EXHIBIT 10.7
AGREEMENT AND PLAN OF MERGER
AMONG
GROUP MAINTENANCE AMERICA CORP.
JARL ACQUISITION CORP.
AND
XX XXXX, INC.
AND
XXXXX XXXXXXXX
MARCH 17, 1997
TABLE OF CONTENTS
PAGE
----
ARTICLE 1
THE MERGER................................................................. 1
1.1 The Merger..................................................... 1
1.2 Effective Time of the Merger................................... 1
1.3 Closing........................................................ 1
1.4 Effects of the Merger.......................................... 2
ARTICLE 2
CONVERSION OF STOCK;EXCHANGE OF CERTIFICATES............................... 2
2.1 Conversion of Stock............................................ 2
(a) Merger Sub Capital Stock.................................. 2
(b) Cancellation of the Company Treasury Stock................ 3
(c) Merger Consideration...................................... 3
2.2 Exchange of Certificates....................................... 3
(a) Exchange Agent............................................ 3
(b) No Fractional Shares...................................... 4
ARTICLE 3
CONSIDERATION ADJUSTMENTS.................................................. 4
3.1 Adjustments to Merger Consideration............................ 4
(a) Debt Adjustment........................................... 4
(b) Working Capital Adjustment................................ 4
(c) Make Whole Adjustment..................................... 5
3.2 Shareholder Options............................................ 5
ARTICLE 4
REPRESENTATIONS AND WARRANTIES............................................. 6
4.1 Representations and Warranties by Shareholder.................. 6
(a) Qualification............................................. 7
(b) Authority Relative to Agreement........................... 7
(c) Non-Contravention......................................... 7
(d) Approvals................................................. 7
(e) Ownership of Company Common Stock......................... 7
(f) Restricted Securities..................................... 8
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4.2 Representations and Warranties of Shareholder and the Company... 8
(a) Organization and Qualification, etc........................ 9
(b) Capital Stock.............................................. 9
(c) Subsidiaries, etc.......................................... 9
(d) Authority Relative to Agreement............................ 9
(e) Non-Contravention.......................................... 10
(f) Approvals.................................................. 10
(g) Financial Statements....................................... 10
(h) Absence of Certain Changes or Events....................... 11
(i) Undisclosed Liabilities.................................... 12
(j) Permits and Legal Compliance............................... 12
(k) Title to Properties; Absence of Liens and
Encumbrances, etc......................................... 12
(l) Software................................................... 13
(m) List of Properties, Contracts and Other Data............... 13
(n) Litigation................................................. 14
(o) Labor or Employee Controversies............................ 14
(p) Patent, Trademark, etc. Claims............................. 15
(q) Use of Real Property....................................... 15
(r) Accounts Receivable........................................ 15
(s) Insurance.................................................. 15
(t) Employee Benefits.......................................... 16
(u) Tax Matters................................................ 16
(v) Brokers.................................................... 17
(w) Tax-Free Reorganization.................................... 17
4.3 Representations and Warranties by the Parent.................... 18
(a) Organization and Qualification, etc........................ 18
(b) Capital Stock.............................................. 19
(c) Subsidiaries, etc.......................................... 19
(d) Authority Relative to Agreement............................ 19
(e) Non-Contravention.......................................... 19
(f) Approvals.................................................. 19
(g) Litigation................................................. 20
(h) Brokers.................................................... 20
(i) Tax-Free Reorganization.................................... 20
4.4 Representations and Warranties Concerning the Merger Sub........ 21
(a) Organization and Standing.................................. 21
(b) Capital Structure.......................................... 21
(c) Authority.................................................. 21
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ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS......................................... 21
5.1 Conduct of Business............................................. 21
5.2 Access to Information by The Parent............................. 22
5.3 Amendment to Schedules.......................................... 23
5.4 Noncompetition.................................................. 23
5.5 Confidentiality................................................. 24
5.6 Exclusivity..................................................... 24
5.7 Release of Shareholder Guarantees............................... 25
5.8 Tax-Free Reorganization......................................... 25
ARTICLE 6
CONDITIONS PRECEDENT........................................................ 25
6.1 Conditions Precedent to the Obligations of the
Parent and the Merger Sub...................................... 25
(a) Accuracy of Representations and Warranties................. 25
(b) Performance of Covenants................................... 25
(c) Legal Actions or Proceedings............................... 25
(d) Approvals.................................................. 26
(e) Shareholders Agreement..................................... 26
(f) Employment Agreement....................................... 26
(g) Lease Agreement............................................ 26
(h) Registration Rights Agreement.............................. 26
(i) Tax Indemnification Agreement.............................. 26
(j) Elimination of Certain Expenses............................ 26
(k) Lender Approval............................................ 26
(l) Opinion of Counsel for the Company and Shareholder......... 26
(m) Resignations of Directors and Officers..................... 27
(n) All Proceedings to be Satisfactory......................... 27
6.2 Conditions Precedent to the Obligations of Shareholder
and the Company................................................ 27
(a) Accuracy of Representations and Warranties................. 27
(b) Performance of Covenants................................... 27
(c) Approvals.................................................. 27
(d) Release from Guarantee..................................... 27
(e) Lease Agreement............................................ 27
(f) Registration Rights Agreement.............................. 27
(g) All Proceedings to be Satisfactory......................... 28
(h) Opinion of Counsel for The Parent.......................... 28
(i) Legal Actions or Proceedings............................... 28
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ARTICLE 7
SURVIVAL OF REPRESENTATIONS INDEMNIFICATION................................. 28
7.1 Survival of Representations and Warranties...................... 28
7.2 Indemnification by Shareholder.................................. 28
7.3 Indemnification by the Surviving Corporation and the Parent..... 28
7.4 Notice.......................................................... 29
ARTICLE 8
STOCK TRANSFER RESTRICTIONS................................................. 29
8.1 Compliance with Securities Laws................................. 29
8.2 Restrictions on Transfer........................................ 29
8.3 Other Agreements................................................ 30
8.4 Tax-Free Requirements........................................... 30
ARTICLE 9
FURTHER ASSURANCES.......................................................... 31
9.1 Further Assurances.............................................. 31
9.2 Books and Records............................................... 31
ARTICLE 10
MISCELLANEOUS............................................................... 31
10.1 Termination..................................................... 31
10.2 Effect of Termination........................................... 32
10.3 Expenses, etc................................................... 32
10.4 Execution in Counterparts....................................... 32
10.5 Notices......................................................... 32
10.6 Waivers......................................................... 33
10.7 Amendments, Supplements, etc.................................... 33
10.8 Entire Agreement................................................ 34
10.9 Choice of Forum; Consent to Jurisdiction........................ 34
10.10 Binding Effect, Benefits........................................ 34
10.11 Assignability................................................... 34
10.12 Public Announcements............................................ 34
10.13 Invalid Provisions.............................................. 34
10.14 Consent of Spouse............................................... 35
COMPANY DISCLOSURE SCHEDULE
PARENT DISCLOSURE SCHEDULE
-iv-
EXHIBIT A
(to the Agreement and Plan of Merger)
SUBORDINATED PROMISSORY NOTE
EXHIBIT B
(to Agreement and Plan of Merger)
EMPLOYMENT AGREEMENT
EXHIBIT C
(to Agreement and Plan of Merger)
LEASE
EXHIBIT D
(to Agreement and Plan of Merger)
REGISTRATION RIGHTS AGREEMENT
EXHIBIT E
(to the Agreement and Plan of Merger)
TAX INDEMNIFICATION AGREEMENT
EXHIBIT F
(to the Agreement and Plan of Merger)
EXPENSES OF THE COMPANY
EXHIBIT G
(to Agreement and Plan of Merger)
OPINION OF COUNSEL FOR THE COMPANY AND SHAREHOLDER
EXHIBIT H
(to the Agreement and Plan of Merger)
OPINION OF COUNSEL FOR THE PARENT
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") made effective as of
March 17, 1997, by and among Group Maintenance America Corp., a Texas
corporation (the "Parent"), JARL Acquisition Corp., a Texas corporation ("Merger
Sub"), XX XXXX, Inc., a Texas corporation (the "Company"), and Xxxxx Xxxxxxxx
together with Xxxx Xxxxx Xxxxxxxx, his spouse, an individual resident of Texas
and sole shareholder of the Company (the "Shareholder").
WHEREAS, the respective Boards of Directors of the Parent, the Merger Sub
and the Company, and the Parent, acting as the sole shareholder of the Merger
Sub, and the Shareholder, acting as the sole shareholder of the Company, have
approved the merger of the Company with and into the Merger Sub (the "Merger"),
pursuant and subject to this Agreement and the applicable statutes of the State
of Texas whereby each issued and outstanding share of Common Stock, $1.00 par
value per share of the Company ("Company Common Stock") will be converted into
the right to receive Common Stock, $.001 par value per share of the Parent
("Parent Common Stock"), and the Cash Consideration (as defined below), all as
provided herein;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions hereof, and in
accordance with the Texas Business Corporation Act ("TBCA") upon the Effective
Time (as defined in Section 1.2), the Company shall be merged with and into the
Merger Sub. Merger Sub, as the surviving entity following the Merger is
sometimes referred to in this Agreement as the "Surviving Corporation."
1.2 EFFECTIVE TIME OF THE MERGER. In accordance with the requirements of
applicable law, appropriate Articles of Merger under the TBCA shall be prepared,
executed and submitted for filing with the Secretary of State of the State of
Texas. The date of such filing is referred to in this Agreement as the
"Effective Time".
1.3 CLOSING. The closing of the Merger ("Closing") will take place at
10:00 a.m. at the executive offices of the Parent in Houston, Texas on a date to
be specified by the parties, which date shall be the first business day of the
calendar month following the month in which the Parent closes its acquisition
transaction with Airtron, Inc. (or as soon as practicable thereafter), but in no
event later than July 1, 1997 ("Closing Date"). The parties may agree in
writing on another date, time or place for the Closing.
1.4 EFFECTS OF THE MERGER.
(a) At the Effective Time, (i) the Company shall merge with and into
the Merger Sub and as a result thereof, the separate existence of the Company
shall cease; (ii) the Articles of Incorporation of the Merger Sub, as amended to
date, as in effect immediately prior to the Effective Time shall be the Articles
of Incorporation of the Surviving Corporation, except that the Articles of
Incorporation of the Merger Sub shall be amended to provide that the name of the
Surviving Corporation shall be changed to "XX XXXX, Inc.", (iii) the Bylaws of
the Merger Sub as in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation, and (iv) the directors and officers of the
Merger Sub immediately prior to the Effective Time shall become the directors
and officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected or
appointed, as the case may be.
(b) As and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, immunities and franchises, of a public as
well as of a private nature previously belonging to the Company and Merger Sub;
and all property (real, personal and mixed), and all debts due on whatever
account, including subscriptions to shares, and all other choses in action, and
all and every other interest of or belonging to or due to each of the Company
and Merger Sub shall be transferred to, and vested in, the Surviving Corporation
without further act or deed; and all such property, rights and privileges,
powers and franchises and all and every other interest shall be thereafter the
property of the Surviving Corporation as they were of the Company and Merger
Sub; and the title to any real estate, or interest therein, whether by deed or
otherwise, shall not revert or be in any way impaired by reason of the Merger.
The Surviving Corporation shall be responsible and liable for all the
liabilities and obligations of the Company and Merger Sub and any claim
existing, or action or proceeding pending, by or against the Company or Merger
Sub may be prosecuted against the Surviving Corporation. Neither the rights of
creditors nor any liens upon the property of the Company or Merger Sub shall be
impaired by the Merger, and all debts, liabilities and duties of each of the
Company and Merger Sub shall attach to the Surviving Corporation, and may be
enforced against it to the same extent as if such debts, liabilities and duties
had been incurred or contracted by it, all in accordance with Section 5.01, et
seq., of the TBCA and the terms of this Agreement.
ARTICLE 2
CONVERSION OF STOCK;
EXCHANGE OF CERTIFICATES
2.1 CONVERSION OF STOCK. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Company
Common Stock or capital stock of the Merger Sub:
(a) Merger Sub Capital Stock. Each share of capital stock of the
Merger Sub issued and outstanding at the Effective Time, shall remain
outstanding and shall be unchanged after the Merger and shall thereafter
constitute all of the issued and outstanding capital stock of the Surviving
Corporation.
JARL Merger Agreement/Page 2
(b) Cancellation of the Company Treasury Stock. All shares of the
Company Common Stock that are owned by the Company as treasury stock shall be
canceled and retired and shall cease to exist and no stock of the Parent or
other consideration shall be delivered in exchange therefor.
(c) Merger Consideration. Subject to the adjustments described in
Article 3 hereof, each share of Company Common Stock (other than shares to be
canceled in accordance with Section 2.1(b)) shall be converted into the right to
receive (i) 3.1746 validly issued, fully paid and nonassessable shares of Parent
Common Stock; and (ii) $10.00 in cash (the "Cash Consideration") (such shares of
Parent Common Stock and Cash Consideration being sometimes referred to herein
collectively as the "Merger Consideration"); provided, however, that if between
the date of this Agreement and the Effective Time, the outstanding shares of
Parent Common Stock shall have been changed into a different number of shares or
a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split-up, combination, or exchange of shares
or the like, the conversion formula in this Section 2.1(c) shall be
correspondingly revised to provide for the proportionate amount of Parent Common
Stock or any other interests into which the Parent Common Stock may have
changed.
2.2 EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. On the Effective Date, the Parent shall deposit
the aggregate amount of Merger Consideration required to be exchanged in
accordance with the terms of this Article 2 with the Secretary or Assistant
Secretary of the Parent (the "Exchange Agent") and Shareholder shall surrender
each and every outstanding certificate which prior thereto represented shares of
Company Common Stock, together with duly and properly executed stock powers, to
the Exchange Agent, and Shareholder shall be entitled upon such surrender to
receive in exchange therefor the Merger Consideration into which such shares so
surrendered shall have been converted pursuant to this Agreement, subject to
adjustment as provided in Section 3.1 below. Adoption of this Agreement by
Shareholder and the Parent shall constitute ratification of the appointment of
such Exchange Agent. After the Effective Time and until the outstanding
certificates formerly representing shares of the Company Common Stock are so
surrendered, each outstanding certificate which, prior to the Effective Time,
represented the Company Common Stock shall be deemed for all corporate purposes
(except the payment of dividends) to evidence ownership of the Merger
Consideration into which the shares of the Company Common Stock represented
thereby prior to such Effective Time shall have been converted. Until
certificates representing shares of Company Common Stock have been surrendered,
no dividend payable to holders of record of the Parent Common Stock shall be
paid to the holders of such outstanding stock certificates of the Company in
respect thereof. Upon surrender of such outstanding certificates, however,
there shall be paid to the holders of the certificate for the Parent Common
Stock issued in exchange therefor the amount of dividends, if any, which
theretofore became payable with respect to such full shares of the Parent Common
Stock, but which have not theretofore been paid on such stock. No interest
shall be payable with respect to the payment of any dividends. Notwithstanding
any of the foregoing, the parties agree that Exchange Agent shall not be
individually responsible or liable in any manner whatsoever for anything which
he may do or refrain from doing in connection herewith, and that in the event
Exchange Agent becomes involved in any litigation, claim a controversy in
connection with his actions under this Agreement,
JARL Merger Agreement/Page 3
Shareholder agrees to indemnify, defend and save Exchange Agent from all losses,
costs, damages, expenses and attorneys' fees suffered or incurred by Exchange
Agent as a result thereof.
(b) No Fractional Shares. Fractional shares of the Parent Common
Stock will not be issued in exchange for the Company Common Stock. Upon
delivery of certificates representing Company Common Stock together with duly
and properly executed stock powers to the Exchange Agent on or after the
Effective Time, Exchange Agent will deliver the Merger Consideration, including
the Parent Common Stock, to Shareholder, provided that in lieu of any fractional
share, Exchange Agent shall deliver a cash amount equivalent to the amount
obtained by multiplying such fraction by $6.30. (The shares of Parent Common
Stock delivered to Shareholder as part of the Merger Consideration are sometimes
referred to hereinafter as the "Initial Shares.") No interest shall be payable
with respect to payment of such cash distribution.
ARTICLE 3
CONSIDERATION ADJUSTMENTS
3.1 ADJUSTMENTS TO MERGER CONSIDERATION. The Merger Consideration into
which the Company Common Stock shall be converted is subject to the adjustments
described in this Section 3.1:
(a) Debt Adjustment. As provided in Section 5.7 below, within 90 days
after the Closing Date, the Parent shall cause the Surviving Corporation to pay
off or otherwise retire all of the Company's indebtedness which is secured by
the personal guarantee of Shareholder as of the Effective Time up to a maximum
of $39,000. To the extent that such indebtedness exceeds $39,000, the Cash
Consideration payable to Shareholder shall be reduced by the amount of such
excess indebtedness (the "Debt Adjustment"), the Parent shall deliver a cash
payment to the holder of such indebtedness in the amount of the Debt Adjustment,
and upon surrender of certificates representing shares of the Company's Common
Stock by Shareholder as provided in Section 2.2 above, the Cash Consideration
payable to Shareholder shall be reduced by the amount of the Debt Adjustment, if
any, and, if the Working Capital Adjustment has been determined pursuant to
Section 3.1(b) below at the time such certificates are surrendered, the Cash
Consideration shall be increased or decreased, as applicable, by the amount of
such Working Capital Adjustment.
(b) Working Capital Adjustment. Ninety days after the Closing Date
(the "Calculation Date"), the value of the Company's "Net Working Capital" (as
defined below) as of the last day of the calendar month prior to the Closing
Date shall be calculated. If the value of the Company's Net Working Capital is
more than or less than One Hundred Three Thousand and 00/100 Dollars ($103,000)
as of the last day of the calendar month prior to the Closing Date, then the
Cash Consideration into which the Company Common Stock is to be converted shall
be increased or decreased accordingly, dollar for dollar (the "Working Capital
Adjustment"). For purposes of the Working Capital Adjustment, "Net Working
Capital" shall mean the Company's current assets minus current liabilities as
determined in accordance with the Company's past practices; provided, however,
that the Company's current assets shall not include the Company' accounts
receivable that remain unpaid as of the Calculation Date (the "Excluded
Accounts"). In consideration of the foregoing,
JARL Merger Agreement/Page 4
Shareholder, in his sole discretion, shall have the right to acquire any
Excluded Accounts from the Surviving Corporation incident to the Working Capital
Adjustment. If the amount of the Working Capital Adjustment has been determined
at the time Shareholder surrenders certificates representing the Company's
Common Stock in exchange for the Merger Consideration as provided in Section 2.2
above, the Cash Consideration shall be increased or decreased, as applicable, by
the amount of the Working Capital Adjustment (and shall also be reduced by the
amount of the Debt Adjustment, if any). If the amount of the Working Capital
Adjustment has not been determined at the time such certificates are
surrendered, the Cash Consideration shall be paid to Shareholder without such
Working Capital Adjustment; provided that if the Working Capital Adjustment
reduces the Cash Consideration, Shareholder shall pay such adjustment to the
Parent via wire transfer within three (3) days after the Working Capital
Adjustment is finally determined, and if the Working Capital Adjustment
increases the Cash Consideration, the Parent shall pay such adjustment to
Shareholder via wire transfer within three (3) business days after the Working
Capital Adjustment is finally determined. No interest will be payable in respect
of the Working Capital Adjustment.
(c) Make Whole Adjustment. Subject to the provisions of Section 3.2
below, if on the second anniversary of the Closing Date ("Measurement Date"),
the average of the per share closing price of the Parent Common Stock for the
ten trading days prior to such date (the "Measurement Price") does not exceed
$6.30 per share (as adjusted for all stock splits, stock dividends,
recapitalization and reorganizations effected after the Closing) (the "Stated
Price"), then Shareholder shall have the right, with respect to each Initial
Share then held by Shareholder, to receive an amount equal to the difference
between the Stated Price and the Measurement Price multiplied by the number of
Initial Shares then held by Shareholder, and reduced by an amount equivalent to
the aggregate amount of the excess, if any, of the proceeds received by
Shareholder from all prior sales of any Initial Shares over the Stated Price
thereof (the "Make Whole Adjustment"). The Make Whole Adjustment shall be paid
within 45 days of the Measurement Date and, at the election of the Parent in its
sole and absolute discretion, shall be payable in any of the following forms:
(x) cash, (y) Parent's subordinated promissory note payable within 180 days of
the date of issuance in the form attached hereto as Exhibit A, or (z) by
delivery of a number of shares of the Parent Common Stock with a value not less
than the amount of Make Whole Adjustment based upon the Measurement Price of
such Parent Common Stock.
(d) Notwithstanding anything in this Article 3 to the contrary, in the
event that any of the adjustments required in this Article 3 would jeopardize
the qualification of the Merger as a reorganization within the meaning of
Section 368(a) of the Code, the parties agree to reallocate the Merger
Consideration payable to Shareholder such that the portion allocated to Parent
Common Stock and the portion allocated to Cash Consideration satisfy the
requirements for a tax-deferred reorganization pursuant to such Code section,
and the parties agree to amend the provisions of this Article 3 as necessary to
cause the Merger to comply with the provisions of Section 368(a).
3.2 SHAREHOLDER OPTIONS. Notwithstanding anything in this Agreement to
the contrary, in the event the Parent Common Stock is not publicly traded by
December 31, 1998:
(a) For the period of 30 days immediately following December 31, 1998,
Shareholder shall have the right, subject to Section 3.2(b), to require the
Parent to repurchase ("Put
JARL Merger Agreement/Page 5
Option") all of the Parent Common Stock originally issued pursuant to this
Agreement and held by Shareholder for a purchase price consisting of $200,000
cash plus an amount equal to an 8% fixed rate of return on such amount
calculated from the Effective Time, by providing the Parent written notice of
his intention to exercise the Put Option ("Option Notice"). In the event that
Shareholder fails to provide the Option Notice during such 30 day period, the
Put Option shall expire unexercised. In the event that Shareholder has timely
exercised the Put Option and the Parent is either unable or unwilling to make
such cash payment within 60 days following its receipt of the Option Notice, the
Parent shall notify Shareholder and the Put Option will terminate.
(b) If Shareholder exercises the Put Option and the Parent is either
unable or unwilling to make the required cash payment within 60 days as provided
in Section 3.2(a) above, then for a period of 10 days following receipt of
notice from Parent regarding termination of the Put Option, or, if Parent is
unable to make the required cash payment and Parent does not provide such
notice, for a period of 10 days immediately following such 60 day period,
Shareholder shall have the right ("Rescission Option") to require the Parent to
sell all of the common stock of the Surviving Corporation back to Shareholder
for a purchase price consisting of the sum of (a) $100,000 cash (or such higher
cash amount as described herein) plus an amount equal to an 8% fixed rate of
return on such amount calculated from the Effective Time, plus (b) the net
amount of cash contributed to the Surviving Corporation by Parent (whether as a
contribution of capital, for the purchase of capital stock, or in the form of
loans) reduced by the net amount of cash dividends and distributions from the
Surviving Corporation to the Parent since the Effective Time (but not including
payments made for goods and services provided by Parent at prices comparable to
those available from third parties), plus (c) the surrender of all of the shares
of the Parent Common Stock issued to Shareholder pursuant to this Agreement and
still held by Shareholder at that time. If, at the time Shareholder exercises
the Rescission Option, Shareholder holds less than the number of shares of
Parent Common Stock issued to Shareholder incident to the Merger, the cash
portion of the purchase price shall be increased by the amount equal to $6.30
multiplied by the number of shares of Parent Common Stock which Shareholder has
sold or otherwise disposed of since the Effective Time. The principal amount of
outstanding loans from the Parent to the Surviving Corporation will be converted
to equity capital immediately prior to such sale. In lieu of making the cash
payment described above, if any, Shareholder, at his option, may elect to assume
a like amount of debt from the Parent's primary lender, or, if such assumption
is not agreed to by such lender, execute and deliver a promissory note payable
to the Parent for such amount and payable in one year at a fixed rate of
interest equal to the Prime Rate as of the date of its issuance. In lieu of
payment for capital consisting of motor vehicles for which ownership is
evidenced by a certificate of title issued by any state and that were added to
the Surviving Corporation after the Effective Time, Shareholder may elect to
return such motor vehicles to the Parent.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES BY SHAREHOLDER. Shareholder represents
and warrants to the Parent and the Merger Sub that the statements contained in
this Section 4.1 are correct and complete as of the date of this Agreement and
will be correct and complete as of the
JARL Merger Agreement/Page 6
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4.1).
(a) Qualification. Shareholder is an individual competent to own his
properties and assets and carry on his business and affairs as currently
conducted.
(b) Authority Relative to Agreement. Shareholder has the power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated on the part of Shareholder hereby. No
proceedings on the part of Shareholder are necessary to authorize the
execution and delivery of this Agreement by Shareholder or the consummation
by Shareholder of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Shareholder and is a valid and binding
agreement of Shareholder, enforceable against Shareholder in accordance
with its terms.
(c) Non-Contravention. The execution and delivery of this Agreement
by Shareholder do not, and the consummation by Shareholder of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation, or
acceleration of any obligation or to the loss of a material benefit under,
or result in the creation or imposition of any material lien, charge,
pledge, security interest or other encumbrance upon any of the property or
assets of Shareholder pursuant to any provision of, any mortgage, lien,
lease, agreement, license, instrument, law, ordinance, regulation, order,
arbitration award, judgment or decree to which Shareholder is a party or by
which any of his assets is bound and do not and will not violate or
conflict with any other restriction of any kind or character to which
Shareholder is subject or by which any of his assets may be bound.
(d) Approvals. No consent, authorization, order or approval of, or
filing or registration with, any governmental commission, board or other
regulatory body or any other person is required for or in connection with
the execution and delivery of this Agreement and the consummation by
Shareholder of the transactions contemplated hereby.
(e) Ownership of Company Common Stock. Shareholder is, and as of the
Closing Date will be, the lawful owner of all of the outstanding shares of
Company Common Stock free and clear of all liens, claims, encumbrances and
rights of others of any nature whatsoever, with full power to vote all such
shares on any matter that may properly come before shareholders of the
Company, and Shareholder may exercise such voting power on any matter,
including the Merger, without violation of the rights of any person. The
Company has no rights, warrants or options outstanding with respect to its
capital stock, and the Company has no obligation to issue voting or
nonvoting equity securities to any person as of the date hereof, at any
time on or prior to the Merger, or as a result thereof or in connection
therewith except as provided in this Agreement.
JARL Merger Agreement/Page 7
(f) Restricted Securities.
(1) The shares of Parent Common Stock which Shareholder will
acquire as a part of the Merger Consideration have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"),
and are being acquired for Shareholder's own account, for investment
and not with a view to the distribution thereof.
(2) Shareholder has the knowledge and experience in financial and
business matters to enable him to evaluate the merits and risks of
approving this Agreement and the transactions contemplated herein and
acquiring shares of Parent Common Stock.
(3) Shareholder is able to bear the economic risks of his
investment in the Parent Common Stock, including the risk of a
complete loss of the value of the Parent Common Stock.
(4) Shareholder has been represented by legal counsel in this
transaction and Shareholder and his representatives, including such
counsel, have been given the opportunity to ask questions of, and
receive answers from, the officers of the Parent concerning the terms
of the transactions contemplated hereby and the affairs and the
business and financial condition of the Parent.
(5) Shareholder and his representatives have been given such
access to all documents, books and additional information which they
have requested regarding the Parent.
(6) Shareholder has conducted such investigations by himself and
through his representatives in making a decision to approve this
Agreement and the transactions contemplated herein as he has deemed
necessary and advisable.
(7) Shareholder agrees that the Parent Common Stock issued to
Shareholder may not be disposed of except in accordance with the
requirements of the Securities Act, any applicable state securities
laws and other provisions of this Agreement, and only in a manner
which would not cause the transactions contemplated by this Agreement
to fail to qualify as a reorganization within the meaning of Section
368(a) of the Code.
4.2 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER AND THE COMPANY. The
Shareholder and the Company, jointly and severally, represent and warrant to the
Parent and the Merger Sub that the statements contained in this Section 4.2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
4.2), except as set forth in the disclosure schedule delivered by the
Shareholder and the Company to the Parent and the Merger Sub on the date hereof
and initialed by the parties hereto (the "Company
JARL Merger Agreement/Page 8
Disclosure Schedule"). Nothing in the Company Disclosure Schedule shall be
deemed adequate to disclose an exception to a representation or warranty made
herein, however, unless the Company Disclosure Schedule identifies the exception
with reasonable particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate to
disclose an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the mere existence of the document or
other item itself). The Company Disclosure Schedule will be arranged in sections
and paragraphs corresponding to the lettered and numbered sections and
paragraphs contained in this Section 4.2.
(a) Organization and Qualification, etc. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas, has the corporate power and authority and all
licenses, permits and authorizations necessary to own all of its properties
and assets and to carry on its business as it is now being conducted, and
is duly qualified to do business and is in good standing in each
jurisdiction as set forth in Schedule 4.2(a) of the Company Disclosure
Schedule where, to the reasonable belief of Shareholder and the Company,
such qualification is appropriate. The copies of the Company's Articles of
Incorporation and Bylaws, as amended to date, which have been delivered to
the Parent are complete and correct, and such instruments, as so amended,
are in full force and effect at the date hereof.
(b) Capital Stock. The entire authorized capital stock of the
Company consists of 100,000 shares of Company Common Stock of which as of
the date hereof 10,000 shares of Company Common Stock are validly issued
and outstanding, fully paid and nonassessable, all of which are held of
record by Shareholder, and no shares of Company Common Stock are in the
treasury of the Company. As of the date hereof, the Company has no
commitments to issue or sell any shares of its capital stock or any
securities or obligations convertible into or exchangeable for, or giving
any person any right to subscribe for or acquire from the Company, any
shares of its capital stock and no securities or obligations evidencing any
such rights are outstanding.
(c) Subsidiaries, etc. The Company does not own of record or
beneficially, directly or indirectly, (1) any shares of outstanding capital
stock or securities convertible into capital stock of any other corporation
or (2) any participating interest in any partnership, joint venture or
other non-corporate business enterprise.
(d) Authority Relative to Agreement. The Company has the corporate
power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated on the part of the Company hereby. The
execution and delivery by the Company of this Agreement and the
consummation by the Company of the transactions contemplated on its part
hereby have been duly authorized by its Board of Directors and the
Shareholder in his capacity as the sole shareholder of the capital stock of
the Company. No other corporate proceedings on the part of the Company are
necessary to authorize the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions contemplated
hereby. This Agreement has been duly executed
JARL Merger Agreement/Page 9
and delivered by the Company and, is a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms.
(e) Non-Contravention. The execution and delivery of this Agreement
by the Company do not and the consummation by the Company of the
transactions contemplated hereby will not (1) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government, government agency, or court
to which the Company or any of its assets is subject or (2) violate any
provision of the Articles of Incorporation or Bylaws of the Company, or (3)
violate or result in, with the giving of notice or the lapse of time or
both, the violation of any provision of, or result in the acceleration of
or entitle any party to accelerate (whether after the giving of notice or
lapse of time or both) any obligation under, or result in the creation or
imposition of any lien, charge, pledge, security interest or other
encumbrance upon any of the property of the Company pursuant to any
provision of any mortgage, lien, lease, contract, agreement, license, or
instrument to which the Company is a party or by which any of its assets is
bound. The execution and delivery of this Agreement by the Company do not
and will not violate or conflict with any other restriction of any kind or
character to which the Company is subject or by which any of its assets may
be bound, and the same does not and will not constitute an event permitting
termination of any such mortgage, lien, lease, agreement, license or
instrument to which the Company is a party or by which any of its assets is
bound, except as such enforcement is subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws relating
to or affecting creditors' rights.
(f) Approvals. No consent, authorization, order or approval of, or
filing or registration with, any governmental commission, board or other
regulatory body or any other person is required for the execution and
delivery of this Agreement or the consummation by the Company of the
transactions contemplated hereby, except for the filing of the Articles of
Merger with the Secretary of State of the State of Texas and except for
those approvals set forth in Schedule 4.2(f) of the Company Disclosure
Schedule.
(g) Financial Statements. Shareholder has previously furnished the
Parent with true and complete copies of the reviewed balance sheets of the
Company as of February 28, 1996 and the related reviewed statements of
income, retained earnings and cash flow for the year ended February 28,
1996 prepared by Xxxxx Xxxxxx And Associates, P.C., the independent
accountants of the Company. Such financial statements have been prepared
in accordance with the past practices of the Company and present fairly the
financial position and results of operations of the Company as of and for
the respective periods then ended. Shareholder has also previously
furnished the Parent with true and complete copies of certain financial
statements and information of the Company as of July 31, 1996, and a copy
of the balance sheet of the Company as of October 31, 1996 and the related
statement of income for the eight months then ended. Such financial
statements have been prepared in accordance with the past practices of the
Company and present fairly the financial position and results of operations
of the Company as of and for the time periods indicated. Collectively, the
financial statements described in this Section 4.2(g) are the "Company
Financial Statements."
JARL Merger Agreement/Page 10
(h) Absence of Certain Changes or Events. Since October 31, 1996,
the Company has not:
(1) incurred any obligation or liability (fixed or contingent),
except normal trade or business obligations incurred in the ordinary
course of business;
(2) discharged or satisfied any lien, security interest or
encumbrance or paid any obligation or liability (fixed or contingent),
other than in the ordinary course of business;
(3) mortgaged, pledged or subjected to any lien, security
interest or other encumbrance any of its assets or properties (other
than Permitted Exceptions);
(4) transferred, leased or otherwise disposed of any of its
assets or properties or acquired any assets or properties, except in
any case in the ordinary course of business;
(5) canceled or compromised any debt or claim, except in the
ordinary course of business;
(6) waived or released, under any contract, rights of the
Company having value to the Company, except in any case in the
ordinary course of business;
(7) transferred or granted any rights under any concessions,
leases, licenses, agreements, patents, inventions, trademarks, trade
names, service marks or copyrights or with respect to any know-how,
except in the ordinary course of business;
(8) made or granted any wage or salary increase applicable to
any group or classification of employees generally, entered into any
employment contract with any officer or employee or made any loan to,
or entered into any material transaction of any other nature with, any
officer or employee of the Company;
(9) entered into any transaction, contract or commitment, except
those listed, or which pursuant to the terms hereof are not required
to be listed, on the Company Disclosure Schedule to this Agreement,
this Agreement and the transactions contemplated hereby, and those
entered into in the ordinary course of business;
(10) declared, paid or made any provision for payment of any
dividends or other distribution in respect of shares of the Company's
Common Stock, or acquired or made any provision for acquiring any
shares of the Company's Common Stock;
(11) declared, paid or made provisions for any other payment to
Shareholder or any other affiliate of Shareholder or the Company,
except in the ordinary course of business;
JARL Merger Agreement/Page 11
(12) suffered any casualty loss or damage (whether or not such
loss or damage shall have been covered by insurance) which affects in
any material respect its ability to conduct its business; or
(13) suffered any material adverse change.
"Permitted Exceptions" shall mean (i) mechanic's, materialman's,
warehouseman's and carrier's liens and purchase money security interests
arising in the ordinary course of business, a true and correct list of
which is set forth on Schedule 4.2(h) of the Company Disclosure Schedule;
(ii) liens for taxes and assessments not yet payable; (iii) liens for
taxes, assessments and charges and other claims, the validity of which the
Company or Shareholder are contesting in good faith, a true and correct
list of which is set forth on Schedule 4.2(h); and (iv) imperfections of
title, liens, security interests, claims and other charges and encumbrances
the existence of which would not have in the aggregate a material adverse
effect.
(i) Undisclosed Liabilities. The Company has no liabilities (and
there is no basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against the
Company giving rise to any liability), except for (i) liabilities set forth
on the face of the Company Financial Statements (rather than in any notes
thereto) and (ii) liabilities which have arisen after October 31, 1996 in
the ordinary course of business (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract,
breach of warranty, tort, infringement, or violation of law).
(j) Permits and Legal Compliance. The Company has all permits,
licenses, orders, and approvals of all governmental authorities material to
the conduct of the Company's business, a true and correct list of which is
set forth in Schedule 4.2(j) of the Company Disclosure Schedule. All such
permits, licenses, orders and approvals are in full force and effect, and
no suspension or cancellation of any of them is pending or threatened.
None of such permits, licenses, orders or approvals, and no application for
any of such permits, licenses, orders or approvals, will be adversely
affected by the consummation of the transactions contemplated by this
Agreement. The Company has complied with all applicable laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has
been filed or commenced against the Company alleging any failure so to
comply.
(k) Title to Properties; Absence of Liens and Encumbrances, etc. The
Company has good and marketable title to all of the real, tangible personal
and mixed properties and assets owned by it and used in its business, free
and clear of any liens, charges, pledges, security interests or other
encumbrances (other than Permitted Exceptions), except as reflected in
the Company Financial Statements. The Company's intangible properties and
assets (other than any intangible properties and assets described in
Section 4.2(l) and Section 4.2(p), which sections contain the Company's and
Shareholder's representations and warranties with respect to such
intangible properties and assets) are free and clear of any liens, charges,
JARL Merger Agreement/Page 12
pledges, security interests or other encumbrances (other than Permitted
Exceptions), except as reflected in the Company Financial Statements.
(l) Software. Schedule 4.2(l) of the Company Disclosure Schedule
contains a list or description by type of all operating and applications
computer programs and data bases ("Software") which the Company uses or has
available for use and plans to use, and such Software constitutes all the
Software which is necessary to operate the business of the Company as
currently conducted. All such Software is owned outright by the Company
except as indicated on Schedule 4.2(l). As to any Software which Schedule
4.2(l) indicates is not owned by the Company, the Company has the right to
use the same pursuant to valid leases or licenses therefor. None of the
Software used by or available to the Company, and no use thereof, infringes
upon or violates any patent, copyright, trade secret or other proprietary
right of anyone else and no claim with respect to any such infringement or
violation is threatened.
(m) List of Properties, Contracts and Other Data. Schedule 4.2(m) of
the Company Disclosure Schedule contains a list setting forth with respect
to the Company as of the date hereof the following:
(1) all real properties owned in fee simple by the Company;
(2) all leases of real or personal property to which the Company
is a party, either as lessee or lessor with a brief description of the
property to which each such lease relates, except such leases of
personal property as require payment during their remaining life
aggregating less than $1,000 or are terminable by the Company within
three months without payment of a premium or penalty;
(3) (i) all patents, trademarks and trade names, trademark and
trade name registrations, servicemark registrations, copyrights and
copyright registrations, unexpired as of the date hereof, all
applications pending on such date for patents or for trademark, trade
name, service xxxx or copyright registrations, all other proprietary
rights owned or held by the Company and reasonably necessary to, or
used by the Company primarily in connection with, its business and
(ii) all licenses granted by or to the Company and all other
agreements to which the Company is a party which relate, in whole or
in part, to any items of the foregoing categories, other than any such
license or other agreement requiring payments during its remaining
life aggregating less than $1,000 or terminable by the Company within
three months without payment of a premium or penalty;
(4) all collective bargaining agreements, employment and
consulting agreements (other than consulting agreements terminable by
the Company within 60 days without payment of a premium or a penalty),
executive compensation plans, bonus plans, deferred compensation
agreements, employee pension plans or retirement plans, employee
profit sharing plans, employee stock purchase and stock
JARL Merger Agreement/Page 13
option plans, group life insurance, hospitalization insurance or other
plans or arrangements providing for benefits to employees of the
Company;
(5) all contracts and commitments (including, without
limitation, mortgages, indentures and loan agreements) to which the
Company is a party, or to which it or any of its assets or properties
are subject and which are not specifically referred to elsewhere in
this Section 4.2, provided that there need not be listed in the
Company Disclosure Schedule of this Agreement (unless required
pursuant to the preceding subsections of this Section 4.2(m)) any
contract or commitment incurred in the ordinary course of business
which requires payments to or by the Company during its remaining life
aggregating less than $1,000 or which is terminable by the Company
within three months without payment of a premium or penalty; and
(6) the current annual compensation of all employees of the
Company (by position or by department) as of a recent date.
True and complete copies of all documents and descriptions complete in
all material respects of all oral agreements or commitments (if any)
referred to in this Section 4.2(m) have been provided to the Parent or its
counsel. Neither the Company nor Shareholder has been notified in writing
of any claim that any contract listed in Schedule 4.2(m) of the Company
Disclosure Schedule is not valid and enforceable in accordance with its
terms for the periods stated therein, or that there is under any such
contract any existing material default or event of default or event which
with notice or lapse of time or both would constitute such a default.
(n) Litigation. Except as provided on Schedule 4.2(n) of the Company
Disclosure Schedule, there are no actions, suits or proceedings with
respect to the business of the Company pending against the Company at law
or in equity, or before or by any federal, state, municipal, foreign or
other governmental department, commission, board, bureau, agency or
instrumentality, nor are there any such actions, suits or proceedings with
respect to the Business of the Company threatened against the Company.
(o) Labor or Employee Controversies.
(1) There are no controversies between the Company and any
employees or any unresolved labor union grievances or unfair labor
practice or labor arbitration proceedings pending or threatened,
related to the Company and there are not any organizational efforts
presently being made or threatened in an organized fashion involving
any of the Company's employees.
(2) Neither Shareholder nor the Company has received notice of
any claim that he or it has not complied with any laws relating to the
employment of labor, including any provisions thereof relating to
wages, hours, collective bargaining, the payment of social security
and similar taxes, equal employment opportunity, employment
discrimination, harassment and employment safety, or that he or it is
JARL Merger Agreement/Page 14
liable for any arrears of wages or any taxes or penalties for failure
to comply with any of the foregoing.
(p) Patent, Trademark, etc. Claims. No person has made or threatened
to make any claims that the operation of the Company is in violation or
infringement of any patent, patent license, trade name, trademark, service
xxxx, brandmark, brand name, copyright, know-how or other proprietary or
trade rights of any third party; and neither Shareholder nor the Company
knows of any non-frivolous basis for any such claims.
(q) Use of Real Property. Neither Shareholder nor the Company has
received notice of violation of any applicable zoning or building
regulation, ordinance or other law, order, regulation or requirement
relating to the operations of the Company or any notice of default under
any material lease, contract, commitment, license or permit, relating to
the use and operation of the owned or leased real property listed in the
Company Disclosure Schedules and there is no such violation or default.
Neither Shareholder nor the Company has received notice that any plant,
facility or other building which is owned or covered by a lease set forth
in the Company Disclosure Schedule does not substantially conform in all
material respects with all applicable ordinances, codes, regulations and
requirements, and neither Shareholder nor the Company has received notice
that any law or regulation presently in effect or condition precludes or
restricts continuation of the present use of such properties. There are no
pending or, to the knowledge of Shareholder or the Company, threatened
condemnation proceedings, lawsuits or administrative actions relating to
the owned or leased real property listed in the Company Disclosure
Schedules, nor are there any other matters (including street or utility
construction projects) known to Shareholder or the Company that would
adversely affect access to such property or the current use, occupancy or
value thereof.
(r) Accounts Receivable. The accounts receivable reflected on the
balance sheet of the Company as of October 31, 1996, and all accounts
receivable arising between October 31, 1996 and the date hereof, arose from
bona fide transactions in the ordinary course of business; the services
involved have been provided to the account obligor and no further services
are required to be provided in order to complete the sales and to entitle
the Company or its assignees to collect the accounts receivable in full
without set-off or defense. No such account has been assigned or pledged
to any other person, firm or corporation.
(s) Insurance. Schedule 4.2(s) of the Company Disclosure Schedule
sets forth a complete and correct list of all insurance policies obtained
and maintained by the Company or Shareholder in connection with the
business of the Company, covering the Company's real property, motor
vehicles and employees, including general liability, property and workers'
compensation insurance. Such insurance policies are in full force and
effect, and all premiums due on such policies have been paid. The Company
and its businesses have been insured under such policies, or substantially
similar policies at all times during the five year period ending on the
date of this Agreement. The insureds under each such policy have complied
in all material respects with the provisions of all such policies. Schedule
4.2(s) lists and briefly describes any claims made by the Company or
Shareholder under such policies within the past
JARL Merger Agreement/Page 15
five years. The Company and Shareholder have made available to the Parent
complete and correct copies of all such policies, together with all riders
and amendments thereto.
(t) Employee Benefits.
(1) The Company has complied and currently is in compliance,
both as to form and operation, in all material respects with the
applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and the Internal Revenue Codes of 1954
and/or 1986, as amended, respectively (for purposes of this Section
4.2(t) only, the "Code"), with respect to each "employee benefit plan"
as defined under Section 3(3) of ERISA. Each employee benefit plan of
the Company ("Plan") is described in Schedule 4.2(t) of the Company
Disclosure Schedule, and a copy of each Plan is attached thereto.
(2) The Company has never maintained, adopted or established,
contributed or been required to contribute to, or otherwise
participated or been required to participate in, a "multiemployer
plan" (as defined in Section 3(37) of ERISA). No amount is due as
owing from the Company on account of a "multiemployer plan" (as
defined in Section 3(37) of ERISA) or on account of any withdrawal
therefrom.
(3) The Company has not incurred any liability with respect to a
Plan including, without limitation, under ERISA (including, without
limitation, Title I or Title IV of ERISA thereof other than liability
for premiums due to the Pension Benefit Guaranty Corporation
("PBGC")), the Code or other applicable law, which has not been
satisfied in full, and no event has occurred, and there exists no
condition or set of circumstances which could result in the imposition
of any liability with respect to a Plan, including, without
limitation, under ERISA (including, without limitation, Title I or
Title IV of ERISA), the Code or other applicable law with respect to
the Plan.
(4) The Company has no outstanding commitments to provide or to
cause to be provided any severance or other postemployment benefit,
salary continuation, termination, disability, death, retirement,
health or medical benefit or similar benefit to any person (including,
without limitation, any former or current employee) that has not been
reflected in the Company Financial Statements or is not included in
any Plan disclosed in Schedule 4.1(t) of the Company Disclosure
Schedule to this Agreement.
(u) Tax Matters.
(1) All federal, state, local and foreign tax returns required
to be filed by the Company prior to the date hereof have been filed on
a timely basis with the appropriate governmental authorities in all
jurisdictions in which such tax returns are required to be filed, and
all such returns are true and correct. All federal, state, local and
foreign income, franchise, sales, use, property, and all other taxes,
fees, assessments, or other governmental charges (including
withholding taxes), and all interest and penalties thereon (all of the
foregoing collectively, "Taxes") due from or
JARL Merger Agreement/Page 16
properly accruable by the Company have been fully and timely paid or,
in the cases of Taxes for which payment is not yet required, properly
and fully accrued for on the Company Financial Statements or in
Schedule 4.2(u) of the Company Disclosure Schedule with respect to all
taxable periods ending on or prior to the date hereof and interim
periods through the date hereof. The Company will not after the
Effective Time, owe, or be liable directly or indirectly, to any other
person or entity for Taxes imposed on the Company, except for accruals
fully reflected on the Company Financial Statements. The Company has
not waived any statute of limitations in respect of Taxes or agreed to
any extension of time with respect to a Tax assessment or deficiency.
The Company is not currently the subject of any audit, examination or
any similar investigation by any governmental authority. Schedule
4.2(u) of the Company Disclosure Schedule sets forth all audits
examinations or similar investigations of the Company by any
governmental authority since January 1, 1991.
(2) Neither Shareholder nor the Company is a party to any
agreement, contract or arrangement that would, by reason of the
consummation of any of the transactions contemplated by this
Agreement, individually or in the aggregate, result in the payment of
any "excess parachute payment" within the meaning of Section 280G of
the Code. None of the assets of the Company is required to be treated
as being owned by any other person pursuant to the "safe harbor"
leasing provisions of Section 168 of the Internal Revenue Code of
1954, as in effect prior to the repeal of said leasing provisions.
(v) Brokers. Other than Xxxx X. Xxxxxxx, all negotiations relative
to this Agreement and the transactions contemplated hereby have been
carried out by Shareholder and the Company directly with the Parent and the
Merger Sub, without the intervention of any other person on behalf of
Shareholder or the Company in such manner as to give rise to any valid
claim by any other person against Shareholder or the Company for a finder's
fee, brokerage commissions, or similar payment.
(w) Tax-Free Reorganization. With respect to the qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the
Code:
(1) There is no plan or intention on the part of Shareholder to
sell, exchange or otherwise dispose of a number of shares of Parent
Common Stock received in the Merger which would reduce Shareholder's
ownership of such Parent Common Stock to a number of shares having a
value, as of the Closing Date, of less than fifty percent of the value
of all of the formerly outstanding stock of the Company as of the same
date.
(2) Immediately following the Merger, the Surviving Corporation
will hold at least 90 percent of the fair market value of the
Company's net assets and at least 70% of the fair market value of the
Company's gross assets.
JARL Merger Agreement/Page 17
(3) The liabilities of the Company assumed by the Surviving
Corporation and the liabilities to which the assets of the Company are
subject were incurred in the Company's ordinary course of business.
(4) The Company and Shareholder will each pay their respective
expenses, if any, incurred in connection with the Merger, and neither
the Company nor Shareholder will pay any Parent or Merger Sub expenses
incurred in connection with the Merger.
(5) At the time of the Merger, the Company will not have any
outstanding warrants, options, convertible securities, or any other
right pursuant to which any person could acquire stock in the Company
that, if exercised or converted, would affect Parent's retention of
control of the Surviving Corporation.
(6) The Company is not an investment Company within the meaning
of Section 368(a)(2)(F) of the Code.
(7) On the Closing Date, the fair market value of the assets of
the Company will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which its assets are subject.
(8) The Company is not under the jurisdiction of a court in a
case under Title 11 of the United States Code, or a receivership,
foreclosure, or similar proceeding in a federal or state court.
4.3 REPRESENTATIONS AND WARRANTIES BY THE PARENT. The Parent represents
and warrants to the Shareholder and the Company that the statements contained in
this Section 4.3 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 4.3), except as set forth in the disclosure schedule
delivered by the Parent to the Shareholder and the Company on the date hereof
and initialed by the parties hereto (the "Parent Disclosure Schedule"). The
Parent Disclosure Schedule will be arranged in sections and paragraphs
corresponding to the lettered and numbered sections and paragraphs contained in
this Section 4.3.
(a) Organization and Qualification, etc. The Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas, has corporate power and authority to own all of its
properties and assets and to carry on its business as it is now being
conducted, and is duly qualified to do business and is in good standing in
each jurisdiction as set forth in Schedule 4.3(a) of the Parent Disclosure
Schedule where, to the reasonable belief of Shareholder and the Parent,
such qualification is appropriate. The copies of the Parent's Articles of
Incorporation and Bylaws, as amended to date, which have been delivered to
Shareholder are complete and correct, and such instruments, as so amended,
are in full force and effect at the date hereof.
JARL Merger Agreement/Page 18
(b) Capital Stock. The entire authorized capital stock of the Parent
consists of 100,000,000 shares of Parent Common Stock of which as of the
date hereof 3,028,000 shares of Parent Common Stock are validly issued and
outstanding, fully paid and nonassessable.
(c) Subsidiaries, etc. Other than the Merger Sub, the Parent does
not own of record or beneficially, directly or indirectly, (1) any shares
of outstanding capital stock or securities convertible into capital stock
of any other corporation or (2) any participating interest in any
partnership, joint venture or other non-corporate business enterprise.
(d) Authority Relative to Agreement. The Parent has the corporate
power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated on the part of the Parent hereby. The
execution and delivery by the Parent of this Agreement and the consummation
by the Parent of the transactions contemplated on its part hereby have been
duly authorized by its Board of Directors. No other corporate proceedings
on the part of the Parent are necessary to authorize the execution and
delivery of this Agreement by the Parent or the consummation by the Parent
of the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Parent and is enforceable against the Parent
in accordance with its terms.
(e) Non-Contravention. The execution and delivery of this Agreement
by the Parent do not and the consummation by the Parent of the transactions
contemplated hereby will not (1) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling change, or
other restriction of any government, government agency, or court to which
the Parent is subject to, or (2) violate any provision of the Articles of
Incorporation or Bylaws of the Parent, or (3) violate or result in, with
the giving of notice or the lapse of time or both, the violation of any
provision of, or result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or lapse of time or both)
any obligation under, or result in the creation or imposition of any lien,
charge, pledge, security interest or other encumbrance upon any of the
property of the Parent pursuant to any provision of any mortgage, lien,
lease, agreement, contract, license, or instrument to which the Parent is a
party or by which any of its assets is bound. The execution and delivery
of this Agreement by the Parent do not and will not violate or conflict
with any other restriction of any kind or character to which the Parent is
subject or by which any of its assets may be bound, and the same does not
and will not constitute an event permitting termination of any such
mortgage, lien, lease, agreement, license or instrument to which the Parent
is a party or by which any of its assets is bound, except as such
enforcement is subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting
creditors' rights.
(f) Approvals. Except as set forth in Schedule 4.3(f) of the Parent
Disclosure Schedule, no consent, authorization, order or approval of, or
filing or registration with, any governmental commission, board or other
regulatory body or any other person is required for the execution and
delivery of this Agreement and the consummation by the Parent of the
transactions contemplated hereby, except for the filing of the Articles of
Merger with the Secretary of State of the State of Texas.
JARL Merger Agreement/Page 19
(g) Litigation. There are no actions, claims, proceedings or
governmental investigations pending against the Parent or any of its assets
or properties at law or in equity, before or by any federal, state, or
municipal court, agency or other governmental entity, or by any other
person, which, individually or in the aggregate, could reasonably be
expected (1) to have a material adverse effect on the financial condition
or results of operations of the Parent or (2) to prevent the consummation
of the transactions contemplated hereby.
(h) Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Parent
directly with Shareholder and the Company, without the intervention of any
person on behalf of the Parent in such manner as to give rise to any valid
claim by any person against the Parent for a finder's fee, brokerage
commission, or similar payment.
(i) Tax-Free Reorganization. With respect to the qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the
Code:
(1) The Parent has no plan or intention to sell, exchange or
otherwise dispose or liquidate the Surviving Corporation, to merge the
Surviving Corporation with or into any other corporation, to sell or
otherwise dispose of its Surviving Corporation Common Stock except for
transfers of Surviving Corporation Common Stock to corporations of
which the Parent has control (within the meaning of Section 368(a) of
the Code) at the time of such transfer, or to cause the Surviving
Corporation to sell or otherwise dispose of any of its assets or of
any assets acquired in the Merger, except for dispositions made in the
ordinary course of business or transfers of assets to a corporation of
which the Surviving Corporation has control (within the meaning of
Section 368(a) of the Code) at the time of such transfer.
(2) The Parent has no plan or intention to cause the Surviving
Corporation, after the Merger, to issue additional shares of its stock
that would result in the Parent losing control of the Surviving
Corporation within the meaning of Section 368(c) of the Code.
(3) Following the Merger, the Surviving Corporation will
continue the Company's historic business or use a significant portion
of his historic business assets in a business.
(4) If the Merger is effected, the Parent and the Merger Sub
will each pay their respective expenses, if any, incurred in
connection with the Merger.
(5) The Parent Common Stock that will be exchanged in the Merger
is voting stock within the meaning of Section 368(c) of the Code.
(6) At the time of the Merger, neither the Parent nor Merger Sub
will have any outstanding warrants, options, convertible securities,
or any other right pursuant to which any person could acquire stock in
the Parent or Merger Sub which, if
JARL Merger Agreement/Page 20
exercised or converted, would affect Parent's acquisition or retention
of control of the Surviving Corporation.
(7) The Parent and the Merger Sub are not investment companies
as defined in Section 368(a)(2)(F) of the Code.
(8) None of the Parent Common Stock received by Shareholder as a
part of the Merger Consideration will be separate consideration for,
or allocable to, any employment agreement.
(9) Neither the Parent nor the Merger Sub is under the
jurisdiction of a court in a case under Title 11 of the United States
Code, or a receivership, foreclosure, or similar proceeding in a
federal or state court.
4.4 REPRESENTATIONS AND WARRANTIES CONCERNING THE MERGER SUB. The Parent
and the Merger Sub, jointly and severally, represent and warrant to, and agree
with, Shareholder and the Company as follows:
(a) Organization and Standing. The Merger Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Texas.
(b) Capital Structure. The authorized capital stock of the Merger
Sub consists of 5,000 shares of common stock, par value $.01 per share,
1,000 of which are validly issued and outstanding, fully paid and
nonassessable and are owned by the Parent free and clear of all liens,
claims and encumbrances.
(c) Authority. The Merger Sub has the requisite power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the
performance by the Merger Sub of its obligations hereunder and the
consummation of the transactions contemplated hereby have been duly
authorized by its Board of Directors and the Parent as its sole
shareholder, and, except for the corporate filings required by state law,
no other corporate proceedings on the part of the Merger Sub are necessary
to authorize this Agreement and the transaction contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Merger
Sub and (assuming the due authorization, execution and delivery hereof by
the Company) constitutes a valid and binding obligation of the Merger Sub
enforceable against the Merger Sub in accordance with its terms.
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 CONDUCT OF BUSINESS. During the period from the date hereof to the
Closing Date, except as otherwise contemplated by this Agreement, Shareholder
shall cause the Company to, and the Company shall, conduct its operations
according to its ordinary and usual course of business,
JARL Merger Agreement/Page 21
subject to the foregoing, to preserve substantially intact its business
organization, keep available the services of its officers and employees, and
maintain its present relationships with licensors, suppliers, distributors,
customers and others having significant business relationships with it.
Representatives of the Company will confer with representatives of the Parent to
keep it informed with respect to the general status of the on-going operations
of the Business of the Company. Without limiting the generality of the
foregoing, Shareholder will cause the Company to:
(a) carry on the business in substantially the same manner as
heretofore carried on and not introduce any material new method of
management, operation or accounting, nor provide discounted services;
(b) maintain its properties, facilities, equipment and other assets,
including those held under leases, in good working order, condition and
repair, ordinary wear and tear excepted;
(c) perform all of its material obligations under all debt and lease
instruments and other agreements relating to or affecting its business,
assets, properties, equipment and rights, and pay all vendors and suppliers
as and when their bills are due;
(d) maintain its present debt and lease instruments (unless same are
otherwise mature) and refrain from entering into new or amended debt or
lease instruments without prior written notification to the Parent;
(e) keep in full force and effect its present insurance policies or
other comparable insurance coverage;
(f) use its best efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its
relationship with suppliers, customers and other having business relations
with the Company;
(g) refrain from effecting any change in the capital structure of the
Company; refrain from incurring any expenditures outside the normal course
of business, including any capital expenditures in excess of $5,000,
without prior written notification to the Parent;
(h) refrain from starting or acquiring any new businesses without the
prior written consent of the Parent;
(i) maintain its present salaries and commission levels for all
officers, directors, employees or agents;
(j) refrain from declaring or paying any bonuses, fees, extraordinary
commissions or any other unusual distributions to Shareholder, directors,
management, sales agents, employees or other personnel without prior
written notification to the Parent.
5.2 ACCESS TO INFORMATION BY THE PARENT. The Parent may prior to the
Closing have access to the business and properties of the Company and
information concerning its financial and
JARL Merger Agreement/Page 22
legal condition as the Parent deems necessary or advisable in connection with
the consummation of the transactions contemplated hereby, provided that such
access shall not interfere with normal operations of the Company. Shareholder
and the Company agree to permit the Parent and its authorized representatives,
or cause them to be permitted to have, after the date hereof and until the
Closing Date, full access to the premises, books and records of the Company
during normal business hours, and the officers of the Company will furnish the
Parent with such financial and operating data and other information with respect
to the Business and properties of the Company as the Parent shall from time to
time reasonably request. No investigation by the Parent heretofore or hereafter
made shall affect the representations and warranties of Shareholder and the
Company, and each such representation and warranty shall survive any such
investigation.
5.3 AMENDMENT TO SCHEDULES. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until Closing to supplement or
amend promptly the Disclosure Schedules with respect to any matter that would
have been or would be required to be set forth or described in the Disclosure
Schedules in order to not materially breach any representation, warranty or
covenant of such party contained herein; provided that no amendment or
supplement to a Disclosure Schedule that constitutes or reflects, individually
or in the aggregate, a material adverse change to the Company's business or
assets may be made unless the Parent is informed of the material nature of such
change in writing and consents to such amendment or supplement, and no amendment
or supplement to a Disclosure Schedule that constitutes or reflects a material
adverse change to the Parent's assets or business may be made unless the Company
and Shareholder are informed of the material nature of such change in writing
and consent to such amendment or supplement. For all purposes of this
Agreement, including without limitation for purposes of determining whether the
conditions set forth in Section 6.1 and Section 6.2 have been fulfilled, the
Disclosure Schedules hereto shall be deemed to be the Disclosure Schedules as
amended or supplemented pursuant to this Section 5.3. In the event that the
Company or Shareholder seeks to amend or supplement a Disclosure Schedule
pursuant to this Section 5.3 and the Parent does not consent to such amendment
or supplement, or the Parent seeks to amend or supplement a Disclosure Schedule
pursuant to this Section 5.3 and Company or Shareholder does not consent, this
Agreement shall be deemed terminated by mutual written consent as set forth in
Section 10.1 hereof.
5.4 NONCOMPETITION.
(a) During the period commencing on the Closing Date and ending on the
fifth anniversary of the Closing Date, Shareholder agrees that, within a
00-xxxx xxxxxx xx Xxxxxxx, Xxxxx, he shall not, without the prior consent
of the Parent directly or indirectly own, manage, operate, join, control,
finance, participate or otherwise engage in the ownership, management,
operation, control or financing of, or be connected as an officer,
director, employee, principal, agent, representative, consultant, investor,
owner, partner, shareholder (except as a holder of less than 1% of the
issued and outstanding voting stock of a corporation listed on a national
exchange or qualified to be traded on the NASDAQ National Market System),
member, manager joint venturer or otherwise permit his name to be used by
or in connection with, or lease, sell, or permit to use any real property
or interest therein owned by him, any business that the Parent (or any its
affiliates) conducts as of the Effective
JARL Merger Agreement/Page 23
Time including, without limitation, any aspect of the plumbing and sewer
cleaning, heating, ventilation and air conditioning, electrical, or indoor
air quality products or service businesses, other than as an employee of
the Parent or a subsidiary of the Parent within the United States.
(b) Shareholder agrees that the limitations set forth in this Section
(including, without limitation, any time or territorial limitations) are
reasonable and properly required for the adequate protection of the
business of the Surviving Corporation and the Parent. In the event that
any such territorial or time limitation is deemed to be unreasonable by a
court of competent jurisdiction, Shareholder agrees to the reduction of the
territorial or time limitation to the area or period which such court shall
have deemed reasonable.
5.5 CONFIDENTIALITY. Until the closing of the transactions contemplated
herein, all Confidential Information, as hereinafter defined, acquired by the
Parent with respect to the Company, shall be (a) maintained in strict
confidence, (b) used only for the purpose of and in connection with evaluating
or financing the transactions contemplated herein, and (c) disclosed only to
employees and duly authorized agents and representatives of the Parent who have
been informed of the obligations of the Parent under this Section or any other
agreement with respect to such Confidential Information, have a need to know the
information in connection with consummating the transactions contemplated
herein, agree to keep such information confidential, and agree to be bound by
the terms hereof to the same extent as if they were parties hereto. The Parent
shall be responsible for any breach of this Section by any of its
representatives and agrees to take all reasonable measures to restrain its
representatives from prohibited or unauthorized disclosure of the Confidential
Information. For the purpose of this Agreement, the term "Confidential
Information" shall mean all information acquired by the Parent from the Company
or its representatives pursuant to Section 5.2 hereof or otherwise with respect
to its operations or Business, other than information generally available to the
public other than as a result of disclosure by the Parent or its representatives
in violation of this Section and information which becomes available to the
Parent on a nonconfidential basis from a source other than the Company or its
representatives, provided that such source is not known by the Parent to be
bound by a confidentiality agreement, or other obligation of secrecy to the
Company or another party. If the transactions contemplated herein are not
consummated, all Confidential Information in written or printed or other
tangible form (whether copies or originals) shall be returned to the Company,
and all documents, memoranda, notes and other writings whatsoever prepared by
the Parent or its representatives based on the Confidential Information shall
continue to be held in strict confidence hereunder.
5.6 EXCLUSIVITY. After the signing of this Agreement until May 31, 1997,
Shareholder shall not (i) solicit, initiate, or encourage the submission of any
proposal or offer from any person or entity relating to the acquisition of any
capital stock or other voting securities, or any substantial portion of the
assets of the Company (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any negotiations or
discussions regarding, furnishing any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
person or entity in favor of such acquisition structured as a merger,
consolidation, or share exchange. Shareholder will (and shall cause the Company
to) promptly notify the Parent if any person or entity makes any proposal,
offer, inquiry, or contact with respect to any of the foregoing.
JARL Merger Agreement/Page 24
5.7 RELEASE OF SHAREHOLDER GUARANTEES. Within 90 days after the Closing
Date, the Parent will use its best efforts to obtain the release of Shareholder
from any and all personal guarantees previously given by Shareholder to secure
the Company's long-term debt obligations. In the event that the Parent is
unable to obtain such releases from the Company's lenders, the Parent shall
cause the Surviving Corporation to pay off or otherwise retire all of the
Company's indebtedness secured by the personal guarantee of the Shareholder, up
to a maximum of $39,000. To the extent that the pay off amounts necessary to
cause the release of Shareholder's guarantees exceed $39,000, Shareholder agrees
that such excess amounts shall be an adjustment to the Cash Consideration as
provided in Section 3.1 above.
5.8 TAX-FREE REORGANIZATION. During the period from the date of this
Agreement to the Effective Time, unless the other parties shall otherwise agree
in writing, none of the Shareholder, the Parent, the Merger Sub or the Company
shall knowingly take or fail to take any action, which action or failure to act
would jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARENT AND THE MERGER
SUB. The obligations of the Parent and the Merger Sub to effect the Merger
under this Agreement are subject to the satisfaction in all material respects of
each of the following conditions, unless waived by the Parent and the Merger Sub
in writing:
(a) Accuracy of Representations and Warranties. Except for such
changes as are permitted pursuant to Section 5.3 of this Agreement, the
representations and warranties of Shareholder and the Company contained in
this Agreement, in the Company Disclosure Schedule of this Agreement or in
any closing certificate or document delivered to the Parent pursuant hereto
shall be true and correct at and as of the Closing Date as though made at
and as of that time other than such representations and warranties as are
specifically made as of another date, and Shareholder and the Company shall
each have delivered to the Parent and the Merger Sub a certificate to that
effect.
(b) Performance of Covenants. Shareholder and the Company shall have
performed and complied with all covenants of this Agreement to be performed
or complied with by them at or prior to the Closing Date (except where the
failure to so perform or comply would not have an adverse effect on the
Parent or the Merger Sub or prevent either of them from consummating the
transactions contemplated hereby), and Shareholder and the Company shall
each have delivered to the Parent and the Merger Sub a certificate to that
effect.
(c) Legal Actions or Proceedings. No legal action or proceeding
shall have been instituted after the date hereof against the Company, or
against the Parent arising by reason of the acquisition of the Company
pursuant to this Agreement, which is reasonably likely (1)
JARL Merger Agreement/Page 25
to restrain, prohibit or invalidate the consummation of the transactions
contemplated by this Agreement, (2) to have a material adverse effect on
the Company or (3) to have a material adverse effect on the results of
operations or financial condition of the Parent and its subsidiaries, taken
as a whole, after giving effect to the consummation of the transactions
contemplated by this Agreement; and Shareholder and the Company shall each
have delivered to the Parent and the Merger Sub a certificate to that
effect.
(d) Approvals. The Company and Shareholder shall have procured all
of the consents, approvals and waivers specified in Section 4.2(f), and
Shareholder and the Company shall each have delivered to the Parent and the
Merger Sub a certificate to that effect.
(e) Shareholders Agreement. Shareholder shall execute and deliver a
counterpart of that certain Shareholders Agreement dated as of October 24,
1996 among the Parent and its shareholders (the "Shareholders Agreement").
(f) Employment Agreement. Shareholder shall execute and deliver an
employment agreement with the Surviving Corporation in substantially the
form set forth in Exhibit B attached hereto (the "Employment Agreement").
(g) Lease Agreement. Shareholder and the Company shall execute and
deliver a lease in substantially the form set forth in Exhibit C attached
hereto (the "Lease Agreement").
(h) Registration Rights Agreement. Shareholder and the Company
shall execute and deliver a Registration Rights Agreement in substantially
the form set forth in Exhibit D attached hereto or in such other form as
the parties may mutually agree (the "Registration Rights Agreement").
(l) Tax Indemnification Agreement. Shareholder and the Parent shall
execute and deliver a Tax Identification Agreement in substantially the
form set forth in Exhibit E attached hereto (the "Tax Indemnification
Agreement").
(j) Elimination of Certain Expenses. Shareholder shall produce
evidence to the satisfaction of the Parent that the expenses of the Company
as described on Exhibit E attached hereto have been or will be eliminated
as expenses of the Company at the Effective Time.
(k) Lender Approval. Parent shall have obtained the consent or
approval of Texas Commerce Bank, N.A., the primary lending institution of
the Parent with respect to the transactions contemplated by this Agreement.
(l) Opinion of Counsel for the Company and Shareholder. The Parent
shall have received the favorable opinion of Xxxxx & Small dated the
Effective Time, substantially in the form and to the effect set forth in
Exhibit G hereto.
JARL Merger Agreement/Page 26
(m) Resignations of Directors and Officers. The Parent shall have
received the resignations of all the directors and officers of the Company.
(n) All Proceedings to be Satisfactory. All actions to be taken by
Shareholder and the Company in connection with the consummation of the
transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby shall be satisfactory in form and substance to the
Parent and the Merger Sub and their counsel.
6.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SHAREHOLDER AND THE
COMPANY. The obligations of Shareholder and the Company under this Agreement
are subject to the satisfaction in all material respects or waiver by
Shareholder prior to or on the Closing Date of each of the following conditions:
(a) Accuracy of Representations and Warranties. Except for such
changes as are permitted pursuant to Section 5.3 of this Agreement, the
representations and warranties of the Parent and Merger Sub contained in
this Agreement or in any closing certificate or document delivered to
Shareholder or the Company pursuant hereto shall be true and correct on and
as of the Closing Date as though made at and as of that date other than
such representations and warranties as are specifically made as of another
date, and the Parent and Merger Sub shall have delivered to Shareholder and
the Company a certificate to that effect.
(b) Performance of Covenants. The Parent and Merger Sub shall have
performed and complied with all covenants of this Agreement to be performed
or complied with by them at the Closing Date (except where the failure to
so perform or comply would not have a material adverse effect on
Shareholder and the Company or prevent it from consummating the
transactions contemplated hereby), and the Parent and Merger Sub shall have
delivered to Shareholder and the Company a certificate to such effect.
(c) Approvals. The Parent shall have procured all of the consents,
approvals and waivers specified in Section 4.3(f), and Parent shall deliver
to Shareholder and the Company a certificate to that effect.
(d) Release from Guarantee. The Parent shall have taken affirmative
steps to cause the release of Shareholder from any and all personal
guarantees of the Company's indebtedness within 90 days after the Closing
Date in accordance with Section 5.7 above.
(e) Lease Agreement. Shareholder and the Surviving Corporation
shall have executed and delivered the Lease Agreement in substantially the
form set forth in Exhibit C attached hereto.
(f) Registration Rights Agreement. Shareholder and the Parent shall
have executed and delivered the Registration Rights Agreement in
substantially the form set forth in Exhibit D attached hereto or such other
form as the parties mutually agree.
JARL Merger Agreement/Page 27
(g) All Proceedings to be Satisfactory. Shareholder and their
counsel shall have received all such counterpart originals or certified or
other copies of all documents relating to the Parent incident to the
transactions contemplated hereby as Shareholder or said counsel may
reasonably request and such documents shall be reasonably satisfactory in
form and substance to Shareholder and such counsel.
(h) Opinion of Counsel for The Parent. Shareholder and the Company
shall have received the favorable opinion of Chamberlain, Hrdlicka, White,
Xxxxxxxx & Xxxxxx, counsel for the Parent, dated the Closing Date,
substantially in the form and to the effect set forth in Exhibit H hereto.
(i) Legal Actions or Proceedings. No legal action or proceeding
shall have been instituted that is reasonably likely to restrain, prohibit,
violate or otherwise affect the consummation of the transactions
contemplated hereby.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of the parties contained in this Agreement
(except for Section 4.2(u)) shall survive the Closing Date, regardless of any
investigation made by or on behalf of any party, and shall expire and terminate
on the last day of the 24th month after the Effective Time. The representations
and warranties contained in Section 4.2(u) hereof shall not terminate until the
expiration of the applicable statute of limitations (including any extension
thereof) for any claim by a taxing authority for any taxes, penalties or
interest.
7.2 INDEMNIFICATION BY SHAREHOLDER. Shareholder hereby agrees to
indemnify and hold harmless Surviving Corporation and the Parent in respect of
any losses, claims, damages, liabilities or related expenses (including, but not
limited to, all litigation costs, as defined hereafter) which the Surviving
Corporation or the Parent incurs in excess of $5,000 in the aggregate as a
result of (i) the breach of any of the representations, warranties and covenants
made by Shareholder in or pursuant to this Agreement or (ii) any actual
violation or non-compliance with, or remedial obligation arising under, any
environmental laws arising from any event, condition, circumstance, activity,
practice, incident, action or plan relating in any way to that certain real
property located in Pearland, Texas that is referenced on the Company Financial
Statements; provided, however, that in no event shall the aggregate amount of
indemnification hereunder, including amounts paid for attorneys fees and related
expenses, exceed $300,000. The indemnification obligations of Shareholder under
this Section 7.2 shall survive the Closing and will terminate at the time
specified in Section 7.1, except with respect to any indemnity claim or claims
pending on the date of such termination.
7.3 INDEMNIFICATION BY THE SURVIVING CORPORATION AND THE PARENT. The
Parent agrees to indemnify and hold harmless Shareholder in respect of any
losses, claims, damages, liabilities or related expenses (including, but not
limited to, all litigation costs, as defined hereafter) which the Shareholder
incurs in excess of $5,000 in the aggregate as a result of the breach of any of
the
JARL Merger Agreement/Page 28
representations, warranties and covenants made by the Parent in or pursuant
to this Agreement; provided, however, that in no event shall the aggregate
amount of indemnification hereunder, including amounts paid for attorneys fees
and related expenses, exceed $300,000. The indemnification obligations of the
Parent under this Section 7.3 shall survive the Closing and will terminate at
the time specified in Section 7.1, except with respect to any indemnity claim or
claims pending on the date of such termination.
7.4 NOTICE. Promptly after any party hereto (the "Indemnified Party") has
received notice or has knowledge of the occurrence of any event which the
Indemnified Party asserts is an indemnifiable event or after the commencement of
any action, claim or proceeding commenced against the Indemnified Party by a
third party that might result in any claim for indemnity pursuant to this
Agreement (a "Third Party Claim"), the Indemnified Party shall notify the party
obligated to provide indemnification hereunder (the "Indemnifying Party")
written notice of such claim or the commencement of such action or proceeding.
Promptly after receipt by an Indemnifying Party of any such notice, the
Indemnifying Party shall, within ten business days of receipt of such notice,
either: (i) acknowledge the debt, liability or obligation for which indemnity is
sought as a valid claim and forthwith pay the Indemnified Party an amount
sufficient to discharge such debt, liability or obligation; (ii) in the event of
a Third Party Claim which is not acknowledged by the Indemnifying Party to be
owing, notify the Indemnified Party of the defense thereto and thereupon
promptly assume and diligently contest such Third Party Claim with counsel
satisfactory to the Indemnified Party; or (iii) with respect to a claim other
than a Third Party Claim, in the event of a claim by the Indemnified Party for
indemnity hereunder which is challenged by the Indemnifying Party, notify the
Indemnified Party of such challenge. Failure to respond within the appropriate
time period following the receipt of a notice hereunder shall be deemed
acknowledgment of the right to be indemnified and give rise to the immediate
right in the Indemnified Party to payment in full of the amount claimed.
ARTICLE 8
STOCK TRANSFER RESTRICTIONS
8.1 COMPLIANCE WITH SECURITIES LAWS. Shareholder acknowledges and agrees
with the Parent that the shares of the Parent Stock issued pursuant to the
Merger and this Agreement (the "Restricted Shares") to Shareholder shall not be
transferable except upon the conditions specified in this Article 8, which
conditions are intended, among other things, to ensure compliance with the
provisions of the Securities Act and any applicable state securities laws in
respect of the transfer of such Restricted Shares. Shareholder acknowledges and
agrees that the certificates representing the Restricted Shares will contain a
restrictive legend to the effect that transfer of such shares is prohibited
unless the shares are registered under the Securities Act and applicable state
securities laws, or in the event that such transfer is, in the opinion of
counsel to the Parent, exempt from the registration provisions of the Securities
Act and applicable state securities laws.
8.2 RESTRICTIONS ON TRANSFER. Prior to any transfer or attempted transfer
of Restricted Shares other than the sale of such shares pursuant to registration
under the Securities Act, Shareholder agrees to give written notice to the
Parent of his intention to effect such transfer. The notice shall describe the
manner and circumstances of the proposed transfer in detail and shall contain
JARL Merger Agreement/Page 29
an undertaking to furnish such other information as may be required to enable
the Parent's counsel to render the opinions referred to below, and shall give
the identity and address of the Shareholder's counsel. The Parent shall submit a
copy of the notice to its counsel, and the following provisions shall apply:
(a) If, in the opinion of the Parent's counsel, the proposed transfer
may be effected without registration of the Restricted Shares under the
Securities Act, the Parent shall, as promptly as practicable, so notify
Shareholder who will then be entitled to transfer the Parent Stock in accordance
with the terms of the notice delivered by Shareholder to the Parent.
(b) If, in the opinion of the Parent's counsel, the proposed transfer
of the Parent Stock may not be effected without registration under the
Securities Act, the Parent shall, as promptly as practicable, so notify
Shareholder, and Shareholder shall not be allowed to effect the proposed
transfer except pursuant to an offering registered under the Securities Act.
(c) Shareholder understands and agrees that the Parent is not
obligated to furnish a registration statement under the Act or any state
securities laws covering the Restricted Shares nor is the Parent under any
obligation to aid Shareholder in obtaining any exemption from any such
registration requirements. Shareholder also acknowledges that he shall be
responsible for compliance with all conditions of transfer of the Restricted
Shares imposed by any administrator of any state and for any expenses incurred
by the Parent for legal or accounting services in connection with reviewing such
proposed transfer and issuing opinions in connection therewith.
(d) Shareholder understands and agrees that transfer of the Restricted
Shares may be effected only on the books of the Parent, and that stop transfer
instructions will be issued to the transfer agent of the Parent Common Stock in
accordance with the legend on any certificate representing the Restricted
Shares. The transfer agent will not remove the legend from any certificate
representing the Restricted Shares without either registration of the Restricted
Shares under the Securities Act and applicable state securities laws or an
opinion of the Parent's counsel stating that the transfer of the Restricted
Shares is exempt from such registration requirements and authorizing removal of
the stop transfer instructions.
8.3 OTHER AGREEMENTS. Shareholder acknowledges that certain provisions of
the Shareholders Agreement and the Registration Rights Agreement will contain
additional restriction on Shareholder's rights to transfer the Restricted
shares, and Shareholder understands and agrees that the provisions of this
Article 8 shall apply in addition to, and not as a limitation of, the provisions
of the Shareholders Agreement and the Registration Rights Agreement.
8.4 TAX-FREE REQUIREMENTS. Notwithstanding anything in this Agreement to
the contrary, Shareholder will not effect any disposition of the Parent Common
Stock acquired by him pursuant to this Agreement which disposition would
jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
JARL Merger Agreement/Page 30
ARTICLE 9
FURTHER ASSURANCES
9.1 FURTHER ASSURANCES. At any time and from time to time on and after
the Closing Date (a) at the request of the Parent, Shareholder shall deliver to
the Parent any records, documents and data possessed by Shareholder and not
previously delivered to the Parent to which the Parent is entitled and execute
and deliver or cause to be executed and delivered all such deeds, assignments,
consents, documents and further instruments of transfer and conveyance, and take
or cause to be taken all such other actions, as the Parent may reasonably deem
necessary or desirable in order to fully and effectively vest in the Parent, or
to confirm its title to and possession of, the Shares or to assist the Parent in
exercising rights with respect thereto which the Parent is entitled to exercise
pursuant to the terms of this Agreement; and (b) the Parent shall execute and
deliver or cause to be executed and delivered such further instruments and take
or cause to be taken such further actions as Shareholder may reasonably deem
necessary or desirable to carry out the terms and provisions of this Agreement.
9.2 BOOKS AND RECORDS.
(a) The Parent agrees that it shall preserve and keep all books and
records relating to the Company in the Parent's possession until six months
following the expiration of the statute of limitations (including
extensions thereof) applicable to the Tax Returns filed by or with respect
to the Company for taxable periods ending prior to or on the Closing Date
to which such books or records are relevant. Duly authorized
representatives of Shareholder shall, upon reasonable notice, have access
to such books and records during normal business hours to examine, inspect
and copy such books and records.
(b) In any instance in which either a Shareholder or the Parent, as
the case may be, is required to prepare or file (or cause to be filed) Tax
Returns which cover a period that includes the Closing Date or to respond
to an audit by the Internal Revenue Service or other governmental agency
with respect to a period prior to the Closing Date, each Shareholder or the
Parent, as the case may be, will furnish all information and records
reasonably available to it and reasonably requested of him, her or it and
necessary or appropriate for use in preparing such returns or responding to
such audit.
ARTICLE 10
MISCELLANEOUS
10.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual written consent of Shareholder and the Parent;
(b) by either Shareholder or Parent, if the Closing shall not have
occurred by the 60th calendar day after the date hereof through no fault of
the terminating party; provided,
JARL Merger Agreement/Page 31
however, that the right to terminate this Agreement under this
Section 10.1(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement shall have been the cause of,
or shall have resulted in, the failure of the Closing to occur prior to
such date.
10.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 10.1, this Agreement shall forthwith become void and
there shall be no liability on the part of any party hereto, except that (a)
Section 10.3, Section 10.8, Section 10.9, Section 10.10 and Section 10.13 hereof
shall survive such termination and (b) nothing herein shall relieve any party
from liability for any willful breach of any other provision hereof.
10.3 EXPENSES, ETC. Each of the parties will bear their own legal costs
and other expenses incurred in negotiating and preparing this Agreement, the
Schedules, Exhibits or related agreements, or in consummating the transactions
contemplated in this Agreement. The Company will pay any costs associated with
business brokers or advisors engaged by Shareholder. If the Parent's financial
due diligence reveals a material adverse change in the financial condition of
the Company and, as a consequence thereof, the transactions contemplated by this
Agreement are not consummated, the Company will pay the cost of any outside
accountants deemed by the Parent to be necessary to consummate such
transactions. Otherwise, the Parent will pay all such outside accounting or
auditing costs incident to the termination contemplated by this Agreement. Each
of Shareholder, the Company and the Parent will indemnify the other parties, and
hold them harmless from and against any claims for finders' fees or brokerage
commissions in relation to or in connection with such transactions as a result
of any agreement or understanding between such indemnifying party and any third
party.
10.4 EXECUTION IN COUNTERPARTS. For the convenience of the parties, this
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
10.5 NOTICES. All notices which are required or may be given pursuant to
the terms of this Agreement shall be in writing and shall be sufficient in all
respects if given in writing and delivered or mailed by registered or certified
mail postage prepaid, or sent by telex, telecopier, facsimile transmission or
telegraph as follows:
If to the Shareholder, to:
Xxxxx Xxxxxxxx
0000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Facsimile No. (000) 000-0000
JARL Merger Agreement/Page 32
If to the Company, to:
XX XXXX, Inc.
0000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: President
Facsimile No. (000) 000-0000
If to the Parent to:
Group Maintenance America Corp.
0000 Xxxx Xxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Secretary
Facsimile No. (000) 000-0000
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto. Any notice or other
communication pursuant to this Agreement shall be deemed to have been duly given
or made and to have become effective when delivered in hand to the party to
which directed or if sent by first-class mail postage prepaid or by telex,
telecopier, facsimile transmission or telegraph and properly addressed as set
forth above at the earlier of (a) the time when received by the addressee or (b)
the third business day following the dispatch thereof.
10.6 WAIVERS. Any party hereto (as to itself, but not as to other parties
without their consent) may, by written notice to the other parties hereto, (a)
extend the time for the performance of any of the obligations or other actions
of the other parties under this Agreement; (b) waive any inaccuracies in the
representations or warranties of another party contained in this Agreement or in
any document delivered pursuant to this Agreement; (c) waive compliance with any
of the conditions or covenants of another party contained in this Agreement; or
(d) waive performance of any of the obligations of another party under this
Agreement. Except as otherwise provided in the preceding sentence or Section
5.2 hereof, no action taken pursuant to this Agreement, including without
limitation any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representation, warranty, covenant or agreement contained in this Agreement. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed a waiver of any subsequent breach.
10.7 AMENDMENTS, SUPPLEMENTS, ETC. At any time this Agreement may be
amended or supplemented by such additional agreements, articles or certificates,
as may be determined by the parties hereto to be necessary, desirable or
expedient to further the purposes of the Agreement, or to clarify the intention
of the parties hereto, or to add to or modify the covenants, terms or conditions
hereof or to effect or facilitate any governmental approval or acceptance of
this Agreement or to effect or facilitate the filing or recording of this
Agreement or the consummation of any of the transactions contemplated hereby.
Any such instrument must be in writing and signed by all parties.
JARL Merger Agreement/Page 33
10.8 ENTIRE AGREEMENT. This Agreement, its Exhibits and Disclosure
Schedules and the documents executed on the Closing Date in connection herewith,
constitute the entire agreement between the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings,
oral and written, between the parties hereto with respect to the subject matter
hereof. No representation, warranty, promise, inducement or statement of
intention has been made by any party hereto which is not embodied in this
Agreement or such other documents, and no party hereto shall be bound by, or be
liable for, any alleged representation, warranty, promise, inducement or
statement of intention not embodied herein or therein.
10.9 CHOICE OF FORUM; CONSENT TO JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the State of Texas.
Any suit, action or proceeding arising with respect to the validity,
construction, enforcement or interpretation of this Agreement, and all issues
relating in any matter hereto, shall be brought in the United States District
Court for the Southern District of Texas, or in the event that federal
jurisdiction does not pertain, in the state courts of the State of Texas in
Xxxxxx County. Each of the parties hereto hereby submits and consents to the
jurisdiction of such court for the purpose of any such suit, action or
proceeding and hereby irrevocably waives (a) any objection which any of them may
now or hereafter have to the laying of venue in such courts, and (b) any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum.
10.10 BINDING EFFECT, BENEFITS. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
assigns. Notwithstanding anything contained in this Agreement to the contrary,
nothing in this Agreement, expressed or implied, is intended to confer on any
person other than the parties hereto or their respective successors and assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
10.11 ASSIGNABILITY. Neither this Agreement nor any of the parties'
rights hereunder shall be assignable by any party hereto without the prior
written consent of the other parties hereto.
10.12 PUBLIC ANNOUNCEMENTS. The Parent, Shareholder and the Company will
consult with each other before issuing any press release or otherwise making any
public statement with respect to the transactions contemplated herein and shall
not issue any such press release or make any such public statement without the
approval of the other, unless counsel has advised such party that such release
or other public statement must be issued immediately and the issuing party has
not been able, despite its good faith efforts, to secure the prior approval of
the other party.
10.13 INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law, rule or
regulation, such provision shall be fully severable and this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof. The remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision, there shall be added
automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
JARL Merger Agreement/Page 34
10.14 CONSENT OF SPOUSE. The signature of the spouse of Shareholder
represents that the spouse has read and understands this Agreement and agrees
that its terms are fair and in such spouse's best interest and such spouse
agrees to bind her community interest, if any, in the Parent Common Stock, and
such spouse's heirs, beneficiaries, legal representatives and assigns, to the
terms of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed effective as of the date first above written.
THE PARENT
GROUP MAINTENANCE AMERICA CORP.
/s/ J. XXXXXXX XXXXXXXX, XX.
By:_____________________________________
J. Xxxxxxx Xxxxxxxx, Xx., President
THE MERGER SUB
JARL ACQUISITION CORP.
/s/ J. XXXXXXX XXXXXXXX, XX.
By:_____________________________________
J. Xxxxxxx Xxxxxxxx, Xx. President
SHAREHOLDER
/s/ XXXXX XXXXXXXX
________________________________________
Xxxxx Xxxxxxxx (individually)
/s/ XXXX XXXXX XXXXXXXX
________________________________________
Xxxx Xxxxx Xxxxxxxx (individually)
JARL Merger Agreement/Page 35
THE COMPANY
XX XXXX, INC.
/s/ XXXXX XXXXXXXX
By:_____________________________________
Xxxxx Xxxxxxxx, President
JARL Merger Agreement/Page 36