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EXHIBIT 10.25
STERLING CONSTRUCTION COMPANY
STOCK PURCHASE AND INVESTMENT AGREEMENT
DATED AS OF JANUARY 19, 1999
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TABLE OF CONTENTS
PAGE
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1. PURCHASES AND SALES......................................................................................1
1.1. First Tranche of Purchased Stock................................................................1
1.2. Second Tranche of Purchased Stock...............................................................2
1.3. Escrow Agreement................................................................................2
1.4. Note Purchase Agreements........................................................................2
1.5. Closing.........................................................................................3
1.6. Closing Deliveries of Parent, Subsidiary and Selling Stockholders...............................3
1.7. Closing Deliveries of Purchasers................................................................4
1.8. Merger..........................................................................................5
1.9. Determination of December 31, 1998 Stockholders' Equity Amount and November 30, 1998
Pre-Tax Profit Amount...........................................................................5
1.10. Assurance of December 31, 1998 Stockholders' Equity Amount......................................7
1.11. Possible Adjustment for November 30, 1998 Pre-Tax Profit Amount.................................7
1.12. Final S Corporation Distribution; Subordinated Stockholder Notes................................8
2. DETERMINATIONS, NOTICES AND PROCEDURES FOR PURCHASE AND SALE OF SECOND TRANCHE OF PURCHASED STOCK........9
2.1. Trigger Event Notice and Option Exercise Notice.................................................9
2.2. Purchase and Sale of Second Tranche of Purchased Stock After Trigger Option Exercise
Notice.........................................................................................10
2.3. Conditions to Purchasers Obligation After Trigger Option Exercise Notice by Selling
Stockholders...................................................................................11
2.4. Purchase and Sale of Second Tranche of Purchased Stock After Pre-Trigger Option
Exercise Notice................................................................................12
3. REPRESENTATIONS AND WARRANTIES OF SELLING STOCKHOLDERS..................................................12
3.1. Due Organization...............................................................................12
3.2. Authorization..................................................................................13
3.3. No Conflicts; Approvals........................................................................13
3.4. Capital Stock of the Company...................................................................14
3.5. Subsidiaries...................................................................................14
3.6. Transactions in Company Stock..................................................................14
3.7. Predecessors...................................................................................15
3.8. Financial Statements...........................................................................15
3.9. Balance Sheet Liabilities and Obligations......................................................16
3.10. Accounts and Notes Receivable..................................................................16
3.11. Permits........................................................................................16
3.12. Real and Personal Property.....................................................................16
3.13. Material Contracts and Commitments.............................................................18
3.14. Labor..........................................................................................19
3.15. Title to Owned Real Property...................................................................19
3.16. Insurance......................................................................................20
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3.17. Compensation...................................................................................20
3.18. Employee Benefit Plans.........................................................................20
3.19. No Multiemployer Plans.........................................................................22
3.20. Conformity with Law; Governmental Claims.......................................................22
3.21. Taxes and Tax Returns..........................................................................22
3.22. Intellectual Property..........................................................................23
3.23. Governmental Contracts.........................................................................24
3.24. Absence of Changes.............................................................................24
3.25. Powers of Attorney.............................................................................25
3.26. Brokers and Finders............................................................................25
3.27. Environmental Matters..........................................................................25
3.28. No Underground Storage Tanks...................................................................26
3.29. Relations with Government......................................................................26
3.30. Accounting Records.............................................................................26
3.31. Litigation and Claims..........................................................................26
3.32. Related Party Transactions.....................................................................27
3.33. Management Incentive Plans.....................................................................27
4. REPRESENTATIONS AND WARRANTEES OF PURCHASERS............................................................27
4.1. Due Organization...............................................................................27
4.2. Authorization..................................................................................28
4.3. No Conflicts; Approvals........................................................................28
4.4. Brokers and Finders............................................................................28
4.5. Investment Representations.....................................................................28
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING STOCKHOLDERS AND THE COMPANY.........................29
5.1. Representations and Warranties; Performance of Obligations.....................................29
5.2. No Litigation..................................................................................30
5.3. Closing Documents..............................................................................30
5.4. Opinion of Counsel.............................................................................30
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASERS.......................................................31
6.1. Representations and Warranties.................................................................31
6.2. No Litigation..................................................................................31
6.3. Closing Documents..............................................................................31
6.4. Opinion of Counsel.............................................................................31
6.5. Good Standing Certificates.....................................................................32
6.6. Employee Notes.................................................................................33
7. INDEMNIFICATION.........................................................................................33
7.1. Survival of Representations and Warranties.....................................................33
7.2. Indemnification by the Selling Stockholders....................................................33
7.3. Indemnification by Each Purchaser..............................................................34
7.4. Third Person Claims............................................................................34
7.5. Limitation of the Selling Stockholders' Liability..............................................35
7.6. Limitation of the Purchasers' Liability........................................................36
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7.7. Limitation on Claims...........................................................................36
7.8. Inconsistent Provisions........................................................................36
7.9. Method of Payment..............................................................................36
8. MISCELLANEOUS...........................................................................................36
8.1. Cooperation....................................................................................36
8.2. Successors and Assigns.........................................................................36
8.3. Entire Agreement...............................................................................36
8.4. Counterparts...................................................................................37
8.5. Expenses.......................................................................................37
8.6. Notices........................................................................................37
8.7. Governing Law..................................................................................39
8.8. Exercise of Rights and Remedies................................................................39
8.9. Reformation and Severability...................................................................39
8.10. Attorney's Fees................................................................................39
8.11. Interpretation; Definitions....................................................................39
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CERTAIN DEFINED TERMS
Advisory Services Agreement..............................................4
Agreement................................................................1
Audited 1998 Financial Statements........................................5
Audited Financial Statements............................................14
Auditor..................................................................5
CERCLA..................................................................24
Closing..................................................................2
Closing Date.............................................................3
Closing Date Distribution................................................8
Code....................................................................19
Company..................................................................5
Contracts...............................................................18
Controlled Group Member.................................................19
Current Year Financial Statements.......................................15
Damages.................................................................32
December 31, 1998 Income Statement.......................................6
December 31, 1998 Stockholders' Equity Amount............................6
December 31, 1998 Unaudited Financial Statements.........................6
Deficiency Amount........................................................6
EBITDA..................................................................17
EBITDA Amount...........................................................10
Employment Agreements....................................................3
Environmental Laws......................................................25
Environmental Permits...................................................25
ERISA...................................................................19
Escrow Agent.............................................................2
Escrow Agreement.........................................................2
Escrowed Funds...........................................................7
Escrowed Shares..........................................................2
Expiration Date.........................................................32
Final Number............................................................10
Final S Corporation Distribution.........................................8
First Tranche of Purchased Stock.........................................1
First Tranche Percentages................................................1
First Tranche Stock Purchase Price.......................................2
GAAP.....................................................................5
Hazardous Substances....................................................24
Indemnified Party.......................................................33
Indemnifying Party......................................................33
Insurance...............................................................19
Leased Real Property....................................................16
Liens....................................................................1
Management Incentive Plans...............................................4
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Material Adverse Effect.................................................12
Maximum Number...........................................................2
Merger...................................................................4
Merger Corp..............................................................4
Merger Documents.........................................................4
Merger Time..............................................................5
Minimum Number...........................................................2
Note Purchase Agreements.................................................2
Notes....................................................................2
November 30, 1998 Balance Sheet......................................... 6
November 30, 1998 Income Statement.......................................5
November 30, 1998 Pre-Tax Profit Amount..................................5
November 30, 1998 Unaudited Financial Statements.........................5
Owned Real Property.....................................................16
Parent...................................................................1
Parent Common Stock......................................................1
Pension Plan............................................................20
Per Share Amount........................................................10
Permits.................................................................15
Plans...................................................................19
Pre-Signing Balance Sheet...............................................14
Pre-Signing Balance Sheet Date..........................................14
Pre-Tax Profit...........................................................5
Pre-Tax Profit Amount...................................................12
Pre-Trigger Option Exercise Notice.......................................9
Proceeding..............................................................25
Purchaser................................................................1
Purchaser Percentages....................................................1
Purchasers...............................................................1
Purchasers' Indemnified Persons.........................................32
RCRA....................................................................24
Real Property Leases....................................................16
S Election..............................................................21
Second Tranche Audit....................................................10
Second Tranche of Purchased Stock.......................................2
Second Tranche Payment...................................................9
Second Tranche Payment Date.............................................11
Second Tranche Payment Notice............................................9
Second Tranche Percentages...............................................8
Securities..............................................................27
Securities Act..........................................................27
Sellers' Indemnified Persons............................................33
Selling Stockholder......................................................1
Selling Stockholder Percentage...........................................9
Selling Stockholders.....................................................1
Stockholders Agreement...................................................3
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Stockholders' Equity.....................................................6
Stockholders' Equity Amount.............................................13
Subordinated Stockholder Notes...........................................8
Subordination Agreement..................................................8
Subsidiary...............................................................1
Subsidiary Common Stock.................................................13
Tax Returns.............................................................22
Taxes...................................................................22
Third Person............................................................33
Trigger Event Notice.....................................................8
Trigger Option Exercise Notice...........................................9
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EXHIBITS
Exhibit A Selling Stockholders, Purchasers, Stock Holdings and Note Holdings
Exhibit B Escrow Agreement
Exhibit C Note Purchase Agreements
Exhibit D Stockholders Agreement
Exhibit E ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Employment Agreement
Exhibit F ▇▇▇▇▇▇ ▇▇▇▇▇▇ Employment Agreement
Exhibit G ▇▇▇▇▇ ▇▇▇▇▇▇▇ Employment Agreement
Exhibit H Management Incentive Plans and Related Resolutions and Agreements
Exhibit I Advisory Services Agreement
Exhibit J Merger Documents
Exhibit K Audited 1998 Financial Statements
Exhibit L Calculation of Pre-Tax Profit Amount
Exhibit M Calculation of Stockholders' Equity Amount
Exhibit N Form of Trigger Event Notice
Exhibit O Calculation of EBITDA Amount
SCHEDULES
Schedule 3.3 Required Consents and Approvals
Schedule 3.5 Subsidiaries
Schedule 3.6 Transactions in Company Stock
Schedule 3.9 Balance Sheet Liabilities and Obligations
Schedule 3.10 Accounts and Notes Receivable
Schedule 3.11 Permits
Schedule 3.12 Real and Personal Property
Schedule 3.13 Material Contracts and Commitments
Schedule 3.15 Title to Real Property Liens
Schedule 3.16 Insurance
Schedule 3.17 Compensation
Schedule 3.18 Employee Benefit Plans
Schedule 3.21 Taxes and Tax Returns
Schedule 3.22 Intellectual Property
Schedule 3.24 Absence of Changes
Schedule 3.26 Brokers and Finders
Schedule 3.27 Environmental Matters
Schedule 3.31 Litigation and Claims
Schedule 3.32 Related Party Transactions
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STOCK PURCHASE AND INVESTMENT AGREEMENT
THIS STOCK PURCHASE AND INVESTMENT AGREEMENT (the "Agreement") is
entered into as of the 19th day of January, 1999, by and between (a) the
purchasers listed on Exhibit A hereto (each a "Purchaser" and collectively the
"Purchasers"), on the one hand, and (b)(i) STERLING CONSTRUCTION COMPANY, a
Delaware corporation ("Parent"), (ii) STERLING CONSTRUCTION COMPANY, a Michigan
corporation doing business in Texas as Texas-Sterling Construction, Inc. and a
wholly owned subsidiary of Parent ("Subsidiary") and (iii) the stockholders of
Parent listed on Exhibit A hereto (each a "Selling Stockholder" and collectively
the "Selling Stockholders"), on the other hand.
RECITALS
A. The Selling Stockholders are the owners of FIVE HUNDRED
SIXTY-FOUR THOUSAND (564,000) shares of common stock, par value $0.01 per share
("Parent Common Stock"), of Parent, constituting approximately eighty-seven
percent (87%) of the SIX HUNDRED FIFTY THOUSAND ONE HUNDRED (650,100) total
issued and outstanding shares of Parent Common Stock.
B. The Purchasers desire to purchase from the Selling
Stockholders and the Selling Stockholders desire to sell to the Purchasers a
portion of the Parent Common Stock owned by the Selling Stockholders, and the
Purchasers desire to purchase from Subsidiary and Subsidiary desires to sell to
the Purchasers certain subordinated notes of Subsidiary exchangeable for shares
of Parent Common Stock, all upon the terms and subject to the conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. PURCHASES AND SALES.
1.1. First Tranche of Purchased Stock. Upon the terms and subject
to the conditions set forth in this Agreement, on the Closing Date (as defined
in Section 1.5) the Selling Stockholders severally will sell, assign, transfer
and deliver to the Purchasers, and the Purchasers will purchase and acquire
severally from the Selling Stockholders an aggregate of ONE HUNDRED THIRTY
THOUSAND TWENTY (130,020) shares of Parent Common Stock (the "First Tranche of
Purchased Stock") free and clear of all mortgages, pledges, security interests,
encumbrances, liens (statutory or other), conditional sale agreements, claims,
charges, limitations or restrictions ("Liens"). The respective percentages of
the shares of the First Tranche of Purchased Stock so to be sold by each of the
several Selling Stockholders (the "First Tranche Percentages") and the
respective percentages of the First Tranche of Purchased Stock to be purchased
by each of the several Purchasers (the "Purchaser Percentages") are set forth on
Exhibit A. The per share purchase price of each share of Parent Common Stock so
purchased as part of the First Tranche of Purchased Stock shall be THIRTY AND
76.45/100THS DOLLARS ($30.7645), subject to possible adjustment as provided in
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Section 1.11 (such purchase price, as so adjusted if applicable, the "First
Tranche Stock Purchase Price").
1.2. Second Tranche of Purchased Stock. Upon the terms and subject
to the conditions set forth in Section 2 of this Agreement, subsequent to the
Closing Date the Selling Stockholders severally will sell assign, transfer and
deliver to the Purchasers, and the Purchasers will purchase and acquire
severally from the Selling Stockholders, an aggregate number of additional
shares of Parent Common Stock free and clear of all Liens, which number of
shares shall be determined in accordance with Section 2 hereof and shall be not
more than ONE HUNDRED THIRTY THOUSAND TWENTY (130,020) (the "Maximum Number")
and not less than ONE HUNDRED ELEVEN THOUSAND ONE HUNDRED TWENTY-EIGHT (111,128)
(the "Minimum Number") shares of Parent Common Stock (the actual number of
additional shares of Parent Common Stock so determined and purchased, the
"Second Tranche of Purchased Stock"). The respective numbers of shares of the
Second Tranche of Purchased Stock so to be sold by each of the several Selling
Stockholders and purchased by each of the Purchasers, and the purchase price of
each share of Parent Common Stock so purchased as part of the Second Tranche of
Purchased Stock, shall be determined as provided in Section 2.
1.3. Escrow Agreement. At the Closing, the Purchasers, the Selling
Stockholders and Parent, as escrow agent (in such capacity, the "Escrow Agent"),
will enter into an Escrow Agreement in substantially the form attached hereto as
Exhibit B (the "Escrow Agreement"), and each of the Selling Stockholders will
deliver to the Escrow Agent, for retention and disposition as part of the Second
Tranche of Purchased Stock as provided in Section 2, certificates representing a
number of shares of Parent Common Stock equal to the number of shares sold by
such Selling Stockholder as part of the First Tranche of Purchased Stock. The
aggregate number of shares so deposited by all Selling Stockholders with the
Escrow Agent (the "Escrowed Shares") shall be equal to the Maximum Number.
1.4. Note Purchase Agreements. At the Closing, Parent, Subsidiary
and the respective Purchasers will enter into Note Purchase Agreements in
substantially the form attached hereto as Exhibit C (the "Note Purchase
Agreements"), and the Purchasers will purchase from Subsidiary and Subsidiary
will issue and sell to the Purchasers for an aggregate purchase price of FOUR
MILLION DOLLARS ($4,000,000) certain subordinated notes exchangeable for shares
of Parent Common Stock as provided in the Note Purchase Agreements (the
"Notes"). The Notes shall be in the aggregate principal amount of FOUR MILLION
DOLLARS ($4,000,000).
1.5. Closing.
(a) The consummation of the purchase and sale of the First
Tranche of Purchased Stock, the delivery of certificates representing
the Escrowed Shares to the Escrow Agent pursuant to the Escrow
Agreement, the execution and delivery of the Escrow Agreement and the
Note Purchase Agreement, the issuance, purchase and sale of the Notes,
and the other transactions that are to take place at that time as
contemplated by this Agreement and the Note Purchase Agreements (the
"Closing") shall take place at the offices of Mayor, Day, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, L.L.P., ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇,
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Texas, at 10:00 a.m. on January 19, 1999 or at such other time and
place as the parties may mutually agree upon. The Closing shall be
deemed to occur at the close of business on the date of the Closing,
and such date and time of the Closing is referred to as the "Closing
Date."
(b) At or prior to the Closing, provided that the conditions
set forth in Section 6 of this Agreement have been satisfied or waived,
Parent, Subsidiary and the Selling Stockholders shall tender delivery,
or cause to be tendered delivery, of each of the instruments and
documents described in Section 1.6 hereof. At or prior to the Closing,
provided that the conditions set forth in Section 7 of this Agreement
have been satisfied or waived, the Purchasers shall tender delivery, or
cause to be tendered delivery, of each of the payments and documents
described in Section 1.7 hereof.
1.6. Closing Deliveries of Parent, Subsidiary and Selling
Stockholders. Upon the terms and subject to the conditions set forth in Section
6 of this Agreement, at the Closing:
(a) the Selling Stockholders will deliver to the Purchasers
certificates representing the First Tranche of Purchased Stock and to
the Escrow Agent certificates representing the Maximum Number of shares
of Parent Common Stock for retention and disposition as part of the
Second Tranche of Purchased Stock, each such certificate duly endorsed
for transfer or accompanied by a stock power duly executed in blank;
(b) Parent and the Selling Stockholders will deliver duly
executed counterparts of the Escrow Agreement;
(c) Parent and Subsidiary will deliver duly executed
counterparts of the Note Purchase Agreements and Subsidiary will issue
and deliver duly executed Notes to the Purchasers;
(d) Parent, Subsidiary and the Selling Stockholders will
deliver to the other parties thereto duly executed counterparts of the
Stockholders Agreement in substantially the form attached hereto as
Exhibit D (the "Stockholders Agreement");
(e) Subsidiary and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ will deliver to each
other duly executed counterparts of an Executive Employment Agreement
in substantially the form attached hereto as Exhibit E;
(f) Subsidiary and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. will deliver to each
other duly executed counterparts of an Executive Employment Agreement
in substantially the form attached hereto as Exhibit F;
(g) Subsidiary and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ will deliver to each other
duly executed counterparts of a ▇▇▇▇▇ ▇▇▇▇▇▇▇ Employment Agreement in
substantially the form attached hereto as Exhibit G (collectively, with
Exhibits E and F, the "Employment Agreements");
(h) Parent and Subsidiary will adopt and cause to be effective
the restructuring of Subsidiary's bonus and share purchase agreements
and arrangements and
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the adoption of Parent's Stock Option Plan and Subsidiary's Incentive
Bonus Plan, in each case effective as of the Closing, by the
implementation of written plans in substantially the forms attached
hereto as Exhibit H (the "Management Incentive Plans");
(i) Parent will deliver to Menai Capital LLC (representing the
Purchasers) a duly executed counterpart of the Advisory Services
Agreement in substantially the form attached hereto as Exhibit I (the
"Advisory Services Agreement");
(j) Parent, Subsidiary and the Selling Stockholders will duly
execute and deliver the other instruments, documents and certificates
contemplated to be delivered by them under Section 6 of this Agreement;
(k) Subsidiary will make the Closing Date Distribution
pursuant to and as defined in Section 1.12; and
(l) With respect to the Subordinated Stockholder Notes, the
applicable parties thereto will enter into the Subordination Agreement,
in each case pursuant to and as defined in Section 1.12.
1.7. Closing Deliveries of Purchasers. Upon the terms and subject
to the conditions set forth in Section 7 of this Agreement, at the Closing:
(a) each of the Purchasers will deliver to Parent, as agent
for the Selling Stockholders, by wire transfers in immediately
available funds for the account set forth on Exhibit A hereto, the cash
sum equal to such Purchaser's portion of the purchase price of the
First Tranche of Purchased Stock;
(b) each of the Purchasers will deliver to Parent duly
executed counterparts of the Note Purchase Agreements;
(c) each of the Purchasers will deliver to Parent, by wire
transfers in immediately available funds for the account set forth on
Exhibit A hereto, the cash sum equal to such Purchaser's portion of the
purchase price of the Notes;
(d) each of the Purchasers will deliver to the other parties
thereto duly executed counterparts of the Stockholders Agreement;
(e) Menai Capital LLC will deliver to Parent a duly executed
counterpart of the Advisory Services Agreement; and
(f) each of the Purchasers will duly execute and deliver, or
cause to be executed and delivered, the other instruments, documents
and certificates contemplated by Section 5 of this Agreement.
1.8. Merger. Prior to the signing of this Agreement, Texas Sterling
Construction, Inc. ("Merger Corp.") merged with and into Subsidiary (the
"Merger") pursuant to and on the terms set
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forth in the Agreement and Plan of Merger, Certificates of Merger and related
documents attached hereto as Exhibit J (the "Merger Documents"), effective as of
the time set forth in the Merger Documents (the "Merger Time"). As used in this
Agreement, the term "Company" means (i) Subsidiary at all times up to and
including the Merger Time and (ii) Parent and Subsidiary taken as a whole at all
times after the Merger Time.
1.9. Determination of December 31, 1998 Stockholders' Equity Amount
and November 30, 1998 Pre-Tax Profit Amount. Attached hereto as Exhibit K is a
copy of the audited balance sheet of the Company as of September 30, 1998 and
the related audited statements of income and cash flows for the year ended
September 30, 1998, and footnotes at and for the year ended September 30, 1998,
and the accompanying report of ▇.▇. ▇▇▇▇▇▇▇ Company, P.C. (the "Auditor") with
respect thereto (the "Audited 1998 Financial Statements").
(a) As promptly as is reasonably practicable, and in any event
by January 25, 1999, Parent shall deliver to the Purchasers and the
Selling Stockholders:
(i) the unaudited balance sheet of the Company as of
November 30, 1998 (the "November 30, 1998 Balance Sheet") and
the related statement of income for the twelve-month period
from December 1, 1997 through November 30, 1998 (the "November
30, 1998 Income Statement" and, together with the November 30,
1998 Balance Sheet, the "November 30, 1998 Unaudited Financial
Statements");
(ii) a certificate of the chief financial officer of
the Company to the effect that (subject to (x) normal year-end
audit adjustments with respect to periods and as of dates
subsequent to September 30, 1998 consistent with prior
periods, the effects of which, individually and in the
aggregate, would not reasonably be expected to have a material
adverse effect on to the financial position or results of
operations of the Company and (y) the fact that the November
30, 1998 Unaudited Financial Statements do not contain all of
the footnote disclosures required by GAAP (as defined below))
the November 30, 1998 Unaudited Financial Statements fairly
present in all material respects the Company's financial
position at November 30, 1998 and its results of operations
for the two-month period then ended, in each case in
accordance with GAAP; and
(iii) a certificate of the Auditor setting forth the
amounts (and, in reasonable detail, the calculation) of the
amount of the Company's Pre-Tax Profit for the twelve-month
period ended November 30, 1998, determined from the November
30, 1998 Income Statement in accordance with Exhibit L (as so
determined in accordance with Exhibit L and without adjustment
pursuant to Section 1.11, if applicable, the "November 30,
1998 Pre-Tax Profit Amount"). "Pre-Tax Profit" means, for any
period, the net income of the Company determined in accordance
with generally accepted accounting principles applied on a
basis consistent with the Audited 1998 Financial Statements
("GAAP"), as adjusted in accordance with the adjustment
procedures set forth on Exhibit L hereto.
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(b) As promptly as is reasonably practicable, and in any event
by February 26, 1999, Parent shall deliver to the Purchasers and the
Selling Stockholders:
(i) the unaudited balance sheet of the Company as of
December 31, 1998 (the "December 31, 1998 Balance Sheet") and
the related statement of income for the twelve-month period
from January 1, 1998 through December 31, 1998 (the "December
31, 1998 Income Statement" and, together with the December 31,
1998 Balance Sheet, the "December 31, 1998 Unaudited Financial
Statements");
(ii) a certificate of the chief financial officer of
the Company to the effect that (subject to (x) normal year-end
audit adjustments with respect to periods and as of dates
subsequent to September 30, 1998 consistent with prior
periods, the effects of which, individually and in the
aggregate, would not reasonably be expected to have a material
adverse effect on to the financial position or results of
operations of the Company and (y) the fact that the December
31, 1998 Unaudited Financial Statements do not contain all of
the footnote disclosures required by GAAP) the December 31,
1998 Unaudited Financial Statements fairly present in all
material respects the Company's financial position at December
31, 1998 and its results of operations for the three-month
period then ended, in each case in accordance with GAAP; and
(iii) a certificate of the Auditor setting forth the
amounts (and, in reasonable detail, the calculation) of: (i)
the amount of the Company's Stockholders' Equity as of
December 31, 1998, determined from the December 31, 1998
Balance Sheet in accordance with Exhibit M (as so determined
in accordance with Exhibit M and without adjustment to reflect
restoration of any Deficiency Amount (as defined below), the
"December 31, 1998 Stockholders' Equity Amount"); and (ii) if
applicable, the amount of any Deficiency Amount pursuant to,
and determined as set forth in, Section 1.10. "Stockholders'
Equity" means, as of any date, the stockholders' equity of the
Company determined in accordance with GAAP, as adjusted in
accordance with the adjustment procedures set forth on Exhibit
M hereto.
1.10. Assurance of December 31, 1998 Stockholders' Equity Amount. In
the event that the December 31, 1998 Stockholders' Equity Amount calculated in
accordance with Exhibit M is less than $6,000,000, the Selling Stockholders
severally agree to restore the amount by which the December 31, 1998
Stockholders' Equity Amount is less than $6,000,000 (the "Deficiency Amount").
Any such Deficiency Amount shall be so restored by the respective Selling
Stockholders, severally, pro rata in proportion to their respective First
Tranche Percentages, by payment to the Company or by (to the extent then accrued
but not already paid) the Company's cancellation, to which the Selling
Stockholders hereby agree, of any amounts of bonus compensation or stockholders'
distributions otherwise payable to such Selling Stockholders, and any such
required payment by the Selling Stockholders shall be paid (if applicable) by
the several Selling Stockholders within five business days after the date of
delivery to the Selling Stockholders of the certificate from the Auditor setting
forth the December 31, 1998 Stockholders' Equity Amount. Parent shall
immediately notify the
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Purchasers and the Selling Stockholders when the entire Deficiency Amount has
been so restored.
1.11. Possible Adjustment for November 30, 1998 Pre-Tax Profit
Amount
(a) Twenty percent (20%) of the funds received at the Closing
by Parent as agent for the Selling Stockholders pursuant to Section
1.7(a) will be retained by Parent at and after the Closing until
disbursed in accordance with the provisions of this Section 1.11. (Such
funds retained by Parent are referred to as the "Escrowed Funds".)
(b) If the Company's November 30, 1998 Pre-Tax Profit Amount
is less than $3,400,000, then, within five business days after the date
of delivery of the certificate of the Auditor pursuant to Section
1.9(a)(iii), Parent shall disburse the Escrowed Funds as follows: (i)
to the Purchasers, severally, pro rata in accordance with their
respective Purchaser Percentages, an amount equal to twenty percent
(20%) of the product of (x) the remainder of (A) $3,400,000 minus (B)
the Company's November 30, 1998 Pre-Tax Profit Amount multiplied by (y)
5.6; and (ii) to the Selling Stockholders, severally, pro rata in
accordance with their respective First Tranche Percentages, an amount
equal to the balance of the Escrowed Funds remaining after the
disbursement to Purchaser under clause (c)(i) of this Section 1.11, if
any. If the amount calculated pursuant to clause (i) of the preceding
sentence exceeds the amount of the Escrowed Funds, then: (A) Parent
shall so notify the Selling Stockholders and the Selling Stockholders
shall immediately pay to Parent, severally, their respective pro rata
First Tranche Percentages of the amount of such excess; and (B) Parent
shall immediately pay to the Purchasers, pro rata in accordance with
their respective Purchaser Percentages, the amounts so received by it
from the Selling Stockholders. The amounts disbursed to the Purchasers
pursuant to clause (c)(i) of the first sentence of this Section 1.11
and pursuant to the second sentence of this Section 1.11, as
applicable, shall be deemed adjustments (decreases) to the First
Tranche Stock Purchase Price.
(c) If the Company's November 30, 1998 Pre-Tax Profit Amount
is greater than $3,800,000, then, within five business days after the
date of delivery of the certificate of the Auditor pursuant to Section
1.9(a)(iii): (i) the Purchasers shall, severally, pro rata in
accordance with their respective Purchaser Percentages pay to Parent as
agent for the Selling Stockholders by wire transfer in the same manner
as the payments made pursuant to Section 1.7(a), the aggregate cash sum
equal to twenty percent (20%) of the product of (x) the remainder of
(A) the Company's November 30, 1998 Pre-Tax Profit Amount minus (B)
$3,800,000 multiplied by (y) 5.6; and (ii) Parent shall disburse the
Escrowed Funds to the Selling Stockholders, severally, pro rata in
accordance with their respective First Tranche Percentages. The amount
paid to the Selling Stockholders by Purchasers pursuant to clause
(d)(i) of this Section 1.11 shall be deemed an adjustment (increase) to
the First Tranche Stock Purchase Price.
(d) If the Company's November 30, 1998 Pre-Tax Profit Amount
is greater than or equal to $3,400,000 and less than or equal to
$3,800,000, (i) no adjustment shall be made to the First Tranche Stock
Purchase Price and (ii) Parent shall disburse the
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Escrowed Funds to the Selling Stockholders, severally, pro rata in
accordance with their respective First Tranche Percentages.
1.12. Final S Corporation Distribution; Subordinated Stockholder
Notes.
(a) Prior to the Merger, Subsidiary declared and became liable
to pay to its stockholders of record as of the time immediately prior
to the Merger (the "S Corporation Stockholders") a dividend on its
outstanding shares of common stock equal in aggregate amount to the
amount by which the December 31, 1998 Stockholders' Equity Amount
calculated in accordance with Exhibit M exceeds $6,000,000 (the "Final
S Corporation Distribution"). After the Merger, Subsidiary remains
liable for payment of the Final S Corporation Distribution. The
December 31, 1998 Stockholders' Equity Amount, and therefore the actual
amount of the Final S Corporation Distribution, will be determined
after the Closing on the basis of the certificate of the Auditor to be
delivered pursuant to Section 1.9(b). At the Closing, Subsidiary will
distribute to the S Corporation Stockholders a portion of the Final S
Corporation Distribution equal in aggregate to $1,358,991 (the "Closing
Date Distribution"). Promptly after the determination of the Final S
Corporation Distribution amount, Subsidiary will distribute to the S
Corporation Stockholders the remaining amount of the S Corporation
Final Distribution over $1,358,991.
(b) Subsidiary has outstanding certain subordinated promissory
notes payable to the order of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., respectively (the "Subordinated Stockholder
Notes"). At the Closing, Subsidiary and the holders of the Subordinated
Stockholder Notes will enter into the subordination agreement (the
"Subordination Agreement") with respect to the Subordinated Stockholder
Notes as provided in the Note Purchase Agreements.
2. DETERMINATIONS, NOTICES AND PROCEDURES FOR PURCHASE AND SALE OF SECOND
TRANCHE OF PURCHASED STOCK
2.1. Trigger Event Notice and Option Exercise Notice. Any other
provisions of this Agreement to the contrary notwithstanding, the purchase and
sale of the Second Tranche of Purchased Stock shall not occur until and unless
either:
(a) both (x) within eighteen (18) months after the Closing
Date, Parent shall have delivered to the Purchasers and the Selling
Stockholders a notice in form and substance as attached hereto as
Exhibit N, duly completed and executed on behalf of Parent by its chief
financial officer (a "Trigger Event Notice") (and Parent hereby agrees
during such period to give a Trigger Event Notice within fifteen (15)
days after the date on which Parent first becomes able to do so), and
(y) Parent shall thereafter and before the sixteenth (16th) day after
the auditor's issuance of the Second Tranche Audit (as defined below)
have received a written notice from either (i) Purchasers with
aggregate Purchaser Percentages of greater than fifty percent (50%) or
(ii) Selling Stockholders with aggregate "Second Tranche Percentages"
(as set forth on Exhibit A) of greater than fifty percent (50%), in
either case advising Parent and all other Purchasers and Selling
Stockholders that the notifying parties thereby elect to exercise their
option to cause the
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purchase and sale of all of the Second Tranche of Purchased Stock (a
"Trigger Option Exercise Notice") and stating that such notice is a
Trigger Option Exercise Notice pursuant to this Section 2.1 of this
Agreement; or
(b) prior to the earlier of (i) the date that is eighteen (18)
months after the Closing Date and (ii) the date of delivery to Parent
of a Trigger Event Notice, Parent shall have received a written notice
from Purchasers with aggregate Purchaser Percentages of greater than
fifty percent (50%) advising Parent and all other Purchasers and
Selling Stockholders that the notifying Purchasers thereby elect to
exercise their option to cause the purchase and sale of all of the
Second Tranche of Purchased Stock (a "Pre-Trigger Option Exercise
Notice") and stating that such notice is a Pre-Trigger Option Exercise
Notice pursuant to Section 2.1 of this Agreement.
As used herein, "Selling Stockholder Percentage" (i) shall mean as to any
Selling Stockholder, such Selling Stockholder's First Tranche Percentage at all
times prior to a Trigger Option Exercise Notice and prior to a Pre-Trigger
Option Exercise Notice, and (ii) thereafter shall mean the percentage equal to
one-half of the sum of (A) such Selling Stockholder's First Tranche Percentage
plus (B) such Selling Stockholder's Second Tranche Percentage.
2.2. Purchase and Sale of Second Tranche of Purchased Stock After
Trigger Option Exercise Notice.
(a) Within thirty (30) days after a Trigger Option Exercise
Notice, each Purchaser shall deliver to Parent, as agent for the
Selling Stockholders, by wire transfer in the same manner as the
payments made pursuant to Section 1.7(a) or by wire transfer as
otherwise requested in writing by Parent, an amount equal to the
product of FOUR MILLION DOLLARS ($4,000,000) (the "Second Tranche
Payment") multiplied by such Purchaser's Purchaser Percentage. Parent
shall immediately notify the Purchasers and the Selling Stockholders
when all such payments have been received (the "Second Tranche Payment
Notice"). Immediately upon, and effective as of the date of such Second
Tranche Payment Notice, Parent shall (i) cause to be paid by the
Purchasers, severally, pro rata in proportion to their respective
Purchaser Percentages, to the Selling Stockholders, severally, pro rata
in proportion to their respective Second Tranche Percentages, the
Second Tranche Payment less the amount of any expenses to be borne by
the Selling Stockholders as provided in Section 8.5 and (ii) cause to
be transferred from the Selling Stockholders, severally, pro rata in
proportion to their respective Second Tranche Percentages, to the
several Purchasers, severally, pro rata in proportion to their
respective Purchaser Percentages, a number of shares of Escrowed Stock
equal to the Minimum Number of the Second Tranche of Purchased Stock.
Effective as of the date of such Second Tranche Payment Notice, the
Purchasers shall become the holders of record of their respective
shares of such Minimum Number of the Second Tranche of Purchased Stock
and Parent shall promptly issue and deliver, or cause to be issued and
delivered, to the Purchasers certificates representing such shares. The
Selling Stockholders shall remain the holders of record of their
respective shares of the remaining Escrowed Stock until disposition
thereof by the Escrow Agent as provided below.
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(b) Promptly and in any event within sixty (60) days after the
end of the first four consecutive fiscal quarters of the Company
commencing after the end of the calendar month in which a Trigger
Option Exercise Notice is received by Parent and in any event within
fifteen days after the auditor's issuance of the Second Tranche Audit
(as defined below), Parent shall deliver to the Selling Stockholders
and the Purchasers a certificate of the Auditor or another independent
accounting firm selected by the board of directors of Parent setting
forth: (i) the amount (and the calculation thereof in reasonable
detail) of the EBITDA (as defined and calculated in accordance with
Exhibit O) of Parent and its consolidated subsidiaries for the twelve
months covered by the Second Tranche Audit (the "EBITDA Amount"); (ii)
the amount and calculation of the Per Share Amount (as defined below);
and (iii) the amount and calculation of the number of shares of Parent
Common Stock that are to be purchased and sold in the Second Tranche of
Purchased Stock (the "Final Number"). The "Per Share Amount" shall be
the dollar amount equal to the quotient of (x) the product of the
EBITDA Amount multiplied by 3.2 divided by (y) 650,100. The "Final
Number" shall equal FOUR MILLION DOLLARS ($4,000,000) divided by the
Per Share Amount; provided, however, that the Final Number shall not be
less than the Minimum Number nor greater than the Maximum Number. The
term "Second Tranche Audit" shall mean the audited consolidated balance
sheet of the Company as of, and the related audited statements of
income and cash flows for the twelve-month period ending on, the last
day of the first four consecutive fiscal quarter period of the Company
commencing after the end of the calendar month in which a Trigger
Exercise Notice is received by Parent, the footnotes at and for the
year so ended, and the accompanying report of the Auditor or such other
independent accounting firm selected by the board of directors of
Parent.
(c) If the Final Number calculated pursuant to Section 2.2(b)
is greater than the Minimum Number, Parent shall promptly cause to be
transferred for the accounts of the Selling Stockholders, severally,
pro rata in proportion to their respective Second Tranche Percentages,
to the Purchasers, pro rata in proportion to their respective Purchaser
Percentages, a number of shares of Escrowed Stock equal to the
remainder of (i) the Final Number minus (ii) the Minimum Number.
Effective as of the date of such transfer of such shares to the
Purchasers, the Purchasers shall become the holders of record of such
shares so transferred to them and Parent shall promptly issue and
deliver to the Purchasers certificates representing such shares.
(d) If the Final Number calculated pursuant to Section 2.2(b)
is less than the Maximum Number, Parent shall promptly deliver to the
Selling Stockholders, severally, pro rata in proportion to their
respective Second Tranche Percentages, all Escrowed Shares other than
those transferred to the Purchasers pursuant to Section 2.2(c) above,
and the Escrow Agreement shall terminate.
(e) No fractional shares shall be issued or transferred.
Parent shall cause all calculations to be rounded to the nearest whole
share or to the nearest whole cent, as applicable, and all rounding
decisions by Parent shall be final and binding on all parties.
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2.3. Conditions to Purchasers Obligation After Trigger Option
Exercise Notice by Selling Stockholders.
(a) The Purchasers' obligations to purchase the Second Tranche
of Purchased Stock upon delivery of a Trigger Option Exercise Notice by
Selling Stockholders shall be subject to the conditions that, as of the
date of the Second Tranche Payment ("Second Tranche Payment Date"): (i)
there shall not exist any material adverse change from the Closing Date
in the financial condition, assets, liabilities (contingent or
otherwise) or business of the Company taken as a whole; (ii) no
defaults shall exist on the Senior Indebtedness (as defined in the Note
Purchase Agreements) or the Notes; (iii) each of Parent and Subsidiary
shall be duly organized, validly existing and in good standing under
the laws of the state of its incorporation; and (iv) each of the
Selling Stockholders delivering the Trigger Option Exercise Notice also
shall have delivered to the Purchasers on the Second Tranche Payment
Date a certificate to the effect that such Selling Stockholder (x) has
no knowledge that the conditions set forth in Section 2.3(a)(i) through
(iii) have not been satisfied and (y) has good and marketable title to
his shares of the Second Tranche of Purchased Stock, free and clear of
all Liens.
(b) For purposes of Section 2.3(a)(i), it is understood that
each of the following items would be considered a "material adverse
change" as of the Second Tranche Payment Date:
(i) if either of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. or ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ were either (A) no longer employed by the Company (or
had given written notice of his intent to terminate his
employment with the Company) or (B) not involved in a full
time executive capacity in the operations of the Company; or
(ii) if the Company's consolidated stockholders'
equity were less than $4,000,000.
2.4. Purchase and Sale of Second Tranche of Purchased Stock After
Pre-Trigger Option Exercise Notice. Within thirty (30) days after a Pre-Trigger
Option Exercise Notice, each Purchaser shall deliver to Parent, as agent for the
Selling Stockholders, by wire transfer in the same manner as the payments made
pursuant to Section 1.7(a) or by wire transfer as otherwise requested in writing
by Parent, an amount equal to the Second Tranche Payment multiplied by such
Purchaser's Purchaser Percentage. Parent shall give the Second Tranche Payment
Notice when all such payments have been received. Immediately upon, and
effective as of the date of such Second Tranche Payment Notice, Parent shall (i)
cause to be paid by the Purchasers, severally, pro rata in proportion to their
respective Purchaser Percentages, to the Selling Stockholders, severally, pro
rata in proportion to their respective Second Tranche Percentages, the Second
Tranche Payment and (ii) cause to be transferred from the Selling Stockholders,
severally, pro rata in proportion to their respective Second Tranche
Percentages, to the several Purchasers, pro rata in proportion to their
respective Purchaser Percentages, a number of shares of Escrowed Stock equal to
the Minimum Number of the Second Tranche of Purchased Stock. Effective as of the
date of such Second Tranche Payment Notice, the Purchasers shall become the
holders of record of their respective shares of such Minimum Number of the
Second Tranche of Purchased Stock and Parent shall promptly issue and deliver,
or cause to be issued and delivered, to the Purchasers certificates representing
such shares. Parent shall promptly issue and
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deliver, or cause to be issued and delivered, to the Selling Stockholders
certificates representing the shares not delivered to the Purchasers pursuant to
the preceding sentence, and the Escrow Agreement shall terminate.
3. REPRESENTATIONS AND WARRANTIES OF SELLING STOCKHOLDERS.
The Selling Stockholders, jointly and severally, make the
representations and warranties set forth in this Section 3 to the Purchasers at
and as of the Closing.
3.1. Due Organization. Each of Parent and Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the state or jurisdiction of its incorporation, and has all requisite
corporate power and authority to own or lease its properties and assets and
conduct its business as now conducted. Each of Parent and Subsidiary is duly
authorized and qualified to carry on its business as a foreign corporation in
the places and in the manner as now conducted except where the failure to be so
authorized or qualified would not have a material adverse effect on the
business, assets, condition (financial or other), properties or results of
operations of the Company taken as a whole (a "Material Adverse Effect"). Copies
of the Articles or Certificate of Incorporation, Bylaws, stock records and
minute books of Parent and Subsidiary, with all amendments thereto on the date
hereof, have been furnished or made available to the Purchasers or their
representatives, and such copies are correct and complete.
3.2. Authorization. Each of the Selling Stockholders has all
necessary power, authority and capacity to enter into this Agreement, the Escrow
Agreement and the Stockholders Agreement, and the other documents and
instruments to be delivered by him pursuant to this Agreement, the Escrow
Agreement and the Stockholders Agreement, and, as applicable, to consummate the
sale of such Selling Stockholder's shares of the Purchased Stock and the other
transactions contemplated hereby and thereby to be consummated by him. The
execution and delivery by Parent and Subsidiary, as the case may be, of this
Agreement the Note Purchase Agreements, the Stockholders Agreement, the Escrow
Agreement, the Employment Agreements and all instruments, documents and
agreements contemplated hereby and thereby to be executed by or on behalf of
Parent and Subsidiary, as the case may be, have been or will be at the Closing
duly and validly authorized by all necessary corporate action on the part of
Parent and Subsidiary, as the case may be. This Agreement, the Note Purchase
Agreements, the Stockholders Agreement, the Escrow Agreement, the Employment
Agreements and all other instruments, documents and agreements contemplated
hereby and thereby to be executed and delivered by Parent and Subsidiary, as the
case may be, or the Selling Stockholders have been or will be at the Closing
duly and validly executed and delivered by each of Parent and Subsidiary, as the
case may be, and the Selling Stockholders, as applicable, and constitute (or
will constitute) the valid and binding obligation of each of Parent and
Subsidiary, as the case may be, and the Selling Stockholders, as applicable,
subject to applicable bankruptcy, reorganization, insolvency and similar laws
from time to time in effect and subject to general principles of equity and
judicial discretion.
3.3. No Conflicts; Approvals. Neither the execution, delivery and
performance of this Agreement, the Note Purchase Agreements, the Stockholders
Agreement, the Escrow
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Agreement or the Employment Agreements by the Selling Stockholders, Parent or
Subsidiary, as the case may be, nor the consummation of the sale of the
Purchased Stock and the Notes, nor the consummation of the other transactions
contemplated hereby and thereby, will (a) conflict with or result in a breach of
any provision of the Articles of Incorporation or Certificate of Incorporation,
as applicable, or Bylaws of Parent or Subsidiary, as the case may be, (b) result
in any conflict with, breach of, or default (or give rise to any right to
termination, cancellation or acceleration or loss of any right or benefit) under
or require any consent or approval which has not been obtained with respect to
any of the terms, conditions or provisions of any material contract or agreement
to which the Selling Stockholders or Parent or Subsidiary, as the case may be,
are a party or by which any of their respective properties or assets may be
bound (except for those consents or approvals set forth on Schedule 3.3) or
result in the creation or imposition of any Lien upon any of the assets or
properties of Parent or Subsidiary, as the case may be, or result in the
cancellation, modification, revocation or suspension of any of the Permits (as
defined below), or (c) violate any order, law, rule or regulation applicable to
the Selling Stockholders or Parent or Subsidiary, as the case may be, or by
which any of their respective properties or assets may be bound. No action,
consent, authorization, waiver or approval by, or filing or registration by the
Selling Stockholders or Parent or Subsidiary with, any federal, state,
municipal, foreign or other court or governmental body or agency, or any other
regulatory body, is required in connection with the execution, delivery or
performance by the Selling Stockholders or Parent or Subsidiary, as the case may
be, of this Agreement, the Note Purchase Agreements, the Stockholders Agreement,
the Escrow Agreement or the Employment Agreements or the consummation of the
sale of the Purchased Stock and the Notes and the other transactions
contemplated hereby and thereby.
3.4. Capital Stock of the Company. The authorized capital stock of
Parent consists of 1,000,000 shares of Parent Common Stock, of which 650,100
shares of Parent Common Stock are issued and outstanding and owned by the
several Selling Stockholders and five other persons as set forth on Exhibit A,
and 10,000 shares of preferred stock, par value $0.01 per share, of which no
shares are issued or outstanding. The authorized capital stock of Subsidiary
consists of 10,000 shares of common stock par value $10.00 per share
("Subsidiary Common Stock"), of which one share is issued and outstanding and
owned beneficially and of record by Parent. Such share of Subsidiary Common
Stock has been duly authorized and is validly issued, fully paid and
nonassessable. There are no other outstanding shares of capital stock of Parent
or Subsidiary. Neither Parent nor Subsidiary have outstanding any securities
convertible into or exchangeable for any share of capital stock, any rights to
subscribe for or to purchase or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any other character relating to the issuance of,
any capital stock, or any stock or securities convertible into or exchangeable
for any capital stock. All of the issued and outstanding shares of the Parent
Common Stock have been duly authorized and are validly issued, fully paid and
nonassessable (other than as disclosed on Schedule 3.4), and are owned
beneficially and of record by the Selling Stockholders and other individuals as
set forth on Exhibit A. The Selling Stockholders have, as of the Closing Date
and prior to the sale thereof pursuant to this Agreement, good and marketable
title to all shares of Purchased Stock, free and clear of all Liens. All issued
and outstanding shares of Parent Common Stock were offered, issued, sold and
delivered by Parent in compliance with (or pursuant to exemptions from) all
applicable state and federal laws
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governing the offer and sale of securities. None of such shares was issued in
violation of the preemptive rights of any stockholder.
3.5. Subsidiaries. Except as disclosed on Schedule 3.5, the Company
does not hold or own, directly or indirectly any shares of capital stock of any
corporation; any membership interests in any limited liability company, any
partnership interests in any limited or general partnership, any participations
in any joint venture, or any other equity interests in any other entity.
3.6. Transactions in Company Stock. Except as set forth on Schedule
3.6, since October 1, 1994 the Company has not acquired, directly or indirectly,
any shares of its capital stock and has no obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire or retire any of its capital stock or
any interests therein, or to register such shares under the Securities Act (as
defined below), or to pay any dividend or make any distribution in respect
thereof.
3.7. Predecessors.
(a) Since October 1, 1994 until the Merger Time, the Company
has existed solely as Sterling Construction Company, a Michigan
corporation. The Company since October 1, 1994 has never been a
subsidiary or division of another corporation nor been a part of an
acquisition which was later rescinded. The Company and the Selling
Stockholders have never owned any equity interest in any Purchaser and
since October 1, 1994 there has been no sale or spin-off of significant
assets of the Company or any predecessor other than in the ordinary
course of business.
(b) Merger Corp. did not conduct any business or operations
prior to the Merger Time and had no assets, liabilities or obligations
of any nature other than those incident to its formation and the
Merger. On the date hereof, Merger Corp. was merged with and into
Subsidiary, pursuant to which the separate existence of Merger Corp.
ceased.
3.8. Financial Statements.
(a) The Selling Stockholders have furnished or made available
to the Purchasers true and complete copies of: (i) 1998 Audited
Financial Statements and the audited balance sheets of the Company as
of September 30, 1997, September 30, 1996, September 30, 1995,
September 30, 1994 and September 30, 1993 and the related audited
statements of earnings and changes in stockholders' equity and cash
flows of the Company for the fiscal years ended September 30, 1997,
September 30, 1996, September 30, 1995, September 30, 1994 and
September 30, 1993 (collectively, the "Audited Financial Statements");
and (ii) the unaudited or audited (as the case may be) balance sheet of
the Company (the "Pre-Signing Balance Sheet") as of the last day of the
most recent calendar month ended at least 30 days prior to the date of
this Agreement for which financial statements have been prepared by the
Company (the "Pre-Signing Balance Sheet Date") and the related
statements of earnings and changes in Stockholders' equity and cash
flows of the Company for the period from October 1, 1997 through the
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Pre-Signing Balance Sheet Date (the foregoing financial statements
being collectively referred to as the "Current Year Financial
Statements").
(b) The Company's Audited Financial Statements and Current
Year Financial Statements are, and its November 30, 1998 Income
Statement and November 30, 1998 Balance Sheet, when delivered pursuant
to this Agreement will be, in all material respects accurate, complete
and in accordance with the books and records of the Company and
present, or when delivered pursuant to this Agreement will present,
fairly in all material respects, the financial position of the Company
as of their respective dates and the results of its operations for the
periods then ended, in conformity with GAAP, consistently applied
(subject, in the case of the unaudited financial statements, to (i)
normal year-end and audit adjustments, the effects of which,
individually or in the aggregate, will not be materially adverse, and
(ii) the fact that they do not contain all of the footnote disclosures
required by GAAP).
3.9. Balance Sheet Liabilities and Obligations. Except as set forth
on Schedule 3.9, there are no material liabilities or obligations of the Company
of any kind, character and description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, except for those reflected on the
Pre-Signing Balance Sheet and those incurred after the Pre-Signing Balance Sheet
Date in the ordinary course of business, that are required to be reflected on a
balance sheet of the Company prepared in accordance with GAAP.
3.10. Accounts and Notes Receivable. Except to the extent reflected
on Schedule 3.10, all accounts and notes receivable, payable to or for the
benefit of the Company reflected on the Pre-Signing Balance Sheet arose from the
sale of products and services in the ordinary course of business or reflect
advances to employees or affiliates and are legal, valid and binding claims of
the Company and the reserves with respect thereto reflected on the Pre-Signing
Balance Sheet were reasonable and adequate in accordance with GAAP as of the
date of issuance of the Pre-Signing Balance Sheet.
3.11. Permits. Schedule 3.11 sets forth an accurate list of all
material permits (excluding permits for particular construction projects or
other jobs for customers), authorizations, consents, registrations, licenses,
franchises and certificates (collectively, the "Permits") held by the Company
or, if applicable, by its employees that are used to conduct the business of the
Company. Such Permits (i) are valid, in good standing and in full force and
effect, (ii) are not subject to any pending or threatened administrative or
judicial proceeding to revoke, cancel, suspend or declare such Permits invalid
in any respect, and (iii) are in all material respects adequate for the
operation of the business of the Company as it is presently being conducted and
has been proposed by the Company to be conducted. None of the operations of the
Company are being conducted in a manner that violates in any material respect
any of the terms or conditions under which any Permit was granted. Neither the
execution and delivery by the Selling Stockholders or Parent or Subsidiary, as
the case may be, of this Agreement, the Note Purchase Agreements, the
Stockholders Agreement, the Escrow Agreement or the Employment Agreements, nor
the consummation of the sale of the Purchased Stock or the Notes and the other
transactions contemplated hereby and thereby, will require transfer or
reissuance of, or cause a default, termination or suspension under, or alter or
impair any rights under, such Permits.
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3.12. Real and Personal Property. Except as set forth on Schedule 3.12,
the Company does not and has not at any time since October 1, 1994 owned or
leased any real property (other than property previously (but not currently)
leased on a temporary basis for particular construction projects or other jobs
for customers), and true, correct and complete copies of all current lease
agreements of the Company relating to real property leased by the Company
("Leased Real Property") have been furnished or made available to the Purchasers
(the "Real Property Leases"). The Real Property Leases are in full force and
effect and constitute valid, legal and binding agreements of the parties (and
their successors) thereto. All tangible assets used by the Company in the
operation of its business are either owned by the Company or leased under
agreements that have been furnished or made available to the Purchasers, or, in
the case of certain tools and immaterial tangible assets, are owned and used by
the relevant employees. Subject to normal maintenance, repair, reconditioning
and replacement, except as set forth on Schedule 3.12, all of the vehicles,
machinery and equipment of the Company are in reasonably good working order and
condition, ordinary wear and tear excepted. True, correct and complete copies of
the most recent real estate title report and each title insurance policy held by
the Company relating to the real property owned by the Company ("Owned Real
Property") have been furnished or made available to the Purchasers.
(a) Owned Real Property and Leased Real Property
(i) The Owned Real Property and the Leased Real
Property constitutes all of the real property necessary for
the Company to operate its business as it is currently being
conducted other than property to be leased on a temporary
basis for particular construction projects or other jobs for
customers.
(ii) None of the Owned Real Property is subject to
any right or option of any Person to purchase, lease or
otherwise obtain title to such property, except in connection
with the mortgage liens reflected on Schedule 3.15. No Person
other than the Company has any right to use, occupy or lease
all or any portion of the Owned Real Property.
(b) Real Property Leases - No Default: Neither the Company
nor, to the Company's knowledge, any of the other parties to the Real
Property Leases, is in material default under any of the Real Property
Leases, and no material amount due under the Real Property Leases
remains unpaid, no material controversy, claim, dispute or disagreement
exists between the parties to the Real Property Leases, and to the
Company's knowledge no event has occurred which with the passage of
time or giving of notice, or both would constitute a material default
thereunder.
(c) Restrictive Covenants. To the Company's knowledge, there
is no violation of a condition or agreement contained in any covenant,
easement or any similar agreement affecting the Owned Real Property or
the Leased Real Property. The covenants, easements or rights-of-way
affecting the Owned Real Property or the Leased Real Property do not
with respect to each Owned Real Property or Leased Real Property
materially impair the Company's ability to use any such Owned Real
Property or Leased Real Property in the operation of its business as
currently conducted. The Company has access to public roads, streets or
the like or valid perpetual easements over private streets,
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roads or other private property for such ingress to and egress from the
Owned Real Property and the Leased Real Property, except as would not
materially impair the ability to use any such Owned Real Property or
Leased Real Property in the operation of its business as currently
conducted.
(d) Eminent Domain: There is no pending or, to the Company's
knowledge, threatened condemnation of any part of the Owned Real
Property by any governmental authority and to the Company's knowledge
their is no pending or threatened condemnation of any part of the
Leased Real Property by any governmental authority.
(e) Utilities: The Company has not received any notice from
any utility company or municipality of any fact or condition which
could result in the discontinuation of currently available or otherwise
necessary sewer, water, electric, gas, telephone or other utilities or
services for the Owned Real Property or Leased Real Property. The Owned
Real Property has adequate water, sewer, sanitary sewer and storm drain
facilities and community services for its current use. All public
utilities necessary or convenient to the use, occupancy, disposition
and enjoyment of the Owned Real Property (as currently used and
occupied) are located in the public right-of-way abutting the Owned
Real Property and all such utilities are connected so as to serve the
Owned Real Property without passing over other property or are within
nonterminable easements.
(f) No Commissions: All brokerage commissions and other
compensation and fees payable by reason of the Real Property Leases or
the Owned Real Property, have been paid in full except to the extent
that such may result from the extension or renewal of any Real Property
leases.
(g) Improvements: To the Company's knowledge, all improvements
on the Owned Real Property and the Leased Real Property (for which the
Company is responsible) conform in all material respects to all
applicable federal, state and local laws, zoning, land use and building
ordinances and health and safety ordinances (including, without
limitation, the Americans with Disabilities Act), and neither the
Company nor any of its affiliates, has received any notice of any
violation of any such laws or ordinances which violation has not been
cured. The Owned Real Property and the Leased Real Property are zoned
for the various purposes for which the real estate and improvements
have been used in connection with the normal operation of the business.
To the Company's knowledge, there is no material latent or patent
structural, mechanical or other significant defect, soil condition or
deficiency in the improvements located on the Owned Real Property or
Leased Real Property (for which the Company is responsible).
(h) Insurance: There are no outstanding requirements or
recommendations by any insurance company which has issued to the
Company a policy covering the Owned Real Property or Leased Real
Property, or as to the Owned Real Property by any board of fire
underwriters or other body exercising similar functions, requiring or
recommending any repairs or work to be done on such property.
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3.13. Material Contracts and Commitments. Except to the extent set
forth on Schedule 3.13, the Company (i) has performed all obligations required
to be performed by it under, and has complied in all material respects with all
written and oral contracts, commitments and similar agreements or arrangements
that as of the date of this Agreement are material to the Company taken as a
whole to which the Company is a party or by which it or any of its properties
may be bound (including, but not limited to, municipal contracts, joint venture
or partnership agreements, contracts with any labor organizations, loan
agreements, indemnity or guaranty agreements, bonds, mortgages, options to
purchase land, liens, pledges or other security agreements) (collectively, the
"Contracts"); and (ii) is not in material default under any such Contract and no
notice of default or delinquency has been received, nor has any event occurred
which, with due notice or lapse of time or both, would constitute such a
default. To the knowledge of the Company, no other party to any Contract is in
default in respect thereof, and no event has occurred which, with due notice or
lapse of time or both, would constitute such a default. Schedule 3.13 sets forth
an accurate list of all Contracts, excluding oral contracts for materials and
contracts with subcontractors made in the ordinary course of business, which as
of the date of this Agreement (i) commit the Company for a commitment involving
in any one case $50,000 or more or (ii) by their terms do not terminate and
cannot be terminated within six (6) months, and the Company has furnished or
made available to the Purchasers copies of all Contracts listed on Schedule
3.13. Each of the Contracts listed on Schedule 3.13 is a valid and binding
obligation of the Company and is in full force and effect and enforceable
against the parties thereto in accordance with its terms and, except as set
forth on Schedule 3.13, will continue in such force and effect following the
Closing Date and requires no consent of any party to the execution of this
Agreement, the Note Purchase Agreements, the Stockholders Agreement, the Escrow
Agreement or the Employment Agreements or the consummation of the transactions
contemplated hereby or thereby.
3.14. Labor. The Company is not bound by or subject to (and none of
its assets or properties is bound by or subject to) any arrangement with any
labor union. No employees of the Company are represented by a labor union or
covered by any collective bargaining agreement nor is any organizational
campaign to establish such representation in progress. There is no pending or
threatened labor dispute involving the Company and any group of its employees
nor has the Company experienced any labor interruptions since October 1, 1994.
The Company is in compliance in all material respects with all laws, regulations
and orders relating to the employment of labor, including all such laws,
regulations and orders relating to wages, hours, collective bargaining,
discrimination, civil rights, safety and health, workers' compensation and the
collection and payment of withholding and/or social security taxes and any
similar employment tax. There has been no "mass layoff" or "plant closing" as
defined by the Worker Adjustment and Retraining Notification Act or any similar
state or local "plant closing" law with respect to the current or former
employees of the Company.
3.15. Title to Owned Real Property. The Seller has good and
indefeasible fee simple title to the Owned Real Property and owns all of the
improvements located thereon, free and clear of all Liens except as indicated on
the title reports and title insurance policies furnished or made available to
Purchaser pursuant to Section 3.12 and except for:
(a) the mortgage lien reflected on Schedule 3.15;
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(b) liens for current taxes and assessments not delinquent;
and
(c) easements for utilities serving the property only.
3.16. Insurance. Schedule 3.16 sets forth an accurate list of all
insurance policies, fidelity bonds or other insurance service contracts (the
"Insurance") in force with respect to the Company or its properties, assets,
employees, officers, directors and business. The Insurance carried by the
Company with respect to its properties, assets, employees, officers, directors
and business is in amounts consistent with past practice and, to the knowledge
of the Selling Stockholders, in accordance with industry standards and as
required by legal requirements and the Contracts. Such Insurance is currently in
full force and effect, is sufficient for all applicable requirements of law and
will not be affected by or terminated or lapsed by reason of the consummation of
the transactions contemplated by this Agreement, the Note Purchase Agreements,
the Stockholders Agreement, the Escrow Agreement or the Employment Agreements.
All premiums due and payable under all Insurance have been paid. Except as set
forth on Schedule 3.16, the Company is not in default under any provisions of
any such Insurance, such Insurance has never been canceled and, since October 1,
1994, no insurer has ever refused to issue any Insurance requested to be issued
by the Company. There are no claims by the Company pending under any of such
Insurance as to which coverage has been questioned, denied or disputed by the
underwriters of such Insurance.
3.17. Compensation. Schedule 3.17 sets forth the names of all
officers, directors and key employees of the Company who received total
compensation for the fiscal year ended September 30, 1998 in excess of $75,000
and their current rates of compensation.
3.18. Employee Benefit Plans.
(a) Schedule 3.18 sets forth an accurate list of all employee
benefit or welfare plans, including without limitation any "employee
welfare benefit plans" and "employee pension benefit plans" as defined
in the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), benefits under any collective bargaining agreement or
employment contracts, pension, profit-sharing, bonus, stock option,
incentive, deferred compensation, dependent care, medical
reimbursement, hospitalization, medical, or life insurance, severance
benefits or any other plan, arrangement, or program and any employment
agreement containing "golden parachute" provisions, and a description
of such plans, programs or arrangements, that are currently maintained,
or contributed to, or required to be maintained or contributed to, by
the Company or any entity that together with the Company is treated as
a single employer (collectively, "Controlled Group Member") under
Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986,
as amended (the "Code"), for the benefit of any current or former
employees, officers or directors of the Company or any of its
predecessors (collectively, the "Plans"). To the knowledge of the
Selling Stockholders all Plans listed on Schedule 3.18 are in
substantial compliance in all material respects with all applicable
provisions of ERISA, the Code and the regulations issued thereunder, as
well as with all other applicable federal, state and local statutes,
ordinances and regulations. The Selling Stockholders have previously
provided Purchaser with copies of or access to all such Plans and any
trusts, insurance contracts, investment management agreements or any
other funding arrangement related
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thereto, annual reports (Form 5500) and all schedules related thereto
filed for the last three years (if required to be filed), and the most
recent summary plan description for each Plan, arrangement, or program
and classifications of employees covered thereby that are in effect on
the date hereof as to which a summary plan description is required.
With respect to any Plan listed on Schedule 3.18, individually and in
the aggregate, to the knowledge of the Selling Stockholders, no event
has occurred, and no set of circumstances have occurred in connection
with which the Company is reasonably likely to be subject to any
liability that could have a Material Adverse Effect.
(b) None of the Plans is a "single-employer plan" as defined
in Section 4001(a)(15) of ERISA ("Pension Plan"). Neither the Company
nor any Controlled Group Member has any outstanding liability under
Section 4062 of ERISA to the Pension Benefit Guaranty Corporation or to
a trustee appointed under Section 4042 of ERISA with respect to any
Pension Plan, and no events have occurred and no circumstances exist
that could reasonably be expected to result in any such liability to
the Company or any Controlled Group Member.
(c) Each Plan that is intended to qualify under Section 401(a)
of the Code and the trust maintained pursuant thereto is intended to be
so qualified and exempt from federal income taxation under Section
501(a) of the Code, and to the knowledge of the Selling Stockholders,
nothing has occurred with respect to the operation of any such Plan
that could reasonably result in the loss of such qualification or tax
exemption or the imposition of any material liability, penalty or tax
under ERISA or the Code.
(d) All contributions (including all employer contributions
and employee salary reduction contributions) required to have been made
under any of the Plans or by law (without regard to any waivers granted
under Section 412 of the Code) to any funds or trusts established
thereunder or in connection therewith have been made by the due date
thereof (including any valid extension), and all contributions for any
period ending on or before the Closing Date which are not yet due will
have been paid or accrued.
(e) There are no pending actions, claims or lawsuits which
have been asserted or instituted against the Plans, the assets of any
of the trusts under the Plans or the Plan sponsor or the Plan
administrator, or against any fiduciary of the Plans with respect to
the operation of the Plans (other than routine benefit claims), nor do
the Selling Stockholders have any knowledge of facts which could
reasonably form the basis for any such claim or lawsuit.
(f) The Plans have been maintained, in all material respects,
in accordance with their terms and with all provisions of ERISA and the
Code (including rules and regulations thereunder) and other applicable
federal and state laws and regulations, and neither the Company nor, to
the knowledge of the Selling Stockholders, any "party in interest" or
"disqualified person" with respect to the Plans has engaged in a
"prohibited transaction" within the meaning of Section 406 of ERISA or
4975 of the Code. To the knowledge of the Selling Stockholders, no
fiduciary has any liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or
investment of the assets of any Plan.
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(g) None of the Plans provide retiree life or retiree health
benefits except as may be required under Section 4980B of the Code or
Sections 601 - 608 of ERISA and at the expense of the participant or
the participant's beneficiary.
(h) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will, (i)
result in any payment becoming due to any employee (current, former or
retired) of the Company, (ii) increase any benefits otherwise payable
under any Plan, (iii) result in the acceleration of the time of payment
or vesting of any benefits under any Plan or (iv) constitute a "change
in control" or similar event under any Plan or fail to be deductible by
reason of Section 280G of the Code.
(i) No stock or other security issued by the Company or any
affiliate forms or has formed a material part of the assets of any
Plan.
3.19. No Multiemployer Plans. Neither the Company nor any Controlled
Group Member has ever sponsored or contributed to, or had an obligation to
contribute to, a Multiemployer Plan as such term is defined in Section
4001(a)(3) of ERISA.
3.20. Conformity with Law; Governmental Claims. The Company is not
in default under any statute or regulation or under any order of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over any of them, which
default would have a Material Adverse Effect; and except to the extent set forth
in Schedule 3.31, there are no material claims, actions, suits, investigations
or proceedings pending or threatened against the Company, at law or in equity,
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it and no
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. The Company has conducted and is conducting its business in
substantial compliance in all material respects with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations and is not in violation in any material respect of any of
the foregoing.
3.21. Taxes and Tax Returns. The Subsidiary has and has had at all
times since September 30, 1994 through the Closing a valid election in effect
under Section 1362 of the Code and any comparable provision of state or local
law for all taxable years through and including the Closing Date (the "S
Election"). The S Election is respected under the income Tax laws of every state
or local jurisdiction in which the Company does business. Tax Returns of the
Company that are required (so as to avoid delinquency) to be filed on or before
the Closing Date have been (or will have been by the Closing Date) timely filed
(subject to any extensions that have been obtained) with the appropriate
governmental authorities. All Taxes of any kind whatsoever (whether payable
directly or via withholding) that are shown on the Tax Returns described in the
preceding sentence as due from the Company have been (or will have been by the
Closing Date) properly paid or deposited. All such Tax Returns were true,
correct and complete in all material respects as of the time of such filing. Any
liability for taxes owed by the Company and not yet due and payable, or which
are being contested in good faith, has been provided for on the financial
statements of the Company in accordance with
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GAAP. Except as set forth on Schedule 3.21, the Company has not, to the
knowledge of any Selling Stockholders, received any notice of deficiency or
assessment in connection with any Tax Returns, and there are not any pending Tax
examinations of, or Tax claims asserted against, the Company. The Company has
not extended, or waived the application of, any statute of limitations of any
jurisdiction regarding the assessment or collection of any Taxes. There are no
requests for rulings or determinations in respect of any taxes pending between
the Company and the Internal Revenue Service or any other Tax authority. The
Company has not filed a consent under Section 341(f) of the Code concerning
collapsible corporations. The Company has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Code. There is no lien for Taxes (other
than any lien for current Taxes not yet delinquent) on or with respect to any
assets of the Company. The Company is not and has not been a party to any Tax
allocation or sharing agreement. None of the Selling Stockholders is a "foreign
person" for purposes of U.S. income taxation. Except as set forth on Schedule
3.21, the Company has never been a member of an affiliated group within the
meaning of Section 1504(a) of the Code. The Company has made all deposits
required by law to be made with respect to employees' withholding and other
employment Taxes. The Company has withheld and paid all material Taxes required
to be withheld in connection with any amounts paid or owing to any employee,
creditor, independent contractor or other third party. For purposes of this
Agreement, "Taxes" shall mean any and all federal, state, local, foreign and
other taxes, levies, fees, imposts, duties and charges of whatever kind
(including any interest, penalties or additions to the tax imposed in connection
therewith or with respect thereto), whether or not imposed on the Company,
including, without limitation, taxes imposed on, or measured by, income,
franchise, profits or gross receipts, and also value added, sales, use, service,
real property, capital stock, license, payroll, withholding, employment, social
security, workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premium, windfall profits, transfer and
gains taxes and customs duties; and "Tax Returns" shall mean returns, reports,
information statements and other documentation (including any additional or
supporting material) filed or maintained, or required to be filed or maintained,
in connection with the calculation, determination, assessment or collection of
any Tax and shall include any amended returns required as a result of
examination adjustments made by the Internal Revenue Service or other Tax
authority.
3.22. Intellectual Property. All material patents, patent
applications, copyrights, trademarks, trade names, service marks and other
intellectual property which are used in the business of the Company are listed
on Schedule 3.22. Schedule 3.22 also lists, where applicable, the state and
federal registration numbers relating to such intellectual property and the
class of services to which such intellectual property relates. Except as set
forth in Schedule 3.22, (i) there are no claims or proceedings pending or
threatened against the Company asserting that the use of any of such
intellectual property infringes the rights of any other person and (ii) the
Company has adequate rights to use all material patents, patent applications,
inventions, know-how, technical information and other intellectual property used
in the conduct of their respective businesses.
3.23. Governmental Contracts. The Company is not a party to any
governmental contract subject to price redetermination or renegotiation.
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3.24. Absence of Changes. Since the Pre-Signing Balance Sheet Date,
except as set forth in Schedule 3.24 or except as otherwise expressly
contemplated hereby, there has not been:
(a) any changes in the financial condition, assets,
liabilities (contingent or otherwise), or business of the Company taken
as a whole that could reasonably be expected to have a Material Adverse
Effect;
(b) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties, assets or
business of the Company, taken as a whole;
(c) any change in the authorized, issued or outstanding
capital stock of the Company, except for stock purchases by employees
of the Company pursuant to the Company's existing employee stock
purchase program;
(d) any declaration, setting aside 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, except for the Final S Corporation
Distribution;
(e) any increase in the compensation, bonus, benefits, sales
commissions or fee arrangements payable or to become payable by the
Company to any of its respective officers, directors, the Selling
Stockholders, employees, consultants or agents, except in the normal
course of business consistent with past practices;
(f) any work interruption or any similar event or condition
materially adversely affecting the business of the Company taken as a
whole;
(g) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the Company to any
person, including, without limitation, the Selling Stockholders or any
affiliates thereof;
(h) any cancellation, or agreement to cancel, any material
indebtedness or other material obligation owing to the Company,
including without limitation any indebtedness or obligation of the
Selling Stockholders or any affiliates thereof;
(i) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any 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;
(j) any purchase or acquisition, or agreement, plan or
arrangement to purchase or acquire, any material property, rights or
assets other than in the normal course of business consistent with past
practices;
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(k) any material breach, or (other than in the normal course
of business or as expressly contemplated by this Agreement) any
amendment or termination, of any Contract or Permit of the Company;
(l) any change in any method of accounting or accounting
practice of the Company;
(m) any loss of the employment, services or benefits of any
key employee of the Company;
(n) any material defaults on any material obligation of the
Company;
(o) any write down of the value of any inventory or any write
off as uncollectible of any of the Company's accounts receivable or any
Portion thereof, in any such case not reflected in the Pre-Signing
Balance Sheet; or
(p) any agreement by the Company or the Selling Stockholders
(whether or not in writing) to effect any of the changes set forth in
clauses (a) through (o) above.
3.25. Powers of Attorney. No person, corporation, firm or other
entity holds a general or special power of attorney from the Company.
3.26. Brokers and Finders. Except as set forth on Schedule 3.26,
none of the Selling Stockholders or the Company has employed any broker, agent
or finder or incurred any liability for any brokerage fees, commissions or
finders' fees in cash for the sale of the Purchased Stock, the Notes, or the
consummation of the other transactions contemplated by the Agreement or the Note
Purchase Agreements. Neither the Company nor any of its officers, directors, or
employees on behalf of the Company has incurred any liabilities for any
financial advisory fees, brokerage fees, commissions or finders' fees that
remain unpaid in connection with any transaction or proposed transaction other
than the transactions contemplated hereby.
3.27. Environmental Matters. Except as disclosed on Schedule 3.27,
neither Parent nor Subsidiary has disposed of, or arranged for the disposal of,
hazardous wastes, hazardous substances, petroleum, petroleum products, or
infectious or medical waste, as those terms are defined by the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or any comparable state laws, rules or regulations ("Hazardous
Substances"). Except as disclosed on Schedule 3.27, there has been no
generation, storage or treatment of solid wastes or Hazardous Substances by
Parent or Subsidiary at any site or other facility in material violation of any
applicable law, rule, regulation, order, judgment or permit or that would
require any material ongoing or future removal, remedial or other response
action under any applicable law. Based upon all of the facts known to the
Selling Stockholders, including but not limited to all of the facts set forth in
Schedule 3.27 with respect to any and all real property owned, operated or
leased by Parent or Subsidiary, the Selling Stockholders after due inquiry do
not believe and have no reasonable basis to believe that any or all of Parent or
Subsidiary or the owner or operator of such properties could reasonably be
expected to incur any material remediation or other liability with respect to
such properties under any law, rule, regulation, order, judgment or permit
relating to human health,
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natural resources or the environment (collectively "Environmental Laws").
Neither Parent nor Subsidiary has received any notice of any violation of, or
potential liability under, any Environmental Law, and the Selling Stockholders
have no knowledge after due inquiry that there has been any spill, discharge,
leak, emission, injection, escape, emptying, dumping or release of any kind onto
any property owned, operated or leased by Parent or Subsidiary or into the
environment surrounding any such property of any Hazardous Substances such as
would result in any material violation of, or require any material removal,
remediation or other response action under, any applicable Environmental Law.
Parent and Subsidiary have been and are in compliance with all applicable
Environmental Laws and have obtained, and have been and are in compliance with
all permits, licenses, franchises, certificates, registrations, consents, and
authorizations required under all applicable Environmental Laws ("Environmental
Permits"), including such required for particular construction projects or other
jobs for customers. Neither the execution and delivery by the Selling
Stockholders, Parent or Subsidiary of this Agreement or the Note Purchase
Agreements, nor the consummation of the sale of the Purchased Stock, the Notes
and the other transactions contemplated hereby and thereby, will require
transfer or reissuance of, or cause a default under, or alter or impair any
rights under, such Environmental Permits. There are no claims, actions, suits or
other proceedings involving Environmental Laws pending, or to the knowledge of
the Selling Stockholders after due inquiry, threatened against Parent or
Subsidiary. Neither Parent nor Subsidiary has entered into any agreements
relating to any removal, remedial or other response action required under
Environmental Laws or relating to any claims arising under any Environmental
Law.
3.28. No Underground Storage Tanks. None of the real property owned,
operated or leased by Parent or Subsidiary has nor has in the past had (to the
knowledge of the Selling Stockholders after due inquiry) any underground storage
tanks located thereon containing Hazardous Substances.
3.29. Relations with Government. Neither the Selling Stockholders
nor the Company have given, offered or agreed to offer anything of value to any
governmental official, political party or candidate for government office nor,
to the Selling Stockholders' knowledge, have they otherwise taken any action, in
each case, that would cause the Company to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any law of similar effect.
3.30. Accounting Records. The books of account and other accounting
records of the Company are complete and correct in all material respects, and
have been maintained in accordance with the Company's normal business practices.
3.31. Litigation and Claims. Except as set forth on Schedule 3.31,
there are no actions, suits, claims or other proceedings pending or, to the
knowledge of the Selling Stockholders, threatened against the Company or any of
its employees, officers or directors or involving any of its assets, properties
or rights at law or in equity before any foreign, federal, state, municipal, or
other governmental court, department, commission, board, bureau, agency,
governmental authority, or other instrumentality or person or any board of
arbitration or similar entity (a "Proceeding").
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3.32. Related Party Transactions. Except as set forth on Schedule
3.32, neither the Selling Stockholders nor any member of their immediate
families are a party to any contract, agreement, understanding, or business
arrangement with the Company. Except for the Plans and except as set forth on
Schedule 3.32, no director, officer or employee (nor any member of any such
person's immediate family) of the Company is a party to any written contract or
agreement with the Company. Except as set forth on Schedule 3.32, the Company
does not employ as an employee or engage as a consultant any family member of
any of the directors or officers of the Company or of the Selling Stockholders.
Except as set forth on Schedule 3.32, during the past three years none of the
directors or officers of the Company or the Selling Stockholders, or any family
member of any of such persons, has been a director or officer of, or has had any
direct or indirect interest in, any person which during such period has been a
supplier, customer or sales agent of the Company or has competed with or been
engaged in any business of the kind being conducted by the Company. Except as
set forth on Schedule 3.32, no person who, directly or indirectly, controls, is
controlled by or under common control with the Company owns or has any rights in
or to any of the assets, properties or rights used by the Company in the
ordinary course of its business.
3.33. Management Incentive Plans. Included in Exhibit H are copies
of written consents of directors of Parent and Subsidiary, executed prior to the
execution of this Agreement, that set forth resolutions, together with the
related agreements of all other parties, (a) terminating prior to the date
hereof all options, warrants, calls, conversion rights and commitments pursuant
to which any person or entity, including without limitation the Selling
Stockholders, would otherwise have had any right or potential right to acquire
any shares of capital stock of the Company and (b) implementing, conditioned
upon and effective as of the Closing, the Management Incentive Plans. Such
resolutions have not been revoked or superseded, and neither Parent nor
Subsidiary has issued or granted shares of capital stock or any options,
warrants, calls, conversion rights or commitments pursuant to which any person
or entity, including without limitation the Selling Stockholders, have any right
or potential right to acquire any shares of capital stock of Company prior to
the Closing or the termination of this Agreement in accordance with its terms.
4. REPRESENTATIONS AND WARRANTEES OF PURCHASERS.
Each of the several Purchasers, severally and not jointly, makes the
following representations and warranties to the Selling Stockholders at and as
of the Closing.
4.1. Due Organization. Such Purchaser is duly organized, validly
existing and in good standing under the laws of the state or jurisdiction of its
organization and is duly authorized, qualified and licensed under all applicable
laws, regulations, ordinances and orders of public authorities to carry on its
business in the places and in the manner as now conducted except where the
failure to be so authorized, qualified or licensed would not have a material
adverse affect on its business.
4.2. Authorization. Such Purchaser has the power and authority to
execute and deliver this Agreement, the Note Purchase Agreements, the
Stockholders Agreement and the other documents and instrument to be delivered
pursuant to this Agreement and to consummate the purchase of the Purchased Stock
and Notes and to consummate the other transactions
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contemplated hereby and thereby to be consummated by it. The execution and
delivery by Purchaser of this Agreement, the Note Purchase Agreements, the
Stockholders Agreement and all other instruments, documents and agreements
contemplated hereby executed and delivered by or on behalf of such Purchaser at
the Closing, and the consummation by such Purchaser of the purchase of the
Purchased Stock and the other transactions contemplated hereby and thereby, have
been duly and validly authorized by all necessary action on the part of such
Purchaser. This Agreement, the Note Purchase Agreements, the Stockholders
Agreement, and all other instruments, documents and agreements contemplated
hereby and thereby to be executed and delivered by or on behalf of such
Purchaser at the Closing have been duly and validly executed and delivered by
such Purchaser and constitutes (or will constitute) the valid and binding
obligations of such Purchaser enforceable in accordance with its respective
terms, subject to applicable bankruptcy, reorganization, insolvency and similar
laws from time to time in effect and subject to general principles of equity and
judicial discretion.
4.3. No Conflicts; Approvals. Neither the execution, delivery and
performance of this Agreement, the Note Purchase Agreements or the Stockholders
Agreement, nor the consummation of the purchase of the Purchased Stock, the Note
Purchase Agreements and the other transactions contemplated hereby and thereby
by such Purchaser will (i) conflict with or result in a breach of any provision
of the constituent or governing documents of such Purchaser, (ii) result in any
conflict with, breach of, or default (or give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit) under or require
any consent or approval which has not been obtained with respect to any of the
terms, conditions or provisions of any indenture, contract, agreement or
instrument to which such Purchaser is a party or by which any of its properties
or assets may be bound or (iii) violate any order, law, rule or regulation
applicable to such Purchaser or by which any of its properties or assets may be
bound. No action, consent, authorization, waiver or approval by, or filing or
registration by such Purchaser with, any federal, state, municipal, foreign or
other court or governmental body or agency, or any other regulatory body, is
required in connection with the execution and delivery by such Purchaser of this
Agreement, the Note Purchase Agreements or the Stockholders Agreement or the
consummation by such Purchaser of the purchase of the Purchased Stock and the
Notes and the consummation of the other transactions contemplated hereby and
thereby.
4.4. Brokers and Finders. None of such Purchaser or any of its
officers, directors, partners, managers, agents or employees has employed any
broker, agent or finder (other than Menai Capital LLC, all fees and expenses of
which shall be paid by Purchasers) or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the sale of the Purchased
Stock and the other transactions contemplated by the Agreement.
4.5. Investment Representations.
(a) Such Purchaser understands that the offer and sale of the
Purchased Stock and the Notes (collectively, the "Securities") will not
be registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws, on the grounds that
the offer and sale of the Securities are exempt from registration under
Section 4(2) of the Securities Act and applicable state securities
laws, and that the reliance of the Selling Stockholders and the Company
on such exemptions are predicated
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in part on such Purchaser's representations, warranties and
confirmations set forth in this Section 4.5.
(b) Such Purchaser represents and warrants that, upon
consummation of the Closing, the Securities will be acquired by such
Purchaser for its own account, not as a nominee or agent, and without a
view to resale or other distribution within the meaning of the
Securities Act.
(c) Such Purchaser represents and warrants that such Purchaser
has sufficient knowledge and expertise in financial and business
matters such that Purchaser is fully capable of evaluating the merits
and risks of such Purchaser's purchase of the Securities upon
consummation of the Closing, and that such Purchaser is an "accredited
investor", as such term is defined in Rule 501 under the Securities
Act.
(d) Such Purchaser confirms that the Selling Stockholders have
given such Purchaser the full and unrestricted opportunity to
investigate the business, properties and assets of the Company. Such
Purchaser also confirms that the Selling Stockholders have given such
Purchaser the full and unrestricted opportunity to ask questions of and
receive answers from the Selling Stockholders and other employees of
the Company concerning such Purchaser's purchase of the Securities.
Such Purchaser represents and warrants that (i) the full and
unrestricted opportunity to investigate the business, properties and
assets of the Company, (ii) the full and unrestricted opportunity to
ask questions of and receive answers from the Selling Stockholders and
other employees of the Company concerning such Purchaser's purchase of
the Securities and (iii) the representations and warranties of the
Selling Stockholders set forth in Section 3, the Company's financial
statements and the schedules, reports and other information furnished
or made available by the Selling Stockholders to such Purchaser
pursuant to or in connection with this Agreement are, taken together,
sufficient to enable such Purchaser, in light of the experience and
expertise of the principals and advisors of such Purchaser, to make a
fully informed investment decision regarding its purchase of the
Securities and its consummation of the other transactions contemplated
hereby.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING STOCKHOLDERS AND THE
COMPANY.
The obligations of the Selling Stockholders and the Company hereunder
are subject to the fulfillment, at or prior to the Closing Date, of each of the
following conditions, any of which may be waived in writing by the Selling
Stockholders.
5.1. Representations and Warranties; Performance of Obligations.
The representations and warranties of the Purchasers set forth in this Agreement
shall be accurate as of the Closing Date in all respects. All of the terms,
covenants and conditions of this Agreement to be complied with and performed by
the Purchasers on or before the Closing Date shall have been duly complied with
and performed in all material respects. A certificate to the foregoing effect
dated the Closing Date and signed by the an authorized officer of each Purchaser
shall have been delivered to the Selling Stockholders.
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5.2. No Litigation. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened by
any person not a party to this Agreement to restrain or prohibit the purchase
and sale of the Purchased Stock or the Notes or the consummation of the other
transactions contemplated by this Agreement.
5.3. Closing Documents. The Selling Stockholders and the Company
shall have been tendered delivery of each of the payments and documents to be
delivered to them at the Closing pursuant to Section 1.7 hereof.
5.4. Opinion of Counsel. The Selling Stockholders and the Company
shall have received an opinion of counsel for Oakhurst Technology, Inc., dated
the Closing Date, substantially to the effect that:
(a) such Purchaser is duly organized and validly existing in
good standing under the laws of its jurisdiction of organization;
(b) such Purchaser has the requisite power and authority to
enter into this Agreement, the Note Purchase Agreements, the
Stockholders Agreement and each of the other documents to be delivered
by such Purchaser pursuant to Section 1.7 hereof and to perform its
obligations hereunder and thereunder; this Agreement, the Note Purchase
Agreements, the Stockholders Agreement and each of the other documents
delivered by such Purchaser pursuant to Section 1.7 each has been duly
authorized, executed and delivered by Purchaser and constitutes a valid
and binding agreement of each Purchaser enforceable in accordance with
its terms, subject to applicable bankruptcy, reorganization, insolvency
and similar laws from time to time in effect and subject to general
principles of equity and judicial discretion;
(c) to the knowledge of such counsel, no notice to, consent,
authorization, approval or order of any court or governmental agency or
body is required in connection with the execution, delivery or
performance of this Agreement, such Purchaser's Note Purchase Agreement
or the Stockholders Agreement by such Purchaser; and
(d) the execution and delivery of this Agreement, such
Purchaser's Note Purchase Agreement and the Stockholders Agreement and
the performance by such Purchaser of its obligations hereunder and
thereunder will not violate or result in a breach or constitute a
default under any of the terms or provisions of such Purchaser's
constituent or organizational, documents, or, to the knowledge of such
counsel, any material agreement, lease, license, permit or other
contract to which such Purchaser is a party or by which it may be
bound.
Such opinions may be subject to normal and customary assumptions,
qualifications, limitations and exceptions.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASERS.
The obligations of the Purchasers hereunder are subject to the
fulfillment, at or prior to the Closing Date, of each of the following
conditions, any of which may be waived in writing by Purchasers.
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6.1. Representations and Warranties. The representations and
warranties of the Selling Stockholders set forth in this Agreement shall be
accurate as of the Closing Date in all respects. All of the terms, covenants and
conditions of this Agreement to be complied with and performed by the Selling
Stockholders, Parent and Subsidiary on or before the Closing Date shall have
been duly complied with and performed in all material respects. Certificates to
the foregoing effect dated the Closing Date and signed by the Selling
Stockholders, and by an authorized officer of each of Parent and Subsidiary
shall have been delivered to the Purchasers.
6.2. No Litigation. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened by
any person not a party to this Agreement to restrain or prohibit the purchase
and sale of the Purchased Stock or the Notes or the consummation of the other
transactions contemplated by this Agreement.
6.3. Closing Documents. The Purchasers shall have been tendered
delivery of each of the payments and documents to be delivered to the Purchasers
at the Closing pursuant to Section 1.6 hereof.
6.4. Opinion of Counsel. The Purchasers shall have received an
opinion of counsel to Parent, Subsidiary and the Selling Stockholders, dated the
Closing Date, substantially to the effect that:
(a) each of Parent and Subsidiary has been duly organized and
is validly existing in good standing under the laws of its state of
organization;
(b) each of Parent and Subsidiary is duly authorized,
qualified or licensed to do business as a foreign corporation in the
places where such is required, except where the failure to be so
authorized, qualified or licensed would not have a Material Adverse
Effect;
(c) the authorized and outstanding capital stock of each of
Parent and Subsidiary is as set forth in Section 3.4 of this Agreement,
and each outstanding share of Parent Common Stock and Subsidiary Common
Stock has been duly authorized and validly issued, and is fully paid
and nonassessable;
(d) each of Parent and Subsidiary has the requisite corporate
power and authority to enter into this Agreement, the Note Purchase
Agreements, the Stockholders Agreement, the Escrow Agreement, the
Employment Agreements and each of the other documents to be delivered
by such party pursuant to Section 1.6 hereof, as applicable, and to
perform its obligations hereunder and thereunder, as applicable; this
Agreement, the Note Purchase Agreements, the Stockholders Agreement,
the Escrow Agreement, the Employment Agreements and each of the other
documents to be delivered by Parent and Subsidiary pursuant to Section
1.6 hereof has been duly authorized, executed and delivered by each
such Party, as applicable; assuming the legal capacity and competency
of the Selling Stockholders and assuming that this Agreement and the
other agreements delivered by the Selling Stockholders referred to in
Section 1.6 have been duly authorized, executed and delivered by the
Selling Stockholders, this Agreement, the Note Purchase Agreements, the
Stockholders Agreement, the Escrow Agreement, the
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Employment Agreements and each of the other documents delivered by
Parent and Subsidiary and the Selling Stockholders, as applicable, each
constitutes a valid and binding agreement of Parent and Subsidiary or
the Selling Stockholders, as the case may be, enforceable in accordance
with its terms subject to applicable bankruptcy, reorganization,
insolvency and similar laws from time to time in effect and subject to
general principles of equity and judicial discretion;
(e) to the knowledge of such counsel, no notice to, consent,
authorization, approval or order of any court or governmental agency or
body is required in connection with the execution, delivery or
performance of this Agreement, the Note Purchase Agreements, the
Stockholders Agreement, the Escrow Agreement, or the Employment
Agreements by Parent, Subsidiary or the Selling Stockholders;
(f) the execution and delivery of this Agreement, the Note
Purchase Agreements, the Stockholders Agreement, the Escrow Agreement,
the Employment Agreements and the performance by Parent and Subsidiary
and the Selling Stockholders of their obligations hereunder and
thereunder will not violate or result in a breach or constitute a
default under any of the terms or provisions of the Certificate or
Articles of Incorporation or Bylaws of Parent, Subsidiary or, to the
knowledge of such counsel, any material Contract or Permit, to which
Parent or Subsidiary is a party or by which it may be bound and which
is listed on Schedule 3.11 or Schedule 3.13.
(g) the Merger, the formation of Merger Corp. and Merger
Corp.'s subsequent merger out of existence were made in accordance with
(i) the Delaware General Corporation Law, and (ii) as to such merger,
the Michigan Business Corporation Act.
Such opinion may be subject to normal and customary assumptions,
qualifications, limitations and exceptions.
6.5. Good Standing Certificates. Selling Stockholders shall have
delivered to Purchaser certificates, dated as of a date not more than 5 days
prior to the Closing Date, (a) duly issued by the Secretary of State of Delaware
and the appropriate authority of the State of Michigan as to (i) the good
standing of Parent and Subsidiary, as applicable, and (ii) the merger of
Subsidiary with and into Texas - Sterling Construction, Inc.; and (b) duly
issued by the appropriate governmental authority in each state in which Parent
or Subsidiary is authorized to do business, showing Parent and Subsidiary, as
applicable, to be in good standing and authorized to do business and that all
state franchise and/or income tax returns and taxes required to have been filed
or paid by Parent and Subsidiary for all periods prior to the Closing Date have
been filed and paid.
6.6. Employee Notes. All of the promissory notes payable to
Subsidiary for the purchase of, and secured by pledges of, shares of Subsidiary
common stock heretofore purchased by employees of Subsidiary shall have been
paid in full.
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7. INDEMNIFICATION.
7.1. Survival of Representations and Warranties. The
representations and warranties of the Selling Stockholders and the Company in
this Agreement and in the Note Purchase Agreements and other documents and
instruments delivered by the Selling Stockholders and the Company pursuant to
this Agreement will survive until January 31, 2000, except that the
representations and warranties in Section 3.4 (Capital Stock of the Company),
Section 3.5 (Subsidiaries), Section 3.27 (Environmental Matters) and 3.6
(Transactions in Company Stock) shall survive forever, the representations and
warranties under Sections 3.18 (Employee Benefit Plans), Section 3.19 (No
Multiemployer Plans) and Section 3.21 (Taxes and Tax Returns) shall survive for
a period equal to the applicable statute of limitations; provided, however,
that, if a Trigger Option Exercise Notice or a Pre-Trigger Option Exercise
Notice is delivered, then the survival period with respect to any representation
or warranty of the Selling Stockholders that would otherwise previously have
expired shall be extended through and including the date of the Purchasers'
payment of the Second Tranche Payment. The representations and warranties of the
Purchasers in this Agreement and in the Note Purchase Agreements and other
documents and instruments delivered by the Purchasers pursuant to this Agreement
will survive until January 31, 2000, except that the representations and
warranties in Section 4.5 (Investment Representations) shall survive for a
period of six years; provided, however, that if a Trigger Option Exercise Notice
or a Pre-Trigger Option Exercise Notice is delivered, then the survival period
with respect to any representation or warranty of the Purchasers that would
otherwise have expired will be extended through and including the date of the
Purchasers' payment (or required payment) of the Second Tranche Payment. The
liabilities of the parties under their respective representations and warranties
will expire as of the expiration of the applicable survival period (the
"Expiration Date"); provided, however, that such expiration will not extend to
any representation or warranty, the breach of which shall have been specifically
asserted in writing before such Expiration Date, until the asserted breach has
been resolved. The covenants and agreements in this Agreement and in the Note
Purchase Agreements and other instruments and documents delivered pursuant to
this Agreement that by their terms are to be performed in whole or in part after
the Closing Date will survive the Closing Date and continue in full force and
effect without limitation.
7.2. Indemnification by the Selling Stockholders. The Selling
Stockholders covenant and agree that they will jointly and severally, on the
terms and subject to the conditions and limitations set forth in this Agreement,
indemnify, defend, protect and hold harmless the Purchasers and each Purchaser's
officers, directors, principals, members, affiliates, agents, successors and
assigns (the Purchasers and all such persons or other entities are collectively
referred to as the "Purchasers' Indemnified Persons") at all times from and
after the date of this Agreement from and against all claims, losses, damages,
actions, suits, proceedings, demands, assessments, adjustments, interest, fines,
penalties, costs and expenses, including specifically, but without limitation,
reasonable attorneys', consultants', experts' and accountants' fees and expenses
incurred in the investigation of such claims (collectively, "Damages"), incurred
by Purchasers' Indemnified Persons resulting from (a) any breach of the
representations and warranties of the Selling Stockholders or the Company set
forth herein or on the schedules or certificates delivered by or on behalf of
the Selling Stockholders or the Company in connection herewith, provided that
such Purchasers' Indemnified Persons assert in writing entitlement to indemnity
prior to the Expiration Date applicable with respect to such
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representations and warranties, or (b) any nonfulfillment of any agreement on
the part of the Selling Stockholders or the Company under this Agreement;
provided, however, that the Selling Stockholders shall have no liability or
obligation whatsoever under the Notes or the Note Purchase Agreements, as all
such obligations shall be solely the corporate obligations of Parent.
7.3. Indemnification by Each Purchaser. Each Purchaser severally
covenants and agrees that it will indemnify, defend, protect and hold harmless,
the Company, the Selling Stockholders and respective officers, directors,
affiliates, agents, successors and assigns (the Selling Stockholders and such
persons or other entities are collectively referred to as "Sellers' Indemnified
Persons") at all times from and after the date of this Agreement from and
against all Damages resulting from any breach of the representations and
warranties of such Purchaser set forth herein or on the schedules or
certificates delivered in connection herewith, provided that such Sellers
Indemnified Persons assert entitlement to indemnity prior to the Expiration Date
applicable with respect to such representations and warranties, and any
nonfulfillment of any agreement on the part of such Purchaser under this
Agreement.
7.4. Third Person Claims. Promptly after any of Purchasers'
Indemnified Persons or Sellers' Indemnified Persons, as the case may be
(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") or the
commencement of any action or proceeding by a Third Person, the Indemnified
Party shall, as a condition precedent to a claim with respect thereto being made
against the party obligated to provide indemnification pursuant to Section 7.2
or 7.3 hereof (hereinafter the "Indemnifying Party"), give 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
to the extent practicable a reasonable estimate of the potential amount thereof.
The Indemnifying Party shall have 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 in good faith and diligently. 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 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 or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. Notwithstanding the foregoing, the Indemnified Party
shall have the right to participate in any matter through counsel of its own
choosing at its own expense (unless there is a conflict of interest that
prevents counsel for the Indemnifying Party from representing Indemnified Party,
in which case the Indemnifying Party will reimburse the Indemnified Party for
the expenses of its counsel); provided that the Indemnifying Party's counsel
shall always be lead counsel and shall determine all litigation and settlement
steps, strategy and the like, and provided further that, unless otherwise
provided, the Indemnifying Party shall not be liable for the costs of more than
one counsel for all Indemnified Parties in any action or proceeding. 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, except to the extent such participation is requested by the
Indemnifying Party or there
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exists a conflict of interest as described above, in which event the Indemnified
Party shall be reimbursed, promptly as such expenses are incurred, by the
Indemnifying Party for reasonable additional legal expenses, out-of-pocket
expenses and allocable share of employee compensation incurred in connection
with such participation for any employee whose participation is so requested.
The Indemnifying Party will not settle any such Third Person claim without the
written consent of the Indemnified Party, which consent shall not be
unreasonably withheld. If the Indemnifying Party does not 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, and
the Indemnifying Party will reimburse, promptly as such expenses are incurred,
the Indemnified Party for the amount paid in such settlement and any other
liabilities or expenses incurred by the Indemnified Party in connection
therewith, provided, however, that the Indemnified Party will not settle any
Third Person claim without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.
7.5. Limitation of the Selling Stockholders' Liability.
(a) Notwithstanding anything to the contrary contained in this
Agreement, after the Closing Date, the aggregate liability of each of
the Selling Stockholders for any and all Damages, individually or in
the aggregate with all other Damages covered by this Agreement, for
which indemnification is required by such Selling Stockholders pursuant
to Section 7.2 shall be limited to the aggregate net proceeds received
by such Selling Stockholder from the sale of shares of the First
Tranche of Purchased Stock and, if applicable, the Second Tranche of
Purchased Stock hereunder.
(b) Notwithstanding anything to the contrary contained in this
Agreement, after the Closing Date, the Purchasers' Indemnified Persons
are entitled to indemnification pursuant to Section 7.2 of this
Agreement only to the extent that the amount of all Damages, in the
aggregate with all other Damages covered by this Agreement, exceeds
$150,000 (it being understood that once such amount is exceeded, only
the aggregate amount of all such Damages in excess of $150,000 shall be
payable by the Selling Stockholders), except that (i) the limitation
set forth in this Section 7.5(b) shall not apply to or otherwise limit
payment of any amounts to be paid pursuant to Section 1.10, Section
1.11 or Section 2 of this Agreement or under the Notes or the Note
Purchase Agreements, (ii) any such amounts paid pursuant to Section
1.10, Section 1.11 or Section 2 or under the Notes or the Note Purchase
Agreements shall be disregarded in calculating the amount of any
Damages for any purposes under this Section 7, and (iii) the
limitations of Section 7.7 shall not apply with respect to any claim or
cause of action arising from the Selling Stockholders' nonfulfillment
of any agreement on the part of the Selling Stockholders under Section
1.10, Section 1.11 or Section 2 or under the Notes or the Note Purchase
Agreements of this Agreement.
7.6. Limitation of the Purchasers' Liability. Notwithstanding
anything to the contrary contained in this Agreement, after the Closing Date,
the aggregate liability of each of the Purchasers for any and all Damages,
individually or in the aggregate with all other Damages covered by this
Agreement, for which indemnification is required by the Purchasers
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pursuant to Section 7.3: (a) shall be limited to an amount equal to the
aggregate amount of the First Tranche Stock Purchase Price paid by such
Purchaser hereunder; and (b) shall be limited to the amount of Damages for which
indemnification is required from such Purchaser pursuant to Section 7.3. No
Purchaser shall have any liability or obligation in respect of the
indemnification obligation of any other Purchaser.
7.7. Limitation on Claims. After the Closing Date, in the absence
of actual fraud, the indemnification rights provided in this Section 7 shall be
the sole and exclusive remedy available to Purchasers' Indemnified Persons and
Sellers' Indemnified Persons for any misrepresentation, breach of warranty,
failure to fulfill any covenant or agreement contained herein or other breach
hereof or default hereunder; provided however that the provisions of this
Section 7.7 shall not apply to obligations and agreements under Section 1.10,
Section 1.11 or Section 2 of this Agreement or under the Note or the Note
Purchase Agreements.
7.8. Inconsistent Provisions. The provisions of this Section 7
shall govern and control over any inconsistent provisions of this Agreement.
7.9. Method of Payment. Except as otherwise expressly provided
herein, all payments for Damages under this Section 7 shall be paid in cash
immediately as incurred.
8. MISCELLANEOUS.
8.1. Cooperation. The Selling Stockholders, Parent and Subsidiary
and each Purchaser shall each deliver or cause to be delivered to the other on
the Closing Date, and at such other times and places thereafter as shall be
reasonably agreed to, such additional instruments as the other may reasonably
request for the purpose of consummating the transactions contemplated by this
Agreement. After the Closing Date, the Selling Stockholders and the Company will
cooperate with each Purchaser, and each Purchaser will cooperate with the
Selling Stockholders and the Company, 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 at or prior to the Closing Date. Such cooperation shall be without
charge.
8.2. Successors and Assigns. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) without the
written consent of the other parties hereto and shall be binding upon and shall
inure solely and exclusively to the benefit of the parties hereto, their
successors, heirs, personal representatives and permitted assigns.
8.3. Entire Agreement. This Agreement (which shall for all purposes
hereof be deemed to include the Schedules and Exhibits hereto) and, when
delivered, the documents and instruments delivered pursuant hereto constitute
the entire agreement and understanding among the Selling Stockholders, Parent
and Subsidiary and the Purchasers and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement
may be modified or amended only by a written instrument executed by the Selling
Stockholders, Parent and Subsidiary and the Purchasers.
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8.4. Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
8.5. Expenses.
(a) Whether or not the transactions herein contemplated shall
be consummated, the Purchasers will pay the fees, expenses and
disbursements of the Purchasers and their agents, representatives,
accountants and counsel incurred in connection with the subject matter
of this Agreement or any amendments hereto and the Note Purchase
Agreements (except as otherwise specified therein) and other documents
to be delivered pursuant to Sections 1.6, 1.7, 6 and 7, or any
amendments thereto, and all costs and expenses related to the
Purchasers' due diligence investigation.
(b) Whether or not the transactions herein contemplated shall
be consummated, the Company will pay the fees, expenses and
disbursements of its auditors in connection with the preparation of the
audited financial statements required by Section 2.1 and all other
fees, expenses and disbursements incurred (including, but not limited
to, legal and accounting fees and expenses) in connection with the
subject matter of this Agreement or any amendments hereto and the Note
Purchase Agreements and other documents to be delivered pursuant to
Sections 1.6, 1.7, 6 and 7, or any amendments thereto; provided,
however, that:
(i) upon consummation of the purchase and sale of the
First Tranche of Purchased Stock at the Closing, the Selling
Stockholders shall reimburse Parent's expenses in an aggregate
amount equal to one and one-quarter percent (1.25%) of the
purchase price of the First Tranche of Purchased Stock;
(ii) upon consummation of the purchase and sale of
the Second Tranche of Purchased Stock after a Trigger Option
Exercise Notice is delivered by Purchasers, the Selling
Stockholders shall reimburse Parent's expenses in an aggregate
amount equal to one and one-quarter percent (1.25%) of the
purchase price of the Second Tranche of Purchased Stock; and
(iii) Parent is hereby authorized, and agrees, to
deduct all amounts to be reimbursed by the Selling
Stockholders pursuant to clause (i) and/or clause (ii) above,
pro rata in accordance with their respective Selling
Stockholder Percentages, from the amounts otherwise to be
distributed by Parent to such Selling Stockholders.
8.6. Notices. All notices or communications required or permitted
hereunder shall be in writing and may be given (i) by depositing the same in
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, (ii) by a reputable
overnight courier service, (iii) by electronically confirmed facsimile or (iv)
by delivering the same in person to an officer or agent of such party. Notices
shall be deemed to have been given (a) if sent by United States mail, on the
fourth day following mailing, (b) if sent by overnight courier, on the day
following delivery by the
36
45
sending party to the courier service and (c) if sent by facsimile, on the day
the facsimile is confirmed as having been received. Notices shall be addressed
as follows:
(a) If to any Purchaser, to its address set forth on Exhibit A
and to:
Menai Capital LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Managing Director
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to any Selling Stockholder or the Company, to such
Selling Stockholder's address set forth on Exhibit A and to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Executive Officer
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
Texas-Sterling Construction, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with copy (which shall not constitute notice) to:
Mayor, Day, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
8.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without regard to
its conflict of law principles.
37
46
8.8. 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
or in 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 of default
occurring before or after that waiver.
8.9. 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 enforceable 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.
8.10. Attorney's Fees. Should it become necessary for any party to
bring an action or cross-action against any other party to resolve any claim or
controversy arising under this Agreement, the prevailing party shall be entitled
to recover from the other party its reasonable attorneys' fees and expenses,
including fees incurred in connection with enforcing any decision of a court or
arbitration panel, in addition to the costs of any such action. For purposes of
this section, the "prevailing party" shall be determined by the court or
arbitration panel, taking into consideration all aspects of the litigation the
court may deem appropriate, including but not limited to matters of liability
and extent of damages both as claimed before trial and proven during trial; the
court or arbitration panel may determine that different parties prevailed on
different aspects of the litigation and allocate the responsibility to pay fees
and costs reasonably as a result thereof.
8.11. Interpretation; Definitions. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement. Except as may be otherwise specified in this
Agreement: (a) the singular includes the plural and the plural includes the
singular; (b) "or" and "any" are not exclusive and "include" and "including" are
not limiting; (c) a reference to any agreement or contract includes supplements
and amendments; (d) a reference to a law includes any amendment or modification
to such law and any rules or regulations thereunder; (e) a reference to a
"person" includes any individual or entity of any kind and its successors and
assigns; (f) a reference to generally accepted accounting principles refers to
United States generally accepted accounting principles as mandated (or permitted
and elected by the Company) as of the date hereof; and (g) a reference in this
Agreement to a Section, Exhibit or Schedule refers to the Section, Exhibit or
Schedule of this Agreement. A table indicating the location within this
Agreement of the provisions containing the definitions of certain capitalized
terms used herein is set forth in the Table of Contents. Any matter disclosed in
any Schedule or other disclosure furnished or made available in connection with
this Agreement shall be deemed to be disclosed in each other Schedule or other
disclosure furnished or made available in connection with this Agreement where
such disclosure may be relevant.
[SIGNATURE PAGES FOLLOW]
38
47
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PARENT: STERLING CONSTRUCTION COMPANY
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
SUBSIDIARY: STERLING CONSTRUCTION COMPANY
a Michigan corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
SELLING STOCKHOLDERS:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
48
PURCHASERS: OAKHURST TECHNOLOGY, INC.
a Delaware corporation
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
[OTHER PURCHASERS]
49
Exhibit A
Selling Stockholders, Purchasers
Stock Holdings and Note Holdings
50
Exhibit B
Escrow Agreement
51
Exhibit C
Note Purchase Agreements
52
Exhibit D
Stockholders Agreement
53
Exhibit E
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Employment Agreement
54
Exhibit F
▇▇▇▇▇▇ ▇▇▇▇▇▇ Employment Agreement
55
Exhibit G
▇▇▇▇▇ ▇▇▇▇▇▇▇ Employment Agreement
56
Exhibit H
Management Incentive Plans
57
Exhibit I
Advisory Services Agreement
58
Exhibit J
Merger Documents
59
Exhibit K
Audited 1998 Financial Statements
60
Exhibit L
Calculation of Pre-Tax Profit Amount
The "Pre-Tax Profit Amount" shall be Net Income for the twelve months ended
11/30/98 prepared in accordance with GAAP
Plus: Extraordinary Items, if any, to the extent such items reduced such Net
Income.
Minus: Extraordinary Items, if any, to the extent such items increased such
Net Income.
Plus: Non-recurring transaction, legal and consulting expenses, including,
but not limited to, corporate costs and fees paid to each of
PricewaterhouseCoopers, LLC, Mayor, Day, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., and
▇.▇. ▇▇▇▇▇▇▇, P.C.
Plus: Excess Compensation expense
(i) All amounts paid during or accrued for the twelve-month period ended
November 30, 1998 to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ in excess of (a) regular payroll compensation as set forth in
the attached Base Payroll Compensation Schedule; and (b) bonus payments
of $200,000 in the aggregate.
(ii) All amounts paid during or accrued for the twelve-month period ended
November 30, 1998 to stockholders other than ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ in excess or regular payroll
compensation as set forth in the attached Base Payroll Compensation
Schedule.
61
Attachment to Exhibit L
Base Payroll Compensation Schedule
BASE PAYROLL
------------
(i)(a)
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $ 150,800.00
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 145,600.00
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. 145,600.00
(ii)
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $ 93,400.00
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. 64,833.00
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 89,607.72
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 85,000.00
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 98,001.00
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 59,000.00
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 154,708.50
62
Exhibit M
Calculation of Stockholders' Equity Amount
The "Stockholders' Equity Amount" shall be stockholders' equity as of 12/31/98
prepared in accordance with GAAP
Plus: All non-recurring corporate transaction, legal and consulting expenses
paid or accrued through December 31, 1998
63
Exhibit N
Form of Trigger Event Notice
The undersigned, Chief Financial Officer of Sterling Construction
Company, a Delaware corporation (the "Company"), does hereby certify on behalf
of the Company as follows:
(a) The Company or a wholly-owned subsidiary has been
identified as low bidder on state highway projects for the Texas
Department of Transportation with an aggregate bid amount of at least
$____________1 as set forth in Schedule N-1 hereto; and
(b) The estimated Aggregate Margin2 for the projects
identified on Schedule N-1 is _____%.3 The calculation of such
estimated Aggregate Margin is set forth on Schedule N-2. A reasonably
detailed analysis of the calculation of such estimated Aggregate
Margin, including an analysis of each project included in Schedule N-1,
accompanies this Notice.
IN WITNESS WHEREOF, I have set forth my hand this ___ day of _________,
19__.
By:
----------------------------------
Name:
----------------------------------
Title: Chief Financial Officer
----------------------
1 Such amount shall be at least $15,000,000.
2 Estimated "Aggregate Margin" shall be calculated by subtracting the
estimated aggregate cost from the aggregate bid amount and dividing
such remainder by the aggregate bid amount.
3 Such number shall be at least 12.0%.
64
SCHEDULE N-1
Description of Project Bid Amount Estimated Cost
---------------------- ---------- --------------
$ $
---------- ---------
Total $ $
========== =========
65
SCHEDULE N-2
[$ ]. minus [$ ].
(Aggregate Amount of All Bids) minus (Aggregate estimated cost)
--------------------------------------------------------------------------------
[$ ]
(Aggregate Amount of all Bids)
= multiplied by 100
--------------
= %
---------------
(Margin Percentage)
66
Exhibit O
Calculation of EBITDA
"EBITDA" shall be net income determined in accordance with GAAP for Parent and
its consolidated subsidiaries for the first four consecutive fiscal quarters
commencing after the end of the calendar month in which a Trigger Option
Exercise Notice was received by Parent.
Plus: Interest expense for the period
Plus: Depreciation and amortization expense for the period
Plus: Federal and state income tax expense incurred for the period
Plus: Extraordinary Items (to the extent negative), if any, for the period
Plus: Any and all fees paid to Menai Capital, LLC, and any fees paid to
Directors
Minus: Extraordinary Items (to the extent positive), if any
67
Schedule 3.3
Required Consents and Approvals
1. Comerica Bank-Texas
68
Schedule 3.5
Subsidiaries
The Company participates in a joint venture known as BRH-▇▇▇▇▇▇,
Inc./Texas-Sterling Construction, Inc. Joint Venture, formed on July 20, 1995,
for the purpose of operating and managing an underground construction project in
▇▇▇▇▇▇ County, Texas. The Company has a 50% participation percentage in the
profits, losses and indemnity of the Joint Venture, accounted for using the
equity method of accounting.
Subsidiary is a wholly-owned subsidiary of Parent.
69
Schedule 3.6
Transactions in Company Stock
Under the Buy/Sell Agreement, the Company has a contingent obligation to
purchase shares upon the death, disability or termination of a stockholder. No
such obligations are currently outstanding.
70
Schedule 3.9
Balance Sheet Liabilities and Obligations
1. Corporate Finance fees and out-of-pocket expenses of
PricewaterhouseCoopers Securities LLC.
2. Fees and expenses of Mayor, Day, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., in
connection with the transactions contemplated by this Agreement.
3. Other expenses incurred by the Company in connection with the
transactions contemplated by this Agreement.
4. Contingent Final S Corporation Distribution.
71
Schedule 3.10
Accounts and Notes Receivable
None.
72
Schedule 3.11
Permits
1. The Company holds an exclusive license to market and perform pipe
replacement using the IMPIPE process throughout Texas (excluding
Houston).
2. Texas Sales Tax Permit.
3. Overweight and overwidth moving permits issued by the Texas Department
of Transportation.
73
Schedule 3.12
Real and Personal Property
The Company owns real property, as reflected in the real estate title insurance
policy attached hereto.
1. ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
2. ▇▇▇▇▇▇ property - 5 acre lot located in ▇▇▇▇▇▇ County, Texas.
The following leases are attached hereto and incorporated herein.
1. Month-to-month rental arrangement with Greenbriar Atrium Office
Building, for office space located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. Rental follows "Holding Over" terms of
1991 lease.
3. Month-to-month rental arrangement with ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, dba Ridgmar
Oil & Gas Building, for office space located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇. Rental follows "Holding Over" terms of
1997 lease.
4. Lease with ▇▇▇▇ ▇▇▇▇▇▇▇ for land used as temporary construction site
office, located at ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇.
5. Lease with E&S Interior Construction for land used as temporary
construction site office, located on ▇▇▇▇▇▇▇▇▇ Street, Pasadena, Texas.
6. Lease with ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ for land used as temporary construction
site office, located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇.
7. Lease with ▇▇▇▇▇▇▇ Supply for land used as temporary construction site
office, located at the intersection of Sabine and Center Streets,
Houston, Texas.
8. Lease with ▇▇▇▇ ▇▇▇▇▇▇ for land used as temporary construction site
office, located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇.
9. Lease with ▇▇▇▇ ▇▇▇▇▇▇ for land used as temporary construction site
office, located at the intersection of ▇▇▇▇▇▇ and ▇▇▇▇▇ Streets,
Houston, Texas.
10. Lease with ▇▇▇▇ ▇▇▇▇▇▇ for land used as temporary construction site
office, located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇.
74
Schedule 3.13
Material Contracts and Commitments
1. Construction contracts in progress as of September 30, 1998:
ESTIMATED COST
JOB NO. PROJECT TO COMPLETE
9630 City of Houston, Project N-0611A-01-3 $1,003,254
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Collingsworth
9706 County of ▇▇▇▇▇▇ 423,320
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ 318,949
Cedar Creek Sanitary Sewer
9721 City of Houston, Project 4250-78 174,547
Northside II
9726 Texas Department of Transportation 2,889,986
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ 166,354
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, Project No. 10329-2 101,176
Preston 42" Watermain
9735 City of Houston, Project No. N-0611-23-3 957,570
Bissonnet
9739 City of Houston, Project No. N-0678-01-3 1,584,275
North MacGregor
9740 City of Galveston 233,207
▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ Drive., Relief Sewer and Lift Station
9743 ▇▇▇▇▇▇ County Flood Control, Job No. 98/0172-C 667,532
Brays Bayou
9802 Metropolitan Transit Authority 1,089,179
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, Project No. M-0227-01-3 66,867
▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, Project No. N-0458-02-3 4,942,932
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, Project No. S-0900-29-3 2,587,733
Surface Water Transmission
9810 City of Houston, Project No. R-1036-13-3 4,191,896
SW District Rehabilitation
9811 City of Houston, Project No. N-584A-01-3 4,537,541
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, Project No. N-0672-01-3 3,934,610
▇▇▇▇▇▇▇
▇▇▇▇ Insituform Technologies - Southwest Rehabilitation 470,673
9815 City of Fort Worth, M-106R, Unit 5 653,749
75
Schedule 3.13
Material Contracts and Commitments
ESTIMATED COST
JOB NO. PROJECT TO COMPLETE
9816 Metropolitan Transit Authority 5,543,795
Louisiana Segment 3
9817 ▇▇▇▇▇▇ County Flood Control, Job No. 98/0712 1,212,934
Brays Bayou Channel Repairs
9819 City of Fort Worth 235,394
SS Main 36SR, Part 8, ▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇ - Sanitary Sewer Main 420,478
# 36SR, Part 9, ▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ Count LID ▇▇. ▇▇ ▇▇▇,▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Tracts, Phase Two
9822 City of Plano 263,352
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ 188,000
9824 New Orleans 80,000
9825 City of Houston 5,960,000
9826 ▇▇▇▇▇ 30,000
9827 Courtland Storm 39,000
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ Authority 2,765,000
2. Loan agreement with Comerica Bank-Texas.
3. Mortgage loan agreement with Comerica Bank-Texas.
4. Engagement letter with Price Waterhouse LLP (and its successor
PricewaterhouseCoopers Securities LLC).
5. Engagement letter with Mayor, Day, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
6. The leases on Schedule 3.12.
7. ▇▇▇ ▇▇▇▇▇ Employment Agreement.
8. In addition, as of the date hereof, the Company has been identified as
low bidder, but has not executed a contract, in respect of the
following projects:
ESTIMATED COST TO
PROJECT TO COMPLETE
9829 City of Garland 1,643,000
State of Texas 225,000
▇▇▇▇▇▇ County 83,177
76
Schedule 3.15
Real Property Liens
Mortgage lien on the real property identified as the first item on Schedule 3.12
in favor of Comerica Bank-Texas.
77
Schedule 3.16
Insurance
Type of Policy Carrier Policy No. Expiration
-------------- ------- ---------- ----------
OCP4 CNA Insurance Companies B981001122 10/29/99
Builder's Risk5 CNA Insurance Companies B981001073 10/15/99
Railroad Protective6 CNA Insurance Companies B981001066 10/15/99
OCP CNA Insurance Companies L▇▇▇▇▇▇▇▇▇▇ 09/03/99
OCP CNA Insurance Companies L▇▇▇▇▇▇▇▇▇▇ 09/02/99
OCP CNA Insurance Companies L178861990 07/31/99
OCP CNA Insurance Companies L178846910 06/23/99
Railroad Protective CNA Insurance Companies L178846907 06/23/99
Pollution Liability Reliance Insurance Company NTP251644502 06/18/99
OCP CNA Insurance Companies L182027751 06/09/99
OCP CNA Insurance Companies L182031394 05/11/99
OCP CNA Insurance Companies B980500328 05/01/99
OCP CNA Insurance Companies B980400268 04/22/99
OCP CNA Insurance Companies L181994250 03/29/99
OCP CNA Insurance Companies L181992174 03/17/99
Automobile CNA Insurance Companies L163316910 03/01/99
Umbrella CNA Insurance Companies L167492527 03/01/99
Package CNA Insurance Companies L163316924 03/01/99
Workers' Compensation CNA Insurance Companies WCL163316907 03/01/99
OCP CNA Insurance Companies L181983250 02/25/99
OCP CNA Insurance Companies L181980834 02/19/99
OCP CNA Insurance Companies L181977383 02/03/99
OCP CNA Insurance Companies L181974239 01/07/99
OCP CNA Insurance Companies L174272959 01/05/99
Railroad Protective CNA Insurance Companies L181976279 12/11/98
Commercial, General Liability Transcontinental Insurance Company L163316924 03/01/99
Automobile American Casualty Co. of Reading, PA L163316910 03/01/99
Excess Liability American Casualty Co. of Reading, PA L167492527 03/01/99
Workers' Compensation Transcontinental Insurance Company WCL163316907 03/01/99
-------------------------
4 OCP is an Owners' Contractors' Protective Liability Policy. This type of
policy is a separate General Liability policy written in the name of a
project owner but paid for by the Company. OCPs are written when required
by a contract.
5 Builder's Risk policies are written when required by contract. This type of
policy provides property coverage for the project owner and the premium is
paid by the Company.
6 Railroad Protective policies are similar to OCPs, written in the name of
the railroad company when work is done within 50 feet of a railroad. This
coverage is required by contract when applicable and the premium is paid by
the Company.
78
2. OFFICERS' LIFE INSURANCE
(Beneficiary is the Company):
Insured Carrier Policy No. Face Amount
------- ------- ---------- -----------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ American General Life A10135734L 500,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ American General Life A10131998L 1,000,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ American General Life A10128967L 1,000,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ American General Life A10135733L 500,000
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Chubb Life America 297884A 400,000
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Confederation Life Insurance Company 05749895 400,000
▇▇▇▇ ▇▇▇▇▇▇ Insurance Group
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Security Life of Denver 1542212 500,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Security Life of Denver 1542213 500,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Aetna G6503315 150,000
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Equitable ▇▇-▇▇▇-▇▇▇ 350,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Equitable ▇▇-▇▇▇-▇▇▇ 150,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. Equitable ▇▇-▇▇▇-▇▇▇ 150,000
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Equitable ▇▇-▇▇▇-▇▇▇ 150,000
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Equitable ▇▇-▇▇▇-▇▇▇ 150,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Equitable ▇▇-▇▇▇-▇▇▇ 350,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Equitable ▇▇-▇▇▇-▇▇▇ 350,000
79
Schedule 3.17
Base Payroll Compensation Schedule
EMPLOYEE BASE COMPENSATION
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $ 150,800.00
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $ 145,600.00
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. $ 145,600.00
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ $ 87,708.50
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $ 65,001.00
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ $ 64,607.72
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $ 60,400.00
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $ 52,000.00
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $ 42,000.00
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. $ 40,833.00
Note: Current rates of compensation reflect annualized base salaries, exclusive
of benefits, bonuses or other compensation.
80
Schedule 3.18
Plans
1. PROFIT SHARING PLAN
Sterling Construction Company Restated Employees' Retirement Profit
Sharing Plan and Trust. Effective October 1, 1989.
2. HEALTH INSURANCE
The health insurance plan offered to full-time employees of
Texas-Sterling Construction, Inc. is a self-funded Benefit Trust
administered by a third party specialist, Entrust, Inc. A re-insurance
(stop loss) policy paid for by the fund reduces the total risk exposure
as shown below. The trust fund itself is funded by the Company and
employee contributions, deposited to an account at NationsBank;
distributions for covered expenses are then made by Entrust, Inc. on
behalf of the plan.
The plan covers medical care needs of participants typical of a fully
insured plan and includes a PPO network to help contain costs. As of
October 1998, 56 employees are participants in the plan; of those, 14
have elected dependent coverage.
PLAN: Texas-Sterling Employee Benefit Plan Trust
TRUSTEE: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
ADMINISTRATOR: Entrust, Inc.
PLAN YEAR: June 1 to May 31
STOP LOSS AGGREGATE: $127,737
POLICY PREMIUM: $ 77,448
MAXIMUM EXPOSURE: $205,185
3. BONUS PLANS
Effective as of the Closing Date, the Management Incentive Plans will
take effect.
81
Schedule 3.21
Taxes and Tax Returns
Subsidiary has been notified that it is to be subject to a Texas sales tax
audit.
82
Schedule 3.22
Intellectual Property
Tradenames Used by the Company
Texas-Sterling Construction, Inc.
Sterling Construction Company
Patents, Trademarks, Service Marks, Copyrights and Trade Secrets
See Item 1 of Schedule 3.11.
83
Schedule 3.24
Absence of Changes
1. Payment of bonuses already accrued in Pre-Signing Balance Sheet.
2. Issuance of new shares on October 1, 1998 and corresponding notes of
purchasers.
3. Repayment of outstanding employee notes at the Closing pursuant to
Section 6.6 hereof.
4. Declaration of the Final S Corporation Distribution and payment of the
Closing Date Distribution pursuant to Section 1.12 hereof.
5. The Employment Agreements.
6. The Management Incentive Plans.
7. Payments of costs and expenses of the transactions contemplated by this
Agreement and other matters expressly contemplated by this Agreement.
84
Schedule 3.26
Brokers and Finders
The Company engaged Price Waterhouse LLP (and its successor
PricewaterhouseCoopers Securities LLC) as exclusive financial advisor in
connection with this transaction.
85
Schedule 3.27
Environmental Matters
Solely for purposes of Section 3.27 of the Agreement, there is possible
contamination of gasoline and diesel fuel at certain limited areas located at
the approximately one (1) acre former site of Company's shop, located at ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇. The cost of remediation of such contamination, if any
were found to exist, would not exceed $25,000.
86
Schedule 3.31
Litigation and Claims
CURRENT LITIGATION
Maximum Exposure
(taking into account
expected insurance
Plaintiff/Description Incident Date Claim coverage)
--------------------- ------------- ----- --------------------
Southwestern ▇▇▇▇ Telephone 09/25/96 $153,000 $ 1,000
Damaged phone conduit
Southwestern ▇▇▇▇ Telephone 07/07/97 $ 7,700 $ 1,000
Damaged phone conduit
Southwestern ▇▇▇▇ Telephone Various 1998 $23,500 $ 1,000
Damaged phone conduit
Enterprise Leasing 11/01/96 $115,000 $115,000
Collection attempt on an alleged guaranty
of Texas-Sterling of vehicle acquisition
expenditures; Texas-Sterling contends
fraudulent use of guaranty by agent of
Enterprise
▇. ▇▇▇▇▇▇▇ January 1997 $15,000 $ 1,000
Alleged foundation damage to residence
adjacent to job site
▇▇ ▇▇▇▇▇ July 1998 $1,200 $ 1,200
Attempt to collect on payroll check upon
which stop payment had been ordered
POSSIBLE LITIGATION
Maximum Exposure
(taking into account
expected insurance
Claimant/Description Incident Date Claim coverage)
-------------------- ------------- ----- --------------------
Texas Utilities 06/12/96 $41,825 $ 1,000
Damage to electric lines and facilities
Estate of ▇. ▇▇▇▇▇▇▇▇▇ 03/20/98 Unknown $ 1,000
Wrongful death of employee; will have to
prove gross negligence
87
Schedule 3.32
Related Party Transactions
1. WOODLANDS EQUIPMENT COMPANY. The Company buys equipment on a rental
purchase arrangement from Woodlands Equipment, a company owned by ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇. For the year ended
September 30, 1998, the Company paid equipment rental charges of
$295,558 to Woodlands Equipment Company. As of September 30, 1998, the
Company purchased all equipment previously rented from Woodlands
Equipment, with a note payable to Woodlands Equipment Company in the
amount of $243,777 for purchased equipment.
2. SPRING EQUIPMENT CO., INC. The Company rents equipment on a monthly
basis from Spring Equipment Co., Inc., a company 50%-owned by ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. and 50%-owned by
the current owners of ▇▇▇▇ ▇▇▇▇▇ & Co., a subcontractor for the
Company. For the year ended September 30, 1998, the Company paid
equipment rental charges of $280,000 to Spring Equipment Co., Inc.
3. STERLING PROPERTIES. Prior to May 1998, the Company rented maintenance
facilities from Sterling Properties, a company owned by ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. and the estate of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇. For the year ended September 30, 1998, the Company
paid rental charges of $7,000 to Sterling Properties.
4. NOTE PAYABLE TO ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇. The balance of $720,000 remains on
notes issued October 1996 for funds used by the Company to replace
working capital subsequent to a Sub-S distribution. The notes require
annual principal payments, with final payment due in September 2001,
and quarterly interest payments at Prime plus 2%.
5. NOTE PAYABLE TO ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇. The balance of $72,000 remains on
notes issued October 1996 for funds used by the Company to replace
working capital subsequent to a Sub-S distribution. The notes require
annual principal payments, with final payment due in September 2001,
and quarterly interest payments at Prime plus 2%.
6. NOTE PAYABLE TO ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇. The balance of $72,000 remains on
notes issued October 1996 for funds used by the Company to replace
working capital subsequent to a Sub-S distribution. The notes require
annual principal payments, with final payment due in September 2001,
and quarterly interest payments at Prime plus 2%.
7. THE FINAL S CORPORATION DISTRIBUTION.