EXHIBIT 10.21
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
QUANTA SERVICES, INC.,
QUANTA XXIV ACQUISITION, INC.,
CROWN FIBER COMMUNICATIONS, INC.,
AND
▇▇▇▇▇ ▇. ▇▇▇▇▇
DATED AS OF AUGUST 13, 1999
ACQUISITION AGREEMENT AND PLAN OR REORGANIZATION
THIS ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made as of August 13, 1999, by and among Quanta Services, Inc., a Delaware
corporation ("Quanta"), Quanta XXIV Acquisition, Inc., a Delaware corporation
that is a subsidiary of Quanta ("Newco"), Crown Fiber Communications, Inc., a
Virginia corporation (the "Company"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇ (the "Stockholder"),
with the Stockholder being the Company's only stockholder.
WHEREAS, the respective Boards of Directors of Newco and the Company
(collectively referred to as "Constituent Corporations") deem it advisable and
in the best interests of the Constituent Corporations and their respective
stockholders that Newco merge with and into the Company (the "Merger"); and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization within the
provisions of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, the stockholders of the Constituent Corporations have approved the
Merger in accordance with the GCL and the VBCA;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants contained
herein, the parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1.1. DEFINITIONS. Capitalized terms used in this Agreement shall have the
following meanings:
"Affiliate" of, or "Affiliated" with, a specified person or entity means a
person or entity that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the specified person or entity.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Balance Sheet Date" has the meaning set forth in Section 5.5.
"Closing" has the meaning set forth in ARTICLE IV.
"Closing Date" has the meaning set forth in ARTICLE IV.
"Code" has the meaning set forth in the third paragraph of this Agreement.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Common Stock" means the Company"s Common-A Stock, $1.00 par value
per share.
"Competitive Business" means any business that competes with the Company or
the Surviving Corporation, including, without limitation, any business that
provides specialty electrical contracting services to the electric utility,
telecommunications or transportation industries.
"Constituent Corporations" has the meaning set forth in the second
paragraph of this Agreement.
"Effective Time" has the meaning set forth in Section 2.2.
"Encumbrances" means all liens, encumbrances, mortgages, pledges, security
interests, conditional sales agreements, charges, options, preemptive rights,
rights of first refusal, reservations, restrictions or other encumbrances or
defects in title.
"Employee benefit plan" has the meaning set forth in Section 5.16.
"Employee pension benefit plan" has the meaning set forth in Section 5.16.
"Employment Agreements" has the meaning set forth in Section 7.5.
"Environmental, Health and Safety Laws" means any federal, state or local
Law now or hereafter in effect, including, without limitation, any judicial or
administrative interpretation thereof, any judicial or administrative order,
consent decree or judgment, or agreement with any Governmental Authority,
relating to (a) pollution, exposure to oil, pollutants, contaminants, hazardous
or toxic materials or waste, (b) the protection, preservation or restoration of
the environment, including laws relating to exposures to, or emissions,
discharges, releases or threatened releases of oil, pollutants, contaminants,
hazardous or toxic materials or wastes into ambient air, surface water, ground
water or land surface or subsurface strata or (c) the manufacture, processing,
labeling, distribution, use, treatment, storage, transport, handling or disposal
of oil, pollutants, contaminants, hazardous or toxic materials or wastes or
relating to the environment, plant and animal life, natural resources or health,
safety or any Hazardous Substance. "Environmental, Health and Safety Laws"
include, without limitation, (i) the Federal Comprehensive Environmental
Response Compensation and Liability Act of 1980 (CERCLA), 42 U.S.C. (SS) 9601 et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. (SS) 6901 et seq.,
the Federal Water Pollution Control Act, 33 U.S.C. (SS) 1251 et seq., the Toxic
Substances Control Act, 15 U.S.C. (SS) 2601 et seq., the Clean Air Act, 42
U.S.C. (SS) 7401 et seq., the Safe Drinking Water Act, 42 U.S.C. (SS) 300f et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. (SS) 5101 et seq.,
the Atomic Energy Act, 42 U.S.C. (SS) 2011 et seq., the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. (SS) 136 et seq., and the Occupational
Safety and Health Act, 29 U.S.C. (SS) 651 et seq., in each case as amended from
time to time, and any other federal, state or local Laws now or hereafter
relating to any of the foregoing, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such as
negligence, nuisance, trespass and strict
liability) that may impose liability or obligations for injuries or damages due
to, or threatened as a result of, the presence of, effects of or exposure to any
Hazardous Substance.
"ERISA" has the meaning set forth in Section 5.16.
"ERISA Affiliate" has the meaning set forth in Section 5.16.
"Expiration Date" has the meaning set forth in Section 13.6.
"Financial Statements" has the meaning set forth in Section 5.5.
"GAAP" means the generally accepted accounting principles as currently
applied by the respective party on a basis consistent with preceding years and
throughout the periods involved.
"GCL" means the General Corporation Law of the State of Delaware, as
amended.
"Governmental Authority" means any federal, state, local or foreign
government, political subdivision or governmental or regulatory authority,
agency, board, bureau, commission, instrumentality or court or quasi-
governmental authority.
"Hazardous Substances" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental, Health and Safety Law. The term
"Hazardous Substances" includes, without limitation, any substance to which
exposure is regulated by any Governmental Authority or any Environmental, Health
and Safety Law including, without limitation, any toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste, special
waste, industrial substance or petroleum or any derivative or by-product
thereof, radon, radioactive material, asbestos or asbestos containing material,
urea formaldehyde foam insulation, lead or polychlorinated biphenyls.
"Indemnified Party" has the meaning set forth in Section 8.3.
"Indemnifying Party" has the meaning set forth in Section 8.3.
"Initial Lockup Period" has the meaning set forth in Section 12.4.
"Interim Balance Sheet" has the meaning set forth in Section 5.5.
"Interim Financial Statements" has the meaning set forth in Section 5.5.
"JAMS" has the meaning set forth in Section 13.10.
"Judge List" has the meaning set forth in Section 13.10.
"Knowledge" means actual knowledge. Knowledge of the Company shall mean
the Knowledge of the Stockholder and the officers of the Company.
"Law" or "Laws" means any and all federal, state, local or foreign
statutes, laws, ordinances, proclamations, codes, regulations, licenses,
permits, authorizations, approvals, consents, legal doctrines, published
requirements, orders, decrees, judgments, injunctions and rules of any
Governmental Authority, including, without limitation, those covering
environmental, Tax, energy, safety, health, transportation, bribery,
recordkeeping, zoning, discrimination, antitrust and wage and hour matters, in
each case as amended and in effect from time to time.
"Lease" has the meaning set forth in Section 7.8.
"Letter of Intent" means that certain letter of intent dated May 25, 1999
by and among Quanta, the Company and the Stockholders, as amended or
supplemented.
"Lockup Periods" has the meaning set forth in Section 12.4.
"Loss" or "Losses" means all liabilities, losses, claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, fees, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
costs and expenses of investigation), net of income Tax effects with respect
thereto (including, without limitation, income Tax benefits recognized in
connection therewith and income Taxes upon any indemnification recovery
thereof), provided, however, that for purposes of calculating Losses as a result
of a breach of the representations and warranties contained in Section 5.27
only, "Losses" shall not include any consequential or incidental damages.
"Material Customers" has the meaning set forth in Section 5.9.
"Merger" has the meaning set forth in the second paragraph of this
Agreement.
"Merger Consideration" has the meaning set forth in Section 3.1.
"Merger Filings" has the meaning set forth in Section 2.2.
"Newco" has the meaning set forth in the first paragraph of this Agreement.
"Noncompete Term" has the meaning set forth in Section 9.1(a).
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Permits" has the meaning set forth in Section 5.10.
"Permitted Encumbrances" means (a) any Encumbrances reserved against in the
Interim Balance Sheets, (b) Encumbrances for property or ad valorem Taxes not
yet due and payable or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the Company"s books in accordance with GAAP, and (c) obligations under
operating and capital leases described in Schedule 5.9.
"Plan" has the meaning set forth in Section 5.16.
"Potential Material Event" means any of the following: (a) the possession
by Quanta of material non-public information required to be disclosed in the
registration statement and the determination in good faith by the Board of
Directors of Quanta that disclosure of such information in the registration
statement at that time would be detrimental to the business and affairs of
Quanta; or (b) any material engagement or activity by Quanta which would in the
good faith determination of the Board of Directors of Quanta, if disclosed in
the registration statement at such time, be materially and advisedly affected,
which determination shall be accompanied by a good faith determination by the
Board of Directors of Quanta that the registration statement would be materially
misleading absent the inclusion of such information.
"Qualified Plans" has the meaning set forth in Section 5.16.
"Quanta" has the meaning set forth in the first paragraph of this
Agreement.
"Quanta Common Stock" means Quanta's Common Stock, par value $.00001 per
share.
"Registrable Stock" means (a) the Quanta Common Stock received by
Stockholder in connection with the Merger and (b) any securities issued or
issuable with respect to such shares of Quanta Common Stock by way of a stock
dividend or stock split or in connection with a combination or reclassification
of shares, recapitalization, merger, consolidation or otherwise.
"Restricted Shares" has the meaning set forth in Section 12.1.
"Rule 144" means Rule 144 as promulgated under the 1933 Act.
"SEC" means the Securities and Exchange Commission.
"Secondary Lockup Period" has the meaning set forth in Section 12.4.
"Stockholder" has the meaning set forth in the first paragraph of this
Agreement.
"Surviving Corporation" has the meaning set forth in Section 2.1.
"Territory" has the meaning set forth in Section 9.1.
"Third Person" has the meaning set forth in Section 8.3.
"VBCA" means the Virginia Business Corporation Act, as amended.
"Year-End Financial Statements" has the meaning set forth in Section 5.5.
"Year 2000 Compliant" has the meaning set forth in Section 5.27.
1.2. INTERPRETATION. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in Section 1.1 and elsewhere in this Agreement
include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the
meanings ascribed to them in accordance with GAAP; and
(c) the words "herein," "hereof," and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision.
ARTICLE II
THE MERGER AND THE SURVIVING CORPORATION
2.1. THE MERGER. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time in accordance with the VBCA and GCL, Newco
shall be merged with and into the Company and the separate existence of Newco
shall thereupon cease. The Company shall be the surviving corporation in the
Merger (hereinafter sometimes referred to as the "Surviving Corporation").
2.2. EFFECTIVE TIME OF THE MERGER. The Merger shall become effective at
12:01 a.m. on August 14, 1999 (the "Effective Time") as set forth in
certificates or articles of merger, as appropriate, in form mutually acceptable
to Quanta and the Company, and filed with the Secretary of State of the States
of Delaware and Virginia (the "Merger Filings"). The Merger Filings shall be
made simultaneously with or as soon as practicable after the execution of this
Agreement and the Closing.
2.3 CERTIFICATE OF INCORPORATION, BYLAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION. As a result of the Merger and at the Effective Time:
(a) The Certificate of Incorporation of the Company in effect
immediately prior to the Effective Time shall become the Certificate of
Incorporation of the Surviving Corporation. After the Effective Time, the
Certificate of Incorporation of the Surviving Corporation may be amended in
accordance with its terms and as provided in the VBCA.
(b) The Bylaws of Newco in effect immediately prior to the Effective
Time shall become the Bylaws of the Surviving Corporation, and thereafter
may be amended in accordance with their terms and as provided by the
Certificate of Incorporation of the Surviving Corporation and the VBCA.
(c) The Board of Directors of Newco as constituted immediately prior
to the Effective Time shall be the Board of Directors of the Surviving
Corporation.
ARTICLE III
CONVERSION OF SHARES
3.1. CONVERSION OF SHARES. At the Effective Time, by virtue of the
Merger, and without any action on the part of any holder of any capital stock of
the Company, the issued and outstanding shares of the Company Common Stock as of
the Effective Time shall be converted into the right to receive, and become
exchangeable for 2,034,849 shares of Quanta Common Stock at Closing (the Quanta
Common Stock paid in exchange for the Company Common Stock being herein
collectively referred to as the "Merger Consideration").
3.2. NEWCO SHARES. The outstanding shares of common stock, $0.01 par
value per share, of Newco shall be converted into the right to receive, and
become exchangeable for 1,000 shares of Company Common Stock.
3.3. DELIVERY OF MERGER CONSIDERATION. At the Closing, (a) the
Stockholder shall furnish to Quanta the certificates representing his Company
Common Stock, duly endorsed in blank by such Stockholder or accompanied by duly
executed blank stock powers, and (b) Quanta shall deliver to the Stockholder
cash (by wire transfer in accordance with the wiring instructions for the
Stockholder set forth on Schedule 3.3) and a copy of an irrevocable instruction
letter to Quanta's transfer agent directing that certificates representing the
shares of Quanta Common Stock be delivered to the Stockholder pursuant to
Section 3.1. The Stockholder agrees promptly to cure any deficiencies with
respect to the endorsement of the certificates or other documents of conveyance
with respect to the Company Common Stock or with respect to the stock powers
accompanying such stock.
ARTICLE IV
CLOSING
4.1 CLOSING. The consummation of the Merger and delivery of the Merger
Consideration and the other transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Quanta, ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇., ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, concurrently with the execution of this Agreement or at
such other time and date as Quanta, the Company and the Stockholders may
mutually agree, which date is herein referred to as the "Closing Date."
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder represents and warrants to Quanta as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly organized, validly existing and in good standing under the Laws of the
State of Virginia and is duly authorized and qualified to do business under all
applicable Laws and to carry on its business in the places and in the manner as
now conducted. The Company has the requisite power and authority to own, lease
and operate its assets and properties and to carry on its business as such
business is currently being conducted. Schedule 5.1 includes (a) certificate(s)
of existence and good standing for the Company issued by the appropriate
Governmental Authorities of the State of Virginia and (b) certificate(s) of
qualification or authority to do business (or similar certificates) for the
Company issued by the appropriate Governmental Authorities of each of the
jurisdictions in which the Company is authorized or qualified to do business.
Each such certificate is dated within twenty days of the Closing Date. True,
complete and correct copies of the Articles of Incorporation and Bylaws, each as
amended, of the Company are attached hereto as Schedule 5.1. Correct and
complete copies of all stock records and minute books of the Company have been
provided to Quanta and are correct and complete in all material respects.
5.2. AUTHORIZATION; NON-CONTRAVENTION; APPROVALS.
(a) The Company has the requisite power and authority to enter into
this Agreement and to effect the Merger. Each Stockholder has the full
legal right, power and authority to enter into this Agreement. The
execution, delivery and performance of this Agreement have been approved by
the board of directors of the Company and by the Stockholder. No
additional corporate proceedings on the part of the Company is necessary to
authorize the execution and delivery of this Agreement and the consummation
by the Company of the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by the Company and the
Stockholder, and, assuming the due authorization, execution and delivery
hereof by Quanta and Newco, constitutes a valid and binding agreement of
the Company and the Stockholder, enforceable against each of them in
accordance with its terms.
(b) The execution and delivery of this Agreement by the Company and
the Stockholder do not, and the consummation by the Company and the
Stockholder of the transactions contemplated hereby will not, violate or
result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Encumbrance upon any
of the properties or assets of the Company under any of the terms,
conditions or provisions of, (i) the Articles of Incorporation or Bylaws of
the Company, (ii) any Laws applicable to the Stockholder or the Company or
any of the properties or assets of the Stockholder or the Company, or (iii)
except as set forth in Schedule 5.2, any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, lease or
other instrument, obligation or agreement of any kind to which the
Stockholder or the Company is now a party or by which the Company or any of
its properties or assets may be bound or affected.
(c) Except for the Merger Filings and as set forth in Schedule 5.2, no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any Governmental Authority or third party is
necessary for the execution and delivery of this Agreement by the Company
and the Stockholder or the consummation by the Company and the Stockholder
of the transactions contemplated hereby. Except as set forth in Schedule
5.2, none of the contracts or agreements with Material Customers or
contracts providing for purchases or services individually in excess of
$25,000, or in the aggregate in excess of $50,000, or other material
agreements, licenses or permits to which the Company is a party requires
notice to, or the consent or approval of, any third party for the execution
and delivery of this Agreement by the Company or the Stockholder and the
consummation of the transactions contemplated hereby.
5.3 CAPITALIZATION AND OWNERSHIP. The authorized capital stock of the
Company consists solely of 1,000 shares of Company Common Stock, of which 100
shares are issued and outstanding. All of the issued and outstanding shares of
the Company Common Stock are owned beneficially and of record by the
Stockholder. All of the issued and outstanding shares of the Company Common
Stock have been duly authorized and validly issued, are fully paid and
nonassessable, and were offered, issued, sold and delivered by the Company in
compliance with all applicable Laws, including, without limitation, those Laws
concerning the issuance of securities. None of such shares were issued in
violation of the preemptive rights of any past or present stockholder. At the
Effective Time, by virtue of the Merger Filing in Virginia the Merger will
become effective in Virginia. Except as set forth in Schedule 5.3, no
subscription, option, warrant, call, convertible or exchangeable security, other
conversion right or commitment of any kind exists which obligates the Company to
issue any of its capital stock or the Stockholder to transfer any of the capital
stock of the Company.
5.4 SUBSIDIARIES. Except as set forth in Schedule 5.4, the Company
owns, of record or beneficially, or controls, directly or indirectly, no capital
stock, securities convertible into or exchangeable for capital stock or any
other equity interest in any corporation, association or other business entity.
Except as set forth in Schedule 5.4, the Company is not, directly or indirectly,
a participant in any joint venture, limited liability company, partnership or
other noncorporate entity.
5.5 FINANCIAL STATEMENTS.
(a) The Company has delivered to Quanta complete and correct copies of
the following financial statements:
(i) the reviewed balance sheets of the Company as of December 3,
1996, 1997 and 1998 and the related reviewed statements of
operations, stockholder's equity and cash flows for the
three-year period ended December 31, 1998, together with the
related notes, schedules and report of the Company's
independent accountants (such balance sheets and the related
income
statements and the related notes and schedules of the
Company are referred to herein as the "Year-End Financial
Statements");
(ii) the unaudited balance sheet (the "Interim Balance Sheet") of
the Company as of June 30, 1999 (the "Balance Sheet Date")
and the related unaudited statements of operations for the
interim period ended on the Balance Sheet Date, together
with the related notes and schedules (such balance sheets,
the related statements of operations and the related notes
and schedules are referred to herein as the "Interim
Financial Statements"). The Year-End Financial Statements
and the Interim Financial Statements (collectively, the
"Financial Statements") are attached as Schedule 5.5 to this
Agreement;
(b) Except as set forth in Schedule 5.5, the Financial Statements have
been prepared from the books and records of the Company in conformity with
GAAP (except for the absence of notes in the Interim Financial Statements)
and present fairly the financial position and results of operations of the
Company as of the dates of such statements and for the periods covered
thereby. The books of account of the Company have been kept accurately in
all material respects in the ordinary course of business, the transactions
entered therein represent bona fide transactions, and the revenues,
expenses, assets and liabilities of the Company have been properly recorded
therein in all material respects.
5.6 LIABILITIES AND OBLIGATIONS. Except as set forth in Schedule 5.6,
as of the Balance Sheet Date the Company does not have, nor has it incurred
since that date, any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature, except (a) liabilities, obligations or
contingencies (i) that are accrued or reserved against in the Financial
Statements or reflected in the notes thereto or (ii) that were incurred after
the Balance Sheet Date and were incurred in the ordinary course of business,
consistent with past practices, and (b) liabilities and obligations that are of
a nature not required to be reflected in the Financial Statements prepared in
accordance with GAAP and that were incurred in the normal course of business and
are described in Schedule 5.6. Schedule 5.6 contains a reasonable estimate by
the Company and the Stockholder of the maximum amount that may be payable with
respect to liabilities which are not fixed. For each such liability for which
the amount is not fixed or is contested, the Company has provided a summary
description of the liability together with copies of all relevant documentation
relating thereto. Schedule 5.6 sets forth the Company's outstanding principal
amount of indebtedness for borrowed money (including overdrafts) as of the date
hereof.
5.7 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.7 sets forth an accurate
list of the accounts and notes receivable of the Company as of the Balance Sheet
Date and of those invoiced between the Balance Sheet Date and the second
business day preceding the Closing Date, including any such amounts which are
not reflected in the Interim Balance Sheet. Receivables from and advances to
employees, the Stockholder and any entities or persons related to or Affiliates
of the Stockholder are separately identified in Schedule 5.7. Schedule 5.7 also
sets forth an accurate aging of all accounts and notes receivable as of the
Balance Sheet Date, showing amounts due in 30-day aging categories. The trade
and other accounts receivable of the Company, including without limitation those
classified as current assets on the Interim
Balance Sheet, are bona fide receivables, were acquired in the ordinary course
of business, are stated in accordance with GAAP and are collectible in the
amounts shown on Schedule 5.7, net of reserves reflected in the Interim
Financial Statements with respect to the accounts receivable as of the Balance
Sheet Date, and net of reserves reflected in the books and records of the
Company (consistent with the methods used in the Interim Financial Statements)
with respect to receivables of the Company after the Balance Sheet Date.
5.8 ASSETS.
(a) Schedule 5.8 sets forth an accurate list of all real and personal
property included in "property and equipment" on the Interim Balance Sheets
and all other tangible assets of the Company each with a book value in
excess of $10,000 (i) owned by the Company as of the Balance Sheet Date and
(ii) acquired since the Balance Sheet Date, including in each case true,
complete and correct copies of leases for significant equipment and for all
real property leased by the Company and descriptions of all real property
on which buildings, warehouses, workshops, garages and other structures
used in the operation of the business of the Company are situated. Schedule
5.8 indicates which assets used in the operation of the businesses of the
Company are currently owned by the Stockholder or Affiliates of either of
the Company or the Stockholder. Except as specifically identified in
Schedule 5.8, all of the tangible assets, vehicles and other significant
machinery and equipment of the Company listed in Schedule 5.8 are in
working order and condition, ordinary wear and tear excepted. Except as
specifically described in Schedule 5.8, all fixed assets used by the
Company in its business are either owned by the Company or leased under
agreements identified in Schedule 5.8. All leases set forth in Schedule 5.8
are in full force and effect and constitute valid and binding agreements of
the Company that is a party thereto, and to the knowledge of the Company
and the Stockholder, the other parties thereto in accordance with their
respective terms. Schedule 5.8 contains true, complete and correct copies
of all title reports and title insurance policies received or owned by the
Company. Schedule 5.8 includes a summary description of all contractual
commitments of the Company involving the opening of new operations,
expansion of existing operations or the acquisition of any real property or
existing business, to which management of the Company has devoted any
significant effort or expenditure in the two-year period prior to the date
of the Agreement, and which (i) are currently being implemented by the
Company, or (ii) involve purchases of capital equipment in connection with
existing operations in amounts in excess of $10,000, individually, or
$25,000 in the aggregate.
(b) The Company has good and indefeasible title to the tangible and
intangible personal property and the real property owned and used in its
business, including the properties identified in Schedule 5.8 as owned real
property, free and clear of all Encumbrances other than Permitted
Encumbrances and those set forth in Schedule 5.8.
(c) Except as specifically described in Schedule 5.8, the tangible and
intangible assets of the Company include all the assets used in the
operation of the business of the Company as conducted at the Balance Sheet
Date, except for dispositions of such assets since such date in the
ordinary course of business, consistent with past practices.
5.9 MATERIAL CUSTOMERS AND CONTRACTS.
(a) Schedule 5.9 sets forth an accurate list of (i) all customers
representing 5% ormore of the Company's revenues for the fiscal year ended
in 1998 or the interim period ended on the Balance Sheet Date (the
"Material Customers"), and (ii) all material executory contracts,
warranties, commitments and similar agreements to which the Company is
currently a party or by which it or any of its properties is bound,
including, but not limited to, (A) all customer contracts in excess of
$10,000, individually, or $25,000 in the aggregate, including, without
limitation, consignment contracts, (B) contracts with any labor
organizations, (C) leases providing for annual rental payments in excess of
$5,000, individually, or $10,000 in the aggregate, (D) loan agreements, (E)
pledge and security agreements, (F) indemnity or guaranty agreements or
obligations , (G) bonds, (H) notes, (I) mortgages, (J) joint venture or
partnership agreements, (K) options to purchase real or personal property,
and (L) agreements relating to the purchase or sale by the Company of
assets (other than oral agreements relating to sales of inventory or
services in the ordinary course of business, consistent with past
practices) or securities for more than $5,000, individually, or $10,000 in
the aggregate. Prior to the date hereof, the Company has made available to
Quanta complete and correct copies of all such agreements. To the extent
applicable, the contracts and agreements set forth in Schedule 5.9 are
separately identified as lump sum, unit price, cost plus or maintenance
agreements.
(b) Except to the extent set forth in Schedule 5.9, since December 31,
1998 (i) no Material Customer has canceled or substantially reduced or, to
the knowledge of the Company and the Stockholder, is threatening to cancel
or substantially reduce its purchases of the Company's products or
services, and (ii) the Company is in compliance with all material
commitments and obligations pertaining to it under such agreements and is
not in default under any of the agreements described in subsection (a), no
notice of default has been received by the Company, and the Stockholder and
the Company are aware of no basis therefor.
(c) Except to the extent set forth in Schedule 5.9, the Company is not
a party to any governmental contracts subject to price redetermination or
renegotiation. Except to the extent set forth in Schedule 5.9, the Company
is not required to provide any bonding or other financial security
arrangements in any material amount in connection with any transactions
with any of its customers or suppliers.
(d) Schedule 5.9 sets forth a summary of each outstanding bid or
proposal by the Company that, if awarded to the Company, contemplates
payments to the Company in excess of $25,000 and that is subject to
acceptance or award by a third party.
(e) Schedule 5.9 sets forth a summary of the Company's material open
jobs and a job cost schedule supporting the Interim Balance Sheet, which
Schedule 5.9 includesthe Company's good faith estimate of each such job's
profit or loss as of the Balance Sheet Date and the Closing Date.
5.10 PERMITS. Schedule 5.10 contains an accurate list of all material
licenses, franchises, permits,
transportation authorities and other governmental authorizations and intangible
assets held by the Company, including, without limitation, permits, licenses and
operating authorizations, titles (including motor vehicle titles and current
registrations), fuel permits, franchises, certificates, trademarks, trade names,
patents, patent applications and copyrights owned or held by the Company (the
"Permits"). The Permits are valid, and the Company has not received any written
notice that any Governmental Authority intends to cancel, terminate or not renew
any such license, operating authorization, franchise, permit or other
governmental authorization. The Permits are all the permits that are required
by Law for the operation of the businesses of the Company as conducted at the
Balance Sheet Date and the ownership of the assets of the Company. The Company
has conducted and is conducting its business in substantial compliance with the
requirements, standards, criteria and conditions set forth in the Permits, as
well as the applicable orders, approvals and variances related thereto, and is
not in violation of any of the foregoing. Except as specifically provided in
Schedule 5.10, the transactions contemplated by this Agreement will not result
in a default under or a breach or violation of, or adversely affect the rights
and benefits afforded to the Company by, any Permits.
5.11 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 5.11, (a)
the Company has complied with and is in compliance, in all material respects,
with all Environmental, Health and Safety Laws, including, without limitation,
Environmental, Health and Safety Laws relating to air, water, land and the
generation, storage, use, handling, transportation, treatment or disposal of
Hazardous Substances; (b) the Company has obtained and complied, in all material
respects, with all necessary permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Substances and has
reported, to the extent required by all Environmental, Health and Safety Laws,
all past and present sites owned or operated by the Company where Hazardous
Substances have been treated, stored, disposed of or otherwise handled; (c)
there have been no "releases" or threats of "releases" (as defined in any
Environmental, Health and Safety Laws) at, from, in or on any property owned or
operated by the Company; (d) there is no on-site or off-site location to which
the Company has transported or disposed of Hazardous Substances or arranged for
the transportation or disposal of Hazardous Substances which is the subject of
any federal, state, local or foreign enforcement action or any other
investigation which could lead to any claim against the Surviving Corporation,
Quanta or Newco for any clean-up cost, remedial work, damage to natural
resources or personal injury, including, but not limited to, any claim under (i)
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, (ii) the Resource Conservation and Recovery Act, (iii) the
Hazardous Materials Transportation Act, or (iv) comparable state and local
statutes and regulations; and (e) the Company has no contingent liability in
connection with any release or disposal of any Hazardous Substance into the
environment. None of the past or present sites owned or operated by the Company
is currently or has ever been designated as a treatment, storage and/or disposal
facility, nor has any such facility ever applied for a Permit designating it as
a treatment, storage and/or disposal facility, under any Environmental, Health
and Safety Law.
5.12 LABOR AND EMPLOYEE RELATIONS. Except as set forth in Schedule
5.12, the Company is not bound by or subject to any arrangement with any labor
union. Except as set forth in Schedule 5.12, no employees of the Company are
represented by any labor union or covered by any collective bargaining agreement
nor, to the Company's or the Stockholder's knowledge, is any campaign to
establish such representation in progress. There is no pending or, to the
Company's or the Stockholder's knowledge, threatened labor dispute involving the
Company and any group of its employees nor has the Company
experienced any significant labor interruptions over the past five years.
Neither the Company nor the Stockholder has any knowledge of any significant
issues or problems in connection with the relationship of the Company with its
employees.
5.13 INSURANCE. Schedule 5.13 sets forth an accurate list as of the
Balance Sheet Date of (a) all insurance policies carried by the Company, copies
of which are attached as Schedule 5.13, (b) all insurance loss runs or workmen's
compensation claims received for the past five policy years, and (c) the
following information with respect to all insurance policies previously carried
by the Company within the last five years: (i) insurer, (ii) type of policy,
(iii) coverage period, and (iv) policy limits and amount of deductible or loss
retention. Except as set forth in Schedule 5.13, none of such policies are
"claims made" policies. The policies described in Schedule 5.13 for the current
policy year are currently in full force and effect. Any open claims as of the
Closing Date are recoverable under such policies, except to the extent of any
applicable deductible or loss retention as set forth on Schedule 5.13.
5.14 COMPENSATION; EMPLOYMENT AGREEMENTS. Schedule 5.14 sets forth an
accurate schedule of all officers, directors and Stockholder employees of the
Company with annual salaries of $50,000 or more, listing the rate of
compensation (and the portions thereof attributable to salary, bonus, benefits
and other compensation, respectively) of each of such persons as of (a) the
Balance Sheet Date and (b) the date hereof. Attached to Schedule 5.14 are true,
complete and correct copies of each employment or consulting agreement with any
employee of the Company or the Stockholder. The Company is not a party with any
officer, director, stockholder, member or employee to any employment agreement
or similar arrangement containing "golden parachute" or other similar
provisions.
5.15 NONCOMPETITION, CONFIDENTIALITY AND NONSOLICITATION AGREEMENTS.
Schedule 5.15 sets forth all agreements containing covenants not to compete or
solicit employees or to maintain the confidentiality of information to which the
Company is bound or under which the Company has any rights or obligations.
5.16 EMPLOYEE BENEFIT PLANS.
(a) Schedule 5.16 sets forth an accurate schedule of each "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all nonqualified deferred
compensation arrangements, whether formal or informal and whether legally
binding or not, under which the Company or an ERISA Affiliate has any
current or future obligation or liability or under which any present or
former employee of the Company or an ERISA Affiliate, or such present or
former employee's dependents or beneficiaries, has any current or future
right to benefits (each such plan and arrangement referred to hereinafter
as a "Plan"), together with true and complete copies of such Plans,
arrangements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except as set
forth in Schedule 5.16, neither the Company nor any ERISA Affiliate
sponsors, maintains or contributes currently, or at any time during the
preceding five years, to any plan, program, fund or arrangement that
constitutes an employee pension benefit plan. Each Plan may be terminated
by the Company, or if applicable, by an ERISA Affiliate at any time without
any liability, cost or expense, other than
costs and expenses that are customary in connection with the termination of
a Plan. For purposes of this Agreement, the term "employee pension benefit
plan" shall have the meaning given that term in Section 3(2) of ERISA, and
the term "ERISA Affiliate" means any corporation or trade or business under
common control with a Company as determined under Section 414(b), (c), (m)
or (o) of the Code.
(b) Each Plan listed in Schedule 5.16 is in compliance in all material
respects with the applicable provisions of ERISA, the Code, and any other
applicable Law. Except as set forth in Schedule 5.16, with respect to each
Plan of the Company and each ERISA Affiliate (other than a "multiemployer
plan," as defined in Section 4001(a)(3) of ERISA), all reports and other
documents required under ERISA or other applicable Law to be filed with any
Governmental Authority, the failure of which to file could reasonably be
expected to result in a material liability to the Company or any ERISA
Affiliate, including all Forms 5500, or required to be distributed to
participants or beneficiaries, have been duly and timely filed or
distributed. True and complete copies of all such reports and other
documents with respect to the past five years for each Plan have been
provided to Quanta. No "accumulated funding deficiency" (as defined in
Section 412(a) of the Code) with respect to any Plan has been incurred
(without regard to any waiver granted under Section 412 of the Code), nor
has any funding waiver from the Internal Revenue Service been received or
requested. Except as set forth in Schedule 5.16, each Plan that is
intended to be "qualified" within the meaning of Section 401(a) of the Code
(a "Qualified Plan") is, and has been during the period from its adoption
to the date hereof, so qualified, both as to form and operation and all
necessary approvals of Governmental Authorities, including a favorable
determination as to the qualification under the Code of each of such
Qualified Plans and each amendment thereto, have been timely obtained.
Except as set forth in Schedule 5.16, all accrued contribution obligations
of the Company with respect to any Plan have either been fulfilled in their
entirety or are fully reflected in the Financial Statements.
(c) No Plan has incurred or will incur, and no Company nor any ERISA
Affiliate has incurred or will incur, with respect to any Plan, any
liability for excise tax or penalty due to the Internal Revenue Service.
There have been no terminations, partial terminations or discontinuances of
contributions to any Qualified Plan during the preceding five years without
notice to and approval by the Internal Revenue Service and payment of all
obligations and liabilities attributable to such Qualified Plan.
(d) Except as set forth in Schedule 5.16, neither the Company nor any
ERISA Affiliate has made any promises of retirement or other benefits to
employees, except as set forth in the Plans, and neither the Company nor
any ERISA Affiliate maintains or has established any Plan that is a
"welfare benefit plan" within the meaning of Section 3(1) of ERISA that
provides for continuing benefits or coverage for any participant or any
beneficiary of a participant after such participant's termination of
employment, except as may be required by Part 6 of Subtitle B of Title I of
ERISA and Section 4980B of the Code and similar state Law provisions, and
at the expense of the participant or the beneficiary of the participant, or
retiree medical liabilities. Neither the Company nor any ERISA Affiliate
maintains, has established or has ever participated in a multiple employer
welfare benefit arrangement as described in Section 3(40)(A) of ERISA.
Except as set forth in
Schedule 5.16, neither the Company nor any ERISA Affiliate has any
current or future obligation or liability with respect to a Plan pursuant
to the provisions of a collective bargaining agreement.
(e) Neither the Company nor any ERISA Affiliate has incurred any
material liability to the Pension Benefit Guaranty Corporation in
connection with any Plan. The assets of each Plan that are subject to
Title IV of ERISA are sufficient to provide the benefits under such Plan,
the payment of which the Pension Benefit Guaranty Corporation would
guarantee if such Plan were terminated, and such assets are also sufficient
to provide all other "benefits liabilities" (as defined in ERISA Section
4001(a)(16)) due under such Plan upon termination.
(f) No "reportable event" (as defined in Section 4043 of ERISA) has
occurred and is continuing with respect to any Plan. There are no pending,
or to the Company's and the Stockholder's knowledge, threatened claims,
lawsuits or actions (other than routine claims for benefits in the ordinary
course) asserted or instituted against, and neither the Company nor any
ERISA Affiliate has knowledge of any threatened litigation or claims
against, the assets of any Plan or its related trust or against any
fiduciary of a Plan with respect to the operation of such Plan. To the
Company's and the Stockholder's knowledge, there are no investigations or
audits of any Plan by any Governmental Authority currently pending and
there have been no such investigations or audits that have been concluded
that resulted in any liability to the Company or any ERISA Affiliate that
has not been fully discharged. Neither the Company nor any ERISA Affiliate
has participated in any voluntary compliance or closing agreement programs
established with respect to the form or operation of a Plan.
(g) Neither the Company nor any ERISA Affiliate has engaged in any
prohibited transaction, within the meaning of Section 406 of ERISA or
Section 4975 of the Code, in connection with any Plan for which exemption
was not available. Except as set forth in Schedule 5.16, neither the
Company nor any ERISA Affiliate is, or ever has been, a participant in or
is obligated to make any payment to a multiemployer plan. No person or
entity that was engaged by the Company or an ERISA Affiliate as an
independent contractor within the last five years reasonably can or will be
characterized or deemed to be an employee of the Company or an ERISA
Affiliate under applicable Laws for any purpose whatsoever, including,
without limitation, for purposes of federal, state and local income
taxation, workers' compensation and unemployment insurance and Plan
eligibility.
5.17 LITIGATION AND COMPLIANCE WITH LAW. Except as set forth in
Schedule 5.17, there are no claims, actions, suits or proceedings, pending or,
to the knowledge of the Company and the Stockholder, threatened against or
affecting the Company, at law or in equity, or before or by any Governmental
Authority having jurisdiction over the Company. No written notice of any claim,
action, suit or proceeding, whether pending or threatened, has been received by
the Company and, to the Stockholder's and the Company's knowledge, there is no
basis therefor. Except to the extent set forth in Schedule 5.17, the Company has
conducted and is conducting its business in compliance with all Laws applicable
to the Company, its assets or the operation of its business.
5.18 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees,
levies or other assessments including, without limitation, income, gross
receipts, excise, property, sales, withholding, social security, unemployment,
occupation, use, service, service use, license, payroll, franchise, transfer and
recording taxes, fees and charges, imposed by the United States or any state,
local or foreign government or subdivision or agency thereof, whether computed
on a separate, consolidated, unitary, combined or any other basis; and such term
shall include any interest, fines, penalties or additional amounts attributable
to or imposed with respect to any such taxes, charges, fees, levies or other
assessments. The Company has timely filed all requisite federal, state, local
and other tax returns for all fiscal periods ended on or before the Closing, and
has duly paid in full or made adequate provision in the Financial Statements for
the payment of all Taxes for all periods ending at or prior to the Closing Date.
The Company has duly withheld and paid or remitted all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other person or entity that
required withholding under any applicable Law, including, without limitation,
any amounts required to be withheld or collected with respect to social
security, unemployment compensation, sales or use taxes or workers'
compensation. There are no examinations in progress or claims against the
Company relating to Taxes for any period or periods prior to and including the
Balance Sheet Date and no written notice of any claim for Taxes, whether pending
or threatened, has been received. The Company has not granted or been requested
to grant any extension of the limitation period applicable to any claim for
Taxes or assessments with respect to Taxes. The Company is not a party to any
Tax allocation or sharing agreement and is not otherwise liable or obligated to
indemnify any person or entity with respect to any Taxes. The amounts shown as
accruals for Taxes on the Interim Financial Statements as of the Balance Sheet
Date are sufficient for the payment of all Taxes for all fiscal periods ended on
or before that date. True and complete copies of (a) any tax examinations, (b)
extensions of statutory limitations and (c) the federal, state and local Tax
returns of the Company for the last three fiscal years have been previously
provided to Quanta. There are no requests for ruling in respect of any Tax
pending between the Company and any Taxing authority. The Company has been
taxed under the provisions of Subchapter S of the Code since June 1, 1992. The
Company currently utilizes the accrual method of accounting for income tax
purposes. Such method of accounting has not changed in the past five years.
5.19 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set
forth in Schedule 5.19, the Company has conducted its operations in the ordinary
course and there has not been:
(a) any material adverse change in the business, operations,
properties, condition (financial or other), assets, liabilities (contingent
or otherwise), results of operations or prospects of the Company, taken as
a whole;
(b) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
Company, taken as a whole;
(c) any change in the authorized capital stock of the Company or in
its outstanding securities or any change in the Stockholder's ownership
interests in the Company or any grant of any options, warrants, calls,
conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption, purchase
or other acquisition of any of the capital stock of the Company;
(e) any increase in the compensation payable or to become payable by
the Company to the Stockholder or any of its officers, directors,
employees, consultants or agents, except for bonuses and salary increases
for employees, which bonuses and salary increases are set forth in Schedule
5.19;
(f) any significant work interruptions, labor grievances or claims
filed;
(g) except for the Merger, any sale or transfer, or any agreement to
sell or transfer, any material assets, properties or rights of the Company
to any person, including, without limitation, the Stockholder and his
Affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(i) any increase in the indebtedness of the Company, other than
accounts payable incurred in the ordinary course of business, consistent
with past practices or incurred in connection with the transactions
contemplated by this Agreement;
(j) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(k) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of the Company's business;
(j) any waiver of any material rights or claims of the Company;
(l) any material breach, amendment or termination of any material
contract, agreement, Permit or other right to which the Company is a party
or any of its property is subject; or
(m) any other material transaction by the Company outside the ordinary
course of business.
5.20 ACCOUNTS WITH BANKS AND BROKERAGES; POWERS OF ATTORNEY. Schedule
5.20 sets forth an accurate schedule, as of the date of this Agreement, of (a)
the name of each financial institution or brokerage firm in which the Company
has accounts or safe deposit boxes; (b) the names in which the accounts or boxes
are held; (c) the type of account and the cash, cash equivalents and securities
held in such account as of the second business day prior to the Closing, none of
which assets have been withdrawn from such accounts since such date except for
bona fide business purposes in the ordinary course of the business of the
Company; and (d) the name of each person authorized to draw thereon or have
access thereto. Schedule 5.20 also sets forth the name of each person,
corporation, firm or other entity holding a general or special power of attorney
from the Company and a description of the terms thereof.
5.21 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Company nor any
of its affiliates has given or offered to give anything of value to any
governmental official, political party or candidate for government office that
was illegal to give or offer to give nor has it otherwise taken any action which
would constitute a violation of the Foreign Corrupt Practices Act of 1977, as
amended, or any similar Law.
5.22 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth in Schedule 5.22, neither the Stockholder nor any other Affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is in a Competitive Business or is a competitor, lessor, lessee,
customer or supplier of the Company. Except as set forth in Schedule 5.22, no
officer or director of the Company nor the Stockholder has any interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
business of the Company.
5.23 INTANGIBLE PROPERTY. Schedule 5.23 sets forth an accurate list of
all patents, patent applications, trademarks, service marks, technology,
licenses, trade names, copyrights and other intellectual property or proprietary
property rights owned or used by the Company. The Company owns or possesses, and
the assets of the Company include, sufficient legal rights to use all of such
items without conflict with or infringement of the rights of others.
5.24 TAX REORGANIZATION REPRESENTATION. The Surviving Corporation will
acquire substantially all of the properties of the Company within the meaning of
Section 368(a)(2)(E) of the Code.
5.25 NO IMPLIED REPRESENTATIONS. Notwithstanding anything to the
contrary contained in this Agreement, it is the express understanding of the
Stockholder and the Company that Quanta and Newco are not making any
representation or warranty whatsoever, express or implied, other than those
representations and warranties of Quanta and Newco expressly set forth in this
Agreement.
5.26 DISCLOSURE. The Stockholder and the Company have used commercially
reasonable efforts to fully provide Quanta or its representatives with all the
information that Quanta has requested in analyzing whether to consummate the
Merger and the other transactions contemplated by this Agreement. None of the
representations or warranties of the Stockholder to Quanta or Newco in this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein, in light of the
circumstances under which they were made, not misleading.
5.27 YEAR 2000 COMPLIANCE. All devices, systems, machinery, information
technology, computer software and hardware, and other date sensitive technology
(jointly and severally its "systems") necessary for the Company's business as
presently conducted will be Year 2000 Compliant within a period of time
calculated to result in no material disruption of any of their business
operations. For purposes hereof, "Year 2000 Compliant" means that such systems
are designed to be used prior to, during and after the Gregorian
calendar year 2000 A.D. and will operate during each such time period without
error relating to date data, specifically including any error relating to, or
the product of, date data which represents or references different centuries or
more than one century.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF QUANTA AND NEWCO
Quanta and Newco jointly and severally represent and warrant to the
Stockholder as follows:
6.1 ORGANIZATION. Each of Quanta and Newco is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware. Each of Quanta and Newco is duly authorized and qualified under all
applicable Laws to carry on its business in the places and in the manner now
conducted. Each of Quanta and Newco has the requisite power and authority to
own, lease and operate its assets and properties and to carry on its business as
such business is currently being conducted.
6.2 AUTHORIZATION; NON-CONTRAVENTION; APPROVALS.
(a) Each of Quanta and Newco has the full legal right, power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement has been approved by the boards of directors of Quanta and Newco
and by Quanta, as the sole stockholder of Newco. No additional corporate
proceedings on the part of Quanta or Newco are necessary to authorize the
execution and delivery of this Agreement and the consummation by Quanta and
Newco of the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Quanta and Newco, and, assuming
the due authorization, execution and delivery by the Company and the
Stockholder, constitutes valid and binding agreements of Quanta and Newco,
enforceable against Quanta and Newco in accordance with its terms.
(b) The execution and delivery of this Agreement by Quanta and Newco
do not, and the consummation by Quanta and Newco of the transactions
contemplated hereby will not, violate or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under any of the terms, conditions or
provisions of (i) the Certificate of Incorporation or By-Laws of Quanta or
Newco, (ii) any Law applicable to either Quanta or Newco or any of its
properties or assets or (iii) any material note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or
other instrument, obligation or agreement of any kind to which Quanta or
Newco is now a party or by which either Quanta or Newco or any of its
properties or assets may be bound or affected.
(c) Except for the Merger Filings and such filings as may be required
under federal or state securities Laws, no declaration, filing or
registration with, or notice to, or authorization, consent or approval of,
any Governmental Authority is necessary for the execution and delivery of
this
Agreement by Quanta and Newco or the consummation by Quanta and Newco
of the transactions contemplated hereby.
6.3 QUANTA COMMON STOCK. The shares of Quanta Common Stock to be
issued to the Stockholder pursuant to the Merger are duly authorized and, when
issued in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable. The issuance of Quanta Common Stock pursuant to
the Merger will transfer to the Stockholder valid title to such shares of Quanta
Common Stock, free and clear of all Encumbrances, except for any Encumbrances
created by the Stockholder.
6.4 TAX REORGANIZATION REPRESENTATIONS.
(a) Prior to the Merger, Quanta will be in control of Newco within the
meaning of Section 368(c) of the Code.
(b) Quanta has no plan or intention to cause the Surviving Corporation
to issue additional shares of its stock that would result in Quanta losing
control of the Surviving Corporation within the meaning of Section 368(c)
of the Code.
(c) Quanta has no plan or intention to reacquire any of its stock
issued in the Merger.
(d) Quanta has no plan or intention to liquidate the Surviving
Corporation; to merge the Surviving Corporation with or into another
corporation; to sell or otherwise dispose of the stock of the Surviving
Corporation except for transfers of stock to another corporation controlled
by Quanta; or to cause the Surviving Corporation to sell or otherwise
dispose of any of its assets, except for dispositions made in the ordinary
course of business or transfers of assets to a corporation controlled by
Quanta.
(e) Following the Closing, Quanta's intention is that the Surviving
Corporation will continue the historic business of the Company or use a
significant portion of the historic business assets of the Company in a
business, all as required to satisfy the "continuity of business
enterprise" requirement under Section 368 of the Code.
(f) Quanta does not own, nor has it owned during the past five years,
any shares of the stock of the Company.
(g) Each of Quanta and Newco is undertaking the Merger for a bona fide
business purpose and not merely for the avoidance of federal income tax.
(h) Neither Quanta nor Newco is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(i) As of the Closing Date, the fair market value of the assets of
Newco will exceed the sum of Newco's liabilities plus the amount of other
liabilities, if any, to which Newco's assets are subject.
6.5 SEC FILINGS; DISCLOSURE. Quanta has filed with the SEC all material
forms, statements, reports and documents required to be filed by it prior to the
date hereof under each of the 1933 Act and the 1934 Act and the respective rules
and regulations thereunder, (a) all of which, as amended, if applicable,
complied when filed in all material respects with all applicable requirements of
the appropriate Act and the rules and regulations thereunder, and (b) none of
which, as amended, if applicable, contains any untrue statement of material fact
or omits to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made and at the time they were made, not misleading.
6.6 NO IMPLIED REPRESENTATIONS. Notwithstanding anything to the
contrary contained in this Agreement, it is the express understanding of Quanta
and Newco that the Stockholder is not making any representation or warranty
whatsoever, express or implied, other than those representations and warranties
of the Stockholder expressly set forth in this Agreement.
6.7 DISCLOSURE. Quanta has fully provided the Stockholder or his
representatives with all the information that the Stockholder has requested in
analyzing whether to consummate the Merger. None of the information so provided
nor any representation or warranty of Quanta contained in this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein, in light of
the circumstances under which they were made, not misleading.
ARTICLE VII
CERTAIN COVENANTS
7.1. RELEASE FROM GUARANTEES. Quanta shall use its commercially
reasonable best efforts to have the Stockholder released from the personal
guarantees of the Company's indebtedness and other obligations identified in
Schedule 7.1 within 90 days after the Closing Date. Quanta hereby agrees to
indemnify and defend the Stockholder and hold the Stockholder harmless for any
amounts that the Stockholder is required to pay in connection with the
enforcement of any obligations under such personal guarantees after the Closing,
including without limitation any reasonable attorneys' fees and expenses
incurred in connection therewith.
7.2. FUTURE COOPERATION; TAX MATTERS.
(a) The Stockholder and Quanta shall each deliver or cause to be
delivered to the other following the Closing such additional
instruments as the other may reasonably request for the purpose of
fully carrying out this Agreement. The Stockholder will cooperate and
use his commercially reasonable best efforts to have the present
officers, directors and employees of the Company cooperate with
Quanta and the Surviving Corporation at and after the Closing
in furnishing information, evidence, testimony and other assistance
in connection with any actions, proceedings, arrangements or disputes
of any nature with respect to matters pertaining to all periods prior
to the Closing. Each party will bear its out-of-pocket costs and
expenses paid or incurred in connection with any action taken
pursuant to this Section 7.2.
(b) The Stockholder shall prepare or cause to be prepared and file or
cause to be filed all Tax returns for the Company for all periods
ending on or prior to the Closing which are filed after the Closing
consistent with the principles used to prepare such returns in
previous periods. The Stockholder shall permit representatives of
Quanta to review and comment on each such Tax return described in the
preceding sentence prior to filing. The Stockholder shall include any
income, gain, loss, deduction or other tax items for such periods on
his Tax returns in a manner consistent with the Schedule K-1's
prepared by the Stockholder for such periods.
(c) Quanta and the Stockholder shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with
the filing of Tax returns pursuant to this Section 7.2 and any audit,
litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon either party's
request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to
provide additional information and explanation of any material
provided hereunder. Quanta, the Company and the Stockholder agree (i)
to retain all books and records with respect to Tax matters pertinent
to the Company relating to any taxable period beginning before the
Closing until the expiration of the statute of limitations (and to
the extent notified by Quanta or the Company, any extensions thereof)
of the respective tax periods, and to abide by all record retention
agreements entered into with any taxing authority, and (ii) to give
the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other
party so requests, Quanta and the Company shall allow the
Stockholder, or the Stockholder shall allow Quanta or the Company, as
the case may be, to take possession of such books and records.
7.3. EXPENSES. Quanta will pay the fees, expenses and disbursements
of Quanta and its agents, representatives, accountants and counsel incurred in
connection with the execution, delivery and performance of this Agreement and
any amendments hereto. Upon consummation of the Merger, the Company will be
responsible for the fees and expenses of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP's audit or audit
related procedures in connection with the transactions contemplated hereby. The
Stockholder will pay the fees, expenses and disbursements incurred by him and
those of the Company's agents, representatives, financial advisors, accountants
(excluding the fees, expenses and disbursements of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP) and
counsel incurred in connection with the execution, delivery and performance of
this Agreement and any amendments hereto and the consummation of the
transactions contemplated hereby, including, without limitation, accounting
fees and related expenses attributable to the final Tax returns of the Company
and the Stockholder for periods through the Closing. The Stockholder will also
pay any costs associated with business brokers or other advisors engaged by the
Stockholder or the Company.
7.4. LEGAL OPINION. At the Closing, the Company and the Stockholder
shall cause their legal counsel, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, to deliver to Quanta a
legal opinion in form and substance acceptable to Quanta.
7.5. EMPLOYMENT AGREEMENTS. Concurrently with the execution of this
Agreement, the Surviving Corporation shall enter into a mutually acceptable
Employment Agreement with each of the individuals identified on Schedule 7.5
(collectively, the "Employment Agreements").
7.6. REPAYMENT OF RELATED PARTY INDEBTEDNESS. Concurrently with the
execution of this Agreement, (a) the Stockholder shall repay to the Company all
amounts outstanding as advances to or receivables from the Stockholder, each of
which advances or receivables is specifically reflected in Schedule 5.7, and (b)
the Company shall repay all amounts outstanding under loans to the Company from
the Stockholder, each of which loans to the Company is specifically reflected in
Schedule 5.6.
7.7. STOCK OPTIONS. Quanta shall recommend to the Compensation
Committee of its Board of Directors that it grant nonqualified options to
purchase an aggregate of 150,000 shares of Quanta Common Stock as of the Closing
Date under Quanta's 1997 Stock Option Plan (the "Option Plan") to certain key
employees of the Company (other than the Stockholder), as set forth on Schedule
7.7 in the amounts listed thereon. Schedule 7.7 shall also include the social
security number and home address of each individual listed thereon. Such options
shall vest in equal annual increments for four years, commencing on the first
anniversary of the Closing Date.
7.8. LEASE AGREEMENT. Concurrently with the execution of this Agreement,
the Surviving Corporation shall enter into a mutually acceptable Lease Agreement
with Stockholder for the offices of the Company located at ▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ (the "Lease").
7.9 REGISTRATION RIGHTS.
(a) Quanta shall cause to be filed with the SEC by October 31, 1999,
a shelf registration statement providing for the registration and
resale on a continuous or delayed basis by the Stockholder the
Registrable Stock pursuant to Rule 415 under the Act, and Quanta
shall use its commercially reasonable efforts to become or be
declared effective as soon as practicable. Quanta shall use its
commercially reasonable efforts to keep such registration
statement continuously effective, supplemented and amended as
provided in this Section 7.9 until the second anniversary of the
Closing Date.
(b) In connection with the registration required by Section 7.9(a),
Quanta will use its commercially reasonable efforts to as
expeditiously as possible:
(i) prepare and file with the SEC such amendments and
supplements to such registration statement and prospectus
used in connection therewith as may be necessary to keep
such registration statement for such period as shall be
required for the disposition pursuant to the terms of such
registration of all shares of Registrable Stock, and to
comply with the provisions of the 1933 Act with respect to
the disposition of all securities covered by such
registration statement during such period in accordance
with the intended methods of distribution by the
Stockholder set forth in such registration statement;
(ii) furnish to the Stockholder such number of copies of such
registration statement, each amendment and supplement
thereto, in each case including all exhibits, the
prospectus included in such registration statement
(including each preliminary prospectus) and such other
documents as the Stockholder may reasonably request in
order to facilitate the disposition of the Registrable
Stock;
(iii) qualify such Registrable Stock under such other
securities, under such other securities or blue sky laws
of such jurisdictions as the Stockholder reasonably
requests to keep such registration or qualification in
effect for as long as the relevant registration statement
is in effect and do any and all other acts and things
which may be reasonably necessary or advisable to enable
Stockholder to consummate the disposition in such
jurisdictions of the Registrable Stock; provided, however,
Quanta will not be required to qualify generally to do
business in any jurisdiction where it would not otherwise
be required to qualify but for this subsection or to
consent to general service of process in any such
jurisdiction;
(iv) notify Stockholder at any time when a prospectus included
in such registration statement is required to be delivered
under the 1933 Act, of the happening of any event as a
result of which the prospectus included in such
registration statement includes an untrue statement of a
material fact or omits any fact necessary to make the
statements therein not misleading and, at the request of
Stockholder, Quanta will promptly prepare a supplement or
amendment to such prospectus so that, as thereafter
delivered to purchasers of such Registrable Stock, such
prospectus will not contain an untrue statement of a
material fact or omit to state any fact necessary to make
the statements therein, in light of the circumstances
under which such statements are made, not misleading;
(v) cause all such Registrable Stock to be listed on each
securities exchange on which similar securities issued by
Quanta are then listed and to be qualified for trading on
each system on which similar securities issued by Quanta
are from time to time qualified;
(vi) provide a transfer agent and a registrar for all such
Registrable Stock not later than the effective date of
such registration statement and thereafter maintain such a
transfer agent and registrar;
(vii) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make
available to its security holders, as soon as practicable,
an earnings statement covering the period of at least 12
months beginning with the first day of Quanta's first full
calendar quarter after the effective date of the
registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the 1933 Act
and Rule 158 thereunder; and
(viii) in the event of the issuance of any stop order suspending
the effectiveness of such registration statement, or of
any order suspending or preventing the use of any related
prospectus or suspending the qualification of any
Registrable Stock included in any registration statement
for sale in any jurisdiction, Quanta will promptly notify
the Stockholder thereof and will use its commercially
reasonable efforts promptly to obtain the withdrawal of
such order.
The Stockholder agrees that if Quanta has delivered
preliminary or final prospectuses to Stockholder and after
having done so Quanta shall give notice to Stockholder
that (i) the prospectus needs to be amended or
supplemented to comply with the requirements of the 1933
Act, (ii) a stop order suspending the effectiveness of the
registration is issued by the SEC or (iii) a Potential
Material Event shall exist, then Stockholder shall
immediately cease making offers and sales of Registrable
Stock and return all remaining prospectuses to Quanta.
Following such amendment or supplement, the lifting of any
stop order or such time as the Potential Material Event
shall no longer exist, Quanta shall promptly provide
Stockholder with revised prospectuses and, following
receipt of the revised prospectuses, Stockholder shall be
free to resume making offers of the Registrable Stock, or
any portion thereof. The period during which Quanta
exercises its rights described in this paragraph to
postpone, delay or interrupt the offer and sale of the
Registrable Stock or during the pendency of any stop
order, injunction or other order or requirement of the SEC
or any other governmental agency or court shall be added
to the period for which Quanta must keep such registration
effective pursuant to subsection (i) of this Section
7.9(b).
(c) Quanta shall pay all expenses incident to Quanta's performance of
or compliance with this Section 7.9, including, without
limitation, all registration, SEC filing fees, New York Stock
Exchange fees, all fees and expenses of complying with securities
or blue sky laws, printing expenses, the fees and disbursements
of counsel for Quanta
and of its independent public accountants, provided, however,
that Quanta shall not pay, and Stockholder shall pay, any
underwriting discounts, commissions and transfer taxes in respect
of the Registrable Stock being registered.
(d) As a condition to Quanta's obligations hereunder, Stockholder
shall furnish to Quanta such information regarding Stockholder
and the distribution proposed by Stockholder as Quanta may
reasonably request and as shall be required in connection with
any registration, qualification or compliance contemplated by
this Agreement.
(e) Quanta agrees to indemnify, to the extent permitted by law,
Stockholder against all Losses caused by any untrue or alleged
untrue statement of material fact contained in the registration
statement required by this Section 7.9, including any prospectus
or preliminary prospectus included therein, or any amendment
thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as the
same are caused by or contained in any information furnished in
writing to Quanta by Stockholder expressly for use therein or by
Stockholder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto
after Quanta has furnished Stockholder with a sufficient number
of copies of the same. Any claim to indemnification pursuant to
this Section 7.9(e) shall be made pursuant to Article VIII
hereof.
(f) In connection with any registration statement, Stockholder will,
to the extent permitted by law, indemnify Quanta, its directors
and officers and each person who controls Quanta (within the
meaning of the ▇▇▇▇ ▇▇▇) against any Losses resulting from any
untrue or alleged untrue statement of material fact contained in
the registration statement, prospectus or preliminary prospectus
or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading (but
only to the extent that any such untrue statement or omission is
contained in any information or affidavit so furnished in writing
by Stockholder for use therein) and any failure of Stockholder to
deliver a copy of the registration statement or prospectus or any
amendments or supplements thereto after Quanta has furnished
Stockholder with a sufficient number of copies of the same. Any
claim to indemnification pursuant to this Section 7.9(f) shall be
made pursuant to Article VIII hereof.
ARTICLE VIII
INDEMNIFICATION
The Stockholder, Quanta and Newco each make the following covenants:
8.1. GENERAL INDEMNIFICATION BY THE STOCKHOLDER. Subject to Section 8.5
and Section 8.6 the
Stockholder covenants and agrees that he will (without any right of
indemnification or contribution from the Company) indemnify, defend, protect and
hold harmless Quanta, Newco and the Surviving Corporation, and their respective
officers, directors, employees, stockholder, agents, representatives and
Affiliates, at all times from and after the date of this Agreement from and
against all Losses incurred by any of such indemnified persons as a result of or
arising from (a) until the Expiration Date any breach of the representations and
warranties of the Stockholder set forth herein or in the Schedules or
certificates delivered in connection herewith, (b) any breach or nonfulfillment
of any covenant or agreement on the part of the Stockholder or the Company under
this Agreement, (c) all income Taxes payable by the Company for all periods
prior to and including the Closing Date, (d) all transfer and other Taxes
arising from the transactions contemplated by this Agreement or (e) as the
result of the breach of, or non-compliance by the Company with, any
Environmental, Health and Safety Law prior to the Closing.
8.2. INDEMNIFICATION BY QUANTA. Subject to Section 8.5 and Section 8.6,
Quanta covenants and agrees that it will indemnify, defend, protect and hold
harmless the Stockholder and his respective agents, representatives, Affiliates,
beneficiaries and heirs and employees at all times from and after the date of
this Agreement from and against all Losses incurred by any of such indemnified
persons as a result of or arising from (a) until the Expiration Date, any breach
of the representations and warranties of Quanta or Newco set forth herein or in
the Schedules or certificates attached hereto or (b) any breach or
nonfulfillment of any covenant or agreement on the part of Quanta or Newco under
this Agreement.
8.3. THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), of the commencement of
any action or proceeding by a Third Person, which the Indemnified Party believes
in good faith is an indemnifiable claim under this Agreement, the Indemnified
Party shall give to the party obligated to provide indemnification pursuant to
Sections 8.1 or 8.2 hereof (hereinafter the "Indemnifying Party") written notice
of such claim or the commencement of such action or proceeding. Such notice
shall state the nature and the basis of such claim and a reasonable estimate of
the amount thereof. The Indemnifying Party shall have the right to defend and
settle, at its own expense and by its own counsel, any such matter so long as
the Indemnifying Party pursues the same diligently and in good faith. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in all commercially
reasonable respects in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnifying Party with any books, records and other information reasonably
requested by the Indemnifying Party and in the Indemnified Party's possession or
control. After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability, and for
so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability; provided, however, that the Indemnified Party shall
be entitled, at its expense, to participate in the defense of such asserted
liability and the negotiations of the settlement thereof. The Indemnifying Party
shall not settle any such Third Person claim without the consent of the
Indemnified Party, unless the settlement thereof imposes no liability or
obligation on, and includes a complete release from liability of, the
Indemnified Party. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the
Indemnified Party refuses to consent to such settlement, then the Indemnifying
Party's liability under this Section with respect to such Third Person claim
shall be limited to the amount so offered in settlement by said Third Person;
provided, however, that notwithstanding the foregoing, the Indemnified Party
shall be entitled to refuse to consent to any such proposed settlement and the
Indemnifying Party's liability hereunder shall not be limited by the amount of
the proposed settlement if such settlement does not provide for the complete
release of the Indemnified Party. If, upon receiving notice, the Indemnifying
Party does not timely undertake to defend such matter to which the Indemnified
Party is entitled to indemnification hereunder, or fails diligently to pursue
such defense, the Indemnified Party may undertake such defense through counsel
of its choice, at the cost and expense of the Indemnifying Party, and the
Indemnified Party may settle such matter, in its discretion, and the
Indemnifying Party shall reimburse the Indemnified Party for the amount paid in
such settlement and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith.
8.4. NON-THIRD PERSON CLAIMS. In the event that any Indemnified Party
asserts the existence of a claim giving rise to Losses (but excluding claims
resulting from the assertion of liability by Third Persons), such party shall
give written notice to the Indemnifying Party. Such written notice shall state
that it is being given pursuant to this Section 8.4, specify the nature and
amount of the claim asserted, and indicate the date on which such assertion
shall be deemed accepted and the amount of the claim deemed a valid claim (such
date to be established in accordance with the next sentence). If such
indemnifying Party, within 60 days after the mailing of notice by such
Indemnified Party, shall not give written notice to such Indemnified Party
announcing such Indemnifying Party's intent to contest such assertion of such
Indemnified Party, such assertion shall be deemed accepted and the amount of
such claim shall be deemed a valid claim. In the event, however, that such
Indemnifying Party contests such assertion of a claim by giving such written
notice to the Indemnified Party within said period, then the parties shall act
in good faith to reach agreement regarding such claim. In the event that
litigation shall arise with respect to any such claim, the prevailing party
shall be entitled to reimbursement of costs and expenses incurred in connection
with such litigation including reasonable attorneys' fees, if the parties
hereto, acting in good faith, cannot reach agreement with respect to such claim
within 60 days after the notice provided by the Indemnified Party.
8.5. INDEMNIFICATION DEDUCTIBLE. Neither the Stockholder, on the one
hand, nor Quanta, Newco and the Surviving Corporation, on the other hand, shall
be entitled to indemnification from the other under the provisions of Section
8.1(a) or Section 8.2(a), as the case may be, until such time as, and only to
the extent that, the claims subject to indemnification by such other party
exceed, in the aggregate, $600,000. Notwithstanding the foregoing, the
limitations set forth in this Section 8.5 shall not apply to fraudulent
misrepresentations.
8.6. INDEMNIFICATION LIMITATION. Subject to Section 8.5, the aggregate
indemnification obligation of the Stockholder under Section 8.1(a) and of Quanta
and Newco under Section 8.2(a) shall be limited to $60,000,000. Notwithstanding
the foregoing, the limitations set forth in this Section 8.6 not apply to
fraudulent misrepresentations.
8.7. INDEMNIFICATION FOR NEGLIGENCE OF INDEMNIFIED PARTY. THE RIGHTS TO
INDEMNIFICATION UNDER THIS ARTICLE VIII INCLUDE RIGHTS TO INDEMNIFICATION FOR
THE RESULTS OF AN INDEMNIFIED PARTY'S ACTUAL OR ALLEGED NEGLIGENCE, IF SUCH
INDEMNIFIED PARTY WOULD OTHERWISE BE ENTITLED TO INDEMNIFICATION HEREUNDER.
8.8 EXCLUSIVE REMEDY. Except as expressly provided in this Agreement, the
provisions of this Article VIII, absent fraud, shall be the sole and exclusive
remedy of any party after the Closing Date for any damage, claim, cause of
action or right of any nature arising out of or relating to this Agreement, the
certificates or other documents executed or delivered herewith, or the
transactions contemplated hereby. Notwithstanding the foregoing, the limitations
set forth in this Section 8.8 shall not apply to equitable relief sought by
Quanta with regard to the covenants of the Stockholder set forth in Section 7.2,
ARTICLE IX or ARTICLE X.
ARTICLE IX
NONCOMPETITION COVENANTS
9.1 PROHIBITED ACTIVITIES.
(a) For no additional consideration, the Stockholder will not for five
years following the Closing Date and, if longer, one year following
Stockholder's termination of employment with the Surviving Corporation or
its Affiliates (with the applicable period being herein referred to as the
"Noncompete Term"), directly or indirectly, for himself or on behalf of or
in conjunction with any other person, company, partnership, corporation or
business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial or advisory
capacity, whether as an employee, independent contractor,
consultant or advisor, or as a sales representative, in
any Competitive Business within 150 miles of (A) where the
Company or any of its subsidiaries conducts a Competitive
Business, or has conducted a Competitive Business within
the past three years or (B) where Quanta or the Surviving
Corporation or an Affiliate of Quanta or the Surviving
Corporation conducts a Competitive Business after the
Closing that is, within six months prior to the date of
termination of Stockholder's employment, a Competitive
Business under his supervision or managerial authority
(such areas being herein referred to as the "Territory");
(ii) call upon any person, who is, at that time, an employee or
consultant of Quanta, the Surviving Corporation or any of
their respective subsidiaries, for the purpose or with the
intent or effect of enticing such employee or consultant
away from or out of the employ or contract with Quanta,
the Surviving Corporation or any of their respective
subsidiaries; or
(iii) call upon any person or entity which is, at that time, or
which has been, within one year prior to that time, a
customer of the Company, Quanta or the Surviving
Corporation or any of the subsidiaries of such parties
within the Territory for the purpose of soliciting or
selling services or products in a Competitive Business
within the Territory.
(b) Notwithstanding the above, Section 9.1(a) shall not be deemed to
prohibit Stockholder from acquiring, as a passive investor with no
involvement in the operations of the business, not more than one percent of
the capital stock of a Competitive Business whose stock is publicly traded
on a national securities exchange, The NASDAQ Stock Market or over-the-
counter.
9.2. EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to Quanta and the Surviving Corporation as a result of a breach of the
foregoing covenant, because a breach of such covenant would diminish the value
of the assets and business of the Company being sold pursuant to this Agreement,
and because of the immediate and irreparable damage that could be caused to
Quanta and the Surviving Corporation for which it would have no other adequate
remedy, Stockholder agrees that the foregoing covenant may be enforced against
him by injunctions, restraining orders and other equitable actions.
9.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this ARTICLE IX are necessary in terms of time, activity
and territory to protect Quanta's and the Surviving Corporation's interest in
the assets and business being acquired pursuant to the terms of this Agreement
and impose a reasonable restraint on Stockholder in light of the activities and
businesses of the Company on the date of the execution of this Agreement and the
current plans of the Company.
9.4. SEVERABILITY; REFORMATION. The covenants in this ARTICLE IX are
severable and separate, and the unenforceability of any specific covenant shall
not affect the continuing validity and enforceability of any other covenant. In
the event any court of competent jurisdiction shall determine that the scope,
time or territorial restrictions set forth in this ARTICLE IX are unreasonable
and therefore unenforceable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable
and this Agreement shall thereby be reformed.
9.5. MATERIAL AND INDEPENDENT COVENANT. Stockholder acknowledges that
his agreements and the covenants set forth in this ARTICLE IX are material
conditions to Quanta's and Newco's agreements to execute and deliver this
Agreement and to consummate the transactions contemplated hereby and that Quanta
and Newco would not have entered into this Agreement without such covenants. All
of the covenants in this ARTICLE IX shall be construed as an agreement
independent of any other provision in this Agreement.
ARTICLE X
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1. GENERAL. Stockholder recognizes and acknowledges that he had in
the past, currently has,
and in the future will have, access to certain confidential information relating
to the businesses of the Company, such as lists of customers, operational
policies, and pricing and cost policies that are, and following the Closing will
be, valuable, special and unique assets of the Surviving Corporation.
Stockholder agrees that he will not use or disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose whatsoever, except as is required in the course of performing his
duties, if any, to the Surviving Corporation and/or Quanta, unless (a) such
information becomes known to the public generally through no fault of
Stockholder, or (b) disclosure is required by Law, provided that prior to
disclosing any information pursuant to this clause (b) Stockholder shall, if
commercially reasonable, give prior written notice thereof to Quanta and the
Surviving Corporation and provide Quanta with the opportunity to contest such
disclosure. In the event of a breach or threatened breach by Stockholder of the
provisions of this Section, Quanta shall be entitled to an injunction
restraining Stockholder from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Quanta from
pursuing any other available remedy for such breach or threatened breach,
including, without limitation, the recovery of damages.
10.2. EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, because a breach of
such covenant would diminish the value of the assets and business of the Company
being sold pursuant to this Agreement, and because of the immediate and
irreparable damage that would be caused for which the Surviving Corporation
and/or Quanta would have no other adequate remedy, Stockholder agrees that the
foregoing covenants may be enforced against him by injunctions, restraining
orders and other equitable actions.
ARTICLE XI
INTENDED TAX TREATMENT
11.1. TAX-FREE REORGANIZATION. Quanta and the Stockholder are
entering into this Agreement with the intention that the Merger qualify as a
tax-free reorganization for federal income tax purposes, except to the extent
of any "boot" received, and neither Quanta nor the Stockholder will take any
actions that disqualify the Merger for such treatment.
ARTICLE XII
FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS
ON QUANTA COMMON STOCK
12.1 COMPLIANCE WITH LAW. The Stockholder acknowledges the shares of
Quanta Common Stock issued in accordance with the terms of this Agreement (the
"Restricted Shares") will not be registered under the 1933 Act, except as
required by Section 7.9, and therefore may not be resold without compliance with
the 1933 Act. The Restricted Shares are being or will be acquired by the
Stockholder solely for his own account, for investment purposes only, and with
no present intention of distributing, selling or otherwise disposing of them in
connection with a distribution. The Stockholder covenants, warrants and
represents that none of the Restricted Shares will be, directly or indirectly,
offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full compliance
with all of the applicable provisions of the 1933 Act and the rules and
regulations of the SEC. Until the effective date of the shelf registration
statement filed pursuant to Section 7.9, certificates representing the shares of
Quanta Common Stock issued at the Closing shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE NOT ISSUED IN A TRANSACTION
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"),
OR ANY APPLICABLE STATE SECURITIES LAWS. THE SHARES REPRESENTED HEREBY
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED UNLESS
SUCH SALE OR TRANSFER IS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR, IN THE
OPINION OF COUNSEL TO THE ISSUER, IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS.
12.2. ECONOMIC RISK; SOPHISTICATION; ACCREDITED INVESTORS. Stockholder
is able to bear the economic risk of an investment in the Restricted Shares and
can afford to sustain a total loss of such investment. Stockholder has such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of the proposed investment and therefore has the
capacity to protect his own interests in connection with the acquisition of the
Restricted Shares pursuant hereto. Stockholder represents to Quanta and Newco
that he is an "accredited investor," as that term is defined in Regulation D
under the 1933 Act. Stockholder or his representatives have had an adequate
opportunity to ask questions and receive answers from the officers of Quanta and
Newco concerning, among other matters, Quanta, its management, its plans for the
operation of its business and potential additional acquisitions.
12.3 RESTRICTION ON SALE OR OTHER TRANSFER OF RESTRICTED SHARES.
Stockholder covenants, warrants and represents that, (i) 50% of the shares of
Quanta Common Stock issued at the Closing will not be offered, sold, assigned,
pledged, hypothecated, transferred or otherwise disposed of, directly or
indirectly, during the one-year period commencing on the Closing Date (the
"Initial Lockup Period") and (ii) 25% of the shares of Quanta Common Stock
issued at the Closing will not be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of, directly or indirectly,
during the two-year period commencing on the Closing Date (the "Secondary Lockup
Period" and together with the Initial Lockup Period, the "Lockup Periods"), and,
after the applicable Lockup Period, the shares of Quanta Common Stock issued at
the Closing may be offered, sold, assigned, pledged, hypothecated, transferred
or otherwise disposed of directly or indirectly, only after full compliance with
all of the applicable provisions of the 1933 Act and the rules and regulations
of the SEC; and, during the applicable Lockup Period, Stockholder shall not
engage in put, call, short-sale, hedge, straddle or similar transactions
intended to reduce the Stockholder's risk of owning the shares subject to lockup
restrictions under this Section 12.3. Certificates representing a portion of
the shares of Quanta Common Stock issued at the Closing, shall bear the
following legend, which shall reflect the applicable Lockup Period, in addition
to the legend under Section 12.1:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
CONTRACTUAL RESTRICTION ON TRANSFER THAT EXPIRES ON AUGUST 13, 200_
AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED,
TRANSFERRED OR OTHERWISE DISPOSED OF DURING
THE PERIOD OF SUCH CONTRACTUAL RESTRICTION WITHOUT THE PRIOR WRITTEN
CONSENT OF QUANTA SERVICES, INC.
12.4. REMOVAL OF LEGENDS. The legends required under Section 12.1 and
Section 12.3 shall be removed at the request of the Stockholder at any time
after the effective date of the shelf registration statement, or the expiration
of the applicable Lock Up-Period with respect to those shares, respectively.
ARTICLE XIII
MISCELLANEOUS
13.1. SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of Law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of Quanta, Newco, the Surviving Corporation and the Company, and the
heirs and legal representatives of the Stockholder.
13.2. ENTIRE AGREEMENT. This Agreement (including the Schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholder,
the Company, Newco and Quanta and supersede any prior agreement and
understanding relating to the subject matter of this Agreement, including,
without limitation, the Letter of Intent. This Agreement may be modified or
amended only by a written instrument executed by the Stockholder, the Company,
Newco and Quanta, acting through their respective officers, duly authorized by
their respective Boards of Directors.
13.3. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. Facsimile
transmission of any signed original document and/or retransmission of any signed
facsimile transmission will be deemed the same as delivery of an original. At
the request of any party, the parties will confirm facsimile transmission by
signing a duplicate original document.
13.4. BROKERS AND AGENTS. Each party hereto represents and warrants that
it employed no broker or agent in connection with the transactions contemplated
by this Agreement. Except as specifically provided in Section 7.3, each party
agrees to indemnify each other party against all loss, cost, damages or expense
arising out of claims for fees or commissions of brokers employed or alleged to
have been employed by such indemnifying party.
13.5. NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in the
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, as follows:
(a) If to Quanta, Newco or the Surviving Corporation, addressed to
them at:
Quanta Services, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: President and General Counsel
(b) If to the Stockholder, addressed as follows:
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
or such other address as any party hereto shall specify pursuant to this Section
13.5 from time to time.
13.6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties set forth in ARTICLE V and ARTICLE VI shall survive the Closing
for a period of two years from the Closing Date (the "Expiration Date"), except
that the representations and warranties set forth in Sections 5.16 (related to
Tax matters) and 5.18 hereof shall survive until such time as the applicable
statute of limitations has run for all tax periods ended prior to the Closing
Date, which shall be deemed to be the Expiration Date for Sections 5.16
(related to Tax matters) and 5.18.
13.7. EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
13.8. REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and unenforceable,
but so as to most nearly retain the intent of the parties, and if such
modification is not possible, such provision shall be severed from this
Agreement, and in either case, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
13.9. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Georgia applicable to agreements entered into and
fully to be performed in the State of Georgia by residents of the State of
Georgia.
13.10 DISPUTE RESOLUTION.
(a) Except with respect to injunctive relief as provided in Section
9.2 and Section 10.2 (which relief may be sought from any court or
administrative agency with jurisdiction with respect thereto), any
unresolved dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in accordance with
the rules of the American Arbitration Association then in effect. The
arbitration shall be conducted by a retired judge employed by the Atlanta,
Georgia Regional Office of J.A.M.S./Endispute, Inc. ("JAMS"). The
arbitration shall be held in JAMS' Atlanta, Georgia office.
(b) The parties shall obtain from JAMS a list of the retired judges
available to conduct the arbitration. The parties shall use their
reasonable efforts to agree upon a judge to conduct the arbitration. If
the parties cannot agree upon a judge to conduct the arbitration within 10
days after receipt of the list of available judges, the parties shall ask
JAMS to provide the parties a list of three available judges (the "Judge
List"). Within five days after receipt of the Judge List, each party shall
strike one of the names of the available judges from the Judge List and
return a copy of such list to JAMS and the other party. If two different
judges are stricken from the Judge List, the remaining judge shall conduct
the arbitration. If only one judge is stricken from the Judge List, JAMS
shall select a judge from the remaining two judges on the Judge List to
conduct the arbitration.
(c) The arbitrator shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. The arbitrator shall have the authority to order payment of
damages, reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrator determines that
a material breach of this Agreement has occurred. A decision by the
arbitrator shall be final and binding. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
QUANTA SERVICES, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
QUANTA XXIV ACQUISITION, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇, President
CROWN FIBER COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Executive Officer
STOCKHOLDER:
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇, Individually