EXHIBIT 2.11
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF REORGANIZATION
By and Among
Consolidation Capital Corporation,
RECI Acquisition Corp.,
Regency Electric Company, Inc.
and
The Stockholder[s] Named Herein
made effective as of June 1, 1998.
================================================================================
Table of Contents
Page
1. THE MERGER..................................................................1
1.1 The Merger.......................................................1
1.2 Effects of the Merger............................................1
1.3 Certificate of Incorporation; Bylaws, Directors and Officers.....2
2. CONVERSION AND EXCHANGE OF STOCK............................................2
2.1 Manner of Conversion.............................................2
2.2 Merger Consideration.............................................3
2.3 Contingent Merger Consideration..................................4
2.4 Exchange of Certificates and Payment of Cash.....................6
3. POST CLOSING ADJUSTMENT; PLEDGED ASSETS.....................................8
3.1 Post-Closing Adjustment..........................................8
3.2 Pledged Assets...................................................9
4. CLOSING.....................................................................10
4.1 Location and Date................................................10
4.2 Effect...........................................................10
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDERS................................................................10
5.1 Due Organization.................................................11
5.2 Authorization; Validity..........................................11
5.3 No Conflicts.....................................................11
5.4 Capital Stock of the Company.....................................12
5.5 Transactions in Capital Stock....................................13
5.6 Subsidiaries, Stock, and Notes...................................13
5.7 Predecessor Status...............................................13
5.8 Absence of Claims Against the Company............................13
5.9 Financial Statements.............................................13
5.10 Liabilities and Obligations......................................14
5.11 Accounts and Notes Receivable....................................14
5.12 Books and Records................................................15
5.13 Permits..........................................................15
5.14 Real Property....................................................15
5.15 Personal Property................................................16
5.16 Intellectual Property............................................17
5.17 Material Contracts and Commitments...............................17
5.18 Government Contracts.............................................18
5.19 Insurance........................................................19
5.20 Labor and Employment Matters.....................................19
5.21 Employee Benefit Plans...........................................20
5.22 Conformity with Law; Litigation..................................22
i
5.23 Taxes.........................................................22
5.24 Absence of Changes............................................24
5.25 Deposit Accounts; Powers of Attorney..........................26
5.26 Environmental Matters.........................................26
5.27 Relations with Governments....................................28
5.28 Disclosure....................................................28
5.29 CCC Prospectus; Securities Representations....................28
5.30 Affiliates....................................................28
5.31 Location of Chief Executive Offices...........................29
5.32 Location of Equipment and Inventory...........................29
5.33 FIRPTA........................................................29
5.34 Cross-Incorporation...........................................29
6. REPRESENTATIONS OF CCC AND NEWCO.........................................29
6.1 Due Organization..............................................29
6.2 CCC Common Stock..............................................30
6.3 Authorization; Validity of Obligations........................30
6.4 No Conflicts..................................................30
6.5 Capitalization of CCC and Ownership of CCC Stock..............31
6.6 Conformity with Law; Litigation...............................31
6.7 Disclosure....................................................31
6.8 CCC Prospectus................................................32
6.9 Registration Statement........................................32
6.10 Investment Intent.............................................32
7. COVENANTS................................................................32
7.1 Tax Matters...................................................32
7.2 Long Term Incentive Plan......................................34
7.3 Accounts Receivable...........................................34
7.4 401(k) Plan...................................................34
7.5 Related Party Agreements......................................34
7.6 Cooperation...................................................35
7.7 Conduct of Business Pending Closing...........................35
7.8 Access to Information.........................................36
7.9 Prohibited Activities.........................................36
7.9A Permitted Distributions, Etc..................................38
7.10 Notice to Bargaining Agents...................................39
7.11 Sales of CCC Common Stock.....................................39
7.12 CCC Stock Options.............................................40
7.13 Tax Covenant..................................................41
7.14 Tax Free Reorganization Protection............................41
7.15 Executive Employment Agreements...............................41
7.16 Director and Officer Indemnification..........................41
7.17 Indemnification of License Holders............................41
ii
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CCC
AND NEWCO....................................................................42
8.1 Representations and Warranties; Performance of Obligations........42
8.2 No Litigation.....................................................42
8.3 No Material Adverse Change........................................42
8.4 Consents and Approvals............................................42
8.5 Opinion of Counsel................................................42
8.6 Charter Documents.................................................43
8.7 Quarterly Financial Statements....................................43
8.8 Affiliate Agreements..............................................43
8.9 Stockholders' Release.............................................43
8.10 Board Approval....................................................43
8.11 Green Employment Agreement........................................43
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY
AND THE STOCKHOLDERS.........................................................43
9.1 Representations and Warranties; Performance of Obligations........43
9.2 No Litigation.....................................................43
9.3 Consents and Approvals............................................44
9.4 No Material Adverse Change........................................44
9.5 Officers and Directors of Surviving Corporation...................44
9.6 Employment Agreements.............................................44
9.7 Registration Statement............................................44
10. INDEMNIFICATION..............................................................44
10.1 General Indemnification by the Stockholders.......................44
10.2 General Indemnification by CCC and Newco..........................45
10.3 Limitation and Expiration.........................................45
10.4 Indemnification Procedures........................................47
10.5 Survival of Representations Warranties and Covenants..............49
10.6 Exclusive Remedies................................................49
10.7 Right to Set Off..................................................49
11. NONCOMPETITION...............................................................49
11.1 Prohibited Activities.............................................49
11.2 Damages...........................................................50
11.3 Reasonable Restraint..............................................50
11.4 Severability; Reformation.........................................50
11.5 Independent Covenant..............................................50
11.6 Materiality.......................................................50
iii
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................51
12.1 Stockholders..................................................51
12.2 CCC...........................................................51
12.3 Damages.......................................................51
13. GENERAL..................................................................51
13.1 Termination...................................................51
13.2 Effect of Termination.........................................52
13.3 Successors and Assigns........................................52
13.4 Entire Agreement; Amendment; Waiver...........................52
13.5 Counterparts..................................................53
13.6 Brokers and Agents............................................53
13.7 Expenses......................................................53
13.8 Specific Performance; Remedies................................53
13.9 Notices.......................................................53
13.10 Governing Law.................................................54
13.11 Severability..................................................55
13.12 Absence of Third Party Beneficiary Rights.....................55
13.13 Further Representations.......................................55
13.14 Accounting Terms..............................................55
13.15 Representative................................................55
13.16 Unanimous Written Consent of Stockholders.....................56
iv
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
---------
entered into as of the 1st day of June, 1998, by and among Consolidation Capital
Corporation, a Delaware corporation ("CCC"), RECI Acquisition Corp., a Florida
---
corporation and a newly-formed, wholly-owned subsidiary of CCC ("Newco"),
-----
Regency Electric Company, Inc., a Florida corporation (the "Company"), and the
-------
stockholders identified on the signature page hereof (such stockholders and any
Person who becomes a stockholder of the Company after the date hereof and prior
to the Closing Date, the "Stockholders").
------------
BACKGROUND
WHEREAS, the Stockholders own all of the issued and outstanding capital
stock of the Company on the date hereof (the "Company Common Stock");
--------------------
WHEREAS, the respective Boards of Directors of Newco and the Company deem
it advisable and in the best interests of Newco and the Company (each of which
are sometimes herein referred to as the "Constituent Corporations") and their
------------------------
respective stockholders that the Company merge with and into Newco (the
"Merger") pursuant to this Agreement and the applicable provisions of the law of
------
the State of Florida; and
WHEREAS, the Boards of Directors of each of the Constituent Corporations
have approved and adopted this Agreement as a plan of reorganization (a "tax-
---
free reorganization") within the provisions of Sections 368(a) of the Internal
-------------------
Revenue Code of 1986, as amended (the "Code").
----
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 4.2), the
Company shall be merged with and into Newco pursuant to this Agreement, and the
separate corporate existence of the Company shall cease. Newco, as it exists
from and after the Effective Time, is sometimes referred to as the "Surviving
---------
Corporation."
-----------
1.2 EFFECTS OF THE MERGER. The Merger shall have the effects provided
therefor by the 1989 Business Corporation Act of the State of Florida (the
"State Corporate Laws"). Without limiting the generality of the foregoing, and
--------------------
subject thereto, at the Effective Time (i) all the rights, privileges,
immunities, powers 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 without limitation subscriptions to shares, and all other
choses in action, and all and every other interest of or belonging to or due to
the Company or Newco shall be taken and deemed to be transferred to, and
1
vested in, the Surviving Corporation without further act or deed; and all
property, rights and privileges, immunities, 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 (ii) all
debts, liabilities, duties and obligations of the Company and Newco, subject to
the terms hereof, shall become the debts, liabilities and duties of the
Surviving Corporation and the Surviving Corporation shall thenceforth be
responsible and liable for all the debts, liabilities, duties and obligations of
the Company and Newco and neither the rights of creditors nor any liens upon the
property of the Company or Newco shall be impaired by the Merger, and may be
enforced against the Surviving Corporation.
1.3 CERTIFICATE OF INCORPORATION; BYLAWS, DIRECTORS AND OFFICERS. At the
Effective Time:
(a) The Certificate of Incorporation of the Surviving Corporation from
and after the Effective Time shall be the Certificate of Incorporation of Newco,
as amended pursuant to a certificate of merger filed with respect to the Merger,
and until thereafter amended in accordance with the provisions therein and as
provided by the applicable provisions of the State Corporate Laws.
(b) The name of the of the Surviving Corporation from and after the
Effective Time shall be "Regency Electric Company, Inc."
(c) The Bylaws of the Surviving Corporation from and after the
Effective Time shall be the Bylaws of Newco in effect immediately prior to the
Effective Time, continuing until thereafter amended in accordance with their
terms and the Certificate of Incorporation of the Surviving Corporation and as
provided by the State Corporate Laws.
(d) The initial directors of the Surviving Corporation shall be: X.
Xxxxxxx Xxxx, Xxxxxxx X. Xxxxxxx and Xxxx X. Xxxxx ("Green") in each case until
-----
their successors are elected and qualified, and the initial officers of the
Surviving Corporation shall be the officers of the Company immediately prior to
the Effective Time, with the addition of X. Xxxxxxx Xxxx as Vice President and
Assistant Secretary of the Surviving Corporation, until his successor is duly
elected and qualified.
2. CONVERSION AND EXCHANGE OF STOCK
2.1 MANNER OF CONVERSION. At the Effective Time, by virtue of the Merger
and without any action on the part of CCC, Newco, the Company or the
Stockholders, the shares of capital stock of each of the Constituent
Corporations shall be converted as follows:
(a) Capital Stock of Newco. Each issued and outstanding share of
----------------------
capital stock of Newco shall continue to be issued and outstanding and shall
represent shares of stock of the Surviving Corporation. Each stock certificate
of Newco evidencing ownership of any such shares shall continue to evidence
ownership of such shares of capital stock of the Surviving Corporation.
2
(b) Cancellation of Certain Shares of Capital Stock of the Company.
--------------------------------------------------------------
All shares of capital stock of the Company that are owned directly or indirectly
by the Company shall be canceled and no stock of CCC or other consideration
shall be delivered in exchange therefor.
(c) Conversion of Capital Stock of the Company. Subject to Section
------------------------------------------
2.1(d), and Sections 2.2, 2.3, 2.4, and 3.1, each issued and outstanding share
of Company Common Stock (other than shares to be canceled pursuant to Section
2.1(b)), that is issued and outstanding immediately prior to the Effective Time
shall automatically be canceled and extinguished and converted, without any
action on the part of the holder thereof, into the right to receive at the time
and in the amounts described in this Agreement (i) an amount of cash equal to
the cash portion of the Base Merger Consideration (as described in Section
2.2(a)) divided by the number of shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares to be
canceled pursuant to Section 2.1(b)), (ii) that number of shares of CCC common
stock, $.001 par value ("CCC Common Stock"), valued at the Merger Price (as
----------------
described in Section 2.2(a)), that is equal in value to the CCC Common Stock
portion of the Base Merger Consideration (as defined in Section 2.2(a)) divided
by the number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be canceled
pursuant to Section 2.1(b)), (iii) an amount of cash equal to 50% of the
Contingent Merger Consideration (as defined in Section 2.3(a)) divided by the
number of shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares to be canceled pursuant to
Section 2.1(b)), and (iv) that number of shares of CCC Common Stock, valued at
the Earn Out Period Average Price (as defined in Section 2.3(e)), that is equal
in value to 50% of the Contingent Merger Consideration divided by the number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time (other than shares to be canceled pursuant to Section 2.1(b)). All such
shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares shall cease
to have any rights with respect thereto, except the right to receive the
consideration therefor upon the surrender of such certificate in accordance with
this Section and Sections 2.2, 2.3 and 2.4 of this Agreement.
(d) Fractional Shares. No fractional shares of CCC Common Stock shall
-----------------
be issued, but if the Stockholders would otherwise be entitled to receive a
fraction of a share of CCC Common Stock, the Stockholders shall receive from CCC
an amount of cash equal to the Merger Price, as defined in Section 2.2(a),
multiplied by the fraction of a share of CCC Common Stock to which the
Stockholders would otherwise be entitled.
2.2 MERGER CONSIDERATION.
(a) For purposes of this Agreement, the "Base Merger Consideration"
-------------------------
shall be $80,000,000. Of the Base Merger Consideration, $40,000,000 shall be
paid in cash at Closing (as defined in Section 4.1) in immediately available
funds. The remaining $40,000,000 of the Base Merger Consideration shall be paid
at Closing in shares of CCC Common Stock valued at a price per share (the
"Merger Price") equal to the quotient determined by dividing the sum of (i) the
------------
closing
3
price of CCC Common Stock on May 12, 1998, plus (ii) the closing trading price
of CCC Common Stock on the date that is three trading days prior to the Closing
Date (as defined in Section 4.1 below), plus (iii) the "Interim Period Average"
----------------------
(as such term is defined below), by three. Interim Period Average means the sum
of the closing trading prices of CCC Common Stock on every trading day from and
including the date referenced in clause (i) above and through and including the
date referenced in clause (ii) above, divided by the number of trading days
included in such period. The shares of CCC Common Stock to be issued in respect
of the Base Merger Consideration shall be registered under the Securities Act of
1933, as amended (the "1933 Act"), and approved for quotation on the Nasdaq
--------
National Market.
(b) The Merger Consideration has been calculated based upon several
factors, including the assumption that the net worth of the Company, calculated
in accordance with generally accepted accounting principles ("GAAP")
----
consistently applied, but in any event excluding any material increase in
intangible assets of the Company since December 31, 1997, shall be equal to or
greater than $4,500,000 (the "Net Worth Target") as of the Closing.
----------------
(c) If, the Actual Closing Net Worth (as defined in Section 3.1), as
determined pursuant to the Post-Closing Audit (as defined in Section 3.1), is
less than the Net Worth Target, then following the Closing in accordance with
Section 3.1, the Base Merger Consideration delivered to the Stockholders will be
adjusted downward by the difference between the Net Worth Target and the Actual
Closing Net Worth (which reduction shall be made 50% in cash and 50% in CCC
Common Stock valued at the Merger Price) and the Stockholders shall transfer and
deliver to CCC that amount of cash and that number of shares CCC Common Stock
which together represent the adjustment.
(d) If, on or prior to the Effective Time, CCC should split or combine
the CCC Common Stock, or pay a stock dividend or other stock distribution in CCC
Common Stock or any other security, or otherwise change the CCC Common Stock
into any other securities, or make any other dividend or distribution on the CCC
Common Stock (other than normal quarterly dividends, as the same may be adjusted
from time to time and in the ordinary course), then the number of shares of CCC
Common Stock issuable as the Merger Consideration will be appropriately adjusted
to reflect such split, combination, dividend or other distribution or change.
2.3 CONTINGENT MERGER CONSIDERATION.
(a) For purposes of this Agreement the "Contingent Merger
-----------------
Consideration" shall mean the Actual Earn Out EBIT (hereinafter defined) of the
-------------
Surviving Corporation for the twelve month period ending on May 31, 1999.
(b) For purposes of this Section 2.3, "Actual Earn Out EBIT" means for
--------------------
the twelve month period ending on May 31, 1999, the earnings of the Surviving
Corporation (A) plus interest expense, income taxes, extraordinary items, and
cumulative effect of accounting changes and discontinued operations and (B) less
interest income, calculated in accordance with generally accepted accounting
principles ("GAAP") consistently applied; provided however, that in any event
----
4
Actual Earn Out EBIT shall exclude any increases in intangible assets of the
Surviving Corporation. CCC's Accountant (hereinafter defined) will calculate the
Contingent Merger Consideration and the Actual Earn Out EBIT applying the same
accounting principles applied by the Company, with all such computations made
(and definitions used) in the same way the computations were made (and
definitions were used) by the Company prior to the Closing and will conform to
the methods of accounting utilized consistently during the calendar years 1996
and 1997 for the Company, provided in each case that such computations were in
accordance with GAAP.
(c) Price Waterhouse LLP, CCC's independent accountant ("CCC's
-----
Accountant"), will determine the Actual Earn Out EBIT within sixty (60) days
----------
following the last day of the Actual Earn Out EBIT measuring period and deliver
prompt notice of such amount to the Stockholders (the "Earn Out EBIT Notice")
--------------------
with supporting documentation. The Stockholders (through the Representative as
defined in Section 13.15) shall have the right to inspect, audit and make
extracts from all of the records, files and books of account of CCC relating to
the Actual Earn Out EBIT for purposes of verifying the amount of the
consideration payable pursuant to Section 2.3, at reasonable times during
business hours, upon advance notice to CCC.
(d) The Stockholders (through the Representative) shall have thirty
(30) days from the receipt of the Earn Out EBIT Notice to notify CCC if they
dispute the amount of the Actual Earn Out EBIT. If CCC has not received notice
of any such dispute within such 30-day period, the Actual Earn Out EBIT
contained in the Earn Out EBIT Notice shall be final. If, however, the
Stockholders (through the Representative) have delivered notice of such a
dispute to CCC within such 30-day period, then CCC shall, pursuant to Section
2.3(e) below, pay such amount of the Contingent Merger Consideration that is not
subject to any dispute and CCC's Accountant shall select a mutually agreeable
partner at an independent accounting firm that has not represented any of the
parties hereto within the preceding two (2) years and is one of the six largest
accounting firms in the United States (each, a "New Accounting Firm") to review
-------------------
the amount of the disputed Actual Earn Out EBIT, the books of the Surviving
Corporation, and the Earn Out EBIT Notice (and related information) to determine
the amount, if any, that the Actual Earn Out EBIT is in error. The New
Accounting Firm shall make its determination of the Actual Earn Out EBIT (the
"Revised Earn Out EBIT") if any, within thirty (30) days of its selection. The
---------------------
Revised Earn Out EBIT shall be final and binding on the parties hereto, and,
upon such determination, CCC shall be entitled or required to adjust the Actual
Earn Out EBIT accordingly. If the Revised Earn Out EBIT is higher than the
Actual Earn Out EBIT, CCC shall pay to the Stockholders interest, at the Prime
Rate (defined below), on the deficiency from the date that is three months after
the end of the period with respect to which the disputed Actual Earn Out EBIT is
calculated. The costs of the New Accounting Firm shall be borne by CCC if the
Revised Earn Out EBIT is higher than the Actual Earn Out EBIT and by the
Stockholders in all other cases. For purposes of this Section, the term "Prime
-----
Rate" shall mean the annual rate of interest announced by Citibank, N.A. in New
----
York, New York as its prime rate in effect on the Contingent Merger
Consideration Payment Date.
(e) The Contingent Merger Consideration described in Section 2.3 (a),
will be paid 50% in cash and 50% in shares of CCC Common Stock and the cash
portion of the Contingent Merger Consideration will be paid in a single lump
payment by federal wire transfer of same day
5
funds immediately following the determination of the Actual Earn Out EBIT by
CCC's Accountant. For purposes of determining the number of shares of CCC
Common Stock that are issuable as part of the Contingent Merger Consideration,
the value of each such share shall be equal to the Earn Out Period Average Price
(defined below). The "Earn Out Period Average Price" means the quotient
-----------------------------
determined by dividing the sum of the closing trading price of a share of CCC
Common Stock on the Nasdaq National Market on each trading day from and
including the date that is thirty (30) trading days prior to, and including, May
31, 1999, by thirty (30). The date or dates on which the Contingent Merger
Consideration is paid to the Stockholders is hereinafter referred to as the
"Contingent Merger Consideration Payment Date." The certificates evidencing CCC
Common Stock received as part of the Merger Consideration shall be issued in the
denominations and names of the Stockholders as set forth in written instructions
delivered by the Stockholders to CCC at least five (5) business days prior to
the Closing Date and the Contingent Merger Consideration Payment Date or Dates,
as applicable.
(f) If, on or prior to a Contingent Merger Consideration Payment Date
but after calculation of the Earn Out Period Average Price with respect thereto,
CCC should split or combine the CCC Common Stock, or pay a stock dividend or
other stock distribution in CCC Common Stock or any other security, or otherwise
change the CCC Common Stock into any other securities, or make any other
dividend or distribution on the CCC Common Stock (other than normal quarterly
dividends, as the same may be adjusted from time to time and in the ordinary
course), then the number of shares of CCC Common stock issuable as the
Contingent Merger Consideration will be appropriately adjusted to reflect such
split, combination, dividend or other distribution or change.
(g) The shares of CCC Common Stock to be issued as part of the
Contingent Merger Consideration shall be registered under the Securities Act and
approved for quotation on the Nasdaq National Market.
(h) CCC and Newco agree that separate books and records will be kept
for the Surviving Corporation from the Closing Date through the Contingent
Merger Consideration Payment Date.
2.4 EXCHANGE OF CERTIFICATES AND PAYMENT OF CASH.
(a) Delivery of Consideration. At Closing, in exchange for the
-------------------------
outstanding shares of capital stock of the Company, CCC shall cause to be made
available to the Stockholders the Base Merger Consideration (including cash in
an amount sufficient for payment in lieu of fractional shares pursuant to
Section 2.1(d)), with all cash payments to be made by federal wire transfer of
immediately available funds pursuant to wire transfer instructions provided by
the Stockholders at least two business days prior to Closing. The certificates
evidencing the CCC Common Stock component of the Base Merger Consideration and
the Contingent Merger Consideration (the cash and the CCC Common Stock
components of the Base Merger Consideration and the Contingent Merger
Consideration are referred to together as the "Merger Consideration") shall bear
--------------------
appropriate legends pursuant to the terms of this Agreement and any applicable
Affiliate Agreement (as described in Section 8.8), and CCC shall be entitled to
issue appropriate stop transfer instructions
6
to its transfer agent consistent with the terms of this Agreement and any
applicable Affiliate Agreement.
(b) Certificate Delivery Requirements. At the Effective Time, the
---------------------------------
Stockholders shall deliver to CCC the certificates (the "Certificates")
------------
representing Company Common Stock owned by them, accompanied by blank stock
powers duly executed by each respective Stockholder and with all necessary
transfer tax and other revenue stamps, acquired at the Stockholder's expense,
affixed and canceled. Each Stockholder shall promptly cure any deficiencies
with respect to the stock powers accompanying such Certificates. The
Certificates so delivered shall forthwith be canceled. Until delivered as
contemplated by this Section 2.4(b), each Certificate shall be deemed at any
time after the Effective Time to represent the right to receive upon such
surrender the cash and number of shares of CCC Common Stock as provided by this
Article 2 and the applicable provisions of the State Corporate Laws.
(c) No Further Ownership Rights in Capital Stock of the Company. All
-----------------------------------------------------------
CCC Common Stock and cash to be delivered (including CCC Common Stock delivered
but withheld pursuant to Section 3.2(a)) upon the surrender for exchange of
shares of Company Common Stock in accordance with the terms hereof shall be
deemed to have been delivered in full satisfaction of all rights pertaining to
such shares of Company Common Stock, and, following the Effective Time, the
Stockholders shall have no further rights to, or ownership in, shares of capital
stock of the Company. There shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Company
Common Stock which were issued and outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Section 2.4.
(d) Lost, Stolen or Destroyed Certificates. If any certificates
--------------------------------------
evidencing shares of Company Common Stock shall have been lost, stolen or
destroyed, then CCC shall cause payment to be made of such shares of CCC Common
Stock and cash as provided in Section 2.1 in exchange for such lost, stolen or
destroyed certificates, upon the delivery to CCC of an affidavit of that fact by
the holder thereof; provided, however that CCC may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificates to deliver an agreement of indemnity against
any claim that may be made against CCC with respect to the certificates alleged
to have been lost, stolen or destroyed.
(e) No Liability. Notwithstanding anything to the contrary in this
------------
Section 2.4, none of the Surviving Corporation or any party hereto shall be
liable to a holder of shares of Company Common Stock for any amount paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
7
3. POST CLOSING ADJUSTMENT; PLEDGED ASSETS
3.1 POST-CLOSING ADJUSTMENT.
(a) The Base Merger Consideration shall be subject to adjustment after
the Closing Date as specified in this Section 3.1.
(b) Within one hundred twenty (120) days following the Effective Time,
CCC shall cause CCC's Accountant to audit (the "Post-Closing Audit") the
------------------
Surviving Company's books to determine the actual Company net worth as of
Closing without regard to the impact of the award, payment or redemption of
stock appreciation rights granted pursuant to the January 1998 Stock
Appreciation Rights Plan of the Company (the "Actual Closing Net Worth"). The
------------------------
parties acknowledge and agree that Actual Closing Net Worth shall be determined
in accordance with GAAP, provided that no increase in intangible assets
(including without limitation goodwill, franchises and intellectual property)
accounted for after December 31, 1997 shall be taken into account and no write-
offs shall be proposed, other than regular depreciation between December 31,
1997 and March 31, 1998 in accordance with GAAP consistently applied. The
Stockholders shall cooperate and shall use their reasonable efforts to cause the
officers and employees of the Company to cooperate with CCC and CCC's Accountant
after the Closing Date in furnishing information, documents, evidence and other
assistance to CCC's Accountant to facilitate the completion of the Post-Closing
Audit within the aforementioned time period. Without limiting the generality of
the foregoing, within two weeks after the Closing the Stockholders shall provide
CCC's Accountants with the information and/or documents reasonably requested by
them. In the event that CCC's Accountant determines that the Actual Closing Net
Worth was less than the Net Worth Target, CCC shall deliver a written notice
(the "Financial Adjustment Notice") to the Stockholders setting forth (i) the
---------------------------
determination made by CCC's Accountant of the Actual Closing Net Worth, and (ii)
the amount of the Adjustment to the Base Merger Consideration pursuant to the
provisions of Section 2.2(c) (the "Merger Consideration Adjustment").
-------------------------------
(c) The Stockholders shall have thirty (30) days from the receipt of
the Financial Adjustment Notice to notify CCC if they dispute such Financial
Adjustment Notice. If CCC has not received notice of such a dispute within such
30-day period, CCC shall be entitled to receive the Merger Consideration
Adjustment, as provided in Section 2.2(c). If, however, the Stockholders have
delivered notice of such a dispute to CCC within such 30-day period, then CCC's
Accountant shall select a mutually agreeable partner at an independent
accounting firm that has not represented any of the parties hereto within the
preceding two (2) years to review the Surviving Corporation's books and
Financial Adjustment Notice (and related information) to determine the amount,
if any, of the Merger Consideration Adjustment. The independent accounting firm
shall make its determination of the Merger Consideration Adjustment, if any,
within thirty (30) days of its selection. The determination made by the
independent accounting firm shall be final and binding on the parties hereto,
and upon such determination, CCC shall be entitled to receive the Merger
Consideration Adjustment (which shall be from the Pledged Assets as defined in
Section 3.2). The costs of the independent accounting firm shall be borne by
the party (either CCC or the Stockholders) whose determination of the Company's
net worth at Closing was further from the determination of the
8
independent accounting firm, or equally by CCC and the Stockholders in the event
that the determination by the independent accounting firm is equidistant between
the disputed determinations by CCC and the Stockholders.
3.2 PLEDGED ASSETS.
(a) As collateral security for the payment of any Merger
Consideration Adjustment or any indemnification obligations of the Stockholders
pursuant to (and subject to the limitations of) Article 10, Green shall, at the
Closing, transfer, pledge and assign to CCC, for the benefit of CCC, a security
interest in the following assets (the "Pledged Assets"):
--------------
(i) Green's portion of shares of CCC Common Stock with a
value, based on the Merger Price, equal to ten percent (10%) of the Merger
Consideration, and the certificates and instruments, if any, representing or
evidencing such Pledged Assets;
(ii) all securities hereafter delivered to Green with
respect to or in substitution for the Pledged Assets, all certificates and
instruments representing or evidencing such securities, and all cash and non-
cash dividends and other property at any time received, receivable or otherwise
distributed in respect of or in exchange for any or all thereof; and in the
event Green receives any such property, Green shall hold such property in trust
for CCC and shall immediately deliver such property to CCC to be held hereunder
as Pledged Assets; and
(iii) all cash and non-cash proceeds of all of the foregoing
property and all rights, titles, interests, privileges and preferences
appertaining or incident to the foregoing property.
(b) Each certificate, if any, evidencing the Pledged Assets issued in
Green's name in the Merger shall be delivered to CCC directly by the transfer
agent, such certificate bearing no restrictive or cautionary legend other than
those imprinted by the transfer agent at CCC's request in accordance with the
terms and provisions of this Agreement. Green shall, at the Closing, deliver to
CCC, for each such certificate, a stock power duly signed in blank by him. All
shares of CCC Common Stock comprising the Pledged Assets shall not be commingled
with the assets of CCC or any of its subsidiaries.
(c) The Pledged Assets shall be available to satisfy the Merger
Consideration Adjustment and any indemnification obligations of the Stockholders
pursuant to (and subject to the limitations of) Article 10 until the date which
is one year after the Effective Time (the "Release Date"). Promptly following
------------
the Release Date, CCC shall release such pledge and return or cause to be
returned to Green the Pledged Assets (including dividends and distributions with
respect to shares of CCC Common Stock subject to pledge), less Pledged Assets
having an aggregate value equal to the amount of (i) any finally adjudicated
claim (to the extent not fully satisfied) or any pending claim for
indemnification made by any Indemnified Party (as defined in Article 10) subject
to the limitations of Article 10, and (ii) any indemnification obligations of
any Stockholder pursuant to Article 10 subject to the limitations of Article 10
to the extent previously paid from the Pledged Assets. For purposes of the
preceding sentence and Article 10, the CCC Common Stock held as
9
Pledged Assets and applied to satisfy the Merger Consideration Adjustment or any
indemnification obligation under Article 10 shall be valued at the average of
the last daily trading price per share on the Nasdaq National Market of CCC
Common Stock for the fifteen trading days prior to the satisfaction of the
Merger Consideration Adjustment or an indemnification obligation pursuant to
Article 10, as the case may be. Notwithstanding the foregoing or anything to
the contrary herein, the Stockholders shall be entitled to satisfy any claims
relating to the Pledged Assets, including but not limited to any indemnification
pursuant to Article 10 hereof, with cash, in lieu of shares of CCC Common Stock
constituting Pledged Assets.
(d) While any shares of CCC Common Stock remain subject to the pledge
set forth herein, and pending the disbursement thereof in accordance with this
Section 3.2, Green shall have all the rights of a stockholder of CCC with
respect to such shares (including without limitation the right to vote such
shares in accordance with his interest therein and the right to receive
dividends and distributions thereon), except (i) the right of possession
thereof, (ii) the right to sell, assign, pledge, hypothecate or otherwise
dispose of such shares or any interest therein and (iii) the right to possession
of any dividends or other distributions received in respect thereof.
4. CLOSING
4.1 LOCATION AND DATE. The consummation of the Merger and the other
transactions contemplated by this Agreement (the "Closing") shall take place at
-------
the offices of [Xxxxxx, Xxxxx & Xxxxxxx LLP, 0000 X Xxxxxx, XX, Xxxxxxxxxx, X.X.
00000], on June [__], 1998, providing that all conditions to Closing shall have
been satisfied or waived, or at such other time, place and date as CCC, the
Company and the Stockholders may mutually agree, which date shall be referred to
as the "Closing Date."
------------
4.2 EFFECT. On the Closing Date, a certificate of merger, or other
appropriate documents executed in accordance with the State Corporate Laws (the
"Merger Documents"), together with any required officers' certificates, shall be
----------------
filed in accordance with the provisions of the State Corporate Laws. The Merger
shall become effective upon such filing or at such later time as may be
specified in such filing (the "Effective Time").
--------------
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
To induce CCC and Newco to enter into this Agreement and consummate the
transactions contemplated hereby, each of the Company (with respect to
representations relating to the Company only) and the Stockholders, jointly and
severally, represent and warrant to CCC and Newco, as follows (for purposes of
this Agreement, the phrases "knowledge of the Company" or the "Company's
------------------------ ---------
knowledge," or words of similar import, mean the actual knowledge of Green and
---------
Xxxxx Xxxxx).
10
5.1 DUE ORGANIZATION. The Company, and each subsidiary of the Company
listed on Schedule 5.6(a) (each, a "Subsidiary" and together the
----------
"Subsidiaries"), is a corporation duly organized, validly existing and in good
------------
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, operate and lease its properties
and to carry on its business in the places and in the manner as now conducted
except where the failure to be so authorized, qualified or licensed would not
have a material adverse effect on the business, operations, properties, assets
or condition, financial or otherwise, of the Company on a consolidated basis
with its Subsidiaries, taken as a whole, provided that the foregoing shall not
include any material adverse effect attributable to (a) factors affecting the
electrical contracting industry generally, (b) general national, regional or
local economic or financial conditions, (c) changes in governmental or
legislative laws, rules or regulations, or (d) actions taken by CCC or any
affiliate of CCC ("Material Adverse Effect"). SCHEDULE 5.l hereto contains (i) a
-----------------------
list of all jurisdictions in which the Company and its Subsidiaries conduct
business and (ii) a list of all jurisdictions in which the Company and its
Subsidiaries are authorized or qualified to do business as a foreign
corporation. The Company and each Subsidiary is in good standing in all
jurisdictions where the failure to be in good standing would have a Material
Adverse Effect. The Company has delivered to CCC or given CCC access to true,
complete and correct copies of the Certificate of Incorporation and Bylaws of
the Company and each Subsidiary. Such Certificates of Incorporation and Bylaws
are collectively referred to as the "Charter Documents." Neither the Company nor
-----------------
any Subsidiary is in violation of their respective Charter Documents. The minute
books, original stock ledger and corporate seal of the Company and each
Subsidiary have been made available to CCC and are correct and, except as set
forth in SCHEDULE 5.1, complete in all material respects.
5.2 AUTHORIZATION; VALIDITY. The Company has the requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. Each Stockholder has the full legal right and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the performance by the Company of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the Company and
will be approved by the Stockholders prior to Closing and, subject to the
foregoing, this Agreement has been duly and validly authorized by all necessary
corporate action. This Agreement is a legal, valid and binding obligation of the
Company and the Stockholders, enforceable in accordance with its terms subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
5.3 NO CONFLICTS. Except as set forth on SCHEDULES 5.3 OR 5.13, the
execution, delivery and performance of this Agreement, the consummation of the
transactions contemplated hereby, and the fulfillment of the terms hereof will
not:
(a) conflict with, or result in a breach or violation of, any of the
Charter Documents;
(b) other than such as would not, individually or in the aggregate,
have a Material Adverse Effect, conflict with, or result in a default (or an
event that would constitute a default but
11
for the requirement of notice or lapse of time or both) under, any document,
agreement or other instrument to which the Company, any Subsidiary or any
Stockholder is a party or by which the Company, any Subsidiary or any
Stockholder is bound, or result in the creation or imposition of any lien,
charge or encumbrance on any of the Company's or any Subsidiary's properties
pursuant to (i) any law or regulation to which the Company, any Subsidiary or
any Stockholder or any of their respective property is subject, or (ii) any
judgment, order or decree to which the Company, any Subsidiary or any
Stockholder is bound or any of their respective property is subject;
(c) result in termination or any impairment of any material permit,
license, franchise, surety bond, insurance coverage, contractual right or other
authorization of the Company or any Subsidiary;
(d) violate any material law, order, judgment, rule, regulation,
decree or ordinance to which the Company, any Subsidiary or any Stockholder is
subject or by which the Company or any Stockholder is bound; or
(e) require the consent of any third party.
5.4 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists of 100,000 shares of Common Stock, par value $0.01 per share,
of which 10,000 shares are voting stock and 90,000 shares are non-voting stock.
There are 1,000 shares of voting stock that are issued and outstanding and 9,000
shares of non-voting stock that are issued and outstanding. No shares are held
as treasury stock. Except as disclosed in SCHEDULE 5.4, all of the issued and
outstanding shares of the capital stock of the Company have been duly authorized
and validly issued, are fully paid and nonassessable and are owned of record and
beneficially by the Stockholders in the respective amounts set forth on SCHEDULE
5.4, free and clear of all Liens (defined below). SCHEDULE 5.4 attached hereto
sets forth the number and class of the authorized capital stock of each
Subsidiary and the number of shares of each Subsidiary which are issued and
outstanding, all of which shares are owned by the Company free and clear of all
Liens. All of the issued and outstanding shares of the capital stock of the
Company 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 was issued in violation of any
preemptive rights. There are no voting agreements or voting trusts with respect
to any of the outstanding shares of the capital stock of the Company. For
purposes of this Agreement, "Lien" means any mortgage, security interest,
----
pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or otherwise), charge, preference, priority or other security
agreement, option, warrant, attachment, right of first refusal, preemptive,
conversion, put, call or other claim or right, restriction on transfer (other
than restrictions imposed by federal and state securities laws), or preferential
arrangement of any kind or nature whatsoever (including any restriction on the
transfer of any assets, any conditional sale or other title retention agreement,
any financing lease involving substantially the same economic effect as any of
the foregoing and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction).
12
5.5 TRANSACTIONS IN CAPITAL STOCK. Except as disclosed in SCHEDULE 5.5, no
option, warrant, call, subscription right, conversion right or other contract or
commitment of any kind exists of any character, written or oral, which may
obligate the Company or any Subsidiary to issue, sell or otherwise cause to
become outstanding any shares of capital stock. Except as disclosed in Schedule
5.5, neither the Company nor any Subsidiary 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.
5.6 SUBSIDIARIES, STOCK, AND NOTES.
(a) Except as set forth in SCHEDULE 5.6(A), the Company has no
subsidiaries.
(b) Except as set forth on SCHEDULE 5.6(B), neither the Company nor
any Subsidiary 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 or any Subsidiary, directly or indirectly, a participant in any
joint venture, partnership or other noncorporate entity.
(c) Except as set forth on SCHEDULE 5.6(C), there are no promissory
notes that have been issued to, or are held by, the Company or any Subsidiary.
5.7 PREDECESSOR STATUS. SCHEDULE 5.7 sets forth a list of all names of all
predecessor companies of the Company and each Subsidiary, including the names of
any entities from which the Company and each Subsidiary previously acquired
substantially all of the assets. Except as set forth in SCHEDULE 5.7, neither
the Company nor any Subsidiary has ever been a subsidiary or division of another
corporation (other than the Company).
5.8 ABSENCE OF CLAIMS AGAINST THE COMPANY. Except as set forth in SCHEDULE
5.8, no Stockholder has made any claims against the Company or any Subsidiary,
nor, to the knowledge of the Company, has any such claim been threatened.
5.9 FINANCIAL STATEMENTS. SCHEDULE 5.9 includes (a) copies of the
Company's audited consolidated balance sheet as of December 31, 1997 (the
"Balance Sheet Date") (December 31, 1997 being the end of its most recently
------------------
completed fiscal year), and consolidated income statements and statements of
cash flows for the years ended December 31, 1997, 1996 and 1995 (collectively,
the "Audited Financials") and (b) copies of the Company's unaudited consolidated
------------------
balance sheet (the "Interim Balance Sheet") as of March 31, 1998 and
---------------------
consolidated income statement and statement of cash flows, for the three-month
period then ended (collectively, the "Interim Financials," and together with the
------------------
Audited Financials, the "Company Financial Statements"). Except as noted on the
----------------------------
auditors' report accompanying the Audited Financials, the Company Financial
Statements have been prepared in accordance with GAAP consistently applied,
subject to, in the case of the Interim Financials, (i) the exceptions stated on
SCHEDULE 5.9, and (ii) the omission of footnote information and, in the case of
the Interim Financial Statements, normal year end adjustments. Except as set
forth in SCHEDULE 5.9 or as noted on the accompanying auditor's report, each
balance sheet included
13
in the Company Financial Statements presents fairly the financial condition of
the Company on a consolidated basis as of the date indicated thereon, and each
of the income statements included in the Company Financial Statements presents
fairly the results of its operations for the periods indicated thereon, in each
case in accordance with GAAP.
5.10 LIABILITIES AND OBLIGATIONS.
(a) Neither the Company nor any Subsidiary is liable for or subject
to any liabilities except for:
(i) those liabilities reflected on the Interim Balance Sheet
and not previously paid or discharged;
(ii) those liabilities arising in the ordinary course of its
business consistent with past practice under any contract, commitment or
agreement to which the Company or any of its Subsidiaries is a party;
(iii) those liabilities incurred since the Balance Sheet Date
in the ordinary course of business consistent with past practice, which
liabilities are not, individually or in the aggregate, material; and
(iv) those liabilities set forth on SCHEDULE 5.10.
(b) The Company has provided to CCC, in the case of those
liabilities which are not fixed or are contested, its good faith estimate of the
maximum amount which may be payable.
(c) SCHEDULE 5.10 also includes a summary description of all plans
or projects involving the opening of new operations, expansion of any existing
operations or the acquisition of any real property or existing business, to
which management of the Company has made any material expenditure in the two-
year period prior to the date of this Agreement, which if pursued by the
Company, any Subsidiary or the Surviving Corporation would require additional
material expenditures of capital.
(d) For purposes of this Section 5.10, the term "liabilities" shall
-----------
include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued, absolute, contingent, mature,
unmatured or otherwise and whether known or unknown, fixed or unfixed, xxxxxx or
inchoate, liquidated or unliquidated, secured or unsecured. SCHEDULE 5.10
contains a complete list of all indebtedness of the Company and its Subsidiaries
for borrowed money as of the Balance Sheet Date.
5.11 ACCOUNTS AND NOTES RECEIVABLE. Attached hereto as SCHEDULE 5.11 is
an accurate list, as of a date not more than five (5) business days prior to the
date hereof, of the accounts and notes receivable of the Company and each
Subsidiary (including without limitation receivables from and advances to
employees, former employees, and the Stockholders), which includes an aging of
14
all accounts and notes receivable showing amounts due in 30-day aging categories
(collectively, the "Accounts Receivable"). On the Closing Date, the Company will
-------------------
deliver to CCC an accurate list, as of a date not more than five (5) business
days prior to the Closing Date, of the Accounts Receivable. All Accounts
Receivable represent valid obligations arising from sales actually made or
services actually performed in the ordinary course of business or such other
valid obligations arising from receivables from and advances to employees,
former employees or the Stockholders.
5.12 BOOKS AND RECORDS. The Company has made and kept books and records
and accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Company and each Subsidiary.
5.13 PERMITS. Except as set forth on SCHEDULE 5.13, the Company and its
Subsidiaries own or hold all material licenses, franchises, permits and other
governmental authorizations, including without limitation permits, titles
(including without limitation motor vehicle titles and current registrations),
fuel permits, licenses and franchises necessary for the continued operation of
their businesses as they are currently being conducted (the "Permits"). The
-------
Permits are valid, and neither the Company nor any Subsidiary has received any
notice that any governmental authority intends to modify, cancel, terminate or
fail to renew any Permit. Except as set forth on SCHEDULE 5.13, no present or
former officer, manager, member or employee of the Company, any Subsidiary or
any affiliate thereof, or any other person, firm, corporation or other entity,
owns or has any proprietary, financial or other interest (direct or indirect) in
any Permits. The Company and each Subsidiary has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the Permits and other applicable orders, approvals, variances,
rules and regulations 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 set forth on SCHEDULES 5.3 or 5.13, the transactions contemplated by
this Agreement will not result in a default under, or a breach or violation of,
or adversely affect the rights and benefits afforded to the Company or any
Subsidiary by, any Permit.
5.14 REAL PROPERTY.
(a) For purposes of this Agreement, "Real Property" means all of the
-------------
Company's and each Subsidiary's interest in real property, including, without
limitation, fee estates, leaseholds and subleaseholds, purchase options with
respect to real property, easements, licenses with respect to real property,
rights to access, and rights of way, and all buildings and other improvements
thereon, owned or used by the Company, together with any additions thereto or
replacements thereof.
(b) Neither the Company nor any Subsidiary has any fee ownership in
any Real Property.
(c) SCHEDULE 5.14(c) contains an accurate description as of the date
of this Agreement of all Real Property (including street address, legal
description (where known), owner and Company's or its Subsidiaries' use thereof)
and, to the Company's knowledge, any Liens other than for: (A) Liens for current
taxes not yet due and payable or in dispute (to the extent the Company has
established a reasonable reserve therefore in accordance with GAAP), (B)
easements, covenants,
15
conditions, restrictions, rights of way and title defects reflected in the
public records, and any matters which would be reflected in a current, accurate
survey of the owned Real Property and which will not individually, or in the
aggregate, materially interfere with the right or ability of CCC to use or
operate the owned Real Property as the owned Real Property is currently used by
the Company, (C) Liens securing indebtedness for borrowed money that CCC or one
of its affiliates has agreed to assume at Closing, as set forth on SCHEDULE
5.14(c)(i), (D) landlord's Liens and Liens for property taxes not delinquent,
(E) statutory Liens that were created in the ordinary course of business not
delinquent, (F) restrictions or rights granted to governmental authorities under
applicable law, (G) zoning, building, or similar restrictions relating to or
affecting property, and (H) all matters of record, including leasehold interests
in real property owned by others and operating leases for personal property and
leased interests in property leased to others (collectively, "Permitted
---------
Encumbrances").
------------
(d) The Company and each Subsidiary: (i) holds no interest as
landlord in any Real Property; (ii) has a valid leasehold interest as tenant in
all the Real Property listed as leased by the respective Company or Subsidiary
on SCHEDULE 5.14(C) (the "leased Real Property"); (iii) is not in default of any
--------------------
of its obligations under any lease relating to the leased Real Property, nor has
an event occurred which, with the giving of notice or the passage of time, could
become an event of default; (iv) has no knowledge of any default by the landlord
under any lease relating to the leased Real Property; (v) has paid all rent due
under each lease relating to the leased Real Property with respect to the period
through the Closing Date; and (vi) has not exercised any termination or purchase
option under any lease relating to the leased Real Property.
(e) The Company has made available to CCC true and complete copies
of each lease relating to the leased Real Property and all amendments, renewals,
extensions, modifications or supplements thereto, and all correspondence
pursuant to which any party to any of such leases declared a default thereunder
or provided notice of the exercise of any option granted to such party under
such lease.
(f) Except as provided on SCHEDULE 5.3, none of the leases relating
to the leased Real Property requires the consent or approval of any party
thereto in connection with the consummation of the transactions contemplated
hereby.
5.15 PERSONAL PROPERTY.
(a) The Company and each Subsidiary currently owns or leases all
personal property necessary to conduct its business and operations as they are
currently being conducted.
(b) All of the trucks and other material machinery and equipment of
the Company and each Subsidiary are in good working order and condition,
ordinary wear and tear excepted. All leases for the personal property necessary
to conduct the business and operations of the Company and each Subsidiary are in
full force and effect and constitute valid and binding agreements of the Company
and each Subsidiary, as applicable, and neither Company nor any Subsidiary, as
applicable, is in breach of any of their material terms. All fixed assets used
by the Company and
16
each Subsidiary that are material to the operation of its business are either
owned by the applicable Company or Subsidiary or leased under an agreement.
5.16 INTELLECTUAL PROPERTY. Neither the Company nor any Subsidiary uses
or employs any copyrights, patents, trade names, trade secrets, registered and
unregistered trademarks, service marks, trade dress, franchises, domain names or
similar rights in the business of the Company or its Subsidiaries.
5.17 MATERIAL CONTRACTS AND COMMITMENTS.
(a) The Company has made available each written contract,
commitment, lease, instrument, agreement or contracting license to which the
Company or any Subsidiary is a party or by which any of their respective
properties are bound (including without limitation, joint venture or partnership
agreements, contracts with any labor organizations, employment agreements,
consulting agreements, loan agreements, indemnity or guaranty agreements, bonds,
mortgages, options to purchase land, liens, pledges or other security
agreements) (i) to which the Company or any Subsidiary on the one hand and on
the other hand any affiliate of the Company or any Subsidiary or any officer,
director or shareholder of the Company or any Subsidiary are parties ("Related
-------
Party Agreements"); (ii) that may give rise to obligations or liabilities
----------------
exceeding, during the current term thereof, $50,000 individually, or that may
generate revenues or income exceeding, during the current term thereof, $50,000
individually (collectively with the Related Party Agreements, the "Material
--------
Contracts"); or (iii) that provides rights to indemnification to any current or
---------
former directors, officers, employees or agents of the Company or any
Subsidiary. Other than as disclosed on SCHEDULE 5.17(A) the Company and each
Subsidiary has complied with all of its material commitments and obligations, is
not in default under any of the Material Contracts, except as arising in the
ordinary course of business, has no contracts under which the work has been
substantially delayed or changed for which proper compensation is not expected,
has no pending or expected claims in excess of $50,000 against a prime
contractor or owner in connection with completed work or work in progress, and
has not received any notice of default with respect to any obligation thereof,
and there are no Material Contracts that were not negotiated at arm's length.
(b) Each Material Contract, except those terminated pursuant to
Section 7.4, is valid and binding on the Company or its Subsidiaries and is in
full force and effect and, to the knowledge of the Company, is not subject to
any default thereunder by any party obligated to the Company or its Subsidiaries
pursuant thereto.
(c) The outstanding balance on all loans or credit agreements either
(i) between the Company and any Person in which any Stockholder owns a material
interest, or (ii) guaranteed by the Company for the benefit of any Person in
which any Stockholder owns a material interest, are set forth in SCHEDULE
5.17(C) as of the date indicated therein.
17
5.18 GOVERNMENT CONTRACTS.
(a) The Company has made available to CCC any government contracts
to which it or any Subsidiary is a party.
(b) Neither the Company nor any Subsidiary has been suspended or
debarred from bidding on contracts or subcontracts for any agency or
instrumentality of the United States Government or any state or local
government, nor, to the knowledge of the Company, has any such suspension or
debarment action been threatened or commenced.
(c) Except as set forth on SCHEDULE 5.18, to the knowledge of the
Company, neither the Company nor any Subsidiary has been, nor is it now being,
audited, or investigated by any government agency, or the inspector general or
auditor general or similar functionary of any agency or instrumentality, nor, to
the knowledge of the Company has such audit or investigation been threatened in
writing.
(d) Except as set forth on SCHEDULE 5.18, neither the Company nor
any Subsidiary has any material dispute pending before a contracting office of,
nor any current claim (other than the Accounts Receivable) pending against, any
agency or instrumentality of the United States Government or any state or local
government, relating to a contract.
(e) Neither the Company nor any Subsidiary has, with respect to any
government contract, received a cure notice advising the Company or Subsidiary
that it is or was in default or would, if it failed to take remedial action, be
in default under such contract.
(f) Neither the Company nor any Subsidiary has submitted any cost or
pricing data, certification, bid, proposal, report, claim, or any other
information relating to a contract to any agency or instrumentality of the
United States Government or any state or local government which was inaccurate,
untruthful or misleading in any material respect.
(g) No employee of the Company or any Subsidiary is in receipt or
possession of any competitor or government proprietary or procurement sensitive
information related to the Company's or any Subsidiary's business under
circumstances where there is reason to believe that such receipt or possession
is unlawful or unauthorized.
(h) Except as set forth on SCHEDULE 5.18, each of the Company's and
each Subsidiary's government contracts has been issued, awarded or novated to
the Company or any Subsidiary in the Company's or such Subsidiary's name.
(i) Except as set forth on SCHEDULE 5.18, the Company's and each
Subsidiary's cost accounting records can be adjusted in conformance with the
requirements of the Federal Acquisition Regulations to the extent applicable.
18
5.19 INSURANCE. SCHEDULE 5.19 sets forth, as of the date of this
Agreement, an accurate list of all insurance policies carried by the Company and
its Subsidiaries and the Company has delivered to CCC all insurance loss runs or
workers' compensation claims received for the past two policy years with respect
to the Company and its Subsidiaries. The Company has delivered to CCC complete
correct copies of all current insurance policies, all of which are in full force
and effect other than the omission of additional insured parties. All premiums
payable under all such policies have been paid and the Company and each
Subsidiary is otherwise in compliance with the terms of such policies. The
insurance carried by the Company and each Subsidiary with respect to its
properties, assets and business is, to the Company's knowledge, with financially
sound insurers. To the knowledge of the Company, there have been no threatened
terminations of, or material premium increases with respect to, any of such
policies.
5.20 LABOR AND EMPLOYMENT MATTERS. Except as set forth in SCHEDULE 5.20,
as of the date of this Agreement, with respect to employees of and service
providers to the Company and each Subsidiary:
(a) during the last two years, the Company and each Subsidiary is
and has been in compliance in all material respects with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, including without limitation any such laws
respecting minimum wage and overtime payments, employment discrimination,
workers' compensation, family and medical leave, the Immigration Reform and
Control Act, and occupational safety and health requirements, and has not and is
not engaged in any unfair labor practice;
(b) there is not now, nor within the past three years has there
been, any unfair labor practice complaint against the Company or any Subsidiary
pending or, to the Company's knowledge, threatened, before the National Labor
Relations Board or any other comparable authority;
(c) there is not now, nor within the past three years has there
been, any labor strike, slowdown or stoppage actually pending or, to the
Company's knowledge, threatened, against or directly affecting the Company or
any Subsidiary;
(d) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to the Company's knowledge, no
claims therefor exist or have been threatened;
(e) the employees of the Company and each Subsidiary are not and
have never been represented by any labor union, and no collective bargaining
agreement is binding and in force against the Company or any Subsidiary or
currently being negotiated by the Company or any Subsidiary; and
(f) all persons classified by the Company or any Subsidiary as
independent contractors do satisfy and have satisfied the requirements of law to
be so classified, and the
19
Company and each Subsidiary has fully and accurately reported their compensation
on IRS Forms 1099 when required to do so.
5.21 EMPLOYEE BENEFIT PLANS. Attached hereto as SCHEDULE 5.21 is a list of
all employee benefit plans, all employee welfare benefit plans, all employee
pension benefit plans, all multiemployer plans and all multiple employer
welfare arrangements (as defined in Sections 3(3), (1), (2), (37) and (40),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), which are currently maintained and/or sponsored by the Company and
-----
each Subsidiary, or to which the Company or any Subsidiary currently contributes
(including, without limitation, any such plan or arrangement created by any
agreements, including any employment agreements and any other agreements
containing "golden parachute" provisions and deferred compensation agreements,
----------------
together with copies of any trusts related thereto and a classification of
employees covered thereby (collectively, the "Plans"). To the knowledge of the
-----
Company, SCHEDULE 5.21 sets forth each plan or arrangement that would have been
an employee pension or welfare benefit plan described in the first sentence of
this Section 5.21 but for its termination within the past three years.
All Plans are in substantial compliance with all applicable provisions of
ERISA and the regulations issued thereunder, as well as with all other
applicable laws, and, in all material respects, have been administered, operated
and managed in substantial accordance with the governing documents. All Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
---------------
Internal Revenue Code of 1986, as amended (the "Code") have been determined by
the Internal Revenue Service to be so qualified, and copies of the current plan
determination letters, most recent actuarial valuation reports, if any, most
recent Form 5500, or, as applicable, Form 5500-C/R filed with respect to each
such Qualified Plan or employee welfare benefit plan and most recent trustee or
custodian report, as listed on SCHEDULE 5.21. To the extent that any Qualified
Plans have not been amended to comply with applicable law, the remedial
amendment period permitting retroactive amendment of such Qualified Plans has
not expired and will not expire within 120 days after the Closing Date. None of:
(i) any Stockholder; (ii) any Plan; or (iii) the Company or any Subsidiary has
engaged in any non-exempt transaction prohibited under the provisions of Section
4975 of the Code or Section 406 of ERISA. No Plan has incurred an accumulated
funding deficiency, as defined in Section 412(a) of the Code and Section 302(1)
of ERISA; and neither the Company nor any Subsidiary currently has (nor at the
Closing Date will have) any direct or indirect liability whatsoever (including
being subject to any statutory lien to secure payment of any such liability), to
the Pension Benefit Guaranty Corporation ("PBGC") with respect to any such Plan
----
under Title IV of ERISA or to the Internal Revenue Service for any excise tax or
penalty; and neither the Company nor any member of a "controlled group" with the
----------------
Company (as defined in ERISA Section 4001(a)(14)) currently has (or at the
Closing Date will have) any obligation whatsoever to contribute to any
"multiemployer pension plan" (as defined in ERISA Section 4001(a)(14), nor has
--------------------------
any withdrawal liability whatsoever (whether or not yet assessed) arising under
or capable of assertion under Title IV of ERISA (including, but not limited to,
Sections 4201, 4202, 4203, 4204, or 4205 thereof) been incurred directly or
indirectly by the Company. Further, except as set forth on SCHEDULE 5.21:
20
(a) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without notice to and
issuance of a favorable determination letter by the Internal Revenue Service;
(b) no Plan which is subject to the provisions of Title IV of
ERISA has been terminated;
(c) there have been no "reportable events" (as that phrase is
-----------------
defined in Section 4043 of ERISA) with respect to any Plan which were not
properly reported (other than reportable events as to which the PBGC has waived
the notice requirements);
(d) the valuation of assets of any Qualified Plan subject to
Title IV of ERISA, as of the Closing Date, shall exceed the actuarial present
value of all accrued pension benefits under such Qualified Plan in accordance
with the assumptions contained in the Regulations of the PBGC governing the
funding of terminated defined benefit plans;
(e) with respect to Plans which qualify as "group health plans"
------------------
under Section 5000(b)(1) of the Internal Revenue Code and Sections 607(1) and
733(a) of ERISA and related regulations, the Company, each Subsidiary and the
Stockholder have complied (and on the Closing Date will have complied), in all
material respects with all reporting, disclosure, notice, election, coverage and
other benefit requirements imposed under Sections 4980B and 9801-9833 of the
Internal Revenue Code and Sections 601-734 of ERISA as and when applicable to
such plans, and neither the Company nor any Subsidiary has any (nor does the
Company have any reasonable basis to believe that it or its Subsidiaries will
incur any) direct or indirect liability and is not (and will not be) subject to
any material loss, assessment, excise tax, penalty, loss of federal income tax
deduction or other sanction, arising on account of or in respect of any direct
or indirect failure by the Company, any Subsidiary or the Stockholders, at any
time prior to the Closing Date, to comply with any such federal or state
requirement, which is capable of being assessed or asserted before or after the
Closing Date directly or indirectly against the Company, any Subsidiary or the
Stockholders with respect to such group health plans;
(f) neither the Company nor any Subsidiary is now or within
the past five years has been a member of a "controlled group" as defined in
ERISA Section 4001(a)(14) (other than with respect to its Subsidiaries);
(g) except as set forth in SCHEDULE 5.21(G), there is no
pending litigation, arbitration, or disputed claim, settlement or adjudication
proceeding and to the Company's knowledge, there is no threatened (in writing)
litigation, arbitration or disputed claim, settlement or adjudication
proceeding, or any governmental or other proceeding, or investigation with
respect to any Plan, or any disputed claim, settlement or adjudication (other
than routine claims for benefits) with respect to any fiduciary, administrator,
party in interest or sponsor thereof (in their capacities as such);
21
(h) as required in accordance with GAAP, the Company Financial
Statements as of the Balance Sheet Date reflect the approximate total pension,
medical and other benefit expense for all Plans as of the date thereof, and no
material funding changes or irregularities not reflected thereon would cause
such Company Financial Statements to be inaccurate; and
(i) neither the Company nor any Subsidiary has incurred liability
under Section 4062, 4063 or 4064 of ERISA.
5.22 CONFORMITY WITH LAW; LITIGATION.
(a) Except as set forth on SCHEDULE 5.22(A), neither the
Company nor any Subsidiary is in violation of any law or regulation or under any
order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction which would have a Material Adverse Effect on the Company and its
Subsidiaries take as a whole. The Company and each of its Subsidiaries has
conducted and is conducting its business in substantial 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 is not in violation of any of
the foregoing which might have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole.
(b) Except as set forth on SCHEDULE 5.22(B), as of the date of
this Agreement, there are no claims, actions, suits or proceedings, pending or,
to the knowledge of the Company, threatened against or affecting the Company or
any Subsidiary 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 it and no notice of any claim, action,
suit or proceeding, whether pending or threatened, has been received by the
Company or any of its Subsidiaries which might have a Material Adverse Effect on
the Company and its Subsidiaries taken as a whole. As of the date of this
Agreement, there are no judgments, orders, injunctions, decrees, stipulations or
awards (whether rendered by a court or administrative agency or by arbitration)
against the Company or any Subsidiary or against any of their properties or
businesses which might have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole.
(c) Green has not at any time: (i) committed any criminal act
(expect for minor traffic violations); (ii) engaged in acts of fraud,
dishonesty, gross negligence or moral turpitude; (iii) filed for personal
bankruptcy; of (iv) been an officer, director, manager, trustee or controlling
shareholder of a company that filed for bankruptcy or Chapter 11 protection.
5.23 TAXES.
(a) Except as set forth on SCHEDULE 5.23:
(i) The Company and each Subsidiary has timely filed all
Tax Returns (as defined below) due on or before the Closing Date and all such
Tax Returns are true, correct and complete in all material respects.
22
(ii) The Company and each Subsidiary has paid in full on a
timely basis all Taxes (as defined below) owed by it.
(iii) The amount of the Company's and its Subsidiaries'
liability for unpaid Taxes as of the Balance Sheet Date did not exceed the
amount of the current liability accruals for Taxes (excluding reserves for
deferred Taxes) shown on the Interim Balance Sheet, and the amount of the
Company's and its Subsidiaries' liability for unpaid Taxes for all periods or
portions thereof ending on or before the Closing Date will not exceed the amount
of the current liability accruals for Taxes (excluding reserves for deferred
Taxes) as such accruals are reflected on the books and records of the Company
and its Subsidiaries on the Closing Date.
(iv) There are no ongoing examinations or claims against
the Company or any Subsidiary for Taxes, and no notice of any audit, examination
or claim for Taxes, whether pending or threatened, has been received.
(v) The Company and each Subsidiary has a taxable year
ended on December 31, in each year commencing from the incorporation of the
Company and each Subsidiary.
(vi) The Company and each Subsidiary currently utilizes the
accrual method of accounting for income Tax purposes and such method of
accounting has not changed in the past 10 years. The Company and its
Subsidiaries have not agreed to, and are not and will not be required to, make
any adjustments under Code Section 481(a) as a result of a change in accounting
methods.
(vii) The Company and each Subsidiary has withheld and paid
over to the proper governmental authorities all Taxes required to have been
withheld and paid over, and complied with all information reporting and backup
withholding requirements, including maintenance of required records with respect
thereto, in connection with amounts paid to any employee, independent
contractor, creditor or third party.
(viii) Copies of (A) any Tax examinations, (B) extensions of
statutory limitations for the collection or assessment of Taxes and (C) the Tax
Returns of the Company and each Subsidiary for the last three fiscal years have
been made available to CCC.
(ix) There are (and as of immediately following the Closing
there will be) no Liens on the assets of the Company or any Subsidiary relating
to or attributable to Taxes, except for Permitted Encumbrances.
(x) To the Company's knowledge, except for Permitted
Encumbrances, there is no basis for the assertion of any claim relating to or
attributable to Taxes which, if adversely determined, would result in any Lien
on the assets of the Company or any Subsidiary or otherwise have an adverse
effect on the Company and its Subsidiaries or their businesses.
23
(xi) There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Company or any Subsidiary that,
individually or collectively, could give rise to any payment (or portion
thereof) that would not be deductible pursuant to Sections 280G, 404 or 162 of
the Code.
(xii) The Company and its Subsidiaries are not, and have not
been at any time, a party to a tax sharing, tax indemnity or tax allocation
agreement, and neither the Company nor any Subsidiary has assumed the tax
liability of any other person under contract.
(xiii) To the knowledge of the Company and the Stockholders,
neither the Company, any Subsidiary nor any Stockholder has taken any action or
refrained from taking any action that would cause the Merger not to qualify as a
reorganization as defined under Code Section 368(a)(1)(A) and Section
368(a)(2)(D).
(b) For purposes of this Agreement:
(i) the term "Tax" shall include any tax or similar
---
governmental charge, impost or levy (including without limitation income taxes,
franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross receipt
taxes, value added taxes, employment taxes, excise taxes, ad valorem taxes,
property taxes, withholding taxes, payroll taxes, minimum taxes or windfall
profit taxes) together with any related penalties, fines, additions to tax or
interest imposed by the United States or any state, county, local or foreign
government or subdivision or agency thereof; and
(ii) the term "Tax Return" shall mean any return
----------
(including any information return), report, statement, schedule, notice, form,
estimate or declaration of estimated tax relating to or required to be filed
with any governmental authority in connection with the determination,
assessment, collection or payment of any Tax.
5.24 ABSENCE OF CHANGES. Since the Interim Balance Sheet Date, the
Company and each Subsidiary has conducted its business in the ordinary course
and, between the Interim Balance Sheet Date and the date of this Agreement
except as contemplated herein or as set forth on SCHEDULE 5.24, there has not
been:
(a) any change that by itself or together with other changes has
had a Material Adverse Effect;
(b) any damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting the properties or business of the
Company and its Subsidiaries taken as a whole;
(c) any change in the authorized capital of the Company or any
Subsidiary or in their outstanding securities or any change in their ownership
interests or any grant of any options, warrants, calls, conversion rights or
commitments;
24
(d) any increase in the compensation, bonus, sales commissions or
fee arrangements payable or to become payable by the Company or any Subsidiary
to any of their officers, directors, Stockholders, employees, consultants or
agents, except in the ordinary course of business consistent with past practice
or as required by contract or law;
(e) any work interruptions, labor grievances or claims filed, or
any similar event or condition of any character, which has had a Material
Adverse Effect;
(f) any sale or transfer, or any agreement to sell or transfer,
any material assets property or rights of the Company or any Subsidiary to any
person other than distributions to Stockholders of assets not used in the
operation of the business;
(g) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company or any Subsidiary, including without
limitation any indebtedness or obligation of any Stockholder and his affiliates
owing to the Company or any Subsidiary, provided that the Company and its
Subsidiaries may negotiate and adjust bills in the course of good faith disputes
with customers in a manner consistent with past practice;
(h) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of the Company or any Subsidiary or requiring consent of any party to the
transfer and assignment of any such assets, property or rights;
(i) 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 business of the Company or any Subsidiary;
(j) any waiver of any material rights or claims of the Company or
any Subsidiary;
(k) to the knowledge of the Company any breach, amendment or
termination of any material contract, agreement, license, permit or other right
to which the Company or any Subsidiary is a party other than in the ordinary
course of business;
(l) any transaction by the Company or any Subsidiary outside the
ordinary course of business;
(m) any individual capital commitment by the Company or any
Subsidiary exceeding $50,000;
(n) other than as previously disclosed to CCC, any change in
accounting methods or practices (including any change in depreciation or
amortization policies or rates) by the Company or any Subsidiary or the
revaluation by the Company or any Subsidiary of any of their assets;
25
(o) any creation or assumption by the Company or any Subsidiary
of any Lien on any asset (other than Permitted Encumbrances, Liens arising under
existing lease financing arrangements which are not material and Liens for Taxes
not yet due and payable);
(p) any entry into, amendment of, relinquishment, termination or
non- renewal by the Company or any Subsidiary of any Material Contract, other
than in the ordinary course of business;
(q) any loan by the Company or any Subsidiary to any person or
entity, incurring by the Company or any Subsidiary, of any indebtedness for
borrowed money, guaranteeing by the Company or any Subsidiary of any
indebtedness, issuance or sale of any debt securities of the Company or any
Subsidiary or guaranteeing of any debt securities of others;
(r) the commencement or notice or, to the knowledge of the
Company and the Stockholders, written threat of commencement, of any lawsuit or
proceeding against, or investigation of, the Company or any Subsidiary or any of
their affairs; or
(s) to the knowledge of the Company, negotiation or agreement by
the Company or any Subsidiary or any officer or employee thereof to do any of
the things described in the preceding clauses (a) through (s) (other than
negotiations with CCC and its representatives regarding the transactions
contemplated by this Agreement).
5.25 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 5.25 sets forth a
complete and accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which the Company
and each Subsidiary has any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have
access thereto; and
(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Company and each
Subsidiary and a description of the terms of such power.
5.26 ENVIRONMENTAL MATTERS.
(a) Hazardous Material. To the knowledge of the Company other
------------------
than as set forth on SCHEDULE 5.26, no underground storage tanks and no amount
of any substance that has been regulated by any applicable law as radioactive,
toxic, hazardous or otherwise a danger to health or
26
the environment, including, without limitation, PCBs, asbestos, petroleum, urea-
formaldehyde and all substances listed as hazardous substances pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office, janitorial, vehicular
and similar supplies properly and safely maintained (a "Hazardous Material"),
------------------
are present in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that the Company and each
Subsidiary has at any time owned, operated, occupied or leased. SCHEDULE 5.26
identifies all underground and aboveground storage tanks, and the capacity, age,
and contents of such tanks are located on Real Property owned or leased by the
Company and each Subsidiary.
(b) Hazardous Materials Activities. Neither the Company nor any
------------------------------
Subsidiary has transported, stored, used, manufactured, disposed of or released,
or exposed its employees or others to, Hazardous Materials in violation of any
law in effect on or before the Closing Date, nor has the Company or any
Subsidiary disposed of, transported, sold, or manufactured any product
containing a Hazardous Material (collectively, "Company Hazardous Materials
---------------------------
Activities") in violation of any rule, regulation, or statute promulgated by any
----------
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Company Hazardous Material
Activity.
(c) Permits. The Company and each Subsidiary currently holds all
-------
environmental approvals, permits, licenses, clearances and consents (the
"Environmental Permits") necessary for the conduct of the Company's Hazardous
---------------------
Material Activities and other business of the Company and each Subsidiary as
such activities and business are currently being conducted. All Environmental
Permits are in full force and effect. The Company and each Subsidiary (A) is in
compliance in all material respects with all terms and conditions of the
Environmental Permits and (B) is in compliance in all material respects with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the laws of all
Governmental Entities relating to pollution or protection of the environment or
contained in any regulation, code, plan, order, decree, judgment, notice or
demand letter issued, entered, promulgated or approved thereunder. To the
Company's knowledge, there are no circumstances that may prevent or interfere
with such compliance in the future. SCHEDULE 5.26 includes a listing and
description of all Environmental Permits currently held by the Company and each
Subsidiary.
(d) Environmental Liabilities. No action, proceeding, revocation
-------------------------
proceeding, amendment procedure, writ, injunction or claim is pending against
the Company or any Subsidiary, or to the knowledge of the Company, threatened
against the Company or any Subsidiary concerning any Environmental Permit,
Hazardous Material or any Company Hazardous Materials Activity. There are no
present or, to the knowledge of the Company, no past actions, activities,
circumstances, conditions, events, or incidents that could involve the Company
or any Subsidiary (or any person or entity whose liability the Company or any
Subsidiary has retained or assumed, either by contract or operation of law) in
any environmental litigation, or impose upon the Company or any Subsidiary (or
any person or entity whose liability the Company or any Subsidiary has retained
or assumed,
27
either by contract or operation of law) any environmental liability including,
without limitation, common law tort liability.
5.27 RELATIONS WITH GOVERNMENTS. Neither the Company nor any
Subsidiary has 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 that would cause the Company or any Subsidiary
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
5.28 DISCLOSURE. The Company has delivered or made available to CCC
and Newco true and complete copies of each agreement, contract, commitment or
other document (or summaries thereof) that is referred to specifically in the
Schedules or that has been requested by CCC. Without limiting any exclusion,
exception or other limitation contained in any of the representations and
warranties made herein, this Agreement and the schedules and all other documents
and information furnished to CCC and its representatives pursuant hereto do not
and will not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements herein or therein not misleading.
If Green or Xxxxx Xxxxx becomes aware of any fact or circumstance which would
change a representation or warranty of any Stockholder in this Agreement or any
representation made on behalf of the Company, they shall give notice prior to
Closing of such fact or circumstance to CCC. However, such notification shall
not relieve the Company or the Stockholders of their respective obligations
under this Agreement.
5.29 CCC PROSPECTUS; SECURITIES REPRESENTATIONS. Each Stockholder has
received and reviewed a copy of the prospectus dated May 20, 1998 including all
supplements thereto (as supplemented, the "CCC Prospectus") contained in CCC's
--------------
shelf registration statement on Form S-1 (File No. 333-42317). Each Stockholder,
or, to the knowledge of such Stockholder, such Stockholder's purchaser
representative, (a) has such knowledge and experience in business and financial
matters and such knowledge concerning the business, operations and financial
condition of the Company that such Stockholder is capable of evaluating the
merits and risks of an investment in the shares of CCC Common Stock, (b) fully
understands the nature, scope, and duration of the limitations on transfer
contained herein, in the Affiliate Agreement (if applicable), and under
applicable law, and (c) can bear the economic risk of any investment in the
shares of CCC Common Stock and can afford a complete loss of such investment.
Each Stockholder, or such Stockholders' purchaser representative, has had an
adequate opportunity to ask questions and receive answers (and has asked such
questions and received answers to his satisfaction) from the officers of CCC
concerning the business, operations and financial condition of CCC. Except as
required by applicable law, the Stockholders have no contract, undertaking,
agreement or arrangement, written or oral, with any other person to sell,
transfer or grant participation in any shares of CCC Common Stock to be acquired
by such Stockholder in the Merger.
5.30 AFFILIATES. SCHEDULE 5.30 lists each of the persons who is, in
the reasonable judgment of the Company and the Stockholders, an affiliate of the
Company within the meaning of Rule 145 (each such person an "Affiliate" with
---------
respect to the Company) promulgated under the 1933 Act.
28
5.31 LOCATION OF CHIEF EXECUTIVE OFFICES. SCHEDULE 5.31 sets forth
the location of the Company's chief executive offices.
5.32 LOCATION OF EQUIPMENT AND INVENTORY. Set forth on SCHEDULE 5.32
is a list of all locations where a filing is required under the UCC (as defined
below) with respect to Inventory and Equipment held on the date hereof by the
Company or any Subsidiary. For purposes of this Agreement, (a) the term
"Inventory" shall mean any "inventory" as such term is defined in the Uniform
---------
Commercial Code as in effect on the date hereof in the states listed on SCHEDULE
5.32 (the "UCC") owned by the Company and each Subsidiary as of the date hereof,
---
and, in any event, shall include, but shall not be limited to, all merchandise,
inventory and goods, and all additions, substitutions and replacements thereof,
wherever located, together with all goods, supplies, incidentals, packaging
materials, labels, materials and any other items used or usable in
manufacturing, processing, packaging or shipping same; in all stages of
production, and all proceeds therefrom; and (b) the term "Equipment" shall mean
---------
any "equipment" as such term is defined in the UCC owned by the Company and each
Subsidiary as of the date hereof, and, in any event, shall include, but shall
not be limited to, all machinery, equipment, furnishings, fixtures and vehicles
owned by the Company and each Subsidiary , wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto.
5.33 FIRPTA. None of the Company and its Subsidiaries has ever been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code.
5.34 CROSS-INCORPORATION. Any disclosure on any Schedule attached
hereto may be deemed to be incorporated into and disclosed on any other Schedule
if such disclosure is specifically cross-referenced to such other Schedule. No
disclosure of any matter on any Schedule shall constitute a representation or
admission by the Stockholders that such matter is "material" or would have a
Material Adverse Effect as such terms are used in Article 5.
6. REPRESENTATIONS OF CCC AND NEWCO
To induce the Company and each Stockholder to enter into this Agreement
and consummate the transactions contemplated hereby, each of CCC and Newco
jointly and severally represents and warrants to the Company and the
Stockholders as follows (for purposes of this Agreement, the phrases "knowledge
---------
of CCC," "knowledge of Newco," "CCC's knowledge," or "Newco's knowledge" or
------ ------------------ --------------- -----------------
words of similar import, mean the actual knowledge of the directors and officers
of each of CCC and Newco.
6.1 DUE ORGANIZATION. Each of CCC and Newco is a corporation duly
organized, validly existing and in good standing under the laws of its state of
organization, and each is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective businesses in the places and in the manner as now
conducted, except where the failure to be so authorized, qualified or licensed
would not have a material adverse effect on the business, operations,
properties, assets or condition, financial or otherwise, of CCC or
29
Newco. Copies of the Certificate of Incorporation and the Bylaws of each of CCC
and Newco (collectively, the "CCC Charter Documents") have been made available
---------------------
to the Company. Neither CCC nor Newco is in violation of any CCC Charter
Document.
6.2 CCC COMMON STOCK. The shares of CCC Common Stock to be delivered
to the Stockholders pursuant to this Agreement, when delivered in accordance
with the terms of this Agreement, will be validly and legally issued shares of
CCC capital stock, fully paid and nonassessable and have been issued in
compliance with all relevant federal and state securities laws.
6.3 AUTHORIZATION; VALIDITY OF OBLIGATIONS. CCC and Newco have all
requisite corporate power and authority to enter into this Agreement and the
transactions contemplated hereby. Each of CCC and Newco has the full legal right
and authority to enter into this Agreement and the transactions contemplated
hereby. The execution and delivery of this Agreement by CCC and Newco and the
performance by each of CCC and Newco of the transactions contemplated herein
will, prior to Closing, have been duly and validly authorized by the respective
Boards of Directors of CCC and Newco, and this Agreement will, prior to Closing,
have been duly and validly authorized by all necessary corporate action. This
Agreement is a legal, valid and binding obligation of each of CCC and Newco
enforceable against CCC and Newco in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
6.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the CCC
Charter Documents;
(b) conflict with, or result in a default (or would constitute a
default but for a requirement of notice or lapse of time or both) under any
document, agreement or other instrument to which CCC or Newco is a party, or by
which CCC or Newco is bound, or result in the creation or imposition of any
Lien, charge or encumbrance on any of CCC's or Newco's properties pursuant to
(i) any law or regulation to which either CCC or Newco or any of their
respective property is subject, or (ii) any judgment, order or decree to which
CCC or Newco is bound or any of their respective property is subject;
(c) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of CCC or
Newco;
(d) violate any material law, order, judgment, rule, regulation,
decree or ordinance to which CCC or Newco is subject, or by which CCC or Newco
is bound;
(e) require the consent of any third party; or
30
(f) violate or conflict with any preemptive or similar rights,
trigger any "anti-dilution adjustment" to any right, warrant, option or
convertible debt or equity security.
6.5 CAPITALIZATION OF CCC AND OWNERSHIP OF CCC STOCK. The authorized
capital stock of CCC consists of 250,000,000 shares of Common Stock, of which
39,007,472 shares are outstanding on June 1, 1998, and 500,000 shares of
Convertible Non-Voting Common Stock, par value $.001 per share, of which 500,000
shares were outstanding on June 1, 1998. The authorized capital stock of Newco
consists of 1,000 shares of Common Stock, of which 100 shares are outstanding.
All of the issued and outstanding shares of Newco are owned beneficially, and of
record by CCC. All of the issued and outstanding shares of CCC Common Stock are
duly authorized and validly issued shares of CCC, fully paid and non-assessable.
All of the issued and outstanding shares of CCC Common Stock have been offered,
issued, sold and delivered by CCC in compliance with all applicable state and
federal laws concerning the issuance of securities and none of such shares was
issued in violation of the preemptive rights of any stockholder of CCC.
6.6 CONFORMITY WITH LAW; LITIGATION.
(a) Neither CCC nor Newco is in violation of any law or regulation or
under 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 which would have a material adverse effect on
the business operations, properties, assets or condition, financial or otherwise
of CCC and its subsidiaries taken as a whole. CCC has conducted and is
conducting its business in substantial 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 is not in violation of any of the foregoing which
might have a material adverse effect on the business operations, properties,
assets or conditions, financial or otherwise of CCC and its subsidiaries taken
as a whole.
(b) There are no claims, actions, suits or proceedings, pending or,
to the knowledge of CCC or Newco, threatened against or affecting CCC or Newco
at law or in equity, or before any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them that would have a material adverse
effect and no notice of any such claim, action, suit or proceeding, whether
pending or threatened, has been received. There are no judgments, orders,
injunctions, decrees, stipulations or awards (whether rendered by a court or
administrative agency or by arbitration) against CCC or Newco or against any of
the properties of either of them which would have a material adverse effect on
the business operations, properties, assets or conditions, financial or
otherwise of CCC and its subsidiaries taken as a whole.
6.7 DISCLOSURE. Without limiting any exclusion, exception or other
limitation contained in any of the representations and warranties made herein,
this Agreement and the schedules and all other documents and information
furnished to the Company and its representatives pursuant hereto do not and will
not include any untrue statement of a material fact or omit to state a material
fact necessary to make the statements herein or therein not misleading. If CCC
or Newco becomes aware
31
of any fact or circumstance which would change a representation or warranty of
CCC or Newco in this Agreement, they shall give notice prior to Closing of such
fact or circumstance to the Company. However, such notification shall not
relieve the CCC or Newco of their respective obligations under this Agreement.
6.8 CCC PROSPECTUS. The CCC Prospectus, in the form delivered to the
Stockholders pursuant to Section 5.29 hereof, does not contain, as of the date
hereof, with respect to the sale of shares of CCC Common Stock to the
Stockholders hereunder, any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The balance sheet of CCC (including the related notes)
included in the CCC Prospectus presents fairly, in all material respects, the
financial position of CCC as of the date thereof in conformity with GAAP.
6.9 REGISTRATION STATEMENT. The Shares to be delivered pursuant to this
Agreement will be issued pursuant to a Shelf Registration Statement on Form S-1
filed with the United States Securities and Exchange Commission (the
"Registration Statement") on May 20, 1998 and declared effective on May 20,
----------------------
1998. To the knowledge of CCC, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceeding for that purpose
shall have been instituted or threatened by the SEC. The Shares will be subject
to the contractual restrictions on resale set forth in Section 7.10 below and
will be tradable in accordance with the requirements of Rule 145(d) under the
1933 Act.
6.10 INVESTMENT INTENT. CCC is acquiring the shares of the Company for
its own account and not as a nominee or agent for any other Person, and not with
a view to or for resale in connection with any distribution thereof within the
meaning of the 1933 Act, and can bear the economic risk of an investment in the
shares of the Company and can afford a complete loss of such investment.
7. COVENANTS
7.1 TAX MATTERS.
(a) The following provisions shall govern the allocation of
responsibility as between the Stockholders, on the one hand, and the Surviving
Corporation, on the other, for certain tax matters following the Closing Date:
(i) The Representative shall cause to be prepared and cause
to be filed, within the time and in the manner provided by law, all Tax Returns
of the Company and its Subsidiaries for all periods ending on or before the
Closing Date that are due after the Closing Date. The Stockholders shall pay to
the Surviving Corporation on or before the due date of such Tax Returns the
amount of all Taxes shown as due on such Tax Returns to the extent that such
Taxes are not reflected in the current liability accruals for Taxes shown on the
Company's and its Subsidiaries' books and records as of the Closing Date. Such
Returns shall be prepared and filed in accordance
32
with applicable law and in a manner consistent with past practices and shall be
subject to review and approval by CCC which shall not be unreasonably withheld
or delayed. To the extent reasonably requested by the Stockholders or required
by law, CCC and the Surviving Corporation shall participate in the filing of any
Tax Returns filed pursuant to this paragraph. The parties acknowledge that under
Code Section 1362(e) a short-year return for the period ending the day before
the Closing Date must be filed by the Company and its Subsidiaries.
(ii) The Surviving Corporation shall prepare or cause to
be prepared and file or cause to be filed any Tax Returns for Tax periods which
begin before the Closing Date and end after the Closing Date other than the
short-year return required to be filed under Code Section 1362(e). The
Stockholders shall pay to the Surviving Corporation within fifteen (15) days
after the date on which Taxes are paid with respect to such periods an amount
equal to the portion of such Taxes which relates to the portion of such taxable
period ending on the Closing Date to the extent such Taxes are not reflected in
the current liability accruals for Taxes (excluding reserves for deferred Taxes)
shown on the Company's and each Subsidiary's books and records as of the Closing
Date. Notwithstanding the preceding sentence, the Stockholders shall not be
responsible for any tax that may arise under Section 4978 of the Code as a
result of the consummation of the Merger. For purposes of this Section 7.1, in
the case of any Taxes that are imposed on a periodic basis and are payable for a
taxable period that includes (but does not end on) the Closing Date, the portion
of such Tax which relates to the portion of such taxable period ending on the
Closing Date shall (A) in the case of any Taxes other than Taxes based upon or
related to income or receipts, be deemed to be the amount of such Tax for the
entire taxable period multiplied by a fraction the numerator of which is the
number of days in the taxable period ending on the Closing Date and the
denominator of which is the number of days in the entire taxable period, and (B)
in the case of any Tax based upon or related to income or receipts be deemed
equal to the amount which would be payable if the relevant taxable period ended
on the Closing Date. Any credits relating to a taxable period that begins before
and ends after the Closing Date shall be taken into account as though the
relevant taxable period ended on the Closing Date. All determinations necessary
to give effect to the foregoing allocations shall be made in a manner consistent
with prior practice of the Company and its Subsidiaries. The Surviving
Corporation will pay over to the Stockholders any Tax refunds attributable to
Tax periods ending on or before the Closing Date; provided that either (i) the
Company paid the Taxes subject to the refund, (ii) such Taxes were reflected in
the current liability accruals for Taxes (excluding reserves for deferred Taxes)
shown on the Company's books and records as of the Closing Date, or (iii) that
the Stockholders paid to the Company or to the applicable taxing authority,
pursuant to this Section 7.1(a), the Taxes subject to the refund(s).
(iii) CCC and the Surviving Corporation on the one hand and
the Stockholders on the other hand shall (A) cooperate fully, as reasonably
requested, in connection with the preparation and filing of Tax Returns pursuant
to this Section 7.1 and any audit, litigation or other proceeding with respect
to Taxes; (B) make available to the other, as reasonably requested, all
information, records or documents with respect to Tax matters pertinent to the
Company and its Subsidiaries for all periods ending prior to or including the
Closing Date; and (C) preserve information, records or documents relating to Tax
matters pertinent to the Company and its
33
Subsidiaries that is in their possession or under their control until the
expiration of any applicable statute of limitations or extensions thereof.
(iv) The Stockholders shall timely pay all transfer,
documentary, sales, use, stamp, registration and other Taxes and fees arising
from or relating to the transactions contemplated by this Agreement, and the
Stockholders shall, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration, and other Taxes and fees. If required by applicable law,
CCC and the Surviving Corporation will join in the execution of any such Tax
Returns and other documentation.
7.2 LONG TERM INCENTIVE PLAN. CCC shall cause the Surviving Corporation
to establish a Long Term Incentive Plan similar to the Long Term Incentive Plan
currently maintained by the Company and to maintain the Long Term Incentive Plan
for at least the term of the Employment Contracts.
7.3 ACCOUNTS RECEIVABLE. In the event that all Accounts Receivable are
not collected in full within 135 days (18 months for the Account Receivable
described on Schedule 7.3) after the Closing then, at the request of the
Surviving Corporation, the Stockholders shall pay (based on their percentage
ownership of the Company immediately prior to the Effective Time) the Surviving
Corporation an amount equal to the Accounts Receivable not so collected, and
upon receipt of such payment the Surviving Corporation shall assign to the
Stockholders making the payment all of their rights with respect to the
uncollected Accounts Receivable giving rise to the payment and shall also
thereafter promptly remit any excess collections received by it with respect to
such assigned Accounts Receivable.
7.4 401(K) PLAN. CCC shall cause the Surviving Corporation to retain
the Company's current 401(k) plan until the Surviving Corporation adopts a
401(k) plan that provides substantially the same or more favorable benefits than
the Company's current 401(k) plan.
7.5 RELATED PARTY AGREEMENTS. All Related Party Agreements, other than
those listed on Schedule 7.5, will be terminated at the Closing by the Company,
its Subsidiaries and/or Stockholder parties thereto. Reasonably promptly
following the Closing and at the expense of CCC, the Stockholders shall, if
requested by CCC direct a third party, which shall be reasonably acceptable to
CCC, to evaluate if the rents with respect to each lease that is a Related Party
Agreement (other than those listed on Schedule 7.5) are greater than those for
comparably situated properties in the same geographic market as of the date the
Related Party Agreement was entered into or as of the date of such evaluation.
To the extent that such third party reasonably determines that the rents payable
with respect to any such lease are 25% or more than for comparably situated
properties both as of the date the Related Party Agreement was entered into and
the date of the evaluation, the parties will negotiate in good faith to adjust
such rents to market rates.
34
7.6 COOPERATION.
(a) The Company, the Stockholders, CCC 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 instruments as the
other may reasonably request for the purpose of carrying out this Agreement. In
connection therewith, if required, the president or chief financial officer of
the Company shall execute any documentation reasonably required by CCC's
Accountant (in connection with such accountants' audit or review of the Company)
or the Nasdaq National Market.
(b) The Stockholders and the Company shall cooperate and use
their reasonable efforts to have the present officers, directors and employees
of the Company cooperate with CCC on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
filing obligations, actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Closing Date.
(c) Each party hereto shall cooperate in obtaining all consents and
approvals required under this Agreement to effect the transactions contemplated
hereby
(d) The Company, the Stockholders and CCC shall file any
information and documents that remain to be filed under the HSR Act as promptly
as practicable at such time as such items are required to be filed. The Parties
hereby agree to (a) cooperate with each other in connection with such HSR Act
filings, which cooperation shall include furnishing the other with any
information or documents that may be reasonably required in connection with such
filings; (b) promptly file, after any request by the Federal Trade Commission
("FTC") or Department of Justice ("DOJ") and after appropriate negotiation with
the FTC or DOJ of the scope of such request, any information or documents
requested by the FTC or DOJ; and (c) furnish each other with any correspondence
from or to, and notify each other of any other communications with, the FTC or
DOJ that relates to the transactions contemplated hereunder, and to the extent
practicable, to permit each other to participate in any conferences with the FTC
or DOJ.
7.7 CONDUCT OF BUSINESS PENDING CLOSING. Except as set forth on
Schedule 7.7 or as permitted by Section 7.9A, between the date hereof and the
Effective Time, the Company will and will cause each Subsidiary to (except as
requested or agreed by CCC):
(a) carry on its business in substantially the same manner as it
has heretofore and not introduce any material new method of management,
operation or accounting;
(b) maintain its properties, facilities and equipment and other
assets in as good working order and condition as at present, ordinary wear and
tear excepted;
(c) perform in the ordinary course of business all of its
obligations under debt and lease instruments and other agreements relating to or
affecting its assets, properties, equipment or rights;
35
(d) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments other than in the ordinary course of
business without the consent of CCC;
(e) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(f) use its best efforts to maintain and preserve its business
organization intact, retain its present key employees and maintain its
relationships and present agreements with suppliers, customers and others having
business relations with the Company and its Subsidiaries;
(g) maintain compliance in all material respects with all permits,
rules, laws and regulations, consent orders and the like; and
(h) maintain present salaries and commission levels for all
officers, directors, employees, agents, representatives and independent
contractors, except in the ordinary course of business consistent with past
practice or as required by contract or law.
7.8 ACCESS TO INFORMATION. Between the date of this Agreement and the
Closing Date, the Company will afford to the officers and authorized
representatives of CCC during normal business hours and with reasonable prior
notice access to (i) all of the sites, properties, books and records of the
Company and (ii) such additional financial and operating data and other
information as to the business and properties of the Company and its
Subsidiaries as CCC may from time to time reasonably request, including without
limitation, access upon reasonable request to the Company's and each
Subsidiary's employees, customers, vendors, suppliers and creditors. No
information or knowledge obtained in any investigation pursuant to this Section
7.8 shall affect or be deemed to modify any representation or warranty contained
in this Agreement or the conditions to the obligations of the parties to
consummate the Merger.
7.9 PROHIBITED ACTIVITIES. Except as provided in Section 7.9A or as set
forth in Schedule 7.9, between the date hereof and the Effective Time, the
Company will not, and will not permit any Subsidiary to, without the prior
written consent of CCC:
(a) make any change in its Certificate of Incorporation or Bylaws,
or authorize or propose the same;
(b) issue, deliver or sell, authorize or propose the issuance,
delivery or sale of any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind, or authorize or propose
any change in its equity capitalization, or issue or authorize the issuance of
any debt securities, except (a) as required under any currently existing
"employee benefit plan" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended), any currently existing employment
agreement or any currently existing buy sell agreements, (b) shares issued upon
exercise of options or other rights outstanding as of the date
36
hereof, (c) shares, if any, required to be issued under the tax-qualified
employee stock ownership plan or (d) stock appreciation rights;
(c) declare or pay any dividend, or make any distribution
(whether in cash, stock or property) in respect of its stock whether now or
hereafter outstanding, or split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock except as provided
above in subsection (b), or purchase, redeem or otherwise acquire or retire for
value any shares of its stock;
(d) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, or guarantee any
indebtedness, except in the ordinary course of business and consistent with past
practice in an amount in excess of $50,000 individually;
(e) increase the compensation payable or to become payable to
any officer, director, Stockholder, employee, agent, representative or
independent contractor; make any bonus or management fee payment to any such
person (except for accrued and unpaid bonuses); make any loans or advances;
adopt or amend any Plan; or grant any severance or termination pay;
(f) create or assume any Lien (other than Permitted Encumbrances)
upon any assets or properties whether now owned or hereafter acquired;
(g) sell, assign, lease, pledge or otherwise transfer or dispose of
any property or equipment except in the ordinary course of business consistent
with past practice;
(h) acquire or negotiate for the acquisition of (by merger,
consolidation, purchase of a substantial portion of assets or otherwise) any
business or the start-up of any new business, or otherwise acquire or agree to
acquire any assets that are material, individually or in the aggregate, to the
Company and its Subsidiaries;
(i) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(j) waive any material rights or claims of the Company or any
Subsidiary, provided that the Company and each Subsidiary may negotiate and
adjust bills and accounts receivable in the course of good faith disputes with
customers in a manner consistent with past practice;
(k) commit a breach of or amend or terminate any material
agreement, permit, license or other right;
(l) enter into any other transaction (i) that is not negotiated at
arm's length with a third party not affiliated with the Company or any
Subsidiary or any officer, director or Stockholder of the Company or any
Subsidiary or (ii) outside the ordinary course of business consistent with past
practice or (iii) prohibited hereunder;
37
(m) commence a lawsuit other than for routine collection of bills
and accounts receivable;
(n) revalue any of its assets, including without limitation,
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business consistent with past practice;
(o) make any tax election other than in the ordinary course of
business and consistent with past practice, change any tax election, adopt any
tax accounting method other than in the ordinary course of business and
consistent with past practice, change any tax accounting method, file any Tax
Return (other than any estimated tax returns, payroll tax returns or sales tax
returns) or any amendment to a Tax Return, enter into any closing agreement,
settle any tax claim or assessment, or consent to any tax claim or assessment,
without the prior written consent of CCC; or
(p) take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 7.9(a) through (o) above.
7.9A PERMITTED DISTRIBUTIONS, ETC.
Notwithstanding Section 7.7, 7.9 or any other provision of this
Agreement, the Company and Stockholders shall, at any time on or before the
Closing, be permitted to:
(a) Distribute the stock of Regency Aviation Company, Inc.
("Regency Aviation") to the Stockholders, or dissolve and liquidate Regency
Aviation and distribute any assets therein (or any portion thereof), to the
Stockholders;
(b) Distribute any cash or cash equivalents (investment securities,
money market instruments, etc.) to the Stockholders;
(c) Distribute any other asset of the Company or any of its
subsidiaries which is not used or useful in the Company's and its Subsidiaries'
electrical contracting business (including, without limitation, the Company's
rights in respect of any split dollar life insurance policy on the life of
Green); or
(d) Pay any transaction costs on behalf of the Company or its
Stockholders incurred in connection with this Agreement and the transaction
contemplated hereby.
None of the foregoing distributions shall cause any representation,
warranty, covenant or agreement herein to be untrue or in violation and such
aforesaid provisions shall be deemed modified to the extent necessary to avoid
such untruth or violation; provided that, nothing in this Section 7.9A shall
change the requirement that a Merger Consideration Adjustment be made to the
extent Actual Net Worth is determined to be less than $4,500,000.
38
7.10 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
Company and each Subsidiary shall satisfy any requirement for notice of the
transactions contemplated by this Agreement under applicable collective
bargaining agreements, if requested by CCC, and shall provide CCC with proof
that any required notice has been sent.
7.11 SALES OF CCC COMMON STOCK.
(a) Except with the consent of CCC, no Stockholder will, directly
or indirectly, offer, sell, contract to sell, pledge or otherwise dispose of any
shares of CCC Common Stock received by such Stockholder in the Merger as the
Merger Consideration prior to the first anniversary of the Closing. Thereafter,
up to one-third of the shares of CCC Common Stock received by a Stockholder as
part of the Merger Consideration may be resold at any time after the first
anniversary of the Closing, an additional one-third may be resold beginning
eighteen months after the Closing by each Stockholder and the remaining one-
third may be resold beginning on March 12, 2000. Notwithstanding anything in the
foregoing to the contrary, a Stockholder may transfer shares of CCC Common Stock
to a Related Party for estate planning purposes, provided that such Related
Party transferee (i) acknowledges the contractual restrictions relating to the
transfer of such shares set forth in this Section 7.11 and (ii) agrees to be
bound by the same. For purposes hereof, "Related Party" means, with respect to
any Person that is an individual, any spouse, lineal descendant (including by
adoption), executor, administrator, trustee, legatee or beneficiary of such
Person or any other Person controlled by such Person or as to which such Person
or Persons are beneficiaries. For purposes hereof, "Person" means an individual,
corporation, association, partnership, joint venture, trust, estate, limited
liability company, limited liability partnership or other entity or
organization. Transfers of shares of CCC Common Stock by employees of CCC also
are subject to CCC policies against xxxxxxx xxxxxxx and the misuse of material
non-public information and compliance with applicable securities laws and rules.
Persons who become affiliates of CCC may be subject to additional restrictions
on the trading of their CCC Common Shares pursuant to applicable law.
(b) Each Stockholder agrees to sell the shares of CCC Common
Stock to be received by such Stockholder in the Merger only in accordance with
the requirements, if any, of applicable law, including, without limitation, Rule
145(d) promulgated under the 1933 Act or any successor to such rule. CCC
acknowledges that the provisions of this Section 7.10(b) will be satisfied as to
any sale by a Stockholder of the CCC Common Stock that the Stockholder may
acquire pursuant to the Merger by a broker's letter and a letter from the
Stockholder with respect to that sale stating that the applicable requirements
of Rule 145(d)(1) have been met or are inapplicable by virtue of Rule 145(d)(2)
or Rule 145(d)(3).
(c) The certificate or certificates evidencing the shares of CCC
Common Stock to be delivered to the Stockholders in the Merger will bear
restrictive legends substantially in the following forms as long as applicable:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), MAY
--------------
39
APPLY. IF RULE 145 APPLIES, PRIOR TO [ONE YEAR FROM DATE OF
---------------------
ACQUISITION], THESE SHARES MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH
-----------
THE PROVISIONS OF RULE 145(d)(1) OR ANOTHER APPLICABLE EXEMPTION UNDER
THE SECURITIES ACT. WITHOUT LIMITING THE FOREGOING, IF RULE 145
APPLIES, AFTER [ONE YEAR FROM DATE OF ACQUISITION], THESE SHARES MAY BE
---------------------------------
TRANSFERRED BY NON-AFFILIATES OF THE ISSUER UNDER RULE 145(d)(2) SO
LONG AS THE ISSUER IS CURRENT IN ITS REPORTING OBLIGATIONS UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OR UNDER ANOTHER
APPLICABLE EXEMPTION UNDER THE SECURITIES ACT.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CONTRACTUAL
RESTRICTIONS ON TRANSFER EXPIRING ON MARCH 12, 2000, PURSUANT TO THAT
CERTAIN AGREEMENT AND PLAN OF REORGANIZATION DATED AS OF JUNE 1, 1998
(THE "AGREEMENT"), BY AND AMONG THE ISSUER, RECI ACQUISITION CORP.,
---------
REGENCY ELECTRIC COMPANY, INC. (THE "COMPANY") AND THE STOCKHOLDERS OF
-------
THE COMPANY. PRIOR TO THE EXPIRATION OF SUCH HOLDING PERIOD, SUCH
SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED AND THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, TRANSFER OR
ASSIGNMENT EXCEPT TO THE EXTENT SUCH SALE, TRANSFER OR ASSIGNMENT IS IN
COMPLIANCE WITH THE AGREEMENT. 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) WHEN THE
HOLDING PERIOD HAS EXPIRED.
(d) Each of the certificates evidencing the Pledged Assets
will, as long as such shares are subject to Section 3.2 hereof, bear restrictive
legends substantially in the following forms:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN PLEDGED AS
COLLATERAL PURSUANT TO THAT CERTAIN AGREEMENT AND PLAN OF
REORGANIZATION DATED JUNE 1, 1998 BY AND AMONG CONSOLIDATION CAPITAL
CORPORATION, RECI ACQUISITION CORP., REGENCY ELECTRIC COMPANY, INC.
(THE "COMPANY") AND THE STOCKHOLDERS OF THE COMPANY. PRIOR TO THE
-------
EXPIRATION OF THE PLEDGE AS SET FORTH IN SUCH AGREEMENT, SUCH SHARES
MAY NOT BE OFFERED, SOLD, EXCHANGED, TRANSFERRED OR OTHERWISE DISPOSED
OF.
7.12 CCC STOCK OPTIONS. Subject to prior approval by the Compensation
-----------------
Committee of the Board, options to purchase 250,000 shares of CCC Common Stock
shall be available for issuance immediately after the Closing to the key
employees of the Surviving Corporation, as determined by
40
the current Board of the Company, in accordance with CCC's policies, and
authorized and issued under the terms of CCC's 1997 Long-Term Incentive Plan.
The exercise price of such options shall be equal to the fair market value of
the underlying shares of CCC Common Stock at date of grant and such options
shall have vesting provisions established by the Compensation Committee of the
Board. The value of such options on the Merger Effective Date together with the
Base Merger Consideration, Contingent Merger Consideration and the aggregate
amount of distributions permitted to be made hereunder to the Stockholders after
March 31, 1998 and before the Closing Date is the "Aggregate Merger
----------------
Consideration."
-------------
7.13 TAX COVENANT. CCC, Newco and the Company shall treat the Merger for
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code and any comparable state or local tax statute.
7.14 TAX FREE REORGANIZATION PROTECTION. Prior to the Effective Time, CCC,
Newco, the Stockholders and the Company will each use their best efforts to
cause the Merger to qualify, and prior to the Effective Time and on and after
the Closing Date, will refrain from taking any actions that would result in the
Merger failing to qualify, as a reorganization as defined under Code Section
368(a)(1)(A) and Section 368(a)(2)(D). After the Effective Time, CCC, Newco,
the Stockholders and the Company will refrain from taking any actions that would
cause the stock paid to the Stockholders pursuant to Section 2.3 of this
Agreement to be taxable to the Stockholders upon receipt.
7.15 EXECUTIVE EMPLOYMENT AGREEMENTS. CCC shall cause the Surviving
Company (or its subsidiaries) to enter into employment agreements that include
the executive compensation bonus plan as previously disclosed to CCC by the
Company with Xxxxx Xxxxx, Xxxxxx X Xxxxxx, Xxxx X. Xxxxx, Xxxxxxx X. Xxxxx,
Xxxxx X. Xxxxxxxx and Xxxxxxx X. Crochet in substantially the same form as set
forth in SCHEDULE 7.15 (the "Employment Agreements") effective as of the Closing
Date.
7.16 DIRECTOR AND OFFICER INDEMNIFICATION. CCC will provide to each
director and officer of the Surviving Corporation, during the term of his
service, directors and officers insurance having coverage at least as
comprehensive as the directors and officers insurance currently maintained by
CCC. In addition, all rights to indemnification for acts or omissions occurring
prior to the Closing now existing in favor of current or former directors,
officers, employees or agents of the Company required by applicable law, the
Company's Charter or bylaws shall survive the Merger and continue in full force
and effect in accordance with their terms for a period of at least six years
from the Closing Date.
7.17 INDEMNIFICATION OF LICENSE HOLDERS. CCC shall cause the Surviving
Corporation to indemnify each of the employees listed on SCHEDULE 5.13 for any
claim arising in connection with the Surviving Corporation's use of the Permits
listed opposite each such employee's name on such Schedule.
41
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CCC AND NEWCO
The obligation of CCC and Newco to effect the Merger is subject to the
satisfaction or waiver, at or before the Effective Time, of the following
conditions and deliveries:
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. (a) All
of the representations and warranties of the Stockholders and the Company
contained in this Agreement shall be true, correct and complete on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date except (i) as to representations and
warranties as of a specific date, (ii) as permitted by 7.7, 7.9 and 7.9A, (iii)
which would not have a Material Adverse Effect; and (b) all of the terms,
covenants, agreements and conditions of this Agreement to be complied with,
performed or satisfied by the Company and the Stockholders on or before the
Closing Date shall have been duly complied with, performed or satisfied except
where the failure to do so would not have a Material Adverse Effect; and (c) a
certificate to the foregoing effects dated the Closing Date and signed on behalf
of the Company and by each Stockholder shall have been delivered to CCC.
8.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
CCC's proposed acquisition of the Company, or limiting or restricting CCC's
conduct or operation of the business of the Company (or its own business) which
has a reasonable likelihood of succeeding following the Merger shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending. There shall be no action, suit
claim or proceeding of any nature pending or threatened against CCC, Newco or
the Company, their respective properties or any of their officers or directors,
that could materially and adversely affect the business, assets, liabilities,
financial condition, results of operations or prospects of the Company and its
Subsidiaries taken as a whole.
8.3 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
changes in the business, operations, affairs, prospects, properties, assets or
condition (financial or otherwise) of the Company and its Subsidiaries, taken as
a whole, since the Balance Sheet Date; and CCC shall have received a certificate
signed by each Stockholder dated the Closing Date to such effect.
8.4 CONSENTS AND APPROVALS. All necessary consents of, and filings with,
any governmental authority or agency or third party, relating to the
consummation by the Company and the Stockholder of the transactions contemplated
hereby, shall have been obtained and made. Any waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated, and no action by the Department of Justice ("DOJ") or Federal Trade
Commission ("FTC") challenging or seeking to enjoin the consummation of the
transactions contemplated hereby shall be pending.
8.5 OPINION OF COUNSEL. CCC shall have received an opinion from counsel
to the Company and the Stockholders, dated the Closing Date, in form and
substance satisfactory to CCC.
42
8.6 CHARTER DOCUMENTS. CCC shall have received (a) a copy of the
Certificate of Incorporation of the Company certified by an appropriate
authority in the state of its incorporation and (b) a copy of the Bylaws of the
Company certified by the Secretary of the Company.
8.7 QUARTERLY FINANCIAL STATEMENTS. CCC shall have received from the
Company completed quarterly financial statements for any quarter ending after
the date of the Interim Financials in a form reasonably satisfactory to CCC.
8.8 AFFILIATE AGREEMENTS. The Stockholders listed on SCHEDULE 5.30 shall
have entered into an Affiliate Agreement in the form set forth as SCHEDULE 8.8.
8.9 STOCKHOLDERS' RELEASE. The Stockholders shall each have delivered to
CCC an instrument dated the Closing Date in the form of EXHIBIT 8.9.
8.10 BOARD APPROVAL. This Agreement and the Merger shall have been adopted
and approved by the Board of CCC.
8.11 GREEN EMPLOYMENT AGREEMENT. Green shall have entered into an
employment agreement with the Surviving Corporation in the form attached hereto
as SCHEDULE 8.11.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS
The obligation of the Stockholders and the Company to effect the Merger are
subject to the satisfaction or waiver, at or before the Effective Time, of the
following conditions and deliveries:
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. (a) All
of the representations and warranties of CCC and Newco contained in this
Agreement shall be true, correct and complete on and as of the Closing Date with
the same effect as though such representations and warranties had been made as
of such date; (b) all of the terms, covenants, agreements and conditions of this
Agreement to be complied with, performed or satisfied by CCC and Newco on or
before the Closing Date shall have been duly complied with, performed or
satisfied; and (c) a certificate to the foregoing effects dated the Closing Date
and signed by the President or any Vice President of CCC shall have been
delivered to the Company and the Stockholders.
9.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
CCC's proposed acquisition of the Company, limiting or restricting CCC's conduct
or operation of the business of the Company (or its own business) following the
Merger or restraining or prohibiting the Company or the Stockholders from
consummating the transactions contemplated hereby shall be in effect, nor shall
any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any
43
of the foregoing be pending. There shall be no action, suit, claim or proceeding
of any nature having a reasonable likelihood of success pending or threatened,
against CCC, Newco, the Stockholders, or the Company, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, financial condition, results of
operations or prospects of CCC and its subsidiaries taken as a whole.
9.3 CONSENTS AND APPROVALS. All necessary consents of, and filings with,
any governmental authority or agency or third party relating to the consummation
by CCC and Newco of the transactions contemplated herein, shall have been
obtained and made. Any waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and no action by
the DOJ or FTC challenging or seeking to enjoin the consummation of the DOJ
transactions contemplated hereby shall be pending.
9.4 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
changes in the business, operations, properties, assets, or condition (financial
or otherwise) of CCC and its subsidiaries, taken as a whole, since the date of
this Agreement, and the Stockholders shall have received a certificate signed by
CCC and Newco dated the Closing Date to such effect; provided, however, that the
Stockholders and the Company shall be required to effect the Merger (and this
condition shall be deemed satisfied) if the foregoing matters, taken together,
would not, in the reasonable discretion of the Stockholders and the Company,
have a material adverse effect on the business operations, properties, assets or
conditions, financial or otherwise, of CCC and its subsidiaries taken as a
whole.
9.5 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION. The persons set
forth in Section 1.3(d) shall have been appointed, effective at the Effective
Time, to serve as officers and directors of the Surviving Corporation.
9.6 EMPLOYMENT AGREEMENTS. The Surviving Corporation shall have afforded
Green the opportunity to enter into, at Closing, an employment agreement with
the Surviving Corporation in substantially the form of SCHEDULE 8.11 hereto.
The Surviving Corporation (or its subsidiaries) shall have afforded the persons
listed in Section 7.14 the opportunity to enter into, at Closing, an employment
agreement with the Surviving Corporation (or its subsidiaries) in substantially
the form of SCHEDULE 7.14 hereto (the "Employment Agreements").
---------------------
9.7 REGISTRATION STATEMENT. No stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceeding for that
purpose shall have been instituted or threatened by the SEC and the shares of
CCC Common Stock to be issued as part of the Base Merger Consideration shall
have been approved for listing on Nasdaq.
10. INDEMNIFICATION
10.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders,
jointly and severally, covenant and agree to indemnify, defend, protect and hold
harmless CCC, Newco and the
44
Surviving Corporation and their respective officers, directors, employees,
shareholders, assigns, successors and affiliates (individually, an "CCC
---
Indemnified Party" and collectively, "CCC Indemnified Parties") from, against
----------------- -----------------------
and in respect of all liabilities, losses, claims, damages, causes of action,
lawsuits, administrative proceedings (including informal proceedings),
investigations, audits, demands, assessments, adjustments, judgments, settlement
payments, deficiencies, penalties, fines, interest (including interest from the
date of such damages) and costs and expenses (including without limitation
reasonable attorneys' fees and disbursements of every kind, nature and
description) (collectively, "Damages") suffered, sustained, incurred or paid by
-------
the Indemnified Parties in connection with, resulting from or arising out of,
directly or indirectly:
(a) any breach of any representation or warranty of the Stockholder or
the Company set forth in this Agreement or any Schedule, certificate or other
document or instrument, delivered by or on behalf of the Stockholder or the
Company in connection herewith; or
(b) any nonfulfillment of any covenant or agreement by the
Stockholders or, prior to the Effective Time, the Company, under this Agreement
or certificate or other document or instrument, delivered by or on behalf of the
Stockholders or the Company in connection herewith.
10.2 GENERAL INDEMNIFICATION BY CCC AND NEWCO. CCC and Newco, jointly and
severally, covenant and agree to indemnify, defend, protect and hold harmless
the Stockholders and their respective officers, directors, employees,
shareholders, assigns, successors and affiliates (individually, a "Shareholder
-----------
Indemnified Party" and collectively, the "Shareholder Indemnified Parties")
----------------- -------------------------------
from, against and in respect of all Damages suffered, sustained, incurred or
paid by the Shareholder Indemnified Parties in connection with, resulting from
or arising out of, directly or indirectly:
(a) any breach of any representation or warranty of CCC or Newco set
forth in this Agreement or any Schedule or certificate, delivered by or on
behalf of any CCC or Newco in connection herewith; or
(b) any nonfulfillment of any covenant or agreement by CCC or Newco
under this Agreement.
10.3 LIMITATION AND EXPIRATION. Notwithstanding the above:
(a) there shall be no liability for indemnification under Section 10.1
or 10.2 unless, and solely to the extent that the aggregate amount of Damages
exceeds an amount equal to one percent of the Aggregate Merger Consideration
(the "Indemnification Threshold") at which time the Indemnifying Party (defined
-------------------------
in Section 10.4 below) shall be liable for all Damages from the first dollar;
provided, however, that the Indemnification Threshold shall not apply to (i)
adjustments to the Merger Consideration as set forth in Sections 2.2 and 3.1; or
(ii) Damages arising out of any breaches of the covenants of the Stockholders
set forth in this Agreement which occur to the knowledge of the Company; or
(iii) representations and warranties made in (A) Section 5.23 (taxes), or (B)
Sections 5.22(b) (litigation) and 5.26 (environmental matters), and with respect
to this clause
45
(B), the Indemnifying Party shall only be liable for Damages to the extent such
Damages exceed $150,000.
(b) the aggregate amount of any liability for Damages of the
Stockholders, CCC and Newco under this Article 10 shall not exceed 50% of the
Base Merger Consideration except with regard to any Damages that occur as a
result of fraudulent misrepresentations or fraudulent acts of the Stockholders,
the Company, its Subsidiaries, CCC or Newco, as applicable;
(c) the indemnification obligations under this Article 10, or under
any certificate or writing furnished in connection herewith, shall terminate at
the date that is the later of clause (i) or (ii) of this Section 10.3(c):
(i)
(1) except as to representations, warranties, and covenants
specified in clause (i)(2) of this Section 10.3(c), the first anniversary of the
Closing Date, or
(2) with respect to representations and warranties contained
in 5.23 (taxes), 5.26 (environmental matters), and the indemnification set forth
in Section 10.1(b) on (A) the date that is six (6) months after the expiration
of the longest applicable federal or state statute of limitation (including
extensions thereof), or (B) if there is no applicable statute of limitation, (x)
five (5) years after the Closing Date if the Claim is related to the cost of
investigating, containing, removing, or remediating a release of Hazardous
Material into the environment, or (y) two (2) years after the Closing Date for
any other Claim covered by clause (i)(2)(B) of this Section 10.3(c); or
(ii) the final resolution of claims or demands pending as of the
relevant dates described in clause (i) of this Section 10.3(c) (such claims
referred to as "Pending Claims").
--------------
(d) the Stockholders shall have no liability under this Article 10 in
respect of any Damages to the extent the amount thereof has been recouped by CCC
in the form of a as a result of any reduction to the Merger Consideration
pursuant to the provisions of Sections 2.2(b)-(d).
(e) to the extent of the amount CCC actually receives pursuant to a
Merger Consideration Adjustment that is directly attributable to a decrease in
the Actual Closing Net Worth that consists of a liability for which CCC would
otherwise be entitled to indemnification under this Article 10;
(f) Damages will be net of:
(i) any amounts recovered from third parties by way of
indemnification;
(ii) insurance proceed and other receipts or other reimbursement
of losses from third parties; and
46
(iii) amounts attributable to any tax benefit if actually
realized with respect to the loss.
The Indemnified Parties agree to pursue the remedies described under
the foregoing clauses (i) through (iii) in good faith and acknowledge that
such remedies are not the Indemnified Parties' exclusive remedies.
(g) Damages shall not under any circumstances include punitive or
consequential Damages;
(h) the Indemnified Parties shall have no right to be indemnified for
Damages arising out of breaches of a representation or warranty occurring prior
to Closing if disclosed to the Indemnified Party prior to Closing;
(i) upon making a payment of Damages, the Indemnifying Party shall be
subrogated to the extent of such payment, to any rights of the Indemnified Party
in respect of the matter underlying the claim.
10.4 INDEMNIFICATION PROCEDURES. All claims or demands for indemnification
under this Article 10 ("Claims") shall be asserted and resolved as follows:
------
(a) In the event that any CCC Indemnified Party or Stockholder
Indemnified Party (in either case, an "Indemnified Party") has a Claim against
-----------------
any party obligated to provide indemnification pursuant to this Article 10 (the
"Indemnifying Party") which does not involve a Claim being asserted against or
------------------
sought to be collected by a third party, the Indemnified Party shall with
reasonable promptness notify the Indemnifying Party of such Claim, specifying
the nature of such Claim and the amount or the estimated amount thereof to the
extent then feasible (the "Claim Notice"). If the Indemnifying Party does not
------------
notify the Indemnified Party within thirty days after the date of delivery of
the Claim Notice that the Indemnifying Party disputes such Claim, with a
detailed statement of the basis of such position, the amount of such Claim shall
be conclusively deemed a liability of the Indemnifying Party hereunder. In case
an objection is made in writing in accordance with this Section 10.4(a), the
Indemnified Party shall respond in a written statement to the objection within
thirty days and, for sixty days thereafter, attempt in good faith to agree upon
the rights of the respective parties with respect to each of such Claims (and,
if the parties should so agree, a memorandum setting forth such agreement shall
be prepared and signed by both parties).
(b)
(i) In the event that any Claim for which the Indemnifying Party
would be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a third party (a "Third Party Claim"), the Indemnified
-----------------
Party shall deliver a Claim Notice to the Indemnifying Party. The Indemnifying
Party shall have thirty days from the date of delivery of the Claim Notice to
notify the Indemnified Party (A) whether the Indemnifying Party disputes
liability to the Indemnified Party hereunder with respect to the Third Party
Claim, and, if so, the basis for such a dispute, and (B) if such party does not
dispute liability, whether or not the Indemnifying Party
47
desires, at the sole cost and expense of the Indemnifying Party, to defend
against the Third Party Claim, provided that the Indemnified Party is hereby
authorized (but not obligated) to file any motion, answer or other pleading and
to take any other action which the Indemnified Party shall deem necessary or
appropriate to protect the Indemnified Party's interests.
(ii) In the event that the Indemnifying Party timely notifies
the Indemnified Party that the Indemnifying Party does not dispute the
Indemnifying Party's obligation to indemnify with respect to the Third Party
Claim, the Indemnifying Party shall defend the Indemnified Party against such
Third Party Claim by appropriate proceedings, provided that, unless the
Indemnified Party otherwise agrees in writing, the Indemnifying Party may not
settle any Third Party Claim (in whole or in part) if such settlement does not
include a complete and unconditional release of the Indemnified Party. If the
Indemnified Party desires to participate in, but not control, any such defense
or settlement the Indemnified Party may do so at its sole cost and expense. If
the Indemnifying Party elects not to defend the Indemnified Party against a
Third Party Claim, whether by failure of such party to give the Indemnified
Party timely notice as provided herein or otherwise, then the Indemnified Party,
without waiving any rights against such party, may settle or defend against such
Third Party Claim in the Indemnified Party's sole discretion and the Indemnified
Party shall be entitled to recover from the Indemnifying Party the amount of any
settlement or judgment and, on an ongoing basis, all indemnifiable costs and
expenses of the Indemnified Party with respect thereto, including interest from
the date such costs and expenses were incurred.
(iii) If at any time, in the reasonable opinion of the
Indemnified Party, notice of which shall be given in writing to the Indemnifying
Party, any Third Party Claim seeks material prospective relief which could have
an adverse effect on any Indemnified Party or the Surviving Corporation or any
subsidiary, the Indemnified Party shall have the right to control or assume (as
the case may be) the defense of any such Third Party Claim, provided that the
Indemnified Party shall not settle any such claim without the consent of the
Indemnifying Party (which consent shall not be unreasonably withheld). If the
Indemnified Party elects to exercise such right, the Indemnifying Party shall
have the right to participate in, but not control, the defense of such Third
Party Claim at the sole cost and expense of the Indemnifying Party.
(c) Nothing herein shall be deemed to prevent the Indemnified Party
from making a Claim, and an Indemnified Party may make a Claim hereunder, for
potential or contingent Damages provided the Claim Notice sets forth the
specific basis for any such potential or contingent claim or demand to the
extent then feasible and the Indemnified Party has reasonable grounds to believe
that such Claim may be made.
(d) Subject to the provisions of Section 10.3, the Indemnified
Party's failure to give timely notice as required by this Section 10.4 of any
actual, threatened or possible claim or demand which may give rise to a right of
indemnification hereunder shall not relieve the Indemnifying Party of any
liability which the Indemnifying Party may have to the Indemnified Party except
to the extent that the failure to give such notice materially and adversely
prejudiced the Indemnifying Party.
48
10.5 SURVIVAL OF REPRESENTATIONS WARRANTIES AND COVENANTS. All
representations, warranties and covenants made by the Company, the Stockholders,
CCC and Newco in or pursuant to this Agreement or in any document delivered
pursuant hereto shall be deemed to have been made on the date of this Agreement
(except as otherwise provided herein) and, if a Closing occurs, as of the
Closing Date. The representations of the Company, the Stockholders, CCC and
Newco will survive the Closing and will remain in effect until, and will expire
upon, the termination of the indemnification obligations as provided in Section
10.3.
10.6 EXCLUSIVE REMEDIES. The remedies set forth in this Article 10 shall
be the exclusive remedies available for any breach of this Agreement except with
regard to any Damages that occur as a result of fraudulent misrepresentations or
fraudulent acts of the Stockholders, the Company, its Subsidiaries, CCC or
Newco, as applicable.
10.7 RIGHT TO SET OFF. Subject to the Stockholders' right to satisfy
claims relating to Pledged Assets in cash as provided in Section 3.2(c), CCC
shall have the right, but not the obligation, to set off, in whole or in part,
against the Pledged Assets, amounts finally determined under Section 10.4 to be
owed to CCC by the Stockholders under Section 10.1 hereof.
11. NONCOMPETITION
11.1 PROHIBITED ACTIVITIES. Except as described on SCHEDULE 11.1 hereto or
as otherwise provided in an employment agreement with CCC or a subsidiary of
CCC, the Surviving Corporation or any other subsidiary of CCC, Green agrees, for
a period of two years following the Closing Date, not to:
(a) 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 business
selling any electrical contracting products or services (the "Business") in
--------
direct competition with the Surviving Corporation or CCC's other electrical
contracting subsidiaries within 100 miles of any office of CCC or any office of
its subsidiaries engaged in the Business (the "Territory");
---------
(b) call upon any person who is, at that time, or who was at any time
within one year prior to that time, an employee of the Company (including its
subsidiaries) in a managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of CCC (including its
subsidiaries);
(c) call upon any person or entity which is, at that time, or which
has been, within one year prior to that time, a customer the Company or CCC
(including their respective subsidiaries engaged in the Business) within the
Territory for the purpose of soliciting or selling products or services within
the Territory which are in direct competition with the Surviving Corporation or
CCC's other subsidiaries engaged in the Business;
49
(d) call upon any prospective acquisition candidate, on the
Stockholder's own behalf or on behalf of any competitor, which candidate either
was called upon by the Company or CCC (including their respective subsidiaries)
or was the subject of an acquisition analysis conducted by the Company or CCC
(including their respective subsidiaries); or
(e) disclose customers, whether in existence or proposed, of the
Company to any person, firm, partnership, corporation or business for any reason
or purpose whatsoever.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Green from acquiring as an investment not more than 2.5 percent of the
outstanding voting capital stock of a competing business, whose stock is traded
on a national securities exchange or through the auto mated quotation system of
a registered securities association.
11.2 DAMAGES. Because of the difficulty of measuring economic losses to
CCC and the Surviving Corporation as a result of the breach of the foregoing
covenant, and because of the immediate and irreparable damage that would be
caused to CCC and the Surviving Corporation for which they would have no other
adequate remedy, each Stockholder subject to this Article 11 agrees that, in the
event of a breach by them of the foregoing covenant, the covenant may be
enforced by CCC or the Surviving Corporation by, without limitation, injunctions
and restraining orders.
11.3 REASONABLE RESTRAINT. It is agreed by the parties that the foregoing
covenants in this Article 11 impose a reasonable restraint on Green subject to
this Article 11 in light of the activities and business of CCC on the date of
the execution of this Agreement and the current and future plans of CCC and the
Surviving Corporation (as successors to the businesses of the Company).
11.4 SEVERABILITY; REFORMATION. The covenants in this Article 11 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 the Agreement shall thereby be reformed.
11.5 INDEPENDENT COVENANT. All of the covenants in this Article 11 shall
be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the Stockholders
against the Company, the Surviving Corporation or CCC, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
of such covenants.
11.6 MATERIALITY. The Company and the Stockholders hereby agree that the
covenants set forth in this Article 11 are a material and substantial part of
the transactions contemplated by this Agreement, supported by adequate
consideration.
50
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
12.1 STOCKHOLDERS. Green recognizes and acknowledge that he has in the
past, currently has, and in the future may possibly have, access to certain
confidential information of the Company, such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of the Company and the Company's business. Green agrees that he will not
disclose any confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except to
authorized representatives of CCC, unless Green can show that such information
has become known to the public generally through no fault of Green. In the event
of a breach or threatened breach by Green of the provisions of this Article 12,
CCC and the Surviving Corporation shall be entitled to an injunction restraining
Green from disclosing, in whole or in part, such confidential information.
Nothing herein shall be construed as prohibiting CCC and the Surviving
Corporation from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
12.2 CCC. CCC recognizes and acknowledges that it has in the past,
currently has, and prior to the Closing Date will have, access to certain
confidential information of the Company, such as lists of customers, operational
policies, pricing and cost policies that are valuable, special and unique assets
of the Company and the Company's business. CCC agrees that it will not disclose
any confidential information to any person, firm, corporation, association, or
other entity for any purpose or reason whatsoever, prior to the Closing Date
without prior written consent of the Stockholders. In the event of a breach or
threatened breach by CCC of the provisions of this Article 12, the Stockholders
shall be entitled to an injunction restraining CCC from disclosing, in whole or
in part, such confidential information. Nothing contained herein shall be
construed as prohibiting the Stockholders from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
12.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, CCC, the Surviving Corporation and the Stockholders agree that,
in the event of a breach by any of them of the foregoing covenant, the covenant
may be enforced against them by injunctions and restraining orders.
13. GENERAL
13.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date solely:
(a) by mutual consent of the boards of directors of CCC and the
Company; or
(b) by the Stockholders and the Company as a group, on the one
hand, or by CCC, on the other hand, if the Closing shall not have occurred on or
before July 31, 1998, provided that the right to terminate this Agreement under
this Section 13.1(b) shall not be available to either
51
party (with the Stockholders and the Company deemed to be a single party for
this purpose and CCC and Newco deemed to be a single party for this purpose)
whose material misrepresentation, breach of warranty or failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date; or
(c) by the Stockholders and the Company as a group, on the one
hand, or by CCC, on the other hand, if there is or has been a material breach,
failure to fulfill or default on the part of the other party (with the
Stockholders and the Company deemed to be a single party for this purpose and
CCC and Newco deemed to be a single party for this purpose) of any of the
representations and warranties contained herein or in the due and timely
performance and satisfaction of any of the covenants, agreements or conditions
contained herein, and the curing of such default shall not have been made or
shall not reasonably be expected to occur before the Closing Date; or
(d) by the Stockholders and the Company as a group, on the one
hand, or by CCC, on the other hand, if there shall be a final nonappealable
order of a federal or state court in effect preventing consummation of the
Merger; or there shall be any action taken, or any statute, rule or regulation
or order enacted, promulgated or issued or deemed applicable to the Merger by
any governmental entity which would make the consummation of the Merger illegal.
13.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 13.1, this Agreement shall forthwith become
ineffective, and there shall be no liability or obligation on the part of any
party hereto or its officers, directors or shareholders. Notwithstanding the
foregoing sentence, (i) the provisions of this Article 13 shall remain in full
force and effect and survive any termination of this Agreement; (ii) each party
shall remain liable for any breach of this Agreement prior to its termination;
and (iii) in the event of termination of this Agreement pursuant to Section
13.1(c) above, then notwithstanding the provisions of Section 13.7 below, the
breaching party (with the Stockholders and the Company deemed to be a single
party for purposes of this Article 13), shall be liable to the other party to
the extent of the expenses incurred by such other party in connection with this
Agreement and the transactions contemplated hereby, as well as any damages in
accordance with applicable law.
13.3 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 CCC, and the heirs and legal representatives of the Stockholders.
13.4 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement sets forth
the entire understanding of the parties hereto with respect to the transactions
contemplated hereby. Each of the Schedules to this Agreement is incorporated
herein by this reference and expressly made a part hereof. Any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement except
the Confidentiality Agreement dated as of May 21, 1998, between the Company,
Mid-Atlantic Companies Ltd. and CCC. This Agreement shall not be amended or
modified except by a written instrument duly executed by each of the parties
hereto, or in accordance with Section 11.4. Any
52
extension or waiver by any party of any provision hereto shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
13.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original, and all of
which counterparts taken together shall constitute but one and the same
instrument.
13.6 BROKERS AND AGENTS. CCC and Newco (as a group) and the Company and
each Stockholder (as a group) each represents and warrants to the other that it
has not employed any broker or agent in connection with the transactions
contemplated by this Agreement other than the Company's engagement of
Mid-Atlantic and agrees to indemnify the other against all losses, damages or
expenses relating to or arising out of claims for fees or commission of any
broker or agent employed or alleged to have been employed by such party.
13.7 EXPENSES. CCC has and will pay the fees, expenses and
disbursements of CCC and Newco and their agents, representatives, accountants
and counsel incurred in connection with the subject matter of this Agreement.
The Company has and will pay the fees, expenses and disbursements of the
Stockholders, the Company, and their agents, representatives, financial
advisers, accountants and counsel incurred in connection with the subject matter
of this Agreement; provided that any such fees due after the Closing (which
shall promptly be paid by the Surviving Corporation) shall be deemed accrued as
of the Closing Date for purposes of determining the Actual Closing Net Worth.
13.8 SPECIFIC PERFORMANCE; REMEDIES. Each party hereto acknowledges
that the other parties will be irreparably harmed and that there will be no
adequate remedy at law for any violation by any of them of any of the covenants
or agreements contained in this Agreement, including without limitation, the
noncompetition provisions set forth in Article 11 and the confidentiality
obligations set forth in Article 12. It is accordingly agreed that, in addition
to any other remedies which may be available upon the breach of any such
covenants or agreements, each party hereto shall have the right to obtain
injunctive relief to restrain a breach or threatened breach of, or otherwise to
obtain specific performance of, the other parties, covenants and agreements
contained in this Agreement.
13.9 NOTICES. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
53
If to CCC, Newco or the Surviving Corporation to:
Consolidation Capital Corporation
000 Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxxxxx XX 00000
Attn: X. Xxxxxxx Xxxx
Executive Vice President, General Counsel and Secretary
(Telefax: (000) 000-0000)
with a required copy to:
Xxxxxx, Xxxxx & Bockius LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telefax: (000) 000-0000
Attention: N. Xxxxxxx Xxxxxxx
If to any Stockholder to:
Regency Electric Company, Inc.
The Regency Electric Building
0000 Xxxxxxxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attention: Xxxx Xxxxx
(Telefax: (000) 000-0000)
with a required copy to:
Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxxxxxxxxx Xxxxx
(Telefax: (000) 000-0000)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
13.10 GOVERNING LAW. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State of Delaware,
without giving effect to any of
54
the conflicts of laws provisions thereof that would require the application of
the substantive laws of any other jurisdiction.
13.11 SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstances is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application of
such provision to such person or circumstances in any other jurisdiction, shall
not be affected thereby, and to this end the provisions of this Agreement shall
be severable. The preceding sentence is in addition to and not in place of the
severability provisions in Section 11.4.
13.12 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provision of this
Agreement is intended, nor will any provision be interpreted, to provide or to
create any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, employee or partner of any party
hereto or any other person or entity.
13.13 FURTHER REPRESENTATIONS. Each party to this Agreement
acknowledges and represents that it has been represented by its own legal
counsel in connection with the transactions contemplated by this Agreement, with
the opportunity to seek advice as to its legal rights from such counsel. Each
party further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences.
13.14 ACCOUNTING TERMS. Except as otherwise expressly provided herein
or in the Schedules, all accounting terms used in this Agreement shall be
interpreted, and all financial statements, Schedules, certificates and reports
as to financial matters required to be delivered hereunder shall be prepared, in
accordance with GAAP consistently applied.
13.15 REPRESENTATIVE. Each of the Stockholders hereby appoints Green as
his exclusive agent and attorney-in-fact to act on his behalf with respect to
any and all matters, claims, controversies, or disputes arising out of the terms
of this Agreement (the "Representative"). Each Stockholder further agrees that
--------------
upon the vote of the Stockholders holding a majority of the stock of the Company
immediately preceding the Closing (the "Stockholder Approval") the
--------------------
Representative shall have the power to take any and all actions which the
Representative believes are necessary or appropriate or in the best interests of
the Stockholders, as fully as if the Stockholders were acting on their own
behalf, including without limitation, consenting to, and settling any and all
claims, disputes or controversies arising hereunder (including without
limitation the calculation and payment of the Merger Consideration), conducting
all negotiations with and otherwise dealing with CCC and the Surviving
Corporation and engaging counsel, accountants and other representatives in
connection with the foregoing matters. CCC and the Surviving Corporation shall
have the right to rely on any actions taken or omitted to be taken by the
Representative as being the act or omission of the Stockholders, without the
need for any inquiry, and any such actions or omissions shall be binding upon
the Stockholders. The Stockholders shall have the right to change the identity
of the Representative upon Stockholder Approval and shall deliver to CCC and the
Surviving Corporation prompt written notice of any such change of identity,
which upon receipt by CCC and the Surviving Corporation will effect said change.
The Stockholders agree to hold the Representative free and
55
harmless from and indemnify the Representative against any and all loss, damage
or liability which he may sustain as a result of any action taken in good faith
hereunder, including, without limitation, any legal fees and expenses.
13.16 UNANIMOUS WRITTEN CONSENT OF STOCKHOLDERS. The execution of this
Agreement by all of the Stockholders shall constitute unanimous written consent
of all of the stockholders of the Company approving the this Agreement as a plan
of merger within the meaning of the State Corporate Laws.
[Execution Page Following]
56
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CONSOLIDATION CAPITAL
CORPORATION
By: /s/ X. Xxxxxxx Xxxx
--------------------------------------
X. Xxxxxxx Xxxx
Executive Vice President
RECI ACQUISITION CORP.
By: /s/ X. Xxxxxxx Xxxx
--------------------------------------
X. Xxxxxxx Xxxx
Executive Vice President & Secretary
REGENCY ELECTRIC COMPANY, INC.
By: /s/ Xxxx X. Xxxxx
--------------------------------------
Xxxx X. Xxxxx
President
STOCKHOLDERS:
/s/ Xxxx X. Xxxxx
------------------------------------------
Xxxx X. Xxxxx
XXXX X. XXXXX, GRANTOR RETAINED
ANNUITY TRUST
/s/ Xxxxx X. Xxxxx
------------------------------------------
Xxxxx X. Xxxxx, Trustee
XXXXXXX XXXXX IRREVOCABLE TRUST
/s/ Xxxxx X. Xxxxx
-----------------------------------
Xxxxx X. Xxxxx, Trustee
XXXXX XXXXX IRREVOCABLE TRUST
/s/ Xxxxx X. Xxxxx
-----------------------------------
Xxxxx X. Xxxxx, Trustee
XXXXXX X. XXXXX GRANTOR RETAINED
ANNUITY TRUST
/s/ Xxxxx X. Xxxxx
-----------------------------------
Xxxxx X. Xxxxx, Trustee
Index of Certain Defined Terms
------------------------------
1933 Act .................................................................................................... 4
Accounts Receivable ......................................................................................... 15
Actual Closing Net Worth .................................................................................... 8
Actual Earn Out EBIT ........................................................................................ 4
Affiliate ................................................................................................... 28
Affiliates .................................................................................................. 62
Agreement ................................................................................................... 1, 40
Audited Financials .......................................................................................... 13
Balance Sheet Date .......................................................................................... 13
Base Merger Consideration ................................................................................... 3
CCC ......................................................................................................... 1
CCC Charter Documents ....................................................................................... 30
CCC Common Stock ............................................................................................ 3
CCC Prospectus .............................................................................................. 28
CCC's Accountant ............................................................................................ 5, 8
CCC's knowledge ............................................................................................. 29
Certificates ................................................................................................ 7
Charter Documents ........................................................................................... 11
Claim Notice ................................................................................................ 47
Claims ...................................................................................................... 47
Closing ..................................................................................................... 10
Closing Date ................................................................................................ 10
Code ........................................................................................................ 1
Company ..................................................................................................... 1, 40
Company Common Stock ........................................................................................ 1
Company Financial Statements ................................................................................ 13
Company Hazardous Materials Activities ...................................................................... 27
Company's knowledge ......................................................................................... 10
Constituent Corporations .................................................................................... 1
Contingent Merger Consideration ............................................................................. 4
Contingent Merger Consideration Payment Date ................................................................ 6
controlled group ............................................................................................20, 21
Damages ..................................................................................................... 45
DOJ ......................................................................................................... 35
Earn Out EBIT Notice ........................................................................................ 5
Earn Out Period Average Price ............................................................................... 6
Effective Time .............................................................................................. 10
employee benefit plan ....................................................................................... 36
Environmental Permits ....................................................................................... 27
Equipment ................................................................................................... 29
ERISA ....................................................................................................... 20
Financial Adjustment Notice ................................................................................ 8
FTC ........................................................................................................ 35
GAAP ....................................................................................................... 4
GCL ........................................................................................................ 1
golden parachute ........................................................................................... 20
group health plans ......................................................................................... 21
Hazardous Material ......................................................................................... 27
Indemnification Threshold .................................................................................. 45
Indemnified Parties ........................................................................................ 45
Indemnified Party .......................................................................................... 45
Indemnifying Party ......................................................................................... 47
Interim Balance Sheet ...................................................................................... 13
Interim Financials ......................................................................................... 13
Interim Period Average ..................................................................................... 4
Inventory .................................................................................................. 29
knowledge of CCC ........................................................................................... 29
knowledge of Newco ......................................................................................... 29
knowledge of the Company ................................................................................... 10
leased Real Property ....................................................................................... 16
liabilities ................................................................................................ 14
Lien ....................................................................................................... 12
Material Adverse Effect .................................................................................... 11
Material Contracts ......................................................................................... 17
Merger ..................................................................................................... 1
Merger Consideration ....................................................................................... 6
Merger Consideration Adjustment ............................................................................ 8
Merger Documents ........................................................................................... 10
Merger Price ............................................................................................... 3
multiemployer pension plan ................................................................................. 20
Net Worth Target ........................................................................................... 4
New Accounting Firm ........................................................................................ 5
Newco ...................................................................................................... 1
Newco's knowledge .......................................................................................... 29
PBGC ....................................................................................................... 20
Pending Claims ............................................................................................. 46
Permits .................................................................................................... 15
Permitted Encumbrances ..................................................................................... 16
Person ..................................................................................................... 39
Plans ...................................................................................................... 20
Pledged Assets ............................................................................................. 9
Post-Closing Audit ......................................................................................... 8
Prime Rate ................................................................................................. 5
Qualified Plans ............................................................................................ 20
Real Property .............................................................................................. 15
60
Registration Statement ................................................................................... 32
Related Party ............................................................................................ 39
Related Party Agreements ................................................................................. 17
Release Date ............................................................................................. 9
reportable events ........................................................................................ 21
Representative ........................................................................................... 55
Revised Earn Out EBIT .................................................................................... 5
Securities Act ........................................................................................... 39
Shareholder Approval ..................................................................................... 55
Shareholder Indemnified Parties .......................................................................... 45
Stockholder .............................................................................................. 1
Surviving Corporation .................................................................................... 1
Tax ...................................................................................................... 24
Tax Return ............................................................................................... 24
tax-free reorganization .................................................................................. 1
Territory ................................................................................................ 49
Third Party Claim ........................................................................................ 47
UCC ...................................................................................................... 29
61
SCHEDULES
5.1 Due Organization
5.3 No Conflicts
5.4 Capital Stock of the Company
5.5 Transactions in Capital Stock
5.6(a) Subsidiaries
5.6(b) Other Holdings of Company
5.6(c) Promissory Notes
5.7 Predecessor Status
5.8 Stockholder Claims
5.9(b) EBIT add-backs
5.9 Financial Statements
5.10 Liabilities and Obligations; Capital Expenditures; Indebtedness as
of the Balance Sheet Date
5.11 Accounts and Notes Receivable
5.13 Permits
5.14(c) Real Property Leased; Permitted Encumbrances
5.14(c)(i) Liens securing indebtedness for borrowed money that CCC or one of
its affiliates has agreed to assume at Closing.
5.14(d) Landlord Interests
5.17(a) Material Contracts
5.17(c) Outstanding balances on all loans or credit agreements
5.17(d) Breaches/defaults/terminations/liens on Material Contracts caused
by transaction
5.18 Government Contracts
5.19 Insurance
5.20 Labor and Employment Matters
5.21 Employment Benefit Plans
5.22(a) Conformity with Law
5.22(b) Litigation
5.23 Taxes
5.24 Absence of Changes
5.25 Deposit Accounts; Powers of Attorney
5.26 Environmental Matters
5.30 "Affiliates" under the 1933 Act
5.31 Location of chief executive offices
5.32 Location of Equipment and Inventory
7.3 Title Insurance and Surveys
7.4 Related Party Agreements
7.6 Conduct of Business Pending Closing
7.8 Prohibited Activities
8.5 Opinion of Counsel
62
8.9 Stockholders' Releases
8.11 Employment Agreement
11.1 Prohibited Activities