EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered into
as of December 6, 2004 by and among INTEGRATED ELECTRICAL SERVICES, INC., a
Delaware corporation (the "PARENT"), DELCO ELECTRIC, INC., a Delaware
corporation (the "COMPANY"), DFI GROUP, INC., an Oklahoma corporation (the
"BUYER"), Xxxxx Xxxxx, an individual and resident of the State of Oklahoma
("XXXXX"), and Xxxxx Xxxxxxxxx, an individual and resident of the State of
Oklahoma ("XXXXXXXXX") (Xxxxx and Xxxxxxxxx together referred to as the
"GUARANTORS").
WITNESSETH:
WHEREAS, the Parent owns, either directly or indirectly, all of the issued
and outstanding capital stock of the Company, which is engaged in the electrical
construction and services business (the "BUSINESS");
WHEREAS, the Parent and the Company desire to sell to the Buyer
substantially all of the Company's assets, which are more fully described in
Section 1.1 hereof, and the Buyer desires to acquire such assets in
consideration of the payment by the Buyer of the purchase price and the
assumption by the Buyer of the liabilities provided for herein, all upon the
terms and subject to the conditions hereinafter set forth;
WHEREAS, Xxxxx is the President of the Buyer and agrees to personally
guaranty the Buyer's performance of all representations, warranties, covenants,
agreements and conditions contained herein; and
WHEREAS, Xxxxxxxxx is a Director and the principal shareholder of the
Buyer and agrees to personally guaranty the Buyer's performance of all
representations, warranties, covenants, agreements and conditions contained
herein;
NOW, THEREFORE, for and in consideration of the premises and of the
respective representations, warranties, covenants, agreements and conditions of
the parties contained herein, it is hereby agreed as follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 Transfer of Assets. On the terms and subject to the conditions set
forth in this Agreement, on the Closing Date (as defined in Section 2.1 hereof),
the Company shall sell, convey, assign, transfer and deliver to the Buyer, and
the Buyer shall purchase and acquire from the Company (except as provided in
Section 1.2 hereof) all of the assets, rights and properties of the Parent or
the Company set forth on Schedule 1.1. The assets described in this Section 1.1
as being sold, conveyed, assigned, transferred and delivered to the Buyer
hereunder are sometimes hereinafter referred to collectively as the "ASSETS".
1.2 Excluded Assets. It is expressly understood and agreed that the Assets
shall not include the following (such assets are hereinafter referred to
collectively as the "EXCLUDED ASSETS"):
(a) Cash and cash equivalents or similar type investments, such as
certificates of deposit, Treasury bills and other marketable securities;
(b) Claims for refunds of taxes and other governmental charges to
the extent such refunds relate to periods ending on or prior to the
Closing Date;
(c) Any asset, tangible or intangible, which is not freely
transferable without the consent of a third party, upon the failure to
obtain such consent;
(d) The original corporate minute books, stock books, financial
records, tax returns, personnel and payroll records and corporate policies
and procedures manuals of the Company and other records required by
applicable laws to be retained;
(e) Any contract or agreement, whether written or oral, between the
Company and IES Contractors, Inc.; and
(f) Any asset not set forth on Schedule 1.1.
1.3 Instruments of Conveyance and Transfer.
(a) At the Closing, the Buyer, the Company and the Parent shall
enter into a Xxxx of Sale, Assignment and Assumption Agreement in the form
attached hereto as Exhibit A, transferring to the Buyer good and
indefeasible title to all of the tangible personal property included in
the Assets, subject only to Permitted Encumbrances.
(b) At the Closing, the Buyer and the Parent shall deliver such
other instruments of transfer and assignment in respect of the Assets as
the Buyer shall reasonably require and as shall be consistent with the
terms and provisions of this Agreement.
(c) At the Closing, the Buyer shall, and shall cause the Transferred
Employees (as hereinafter defined) to, resign as officers and directors of
the Company and any other affiliates of the Parent.
1.4 Further Assurances. From time to time after the Closing, the Parent
and the Company will execute and deliver, or cause to be executed and delivered,
without further consideration, such other instruments of conveyance, assignment,
transfer and delivery and will take such other actions as the Buyer may
reasonably request in order to more effectively transfer, convey, assign and
deliver to the Buyer, and to place the Buyer in possession and control of any of
the Assets or to enable the Buyer to exercise and enjoy all rights and benefits
of the Company with respect thereto.
1.5 Liabilities. On the Closing Date, the Buyer will assume and agree to
pay and discharge all liabilities of the Company, known or unknown, absolute or
contingent (the "ASSUMED
LIABILITIES") other than the liabilities set forth on Schedule 1.5 (the
"RETAINED LIABILITIES"), which shall be retained by the Parent or the Company,
respectively.
1.6 Expenses: Consents and Taxes. The Buyer shall pay, or cause to be paid
(i) all costs and expenses of obtaining all consents of third parties for the
assignment of any of the Assets, and (ii) all transfer, stamp, sales, use or
other similar taxes or duties payable in connection with the sale and transfer
of the Assets to the Buyer.
2. CLOSING; PURCHASE PRICE.
2.1 Closing Date. The consummation of the transactions contemplated in
this Agreement (the "CLOSING") shall take place at the offices of Gardere Xxxxx
Xxxxxx LLP, 0000 Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx at 10:00 a.m., Central
time, December [__], 2004 (the "CLOSING DATE") contemporaneously with the
execution of this Agreement or at such other place and time as the parties
hereto may mutually agree.
2.2 Purchase Price. The aggregate purchase price for the Assets shall be
$869,000.00 (the "PURCHASE PRICE"), subject to adjustment pursuant to Section
2.3 below, plus the Buyer's assumption of the Assumed Liabilities pursuant to
Section 1.5 above. The Purchase Price shall be payable by the Buyer at the
Closing to the Company in immediately available funds by confirmed wire transfer
to a bank account to be designated by the Company.
2.3 Cash Reconciliation. Within 30 days following the Closing Date, the
Company shall prepare and deliver to the Buyer a schedule setting forth, for the
period commencing on October 1, 2004, and ending as of the Closing, (a) the cash
disbursements funded by the Company, the Parent or any of their affiliates for
the benefit of the Company, to include those made in the ordinary course to
trade vendors and those made in the ordinary course for Company employee benefit
plans (the "DISBURSEMENTS"), and (b) the cash deposits made by the Company (the
"DEPOSITS"). Within three business days following the Buyer's receipt of such
schedule, (i) the Buyer shall remit to the Company in immediately available
funds, the amount by which the Disbursements exceed the Deposits, if any; or
(ii) the Company shall remit to the Buyer, in like manner and within such
period, the amount by which Deposits exceed the Disbursements, if any.
Disbursements shall include, but not be limited to, actual cash amounts paid by
the Company or the Parent on behalf of the Company, including (i) amounts paid
after September 30, 2004 for checks issued by the Company or Parent on behalf of
the Company on or before September 30, 2004 that had not cleared the banks on
September 30, 2004, which amounts were reflected on the September 30, 2004
balance sheet as negative cash amounts, and (ii) checks issued by the Company or
Parent on behalf of the Company subsequent to September 30, 2004, but before the
Closing that have not cleared the banks as of the Closing, and Deposits shall
include, but not be limited to, actual cash amounts received by the Company or
the Parent on behalf of the Company subsequent to September 30, 2004, but before
the Closing that have not been reflected in the Company's accounts as of the
Closing. Disbursements and Deposits will be accounted for in accordance with
Parent's accounting practices consistent with past periods.
2.4 Purchase Price Allocation. As soon as practicable after the Closing
Date, the Company shall prepare IRS Form 8594 to report the allocation of the
Purchase Price among the
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Assets. Each party hereto agrees not to assert, in connection with any tax
return, tax audit or similar proceeding, any allocation that differs from that
set forth in such Form 8594.
3. REPRESENTATIONS AND WARRANTIES.
3.1 Representations and Warranties of the Company and the Parent. The
Company and the Parent represent and warrant to the Buyer as follows:
(a) Organization, Authority and Qualification of the Company. The
Company is a corporation duly organized and validly existing under the
laws of the State of Delaware and the Company has full corporate power and
authority to own or lease its properties and to carry on its business in
such state. The Company has the full corporate power and authority to
execute, deliver and perform this Agreement, and this Agreement has been
duly and validly executed and delivered by the Company and constitutes the
valid and legally binding obligation of the Company, subject to general
equity principles, enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, reorganization or similar
laws affecting the rights of creditors generally.
(b) No Violation. The Company is not in default under or in
violation of its Articles of Incorporation or Bylaws.
(c) Title to Properties; Absence of Liens and Encumbrances. The
Company owns good and indefeasible title to the Assets, free and clear of
all claims, liens, security interests, charges, leases, encumbrances,
licenses or sublicenses and other restrictions of any kind and nature,
other than the claims, liens, security interests, charges, leases,
encumbrances, licenses or sublicenses either included among the Assumed
Liabilities or specifically set forth on Schedule 3.1(c) hereto
("PERMITTED ENCUMBRANCES").
3.2 Representations and Warranties of the Buyer. The Buyer and the
Guarantors, jointly and severally, represent and warrant to the Parent and the
Company as follows:
(a) Residence. The Buyer is a corporation that is duly organized and
validly existing under the laws of the State of Oklahoma. Each Guarantor
is a resident of the State of Oklahoma.
(b) Authorization. The Buyer has the legal and mental capacity to
execute, deliver and perform this Agreement, and this Agreement has been
duly and validly executed and delivered by the Buyer and constitutes the
valid and legally binding obligation of the Buyer, subject to general
equity principles, enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, reorganization or similar
laws affecting the rights of creditors generally.
(c) Certain Fees. The Buyer has not employed any broker or finder or
incurred any other liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated hereby.
(d) Financial Information. The financial and management reports
(including, without limitation, WIP schedules) heretofore delivered or
made by Buyer or the Company
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to the Parent are true and correct in all material respects and do not
omit to state any fact necessary to make any of them, in light of the
circumstances in which made, not misleading. All executed change orders
have been recorded, all agreed change orders have been executed or are
listed on Schedule 3.2(d), and all checks and cash received by the Company
and its affiliates have been deposited.
3.3 No Warranty. The Buyer and the Guarantors acknowledge that the
Guarantors, through previous ownership and/or management of the Company, is
familiar with the Assets and the operations of the Company, and has access to
any information pertaining thereto and has made such information available to
Buyer. Neither the Company nor the Parent, nor any of their respective
directors, officers, employees, agents or representatives has made, or shall be
deemed to have made, and no such person shall be liable for, or bound in any
manner by, and Buyer and Guarantors have not relied upon and will not rely upon,
any express or implied representations, warranties, guaranties, promises or
statements pertaining to the Business or Assets except as specifically provided
in this Section 3. The Buyer and the Guarantors acknowledge that in making the
decision to enter into this Agreement and to consummate the transactions
contemplated hereby, they have relied solely on the basis of their own
independent investigation of the Business and the Assets and upon the express
written representations, warranties and covenants in this Agreement. Without
diminishing the scope of the express written representations, warranties and
covenants of the Company and the Parent in this Agreement and without affecting
or impairing their right to rely thereon, the Buyer and the Guarantors
acknowledge that (a) they have not relied, in whole or in part, on any
information contained in documents, materials or other information provided to
them by, or on behalf of, Company or the Parent, and (b) neither Company nor the
Parent is making any representations or warranties with respect to (i) any such
documents, materials or other information, other than, in each case, as set
forth in this Agreement or (ii) the value, condition, merchantability,
marketability, profitability, suitability or fitness for a particular use or
purpose of the Assets. ACCORDINGLY, THE ASSETS ARE BEING TRANSFERRED "AS IS,
WHERE IS." EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION
3.1 OF THIS AGREEMENT, THE COMPANY AND PARENT MAKE ABSOLUTELY NO REPRESENTATIONS
OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, REGARDING THE ASSETS, INCLUDING
WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, OR THE ABILITY OF THE COMPANY TO ASSIGN THE ASSETS, OR
OBTAIN CONSENTS TO ANY ASSIGNMENT.
4. COVENANTS; ACTION SUBSEQUENT TO CLOSING.
4.1 Access to Books and Records. Until the third anniversary of the
Closing Date, the Parent and the Company shall afford, and will cause its
affiliates to afford, to the Buyer, its counsel, accountants and other
authorized representatives, during normal business hours, reasonable access to
the books, records and other data of the Company and the Business with respect
to periods ending on or prior to the Closing Date to the extent that such access
may be reasonably required by the Buyer to facilitate (i) the investigation,
litigation and final disposition of any claims which may have been or may be
made against the Buyer in connection with the Business or (ii) for any other
reasonable business purpose. Following the Closing, the Buyer shall prepare, on
behalf of the Company, all regularly prepared Company financial reports and
statements for periods up to and including the Closing Date, and shall cooperate
with and provide assistance to the Parent and the
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Company in their financial and tax reporting obligations for the periods up to
and including the Closing Date.
4.2 Mail. The Parent and the Company authorize and empower the Buyer on
and after the Closing Date to receive and open all mail received by the Buyer
relating to the Business or the Assets and to deal with the contents of such
communications in any proper manner. The Parent and the Company shall promptly
deliver to the Buyer any mail or other communication received by them after the
Closing Date pertaining to the Business or the Assets. The Buyer shall promptly
deliver to the Parent any mail or other communication received by it after the
Closing Date pertaining to the Excluded Assets or Retained Liabilities, and any
cash, checks or other instruments of payment in respect of the Excluded Assets.
4.3 No Consent Contracts. To the extent that any contract of the Company
included in the Assets may not be assigned without the consent of any third
party, and such consent is not obtained prior to Closing (such contracts
referred to as "NO CONSENT CONTRACTS"), this Agreement and any assignment
executed at Closing pursuant hereto shall not constitute an assignment thereof,
but to the extent permitted by law shall constitute an equitable assignment by
the Company and assumption by the Buyer of the Company's rights and obligations
under the applicable No Consent Contract, with the Company making available to
the Buyer the benefits thereof and the Buyer performing the obligations
thereunder on the Company's behalf.
4.4 Preparation and Filing of Certain Tax Forms. The Buyer shall prepare
and timely file all Forms W-2, 940, 941 and 1099 with all appropriate
Governmental Entities, including without limitation any summary schedules and
transmittal forms, as well as any similar filings required by any state or local
Governmental Entity, with respect to all wages and other reportable payments for
the calendar year 2004. As used herein, "GOVERNMENTAL ENTITY" means any court or
tribunal in any jurisdiction (domestic or foreign) or any public, governmental
or regulatory body, agency, department, commission, board, bureau or other
authority or instrumentality, domestic or foreign. The Buyer shall pay all
administrative amounts owed as a result of or otherwise related to such filings
with the exception of any tax, interest, or penalties associated with periods
prior to the Closing. The Company will pay, on or before they become due, any
employment taxes withheld by it which have not been previously paid. The Buyer,
Parent and Company shall cooperate in making all such filings and shall make
available to the others such information as any of them requires to assure such
filings are made on a timely and accurate basis.
4.5 The Parent Name and Logos. As soon as practicable (but in any event
within 90 days) after the Closing Date, the Buyer, at its expense, shall remove
all the Parent and its affiliates' names and logos from all of the Assets.
Except as specifically provided in Section 1, nothing in this Agreement shall
constitute a license or authorization for the Buyer to use in any manner any
name, logo or xxxx owned by or licensed to the Company, the Parent or their
respective affiliates which bears any reference to IES or any subsidiary or
affiliate of IES other than the Company. Similarly, the name "Delco Electric" or
"Delco" shall become the exclusive property of the Buyer and shall not be used
by the Company, the Parent or their respective affiliate entities; provided that
Parent will be given a reasonable period of time (not to exceed 60 days) to
change any company names after the Closing Date.
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4.6 Leased Assets. At the Closing, the Buyer, at its expense, shall pay
off or refinance the leases on the vehicles listed on Schedule 4.6 attached
hereto, and in connection therewith shall obtain the release of Parent and the
Company for all liability under such vehicle leases. As soon as practicable (but
in any event within 90 days) after the Closing Date, the Buyer, at its expense,
shall pay off or refinance the leases on the other assets listed on Schedule 4.6
attached hereto, and in connection therewith shall obtain the release of Parent
and the Company for all liability under such leases.
4.7 Guaranty Covenant. The Guarantors personally guaranty the Buyer's
performance of all representations, warranties, covenants, agreements and
conditions contained herein.
4.8 Chubb Bonds. Buyer agrees that at the Closing it shall execute and
deliver to the Federal Insurance Company and its subsidiary or affiliated
insurers and any applicable co-sureties (collectively, "FEDERAL"), a General
Agreement of Indemnity in the form attached as Exhibit B, pursuant to which
Buyer and Guarantor agree to (i) indemnify Federal with respect to the
performance and completion of the bonded obligations as set forth therein; and
(ii) replace within ninety (90) days the bonds identified as Cancelable Bonds
therein. Buyer further agrees to continue to provide to Federal monthly written
reports (with a copy to the Parent) as to the progress of the completion of the
bonded jobs. Buyer and Guarantor further agree to provide, from time to time and
at the request of the Parent, a certificate or certificates certifying that the
Cancelable Bonds have been replaced, and as to such other matters concerning the
performance by the Buyer of its post-closing obligations under this Agreement as
Parent shall request.
4.9 Retained Claims. The Company shall retain liability for certain
insured claims as set forth in Schedule 1.5, paragraph 5 (the "RETAINED
CLAIMS"). The Buyer and the Guarantor agree to cooperate with the Company and
the Parent in the defense of the Retained Claims and to make available the
Buyer's personnel and facilities for that purpose. The Company shall retain as
Excluded Assets and not transfer to the Buyer all books and records associated
with the Retained Claims, as well as any reserves established on the books of
the Company for the Retained Claims, which reserves shall be paid in cash by the
Buyer to the Company at Closing.
5. INDEMNIFICATION.
5.1 Survival. The representations and warranties of the Company, the
Parent and the Buyer and the Guarantors contained in this Agreement, any
schedules delivered by or on behalf of the Company and the Buyer pursuant to
this Agreement, or in any certificate, instrument, agreement or other writing
delivered by or on behalf of the Company, the Parent or the Buyer pursuant to
this Agreement shall survive the consummation of the transactions contemplated
herein; provided that all such representations and warranties of the Company and
the Parent shall be of no further force and effect, and no claim for
indemnification by the Buyer pursuant to this Section 5 may be brought for any
reason, after the expiration of twelve (12) months from the Closing Date (the
"SURVIVAL PERIOD"), except for the representations and warranties contained in
Section 3.1(c), which shall survive indefinitely. Anything to the contrary
notwithstanding, a claim for indemnification which is made but not resolved
prior to the expiration of the Survival Period may be pursued and resolved after
such expiration.
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5.2 Indemnification by the Company.
(a) In accordance with and subject to the provisions of this Section
5, the Company and the Parent shall indemnify and hold harmless the Buyer
from and against and in respect of any and all loss, damage, diminution in
value, liability, cost and expense, including reasonable attorneys' fees
and amounts paid in settlement (collectively, the "BUYER INDEMNIFIED
LOSSES"), suffered or incurred by the Buyer by reason of, or arising out
of (i) any misrepresentation or breach of representation or warranty of
the Company or the Parent contained in this Agreement, or in any schedules
delivered to the Buyer by or on behalf of the Company or the Parent
pursuant to this Agreement; (ii) the breach of any covenant or agreement
of the Company or the Parent contained in this Agreement; or (iii) the
Retained Liabilities.
(b) The Company and the Parent shall reimburse the Buyer on demand
for any Buyer Indemnified Losses suffered by the Buyer with respect to
matters other than claims, actions or demands brought, made or instituted
by a third party ("THIRD PARTY CLAIMS"). With respect to Third Party
Claims, the Company and the Parent shall reimburse the Buyer on demand for
any Buyer Indemnified Losses suffered by the Buyer, based on the judgment
of any court of competent jurisdiction or pursuant to a bona fide
compromise or settlement in respect of any Buyer Indemnified Losses. The
Company and the Parent shall have the opportunity to defend at their
expense any claim, action or demand for which the Buyer claims indemnity
against the Company or the Parent; provided that: (i) the defense is
conducted by reputable counsel; (ii) the defense is expressly assumed in
writing within twenty (20) days after written notice of the claim, action
or demand is delivered to the Company and the Parent; and (iii) counsel
for the Buyer may participate at all times and in all proceedings (formal
and informal) relating to the defense, compromise and settlement of the
claim, action or demand at the expense of the Buyer.
5.3 Indemnification by the Buyer.
(a) In accordance with and subject to the provisions of this Section
5, the Buyer and the Guarantors, jointly and severally, shall indemnify
and hold harmless the Company, the Parent and their respective affiliates
(for purposes of this Section 5, the "COMPANY INDEMNITEES") from and
against and in respect of any and all loss, damage, diminution in value,
liability, cost and expense, including reasonable attorneys' fees and
amounts paid in settlement (collectively, the "COMPANY INDEMNIFIED
LOSSES"), suffered or incurred by the Company Indemnitees by reason of, or
arising out of (i) any misrepresentation or breach of representation or
warranty of the Buyer or any Guarantor contained in this Agreement, or in
any schedules delivered to the Company or the Parent by or on behalf of
the Buyer or any Guarantor pursuant to this Agreement; (ii) or the breach
of any covenant or agreement of the Buyer or any Guarantor contained in
this Agreement; (iii) the Assumed Liabilities, including, without
limitation, any liability to sureties with respect to bonded jobs; or (iv)
the operation of the Business following the Closing, including, but not
limited to, any claims made by Transferred Employees concerning COBRA, the
WARN Act, unemployment claim liability, or any similar matters as a result
of the termination by Buyer of the Transferred Employees.
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(b) The Buyer and the Guarantors, jointly and severally (the "BUYER
INDEMNIFYING PARTIES") shall reimburse the Company Indemnitees on demand
for any Company Indemnified Losses suffered by the Company Indemnitees
with respect to matters other than Third Party Claims. With respect to
Third Party Claims, the Buyer Indemnifying Parties shall reimburse the
Company Indemnitees on demand for any Company Indemnified Losses suffered
by the Company Indemnitees, based on the judgment of any court of
competent jurisdiction or pursuant to a bona fide compromise or settlement
in respect of any Company Indemnified Losses. The Buyer Indemnifying
Parties shall have the opportunity to defend at their expense any claim,
action or demand for which the Company Indemnitees claim indemnity against
the Buyer Indemnifying Parties; provided that: (i) the defense is
conducted by reputable counsel; (ii) the defense is expressly assumed in
writing within twenty (20) days after written notice of the claim, action
or demand is delivered to the Buyer Indemnifying Parties; and (iii)
counsel for the Company and the Parent may participate at all times and in
all proceedings (formal and informal) relating to the defense, compromise
and settlement of the claim, action or demand at the expense of the
Company and the Parent.
5.4 Limitation and Payment on Claims. No claim shall be brought under this
Section 5 for breach of any representation or warranty, and no party hereto
shall be entitled to receive any payment with respect thereto, until such time
as, and only to the extent that, the aggregate amount of such claim(s) that such
party has equals or exceeds $100,000 (the "DEDUCTIBLE"); provided, however, that
the Deductible shall not apply to any obligations under Section 2.3. Anything to
the contrary notwithstanding, the Company and the Parent shall not be liable
under this Section 5 for Buyer Indemnified Losses in excess of the Purchase
Price.
5.5 Sole Remedy. The sole remedy of the Company, the Parent and the Buyer
Indemnifying Parties for breach of the representations and warranties set forth
in Section 3 shall be pursuant to this Section 5.
6. DISPUTE RESOLUTION.
6.1 Arbitration.
(a) Any controversy, dispute or claim arising out of or relating in
any way to this Agreement or the other agreements contemplated by this
Agreement or the transactions arising hereunder (including the validity,
interpretation or applicability of this Section 6.1) shall be settled
exclusively by final and binding arbitration in Houston, Texas. Such
arbitration will apply the laws of the State of Texas and the commercial
arbitration rules of AAA to resolve the dispute, and will be administered
by the AAA.
(b) Written notice of arbitration must be given within one year
after the notifying party has knowledge of accrual of the claim on which
the notice is based. If the claiming party fails to give notice of
arbitration within that time, the claim shall be deemed to be waived and
shall be barred from either arbitration or litigation.
(c) Such arbitration shall be conducted by one independent and
impartial arbitrator to be selected by mutual agreement of the parties, if
possible. If the parties fail to reach agreement regarding appointment of
an arbitrator within thirty (30) days following
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receipt by one party of the other party's notice of arbitration, the
arbitrator shall be selected from a list or lists of proposed arbitrators
submitted by AAA. Unless the parties agree otherwise, the arbitrator shall
be a licensed attorney with at least ten years of experience in the
practice of law. The selection process shall be that which is set forth in
the AAA commercial arbitration rules then prevailing, except that (A) the
number of preemptory strikes shall not be limited and (B), if the parties
fail to select an arbitrator from one or more lists, AAA shall not
initially have the power to make an appointment but shall continue to
submit additional lists until an arbitrator has been selected, but if no
such arbitrator is selected within sixty (60) days after the receipt of
the first notice of arbitration, the AAA shall have the power to make an
appointment and shall promptly do so. Initially, however, promptly
following its receipt of a request to submit a list of proposed
arbitrators, AAA shall convene the parties in person or by telephone and
attempt to facilitate their selection of an arbitrator by agreement. If
the arbitrator should die, withdraw or otherwise become incapable of
serving, a replacement shall be selected and appointed in a like manner.
(d) The arbitrator shall render an opinion setting forth findings of
fact and conclusions of law with the reasons therefor stated. A transcript
of the evidence adduced at the hearing shall be made and shall, upon
request, be made available to either party. The fees and expenses of the
arbitrator shall be shared equally by the parties and advanced by them
from time to time as required; provided that at the conclusion of the
arbitration, the arbitrator may award costs and expenses (including the
costs of the arbitration previously advanced and the fees and expenses of
attorneys, accountants and other experts). No pre-arbitration discovery
shall be permitted, except that the arbitrator shall have the power in his
or her sole discretion, on application by either party, to order
pre-arbitration examination of the witnesses and documents that the other
party intends to introduce in its case-in-chief at the arbitration
hearing. The arbitrator shall render his or her opinion and/or award
within ninety (90) days of the conclusion of the arbitration hearing. The
arbitrator shall not be empowered to award to either party any punitive
damages in connection with any dispute between them arising out of or
relating in any way to this Agreement or the other agreements contemplated
hereby or the transactions arising hereunder or thereunder, and each party
hereby irrevocably waives any right to recover such damages. The
arbitration hearings and award shall be maintained in confidence.
Notwithstanding anything to the contrary provided in this Section 6.1 and
without prejudice to the above procedures, either party may apply to any court
of competent jurisdiction for temporary injunctive or other provisional judicial
relief if such action is necessary to avoid irreparable damage or to preserve
the status quo until such time as the arbitrator is selected and available to
hear such party's request for temporary relief. The award rendered by the
arbitrator shall be final and not subject to judicial review and judgment
thereon may be entered in any court of competent jurisdiction.
7. EMPLOYEE MATTERS.
7.1 Hiring.
(a) The Buyer shall hire (subject to each employee's agreement),
effective as of the Closing Date, all of the employees of the Company on
the day immediately prior to the
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Closing Date, active or inactive (such employees being hereafter referred
to as the "TRANSFERRED EMPLOYEES") at a comparable job and at a rate of
pay not less than each such Transferred Employee's pay as of September 30,
2004. Upon request of the Buyer, the Company shall provide the Buyer
reasonable access to data (including computer data) regarding the ages,
dates of hire, compensation and job description of the Transferred
Employees.
(b) The Buyer shall assume and be responsible for any severance
costs associated with the termination of the Transferred Employees'
employment with the Company. The Buyer shall discharge all liabilities and
claims based on occurrences or conditions first occurring or commencing on
or after the Closing Date with respect to Transferred Employees arising
out of their employment with the Buyer after the Closing Date, including,
but not limited to, any claims arising out of any employee benefit plan,
policy, program or arrangement maintained at any time by the Buyer (a
"BUYER PLAN" or collectively, the "BUYER PLANS"), except Buyer shall not
assume any liabilities with respect to the WARN Act or COBRA benefits for
any terminations occurring prior to the Closing Date (unless provided
otherwise by law or pursuant to applicable regulations) nor shall the
Company or the Parent be liable under the WARN Act, COBRA, or state
unemployment claims law for any Transferred Employee terminated by Buyer
after the Closing.
(c) At Closing, the Buyer shall establish and make available a group
medical plan for the Transferred Employees and their dependents that is
substantially similar to the group medical plan available to the
Transferred Employees immediately prior to Closing. The Buyer shall credit
the Transferred Employees with all service of the Transferred Employees
recognized under the employee benefit plans, policies, programs, or
arrangements maintained by the Parent or the Company (the "PARENT PLANS")
as service with the Buyer for purposes of eligibility to participate,
vesting and levels of benefits available, under all Buyer Plans. The Buyer
shall waive any coverage waiting period, pre-existing condition and
actively-at-work requirements under the Buyer Plans for the Transferred
Employees and shall provide that any expenses incurred before the Closing
Date by a Transferred Employee (and his or her dependents) during the
calendar year of the Closing shall be taken into account for purposes of
satisfying the applicable deductible, coinsurance and maximum
out-of-pocket provisions, and applicable annual and/or lifetime maximum
benefit limitations of the Buyer Plans. The Buyer Plans shall not require
contributions by Transferred Employees at a rate that exceeds the rate in
effect for other similarly situated employees of the Buyer. Any reports or
other information provided to Buyer by the Company or the Parent in
connection with Buyer performing his obligations under this Section 7.1(c)
shall be at the sole expense of the Buyer.
7.2 Benefits. The Buyer shall be responsible for the payment of all
amounts of wages, bonuses and other remuneration (including discretionary
benefits and bonuses) payable to the Transferred Employees of the Company
accrued with respect to periods on or prior to the Closing (except for any
employment taxes actually withheld by the Company) amounts payable to such
employees in connection with events occurring on or prior to the Closing. In
addition, the Buyer shall be responsible for:
11
(a) all vacation pay and pay for other compensated absences earned
or accrued by the Transferred Employees as of the close of business on the
Closing Date to the appropriate employee, including any related payroll
burden (FICA and other pension or other employee benefit plan
contributions and employment taxes) with respect thereto to the
appropriate Governmental Entity or other person, to the extent such pay
has been accrued on the books of the Company at such close of business,
based upon the remuneration of such employees normally used in computing
such pay for other compensated absences; and
(b) amounts accrued under the Integrated Electrical Services, Inc.
401(k) Retirement Savings Plan (the "PARENT 401(k) PLAN") for the
Transferred Employees as of the Closing Date but not yet transferred to
the trustee of the Parent 401(k) Plan, including without limitation, the
accrued match, accrued payroll deductions representing elective deferrals,
loan repayments and accrued profit sharing contribution, if any.
7.3 Parent 401(k) Plan. The Company, the Parent and the Buyer agree that,
as soon as practicable after Closing, but in any event within 90 days of the
Closing Date, the account balances in the Parent 401(k) Plan of the Transferred
Employees shall be transferred to a qualified 401(k) retirement savings plan
established by the Buyer (the "BUYER'S 401(k) PLAN") in accordance with Section
414(l) of the Internal Revenue Code of 1986, as amended (the "CODE"), and the
regulations promulgated thereunder. In connection with such transfer, the
following provisions shall apply:
(a) The account balances of the Transferred Employees transferred to
the Buyer's 401(k) Plan shall be subject to the provisions of the Buyer's
401(k) Plan effective as of the date of transfer; provided, however that
the Buyer's 401(k) Plan shall continue any benefits under the Parent
401(k) Plan as required under Section 411(d)(6) of the Code; and
(b) The outstanding loan of any Transferred Employee shall not be in
default as a result of the Transferred Employee's termination of
employment with the Parent or the Company, but such loan shall be
transferred to the Buyer's 401(k) Plan in accordance with (a) above.
The Buyer shall provide acceptable evidence to the Parent that the Buyer's
401(k) Plan meets the requirements of Section 401(a) of the Code prior to
the date of such transfer. The Buyer, the Parent and the Company agree to
take whatever action, including but not limited to plan amendments and
resolutions, to effectuate the transfer of the Transferred Employee's
account balances according to this section from the Parent 401(k) Plan to
the Buyer's 401(k) Plan.
Notwithstanding the foregoing, nothing in this Section 7 shall be deemed or
construed to give rise to any rights, claims, benefits, or causes of action to
any Transferred Employee or third party whatsoever (including any Governmental
Entity).
7.4 Non-Competition Agreements. All non-competition agreements now
existing between Xxxxx Xxxxx and Integrated Electric Services, Inc. will be
null, void and without effect as of the Closing. Similarly, Buyer intends to
obtain indirect financing and consulting services from Miles Xxxxxxxxx, Sr. Vice
President of Integrated Electric Services, Inc. Accordingly, any non-competition
agreements now existing between Miles Xxxxxxxxx and Integrated Electric
12
Services, Inc. will be amended, as they relate to the Buyer and the Buyer's
Business, as of the Closing.
8. MISCELLANEOUS.
8.1 Notices. All notices and communications required or permitted
hereunder shall be in writing and may be given by (a) depositing the same in the
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, (b) by delivering the
same in person to an officer or agent of such party, or (c) overnight delivery
service. Such notice shall be deemed received on the date (i) on which it is
actually received if sent by overnight delivery service or hand delivery, or
(ii) on the third business day following the date on which it is mailed. For
purposes of notice, the addresses of the parties hereto shall be:
If to the Parent or the Company:
Integrated Electrical Services, Inc.
0000 Xxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
With a copy to:
Integrated Electrical Services, Inc.
0000 Xxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Chief Legal Officer
If to the Buyer or either Guarantor:
DFI Group, Inc.
0 XX 000xx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
or such other address as any party hereto shall specify pursuant to this Section
8.1 from time to time.
8.2 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
8.3 Governing Law. The validity and effect of this Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Texas, without regard to its conflicts of laws rules.
8.4 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective permitted heirs,
successors and assigns. Neither the Company, the Parent nor the Buyer may
assign, delegate or otherwise transfer any of their rights or obligations under
this Agreement without the written consent by each other party hereto.
8.5 Partial Invalidity and Severability. All rights and restrictions
contained herein may be exercised and shall be applicable and binding only to
the extent that they do not violate any
13
applicable laws and are intended to be limited to the extent necessary to render
this Agreement legal, valid and enforceable. If any term of this Agreement, or
part thereof, not essential to the commercial purpose of this Agreement shall be
held to be illegal, invalid or unenforceable by a forum of competent
jurisdiction, it is the intention of the parties that the remaining terms
hereof, or part thereof, shall constitute their agreement with respect to the
subject matter hereof, and all such remaining terms, or parts thereof, shall
remain in full force and effect. To the extent legally permissible, any illegal,
invalid or unenforceable provision of this Agreement shall be replaced by a
valid provision which will implement the commercial purpose of the illegal,
invalid or unenforceable provision.
8.6 Waiver. Any term or condition of this Agreement may be waived at any
time by the party which is entitled to the benefit thereof, but only if such
waiver is evidenced by a writing signed by such party. No failure on the part of
any party hereto to exercise, and no delay in exercising, any right, power or
remedy created hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, power or remedy by either party preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. No waiver by either party hereto of any breach of or default in any term
or condition of this Agreement shall constitute a waiver of or assent to any
succeeding breach of or default in the same or any other term or condition
hereof.
8.7 Headings. The headings of particular provisions of this Agreement are
inserted for convenience only and shall not be construed as a part of this
Agreement or serve as a limitation or expansion on the scope of any term or
provision of this Agreement.
8.8 Entire Agreement; Amendments. This Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof (including without limitation any letters of intent executed by
the parties), and this Agreement contains the sole and entire agreement between
the parties with respect to the matters covered hereby. This Agreement shall not
be altered or amended except by an instrument in writing signed by or on behalf
of the party against whom enforcement is sought.
8.9 Disclosure of Agreement Terms. Neither Buyer nor the Guarantors shall
disclose the terms and conditions of this Agreement to any person or entity
without the prior written consent of an executive officer of the Parent or as
required by applicable law or an order from a court or administrative body of
competent jurisdiction (but only to the extent so required and only after giving
reasonable prior notice to the Company and the Parent and cooperating with the
Company and the Parent in any efforts to legally oppose such disclosure). The
foregoing notwithstanding, the Buyer and Guarantors shall be permitted to make
such disclosures to their accountants, lawyers, financial institutions, lending
sources and related parties as may be appropriate, provided that such parties
are bound by the foregoing nondisclosure provisions.
8.10 Number and Gender. Where the context requires, the use of the
singular form herein shall include the plural, the use of the plural shall
include the singular, and the use of any gender shall include any and all
genders.
[Remainder of page intentionally left blank]
14
IN WITNESS WHEREOF, this Agreement has been executed effective as of the
date set forth above.
PARENT:
INTEGRATED ELECTRICAL SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chief Executive Officer
COMPANY:
DELCO ELECTRIC, INC.
By: /s/ Xxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President
BUYER:
DFI GROUP, INC.
By: /s/ Xxxxx Xxxxx
--------------------------------------------
Name: Xxxxx Xxxxx
Title: President
GUARANTORS:
XXXXX:
/s/ Xxxxx Xxxxx
-----------------------------------------------
Xxxxx Xxxxx, an individual
XXXXXXXXX:
/s/ Xxxxx Xxxxxxxxx
-----------------------------------------------
Xxxxx Xxxxxxxxx, an individual
15
EXHIBIT A
XXXX OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT
This XXXX OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT ("XXXX OF SALE") is
entered into as of the ___ day of December 2004, by and among INTEGRATED
ELECTRICAL SERVICES, INC., a Delaware corporation (the "PARENT"), DELCO
ELECTRIC, INC., a Delaware corporation (the "COMPANY") and DFI GROUP, INC., an
Oklahoma corporation (the "BUYER").
RECITALS
WHEREAS, pursuant to the terms of that certain Asset Purchase Agreement
(the "PURCHASE AGREEMENT") dated as of even date herewith by and among the
Buyer, the Parent, the Company, Xxxxx Xxxxx, an individual, and Xxxxx Xxxxxxxxx,
an individual, the Company and the Parent agreed to convey the Assets to the
Buyer and the Buyer agreed to assume the Assumed Liabilities. In order to
evidence such conveyance and assumption, the parties desire to enter into this
Xxxx of Sale.
WHEREAS, all capitalized terms used herein but not defined herein shall
have the meanings ascribed to them in the Purchase Agreement.
ASSIGNMENT
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements, and benefits contained herein, the sum of TEN DOLLARS ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Parent do hereby BARGAIN, GRANT, SELL,
CONVEY, TRANSFER, DELIVER and ASSIGN unto Buyer all the Assets.
The Assets are hereby conveyed free and clear of all encumbrances other
than the Permitted Encumbrances.
TO HAVE AND TO HOLD the Assets unto the Buyer and its successors and
assigns forever; and the Company and the Parent do hereby bind themselves and
their successors and assigns to WARRANT AND FOREVER DEFEND title to the Assets
in accordance with the terms and provisions of the Purchase Agreement.
The Buyer, upon execution below, accepts this Xxxx of Sale, and to the
extent provided for in the Purchase Agreement, hereby assumes the Assumed
Liabilities, but no others.
This assignment shall be binding upon and shall inure to the benefit of
the parties hereto and their respective permitted successors and assigns.
This Xxxx of Sale may be executed in any number of counterparts, and each
counterpart shall for all purposes be deemed to be an original.
This Xxxx of Sale is subject to all terms and conditions contained in the
Purchase Agreement and nothing herein shall be deemed to alter, amend, or
supersede the Purchase Agreement, the terms of which shall in all respects be
controlling.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have executed this Xxxx of Sale
effective as of the date set forth above.
PARENT:
INTEGRATED ELECTRICAL SERVICES, INC.
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
COMPANY:
DELCO ELECTRIC, INC.
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
BUYER:
DFI GROUP, INC.
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
EXHIBIT B
FORM OF GENERAL AGREEMENT OF INDEMNITY
(attached hereto)
CHUBB GROUP OF INSURANCE COMPANIES
[CHUBB LOGO]
15 Mountain View Road, X.X. Xxx 0000, Xxxxxx, Xxx Xxxxxx 00000-0000
GENERAL AGREEMENT OF INDEMNITY
WHEREAS, the undersigned (hereinafter individually and collectively called
"Indemnitor") desires FEDERAL INSURANCE COMPANY or any of its subsidiary or
affiliated insurers (hereinafter called "Company") to execute bonds including
undertakings and other like obligations (hereinafter referred to as bond or
bonds) on its behalf and also desires the execution of bonds on behalf of
individuals, partnerships, corporations, limited liability companies or any
other similarly unincorporated associations of members (hereinafter called
"Affiliates").
WHEREAS, from time to time the Indemnitor may be a participant in joint
ventures with others, and bonds will be required on behalf of the Indemnitor
along with the other participants in such joint ventures.
WHEREAS, Indemnitor is the successor-in-interest to DELCO ELECTRIC, INC.,
A DELAWARE CORPORATION (along with any other affiliate or related entity whose
assets have been or will be assigned to Indemnitor hereinafter individually and
collectively called "Seller") as the assignee of all bonded contract
obligations, which Indemnitor has expressly assumed without reservation
NOW, THEREFORE, in consideration of the Company executing said bond or
bonds, and the undersigned Indemnitor hereby requests the execution thereof, and
in consideration of the consent of Company to the assignment and assumption of
the bonded obligations formerly undertaken by the Seller, as well as the sum of
One Dollar paid to the Indemnitor by said Company, the receipt whereof is hereby
acknowledged, the Indemnitor, being benefited by the execution and delivery of
said bond or bonds, including, without limitation all Bonds previously issued
prior to the date of this Agreement for the Seller, the bonded obligations of
which have been expressly assumed without reservation by Indemnitor(s) and as to
which Indemnitor(s) have agreed, and do hereby agree, to assume full
responsibility for work in place as well as the prompt and proper performance
and completion of all such bonded obligations, including, without limitation
those bonded obligations listed on Exhibit A attached hereto, hereby agrees that
it will at all times jointly and severally indemnify and save harmless said
Company from and against any and all loss, cost, damage or expense, including
court costs and attorneys' fees, which it shall at any time incur by reason of
its execution and/or delivery of said bond or bonds or its payment of any claim
or liability thereunder and will place the said Company in funds to meet all its
liability under said bond or bonds promptly on request and before it may be
required to make any payment thereunder and that the voucher or other evidence
of payment by said Company of any such loss, cost, damage, expense, claim, or
liability shall be prima facie evidence of the fact and amount of the
Indemnitor's liability to said Company under this Agreement.
IT IS UNDERSTOOD AND AGREED that with respect to any bonds on behalf of
the Indemnitor participating in a joint venture that if specific application is
filed with the Company for such bonds the liability of the Indemnitor to the
Company with respect to such joint venture bonds shall be limited to the amount
expressly set forth in said application.
IT IS UNDERSTOOD AND AGREED that all of the terms, provisions, and
conditions of this Agreement shall be extended to and for the benefit not only
of the Company either as a direct writing company or as a co-surety or reinsurer
but also for the benefit of any surety or insurance company or companies with
which the Company may participate as a co-surety or reinsurer and also for the
benefit of any other company which may execute any bond or bonds at the request
of the Company on behalf of the Indemnitor .
IT IS UNDERSTOOD AND AGREED that this Agreement is in addition to all
other rights and agreements which Company may have or be a party to in
connection with Bonds previously issued for the benefit of Seller and that the
assumption of responsibility therefor by Indemnitors as herein provided shall
not constitute a waiver or release by Company of any rights Company may have to
seek and recover indemnity from third parties having liability in connection
with the issuance of such Bonds including, but not limited to, the obligations
and liabilities of Integrated Electrical Services, Inc., Delco Electric, Inc. or
their affiliates.
IT IS UNDERSTOOD AND AGREED that, notwithstanding anything herein to the
contrary, Indemnitor's agreements, covenants, and all obligations under this
General Agreement of Indemnity is limited to (1) the obligations assumed by
Indemnitor under the Asset Purchase Agreement by and among Integrated Electrical
Services, Inc., Delco Electric, Inc., DFI Group, Inc., Xxxxx Xxxxx and Xxxxx
Xxxxxxxxx, and (2) Company's obligations under the bonds listed on Exhibit A
attached hereto. Furthermore, Indemnitor has acknowledged and agreed that
Indemnitor will replace Bond No. 81889304, and Bond No. 81937100 identified on
Exhibit A (the "Cancelable Bonds") no later than ninety (90) days from the
execution of this Agreement, and hereby acknowledges and consents that the
Cancelable Bonds will be canceled upon the earlier of (i) the date of issuance
of replacement bonds or (ii) the date upon which Federal issues notice of
cancellation in compliance with the terms the Cancelable Bond(s) to be canceleed
thereby. Indemnitor's obligation under this Agreement with respect to any bond
or bonds canceled or replaced as contemplated herein will remain with respect to
such liability accruing under said bond or bonds.
IT IS FURTHER UNDERSTOOD AND AGREED that the Indemnitor, its heirs,
successors and assigns are jointly and severally bound by the foregoing
conditions of this Agreement.
IN WITNESS WHEREOF the Indemnitor has signed this instrument this, the
_____________ day of December, 2004.
WITNESS: DFI GROUP, INC., an Oklahoma Corporation
_______________________________ By: ____________________________________
WITNESS: XXXXX XXXXX, an Oklahoma resident
_______________________________ ________________________________________
WITNESS: XXXXX XXXXXXXXX, an Oklahoma resident
_______________________________ ________________________________________