EXHIBIT 10.19
AGREEMENT AND PLAN OF MERGER
by and among
GROUP MAINTENANCE AMERICA CORP.
LSC ACQUISITION CORP.
LINFORD SERVICE COMPANY
and
THE HOLDERS OF THE
OUTSTANDING CAPITAL STOCK
OF
LINFORD SERVICE COMPANY
August 18,1997
TABLE OF CONTENTS
Page
1. THE MERGER............................................................................................ 1
1.1 The Merger................................................................................ 1
1.2 Effective Time of the Merger.............................................................. 1
1.3 Closing................................................................................... 1
1.4 Effects of the Merger..................................................................... 2
1.4.1 At the Effective Time.............................................................. 2
1.4.2 Effects on the Surviving Corporation............................................... 2
1.5 Written Consents and Other Actions........................................................ 2
1.5.1 Unanimous Written Consent of the Shareholders; Other Matters....................... 2
1.5.2 Written Consent of the Sole Shareholder of Merger Sub.............................. 3
1.5.3 All Other Necessary Actions........................................................ 3
1.6 Conversion of Stock....................................................................... 3
1.6.1 Merger Sub Capital Stock........................................................... 3
1.6.2 Cancellation of the Company Treasury Stock......................................... 3
1.6.3 Merger Consideration............................................................... 3
1.7 Exchange of and Payment for Stock......................................................... 3
1.7.1 Delivery of Company Common Stock and Closing Merger Consideration.................. 3
1.7.2 Assignments........................................................................ 4
1.7.3 Payment In Full Satisfaction of All Rights......................................... 4
1.8 Determination of Closing Merger Consideration............................................. 4
1.8.1 Delivery of IPO Price to Public; Statement......................................... 4
1.9 Post-Closing Determination of Final Merger Consideration.................................. 4
1.9.1 Statement.......................................................................... 4
1.9.2 Review............................................................................. 4
1.9.3 Disputes........................................................................... 4
1.9.4 Resolution by Parties.............................................................. 5
1.9.5 Final Determination................................................................ 5
1.9.6 Expenses........................................................................... 5
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS.................................... 5
2.1 Exhibit 2................................................................................. 6
2.2 Stock Ownership........................................................................... 6
2.3 Authority................................................................................. 6
2.4 Consents.................................................................................. 6
3. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND MERGER SUB.............................................. 6
3.1 Representations and Warranties............................................................ 6
3.1.1 Organization....................................................................... 6
3.1.2 Capitalization of the Parent....................................................... 6
3.1.3 Authority.......................................................................... 7
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3.1.4 Consents.......................................................................... 7
3.1.5 Defaults.......................................................................... 7
3.1.6 Investment Company................................................................ 7
3.1.7 Financial Statements.............................................................. 7
3.1.8 Taxes............................................................................. 8
3.1.9 Full Authority.................................................................... 8
3.1.10 Access............................................................................ 8
3.1.11 Disclosure........................................................................ 8
3.1.12 Parent Material Adverse Effect.................................................... 8
3.1.13 Tax-Free Reorganization........................................................... 8
3.2 Representations and Warranties Concerning the Merger Sub.................................. 9
3.2.1 Organization and Standing.......................................................... 9
3.2.2 Capital Structure.................................................................. 9
3.2.3 Authority.......................................................................... 9
4. CERTAIN COVENANTS, AGREEMENTS AND PRE-CLOSING MATTERS.................................................... 10
4.1 Agreements of the Shareholders to be Effective Upon Closing............................... 10
4.1.1 Covenant Not to Compete............................................................ 10
4.1.2 Release............................................................................ 11
4.2 Elimination of Expense.................................................................... 11
4.3 Audit..................................................................................... 11
4.4 Certain Payables and Receivables.......................................................... 11
4.5 Purchase of Certain Receivables.......................................................... 11
4.6 Pre-Closing Covenants and Agreements...................................................... 11
4.7 Confidentiality........................................................................... 11
4.8 Tax-Free Reorganization................................................................... 12
4.9 Company Plans............................................................................. 12
4.10 Employee Options.......................................................................... 12
4.11 Payment of Indebtedness................................................................... 12
5. CONDITIONS PRECEDENT; CLOSING DELIVERIES................................................................. 12
5.1 Conditions Precedent to the Obligations of the Parent and Merger Sub...................... 12
5.1.1 Accuracy of Representations and Warranties......................................... 12
5.1.2 Performance of Covenants........................................................... 13
5.1.3 Legal Actions or Proceedings....................................................... 13
5.1.4 Approvals.......................................................................... 13
5.1.5 Closing Deliveries................................................................. 13
5.1.6 No Casualty, Loss or Damage........................................................ 13
5.1.7 Licenses, etc...................................................................... 13
5.1.8 No Material Adverse Change......................................................... 13
5.1.9 IPO................................................................................ 13
5.1.10 Certain Corporate Actions.......................................................... 13
5.1.11 Financing.......................................................................... 13
5.2 Conditions Precedent to the Obligations of the Shareholders and the Company............... 14
5.2.1 Accuracy of Representations and Warranties......................................... 14
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5.2.2 Performance of Covenants.......................................................... 14
5.2.3 Approvals......................................................................... 14
5.2.4 Closing Deliveries................................................................ 14
5.3 Deliveries by the Shareholders at the Closing............................................ 14
5.3.1 Closing Certificates.............................................................. 14
5.3.2 Stock Transfer Restriction Agreement.............................................. 14
5.3.3 Employment Agreements............................................................. 14
5.3.4 Lease Agreement................................................................... 14
5.3.5 Registration Rights Agreement..................................................... 14
5.3.6 Opinion of Counsel for the Shareholders and the Company........................... 15
5.3.7 Documents, Stock Certificates..................................................... 15
5.3.8 Discharge of Indebtedness, Releases, Etc.......................................... 15
5.4 Deliveries by the Parent at the Closing.................................................. 15
5.4.1 Closing Certificates.............................................................. 15
5.4.2 Registration Rights Agreement..................................................... 15
5.4.3 Opinion of Counsel for the Parent and Merger Sub.................................. 16
5.4.4 Closing Merger Consideration...................................................... 16
6. SURVIVAL, INDEMNIFICATIONS............................................................................... 16
6.1 Survival................................................................................. 16
6.2 Indemnification.......................................................................... 16
6.2.1 Parent Indemnified Parties........................................................ 16
6.2.2 Parent Indemnity.................................................................. 17
6.3 Limitations.............................................................................. 18
6.4 Procedures for Indemnification........................................................... 18
6.4.1 Notice............................................................................ 18
6.4.2 Legal Defense..................................................................... 18
6.4.3 Settlement........................................................................ 18
6.4.4 Cooperation....................................................................... 19
6.5 Subrogation.............................................................................. 19
7. TERMINATION............................................................................................. 19
7.1 Grounds for Termination.................................................................. 19
7.1.1 Mutual Consent.................................................................... 19
7.1.2 Optional By the Company........................................................... 19
7.1.3 Optional By the Parent............................................................ 20
7.1.4 Breach By the Parent or Merger Sub................................................ 20
7.1.5 Breach by the Company or any Shareholder.......................................... 20
7.2 Effect of Termination.................................................................... 20
8. MISCELLANEOUS........................................................................................... 20
8.1 Notice................................................................................... 20
8.2 Further Documents........................................................................ 21
8.3 Assignability............................................................................ 21
8.4 Exhibits and Schedules................................................................... 21
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8.5 Sections and Articles.................................................................... 21
8.6 Entire Agreement......................................................................... 21
8.7 Headings................................................................................. 21
8.8 CONTROLLING LAW.......................................................................... 21
8.9 Public Announcements..................................................................... 21
8.10 No Third Party Beneficiaries............................................................. 22
8.11 Amendments and Waivers................................................................... 22
8.12 No Employee Rights....................................................................... 22
8.13 Non-Recourse............................................................................. 22
8.14 When Effective........................................................................... 22
8.15 Takeover Statutes........................................................................ 22
8.16 Number and Gender of Words............................................................... 22
8.17 Invalid Provisions....................................................................... 22
8.18 Multiple Counterparts.................................................................... 23
8.19 No Rule of Construction.................................................................. 23
8.20 Expenses................................................................................. 23
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LIST OF EXHIBITS
Exhibit 1......................................................................... Determination of Final Merger Consideration
Exhibit 1.5.1............................................. Unanimous Written Consent of Shareholders of Linford Service Company
Exhibit 1.5.2..................................................... Written Consent of Sole Shareholder of LSC Acquisition Corp.
Exhibit 1.7.............................................................................................. Letter of Transmittal
Exhibit 2................................................................................................... Certain Statements
Exhibit 2.2.................................................................................. Ownership of Company Common Stock
Exhibit 3.1.4....................................................................................... Required Consents - Parent
Exhibit 4.2.......................................................................................... Expenses to be Eliminated
Exhibit 4.6.................................................................................................. Certain Covenants
Exhibit 4.9.................................................................................. Company Plans to Remain in Effect
Exhibit 4.10A........................................................................ Linford Service Company Stock Option Plan
Exhibit 4.10B................................................................................... Employees Eligible For Options
Exhibit 4.10C.............................................................................. Nonqualified Stock Option Agreement
Exhibit 5.3.2............................................................................. Stock Transfer Restriction Agreement
Exhibit 5.3.3................................................... List of Employees to Execute and Deliver Employment Agreements
Exhibit 5.3.3A................................................................................... Employment Agreement (Almini)
Exhibit 5.3.3B.................................................................................. Employment Agreement (Linford)
Exhibit 5.3.3C................................................................................... Employment Agreement (▇▇▇▇▇▇)
Exhibit 5.3.4................................................................................................. Lease Agreement
Exhibit 5.3.5................................................................................... Registration Rights Agreement
Exhibit 5.3.6........................................................... Opinion of Counsel to the Shareholder and the Company
Exhibit 5.3.8.......................................................................................... Terminated Obligations
Exhibit 5.4.3............................................................................... Opinion of Counsel to the Parent
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INDEX OF DEFINED TERMS
Accountants................................................. 5
Agreement................................................... 1
Applicable Corporate Law.................................... 1
Closing..................................................... 1
Closing Date................................................ 1
Closing Merger Consideration............................Exhibit 1
Closing Outstanding Common Stock Number.................Exhibit 1
Closing Per Share Cash Amount...........................Exhibit 1
Closing Per Share Common Stock Amount...................Exhibit 1
Code........................................................ 1
Company..................................................... 1
Company Common Stock........................................ 1
Company Option Plan......................................... 12
Company Options............................................. 12
Converted Share............................................. 3
Effective Time.............................................. 1
Final Outstanding Common Stock Number...................Exhibit 1
Final Per Share Cash Amount.............................Exhibit 1
Final Per Share Common Stock Amount.....................Exhibit 1
GAAP....................................................Exhibit 1
Indemnified Party........................................... 18
Indemnifying Party.......................................... 18
IPO......................................................... 1
IPO Price to the Public.................................Exhibit 1
Long-Term Debt..........................................Exhibit 1
Losses...................................................... 18
Merger...................................................... 1
Merger Sub.................................................. 1
Minimum Proceeds............................................ 2
Net After-Tax Income....................................Exhibit 1
Notice of Dispute........................................... 5
Operating EBITDA Amount.................................Exhibit 1
Parent...................................................... 1
Parent Common Stock......................................... 1
Parent Financial Statements................................. 7
Parent Indemnified Parties.................................. 17
Parent Material Adverse Effect.............................. 8
Parent Preferred Stock...................................... 6
Parent Related Documents.................................... 7
Price Notice................................................ 4
Registration Statement...................................... 7
SEC......................................................... 7
Securities Act.............................................. 2
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Settlement Notice........................................... 18
Shareholder................................................. 1
Shareholder Related Document................................ 6
Statement of Closing Consideration.......................... 4
Statement of Final Per Share Amounts........................ 4
Stock Certificate........................................... 3
Survival Period............................................. 15
Surviving Corporation....................................... 1
Terminated Obligations...................................... 1
Total Consideration.....................................Exhibit 1
Working Capital.........................................Exhibit 1
Working Capital Addition................................Exhibit 1
Working Capital Deduction...............................Exhibit 1
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") made effective as of
August 18, 1997, by and among Group Maintenance America Corp., a Texas
corporation (the "Parent"), LSC Acquisition Corp., a California corporation
("Merger Sub"), Linford Service Company, a California corporation (the
"Company"), and the undersigned holders of all of the outstanding capital stock
of the Company (the "Shareholders").
WHEREAS, the respective Boards of Directors of the Parent, Merger Sub and
the Company have each approved the merger of the Company with and into Merger
Sub (the "Merger") pursuant to this Agreement and the applicable statutes of the
State of California, and pursuant to the Merger each issued and outstanding
share of Common Stock, no par value, of the Company ("Company Common Stock")
will be converted into the right to receive certain shares of common stock,
$.001 par value per share, of the Parent ("Parent Common Stock"), and certain
cash consideration, all as provided herein;
WHEREAS, the Merger has been approved, as required by applicable law, by
the Parent, acting as sole shareholder of Merger Sub, and by the Shareholders,
as the holders of all of the outstanding capital stock of the Company;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties hereto agree as follows:
1. THE MERGER
1.1 The Merger. Subject to the terms and conditions hereof, and in
accordance with Section 1103 of the California Corporations Code (the
"Applicable Corporate Law"), upon the Effective Time (as defined in Section
1.2), the Company shall be merged with and into Merger Sub. Merger Sub, as the
surviving entity following the Merger, is sometimes referred to in this
Agreement as the "Surviving Corporation."
1.2 Effective Time of the Merger. In accordance with the requirements of
applicable law, appropriate documents under the Applicable Corporate Law shall
be prepared, executed and submitted for filing with the California Corporations
Commission as soon as practicable following the Closing (as defined below). The
date of such filing is referred to in this Agreement as the "Effective Time."
1.3 Closing. The closing of the Merger ("Closing") will take place at
10:00 a.m. at the offices of the Parent in Houston, Texas on the date of the
closing of the Parent's IPO (as defined below), but in no event later than
December 31, 1997 ("Closing Date"); provided that each of the conditions
precedent to the obligations of the parties to effect the Merger set forth in
Article 5 of
this Agreement are then satisfied or waived by the applicable party. The parties
may agree in writing on another date, time or place for the Closing. At the
Closing, the parties will deliver or cause to be delivered the documents
described in Sections 5.3 and 5.4 below. The term "IPO" means any underwritten
public offering of Parent Common Stock resulting in net cash proceeds to the
Parent of at least the Minimum Proceeds, as defined below (other than any
offering pursuant to any registration statement (i) relating to any capital
stock of the Parent or options, warrants or other rights to acquire any such
capital stock issued or to be issued primarily to directors, officers or
employees of the Parent or any of its subsidiaries, (ii) relating to any
employee benefit plan or interest therein, (iii) relating principally to any
preferred stock or debt securities of the Parent, or (iv) filed pursuant to Rule
145 under the Securities Act of 1933, as amended ("Securities Act"), or any
successor or similar provision). The term "Minimum Proceeds" means the aggregate
amount necessary to pay in full (i) all indebtedness of the Parent or any of its
subsidiaries outstanding at the closing of the IPO incurred for purposes of
financing any acquisitions by the Parent or any of its subsidiaries, (ii) the
aggregate redemption prices for the redemption of all of the Parent's preferred
stock outstanding at the closing of the IPO issued by the Parent in connection
with then completed acquisitions by the Parent or any of its subsidiaries, and
(iii) the aggregate cash payable by the Parent or any of its subsidiaries in
connection with all then pending acquisitions.
1.4 Effects of the Merger.
1.4.1 At the Effective Time. At the Effective Time, (i) the Company
shall merge with and into Merger Sub and as a result thereof, the separate
existence of the Company shall cease, (ii) the Articles of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation, except that the Articles
of Incorporation of Merger Sub shall be amended to provide that the name of the
Surviving Corporation shall be changed to "Linford Service Company," (iii) the
Bylaws of Merger Sub as in effect immediately prior to the Effective Time shall
be the Bylaws of the Surviving Corporation, and (iv) the directors and officers
of Merger Sub immediately prior to the Effective Time shall become the directors
and officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected or
appointed, as the case may be.
1.4.2 Effects on the Surviving Corporation. As of and after the
Effective Time, the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises of a public as well as of a private nature
previously belonging to the Company and Merger Sub; and all property (real,
personal and mixed), and all debts due on whatever account, including
subscriptions to shares, and all other choses in action, and all and every other
interest of or belonging to or due to each of the Company and Merger Sub shall
be transferred to, and vested in, the Surviving Corporation without further act
or deed; and all such property, rights and privileges, powers and franchises and
all and every other interest shall be thereafter the property of the Surviving
Corporation as they were of the Company and Merger Sub; and the title to any
real estate, or interest therein, whether by deed or otherwise, shall not revert
or be in any way impaired by reason of the Merger. The Surviving Corporation
shall be responsible and liable for all the liabilities and obligations of the
Company and Merger Sub, and any claim existing, or action or proceeding pending,
by or against the Company or Merger Sub may be prosecuted
2
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 the Applicable Corporate Law and the
terms of this Agreement.
1.5 Written Consents and Other Actions.
1.5.1 Unanimous Written Consent of the Shareholders; Other Matters.
Contemporaneously with the execution hereof, the Shareholders (i) are executing
and delivering to the Company a Unanimous Written Consent in substantially the
form of Exhibit 1.5.1 attached hereto, and (ii) hereby acknowledge that they
are aware of their dissenter's or appraisal rights with respect to the Merger
and their receipt of a copy of the provisions of Section 1300 et seq. of the
Applicable Corporate Law and have elected not to exercise such rights.
1.5.2 Written Consent of the Sole Shareholder of Merger Sub.
Contemporaneously with the execution hereof, the Parent is executing and
delivering to Merger Sub a written consent of the sole shareholder of Merger
Sub, in the form of Exhibit 1.5.2 attached hereto, pursuant to the applicable
provisions of the Applicable Corporate Law, adopting this Agreement.
1.5.3 All Other Necessary Actions. In addition to the actions set
forth in Sections 1.5.1 and 1.5.2, the Parent, Merger Sub and the Company will
take all actions necessary in accordance with the Applicable Corporate Law and
their respective articles of incorporation and bylaws to cause the Merger to be
consummated on, and subject to, the terms set forth in this Agreement and the
Applicable Corporate Law.
1.6 Conversion of Stock. As of the Effective Time, by virtue of the
Merger and without further action on the part of any holder of shares of Company
Common Stock or any holder of shares of capital stock of Merger Sub:
1.6.1 Merger Sub Capital Stock. Each share of capital stock of
Merger Sub issued and outstanding at the Effective Time shall remain outstanding
and shall be unchanged at and after the Merger and immediately following the
Effective Time shall constitute all of the issued and outstanding capital stock
of the Surviving Corporation.
1.6.2 Cancellation of the Company Treasury Stock. All shares of
Company Common Stock that are owned by the Company as treasury stock or by any
of its subsidiaries shall be canceled and retired and shall cease to exist and
no stock of the Parent or other consideration shall be delivered in exchange
therefor.
1.6.3 Merger Consideration. Each share of Company Common Stock
(other than shares to be canceled in accordance with Section 1.6.2) shall be
converted into the right to receive (i) that number of shares of Parent Common
Stock equal to the Final Per Share Common Stock Amount (as defined in Exhibit 1
attached hereto), (ii) cash equal to the Final Per Share Cash
3
Amount (as defined in Exhibit 1 attached hereto), (iii) that number of shares of
Parent Common Stock equal to the Contingent Per Share Common Stock Amount (as
defined in Exhibit 1 attached hereto), and (iv) cash equal to the Contingent Per
Share Cash Amount (as defined in Exhibit 1 attached hereto). Each share of
Company Common Stock so converted into the right to receive cash and shares of
Parent Common Stock (a "Converted Share") shall, by virtue of the Merger and
without any action on the part of the holder thereof, at the Effective Time no
longer be outstanding and shall at such time be canceled and retired and shall
cease at such time to exist, and each holder of a certificate which prior to the
Effective Time validly evidenced any such Converted Share (a "Stock
Certificate") shall thereafter cease to have any rights with respect to such
Converted Share, except, upon the surrender of the Stock Certificate and a duly
executed and completed letter of transmittal in accordance with Section 1.7, the
right to receive such cash and Parent Common Stock at the times and in the
manner set forth herein.
1.7 Exchange of and Payment for Stock.
1.7.1 Delivery of Company Common Stock and Closing Merger
Consideration. Prior to the Closing, the Parent will deliver to each
Shareholder a letter of transmittal, in substantially the form attached hereto
as Exhibit 1.7, to be used for the purpose of surrendering to the Parent Stock
Certificates in exchange for the right to receive the Final Per Share Cash
Amount and the Final Per Share Common Stock Amount for each Converted Share
evidenced by such Stock Certificate. All of the Company Common Stock held by
the Shareholders will be surrendered by the Shareholders to the Parent together
with properly completed and executed letters of transmittal (with each such
signature guaranteed by a commercial bank or notarized by a notary public or
similar official reasonably satisfactory to the Parent), and the Parent shall
cause to be delivered to the Shareholders at the Closing the Closing Per Share
Cash Amount (as defined in Exhibit 1 attached hereto) and the Closing Per Share
Common Stock Amount (as defined in Exhibit 1 attached hereto) applicable to each
of the Converted Shares evidenced by the Stock Certificates properly surrendered
(with properly executed and completed letters of transmittal) by each
Shareholder to the Parent.
1.7.2 Assignments. Except as contemplated by Section 4.10, no
assignment, transfer or other disposition of record or beneficial ownership of
any shares of Company Common Stock may be made on or after the date hereof.
1.7.3 Payment In Full Satisfaction of All Rights. The delivery of
the Closing Per Share Cash Amount and the Closing Per Share Common Stock Amount
to the Shareholders with respect to their Converted Shares shall be deemed to be
payment in full satisfaction of all rights pertaining to the outstanding
Converted Shares except for the right to receive additional shares of Parent
Common Stock and cash pursuant to Section 1.9.
1.8 Determination of Closing Merger Consideration.
1.8.1 Delivery of IPO Price to Public; Statement. Within five
business days after the Parent and its underwriters agree on the initial price
to the public for a share of Parent Common Stock offered in the IPO, as set
forth in an executed underwriting agreement, the Parent shall deliver to the
Shareholders a written notice (the "Price Notice") setting forth such
4
initial price to the public and a statement setting forth a calculation of the
Closing Outstanding Common Stock Number (as defined in Exhibit 1 attached
hereto), the Closing Per Share Cash Amount, the Closing Per Share Common Stock
Amount and the Closing Merger Consideration (as defined in Exhibit 1 attached
hereto), payable to the Shareholders at Closing (the "Statement of Closing
Consideration"). The initial price to the public of a share of Parent Common
Stock, as set forth in the Price Notice, and the Closing Outstanding Common
Stock Number, the Closing Per Share Cash Amount, the Closing Per Share Common
Stock Amount and the Closing Merger Consideration, as set forth in the Statement
of Closing Consideration, shall be final, conclusive and binding for purposes of
this Agreement.
1.9 Post-Closing Determination of Final Merger Consideration.
1.9.1 Statement. No later than 90 days after the Closing, the Parent
shall deliver to the Shareholders a statement showing the Final Outstanding
Common Stock Number (as defined in Exhibit 1 attached hereto), the Final Per
Share Cash Amount, the Final Per Share Common Stock Amount and the Final Merger
Consideration (as defined in Exhibit 1 attached hereto) (the "Statement of Final
Per Share Amounts").
1.9.2 Review. After delivery to the Shareholders of the Statement of
Final Per Share Amounts, the Shareholders and their representatives shall be
afforded the opportunity to review and inspect all of the financial records,
work papers, schedules and other supporting papers relating to the preparation
of the Statement of Final Per Share Amounts, and to consult with the Parent and
its representatives regarding the methods used in the preparation of the
Statement of Final Per Share Amounts.
1.9.3 Disputes. The Final Outstanding Common Stock Number, the
Final Per Share Cash Amount, the Final Per Share Common Stock Amount and the
Final Merger Consideration as shown on the Statement of Final Per Share Amounts
shall be final, conclusive and binding for purposes of this Agreement, unless
the Shareholders shall deliver to the Parent a written notice of disagreement
("Notice of Dispute") with any item or items in the Statement of Final Per Share
Amounts within 10 business days following receipt of the Statement of Final Per
Share Amounts, specifying in reasonable detail the nature and extent of such
disagreement; provided, however, that no Notice of Dispute may be given with
respect to any items unless such item involves an amount of $25,000 or more. If
a Notice of Dispute is not properly given within such time, the Final
Outstanding Common Stock Number, the Final Per Share Cash Amount, the Final Per
Share Common Stock Amount and the Final Merger Consideration as set forth in the
Statement of Final Per Share Amounts shall be final, conclusive and binding for
purposes of this Agreement.
1.9.4 Resolution by Parties. If a Notice of Dispute is properly given,
the Parent and the Shareholders agree to negotiate in good faith and use their
best efforts to resolve any disagreement with respect to the Statement of Final
Per Share Amounts. If the Parent and the Shareholders shall not reach such
resolution within 30 days following receipt by the Parent of a properly given
Notice of Dispute, the dispute shall be referred to KPMG Peat Marwick LLP (the
"Accountants"), who shall resolve such dispute within 30 days after its
submission to them. The Parent and the Shareholders (if the dispute is resolved
by them or the Statement of Final Per
5
Share Amounts otherwise becomes final pursuant hereto without referral to the
Accountants) or the Accountants (if a dispute is resolved by them) shall set
forth such resolution in writing and such writing shall (i) set forth the Final
Outstanding Common Stock Number, the Final Per Share Cash Amount, the Final Per
Share Common Stock Amount and the Final Merger Consideration and (ii) be final,
conclusive and binding for purposes of this Agreement.
1.9.5 Final Determination. Within 10 business days following the
final determination of the Final Outstanding Common Stock Number, the Final Per
Share Cash Amount, the Final Per Share Common Stock Amount and the Final Merger
Consideration as provided in this Section 1.9, (i) the Parent shall deliver to
each Shareholder (a) the cash amount, if any, by which the aggregate of the
Final Per Share Cash Amounts payable to such Shareholder, as finally determined
pursuant hereto, exceeds the aggregate of the Closing Per Share Cash Amounts
paid to such Shareholder at the Closing; and (b) the number of shares of Parent
Common Stock, if any, by which the aggregate of the Final Per Share Common Stock
Amounts deliverable to such Shareholder, as finally determined pursuant hereto,
exceeds the aggregate of the Closing Per Share Common Stock Amounts delivered to
such Shareholder at the Closing; or (ii) each Shareholder shall deliver to the
Parent (a) the cash amount, if any, by which the aggregate of the Closing Per
Share Cash Amounts paid to such Shareholder at the Closing exceeds the aggregate
of the Final Per Share Cash Amounts payable to such Shareholder as finally
determined pursuant hereto; and (b) the number of shares of Parent Common Stock,
if any, by which the aggregate of the Closing Per Share Common Stock Amounts
delivered to such Shareholder at the Closing exceeds the aggregate of the Final
Per Share Common Stock Amounts deliverable to such Shareholder as finally
determined pursuant hereto.
1.9.6 Expenses. The Parent and the Shareholders shall each pay their
own costs incurred in connection with this Section 1.9, including the fees and
expenses of their respective attorneys and accountants, if any.
2. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders, jointly and severally, hereby represent
and warrant to the Parent and Merger Sub as follows:
2.1 Exhibit 2. The statements in Exhibit 2 attached hereto are true
and correct.
2.2 Stock Ownership. Each Shareholder owns, beneficially and of record,
with full power to vote, the number of shares of Company Common Stock set forth
beside such Shareholder's name on Exhibit 2.2 and such shares are so held by the
Shareholder free and clear of all liens, encumbrances and adverse claims
whatsoever.
2.3 Authority. The Shareholder has full right, power, legal capacity and
authority to (i) execute, deliver and perform this Agreement, and all other
documents and instruments referred to herein or contemplated hereby to be
executed, delivered and performed by the Shareholder (each a "Shareholder
Related Document") and (ii) consummate the transactions contemplated herein and
thereby. This Agreement has been duly executed and delivered by the
Shareholders and constitutes, and each Shareholder Related Document, when duly
executed and
6
delivered by the Shareholders named as parties therein will constitute, legal,
valid and binding obligations of such Shareholders enforceable against such
Shareholders in accordance with their respective terms and conditions, except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether applied in a proceeding
at law or in equity).
2.4 Consents. No approval, consent, order or action of or filing with any
court, administrative agency, governmental authority or other third party is
required for the execution, delivery or performance by the Shareholders of this
Agreement or any Shareholder Related Document. The execution, delivery and
performance by the Shareholders of this Agreement and any Shareholder Related
Documents do not violate any mortgage, indenture, contract, agreement, lease or
commitment or other instrument of any kind to which any Shareholder is a party
or by which any Shareholder or such Shareholder's assets or properties may be
bound or affected or any law, rule or regulation applicable to any Shareholder
or any court injunction, order or decree or any valid and enforceable order of
any governmental agency in effect as of the date hereof having jurisdiction over
any Shareholder.
3. REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND MERGER SUB
3.1 Representations and Warranties. The Parent hereby represents and
warrants to the Shareholders and the Company as follows:
3.1.1 Organization. The Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas. The
Parent is duly qualified or licensed as a foreign corporation authorized to do
business in all states in which any of its assets or properties may be situated
or where its business is conducted except where the failure to obtain such
qualification or license would not have a Parent Material Adverse Effect (as
defined below).
3.1.2 Capitalization of the Parent. As of the execution date of
this Agreement, the total authorized capital stock of the Parent is 100,000,000
shares of Parent Common Stock, of which 22,833,363 shares are issued and
outstanding and of which 0 are held in the treasury of the Parent, 50,000,000
shares of Preferred Stock, $.001 par value ("Parent Preferred Stock"), divided
into 15,000,000 shares of Series A Preferred Stock, of which 2,088,258 shares
are issued and outstanding, 678,920 shares of Series B Preferred Stock, of which
678,920 shares are issued and outstanding, 130,000 shares of Series C Preferred
Stock, of which 100,000 shares are issued and outstanding, 1,800,000 shares of
Series D Preferred Stock, of which 1,568,000 shares are issued and outstanding,
600,000 shares of Series E Preferred Stock, of which 580,000 shares are issued
and outstanding and 800,000 shares of Series F Preferred Stock, of which 644,691
shares are issued and outstanding, 600,000 shares of Series G Preferred Stock,
none of which are issued and outstanding, 600,000 shares of Series H Preferred
Stock, of which 500,000 are issued and outstanding, and 600,000 shares of Series
I Preferred Stock, none of which are issued and outstanding. The outstanding
shares of Parent Common Stock and Parent Preferred Stock have been duly and
validly issued and are fully paid and non-assessable.
7
3.1.3 Authority. The Parent has the requisite power and authority to
execute, deliver and perform this Agreement and all documents and instruments
referred to herein or contemplated hereby (the "Parent Related Documents") and
to consummate the transactions contemplated herein and thereby. This Agreement
has been duly executed and delivered by the Parent and constitutes, and all the
Parent Related Documents, when executed and delivered by the Parent will
constitute, legal, valid and binding obligations of the Parent, enforceable in
accordance with their respective terms and conditions except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (whether applied in a proceeding at law or in
equity).
3.1.4 Consents. Except as provided on Exhibit 3.1.4, no approval,
consent, order or action of or filing with any court, administrative agency,
governmental authority or other third party is required for the execution,
delivery or performance by the Parent of this Agreement or the Parent Related
Documents or the consummation by the Parent of the transactions contemplated
hereby, except for (i) the filing of the Parent's registration statement with
respect to the IPO ("Registration Statement") with the U.S. Securities and
Exchange Commission ("SEC") pursuant to the Securities Act and the SEC's
declaration of effectiveness of such Registration Statement and the completion
of all necessary filings required under, and the obtaining of all necessary
consents and approvals required pursuant to, state securities or "blue sky" laws
in connection with the IPO, and (ii) the filing of the Certificate of Merger and
other required documents with the California Corporations Commission.
3.1.5 Defaults. The Parent is not in default under or in violation
of, and the execution, delivery and performance of this Agreement and the Parent
Related Documents and the consummation by the Parent of the transactions
contemplated hereby and thereby will not result in a default under or in
violation of (i) any mortgage, indenture, charter or bylaw provision, contract,
agreement, lease, commitment or other instrument of any kind to which the Parent
is a party or by which the Parent or any of its properties or assets may be
bound or affected or (ii) any law, rule or regulation applicable to the Parent
or any court injunction, order or decree, or any valid and enforceable order of
any governmental agency in effect as of the date hereof having jurisdiction over
the Parent, which default or violation prevents the Parent from consummating the
transactions contemplated hereby or is reasonably likely to have a Parent
Material Adverse Effect.
3.1.6 Investment Company. The Parent is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, or a "holding company," a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
3.1.7 Financial Statements. The Parent has provided certain
financial statements to the Shareholders ("Parent Financial Statements") and
such Parent Financial Statements have been prepared in accordance with GAAP and
fairly present the consolidated financial position, results of operations and
cash flows of the Parent and its then existing
8
consolidated subsidiaries as of the dates and for the periods indicated, subject
to normal year-end adjustments and any other adjustments described therein or in
the notes or schedules thereto. The books and records of the Parent have been
kept in reasonable detail and accurately and fairly reflect the transactions of
the Parent.
3.1.8 Taxes. The Parent has either accrued, discharged or caused
to be discharged, as the same have become due, or the Parent Financial
Statements contain adequate accruals and reserves for, all taxes, interest
thereon, fines and penalties of every kind and character, attributable or
relating to the properties and business of the Parent for the period covered by
the Parent Financial Statements.
3.1.9 Full Authority. The Parent has the corporate power and
authority and has obtained all licenses, permits, qualifications, and other
documentation (including permits required under applicable Environmental Law, as
defined in Exhibit 2) necessary to own and/or operate its businesses, properties
and assets and to carry on its businesses as being conducted on the date of this
Agreement, except such licenses, permits, qualifications or other documentation,
the failure to obtain which is not reasonably likely to result in a Parent
Material Adverse Effect, and such businesses are now being conducted and such
assets and properties are being owned and/or operated in compliance with all
applicable laws (including Environmental Law), ordinances, rules and regulations
of any governmental agency of the United States, any state or political
subdivision thereof, or any foreign jurisdiction, all applicable court or
administrative agency decrees, awards and orders and all such licenses, permits,
qualifications and other documentation, except where the failure to comply will
not have a Parent Material Adverse Effect, and there is no existing condition or
state of facts that would give rise to a violation thereof or a liability or
default thereunder that is reasonably likely to have a Parent Material Adverse
Effect.
3.1.10 Access. The Parent has cooperated fully in permitting the
Shareholders and their representatives to make a full investigation of the
properties, operations and financial condition of the Parent and has afforded
the Shareholders and their representatives reasonable access to the offices,
buildings, real properties, machinery and equipment, inventory and supplies,
records, files, books of account, tax returns, agreements and commitments and
personnel of the Parent.
3.1.11 Disclosure. No representation or warranty by the Parent in
this Agreement, and no statement contained in any certificate delivered by the
Parent to the Shareholders pursuant to this Agreement, contains any untrue
statement of a material fact or omits any material fact necessary in order to
make the statements herein or therein, in light of the circumstances under which
they are or were made, not misleading.
3.1.12 Parent Material Adverse Effect. The term "Parent Material
Adverse Effect" shall mean an adverse effect on the properties, assets,
financial position, results of operations, long-term debt, other indebtedness,
cash flows or contingent liabilities of the Parent and its consolidated
subsidiaries, taken as a whole in an amount of $100,000 or more.
3.1.13 Tax-Free Reorganization. With respect to the qualification
of the Merger as a reorganization within the meaning of Section 368(a) of the
Code:
9
(i) The Parent has no plan or intention to sell, exchange or otherwise
dispose or liquidate the Surviving Corporation, to merge the Surviving
Corporation with or into any other corporation, to sell or otherwise
dispose of its Surviving Corporation Common Stock except for transfers of
Surviving Corporation Common Stock to corporations of which the Parent has
control (within the meaning of Section 368(a) of the Code) at the time of
such transfer, or to cause the Surviving Corporation to sell or otherwise
dispose of any of its assets or of any assets acquired in the Merger,
except for dispositions made in the ordinary course of business or
transfers of assets to a corporation of which the Surviving Corporation has
control (within the meaning of Section 368(a) of the Code) at the time of
such transfer.
(ii) The Parent has no plan or intention to cause the Surviving
Corporation, after the Merger, to issue additional shares of its stock that
would result in the Parent losing control of the Surviving Corporation
within the meaning of Section 368(c) of the Code.
(iii) Following the Merger, the Surviving Corporation will continue
the Company's historic business or use a significant portion of its
historic business assets in a business.
(iv) Except as provided in Section 8.20 below, if the Merger is
effected, the Parent and Merger Sub will each pay their respective
expenses, if any, incurred in connection with the Merger.
(v) The Parent Common Stock that will be issued in connection with the
Merger is voting stock within the meaning of Section 368(c) of the Code.
(vi) At the Effective Time, neither the Parent nor Merger Sub will
have any outstanding warrants, options, convertible securities, or any
other right pursuant to which any person could acquire stock in the Parent
or Merger Sub which, if exercised or converted, would affect the Parent's
acquisition or retention of control of the Surviving Corporation.
(vii) Neither the Parent nor Merger Sub is an investment company as
defined in Section 368(a)(2)(F) of the Code.
(viii) None of the Parent Common Stock received by the Shareholders
as a part of the Final Merger Consideration will be separate consideration
for, or allocable to, any employment agreement.
(ix) Neither the Parent nor Merger Sub is under the jurisdiction of a
court in a case under Title 11 of the United States Code, or a
receivership, foreclosure, or similar proceeding in a federal or state
court.
10
3.2 Representations and Warranties Concerning the Merger Sub. The Parent
and Merger Sub, jointly and severally, hereby represent and warrant to the
Shareholders and the Company as follows:
3.2.1 Organization and Standing. Merger Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of California.
3.2.2 Capital Structure. The authorized capital stock of Merger
Sub consists of 5,000 shares of common stock, par value $.01 per share, 1,000 of
which are validly issued and outstanding, fully paid and nonassessable and are
owned by the Parent free and clear of all liens, encumbrances and adverse
claims.
3.2.3 Authority. Merger Sub has the corporate power and authority
to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement,
the performance by Merger Sub of its obligations hereunder and the consummation
of the transactions contemplated hereby have been duly authorized by its Board
of Directors and the Parent as its sole shareholder, and, except for the
corporate filings required by state law, no other corporate proceedings on the
part of Merger Sub are necessary to authorize this Agreement and the transaction
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Merger Sub and (assuming the due authorization, execution and
delivery hereof by the Company) constitutes a valid and binding obligation of
Merger Sub enforceable against Merger Sub in accordance with its terms, except
as such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether applied in a proceeding
at law or in equity).
4. CERTAIN COVENANTS, AGREEMENTS AND PRE-CLOSING MATTERS
4.1 Agreements of the Shareholders to be Effective Upon Closing.
Effective upon Closing, and without further action on the part of any party or
other person, the Shareholders covenant and agree as follows:
4.1.1 Covenant Not to Compete.
(i) For the considerations specified in this Agreement and in
recognition that the covenant by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in this Section is a
material inducement to the Parent to enter into and perform this Agreement,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ agrees that for the period from the Closing Date to the
fifth anniversary of the Closing Date, he will not represent, engage in,
carry on, or have a financial interest in, directly or indirectly,
individually, as a member of a partnership or limited liability company,
equity owner, shareholder (other than as a shareholder of less than one
percent of the issued and outstanding stock of a publicly-held company
whose gross assets exceed $100 million), investor, officer, director,
trustee, manager, employee, agent, associate or consultant engage in any
business that involves indoor air quality, heating, ventilation, air
conditioning, appliance, mechanical construction, plumbing, electrical
contracting, sewer cleaning products or services within a 100 mile radius
of the cities of Oakland, Sacramento, Ontario, San Diego and San ▇▇▇▇;
11
provided, however, that ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ may engage in a consulting
practice in the HVAC industry if (i) he does not directly assist any
company that competes with the Surviving Corporation or any its affiliates
during such five year period in any market where the Surviving Corporation
or any of its affiliates operates and (ii) he provides the Parent with
notice of any consulting engagement that is expected to provide to him
consulting fees of $10,000 or more in any twelve consecutive month period
to allow the Parent the opportunity to assess the engagement for any
conflict with this Section 4.1.1(i).
(ii) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ agrees that the limitations set forth in
Section 4.1.1(i) on his rights to compete with the Parent and its
affiliates as set forth in clause (i) are reasonable and necessary for the
protection of Parent and its affiliates. In this regard, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
specifically agrees that the limitations as to period of time and
geographic area, as well as all other restrictions on his activities
specified herein, are reasonable and necessary for the protection of the
Parent and its affiliates. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ agrees that, in the event that
the provisions of this Section should ever be deemed to exceed the scope of
business, time or geographic limitations permitted by applicable law, such
provisions shall be and are hereby reformed to the maximum scope of
business, time or geographic limitations permitted by applicable law.
(iii) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ agrees that the remedy at law for any breach
by him of this Section 4.1.1 will be inadequate and that the Parent shall
be entitled to injunctive relief.
4.1.2 Release. Effective as of the Effective Time, each
Shareholder does hereby (i) release, acquit and forever discharge the Surviving
Corporation from any and all liabilities, obligations, claims, demands, actions
or causes of action arising from or relating to any event, occurrence, act,
omission or condition occurring or existing on or prior to the Effective Time,
including, without limitation, any claim for indemnity or contribution from the
Surviving Corporation in connection with the obligations or liabilities of such
Shareholder hereunder, except for salary and benefits payable to such
Shareholder as an employee in the ordinary course of business; (ii) waive all
breaches, defaults or violations of any agreement applicable to the Company
Common Stock and agree that any and all such agreements are terminated as of the
Effective Time, and (iii) waive any and all preemptive or other rights to
acquire any shares of capital stock of the Company and release any and all
claims arising in connection with any prior default, violation or failure to
comply with or satisfy any such preemptive or other rights.
4.2 Elimination of Expense. Prior to Closing, the Shareholders will
produce evidence to the satisfaction of the Parent and its lenders that the
expenses of the Company as described on Exhibit 4.2 hereto have been eliminated
as expenses of the Surviving Corporation as of and following the Closing Date.
4.3 Audit. Prior to Closing, the Accountants shall complete an audit of
the Company for the fiscal year ended March 31, 1997, and such additional audit
and/or review work as may be requested by the Parent through and including the
Closing Date, and provide its report to the Parent and the Shareholders.
12
4.4 Certain Payables and Receivables. On or prior to Closing, the
Shareholders shall pay in full in cash all accounts receivable, notes receivable
and advances payable by any Shareholder (or any affiliate thereof) to the
Company and the Company shall pay in full in cash all accounts payable, notes
payable and advances payable by the Company to any Shareholder (or any affiliate
thereof).
4.5 Purchase of Certain Receivables. If any accounts receivable included
in current assets of the Company for purposes of determining Working Capital (as
defined in Exhibit 1) remain unpaid in full for 90 days or more after the
Closing, the Shareholders shall, upon written request by the Surviving
Corporation made within 120 days after the Closing, purchase the same from the
Surviving Corporation, without recourse, for the uncollected amount thereof
(less any bad debt reserve allocable thereto). During the 90 day period after
the Closing Date, Parent shall cause the Company to use reasonable efforts to
collect such receivables, and after the purchase of such receivables by the
Shareholders the Company shall cooperate with the Shareholders to assist them
with the collection of such receivables; provided, however, that in connection
with such cooperation neither Parent nor the Company shall be obligated to incur
any expense unless reimbursed by the Shareholders, give preferential treatment
to the collection of such receivables over the collection of receivables held by
the Company or take action that could damage its ongoing business relationships.
4.6 Pre-Closing Covenants and Agreements. The Shareholders and the Company
jointly and severally agree as set forth in Exhibit 4.6 attached hereto.
4.7 Confidentiality. Prior to the Effective Time, none of the Parent,
Merger Sub, the Company or any Shareholder will disclose the terms of this
Agreement or the Merger to any person other than their respective directors,
officers, agents or representatives, except as otherwise provided herein or
unless required by law. The Company may make appropriate disclosures of the
general nature of the Merger to its employees, vendors and customers to protect
the Company's goodwill and to facilitate the Closing. The Parent and Merger Sub
may disclose pertinent information regarding the Merger to its existing and
prospective investors, lenders, or investment bankers or financial advisors for
the purpose of obtaining financing, including, without limitation, financing
related to the IPO or other offerings of its securities, and may describe this
Agreement and the transactions contemplated hereby in any registration statement
filed by the Parent under the Securities Act and in reports filed by the Parent
under the Securities Exchange Act of 1934, and may file this Agreement as an
exhibit to any thereof. The Parent may also make appropriate disclosures of the
general nature of the Merger and the identity, nature and scope of the Company's
operations to prospective acquisition candidates in connection with the Parent's
efforts to effect additional acquisitions. Each party will have mutual approval
rights with respect to written employee presentations concerning the prospective
merger.
4.8 Tax-Free Reorganization. Unless the other parties shall otherwise
agree in writing, none of the Shareholders, the Parent, Merger Sub, the Company
or the Surviving Corporation shall knowingly take or fail to take any action
that would jeopardize the qualification of the Merger as a reorganization within
the meaning of Section 368(a) of the Code.
13
4.9 Company Plans. Except as otherwise contemplated by this Agreement, the
Company Plans (as defined in Exhibit 2) described on Exhibit 4.9 in effect at
the date of this Agreement will remain in effect unless otherwise determined by
the Parent after the Effective Time.
4.10 Employee Options. Notwithstanding the other provisions of this
Agreement, prior to the Effective Time, the Company and its Board of Directors
may adopt, (and, if adopted, the Shareholders shall approve) a Stock Option Plan
substantially in the form of Exhibit 4.10A attached hereto (the "Company Option
Plan") under which the Company may, during the period from the date hereof
through September 15, 1997 grant options ("Company Options") to certain of its
employees listed in Exhibit 4.10B attached hereto, to purchase up to the number
of shares of Company Common Stock set forth on Exhibit 4.10B beside such
employee's name, for the exercise price per share and for the period set forth
on Exhibit 4.10B attached hereto, all pursuant to Option Agreements in
substantially the form of Exhibit 4.10C attached hereto. The Company shall not
grant any other stock options under the Company Option Plan or otherwise. On or
before September 15, 1997, the Company shall give written notice to the Parent
setting forth whether it has adopted the Company Option Plan and, if so, the
number of Company Options granted thereunder, the employees to whom the Company
Options were granted and copies of each Option Agreement in effect with respect
thereto. At the Effective Time, the Company's obligations with respect to each
outstanding Company Option under such Option Agreements shall be assumed by the
Parent, as provided in the Option Agreements. The Company Options so assumed by
the Parent shall continue to have, and be subject to, the terms and conditions
set forth in the Company Option Plan and the Option Agreements, provided that
the number of shares of Parent Common Stock into which such Company Options are
exercisable and the exercise price therefor and certain other matters shall be
governed by Section 8(ii) of the Option Agreements.
4.11 Payment of Indebtedness. Within 10 days following the Closing, Parent
shall cause all indebtedness owed by the Company to The Mechanics Bank of
Richmond to be paid.
5. CONDITIONS PRECEDENT; CLOSING DELIVERIES
5.1 Conditions Precedent to the Obligations of the Parent and Merger Sub.
The obligations of the Parent and Merger Sub to effect the Merger under this
Agreement are subject to the satisfaction of each of the following conditions,
unless waived by the Parent in writing to the extent permitted by applicable
law:
5.1.1 Accuracy of Representations and Warranties. The
representations and warranties of the Shareholders and the Company contained in
this Agreement, in Exhibit 2 and the Disclosure Schedule referred to therein and
the other Exhibits provided by the Shareholders or the Company pursuant to this
Agreement or in any closing certificate or document delivered to the Parent
pursuant hereto shall be true and correct at and as of the Closing Date as
though made at and as of that time other than such representations and
warranties as are specifically made as of another date, and the Shareholders and
the Company shall each have delivered to the Parent and Merger Sub a certificate
to that effect.
14
5.1.2 Performance of Covenants. The Shareholders and the Company
shall have performed and complied with all covenants of this Agreement to be
performed or complied with by them at or prior to the Closing Date, and the
Shareholders and the Company shall each have delivered to the Parent and Merger
Sub a certificate to that effect.
5.1.3 Legal Actions or Proceedings. No legal action or proceeding
shall have been instituted after the date hereof against the Company or against
the Parent or Merger Sub arising by reason of the acquisition of the Company
pursuant to this Agreement, which is reasonably likely (i) to restrain, prohibit
or invalidate the consummation of the transactions contemplated by this
Agreement, (ii) to have a Company Material Adverse Effect or (iii) to have a
Parent Material Adverse Effect after giving effect to the consummation of the
transactions contemplated by this Agreement, and the Shareholders and the
Company shall each have delivered to the Parent and Merger Sub a certificate to
that effect.
5.1.4 Approvals. The Company and the Shareholders shall have
procured all of the consents, approvals and waivers of third parties or any
regulatory body or authority, whether required contractually or by applicable
law or otherwise necessary for the execution, delivery and performance of this
Agreement (including the Company Related Documents and the Shareholder Related
Documents) by the Company and the Shareholder prior to the Closing Date, and the
Shareholders and the Company shall each have delivered to the Parent and the
Merger Sub a certificate to that effect.
5.1.5 Closing Deliveries. All documents required to be executed or
delivered at Closing by the Shareholders pursuant to Section 5.3 of this
Agreement shall have been so executed and delivered.
5.1.6 No Casualty, Loss or Damage. Since June 30, 1997, no casualty,
loss or damage shall have occurred on or prior to the Effective Time to any of
the properties or assets of the Company.
5.1.7 Licenses, etc. The Company shall have obtained all such
licenses and permits as are legally required for the continued operation of the
business after the Effective Time, except such licenses and permits, the absence
of which will not have a Company Material Adverse Effect.
5.1.8 No Material Adverse Change. Since June 30, 1997, there shall
not have been any event that in the reasonable judgment of the Parent adversely
affects the properties, assets, financial condition, results of operations, cash
flows, businesses or prospects of the Company.
5.1.9 IPO. The Parent shall have completed the IPO on terms
acceptable to it, and the net proceeds thereof shall have been received by the
Parent.
5.1.10 Certain Corporate Actions. All necessary director and
shareholder resolutions, waivers and consents required to consummate the
transactions contemplated
15
hereunder shall have been executed and delivered.
5.1.11 Financing. The Parent shall have obtained financing on terms
and in amounts reasonably acceptable to it, to finance the payment of the cash
portion of the aggregate of the Final Per Share Cash Amounts and the ongoing
financing needs of the Surviving Corporation, and such financing shall be
available.
5.2 Conditions Precedent to the Obligations of the Shareholders and the
Company. The obligations of the Shareholders and the Company under this
Agreement are subject to the satisfaction of each of the following conditions,
unless waived by the Shareholders and the Company in writing to the extent
permitted by applicable law:
5.2.1 Accuracy of Representations and Warranties. The
representations and warranties of the Parent and Merger Sub contained in this
Agreement or in any closing certificate or document delivered to the
Shareholders or the Company pursuant hereto shall be true and correct on and as
of the Closing Date as though made at and as of that date other than such
representations and warranties as are specifically made as of another date, and
the Parent and Merger Sub shall have delivered to the Shareholders and the
Company a certificate to that effect.
5.2.2 Performance of Covenants. The Parent and Merger Sub shall have
performed and complied with all covenants of this Agreement to be performed or
complied with by them at or prior to the Closing Date and the Parent and Merger
Sub shall have delivered to the Shareholders and the Company a certificate to
such effect.
5.2.3 Approvals. The Parent shall have procured all of the consents,
approvals and waivers specified in Exhibit 3.1.4 prior to the Closing Date, and
the Parent shall have delivered to the Shareholders and the Company a
certificate to that effect.
5.2.4 Closing Deliveries. All documents required to be executed or
delivered at Closing by the Parent pursuant to Section 5.4 of this Agreement
shall have been so executed and delivered.
5.3 Deliveries by the Shareholders at the Closing. At the Closing,
simultaneously with the deliveries by the Parent specified in Section 5.4 below,
and in addition to any deliveries required to be made by the Shareholders and
the Company pursuant to any other transaction document at the Closing, the
Shareholders shall deliver or cause to be delivered to the Parent the following:
5.3.1 Closing Certificates. The Shareholders and the Company shall
deliver the certificates required pursuant to Sections 5.1.1, 5.1.2, 5.1.3
and 5.1.4.
5.3.2 Stock Transfer Restriction Agreement. The Shareholders shall
execute and deliver a Stock Transfer Restriction Agreement on the Closing
Date, effective as of the Effective Time, substantially in the form set
forth in Exhibit 5.3.2.
5.3.3 Employment Agreements. ▇▇▇▇▇▇▇ Almini, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇
16
▇▇▇▇▇▇ shall execute and deliver Employment Agreements (with the
blanks appropriately completed) with the Company on the Closing Date,
effective as of the Effective Time, substantially in the forms set forth in
Exhibit 5.3.3A, Exhibit 5.3.3B and Exhibit 5.3.3C, respectively.
5.3.4 Lease Agreement. The Shareholders shall cause the owner of the
property located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, to execute and
deliver a lease agreement with the Company substantially in the form
attached as Exhibit 5.3.4.
5.3.5 Registration Rights Agreement. The Shareholders shall execute
and deliver a Registration Rights Agreement at the Closing, effective as of
the Effective Time, substantially in the form set forth in Exhibit 5.3.5
attached hereto.
5.3.6 Opinion of Counsel for the Shareholders and the Company. The
Shareholders shall deliver the favorable opinion of McPhee & ▇▇▇▇▇-▇▇▇▇▇,
counsel to the Shareholders and the Company, dated the Effective Time,
substantially in the form and to the effect set forth in Exhibit 5.3.6
attached hereto.
5.3.7 Documents, Stock Certificates. The Shareholders shall execute
and deliver, and shall cause the Company to execute and deliver, the
documents, certificates, opinions, instruments and agreements required to
be executed and delivered by the Company or its officers or directors or
the Shareholders at the Closing as contemplated hereby or as may be
reasonably requested by the Parent and shall deliver or cause to be
delivered the documents and evidence required under Section 4. Stock
Certificates representing all of the outstanding Company Common Stock and
properly executed and completed letters of transmittal shall be delivered
by the Shareholders to the Parent.
5.3.8 Discharge of Indebtedness, Releases, Etc. The indebtedness of
the Company referred to in Exhibit 5.3.8 attached hereto ("Terminated
Obligations") shall be paid in full or refinanced on terms acceptable to
the Parent, and the Shareholders shall cause all holders of any such
Terminated Obligations to deliver to the Parent, in form reasonably
satisfactory to the Parent and the lenders to the Parent or Merger Sub,
such customary releases, termination statements, consents, approvals or
other documents or instruments required, in the judgment of the Parent, to
release and terminate all liens, security interests, claims, or rights of
such holders against the Surviving Corporation or the Parent or any of
their respective assets in connection therewith.
The consummation of the Closing shall not be deemed to be a waiver by the Parent
or the Surviving Corporation of any of their rights or remedies against the
Shareholders hereunder for any breach of warranty, covenant or agreement by the
Company or the Shareholders herein irrespective of any knowledge of or
investigation made by or on behalf of the Parent or Merger Sub; provided,
however, that if the Company shall disclose in writing to the Parent prior to
the Closing Date a specified breach of a specifically identified representation,
warranty, covenant or agreement of the Company or any Shareholder herein by the
Company or any Shareholder, and requests a waiver thereof by the Parent, and the
Parent shall waive any such specifically identified breach in writing prior to
the Closing Date, the Parent and the Surviving Corporation, for
17
themselves and for each Parent Indemnified Party (as defined below) shall be
deemed to have waived their respective rights and remedies hereunder for, and
the Shareholders shall have no liability with respect to, any such specifically
identified breach, to the extent so identified by the Company and so waived by
the Parent. Prior to the Closing, the Parent will promptly notify the Company
and the Shareholders if it believes that any representation of the Shareholders
is inaccurate in any material respect.
5.4 Deliveries by the Parent at the Closing. At the Closing,
simultaneously with the deliveries by the Shareholders specified in Section 5.3
above, and in addition to any other deliveries to be made by the Parent and
Merger Sub pursuant to any other transaction document at the Closing, the Parent
shall deliver or cause to be delivered to the Shareholders the following:
5.4.1 Closing Certificates. The Parent and Merger Sub shall deliver
the certificates required pursuant to Sections 5.2.1, 5.2.2 and 5.2.3.
5.4.2 Registration Rights Agreement. The Parent shall execute and
deliver to the Shareholders a Registration Rights Agreement at the Closing,
effective as of the Effective Time, substantially in the form set forth in
Exhibit 5.3.5.
5.4.3 Opinion of Counsel for the Parent and Merger Sub. The Parent
shall deliver the favorable opinion of its legal counsel dated the
Effective Time, substantially in the form and to the effect set forth in
Exhibit 5.4.3.
5.4.4 Closing Merger Consideration. The Parent shall deliver the
Closing Merger Consideration to the Shareholders.
The consummation of the Closing shall not be deemed to be a waiver by
the Shareholders of any of their rights or remedies hereunder for breach of any
warranty, covenant or agreement herein by the Parent or Merger Sub irrespective
of any knowledge of or investigation with respect thereto made by or on behalf
of any Shareholder; provided, however, that if the Parent shall disclose in
writing to the Shareholders prior to the Closing a specified breach of a
specifically identified representation, warranty, covenant or agreement of the
Parent or Merger Sub contained herein by the Parent or Merger Sub, and requests
a waiver thereof by the Company and the Shareholders, and the Company and the
Shareholders shall waive any such specifically identified breach in writing
prior to the Closing, the Company and the Shareholders shall be deemed to have
waived their rights and remedies hereunder for, and the Parent and Merger Sub
shall have no liability or obligation to the Shareholders or the Company with
respect to, any such specifically identified breach, to the extent so identified
by the Parent and waived by the Company and the Shareholders. Prior to the
Closing, each of the Company and the Shareholders will promptly notify the
Parent if it believes that any representation of the Parent or Merger Sub is
inaccurate in any material respect.
6. SURVIVAL, INDEMNIFICATIONS
6.1 Survival. The representations and warranties set forth in this
Agreement and the other documents, instruments and agreements contemplated
hereby shall survive after the date
18
hereof to the extent provided herein. The representations and warranties of the
Shareholders and the Company herein and in the Shareholder Related Documents and
the Company Related Documents (as defined in Exhibit 2) other than those of the
Shareholders and the Company in Sections 2.2, 2.3, 2.4 and in Sections 2 and 3
of Exhibit 2 shall survive for a period of 24 months after the date hereof and
the representations and warranties of the Shareholders and the Company contained
in Sections 2.2, 2.3, 2.4 and in Sections 2 and 3 of Exhibit 2 shall survive for
the maximum period permitted by applicable law. The representations and
warranties of the Parent herein and in the Parent Related Documents, other than
those in Sections 3.1.3 and 3.1.4, shall survive for a period of 24 months after
the date hereof and the representations and warranties of the Parent contained
in Sections 3.1.3 and 3.1.4 shall survive for the maximum period permitted by
applicable law. The periods of survival of the representations and warranties as
stated above in this Section 6.1 are referred to herein as the "Survival
Period." The liabilities of the parties under their respective representations
and warranties shall expire as of the expiration of the applicable Survival
Period and no claim for indemnification may be made with respect to any breach
of any representation or warranty, the applicable Survival Period of which shall
have expired, except to the extent that written notice of such breach shall have
been given to the party against which such claim is asserted on or before the
date of such expiration. The covenants and agreements of the parties herein
(including but not limited to Exhibit 4.6) and in other documents and
instruments executed and delivered in connection with the closing of the
transactions contemplated hereby shall survive for the maximum period permitted
by law.
6.2 Indemnification.
6.2.1 Parent Indemnified Parties. Subject to the provisions of
Sections 6.1 and 6.3 hereof, the Shareholders shall indemnify, save and hold
harmless the Parent, the Surviving Corporation, Merger Sub and any of their
assignees (including lenders) and all of their respective officers, directors,
employees, representatives, agents, advisors and consultants and all of their
respective heirs, legal representatives, successors and assigns (collectively
the "Parent Indemnified Parties") from and against any and all damages,
liabilities, losses, loss of value (including the value of adverse effects on
cash flow or earnings), claims, deficiencies, penalties, interest, expenses,
fines, assessments, charges and costs, including reasonable attorneys' fees and
court costs (net of any insurance recoveries)(collectively "Losses") arising
from, out of or in any manner connected with or based on:
(i) the breach of any covenant of the Shareholders or the Company or
the failure by the Shareholders or the Company to perform any obligation of
the Shareholder or the Company contained herein or in any Company Related
Document or Shareholder Related Document;
(ii) any inaccuracy in or breach of any representation or warranty of
the Shareholders contained herein or in any Shareholder Related Document;
(iii) any inaccuracy in or breach of any representation or warranty
of the Company contained herein or in any Company Related Document;
(iv) indemnification payments made by the Company or the Surviving
19
Corporation to the Company's present or former officers, directors,
employees, agents, consultants, advisors or representatives in respect of
actions taken or omitted to be taken prior to the Closing;
(v) any act, omission, occurrence, event, condition or circumstance
occurring or existing at any time on or before the Effective Time and
involving or related to the assets, properties, business or operations now
or previously owned or operated by the Company and not (a) disclosed with
reasonable specificity in the Disclosure Schedule or (b) disclosed in the
Company Financial Statements (as defined in Exhibit 2) or in working
capital or long term debt (in each case as determined for purposes of
calculating the Final Merger Consideration); and
(vi) the investigation, study, correction, cleanup, removal,
remediation or monitoring of the soil or groundwater (or both) at the
Company's leased facility located in Oakland, California, that may be
required in connection with any condition, circumstance, event or incident
at such facility existing on or prior to the date of this Agreement.
6.2.2 Parent Indemnity. Subject to the provisions of Sections 6.1
and 6.3, the Parent shall indemnify, save and hold harmless the Shareholders and
the Shareholders' heirs, legal representatives, successors and assigns from and
against all Losses arising from, out of or in any manner connected with or based
on:
(i) any breach of any covenant of the Parent or Merger Sub or the
failure by the Parent or Merger Sub to perform any of its obligations
contained herein or in the Parent Related Documents;
(ii) any inaccuracy in or breach of any representation or warranty of
the Parent or Merger Sub contained herein or in the Parent Related
Documents; and
(iii) any act, omission, event, condition or circumstance occurring
or existing at any time after (but not on or before) the Effective Time and
involving or relating to the assets, properties, businesses or operations
of the Company; provided, however, that this clause (iii) shall not apply
to any Losses to the extent that such Losses result from any Shareholder's
acts or omissions after the Effective Time as an officer, director and/or
employee of the Parent, the Surviving Corporation and/or any other
affiliate of the Parent.
The foregoing indemnities shall not limit or otherwise adversely affect the
Parent Indemnified Parties' rights of indemnity for Losses under Section 6.2.1.
6.3 Limitations. The aggregate liability of the Shareholders under
Section 6.2.1 (ii) and (iii) shall not exceed the cash amount equal to the Final
Merger Consideration, with the Parent Common Stock being valued at the IPO Price
to the Public for such purpose. The aggregate liability of the Parent under
Section 6.2.2(ii) shall not exceed the cash amount of the Final Merger
Consideration, with the Parent Common Stock being valued at the IPO Price to the
20
Public for such purpose. Furthermore, neither the Shareholders, on the one
hand, nor the Parent, on the other hand, shall have an obligation to provide
indemnification until the Losses for which indemnification is sought exceeds
$25,000, at which time indemnification may be sought for all such Losses.
6.4 Procedures for Indemnification.
6.4.1 Notice. The party (the "Indemnified Party") that may be
entitled to indemnity hereunder shall give prompt notice to any party obligated
to give indemnity hereunder (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any suit, action or proceeding in respect of which
indemnity may be sought hereunder. Any failure on the part of any Indemnified
Party to give the notice described in this Section 6.4.1 shall relieve the
Indemnifying Party of its obligations under this Article 6 only to the extent
that such Indemnifying Party has been prejudiced by the lack of timely and
adequate notice (except that the Indemnifying Party shall not be liable for any
expenses incurred by the Indemnified Party during the period in which the
Indemnified Party failed to give such notice). Thereafter, the Indemnified Party
shall deliver to the Indemnifying Party, promptly (and in any event within 10
days thereof) after the Indemnified Party's receipt thereof, copies of all
notices and documents (including court papers) received by the Indemnified Party
relating to such claim, action, suit or proceeding.
6.4.2 Legal Defense. The Parent shall have the obligation to
assume the defense or settlement of any third-party claim, suit, action or
proceeding in respect of which indemnity may be sought hereunder, provided that
(i) the Shareholders shall at all times have the right, at their option, to
participate fully therein, and (ii) if the Parent does not proceed diligently to
defend the third-party claim, suit, action or proceeding within 10 days after
receipt of notice of such third-party claim, suit, action or proceeding, the
Shareholder shall have the right, but not the obligation, to undertake the
defense of any such third-party claim, suit, action or proceeding.
6.4.3 Settlement. The Indemnifying Party shall not be required to
indemnify the Indemnified Party with respect to any amounts paid in settlement
of any third-party suit, action, proceeding or investigation entered into
without the written consent of the Indemnifying Party; provided, however, that
if the Indemnified Party is a Parent Indemnified Party, such third-party suit,
action, proceeding or investigation may be settled without the consent of the
Indemnifying Party on 10 days' prior written notice to the Indemnifying Party if
such third-party suit, action, proceeding or investigation is then unreasonably
interfering with the business or operations of the Company or the Surviving
Corporation and the settlement is commercially reasonable under the
circumstances; and provided further, that if the Indemnifying Party gives 10
days' prior written notice to the Indemnified Party of a settlement offer which
the Indemnifying Party desires to accept and to pay all Losses with respect
thereto ("Settlement Notice") and the Indemnified Party fails or refuses to
consent to such settlement within 10 days after delivery of the Settlement
Notice to the Indemnified Party, and such settlement otherwise complies with the
provisions of this Section 6.4, the Indemnifying Party shall not be liable for
Losses arising from such third-party suit, action, proceeding or investigation
in excess of the amount proposed in such settlement offer. Notwithstanding the
foregoing, no Indemnifying Party will consent to the
21
entry of any judgment or enter into any settlement without the consent of the
Indemnified Party, if such judgment or settlement imposes any obligation or
liability upon the Indemnified Party other than the execution, delivery or
approval thereof and customary releases of claims with respect to the subject
matter thereof.
6.4.4 Cooperation. The parties shall cooperate in defending any
such third-party suit, action, proceeding or investigation, and the defending
party shall have reasonable access to the books and records, and personnel in
the possession or control of the Indemnified Party that are pertinent to the
defense. The Indemnified Party may join the Indemnifying Party in any suit,
action, claim or proceeding brought by a third party, as to which any right of
indemnity created by this Agreement would or might apply, for the purpose of
enforcing any right of the indemnity granted to such Indemnified Party pursuant
to this Agreement.
6.5 Insurance. Except as otherwise provided herein, Parent shall use
commercially reasonable efforts and shall cause the Surviving Corporation to
use commercially reasonable efforts to (i) file (or cause to be filed) claims
under insurance policies for all damages that may be recoverable in respect of
any losses thereunder, (ii) pursue all claims for indemnification, contribution
or other recoveries (whether for breach of contract or otherwise) under
agreements with third parties, and (iii) pursue all rights for contribution or
other recoveries against third parties afforded under applicable law. Nothing in
this Agreement shall be construed to require either Parent or the Surviving
Corporation to obtain insurance coverage for their respective operations, but
Parent shall cause the Surviving Corporation to be provided with insurance
coverage that is comparable with the insurance coverage that is provided to its
other subsidiaries. Any insurance policy covering the operations of the
Surviving Corporation shall waive subrogation by and between the signatories
hereto and will name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as named insureds
thereunder. In the event Parent or the Surviving Corporation determines to
cancel or not renew any insurance policy listed on Schedule 8(vi) of the
Disclosure Schedule, Parent shall give the Shareholders written notice the
earlier of 20 days prior to the effective date of such cancellation or
expiration or five days after receipt of a written notice of cancellation. The
Shareholders shall be afforded the opportunity to renew any such policy at their
own cost. Parent shall cooperate, and shall cause the Surviving Corporation to
cooperate, with the Shareholders in respect of the renewal or extension of such
insurance or in securing a replacement policy therefor. No right of subrogation
shall accrue hereunder to any insurer or other party. There shall be no third
party beneficiaries of any provision of this Section 6 other than the
Shareholders under Section 6.2.2.
7. TERMINATION
7.1 Grounds for Termination. This Agreement may be terminated at any time
prior to the Closing Date:
7.1.1 Mutual Consent. By the written agreement of the Company and
the Parent; or
7.1.2 Optional By the Company. By the Company by written notice
to the Parent, if the Closing shall have failed to occur by 5:00 p.m. Houston,
Texas time on December 31, 1997, but only if neither the Company nor any
Shareholder has breached this Agreement or
22
has failed to perform any of their respective obligations under this Agreement;
7.1.3 Optional By the Parent. By the Parent, by written notice to
the Company, if the Closing shall have failed to occur by 5:00 p.m. Houston,
Texas time on December 31, 1997, but only if neither the Parent nor Merger Sub
has breached this Agreement or has failed to perform any of its obligations
under this Agreement;
7.1.4 Breach By the Parent or Merger Sub. By the Company, by
written notice to the Parent, if either the Parent or Merger Sub has breached
this Agreement or failed to perform any of its obligations under this Agreement;
or
7.1.5 Breach by the Company or any Shareholder. By the Parent, by
written notice to the Company, if the Company or any Shareholder has breached
this Agreement or has failed to perform any of their respective obligations
under this Agreement.
7.2 Effect of Termination. If this Agreement is terminated as permitted
under Section 7.1, such termination shall be without liability of any party to
any other party, except that such termination shall be without prejudice to any
and all remedies the parties may have against each other for breach of this
Agreement.
8. MISCELLANEOUS
8.1 Notice. Any notice, delivery or communication required or permitted
to be given under this Agreement shall be in writing, and shall be mailed,
postage prepaid, or delivered, to the addresses given below, or sent by telecopy
to the telecopy numbers set forth below, as follows:
To the Company (prior to the Effective Time) or the Shareholders:
Linford Service Company
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
To the Parent or Merger Sub or the Surviving Corporation:
Group Maintenance America Corp.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or other such address as shall be furnished in writing by any such party to the
other parties, and such notice shall be effective and be deemed to have been
given as of the date actually received.
To the extent any notice provision in any other agreement, instrument or
document
23
required to be executed or executed by the parties in connection with the
transactions contemplated herein contains a notice provision which is different
from the notice provision contained in this Section 8.1 with respect to matters
arising under such other agreement, instrument or document, the notice provision
in such other agreement, instrument or document shall control.
8.2 Further Documents. The Shareholders shall, at any time and from time
to time after the date hereof, upon request by the Parent and without further
consideration, execute and deliver such instruments or other documents and take
such further action as may be reasonably required in order to perfect any other
undertaking made by the Shareholders hereunder.
8.3 Assignability. The Shareholders shall not assign this Agreement in
whole or in part without the prior written consent of the Parent, except by the
operation of law. The Parent may assign its rights under this Agreement, the
Company Related Documents and the Shareholder Related Documents without the
consent of any Shareholder or the Company; provided, however, that any such
assignment shall not relieve Parent of its obligations hereunder. After the
Effective Time, the Surviving Corporation may assign its rights under this
Agreement, the Company Related Documents and the Shareholder Related Documents
without the consent of any Shareholder.
8.4 Exhibits and Schedules. The Exhibits and Schedules (and any
appendices thereto) referred to in this Agreement are and shall be incorporated
herein and made a part hereof.
8.5 Sections and Articles. Unless the context otherwise requires, all
Sections, Articles and Exhibits referred to herein are, respectively, sections
and articles of, and exhibits to, this Agreement and all Schedules referred to
herein are schedules constituting a part of the Disclosure Schedule.
8.6 Entire Agreement. This Agreement constitutes the full understanding
of the parties, a complete allocation of risks between them and a complete and
exclusive statement of the terms and conditions of their agreement relating to
the subject matter hereof and supersedes any and all prior agreements, whether
written or oral, that may exist between the parties with respect thereto.
Except as otherwise specifically provided in this Agreement, no conditions,
usage of trade, course of dealing or performance, understanding or agreement
purporting to modify, vary, explain or supplement the terms or conditions of
this Agreement shall be binding unless hereafter made in writing and signed by
the party to be bound, and no modification shall be effected by the
acknowledgment or acceptance of documents containing terms or conditions at
variance with or in addition to those set forth in this Agreement. No waiver by
any party with respect to any breach or default or of any right or remedy and no
course of dealing shall be deemed to constitute a continuing waiver of any other
breach or default or of any other right or remedy, unless such waiver be
expressed in writing signed by the party to be bound. Failure of a party to
exercise any right shall not be deemed a waiver of such right or rights in the
future.
8.7 Headings. Headings as to the contents of particular articles and
sections are for convenience only and are in no way to be construed as part of
this Agreement or as a limitation of
24
the scope of the particular articles or sections to which they refer.
8.8 CONTROLLING LAW. THE VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS
AGREEMENT AND ANY DISPUTE CONNECTED HEREWITH SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT THE
APPLICABLE CORPORATE LAW MANDATORILY APPLIES WITH RESPECT THERETO.
8.9 Public Announcements. After the Effective Time, no Shareholder shall
make any press release, public announcement, or public confirmation or disclose
any other information regarding this Agreement or the contents hereof.
8.10 No Third Party Beneficiaries. Except as set forth in Article 6, no
person or entity not a party to this Agreement shall have rights under this
Agreement as a third party beneficiary or otherwise.
8.11 Amendments and Waivers. This Agreement may be amended by the Parent,
Merger Sub and the Company, by action taken by their Boards of Directors to the
extent permitted by applicable law; provided, however, that no such amendment
shall (i) alter or change any provision of this Agreement, the alteration or
change of which must be adopted by the holders of capital stock of the Company
under the certificate or articles of incorporation of the Company or the
Applicable Corporate Law, or (ii) alter or change this Section 8.11, unless each
such alteration or change is adopted by the holders of shares of capital stock
of the Company as may be required by the certificate or articles of
incorporation of the Company or the Applicable Corporate Law. Prior to the
Effective Time, all amendments to this Agreement must be by an instrument in
writing signed on behalf of the Parent, Merger Sub, the Company and the
Shareholders. After the Effective Time, all amendments to this Agreement must be
by an instrument in writing signed on behalf of the Parent and the Shareholders.
Any term or provision of this Agreement (other than the requirements for
shareholder approvals) may be waived in writing at any time by the party which
is, or whose shareholders are, entitled to the benefits thereof.
8.12 No Employee Rights. Nothing herein expressed or implied shall confer
upon any employee of the Company, any other employee or legal representatives or
beneficiaries of any thereof any rights or remedies, including any right to
employment or continued employment for any specified period, of any nature or
kind whatsoever under or by reason of this Agreement, or shall cause the
employment status of any employee to be other than terminable at will.
8.13 Non-Recourse. No recourse for the payment of any amounts due
hereunder or for any claim based on this Agreement or the transactions
contemplated hereby or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Parent in this Agreement shall
be had against any incorporator, organizer, promoter, shareholder, officer,
director, employee or representative as such (other than the Shareholders as set
forth herein), past, present or future, of the Parent or of any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly
25
waived and released as a condition of, and as a consideration for, the execution
of this Agreement.
8.14 When Effective. This Agreement shall become effective only upon the
execution and delivery of one or more counterparts of this Agreement by each of
the Parent, Merger Sub, the Company and the Shareholders.
8.15 Takeover Statutes. If any "fair price," "moratorium," "control share
acquisition" or other form of anti-takeover statute or regulation shall become
applicable to the transactions contemplated hereby, the Parent and the Company
and their respective members of their Boards of Directors shall grant such
approvals and take such actions as are necessary so that the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated herein and otherwise act to eliminate or minimize the
effects of such statute or regulation on the transactions contemplated herein.
8.16 Number and Gender of Words. Whenever herein the singular number is
used, the same shall include the plural where appropriate and words of any
gender shall include each other gender where appropriate.
8.17 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws, such provisions
shall be fully severable as if such invalid or unenforceable provisions had
never comprised a part of the Agreement; and the remaining provisions of the
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be automatically as a part of this Agreement, a provision
as similar in terms to such illegal, invalid or unenforceable provision as may
be possible and be legal, valid and enforceable.
8.18 Multiple Counterparts. This Agreement may be executed in a number of
identical counterparts. If so executed, each of such counterparts is to be
deemed an original for all purposes and all such counterparts shall,
collectively, constitute one agreement, but, in making proof of this Agreement,
it shall not be necessary to produce or account for more than one such
counterpart.
8.19 No Rule of Construction. All of the parties hereto have been
represented by counsel in the negotiations and preparation of this Agreement;
therefore, this Agreement will be deemed to be drafted by each of the parties
hereto, and no rule of construction will be invoked respecting the authorship of
this Agreement.
8.20 Expenses. Each of the parties shall bear all of their own expenses in
connection with the negotiation and closing of this Agreement and the
transactions contemplated hereby; provided, however, that the Company may pay
the costs of any business broker, legal counsel, accountants or other advisors
engaged by the Shareholders; provided further, that all fees, costs and expenses
incurred or payable by the Company in connection with the negotiation and
closing of this Agreement and the transactions contemplated hereby shall be
included in current liabilities for purposes of determining Working Capital.
Notwithstanding the foregoing, if the
26
Merger is not consummated as a result of (i) the termination of this agreement
by the Shareholders other than as a result of a material misrepresentation or
breach of covenant by the Parent, (ii) the representations and warranties of the
Company or the Shareholders are untrue or incorrect in any material respect and
such fact results in a final price that is unacceptable to the Company or (iii)
the Company or the Shareholders fail to perform or offer to perform all of their
material agreements and covenants, then the Company shall pay the fees of the
Accountants that do not exceed $35,000 (or shall reimburse the Parent for such
fees within 15 days after being requested to do so) and the Parent shall pay the
fees of the Accountants that exceed $35,000. If the Merger is consummated or the
Merger is not consummated for a reason not described in the preceding sentence,
then the fees of the Accountants shall be paid by the Parent.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered on
the date first hereinabove written.
PARENT:
GROUP MAINTENANCE AMERICA CORP.
By: /s/ J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
-----------------------------------------
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇., President
MERGER SUB:
LSC ACQUISITION CORP.
By: /s/ J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
-----------------------------------------
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇., President
SHAREHOLDERS:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
COMPANY:
LINFORD SERVICE COMPANY
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
By: ___________________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
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