agreement or commitment, (vi) except in the ordinary
and usual course of its business and consistent with its past
practices forgiven or canceled any material debt or claim, waived
any material right; or (vii) adopted or amended any plan or
arrangement (other than amendments that are not material or that
were made to comply with laws or regulations) for the benefit of
any director, officer or employee or changed the compensation
(including bonuses) to be paid to any director, officer or
employee, except for changes made consistent with the prior
practice of Eco.
4.15 Fees of Brokers, Finders and Investment Bankers.
------------------------------------------------
Neither Eco nor any officer, director, or employee of Eco has
employed any brokers, finder or investment banker or incurred any
liability for any brokerage or investment banking fees,
commissions or finders' fees in connection with the transactions
contemplated by this Agreement.
4.16 General Representation and Warranty. Neither
-----------------------------------
this Agreement nor any schedule attached hereto or other
documents and written information furnished by or on behalf of
Eco, its attorneys, auditors or insurance agents to SRS in
connection with this Agreement contains any untrue statement of
material fact or omits to state any material fact necessary to
make the statements contained herein or therein not misleading.
ARTICLE V
COVENANTS
5.1 Implementing Agreement. Subject to the terms
----------------------
and conditions hereof, each party hereto shall use its best
efforts to take all action required of it to fulfill its
obligations under the terms of this Agreement and to facilitate
the consummation of the transactions contemplated hereby;
5.2 Access to Information and Facilities;
-------------------------------------
Confidentiality. (a) From and after the date of this Agreement,
---------------
SRS shall give Eco and Acquisition Corp. and their
representatives access during normal business hours and upon
reasonable notice to all of the facilities, properties, books,
contracts, commitments and records of SRS and shall make the
officers and employees of SRS available to Eco and Acquisition
Corp. and their representatives as Eco or Acquisition Corp. or
their representatives shall from time to time reasonably request.
Eco and Acquisition Corp. and their representatives will be
furnished with any and all information concerning SRS which Eco
or Acquisition Corp. or their representatives reasonably request.
The obligations set forth in this Section 5.2 shall also apply to
-----------
Eco and Acquisition Corp., mutatis mutandis. The investigation by
------- --------
and knowledge of SRS or Eco and the furnishing of information to
each other shall not affect the right of such party to rely on
the representations, warranties, covenants and agreements of the
other party hereto.
(b) Each of SRS, on one hand, and Eco and
Acquisition Corp., on the other hand, agrees for itself, and its
respective representatives, to keep confidential all information
furnished to it pursuant to this Section 5.2, except for
information which is public or which is disclosed other than by a
person subject to this Section 5.2(b).
--------------
5.3 Preservation of Business. (a) From the date of
------------------------
this Agreement until the Closing Date, each of SRS and Eco,
(including the SRS Companies and the other Eco Companies,
respectively) shall operate only in the ordinary and usual course
of business consistent with past practice, and shall use
reasonable commercial efforts to (i) preserve intact its business
organization, (ii) preserve the good will and advantageous
relationships with customers, suppliers, independent contractors,
employees and other persons material to the operation of its
business, and (iii) not permit any action or omission which would
cause any of the representations or warranties contained herein
to become inaccurate or any of the covenants to be breached in
any material respect.
(b) SRS further covenants that prior to the Closing
Date SRS shall not, nor permit any of the SRS Xxxxxxxxx.xx,
without the prior written consent of Eco (which shall not be
unreasonably withheld):
(i) take any action, incur any obligation or enter
into or authorize any contract or transaction other than in
the ordinary course of business;
(ii) except pursuant to the terms of any SRS Options,
issue, sell, deliver or agree or commit to issue, sell or
deliver (whether through the issuance or granting or
options, warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise)
any shares of its capital stock or any other securities, or
amend any of their terms of any such securities;
(iii) split, combine, or reclassify any shares of its
capital stock, declare, set aside or pay any dividend or
other distribution (whether in cash, stock or property or
any combination thereof) in respect of its capital stock, or
redeem or otherwise acquire any of its securities; or
(iv) make any changes in its accounting systems,
policies, principles or practices except as may be required
by law or U.S. GAAP;
(v) make any material Tax election or settle or
compromise any material federal, state, local or foreign
income Tax liability, or waive or extend the statute of
limitations in respect of any such Taxes; or
(vi) terminate, or modify, amend or otherwise alter
or change in any material respect, any of the terms or
provisions of any material Contract.
(c) Each of SRS and Eco will promptly notify the
other in writing upon becoming aware of any fact or condition
which would constitute a breach or non-compliance of this
covenant.
5.4 SRS Stockholder Approval. As soon as
------------------------
practicable after the date hereof, SRS shall prepare a proxy
statement for a stockholders meeting (the "SRS Stockholders
Meeting") at which approval of this Agreement and the Merger will
be voted upon. SRS will convene the SRS Stockholders' Meeting as
promptly as practicable after the proxy statement is available,
subject to prior hearing as described in Section 5.5 hereof.
-----------
Subject to fiduciary obligations of the SRS Board of Directors,
the SRS Board of Directors shall recommend approval to its
stockholders of this Agreement and the Merger and use its best
efforts to obtain such approval. At the request of SRS, Eco shall
furnish to SRS such information regarding Eco and Acquisition
Corp. as may reasonably be necessary for inclusion in the proxy
statement. SRS agrees to provide Eco with drafts of the proxy
statement at least two business days prior to distribution of the
final proxy statement to SRS stockholders.
5.5 California Permit. As soon as practicable
-----------------
after the date hereof SRS shall prepare and file an application
(the "Application") with the California Commissioner of
Corporations (the "COC") seeking a permit (the "Permit") under
Section 25142 of the California Corporations Code for approval of
the terms of the Merger on behalf of SRS stockholders after a
hearing thereon. At the request of SRS, Eco shall furnish such
information regarding Eco as may be reasonably required for
inclusion in the Application. SRS shall provide Eco with a draft
Application at least two business days prior to filing with the
COC. SRS shall use its best efforts to cause the COC to grant the
Permit, including appearing at any hearing required thereunder,
in order that the approval by the COC would permit Eco to issue
the Merger Consideration without registration under the
Securities Act of 1933, as amended (the "Securities Act")
pursuant to the exemption provided in Section 3(a)(10) thereof.
5.6 Consents and Approvals. Subject to the terms
----------------------
and conditions provided herein, each of the parties hereto shall
use reasonable commercial efforts to obtain all consents,
approvals, certificates and other documents required in
connection with the performance by it of this Agreement and the
consummation of the transactions contemplated hereby, in addition
to the approval of SRS Stockholders and the grant of the Permit
pursuant to Sections 5.4 and 5.5 hereof. As soon as practicable
--------------------
after the date hereof, each of the parties hereto shall make all
filings, applications, statements and reports to all Governmental
Authorities and other Persons which are required to be made prior
to the Closing Date pursuant to any applicable law or contract in
connection with this Agreement and the transactions contemplated
hereby.
5.7 Periodic Reports. Until the Effective Time, Eco
----------------
will, subject to the requirements of applicable laws, furnish to
SRS all filings to be made with the TSE and the SEC and will
solicit comments with respect thereto, in each case at least two
business days (or as soon thereafter as is practicable) prior to
the time of such filings and the time of such mailings of reports
which refer to SRS.
5.8 Publicity. Prior to issuing any public
---------
announcement or statement with respect to the transactions
contemplated hereby and prior to making any filing with any
Federal or state governmental or regulatory agency or with the
TSE or Nasdaq with respect thereto, Eco and SRS will, subject to
their respective legal obligations, consult with each other and
will allow each other to review the contents of any such public
announcement or statement and any such filing. Subject to the
preceding sentence, Eco and SRS each agree to furnish to the
other copies of all other public announcements they may make
concerning their respective business and operations promptly
after such public announcements are made.
5.9 No Negotiation. SRS agrees that it shall not,
--------------
after the date hereof and prior to the Effective Time, seek,
directly or through agents, representatives or affiliates (as
defined in the Exchange Act), or permit any of its officers or
directors to seek (whether in their capacities as officers or
directors or in their individual capacities) any person or
persons, (other than Eco or its affiliates), to acquire or
purchase all or substantially all of its assets or to purchase or
exchange for any of its capital stock, or SRS to acquire or
purchase in one or more related transactions the capital stock or
related assets of persons (other than Eco or its affiliates) or
to effect a consolidation or merger (other than the Merger) or
other business combination or recapitalization, or to enter into
any discussions or agreements with respect to any of the
foregoing transactions.
5.10 Listing of Common Stock. Eco shall cause to
-----------------------
be prepared and submitted applications to the TSE and Nasdaq
covering the listing of the shares of Eco Common Stock on the TSE
and NASDAQ National Market issuable in connection with the Merger
and will use its reasonable best efforts to obtain approval for
the listing of such additional shares.
5.11 Blue Sky Approvals. Eco and SRS shall obtain
------------------
all necessary state securities law or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by
this Agreement and the Merger.
5.12 Principal Stockholders. SRS shall cause the
----------------------
Xxxxxx and Xxxxxxx XxXxxxxx Trust, Xxxxxxx X. Xxxx, Xx. and Xxxx
X. Xxx Xxxx to enter into agreements agreeing to vote all of
their respective shares of SRS Common Stock, and shall cause
members of their respective immediate families to vote all of
their shares of SRS Common Stock, at the SRS Stockholders Meeting
in favor of approval of this Agreement and the Merger.
5.13 Rule 145 Affiliates. Prior to the Closing
-------------------
Date, SRS shall deliver to Eco a letter representing that other
than Xxxxxx XxXxxxxx, Xxxxxxx X. Xxxx, Xx., Xxxxx X. Xxxxxxxxxx,
Xxxxxxx Xxxxxxx and Xxxx X. Xxx Xxxx and to its best knowledge,
SRS has no other "affiliates" for purposes of Rule 145 under the
Securities Act.
5.14 Tax-Free Status. No party hereto shall, nor
---------------
shall any party permit any of its subsidiaries to, take any
actions which would, or would be reasonably likely to, adversely
affect the status of the Merger as a tax-free transaction (except
as to dissenters' rights and fractional shares) under Code
Section 368(a).
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS
OF ACQUISITION CORP. AND ECO
The obligations of Acquisition Corp. and Eco to
consummate the Merger are subject to the fulfillment at or before
the Closing of each of the following conditions:
6.1 Warranties True as of Closing Date. Each of
----------------------------------
the representations and warranties of SRS contained herein shall
be true and correct in all material respects on and as of the
Closing Date with the same force and effect as though made on and
as of the Closing Date, without giving effect to any notification
pursuant to Section 5.3(c) hereof.
--------------
6.2 Compliance With Agreements and Covenants. SRS
----------------------------------------
shall have performed and complied with in all material respects
all of its covenants, obligations and agreements contained in
this Agreement to be performed and complied with by SRS on or
prior to the Closing Date, without giving effect to any
notification pursuant to Section 5.3(c) hereof.
--------------
6.3 SRS Certificate. SRS shall have delivered to
---------------
Eco a certificate, dated the Closing Date, from its Chief
Executive Officer and Chief Financial Officer certifying that
each of the conditions specified in Section 6.1 and Section 6.2
----------- -----------
hereof are satisfied in all respects.
6.4 Secretary's Certificate. SRS will have
-----------------------
delivered to Eco a certificate of the duly authorized Secretary
of SRS, dated the Closing Date, certifying resolutions of SRS
Board of Directors and stockholders authorizing the execution,
delivery and performance of this Agreement, the Related Agreement
and the Merger.
6.5 Good Standing Certificates. SRS will have
--------------------------
delivered to Eco at the Closing certificates of good standing and
tax status from the States of Nevada, California, Louisiana and
Washington as to SRS, which Certificates shall be dated a date
not more than five (5) business days prior to the Closing Date.
6.6 Xx Xxxxxx Employment Agreement. SRS will have
------------------------------
delivered to Eco a fully executed employment agreement between
SRS and Xxxxxx Xx Xxxxxx. The Xx Xxxxxx employment agreement
shall be substantially in the form of Exhibit A attached hereto.
---------
6.7 Escrow Agreement. SRS will have delivered to Eco
----------------
Escrow Agreement executed by the escrow agent and Xxxxxx
XxXxxxxx, as the agent of the SRS stockholders, as provided for
in Sections 1.4(d) and 1.9(c) hereof. The Escrow Agreement shall
--------------------------
be substantially in the form of Exhibit B attached hereto.
---------
6.8 Opinion of Counsel. SRS will have delivered
------------------
to American Eco a legal opinion of Stradling, Yocca, Xxxxxxx &
Xxxxx in form and substance reasonably satisfactory to Eco and
its counsel.
6.9 Approval of Merger. The SRS stockholders
------------------
shall have approved this Agreement and the Merger contemplated
hereby in accordance with its Articles of Incorporation and
by-laws and the NRS [and California law?].
6.10 Permit. The COC shall have issued the Permit as
------
contemplated in Section 5.5 hereof, and no action shall have been
-----------
taken or threatened to modify or revoke the Permit.
6.11 Dissent and Appraisal. The holders of not more
---------------------
than 5% of the issued and outstanding shares of SRS Common Stock
have dissented from the Merger and sought appraisal rights
pursuant to the applicable provisions of the NRS.
6.12 Consents and Approvals. Eco shall have received
----------------------
written evidence satisfactory to it that all consents and
approvals required for the consummation of the transactions
contemplated hereby have been obtained, and all required filings
have been made, except where the failure to obtain any such
consent or approval or to make any such filing would not have an
SRS Material Adverse Effect or an Eco Material Adverse Effect.
6.13 Resignations. Such officers and directors of
------------
SRS as requested by Eco shall have delivered letters of
resignation of their positions with SRS.
6.14 Listing of Common Stock. The TSE and NASDAQ
-----------------------
shall have approved the listing of all shares of Eco Common Stock
to be issued in the Merger.
6.15 Rule 145 Letters. The persons listed in Section
---------------- -------
5.13 hereof shall have delivered to Eco letters regarding the
----
resale of the Eco Common Stock they are to receive on the Merger
in accordance with Rule 145 under the Securities Act.
6.16 Actions or Proceedings. No preliminary or
----------------------
permanent injunction or other order by any federal or state court
preventing consummation of the Merger shall have been issued and
shall be continuing in effect, and the Merger and the other
transactions contemplated hereby shall not be prohibited under
any applicable federal or state law or regulation.
6.17 Other Closing Documents. Eco shall have
-----------------------
received the executed Articles of Merger and such other
agreements and instruments as Eco shall reasonably request, in
each case in form and substance reasonably satisfactory to Eco.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SRS
The obligations of SRS to consummate the Merger are
subject to the satisfaction or waiver by SRS of the following
conditions precedent on or before the Closing Date:
7.1 Warranties True as of Closing Date. Each of
----------------------------------
the representations and warranties of Acquisition Corp. and Eco
contained herein shall be true and correct in all material
respects on and as of the Closing Date with the same force and
effect as though made by Acquisition Corp. and Eco on and as of
the Closing Date, without giving effect to any notification
pursuant to Section 5.3(c) hereof.
-------------
7.2 Compliance with Agreements and Covenants.
----------------------------------------
Acquisition Corp. and Eco shall have performed and complied with
in all material respects all of their covenants, obligations and
agreements contained in this Agreement, to be performed and
complied with by them on or prior to the Closing Date, without
giving effect to any notification pursuant to Section 5.3(c)
--------------
hereof.
7.3 Eco Certificate. Eco shall have delivered to
---------------
SRS a certificate, dated the Closing Date, from its Chief
Executive Officer and Chief Financial Officer certifying that
each of the conditions specified in Section 7.1 and Section 7.2
----------- -----------
hereof are satisfied in all respects.
7.4 Opinion of Counsel. Eco shall have delivered
------------------
to SRS a legal opinion of Xxxxxxx Xxxxx & Xxxxxxxxx in form and
substance reasonably satisfactory to SRS.
7.5 Opinion of Tax Counsel. Eco shall have delivered
----------------------
to SRS a legal opinion of Xxxx & Priest LLP to the effect that
the Merger will be treated for federal income tax purposes as a
reorganization within Section 368(a) of the Code.
7.6 Permit. The COC shall have issued the Permit as
------
contemplated in Section 5.5 hereof, and no action shall have been
-----------
taken or threatened to modify or revoke the Permit.
7.7 Consents and Approvals. SRS shall have received
----------------------
written evidence satisfactory to it that all consents and
approvals required for the consummation of the transactions
contemplated hereby have been obtained, and all required filings
have been made, except where the failure to obtain any such
consent or approval or to make any such filing would not have an
SRS Material Adverse Effect or an Eco Material Adverse Effect.
7.8 Listing of Common Stock. The TSE and NASDAQ
-----------------------
shall have approved the listing of all shares of American Eco
Common Stock to be issued in the Merger.
7.9 Actions or Proceedings. No preliminary or
----------------------
permanent injunction or other order by any federal or state court
preventing consummation of the Merger shall have been issued and
shall be continuing in effect, and the Merger and the other
transactions contemplated hereby shall not be prohibited under
any applicable federal or state law or regulation.
7.10 Other Closing Documents. SRS shall have
-----------------------
received such other agreements and instruments as SRS shall
reasonably request, in each case in form and substance reasonably
satisfactory to SRS.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated and the
-----------
Merger may be abandoned at any time prior to the Effective Time,
whether before or after approval by the SRS stockholders:
(a) by mutual written consent of the Board of
Directors of American Eco and the Board of Directors of SRS;
(b) by either American Eco or SRS, by written notice
to the other, if (i) the Effective Time shall not have occurred
on or before June 1, 1996, or (ii) any court of competent
jurisdiction in Canada or any province or in the United States or
any state shall have issued an order, judgment or decree (other
than a temporary restraining order) restraining, enjoining or
otherwise prohibiting the Merger and such order, judgment or
decree shall have become final and non-appealable; provided,
however, that the right to terminate this Agreement (X) under
clause (i) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Effective Time to occur on
or before such date or (Y) under clause (ii) shall not be
available to any party unless such party shall have used all
reasonable efforts to remove such order, judgment or decree;
(c) by Eco, by written notice to SRS, if:
(i) there shall have been any breach of any
representation, warranty, covenant or agreement of SRS
hereunder which, if not remedied prior to the Closing Date,
would have an SRS Material Adverse Effect and such breach
shall not have been remedied, or SRS shall not have provided
Eco with reasonable assurance that such breach will be
remedied prior to the Closing Date, within five (5) business
days after receipt by SRS of notice in writing from Eco,
specifying the nature of such breach and requesting that it
be remedied; or
(ii) the Board of Directors of SRS shall withdraw or
modify in any manner adverse to Eco its approval or
recommendation of this Agreement or the Merger.
(d) by SRS, by written notice to Eco, if:
(i) there shall have been any breach of any
representation, warranty, covenant or agreement of Eco
hereunder which, if not remedied prior to the Closing Date,
would have an Eco Material Adverse Effect and such breach
shall not have been remedied or Eco shall not have provided
SRS with reasonable assurance that such breach will be
remedied prior to the Closing Date, within five (5) business
days after receipt by Eco of notice in writing from SRS,
specifying the nature of such breach and requesting that it
be remedied; or
(ii) the Board of Directors of Eco or any committee
thereof shall withdraw or modify in any manner adverse to
SRS its approval or recommendation of this Agreement or the
Merger.
8.2 Effect of Termination and Abandonment. In the
-------------------------------------
event of termination of this Agreement and abandonment of the
Merger pursuant to this Article VIII, this Agreement shall
------------
forthwith become void and no party hereto (or any of its
directors, officers or stockholders) shall have any liability or
further obligation to any other party to this Agreement, except
that nothing herein will relieve any party from liability for any
breach of any of its representations or warranties under this
Agreement or its failure to comply with one of its covenants,
agreements or obligations under this Agreement.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by SRS Stockholders.
------------------------------------
(a) In consideration of the receipt of the Merger
Consideration, the SRS Stockholders shall indemnify and hold
harmless Eco from and against any claims, demands, debts, suits,
actions, obligations, proceedings, losses, damages, liabilities,
deficiencies, costs and expenses (including without limitation,
all reasonable legal and other professional fees and
disbursements, interest, penalties and amounts paid in
settlement) (collectively, "Claims") arising out of, based upon
or by reason of (A) any breach of any representation or warranty
of SRS contained in this Agreement or in any Schedule or
certificate delivered pursuant to this Agreement or (B) any
breach or non-fulfillment of, or failure to perform, any of the
covenants, agreements or understandings of SRS which are
contained in or made pursuant to this Agreement.
(b) Notwithstanding anything to the contrary herein,
any claim by Eco against the SRS Stockholders under this Section
9.1 shall be xxxxxxx.xx the SRS Stockholders only to the extent
that Eco's damages (the "Damages") shall exceed in the aggregate
525,000 (the "Threshold Amount"). At such time as the aggregate
amount of Eco Damages exceed the Threshold Amount, the SRS
Stockholders shall be liable on a dollar-for-dollar basis for the
full amount of all Eco Damages, including the Threshold Amount.
Any payments to be made by the SRS Stockholders under this
Section 9.1 shall be from shares of Eco Common Stock and/or funds
held under the Escrow Agreement, and shall be pro-rata based upon
their respective ownership of SRS Common stock as of the
Effective Time. In no event shall the aggregate liability of the
SRS Stockholders under this Section 9.1 exceed the amount of
funds and/or shares of Eco Common Stock and/or funds ($500,000)
held under the Escrow Agreement.
9.2 Indemnification by Eco.
-----------------------
(a) Eco shall indemnify and hold harmless the
persons who are SRS Stockholders immediately prior to the
Effective Time (the "Indemnified Stockholders") from and against
any claims, demands, debts, suits, actions, obligations,
proceedings, losses, damages, liabilities, deficiencies, costs
and expenses (including without limitation, all reasonable legal
and other professional fees and disbursements, interest,
penalties and amounts paid in settlement) (collectively,
"Claims") arising out of, based upon or by reason of (A) any
breach by Eco of any representation or warranty by Eco contained
in this Agreement or (B) any breach or non-fulfillment of, or
failure to perform, any of the covenants, agreements or
undertakings of Eco which are contained in or made pursuant to
this Agreement. It is acknowledged that the person who is acting
as the agent of the Indemnified Stockholders pursuant to the
Escrow Agreement shall also act as agent on behalf of the
Indemnified Stockholders pursuant to this Section 9.2 (the
-----------
"Stockholders' Agent").
(b) Notwithstanding anything to the contrary herein,
any claim by the Indemnified Stockholders against Eco under this
Section 9.2 shall be payable by Eco only to the extent that the
Indemnified Stockholders damages ("Damages") shall exceed the
Threshold Amount. At such time as the aggregate amount of the
Indemnified Stockholders Damages exceed the Threshold Amount, Eco
shall thereafter be liable on a dollar-for-dollar basis for the
full amount of all Indemnified Stockholders Damages, including
the Threshold Amount. Eco may make payments of amount payable
under this Section 9.2 in U.S. currency and/or shares of Eco
Common Stock, which shares be valued at the Average Closing Price
per share for the five trading days immediately prior to the
payment date, as provided in the Escrow Agreement. In no event
shall the aggregate liability of Eco under this Section 9.2
exceed $500,000.
9.3 Procedure. (a) Any Claim brought by Eco
---------
or the SRS Stockholders under this ARTICLE IX must be in writing,
specifying the nature of the Claim and the estimated amount of
damages, and be received by the party against whom
indemnification is being sought within one year after the
Effective Date (the "Indemnity Termination Date").
(b) In the event that subsequent to the Effective
Time, and not prior to the Indemnity Termination Date, Eco
receives written notice of the assertion of a claim or the
commencement of any action or proceeding by any person who is not
a party to this Agreement (including any Governmental Entity) (a
"Third Party Claim"), against Eco, SRS or one of their affiliates
against which ECO may be entitled to indemnification hereunder,
Eco shall give written notice of the Third Party Claim to the
Stockholders' Agent. Eco shall have the right to conduct the
defense of the Third Party Claim, and the cost of such defense
shall be part of Eco Damages. If an offer is made to settle a
Third Party Claim and Eco desires to accept such offer, Eco shall
give written notice of the offer of settlement to the
Stockholders' Agent who shall have fifteen (15) days from receipt
thereof to accept or reject the offer, which rejection must be on
a reasonable basis. The failure of the Stockholders Agent to
respond to a desired offer of settlement shall be deemed
acceptance thereof.
9.4 Remedies. Each of Eco and Acquisition Corp, on
--------
one hand, and SRS (until the Effective Time) and the SRS
Stockholders (after the Effective Time), on the other hand, shall
not be liable or responsible in any manner whatsoever to the
other, whether for indemnification or otherwise, with respect to
any matter arising out of the representations, warranties or
covenants of this Agreement or any Schedule hereto or any
certificate delivered in connection herewith except for (i)
equitable relief, (ii) pursuant to remedies expressly provided
for elsewhere in this Agreement and (iii) indemnity as expressly
provided in this ARTICLE IX, all of which provide the exclusive
remedy of the parties hereto.
ARTICLE X
MISCELLANEOUS
10.1 Expenses. Each party hereto shall bear its own
--------
expenses with respect to the transactions contemplated hereby.
10.2 Amendment. This Agreement may not be amended,
---------
modified or supplemented except by a writing executed by
Acquisition Corp., American Eco and SRS.
10.3 Notices. Any notice, request, instruction or
-------
other document to be given hereunder by a party hereto shall be
in writing and shall be deemed to have been given, (a) when
received if given in person, (b) on the date of transmission if
sent by telex, facsimile or other wire transmission (with receipt
confirmed) or (c) three business days after being deposited in
the U.S. mail, certified or registered mail, postage prepaid:
(a) If to SRS:
Separation and Recovery Systems, Inc.
0000 XxXxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xx Xxxxxx, President
Facsimile No.: 000-000-0000
with a copy to:
Stradling, Yocca, Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xx., Xxxxx 0000
P.O. Box 7680
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Attn: X.X. Xxxxxxx, Esq.
Facsimile No.: 000-000-0000
(b) If to American Eco or Acquisition Corp.:
American Eco Corporation
0000 Xxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. XxXxxxxx, President
Facsimile No.: (000) 000-0000
with a copy to:
Xxxx & Priest LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxx, Esq.
Facsimile No.: (000) 000-0000
or to such other individual or address as a party hereto may
designate for itself by notice given as herein provided.
10.4 Waivers. The failure of a party hereto at any
-------
time or times to require performance of any provision hereof
shall in no manner affect its right at a later time to enforce
the same. No waiver by a party of any condition or of any breach
of any term, covenant, representation or warranty contained in
this Agreement shall be effective unless in writing, and no
waiver in any one or more instances shall be deemed to be a
further or continuing waiver of any such condition or breach in
other instances or a waiver of any other condition or breach of
any other term, covenant, representation or warranty.
10.5 Interpretation. The headings preceding the
--------------
text of Articles and Sections included in this Agreement and the
headings to Schedules attached to this Agreement are for
convenience only and shall not be deemed part of this Agreement
or be given any effect in interpreting this Agreement. The use of
the masculine, feminine or neuter gender herein shall not limit
any provision of this Agreement. The use of the terms "including"
or "include" shall in all cases herein mean "including, without
limitation" or "include, without limitation," respectively.
Underscored references to Articles, Sections, Paragraphs,
Subsections, Subparagraphs, Schedules or Exhibits shall refer to
those portions of this Agreement. Prior drafts of this Agreement
shall not be considered in interpreting the rights and
obligations of the parties hereunder.
10.6 Applicable Law. This Agreement shall be
--------------
governed by and construed and enforced in accordance with the
internal laws of the State of California without giving effect to
the principles of conflicts of law thereof.
10.7 Assignment. This Agreement shall be binding
----------
upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that no
assignment of any rights or obligations shall be made by any
party without the prior written consent of all the other parties
hereto.
10.8 No Third Party Beneficiaries. This Agreement
----------------------------
is solely for the benefit of the parties hereto and, to the
extent provided herein, and their respective directors, officers,
employees, agents and representatives, and no provision of this
Agreement shall be deemed to confer upon other third parties any
remedy, claim, liability, reimbursement, cause of action or other
right.
10.9 Enforcement of the Agreement. The parties
----------------------------
hereto agree that irreparable damage would result in the event
that any provision of this Agreement is not performed in
accordance with specific terms or is otherwise breached. It is
accordingly agreed that the parties hereto will be entitled to
equitable relief including an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof.
10.10 Severability. If any provision of this
------------
Agreement shall be held invalid, illegal or unenforceable, the
validity, legality or enforceability of the other provisions
hereof shall not be affected thereby, and there shall be deemed
substituted for the provision at issue a valid, legal and
enforceable provision as similar as possible to the provision at
issue.
10.11 Remedies Cumulative. The remedies provided in
-------------------
this Agreement shall be cumulative and shall not preclude the
assertion or exercise of any other rights or remedies available
by law, in equity or otherwise.
10.12 Entire Understanding. This Agreement and the
--------------------
Related Agreement set forth the entire agreement and
understanding of the parties hereto and supersede all prior
agreements, arrangements and understandings among the parties
hereto, including, without limitation, the First Amended Letter
of Intent, dated April 3, 1996.
10.13 Waiver of Jury Trial. Each party hereto waives
--------------------
the right to a trial by jury in any dispute in connection with
the transactions contemplated by this Agreement and the Related
Agreement, and agrees to take any and all action necessary or
appropriate to effect such waiver.
10.14 Counterparts. This Agreement may be executed
------------
in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered on the date first above
written.
AMERICAN ECO CORPORATION
By: /s/Xxxxxxx XxXxxxxx
----------------------------
Name: Xxxxxxx XxXxxxxx
Title: President
SRS ACQUISITION CORPORATION
By: /s/ Xxxxxxx XxXxxxxx
--------------------------
Name: Xxxxxxx XxXxxxxx
Title: President
SEPARATION AND RECOVERY
SYSTEMS, INC.
By: /s/ Xxxxxx XxXxxxxx
----------------------------
Name: Xxxxxx XxXxxxxx
Title: President
