EXHIBIT 10.20
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
GROUP MAINTENANCE AMERICA CORP.
▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ ACQUISITION CORP.
▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ INDUSTRIES, INC.
THE PRINCIPAL HOLDERS OF THE
OUTSTANDING CAPITAL STOCK
OF
▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ INDUSTRIES, INC.
AND
THE TRUSTEE OF THE
▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ INDUSTRIES, INC. EMPLOYEE
STOCK OWNERSHIP PLAN AND TRUST
August 18, 1997
TABLE OF CONTENTS
Page
1. THE MERGER.............................................................. 1
1.1 The Merger......................................................... 1
1.2 Effective Time of the Merger....................................... 1
1.3 Closing............................................................ 1
1.4 Effects of the Merger.............................................. 2
1.4.1 At the Effective Time....................................... 2
1.4.2 Effects on the Surviving Corporation........................ 2
1.5 Written Agreement and Other Actions
1.5.1 Voting and Instruction Agreement; Other Matters............. 3
1.5.2 Written Consent of the Sole Shareholder of Merger Sub....... 3
1.5.3 All Other Necessary Actions................................. 3
1.6 Conversion of Stock................................................ 3
1.6.1 Merger Sub Capital Stock.................................... 3
1.6.2 Cancellation of the Company Treasury Stock and
Authorized but Unissued Stock............................. 3
1.6.3 Merger Consideration........................................ 3
1.7 Exchange of and Payment for Stock.................................. 4
1.7.1 Delivery of Company Common Stock and Closing Merger
Consideration; Appraisal Rights........................... 4
1.7.2 Return of Stock Certificates................................ 4
1.7.3 Assignments................................................. 5
1.7.4 Payment In Full Satisfaction of All Rights.................. 5
1.8 Determination of Closing Merger Consideration...................... 5
1.8.1 Delivery of IPO Price to Public; Statement.................. 5
1.9 Post-Closing Determination of Total Consideration.................. 5
1.9.1 Statement................................................... 5
1.9.2 Review...................................................... 5
1.9.3 Disputes.................................................... 6
1.9.4 Resolution by Parties....................................... 6
1.9.5 Final Determination......................................... 6
1.9.6 Expenses.................................................... 7
1.10 Additional Consideration........................................... 7
2. REPRESENTATIONS AND WARRANTIES OF THE
TRUSTEE, THE COMPANY AND THE PRINCIPAL SHAREHOLDER.................... 8
2.1 Representations and Warranties of the Trustee...................... 8
2.2 Representations and Warranties of the Company and the Principal
Shareholders..................................................... 8
2.2.1 Exhibit 2................................................... 8
2.2.2 Stock Ownership............................................. 8
-i-
2.2.3 Authority................................................... 8
2.2.4 Consents.................................................... 8
2.2.5 No Warranties of Future Performance......................... 8
3. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND MERGER SUB............. 9
3.1 Representations and Warranties..................................... 9
3.1.1 Organization................................................ 9
3.1.2 Capitalization of the Parent................................ 9
3.1.3 Authority................................................... 9
3.1.4 Consents.................................................... 9
3.1.5 Defaults.................................................... 9
3.1.6 Investment Company.......................................... 10
3.1.7 Financial Statements........................................ 10
3.1.8 Taxes....................................................... 10
3.1.9 Full Authority.............................................. 10
3.1.10 Access...................................................... 10
3.1.11 Disclosure.................................................. 10
3.1.12 Parent Material Adverse Effect.............................. 11
3.1.13 Tax-Free Reorganization..................................... 11
3.1.14 No Warranties of Future Performance......................... 12
3.2 Representations and Warranties Concerning the Merger Sub........... 12
3.2.1 Organization and Standing................................... 12
3.2.2 Capital Structure........................................... 12
3.2.3 Authority................................................... 12
4. CERTAIN COVENANTS, AGREEMENTS AND PRE-CLOSING MATTERS................... 12
4.1 Agreements of the Principal Shareholders to be Effective Upon
Closing.......................................................... 12
4.1.1 Covenant Not to Compete..................................... 12
4.1.2 Release..................................................... 13
4.2 Elimination of Expense............................................. 14
4.3 Deferred Compensation Plans........................................ 14
4.4 Audit.............................................................. 14
4.5 Certain Payables and Receivables................................... 14
4.6 Pre-Closing Covenants and Agreements............................... 14
4.7 Confidentiality.................................................... 14
4.8 Tax-Free Reorganization............................................ 15
4.9 Company Plans...................................................... 15
4.10 HSR Act............................................................ 15
4.11 Purchase of Certain Receivables................................... 15
4.12 Certain Condominiums............................................... 15
4.13 Certain Matters Related to the ESOP................................ 15
4.13.1 Suspension of ESOP Contributions.......................... 15
4.13.2 Amendment of ESOP; Distribution of ESOP Investments........ 16
-ii-
4.14 ESOP Expenses..................................................... 16
4.15 Indemnification of Officers and Directors of the Company.......... 16
4.16 Errors and Omissions Insurance.................................... 16
4.17 Other Insurance................................................... 16
4.18 Releases.......................................................... 16
4.19 Parent Guaranty................................................... 16
4.20 Recommendation by the Company; Cooperation in Preparation of
Registration Statement and Proxy and in Meeting of
Shareholders.................................................... 16
4.21 Sale of MMR....................................................... 17
5. CONDITIONS PRECEDENT; CLOSING DELIVERIES............................... 17
5.1 Conditions Precedent to the Obligations of the Parent
and Merger Sub.................................................. 17
5.1.1 Accuracy of Representations and Warranties................. 17
5.1.2 Performance of Covenants................................... 17
5.1.3 Legal Actions or Proceedings............................... 17
5.1.4 Approvals.................................................. 17
5.1.5 Closing Deliveries......................................... 17
5.1.6 No Casualty, Loss or Damage................................ 17
5.1.7 Licenses, etc.............................................. 18
5.1.8 No Material Adverse Change................................. 18
5.1.9 IPO........................................................ 18
5.1.10 Certain Corporate Actions.................................. 18
5.1.11 HSR Act.................................................... 18
5.2 Conditions Precedent to the Obligations of the Principal
Shareholders and the Company.................................... 18
5.2.1 Accuracy of Representations and Warranties................. 18
5.2.2 Performance of Covenants................................... 18
5.2.3 Approvals.................................................. 18
5.2.4 Closing Deliveries......................................... 18
5.2.5 HSR Act.................................................... 18
5.3 Deliveries by the Principal Shareholders at the Closing........... 19
5.3.1 Closing Certificates....................................... 19
5.3.2 Stock Transfer Restriction Agreement....................... 19
5.3.3 Employment Agreements...................................... 19
5.3.4 Lease Agreement............................................ 19
5.3.5 Opinion of Counsel for the Principal Shareholders
and the Company.......................................... 19
5.3.6 Documents, Stock Certificates.............................. 19
5.3.7 Discharge of Indebtedness, Releases, Etc................... 19
5.4 Deliveries by the Parent at the Closing........................... 20
5.4.1 Closing Certificates....................................... 21
5.4.2 Registration Rights Agreement.............................. 21
-iii-
5.4.3 Opinion of Counsel for the Parent and Merger Sub........... 21
5.4.4 Closing Merger Consideration............................... 21
6. SURVIVAL, INDEMNIFICATIONS............................................. 21
6.1 Survival.......................................................... 21
6.2 Indemnification................................................... 22
6.2.1 Parent Indemnified Parties................................. 22
6.2.2 Parent Indemnity........................................... 23
6.3 Limitations....................................................... 23
6.3.1 Aggregate Liability........................................ 23
6.3.2 Threshold.................................................. 23
6.4 Procedures for Indemnification.................................... 24
6.4.1 Notice..................................................... 24
6.4.2 Legal Defense.............................................. 24
6.4.3 Settlement................................................. 24
6.4.4 Cooperation................................................ 24
6.5 Subrogation....................................................... 25
7. TERMINATION............................................................ 25
7.1 Grounds for Termination........................................... 25
7.1.1 Mutual Consent............................................. 25
7.1.2 Optional By the Company.................................... 25
7.1.3 Optional By the Parent..................................... 25
7.1.4 Breach By the Parent or Merger Sub......................... 25
7.1.5 Breach by the Company or any Principal Shareholder......... 25
7.2 Effect of Termination............................................. 25
8. MISCELLANEOUS........................................................... 25
8.1 Notice............................................................ 25
8.2 Further Documents................................................. 26
8.3 Assignability..................................................... 26
8.4 Exhibits and Schedules............................................ 27
8.5 Sections and Articles............................................. 27
8.6 Entire Agreement.................................................. 27
8.7 Headings.......................................................... 27
8.8 CONTROLLING LAW................................................... 27
8.9 Public Announcements.............................................. 27
8.10 No Third Party Beneficiaries...................................... 27
8.11 Amendments and Waivers............................................ 27
8.12 No Employee Rights................................................ 28
8.13 Non-Recourse...................................................... 28
8.14 When Effective.................................................... 28
8.15 Takeover Statutes................................................. 28
-iv-
8.16 Number and Gender of Words........................................ 28
8.17 Invalid Provisions................................................ 28
8.18 Multiple Counterparts............................................. 29
8.19 No Rule of Construction........................................... 29
8.20 Expenses.......................................................... 29
-v-
LIST OF EXHIBITS
Exhibit 1 ............................... Determination of Final Merger Consideration
Exhibit 1.5.1 ........................... Voting and Instruction Agreement
Exhibit 1.5.2 ........................... Written Consent of Sole Shareholder of ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ Acquisition Corp.
Exhibit 1.7 ............................. Letter of Transmittal
Exhibit 2 ............................... Certain Statements
Exhibit 2.2 ............................. Ownership of Company Common Stock
Exhibit 2.4 ............................. Consents
Exhibit 3.1.4 ........................... Required Consents - Parent
Exhibit 4.3 ............................. Procedure for Satisfaction of Deferred Compensation Plan Liabilities
and Split-Dollar Life Insurance Policies
Exhibit 4.6 ............................. Certain Covenants
Exhibit 4.9 ............................. Company Plans to Remain in Effect
Exhibit 4.12 ............................ Certain Properties
Exhibit 5.3.2 ........................... Stock Transfer Restriction Agreement
Exhibit 5.3.3 ........................... List of Employees to Execute and Deliver Employment Agreements
Exhibit 5.3.3A .......................... Employment Agreement
Exhibit 5.3.4 ........................... Lease Agreement
Exhibit 5.3.5-A ......................... Opinion of Counsel to the Shareholders and the Company
Exhibit 5.3.5-B ......................... Opinion of Counsel to the Trustee
Exhibit 5.3.7 ........................... Terminated Obligations
Exhibit 5.4.3 ........................... Opinion of Counsel to the Parent
-vi-
INDEX OF DEFINED TERMS
Page
1042 Shares................................................................ 3
Accountants................................................................ 6
Additional Consideration................................................... 7
Additional Net After-Tax Income............................................ 7
Agreement.................................................................. 1
Applicable Corporate Law................................................... 1
Approval Shareholders...................................................... 1
AR Reserve................................................................. 15
Closing.................................................................... 1
Closing Date............................................................... 1
Code....................................................................... 1
Company.................................................................... 1
Company Accountants........................................................ 14
Company Common Stock....................................................... 1
Converted Share............................................................ 4
Dissenting Shares.......................................................... 4
Earn-Out Period............................................................ 7
EBITDA..................................................................... 7
Effective Time............................................................. 1
ESOP....................................................................... 15
HSR Act.................................................................... 15
Indemnified Party.......................................................... 24
Indemnifying Party......................................................... 24
IPO........................................................................ 2
Losses..................................................................... 22
Merger..................................................................... 1
Merger Sub................................................................. 1
Minimum Proceeds........................................................... 2
MMR........................................................................ 7
Notice of Dispute.......................................................... 6
Operating EBITDA........................................................... 7
Parent..................................................................... 1
Parent Common Stock........................................................ 1
Parent Financial Statements................................................ 10
Parent Indemnified Parties................................................. 22
Parent Material Adverse Effect............................................. 11
Parent Related Documents................................................... 9
Pre-Closing Period......................................................... 7
Price Notice............................................................... 5
-vii-
Principal Shareholders..................................................... 1
Property................................................................... 14
Registration Statement..................................................... 9
SEC........................................................................ 9
Securities Act............................................................. 2
Settlement Notice.......................................................... 24
Shareholder................................................................ 4
Shareholder Related Document............................................... 8
Statement of Closing Consideration......................................... 5
Statement of Final Per Share Amounts....................................... 5
Stock Certificate.......................................................... 4
Stock Value................................................................ 7
Survival Period............................................................ 21
Surviving Corporation...................................................... 1
Terminated Obligations..................................................... 19
Third Accountants.......................................................... 6
Threshold.................................................................. 23
Trustee.................................................................... 1
-viii-
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") made effective as
of August ___, 1997, by and among Group Maintenance America Corp., a Texas
corporation (the "Parent"), ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ Acquisition Corp., a Washington
corporation ("Merger Sub"), ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ Industries, Inc., a Washington
corporation (the "Company"), the undersigned holders of a portion of the
outstanding capital stock of the Company (the "Principal Shareholders"), and the
Trustee of the ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ Industries, Inc. Employee Stock Ownership Plan
and Trust (the "Trustee").
WHEREAS, the respective Boards of Directors of the Parent, Merger Sub
and the Company have each approved the merger of the Company with and into
Merger Sub (the "Merger") pursuant to this Agreement and the applicable statutes
of the State of Washington, and pursuant to the Merger each issued and
outstanding share of Common Stock of the Company ("Company Common Stock") will
be converted into the right to receive certain shares of common stock, $.001 par
value per share, of the Parent ("Parent Common Stock"), and certain cash
consideration, all as provided herein;
WHEREAS, the Merger has been approved, as required by applicable law,
by the Parent, acting as sole shareholder of Merger Sub, and by the requisite
number of shareholders of the outstanding capital stock of the Company (the
"Approval Shareholders")
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties hereto
agree as follows:
1. THE MERGER
1.1 The Merger. Subject to the terms and conditions hereof, and in
accordance with Section RCW 23B.11.010 of the Washington Business Corporation
Act (the "Applicable Corporate Law"), upon the Effective Time (as defined in
Section 1.2), the Company shall be merged with and into Merger Sub. Merger Sub,
as the surviving entity following the Merger, is sometimes referred to in this
Agreement as the "Surviving Corporation."
1.2 Effective Time of the Merger. In accordance with the
requirements of applicable law, appropriate Articles of Merger under the
Applicable Corporate Law shall be prepared, executed and submitted for filing
with the Secretary of State of the State of Washington immediately following and
on the same day as the Closing (as defined below). The date of such filing is
referred to in this Agreement as the "Effective Time."
1.3 Closing. The closing of the Merger ("Closing") will take place
at the offices of Bracewell & ▇▇▇▇▇▇▇▇▇, L.L.P. in Houston, Texas on a date that
is contemporaneous with the closing of the Parent's IPO (as defined below), but
in no event later than December 31, 1997 ("Closing Date"); provided that each of
the conditions precedent to the obligations of the parties to effect the Merger
set forth in Article 5 of this
Agreement are then satisfied or waived by the applicable party. The parties may
agree in writing on another place for the Closing. At the Closing, the parties
will deliver or cause to be delivered the documents and consideration described
in Sections 5.3 and 5.4 below. The term "IPO" means the first underwritten
public offering of Parent Common Stock resulting in net cash proceeds to the
Parent of at least the Minimum Proceeds, as defined below (other than any
offering pursuant to any registration statement relating to any capital stock of
the Parent or options, warrants or other rights to acquire any such capital
stock issued or to be issued primarily to directors, officers or employees of
the Parent or any of its subsidiaries, (i) relating to any employee benefit plan
or interest therein, (ii) relating principally to any preferred stock or debt
securities of the Parent, or (iii) filed pursuant to Rule 145 under the
Securities Act of 1933, as amended ("Securities Act"), or any successor or
similar provision). The term "Minimum Proceeds" means the aggregate amount
necessary to pay in full (i) all indebtedness of the Parent and any of its
subsidiaries outstanding at the closing of the IPO and incurred for purposes of
financing any acquisitions by the Parent or any of its subsidiaries (including
the refinancing of acquired Company indebtedness), (ii) the aggregate redemption
prices for the redemption of all of the Parent's preferred stock outstanding at
the closing of the IPO issued by the Parent in connection with then completed
acquisitions by the Parent or any of its subsidiaries, and (iii) the aggregate
cash payable by the Parent or any of its subsidiaries in connection with all
then pending acquisitions.
1.4 Effects of the Merger.
1.4.1 At the Effective Time. At the Effective Time, (i) the
Company shall merge with and into Merger Sub and as a result thereof, the
separate existence of the Company shall cease, (ii) the Articles of
Incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation,
except that the Articles of Incorporation of Merger Sub shall be amended to
provide that the name of the Surviving Corporation shall be changed to
"▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ Industries, Inc.," (iii) the Bylaws of Merger Sub as in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation, and (iv) the directors and officers of Merger Sub immediately prior
to the Effective Time shall become the directors and officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected or appointed, as the case may be.
1.4.2 Effects on the Surviving Corporation. As of and after the
Effective Time, the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises of a public as well as of a private nature
previously belonging to the Company and Merger Sub; and all property (real,
personal and mixed), and all debts due on whatever account, including
subscriptions to shares, and all other choses in action, and all and every other
interest of or belonging to or due to each of the Company and Merger Sub shall
be transferred to, and vested in, the Surviving Corporation without further act
or deed; and all such property, rights and privileges, powers and franchises and
all and every other interest shall be thereafter the property of the Surviving
Corporation as they were of the Company and Merger Sub; and the title to any
real estate, or interest therein, whether by deed or otherwise, shall not revert
or be in any way impaired by reason of the Merger. The Surviving Corporation
shall be responsible and liable for all the liabilities and obligations of the
Company and Merger Sub, and any claim existing, or action or proceeding pending,
by or against the Company or Merger Sub may be prosecuted against the Surviving
Corporation. Neither the rights of creditors nor any liens upon the property of
the Company or Merger Sub shall be impaired by the Merger, and all debts,
liabilities and duties of each of the Company and Merger Sub shall attach to the
Surviving Corporation, and may be enforced against it to the same extent as if
such debts, liabilities and
-2-
duties had been incurred or contracted by it, all in accordance with the
Applicable Corporate Law and the terms of this Agreement.
1.5 Written Agreement and Other Actions.
1.5.1 Voting and Instruction Agreement; Other Matters.
Contemporaneously with the execution hereof, the Approval Shareholders are
executing and delivering to the Company a Voting and Instruction Agreement in
substantially the form of Exhibit 1.5.1 attached hereto and in which they
acknowledge that they are aware of their dissenter's or appraisal rights and
with respect to the Merger and their receipt of a copy of the provisions of
Section RCW 23B.13.020 of the Applicable Corporate Law and have elected not to
exercise such rights.
1.5.2 Written Consent of the Sole Shareholder of Merger Sub.
Contemporaneously with the execution hereof, the Parent is executing and
delivering to Merger Sub a written consent of the sole shareholder of Merger
Sub, in the form of Exhibit 1.5.2 attached hereto, pursuant to the applicable
provisions of the Applicable Corporate Law, adopting this Agreement.
1.5.3 All Other Necessary Actions. In addition to the actions
set forth in Sections 1.5.1 and 1.5.2, the Parent, Merger Sub and the Company
will take all actions necessary in accordance with the Applicable Corporate Law
and their respective articles of incorporation and bylaws to cause the Merger to
be consummated on, and subject to, the terms set forth in this Agreement and the
Applicable Corporate Law.
1.6 Conversion of Stock. As of the Effective Time, by virtue of the
Merger and without further action on the part of any holder of shares of Company
Common Stock or any holder of shares of capital stock of Merger Sub:
1.6.1 Merger Sub Capital Stock. Each share of capital stock of
Merger Sub issued and outstanding at the Effective Time shall remain outstanding
and shall be unchanged at and after the Merger and immediately following the
Effective Time shall constitute all of the issued and outstanding capital stock
of the Surviving Corporation.
1.6.2 Cancellation of the Company Treasury Stock and Authorized
but Unissued Stock. All shares of Company Common Stock that are owned by the
Company as treasury stock or by any of its subsidiaries shall be canceled and
retired and shall cease to exist and no stock of the Parent or other
consideration shall be delivered in exchange therefor. All shares of Company
Common Stock that are authorized but not issued shall be canceled and retired
and shall cease to exist and any options, warrants or subscriptions related
thereto shall be terminated and no stock of Parent or other consideration shall
be delivered in exchange therefor.
1.6.3 Merger Consideration. Each share of Company Common Stock
(other than shares to be canceled in accordance with Section 1.6.2) shall be
converted into the right to receive (i) that number of shares of Parent Common
Stock equal to the Final Per Share Common Stock Amount (as defined in Exhibit 1
attached hereto), and (ii) cash equal to the Final Per Share Cash Amount (as
defined in Exhibit 1 attached hereto); provided, however, that the Trustee shall
allocate the Parent Common Stock received by it first to shares of Company
Common Stock most recently acquired by the Trustee (i.e., the "1042 Shares").
Each share of Company Common Stock so converted into the right to receive cash
equal to the Final Per
-3-
Share Cash Amount and shares of Parent Common Stock equal to the Final Per Share
Common Stock Amount (a "Converted Share") shall, by virtue of the Merger and
without any action on the part of the holder thereof, at the Effective Time no
longer be outstanding and shall at such time be canceled and retired and shall
cease at such time to exist, and each holder of a certificate which prior to the
Effective Time validly evidenced any such Converted Share (a "Stock
Certificate") shall thereafter cease to have any rights with respect to such
Converted Share, except, upon the surrender of the Stock Certificate and a duly
executed and completed letter of transmittal in accordance with Section 1.7, the
right to receive such cash and Parent Common Stock at the times and in the
manner set forth herein.
1.7 Exchange of and Payment for Stock.
1.7.1 Delivery of Company Common Stock and Closing Merger
Consideration; Appraisal Rights. Prior to the Closing, the Parent will deliver
to each Principal Shareholder and the Principal Shareholders shall distribute to
each shareholder of the Company ("Shareholder") a letter of transmittal, in
substantially the form attached hereto as Exhibit 1.7, to be used for the
purpose of surrendering Stock Certificates to the Parent in exchange for the
right to receive the Final Per Share Cash Amount and the Final Per Share Common
Stock Amount for each Converted Share evidenced by such Stock Certificate. All
of the Company Common Stock held by the Shareholders will be surrendered by the
Principal Shareholders to the Parent together with properly completed and
executed letters of transmittal (with each such signature guaranteed by a
commercial bank or notarized by a notary public or similar official reasonably
satisfactory to the Parent), and the Parent shall cause to be delivered to the
Shareholders at the Closing the Closing Per Share Cash Amount (as defined in
Exhibit 1 attached hereto) and the Closing Per Share Common Stock Amount (as
defined in Exhibit 1 attached hereto) applicable to each of the Converted Shares
evidenced by the Stock Certificates properly surrendered (with properly executed
and completed letters of transmittal) by each Shareholder to the Parent. If
required by the Applicable Corporate Law but only to the extent required
thereby, shares of Company Common Stock which are issued and outstanding
immediately prior to the Effective Time and which are held by holders of such
shares of Company Common Stock who exercise appraisal rights with respect
thereto in accordance with Section RCW 23B.13.020 of the Applicable Corporate
Law (the "Dissenting Shares") will not be converted into or be exchangeable for
the right to receive the Closing Per Share Cash Amount, the Closing Per Share
Common Stock Amount, the Final Per Share Cash Amount or the Final Per Share
Common Stock Amount, and holders of such shares of Company Common Stock will be
entitled to receive payment of the appraised value of such shares of Company
Common Stock in accordance with the provisions of such Section RCW 23B.13.020 of
the Applicable Corporate Law unless and until such holders fail to perfect or
effectively withdraw or lose their rights to appraisal and payment under the
Applicable Corporate Law. If, after the Effective Time, any such holder fails to
perfect or effectively withdraws or loses such right, such shares of Company
Common Stock will thereupon be treated as if they had been converted into and to
have become exchangeable for, at the Effective Time, the right to receive the
Closing Per Share Cash Amount, the Closing Per Share Common Stock Amount, the
Final Per Share Cash Amount or the Final Per Share Common Stock Amount as
provided hereby and any unpaid dividends and distributions to which the holder
of such shares of Company Common Stock is entitled, without any interest
thereon.
1.7.2 Return of Stock Certificates. In the event the Closing
does not occur by December 31, 1997, any letters of transmittal and Stock
Certificates previously delivered to the Parent shall promptly be returned to
the Shareholders.
-4-
1.7.3 Assignments. Except for the granting of options to
employees of the Company and the exercise or assignment thereof as permitted by
Section 4.10, the assignment, transfer or other disposition of record or
beneficial ownership of any shares of Company Common Stock may not be made on or
after the date hereof.
1.7.4 Payment In Full Satisfaction of All Rights. The delivery
of the Closing Per Share Cash Amount and the Closing Per Share Common Stock
Amount to the Shareholders with respect to their Converted Shares shall be
deemed to be payment in full satisfaction of all rights pertaining to the
outstanding Converted Shares except for the right to receive additional shares
of Parent Common Stock and cash pursuant to Section 1.9.
1.8 Determination of Closing Merger Consideration.
1.8.1 Delivery of IPO Price to Public; Statement. After the
Parent and its underwriters agree on the initial price to the public for a share
of Parent Common Stock offered in the IPO, at the Closing as set forth in an
executed underwriting agreement, the Parent shall deliver to the Principal
Shareholders a written notice (the "Price Notice") setting forth such initial
price to the public and a statement setting forth a calculation of the Closing
Outstanding Common Stock Number (as defined in Exhibit 1 attached hereto), the
Closing Per Share Cash Amount, the Closing Per Share Common Stock Amount and the
Closing Merger Consideration (as defined in Exhibit 1 attached hereto), payable
to the Shareholders at Closing (the "Statement of Closing Consideration"). The
initial price to the public of a share of Parent Common Stock, as set forth in
the Price Notice, and the Closing Outstanding Common Stock Number, the Closing
Per Share Cash Amount, the Closing Per Share Common Stock Amount and the Closing
Merger Consideration, as set forth in the Statement of Closing Consideration,
shall be final, conclusive and binding for purposes of this Agreement.
1.9 Post-Closing Determination of Total Consideration.
1.9.1 Statement. No later than 30 days after the Closing, the
Parent shall deliver to the Principal Shareholders a statement showing the Final
Outstanding Common Stock Number (as defined in Exhibit 1 attached hereto), the
Final Per Share Cash Amount, the Final Per Share Common Stock Amount and the
Total Consideration (as defined in Exhibit 1 attached hereto) (the "Statement of
Final Per Share Amounts"). For purposes of determining the Statement of Final
Per Share Amounts, the Final Outstanding Common Stock Number, the Final Per
Share Cash Amount, the Final Per Share Common Stock Amount, and the Total
Consideration shall be calculated or determined as of the last day of the month
immediately preceding the month in which the Closing occurs (unless the Closing
occurs on the last day of the month, in which case the month of Closing shall be
used).
1.9.2 Review. After delivery to the Principal Shareholders of
the Statement of Final Per Share Amounts, the Principal Shareholders, the
Trustee and their representatives shall be afforded the opportunity to review
and inspect all of the financial records, work papers, schedules and other
supporting papers relating to the preparation of the Statement of Final Per
Share Amounts, and to consult with the Parent and its representatives regarding
the methods used in the preparation of the Statement of Final Per Share Amounts.
-5-
1.9.3 Disputes. The Final Outstanding Common Stock Number, the
Final Per Share Cash Amount, the Final Per Share Common Stock Amount and the
Total Consideration as shown on the Statement of Final Per Share Amounts shall
be final, conclusive and binding for purposes of this Agreement, unless the
Principal Shareholders and the Trustee shall deliver to the Parent a written
notice of disagreement ("Notice of Dispute") with any item or items in the
Statement of Final Per Share Amounts within 10 business days following receipt
of the Statement of Final Per Share Amounts, specifying in reasonable detail the
nature and extent of such disagreement; provided, however, that no Notice of
Dispute may be given with respect to any items unless such item involves an
amount of $25,000 or more and provided further that in the event such
disagreement involves an amount less than $25,000, the Statement of Final Per
Share Amounts shall be final, conclusive and binding. If a Notice of Dispute is
not properly given within such time, the Final Outstanding Common Stock Number,
the Final Per Share Cash Amount, the Final Per Share Common Stock Amount and the
Total Consideration as set forth in the Statement of Final Per Share Amounts
shall be final, conclusive and binding for purposes of this Agreement.
1.9.4 Resolution by Parties. If a Notice of Dispute is properly
given, the Parent, the Principal Shareholders and the Trustee agree to negotiate
in good faith and use their best efforts to resolve any disagreement with
respect to the Statement of Final Per Share Amounts. If a resolution is not
reached within 30 days following receipt by the Parent of a properly given
Notice of Dispute, KPMG Peat Marwick LLP ("Accountants") and the Company
Accountants (as defined below ) shall together choose a qualified third party
firm of independent accountants ("Third Accountants") within 10 days after a
Notice of Dispute is submitted to them and such Third Accountants shall resolve
such dispute within 30 days after its submission to them. The Parent, the
Principal Shareholders and the Trustee (if the dispute is resolved by them or
the Statement of Final Per Share Amounts otherwise becomes final pursuant hereto
without referral to the Accountants) or the Third Accountants (if a dispute is
resolved by them) shall set forth such resolution in writing and such writing
shall (i) set forth the Final Outstanding Common Stock Number, the Final Per
Share Cash Amount, the Final Per Share Common Stock Amount and the Total
Consideration and (ii) be final, conclusive and binding for purposes of this
Agreement.
1.9.5 Final Determination. Within 10 business days following the
final determination of the Final Outstanding Common Stock Number, the Final Per
Share Cash Amount, the Final Per Share Common Stock Amount and the Total
Consideration as provided in this Section 1.9, (i) the Parent shall deliver to
each Shareholder (a) the cash amount, if any, by which the aggregate of the
Final Per Share Cash Amounts payable to such Shareholder, as finally determined
pursuant hereto, exceeds the aggregate of the Closing Per Share Cash Amounts
paid to such Shareholder at the Closing; and (b) the number of shares of Parent
Common Stock, if any, by which the aggregate of the Final Per Share Common Stock
Amounts deliverable to such Shareholder, as finally determined pursuant hereto,
exceeds the aggregate of the Closing Per Share Common Stock Amounts delivered to
such Shareholder at the Closing; or (ii) each Principal Shareholder shall
deliver and shall cause each Shareholder to deliver to the Parent (a) the cash
amount, if any, by which the aggregate of the Closing Per Share Cash Amounts
paid to such Shareholder at the Closing exceeds the aggregate of the Final Per
Share Cash Amounts payable to such Shareholder as finally determined pursuant
hereto; and (b) the number of shares of Parent Common Stock, if any, by which
the aggregate of the Closing Per Share Common Stock Amounts delivered to such
Shareholder at the Closing exceeds the aggregate of the Final Per Share Common
Stock Amounts deliverable to such Shareholder as finally determined pursuant
hereto.
-6-
1.9.6 Expenses. Except as set forth on Exhibit 1, the Parent and
the Principal Shareholders shall each pay their own costs incurred in connection
with this Section 1.9, including the fees and expenses of their respective
attorneys and accountants, if any.
1.10 Additional Consideration. On or before April 30, 1998, the
Parent shall pay to the Shareholders additional consideration ("Additional
Consideration") in an amount equal to the product of 2 times the excess, if any
of (i) EBITDA (as defined below) over (ii) Operating EBITDA (as defined below).
The cash portion of the Additional Consideration shall bear interest at the
prime rate of interest charged by Texas Commerce Bank National Association from
January 1, 1998 through the date of payment of the Additional Consideration.
The Additional Consideration shall be apportioned between cash and Parent Common
Stock in the same ratios as set forth in Exhibit 1 for the Final Per Share Cash
Amount and the Final Per Share Common Stock Amount. The term "EBITDA" means the
sum of (i) Additional Net After-Tax Income (as defined below), plus (ii) the
amount of state, local and federal income and franchise taxes deducted from
Additional Net After-Tax Income, plus (iii) the amount of depreciation and
amortization deducted from Additional Net After-Tax Income, plus (iv) the amount
of interest expense deducted from Additional Net After-Tax Income, plus (v) the
increase to Additional Net After-Tax Income that would result from application
of the annual savings of the type described in the Letter of Intent among the
Parent, the Company and the Principal Shareholders dated June 3, 1997 to the
period from January 1, 1997 through the Closing Date (the "Pre-Closing Period"),
plus (vi) the stock and related tax bonuses contemplated for certain key
employees, the bonuses paid to certain employees related to their exercise of
stock options, and an adjustment to exclude any net income (or loss)
attributable to ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ Residential ("MMR") for the Pre-Closing Period
(the amounts in clauses (i) through (vi) to be determined in accordance with
GAAP). The term "Additional Net After-Tax Income" shall mean the net income (or
loss) of the Company for the period January 1, 1997 through December 31, 1997
(the "Earn-Out Period") after deduction for state, local and federal income and
franchise taxes and without giving effect to extraordinary or non-recurring
items, non-recurring gains and losses (including the sale of the Condominiums
(as defined)), interest income or investment income, determined in accordance
with GAAP. The term "Operating EBITDA" means $2,613,012.80.
For the portion of any Additional Consideration that shall be paid in
Parent Common Stock, the value of such Parent Common Stock ("Stock Value") shall
be calculated using the average of the daily closing prices (or if no closing
price is reported, the average of the daily closing bid and asked prices) of a
share of the Parent Common Stock for the ten consecutive trading days ending on
and including the date which is three trading days prior to the end of the Earn-
Out Period on the principal national securities exchange if any, on which such
shares are admitted for trading, on the National Association of Securities
Dealers, Inc. National Market System if such shares are quoted thereon or, if
such shares are not quoted thereon, in the over-the-counter market in the United
States on which such shares are publicly traded; provided that if the Parent
Common Stock is not then admitted to trading on any national securities exchange
or quoted on the National Association of Securities Dealers, Inc. National
Market System or otherwise traded in the over-the-counter market, the Stock
Value shall be the value of a share of Parent Common Stock as of the last day of
the Earn-Out Period as reasonably determined by the Board of Directors of the
Parent.
-7-
2. REPRESENTATIONS AND WARRANTIES OF THE
TRUSTEE, THE COMPANY AND THE PRINCIPAL SHAREHOLDERS
2.1 Representations and Warranties of the Trustee. The Trustee
hereby represents and warrants to the Parent and Merger Sub that the Trustee
owns, beneficially and of record, with full power to vote, the number of shares
of Company Common Stock set forth beside the Trustee's name on Exhibit 2.2 and
such shares are so held by the Trustee free and clear of all liens, encumbrances
and adverse claims whatsoever.
2.2 Representations and Warranties of the Company and the Principal
Shareholders. The Company and the Principal Shareholders, jointly and
severally, hereby represent and warrant to the Parent and Merger Sub as follows:
2.2.1 Exhibit 2. The statements in Exhibit 2 attached hereto are
true and correct.
2.2.2 Stock Ownership. Each Shareholder owns, beneficially and
of record, with full power to vote, the number of shares of Company Common Stock
set forth beside such Shareholder's name on Exhibits Exhibit 2.2 and such shares
are so held by such Shareholder free and clear of all liens, encumbrances and
adverse claims whatsoever.
2.2.3 Authority. Each Principal Shareholder has full right,
power, legal capacity and authority to (i) execute, deliver and perform this
Agreement, and all other documents and instruments referred to herein or
contemplated hereby to be executed, delivered and performed by such Principal
Shareholder (each a "Shareholder Related Document") and (ii) consummate the
transactions contemplated herein and thereby. This Agreement has been duly
executed and delivered by the Principal Shareholders and constitutes, and any
Shareholder Related Document, when duly executed and delivered by the Principal
Shareholders named as parties therein will constitute, legal, valid and binding
obligations of such Principal Shareholders enforceable against such Principal
Shareholders in accordance with their respective terms and conditions, except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether applied in a proceeding
at law or in equity).
2.2.4 Consents. Except as set forth on Exhibit 2.2.4, no
approval, consent, order or action of or filing with any court, administrative
agency, governmental authority or other third party is required for the
execution, delivery or performance by the Principal Shareholders of this
Agreement or any Shareholder Related Document. The execution, delivery and
performance by the Principal Shareholders of this Agreement and any Shareholder
Related Documents do not violate any mortgage, indenture, contract, agreement,
lease or commitment or other instrument of any kind to which any Principal
Shareholder is a party or by which any Principal Shareholder or such Principal
Shareholder's assets or properties may be bound or affected or any law, rule or
regulation applicable to any Principal Shareholder or any court injunction,
order or decree or any valid and enforceable order of any governmental agency in
effect as of the date hereof having jurisdiction over any Principal Shareholder.
2.2.5 No Warranties of Future Performance. The Principal
Shareholders and the Company acknowledge that they have had the opportunity to
inspect the Parent's and Merger Sub's business and properties, and understand
that no warranties of future performance of the Parent or Merger Sub have been
-8-
or are being made by the Parent or Merger Sub, irrespective of any forecasts,
budgets or other financial information relating to the future that may have been
provided by the Parent or Merger Sub.
3. REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND MERGER SUB
3.1 Representations and Warranties. The Parent hereby represents and
warrants to the Principal Shareholders and the Company as follows:
3.1.1 Organization. The Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas. The
Parent is duly qualified or licensed as a foreign corporation authorized to do
business in all states in which any of its assets or properties may be situated
or where its business is conducted except where the failure to obtain such
qualification or license would not have a Parent Material Adverse Effect (as
defined below).
3.1.2 Capitalization of the Parent. As of the execution date of
this Agreement, the total authorized capital stock of the Parent is as set forth
in the Confidential Information Statement dated August __, 1997. The
outstanding shares of Parent Common Stock and Preferred Stock, par value $.001
(Parent Preferred Stock"), have been duly and validly issued and are fully paid
and non-assessable.
3.1.3 Authority. The Parent has the requisite power and
authority to execute, deliver and perform this Agreement and all documents and
instruments referred to herein or contemplated hereby (the "Parent Related
Documents") and to consummate the transactions contemplated herein and thereby.
This Agreement has been duly executed and delivered by the Parent and
constitutes, and all the Parent Related Documents, when executed and delivered
by the Parent will constitute, legal, valid and binding obligations of the
Parent, enforceable in accordance with their respective terms and conditions
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether applied
in a proceeding at law or in equity).
3.1.4 Consents. Except as provided on Exhibit 3.1.4, no
approval, consent, order or action of or filing with any court, administrative
agency, governmental authority or other third party is required for the
execution, delivery or performance by the Parent of this Agreement or the Parent
Related Documents or the consummation by the Parent of the transactions
contemplated hereby, except for (i) the filing of the Parent's registration
statement with respect to the IPO ("Registration Statement") with the U.S.
Securities and Exchange Commission ("SEC") pursuant to the Securities Act and
the SEC's declaration of effectiveness of such Registration Statement and the
completion of all necessary filings required under, and the obtaining of all
necessary consents and approvals required pursuant to, state securities or "blue
sky" laws in connection with the IPO, and (ii) the filing of the Articles of
Merger with the Secretary of State of Washington.
3.1.5 Defaults. The Parent is not in default under or in
violation of, and the execution, delivery and performance of this Agreement and
the Parent Related Documents and the consummation by the Parent of the
transactions contemplated hereby and thereby will not result in a default under
or in violation of (i) any mortgage, indenture, charter or bylaw provision,
contract, agreement, lease, commitment or other instrument of any kind to which
the Parent is a party or by which the Parent or any of its properties or assets
may be bound or affected or (ii) any law, rule or regulation applicable to the
Parent or any court
-9-
injunction, order or decree, or any valid and enforceable order of any
governmental agency in effect as of the date hereof having jurisdiction over the
Parent, which default or violation prevents the Parent from consummating the
transactions contemplated hereby or is reasonably likely to have a Parent
Material Adverse Effect.
3.1.6 Investment Company. The Parent is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, or a "holding company," a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
3.1.7 Financial Statements. The Parent has provided certain
financial statements to the Principal Shareholders ("Parent Financial
Statements") and such Parent Financial Statements have been prepared in
accordance with GAAP and fairly present the consolidated financial position,
results of operations and cash flows of the Parent and its then existing
consolidated subsidiaries as of the dates and for the periods indicated, subject
to normal year-end adjustments and any other adjustments described therein or in
the notes or schedules thereto. The books and records of the Parent have been
kept in reasonable detail and accurately and fairly reflect the transactions of
the Parent.
3.1.8 Taxes. The Parent has either accrued, discharged or
caused to be discharged, as the same have become due, or the Parent Financial
Statements contain adequate accruals and reserves for, all taxes, interest
thereon, fines and penalties of every kind and character, attributable or
relating to the properties and business of the Parent for the period ended
covered by the Parent Financial Statements.
3.1.9 Full Authority. The Parent has the corporate power and
authority and has obtained all licenses, permits, qualifications, and other
documentation (including permits required under applicable Environmental Law, as
defined in Exhibit 2) necessary to own and/or operate its businesses, properties
and assets and to carry on its businesses as being conducted on the date of this
Agreement, except such licenses, permits, qualifications or other documentation,
the failure to obtain which is not reasonably likely to result in a Parent
Material Adverse Effect, and such businesses are now being conducted and such
assets and properties are being owned and/or operated in compliance with all
applicable laws (including Environmental Law), ordinances, rules and regulations
of any governmental agency of the United States, any state or political
subdivision thereof, or any foreign jurisdiction, all applicable court or
administrative agency decrees, awards and orders and all such licenses, permits,
qualifications and other documentation, except where the failure to comply will
not have a Parent Material Adverse Effect, and there is no existing condition or
state of facts that would give rise to a violation thereof or a liability or
default thereunder that is reasonably likely to have a Parent Material Adverse
Effect.
3.1.10 Access. The Parent has cooperated fully in permitting the
Principal Shareholders and their representatives to make a full investigation of
the properties, operations and financial condition of the Parent and has
afforded the Principal Shareholders and their representatives reasonable access
to the offices, buildings, real properties, machinery and equipment, inventory
and supplies, records, files, books of account, tax returns, agreements and
commitments and personnel of Parent.
3.1.11 Disclosure. No representation or warranty by the Parent
in this Agreement, and no statement contained in any certificate delivered by
the Parent to the Principal Shareholders pursuant to this
-10-
Agreement, contains any untrue statement of a material fact or omits any
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they are or were made, not misleading.
3.1.12 Parent Material Adverse Effect. The term "Parent Material
Adverse Effect" shall mean an adverse effect on the properties, assets,
financial position, results of operations, long-term debt, other indebtedness,
cash flows or contingent liabilities of the Parent and its consolidated
subsidiaries, taken as a whole, in an amount of $100,000 or more.
3.1.13 Tax-Free Reorganization. With respect to the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code:
(i) The Parent has no plan or intention to sell, exchange or
otherwise dispose or liquidate the Surviving Corporation, to merge the
Surviving Corporation with or into any other corporation, to sell or
otherwise dispose of its Surviving Corporation Common Stock except for
transfers of Surviving Corporation Common Stock to corporations of which
the Parent has control (within the meaning of Section 368(a) of the Code)
at the time of such transfer, or to cause the Surviving Corporation to sell
or otherwise dispose of any of its assets or of any assets acquired in the
Merger, except for dispositions made in the ordinary course of business or
transfers of assets to a corporation of which the Surviving Corporation has
control (within the meaning of Section 368(a) of the Code) at the time of
such transfer.
(ii) The Parent has no plan or intention to cause the Surviving
Corporation, after the Merger, to issue additional shares of its stock that
would result in the Parent losing control of the Surviving Corporation
within the meaning of Section 368(c) of the Code.
(iii) Following the Merger, the Surviving Corporation will
continue the Company's historic business or use a significant portion of
its historic business assets in a business.
(iv) Except as provided in Section 8.20 below, if the Merger is
effected, the Parent and Merger Sub will each pay their respective
expenses, if any, incurred in connection with the Merger.
(v) The Parent Common Stock that will be issued in connection
with the Merger is voting stock within the meaning of Section 368(c) of the
Code.
(vi) At the Effective Time, neither the Parent nor Merger Sub
will have any outstanding warrants, options, convertible securities, or any
other right pursuant to which any person could acquire stock in the Parent
or Merger Sub which, if exercised or converted, would affect the Parent's
acquisition or retention of control of the Surviving Corporation.
(vii) Neither the Parent nor Merger Sub is an investment company
as defined in Section 368(a)(2)(F) of the Code.
(viii) None of the Parent Common Stock received by the
Shareholders as a part of the Final Merger Consideration will be separate
consideration for, or allocable to, any employment agreement.
-11-
(ix) Neither the Parent nor Merger Sub is under the
jurisdiction of a court in a case under Title 11 of the United States Code,
or a receivership, foreclosure, or similar proceeding in a federal or state
court.
3.1.14 No Warranties of Future Performance. The Parent and
Merger Sub acknowledge that they have had the opportunity to inspect the
Principal Shareholders' and the Company's business and properties, and
understand that no warranties of future performance of the Principal
Shareholders or the Company have been or are being made by the Principal
Shareholders or the Company, irrespective of any forecasts, budgets or other
financial information relating to the future that may have been provided by the
Principal Shareholders or the Company.
3.2 Representations and Warranties Concerning the Merger Sub. The
Parent and Merger Sub, jointly and severally, hereby represent and warrant to
the Principal Shareholders and the Company as follows:
3.2.1 Organization and Standing. Merger Sub is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Washington.
3.2.2 Capital Structure. The authorized capital stock of Merger
Sub consists of 5,000 shares of common stock, par value $.01 per share, 1,000 of
which are validly issued and outstanding, fully paid and nonassessable and are
owned by the Parent free and clear of all liens, encumbrances and adverse
claims.
3.2.3 Authority. Merger Sub has the corporate power and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement,
the performance by Merger Sub of its obligations hereunder and the consummation
of the transactions contemplated hereby have been duly authorized by its Board
of Directors and the Parent as its sole shareholder, and, except for the
corporate filings required by state law, no other corporate proceedings on the
part of Merger Sub are necessary to authorize this Agreement and the transaction
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Merger Sub and (assuming the due authorization, execution and
delivery hereof by the Company) constitutes a valid and binding obligation of
Merger Sub enforceable against Merger Sub in accordance with its terms, except
as such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether applied in a proceeding
at law or in equity).
4. CERTAIN COVENANTS, AGREEMENTS AND PRE-CLOSING MATTERS
4.1 Agreements of the Principal Shareholders to be Effective Upon
Closing. Effective upon Closing, and without further action on the part of any
party or other person, the Principal Shareholders covenant and agree as follows:
4.1.1 Covenant Not to Compete.
(i) For the considerations specified in this Agreement and in
recognition that the covenants by the Principal Shareholders in this
Section are a material inducement to the Parent to
-12-
enter into and perform this Agreement, each Principal Shareholder agrees
that for the period from the Closing Date to the later to occur of (a) the
date which is three years after the Closing Date or (b) the date which is
one year following any termination of such Principal Shareholder's
employment with the Company, such Principal Shareholder will not represent,
engage in, carry on, or have a financial interest in, directly or
indirectly, individually, as a member of a partnership or limited liability
company, equity owner, shareholder (other than as a shareholder of the
Parent or as a shareholder of less than one percent of the issued and
outstanding stock of a publicly-held company whose gross assets exceed $100
million), investor, officer, director, trustee, manager, employee, agent,
associate or consultant engage in any business that involves indoor air
quality, heating, ventilation, air conditioning, appliance, mechanical
construction or sewer cleaning products or services within a 100-mile
radius of the cities of Seattle, Washington and Portland, Oregon; provided,
however, that for each Principal Shareholder other than ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
(i) if such Principal Shareholder's employment is terminated without Cause
(as such term is defined in the Employment Agreement attached hereto as
Exhibit 5.3.3A for such Principal Shareholder) the noncompete period
applicable thereafter to such Principal Shareholder in Section 4.1.1(i)(b)
of this Agreement shall be reduced to six months and (ii) if the Employment
Agreement for such Principal Shareholder expires, the non-compete period
applicable thereafter to such Principal Shareholder shall be equal to the
then in effect severance period for such Principal Shareholder; provided
further that (i) the Principal Shareholders (other than ▇▇▇▇ ▇. ▇▇▇▇▇▇▇)
may continue to engage in the business of residential indoor air quality,
heating, ventilation and air conditioning installation, replacement, repair
and maintenance services through MMR and (ii) that in the event the
Principal Shareholders cease at any time to hold a controlling interest in
MMR, the words "MacDonald" or "▇▇▇▇▇▇" shall not be used in the name or
marketing of MMR following such loss of such controlling interest.
(ii) Each Principal Shareholder agrees that the limitations
set forth herein on such Principal Shareholder's rights to compete with the
Parent and its affiliates as set forth in clause (i) are reasonable and
necessary for the protection of Parent and its affiliates. In this regard,
each Principal Shareholder specifically agrees that the limitations as to
period of time and geographic area, as well as all other restrictions on
such Principal Shareholder's activities specified herein, are reasonable
and necessary for the protection of the Parent and its affiliates. Each
Principal Shareholder agrees that, in the event that the provisions of this
Section should ever be deemed to exceed the scope of business, time or
geographic limitations permitted by applicable law, such provisions shall
be and are hereby reformed to the maximum scope of business, time or
geographic limitations permitted by applicable law.
(iii) Each Principal Shareholder agrees that the remedy at law
for any breach by such Principal Shareholder of this Section 4.1.1 will be
inadequate and that the Parent shall be entitled to injunctive relief.
4.1.2 Release. Effective as of the Effective Time, each
Principal Shareholder does hereby (i) release, acquit and forever discharge the
Surviving Corporation from any and all liabilities, obligations, claims,
demands, actions or causes of action arising from or relating to any event,
occurrence, act, omission or condition occurring or existing on or prior to the
Effective Time, including, without limitation, any claim for indemnity or
contribution from the Surviving Corporation in connection with the obligations
or liabilities of such Principal Shareholder hereunder, except for salary and
benefits payable to such Principal Shareholder
-13-
as an employee in the ordinary course of business and lease payments payable to
F&V Investments for the property located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇.▇., ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (the "Property"); (ii) waive all breaches, defaults or
violations of any agreement applicable to the Company Common Stock (other than
this Agreement) and agree that any and all such agreements (other than this
Agreement) are terminated as of the Effective Time, and (iii) waive any and all
preemptive or other rights to acquire any shares of capital stock of the Company
and release any and all claims arising in connection with any prior default,
violation or failure to comply with or satisfy any such preemptive or other
rights.
4.2 Elimination of Expense. Prior to Closing, the Principal
Shareholders will produce evidence to the reasonable satisfaction of the Parent
and its lenders that the expenses of the Company as described in the Letter of
Intent between the Parent, the Company and the Principal Shareholder dated June
3, 1997 have been eliminated as expenses of the Surviving Corporation as of and
following the Closing Date.
4.3 Deferred Compensation Plans. Prior to Closing, the
Principal Shareholders will cause all current or future obligations of the
Company under the split dollar life and other deferred compensation plans
covering any Shareholder or any employee of the Company to be satisfied in full
(including current or deferred tax liabilities arising therefrom) all in
accordance with the provisions of Exhibits Exhibit 4.3 attached hereto.
4.4 Audit. Prior to Closing, the Company's firm of independent
accountants (the "Company Accountants") shall complete an audit of the Company
for the fiscal year ended December 31, 1996 and for the period from such date
through June 30, 1997, and such additional audit and/or review work as may be
requested by the Parent through and including the Closing Date and provide its
report to the Parent and the Principal Shareholders. The Accountants shall
confirm the audit/review work of the Company Accountants.
4.5 Certain Payables and Receivables. On or prior to Closing,
the Principal Shareholders shall cause to be paid in full in cash all accounts
receivable, notes receivable and advances payable by any Shareholder to the
Company and the Company shall pay in full in cash all accounts payable, notes
payable and advances payable by the Company to any Shareholder.
4.6 Pre-Closing Covenants and Agreements. The Principal
Shareholders and the Company jointly and severally agree as set forth in
Exhibit 4.6 attached hereto.
4.7 Confidentiality. Prior to the Effective Time, none of the
Parent, Merger Sub, the Company or the Principal Shareholders will disclose the
terms of this Agreement or the Merger to any person other than their respective
directors, officers, agents or representatives, except as otherwise provided
herein or unless required by law. The Company may make appropriate disclosures
of the general nature of the Merger to its employees, vendors and customers to
protect the Company's goodwill and to facilitate the Closing. The Parent and
Merger Sub may disclose pertinent information regarding the Merger to its
existing and prospective investors, lenders, or investment bankers or financial
advisors for the purpose of obtaining financing, including, without limitation,
financing related to the IPO or other offerings of its securities, and may
describe this Agreement and the transactions contemplated hereby in any
registration statement filed by the Parent under the Securities Act and in
reports filed by the Parent under the Securities Exchange Act of 1934, and may
file this Agreement as an exhibit to any thereof. The Parent may also make
appropriate disclosures of the general nature of the Merger and the identity,
nature and scope of the Company's operations to prospective acquisition
candidates in connection with the Parent's efforts to effect additional
-14-
acquisitions. Each party will have mutual approval rights with respect to
outlines of press releases or other communications (including employee
presentations) concerning the prospective merger.
4.8 Tax-Free Reorganization. Unless the other parties shall
otherwise agree in writing, each of the Principal Shareholders, the Parent,
Merger Sub, the Company or the Surviving Corporation shall use their best
efforts to qualify the Merger as a reorganization within the meaning of Section
368(a) of the Code and none of them shall knowingly take or fail to take any
action, that would jeopardize the qualification of the Merger as such a
reorganization.
4.9 Company Plans. Except as otherwise contemplated by this
Agreement, the Company Plans (as defined in Exhibit 2) described on Exhibit 4.9
in effect at the date of this Agreement will remain in effect for three years
following the Closing unless otherwise agreed to by the Parent and the Principal
Shareholders.
4.10 HSR Act. The Parent, the Principal Shareholders and the
Company shall take all reasonable actions necessary to make all filings, if any,
required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended ("HSR Act") in connection with the transaction contemplated hereby and
to obtain the termination or expiration of the waiting period thereunder.
4.11 Purchase of Certain Receivables. If any accounts receivable
included in current assets of the Company for purposes of determining Working
Capital (as defined in Exhibit 1) remain unpaid in full on the second
anniversary of the Closing, the Principal Shareholders shall, upon written
request by the Surviving Corporation made within 30 days after the second
anniversary of the Closing, purchase the same from the Surviving Corporation,
without recourse, for the uncollected amount thereof minus the sum of (i) the
unused portion of the reserves for bad debts that were on the books of the
Company as of the Closing and (ii) the amount of any ▇▇▇▇▇▇▇▇ in excess of costs
on the books of the Company as of the Closing which are directly traceable to
such accounts receivable. Prior to the date the Additional Consideration, if
any, is disbursed, the Principal Shareholders shall make a good faith estimate
of the amount of accounts receivable to be purchased hereunder and such amount
(net of the reserve for bad debts and the amount of any related ▇▇▇▇▇▇▇▇ in
excess of costs, as provided above), if any, shall be deducted from the
Additional Consideration and applied as a reserve against such purchase
obligation (the "AR Reserve"). If the AR Reserve is insufficient, 8% interest
per annum from the Closing to the date of payment will be charged on the
shortfall. If the AR Reserve is more than sufficient, the excess will be
disbursed to the Shareholders in the same manner as Additional Consideration was
disbursed. Collections from an account debtor after the Closing shall be applied
first to reduction of the oldest account receivable of such account debtor
unless there is a dispute and an adjustment on a specific invoice.
4.12 Certain Condominiums. The purchase price delivered to the
Company for the sale of the properties listed on Exhibit 4.12 (the
"Condominiums") shall be included in current assets for the purposes of
determining Working Capital but shall be excluded from Additional Net After-Tax
Income. The Principal Shareholders shall release, acquit and forever discharge
the Company from any and all liabilities, obligations, claims, demands, actions,
or causes of action arising from or relating to any event, occurrence, act,
omission or condition relating to such properties, including, without
limitation, any claim for indemnity or contribution from the Company in
connection with the obligations or liabilities of the Principal Shareholders
hereunder.
4.13 Certain Matters Related to the ESOP.
4.13.1 Suspension of ESOP Contributions. Prior to the
Closing Date, the Company shall not make any contributions to the ▇▇▇▇▇▇▇▇▇-
▇▇▇▇▇▇ Industries, Inc. Employee Stock Ownership Plan ("ESOP").
-15-
4.13.2 Amendment of ESOP; Distribution of ESOP
Investments. Upon receipt of an IRS favorable determination letter and prior to
the second anniversary of the Closing, the Parent and the Company shall
distribute the ESOP accounts to the ESOP participants.
4.14 ESOP Expenses. Expenses of the ESOP's operation
(including post-Merger operation), transition and eventual termination shall be
paid by the Company.
4.15 Indemnification of Officers and Directors of the Company.
The Parent agrees that the Company shall maintain in effect for at least five
(5) years from the Closing Date the indemnification provisions in the Articles
of Incorporation of the Company and its subsidiaries as presently in effect to
the extent such indemnification provisions would apply to acts or omissions of
the present officers and directors and the Company shall maintain in effect
director and officer liability insurance coverage for its officers and directors
with coverage of $10,000,000 and a deductible not in excess of $50,000 and to
the extent it does not increase premiums on such director and officer policies,
the Parent will procure tail coverage for such directors and officers at the
expiration of such five (5) year period.
4.16 Errors and Omissions Insurance. The Parent agrees that
the Company shall maintain in effect a policy covering professional errors and
omissions for engineering and related coverage for the Company and the Company's
professional engineers with coverage of $1,000,000 and a deductible not in
excess of $100,000. In the event any such coverage is canceled for a
professional engineer, the Parent shall purchase appropriate "tail" coverage for
a period not to exceed the applicable statute of limitations for the applicable
errors and omissions.
4.17 Other Insurance. The Parent agrees that the Company shall
maintain in effect insurance policies for general liability, automobile,
property, completed operations, equipment, workers' compensation, employer
practices liability, employee benefits liability, pollution/indoor air quality,
employee dishonesty and depositor's forgery liability and umbrella liability
coverage with coverage amounts and deductible amounts as agreed by the Parent
and the Company.
4.18 Releases. On or prior to the Closing, the Parent shall
procure the release of the Principal Shareholders under any guaranty or
indemnity agreement relating to the business or operations of the Company.
4.19 Parent Guaranty. The Parent hereby unconditionally
guarantees the performance of all Merger Sub's obligations under this Agreement
(including any obligations of the Merger Sub in any Exhibits hereto).
4.20 Recommendation by the Company; Cooperation in Preparation
of Registration Statement and Proxy and in Meeting of Shareholders. The
Company's Board of Directors shall recommend that the Shareholders vote in favor
of the Merger. The Company, the Principal Shareholders and the Trustee shall
cooperate fully with the Parent and Merger Sub in the (i) preparation of a
registration statement on Form S-4 for the registration of the Parent Common
Stock to be delivered to the Shareholders pursuant to this Agreement, (ii)
preparation of a proxy statement in connection with such registration and the
Merger, and (iii) planning, preparation and carrying out of any meetings of
Shareholders in connection with such registration and the Merger.
-16-
4.21 Sale of MMR. The Company shall divest itself of MMR prior
to the Closing. To the extent that the Company realizes actual value as a result
of such divestiture, such value shall be taken into account in the calculation
of Working Capital or Long-Term Debt, as the case may be.
5. CONDITIONS PRECEDENT; CLOSING DELIVERIES
5.1 Conditions Precedent to the Obligations of the Parent and Merger
Sub. The obligations of the Parent and Merger Sub to effect the Merger under
this Agreement are subject to the satisfaction of each of the following
conditions, unless waived by the Parent in writing to the extent permitted by
applicable law:
5.1.1 Accuracy of Representations and Warranties. The
representations and warranties of the Principal Shareholders and the Company
contained in this Agreement, in Exhibit 2 and the Disclosure Schedule referred
to therein and the other Exhibits provided by the Principal Shareholders or the
Company pursuant to this Agreement or in any closing certificate or document
delivered to the Parent pursuant hereto shall be true and correct at and as of
the Closing Date as though made at and as of that time other than such
representations and warranties as are specifically made as of another date, and
the Principal Shareholders and the Company shall each have delivered to the
Parent and Merger Sub a certificate to that effect.
5.1.2 Performance of Covenants. The Principal Shareholders and
the Company shall have performed and complied with all covenants of this
Agreement to be performed or complied with by them at or prior to the Closing
Date, and the Principal Shareholders and the Company shall each have delivered
to the Parent and Merger Sub a certificate to that effect.
5.1.3 Legal Actions or Proceedings. No legal action or
proceeding shall have been instituted after the date hereof against the Company
or against the Parent or Merger Sub arising by reason of the acquisition of the
Company pursuant to this Agreement, which is reasonably likely (i) to restrain,
prohibit or invalidate the consummation of the transactions contemplated by this
Agreement, (ii) to have a Company Material Adverse Effect or (iii) to have a
Parent Material Adverse Effect after giving effect to the consummation of the
transactions contemplated by this Agreement, and the Principal Shareholders and
the Company shall each have delivered to the Parent and Merger Sub a certificate
to that effect.
5.1.4 Approvals. The Company and the Principal Shareholders
shall have procured all of the consents, approvals and waivers of third parties
or any regulatory body or authority, whether required contractually or by
applicable law or otherwise necessary for the execution, delivery and
performance of this Agreement (including the Company Related Documents and the
Shareholder Related Documents) by the Company and the Shareholders prior to the
Closing Date, and the Shareholders and the Company shall each have delivered to
the Parent and Merger Sub a certificate to that effect.
5.1.5 Closing Deliveries. All documents required to be executed
or delivered at Closing by the Principal Shareholders pursuant to Section 5.3 of
this Agreement shall have been so executed and delivered.
5.1.6 No Casualty, Loss or Damage. No casualty, loss or damage
shall have occurred on or prior to the Effective Time to any of the properties
or assets of the Company.
-17-
5.1.7 Licenses, etc. The Company shall have obtained all such
licenses and permits as are legally required for the continued operation of the
business after the Effective Time, except such licenses and permits, the absence
of which will not have a Company Material Adverse Effect.
5.1.8 No Material Adverse Change. Since December 31, 1996,
there shall not have been any event that in the reasonable judgment of the
Parent adversely affects the properties, assets, financial condition, results of
operations, cash flows, businesses or prospects of the Company.
5.1.9 IPO. The Parent shall have completed the IPO on terms
acceptable to it, and the net proceeds thereof shall have been received by the
Parent.
5.1.10 Certain Corporate Actions. All necessary director and
shareholder resolutions, waivers and consents required to consummate the
transactions contemplated hereunder shall have been executed and delivered.
5.1.11 HSR Act. All required filings, if any, under the HSR Act
with respect to the transactions contemplated hereby shall have been made and
the waiting periods thereunder shall have been terminated or shall have expired.
5.2 Conditions Precedent to the Obligations of the Principal
Shareholders and the Company. The obligations of the Principal Shareholders and
the Company under this Agreement are subject to the satisfaction of each of the
following conditions, unless waived by the Principal Shareholders and the
Company in writing to the extent permitted by applicable law:
5.2.1 Accuracy of Representations and Warranties. The
representations and warranties of the Parent and Merger Sub contained in this
Agreement or in any closing certificate or document delivered to the Principal
Shareholders or the Company pursuant hereto shall be true and correct on and as
of the Closing Date as though made at and as of that date other than such
representations and warranties as are specifically made as of another date, and
the Parent and Merger Sub shall have delivered to the Principal Shareholders and
the Company a certificate to that effect.
5.2.2 Performance of Covenants. The Parent and Merger Sub shall
have performed and complied with all covenants of this Agreement to be performed
or complied with by them at or prior to the Closing Date and the Parent and
Merger Sub shall have delivered to the Principal Shareholders and the Company a
certificate to such effect.
5.2.3 Approvals. The Parent shall have procured all of the
consents, approvals and waivers specified in Exhibit 3.1.4 prior to the Closing
Date, and the Parent shall have delivered to the Principal Shareholders and the
Company a certificate to that effect.
5.2.4 Closing Deliveries. All documents required to be executed
or delivered at Closing by the Parent pursuant to Section 5.4 of this Agreement
shall have been so executed and delivered.
5.2.5 HSR Act. All required filings, if any, under the HSR Act
with respect to the transactions contemplated hereby shall have been made and
the waiting periods thereunder shall have been terminated or shall have expired.
-18-
5.3 Deliveries by the Principal Shareholders at the Closing. At the
Closing, simultaneously with the deliveries by the Parent specified in Section
5.4 below, and in addition to any deliveries required to be made by the
Principal Shareholders and the Company pursuant to any other transaction
document at the Closing, the Principal Shareholders shall deliver or cause to be
delivered to the Parent the following:
5.3.1 Closing Certificates. The Principal Shareholders and the
Company shall deliver the certificates required pursuant to Sections 5.1.1,
5.1.2, 5.1.3, 5.1.4 and 5.1.5.
5.3.2 Stock Transfer Restriction Agreement. The Principal
Shareholders shall execute and deliver and shall cause the Shareholders to
execute and deliver a Stock Transfer Restriction Agreement on the Closing Date,
effective as of the Effective Time, substantially in the form set forth in
Exhibit 5.3.2.
5.3.3 Employment Agreements. Each Principal Shareholder and
certain other employees of the Company specified on Exhibit 5.3.3 shall execute
and deliver an Employment Agreement (with the insertion of the appropriate
Section 7(b) based on whether such Principal Shareholder or any such employee is
designated an "Executive or Key Employee" or "Manager" on Exhibit 5.3.3 and with
the blanks appropriately completed as set forth in a confidential letter between
the Company and the Parent) with the Company on the Closing Date, effective as
of the Effective Time, substantially in the form set forth in Exhibit 5.3.3A.
5.3.4 Lease Agreement. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall cause F&V
Investments, the owner of the Property, to execute and deliver a lease agreement
with the Company substantially in the form attached as Exhibit 5.3.4.
5.3.5 Opinion of Counsel for the Principal Shareholders and the
Company. The Principal Shareholders shall deliver the favorable opinion of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.L.L.C., counsel to the Principal
Shareholders and the Company, and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, counsel to the ESOP, each
dated the Effective Time, substantially in the form and to the effect set forth
in Exhibit 5.3.5-A and Exhibit 5.3.5-B, respectively, attached hereto.
5.3.6 Documents, Stock Certificates. The Principal Shareholders
shall execute and deliver, and shall cause the Company and the Shareholders to
execute and deliver, the documents, certificates, opinions, instruments and
agreements required to be executed and delivered by the Company or its officers
or directors or the Shareholders at the Closing as contemplated hereby or as may
be reasonably requested by the Parent and shall deliver or cause to be delivered
the documents and evidence required under Section 4. Stock Certificates
representing all of the outstanding Company Common Stock and properly executed
and completed letters of transmittal shall be delivered by the Principal
Shareholders to the Parent.
5.3.7 Discharge of Indebtedness, Releases, Etc. The
indebtedness of the Company referred to in Exhibit 5.3.8 attached hereto,
including, but not limited to, any debt of the Company in any way related to the
Condominiums, ("Terminated Obligations") shall be paid in full or refinanced on
terms acceptable to the Parent, and the Principal Shareholders shall cause all
holders of any such Terminated Obligations to deliver to the Parent, in form
reasonably satisfactory to the Parent and the lenders to the Parent or Merger
Sub, such customary releases, termination statements, consents, approvals or
other documents or instruments required, in the judgment of the Parent, to
release and terminate all liens, security interests,
-19-
claims, or rights of such holders against the Surviving Corporation or the
Parent or any of their respective assets in connection therewith.
Except as set forth in the next paragraph of this Section 5.3.8, the
consummation of the Closing shall not be deemed to be a waiver by the Parent or
the Surviving Corporation of any of their rights or remedies against the
Principal Shareholders hereunder for any breach of warranty, covenant or
agreement by the Company or the Principal Shareholders herein irrespective of
any knowledge of or investigation made by or on behalf of the Parent or Merger
Sub; provided, however, that if the Company shall disclose in writing to the
Parent prior to the Closing Date a specified breach of a specifically identified
representation, warranty, covenant or agreement of the Company or any Principal
Shareholder herein by the Company or any Principal Shareholder, and requests a
waiver thereof by the Parent, and the Parent shall waive any such specifically
identified breach in writing prior to the Closing Date, the Parent and the
Surviving Corporation, for themselves and for each Parent Indemnified Party (as
defined below) shall be deemed to have waived their respective rights and
remedies hereunder for, and the Principal Shareholders shall have no liability
with respect to, any such specifically identified breach, to the extent so
identified by the Company and so waived by the Parent.
Prior to the Closing, the Parent investigated and reviewed the books
and records relating to the operation of the Company, and inspected the Company
assets as it considered necessary to satisfy itself as to the condition of the
Company's business and properties. The Parent has notified the Company, the
Principal Shareholders and the Trustee of any material discrepancy, statement or
state of facts that was discovered up until the Closing which may affect or
render any of the Company's, the Principal Shareholders' or the Trustee's
representations or warranties contained herein untrue or misleading. To the
extent that the Parent has actual knowledge of any such discrepancy, statement
or state of facts (and the significance of such discrepancy, statement or state
of facts as such relates to the Company's, the Principal Shareholders' or the
Trustee's representations or warranties), and fails to notify the Company, the
Principal Shareholders, and the Trustee, the applicable representation or
warranty known to be untrue or misleading shall be unenforceable. In all other
respects, the representations and warranties of the Company, the Principal
Shareholders and the Trustee shall remain unaffected. Likewise, prior to the
Closing, the Company, the Principal Shareholders and the Trustee investigated
and reviewed the books and records relating to the operation of the Parent and
Merger Sub, and inspected the Parent's and Merger Sub's assets as they
considered necessary to satisfy them as to the condition of the Parents' and
Merger Sub's business and properties. The Company, the Principal Shareholders
and the Trustee have notified the Parent and Merger Sub of any material
discrepancy, statement or state of facts that was discovered up until the
Closing which may affect or render any of the Parent's or Merger Sub's
representations or warranties contained herein untrue or misleading. To the
extent that the Company, the Principal Shareholders or the Trustee have actual
knowledge of any such discrepancy, statement or state of facts (and the
significance of such discrepancy, statement or state of facts as such relates to
the Parent's or Merger Sub's representations or warranties), and fails to notify
the Parent and Merger Sub, the applicable representation or warranty known to be
untrue or misleading shall be unenforceable. In all other respects, the
representations and warranties of the Parent and Merger Sub shall remain
unaffected.
5.4 Deliveries by the Parent at the Closing. At the Closing,
simultaneously with the deliveries by the Principal Shareholders specified in
Section 5.3 above, and in addition to any other deliveries to be made by the
Parent and Merger Sub pursuant to any other transaction document at the Closing,
the Parent shall deliver or cause to be delivered to the Principal Shareholders
the following:
-20-
5.4.1 Closing Certificates. The Parent and Merger Sub shall
deliver the certificates required pursuant to Sections 5.2.1, 5.2.2, 5.2.3 and
5.2.4.
5.4.2 Registration Rights Agreement. The Parent shall execute
and deliver to the Principal Shareholders a Registration Rights Agreement at the
Closing, effective as of the Effective Time, substantially in the form set forth
in Exhibit 5.3.5.
5.4.3 Opinion of Counsel for the Parent and Merger Sub. The
Parent shall deliver the favorable opinion of its legal counsel dated the
Effective Time, substantially in the form and to the effect set forth in
Exhibit 5.4.3.
5.4.4 Closing Merger Consideration. The Parent shall deliver
the Closing Merger Consideration to the Shareholders.
The consummation of the Closing shall not be deemed to be a waiver by
the Principal Shareholders of any of their rights or remedies hereunder for
breach of any warranty, covenant or agreement herein by the Parent or Merger Sub
irrespective of any knowledge of or investigation with respect thereto made by
or on behalf of any Principal Shareholder; provided, however, that if the Parent
shall disclose in writing to the Principal Shareholders prior to the Closing a
specified breach of a specifically identified representation, warranty, covenant
or agreement of the Parent or Merger Sub contained herein by the Parent or
Merger Sub, and requests a waiver thereof by the Company and the Principal
Shareholders, and the Company and the Principal Shareholders shall waive any
such specifically identified breach in writing prior to the Closing, the Company
and the Principal Shareholders shall be deemed to have waived their rights and
remedies hereunder for, and the Parent and Merger Sub shall have no liability or
obligation to the Principal Shareholders or the Company with respect to, any
such specifically identified breach, to the extent so identified by the Parent
and waived by the Company and the Principal Shareholders.
6. SURVIVAL, INDEMNIFICATIONS
6.1 Survival. The representations and warranties set forth in this
Agreement and the other documents, instruments and agreements contemplated
hereby shall survive after the date hereof to the extent provided herein. The
representations and warranties of the Principal Shareholders and the Company
herein and in the Shareholder Related Documents and the Company Related
Documents (as defined in Exhibit 2) other than those of the Principal
Shareholders and the Company in Sections 2.2, 2.3, 2.4 and in Sections 2, 3 and
12 of Exhibit 2 shall survive for a period of 24 months after the Closing Date
and the representations and warranties of the Principal Shareholders and the
Company contained in Sections 2.2, 2.3, 2.4 and in Sections 2, 3 and 12 of
Exhibit 2 shall survive for the maximum period permitted by applicable law. The
representations and warranties of the Parent herein and in the Parent Related
Documents, other than those in Sections 3.1.3, 3.1.4 and 3.1.8 shall survive for
a period of 24 months after the Closing Date and the representations and
warranties of the Parent contained in Sections 3.1.3, 3.1.4 and 3.1.8 shall
survive for the maximum period permitted by applicable law. The periods of
survival of the representations and warranties as stated above in this Section
6.1 are referred to herein as the "Survival Period." The liabilities of the
parties under their respective representations and warranties shall expire as of
the expiration of the applicable Survival Period and no claim for
indemnification may be made with respect to any breach of any representation or
warranty, the applicable Survival Period of which shall have expired, except to
the extent that written notice of such breach shall have been given to the party
against which such claim is asserted on
-21-
or before the date of such expiration. The covenants and agreements of the
parties herein (including but not limited to Exhibit 4.6) and in other documents
and instruments executed and delivered in connection with the closing of the
transactions contemplated hereby shall survive for the maximum period permitted
by law.
6.2 Indemnification.
6.2.1 Parent Indemnified Parties. Subject to the provisions of
Sections 6.1 and 6.3 hereof, the Principal Shareholders shall indemnify, save
and hold harmless the Parent, the Surviving Corporation, Merger Sub and any of
their assignees (including lenders) and all of their respective officers,
directors, employees, representatives, agents, advisors and consultants and all
of their respective heirs, legal representatives, successors and assigns
(collectively the "Parent Indemnified Parties") from and against any and all
damages, liabilities, losses, loss of value (including the value of adverse
effects on cash flow or earnings), claims, deficiencies, penalties, interest,
expenses, fines, assessments, charges and costs, including reasonable attorneys'
fees and court costs (collectively "Losses") arising from, out of or in any
manner connected with or based on:
(i) the breach of any covenant of the Principal Shareholders
or the Company or the failure by the Shareholders or the Company to perform
any obligation of the Principal Shareholders or the Company contained
herein or in any Company Related Document or Shareholder Related Document;
(ii) any inaccuracy in or breach of any representation or
warranty of the Principal Shareholders contained herein or in any
Shareholder Related Document;
(iii) any inaccuracy in or breach of any representation or
warranty of the Company contained herein or in any Company Related
Document;
(iv) any factual misrepresentations provided by the Company or
the Principal Shareholders to the Parent for inclusion and which was
included in the Registration Statement;
(v) indemnification payments made by the Company or the
Surviving Corporation to the Company's present or former officers,
directors, employees, agents, consultants, advisors or representatives in
respect of actions taken or omitted to be taken prior to the Closing to the
extent such indemnification payments are not covered by insurance; and
(vi) any act, omission, occurrence, event, condition or
circumstance occurring or existing at any time on or before the Effective
Time and involving or related to the assets, properties, business or
operations now or previously owned or operated by the Company, including,
but not limited to, the Condominiums, and not (a) disclosed with reasonable
specificity in the Disclosure Schedule, (b) disclosed in the Company
Financial Statements (as defined in Exhibit 2) or in working capital or
long term debt (in each case as determined for purposes of calculating the
Final Merger Consideration) or (c) not otherwise permitted by this
Agreement.
The foregoing indemnities shall not limit or otherwise adversely
affect the Principal Shareholders' Indemnified Parties' rights to indemnity for
Losses under Section 6.2.2.
-22-
6.2.2 Parent Indemnity. Subject to the provisions of Sections
6.1 and 6.3, the Parent shall indemnify, save and hold harmless the Principal
Shareholders and the Principal Shareholders' heirs, legal representatives,
successors and assigns from and against all Losses arising from, out of or in
any manner connected with or based on:
(i) any breach of any covenant of the Parent or Merger Sub or
the failure by the Parent or Merger Sub to perform any of its obligations
contained herein or in the Parent Related Documents;
(ii) any factual misrepresentation made by the Parent in the
Registration Statement (other than factual misrepresentations provided by
the Principal Shareholders or the Company);
(iii) any inaccuracy in or breach of any representation or
warranty of the Parent or Merger Sub contained herein or in the Parent
Related Documents; and
(iv) any act, omission, occurrence, event, condition or
circumstance occurring or existing at any time after (but not on or before)
the Effective Time and involving or relating to the assets, properties,
businesses or operations of the Company; provided, however, that this
clause (iv) shall not apply to any Losses to the extent that such Losses
result from any Shareholder's acts or omissions after the Effective Time as
an officer, director and/or employee of the Parent, the Surviving
Corporation and/or any other affiliate of the Parent.
The foregoing indemnities shall not limit or otherwise adversely affect the
Parent Indemnified Parties' rights of indemnity for Losses under Section 6.2.1.
6.3 Limitations.
6.3.1 Aggregate Liability. The aggregate liability of the
Principal Shareholders under Section 6.2.1 shall not exceed the cash amount
equal to the Total Consideration with the Parent Common Stock being valued at
the IPO Price to the Public for such purpose. The aggregate liability of the
Parent under Section 6.2.2 shall not exceed the cash amount equal to the Total
Consideration with the Parent Common Stock being valued at the IPO Price to the
Public for such purpose.
6.3.2 Threshold. Notwithstanding any other provision of this
Agreement, the Principal Shareholders shall not be liable to the Parent
Indemnified Parties under Section 6.2.1 regarding any claim(s), loss(es),
expense(s), obligation(s), or other liability(ies) that do not exceed $100,000
(the "Threshold"); provided, however, that when the aggregate amount of all such
claims, losses, expenses, obligations, and liabilities not exceeding the
Threshold reaches the Threshold, the Principal Shareholders or the Trustee, as
the case may be, shall thereafter be liable in full regarding all such claims,
losses, expenses, obligations, and liabilities (including the amount of the
Threshold); provided further that the Parent Indemnified Parties shall not seek
indemnification hereunder for insurance deductibles until the aggregate of such
deductibles exceeds the Threshold, in which case the Parent may only seek
indemnification for amounts in excess of the Threshold. In the event the Parent
procures insurance policies with deductibles that are in excess of deductibles
in force immediately prior to the Effective Time, for purposes of determining
any indemnification by the Principal Shareholders or the Trustee hereunder, the
deductible in force immediately prior to the Effective Time shall be used.
-23-
6.4 Procedures for Indemnification.
6.4.1 Notice. The party (the "Indemnified Party") that may be
entitled to indemnity hereunder shall give prompt notice to any party obligated
to give indemnity hereunder (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any suit, action or proceeding in respect of which
indemnity may be sought hereunder. Any failure on the part of any Indemnified
Party to give the notice described in this Section 6.4.1 shall relieve the
Indemnifying Party of its obligations under this Article 6 only to the extent
that such Indemnifying Party has been prejudiced by the lack of timely and
adequate notice (except that the Indemnifying Party shall not be liable for any
expenses incurred by the Indemnified Party during the period in which the
Indemnified Party failed to give such notice). Thereafter, the Indemnified
Party shall deliver to the Indemnifying Party, promptly (and in any event within
10 days thereof) after the Indemnified Party's receipt thereof, copies of all
notices and documents (including court papers) received by the Indemnified Party
relating to such claim, action, suit or proceeding.
6.4.2 Legal Defense. The Parent shall have the obligation to
assume the defense or settlement of any third-party claim, suit, action or
proceeding in respect of which indemnity may be sought hereunder, provided that
(i) the Principal Shareholders shall at all times have the right, at their
option, to participate fully therein, and (ii) if the Parent does not proceed
diligently to defend the third-party claim, suit, action or proceeding within 10
days after receipt of notice of such third-party claim, suit, action or
proceeding, the Principal Shareholders shall have the right, but not the
obligation, to undertake the defense of any such third-party claim, suit, action
or proceeding.
6.4.3 Settlement. The Indemnifying Party shall not be required
to indemnify the Indemnified Party with respect to any amounts paid in
settlement of any third-party suit, action, proceeding or investigation entered
into without the written consent of the Indemnifying Party; provided, however,
that if the Indemnified Party is a Parent Indemnified Party, such third-party
suit, action, proceeding or investigation may be settled without the consent of
the Indemnifying Party on 10 days' prior written notice to the Indemnifying
Party if such third-party suit, action, proceeding or investigation is then
unreasonably interfering with the business or operations of the Company or the
Surviving Corporation and the settlement is commercially reasonable under the
circumstances; and provided further, that if the Indemnifying Party gives 10
days' prior written notice to the Indemnified Party of a settlement offer which
the Indemnifying Party desires to accept and to pay all Losses with respect
thereto ("Settlement Notice") and the Indemnified Party fails or refuses to
consent to such settlement within 10 days after delivery of the Settlement
Notice to the Indemnified Party, and such settlement otherwise complies with the
provisions of this Section 6.4, the Indemnifying Party shall not be liable for
Losses arising from such third-party suit, action, proceeding or investigation
in excess of the amount proposed in such settlement offer. Notwithstanding the
foregoing, no Indemnifying Party will consent to the entry of any judgment or
enter into any settlement without the consent of the Indemnified Party, if such
judgment or settlement imposes any obligation or liability upon the Indemnified
Party other than the execution, delivery or approval thereof and customary
releases of claims with respect to the subject matter thereof.
6.4.4 Cooperation. The parties shall cooperate in defending any
such third-party suit, action, proceeding or investigation, and the defending
party shall have reasonable access to the books and records, and personnel in
the possession or control of the Indemnified Party that are pertinent to the
defense. The Indemnified Party may join the Indemnifying Party in any suit,
action, claim or proceeding brought by a third party, as to which any right of
indemnity created by this Agreement would or might apply, for the
-24-
purpose of enforcing any right of the indemnity granted to such Indemnified
Party pursuant to this Agreement.
6.5 Subrogation. Each of the Parent, the Company and the Principal
Shareholders shall make a good faith attempt (which shall not be deemed to
include an obligation to commence any litigation) to seek indemnification from
any third parties, including insurers, who may be liable upon any claims made
against the Parent, the Company or the Principal Shareholders and for which the
other party would be liable under this Agreement. To the extent a party
indemnifies the other party for claims upon which third parties, including
insurers, may be liable, the indemnified party shall, to the extent permissible,
subrogate to the indemnifying party its rights with respect to such claims.
7. TERMINATION
7.1 Grounds for Termination. This Agreement may be terminated at any
time prior to the Closing Date:
7.1.1 Mutual Consent. By the written agreement of the Company
and the Parent; or
7.1.2 Optional By the Company. By the Company by written notice
to the Parent, if the Closing shall have failed to occur by 5:00 p.m. Houston,
Texas time on December 31, 1997, but only if neither the Company nor any
Principal Shareholder has materially breached this Agreement or has failed to
perform any of their respective obligations under this Agreement;
7.1.3 Optional By the Parent. By the Parent, by written notice
to the Company, if the Closing shall have failed to occur by 5:00 p.m. Houston,
Texas time on December 31, 1997, but only if neither the Parent nor Merger Sub
has materially breached this Agreement or has failed to perform any of its
obligations under this Agreement;
7.1.4 Breach By the Parent or Merger Sub. By the Company, by
written notice to the Parent, if either the Parent or Merger Sub has materially
breached this Agreement or materially failed to perform any of its obligations
under this Agreement; or
7.1.5 Breach by the Company or any Principal Shareholder. By
the Parent, by written notice to the Company, if the Company or any Principal
Shareholder has materially breached this Agreement or has materially failed to
perform any of their respective obligations under this Agreement.
7.2 Effect of Termination. If this Agreement is terminated as
permitted under Section 7.1, such termination shall be without liability of any
party to any other party, except that such termination shall be without
prejudice to any and all remedies the parties may have against each other for
breach of this Agreement.
8. MISCELLANEOUS
8.1 Notice. Any notice, delivery or communication required or
permitted to be given under this Agreement shall be in writing, and shall be
mailed, postage prepaid, or delivered, to the addresses given below, or sent by
telecopy to the telecopy numbers set forth below, as follows:
-25-
To the Company (prior to the Effective Time) or the Principal Shareholders:
▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ Industries, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.L.L.C.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
To the Parent or Merger Sub or the Surviving Corporation:
Group Maintenance America Corp.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or other such address as shall be furnished in writing by any such party to the
other parties, and such notice shall be effective and be deemed to have been
given as of the date actually received.
To the extent any notice provision in any other agreement, instrument or
document required to be executed or executed by the parties in connection with
the transactions contemplated herein contains a notice provision which is
different from the notice provision contained in this Section 8.1 with respect
to matters arising under such other agreement, instrument or document, the
notice provision in such other agreement, instrument or document shall control.
8.2 Further Documents. The Principal Shareholders shall, at any time
and from time to time after the date hereof, upon request by the Parent and
without further consideration, execute and deliver such instruments or other
documents and take such further action as may be reasonably required in order to
perfect any other undertaking made by the Principal Shareholders hereunder.
8.3 Assignability. The Principal Shareholders shall not assign this
Agreement in whole or in part without the prior written consent of the Parent,
except by the operation of law. The Parent shall not assign this Agreement in
whole or in part without the prior written consent of the Principal
Shareholders, which consent shall not be unreasonably withheld, except by the
operation of law. After the Effective Time, the Surviving Corporation may
assign its rights under this Agreement, the Company Related Documents and the
Shareholder Related Documents without the consent of any Shareholder.
-26-
8.4 Exhibits and Schedules. The Exhibits and Schedules (and any
appendices thereto) referred to in this Agreement are and shall be incorporated
herein and made a part hereof.
8.5 Sections and Articles. Unless the context otherwise requires,
all Sections, Articles and Exhibits referred to herein are, respectively,
sections and articles of, and exhibits to, this Agreement and all Schedules
referred to herein are schedules constituting a part of the Disclosure Schedule.
8.6 Entire Agreement. This Agreement constitutes the full
understanding of the parties, a complete allocation of risks between them and a
complete and exclusive statement of the terms and conditions of their agreement
relating to the subject matter hereof and supersedes any and all prior
agreements, whether written or oral, that may exist between the parties with
respect thereto. Except as otherwise specifically provided in this Agreement, no
conditions, usage of trade, course of dealing or performance, understanding or
agreement purporting to modify, vary, explain or supplement the terms or
conditions of this Agreement shall be binding unless hereafter made in writing
and signed by the party to be bound, and no modification shall be effected by
the acknowledgment or acceptance of documents containing terms or conditions at
variance with or in addition to those set forth in this Agreement. No waiver by
any party with respect to any breach or default or of any right or remedy and no
course of dealing shall be deemed to constitute a continuing waiver of any other
breach or default or of any other right or remedy, unless such waiver be
expressed in writing signed by the party to be bound. Failure of a party to
exercise any right shall not be deemed a waiver of such right or rights in the
future.
8.7 Headings. Headings as to the contents of particular articles and
sections are for convenience only and are in no way to be construed as part of
this Agreement or as a limitation of the scope of the particular articles or
sections to which they refer.
8.8 CONTROLLING LAW. THE VALIDITY, INTERPRETATION AND PERFORMANCE OF
THIS AGREEMENT AND ANY DISPUTE CONNECTED HEREWITH SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT
THE APPLICABLE CORPORATE LAW MANDATORILY APPLIES WITH RESPECT THERETO.
8.9 Public Announcements. After the Effective Time, no Principal
Shareholder shall make any press release, public announcement, or public
confirmation or disclose any other information regarding this Agreement or the
contents hereof.
8.10 No Third Party Beneficiaries. Except as set forth in Article 6,
no person or entity not a party to this Agreement shall have rights under this
Agreement as a third party beneficiary or otherwise.
8.11 Amendments and Waivers. This Agreement may be amended by the
Parent, Merger Sub and the Company, by action taken by their Boards of Directors
to the extent permitted by applicable law; provided, however, that no such
amendment shall (i) alter or change any provision of this Agreement, the
alteration or change of which must be adopted by the holders of capital stock of
the Company under the certificate or articles of incorporation of the Company or
the Applicable Corporate Law, or (ii) alter or change this Section 8.11, unless
each such alteration or change is adopted by the holders of shares of capital
stock of the Company as may be required by the certificate or articles of
incorporation of the Company or the Applicable Corporate Law. Prior to the
Effective Time, all amendments to this Agreement must be by
-27-
an instrument in writing signed on behalf of the Parent, Merger Sub, the Company
and the Principal Shareholders. After the Effective Time, all amendments to
this Agreement must be by an instrument in writing signed on behalf of the
Parent and the Principal Shareholders. Any term or provision of this Agreement
(other than the requirements for shareholder approvals) may be waived in writing
at any time by the party which is, or whose shareholders are, entitled to the
benefits thereof.
8.12 No Employee Rights. Except as set forth in Section 5.3.3,
nothing herein expressed or implied shall confer upon any employee of the
Company, any other employee or legal representatives or beneficiaries of any
thereof any rights or remedies, including any right to employment or continued
employment for any specified period, of any nature or kind whatsoever under or
by reason of this Agreement, or shall cause the employment status of any
employee to be other than terminable at will.
8.13 Non-Recourse. No recourse for the payment of any amounts due
hereunder or for any claim based on this Agreement or the transactions
contemplated hereby or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Parent in this Agreement shall
be had against any incorporator, organizer, promoter, shareholder, officer,
director, employee or representative as such (other than the Shareholders as set
forth herein), past, present or future, of the Parent or of any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Agreement;
provided, however, that the foregoing provisions of this Section 8.13 shall not
apply to acts or omissions that constitute fraud, gross negligence or bad faith.
8.14 When Effective. This Agreement shall become effective only upon
the execution and delivery of one or more counterparts of this Agreement by each
of the Parent, Merger Sub, the Company and the Principal Shareholders.
8.15 Takeover Statutes. If any "fair price," "moratorium," "control
share acquisition" or other form of anti-takeover statute or regulation shall
become applicable to the transactions contemplated hereby, the Parent and the
Company and their respective members of their Boards of Directors shall grant
such approvals and take such actions as are necessary so that the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated herein and otherwise act to eliminate or minimize the
effects of such statute or regulation on the transactions contemplated herein.
8.16 Number and Gender of Words. Whenever herein the singular number
is used, the same shall include the plural where appropriate and words of any
gender shall include each other gender where appropriate.
8.17 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under present or future laws, such
provisions shall be fully severable as if such invalid or unenforceable
provisions had never comprised a part of the Agreement; and the remaining
provisions of the Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be automatically as a part of this
Agreement, a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
-28-
8.18 Multiple Counterparts. This Agreement may be executed in a
number of identical counterparts. If so executed, each of such counterparts is
to be deemed an original for all purposes and all such counterparts shall,
collectively, constitute one agreement, but, in making proof of this Agreement,
it shall not be necessary to produce or account for more than one such
counterpart. For purposes of this Agreement and any Exhibits hereto, facsimile
signatures shall be deemed to be original signatures. In addition, if any of the
parties sign facsimile copies of this Agreement or any of the Exhibits, such
copies shall be deemed originals.
8.19 No Rule of Construction. All of the parties hereto have been
represented by counsel in the negotiations and preparation of this Agreement;
therefore, this Agreement will be deemed to be drafted by each of the parties
hereto, and no rule of construction will be invoked respecting the authorship of
this Agreement.
8.20 Expenses. Each of the parties shall bear all of their own
expenses in connection with the negotiation and closing of this Agreement and
the transactions contemplated hereby; provided that the Company may pay the
costs of any broker, legal counsel, accountants, Company Accountants, the
Accountants (up to $50,000) or other advisors engaged by the Shareholders (to
the extent, and only to the extent, that any such payment will not jeopardize
the qualification of the Merger as a reorganization within the meaning of
Section 368(a) of the Code); and provided further that all fees, costs and
expenses (limited to $50,000 for fees, costs and expenses of the Accountants)
incurred or payable by the Company, but not yet paid, in connection with the
negotiation and closing of this Agreement and the transactions contemplated
hereby shall be included in current liabilities for purposes of determining
Working Capital.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
on the date first hereinabove written.
PARENT:
GROUP MAINTENANCE AMERICA CORP.
_________________________________________
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇., President
MERGER SUB:
▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ ACQUISITION CORP.
By:______________________________________
President
-29-
PRINCIPAL SHAREHOLDERS:
_________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_________________________________________
▇▇▇▇▇▇ ▇. Lovely
_________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
_________________________________________
▇▇▇▇ ▇▇▇▇▇
_________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
TRUSTEE:
_________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_________________________________________
▇▇▇▇▇▇ ▇. Lovely
_________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-30-
_________________________________________
B. ▇▇▇▇ ▇▇▇▇▇
_________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
COMPANY:
▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ INDUSTRIES, INC.
By:______________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
-31-
