--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
dated as of May 14, 1998
by and among
ENFINITY CORPORATION
XXXXXX ACQUISITION CORP.
(a subsidiary of Enfinity Corporation)
XXXXXX MECHANICAL SERVICES, INC.
and
the STOCKHOLDERS named herein
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
1. THE MERGER.............................................................6
1.1 Delivery and Filing of Articles of Merger........................6
1.2 Effective Time of the Merger.....................................6
1.3 Certificate of Incorporation, By-Laws and Board of Directors
of Surviving Corporation.........................................6
1.4 Certain Information With Respect to the Capital Stock of the
COMPANY, HOLDING and NEWCO.......................................7
1.5 Effect of Merger.................................................7
2. CONVERSION OF STOCK....................................................8
2.1 Manner of Conversion.............................................8
3. DELIVERY OF MERGER CONSIDERATION.......................................9
4. PRE-CLOSING............................................................9
5. REPRESENTATIONS AND WARRANTIES OF COMPANY
AND STOCKHOLDERS......................................................10
5.1 Due Organization................................................11
5.2 Authorization...................................................11
5.3 Capital Stock of the COMPANY....................................11
5.4 Transactions in Capital Stock; Organization Accounting..........11
5.5 No Bonus Shares.................................................12
5.6 Subsidiaries....................................................12
5.7 Predecessor Status; etc.........................................12
5.8 Spin-off by the COMPANY.........................................12
5.9 Financial Statements............................................12
5.10 Liabilities and Obligations....................................13
5.11 Accounts and Notes Receivable...................................14
5.12 Intellectual Property; Permits and Intangibles..................14
5.13 Environmental Matters...........................................15
5.14 Personal Property...............................................16
5.15 Significant Customers; Material Contracts and Commitments.......16
5.16 Real Property...................................................17
5.17 Insurance.......................................................18
5.18 Compensation; Employment Agreements; Organized Labor Matters....18
5.19 Employee Plans..................................................18
5.20 Compliance with ERISA...........................................19
5.21 Conformity with Law; Litigation.................................20
-i-
5.22 Taxes...........................................................21
5.23 No Violations...................................................23
5.24 Government Contracts............................................24
5.25 Absence of Changes..............................................24
5.26 Deposit Accounts; Powers of Attorney............................26
5.27 Validity of Obligations.........................................26
5.28 Relations with Governments......................................26
5.29 Disclosure......................................................26
5.30 Prohibited Activities...........................................27
5.31 Authority.......................................................27
5.32 Preemptive Rights...............................................27
5.33 Transactions with Directors, Officers and Affiliates............28
5.34 Securities Act Representations..................................28
5.35 Registration Statement Questionnaires...........................30
6. REPRESENTATIONS OF HOLDING and NEWCO..................................30
6.1 Due Organization................................................31
6.2 Authorization...................................................31
6.3 Capital Stock of HOLDING and NEWCO..............................31
6.4 Transactions in Capital Stock, Organization Accounting..........31
6.5 Subsidiaries....................................................32
6.6 Financial Statements............................................32
6.7 Liabilities and Obligations.....................................33
6.8 Conformity with Law; Litigation.................................33
6.9 No Violations...................................................33
6.10 Validity of Obligations.........................................34
6.11 HOLDING Stock...................................................34
6.12 Other Agreements................................................34
6.13 Business; Real Property; Material Agreements....................35
6.14 Taxes...........................................................35
6.15 Disclosure......................................................37
7. COVENANTS PRIOR TO CLOSING............................................37
7.1 Access and Cooperation; Due Diligence...........................37
7.2 Conduct of Business Pending Closing.............................38
7.3 Prohibited Activities...........................................39
7.4 No Shop.........................................................40
7.5 Notice to Bargaining Agents.....................................40
7.6 Agreements......................................................41
7.7 Notification of Certain Matters.................................41
7.8 Amendment of Schedules..........................................41
7.9 Cooperation in Preparation of Registration Statement............43
7.10 Final Financial Statements......................................43
-ii-
7.11 Further Assurances..............................................44
7.12 Authorized Capital..............................................44
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE STOCKHOLDERS
AND THE COMPANY.......................................................44
8.1 Representations and Warranties..................................44
8.2 Performance of Obligations......................................44
8.3 No Litigation...................................................45
8.4 Opinions of Counsel.............................................45
8.5 Registration Statement..........................................45
8.6 Consents and Approvals..........................................45
8.7 Good Standing Certificates......................................45
8.8 No Material Adverse Change......................................45
8.9 Closing of IPO..................................................45
8.10 Secretary's Certificate.........................................46
8.11 Employment Agreements...........................................46
8.12 Director Indemnification........................................46
8.13 Chief Executive Officer.........................................46
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF HOLDING AND
NEWCO.................................................................46
9.1 Representations and Warranties..................................46
9.2 Performance of Obligations......................................47
9.3 No Litigation...................................................47
9.4 Secretary's Certificate.........................................47
9.5 No Material Adverse Change......................................47
9.6 STOCKHOLDERS' Release...........................................47
9.7 Termination of Related Party Agreements.........................48
9.8 Opinion of Counsel..............................................48
9.9 Consents and Approvals..........................................48
9.10 Good Standing Certificates......................................48
9.11 Registration Statement..........................................48
9.12 Employment Agreements...........................................48
9.13 Closing of IPO..................................................48
9.14 FIRPTA Certificate..............................................49
10. COVENANTS OF HOLDING AND THE STOCKHOLDERS AFTER CLOSING...............49
10.1 Release From Guarantees; Repayment of Certain Obligations.......49
10.2 Preparation and Filing of Tax Returns...........................49
10.3 Directors and Officers. .......................................50
10.4 Preservation of Employee Benefit Plans..........................50
10.5 Director Indemnification........................................50
10.6 HOLDING Options.................................................50
-iii-
11. INDEMNIFICATION.......................................................50
11.1 General Indemnification by the STOCKHOLDERS.....................50
11.2 Indemnification by HOLDING......................................51
11.3 Third Person Claims.............................................52
11.4 Exclusive Remedy................................................53
11.5 Limitations on Indemnification..................................53
12. TERMINATION OF AGREEMENT..............................................54
12.1 Termination.....................................................54
12.2 Liabilities in Event of Termination.............................55
13. NONCOMPETITION........................................................55
13.1 Prohibited Activities...........................................55
13.2 Damages.........................................................56
13.3 Reasonable Restraint............................................56
13.4 Severability; Reformation.......................................56
13.5 Independent Covenant............................................56
13.6 Materiality.....................................................57
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................57
14.1 STOCKHOLDERS....................................................57
14.2 HOLDING and NEWCO...............................................57
14.3 Damages.........................................................58
14.4 Survival........................................................58
15. TRANSFER RESTRICTIONS.................................................58
15.1 Transfer Restrictions...........................................58
16. REGISTRATION RIGHTS...................................................60
16.1 Piggyback Registration Rights...................................60
16.2 Demand Registration Rights......................................60
16.3 Registration Procedures.........................................61
16.4 Underwriting Agreement..........................................62
16.5 Availability of Rule 144........................................62
16.6 Market Standoff.................................................62
17. REPRESENTATIONS AND COVENANTS RELATING TO TAX-FREE
ORGANIZATION..........................................................62
17.1 Representations and Warranties of the COMPANY and the
STOCKHOLDERS....................................................63
17.2 Representations and Warranties of the STOCKHOLDERS..............64
17.3 Representations and Warranties of HOLDING and NEWCO.............64
-iv-
18. GENERAL...............................................................66
18.1 Cooperation.....................................................66
18.2 Successors and Assigns..........................................66
18.3 Entire Agreement................................................66
18.4 Counterparts....................................................66
18.5 Brokers and Agents..............................................66
18.6 Expenses........................................................67
18.7 Notices.........................................................67
18.8 Governing Law...................................................68
18.9 Exercise of Rights and Remedies.................................69
18.10 Time............................................................69
18.11 Reformation and Severability....................................69
18.12 Remedies Cumulative.............................................69
18.13 Captions........................................................69
18.14 Amendments and Waivers..........................................69
18.15 Survival of Representations and Warranties......................69
18.16 STOCKHOLDER Representative......................................69
-v-
LIST OF ANNEXES
ANNEX I FORM OF ARTICLES OF MERGER
ANNEX II CERTIFICATE OF INCORPORATION AND BY-LAWS OF HOLDING AND NEWCO
ANNEX III CONSIDERATION TO BE PAID TO THE STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF HOLDING
ANNEX VI FORM OF OPINION OF COUNSEL TO HOLDING
ANNEX VII FORM OF OPINION OF COUNSEL TO THE COMPANY
AND THE STOCKHOLDERS
ANNEX VIII FORM OF TAX OPINION
-vi-
AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION is made as of May 14, 1998, by and
among ENFINITY CORPORATION, a Delaware corporation ("HOLDING"), XXXXXX
ACQUISITION CORP., a Delaware corporation ("NEWCO"), XXXXXX MECHANICAL SERVICES,
INC., a Texas corporation (the "COMPANY"), and Xxxx Xxxxxxxxxx, Xxxxx Xxxxx,
Xxxxx Xxxxxxxx, Xxxxx Xxxxxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxxxxx, Xxxxx Xxxxxxxxx,
Xxxxxx Xxxxxxx, Xxxxx Xxxxxxxxx, Xxxxxxx Xxxxx, Xxxxxxx XxXxxxxx, Xxxxxx
Xxxxxxxx, Xxxxxx Xxxxx, Xxxxxx Xxxxxxxxx, Xxxxxxx Xxxxxxxxxx 1997 Trust, Xxxxx
Xxxxxxxxxx 1997 Trust, Xxxxxx X. Xxxxx Trust and Sydney X. Xxxxx Trust (the
"STOCKHOLDERS"). The STOCKHOLDERS are all the stockholders of the COMPANY.
WHEREAS, NEWCO is a corporation duly organized and existing under the laws
of the State of Delaware, having been incorporated on December 22, 1997, solely
for the purpose of completing the transactions set forth herein, and is a
wholly-owned subsidiary of HOLDING;
WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY
(which together are hereinafter collectively referred to as the "Constituent
Corporations") deem it advisable and in the best interests of the Constituent
Corporations and their respective stockholders that NEWCO merge with and into
the COMPANY pursuant to this Agreement and the applicable provisions of the laws
of the States of Delaware and Texas;
WHEREAS, HOLDING is entering into other separate agreements substantially
similar to this Agreement (the "Other Agreements"), each of which is entitled
"Agreement and Plan of Organization," with each of Air Systems, Inc., Aircond
Corporation, Energy Systems Industries, Inc., New England Mechanical Services,
Inc., Xxx Company, Hill York Corporation, Hill York Service Corporation and
Mechanical Services of Orlando, Inc. (collectively, the "Other Founding
Companies") and their respective stockholders in order to acquire additional
providers of commercial and industrial heating, ventilation, air conditioning,
energy and environmental services (the COMPANY, together with each of the Other
Founding Companies, are collectively referred to herein as the "Founding
Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO (as hereinafter
defined) of HOLDING Stock (as hereinafter defined) constitute the "HOLDING Plan
of Organization;"
WHEREAS, the Boards of Directors of HOLDING, NEWCO, each of the Founding
Companies and each of the subsidiaries of HOLDING that have been formed for the
purpose of merging with the Other Founding Companies have approved and adopted
the HOLDING Plan of Organization as an integrated plan to transfer the capital
stock of the Founding Companies to HOLDING and the cash raised in the IPO of
HOLDING Stock to HOLDING as a transfer of property under Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the STOCKHOLDERS and the Board of
Directors of the COMPANY and the stockholders and the boards of directors of
each of HOLDING and NEWCO have approved this Agreement and the transactions
contemplated hereby.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule attached hereto and not otherwise defined herein
shall have the following meanings for all purposes of this Agreement:
"Acquired Party" has the meaning set forth in Section 5.22(i).
"Acquisition Companies" means NEWCO and each of the other Delaware
companies wholly-owned by HOLDING prior to the Closing Date.
"Affiliates" has the meaning set forth in Section 5.8.
"Agreement" means this Agreement and Plan of Organization.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Articles of Merger" means those Articles or Certificates of Merger
with respect to the Merger substantially in the form[s] attached as Annex
I hereto or with such changes therein as may be required by applicable
state laws.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing Date" has the meaning set forth in Section 4.
"Code" has the meaning set forth in the fifth recital of this
Agreement.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Financial Statements" has the meaning set forth in Section
5.9.
"COMPANY Stock" has the meaning set forth in Section 2.1.
2
"Constituent Corporations" has the meaning set forth in the second
recital of this Agreement.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 16.2.
"Effective Time of the Merger" means the time as of which the Merger
becomes effective, which the parties hereto contemplate to occur on the
Closing Date.
"employee pension benefit plan" has the meaning set forth in Section
5.19.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.19.
"Expiration Date" has the meaning set forth in Section 5(A) and in
Sections 17.1, 17.2 and 17.3.
"Family Member" has the meaning set forth in Section 5.33.
"Founding Companies" has the meaning set forth in the third recital
of this Agreement.
"Founding Stockholders" has the meaning set forth in Section 16.1.
"HOLDING" has the meaning set forth in the first paragraph of this
Agreement.
"HOLDING Charter Documents" has the meaning set forth in Section
6.1.
"HOLDING Documents" has the meaning set forth in Section 6.9.
"HOLDING Financial Statements" has the meaning set forth in Section
6.6.
"HOLDING Plan of Organization" has the meaning set forth in the
fourth recital of this Agreement.
"HOLDING Relevant Group" has the meaning set forth in Section 6.14.
"HOLDING Stock" means the common stock, par value $.01 per share, of
HOLDING.
"Indemnification Threshold" has the meaning set forth in Section
11.5.
3
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
"Intellectual Property" means all trademarks, service marks, trade
dress, trade names, patents and copyrights and any registration or
application for any of the foregoing, and any trade secret, invention,
process, know-how, computer software, technology systems, product design
or product packaging.
"IPO" means the initial public offering of HOLDING Stock pursuant to
the Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.23.
"Merger" means the merger of NEWCO with and into the COMPANY
pursuant to this Agreement and the applicable provisions of the laws of
the State of Delaware and the State of Texas.
"Multiemployer Plan" has the meaning set forth in Section 5.19.
"NEWCO" has the meaning set forth in the first paragraph of this
Agreement.
"NEWCO Stock" means the common stock, par value $.01 per share, of
NEWCO.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Other Agreements" has the meaning set forth in the third recital of
this Agreement.
"Other Founding Companies" has the meaning set forth in the third
recital of this Agreement.
"Pre-Closing" has the meaning set forth in Section 4.
"Pre-Closing Date" has the meaning set forth in Section 4.
"Pricing" means the date of determination by HOLDING and the
Underwriters of the public offering price of the shares of HOLDING Stock
in the IPO; the parties hereto
4
contemplate that the Pricing shall take place on or immediately prior to
the Pre-Closing Date.
"Proposed Transaction" has the meaning set forth in Section 17.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Registration Statement" means that certain registration statement
of HOLDING to be filed on Form S-1 covering the shares of HOLDING Stock to
be issued in the IPO.
"Relevant Group" has the meaning set forth in Section 5.22(i).
"Returns" has the meaning set forth at the end of Section 5.22.
"Schedule" means each Schedule attached hereto, which shall
reference the relevant sections of this Agreement, on which parties hereto
disclose information as part of their respective representations,
warranties and covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3.
"STOCKHOLDER Representative" has the meaning set forth in Section
18.16.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of
this Agreement.
"Surviving Corporation" shall mean the COMPANY as the surviving
party in the Merger.
"Tax" or "Taxes" has the meaning set forth at the end of Section
5.22.
"Tax Losses" has the meaning set forth in Section 5.22 (xvi).
"Taxing Authority" has the meaning set forth at the end of Section
5.22.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
"Transfer" has the meaning set forth in Section 15.1.
"Transfer Taxes" has the meaning set forth in Section 18.6.
5
"Underwriters" means the prospective underwriters in the IPO, as
identified in the Registration Statement.
"Underwriting Agreement" means the Underwriting Agreement to be
dated the Pre-Closing Date between the Underwriters and the Company in
respect of the IPO.
1. THE MERGER
1.1 Delivery and Filing of Articles of Merger. Subject to Section 8
hereof, the Constituent Corporations will cause the Articles of Merger to be
signed, verified and filed with the Secretary of State of the State of Delaware
and the Secretary of State of the State of Texas and stamped receipt copies of
each such filing to be delivered to HOLDING on or before the Closing Date.
1.2 Effective Time of the Merger. At the Effective Time of the Merger,
NEWCO shall be merged with and into the COMPANY in accordance with the Articles
of Merger, the separate existence of NEWCO shall cease and the COMPANY shall be
the surviving party in the Merger. The COMPANY is sometimes hereinafter referred
to as the "Surviving Corporation". The Merger will be effected in a single
transaction.
1.3 Certificate of Incorporation, By-Laws and Board of Directors of
Surviving Corporation. At the Effective Time of the Merger:
(i) the Certificate or Articles of Incorporation of the COMPANY then
in effect shall be the Certificate or Articles of Incorporation of the
Surviving Corporation until changed as provided by law;
(ii) the By-Laws of the COMPANY then in effect shall be the By-Laws
of the Surviving Corporation until amended as provided by law;
(iii) the Board of Directors of the Surviving Corporation shall
consist of the persons who are listed on Schedule 1.3 hereto; the Board of
Directors of the Surviving Corporation shall hold office subject to the
provisions of the laws of the State of Texas and of the Certificate or
Articles of Incorporation and By-Laws of the Surviving Corporation; and
(iv) the officers of the COMPANY immediately prior to the Effective
Time of the Merger shall continue as the officers of the Surviving
Corporation in the same capacity or capacities and, effective upon the
Effective Time of the Merger, Xxxxxx X. Xxxxxxx shall be appointed as a
vice president and as an assistant secretary of the Surviving Corporation,
each of such officers to serve, subject to the provisions of the
Certificate or Articles of Incorporation and By-Laws of the Surviving
Corporation, until his or her successor is duly elected and qualified.
6
1.4 Certain Information With Respect to the Capital Stock of the COMPANY,
HOLDING and NEWCO. The respective designations and numbers of outstanding shares
and voting rights of each class of outstanding capital stock of the COMPANY,
HOLDING and NEWCO as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANY is as set forth on Schedule 1.4 hereto;
(ii) immediately prior to the Closing Date, the authorized capital
stock of HOLDING will consist of 49,000,000 shares of HOLDING Stock, of
which the number of issued and outstanding shares will be set forth in the
Registration Statement, and 500,000 shares of preferred stock, $.01 par
value, of which no shares will be issued and outstanding; and
(iii) as of the date of this Agreement, the authorized capital stock
of NEWCO consists of 3,000 shares of NEWCO Stock, of which ten (10) shares
are issued and outstanding.
1.5 Effect of Merger. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL") and the corporate
law of the State of Texas. Except as herein specifically set forth, the
identity, existence, purposes, powers, objects, franchises, privileges, rights
and immunities of the COMPANY shall continue unaffected and unimpaired by the
Merger and the corporate franchises, existence and rights of NEWCO shall be
merged with and into the COMPANY, and the COMPANY, as the Surviving Corporation,
shall be fully vested therewith. At the Effective Time of the Merger, the
separate existence of NEWCO shall cease and, in accordance with the terms of
this Agreement, the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises, of a public as well as of a private
nature, and all property, real, personal and mixed, and all debts due on
whatever account, including subscriptions to shares, and all Taxes, including
those due and owing and those accrued, and all other choses in action, and all
and every other interest of or belonging to or due to the COMPANY and NEWCO
shall be taken and deemed to be transferred to, and vested in, the Surviving
Corporation without further act or deed; and all property, rights and
privileges, powers and franchises and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of the COMPANY and NEWCO; and the title to any real estate, or interest therein,
whether by deed or otherwise, vested in the COMPANY and NEWCO under the laws of
the state of incorporation of each thereof, shall not revert or be in any way
impaired by reason of the Merger. Except as otherwise provided herein, the
Surviving Corporation shall thenceforth be responsible and liable for all the
liabilities and obligations of the COMPANY and NEWCO and any claim existing, or
action or proceeding pending, by or against the COMPANY or NEWCO may be
prosecuted as if the Merger had not taken place, or the Surviving Corporation
may be substituted in its place. Neither the rights of creditors nor any liens
upon the property of the COMPANY or NEWCO shall be impaired or enlarged by the
7
Merger, and all debts, liabilities and duties of the COMPANY and NEWCO shall
attach to the Surviving Corporation and may be enforced against the Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by the Surviving Corporation.
2. CONVERSION OF STOCK
2.1 Manner of Conversion. The manner of converting the shares of (i)
outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock,
issued and outstanding immediately prior to the Effective Time of the Merger,
respectively, into shares of (x) HOLDING Stock and cash and (y) common stock of
the Surviving Corporation, respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the
Merger and without any further action on the part of the holder thereof,
automatically shall be deemed to represent, with respect to each
STOCKHOLDER, (1) the right to receive the number of shares of HOLDING
Stock set forth on Annex III hereto with respect to such STOCKHOLDER and
(2) the right to receive the amount of cash set forth on Annex III hereto
with respect to such STOCKHOLDER;
(ii) all shares of COMPANY Stock that are held by the COMPANY as
treasury stock shall be canceled and retired and no shares of HOLDING
Stock or other consideration shall be delivered or paid in exchange
therefor; and
(iii) each share of NEWCO Stock issued and outstanding immediately
prior to the Effective Time of the Merger shall, by virtue of the Merger
and without any action on the part of HOLDING, automatically be converted
into one fully paid and non-assessable share of common stock of the
Surviving Corporation, which shall constitute all of the issued and
outstanding shares of common stock of the Surviving Corporation
immediately after the Effective Time of the Merger.
All HOLDING Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Section 15
hereof, have the same rights as all the other shares of outstanding HOLDING
Stock by reason of the provisions of the Certificate of Incorporation of HOLDING
or as otherwise provided by the Delaware GCL. All voting rights of such HOLDING
Stock received by the STOCKHOLDERS shall be fully exercisable by the
STOCKHOLDERS, and the STOCKHOLDERS shall not be deprived nor
8
restricted in exercising those rights. At the Effective Time of the Merger,
HOLDING shall have no class of capital stock issued and outstanding other than
the HOLDING Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 On the Closing Date the STOCKHOLDERS, who are the holders of all
outstanding certificates representing shares of COMPANY Stock, shall, upon
surrender of such certificates, receive (i) the respective number of shares of
HOLDING Stock and (ii) the amount of cash, in each case as set forth on Annex
III hereto with respect to such STOCKHOLDER. The cash payable pursuant to clause
(ii) shall be paid by wire transfer to an account designated by each
STOCKHOLDER.
3.2 The STOCKHOLDERS shall deliver in trust to Xxxxxx, Xxxxx & Xxxxxxx
LLP, counsel to HOLDING, at the Pre-Closing the certificates representing
COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS, or accompanied by
stock powers duly endorsed in blank, with signatures guaranteed by a national or
state chartered bank or other financial institution, and with all necessary
Transfer Tax and other revenue stamps, acquired at the STOCKHOLDERS' expense,
affixed and canceled. To the extent reasonably required, the STOCKHOLDERS agree
promptly to cure any deficiencies with respect to the endorsement of the stock
certificates or other documents of conveyance with respect to such COMPANY Stock
or with respect to the stock powers accompanying any COMPANY Stock. Upon
consummation of the IPO and the transactions contemplated to occur on the
Closing Date (including, without limitation, the tender to each STOCKHOLDER (or
to its agent) of the shares and cash set forth on Annex III hereto), all of such
certificates shall be deemed released and surrendered by such counsel to HOLDING
without any further action on the part of the STOCKHOLDERS or such counsel.
4. PRE-CLOSING
At or prior to the Pricing, the parties shall take all actions necessary
to prepare to (i) effect the Merger (including the advance filing with the
appropriate state authorities of the Articles of Merger, which shall become
effective at the Effective Time of the Merger) and (ii) effect the conversion
and delivery of shares referred to in Section 3 hereof; provided, that such
actions shall not include the actual completion of the Merger for purposes of
this Agreement or the conversion and delivery of the shares and transmission of
funds by wire referred to in Section 3 hereof, each of which actions shall only
be taken upon the Closing Date as herein provided. In the event that there is no
Closing Date or this Agreement terminates for any reason, HOLDING hereby
covenants and agrees to do all things required by Delaware law and all things
which counsel for the COMPANY advise HOLDING are required by applicable laws of
the State of Texas in order to withdraw the Certificate of Merger and rescind
any merger or other actions
9
effected by the advance filing of the Articles of Merger as described in this
Section. The taking of the actions described in clauses (i) and (ii) above (the
"Pre-Closing") shall take place on the Pre-Closing date (the "Pre-Closing Date")
at the offices of Xxxxxx, Xxxxx & Xxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000. On the Closing Date (x) the Articles of Merger shall be or shall
have been filed with the appropriate state authorities so that they shall be or,
as of 8:00 a.m. New York City time on the Closing Date, shall become effective
and the Merger shall thereby be effected, (y) all transactions contemplated by
this Agreement, including the conversion and delivery of shares, the
transmission of funds by wire in an amount equal to the cash portion of the
consideration which the STOCKHOLDERS shall be entitled to receive pursuant to
the Merger referred to in Section 3 hereof shall occur and (z) the closing with
respect to the IPO shall occur and be deemed to be completed. The date on which
the actions described in the preceding clauses (x), (y) and (z) occurs shall be
referred to as the "Closing Date." During the period from the Pre-Closing Date
to the Closing Date, this Agreement may only be terminated by the parties if the
underwriting agreement in respect of the IPO is terminated pursuant to the terms
of such underwriting agreement. This Agreement shall in any event terminate if
the Closing Date has not occurred within 15 business days of the Pre-Closing
Date. Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
(A) Representations and Warranties of COMPANY and STOCKHOLDERS.
Each of the COMPANY and each of the STOCKHOLDERS jointly and severally
represents and warrants to HOLDING and NEWCO that all of the following
representations and warranties in this Section 5(A) are true at the date of this
Agreement and that such representations and warranties shall survive the Closing
Date until January 31, 1999 (the "Expiration Date"), except that (i) the
representations and warranties set forth in Section 5.22 hereof shall survive
until such time as the statute of limitations period has run for all tax periods
ended on, prior to or which include the Closing Date, which shall be deemed to
be the Expiration Date for Section 5.22, and (ii) solely for purposes of Section
11.1(iii) hereof and solely to the extent that, in connection with the IPO,
HOLDING actually incurs liability under the 1933 Act, the 1934 Act or any other
Federal or state securities laws, the representations and warranties set forth
herein shall survive until the expiration of any applicable statute of
limitations period, which shall be deemed to be the Expiration Date for such
purposes. For purposes of this Section 5, the term "COMPANY" shall mean and
refer to the COMPANY and all of its subsidiaries, if any, unless the context
specifically requires otherwise. Notwithstanding the foregoing, no
representations and warranties in Section 5.1 through 5.30, the fourth through
seventh sentences of Section 5.33 or in Section 5.35 are made by any of the
STOCKHOLDERS listed on Schedule 5(A), each of whom either (i) beneficially owns
less than 3% of the COMPANY's outstanding common stock or (ii) only holds shares
of the Company's outstanding preferred stock.
10
5.1 Due Organization. The COMPANY is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and is duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on its
business in the places and in the manner as now conducted except (i) as set
forth on Schedule 5.1 or (ii) where the failure to be so authorized or qualified
would not have a material adverse effect on the business, operations, affairs,
prospects, properties, assets or condition (financial or otherwise) of the
COMPANY (as used herein with respect to the COMPANY, or with respect to any
other person, a "Material Adverse Effect"). Schedule 5.1 sets forth the
jurisdiction in which the COMPANY is incorporated and contains a list of all
jurisdictions in which the COMPANY is authorized or qualified to do business.
True, complete, correct and certified copies of the Certificate or Articles of
Incorporation and By-laws, each as amended, of the COMPANY (the "Charter
Documents") are all attached to Schedule 5.1. The minute books and stock records
of the COMPANY, as heretofore made available to HOLDING, are correct and
complete in all material respects. The most recent minutes of the COMPANY, which
are dated no earlier than ten business days prior to the date hereof, affirm and
ratify all prior acts of the COMPANY and of its officers and directors on behalf
of the COMPANY to the extent any such acts are of a nature that require action
by or the approval of the COMPANY's Board of Directors.
5.2 Authorization. (i) The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to the terms of
this Agreement and (ii) the COMPANY has the corporate right, power and authority
to enter into this Agreement and the Merger. Certified copies of any required
approval of the shareholders and the Board of Directors of the COMPANY are
described on Schedule 5.2 and are attached thereto.
5.3 Capital Stock of the COMPANY. The authorized capital stock of the
COMPANY is as set forth in Section 1.4(i). All of the issued and outstanding
shares of capital stock of the COMPANY are owned by the STOCKHOLDERS in the
amounts set forth in Annex IV. Except as set forth on Schedule 5.3, all of the
issued and outstanding shares of capital stock of the COMPANY have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by the STOCKHOLDERS and were offered, issued, sold and
delivered by the COMPANY in compliance with all applicable state and Federal
laws concerning the issuance of securities. Further, none of such shares were
issued in violation of the preemptive rights of any past or present stockholder.
5.4 Transactions in Capital Stock; Organization Accounting. Except as set
forth on Schedule 5.4, the COMPANY has not acquired any COMPANY Stock since
January 1, 1994. Except as set forth on Schedule 5.4, (i) no option, warrant,
call, conversion right or commitment of any kind exists which obligates the
COMPANY to issue any of its authorized but unissued capital stock or its
treasury stock; (ii) the COMPANY has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof; and (iii) neither the voting stock structure of the COMPANY nor the
relative ownership of shares among any of its
11
respective stockholders has been altered or changed in contemplation of the
Merger and/or the HOLDING Plan of Organization. Schedule 5.4 also includes
complete and accurate copies of all stock option or stock purchase plans,
including a list of all outstanding options, warrants or other rights to acquire
shares of the COMPANY's stock and a description of the material terms of such
outstanding options, warrants or other rights.
5.5 No Bonus Shares. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 Subsidiaries. Schedule 5.6 attached hereto lists the name of each of
the COMPANY's subsidiaries and sets forth the number and class of the authorized
capital stock of each of the COMPANY's subsidiaries and the number of shares of
each of the COMPANY's subsidiaries which are issued and outstanding, all of
which shares (except as set forth on Schedule 5.6) are owned beneficially and of
record by the COMPANY, free and clear of all liens, security interests, pledges,
charges, voting trusts, equities, restrictions, encumbrances and claims of every
kind. Except as set forth in Schedule 5.6, the COMPANY does not presently own,
of record or beneficially, or control, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity interest in
any corporation, association or business entity nor is the COMPANY, directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
5.7 Predecessor Status; etc. Set forth on Schedule 5.7 is a list of all
names of all predecessor companies of the COMPANY, including the names of any
entities acquired by the COMPANY (by stock purchase, merger or otherwise) or
owned by the COMPANY or from whom the COMPANY previously acquired material
assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 Spin-off by the COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
COMPANY or any other person or entity that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the COMPANY ("Affiliates") since January 1, 1994.
5.9 Financial Statements. Attached to Schedule 5.9 are copies of the
following financial statements of the COMPANY (the "COMPANY Financial
Statements"): the COMPANY's audited Consolidated Balance Sheet as of each of
December 31, 1997, December 31, 1996 the Consolidated Statements of Income,
Cash Flows and Retained Earnings for each of the years in the two-year period
ended December 31, 1997 (December 31, 1997 being hereinafter referred to as
the "Balance Sheet Date") and the period ended may 25, 1995. Such Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
(except as noted thereon or on Schedule 5.9). Except as set forth on
Schedule 5.9, such Consolidated Balance Sheets as of December 31, 1997 and
December 31, 1996 present fairly in all material
12
respects the financial position of the COMPANY as of the dates indicated
thereon, and such Consolidated Statements of Income, Cash Flows and Retained
Earnings present fairly in all material respects the results of operations and
cash flows for the periods indicated thereon.
5.10 Liabilities and Obligations. (a) The COMPANY has delivered to HOLDING
an accurate list (which is set forth on Schedule 5.10) of (i) all liabilities of
the COMPANY which are not reflected on the balance sheet of the COMPANY at the
Balance Sheet Date or otherwise reflected in the COMPANY Financial Statements at
the Balance Sheet Date, (ii) any material liabilities of the COMPANY (including
but not limited to all liabilities in excess of $10,000) that are not reflected
on the balance sheet of the COMPANY at the Balance Sheet Date or otherwise
reflected in the COMPANY Financial Statements at the Balance Sheet Date (but
excluding trade payables incurred since the Balance Sheet Date in the ordinary
course of business consistent with past practice) and (iii) all loan agreements,
indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other
security agreements to which the COMPANY is a party. Except as set forth on
Schedule 5.10, since the Balance Sheet Date, the COMPANY has not incurred any
material liabilities of any kind, character and description, whether accrued,
absolute, secured or unsecured, contingent or otherwise, other than trade
payables incurred in the ordinary course of business consistent with past
practice.
(b) The COMPANY has also set forth on Schedule 5.10, in the case of those
contingent liabilities related to pending or, to the knowledge of the COMPANY,
threatened litigation, or other liabilities which are not fixed or are being
contested, the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(ii) the name of each court or agency before which such claim, suit
or proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each
such liability. If no estimate is provided, the estimate shall
for purposes of this Agreement be deemed to be zero.
13
(c) The COMPANY and the STOCKHOLDERS shall have no liability pursuant to
Section 11 for any inadvertent omission of liabilities from Schedule 5.10 if (i)
such liabilities are reflected in the balance sheet of the COMPANY as of the
Balance Sheet Date or otherwise reflected in the COMPANY Financial Statements at
the Balance Sheet Date or (ii) such liabilities were incurred thereafter in the
ordinary course of business consistent with past practice and are not material
either individually or in the aggregate.
5.11 Accounts and Notes Receivable. The COMPANY has delivered to HOLDING
an accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the COMPANY, as of the Balance Sheet Date, including any such
amounts which are not reflected in the balance sheet as of the Balance Sheet
Date, and including receivables from and advances to employees and the
STOCKHOLDERS. Within ten (10) days prior to Pre-Closing, the COMPANY shall
provide HOLDING (x) an accurate list of all outstanding receivables obtained
subsequent to the Balance Sheet Date and (y) an aging of all such accounts and
notes receivable showing amounts due in 30 day aging categories (the "A/R Aging
Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed by
the COMPANY to HOLDING in a writing accompanying the A/R Aging Reports, as the
case may be, the accounts, notes and other receivables shown on Schedule 5.11
and on the A/R Aging Reports are and shall be, and the COMPANY has no reason to
believe that any such account receivable is not or shall not be, collectible in
the amounts shown (in the case of the accounts and notes receivable set forth on
Schedule 5.11, net of reserves reflected in the Balance Sheet and, in the case
of the accounts and notes receivable set forth in the A/R Aging Reports, net of
reserves reflected in the A/R Aging Reports). The COMPANY and the STOCKHOLDERS
shall have no liability pursuant to Section 11 for any inadvertent omission of
accounts and notes receivable from Schedule 5.11 or the A/R Aging Reports if (i)
such accounts and notes receivable are reflected in the balance sheet of the
COMPANY as of the Balance Sheet Date or (ii) such accounts and notes receivable
were obtained thereafter in the ordinary course of business consistent with past
practice and such omissions are not material, either individually or in the
aggregate.
5.12 Intellectual Property; Permits and Intangibles. (a) The COMPANY owns
or has a valid license to use all Intellectual Property the absence of any of
which is reasonably likely to have a Material Adverse Effect, and the COMPANY
has delivered to HOLDING an accurate list (which is set forth on Schedule
5.12(a)) of all Intellectual Property owned or used by the COMPANY. Each item of
Intellectual Property owned by the COMPANY is owned free and clear of all Liens
and each other item of Intellectual Property used by the COMPANY is licensed to
the COMPANY pursuant to a license agreement that is valid and in full force and
effect. Except as set forth on Schedule 5.12(a), all right, title and interest
in and to each item of Intellectual Property is owned by the COMPANY and is not
subject to any license, royalty arrangement or any pending or, to the COMPANY's
knowledge, threatened claim or dispute. None of the Intellectual Property owned
or, to the COMPANY's knowledge, none of the Intellectual Property used by the
COMPANY nor any product sold by the COMPANY infringes any Intellectual Property
right of any other person or entity and, to the COMPANY's knowledge,
14
no Intellectual Property owned by the COMPANY is infringed upon by any other
person or entity.
(b) The COMPANY holds all licenses, franchises, permits and other
governmental authorizations the absence of any of which could have a Material
Adverse Effect and the COMPANY has delivered to HOLDING an accurate list and
summary description (which is set forth on Schedule 5.12(b)) of all such
licenses, franchises, permits and other governmental authorizations held the
Company, including all permits, titles, licenses, franchises and certificates
(it being understood and agreed that a list of all environmental permits and
other environmental approvals required to be identified under this Agreement is
set forth on Schedule 5.13). To the knowledge of the COMPANY, the licenses,
franchises, permits and other governmental authorizations listed on Schedules
5.12(b) and 5.13 are valid, and the COMPANY has not received any notice that any
governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. The COMPANY has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in the licenses, franchises,
permits and other governmental authorizations listed on Schedules 5.12(b) and
5.13 and is not in violation of any of the foregoing except where such
non-compliance or violation would not have a Material Adverse Effect. Except as
specifically provided in Schedule 5.12(a) or 5.12(b), the transactions
contemplated by this Agreement will not result in the infringement by the
COMPANY of any Intellectual Property right of any other person or entity or the
infringement of any Intellectual Property listed on Schedule 5.12(a), or result
in a default under or a breach or violation of, or materially and adversely
affect the rights and benefits afforded to the COMPANY by, any licenses,
franchises, permits or government authorizations listed on Schedule 5.12(b) or
Schedule 5.13.
5.13 Environmental Matters. Except as set forth on Schedule 5.13, (i) the
COMPANY has complied with and is in compliance in all material respects with all
Federal, state, local and foreign statutes (civil and criminal), laws,
ordinances, regulations, rules, notices, permits, judgments, orders and decrees
applicable to it or any of its properties, assets, operations and businesses
relating to environmental protection (collectively "Environmental Laws")
including, without limitation, Environmental Laws relating to air, water, land
and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Wastes and Hazardous Substances including petroleum and
petroleum products (as the foregoing terms are defined in any applicable
Environmental Law); (ii) the COMPANY has obtained and adhered in all material
respects to all necessary permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous
Substances, a list of all of which permits and approvals is set forth on
Schedule 5.13, and has reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been
treated, stored, disposed of or otherwise handled; (iii) there have been no
releases (as defined in Environmental Laws) at, from, in or on any property
owned or operated by the COMPANY except as permitted by Environmental Laws; (iv)
the COMPANY knows of no on-site or off-site location to which the COMPANY has
transported or arranged for the transportation of
15
Hazardous Wastes and Hazardous Substances for disposal or treatment, which site
is the subject of any Federal, state, local or foreign enforcement action or any
other investigation which could lead to any claim against the COMPANY, HOLDING
or NEWCO for any clean-up cost, remedial work, damage to natural resources,
property damage or personal injury, including, but not limited to, any claim
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended; and (v) the COMPANY has no material contingent liability in
connection with any release of any Hazardous Waste or Hazardous Substance into
the environment.
5.14 Personal Property. The COMPANY has delivered to HOLDING an accurate
list (which is set forth on Schedule 5.14) of (x) all personal property included
in "depreciable plant, property and equipment" (or similarly named line item) on
the balance sheet of the COMPANY as of the Balance Sheet Date or that will be
included on any balance sheet of the COMPANY prepared after the Balance Sheet
Date, (y) all other personal property owned by the COMPANY with a value
individually in excess of $10,000 (i) as of the Balance Sheet Date or (ii)
acquired since the Balance Sheet Date and (z) all leases and agreements in
respect of personal property with a cost or value in excess of $10,000,
including, in the case of clause (z), a schedule of the capital costs of all
such assets which are subject to capital leases and true, complete and correct
copies of all such leases and agreements and, in the case of clauses (x) and
(y), an indication as to which of those assets are currently owned, or were
formerly owned, by STOCKHOLDERS or Affiliates of the COMPANY or of any of the
STOCKHOLDERS. Except as set forth on Schedule 5.14, (i) all personal property
used by the COMPANY in its business is either owned by the COMPANY or leased by
the COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the
personal property used in the conduct of the business is in good working order
and condition, ordinary wear and tear excepted, and (iii) all leases and
agreements included on Schedule 5.14 are in full force and effect and constitute
valid and binding agreements of the COMPANY and, to the COMPANY'S knowledge, of
the parties (and their successors) thereto in accordance with their respective
terms.
5.15 Significant Customers; Material Contracts and Commitments. The
COMPANY has delivered to HOLDING an accurate list (which is set forth on
Schedule 5.15) of (i) all significant customers, it being understood and agreed
that a "significant customer," for purposes of this Section 5.15, means a
customer (or person or entity) representing 5% or more of the COMPANY's
consolidated revenues for the year ending on the Balance Sheet Date. Except to
the extent set forth on Schedule 5.15, none of the COMPANY's significant
customers has canceled or substantially reduced its utilization of the services
provided by the COMPANY or, to the knowledge of the COMPANY, is currently
attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the COMPANY.
The COMPANY has listed on Schedule 5.15 all material contracts,
commitments and similar agreements to which the COMPANY is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with significant customers, joint venture or partnership agreements, contracts
with any labor organizations, strategic alliances and options to
16
purchase land), other than contracts, commitments and agreements otherwise
listed on Schedule 5.10, 5.14, 5.16, 5.18 or 5.19 that were (a) in existence as
of the Balance Sheet Date or (b) entered into since the Balance Sheet Date, and
in each case has delivered true, complete and correct copies of such agreements
to HOLDING. The COMPANY has complied with all material commitments and
obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule 5.15, and no notice of default under any such
contract or agreement has been received by the COMPANY or any of the
STOCKHOLDERS. The COMPANY has also indicated on Schedule 5.15 a summary
description of all plans or projects involving the opening of new operations,
expansion of existing operations or the acquisition of any personal property,
business or assets requiring, in any event, the payment of more than $25,000 by
the COMPANY.
5.16 Real Property. Schedule 5.16(a) includes a list of all real property
owned by the COMPANY (i) as of the Balance Sheet Date or (ii) acquired since the
Balance Sheet Date, and all other real property, if any, used by the COMPANY in
the conduct of its business. The COMPANY has good and insurable title to the
real property owned by it, including that reflected on Schedules 5.14 and 5.16,
subject to no mortgage, pledge, lien, conditional sale agreement, encumbrance or
charge, except for:
(i) liens reflected on Schedule 5.10 or 5.15 as securing specified
liabilities (with respect to which no default by the COMPANY exists);
(ii) liens for current taxes not yet due and payable and assessments
not in default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the Town or County Clerks in which
the properties, assets and leasehold estates are located which do not
adversely affect the current use of the property.
Attached to Schedule 5.16(a) are true, complete and correct copies of all title
reports and title insurance policies currently in possession of the COMPANY with
respect to real property owned by the COMPANY.
Schedule 5.16(b) includes an accurate list of real property leased by the
COMPANY and an indication as to which such properties, if any, are currently
owned, or were formerly owned, by STOCKHOLDERS or Affiliates of the COMPANY or
of any of the STOCKHOLDERS, and attached to Schedule 5.16(b) are true, complete
and correct copies of all leases and agreements in respect of such real property
leased by the COMPANY. Except as set forth on Schedule 5.16(b), all of such
leases included on Schedule 5.16(b) are in full force and effect and constitute
valid and binding agreements of the COMPANY and, to the COMPANY'S knowledge, of
the other parties (and their successors) thereto in accordance with their
respective terms.
17
5.17 Insurance. Set forth on and attached to Schedule 5.17 are (i) an
accurate list as of the Balance Sheet Date of all insurance policies carried by
the COMPANY, (ii) an accurate list of all insurance loss runs and workers'
compensation claims received for the past three (3) policy years and (iii) true,
complete and correct copies of all insurance policies currently in effect. Such
insurance policies evidence all of the insurance that the COMPANY is required to
carry pursuant to all of its contracts and other agreements and pursuant to all
applicable laws. All of such insurance policies are currently in full force and
effect and shall remain in full force and effect through the Closing Date or, to
the extent that any such insurance policies expire by their terms on or prior to
the Closing Date, the COMPANY shall have renewed or replaced such insurance
policies on comparable terms and with comparable coverages prior to their
respective dates of expiration. Except as set forth on Schedule 5.17, no
insurance carried by the COMPANY has ever been canceled by the insurer and,
during the past three years, the COMPANY has never been denied coverage.
5.18 Compensation; Employment Agreements; Organized Labor Matters. The
COMPANY has delivered to HOLDING an accurate list (which is set forth on
Schedule 5.18) showing all officers, directors and key employees of the COMPANY,
listing all employment agreements with such officers, directors and key
employees and the annual rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of each of
such persons (i) for the year ended on the Balance Sheet Date and (ii) for the
ensuing fiscal year, if different. The COMPANY has provided to HOLDING true,
complete and correct copies of any employment agreements for persons listed on
Schedule 5.18. Except as set forth on Schedule 5.18, since the Balance Sheet
Date, there have been no increases in the compensation payable or any special
bonuses to any officer, director, key employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.18, (i) the COMPANY is not bound
by or subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
COMPANY are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the COMPANY's knowledge, no campaign to establish
such representation is in progress and (iv) there is no pending or, to the
COMPANY's knowledge, threatened labor dispute involving the COMPANY and any
group of its employees nor has the COMPANY experienced any labor interruptions
over the past three years. The COMPANY believes its relationship with employees
to be good.
5.19 Employee Plans. The COMPANY has delivered to HOLDING an accurate
schedule (which is set forth on Schedule 5.19) showing all employee benefit
plans of the COMPANY, including all employment agreements and other agreements
or arrangements containing "golden parachute" or other similar provisions, and
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.19, the
COMPANY does not sponsor, maintain or contribute to any plan, program, fund or
arrangement
18
that constitutes an "employee pension benefit plan," nor does the COMPANY have
any obligation to contribute to or accrue or pay any benefits under any deferred
compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity, any "excess benefit plan" (within the meaning of
Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) or any non-qualified deferred compensation arrangement). For the
purposes of this Agreement, the term "employee pension benefit plan" shall have
the same meaning as is given that term in Section 3(2) of ERISA. The COMPANY
does not currently maintain or contribute, and has not in the past three years
maintained or contributed, to any employee pension benefit plan other than the
plans set forth on Schedule 5.19, nor is the COMPANY required to contribute to
any retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions of employment of any of the
COMPANY's employees, except as set forth on Schedule 5.19.
Except as set forth on Schedule 5.19, the COMPANY is not now, and it and
the STOCKHOLDERS do not reasonably expect to become, liable to the Pension
Benefit Guaranty Corporation (other than for the payment of premiums in the
ordinary course) or to any multiemployer plan within the meaning of Section
3(37) of ERISA (a "Multiemployer Plan") under the provisions of Title IV of
ERISA.
All employee benefit plans other than Multiemployer Plans listed on
Schedule 5.19 and the administration thereof are in substantial compliance with
their terms and all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable federal, state and local
statutes, ordinances and regulations.
All accrued contribution obligations of the COMPANY with respect to any
plan listed on Schedule 5.19 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of the COMPANY as of the Balance Sheet
Date.
5.20 Compliance with ERISA. All such plans listed on Schedule 5.19 other
than those plans which are Multiemployer Plans that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Code, are and have been so
qualified and have been determined by the Internal Revenue Service to be so
qualified, and copies of such determination letters are included as part of
Schedule 5.19 hereof. Except as disclosed on Schedule 5.19, all reports and
other documents required to be filed with any governmental agency or distributed
to plan participants or beneficiaries (including, but not limited to, actuarial
reports, audits or tax returns) have been timely filed or distributed, and
copies thereof are included as part of Schedule 5.19 hereof. None of the
STOCKHOLDERS, any plan other than the Multiemployer Plans listed in Schedule
5.19, any fiduciary with respect to such plans, nor the COMPANY has engaged in
any transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No such plan other than the Multiemployer Plans listed in
Schedule 5.19 has incurred an accumulated funding deficiency, as defined in
Section 412(a) of the Code and Section 302(a)(1) of ERISA; and the COMPANY has
not incurred any liability for excise tax or penalty
19
due to the Internal Revenue Service nor any liability to the Pension Benefit
Guaranty Corporation (other than for payment in the ordinary course).
Furthermore:
(i) there have been no terminations, partial terminations or any
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no such plan listed in Schedule 5.19 that is subject to the
provisions of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan other than
Multiemployer Plans listed in Schedule 5.19;
(iv) the COMPANY has not incurred liability under Section 4062 of
ERISA; and
(v) no circumstances exist pursuant to which the COMPANY could have
any direct or indirect liability whatsoever (including, but not limited
to, any liability to any Multiemployer Plan or the Pension Benefit
Guaranty Corporation (other than for the payment of premiums in the
ordinary course) under Title IV of ERISA or to the Internal Revenue
Service for any excise tax or penalty, or being subject to any statutory
lien to secure payment of any such liability) with respect to any plan now
or heretofore maintained or contributed to by any entity other than the
COMPANY that is, or at any time was, a member of a "controlled group" (as
defined in Section 412(n)(6)(B) of the Code) that includes the COMPANY.
5.21 Conformity with Law; Litigation. Except to the extent set forth on
Schedule 5.21 or 5.13, the COMPANY is in compliance in all material respects
with all applicable laws, regulations and orders of all courts and of all
Federal, state, municipal or other governmental departments, commissions,
boards, bureaus, agencies and instrumentalities having jurisdiction over any of
them; and except to the extent set forth on Schedule 5.21, 5.10 or 5.13, there
are no claims, actions, suits or proceedings pending or, to the knowledge of the
COMPANY, threatened, against or affecting the COMPANY, at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
the COMPANY, and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received by the COMPANY or any STOCKHOLDER. The
COMPANY has conducted and is conducting its business in compliance in all
material respects with the requirements, standards, criteria and conditions set
forth in all applicable Federal, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations, including all
such permits, licenses, orders and other governmental
20
approvals set forth on Schedules 5.12 and 5.13, and is not in violation in any
material respect of any of the foregoing.
5.22 Taxes. Except as set forth on Schedule 5.22:
(i) All Returns required to have been filed by or with respect to
the COMPANY and any affiliated, combined, consolidated, unitary or similar
group of which the COMPANY is or was a member (a "Relevant Group") with
any Taxing Authority have been duly filed (taking into consideration any
extension for each such Return), and each such Return correctly and
completely reflects the Tax liability and all other information required
to be reported thereon. All Taxes (whether or not shown on any Return) due
and payable by the COMPANY, any subsidiary and any member of a Relevant
Group (individually, the "Acquired Party" and collectively, the "Acquired
Parties") have been paid.
(ii) To the knowledge of the COMPANY or any of the STOCKHOLDERS, the
provisions for Taxes to be paid by the COMPANY and any subsidiaries (as
opposed to any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) in the COMPANY Financial
Statements are sufficient for all unpaid Taxes, being current taxes not
yet due and payable, of such Acquired Party.
(iii) No Acquired Party is a party to any agreement extending the
time within which to file any Return. No claim has ever been made by any
Taxing Authority in a jurisdiction in which an Acquired Party does not
file Returns that it is or may be subject to taxation by that
jurisdiction.
(iv) Each Acquired Party has withheld and paid all applicable Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, creditor, independent contractor or other third
party.
(v) To the knowledge of any Acquired Party or any STOCKHOLDER, no
Taxing Authority is expected to assess any additional Taxes against or in
respect of it for any past period. There is no dispute or claim concerning
any Tax liability of any Acquired Party either (i) claimed or raised by
any Taxing Authority or (ii) otherwise known to any Acquired Party. No
issues have been raised in any examination by any Taxing Authority with
respect to any Acquired Party which, by application of similar principles,
reasonably could be expected to result in a proposed deficiency for any
other period not so examined. Schedule 5.22(v) attached hereto lists all
federal, state, local and foreign income Tax Returns filed by or with
respect to any Acquired Party for all taxable periods ended on or after
January 1, 1991, indicates those Returns, if any, that have been audited,
and indicates those Returns that currently are the subject of audit. Each
Acquired Party has delivered to HOLDING complete and correct copies of all
federal, state, local and foreign income Tax Returns filed by, and all Tax
examination reports and
21
statements of deficiencies assessed against or agreed to by, such Acquired
Party since January 1, 1991.
(vi) No Acquired Party has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any
Tax assessment or deficiency.
(vii) No Acquired Party has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain
circumstances could require it to make any payments, that are not
deductible under Section 280G of the Code.
(viii) No Acquired Party is a party to any Tax allocation or sharing
agreement.
(ix) None of the assets of any Acquired Party constitutes tax-exempt
bond financed property or tax-exempt use property, within the meaning of
Section 168 of the Code. No Acquired Party is a party to any "safe harbor
lease" that is subject to the provisions of Section 168(f)(8) of the
Internal Revenue Code as in effect prior to the Tax Reform Act of 1986, or
to any "long-term contract" within the meaning of Section 460 of the Code.
(x) No Acquired Party is a "consenting corporation" within the
meaning of Section 341(f)(1) of the Code, or comparable provisions of any
state statutes, and none of the assets of any Acquired Party is subject to
an election under Section 341(f) of the Code or comparable provisions of
any state statutes.
(xi) No Acquired Party is a party to any joint venture, partnership
or other arrangement that is treated as a partnership for federal income
Tax purposes.
(xii) There are no accounting method changes or proposed or
threatened accounting method changes, of any Acquired Party that could
give rise to an adjustment under Section 481 of the Code for periods after
the Closing Date.
(xiii) No Acquired Party has received any written ruling of a Taxing
Authority related to Taxes or entered into any written and legally binding
agreement with a Taxing Authority relating to Taxes.
(xiv) Each Acquired Party has disclosed (in accordance with Section
6662(d)(2)(B)(ii) of the Code) on its federal income Tax Returns all
positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Section 6662(d)
of the Code.
(xv) No Acquired Party has any liability for Taxes of any person or
entity other than such Acquired Party (i) under Section 1.1502-6 of the
Treasury regulations (or any
22
similar provision of state, local or foreign law), (ii) as a transferee or
successor, (iii) by contract or (iv) otherwise.
(xvi) There currently are no limitations on the utilization of the
net operating losses, built-in losses, capital losses, Tax credits or
other similar items of any Acquired Party (collectively, the "Tax Losses")
under (i) Section 382 of the Code, (ii) Section 383 of the Code, (iii)
Section 384 of the Code, (iv) Section 269 of the Code, (v) Section
1.1502-15 and Section 1.1502-15A of the Treasury regulations, (vi) Section
1.1502-21 and Section 1.1502-21A of the Treasury regulations or (vii)
Sections 1.1502-91 through 1.1502-99 of the Treasury regulations, in each
case as in effect both prior to and following the Tax Reform Act of 1986.
(xvii) At the end of the COMPANY's most recent taxable year, the
Acquired Parties had aggregate Tax Losses for federal income Tax purposes
as described on Schedule 5.22(xvii) attached hereto.
(xviii) Since January 1, 1997, the COMPANY at all times was an "S"
Corporation within the meaning of Section 1361 of the Code and, if
applicable, under the laws of the State of Texas.
For purposes of this Agreement, the following definitions shall
apply:
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax with
any Taxing Authority or governmental agency.
"Tax" or "Taxes" means all Federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatsoever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having jurisdiction with respect to
any Tax.
5.23 No Violations. The COMPANY is not in violation of any Charter
Document. Except as set forth on Schedule 5.23, neither the COMPANY nor, to the
knowledge of the COMPANY or any of the STOCKHOLDERS, any other party thereto, is
in default under any lease, instrument, agreement, license, or permit set forth
on Schedule 5.12, 5.13, 5.14, 5.15, 5.16, 5.18 or 5.19 or any other material
agreement to which it is a party or by which its properties are bound
(collectively, the "Material Documents"); and, except as set forth on Schedule
5.23, (a)
23
the rights and benefits of the COMPANY under the Material Documents will not be
materially and adversely affected by the transactions contemplated hereby and
(b) the execution of this Agreement and the performance by the COMPANY and the
STOCKHOLDERS of their obligations hereunder and the consummation by the COMPANY
and the STOCKHOLDERS of the transactions contemplated hereby will not result in
any violation or breach of, or constitute a default under, any of the terms or
provisions of the Material Documents or the Charter Documents. Except as set
forth on Schedule 5.23, none of the Material Documents requires notice to, or
the consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. Except as set forth on Schedule 5.23, none of the
Material Documents prohibits the use or publication by the COMPANY, HOLDING or
NEWCO of the name of any other party to such Material Document, and none of the
Material Documents prohibits or restricts the COMPANY from freely providing
services to any other customer or potential customer of the COMPANY, HOLDING,
NEWCO or any Other Founding Company.
5.24 Government Contracts. Except as set forth on Schedule 5.24, the
COMPANY is not a party to any governmental contract subject to price
redetermination or renegotiation.
5.25 Absence of Changes. Since the Balance Sheet Date, except as set forth
on Schedule 5.25, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
the COMPANY;
(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in the terms of its ownership
interests or any grant or issuance of any options, warrants, calls,
conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the COMPANY;
(v) any increase in the compensation, bonus, sales commissions or
fees payable or to become payable by the COMPANY to any of its officers,
directors, STOCKHOLDERS, employees, consultants or agents, except for
ordinary and customary bonuses and salary increases for employees in
accordance with past practice or as otherwise described on Schedule 5.18;
24
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the COMPANY to any person or
entity, including, without limitation, any of the STOCKHOLDERS or any of
their Affiliates;
(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the COMPANY in excess of $10,000 in the
aggregate, or any cancellation or agreement to cancel any indebtedness or
obligation of any of the STOCKHOLDERS or any Affiliate thereof; provided,
that the COMPANY may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past practice;
and provided, further, that such adjustments shall not be deemed to be
included in Schedule 5.11 unless specifically listed thereon;
(ix) any plan, agreement or arrangement granting any preferential
right to purchase or acquire any interest in any of the assets, property
or rights of the COMPANY or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the COMPANY's business consistent with past
practice;
(xi) any waiver of any material rights or claims of the COMPANY;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which the COMPANY is a party
or as to which it is a beneficiary;
(xiii) any transaction by the COMPANY outside the ordinary course of
its respective businesses consistent with past practices;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date;
(xv) any other distribution of property or assets by the COMPANY; or
(xvi) any other activity prohibited by Section 7.3 that is not
specifically included in this Section 5.25.
25
5.26 Deposit Accounts; Powers of Attorney. Schedule 5.26 sets forth a
complete and correct list of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the COMPANY and
a description of the terms of such power of attorney.
5.27 Validity of Obligations. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the COMPANY and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of the COMPANY, enforceable
against the COMPANY in accordance with its terms.
5.28 Relations with Governments. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office nor has it otherwise taken any action which
would cause the COMPANY to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
5.29 Disclosure. (a) This Agreement, including the schedules hereto,
together with the completed Directors and Officers Questionnaires and
Registration Statement Questionnaires attached hereto as Schedule 5.29 and all
other documents and information made available to HOLDING and its
representatives in writing pursuant hereto or thereto, present fairly the
business and operations of the COMPANY for the time periods with respect to
which such information was requested. The COMPANY'S rights under the documents
delivered pursuant hereto would not be materially adversely affected by, and no
statement made herein would be rendered untrue in any material respect by, any
other document to which the COMPANY is a party, or to which its properties are
subject, or by any other fact or circumstance regarding the COMPANY that is not
disclosed pursuant hereto or thereto. If, prior to the 25th day after the date
of HOLDING's final prospectus utilized in connection with the IPO, the COMPANY
or the STOCKHOLDERS become aware of any fact or circumstance which would change
(or, if after the Closing Date, would have changed) a representation or warranty
of the COMPANY or the STOCKHOLDERS in this Agreement or would affect any
document delivered pursuant hereto in any material respect, the COMPANY and the
STOCKHOLDERS shall immediately give notice
26
of such fact or circumstance to HOLDING. However, subject to the provisions of
Section 7.8, such notification shall not relieve either the COMPANY or the
STOCKHOLDERS of their respective obligations under this Agreement, and, subject
to the provisions of Section 7.8, at the sole option of HOLDING, the truth and
accuracy of any and all warranties and representations of the COMPANY or on
behalf of the COMPANY and of the STOCKHOLDERS, in each case at the date of this
Agreement and on the Pre-Closing Date and on the Closing Date, shall be a
precondition to the consummation of this transaction.
(b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that
there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; (ii) that neither HOLDING nor any of its shareholders, officers,
directors, agents or representatives nor any Underwriter shall have any
liability to the COMPANY, the STOCKHOLDERS or any other person or entity
affiliated or associated with the COMPANY for any failure of the Registration
Statement to become effective, the IPO to occur at a particular price or within
a particular range of prices or to occur at all; and (iii) that the decision of
the STOCKHOLDERS to enter into this Agreement, or to vote in favor of or consent
to the proposed Merger, has been or will be made independent of, and without
reliance upon, any statements, opinions or other communications, or due
diligence investigations which have been or will be made or performed by any
prospective Underwriter, relative to HOLDING or the prospective IPO.
5.30 Prohibited Activities. Except as set forth on Schedule 5.30, the
COMPANY has not, between the Balance Sheet Date and the date hereof, taken any
of the actions (Prohibited Activities) set forth in Section 7.3.
(B) Representations and Warranties of the STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement, and that the representations and warranties set forth in Sections
5.31 through 5.35 shall survive until January 31, 1999, which shall be deemed to
be the Expiration Date for purposes of those Sections.
5.31 Authority. Such STOCKHOLDER has the full legal right, power and
authority to enter into this Agreement. Such STOCKHOLDER owns beneficially and
of record all of the shares of the COMPANY Stock identified on Annex IV as being
owned by such STOCKHOLDER and, except as set forth on Schedule 5.31, such
COMPANY Stock is owned free and clear of all liens, security interests, pledges,
charges, voting trusts, restrictions, encumbrances and claims of every kind.
5.32 Preemptive Rights. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or HOLDING
Stock that
27
such STOCKHOLDER has or may have had, other than rights of such STOCKHOLDER to
acquire HOLDING Stock pursuant to (i) this Agreement or (ii) any option granted
by HOLDING.
5.33 Transactions with Directors, Officers and Affiliates. The completed
Officers and Directors Questionnaire of such STOCKHOLDER, if any, attached
hereto as Schedule 5.33 is complete and correct in all material respects. If,
prior to the 25th day after the date of the final prospectus of HOLDING utilized
in connection with the IPO, such STOCKHOLDER becomes aware of any fact or
circumstance which would affect the information disclosed in its Directors and
Officers Questionnaire in any material respect, then such STOCKHOLDER shall
immediately give notice of such fact or circumstance to HOLDING. However,
subject to the provisions of Section 7.8, such notification shall not relieve
the STOCKHOLDER of any of its obligations under this Agreement. Except as listed
on Schedule 5.33 annexed hereto, there have been no transactions since January
1, 1992 between the COMPANY and any of its directors, officers, stockholders or
affiliates or any of their Family Members (as defined below) involving $60,000
or more, except for any transaction with such persons solely in such capacities.
Except as set forth on Schedule 5.33, each transaction set forth on Schedule
5.33 has been on reasonable commercial terms which could have been obtained at
the time from bona fide third parties. To the best knowledge of such
STOCKHOLDER, since January 1, 1992, none of the officers or directors of the
COMPANY or any spouse or Family Member (as defined below) of any of such persons
has been a director, officer or consultant of, or owns directly or indirectly
any interest in, any firm, corporation, association or business enterprise which
during such period has been a significant supplier, customer or sales agent of
the COMPANY or has competed with or been engaged in any business of the kind
being conducted by the COMPANY except as disclosed on Schedule 5.33 annexed
hereto. Except as disclosed on Schedule 5.33, no Family Member (as defined
below) of any STOCKHOLDER, officer or director of the COMPANY is currently an
employee or consultant receiving payments from the COMPANY or otherwise on the
payroll of the COMPANY or has any material claim whatsoever against or owes any
amount to the COMPANY, except for claims in the ordinary course of business such
as for accrued vacation pay and accrued benefits under employee benefit plans.
"Family Member" as it applies to any person shall mean all relatives and their
spouses in a relationship of first cousin or closer to such person or such
person's spouse.
5.34 Securities Act Representations. Except as set forth on Schedule 5.34,
the STOCKHOLDER alone, or together with such STOCKHOLDER's "purchaser
representative" (as defined in Rule 501(h) promulgated under the 0000 Xxx):
(a) acknowledges and agrees that (x) the shares of HOLDING Stock to be
delivered to the STOCKHOLDER pursuant to this Agreement have not been and will
not be registered under the 1933 Act or any state securities or "blue sky" laws,
and therefore may not be sold, transferred or otherwise conveyed without
compliance with the 1933 Act and all applicable state securities or "blue sky"
laws, or pursuant to an exemption therefrom and (y) the HOLDING Stock to be
acquired by the STOCKHOLDER pursuant to this Agreement is being acquired
28
solely for its own account, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of the HOLDING Stock
in connection with a distribution;
(b) acknowledges and agrees that it knows and understands that an
investment in the HOLDING Stock is a speculative investment which involves a
high degree of risk of loss;
(c) represents and warrants that it is able to bear the economic risk of
an investment in the HOLDING Stock acquired pursuant to this Agreement, can
afford to sustain a total loss of such investment and it (or for those
STOCKHOLDERS that are trusts, its trustee or trustees) has such knowledge and
experience in financial and business matters that it (or for those STOCKHOLDERS
that are trusts, its trustee or trustees) is capable of evaluating the merits
and risks of the proposed investment in the HOLDING Stock;
(d) represents and warrants that it has had an adequate opportunity to
review and to ask questions and receive answers concerning any and all matters
relating to the transactions described in (i) HOLDING's private placement
memorandum and (ii) this Agreement;
(e) represents and warrants that (1) it has had access to all relevant
information regarding and has had adequate opportunity to ask questions and
received answers concerning (i) the background and experience of the current and
proposed officers and directors of HOLDING, (ii) the plans for the operations of
the business of HOLDING, (iii) the business, operations and financial condition
of the Other Founding Companies, and (iv) any plans for additional acquisitions
and the like and (2) it has received all such relevant information and has asked
any and all questions in the nature described in the preceding clause (1) and
all questions have been answered to its satisfaction;
(f) represents and warrants that (i) such STOCKHOLDER is an "accredited
investor" (as defined in Rule 501(a) promulgated under the 0000 Xxx) and (ii)
after taking into consideration the information and advice provided the
STOCKHOLDER, such STOCKHOLDER (or for those STOCKHOLDERS that are trusts, its
trustee or trustees) has the requisite knowledge and experience in financial and
business matters to be capable of evaluating the merits and risks of an
investment in the HOLDING Stock and (iii) for any STOCKHOLDER that is a trust
and is not an "accredited investor", such STOCKHOLDER counts as one purchaser
for purposes of Rule 506 under the Securities Act;
(g) represents and warrants that, to its knowledge, there have been no
general or public solicitations or advertisements or other broadly disseminated
disclosures (including, without limitation, any advertisement, article, notice
or other communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or advertising) by or on behalf of
HOLDING regarding an investment in the HOLDING Stock; and
29
(h) acknowledges and agrees that the HOLDING Stock shall bear the
following legend in addition to the legend required under Section 15 of this
Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SHARES UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND, IF REQUIRED BY
ENFINITY CORPORATION, AN OPINION OF COUNSEL TO ENFINITY CORPORATION
STATING THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT.
The STOCKHOLDER acknowledges that the effect of the foregoing legend, among
other things, is or may be to limit or destroy the value of the certificate for
purposes of sale or use as loan collateral. The STOCKHOLDER consents that "stop
transfer" instructions may be noted against the HOLDING Stock.
5.35 Registration Statement Questionnaires. The completed Registration
Statement Questionnaires attached hereto as Schedule 5.35 present fairly the
business and operations of the COMPANY for the time periods with respect to
which such information was requested. If, prior to the 25th day after the date
of the final prospectus of HOLDING utilized in connection with the IPO, the
STOCKHOLDER becomes aware of any fact or circumstance which would affect the
information disclosed in its Registration Statement Questionnaires in any
material respect, then the STOCKHOLDER shall immediately give notice of such
fact or circumstance to HOLDING. However, subject to the provisions of Section
7.8, such notification shall not relieve the STOCKHOLDER of its obligations
under this Agreement.
6. REPRESENTATIONS OF HOLDING and NEWCO
HOLDING and NEWCO jointly and severally represent and warrant that all of
the following representations and warranties in this Section 6 are true at the
date of this Agreement and that such representations and warranties shall
survive the Closing Date until January 31, 1999 (the "Expiration Date"), except
that (i) the warranties and representations set forth in Section 6.14 hereof
shall survive until such time as the limitations period has run for all tax
periods ended on or prior to the Closing Date, which shall be deemed to be the
Expiration Date for Section 6.14 and (ii) solely for purposes of Section
11.2(iv) hereof, and solely to the extent that in connection with the IPO, a
STOCKHOLDER actually incurs liability under the 1933 Act, the 1934 Act or any
other Federal or state securities laws, the representations and warranties set
30
forth herein shall survive until the expiration of any applicable limitations
period, which shall be deemed to be the Expiration Date for such purposes.
6.1 Due Organization. HOLDING and NEWCO are each corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and are duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective business in the places and in the manner as now
conducted except where the failure to be so authorized or qualified would not
have a Material Adverse Effect. True, complete, correct and certified copies of
the Certificate of Incorporation and By-laws, each as amended, of HOLDING and
NEWCO (the "HOLDING Charter Documents") are all attached hereto as Annex II.
Schedule 6.1 sets forth a list of all jurisdictions in which HOLDING or NEWCO is
authorized or qualified to do business.
6.2 Authorization. (i) The respective representatives of HOLDING and NEWCO
executing this Agreement have the authority to enter into and bind HOLDING and
NEWCO to the terms of this Agreement and (ii) HOLDING and NEWCO have the
corporate right, power and authority to enter into this Agreement and the
Merger.
6.3 Capital Stock of HOLDING and NEWCO. The authorized capital stock of
HOLDING and NEWCO is as set forth in Sections 1.4(ii) and (iii), respectively.
All of the issued and outstanding shares of the capital stock of NEWCO are owned
by HOLDING and all of the issued and outstanding shares of the capital stock of
HOLDING are owned by the persons set forth on Annex V hereof, in each case free
and clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. All of the issued and
outstanding shares of the capital stock of NEWCO and HOLDING have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by HOLDING and by the persons set forth on Annex V,
respectively, and were offered, issued, sold and delivered by HOLDING and
NEWCO in compliance with all applicable state and Federal laws concerning the
issuance of securities. Further, none of such shares was issued in violation
of the preemptive rights of any past or present stockholder of HOLDING or NEWCO.
6.4 Transactions in Capital Stock, Organization Accounting. Except as set
forth on Schedule 6.4 of this Agreement and as set forth in the Registration
Statement, (i) no option, warrant, call, conversion right or commitment of any
kind exists which obligates HOLDING or NEWCO to issue any of its authorized but
unissued capital stock or its treasury stock; and (ii) neither HOLDING nor NEWCO
has any obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof. Schedule 6.4 also includes
complete and accurate copies of all stock option or stock purchase plans of
HOLDING and NEWCO, including a list, accurate as of the date hereof, of all
outstanding options, warrants or other rights to acquire shares of their
respective capital stock.
31
6.5 Subsidiaries. NEWCO has no subsidiaries. HOLDING has no subsidiaries
except for NEWCO and each of the companies identified as "NEWCO" in each of the
Other Agreements. Except as set forth in the preceding sentence, neither HOLDING
nor NEWCO owns, of record or beneficially, or controls, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is HOLDING or
NEWCO, directly or indirectly, a participant in any joint venture, partnership
or other non-corporate entity.
6.6 Financial Statements. (a) Attached hereto as Schedule 6.6(a) are
copies of the following financial statements of HOLDING (the "HOLDING Financial
Statements"), which reflect the results of its operations from inception:
HOLDING's audited Balance Sheet as of December 31, 1997 and Statements of
Income, Cash Flows and Retained Earnings for the period from inception through
December 31, 1997. Such HOLDING Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as noted thereon or on Schedule
6.6(a)). Except as set forth on Schedule 6.6(a), such Balance Sheet as of
December 31, 1997 presents fairly the financial position of HOLDING as of such
date, and such Statements of Income, Cash Flows and Retained Earnings present
fairly the results of operations for the period indicated.
(b) Since the Balance Sheet Date, except as set forth in the draft of the
Registration Statement delivered to the STOCKHOLDERS, and except as contemplated
by this Agreement and the Other Agreements, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of HOLDING or
NEWCO;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
HOLDING or NEWCO;
(iii) any change in the authorized capital of HOLDING or NEWCO or
their outstanding securities or any change in their ownership interests or
any grant or issuance of any options, warrants, calls, conversion rights
or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of HOLDING or
NEWCO;
(v) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of HOLDING or NEWCO;
(vi) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of HOLDING or NEWCO to any person or
entity;
32
(vii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to HOLDING or NEWCO in excess of $10,000 in the
aggregate;
(viii) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of HOLDING or NEWCO or requiring consent of any party to the
transfer and assignment of any such assets, property or rights;
(ix) any waiver of any material rights or claims of HOLDING or
NEWCO;
(x) any material breach, amendment or termination of any material
contract, agreement, license, permit or other right to which HOLDING or
NEWCO is a party or as to which it is a beneficiary;
(xi) any transaction by HOLDING or NEWCO outside the ordinary course
of its business;
(xii) any other distribution of property or assets by HOLDING or
NEWCO.
6.7 Liabilities and Obligations. Except as set forth on Schedule 6.7,
HOLDING and NEWCO have no material liabilities, contingent or otherwise, except
as set forth in or contemplated by this Agreement and the Other Agreements and
except for fees and expenses incurred in connection with the transactions
contemplated hereby and thereby.
6.8 Conformity with Law; Litigation. Except to the extent set forth on
Schedule 6.8, neither HOLDING nor NEWCO is in violation of any law or
regulation, which violation would have a Material Adverse Effect, or of any
order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them; and except to the extent set forth in Schedule
6.8, there are no material claims, actions, suits or proceedings pending or, to
the knowledge of HOLDING or NEWCO, threatened against or affecting HOLDING or
NEWCO, at law or in equity, or before or by any Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over either of them, and no notice of any
claim, action, suit or proceeding, whether pending or threatened, has been
received. HOLDING and NEWCO have conducted and are conducting their respective
businesses in compliance with the requirements, standards, criteria and
conditions set forth in applicable Federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and are not in violation in any material respect of any of the
foregoing.
6.9 No Violations. Neither HOLDING nor NEWCO is in violation of any
HOLDING Charter Document. None of HOLDING, NEWCO or, to the knowledge of HOLDING
and NEWCO, any other party thereto is in default under any lease, instrument,
agreement, license, or permit to which HOLDING or NEWCO is a party, or by which
33
HOLDING or NEWCO, or any of its properties, is bound (collectively, the "HOLDING
Documents"); and (a) the rights and benefits of HOLDING and NEWCO under the
HOLDING Documents will not be adversely affected by the transactions
contemplated hereby and (b) the execution of this Agreement and the performance
of HOLDING's and NEWCO's obligations hereunder and the consummation by them of
the transactions contemplated hereby will not result in any violation or breach
or constitute a default under any of the terms or provisions of the HOLDING
Documents or the HOLDING Charter Documents. Except as set forth on Schedule 6.9,
none of the HOLDING Documents requires notice to, or the consent or approval of,
any governmental agency or other third party with respect to any of the
transactions contemplated hereby in order to remain in full force and effect,
and the consummation of the transactions contemplated hereby will not give rise
to any right to termination, cancellation or acceleration or loss of any right
or benefit of HOLDING or NEWCO.
6.10 Validity of Obligations. The execution and delivery of this Agreement
by HOLDING and NEWCO and the performance by them of the transactions
contemplated hereby have been duly and validly authorized by the respective
Boards of Directors of HOLDING and NEWCO and this Agreement has been duly and
validly authorized by all necessary corporate action and is a legal, valid and
binding obligation of HOLDING and NEWCO enforceable against HOLDING and NEWCO in
accordance with its terms. The execution and delivery of the Other Agreements by
HOLDING and the other subsidiaries of HOLDING that are party thereto and the
performance by each of them of the transactions contemplated thereby have been
duly and validly authorized by the respective Boards of Directors of HOLDING and
such subsidiaries, and such Other Agreements have been duly and validly
authorized by all necessary corporate action and are legal, valid and binding
obligations of HOLDING and the subsidiaries that are party thereto.
6.11 HOLDING Stock. At the time of issuance thereof, the HOLDING Stock to
be delivered to the STOCKHOLDERS pursuant to this Agreement will constitute
valid and legally issued shares of HOLDING, fully paid and nonassessable, and
with the exception of restrictions upon resale set forth in Section 15 hereof,
will be identical in all material and substantive respects to the HOLDING Stock
issued and outstanding as of the date hereof by reason of the provisions of the
Delaware GCL. The shares of HOLDING Stock to be issued to the STOCKHOLDERS
pursuant to this Agreement will not be registered under the 1933 Act, except as
provided in Section 16 hereof.
6.12 Other Agreements. Neither HOLDING nor NEWCO has entered or will enter
into any material agreement with any of the Founding Companies or any of the
stockholders of the Founding Companies other than the Other Agreements and the
agreements contemplated by each of the Other Agreements, including the
employment agreements referred to therein. Except with respect to the Schedules
thereto and the consideration payable at the Effective Time of the Merger, the
Other Agreements are substantially identical to this Agreement in all material
respects. Following the date hereof, HOLDING shall provide a copy of each such
Other
34
Agreement (including all Schedules and Annexes thereto) to the Stockholder
Representative promptly upon request.
6.13 Business; Real Property; Material Agreements. Neither HOLDING nor
NEWCO has conducted any operations or business since inception other than
activities related to the HOLDING Plan of Organization. Neither HOLDING nor
NEWCO owns or has at any time owned any real property or any material personal
property or is a party to any other material agreement, except as listed on
Schedule 6.13 and except that HOLDING is a party to the Other Agreements and the
agreements contemplated thereby and to certain agreements which will be filed as
Exhibits to the Registration Statement.
6.14 Taxes. NEWCO is a newly formed entity with no tax or operational
history. Except as set forth on Schedule 6.14:
(i) All Returns required to have been filed by or with respect to
HOLDING and any affiliated, combined, consolidated, unitary or similar
group of which HOLDING is or was a member (a "HOLDING Relevant Group")
with any Taxing Authority have been duly filed (taking into consideration
any extension for each such Return), and each such Return correctly and
completely reflects the Tax liability and all other information required
to be reported thereon. All Taxes (whether or not shown on any Return)
owed by the HOLDING Relevant Group have been paid.
(ii) The provisions for Taxes due by HOLDING and any subsidiaries
(as opposed to any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) in the HOLDING Financial
Statements are sufficient for all unpaid Taxes, being current taxes not
yet due and payable, of the HOLDING Relevant Group.
(iii) No corporation in the HOLDING Relevant Group is a party to any
agreement extending the time within which to file any Return. No claim has
ever been made by any Taxing Authority in a jurisdiction in which a
corporation in the HOLDING Relevant Group does not file Returns that it is
or may be subject to taxation by that jurisdiction.
(iv) Each corporation in the HOLDING Relevant Group has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor or
other third party.
(v) To the knowledge of any corporation in the HOLDING Relevant
Group, no Taxing Authority is expected to assess any additional Taxes
against or in respect of it for any past period. There is no dispute or
claim concerning any Tax liability of any corporation in the HOLDING
Relevant Group either (i) claimed or raised by any Taxing Authority or
(ii) otherwise known to any corporation in the HOLDING Relevant Group.
35
No issues have been raised in any examination by any Taxing Authority with
respect to any corporation in the HOLDING Relevant Group which, by
application of similar principles, reasonably could be expected to result
in a proposed deficiency for any other period not so examined. Schedule
6.14(v) attached hereto lists all federal, state, local and foreign income
Tax Returns filed by or with respect to any corporation in the HOLDING
Relevant Group for all taxable periods, indicates those Returns, if any,
that have been audited, and indicates those Returns that currently are the
subject of audit. Each corporation in the HOLDING Relevant Group will make
available to the COMPANY and the STOCKHOLDERS, at their request, complete
and correct copies of all federal, state, local and foreign income Tax
Returns filed by, and all Tax examination reports and statements of
deficiencies assessed against or agreed to by, HOLDING.
(vi) No corporation in the HOLDING Relevant Group has waived any
statute of limitations in respect of Taxes or agreed to any extension of
time with respect to any Tax assessment or deficiency.
(vii) No corporation in the HOLDING Relevant Group has made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could require it to make any
payments, that are not deductible under Section 280G the Code.
(viii) No corporation in the HOLDING Relevant Group is a party to
any Tax allocation or sharing agreement.
(ix) None of the assets of any corporation in the HOLDING Relevant
Group constitutes tax-exempt bond financed property or tax-exempt use
property, within the meaning of Section 168 of the Code. No corporation in
the HOLDING Relevant Group is a party to any "safe harbor lease" that is
subject to the provisions of Section 168(f)(8) of the Internal Revenue
Code as in effect prior to the Tax Reform Act of 1986, or to any
"long-term contract" within the meaning of Section 460 of the Code.
(x) No corporation in the HOLDING Relevant Group is a "consenting
corporation" within the meaning of Section 341(f)(1) of the Code, or
comparable provisions of any state statutes, and none of the assets of any
corporation in the HOLDING Relevant Group is subject to an election under
Section 341(f) of the Code or comparable provisions of any state statutes.
(xi) No corporation in the HOLDING Relevant Group is a party to any
joint venture, partnership or other arrangement that is treated as a
partnership for federal income Tax purposes.
(xii) There are no accounting method changes or proposed or
threatened accounting method changes, of any corporation in the HOLDING
Relevant Group that
36
could give rise to an adjustment under Section 481 of the Code for periods
after the Closing Date.
(xiii) No corporation in the HOLDING Relevant Group has received any
written ruling of a Taxing Authority related to Taxes or entered into any
written and legally binding agreement with a Taxing Authority relating to
Taxes.
(xiv) Each corporation in the HOLDING Relevant Group has disclosed
(in accordance with Section 6662(d)(2)(B)(ii) of the Code) on its federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of
Section 6662(d) of the Code.
(xv) No corporation in the HOLDING Relevant Group has any liability
for Taxes of any person or entity other than such corporation in the
HOLDING Relevant Group (i) under Section 1.1502-6 of the Treasury
regulations (or any similar provision of state, local or foreign law),
(ii) as a transferee or successor, (iii) by contract or (iv) otherwise.
(xvi) There currently are no limitations on the utilization of the
net operating losses, built-in losses, capital losses, Tax credits or
other similar items of any corporation in the HOLDING Relevant Group under
(i) Section 382 of the Code, (ii) Section 383 of the Code, (iii) Section
384 of the Code, (iv) Section 269 of the Code, (v) Section 1.1502-15 and
Section 1.1502-15A of the Treasury regulations, (vi) Section 1.1502-21 and
Section 1.1502-21A of the Treasury regulations or (vii) sections 1.1502-91
through 1.1502-99 of the Treasury regulations, in each case as in effect
both prior to and following the Tax Reform Act of 1986.
6.15 Disclosure. To the best knowledge of HOLDING, no representations or
warranties by HOLDING or NEWCO in this Agreement and no statement contained in
the Registration Statement or in any other document furnished by HOLDING or
NEWCO to the COMPANY or any of its STOCKHOLDERS pursuant to the provisions
hereof, contains any untrue statement of material fact or omits to state any
fact necessary in light of the circumstances under which it was made in order to
make the statements herein or therein not misleading.
7. COVENANTS PRIOR TO CLOSING
7.1 Access and Cooperation; Due Diligence. (a) Between the date of this
Agreement and the Closing Date, the COMPANY will afford to the officers and
authorized representatives of HOLDING and the Other Founding Companies
(including, without limitation, their respective counsel) reasonable access,
during normal business hours and upon prior written notice, to all of the
COMPANY's sites, properties, books and records and will furnish HOLDING with
such additional financial and operating data and other information as to the
37
business and properties of the COMPANY as HOLDING or the Other Founding
Companies may from time to time reasonably request in connection with and
related to the transactions contemplated by this Agreement and the Registration
Statement. The COMPANY will cooperate with HOLDING and the Other Founding
Companies and their respective representatives, including HOLDING's auditors and
counsel, in the preparation of any documents or other material (including the
Registration Statement) which may be required in connection with the
transactions contemplated by this Agreement. HOLDING, NEWCO, the STOCKHOLDERS
and the COMPANY will treat all information obtained in connection with the
negotiation and performance of this Agreement or the due diligence
investigations conducted with respect to the Other Founding Companies as
confidential in accordance with the provisions of Section 14 hereof. In
addition, HOLDING will cause each of the Other Agreements, binding each of the
Other Founding Companies, to contain a provision similar to this Section 7.1
requiring each such Other Founding Company, its stockholders, directors,
officers, representatives, employees and agents to keep confidential any
information obtained by such Other Founding Company and to provide the COMPANY
with reasonable access and information as will be provided by the COMPANY
pursuant to this Section 7.1(a).
(b) Between the date of this Agreement and the Closing Date, HOLDING will
afford to the officers and authorized representatives of the COMPANY reasonable
access during normal business hours and upon prior written notice to all of
HOLDING's and NEWCO's sites, properties, books and records and will furnish the
COMPANY with such additional financial and operating data and other information
as to the business and properties of HOLDING and NEWCO as the COMPANY may from
time to time reasonably request. HOLDING and NEWCO will cooperate with the
COMPANY, its representatives, auditors and counsel in the preparation of any
documents or other material which may be required in connection with the
transactions contemplated by this Agreement. The COMPANY will cause all
information obtained in connection with the negotiation and performance of this
Agreement to be treated as confidential in accordance with the provisions of
Section 14 hereof.
7.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Closing Date, the COMPANY will, except (x) as set forth on
Schedule 7.2 or (y) as requested by HOLDING:
(i) carry on its business in the ordinary course substantially as
conducted heretofore and not introduce any new method of management,
operation or accounting;
(ii) maintain its properties and facilities, including those held
under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under
agreements relating to or affecting its assets, properties or rights;
38
(iv) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(v) maintain and preserve its business organization intact and use
commercially reasonable efforts to retain its present key employees and to
maintain relationships with suppliers, customers and others having
business relations with the COMPANY;
(vi) maintain compliance in all material respects with all permits,
laws, rules and regulations, consent orders, and all other orders of
applicable courts, regulatory agencies and similar governmental
authorities;
(vii) maintain present debt and lease instruments in accordance with
their respective terms and not enter into new or amended debt or lease
instruments, provided that debt and/or lease instruments may be replaced
if such replacement instruments are on terms at least as favorable to the
COMPANY as the instruments being replaced; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents, except for ordinary and
customary bonus and salary increases for employees in accordance with past
practices.
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3, between
the date hereof and the Closing Date, the COMPANY will not, without the prior
written consent of HOLDING:
(i) make any change in its Articles or Certificate of Incorporation
or By-laws;
(ii) grant or issue any securities, options, warrants, calls,
conversion rights or commitments of any kind relating to its securities of
any kind other than in connection with the exercise of options or warrants
listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase,
redeem or otherwise acquire or retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditure, except if it is in
the ordinary course of business (consistent with past practice) or
involves an amount not in excess of $25,000;
(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $25,000 necessary or
39
desirable for the conduct of the business of the COMPANY, (2) (A) liens
for taxes either not yet due or being contested in good faith and by
appropriate proceedings (and for which adequate reserves have been
established and are being maintained) or (B) materialmen's, mechanics',
workers', repairmen's, employees' or other like liens arising in the
ordinary course of business consistent with past practice (the liens set
forth in clause (2) being referred to herein as "Statutory Liens"), or (3)
liens set forth on Schedule 5.10 or 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the ordinary course of business consistent
with past practice;
(vii) negotiate for the acquisition of any business or the start-up
of any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material right or claim of the COMPANY; provided,
that the COMPANY may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past practice;
provided, further, that such adjustments shall not be deemed to be
included on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
contract, agreement, permit, license or other right to which the COMPANY
is a party or as to which it is a beneficiary; or
(xi) enter into any other transaction outside the ordinary course of
its business consistent with past practice or prohibited hereunder.
7.4 No Shop. None of the STOCKHOLDERS or the COMPANY, nor any agent,
officer, director, trustee or any representative of any of the foregoing, will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly: (i) solicit or initiate the
submission of proposals or offers from any person or entity for, (ii)
participate in any discussion pertaining to, or (iii) furnish any information to
any person or entity other than HOLDING or its authorized agents relating to,
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the COMPANY or a merger, consolidation or business
combination of the COMPANY.
7.5 Notice to Bargaining Agents. Prior to the Pre-Closing Date, the
COMPANY shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under
40
applicable collective bargaining agreements. Promptly following delivery of such
notice, the COMPANY shall provide HOLDING with a copy of such required notice,
as sent.
7.6 Agreements. On or prior to the Pre-Closing Date, the STOCKHOLDERS and
the COMPANY shall terminate (i) any stockholders' agreements, voting agreements,
voting trusts, options, warrants and employment agreements between the COMPANY
and any employee (other than the new employment agreements contemplated by
Section 9.12) and (ii) any existing agreement between the COMPANY and any
STOCKHOLDER (other than the agreements set forth in Schedule 9.7), in each case
on or prior to the Closing Date. A list of such termination agreements is set
forth on Schedule 7.6. The COMPANY shall provide a copy of each such termination
agreement to HOLDING on or prior to the Pre-Closing Date.
7.7 Notification of Certain Matters. The STOCKHOLDERS and the COMPANY
shall give prompt notice to HOLDING of (i) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect at or prior to the
Pre-Closing and (ii) any material failure of any STOCKHOLDER or the COMPANY to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such person hereunder. HOLDING and NEWCO shall give prompt
notice to the COMPANY of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of HOLDING or NEWCO contained herein to be untrue or
inaccurate in any material respect at or prior to the Pre-Closing and (ii) any
material failure of HOLDING or NEWCO to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 7.7 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, which modification may only be made pursuant to Section 7.8, (ii) modify
the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.8 Amendment of Schedules. (a) Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing
Date to supplement or amend promptly the Schedules hereto with respect to any
matter hereafter arising or discovered which, if existing or known at the date
of this Agreement, would have been required to be set forth or described in the
Schedules, provided however, that supplements and amendments to Schedules 5.10,
5.11, 5.14 and 5.15 shall only have to be delivered at the Pre-Closing Date,
unless such Schedule is to be amended to reflect an event occurring other than
in the ordinary course of business consistent with past practice.
(b) Prior to the anticipated effectiveness of the Registration Statement,
and notwithstanding the foregoing clause (a), the provisions of this clause (b)
shall apply: no amendment or supplement to a Schedule prepared by the COMPANY or
the STOCKHOLDERS
41
that constitutes or reflects an event or occurrence that would have a Material
Adverse Effect may be made unless HOLDING and a majority of the Founding
Companies other than the COMPANY consent to such amendment or supplement; and no
amendment or supplement to a Schedule prepared by HOLDING or NEWCO that
constitutes or reflects an event or occurrence that would have a Material
Adverse Effect may be made unless a majority of the Founding Companies consent
to such amendment or supplement. In the event that one of the Other Founding
Companies seeks to amend or supplement a Schedule pursuant to Section 7.8 of one
of the Other Agreements, and such amendment or supplement constitutes or
reflects an event or occurrence that would have a Material Adverse Effect on
such Other Founding Company or upon HOLDING, then HOLDING shall give the COMPANY
notice promptly after it has knowledge thereof, which notice shall give in
reasonable detail the facts and circumstances underlying such amendment or
supplement. If HOLDING and a majority of the Founding Companies consent to such
amendment or supplement, then such amendment or supplement shall become
effective whether or not the COMPANY has given its consent; provided, that if
such amendment or supplement constitutes or reflects an event or occurrence that
would have a Material Adverse Effect on the Other Founding Company that is
proposing such amendment or supplement or on HOLDING and the COMPANY does not
consent (or is not deemed to have consented) to such amendment or supplement,
then the COMPANY shall have the right to terminate this Agreement by notice to
HOLDING given prior to the earlier of the Effective Time of the Merger and the
fifth day following the date on which HOLDING gives notice to the COMPANY
seeking its consent to such amendment or supplement. Consent shall have been
deemed given for all purposes of this Agreement by HOLDING or any Founding
Company if no response is received from HOLDING or any such Founding Company
within 24 hours following receipt of notice of such amendment or supplement (or
sooner if required by the exigencies of the circumstances under which such
consent is requested). In the event that the COMPANY seeks to amend or
supplement a Schedule pursuant to this Section 7.8 and HOLDING and a majority of
the Other Founding Companies do not consent (or are not deemed to have
consented) to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. In the
event that HOLDING or NEWCO seeks to amend or supplement a Schedule pursuant to
this Section 7.8 and a majority of the Founding Companies do not consent (or are
not deemed to have consented) to such amendment or supplement, this Agreement
shall be deemed terminated by mutual consent as set forth in Section 12.1(i)
hereof.
(c) For all purposes of this Agreement, including without limitation for
purposes of determining whether the conditions set forth in Sections 8.1 and 9.1
have been fulfilled, the Schedules hereto shall be deemed to be the Schedules as
amended or supplemented pursuant to this Section 7.8. No party to this Agreement
shall be liable to any other party if this Agreement shall be terminated
pursuant to the provisions of this Section 7.8, except that, notwithstanding
anything to the contrary contained in this Agreement, if the COMPANY or the
STOCKHOLDERS on the one hand, or HOLDING or NEWCO on the other hand, amends or
supplements a Schedule which results in a termination of this Agreement and such
amendment or supplement arises out of or reflects facts or circumstances which
such party knew about at the time of execution of this Agreement or if such
amendment or supplement otherwise is proposed
42
in bad faith, such party shall pay or reimburse HOLDING and NEWCO or the COMPANY
and the STOCKHOLDERS, as the case may be, for all of the legal, accounting and
other out of pocket costs reasonably incurred in connection with this Agreement
and the IPO as it relates to HOLDING, NEWCO, the COMPANY and the STOCKHOLDERS.
7.9 Cooperation in Preparation of Registration Statement. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to HOLDING and the
Underwriters all of the information concerning the COMPANY and the STOCKHOLDERS
requested by HOLDING or the Underwriters for inclusion in, and will cooperate
with HOLDING and the Underwriters in the preparation of, the Registration
Statement and the prospectus included therein (including audited and unaudited
financial statements, prepared in accordance with generally accepted accounting
principles, in form suitable for inclusion in the Registration Statement). The
COMPANY and the STOCKHOLDERS agree promptly to advise HOLDING if at any time
during the period in which a prospectus relating to the offering is required to
be delivered under the Securities Act, any information contained in the
prospectus concerning the COMPANY or the STOCKHOLDERS contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
to provide the information needed to correct such inaccuracy. Insofar as the
information relates solely to the COMPANY or the STOCKHOLDERS, the COMPANY
represents and warrants as to such information with respect to itself, and each
STOCKHOLDER represents and warrants, as to such information with respect to the
COMPANY and himself or herself, that the Registration Statement at its effective
date, at the date of the Final Prospectus (as defined in the Underwriting
Agreement), the Preliminary Prospectus (as defined in the Underwriting
Agreement), and each amendment to the Registration Statement, and at each
closing date with respect to the IPO under the Underwriting Agreement (including
with respect to any over-allotment option) will not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
7.10 Final Financial Statements. The COMPANY shall provide prior to the
Closing Date, and HOLDING shall have had sufficient time prior thereto to
review, the unaudited consolidated balance sheets of the COMPANY as of the end
of each fiscal quarter following the Balance Sheet Date that ends at least 45
days prior to the Closing Date (or if sooner, that ends on the 135th day
following the end of the prior fiscal quarter for which financial statements
were provided to HOLDING pursuant to Section 5.9 or this Section 7.10), and the
unaudited consolidated statements of income, cash flows and retained earnings of
the COMPANY for all fiscal quarters ended after the Balance Sheet Date,
disclosing no material adverse change in the financial condition of the COMPANY
or the results of its operations from the financial statements as of the Balance
Sheet Date. Upon delivery of such financial statements, each STOCKHOLDER (except
for those STOCKHOLDERS listed on Schedule 5(A)) shall be deemed to represent and
warrant, jointly and severally to HOLDING and NEWCO that (a) such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
(except as noted therein)
43
and (b) except as noted in such financial statements, all of such financial
statements present fairly in all material respects the financial position of the
COMPANY as of the dates indicated thereon and the results of operations and cash
flows of the COMPANY for the periods indicated thereon.
7.11 Further Assurances. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 Authorized Capital. HOLDING shall maintain its authorized capital
stock as set forth in the Registration Statement filed with the SEC except for
such changes in authorized capital stock as are made to respond to comments made
by the SEC or requirements of any exchange or automated trading system for which
application is made to register the HOLDING Stock.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE STOCKHOLDERS AND THE COMPANY
The obligations of the STOCKHOLDERS and the COMPANY with respect to
actions to be taken on the Pre-Closing Date and, to the extent specified in this
Section 8, on the Closing Date, are subject to the satisfaction or waiver on or
prior to the Pre-Closing Date and/or the Closing Date, as the case may be, of
all of the conditions set forth in this Section 8. As of the Pre-Closing Date
and/or the Closing Date, as the case may be, all conditions not satisfied shall
be deemed to have been waived by the COMPANY and the STOCKHOLDERS unless such
parties have objected by notifying HOLDING in writing of such objection on or
before the closing on the Pre-Closing Date or consummation of the transactions
on the Closing Date, respectively; provided, that any waiver of compliance with
a particular representation or warranty contained in this Agreement shall
operate as a waiver of compliance with such representation and warranty for all
purposes of this Agreement except with respect to the fraud or intentional
misconduct of the party making such representation and warranty.
8.1 Representations and Warranties. All representations and warranties of
HOLDING and NEWCO contained in Section 6 and Section 17 shall be true and
correct in all material respects on the date hereof and on and as of each of the
Pre-Closing Date and the Closing Date as though such representations and
warranties had been made on and as of each of the Pre-Closing Date and the
Closing Date; and certificates to the foregoing effect dated each of the
Pre-Closing Date and the Closing Date, as the case may be, and signed by the
President or any Vice President of HOLDING shall have been delivered to the
STOCKHOLDERS.
8.2 Performance of Obligations. All of the terms, covenants and conditions
of this Agreement to be complied with and performed by HOLDING and NEWCO on or
before each of the Pre-Closing Date and the Closing Date shall have been duly
complied with and performed in all material respects on or before each of the
Pre-Closing Date and the Closing Date, as the case
44
may be; and certificates to the foregoing effect dated each of the Pre-Closing
Date and the Closing Date and signed by the President or any Vice President of
HOLDING shall have been delivered to the STOCKHOLDERS.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it impracticable to proceed with the
transactions hereunder.
8.4 Opinions of Counsel. The COMPANY shall have received opinions from
counsel for HOLDING, dated the Pre-Closing Date, in the forms annexed hereto as
Annex VI and as Annex VIII.
8.5 Registration Statement. The Registration Statement shall have been
declared effective by the SEC and no stop order suspending the effectiveness of
the Registration Statement shall be in effect and no proceeding therefor shall
have been instituted or shall be pending or contemplated under the 1933 Act and
the Underwriters shall have agreed to acquire on a firm commitment basis,
subject to the conditions set forth in the Underwriting Agreement, on terms such
that the aggregate value of the cash and the number of shares of HOLDING Stock
to be received by the STOCKHOLDERS is not less than the Minimum Value set forth
on Annex III.
8.6 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made, and no
action or proceeding shall have been instituted or threatened to restrain or
prohibit HOLDING's acquisition of the COMPANY Stock.
8.7 Good Standing Certificates. HOLDING and NEWCO each shall have
delivered to the COMPANY a certificate, dated as of a date no earlier than five
days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of
State and in each state in which HOLDING or NEWCO is authorized to do business,
showing that each of HOLDING and NEWCO is in good standing and authorized to do
business and that all state franchise and/or income tax returns and taxes for
HOLDING and NEWCO, respectively, for all periods prior to the Pre-Closing have
been filed and paid.
8.8 No Material Adverse Change. As of the Pre-Closing Date and as of the
Closing Date, no event or circumstance shall have occurred with respect to
HOLDING, NEWCO or any of the Other Founding Companies which would constitute a
Material Adverse Effect on HOLDING, NEWCO and the Founding Companies taken as a
whole.
8.9 Closing of IPO. The closing of the sale of the HOLDING Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Closing Date
hereunder.
45
8.10 Secretary's Certificate. The COMPANY shall have received a
certificate or certificates, dated the Pre-Closing Date and the Closing Date and
signed by the secretary of HOLDING and of NEWCO, certifying the truth and
correctness of attached copies of HOLDING's and NEWCO's respective Certificates
of Incorporation (including amendments thereto), By-Laws (including amendments
thereto), and resolutions of the boards of directors and, if required, the
stockholders of HOLDING and NEWCO approving HOLDING's and NEWCO's entering into
this Agreement and the consummation of the transactions contemplated hereby.
8.11 Employment Agreements. Each of the persons listed on Schedule 9.12
shall have been afforded the opportunity to enter into an employment agreement
mutually acceptable to such person and HOLDING. Each such employment agreement
will be substantially identical in all material respects to the employment
agreements entered into pursuant to Section 8.11 of the Other Agreements (the
"Other Employment Agreements"). Each of the persons listed on Schedule 9.12 will
have the opportunity to review each such Other Employment Agreement.
8.12 Director Indemnification. HOLDING shall have obtained directors and
officers liability insurance from a reputable insurance company in type and
amount approved by at least five of the Founding Companies.
8.13 Chief Executive Officer. Xxxxxx X. Xxxxxxx or another individual
approved by at least five of the Founding Companies shall have been appointed as
Chief Executive Officer of HOLDING.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF HOLDING AND NEWCO
The obligations of HOLDING and NEWCO with respect to actions to be taken
on the Pre-Closing Date and, to the extent specified in this Section 9, on the
Closing Date, are subject to the satisfaction or waiver on or prior to the
Pre-Closing Date and/or the Closing Date, as the case may be, of all of the
conditions set forth in this Section 9. As of the Pre-Closing Date and/or the
Closing Date, as the case may be, all conditions not satisfied shall be deemed
to have been waived by HOLDING and NEWCO unless such parties have objected by
notifying the COMPANY and the STOCKHOLDERS in writing of such objection on or
before the closing on the Pre-Closing Date or consummation of the transactions
on the Closing Date, respectively; provided, that any waiver of compliance with
a particular representation or warranty contained in this Agreement shall
operate as a waiver of compliance with such representation and warranty for all
purposes of this Agreement except with respect to the fraud or intentional
misconduct of the party making such representation and warranty.
9.1 Representations and Warranties. All the representations and warranties
of the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true
and correct in
46
all material respects on the date hereof and on and as of each of the
Pre-Closing Date and the Closing Date with the same effect as though such
representations and warranties had been made on and as of each of the
Pre-Closing Date and the Closing Date; and the STOCKHOLDERS shall have delivered
to HOLDING certificates dated each of the Pre-Closing Date and the Closing Date,
as the case may be, and signed by them to such effect.
9.2 Performance of Obligations. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by the STOCKHOLDERS and the
COMPANY on or before each of the Pre-Closing Date and the Closing Date shall
have been duly performed or complied with in all material respects on or before
each of the Pre-Closing Date and the Closing Date, as the case may be; and the
STOCKHOLDERS shall have delivered to HOLDING certificates dated the Pre-Closing
Date and the Closing Date, respectively, and signed by them to such effect.
9.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of HOLDING as a result of which the
management of HOLDING deems it impracticable to proceed with the transactions
hereunder.
9.4 Secretary's Certificate. HOLDING shall have received a certificate or
certificates, dated each of the Pre-Closing Date and the Closing Date and signed
by the secretary of the COMPANY, certifying the truth and correctness of
attached copies of the COMPANY's Certificate or Articles of Incorporation
(including amendments thereto), By-Laws (including amendments thereto), and
resolutions of the board of directors and the STOCKHOLDERS approving the
COMPANY's entering into this Agreement and the consummation of the transactions
contemplated hereby.
9.5 No Material Adverse Change. As of the Pre-Closing Date and as of the
Closing Date, no event or circumstance shall have occurred with respect to the
COMPANY which would constitute a Material Adverse Effect, and the COMPANY shall
not have suffered any material loss or damages to any of its properties or
assets, whether or not covered by insurance, which change, loss or damage
materially affects or impairs the ability of the COMPANY to conduct its
business.
9.6 STOCKHOLDERS' Release. The STOCKHOLDERS and the individuals listed on
Schedule 9.6 shall have delivered to HOLDING an instrument dated the Pre-Closing
Date releasing the COMPANY, to the maximum extent permitted by law, from any and
all (i) claims of the STOCKHOLDERS against the COMPANY and (ii) obligations of
the COMPANY to the STOCKHOLDERS, except for (x) items specifically identified on
Schedules 5.10, 5.15 and 9.6 as being claims of or obligations to the
STOCKHOLDERS and (y) continuing obligations to the STOCKHOLDERS relating to
their employment by the COMPANY.
47
9.7 Termination of Related Party Agreements. Except as set forth on
Schedule 9.7, or as contemplated by Section 9.12, all existing agreements
between the COMPANY and the STOCKHOLDERS or any Affiliate of any STOCKHOLDER
shall have been canceled effective prior to or as of the Closing Date.
9.8 Opinion of Counsel. HOLDING shall have received one or more opinions
of counsel to the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date and
including a statement to the effect that it may be relied upon as of the Closing
Date (or in the absence of such a statement, a separate opinion of such counsel
dated the Closing Date), substantially in the form annexed hereto as Annex VII,
and covering matters customary under the circumstances or covering such
additional matters as the Underwriters may reasonably request, and the
Underwriters shall have received a copy of the same opinion addressed to them.
9.9 Consents and Approvals. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.23 shall have been
obtained.
9.10 Good Standing Certificates. The COMPANY shall have delivered to
HOLDING a certificate, dated as of a date no earlier than five days prior to the
Pre-Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's state of incorporation and, unless waived by HOLDING, in each state in
which the COMPANY is authorized to do business, showing the COMPANY is in good
standing and authorized to do business and if applicable, that all state
franchise and/or income tax returns and taxes for the COMPANY for all periods
prior to the Pre-Closing have been filed and paid.
9.11 Registration Statement. The Registration Statement shall have been
declared effective by the SEC and no stop order suspending the effectiveness of
the Registration Statement shall be in effect and no proceeding therefor shall
have been instituted or shall be pending or contemplated under the 1933 Act and
the Underwriters shall have agreed to acquire on a firm commitment basis,
subject to the conditions set forth in the Underwriting Agreement, on terms such
that the aggregate value of the cash and the number of shares of HOLDING Stock
to be received by the STOCKHOLDERS is not less than the Minimum Value set forth
on Annex III.
9.12 Employment Agreements. Each of the persons listed on Schedule 9.12
shall have entered into an employment agreement mutually acceptable to such
person and HOLDING.
9.13 Closing of IPO. The closing of the sale of the HOLDING Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Closing Date
hereunder.
48
9.14 FIRPTA Certificate. Each STOCKHOLDER shall have delivered to HOLDING
a certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
10. COVENANTS OF HOLDING AND THE STOCKHOLDERS AFTER CLOSING
10.1 Release From Guarantees; Repayment of Certain Obligations. HOLDING
shall use its best efforts to have the STOCKHOLDERS released from the guarantees
listed on Schedule 10.1 of the indebtedness that they personally guaranteed and
from the pledges of the assets listed on Schedule 10.1 that they pledged to
secure such indebtedness for the benefit of the COMPANY, with all such
guarantees on indebtedness being assumed by HOLDING. In the event that HOLDING
cannot obtain such releases from the lenders of any such guaranteed indebtedness
on or prior to the 90th day subsequent to the Closing Date, HOLDING shall pay
off or otherwise refinance or retire such indebtedness and, if HOLDING cannot
obtain such releases on or prior to the Closing Date, then HOLDING agrees to
indemnify the STOCKHOLDERS against any and all claims made against them by the
beneficiaries of such guarantees which arise as a result of HOLDING's failure to
cause such guarantees to be released on or prior to the Closing.
10.2 Preparation and Filing of Tax Returns.
(a) The COMPANY shall, if possible, file or cause to be filed all separate
Returns of any Acquired Party for all taxable periods that end on or before the
Closing Date. Each STOCKHOLDER shall pay or cause to be paid all Tax liabilities
(in excess of all amounts already paid with respect thereto or properly accrued
or reserved with respect thereto on the COMPANY Financial Statements) shown by
such Returns to be due.
(b) HOLDING shall file or cause to be filed all separate Returns of, or
that include, any Acquired Party for all taxable periods ending after the
Closing Date.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Return, amended
Return or claim for refund, determining a liability for Taxes or a right to
refund of Taxes or in conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of all
relevant portions of relevant Returns, together with relevant accompanying
schedules and relevant work papers, relevant documents relating to rulings or
other determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which such party may possess. Each party
shall make its employees reasonably available on a mutually convenient basis at
its cost to provide explanation of any documents or information so provided.
Subject to the preceding sentence, each party required to file Returns pursuant
to this Agreement shall bear all costs of filing such Returns.
49
10.3 Directors and Officers. The persons named in the Registration
Statement shall be appointed as directors and elected as officers of HOLDING, as
and to the extent set forth in the Registration Statement, promptly following
the Closing Date.
10.4 Preservation of Employee Benefit Plans. Following the Closing Date,
HOLDING shall not require that the COMPANY terminate any health insurance, life
insurance or 401(k) plan in effect at the COMPANY until such time as HOLDING is
able to replace such plan with a plan that is applicable to HOLDING and all of
its then existing subsidiaries. HOLDING shall have no obligation to provide
replacement plans that have the same terms and provisions as the existing plans,
provided, that any new health insurance plan shall provide for coverage for
preexisting conditions. Notwithstanding the foregoing, on or following the
Closing Date, HOLDING may require that the COMPANY freeze or terminate any
defined benefit pension plans in effect at the COMPANY at any time, subject to
applicable laws, and HOLDING shall have no obligation to provide replacement
defined benefit pension plans.
10.5 Director Indemnification. HOLDING agrees to indemnify each
STOCKHOLDER (or for any STOCKHOLDER that is a trust, its trustees or
beneficiaries, as applicable), if any, who will become a director of HOLDING on
the Closing Date, as set forth in the Registration Statement, from all
liabilities he or she may incur as a director of HOLDING, except for all
liabilities arising from (i) any breach of such person's duty of loyalty to
HOLDING or its stockholders or subsidiaries, (ii) any acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) any violations of Section 174 of the Delaware GCL or (iv) any
transactions from which the director derived an improper personal benefit.
10.6 HOLDING Options. HOLDING agrees that at the Closing, it shall reserve
and set aside options to purchase shares of HOLDING Stock to be allocated to the
officers and employees of the COMPANY and the Other Founding Companies
representing, in the aggregate, 6% of the HOLDING Stock outstanding as of the
close of the IPO. Half of such options shall be allocated equally among the
COMPANY and the Other Founding Companies, and the other half of such options
shall be allocated among the COMPANY and the other Founding Companies based on
their relative valuations determined by reference to the aggregate consideration
to be paid to their respective stockholders pursuant to this Agreement and the
Other Agreements. Following consummation of the IPO, the COMPANY's Board of
Directors will be entitled to determine the recipients of such option grants
subject to the terms of HOLDING's stock option plan and applicable law.
11. INDEMNIFICATION
The STOCKHOLDERS, HOLDING and NEWCO each make the following covenants that
are applicable to them, respectively:
11.1 General Indemnification by the STOCKHOLDERS. The STOCKHOLDERS
covenant and agree that they, jointly and severally (except for those
STOCKHOLDERS listed on Schedule 5(A), whose indemnity obligations shall be on a
several and not joint basis), will indemnify, defend, protect and hold harmless
HOLDING, NEWCO, the COMPANY and the Surviving Corporation at all times, from and
after the date of this Agreement until the Expiration Date, from and against all
claims, damages, actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses) incurred by HOLDING, NEWCO, the COMPANY or the
Surviving Corporation as a result of or arising from (i) subject to the survival
periods set forth in Section 5, any breach of the representations and warranties
of the STOCKHOLDERS or the COMPANY set forth herein or on the schedules or
certificates delivered in connection herewith as of the date made and as of the
date any such representations and warranties are re-confirmed,
50
(ii) any breach on the part of the STOCKHOLDERS or the COMPANY of any agreement
under this Agreement, (iii) any liability under the 1933 Act, the 1934 Act or
other Federal or state law or regulation, at common law or otherwise, either (1)
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact relating to the COMPANY or the STOCKHOLDERS, and provided in
writing to HOLDING or its counsel by the COMPANY or the STOCKHOLDERS for
inclusion in the Registration Statement or any prospectus forming a part
thereof, or any amendment thereof or supplement thereto, or (2) arising out of
or based upon any omission or alleged omission to state therein a material fact
relating to the COMPANY or the STOCKHOLDERS required to be stated therein or
necessary to make the statements therein not misleading and not provided to
HOLDING or its counsel by the COMPANY or its STOCKHOLDERS for inclusion in the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, (iv) the matters described on Schedule
11.1(iv), (v) any Tax relating to a period ending on or before the Closing Date
(or any portion of a period ending after the Closing Date that relates to the
portion of such period ending on the Closing Date, using the closing of the
books method) that has not been paid on or before the Closing Date, or (vi) any
Tax imposed upon or relating to any third party for a pre-Closing Date period,
including, in each case, any such Tax for which an Acquired Party may be liable
under Section 1.1502-6 of the Treasury Regulations (or any similar provisions of
state, local of foreign law), as a transferee or successor, by contract or
otherwise, provided, however, (A) that in the case of any indemnity arising
pursuant to clause (iii), such indemnity shall not inure to the benefit of
HOLDING, NEWCO, the COMPANY or the Surviving Corporation to the extent that such
untrue statement (or alleged untrue statement) was made in, or omission (or
alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDERS
provided, in writing, corrected information to HOLDING's counsel and to HOLDING
for inclusion in the final prospectus, and such information was not so included
or properly delivered, and (B) that each STOCKHOLDER shall be liable for
indemnification obligations pursuant to this Section 11.1 that are attributable
to a breach of any representation, warranty or agreement made in Sections 5.31
through 5.35 by that STOCKHOLDER and not for breach of the representations,
warranties or agreements made in Sections 5.31 through 5.35 by any other
STOCKHOLDER.
11.2 Indemnification by HOLDING. HOLDING covenants and agrees that it will
indemnify, defend, protect and hold harmless the COMPANY and the STOCKHOLDERS at
all times from and after the date of this Agreement until the Expiration Date,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by the COMPANY or the STOCKHOLDERS as a result of or arising from (i)
any breach by HOLDING or NEWCO of its representations and warranties set forth
herein or on the schedules or certificates delivered in connection herewith as
of the date made and as of the date any such representations and warranties are
re-confirmed, (ii) any breach on the part of HOLDING or NEWCO of any agreement
under this Agreement, (iii) any liability which the STOCKHOLDERS may incur due
to HOLDING's or NEWCO's failure to be responsible for the liabilities and
obligations of the COMPANY as provided in Section 1 hereof (except to the extent
that HOLDING or NEWCO has claims against the STOCKHOLDERS by
51
reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act
or other Federal or state law or regulation, at common law or otherwise, either
(1) arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating to HOLDING or NEWCO included in any
preliminary prospectus, the Registration Statement or any prospectus forming a
part thereof, or any amendment thereof or supplement thereto, or (2) arising out
of or based upon any omission or alleged omission to state therein a material
fact relating to HOLDING or NEWCO required to be stated therein or necessary to
make the statements therein not misleading or (v) the matters described on
Schedule 11.2(v).
11.3 Third Person Claims. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has knowledge of any claim by a
person or entity not a party to this Agreement ("Third Person"), or the
commencement of any action or proceeding by a Third Person, the Indemnified
Party shall, as a condition precedent to a claim with respect thereto being made
against any party obligated to provide indemnification pursuant to Section 11.1
or 11.2 hereof (hereinafter the "Indemnifying Party"), give the Indemnifying
Party written notice of such claim or the commencement of such action or
proceeding. Such notice shall state the nature and the basis of such claim and a
reasonable estimate of the amount thereof. The Indemnifying Party shall have the
right to defend and settle, at its own expense and by its own counsel, any such
matter so long as the Indemnifying Party pursues the same in good faith and
diligently, provided that the Indemnifying Party shall not settle any action or
proceeding without the written consent of the Indemnified Party unless the
Indemnified Party is fully released and exonerated from all matters related to
the claim. If the Indemnifying Party undertakes to defend or settle, it shall
promptly notify the Indemnified Party of its intention to do so, and the
Indemnified Party shall cooperate with the Indemnifying Party and its counsel in
the defense thereof and in any settlement thereof. Such cooperation shall
include, but shall not be limited to, furnishing the Indemnifying Party with any
books, records or information reasonably requested by the Indemnifying Party
that are in the Indemnified Party's possession or control. All Indemnified
Parties shall endeavor to use the same counsel, which shall be the counsel
selected by Indemnifying Party, provided that if counsel to the Indemnifying
Party shall have a conflict of interest in the opinion of such counsel that
prevents counsel for the Indemnifying Party from representing the Indemnified
Party, the Indemnified Party shall have the right to participate in such matter
through counsel of its own choosing and the Indemnifying Party will reimburse
the Indemnified Party for the reasonable expenses of its counsel and experts.
After the Indemnifying Party has notified the Indemnified Party of its intention
to undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses or out-of-pocket expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except (i) as set forth in the preceding sentence
and (ii) to the extent such participation is requested by the Indemnifying
Party, in which event the Indemnified Party shall be reimbursed by the
Indemnifying Party for reasonable additional legal expenses and out-of-pocket
expenses. If the Indemnifying Party desires to accept a final and complete
settlement of any such Third Person claim, which settlement provides solely for
the payment of monetary damages and effects a full release of the Indemnified
Party from all matters
52
related to the claim, and the Indemnified Party refuses to consent to such
settlement, then the Indemnifying Party's liability under this Section with
respect to such Third Person claim shall be limited to the amount so offered in
settlement to said Third Person, and the Indemnifying Party, upon payment of
such settlement amount to such Third Person, shall be deemed released from any
and all obligation or liability with respect thereto and the Indemnified Party
shall reimburse the Indemnifying Party for any additional costs of defense that
the Indemnifying Party subsequently incurs with respect to such claims and all
additional costs of settlement or judgment. If the Indemnifying Party does not
undertake to defend such matter to which the Indemnified Party is entitled to
indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense through counsel of its choice, at
the cost and expense of the Indemnifying Party, and the Indemnified Party may
settle such matter, and the Indemnifying Party shall reimburse the Indemnified
Party for the amount paid in such settlement and any other liabilities or
expenses incurred by the Indemnified Party in connection therewith, provided,
however, that under no circumstances shall the Indemnified Party settle any
Third Person claim without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed. All settlements hereunder
shall effect a complete release of the Indemnified Party, unless the Indemnified
Party otherwise agrees in writing. The parties hereto will make appropriate
adjustments for any tax benefits or detriments and any insurance proceeds in
determining the amount of any indemnification obligation under this Section.
11.4 Exclusive Remedy. The indemnification provided for in this Section 11
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party, provided that nothing herein shall be
construed to limit the right of a party, in a proper case, to seek injunctive
relief for a breach of this Agreement.
11.5 Limitations on Indemnification. Notwithstanding the foregoing,
HOLDING, NEWCO, the Surviving Corporation and the other persons or entities
indemnified pursuant to Section 11.1 or 11.2 shall not assert any claim for
indemnification hereunder against the STOCKHOLDERS unless, and solely to the
extent that, the aggregate of all claims which such persons and entities may
have against such STOCKHOLDERS shall exceed, in the aggregate for all such
claims, 2.0% of the sum of (i) the cash paid to STOCKHOLDERS plus (ii) the value
(determined in accordance with the last paragraph of Section 11.5) of the
HOLDING Stock delivered to STOCKHOLDERS (the "Indemnification Threshold"),
provided, however, that except with respect to the matters specified on Schedule
11.5, HOLDING, NEWCO, the Surviving Corporation and the other persons or
entities indemnified pursuant to Section 11.1 may assert and shall be
indemnified for any claim under Section 11.1(iv) or 11.1(v) at any time,
regardless of whether the aggregate of all claims which such persons and
entities may have against any STOCKHOLDER or all STOCKHOLDERS exceeds the
Indemnification Threshold, it being understood that the amount of any such claim
under Section 11.1(iv) or 11.1(v) shall not be counted towards the
Indemnification Threshold, other than with respect to the matters specified in
Schedule 11.5 which shall count toward the Indemnification Threshold. The
53
STOCKHOLDERS shall not assert any claim for indemnification hereunder against
HOLDING or NEWCO until such time as, and solely to the extent that, the
aggregate of all claims which the STOCKHOLDERS may have against HOLDING or NEWCO
shall exceed, in the aggregate for all such claims, $100,000, provided, however,
that the STOCKHOLDERS and the other persons or entities indemnified pursuant to
Section 11.2 may assert and shall be indemnified for any claim under Section
11.2(v) at any time, regardless of whether the aggregate of all claims which
such persons and entities may have against any of HOLDING or NEWCO exceeds
$100,000, it being understood that the amount of any such claim under Section
11.2(v) shall not be counted towards such $100,000 amount. No person shall be
entitled to indemnification under this Section 11 if and to the extent that such
person's claim for indemnification is directly or indirectly related to a breach
by such person of any representation, warranty, covenant or other agreement set
forth in this Agreement.
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the Merger, provided that a STOCKHOLDER's indemnification
obligations pursuant to Section 11.1(iv) or 11.1(v) shall not be limited.
Indemnity obligations hereunder may be satisfied through the payment of cash or
the delivery of HOLDING Stock, or a combination thereof as determined by the
Indemnifying Party in its sole discretion. For purposes of calculating the value
of the HOLDING Stock received or delivered by a STOCKHOLDER (for purposes of
determining the Indemnification Threshold, limitation on indemnity set forth in
the second preceding sentence and the amount of any indemnity paid), the HOLDING
Stock shall be valued at its initial public offering price as set forth in the
Registration Statement.
12. TERMINATION OF AGREEMENT
12.1 Termination.This Agreement may be terminated at any time prior to the
Pre-Closing Date solely:
(i) by mutual consent of the boards of directors of HOLDING and the
COMPANY;
(ii) by the STOCKHOLDERS or the COMPANY (acting through its board of
directors), on the one hand, or by HOLDING (acting through its board of
directors), on the other hand, if the transactions contemplated by this
Agreement to take place at the Pre-Closing shall not have been consummated by
September 30, 1998, unless the failure of such transactions to be consummated is
due to the willful failure of the party seeking to terminate this Agreement to
perform any of its obligations under this Agreement to the extent required to be
performed by it prior to or on the Closing Date;
(iii) by the STOCKHOLDERS or the COMPANY, on the one hand, or by HOLDING,
on the other hand, if a material breach or default shall be made by the other
party in the
54
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein, and the curing of such default shall
not have been made on or before the Pre-Closing Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 Liabilities in Event of Termination. Except as provided in Section
7.8 hereof, the termination of this Agreement will in no way limit any
obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement including, but not limited
to, legal and audit costs and out of pocket expenses.
13. NONCOMPETITION
13.1 Prohibited Activities. The STOCKHOLDERS and the individuals listed on
Schedule 13.1(a) (who shall be deemed to be STOCKHOLDERS for all purposes of
this Section 13) will not, for a period commencing on the Closing Date and
ending on the date that is four (4) years following the Closing Date, for any
reason whatsoever, directly or indirectly, for themselves or on behalf of or in
conjunction with any other person, company, partnership, corporation or business
of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any heating,
ventilation, air conditioning, energy or environmental services business in
direct competition with HOLDING or any of the subsidiaries thereof, within the
United States of America or within 100 miles of where the COMPANY or any of its
subsidiaries or any of the Other Founding Companies conducted business prior to
the effectiveness of the Merger (the "Territory") ;
(ii) call upon any person who is, at that time, within the Territory, an
employee of HOLDING (including the subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of HOLDING (including the
subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to call
upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is, at that time, or which has
been, within one (1) year prior to the Closing Date, a customer of HOLDING
(including the subsidiaries thereof), of the COMPANY or of any of the Other
Founding Companies within the Territory for the purpose of soliciting or selling
products or services in direct competition with HOLDING (or any of the
subsidiaries thereof) within the Territory;
55
(iv) call upon any prospective acquisition candidate, on any STOCKHOLDER's
own behalf or on behalf of any competitor in the heating, ventilation, air
conditioning, energy or environmental services business, which candidate, to the
actual knowledge of such STOCKHOLDER after due inquiry, was called upon by
HOLDING (including the subsidiaries thereof) or for which, to the actual
knowledge of such STOCKHOLDER after due inquiry, HOLDING (or any subsidiary
thereof) made an acquisition analysis, for the purpose of acquiring such entity;
or
(v) disclose customers, whether in existence or proposed, of the COMPANY
to any person, firm, partnership, corporation or business for any reason or
purpose whatsoever except to the extent that the COMPANY has in the past
disclosed such information to the public for valid business reasons.
Notwithstanding the above, (A) the foregoing covenants shall not be deemed
to prohibit any STOCKHOLDER from acquiring as an investment not more than one
percent (1%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter and (B) the foregoing
covenants shall not be deemed to apply to any STOCKHOLDER listed on Schedule
13.1(b), each of whom either (i) beneficially owns less than 3% of the COMPANY's
outstanding common stock or (ii) only holds shares of the Company's outstanding
preferred stock.
13.2 Damages. Because of the difficulty of measuring economic losses to
HOLDING as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to HOLDING for which it
would have no other adequate remedy, each STOCKHOLDER agrees that, in the event
of any breach or threatened breach by such STOCKHOLDER, the foregoing covenant
may be enforced by HOLDING by injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of HOLDING (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of HOLDING.
13.4 Severability; Reformation. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and this Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Section 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any STOCKHOLDER
against HOLDING (including
56
the subsidiaries thereof), whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by HOLDING of such covenants.
It is specifically agreed that the period of four (4) years stated at the
beginning of this Section 13, during which the agreements and covenants of each
STOCKHOLDER made in this Section 13 shall be effective, shall be computed by
excluding from such computation any time during which such STOCKHOLDER is in
violation of any provision of this Section 13. The covenants contained in
Section 13 shall not be affected by any breach of any other provision hereof by
any party hereto and shall have no effect if the transactions contemplated by
this Agreement are not consummated.
13.6 Materiality. The COMPANY and the STOCKHOLDERS hereby agree that this
covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they
had in the past, currently have, and in the future may have, access to certain
confidential information of the COMPANY, the Other Founding Companies, and/or
HOLDING, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's, the Other Founding
Companies' and/or HOLDING's respective businesses. The STOCKHOLDERS agree that
they will not disclose any such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of HOLDING, (b) following the
Pre-Closing, such information may be disclosed by the STOCKHOLDERS as is
required in the course of performing their duties for HOLDING or the Surviving
Corporation and (c) to counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
14.1, unless (i) such information becomes known to the public generally through
no fault of any of the STOCKHOLDERS, (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), the STOCKHOLDERS shall
give prior written notice thereof to HOLDING and provide HOLDING with the
opportunity to contest such disclosure, or (iii) the disclosing party reasonably
believes that such disclosure is required in connection with the defense of a
lawsuit against the disclosing party. In the event of a breach or threatened
breach by any of the STOCKHOLDERS of the provisions of this Section 14, HOLDING
shall be entitled to an injunction restraining such STOCKHOLDERS from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting HOLDING from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by this Agreement are not
consummated, the STOCKHOLDERS shall have none of the above-mentioned
restrictions on their ability to disseminate confidential information with
respect to the COMPANY.
14.2 HOLDING and NEWCO. HOLDING and NEWCO recognize and acknowledge that
they had in the past and currently have access to certain confidential
57
information of the COMPANY, such as operational policies, and pricing and cost
policies that are valuable, special and unique assets of the COMPANY's business.
HOLDING and NEWCO agree that, prior to the Pre-Closing, or if the Transactions
contemplated by this Agreement are not consummated, they will not use or
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except (a) to
authorized representatives of the COMPANY, (b) to counsel and other advisers,
provided that such advisors (other than counsel) agree to the confidentiality
provisions of this Section 14.2, (c) to underwriters and their counsel in
connection with the registration statement and (d) to the Other Founding
Companies and their representatives who have agreed to maintain confidentiality
pursuant to Section 7.1(a), unless (i) such information becomes known to the
public generally through no fault of HOLDING or NEWCO, (ii) disclosure is
required by law or the order of any governmental authority under color of law,
provided, that prior to disclosing any information pursuant to this clause (ii),
HOLDING and NEWCO shall, if possible, give prior written notice thereof to the
COMPANY and the STOCKHOLDERS and provide the COMPANY and the STOCKHOLDERS with
the opportunity to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by HOLDING or NEWCO of the provisions of this Section, the
COMPANY and the STOCKHOLDERS shall be entitled to an injunction restraining
HOLDING and NEWCO from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting the COMPANY and
the STOCKHOLDERS from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages. Upon any termination of
this Agreement, HOLDING and NEWCO shall return all confidential information of
the Company then in their possession.
14.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Sections 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 Survival. The obligations of the parties under this Article 14 shall
survive for a period of two (2) years from the Closing Date, or in the event
this Agreement in terminated, for a period of two (2) years from the date of
termination.
15. TRANSFER RESTRICTIONS
15.1 Transfer Restrictions. For a period of three years from the Closing
Date, except pursuant to Section 16 hereof or for purposes of satisfying
indemnification obligations hereunder, the STOCKHOLDER shall not (i) sell,
assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise
dispose (a "Transfer") of (a) any shares of HOLDING Stock
58
received by the STOCKHOLDER pursuant to the terms hereof or (b) any interest
(including, without limitation, an option to buy or sell) in any such shares of
HOLDING Stock, in whole or in part, and no such attempted Transfer shall be
treated as effective for any purpose; or (ii) engage in any transaction, whether
or not with respect to any shares of HOLDING Stock or any interest therein, the
intent or effect of which is to reduce the risk of owning the shares of HOLDING
Stock acquired pursuant hereto (including, by way of example and not limitation,
engaging in put, call, short-sale, straddle or similar market transactions);
provided, that from and after the 24th month following the Closing Date, the
STOCKHOLDER shall be entitled to make such a Transfer of up to 50% of the number
shares of HOLDING Stock received by the STOCKHOLDER pursuant to the terms
hereof; and, provided, further, that from and after the 30th month following the
Closing Date, the STOCKHOLDER shall be entitled to make such a Transfer of up to
75% of the number shares of HOLDING Stock received by the STOCKHOLDER pursuant
to the terms hereof. Notwithstanding the foregoing, (x) the STOCKHOLDER may
Transfer shares of HOLDING Stock to immediate family members (or trusts for the
benefit of the STOCKHOLDER or family members, the trustees of which so agree)
(such family members and trusts are referred to herein as "Permitted
Transferees"); provided, that the family member, trust, trustee, pledgee or
other beneficiary of such Transfer, encumbrance or pledge, as the case my be,
agrees in writing prior to such transaction to be bound by (1) the provisions of
this Section as if a STOCKHOLDER and party hereto and (2) the indemnification
provisions set forth in this Agreement as if a STOCKHOLDER and party hereto; and
(y) the STOCKHOLDER may encumber or pledge any of such shares of HOLDING Stock.
The certificates evidencing the HOLDING Stock delivered to the STOCKHOLDER
pursuant to Section 3 of this Agreement will bear a legend substantially in the
form set forth below and containing such other information as HOLDING may deem
necessary or appropriate:
EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED BY THAT CERTAIN AGREEMENT AND
PLAN OF ORGANIZATION, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE COMPANY FOR PUBLIC INSPECTION, THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE
DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY
ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO THE THIRD
ANNIVERSARY OF THE CLOSING DATE. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND
ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED
ABOVE.
59
16. REGISTRATION RIGHTS
16.1 Piggyback Registration Rights. At any time following the Closing
Date, whenever HOLDING proposes to register any HOLDING Stock for its own or
others' account under the 1933 Act for a public offering, other than (i) any
shelf registration of shares to be used as consideration for acquisitions of
additional businesses by HOLDING, (ii) registrations relating to employee
benefit plans and (iii) registrations constituting secondary offerings of shares
issued in connection with any acquisitions of businesses or assets, HOLDING
shall give each of the STOCKHOLDERS written notice of its intent to do so at
least 15 days prior to the date of filing of a registration statement with the
Securities and Exchange Commission with respect to such registration. Upon the
written request of any of the STOCKHOLDERS or its Permitted Transferees given
within 15 days after receipt of such notice, HOLDING shall cause to be included
in such registration all of the HOLDING Stock issued to the STOCKHOLDERS
pursuant to this Agreement or transferred to such Permitted Transferees which
any such STOCKHOLDER or Permitted Transferee requests be included in such
registration, provided that HOLDING shall have the right to reduce the number of
shares to be included by the STOCKHOLDER in such registration to the extent that
inclusion of such shares could, in the written opinion of tax counsel to HOLDING
or its independent auditors, jeopardize the status of the transactions
contemplated hereby and by the Registration Statement as a tax-free
organization. In addition, if the proposed offering is a firm commitment
underwritten offering and HOLDING is advised in writing in good faith by any
managing underwriter of the securities being offered that the number of shares
to be included in such registration is greater than the number of such shares
which can be offered without adversely affecting the offering, HOLDING may
reduce pro rata the number of shares offered for the accounts of such persons
(based upon the number of shares held by each such person) to a number deemed
satisfactory by such managing underwriter, provided, that, for each such
offering made by HOLDING after the IPO, such reduction shall be made first by
reducing the number of shares to be sold by persons other than HOLDING, the
STOCKHOLDERS and the stockholders of the Other Founding Companies (collectively,
the STOCKHOLDERS and the stockholders of the other Founding Companies being
referred to herein as the "Founding Stockholders"), and thereafter, if a further
reduction is required, by reducing on a pro rata basis the number of shares to
be sold by the Founding Stockholders.
16.2 Demand Registration Rights. (a) At any time after the date that is
three years after the Closing Date, the holders of 30% of the shares of HOLDING
Stock issued to the Founding Stockholders pursuant to this Agreement and the
Other Agreements that have not been previously registered or sold and that are
not then entitled to be sold under Rule 144(k) (or any successor provision)
promulgated under the 1933 Act may request in writing that HOLDING file a
registration statement under the 1933 Act covering the registration of shares of
HOLDING Stock issued to such Founding Stockholders pursuant to this Agreement
and the Other Agreements (including any stock issued as a dividend or other
distribution with respect to, or in exchange for, or in replacement of such
HOLDING Stock) then held by such Founding Stockholders (a "Demand
Registration"). Within ten (10) days of the receipt of such request,
60
HOLDING shall give written notice of such request to all other of such Founding
Stockholders and shall, as soon as reasonably practicable but in no event later
than 45 days after the date on which HOLDING gave such notice to such Founding
Stockholders, file and thereafter use its best efforts to cause to become
effective a registration statement covering all shares that such Founding
Stockholders have requested to be included in such registration, which requests
must be delivered to HOLDING no later than 30 days following HOLDING's delivery
of such notice to such Founding Stockholders. HOLDING shall be obligated to
effect only one Demand Registration for all Founding Stockholders and will keep
such Demand Registration current and effective for 120 days (or such shorter
period as is required to sell all of the shares registered thereon).
(b) Notwithstanding the foregoing paragraph, following such a demand, a
majority of HOLDING's disinterested directors (i.e., directors who have not
demanded or elected to sell shares in any such public offering) may defer the
filing of the registration statement for one 30-day period.
(c) If at the time of any request by the Founding Stockholders for a
Demand Registration, HOLDING has plans to file, within 60 days after such
request, a registration statement covering the sale of any of its securities in
a public offering under the 1933 Act, then no registration of the HOLDING Stock
held by the Founding Stockholders shall be initiated under this Section 16.2
until 90 days after the effective date of such registration unless HOLDING is no
longer proceeding diligently to effect such registration; provided that if such
registration is for HOLDING Stock, then HOLDING shall provide the Founding
Stockholders the right to participate in such public offering pursuant to, and
subject to, Section 16.1 hereof.
(d) In addition, if the Founding Stockholders offering shares are advised
in writing in good faith by any managing underwriter of an underwritten offering
of the securities being offered pursuant to any registration statement under
this Section 16.2 that the number of shares to be sold by such Founding
Stockholders is greater than the number of such shares which can be offered
without adversely affecting the offering, then the shares to be registered for
each of the Founding Stockholders offering shares shall be reduced pro rata
(based upon the number of shares proposed to be sold by each such Founding
Stockholder) to a number deemed satisfactory by such managing underwriter.
16.3 Registration Procedures. All expenses incurred in connection with the
registrations under this Article 16 (including all registration, filing,
qualification, blue sky, legal, printer and accounting fees, but excluding
underwriting commissions and discounts), shall be borne by HOLDING. In
connection with registrations under Section 16.1 and 16.2, HOLDING shall (i) use
its best efforts to prepare and file with the SEC as soon as reasonably
practicable, a registration statement and all necessary amendments thereto with
respect to the HOLDING Stock and use its best efforts to cause such registration
to promptly become and remain effective until the earlier of (a) such time as
all of the shares covered by the registration statement have been disposed of
and (b) 120 days after the effective date of the registration statement;
provided, that
61
if HOLDING or the managing underwriter for such offering requires that a
STOCKHOLDER refrain from selling shares at any time during the offering, then
such 120-day period shall be extended for the period of time equal to the period
for which the STOCKHOLDER was required to refrain from selling shares; (ii) use
its best efforts to register and qualify the HOLDING Stock covered by such
registration statement under applicable state securities laws as the holders
shall reasonably request for the distribution of the HOLDING Stock; and (iii)
take such other actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder.
16.4 Underwriting Agreement. In connection with each registration pursuant
to Section 16.1 or 16.2 covering an underwritten registered public offering,
HOLDING and each participating holder agree to enter into a written agreement
with the managing underwriters in such form and containing such provisions as
are customary in the securities business for such an arrangement between such
managing underwriters and companies of HOLDING's size and investment stature,
including reasonable and customary indemnification provisions.
16.5 Availability of Rule 144. Notwithstanding any other provision of this
Section 16, HOLDING shall not be obligated to register shares of HOLDING Stock
held by any STOCKHOLDER at any time when the resale provisions of Rule 144(k)
(or any successor provision) promulgated under the 1933 Act are available to
such STOCKHOLDER for such shares.
16.6 Market Standoff. In consideration of the granting to the STOCKHOLDER
of the registration rights under this Section 16 and if requested by the
managing underwriter, each STOCKHOLDER agrees that, until the third anniversary
of the Closing, it will not sell, transfer or otherwise dispose of, including
without limitation through put or short sale arrangements, shares of HOLDING
Stock during the period from the effective date of the registration statement
through the 90th day following the effective date of such registration,
provided, that: (i) all directors, executive officers and holders of more than
five percent of the outstanding HOLDING Stock agree to the same restrictions;
and (ii) with respect to the first public offering of shares of HOLDING Stock
within three years following the IPO, the STOCKHOLDER shall have been afforded a
meaningful opportunity to include shares in such registration after giving
effect to any reduction by reason of underwriters' advice, unless sales by such
STOCKHOLDER otherwise are restricted by Section 15.
17. REPRESENTATIONS AND COVENANTS RELATING TO TAX-FREE ORGANIZATION
The COMPANY, the STOCKHOLDERS, the Other Founding Companies and the
stockholders of the Other Founding Companies have requested that Xxxxxx, Xxxxx &
Xxxxxxx LLP provide an opinion as to the qualification under section 351 of the
Code of the Merger, the mergers involving the Other Founding Companies and the
IPO (collectively referred to herein as
62
the "Proposed Transaction"). The parties to this Agreement hereby make the
following representations and warranties and acknowledge that such
representations and warranties are for the benefit of and will be relied upon by
Xxxxxx, Xxxxx & Bockius LLP for purposes of such opinion.
17.1 Representations and Warranties of the COMPANY and the STOCKHOLDERS.
Each of the COMPANY and each of the STOCKHOLDERS jointly and severally
represents and warrants to HOLDING and NEWCO that all of the following
representations and warranties in this Section are true at the date of this
Agreement and shall be true at the time of the Pre-Closing and the Closing Date
and that such representations and warranties shall survive the Closing Date
until such time as all statute of limitations periods have run for all tax
periods ended on or prior to or which include the Closing Date, which shall be
deemed to be the Expiration Date for purposes of this Section 17.1.
(a) No stock or securities of HOLDING will be issued to any STOCKHOLDER
for services rendered to or for the benefit of HOLDING in connection with the
Proposed Transaction.
(b) No stock or securities of HOLDING will be issued for any indebtedness
of HOLDING owed to any STOCKHOLDER in connection with the Proposed Transaction.
(c) Each STOCKHOLDER will receive HOLDING Stock or other property
approximately equal to the fair market value of the shares of the COMPANY Stock
such STOCKHOLDER surrenders pursuant to this Agreement.
(d) Except as otherwise provided in Section 18.6, each of the parties to
the Proposed Transaction will pay its or his/her own expenses, if any, incurred
in connection with the Proposed Transaction.
(e) The COMPANY and each STOCKHOLDER shall comply with the tax reporting
requirements of section 1.351-3 of the Treasury regulations promulgated under
the Code, and shall treat the transaction as a transfer of property under
section 351(a) of the Code.
(f) Except as otherwise specifically contemplated by this Agreement or the
Registration Statement, after the Closing Date, no STOCKHOLDER shall take any
action that would jeopardize the qualification as a transaction under Section
351 of the Code of the Proposed Transaction.
(g) The fair market value of the assets of the COMPANY exceeds the sum of
the liabilities of the Company, plus the amount of liabilities, if any, to which
such assets are subject.
(h) The COMPANY is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of section 351(e)(2) of the Code.
63
(i) None of the COMPANY Stock is subject to any liabilities.
(j) None of the COMPANY Stock is section 306 stock within the meaning of
section 306(c) of the Code.
17.2 Representations and Warranties of the STOCKHOLDERS. Each STOCKHOLDER
severally represents and warrants to HOLDING and NEWCO that the representations
and warranties set forth below are true as of the date of this Agreement and
shall be true at the time of the Pre-Closing and the Closing Date, and that such
representations and warranties shall survive the Closing Date until such time as
all statute of limitations periods have run for all tax periods ended on or
prior to or which include the Closing Date, which shall be deemed to be the
Expiration Date for purposes of this Section 17.2.
(a) There is no indebtedness between such STOCKHOLDER and HOLDING, and
there will be no indebtedness created in favor of such STOCKHOLDER as a result
of the Proposed Transaction.
(b) Such STOCKHOLDER does not have any current plan or intention that may
be regarded as a part of the entire preconceived plan that includes the Merger,
or is under any prearranged binding commitment or contract, to sell, exchange,
distribute or otherwise dispose of, to pledge or otherwise encumber, or to enter
into a short sale, equity swap, option or other risk-reducing transaction with
respect to, shares of HOLDING Stock to be issued to such STOCKHOLDER pursuant to
this Agreement.
17.3 Representations and Warranties of HOLDING and NEWCO. HOLDING and
NEWCO jointly and severally represent and warrant to the COMPANY and the
STOCKHOLDERS that all of the following representations and warranties in this
Section are true at the date of this Agreement and shall be true at the time of
the Pre-Closing and the Closing Date and that such representations and
warranties shall survive the Closing Date until such time as all statute of
limitations periods have run for all tax periods ended on or prior to or which
include the Closing Date, which shall be deemed to be the Expiration Date for
purposes of this Section 17.3.
(a) No stock or securities will be issued to the STOCKHOLDERS, the
stockholders of the Other Founding Companies (who, together with the
STOCKHOLDERS, are hereinafter referred to as "HOLDERS") and the purchasers of
the HOLDING Stock in the IPO for services rendered to or for the benefit of
HOLDING in connection with the Proposed Transaction.
(b) No stock or securities will be issued for any indebtedness owed to any
HOLDER in connection with the Proposed Transaction.
(c) Each HOLDER will receive HOLDING Stock or other property approximately
equal to the fair market value of the shares of the stock in its respective
Founding Company that
64
such HOLDER surrenders pursuant to this Agreement or the Other Agreements as the
case may be.
(d) There is no indebtedness between the HOLDERS and HOLDING, and there
will be no indebtedness created in favor of any HOLDER as a result of the
Proposed Transaction.
(e) Except as otherwise provided in Section 18.6, each of the parties to
the Proposed Transaction will pay its or his/her own expenses, if any, incurred
in connection with the Proposed Transaction.
(f) Each of NEWCO and HOLDING shall comply with the tax reporting
requirements of section 1.351-3 of the Treasury regulations promulgated under
the Code, and shall treat the transaction as a transfer of property under
section 351(a) of the Code.
(g) Except as otherwise specifically contemplated by this Agreement or the
Registration Statement, after the Closing Date, HOLDING shall not and shall not
permit any of its subsidiaries to take any action that would jeopardize the
qualification as a transaction under Section 351 of the Code of the Proposed
Transaction.
(h) There is no plan or intention on the part of HOLDING to redeem or
otherwise reacquire any HOLDING Stock to be issued in the Proposed Transaction.
(i) Taking into account any issuance of additional shares of HOLDING Stock
and any issuance of HOLDING Stock for services in connection with the Proposed
Transaction, the STOCKHOLDERS, together with the stockholders of the Other
Founding Companies and the purchasers of the HOLDING Stock in the IPO, will be
in "control" of HOLDING within the meaning of section 368(c) of the Code.
(j) HOLDING will not be an investment company within the meaning of
section 351(e)(1) of the Code and section 1.351-1(c)(1)(ii) of the Treasury
regulations.
(k) After the Closing Date, HOLDING will remain in existence and will not
be merged or liquidated into another company for at least two years.
(l) There is no plan or intention by HOLDING to liquidate, merge or
otherwise dispose of the COMPANY or to dispose of any material part of the
assets of the COMPANY within the two years following the Closing Date except in
the ordinary course of business or to eliminate duplicate services or excess
capacity.
(m) NEWCO is a Delaware corporation formed solely for the purpose of
completing the transactions set forth herein, has no operations or assets and is
wholly owned by HOLDING.
65
18. GENERAL
18.1 Cooperation. The COMPANY, the STOCKHOLDERS, HOLDING and NEWCO shall
each deliver or cause to be delivered to the other on the Closing Date, and at
such other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The COMPANY will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the COMPANY cooperate with
HOLDING on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any Tax Return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
18.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
HOLDING, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 Entire Agreement. This Agreement (including the Schedules, exhibits
and annexes attached hereto), that certain Cost Sharing Agreement among HOLDING,
the COMPANY and each of the Other Founding Companies, and the documents
delivered pursuant hereto and thereto constitute the entire agreement and
understanding among the STOCKHOLDERS, the COMPANY, NEWCO and HOLDING and
supersede any prior agreement and understanding relating to the subject matter
of this Agreement. This Agreement, upon execution, constitutes a valid and
binding agreement of the parties hereto enforceable in accordance with its terms
and may be modified or amended as provided in Section 18.14 only by a written
instrument executed by the STOCKHOLDERS, the COMPANY, NEWCO and HOLDING, acting
through their respective officers or trustees, duly authorized by their
respective boards of directors. Any disclosure made on any Schedule delivered
pursuant hereto shall be deemed to have been disclosed for purposes of any other
Schedule required hereby, provided that the COMPANY shall make a good faith
effort to cross reference disclosure, as necessary or advisable, between related
Schedules.
18.4 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
18.5 Brokers and Agents. Except as disclosed on Schedule 18.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commissions of
brokers employed or alleged to have been employed by such indemnifying party.
66
18.6 Expenses. Whether or not the transactions herein contemplated shall
be consummated but subject in all respects to that certain Cost Sharing
Agreement among HOLDING, the COMPANY and each of the Other Founding Companies,
HOLDING will pay the fees, expenses and disbursements of HOLDING and its agents,
representatives, accountants and counsel incurred in connection with the subject
matter of this Agreement and any amendments thereto, including all costs and
expenses incurred in the performance and compliance with all conditions to be
performed by HOLDING under this Agreement (including the reasonable fees and
expenses of Xxxxxx, Xxxxx & Xxxxxxx LLP, and any other person or entity retained
by HOLDING) and except as otherwise provided below, the costs of preparing the
Registration Statement. Whether or not the transactions herein contemplated
shall be consummated, the COMPANY shall pay the reasonable fees, expenses and
disbursements of the COMPANY's accountants in preparing the financial statements
for inclusion in the Registration Statement, the fees, expenses and costs
specified in that certain Cost Sharing Agreement among HOLDING, the COMPANY and
each of the Other Founding Companies and up to $50,000 of the reasonable fees,
expenses and disbursements of counsel to the COMPANY incurred in connection with
this Agreement and the transactions contemplated hereby. Whether or not the
transactions herein contemplated shall be consummated, the STOCKHOLDERS shall
pay all other fees, expenses and disbursements of the STOCKHOLDERS, the COMPANY
and their respective agents, representatives, accountants and counsel incurred
in connection with the subject matter of this Agreement and any amendments
thereto, including all costs and expenses incurred in the performance and
compliance with all conditions to be performed by the COMPANY and the
STOCKHOLDERS under this Agreement, including the fees and expenses of
accountants and legal counsel to the COMPANY and the STOCKHOLDERS. In addition,
each STOCKHOLDER shall pay all sales, use, transfer, real property transfer,
recording, gains, stock transfer and other similar taxes and fees ("Transfer
Taxes") imposed in connection with the Merger, other than stock Transfer Taxes,
if any, imposed by the State of Delaware. Each STOCKHOLDER shall file all
necessary documentation and Returns with respect to such Transfer Taxes. In
addition, each STOCKHOLDER acknowledges that he, and not the COMPANY or HOLDING,
will pay all Taxes due upon receipt of the consideration payable pursuant
hereto, and will assume all Tax risks and liabilities of such STOCKHOLDER in
connection with the transactions contemplated hereby.
18.7 Notices. All notices of communication required or permitted hereunder
shall be in writing and may be given (1) by facsimile and by depositing a copy
thereof in United States mail, addressed to the party to be notified, postage
prepaid and registered or certified with return receipt requested, or (2) by
delivering the same in person to an officer or agent of such party.
(a) If to HOLDING, or NEWCO, addressed to them at:
Enfinity Corporation
0000 Xxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
67
Attn: Xxxxxx X. Xxxxxxx
with copies to:
Xxxxxx, Xxxxx & Bockius LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxxxxxx X. Xxxxxx, Esq.
(b) If to the STOCKHOLDERS, addressed to them at their addresses set
forth on Annex IV, with copies to such counsel as is set forth with respect to
each STOCKHOLDER on such Annex IV;
(c) If to the COMPANY, addressed to it at:
Xxxxxx Mechanical Services, Inc.
00000 Xxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx Xxxxxxxxxx
and marked "Personal and Confidential"
with copies to:
Xxxxxx & Xxxx LLP
0000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxx Xxxxxxxx, Esq.
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
18.8 Governing Law. This Agreement shall be construed in accordance with
the laws of the State of New York, except that matters herein strictly within
the purview of the matters covered by the General Corporation Law of the State
of Delaware shall be governed by such General Corporation Law and matters herein
strictly within the purview of the matters covered by the corporate law of the
State of Texas shall be governed thereby, in each case without reference to its
conflicts of law provisions.
68
18.9 Exercise of Rights and Remedies. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.10 Time. Time is of the essence with respect to this Agreement.
18.11 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.12 Remedies Cumulative. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
18.13 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
18.14 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of HOLDING, NEWCO, the COMPANY and STOCKHOLDERS who will hold or
who hold at least 50% of the HOLDING Stock issued or to be issued upon
consummation of the Merger. Any amendment or waiver effected in accordance with
this Section 18.14 shall be binding upon each of the parties hereto, any other
person receiving HOLDING Stock in connection with the Merger and each future
holder of such HOLDING Stock.
18.15 Survival of Representations and Warranties. Unless otherwise
provided herein, the representations, warranties, covenants and agreements of
the parties made herein and at the time of the Pre-Closing and the Closing or in
writing delivered pursuant to the provisions of this Agreement shall survive the
consummation of the transactions contemplated hereby and any examination on
behalf of the parties until the Expiration Date.
18.16 STOCKHOLDER Representative
(a) As of the date hereof and at all times subsequent to the Closing, the
STOCKHOLDERS shall be deemed to have appointed Xxxx Xxxxxxxxxx (hereinafter
referred to
69
as the "STOCKHOLDER Representative") as their representative for purposes of all
amendments, consents and waivers under this Agreement and for purposes of taking
actions on behalf of the STOCKHOLDERS pursuant to Section 11 and as
attorney-in-fact and agent for and on behalf of the STOCKHOLDERS with authority
to take any and all actions and make any and all decisions required or permitted
to be taken or made by them with respect to such amendments, consents, waivers
and actions under Section 11 (including, without limitation, the settling of
claims pursuant to Section 11). The STOCKHOLDER Representative shall have and is
hereby granted by the STOCKHOLDERS full power and authority as agent of
STOCKHOLDERS to represent such STOCKHOLDERS, and their respective successors,
heirs, representatives, and assigns with respect to all matters arising under
this Agreement and any other matters concerning the transactions contemplated by
this Agreement, both before and after the Closing, and all action taken by the
STOCKHOLDER Representative hereunder shall be binding upon all of the
STOCKHOLDERS, and their respective successors, heirs, representatives and
assigns as if expressly confirmed and ratified in writing by each of them.
(b) The STOCKHOLDER Representative, in his capacity as such, shall not
incur any liability to any other STOCKHOLDER with respect to any action or
inaction taken by him except those involving his own willful misconduct or gross
negligence. The STOCKHOLDER Representative may, in all questions arising under
this Agreement, rely on the advice of counsel and for anything done, omitted or
suffered in good faith by the STOCKHOLDER Representative based on such advice,
the STOCKHOLDER Representative, in his capacity as such, shall not be liable to
any other STOCKHOLDER. Nothing set forth in this Section 18.16(b) shall in any
way relieve the STOCKHOLDERS, in their capacities as STOCKHOLDERS, of their
obligations under this Agreement.
(c) In the event of the death or permanent disability of the STOCKHOLDER
Representative, or his resignation as STOCKHOLDER Representative, a successor
STOCKHOLDER Representative shall be appointed by the STOCKHOLDERS. Prompt notice
of such appointment shall be delivered in writing by the STOCKHOLDERS to
HOLDING.
[signature page to follow]
70
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ENFINITY CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
XXXXXX ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
XXXXXX MECHANICAL SERVICES, INC.
By: /s/ Xxxx Xxxxxxxxxx
--------------------------------------
Name: Xxxx Xxxxxxxxxx
Title: President
STOCKHOLDERS:
/s/ Xxxxxxx Xxxxx
------------------------------------
Xxxxxxx Xxxxx
/s/ Xxxxxxx XxXxxxxx
------------------------------------
Xxxxxxx XxXxxxxx
/s/ Xxxxxx Xxxxxxxx
------------------------------------
Xxxxxx Xxxxxxxx
/s/ Xxxxxx Xxxxx
------------------------------------
Xxxxxx Xxxxx
/s/ Xxxxxx Xxxxxxxxx
------------------------------------
Xxxxxx Xxxxxxxxx
/s/ Xxxx Xxxxxxxxxx
------------------------------------
Xxxx Xxxxxxxxxx
/s/ Xxxxx Xxxxx
------------------------------------
Xxxxx Xxxxx
/s/ Xxxxx Xxxxxxxx
------------------------------------
Xxxxx Xxxxxxxx
/s/ Xxxxx Xxxxxxxx
------------------------------------
Xxxxx Xxxxxxxx
/s/ Xxxx Xxxxxxxx
------------------------------------
Xxxx Xxxxxxxx
71
STOCKHOLDERS (cont'd)
/s/ Xxxxx Xxxxxxxx
------------------------------------
Xxxxx Xxxxxxxx
/s/ Xxxxx Xxxxxxxxx
------------------------------------
Xxxxx Xxxxxxxxx
/s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxxx Xxxxxxxxx
------------------------------------
Xxxxx Xxxxxxxxx
XXXXXX X. XXXXX TRUST
By: /s/ Xxxxxx Job
---------------------------------
Name: Xxxxxx Job
Title: Trustee
XXXXXXX XXXXXXXXXX 1997 TRUST
By: /s/ Xxx Xxxxxxxxxx
---------------------------------
Name: Xxx Xxxxxxxxxx
Title: Trustee
XXXXX XXXXXXXXXX 1997 TRUST
By: /s/ Xxx Xxxxxxxxxx
---------------------------------
Name: Xxx Xxxxxxxxxx
Title: Trustee
SYDNEY X. XXXXX TRUST
By: /s/ Xxxxxx Job
---------------------------------
Name: Xxxxxx Job
Title: Trustee
72
ANNEX III
CONSIDERATION TO BE PAID TO THE STOCKHOLDERS
Aggregate consideration to be paid to the STOCKHOLDERS:
Minimum cash*/** of $12,393,179 and 1,523,171 shares of Common
Stock of HOLDING, to be distributed as follows:
Consideration to be paid to each STOCKHOLDER:
Shares of Common Stock
Stockholder of HOLDING Minimum Cash*/**
----------- ---------- ----------------
Xxxx Xxxxxxxxxx 556,503 $4,637,522
X. Xxxxxxxxxx 1997 Trust 8,997 -
X. Xxxxxxxxxx 1997 Trust 8,997 -
Xxxxx Xxxxx 556,503 4,637,522
Xxxxxx X. Xxxxx Trust 8,997 -
Sydney X. Xxxxx Trust 8,997 -
Xxxxx Xxxxxxxx 241,404 2,011,700
Xxxxx Xxxxxxxx 9,053 75,439
Xxxx Xxxxxxxx 9,053 75,439
Xxxxx Xxxxxxxx 9,053 75,439
Xxxxx Xxxxxxxxx 9,053 75,439
Xxxxxx Xxxxxxx 6,035 50,293
X. Xxxxxxxxx 15,088 125,731
X. Xxxxx 15,088 125,731
X. XxXxxxxx 15,088 125,731
X. Xxxxxxxx 15,088 125,731
X. Xxxxx 15,088 125,731
X. Xxxxxxxxx 15,088 125,731
------ -------
TOTALS: 1,523,171 $12,393,179
MINIMUM VALUE: $29,148,060 (determined by adding (a) the product found by
multiplying (i) the aggregate number of shares of HOLDING Stock to be paid to
the STOCKHOLDERS by (ii) $11.00 per share) plus (b) the aggregate amount of
minimum cash to be paid to the STOCKHOLDERS as specified in the table above.
* / Each STOCKHOLDER shall have the right to receive in cash his or her pro rata
portion of the amount found by multiplying (a) 991,454 [the number of shares
sold on behalf of the STOCKHOLDERS to provide the expected cash portion of the
Purchase Price] by (b) the positive difference, if any, found by subtracting (i)
$12.50 from (ii) the public offering price of the shares of HOLDING Stock in the
IPO. For purposes of this
footnote, each STOCKHOLDERS pro rata portion shall based on the minimum cash
payable to such STOCKHOLDER relative to the minimum cash payable to all
STOCKHOLDERS as specified in the table above.
**/ In addition, the STOCKHOLDERS shall be entitled to receive from the COMPANY,
as a post-closing adjustment to the aggregate Purchase Price, an amount equal to
the "excess working capital" of the COMPANY, determined as of the Closing Date.
STOCKHOLDERS who believe they may be entitled to such an adjustment shall cause
the COMPANY to prepare a Closing Date Balance Sheet of the COMPANY in accordance
with GAAP, except that, for purposes of the ratios described below, xxxxxxxx in
excess of costs shall be reclassified from current liabilities and deducted from
accounts receivable. The "excess working capital" shall equal the amount
determined from the Closing Date Balance Sheet, which, after giving effect to
the payment to the STOCKHOLDERS of such amount, (1) does not cause the COMPANY
to have a current ratio of less than 1.33 (the current ratio being defined as
the ratio of current assets after withdrawal of all cash included in such
payment to current liabilities), (2) does not cause the COMPANY to have a debt
to equity ratio of greater than 2.25 and (3) does not have debt in excess of the
average total debt outstanding of the COMPANY during the two-year period
preceding the Balance Sheet Date. The payment of such amount to the STOCKHOLDERS
shall be made to the STOCKHOLDERS, pro rata, in accordance with their respective
percentage ownership interests in the COMPANY immediately prior to the Merger.
Prior to making any such payment to the STOCKHOLDERS, the COMPANY shall have the
amount of such payment approved by HOLDING and, to the extent payment of such
amount exceeds available cash as of the Closing Date (a "Shortfall"), HOLDING
shall cause the COMPANY to make such payment to the STOCKHOLDERS in accordance
with HOLDING'S instructions (which may require that the COMPANY draw on its line
of credit to the extent of the Shortfall or receive funds from HOLDING to the
extent of the Shortfall).
