AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, made this 2nd day of
January, 1998, by and between XXXXXX X. XXXXXXX ("X.
Xxxxxxx"), XXXX X. XXXXX, XX. ("Wheat") and XXXXX X. XXXXXXX
("X. Xxxxxxx") (hereinafter collectively referred to as
"Securityholders"), XXXXXXX CONSTRUCTION OF ALASKA, INC., an
Alaska corporation (the "Company"), ARGUSS HOLDINGS, INC., a
Delaware corporation (the "Parent"), and WHITE MOUNTAIN CABLE
CONSTRUCTION CORP. ("White Mountain"), a New Hampshire
corporation and a 100% subsidiary of Parent.
INTRODUCTORY STATEMENT
A. Securityholders collectively own One Hundred (100)
shares of capital stock of the Company, which shares constitute
all of the issued and outstanding capital stock ("Stock") of
the Company, an Alaska corporation doing business as Xxxxxxx
Construction and as Xxxxxxx Communications.
B. The Company is a full service multimedia
communications contractor engaged in the construction,
reconstruction, maintenance, repair, and expansion of CATV,
SMATV systems and other related systems in the
telecommunications industry.
X. Xxxxxxx Communications, Inc. ("SCI") is a Washington
Corporation and wholly owned subsidiary of the Company.
D. Parent has agreed with the Securityholders for Parent
to acquire the Company by means of a merger of the Company with
and into White Mountain, a wholly owned subsidiary of Parent
upon the terms and subject to the conditions set forth herein.
E. In furtherance of such acquisition, the Boards of
Directors of Parent, White Mountain and the Company have each
approved the plan of merger to merge the Company with and into
White Mountain (the "Merger") in accordance with the applicable
provisions of the Delaware General Corporation Law (the
"DGCL"), the Alaska General Corporation Law ("AGCL") and the
Washington General Corporation Law ("WGCL"), and upon the terms
and subject to the conditions set forth herein.
F. Pursuant to the Merger, the record holders of each
outstanding share of the Company's common stock, $1.00 par
value, shall be entitled to receive the Merger Consideration
(as defined in Section 2.1) so that upon receipt of the Merger
Consideration, such share of the Stock shall be cancelled, all
upon the terms and subject to the conditions set forth herein.
G. The parties hereto intend that this transaction to
qualify as a tax free reorganization under Section 368(a)(1)(A)
of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, WITNESSETH, for and in consideration of
the promises and the mutual representations, warranties,
covenants and agreements herein contained and other good and
valuable consideration, receipt of which is hereby
acknowledged, the parties do agree as follows:
DEFINITIONS
The following terms when used in this AGREEMENT AND PLAN
OF MERGER shall have the following meanings:
"1998 Value of the Company" shall mean the value of
the Company equal to the product of Three and One-Half (3-1/2)
times the December 1998 12 Month Adjusted Cash Flow.
"1997 Value of the Company" shall mean the value of
the Company equal to the product of Three and One-Half (3-1/2)
times the September 1997 12 Month Adjusted Cash Flow. For the
puposes of this Agreement, the 1997 Value of the Company is
$8,045,096.
"AGCL" has the meaning set forth in the introductory
statement above.
"Accounts Receivable" means accounts receivable,
notes due from all sources of the Company, and credits for
returned or damaged merchandise.
"Act" shall mean the Securities Act of 1933, as the
same has been and shall be amended from time to time.
"Adverse Consequences" means all material actions,
suits, proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments, orders,
decrees, rulings, damages, dues, penalties, fines, costs,
liabilities, obligations, taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses,
net of all tax savings and insurance proceeds actually received
by an Indemnitee with respect to any of the foregoing.
"Agreement" means this AGREEMENT AND PLAN OF MERGER.
"Arguss" shall mean the Parent, Arguss Holdings,
Inc., a Delaware corporation with its principal offices located
at Xxx Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000, and
its successors and assigns.
"Arguss Stock" shall mean the authorized capital
stock of Arguss.
"Assets" means all property, rights, things of value
and other assets of the Company described, referred to, or
listed, in Section 4.9 of this Agreement.
"Bonus 1998 Value of the Company" shall mean the
value of the Company equal to the product of Four (4) times the
December 1998 12 Month Adjusted Cash Flow.
"Certificate of Merger" has the meaning set forth in
Section 1.2 below.
" Closing" means the transfer of the Stock to White
Mountain and the payment of the Purchase Price to
Securityholders pursuant to this Agreement.
"Closing Balance Sheet" shall mean the internally
generated closing balance sheet and profit and loss statement
of the Company for the period ending December 31, 1997, as
adjusted to present them on an accrual basis for a Subchapter C
corporation.
"Closing Date" means the date of Closing, established
under Section 3 of this Agreement.
"Code" means the United States Federal Internal
Revenue Code of 1986, as amended.
"Company" means SCA and SCI for all references prior
to the merger and the division or wholly owned subsidiary of
White Mountain that conducts the business of SCA and SCI after
the merger.
"DGCL" has the meaning set forth in the introductory
statement.
"December 1998 Audit" shall mean the audit of the
Company for the twelve (12) month period ending December 31,
1998, prepared in accordance with generally accepted accounting
principles consistently applied by the accounting firm of Xxxx
and Xxxxxxx, CPA, and acceptable to the accounting firm of KPMG
Peat Marwick.
"December 1998 12 Month Adjusted Cash Flow" shall
mean that value determined in accordance with generally
accepted accounting principles consistently applied, and based
on the December 1998 Audit, equal to the difference between (a)
that number equal to the twelve (12) month net income of the
Company as of December 31, 1998, adjusted by adding back all
deductions taken in determining such number, if any, for
interest, depreciation, amortization and income taxes and (b)
that number equal to the sum of fifty per cent (50%) of the
Company's depreciation for that same period and the amount, if
any, that the total compensation paid or earned by X. Xxxxxxx,
Wheat, and X. Xxxxxxx during such period exceeded the
compensation paid to such persons for the similar computation
period of the prior year. For the purpose of this calculation,
all interest paid by the Company on that portion of Company's
indebtedness that exceeds its Net Worth by a multiple greater
than three (3) shall not be added back to the Company's net
income in (a). Notwithstanding the form of the December 1998
Audit, no expense of any kind of Parent or White Mountain, or
any of their subsidiaries of affiliates, shall be allocated or
attributed to the Xxxxxxx Division of Company, and no assets of
the Xxxxxxx Division shall be written off, in determining the
December 1998 12 Month Adjusted Cash Flow, without the prior
written consent of Securityholders.
"Employment Agreement" means the Employment
Agreements to be executed by the Company, X. Xxxxxxx, Wheat,
and the other key employees pursuant to Section 6.6 hereof.
"Environmental, Health, and Safety Laws" means the
United States federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational
Safety and Health Act of 1970, each as amended, together with
all other laws (including rules, regulations, codes, and
judicial decisions thereunder of federal, state, local, and
foreign governments and all agencies thereof) concerning
pollution or protection of the environment, public health and
safety, or employee health and safety, including laws relating
to emissions, discharges, releases, or threatened releases of
(Hazardous Materials) into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of Hazardous Materials.
"Escrow Agreement" shall mean the Escrow Agreement
executed by the Securityholders, Company and Parent pursuant to
Section 6.5 and 2.2(c) hereof.
"Escrowed Purchase Price" shall mean that sum equal
to twenty-five per cent (25%) of the 1997 Value of the Company
and placed in escrow pursuant to Section 2.2(c) hereof. For
the purposes of this Agreement, the Escrowed Purchase Price
shall equal $2,011,274.
"Extremely Hazardous Substance" has the meaning set
forth in Section 302 of the Emergency Planning and Community
Right-to-Know Act of 1986, as amended.
"Financial Statements" means collectively the audited
consolidated financial statement of the Company and its
subsidiaries and affiliates for the Company's fiscal year
ending in 1996, and for the twelve (12) month period ending
September 30, 1997, including the notes thereto, prepared by
Xxxx and Xxxxxxx, CPA, the Company's regular independent
certified public accountant, and accepted by the accounting
firm of KPMG Peat Marwick. The Financial Statements shall be
presented after making all appropriate adjustments required to
present them on an accrual basis for a Subchapter C
corporation.
"GAAP" shall mean in accordance with generally
accepted accounting principles, consistently applied.
"Gross Margin" shall mean the gross margin of the
Company, based on the December 1998 Audit, determined by
deducting from the revenues of the Company all direct material
and labor costs and all other direct operating costs of the
Company, including, but not limited to, all depreciation of the
tangible assets used by the Company in generating such
revenues.
"Hazardous Materials" shall include, without
limitation, any pollutants or other toxic or hazardous
substances or any solid, liquid, gaseous or thermal irritant or
contaminant, including smoke, vapor, soot, fumes, acids,
alkalis, chemicals and waste (including materials to be
recycled, reconditioned or reclaimed), oil or petroleum
flammable materials, explosives, radioactive materials,
hazardous waste, hazardous or toxic substances, or related
materials, asbestos requiring treatment as a matter of law, or
any other substance or materials defined as hazardous or
harmful, or requiring special treatment or special handling by
any federal, state or local environmental law, ordinance, rule
or regulation including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended (42 U.S.C. Sections 9601, et seq.), the Hazardous
Materials Transportation Act, as amended (49 U.S.C. Section
1801, et seq.), the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Sections 6901 et seq.), the Occupational
Safety and Health Act of 1970 and the regulations adopted and
publications promulgated pursuant thereto.
"Initial Payment" shall mean the consideration paid
at closing which is the sum equal to seventy-five per cent
(75%) of the 1997 Value of the Company. For the purposes of
this Agreement, the Initial Payment shall equal $6,033,822.
"Merger" means the merger of SCA and SCI into White
Mountain.
"Merger Consideration" means the aggregate
consideration set forth in Section 2 hereof.
"Net Worth" shall mean the total assets of the
Company, reduced by any value placed on the intangible assets
of the Company, including, but not limited to, goodwill, less
the total liabilities of the Company as those terms are shown
on the Financial Statements and on the Closing Balance Sheet.
"Registration Rights Agreement" shall mean the
Registration Rights Agreement executed by the Securityholders
and Parent pursuant to Section 6.10 hereof.
"X. Xxxxxxx" shall mean Xxxxxx X. Xxxxxxx, a
stockholder, officer and director of the Company and a
signatory to this Agreement.
"X. Xxxxxxx" shall mean Xxxxx X. Xxxxxxx, a
stockholder, officer and director of the Company and a
signatory to this Agreement.
"September 1997 Audit" shall mean the audit of the
Company for the twelve (12) month period ending September 30,
1997, prepared in accordance with generally accepted accounting
principles consistently applied by the accounting firm of Xxxx
and Xxxxxxx, CPA, and acceptable to the accounting firm of KPMG
Peat Marwick.
"September 1997 12 Month Adjusted Cash Flow" shall
mean that value determined in accordance with generally
accepted accounting principles consistently applied, and based
on the September 1997 Audit, equal to the difference between
(a) that number equal to the twelve (12) month net income of
the Company as of September 30, 1997, adjusted by adding back
all deductions taken in determining such number, if any, for
interest, depreciation, amortization and income taxes and (b)
that number equal to the sum of fifty per cent (50%) of the
Company's depreciation for that same period. For the purposes
of this Agreement, the September 1997 Adjusted Cash Flow is
$2,298,599.
."Stock" shall mean all of the authorized issued and
outstanding capital stock of the Company, including all
warrants, options, convertible securities or right (contingent
or otherwise) to purchase or acquire stock of the Company.
"Surviving Corporation" has the meaning set forth in
Section 1.1 below.
"WGCL" has the meaning set forth in the introductory
statement above.
"Wheat" shall mean Xxxx X. Xxxxx, Xx., a stockholder,
officer and director of the Company, and a signatory to this
Agreement.
"White Mountain" has the meaning set forth in the
preface above.
SECTION 1
THE MERGER
1.1 Effective Time. On the Closing Date (as defined
in Section 3), and subject to and upon the fulfillment or
waiver of the terms and conditions of this Agreement, the DGCL,
the AGCL, and the WGCL, Parent shall, effective as of
January 2, 1998, acquire the Company by means of the Company
being merged with and into White Mountain, where by the
separate corporate existence of the Company shall cease, and
White Mountain shall continue as the surviving corporation.
White Mountain as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "Surviving
Corporation."
1.2 Certificate of Merger. On the Closing Date,
assuming satisfaction or waiver of the conditions set forth in
Section 6, the parties hereto shall cause the Merger to be
consummated by filing Certificates of Merger as contemplated by
the DGCL, the AGCL, and the WGCL (the "Certificates of
Merger"), together with any required related certificates, with
the Secretary of State of the State of Delaware, the Secretary
of the State of Alaska, and the Secretary of the State of
Washington, respectively, in such form as required by, and
executed in accordance with the relevant provisions of, the
DGCL, the AGCL and the WGCL. The date of filing of the
respective Certificates of Merger shall be deemed the Filing
Date.
1.3 Effect of the Merger. Upon the consummation of
the Merger, the effect of the merger shall be as provided in
this Agreement, the Certificates of Merger and the applicable
provisions of the DGCL, the AGCL, and the WGCL. Without
limiting the generality of the foregoing, and subject thereto,
upon the consummation of the Merger all the property, rights,
privileges, powers and franchises of the Company and White
Mountain shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and White Mountain
shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificate of Incorporation, By-Laws.
(i) Certificate of Incorporation. Unless
otherwise determined by Parent prior to the Closing Date, upon
the consummation of the Merger the Certificate of Incorporation
of White Mountain, as in effect immediately prior to the
consummation of the Merger, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter
amended in accordance with the DGCL and such Certificate of
Incorporation.
(ii) By-Laws. Unless otherwise determined by
Parent prior to the consummation of the Merger, the By-Laws of
White Mountain, as in effect immediately prior to the closing
date, shall be the By-Laws of the Surviving Corporation until
thereafter amended in accordance with the DGCL, the Certificate
of Incorporation of the Surviving Corporation and such By-Laws.
1.5 Directors and Officers. The directors of White
Mountain immediately prior to the consummation of the Merger,
with the addition of one individual appointed by the
Securityholders, in writing, shall be the initial directors of
the Surviving Corporation, each to hold office in accordance
with the Certificate of Incorporation and By-Laws of the
Surviving Corporation, and the officers of White Mountain
immediately prior to the consummation of the Merger shall be
the initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed
and qualified.
SECTION 2
MERGER CONSIDERATION
2.1 Shares of Company. As of the Filing Date, each
share of Stock issued and outstanding as of the Closing Date,
shall by virtue of the merger and without any action on the
part of the holder thereof, be converted into the right to
receive an amount per share in Arguss Stock and in cash
("Merger Consideration"), without interest, determined in
accordance with Section 2.2.
2.2 Merger Consideration. The total merger
consideration to be paid collectively by Parent and White
Mountain to each Securityholder shall either be an amount equal
to the 1998 Value of the Company or an amount equal to the
Bonus 1998 Value of the Company, as those terms are defined in
this Agreement. Each share of Stock shall be entitled to
receive a sum equal to the 1998 Value of the Company or the
Bonus 1998 Value of the Company divided by the total number of
shares of the Stock.
The Merger Consideration shall be paid to the
Securityholders as follows:
(a) At Closing, the Securityholders shall
receive their pro rata share of the sum equal to Fifty Per Cent
(50%) of the Initial Payment through the issuance of shares of
the authorized capital stock of Arguss ("Arguss Stock") as set
forth in Exhibit 2.2(a). For the purposes of determining the
number of shares of Arguss Stock to be issued to the
Securityholders pursuant to this paragraph 2.2(a), the value of
each share of Arguss Stock shall be Nine and 75/100 Dollars
($9.75).
(b) At Closing, the Securityholders shall
receive their pro rata share of the sum equal to Fifty Per Cent
(50%) of the Initial Payment in cash, wire transfer, or
certified funds as set forth on Exhibit 2.2(b).
(c) At Closing, Parent shall deposit the
Escrowed Purchase Price in an Escrow Account to be held and/or
released pursuant to the terms and conditions of the Escrow
Agreement attached as Exhibit 6.5. Fifty Per Cent (50%) of the
Escrowed Purchase Price shall be in the form of a promissory
note and Fifty Per Cent (50%) of the Escrowed Purchase Price
shall be in the form of an irrevocable commitment to issue
shares of Arguss Stock. For the purpose of determining the
number of shares of Arguss Stock to be placed in Escrow
pursuant to this paragraph 2.2(c), the value of each share of
Arguss Stock irrevocably committed shall be Nine and 75/100
Dollars ($9.75). Such Escrow Agreement shall provide therein
for a release of all or part of the Escrow Purchase Price on
December 1, 1998 in accordance with paragraph 2.2(d), below.
(d) On March 1, 1999, Securityholders shall
receive the sum equal to the difference, if any, between
(a) the 1998 Value of the Company and (b) the Initial Payment,
if the Gross Margin of the Company equals or is less than
twenty-five per cent (25%), or the difference, if any, between
(a) the Bonus 1998 Value of the Company and (b) the Initial
Payment, if the Gross Margin of the Company exceeds twenty-five
per cent (25%). Such payment shall be made in equal parts of
cash and Arguss Stock. For the purposes of determining the
number of shares of Arguss Stock to be issued to
Securityholders pursuant to paragraph 2.2(d), the value of each
share of Arguss Stock shall be Nine and 75/100 Dollars ($9.75).
To enable all parties to determine the 1998 Value of the
Company and the Bonus 1998 Value of the Company, the
Securityholders shall cause the December 1998 Audit to be
completed and delivered to Parent, at Parent's expense on or
before March 1, 1999.
(e) The Net Worth of the Company on the Closing
Date shall be the Net Worth of the Company as set forth on the
Closing Balance Sheet. In the event the Net Worth exceeds
$1,700,000 on the Closing Date, such excess shall be paid to
Securityholders in cash on or before 30 days from the Closing
Date. In the event the Net Worth is less than $1,700,000 on
the Closing Date, such deficiency shall be withheld from the
Merger Consideration paid to Securityholders pursuant to
Section 2.2(b), hereof. To enable all parties to determine the
Net Worth of the Company on the Closing Date, the
Securityholders shall cause the Closing Balance Sheet to be
delivered to the Parent within ten (10) days of Closing.
2.3 Allocation of Merger Consideration. The allocation
of the Merger Consideration by Securityholders, if desired, is
set forth in Exhibit 2.3.
SECTION 3
CLOSING
The Closing of the Merger shall occur at the offices
of Arguss Holdings, Inc., Xxx Xxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxxxx, Xxxxxxxx 00000, at 2:00 p.m. on the 5th day of
January, 1998, or at such other time, date and place as Parent
and Securityholders may agree (the "Closing Date"). At the
Closing:
3.1 Cancellation.
(a) Upon filing of the Certificate of Merger,
each such share of the Stock shall be canceled and shall
thereafter evidence only the right to receive a pro rata share
of the Merger Consideration.
(b) Upon filing of the Certificate of Merger,
each share of the Stock held in the treasury of the Company and
each share of Stock owned directly or indirectly by any wholly
owned Subsidiary of the Company immediately prior to the
consummation of the Merger shall, by virtue of the Merger and
without any action on the part of the holder thereof, cease to
be outstanding, be canceled and retired without payment of any
consideration therefor and cease to exist.
3.2 Delivery of Cash and Exchange of Certificates.
(a) Exchange Procedures. As of the Filing
Date, upon surrender of the certificates representing shares of
the Stock (the "Certificates") for cancellation to Parent
together with such other customary documents as may be required
to transfer the Stock, subject to the provisions of the Escrow
Agreement, the holder of such Certificates shall be entitled to
receive in exchange therefore their pro rata share of the
Merger Consideration as provided in Section 2.2(a), (b) and (d)
above, and the Certificates so surrendered shall forthwith be
canceled. Each outstanding Certificate that, prior to the
Closing Date, represented shares of the Stock will be deemed
from and after the Closing Date, for all corporate purposes, to
evidence the right to receive a pro rata share of the Merger
Consideration into which such shares of the Stock shall have
been so converted.
(b) No Liability. Neither Parent, White
Mountain, nor the Company shall be liable to any holder of the
Stock for any Merger Consideration delivered to a public
official pursuant to any applicable abandoned property, escheat
or similar law.
(c) Withholding Rights. Parent shall be
entitled to deduct and withhold from the Merger Consideration
otherwise payable pursuant to this Agreement to any holder of
the Stock such amounts, if any, as Parent is required to deduct
and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign tax law.
To the extent that amounts are so withheld by Parent, such
withheld amount shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares in
respect of which such deduction and withholding was made by
Parent, and Parent shall pay all such withheld amounts to the
proper authorities within the ordinary course of business.
SECTION 4
REPRESENTATIONS, WARRANTIES AND CERTAIN
COVENANTS OF SECURITYHOLDERS AND THE COMPANY
As a material inducement to induce Parent and White
Mountain to consummate the Merger under this Agreement, each
Securityholder and Company represent and warrant that each of
the matters set forth in this Section 4 are true and correct as
of the date hereof, and acknowledge that Parent and White
Mountain's entry into this Agreement and the performance of
their obligations hereunder are made in reliance upon the
completeness and accuracy of each of the matters set forth
herein. The representations and warranties being made by the
Company shall survive up and until the Closing Date. The
representations and warranties being made by the
Securityholders shall survive as set forth in Section 12.11,
herein.
4.1 Organization, Qualifications and Corporate
Power.
(a) The Company is a corporation duly
incorporated, validly existing and in good standing under the
laws of the State of Alaska. Attached as Exhibit 4.1(a) is a
list of all states in which the Company, and its subsidiaries
or affiliates, are qualified to do business. The Company, and
its subsidiaries or affiliates, are duly qualified as a
foreign corporation in each other jurisdiction in which the
failure to be qualified would have a material adverse effect
upon the Company, and its subsidiaries or affiliates. The
Company, and its subsidiaries or affiliates, has the corporate
power and authority to own and hold their properties and to
conduct their businesses as currently conducted and as proposed
to be conducted, to execute, deliver and perform this Agreement
to which the Company is a signatory.
(b) Except as listed on Exhibit 4.1(b), the
Company, and its subsidiaries or affiliates, do not own of
record or beneficially, directly or indirectly, (i) any shares
of outstanding capital stock or securities convertible into
capital stock of any other corporation or (ii) any
participating interest in any partnership, joint venture or
other non-corporate business enterprise.
4.2 Authorization of Agreement.
(a) The execution, delivery and performance by
the Company of this Agreement to which it is a signatory
hereunder have been duly authorized by all requisite corporate
action and will not (i) violate any applicable provision of
law, any order of any court or other agency of government, the
Articles or Certificate of Incorporation or Bylaws of the
Company, or any provision of any indenture, agreement or other
instrument by which the Company, or any of its properties or
assets is bound or affected, or (ii) conflict with, result in a
material breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or
other instrument, or results in being declared void, voidable
or without further binding effect any license, governmental
permit or certification, employee plan, note, bond, mortgage,
indenture, deed of trust, franchise, lease, contract,
agreement, or other instrument or commitment or obligation to
which Company is a party, or by which Company, or any of its
assets, may be bound, subject or affected, (iii) violate any
order, writ, injunction, decree, judgment, or ruling of any
court or governmental authority applicable to Company or any of
its assets, or (iv) except as otherwise provided in this
Agreement, result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever not arising in
the ordinary course of business upon any of the properties or
assets of the Company except as to conflicts, breaches and
violations that will not have a material adverse effect on the
business, property or assets of the Company.
4.3 Capital Stock. The authorized capital stock of
the Company, and its subsidiaries or affiliates, and the
holders of the issued and outstanding shares of such capital
stock are set forth in Exhibit 4.3 hereto. Except as disclosed
in Exhibit 4.3, there is no (i) subscription, warrant, option,
convertible security or other right (contingent or otherwise)
to purchase or acquire any shares of any class of capital stock
of the Company, or of its subsidiaries or affiliates, which is
authorized or outstanding, (ii) the Company, and its
subsidiaries or affiliates, have no commitments to issue any
shares, warrants, options or other such rights or to distribute
to holders of any class of its capital stock any evidence of
indebtedness or assets, (iii) the Company, and its subsidiaries
or affiliates, have no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or make
any other distribution in respect thereof, and (iv) the
Company, and its subsidiaries or affiliates, have no obligation
or commitment to register under the Act any securities issued
or to be issued by it. All of the issued and outstanding
shares of the capital stock of the Company, and of its
subsidiaries or affiliates, have been validly issued in
compliance with all federal and state securities laws and are
fully paid and non-assessable.
4.4 Financial Statements. The Company has delivered
to Parent the Financial Statements and Closing Balance Sheet,
exclusive of the December 1998 Audit which will be delivered to
Parent prior to March 1, 1999. Such preliminary Financial
Statements and Closing Balance Sheet are complete and correct,
have been prepared in accordance with GAAP and fairly present
the consolidated financial position of the Company, and its
subsidiaries or affiliates, as of such respective dates after
making all appropriate adjustments required to present the
Financial Statements and Closing Balance Sheet on an accrual
basis for a Subchapter C corporation, and the results of
operations for the respective periods then ended. Except as
set forth in such Financial Statements and Closing Balance
Sheet or incurred in the ordinary course of business, to the
knowledge of Securityholders and the Company neither the
Company nor any of its subsidiaries or affiliates has any
material obligation or liability, absolute, accrued or
contingent except obligations and liabilities which do not
adversely effect the business, property or assets of the
Company.
4.5 Absence of Changes. Except as listed in
Exhibit 4.5 and since the time period covered by the Financial
Statements, neither the Company nor any of its subsidiaries or
affiliates, have:
(a) Transferred, assigned, conveyed or
liquidated any of its assets or entered into any transaction or
incurred any liability or obligation which affects the assets
or the conduct of its business, other than in the ordinary
course of the Company's business;
(b) Incurred any change in its business,
operations, or financial condition which may have a material
adverse effect on its assets or its business, or become aware
of any event which may result in any such adverse change;
(c) Suffered any material destruction, damage
or loss relating to its assets or the conduct of its business
whether or not covered by insurance;
(d) Suffered, permitted or incurred other than
in the ordinary course of business the imposition of any lien,
charge, encumbrance (which as used herein includes, without
limitation, any mortgage, deed of trust, conveyance to secure
debt or security interest) whether or not contingent in nature,
or claim upon any of its assets, except for any current year
lien with respect to personal or real property taxes not yet
due and payable;
(e) Committed, suffered, permitted or incurred
any default in any liability or obligation which, in the
aggregate, have had or will have a material adverse effect upon
its assets or the conduct of its business;
(f) Made or agreed to any change in the terms
of any contract or instrument to which it is a party which has
a material adverse effect on its assets or the conduct of its
business;
(g) Knowingly waived, canceled, sold or
otherwise disposed of other than in the ordinary course of
business, for less than the face amount thereof, any claim or
right relating to its assets or the conduct of its business,
which it has against others;
(h) Declared, promised or made any distribution
from its assets or other payment from the assets to its
shareholders (other than reasonable compensation for services
actually rendered) or issued any additional shares or rights,
options or calls with respect to its shares of capital stock,
or redeemed, purchased or otherwise acquired any of its shares,
or made any change whatsoever in its capital structure;
(i) Paid, agreed to pay or incurred any
obligation for any payment for, any contribution or other
amount to, or with respect to, any employee benefit plan, or
paid or agreed to pay any bonus or salary increase to its
executive officers or directors, or made any increase in the
pension, retirement or other benefits of its directors or
executive officers other than in the ordinary course of
business;
(j) Committed, suffered, permitted, incurred or
entered into any transaction or event other than in the normal
course of business which would increase its liability for any
prior taxable year;
(k) Incurred any other liability or obligation
or entered into any transaction other than in the ordinary
course of business which would have a material adverse effect
on its condition (financial or otherwise); or
(l) Received any notices of, or has reason to
believe, that any of its customers or clients have taken or
contemplate any steps which could disrupt its business
relationship with said customer or client or could result in
the diminution in the value of the business of the Company as a
going concern.
4.6 Actions Pending. Except as listed on Exhibit
4.6, there is no action, suit, investigation, or proceeding
pending or, to the knowledge of the Company or Securityholders
threatened against or affecting the Securityholders, the
Company, or its subsidiaries or affiliates, or any of its
properties or rights, before any court or by or before any
governmental body or arbitration board or tribunal and no basis
exists for any such action, suit, investigation or proceeding
which will result in any material liability or affirmative or
negative injunction being imposed on the Company, or its
subsidiaries or affiliates, or Securityholders. The foregoing
includes, without limiting its generality, actions pending or
threatened (or any basis therefor known to the Company or
Securityholders) involving the prior employment of any
employees or prospective employees of the Company, or of its
subsidiaries or affiliates, or its use, in connection with its
business, of any information or techniques which might be
alleged to be proprietary to its former employer(s).
4.7 Business Property Rights. To the best of the
Company's or each Securityholders' knowledge, no person or
entity has made or threatened to make (or has any valid reason
to threaten) any claims that the operation of the business of
the Company, or of its subsidiaries or affiliates, is or will
be in violation of or infringe on any technology, patents,
copyrights, trademarks, trade names, service marks (and any
application for any of the foregoing) licenses, proprietary
information, know-how, or trade secrets (the "Business Property
Rights"). To the best of the Company's or each
Securityholders' knowledge no third party is infringing upon or
violating any of the Company's Business Property Rights and the
Company has the exclusive right to use the same. None of the
employees, directors, or stockholders of the Company's or its
subsidiaries or affiliates has any valid claim whatsoever
(whether direct, indirect or contingent) of right, title or
interest in or to any of the Company's Business Property
Rights.
4.8 Liabilities. Except as listed in Exhibit 4.8,
to the knowledge of Securityholders and the Company neither the
Company, or its subsidiaries or affiliates, has any liabilities
or obligations, whether accrued, absolute, contingent or
otherwise (individually or in the aggregate), which are of a
nature required to be reflected in financial statements
prepared in accordance with GAAP, including without limitation,
any liability which might result from an audit of its tax
returns by any appropriate authority except (i) the liabilities
and obligations set forth in the "Financial Statements or
Closing Balance Sheet") delivered in accordance with Section
4.4 and (ii) liabilities and obligations incurred for the
purpose of enabling the Company or its subsidiaries or
affiliates to conduct their normal business (in each case in
normal amounts and incurred only in the ordinary course of
business) except such liabilities and obligations that do not
have a material adverse effect on the business, property and
assets of the Company. Except as disclosed in the Financial
Statements or Closing Balance Sheet, to the knowledge of
Securityholders and the Company neither the Company, nor its
subsidiaries or affiliates, is in default with respect to any
liabilities or obligations and all such liabilities or
obligations shown and reflected in the Financial Statements and
Closing Balance Sheet, and such liabilities incurred or accrued
subsequent to the Company's and its subsidiaries or affiliates
incorporation, have been, or are being, paid or discharged as
they become due, and all such liabilities and obligations were
incurred in the ordinary course of business except with respect
to defaults that do not have a material adverse effect on the
business, property and assets of the Company.
4.9 Ownership of Assets and Leases. Attached hereto
as Exhibit 4.9(a) is a complete and correct list and brief
description, as of the date of this Agreement, of all real
property and material items of personal property owned by the
Company, or by its subsidiaries or affiliates, and all of the
leases and other agreements relating to any real, personal or
intangible property owned, used, licensed or leased by the
Company, its subsidiaries or its affiliates. The Company, its
subsidiaries and its affiliates, have good and marketable title
to all of its assets, including those listed on Exhibit 4.9(a),
and any income or revenue generated therefrom, in each case
free and clear of any liens, claims, charges, options, rights
of tenants or other encumbrances except (i) as disclosed and
reserved against in the Financial Statements (to the extent and
in the amounts so disclosed and reserved against), (ii) for
liens arising from current taxes not yet due and payable and
(iii) as set forth on Exhibit 4.9(b). Each of the leases and
agreements of the Company, its subsidiaries and its affiliates
are in full force and effect and constitute a legal, valid and
binding obligation of the Company, and of its subsidiaries and
affiliates, and the other respective parties thereto,
enforceable in accordance with its terms, except as
enforceability may be limited by applicable equitable
principles or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally, and,
there is not under any of such leases or agreements existing
any default of the Company, or of its subsidiaries or
affiliates, or to the best of the Company's or each
Securityholders' knowledge of any other parties thereto (or
event or condition which, with notice or lapse of time, or
both, would constitute a default). Neither the Company, nor
any of its subsidiaries or affiliates, has received any notice
of violation of any applicable regulation, ordinance or other
law with respect to its operations or assets, and, to the best
of the Company's knowledge there is not any such violation or
grounds therefor which could adversely affect their assets or
the conduct of its business. Neither the Company, nor any of
its subsidiaries or affiliates, is a party to any contract or
obligation whereby an absolute or contingent right to purchase,
obtain or acquire any rights in any of the assets has been
granted to anyone. There does not exist and will not exist by
virtue of the transactions contemplated by this Agreement any
claim or right of third persons which may be legally asserted
against any asset of the Company's, or its subsidiaries or
affiliates.
4.10 Taxes. The Company, and its subsidiaries and
affiliates, have paid all taxes due, assessed and owed by them
as reflected on their tax returns and have timely filed all
federal, state, local and other tax returns which were required
to be filed and which were due prior to the Closing Date,
except for those taxes set forth on Exhibit 4.10(a). All
federal, state, local, and other taxes of the Company, or of
its subsidiaries or affiliates, accruable since the filing of
such returns have been properly accrued. No federal income tax
returns for the Company, or for its subsidiaries or affiliates,
have ever been audited by the Internal Revenue Service or any
state or local taxing authority, except as described in
Exhibit 4.10(b). No other proceedings or other actions which
are still pending or open have been taken for the assessment or
collection of additional taxes of any kind from the Company, or
from its subsidiaries or affiliates, for any period for which
returns have been filed, and to the Company's knowledge, no
other examination by the Internal Revenue Service or any other
taxing authority affecting the Company, or its subsidiaries or
affiliates, is now pending. Except for those taxes set forth
on Exhibit 4.10(a), taxes which the Company, or its
subsidiaries or affiliates, were required by law to withhold or
collect subsequent to the incorporation of the Company or its
subsidiaries or affiliates, have been withheld or collected and
have been paid over to the proper governmental authorities or
are properly held by the Company, or by its subsidiaries or
affiliates, for such payment and are so withheld, collected and
paid over as of the date hereof. No waivers of statutes of
limitations with respect to any tax returns of the Company, or
of its subsidiaries or affiliates, nor extensions of time for
the assessment of any tax have been given by any current
employees of the Company, or of its subsidiaries or affiliates.
There is not and there will not be any liabilities for federal,
state and local income, sales, use, excise or other taxes
arising out of, or attributable to, or affecting the assets or
the conduct of the business of the Company or its subsidiaries
or affiliates, through the close of business on the Closing
Date, or attributable to the conduct of the operations of the
Company, or its subsidiaries or affiliates, at any time for
which Parent or the Surviving Corporation will have any
liability for payment or otherwise, including, but not limited
to, any tax assessed or imposed as a result of any conversion
by the Company or any of its subsidiaries or affiliates from a
Subchapter S to a Subchapter C corporation. After the Closing,
there does not and will not exist by virtue of the transactions
contemplated by this Agreement any liability for taxes which
may be asserted by any taxing authority against the assets of
the Company or its subsidiaries or affiliates, or the operation
of their businesses, and no lien or other encumbrance for taxes
will attach to such assets or the operation of their
businesses.
4.11 Contracts, Other Agreements. Attached hereto as
Exhibit 4.11 is a true and complete list of each material
contract, agreement and other instrument to which the Company,
or its subsidiaries or affiliates, is a party, including, but
not limited to, all bank and financing documents. At Parent's
request, the Company, and its subsidiaries or affiliates, shall
deliver to Parent a true and complete copy of any such
contract, agreement or instrument. All of the contracts,
agreements, and instruments described in Exhibit 4.11 hereto
are valid and binding upon the Company, or its subsidiaries or
affiliates, and the other parties thereto and are in full force
and effect, and, neither the Company, nor to the best of the
Company's or each Securityholders' knowledge any other party to
any such contract, commitment or arrangement has breached any
provision of, or is in default in any respect under, the
material terms thereof. No contract, agreement or other
instrument to which the Company, or its subsidiaries or
affiliates, are a party will be materially breached, violated
or result in a default as a result of the transaction
contemplated hereunder.
4.12 Governmental Approvals. No registration or
filing with, or consent or approval of, or other action by, any
federal, state or other governmental agency or instrumentality
is or will be necessary for the valid execution, delivery and
performance of this Agreement by the Company, including, but
not limited to, any approval of the United States Small
Business Administration required to assign any obligation of
the Company to the Surviving Corporation.
4.13 Lack of Defaults. The Company and
Securityholders know of no default in performance of any
obligation, covenant or condition contained in any note,
debenture, mortgage or other contract or agreement of any
nature or kind to which either is a party, nor of any default
with respect to any order, writ, injunction or decree of any
court, governmental authority or arbitration board or tribunal
to which either is a party, which would have a material adverse
effect on the assets or business of the Company, its
subsidiaries or affiliates. The Company and Securityholders
know of no violation of any law, ordinance, governmental rule
or regulation to which either is subject, nor has either failed
to obtain any licenses, permits, franchises or other
governmental authorizations necessary for the ownership of
their properties or to the conduct of their business where any
such violation or failure would likely result in a material
adverse effect upon the business of the Company, its
subsidiaries or affiliates. The Company, its subsidiaries and
affiliates, have conducted and will conduct their businesses
and operations in substantial compliance with all federal,
state, county and municipal laws, statutes, ordinances and
regulations and are in substantial compliance with all
applicable requirements of all federal, state, county and
municipal regulatory authorities.
4.14 Employees and Employee Benefit Plans.
(a) Attached hereto as Exhibit 4.14(a) is a
list of each pension retirement, profit-sharing, deferred
compensation, bonus or other incentive plan, or program
arrangement, agreement or other understanding, or medical,
vision, dental or other health plan, or life insurance or
disability plan, or any other employee benefit plan, including,
without limitation, any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), to which the Company or SCI
contributes or is a party or is bound or under which it may
have liability and under which employees or former employees of
the Company, or of its subsidiaries or affiliates (or their
beneficiaries) are eligible to participate or derive a benefit
(the foregoing herein referred to as the "Employee Benefit
Plans). The Company has delivered to Parent true, correct and
complete copies of all Employee Benefit Plans, and the Company
has complied in all material aspects with any and all
obligations required of it under the terms of any plan listed
on Exhibit 4.14(a).
(b) Attached hereto as Exhibit 4.14(b) are the
names, social security numbers and current rate of compensation
of all salaried and hourly paid employees employed by the
Company, or by its subsidiaries or affiliates, as of the date
hereof, with all key employees being so designated, and at
Closing the Company will provide an updated list of all such
employees as of the date of closing, such updated list to be
initialed by both parties at Closing.
4.15 Insurance. Attached hereto as Exhibit 4.15 is a
complete and correct list and description of all of the
policies of liability, property, workers' compensation and
other forms of insurance or bonds carried by the Company, or
its subsidiaries or affiliates, for the benefit of or in
connection with their assets and businesses. All of such
policies are in full force and effect and there are no overdue
premiums or other payments on such policies and neither the
Company nor any of its subsidiaries or affiliates, has received
any notice of cancellation or termination of any of these
policies. Neither the Securityholders nor the Company have
knowledge of any change or proposed change to any of the rates
set forth in the policies listed on Exhibit 4.15 other than as
set out in the Policies.
4.16 Labor Matters. Except as set forth on
Exhibit 4.16, none of the employees of the Company or of its
subsidiaries or affiliates are covered by a collective
bargaining agreement, and no collective bargaining efforts with
respect to any of the employees of the Company, its
subsidiaries or affiliates, are pending or, to the knowledge of
the Company threatened. No labor dispute, strike, work
stoppage, employee collective action or labor relations problem
of any kind which has materially adversely affected or may so
affect the Company, or its subsidiaries or affiliates, or any
of their businesses or operations, is pending or, to the
knowledge of the Company is threatened. The Company, and its
subsidiaries or affiliates, have complied in all material
respects with the reporting and withholding provisions of the
Code and the Federal Insurance Contribution Act and all similar
state and local laws, and with the federal, state, and local
laws, ordinances, rules and regulations with respect to
employment and employment practices, terms and conditions of
employment and of the workplace, wages and hours and equal
employment opportunity.
4.17 Brokers and Finders. Except for the fees listed
on Exhibit 4.17, neither the Securityholders nor the Company or
any of its subsidiaries or affiliates, has incurred or become
liable for any commission, fee or other similar payment to any
broker, finder, agent or other intermediary in connection with
the negotiation or execution of this Agreement or the
consummation of the transactions contemplated hereby.
Securityholders agrees to be responsible for paying all Broker
fees incurred by the Company, and its subsidiaries or
affiliates, as a result of this transaction.
4.18 Accounts Receivable.
(a) All accounts receivable of the Company, and
its subsidiaries or affiliates, shown on the consolidated
audited balance sheet of the Company, and its subsidiaries or
affiliates, as of September 30, 1997, and all notes and
accounts receivable acquired by the Company and its
subsidiaries or affiliates subsequent to September 30, 1997,
reflect actual transactions, have arisen in the ordinary course
of business and have been collected or are now in the process
of collection without recourse to any judicial proceedings in
the ordinary course of business in the aggregate recorded
amounts thereof, less the applicable allowances reflected on
such balance sheets with respect to the accounts receivable
shown thereon or set up on the respective books of the Company,
and its subsidiaries or affiliates, with respect to the notes
and accounts receivable acquired subsequent to September 30,
1997.
(b) Except as set forth on Exhibit 4.18(b), the
Company has no knowledge as to any of the accounts receivable
of the Company or of its subsidiaries or affiliates, being
subject to any lien or claim of offset, set off or counterclaim
not provided for by the Company's, its subsidiaries, or
affiliates, allowance for doubtful accounts as of the date of
execution hereof.
4.19 Conflicts of Interests. Except as described in
Exhibit 4.19 (a), no officer, director or stockholder of the
Company, or of its subsidiaries or affiliates, was or is,
directly or indirectly, a joint investor or co-venturer with,
or owner, lessor, lessee, licensor or license of any real or
personal property, tangible or intangible, owned or used by, or
a lender to or debtor of, the Company, its subsidiaries or
affiliates, and neither the Company, nor any of its
subsidiaries or affiliates, has any commitments or obligations
as a result of any such transactions prior to the date hereof.
Except as described in Exhibit 4.19 (b), and except for
directly or indirectly holding less than five percent (5%) of
the outstanding shares of stock in a company which is publicly
traded, none of such officers, stockholders, or directors own
or have owned, directly or indirectly, individually or
collectively, an interest in any entity which is a competitor,
customer or supplier of (or has any existing contractual
relationship with) the Company, its subsidiaries or affiliates.
4.20 Environmental Compliance. Exhibit 4.20(a) sets
forth all government agencies which substantially regulate the
business of the Company, its subsidiaries or affiliates under
Environmental, Health and Safety Laws. Except as listed on
Exhibit 4.20(b), the Company, and its subsidiaries and
affiliates, has complied in all material respects with all
applicable federal, state and local Environmental Health and
Safety Laws with respect to its premises and its operations and
have kept its premises free and clear of any liens and charges
imposed pursuant to such laws. Neither the Company, nor any
its subsidiaries or affiliates, has received any notice that
any facts or conditions exist which would give rise to any
violation, claim, charge, penalty or liability relating to any
applicable Environmental Health and Safety Laws of any
governmental body or agency having jurisdiction over the
premises.
4.21 Ownership of the Stock. The Securityholders own
all of the Stock beneficially and of record, free and clear of
all liens, restrictions, encumbrances, charges, and adverse
claims and the Stock to be purchased hereunder constitutes One
Hundred Per Cent (100%) of issued and outstanding stock of the
Company.
4.22 Absence of Sensitive Payments. Neither the
Securityholders nor, to the knowledge of the Securityholders
and Company, any of the directors, officers, or stockholders of
the Company, its subsidiaries or affiliates:
(a) has made or has agreed to make any
contributions, payments or gifts of funds or property to any
governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift
was or is illegal under the laws of the United States, any
state thereof, or any other jurisdiction (foreign or domestic);
(b) has established or maintained any
unrecorded fund or asset for any purpose, or has made any false
or artificial entries on any of its books or records for any
reason; or
(c) has made or has agreed to make any
contribution or expenditure, or has reimbursed any political
gift or contribution or expenditure made by any other person to
candidates for public office, whether federal, state or
local(foreign or domestic) where such contributions were or
would be a violation of applicable law.
4.23 Approval of Merger; Related Matters. Each of
the Securityholders represents and warrants that such
Securityholders, in his or her capacity as a shareholder of the
Company (i) approves of and consents to the Merger as set forth
in this Agreement, (ii) waives any notice of a shareholder's
meeting or similar corporate formality in connection with the
approval of the transactions described herein, including,
without limitation, the Merger, (iii) waives any rights to
protest or object to the Merger or to the exercise of any
statutory remedy of appraisal as to the Stock owned by such
Securityholders as provided in the AGCL, (iv) has received a
copy of resolutions approving the Merger in accordance with the
AGCL, and (v), to the extent such Securityholders owe any
amounts to the Company, or its subsidiaries or affiliates,
pursuant to any Promissory Note issued by such Securityholders
to the Company, or to its subsidiaries or affiliates, consents
to the use of a portion of the Merger Consideration payable to
such Securityholders to pay off each such Promissory Note.
SECTION 5
REPRESENTATIONS, WARRANTIES AND CERTAIN
COVENANTS OF PARENT AND WHITE MOUNTAIN
As a material inducement to induce Securityholders to
consummate the Merger under this Agreement, Parent and White
Mountain represent and warrant that each of the matters set
forth in this Section 5 are true and correct as of the date
hereof, and acknowledge that Securityholders' entry into this
Agreement and the performance of their obligations hereunder
are made in reliance upon the completeness and accuracy of each
of the matters set forth herein. The representations and
warranties being made by the Parent and White Mountain shall
survive as set forth in Section 12.11 herein.
5.1 Organization, Standing, etc. Parent and White
Mountain are duly organized, validly existing and in good
standing under the laws of its jurisdiction of their
organization.
5.2 Authorization, etc. The execution and delivery
of this Agreement and any other instruments or documents
required to be executed and delivered hereby, and the purchase
of the Stock contemplated hereby, have been authorized by such
authorities or by such court of competent jurisdiction, if any,
as may be required by applicable law and constitute a valid and
binding obligations of Parent and of White Mountain,
enforceable against them in accordance with the terms of this
Agreement.
5.3 No Breach or Defaults Caused by Agreement. The
making and execution, delivery, and performance by Parent and
White Mountain of this Agreement does and will not breach or
constitute (with due notice or lapse of time or both) any
default in any articles, by-laws, agreements, or instruments of
any kind or character to which Parent or White Mountain are a
signatory or a party, or by which they may be bound, subject
to, or affected, now or in the future.
5.4 Governmental Approvals. No registration or
filing with, or consent or approval of, or other action by, any
federal, state, or other governmental agency or
instrumentality, which has not been made or obtained prior to
the execution of this Agreement by Parent or White Mountain, is
or will be necessary for the valid execution, delivery, and
performance of this Agreement by Parent and White Mountain.
5.5 Brokers Fees. Parent and White Mountain
represent there are no brokers, other than those set forth on
Exhibit 5.5, involved in this transaction on their behalf.
Parent and White Mountain shall pay all broker fees
contractually obligated to be paid to those brokers set forth
on said Exhibit.
5.6 Authorized Shares of Stock. There exists
sufficient authorized, but unissued, shares of Arguss Stock
necessary to enable Parent to satisfy any obligation of it to
issue shares of Arguss Stock pursuant to this Merger Agreement.
5.7 Survival of Company. The operations of the
Company on the Closing Date shall remain separate and apart
from the other assets, operations and business of Parent or
White Mountain after the Closing, as a separate and distinct
division of Parent and White Mountain until the December 1998
Audit has been completed. No expenses of Parent or White
Mountain unrelated to the Company may be charged against the
Company during such Audit.
5.8 Support of Company. Parent and White Mountain
shall, after the Closing, use their best efforts to accommodate
the Company in the ordinary course of business, including, but
not limited to, the provision of marketing, financial
(including lines of credit), and other support as may be
reasonably required to enable the Xxxxxxx Division to acquire
and complete all contracts and business transactions.
5.9 No Section 338 Election. Neither Parent nor
White Mountain shall make any election under Section 338 of the
Internal Revenue Code of 1986, as amended, with respect to any
part of the transaction contemplated hereunder without the
express written consent of all of the Securityholders.
SECTION 6
CONDITIONS TO CLOSING
Parent's obligation to consummate the Merger under
this Agreement shall be subject to fulfillment of all of the
following conditions on or prior to the Closing, any of which
may be waived in writing by Parent.
6.1 Performance of Agreements. The Company shall
have performed all agreements contained herein and required to
be performed by it prior to or at the Closing and all of the
representations and warranties made by it and Securityholders
in this Agreement shall be true and correct as of the Closing
Date.
6.2 Lack of Material Liabilities. Neither the
Company, nor any of its subsidiaries or affiliates, shall have
incurred any material liability, direct or contingent
(as that term is ordinarily used), other than in the ordinary
course of its business, since September 30, 1997; including,
but not limited to, any tax liability resulting from the
transaction contemplated hereby, or by the Company's compliance
with any of the terms and conditions hereof.
6.3 Financial Statements. Parent shall have
received a balance sheet and profit and loss statement for the
Company, and its subsidiaries or affiliates, as of
September 30, 1997.
6.4 Lack of Defaults. No Event of Default (as
defined in Section 10 hereof) and no event or condition which,
with notice or the lapse of time, or both, would constitute an
Event of Default, shall exist.
6.5 Escrow Agreement. Securityholders, Company,
Parent, White Mountain, and all other parties thereto shall
have executed the Escrow Agreement, a copy of which is attached
hereto as Exhibit 6.5.
6.6 Employment Agreements. X. Xxxxxxx and Wheat and
those employees designated as key employees on Exhibit 4.14(b)
and the Company shall have executed the Employment Agreements,
copies of which are attached hereto as Exhibits 6.6(a) -
6.6(b).
6.7 Opinion of Counsel. Parent shall have received
an opinion of counsel from the attorneys for the Company, dated
as of the Closing Date, in form and substance substantially
similar to that attached hereto as Exhibit 6.7.
6.8 Compliance Certificate. The Company shall have
delivered to Parent the certificate, attached hereto as
Exhibit 6.8, executed by its President, dated the Closing Date,
certifying the fulfillment of the conditions specified in this
Section 6 and the accuracy of the representations and
warranties contained in Section 4 hereof.
6.9 Key-Person Term Life Insurance. The Company
shall have applied for an insurance policy on the lives of X.
Xxxxxxx and Wheat, such policy (a) to name the Parent as sole
beneficiary, (b) to be in form and substance satisfactory to
the Parent, and (c) to be in the amount of Two Million Dollars
($2,000,000) each.
6.10 Registration Rights Agreement. The
Securityholders and Parent shall have executed the Registration
Rights Agreement, a copy of which is attached hereto as
Exhibit 6.10.
6.11 Employee Stock Options. Parent resolves to take
any and all actions necessary, including soliciting the
approval of its shareholders, to grant unqualified stock
options to the employees and in the amounts designated in
Exhibit 6.11.
6.12 Release from Securityholders. Securityholders
shall execute and deliver to the Parent, in a form satisfactory
to Parent's counsel, a release of any claim that they may have
against the Company, and its subsidiaries or affiliates, for
the repayment of any loan, claim for unpaid compensation, claim
for indemnification or otherwise except for the notes set forth
in Exhibit 6.12.
6.13 Corporate Documents. Parent shall have received
copies of the following documents:
(a) a certificate of the President of the
Company dated the Closing Date and certifying (i) that attached
thereto is a true and complete copy of the Articles or
Certificate of Incorporation and Bylaws of the Company as in
effect on the date of such certification; and (ii) that
attached thereto are true and complete copies of resolutions
adopted by the Board of Directors of the Company authorizing
the execution, delivery and performance of this Agreement, and
that all such resolutions are still in full force and effect
and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement; and
(b) such additional supporting documents
and other information with respect to the operations and
affairs of the Company as Parent may reasonably request.
All such documents described in (a) and (b) shall be
satisfactory in form and substance to Parent and its counsel.
6.14 Corporate Filings. All relevant incorporation
and merger documents shall be filed with the appropriate
governmental agencies and shall be attached hereto as
Exhibit 6.14.
6.15 Trustee of Profit Sharing Plan. The Surviving
Corporation shall at Closing cause a successor trustee, if
necessary, for the Company's, and its subsidiaries or
affiliates, profit sharing plans to be appointed.
6.16 Net Worth. The Company shall have as of the
Closing Date, as shown on the Closing Balance Sheet, a Net
Worth greater than or equal to One Million Seven Hundred
Thousand Dollars ($1,700,000) as adjusted for deferred taxes
and other decreases due to expenses made in the ordinary course
of business. To enable all parties to determine the net Worth
of the Company, the Securityholders shall cause the Closing
Balance Sheet to be delivered to the Parent within ten (10)
days of Closing.
6.17 Securityholders' Guaranty of Company Debt.
Parent and White Mountain shall obtain the release of all of
Securityholders' personal guaranties of the Company's debt
before the Closing Date listed on Exhibit 6.17, and provide
Securityholders with written confirmation of such release from
the Company's creditors holding Securityholders' guaranties at
the Closing. Parent and White Mountain shall use its best
efforts to obtain Securityholders' release from any guaranty
existing prior to Closing but inadvertently omitted from
inclusion on Exhibit 6.17.
6.18 Release of Buy-Sell Rights. Securityholders
shall deliver to Parent a waiver and/or release of any rights
that they may have under that certain Stockholders' Buy-Sell
Agreement dated March 25, 1997 by and between Wheat, X. Xxxxxxx
and X. Xxxxxxx which would in any way effect the proposed
transaction.
6.19 Spousal Release. Securityholders' spouses,
Xxxxx Xxxxx, Xxxxxxx Xxxxxxx and Xxxx Xxxxxxx, shall
acknowledge the proposed transaction hereunder and shall
release any community property claim that they may have to the
Stock, but not as to the proceeds thereof, which would in any
way effect the transaction proposed hereunder.
SECTION 7
TRANSACTIONS PRIOR TO CLOSING
Between the date of this Contract and the Closing,
the executive officers and Board of Directors of the Company
shall retain full control of the management and business of the
Company. To enable Parent to prepare for settlement at the
Closing, Parent, Securityholders and the Company agree that
between the date hereof and Closing:
7.1 Taxes. The Company will promptly pay and
discharge, or cause to be paid and discharged, their federal,
state and other governmental taxes, assessments, fees and
charges imposed upon it or on any of its property or assets and
timely file any returns and reports in connection with the
foregoing; provided, however, nothing herein shall require the
Company to pay or cause to be paid any tax, assessment, fee or
charge so long as the validity thereof shall be contested in
good faith by appropriate procedures and the Company has set
aside on its books and maintains adequate reserves with respect
thereto or for which disclosure to Parent has been made
pursuant to Exhibits 4.10(a) and (b).
7.2 Books of Record and Account; Inspection. The
Company will maintain at all times proper books of record and
account in accordance with GAAP, and will permit any of
Parent's officers or any of its authorized representatives or
accountants to visit and inspect the offices and properties of
the Company, examine the Company's books of account and other
records, and discuss the Company's affairs, finances and
accounts with Parent's appropriate officers and managers, legal
counsel, accountants and auditors, all at normal business hours
and as often as Parent may request provided any such
discussions with accountants will not cause the Company to
incur any material cost with respect to such accountants and
legal counsel.
7.3 Financial Reports. The Company shall furnish to
Parent, within 20 days after the end of each month (and within
45 days after the end of the last month of the Company's fiscal
year), an unaudited financial report of the Company, which
report shall include profit and loss statement, a consolidated
balance sheet, a cash flow analysis, and such other financial
information that Parent may reasonably request.
7.4 Insurance.
(a) The Company will maintain in effect
liability insurance, property insurance, worker's compensation
insurance, the life insurance policies referenced in Section
6.9 and extended coverage insurance on its personal property
referenced in Section 4.15 above, with responsible insurance
companies, against such risks as are customarily insured
against by similar businesses operating in the same vicinity,
and in amounts not less than those (i) recommended by major
insurance companies for similar businesses or (ii) required by
governmental authorities having jurisdiction over all or part
of the Company's operations.
7.5 Notification. The Company will, within two (2)
business days, advise Parent in writing of the following:
(a) The occurrence of an Event of Default;
(b) The filing of any suit, action, other
proceeding against the Company or any investigation which the
Company learns is pending or threatened against it, if the
amount involved or at risk by nature of such suit, action,
other proceeding or investigation exceeds Seventy-Five Thousand
Dollars ($75,000);
(c) The filing, recording or assessment of a
federal, state or local tax lien against the Company or any of
its assets other than in the ordinary course of business;
(d) The occurrence of any reportable event with
respect to any employee benefit plan of the Company or which is
subject to the provisions of ERISA, including a statement
setting forth details as to the reportable event and the action
proposed to be taken with respect thereto, together with a
copy, if available, of the notice of such reportable event
given to the Pension Benefit Guaranty Corporation; and
(e) Any other condition, act or event which the
Company in its good faith judgment believes will adversely
affect Parent's rights under this Agreement.
7.6 Corporate Existence. The Company shall at all
times cause to be done every act necessary to maintain and
preserve its existence, rights, franchises, and certifications
in the jurisdictions of their incorporation and to remain
qualified as foreign corporations in every jurisdiction in
which qualification is required.
7.7 Maintenance of Properties. The Company shall
maintain or cause to be maintained in good repair, working
order and condition all tangible properties required for its
business and from time to time make or cause to be made all
appropriate repairs and replacements thereof.
7.8 Trade Secrets. The Company will use its best
efforts to maintain the confidentiality of any Business
Property Rights of the Company and will seek to restrict the
ability of any employee having knowledge of such proprietary
information or trade secrets from competing with the Company
through employment and non-competition agreements and similar
arrangements.
7.9 Mergers and Other Transfers. The Company will
not (i) merge or consolidate with any person, firm, association
or corporation, (ii) transfer, sell, assign, lease or otherwise
abandon or dispose of (whether in one transaction or a series
of transactions) any material part of its assets except in the
normal course of business if such transaction would reduce the
net worth of the Company below $1,700,000 (as adjusted for
deferred taxes and other decreases due to expenses made in the
ordinary course of business), (iii) change the nature of its
business, (iv) create any subsidiaries, or (v) liquidate,
dissolve or cease active business operations.
7.10 Certificate of Incorporation and Bylaws. The
Company will not amend its Articles or Certificate of
Incorporation or Bylaws if the result of any such amendment
will have an adverse effect on Parent's rights under this
Agreement.
7.11 Judgments and Liens. Neither the
Securityholders nor the Company shall create, incur, assume or
permit to exist any mortgage, lien, security interest, charge
or encumbrance on any property or assets now owned or hereafter
acquired by the Company except:
(a) Liens arising out of judgments or awards
(i) which have been in force less than the applicable appeal
period so long as execution is not levied thereunder, or (ii)
in respect of which the Company shall in good faith be
prosecuting an appeal or proceedings for review and in respect
of which the Company shall have secured a subsisting stay of
execution pending such appeal or proceedings for review;
(b) Liens for taxes, assessments or
governmental charges or levies, provided payment thereof shall
not at the time be required;
(c) Deposits, liens, bonds or pledges to secure
payment of worker's compensation, unemployment insurance,
pensions or other social obligations, surety, stay or appeal
bonds, or other similar obligations arising in the ordinary
course of business;
(d) Mechanic's, worker's, repairmen's,
warehousemen's, vendor's, or carrier's liens, or other similar
liens arising in the ordinary course of business and securing
sums which are not past due, or deposits or pledges to obtain
the release of any such liens;
(e) Liens arising by operation of law under
lease agreements made in the ordinary course of business and
confined to the property rented;
(f) Liens on property securing the purchase
price of property acquired after the date hereof provided that
each of such lien (i) is given solely to secure indebtedness
not exceeding one hundred percent (100%) of the lesser of the
cost or fair market value of such property, (ii) does not
extend to any other property and (iii) is given at the time of
acquisition of the property;
(g) Presently outstanding liens;
(h) liens and encumbrances securing
indebtedness to Senior Creditors; and
(i) Extension, renewal or refunding of
indebtedness secured by liens permitted by this Section 7.11,
provided that the then outstanding amount of such indebtedness
is not increased and such liens do not extend to property not
then encumbered thereby.
7.12 Issuances of Capital Stock. The Company will
not issue any of its capital stock to any person or entity or
grant any person or entity an option, warrant, convertible
security or any other right or agreement to acquire any shares
of its capital stock, without the prior written consent of
Parent.
7.13 Purchase of Securities or Assets. The Company
will not purchase the outstanding equity securities of any
other person, firm, association or corporation, except
obligations issued or guaranteed by the United States
government or any state or political subdivision thereof or
other short-term instruments normally marketed by banks and
nationally recognized brokerage firms, provided nothing herein
shall restrict the Company from maintaining accounts with
federally insured banking institutions or money market funds.
7.14 Declaration of Dividends, etc. The Company will
not (i) make, pay or declare any distributions or dividends of
cash or property with respect to its issued shares of Common
Stock; (ii) directly or indirectly redeem, repurchase or
otherwise reacquire any shares of its Common Stock; (iii)
increase the salary or pay any bonuses to any management
employees, officers or directors of the Company, if such action
decreases the net worth of the Company below One Million Seven
Hundred Thousand Dollars ($1,700,000) as adjusted for deferred
taxes and other decreases due to expenses made in the ordinary
course of business.
Except as set forth on Schedule 7.14, the Company is
further prohibited from declaring or distributing, without the
prior written approval of Parent in its sole discretion, any
executive bonus or other form of additional compensation.
7.15 Payments to Officers. Except as described on
Exhibit 7.15, the Company shall not loan or advance any amount
to, or sell, transfer or lease any properties or assets (real,
personal or mixed, tangible or intangible), to, or enter into
any agreement or arrangement with, any of the Company's
officers or directors, except for compensation to officers
pursuant to existing agreements, copies of which have been
delivered to Parent, and reimbursement of expenses incurred by
employees of the Company in connection with their employment.
7.16 Indebtedness. The Company shall not incur any
indebtedness for borrowed money, including pension fund loans,
or purchase money indebtedness or guarantee any such
indebtedness or issue or sell any debt securities of the
Company or guarantee in any manner (including, without
limitation, by agreeing to maintain the financial condition of
another person) any debt securities of others, provided,
however, that the Company shall have the right to incur
indebtedness in the ordinary course of business for office
furniture, equipment, trade payables, machinery and vehicles.
7.17 Expenditures. The Company shall not make any
capital investments or capital expenditures in excess of an
aggregate of Seventy-Five Thousand Dollars ($75,000) which are
outside of the ordinary course of the Company's business,
without the consent of Parent.
7.18 Employee Benefit Plans. The Company shall not
adopt any new Employee Benefit Plans but may expand existing
benefits subject to the approval of the Board of Directors.
7.19 Material Contracts. Except as described on
Exhibit 7.19, the Company shall not enter into, assume, renew
or permit to be renewed (including by not giving a permitted
notice of termination) any contract, lease or obligation
outside the ordinary course of business. Except as expressly
set forth therein, the Company shall not modify, amend,
terminate, waive or release any benefit or right under any
employment agreement, or any other material agreement to which
the Company is a party, without the prior written consent of
Parent.
7.20 Non-business Assets. The Company shall not
apply any corporate funds toward the payment of any principal
or interest due or owing for the purchase of any non-corporate
assets.
SECTION 8
COVENANTS NOT TO COMPETE
8.1 Covenant Not to Compete. Except as authorized
by White Mountain and Parent or by the terms of this Agreement,
no Securityholder shall, directly or indirectly, alone or with
others, enter into any business related to the construction,
reconstruction, maintenance, repair and expansion of CATV,
SMATV systems and any other related systems in the
telecommunications industry within the Northwestern Continental
United States, in the State of Alaska, or within Two Hundred
(200) miles of an existing Company, and its subsidiaries or
affiliates, project for a period of three (3) years from the
date of Closing. Further, no Securityholder shall, during such
period, disclose, divulge, communicate, use to the detriment of
the Company or Parent or for the benefit of any other person or
persons, or use in any way, any confidential information or
trade secrets of the Company, including customer list,
personnel information, and other similar data. In addition, no
Securityholder shall, during such period, (i) hire or attempt
to hire any employee of the Company, and its subsidiaries or
affiliates, or (ii) interfere with any contract or other
relationship of the Company, and its subsidiaries or
affiliates, and any of its customers or suppliers.
Securityholders agree that Parent shall be entitled to
injunctive relief in the event of any breach of the covenants
set forth in this paragraph together with reasonable attorney's
fees and damages. Damages shall only be collectible from the
party breaching this provision.
SECTION 9
INDEMNIFICATION BY SECURITYHOLDERS AND THE COMPANY
Securityholders and the Company, to the extent set
forth in this Agreement, shall indemnify and hold harmless
Parent, White Mountain and Surviving Corporation against and in
respect to the following, in addition to any losses otherwise
specifically indemnified against in this Agreement, as follows:
9.1 Indemnification by the Securityholders and the
Company.
(a) Breach. Subject to the provision of this
Section 9.1 and except as otherwise more specifically set forth
herein, the Securityholders and the Company (each in his or her
capacity as an indemnifying party, an "Indemnifying party")
covenants and agrees to jointly and severally indemnify,
defend, protect, and hold harmless each of Parent, White
Mountain, the Surviving Corporation and each of their
respective Subsidiaries and Affiliates (each in its capacity as
an indemnified party, an "Indemnitee") at all times from and
after the date of this Agreement from and against all Adverse
Consequences incurred by such Indemnitee as a result of or
incident to (i) any breach of any representation or warranty of
the Company or the Securityholders set forth in Section 4 of
this Agreement, (ii) any material breach or nonfulfillment by
the Company or the Securityholders of, or any noncompliance by
the Company or the Securityholders with, any covenants,
agreement, or obligation contained herein or in any certificate
or other document delivered in connection herewith, (iii) all
damage or deficiency resulting directly from the material
inaccuracy of any list, certificate or other instrument
delivered by or on behalf of Securityholders or the Company in
connection herewith, whether made as of the date hereof, or as
of the Closing Date hereunder or otherwise, or resulting from
the non-fulfillment of any agreement on the part of
Securityholders or the Company contained in this Agreement or
made in connection with the transactions contemplated hereby,
including, but not limited to all losses, liabilities, damages,
costs and expenses (including reasonable attorneys' fees),
incurred by Parent if this Agreement is terminated pursuant to
Section 10 hereof.
(b) Environmental Indemnification. The
Company, and Securityholders shall jointly and severally,
hereby indemnify each Indemnitee and hold each Indemnitee
harmless from and against any and all damages, losses,
liabilities, costs and expenses of removal, relocation,
elimination, remediation or encapsulation of any Hazardous
Materials (as defined in Section 4.20), obligations, penalties,
fines, impositions, fees, levies, lien removal or bonding
costs, claims, actions, causes of action, injuries,
administrative orders, consent agreements and orders,
litigation, demands, defenses, judgments, suits, proceedings,
disbursements or expenses (including without limitation,
attorney's and experts' reasonable fees and disbursements) of
any kind and nature whatsoever resulting from the operation of
the Company's business as of the Closing Date: (i) which (x)
is imposed upon, or incurred by, Parent by reason of, relating
to or arising out of the violation by the Company prior to the
Closing of any environmental laws, rules or regulations of any
governmental body or agency having jurisdiction over the
premises, or (y) arises out of the discharge, dispersal,
release, storage, treatment, generation, disposal or escape of
any Hazardous Materials, on or from the premises as of the
Closing Date, or (z) arises out of the use, specification, or
inclusion of any product, material or process containing
Hazardous Materials, or the failure to detect the existence or
proportion of Hazardous Materials in the soil, air, surface
water or groundwater, or the performance or failure to perform
the abatement of any Hazardous Materials source as of the
Closing Date or the replacement or removal of any soil, water,
surface water, or groundwater containing Hazardous Materials;
and/or (ii) is imposed upon, or incurred by, Parent by reason
of or relating to any material breach, act, omission or
misrepresentation contained in Section 4.20.
(c) Tax Matters. Company and Securityholders
shall jointly and severally indemnify each Indemnitee from and
against all Adverse Consequences incurred by any Indemnitee as
a result of or incident to any Income Taxes or other Taxes
imposed on the Surviving Corporation, the Company or any of
their Subsidiaries or for which the Surviving Corporation,
Company or any of its Subsidiaries may otherwise be liable by
law or regulation (including, without limitation, the
provisions of Treasury Regulation Section 1.1502-6) or
contract, for any taxable year or period that ends on or before
Closing or resulting in any way from this transaction,
including, but not limited to, any taxes imposed as a result of
the disqualification of this transaction as a tax free
reorganization under the Code.
(i) The Company shall furnish to Parent
copies of the federal, state, and local tax returns of the
Company for the period ending on the Closing Date and shall
obtain the consent of Parent before filing such returns which
consent shall not be unreasonably withheld.
(ii) Except as otherwise provided in this
Agreement, Parent shall have the sole right to represent the
interests of any Indemnitee in any tax audit or administrative
or court proceeding relating to any taxable period, including
without limitation taxable periods ending on or before Closing,
and to compromise, settle, or contest any tax claims in
connection therewith in its sole discretion, provided that
Parent shall provide Securityholders with written notice of its
intent to exercise its rights hereunder. Securityholders shall
have the right, at their expense, to join Parent in any such
defense.
(d) Broker Fee. Each Indemnifying Party
jointly and severally indemnifies each Indemnitee from any
claim made by a broker, finder, agent or other intermediary
against the Company after Closing in connection with the
negotiation or execution of this Agreement or the consummation
of the transactions contemplated hereby except for those claims
made against Parent or White Mountain pursuant to Section 5.5,
hereof.
(e) Set-Off. Except as otherwise provided in
this Agreement, Parent shall be entitled to set-off the
Securityholders' or the Company's liability to Parent for
indemnification under this Section 9, or under any other
paragraph of this Agreement, after any dispute regarding such
liability has been resolved by the parties or otherwise, by
crediting the amount of liability in equal parts against the
monies being held in escrow pursuant to Section 2.2(c) of this
Agreement, and against the Arguss Stock being held in escrow
pursuant to Section 2.2(c) by reducing the amount of cash and
Arguss Stock issued to Securityholders pursuant to
Section 2.2(d). In the event that Parent desires to exercise
its rights pursuant to this paragraph, the amount of any
liability alleged by the Parent which is disputed in writing by
the Company or Securityholders shall remain in escrow until
such dispute has been resolved. If such dispute is resolved in
favor of Securityholders, Parent shall pay interest at the
Prime Rate on any amount improperly held commencing from
December 1, 1998.
(f) Costs and Expenses. Except as otherwise
provided in this Agreement, all amounts indemnified pursuant to
this Section 9 shall include all costs and expenses of the
Indemnitee, including, but not limited to, the costs of any
actions, reasonable attorneys fees, and other expenses
necessary to enforce the rights granted hereunder.
(g) Termination of Company's Obligation.
Company's obligation to indemnify Parent, or to contribute to
any party indemnifying Parent, pursuant to this Section 9 shall
expire as of the Filing Date.
(h) Termination of Securityholders' Obligation.
Securityholders' obligation to indemnify any Indemnitee, or to
contribute to any party indemnifying any Indemnitee, pursuant
to this Section 9, shall, except in the event of actual fraud
or intentional non-disclosure, expire three (3) years from the
Closing Date, except as to those involving tax matters, which
obligation shall expire six (6) years from the Closing Date.
9.2 Limits of Indemnification. For the purposes of
this Section 9, the Indemnifying Parties Indemnification shall
be limited to those Adverse Consequences which exceed in the
aggregate One Hundred Thousand Dollars ($100,000).
9.3 No Circular Recovery. Securityholders hereby
agree that they will not make any claim for indemnification
against either Parent or White Mountain by reason of the fact
that he was a director, officer, employee agent or other
representative of the Company of any of its Subsidiaries
(whether such claim is for Adverse Consequences of any kind or
otherwise and whether such claim is pursuant to any statute,
charter, by-law, contractual obligation or otherwise) with
respect to any claim for indemnification brought by Parent, the
Surviving Corporation, and their respective Subsidiaries and
Affiliates against the Securityholders.
SECTION 10
TERMINATION
10.1 Termination by Parent. This Agreement may be
terminated by Parent, on or before the Closing Date, upon the
occurrence of the following:
(a) If any of the material conditions specified
in Section 6 shall not have been met prior to the Closing Date.
(b) If an event of default, as defined in
Section 11, has occurred, and has not been cured during any
applicable cure period.
10.2 Termination by Securityholders. This Agreement
may be terminated by Securityholders, on or before the Closing
Date if any of the conditions specified in Section 5 shall not
have been met prior to Closing.
SECTION 11
DEFAULT
11.1 Events of Default. It shall be considered an
Event of Default if any one or more of the following events
shall occur:
(a) If any statement, certificate, report,
representation or warranty of a material nature made or
furnished by the Company under this Agreement shall prove to
have been false or erroneous in any material respect.
(b) The occurrence of any event of material
default under any other financing agreement, note, lease,
mortgage, security agreement, factoring agreement or any other
obligation of the Company the result of which will have a
material adverse effect on the Company unless any such event of
default shall be timely cured under any applicable cure
provision or waived by the person to whom or to which the
Company is obligated or indebted.
11.2 Waiver by Parent. Any failure by Parent to
insist upon strict performance by the Securityholders or the
Company of any of the terms and provisions of this Agreement,
shall not be deemed to be a waiver of any of the terms and
conditions hereof and Parent shall have the right thereafter to
insist upon strict performance thereof by the Securityholders
or the Company.
SECTION 12
MISCELLANEOUS
12.1 Costs. Except for expenses relating to the
preparation of the December 1998 Audit, each party shall pay
its own expenses incident to the transaction contemplated
hereby, including fees and expenses of their attorneys,
accountants, appraisers or consultants, whether or not those
transactions are consummated at Closing, subject to the
indemnification and termination provisions hereof.
12.2 Sales and Transfer Taxes. All state sales taxes
and all transfer taxes and all documentary taxes, if any,
payable in connection with the Merger shall be paid by the
party to whom such taxes are customarily attributed under the
laws of the State of Alaska.
12.3 Relationships to Other Agreements. In the event
of a conflict between any of the provisions of this Agreement
and any other agreement relating to this transaction between
the Securityholders, Company and Parent, the provisions of this
Agreement shall control.
12.4 Titles and Captions. All article or section
titles or captions in this Agreement are for convenience of
reference and are not part of this Agreement and shall in no
way define, limit, extend or describe the scope or intent of
provisions herein.
12.5 Exhibits. The Exhibits and Schedules referred
to herein are hereby made a part hereof.
12.6 Applicable Law. This Agreement is to be
governed by, and construed, interpreted, and enforced in
accordance with the laws of Delaware.
12.7 Binding Effect and Assignment. This Agreement
shall be binding upon and inure to the benefit of the
successors and assigns of the parties. Notwithstanding the
foregoing, neither the Company nor Parent shall have any right
to assign any of its rights or obligations under this Agreement
without the prior written consent of the other parties hereto.
12.8 Notices. All notices, requests, instructions,
or other documents required hereunder shall be deemed to have
been given or made when delivered by registered or certified
mail, return receipt requested, postage prepaid or by messenger
or overnight delivery service to:
If Company then: Xxxxxxx Construction of Alaska,
Inc.
0000 Xxxxxx Xxxx
Xxxxxxxxxxx, XX 00000-0000
Counsel for Company: Xxxxx Xxxxxx Xxxxxxxx
1800 Seafirst Building
00000 XX 0xx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxx
If Securityholder X. Xxxxxxx
then: Xxxxxx X. Xxxxxxx
00000 000xx Xxxxxx, XX
Xxxxxxxxxxx, XX 00000
Counsel for X. Xxxxxxx: Xxxxx Xxxxxx Xxxxxxxx
1800 Seafirst Building
00000 XX 0xx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxx
If Securityholder X. Xxxxxxx
then: Xxxxx X. Xxxxxxx
00000 00xx Xxxxxx, X
Xxxxxxx, XX 00000
Counsel for X. Xxxxxxx: Xxxxx Xxxxxx Xxxxxxxx
1800 Seafirst Building
00000 XX 0xx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxx
If Securityholder Xxxx X.
Xxxxx, Xx. then: Xxxx X. Xxxxx, Xx.
0000 00xx Xxxxxx, XX
Xxxxxxxxx, XX 00000
Counsel for Wheat: Xxxxx Xxxxxx Xxxxxxxx
1800 Seafirst Building
00000 XX 0xx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxx
If Parent then: Arguss Holdings, Inc.
Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxxx
Counsel for Parent: Bleecker & Bleecker
00 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
Any party may from time to time give the others
written notice of a change in the address to which notices are
to be sent and of any successors in interest.
12.9 Severability. Inapplicability or
unenforceability of any provision of this Agreement shall not
impair the operation or validity of any other provision hereof.
If any provision shall be declared inapplicable or
unenforceable, there shall be added automatically as part of
this Agreement a provision as similar in terms to such
inapplicable or unenforceable provision as may be possible and
be legal, valid and enforceable.
12.10 Acceptance or Approval. By accepting all
or approving anything required to be observed, performed, or
fulfilled, or to be given to Parent pursuant to this Agreement,
including, but not limited to, any certificate, balance sheet,
statement of profit or loss or other financial statement, or
insurance policy, Parent shall not be deemed to have accepted
or approved the sufficiency, legality, effectiveness or legal
effect of the same, or of any term, provision, or condition
thereof as to third parties.
12.11 Survival. All covenants, representations,
and warranties made by the Securityholders and Parent in this
Agreement shall survive the Closing hereunder for a period of
three (3) years, except as to those involving tax matters,
which shall survive the closing for a period of six (6) years.
12.12 Entire Agreement. This Agreement,
including all Exhibits, constitutes the entire agreement among
the parties hereto pertaining to the subject matter hereof, and
supersedes all prior agreements and understandings pertaining
thereto. No covenant, representation, or condition not
expressed in this Agreement shall affect or be deemed to
interpret, change or restrict the express provisions hereof and
no amendments hereto shall be valid unless made in writing and
signed by all parties hereto.
12.13 Counterparts. This Agreement may be
executed in any number of counterparts, all of which together
shall constitute one instrument.
12.14 Security Matters. (a) By executing this
Agreement, Parent acknowledges that : (i) Parent has been
advised that the Stock has not been and will not have been
registered under the Act or the Alaska or the Act of Washington
or other applicable securities laws of any state, that the
Securityholders in transferring such shares to the Parent will
be relying, if applicable, upon the exemption from such
registration requirements contained in Section 4(1) or 4(2) of
the Act as a transaction by a person other than as issuer,
underwriter or dealer and the applicable state exemption; (ii)
the Stock may be "restricted" as that term is used in Rule 144
under the Act as a consequence of which Parent may not be able
to sell the shares unless such shares are first registered
under the Act and any applicable state securities laws or
unless an exemption from such registration, is, in the opinion
of counsel, available; (iii) the Stock will be acquired by
Parent for purposes other than "distribution" as that term is
used in Section 2(11) of the Act, and (iv) Parent will execute,
if Securityholders so request, an appropriate letter affirming
that its intention with respect to the proposed acquisition of
the Stock is that such acquisition be for investment purposes
only and not with a view toward resale or distribution thereof.
(b) The shares of Arguss Stock are not
registered under the Securities Act of 1933, as amended (the
"1933 Act"), and are being issued without registration on the
grounds that the sale of Arguss Stock hereunder is exempt from
registration under the 1933 Act pursuant to Section 4(2)
thereof and Parent's reliance on such exemption is predicated
on Securityholders' representations set forth herein.
This Agreement is made in reliance upon
Securityholders' representations to Parent that the shares of
Arguss Stock to be issued will be acquired for investment and
not with a view to the sale or distribution of any part
thereof, and that Securityholders have no present intention of
selling, granting participation in or otherwise distributing
the same.
Securityholders hereby represent that they are
experienced in evaluating and investing in companies such as
the Parent, have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and
risks of this investment, and have the ability to bear the
economic risks of this investment. Securityholders further
represent that during the course of the transaction they have
had the opportunity to ask questions of, and receive answers
from, representatives of Parent concerning the Parent.
Securityholders hereby agree that the Arguss Stock
may not be transferred without registration under the 1933 Act
or an exemption therefrom, and that in the absence of an
effective Registration Statement covering the Arguss Stock, or
an available exemption from registration under the 1933 Act,
the Arguss Stock must be held indefinitely. In particular, and
without limiting the foregoing, Securityholders are aware that
the Arguss Stock may be not be sold pursuant to Rule 144
promulgated under the 1933 Act unless all conditions of that
Rule are met.
Securityholders hereby agree that in no event will
they transfer any of the Arguss Stock other than pursuant to an
effective Registration Statement under the 1933 Act, or
pursuant to the conditions of any legend appearing on said
Arguss Stock.
12.15 Preparation and Filing of SEC Documents.
If and whenever, as a result of the transaction contemplated
hereunder, the Parent is under an obligation to provide
financial information to, or prepare a filing of any kind with,
the United States Securities and Exchange Commission ("SEC"),
Securityholders shall assist the Parent in preparing any
audited financial statements required by the SEC for this
purpose. The cost of preparing any such financial statements
shall be borne by the Parent.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
ATTEST: ARGUSS HOLDINGS, INC.
____________________ By:
______________________________
Title: ___________________________
ATTEST: XXXXXXX CONSTRUCTION OF ALASKA, INC.
____________________ By:______________________________
Xxxxxx X. Xxxxxxx, President
WITNESS:
____________________ ______________________________
XXXXXX X. XXXXXXX
WITNESS:
____________________ ______________________________
XXXXX X. XXXXXXX
WITNESS:
____________________ ______________________________
XXXX X. XXXXX, XX.
ATTEST: WHITE MOUNTAIN CABLE CONSTRUCTION CORP.
____________________ By: ____________________________
Title: ___________________________
PAGE 65 OF 65 OF AGREEMENT AND PLAN OF MERGER
