EXHIBIT 2.09
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AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CONSOLIDATION CAPITAL CORPORATION,
CCC ACQUIRING CO. NO. 10,
▇▇▇▇▇▇ ENGINEERING, INC.
AND
THE SHAREHOLDERS NAMED HEREIN
MADE EFFECTIVE AS OF MARCH 15, 1998.
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Table of Contents
Page
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1. THE MERGER 1................................................... 1
1.1 The Merger................................................. 1
1.2 Articles of Incorporation; Bylaws, Directors and Officers.. 1
1.3 Effects of the Merger...................................... 2
2. CONVERSION AND EXCHANGE OF STOCK................................ 2
2.1 Manner of Conversion....................................... 2
2.2 Base Merger Consideration.................................. 3
2.3 Contingent Merger Consideration............................ 4
2.4 Exchange of Certificates and Payment of Cash............... 6
3. PLEDGED ASSETS.................................................. 7
3.1 Pledged Assets........................................... 7
4. CLOSING......................................................... 8
4.1 Location and Date.......................................... 8
4.2 Effect..................................................... 8
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE SHAREHOLDERS................................................ 9
5.1 Due Organization.......................................... 9
5.2 Authorization; Validity................................... 9
5.3 No Conflicts.............................................. 9
5.4 Capital Stock of the Company.............................. 10
5.5 Transactions in Capital Stock............................. 10
5.6 Subsidiaries, Stock, and Notes............................ 10
5.7 Predecessor Status........................................ 11
5.8 Absence of Claims Against the Company..................... 11
5.9 Company Financial Condition............................... 11
5.10 Financial Statements...................................... 11
5.11 Liabilities and Obligations............................... 11
5.12 Accounts and Notes Receivable............................. 12
5.13 Books and Records......................................... 12
5.14 Permits................................................... 12
5.15 Real Property............................................. 13
5.16 Personal Property......................................... 14
5.17 Intellectual Property..................................... 14
5.18 Material Contracts and Commitments........................ 15
5.19 Government Contracts...................................... 16
5.20 Insurance................................................. 17
5.21 Labor and Employment Matters.............................. 17
5.22 Employee Benefit Plans.................................... 18
5.23 Conformity with Law; Litigation........................... 20
5.24 Taxes..................................................... 20
5.25 Absence of Changes........................................ 22
5.26 Deposit Accounts; Powers of Attorney...................... 23
5.27 Environmental Matters..................................... 24
5.28 Relations with Governments................................ 25
5.29 Disclosure................................................ 25
5.30 CCC Prospectus; Securities Representations................ 25
5.31 Affiliates................................................ 25
5.32 Location of Chief Executive Offices....................... 25
5.33 Location of Equipment and Inventory....................... 25
6. REPRESENTATIONS OF CCC AND NEWCO................................ 26
6.1 Due Organization.......................................... 26
6.2 CCC Common Stock.......................................... 26
6.3 Authorization; Validity of Obligations.................... 26
6.4 No Conflicts.............................................. 26
6.5 Capitalization of CCC and Ownership of CCC Stock.......... 27
6.6 Conformity with Law; Litigation........................... 27
6.7 Disclosure................................................ 28
6.8 CCC Prospectus............................................ 28
6.9 Registration Statement.................................... 28
6.10 Investment Intent......................................... 28
7. COVENANTS....................................................... 28
7.1 Tax Matters............................................... 28
7.2 Accounts Receivable....................................... 30
7.3 [intentionally omitted]................................... 30
7.4 Related Party Agreements.................................. 30
7.5 Cooperation............................................... 30
7.6 Conduct of Business Pending Closing....................... 31
7.7 Access to Information..................................... 32
7.8 Prohibited Activities..................................... 32
7.9 Notice to Bargaining Agents............................... 33
7.10 Sales of CCC Common Stock................................. 34
7.11 CCC Stock Options......................................... 35
7.12 Tax Covenant.............................................. 35
7.13 Tax Free Reorganization Protection........................ 35
7.14 D&O Insurance and Indemnification of Directors
and Officers............................................ 36
7.15 Government Contracts...................................... 36
7.16 CCC Stock................................................. 36
7.17 Employee Benefits Matters................................. 36
7.18 Guaranteed Debt........................................... 36
7.19 Repayment of Receivable................................... 37
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CCC AND NEWCO........ 37
8.1 Representations and Warranties; Performance
of Obligations.......................................... 37
8.2 No Litigation............................................. 37
8.3 No Material Adverse Change................................ 37
8.4 Consents and Approvals.................................... 38
8.5 Opinion of Counsel........................................ 38
8.6 Charter Documents......................................... 38
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8.7 Quarterly Financial Statements............................ 38
8.8 FIRPTA Compliance......................................... 38
8.9 Employment Agreements..................................... 38
8.10 Affiliate Agreements...................................... 38
8.11 Shareholders' Release..................................... 38
8.12 Related Party Receivables and Agreements.................. 38
8.13 Closing Net Worth......................................... 38
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS.................................................... 39
9.1 Representations and Warranties; Performance
of Obligations.......................................... 39
9.2 No Litigation............................................. 39
9.3 Consents and Approvals.................................... 39
9.4 Employment Agreements..................................... 39
9.5 Registration Statement.................................... 39
9.6 No Material Adverse Change................................ 39
9.7 Officers and Directors of Surviving Corporation........... 40
10. INDEMNIFICATION................................................. 40
10.1 General Indemnification by the Shareholders............... 40
10.2 General Indemnification by CCC and Newco.................. 41
10.3 Limitation and Expiration................................. 41
10.4 Indemnification Procedures................................ 42
10.5 Survival of Representations Warranties.................... 44
10.6 Right to Set Off.......................................... 44
11. NONCOMPETITION.................................................. 44
11.1 Prohibited Activities..................................... 44
11.2 Damages................................................... 45
11.3 Reasonable Restraint...................................... 45
11.4 Severability; Reformation................................. 45
11.5 Independent Covenant...................................... 45
11.6 Materiality............................................... 45
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION....................... 46
12.1 Confidentiality........................................... 46
12.2 Damages................................................... 46
13. GENERAL......................................................... 47
13.1 Termination............................................... 47
13.2 Effect of Termination..................................... 47
13.3 Successors and Assigns.................................... 48
13.4 Entire Agreement; Amendment; Waiver....................... 48
13.5 Counterparts.............................................. 48
13.6 Brokers and Agents........................................ 48
13.7 Expenses.................................................. 48
13.8 Specific Performance; Remedies............................ 49
13.9 Notices................................................... 49
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13.10 Governing Law............................................ 50
13.11 Severability............................................. 50
13.12 Absence of Third Party Beneficiary Rights................ 50
13.13 Further Representations.................................. 50
13.14 Representative........................................... 50
13.15 Unanimous Written Consent of Shareholders................ 51
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
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entered into as of the 15th day of March, 1998, by and among Consolidation
Capital Corporation, a Delaware corporation ("CCC"), CCC Acquiring Co. No. 10,
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a Texas corporation and a newly-formed, wholly-owned subsidiary of CCC
("Newco"), and ▇▇▇▇▇▇ Engineering, Inc., a Texas corporation (the "Company"),
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and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (each a
"Shareholder" and collectively, the "Shareholders").
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BACKGROUND
WHEREAS, the Shareholders own all of the issued and outstanding capital
stock of the Company (the "Company Common Stock");
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WHEREAS, the respective Boards of Directors of Newco and the Company deem
it advisable and in the best interests of Newco and the Company (each of which
are sometimes herein referred to as the "Constituent Corporations") and their
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respective shareholders that the Company merge with and into Newco (the
"Merger") pursuant to this Agreement, the Articles of Merger (defined below) and
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the applicable provisions of the laws of the State of Texas; and
WHEREAS, the Boards of Directors of each of the Constituent Corporations
have approved and adopted this Agreement as a plan of reorganization (a "tax-
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free reorganization") within the provisions of Sections 368(a)(1)(A) and
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368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code").
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NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 4.2), the
Company shall be merged with and into Newco pursuant to this Agreement and
Articles of Merger (the "Articles of Merger") substantially in the form attached
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as SCHEDULE 1.1 hereto, and the separate corporate existence of the Company
shall cease. Newco, as it exists from and after the Effective Time, is
sometimes referred to as the "Surviving Corporation." The Surviving
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Corporation's name will be changed to that of the Company immediately after the
Effective Time.
1.2 ARTICLES OF INCORPORATION; BYLAWS, DIRECTORS AND OFFICERS. At the
Effective Time:
(a) The Articles of Incorporation of Newco, as in effect immediately
prior to the Effective Time, which are attached as EXHIBIT 1.2(A), shall be the
Articles of Incorporation of the Surviving Corporation unless and until
thereafter amended as provided therein and under the laws of the State of Texas
(the "State Corporate Laws"), provided, that the provisions relating to the
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indemnification of officers and directors contained therein as amended at the
Effective Time shall not be amended until the sixth (6th) anniversary of the
Closing Date (as defined in Section 4.1).
(b) The Bylaws of Newco, as in effect immediately prior to the
Effective Time, which are attached as EXHIBIT 1.2(B), shall be the Bylaws of the
Surviving Corporation unless and until thereafter amended as provided therein
and under the State Corporate Laws; provided, that the provisions
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relating to the indemnification of officers and directors contained therein
shall not be amended until the sixth (6th) anniversary of the Closing Date.
(c) The directors of the Surviving Corporation shall be as set forth
on SCHEDULE 1.2(C) until their successors are elected and qualified, and the
initial officers of the Surviving Cor poration shall be as set forth on SCHEDULE
1.2(C) until their successors are elected and qualified.
1.3 EFFECTS OF THE MERGER. The Merger shall have the effects provided
therefor by the State Corporate Laws. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time (i) all the rights,
privileges, immunities, powers and franchises, of a public as well as of a
private nature, and all property, real, personal and mixed, and all debts due on
whatever account, including without limitation subscriptions to shares, and all
other choses in action, and all and every other interest of or belonging to or
due to the Company or Newco shall be taken and deemed to be transferred to, and
vested in, the Surviving Corporation without further act or deed; and all
property, rights and privileges, immunities, powers and franchises and all and
every other interest shall be thereafter as effectually the property of the
Surviving Corporation, as they were of the Company and Newco, and (ii) all
debts, liabilities, duties and obligations of the Company and Newco shall become
the debts, liabilities, duties and obligations of the Surviving Corporation and
the Surviving Corporation shall thenceforth be responsible and liable for all
the debts, liabilities, duties and obligations of the Company and Newco and
neither the rights of creditors nor any liens upon the property of the Company
or Newco shall be impaired by the Merger, and may be enforced against the
Surviving Corporation.
2. CONVERSION AND EXCHANGE OF STOCK
2.1 MANNER OF CONVERSION. At the Effective Time, by virtue of the Merger
and without any action on the part of CCC, Newco, the Company or the
Shareholders, the shares of capital stock of each of the Constituent
Corporations shall be converted as follows:
(a) Capital Stock of Newco. Each issued and outstanding share of
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capital stock of Newco shall continue to be issued and outstanding and shall
represent shares of stock of the Surviving Corporation. Each stock certificate
of Newco evidencing ownership of any such shares shall continue to evidence
ownership of such shares of capital stock of the Surviving Corporation.
(b) Cancellation of Certain Shares of Capital Stock of the Company.
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All shares of capital stock of the Company that are owned directly or indirectly
by the Company shall be canceled and no stock of CCC or other consideration
shall be delivered in exchange therefor.
(c) Conversion of Capital Stock of the Company. Subject to Section
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2.1(d), and Sections 2.2, 2.3, 2.4, and 3.1, each issued and outstanding share
of Company Common Stock (other than shares to be canceled pursuant to Section
2.1(b)), that is issued and outstanding immediately prior to the Effective Time
shall automatically be canceled and extinguished and converted, without any
action on the part of the holder thereof, into the right to receive at the time
and in the amounts described in this Agreement (i) an amount of cash equal to
the cash portion of the Base Merger Consideration (as described in Section
2.2(a)) divided by the number of shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares to be
canceled pursuant to Section 2.1(b)), (ii) that number of shares of CCC common
stock, $.001 par value ("CCC Common Stock"), valued at the Merger Price (as
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described in Section 2.2(a)), that is equal in value to the CCC Common Stock
portion of the Base Merger Consideration (as defined in Section 2.2(a)) divided
by the number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time
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(other than shares to be canceled pursuant to Section 2.1(b)), (iii) an amount
of cash equal to 50% of the Contingent Merger Consideration (as defined in
Section 2.3(a)) divided by the number of shares of Company Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares to be
canceled pursuant to Section 2.1(b)), and (iv) that number of shares of CCC
Common Stock, valued at the Earn Out Period Average Price (as defined in Section
2.3(d)), that is equal in value to 50% of the Contingent Merger Consideration
divided by the number of shares of Company Common Stock outstanding immediately
prior to the Effective Time (other than shares to be canceled pursuant to
Section 2.1(b)). All such shares of Company Common Stock, when so converted,
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto, except the right to
receive the consideration therefor upon the surrender of such certificate in
accordance with Sections 2.2, 2.3 and 2.4 of this Agreement.
(d) Fractional Shares. No fractional shares of CCC Common Stock
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shall be issued pursuant to this Agreement, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to receive a
fraction of a share of CCC Common Stock shall receive from CCC an amount of cash
equal to the Merger Price or the Earn Out Period Average Price, as applicable,
multiplied by the fraction of a share of CCC Common Stock to which such holder
would otherwise be entitled. The fractional share interests of each Shareholder
shall be aggregated, so that no Shareholder shall receive cash in an amount
greater than the value of one full share of CCC Common Stock.
2.2 BASE MERGER CONSIDERATION.
(a) For purposes of this Agreement, the "Base Merger Consideration"
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shall be $70,000,000. Of the Base Merger Consideration, $35,000,000 shall be
paid in cash at Closing (as defined in Section 4.1) in immediately available
funds. The remaining $35,000,000 of the Base Merger Consideration shall be paid
at Closing in shares of CCC Common Stock valued at a price per share of $23.00
(the "Merger Price") which the parties hereto irrevocably agree is equal to
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the sum of (i) the closing price of CCC Common Stock on February 19, 1998, plus
(ii) the closing price of CCC Common Stock on March 5, 1998, plus (iii) the
"Interim Period Average" (as such term is defined below), divided by 3.
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Interim Period Average means the sum of the closing prices of CCC Common Stock
on every trading day from and including the date referenced in clause (i) above
and through and including the date referenced in clause (ii) above, divided by
the number of trading days included in such period. The closing price of CCC
Common Stock on a trading day, for purposes of this calculation, shall be the
day's last trade price as reported on the Nasdaq National Market (or if no trade
price is reported for any such day, the average of the last bid and ask prices
for the CCC Common Stock). The shares of CCC Common Stock to be issued in
respect of the Base Merger Consideration shall be registered under the
Securities Act of 1933, as amended (the "1933 Act"), and approved for quotation
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on the Nasdaq National Market .
(b) If, on or prior to the Effective Time, CCC should split or
combine the CCC Common Stock, or pay a stock dividend or other stock
distribution in CCC Common Stock, or otherwise change the CCC Common Stock into
any other securities, or make any other dividend or distribution on the CCC
Common Stock (other than normal quarterly dividends, as the same may be adjusted
from time to time and in the ordinary course), then the number of shares of CCC
Common Stock issuable as the Base Merger Consideration will be appropriately
adjusted to reflect such split, combination, dividend or other distribution or
change.
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2.3 CONTINGENT MERGER CONSIDERATION.
(a) For purposes of this Agreement, but subject to the provisions of
subsections (i), (ii), and (iii) below, the "Contingent Merger Consideration"
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shall mean the sum of the First Year Earn Out Amount and the Second Year Earn
Out Amount, provided however that in no event shall the Contingent Merger
Consideration exceed $30,000,000 (the "Maximum Earn Out Amount").
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(i) The "First Year Earn Out Amount" shall mean the lesser of
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(A) the Actual Earn Out EBIT (hereinafter defined) of the Surviving Corporation
for the twelve month period ending on the last day of the month of the first
anniversary of the Closing, or (B) $15,000,000.
(ii) The "Second Year Earn Out Amount" shall mean the lesser of (A)
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the Actual Earn Out EBIT of the Surviving Corporation for the twelve month
period ending on the last day of the month of the second anniversary of the
Closing, or (B) the sum of $15,000,000 plus the amount by which $15,000,000
exceeds the greater of $14,000,000 or the First Year Earn Out Amount.
(iii) For purposes of this Section 2.3, "Actual Earn Out EBIT" for any
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period is equal to the following for such period: the net income of the
Surviving Corporation (A) plus interest expense, income taxes, extraordinary
items, cumulative effect of accounting changes and discontinued operations and
(B) less interest income calculated in accordance with generally accepted
accounting principles ("GAAP") consistently applied; provided however, that in
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any event Actual Earn Out EBIT shall (1) exclude any increases in intangible
assets of the Surviving Corporation, (2) exclude the amortization of goodwill
and other intangibles recognized by CCC in connection with the acquisition of
the Company or any future acquisitions, (3) exclude expenses (including
corporate overhead) of CCC other than those expenses incurred for the benefit of
the Surviving Corporation that do not duplicate expenses incurred by the
Surviving Corporation nor exceed the amounts of similar expenses incurred in the
most recently ended fiscal year by the Company prior to the Closing, and (4)
include depreciation and amortization of assets of the Surviving Corporation
except to the extent such amounts result from an increase in the book value of
the assets resulting from the Merger. CCC's Accountant (hereinafter defined)
will calculate the Contingent Merger Consideration and the Actual Earn Out EBIT
applying the same accounting principles applied by the Company, with all such
computations made (and definitions used) in the same way the computations were
made (and definitions were used) by the Company prior to the Closing and will
conform to the methods of accounting utilized consistently during the calendar
years 1996 and 1997 for the Company, provided in each case that such
computations were in accordance with GAAP.
(b) Price Waterhouse LLP, CCC's independent accountant ("CCC's
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Accountant"), will determine the Actual Earn Out EBIT for each of the years
ending March 31, 1999 and 2000 and deliver prompt notice of such amount to the
Shareholders (the "Earn Out EBIT Notice") with supporting documentation. The
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Shareholders (through the Representative as defined in Section 13.14(a)) shall
have the right to inspect, audit and make extracts from all of the records,
files and books of account of CCC relating to the Actual Earn Out EBIT for
purposes of verifying the amount of the consideration payable pursuant to
Section 2.3, at reasonable times during business hours, upon advance notice to
CCC.
(c) The Shareholders (through the Representative) shall have thirty
(30) days from the receipt of the Earn Out EBIT Notice to notify CCC if they
dispute the amount of the Actual Earn Out EBIT. If CCC has not received notice
of any such dispute within such 30-day period, the Actual Earn Out EBIT
contained in the Earn Out EBIT Notice shall be final. If, however, the
Shareholders (through the Representative) have delivered notice of such a
dispute to CCC within such 30-day period, then CCC
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shall, pursuant to Section 2.3(d) below, pay such amount of the Contingent
Merger Consideration that is not subject to any dispute and CCC's Accountant
shall select an independent accounting firm that has not represented any of the
parties hereto within the preceding two (2) years and is one of the six largest
accounting firms in the United States (each, a "New Accounting Firm") to review
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the amount of the disputed Actual Earn Out EBIT, the books of the Surviving
Corporation, and the Earn Out EBIT Notice (and related information) to determine
the amount, if any, that the Actual Earn Out EBIT is in error. Such New
Accounting Firm shall be confirmed by the Shareholders through the
Representative and CCC within five (5) days of its selection, unless there is an
actual conflict of interest. The New Accounting Firm shall make its
determination of the Actual Earn Out EBIT (the "Revised Earn Out EBIT") if any,
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within thirty (30) days of its selection. The Revised Earn Out EBIT shall be
final and binding on the parties hereto, and, upon such determination, CCC shall
be entitled or required to adjust the First Year Earn Out Amount or the Second
Year Earn Out Amount accordingly. If the Revised Earn Out EBIT is higher than
the Actual Earn Out EBIT, CCC shall pay to the Shareholders interest, at the
Prime Rate (defined below), on the deficiency from the date that is three months
after the end of the period with respect to which the disputed Actual Earn Out
EBIT is calculated. The costs of the New Accounting Firm shall be borne by CCC
if the Revised Earn Out EBIT is higher than the Actual Earn Out EBIT and by the
Shareholders in all other cases. For purposes of this Section, the term "Prime
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Rate" shall mean the annual rate of interest announced by Citibank, N.A. in New
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York, New York as its prime rate in effect on the Contingent Merger
Consideration Payment Date.
(d) The Contingent Merger Consideration described in Section 2.3 (a),
will be paid 50% in cash and 50% in shares of CCC Common Stock and will be paid
in a single lump payment by federal wire transfer of same day funds promptly
following the determination of the Actual Earn Out EBIT for the applicable
period by CCC's Accountant, which shall be made not later than the date that is
three months after the end of the period with respect to which the Actual Earn
Out EBIT is calculated unless the Shareholders dispute the Actual Earn Out EBIT
in accordance herewith. For purposes of determining the number of shares of CCC
Common Stock that are issuable as part of the Contingent Merger Consideration,
the value of each such share shall be equal to the Earn Out Period Average
Prices for the thirty (30) trading days prior to and including the last day of
March 1999, in the case of the First Year Earn Out Amount, and March 2000, in
the case of the Second Year Earn Out Amount. The "Earn Out Period Average
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Price"
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means the quotient of (i) the sum of the closing price of a share of CCC
Common Stock on the Nasdaq National Market on each trading day from and
including the date that is thirty (30) trading days prior to and including the
last day of March 1999, in the case of CCC Common Stock deliverable with respect
to the First Year Earn Out Amount, and March 2000 in the case of CCC Common
Stock deliverable with respect to the Second Year Earn Out Amount, (or if no
trade price is reported for any such day, the average of the last bid and ask
prices for the CCC Common Stock), divided by (ii) 30. The date or dates on which
the Contingent Merger Consideration is paid to the Shareholders is hereinafter
referred to as the "Contingent Merger Consideration Payment Date." The
certificates evidencing CCC Common Stock received as part of the Merger
Consideration shall be issued in the denominations and names of the Shareholders
as set forth in written instructions delivered by the Shareholders to CCC at
least five (5) business days prior to the Closing Date and the Contingent Merger
Consideration Payment Date or Dates, as applicable. The shares of CCC Common
Stock to be issued in respect of the Contingent Merger Consideration shall be
registered under the 1933 Act and approved for quotation on the Nasdaq National
Market.
(e) If, on or prior to a Contingent Merger Consideration Payment
Date but after calculation of the Earn Out Period Average Price with respect
thereto, CCC should split or combine the CCC Common Stock, or pay a stock
dividend or other stock distribution in CCC Common Stock, or otherwise change
the CCC Common Stock into any other securities, or make any other dividend or
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distribution on the CCC Common Stock (other than normal quarterly dividends, as
the same may be adjusted from time to time and in the ordinary course), then the
number of shares of CCC Common stock issuable as the Contingent Merger
Consideration will be appropriately adjusted to reflect such split, combination,
dividend or other distribution or change.
(f) In the event CCC or any of its subsidiaries takes any action or
omits to take any action which is not commercially reasonable in the
circumstances for the conduct of the business of CCC and its subsidiaries taken
as a whole and which has a direct, quantifiable, negative impact on the
Contingent Merger Consideration; then, in any such event, the parties, in good
faith, shall make reasonable adjustments in the calculation of the Actual Earn
Out EBIT as may be necessary to neutralize the impact of any such action or
omission.
(g) CCC and Newco agree that separate books and records will be kept
for the Surviving Corporation during the period from the Closing through March
31, 2000.
2.4 EXCHANGE OF CERTIFICATES AND PAYMENT OF CASH.
(a) Delivery of Consideration. At Closing, in exchange for the
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outstanding shares of capital stock of the Company, CCC shall cause to be made
available to the Shareholders the Base Merger Consideration (including cash in
an amount sufficient for payment in lieu of fractional shares pursuant to
Section 2.1(d)), with all cash payments to be made by federal wire transfer of
immediately available funds pursuant to wire transfer instructions provided by
the Shareholders at least two business days prior to Closing. The certificates
evidencing the CCC Common Stock component of the Base Merger Consideration and
the Contingent Merger Consideration (the cash and the CCC Common Stock
components of the Base Merger Consideration and the Contingent Merger
Consideration are referred to together as the "Merger Consideration") shall bear
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appropriate legends pursuant to the terms of this Agreement and any applicable
Affiliate Agreement (as described in Section 8.10), and CCC shall be entitled to
issue appropriate stop transfer instructions to its transfer agent consistent
with the terms of this Agreement and any applicable Affiliate Agreement.
(b) Certificate Delivery Requirements. At the Effective Time, the
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Shareholders shall deliver to CCC the certificates (the "Certificates")
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representing Company Common Stock owned by them, accompanied by blank stock
powers duly executed by each respective Shareholder and with all necessary
transfer tax and other revenue stamps, acquired at the Shareholder's expense,
affixed and canceled. Each Shareholder shall promptly cure any deficiencies
with respect to the stock powers accompanying such Certificates. The
Certificates so delivered shall forthwith be canceled. Until delivered as
contemplated by this Section 2.4(b), each Certificate shall be deemed at any
time after the Effective Time to represent the right to receive upon such
surrender the number of shares of CCC Common Stock and the amount of cash as
provided by this Article 2 and the applicable provisions of the State Corporate
Laws.
(c) No Further Ownership Rights in Capital Stock of the Company.
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All CCC Common Stock and cash to be delivered (including CCC Common Stock
delivered but withheld pursuant to Section 3.1(a)) upon the surrender for
exchange of shares of Company Common Stock in accordance with the terms hereof
shall be deemed to have been delivered in full satisfaction of all rights
pertaining to such shares of Company Common Stock, and, following the Effective
Time, the Shareholders shall have no further rights to, or ownership in, shares
of capital stock of the Company. There shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of Company Common Stock which were issued and outstanding immediately prior to
the Effective Time.
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If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Section 2.4.
(d) Lost, Stolen or Destroyed Certificates. If any certificates
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evidencing shares of Company Common Stock shall have been lost, stolen or
destroyed, then CCC shall cause payment to be made in exchange for such lost,
stolen or destroyed certificates, upon the delivery to CCC of an affidavit of
that fact by the holder thereof, of such shares of CCC Common Stock and cash as
provided in Section 2.1; provided, however that CCC may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against CCC
with respect to the certificates alleged to have been lost, stolen or destroyed.
(e) No Liability. Notwithstanding anything to the contrary in this
------------
Section 2.4, none of the Surviving Corporation or any party hereto shall be
liable to a holder of shares of Company Common Stock for any amount paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
3. PLEDGED ASSETS
3.1 PLEDGED ASSETS.
(a) As collateral security for the payment of any indemnification
obligations of the Shareholders pursuant to (and subject to the limitations of)
Article 10, the Shareholders (other than the Shareholders set forth on SCHEDULE
5) shall, and by execution hereof do hereby, transfer, pledge and assign to CCC,
for the benefit of CCC, a security interest in the following assets
(collectively, with respect to all of the Shareholders, the "Pledged Assets"):
--------------
(i) such Shareholders' pro rata portion of shares of CCC
Common Stock with a value, based on the Merger Price, equal to ten percent (10%)
of the Base Merger Consideration, and the certificates and instruments, if any,
representing or evidencing such Shareholder's Pledged Assets;
(ii) all securities hereafter delivered to any Shareholder
with respect to or in substitution for the Shareholder's Pledged Assets, all
certificates and instruments representing or evidencing such securities, and all
cash and non-cash dividends and other property at any time received, receivable
or otherwise distributed in respect of or in exchange for any or all thereof;
and in the event such Shareholder receives any such property, such Shareholder
shall hold such property in trust for CCC and shall immediately deliver such
property to CCC to be held hereunder as Pledged Assets; and
(iii) all cash and non-cash proceeds of all of the foregoing
property and all rights, titles, interests, privileges and preferences
appertaining or incident to the foregoing property.
(b) Each certificate, if any, evidencing a Shareholder's Pledged
Assets issued in his or her name in the Merger shall be delivered to CCC
directly by the transfer agent, such certificate bear ing no restrictive or
cautionary legend other than those imprinted by the transfer agent at CCC's
request in accordance with the terms and provisions of this Agreement. Each
Shareholder shall, at the Closing, deliver to CCC, for each such certificate, a
stock power duly signed in blank by him. All shares of CCC
7
Common Stock comprising a Shareholder's Pledged Assets shall not be commingled
with the assets of CCC or any of its subsidiaries.
(c) The Pledged Assets shall be available to satisfy any
indemnification obligations of each Shareholder pursuant to (and subject to the
limitations of) Article 10 until the date which is one year after the Effective
Time (the "Release Date"). On the Release Date, CCC shall release such pledge
--------------
and return or cause to be returned to the Shareholders the Pledged Assets
(including dividends and distri butions with respect to shares of CCC Common
Stock subject to pledge), less Pledged Assets having an aggregate value equal to
the amount of (i) any finally adjudicated claim (to the extent not fully
satisfied) or any pending claim for indemnification made by any Indemnified
Party (as defined in Article 10) subject to the limitations of Article 10, and
(ii) any indemnification obligations of any Shareholder pursuant to Article 10
subject to the limitations of Article 10 to the extent previously paid from the
Pledged Assets. For purposes of the preceding sentence and Article 10, the CCC
Common Stock held as Pledged Assets shall be valued at the average of the
closing price per share on the Nasdaq National Market of CCC Common Stock for
the five trading days prior to the satisfaction of an indemnification obligation
(or if no trade price is reported for any such day, the average of the last bid
and ask prices for the CCC Common Stock) with respect to indemnification
obligations pursuant to Article 10. Notwith standing the foregoing or anything
to the contrary herein, the Shareholders shall be entitled to satisfy any claims
relating to the Pledged Assets, including but not limited to any indemnification
pursuant to Article 10 hereof, with cash, in lieu of shares of CCC Common Stock
constituting Pledged Assets.
(d) While any shares of CCC Common Stock remain subject to the
pledge set forth herein, and pending the disbursement thereof in accordance with
this Section 3.1, the Shareholders shall have all the rights of shareholders of
CCC with respect to such shares (including without limitation the right to vote
such shares in accordance with their respective interest therein and the right
to receive dividends and distributions thereon), except (i) the right of
possession thereof, (ii) the right to sell, assign, pledge, hypothecate or
otherwise dispose of such shares or any interest therein and (iii) the right to
possession of any dividends or other distributions received in respect thereof.
4. CLOSING
4.1 LOCATION AND DATE. The consummation of the Merger and the other
transactions con templated by this Agreement (the "Closing") shall take place
-------
at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇.▇. ▇▇▇▇▇, on March 31, 1998, providing that all conditions to Closing shall
have been satisfied or waived, or at such other time, place and date as CCC, the
Company and the Shareholders may mutually agree, which date shall be referred to
as the "Closing Date."
------------
4.2 EFFECT. On the Closing Date, the articles of merger, or other
appropriate documents executed in accordance with the State Corporate Laws (the
"Merger Documents"), together with any required officers' certificates, shall be
----------------
filed in accordance with the provisions of the State Corporate Laws. The Merger
shall become effective upon such filings or at such later time as may be
specified in such filings (the "Effective Time").
--------------
8
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
To induce CCC and Newco to enter into this Agreement and consummate the
transactions con templated hereby, each of the Company (with respect to
representations relating to the Company only) and the Shareholders (other than
those Shareholders set forth on SCHEDULE 5 who shall not be deemed to be making
any representations or warranties under this Agreement, except the
representations and warranties, with respect to themselves set forth in
Sections, 5.2, 5.3, 5.4, 5.8 and 5.30 ), jointly and severally, represent and
warrant to CCC and Newco, as follows (for purposes of this Agreement, the
phrases "knowledge of the Company" or the "Company's knowledge," or
------------------------ -------------------
words of similar import, mean the actual knowledge of the directors and officers
of the Company.
5.1 DUE ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own,
operate and lease its properties and 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 effect on the business,
operations, properties, assets or condition, financial or otherwise, of the
Company taken as a whole, provided that the foregoing shall not include any
material adverse effect attributable to (a) factors affecting the electrical
contracting industry generally, (b) general national, regional or local economic
or financial conditions, (c) changes in governmental or legislative laws, rules
or regulations, or (d) actions taken by CCC or any affiliate of CCC ("Material
--------
Adverse Effect"). SCHEDULE 5.L hereto contains (i) a list of all jurisdictions
--------------
in which the Company conducts business and (ii) a list of all jurisdictions in
which the Company is authorized or qualified to do business as a foreign
corporation. The Company is in good standing in all jurisdictions where the
failure to be in good standing would have a Material Adverse Effect. The
Company has delivered to CCC or given CCC access to true, complete and correct
copies of the Articles of Incorporation and Bylaws of the Company. Such
Articles of Incorporation and Bylaws are collectively referred to as the
"Charter Documents." The Company is not in violation of any Charter Documents.
------------------
The minute books, original stock ledger and corporate seal of the Company have
been made available to CCC and are correct and, except as set forth in SCHEDULE
5.1, complete in all material respects.
5.2 AUTHORIZATION; VALIDITY. The Company has the requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. Each Shareholder has the full legal right and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Company and the performance by the Company of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
Company and the Shareholders and this Agreement has been duly and validly
authorized by all necessary corporate action. This Agreement is a legal, valid
and binding obligation of the Company and the Shareholders, enforceable against
the Company and the Shareholders in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
5.3 NO CONFLICTS. Except as set forth on SCHEDULES 5.3 OR 5.14, the
execution, delivery and performance of this Agreement, the consummation of the
transactions contemplated hereby, and the fulfillment of the terms hereof will
not:
(a) conflict with, or result in a breach or violation of, any of the
Charter Documents;
9
(b) other than such as would not, individually or in the aggregate,
have a Material Adverse Effect, conflict with, or result in a default (or an
event that would constitute a default but for the requirement of notice or lapse
of time or both) under, any document, agreement or other instrument to
which the Company or any Shareholder is a party or by which the Company or any
Shareholder is bound, or result in the creation or imposition of any lien,
charge or encumbrance on any of the Company's properties pursuant to (i) any law
or regulation to which the Company or any Shareholder or any of their respective
property is subject, or (ii) any judgment, order or decree to which the Company
or any Shareholder is bound or any of their respective property is subject;
(c) result in termination or any impairment of any material permit,
license, ▇▇▇▇ ▇▇▇▇▇, surety bond, insurance coverage, contractual right or
other authorization of the Company;
(d) violate any material law, order, judgment, rule, regulation,
decree or ordinance to which the Company or any Shareholder is subject or by
which the Company or any Shareholder is bound; or
(e) require the consent of any third party.
5.4 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists of 1,000,000 shares of Common Stock, no par value per share, of
which 116,452 shares are issued and outstanding. No shares are held as treasury
stock. Except as disclosed in SCHEDULE 5.4, all of the issued and outstanding
shares of the capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable and are owned of record and
beneficially by the Shareholders in the respective amounts set forth on SCHEDULE
5.4, free and clear of all Liens (defined below). All of the issued and
outstanding shares of the capital stock of the Company were offered, issued,
sold and delivered by the Company in compliance with all applicable state and
federal laws concerning the issuance of securities. Further, none of such
shares was issued in violation of any preemptive rights. There are no voting
agreements or voting trusts with respect to any of the outstanding shares of the
capital stock of the Company. For purposes of this Agreement, "Lien" means any
----
mortgage, security interest, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or otherwise), charge, preference,
priority or other security agreement, option, warrant, attachment, right of
first refusal, preemptive, conversion, put, call or other claim or right,
restriction on transfer (other than restrictions imposed by federal and state
securities laws), or preferential arrangement of any kind or nature whatsoever
(including any restriction on the transfer of any assets, any conditional sale
or other title retention agreement, any financing lease involving substantially
the same economic effect as any of the foregoing and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction).
5.5 TRANSACTIONS IN CAPITAL STOCK. Except as disclosed in SCHEDULE 5.5,
no option, warrant, call, subscription right, conversion right or other contract
or commitment of any kind exists of any character, written or oral, which may
obligate the Company to issue, sell or otherwise cause to become outstanding any
shares of capital stock. Except as disclosed in SCHEDULE 5.5, the Company has
no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof.
5.6 SUBSIDIARIES, STOCK, AND NOTES.
(a) Except as set forth on SCHEDULE 5.6(A), the Company has no
subsidiaries.
10
(b) Except as set forth on SCHEDULE 5.6(B), the Company does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity, nor is the
Company, directly or indirectly, a participant in any joint venture, partnership
or other noncorporate entity.
(c) Except as set forth on SCHEDULE 5.6(C), there are no promissory
notes that have been issued to, or are held by, the Company.
5.7 PREDECESSOR STATUS. SCHEDULE 5.7 sets forth a list of all
names of all predecessor com panies of the Company, including the names of any
entities from which the Company previously acquired substantially all of the
assets. Except as set forth in SCHEDULE 5.7, the Company has never been a
subsidiary or division of another corporation.
5.8 ABSENCE OF CLAIMS AGAINST THE COMPANY. Except as set forth in
SCHEDULE 5.8, no Shareholder has any claims against the Company.
5.9 COMPANY FINANCIAL CONDITION. The Company's net worth calculated
in accordance with GAAP, consistently applied, including intangible assets, as
of the Closing (the "Year-End Net Worth") was not less than $6,000,000.
------------------
5.10 FINANCIAL STATEMENTS. SCHEDULE 5.10 includes (a) true, complete
and correct copies of the Company's audited balance sheet as of December 31,
1997 (the "Balance Sheet Date") and 1996 (December 31, 1997 being the end of its
------------------
most recently completed fiscal year), and income statements and statements of
cash flows for the years ended December 31, 1997, 1996 and 1995 (collectively,
the "Audited Financials") and (b) true, complete and correct copies of the
------------------
Company's unaudited balance sheet as of February 28, 1998 for the two-months
period then ended (the "Interim Balance Sheet," and together with the Audited
---------------------
Financials, the "Company Financial Statements"). Except as noted on the
----------------------------
auditors' report accompanying the Audited Financials, the Company Financial
Statements have been prepared in accordance with GAAP consistently applied,
subject to, in the case of the Interim Financials, (i) the exceptions stated on
SCHEDULE 5.10, and (ii) the omission of footnote information. Except as set
forth in SCHEDULE 5.10 or as noted on the accompanying auditor's report, each
balance sheet included in the Company Financial Statements presents fairly the
financial condition of the Company as of the date indicated thereon, and each of
the income statements included in the Company Financial Statements presents
fairly the results of its operations for the periods indicated thereon, in each
case in accordance with GAAP.
5.11 LIABILITIES AND OBLIGATIONS.
(a) The Company is not liable for or subject to any liabilities
except for:
(i) those liabilities reflected on the Interim Balance Sheet
and not pre viously paid or discharged;
(ii) those liabilities arising in the ordinary course of its
business consistent with past practice under any contract, commitment or
agreement that is not required to be listed on SCHE DULE 5.18(A) and those
liabilities under any contract, commitment or agreement specifically disclosed
on any Schedule to this Agreement.
11
(iii) those liabilities incurred since the Balance Sheet Date
in the ordinary course of business consistent with past practice, which
liabilities are not, individually or in the aggregate, material; and
(iv) those liabilities set forth on SCHEDULE 5.11.
(b) The Company has provided to CCC, in the case of those liabilities
which are not fixed or are contested, its good faith estimate of the maximum
amount which may be payable.
(c) SCHEDULE 5.11 also includes a summary description of all plans or
projects involving the opening of new operations, expansion of any existing
operations or the acquisition of any real property or existing business, to
which management of the Company has made any material expenditure in the two-
year period prior to the date of this Agreement, which if pursued by the Company
or the Surviving Corporation would require additional material expenditures of
capital.
(d) For purposes of this Section 5.11, the term "liabilities" shall
-----------
include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued, absolute, contingent, mature,
unmatured or otherwise and whether known or unknown, fixed or unfixed, ▇▇▇▇▇▇ or
inchoate, liquidated or unliquidated, secured or unsecured. SCHEDULE 5.11
contains a complete list of all indebtedness of the Company as of the Balance
Sheet Date.
5.12 ACCOUNTS AND NOTES RECEIVABLE. Attached hereto as SCHEDULE 5.12
is an accurate list, as of a date not more than five (5) business days prior to
the date hereof, of the accounts and notes receivable of the Company (including
without limitation receivables from and advances to employees, former employees,
and the Shareholders), which includes an aging of all accounts and notes
receivable showing amounts due in 30-day aging categories (collectively, the
"Accounts Receivable"). On the Closing Date, the Company will deliver to CCC an
--------------------
accurate list, as of a date not more than five (5) business days prior to the
Closing Date, of the Accounts Receivable. All Accounts Receivable represent
valid obligations arising from sales actually made or services actually
performed in the ordinary course of business or such other valid obligations
arising from receivables from and advances to employees, former employees or the
Shareholders. The Accounts Receivable are current and collectible net of any
respective reserves shown on the Company's books and records (which reserves are
adequate and calculated consistent with past practice). Subject to such
reserves and except for retainage, each of the Accounts Receivable will be
collected in full, without any set-off, within 180 days after the Closing Date
(or with respect to those Accounts Receivable specified on SCHEDULE 5.12, within
the number of days after the Closing specified for each such Account
Receivable). To the Company's knowledge, there is no contest, claim, or right
of set-of, other than rebates and returns in the ordinary course of business,
under any contract with any obligor of an Account Receivable relating to the
amount or validity of such Account Receivable.
5.13 BOOKS AND RECORDS. The Company has made and kept books and
records and accounts, which, in reasonable detail, accurately and fairly reflect
the activities of the Company.
5.14 PERMITS. Except as set forth on SCHEDULE 5.14, the Company owns
or holds all material licenses, franchises, permits and other governmental
authorizations, including without limitation permits, titles (including without
limitation motor vehicle titles and current registrations), fuel permits,
licenses and franchises necessary for the continued operation of its business as
it is currently being conducted (the "Permits"). The Permits are valid, and the
-------
Company has not received any notice that any governmental
12
authority intends to modify, cancel, terminate or fail to renew any Permit.
Except as set forth on SCHEDULE 5.14, no present or former officer, manager,
member or employee of the Company or any affiliate thereof, or any other person,
firm, corporation or other entity, owns or has any proprietary, financial or
other interest (direct or indirect) in any Permits. The Company has conducted
and is conducting its business in compliance with the requirements, standards,
criteria and conditions set forth in the Permits and other applicable orders,
approvals, variances, rules and regulations and is not in violation of any of
the foregoing, except where such non-compliance or violation would not have a
Material Adverse Effect. Except as set forth on SCHEDULES 5.3 or 5.14, the
transactions contemplated by this Agreement will not result in a default under,
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any Permit.
5.15 REAL PROPERTY.
(a) For purposes of this Agreement, "Real Property" means all of the
-------------
Company's interest in real property, without limitation, fee estates, leaseholds
and subleaseholds, purchase options, easements, licenses, rights to access, and
rights of way, and all buildings and other improvements thereon, owned or used
by the Company, together with any additions thereto or replacements thereof.
(b) The Company has no fee ownership in any Real Property.
(c) SCHEDULE 5.15(C) contains an accurate description as of the date
of this Agreement of all Real Property (including street address, legal
description (where known), owner and Company's use thereof) and, to the
Company's knowledge, any Liens other than for: (A) liens for current taxes not
yet due and payable, (B) easements, covenants, conditions, restrictions, rights
of way and title defects reflected in the public records, and any matters which
would be reflected in a current, accurate survey of the owned Real Property and
which do not individually, or in the aggregate, materially interfere with the
right or ability of CCC to use or operate the owned Real Property as the owned
Real Property is currently used by the Company, (C) liens securing indebtedness
for borrowed money that CCC or one of its affiliates has agreed to assume at
Closing, as set forth on SCHEDULE 5.15(C)(I), (D) landlord's liens and liens for
property taxes not delinquent, (E) statutory liens that were created in the
ordinary course of business not delinquent, (F) restrictions or rights granted
to governmental authorities under applicable law, (G) zoning, building, or
similar restrictions relating to or affecting property, and (H) all matters of
record, including leasehold interests in real property owned by others and
operating leases for personal property and leased interests in property leased
to others (collectively, "Permitted Encumbrances").
----------------------
(d) The Company: (i) holds no interest as landlord in any Real
Property; (ii) has a valid leasehold interest in all the Real Property listed as
leased by the Company on SCHEDULE 5.15(C) (the "leased Real Property"); (iii) is
--------------------
not in default of any of its obligations under any lease relating to the leased
Real Property, nor has an event occurred which, with the giving of notice or the
passage of time, could become an event of default; (iv) has no knowledge of any
default by the landlord under any lease relating to the leased Real Property;
(v) has paid all rent under each lease relating to the leased Real Property with
respect to the period through the Closing Date; and (vi) has not exercised any
renewal or extension (other than renewals or extensions that have been disclosed
to CCC), termination, purchase or other option under any lease relating to the
leased Real Property.
(e) The Company has provided CCC with true and complete copies of
each lease relating to the leased Real Property and all amendments, renewals,
extensions, modifications or supplements thereto, and all correspondence
pursuant to which any party to any of such leases declared a
13
default thereunder or provided notice of the exercise of any option granted to
such party under such lease.
(f) Except as provided on SCHEDULE 5.3, none of the leases relating
to the leased Real Property requires the consent or approval of any party
thereto in connection with the consummation of the transactions contemplated
hereby.
5.16 PERSONAL PROPERTY.
(a) SCHEDULE 5.16(A) sets forth a complete and accurate list of all
personal property included on the Interim Balance Sheet and all other personal
property owned or leased by the Company with a current book value for any one
item in excess of $10,000 both (i) as of the Balance Sheet Date and (ii)
acquired since the Balance Sheet Date, including in each case true, complete and
correct copies of leases for material equipment and an indication as to which
assets are currently owned, or were formerly owned, by any Shareholder or
business or personal affiliates of any Shareholder or of the Company.
(b) The Company currently owns or leases all personal property
necessary to conduct the business and operations of the Company as they are
currently being conducted.
(c) All of the trucks and other material machinery and equipment of
the Company, including those listed on SCHEDULE 5.16(A), are in good working
order and condition, ordinary wear and tear excepted. All leases set forth on
SCHEDULE 5.16(A) are in full force and effect and constitute valid and binding
agreements of the Company, and the Company is not in breach of any of their
material terms. All fixed assets used by the Company that are material to the
operation of its business are either owned by the Company or leased under an
agreement listed on SCHEDULE 5.16(A).
5.17 INTELLECTUAL PROPERTY.
(a) The Company and its subsidiaries own or possess adequate and
enforceable licenses or other rights to use (including foreign rights), all
copyrights, patents, trade names, trade secrets, registered and unregistered
trademarks, service marks, trade dress, franchises, domain names and similar
rights now used or employed in the business of the Company and its subsidiaries
(the "Intellectual Property") and such rights will not cease to be valid rights
---------------------
of the Company and its subsidiaries by reason of the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
(b) SCHEDULE 5.17 sets forth a list of all of the Intellectual
Property of the Company and its subsidiaries. SCHEDULE 5.17 also sets forth:
(i) for each patent, the number, normal expiration date and subject matter for
each country in which such patent has been issued, or, if applicable, the
application number, date of filing and subject matter for each country; (ii) for
each trademark and service ▇▇▇▇, the application serial number or registration
number, the classes of goods and services covered and the expiration date for
each country in which a trademark or service ▇▇▇▇ has been registered; and (iii)
for each copyright, the number and date of filing for each country in which a
copyright has been filed. SCHEDULE 5.17 includes all unregistered and common
law rights to Intellectual Property that are material to the Company. The
Intellectual Property listed on SCHEDULE 5.17 is all such property used by the
Company or any of its subsidiaries in connection with their businesses. True,
correct and complete copies of all patents (including all pending applications),
trademark and service ▇▇▇▇ registrations and pending applications, and copyright
registrations and pending applications, owned, controlled, created or used by or
on behalf of the Company and its subsidiaries have been provided to CCC. All
pending patent applications have been duly filed.
14
(c) Neither the Company nor any of its subsidiaries has any
obligation to compensate any person for the use of any Intellectual Property,
and neither the Company nor any of its Subsidiaries has granted to any person
any license, option, or other rights to use in any manner any of its
Intellectual Property, whether requiring the payment of royalties or not, other
than licenses to the Company of franchises or licenses in the ordinary course of
business.
(d) Neither the Company nor any of its subsidiaries has received any
notice of invalidity or infringement of any rights of others with respect to the
Intellectual Property. No person has notified the Company or any of its
subsidiaries that it is claiming any ownership of or right to use such
Intellectual Property. No person, to the knowledge of the Company, is
infringing upon any such Intellectual Property in any way, except where such use
would not have a Material Adverse Effect on the Company. To the knowledge of
the Company after reasonable investigation, the use of the Intellectual Property
by the Company and its subsidiaries does not and will not conflict with,
infringe upon or otherwise violate the valid rights of any third party in or to
such Intellectual Property, and no action has been instituted against or notices
received by the Company or any subsidiary that are presently outstanding
alleging that the use of the Intellectual Property infringes upon or otherwise
violates any rights of a third party in or to such Intellectual Property.
5.18 MATERIAL CONTRACTS AND COMMITMENTS.
(a) As of the date of this Agreement, SCHEDULE 5.18(A) contains a
complete and accurate list of each contract, commitment, lease, instrument,
agreement, license or permit, written or oral, to which the Company is a party
or by which it or its properties are bound (including without limitation, joint
venture or partnership agreements, contracts with any labor organizations,
employment agreements, consulting agreements, loan agreements, indemnity or
guaranty agreements, bonds, mortgages, options to purchase land, liens, pledges
or other security agreements) (i) to which the Company on the one hand and on
the other hand any affiliate of the Company or any officer, director or
shareholder of the Company are parties ("Related Party Agreements"); (ii) that
------------------------
may give rise to obligations or liabilities exceeding, during the current term
thereof, $2,000,000 individually, or that may generate revenues or income
exceeding, during the current term thereof, $2,000,000 individually
(collectively with the Related Party Agreements, the "Material Contracts"); or
------------------
(iii) that provides rights to indemnification to any current or former
directors, officers, employees or agents of the Company. The Company has
provided CCC with access to true, complete and correct copies of the Material
Contracts. Other than as disclosed on SCHEDULE 5.18(A) the Company has complied
with all of its material commitments and obligations, is not in default under
any of the Material Contracts, has no contracts under which the work has been
substantially delayed or changed for which proper compensation is not expected,
has no pending or expected claims in excess of $50,000 against a prime
contractor or owner in connection with completed work or work in progress, and
has no notice of default has been received with respect to any thereof, and
there are no Material Contracts that were not negotiated at arm's length.
(b) Each Material Contract, except those terminated pursuant to
Section 7.4, is valid and binding on the Company and is in full force and effect
and, to the knowledge of the Company and the Shareholders, is not subject to any
default thereunder by any party obligated to the Company pursuant thereto.
15
(c) The outstanding balance on all loans or credit agreements either
(i) between the Company and any Person in which any Shareholder owns a material
interest, or (ii) guaranteed by the Company for the benefit of any Person in
which any Shareholder owns a material interest, are set forth in SCHEDULE
5.18(C) as of the date indicated therein.
(d) The pledge, hypothecation or mortgage of all or substantially all
of the Company's assets (including, without limitation, a pledge of the
Company's contract rights under any Material Contract) will not, except as set
forth on SCHEDULE 5.18(D), (i) result in the breach or violation of,
(ii) constitute a default under, (iii) create a right of termination under, or
(iv) result in the creation or imposition of (or the obligation to create or
impose) any lien upon any of the assets of the Company (other than a lien
created pursuant to the pledge, hypothecation or mortgage described at the start
of this Section 5.18(d)) pursuant to any of the terms and provisions of, any
Material Contract to which the Company is a party or by which the property of
the Company is bound.
5.19 GOVERNMENT CONTRACTS.
(a) Except as set forth on SCHEDULE 5.19, the Company is not a party
to any government contracts (i) with any local government agency or
instrumentality that may give rise to obligations or liabilities exceeding,
prior to any renewal thereof, $50,000 individually, or that may generate
revenues or income exceeding, prior to any renewal thereof, $50,000
individually, or (ii) with any agency or instrumentality of the United States
Government or any state government.
(b) The Company has not been suspended or debarred from bidding on
contracts or subcontracts for any agency or instrumentality of the United States
Government or any state or local government, nor, to the knowledge of the
Company and the Shareholders, has any suspension or debarment action been
threatened or commenced. To the knowledge of the Company and the Shareholders,
there is no valid basis for the Company's suspension or debarment from bidding
on contracts or subcontracts for any agency of the United States Government or
any state or local government.
(c) Except as set forth on SCHEDULE 5.19, as of the date of this
Agreement, the Company has not been, nor is it now being, audited, or
investigated by any government agency, or the inspector general or auditor
general or similar functionary of any agency or instrumentality, nor, to the
knowledge of the Company and the Shareholders, has such audit or investigation
been threatened.
(d) Except as set forth on SCHEDULE 5.19, as of the date of this
Agreement, the Company has no material dispute pending before a contracting
office of, nor any current claim (other than the Accounts Receivable) pending
against, any agency or instrumentality of the United States Government or any
state or local government, relating to a contract.
(e) As of the date of this Agreement, the Company has not, with
respect to any government contract, received a cure notice advising the Company
that it is or was in default or would, if it failed to take remedial action, be
in default under such contract.
(f) The Company has not submitted any inaccurate, untruthful, or
misleading cost or pricing data, certification, bid, proposal, report, claim, or
any other information relating to a contract to any agency or instrumentality of
the United States Government or any state or local government that would be
contrary to any current rules and regulations.
16
(g) To the knowledge of the Company and the Shareholders, no
employee, agent, consultant, representative, or affiliate of the Company is in
receipt or possession of any competitor or government proprietary or procurement
sensitive information related to the Company's business under circumstances
where there is reason to believe that such receipt or possession is unlawful or
unauthorized.
(h) Each of the Company's government contracts has been issued,
awarded or novated to the Company in the Company's name.
(i) Except as set forth on SCHEDULE 5.19, the Company's cost
accounting records are presently in conformance with the requirements of the
Federal Acquisition Regulations to the extent applicable.
5.20 INSURANCE. SCHEDULE 5.20 sets forth, as of the date of this
Agreement, an accurate list of all insurance policies carried by the Company and
all insurance loss runs or workers' compensation claims received for the past
two policy years. The Company has delivered to CCC or given CCC access to true,
complete and correct copies of all current insurance policies, all of which are
in full force and effect. All premiums payable under all such policies have
been paid and the Company is otherwise in full compliance with the terms of such
policies. Such policies of insurance are of the type and in amounts that to the
knowledge of the Company, are customarily carried by persons conducting
businesses similar to that of the Company. The insurance carried by the Company
with respect to its properties, assets and business is, to the Company's
knowledge, with financially sound insurers. To the knowledge of the Company,
there have been no threatened terminations of, or material premium increases
with respect to, any of such policies.
5.21 LABOR AND EMPLOYMENT MATTERS. Except as set forth in SCHEDULE
5.21, as of the date of this Agreement, with respect to employees of and service
providers to the Company:
(a) the Company is and has been in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including
without limitation any such laws respecting minimum wage and overtime payments,
employment discrimination, workers' compensation, family and medical leave, the
Immigration Reform and Control Act, and occupational safety and health
requirements, and has not and is not engaged in any unfair labor practice;
(b) there is not now, nor within the past three years has there been,
any unfair labor practice complaint against the Company pending or, to the
Company's knowledge, threatened, before the National Labor Relations Board or
any other comparable authority;
(c) there is not now, nor within the past three years has there been,
any labor strike, slowdown or stoppage actually pending or, to the Company's
knowledge, threatened, against or directly affecting the Company;
(d) to the Company's knowledge, no labor representation organization
effort exists nor has there been any such activity within the past three years;
(e) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to the Company's knowledge, no
claims therefor exist or have been threatened;
17
(f) the employees of the Company are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against the Company or currently being negotiated by the
Company; and
(g) to the knowledge of the Company, all persons classified by the
Company as independent contractors do satisfy and have satisfied the
requirements of law to be so classified, and the Company has fully and
accurately reported their compensation on IRS Forms 1099 when required to do so.
5.22 EMPLOYEE BENEFIT PLANS. Attached hereto as SCHEDULE 5.22 are
complete and accurate copies of all employee benefit plans, all employee welfare
benefit plans, all employee pension benefit plans, all multiemployer plans and
all multiple employer welfare arrangements (as defined in Sections 3(3), (1),
(2), (37) and (40), respectively, of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), which are currently maintained and/or sponsored
-----
by the Company, or to which the Company currently contributes, or has an
obligation to contribute in the future (including, without limitation, any such
plan or arrangement created by any agreements, including any employment
agreements and any other agreements containing "golden parachute" provisions and
----------------
deferred compensation agreements disclosed in SCHEDULE 5.18(A)), together with
copies of any trusts related thereto and a classification of employees covered
thereby (collectively, the "Plans"). To the best of the Company's knowledge,
-----
SCHEDULE 5.22 sets forth each plan or arrangement that would have been an
employee pension or welfare benefit plan but for its termination within the past
three years.
To the best of the Company's knowledge, all Plans are in material
compliance with all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable laws, and, in all material
respects, have been administered, operated and managed in material accordance
with the governing documents. All Plans that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Code have been determined by the
----------------
Internal Revenue Service to be so qualified, and copies of the current plan
determination letters, most recent actuarial valuation reports, if any, most
recent Form 5500, or, as applicable, Form 5500-C/R filed with respect to each
such Qualified Plan or employee welfare benefit plan and most recent trustee or
custodian report, are included as part of SCHEDULE 5.22. To the Company's
knowledge, to the extent that any Qualified Plans have not been amended to
comply with applicable law, the remedial amendment period permitting retroactive
amendment of such Qualified Plans has not expired and will not expire within 120
days after the Closing Date. To the Company's knowledge, all reports and other
documents required to be filed with any governmental agency or distributed to
plan participants or beneficiaries (including, but not limited to, annual
reports, summary annual reports, actuarial reports, PBGC-1 Forms, audits or tax
returns) have been timely filed or distributed except to the extent that the
failure to file or distribute such reports or documents would not subject the
Company to any material penalty. None of: (i) any Shareholder; (ii) to the
knowledge of the Company, any Plan; or (iii) the Company has engaged in any
transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA which could result in the imposition of a material penalty
under ERISA or a material tax under the Code, except in accordance with an
applicable exemption or except any such prohibited transaction that results from
the conversion of the ESOP to a Profit Sharing Plan (as defined) in Section
5.22(j) below) and the consequent holding by the Profit Sharing Plan of a
promissory note in favor of the Company. No Plan has incurred an accumulated
funding deficiency, as defined in Section 412(a) of the Code and Section 302(1)
of ERISA; and the Company does not currently have (nor at the Closing Date will
have) any direct or indirect liability whatsoever (including being subject to
any statutory lien to secure payment of any such liability), to the Pension
Benefit Guaranty Corporation ("PBGC") with respect to any such Plan under Title
----
IV of ERISA
18
or to the Internal Revenue Service for any excise tax or penalty;
and neither the Company nor any member of a "controlled group" (as defined in
----------------
ERISA Section 4001(a)(14)) currently has (or at the Closing Date will have) any
obligation whatsoever to contribute to any "multiemployer pension plan" (as
--------------------------
defined in ERISA Section 4001(a)(13), nor has any withdrawal liability
whatsoever (whether or not yet assessed) arising under or capable of assertion
under Title IV of ERISA (including, but not limited to, Sections 4201, 4202,
4203, 4204, or 4205 thereof) been incurred by any Plan. Further, within the
last three years, except as set forth on SCHEDULE 5.22:
(a) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without notice to and,
where required, approval by the Internal Revenue Service;
(b) no Plan which is subject to the provisions of Title IV of
ERISA has been terminated;
(c) there have been no "reportable events" (as that phrase is defined
-----------------
in Section 4043 of ERISA) with respect to any Plan which were not properly
reported;
(d) the valuation of assets of any Qualified Plan subject to Title IV
of ERISA, as of the Closing Date, shall equal or exceed the actuarial present
value of all accrued pension benefits under such Qualified Plan in accordance
with the assumptions contained in the Regulations of the PBGC governing the
funding of terminated defined benefit plans;
(e) with respect to Plans which qualify as "group health plans" under
------------------
Section 4980B of the Internal Revenue Code and Section 607(1) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), and to the Company?s knowledge, the Company has complied (and on the
-----
Closing Date will have complied), in all material respects with all reporting,
disclosure, notice, election and other benefit continuation requirements imposed
thereunder as and when applicable to such plans, and the Company has no (and
will incur no) direct or indirect liability and is not (and will not be) subject
to any material loss, assessment, excise tax penalty, loss of federal income tax
deduction or other sanction, arising on account of or in respect of any direct
or indirect failure by the Company, at any time prior to the Closing Date, to
comply with any such federal or state benefit continuation requirement, which is
capable of being assessed or asserted before or after the Closing Date directly
or indirectly against the Company with respect to such group health plans;
(f) the Company has not been a member of a ?controlled group? as
defined in ERISA Section 4001(a)(14);
(g) there is no pending litigation, arbitration, or disputed claim,
settlement or adjudication proceeding (other than routine claims for benefits)
and to the Company's knowledge, there is no threatened litigation, arbitration
or disputed claim, settlement or adjudication proceeding, or any governmental or
other proceeding, or investigation with respect to any Plan, or any disputed
claim, settlement or adjudication (other than routine claims for benefits) with
respect to any fiduciary, administrator, party in interest or sponsor thereof
(in their capacities as such);
(h) as required in accordance with GAAP, the Company Financial
Statements as of the Balance Sheet Date reflect the approximate total pension,
medical and other benefit expense for all Plans as of the date thereof, and no
material funding changes or irregularities not reflected thereon would cause
such Company Financial Statements to be inaccurate; and
19
(i) the Company has not incurred liability under Section 4062 of
ERISA.
5.23 CONFORMITY WITH LAW; LITIGATION.
(a) Except as set forth on SCHEDULE 5.23(A), the Company is not in
violation of any law 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 which would have a Material
Adverse Effect on the Company. The Company has conducted and is conducting its
business in substantial compliance 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 of any of the foregoing which might have a
Material Adverse Effect on the Company.
(b) Except as set forth on SCHEDULE 5.23(B), as of the date of this
Agreement, there are no claims, actions, suits or proceedings, pending or, to
the knowledge of the Company, threatened against or affecting the Company at law
or in equity, or before or 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 which might have a
Material Adverse Effect on the Company. As of the date of this Agreement, there
are no judgments, orders, injunctions, decrees, stipulations or awards (whether
rendered by a court or administrative agency or by arbitration) against the
Company or against any of its properties or business which might have a Material
Adverse Effect on the Company.
5.24 TAXES.
(a) (i) The Company has timely filed all Tax Returns (as defined
below) due on or before the Closing Date and all such Tax Returns are true,
correct and complete in all material respects.
(ii) The Company has paid in full on a timely basis all
Taxes (as defined below).
(iii) The amount of the Company's liability for unpaid Taxes
as of the Balance Sheet Date did not exceed the amount of the current liability
accruals for Taxes (excluding reserves for deferred Taxes) shown on the Interim
Balance Sheet, and the amount of the Company's liability for unpaid Taxes for
all periods or portions thereof ending on or before the Closing Date will not
exceed the amount of the current liability accruals for Taxes (excluding
reserves for deferred Taxes) as such accruals are reflected on the books and
records of the Company on the Closing Date.
(iv) There are no ongoing examinations or claims against the
Company for Taxes, and no notice of any audit, examination or claim for Taxes,
whether pending or threatened, has been received.
(v) The Company has a taxable year ended on December 31, in
each year commencing from the incorporation of the Company.
20
(vi) The Company currently utilizes the accrual method of
accounting for income Tax purposes and such method of accounting has not changed
in the past 10 years. The Company has not agreed to, and is not and will not be
required to, make any adjustments under Code Section 481(a) as a result of a
change in accounting methods.
(vii) The Company has withheld and paid over to the proper
governmental authorities all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid to any employee, independent contractor, creditor or third
party.
(viii) Copies of (A) any Tax examinations, (B) extensions of
statutory limitations for the collection or assessment of Taxes and (C) the Tax
Returns of the Company for the last five fiscal years have been made available
to CCC.
(ix) There are (and as of immediately following the Closing
there will be) no Liens on the assets of the Company relating to or attributable
to Taxes, except for Permitted Encumbrances.
(x) To the Company's knowledge, there is no basis for the
assertion of any claim relating to or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company or otherwise
have an adverse effect on the Company or its business.
(xi) There are no contracts, agreements, plans or arrangements,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of the Company that, individually or collectively,
could give rise to any payment (or portion thereof) that would not be deductible
pursuant to Sections 280G, 404 or 162 of the Code.
(xii) The Company is not, and has not been at any time, a
party to a tax sharing, tax indemnity or tax allocation agreement, and the
Company has not assumed the tax liability of any other person under contract.
(xiii) To the knowledge of the Company and the Shareholders,
neither the Company nor any Shareholder has taken any action or refrained from
taking any action that would cause the Merger not to qualify as a reorganization
as defined under Code Section 368(a)(1)(A) and Section 368(a)(2)(D).
(b) For purposes of this Agreement:
(i) the term "Tax" shall include any tax or similar
---
governmental charge, impost or levy (including without limitation income taxes,
franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross receipt
taxes, value added taxes, employment taxes, excise taxes, ad valorem taxes,
property taxes, withholding taxes, payroll taxes, minimum taxes or windfall
profit taxes) together with any related penalties, fines, additions to tax or
interest imposed by the United States or any state, county, local or foreign
government or subdivision or agency thereof; and
(ii) the term "Tax Return" shall mean any return (including any
----------
information return), report, statement, schedule, notice, form, estimate or
declaration of estimated tax relating to or required to be filed with any
governmental authority in connection with the determination, assessment,
collection or payment of any Tax.
21
5.25 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company
has conducted its business in the ordinary course and, between the Balance Sheet
Date and the date of this Agreement except as contemplated herein or as set
forth on SCHEDULE 5.25, there has not been:
(a) any change that by itself or together with other changes has
had a Material Adverse Effect;
(b) any damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting the properties or business of the
Company;
(c) any change in the authorized capital of the Company or in its
outstanding securities or any change in its ownership interests or any grant of
any options, warrants, calls, conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution in
respect of the capital stock, or any direct or indirect redemption, purchase or
other acquisition of any of the capital stock of the Company, except for
distributions relating to the payment of taxes (in the event the Company is a
Subchapter S Corporation under the Code);
(e) any increase in the compensation, bonus, sales commissions or fee
arrangements payable or to become payable by the Company to any of its officers,
directors, Shareholders, employees, consultants or agents, except in the
ordinary course of business consistent with past practice or as required by
contract or law;
(f) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character, which has had a Material Adverse
Effect;
(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 any Shareholder and his affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, including without limitation any
indebtedness or obligation of any Shareholder and his affiliates owing to the
Company, provided that the Company may negotiate and adjust bills in the course
of good faith disputes with customers in a manner consistent with past practice;
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of the Company or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(j) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the ordinary
course of business of the Company;
(k) any waiver of any material rights or claims of the Company;
22
(l) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party other
than in the ordinary course of business;
(m) any transaction by the Company outside the ordinary course of
business;
(n) any capital commitment by the Company exceeding $50,000
individually;
(o) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company or the
revaluation by the Company of any of its assets;
(p) any creation or assumption by the Company of any mortgage, pledge,
security interest or lien or other encumbrance on any asset (other than
Permitted Encumbrances, liens arising under existing lease financing
arrangements which are not material and liens for Taxes not yet due and
payable);
(q) any entry into, amendment of, relinquishment, termination or non-
renewal by the Company of any contract, lease transaction, commitment or other
right or obligation requiring aggregate payments by the Company in excess of
$50,000 with respect to such contract, lease, transaction, commitment or other
right or obligation other than in the ordinary course of business;
(r) any loan by the Company to any person or entity, incurring by the
Company, of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others;
(s) the commencement or notice or, to the knowledge of the Company
and the Shareholders, threat of commencement, of any lawsuit or proceeding
against, or investigation of, the Company or any of its affairs; or
(t) negotiation or agreement by the Company or any officer or
employee thereof to do any of the things described in the preceding clauses (a)
through (s) (other than negotiations with CCC and its representatives regarding
the transactions contemplated by this Agreement).
5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 5.26 sets forth a
complete and accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which the Company
has any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have
access thereto; and
(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Company and a
description of the terms of such power.
23
5.27 ENVIRONMENTAL MATTERS.
(a) Hazardous Material. To the knowledge of the Company and its
------------------
Shareholders, other than as set forth on SCHEDULE 5.27(A), no underground
storage tanks and no substance that has been designated by any Governmental
Entity or by applicable federal, state, local or other applicable law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum, urea-
formaldehyde and all substances listed as hazardous substances pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office, janitorial, and similar
supplies properly and safely maintained (a "Hazardous Material"), are present
------------------
in, on or under any property, including the land and the improvements, ground
water and surface water thereof, that the Company has at any time owned,
operated, occupied or leased (including the Real Property). SCHEDULE 5.27(A)
identifies all underground and aboveground storage tanks, and the capacity, age,
and contents of such tanks, which to the knowledge of the Company and the
Shareholders, are located on Real Property owned or leased by the Company.
(b) Hazardous Materials Activities. Except as set forth on SCHEDULE
------------------------------
5.27(B), to its knowledge, the Company has not transported, stored, used,
manufactured, disposed of or released, or exposed its employees or others to,
Hazardous Materials in violation of any law in effect on or before the Closing
Date, nor has the Company disposed of, transported, sold, or manufactured any
product containing a Hazardous Material (collectively, "Company Hazardous
-----------------
Materials Activities") in violation of any rule, regulation, treaty or statute
--------------------
promulgated by any Governmental Entity in effect prior to or as of the date
hereof to prohibit, regulate or control Hazardous Materials or any Company
Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental
-------
approvals, permits, licenses, clearances and consents (the "Environmental
-------------
Permits") necessary for the conduct of the Company?s Hazardous Material
--------
Activities and other business of the Company as such activities and business are
currently being conducted. All Environmental Permits are in full force and
effect. The Company (A) is in compliance in all material respects with all terms
and conditions of the Environmental Permits and (B) is in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the laws of all Governmental Entities relating to pollution or
protection of the environment or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder. To the Company?s knowledge, there are no circumstances that
may prevent or interfere with such compliance in the future. SCHEDULE 5.27(C)
includes a listing and description of all Environmental Permits currently held
by the Company.
(d) Environmental Liabilities. No action, proceeding, revocation
-------------------------
proceeding, amendment procedure, writ, injunction or claim is pending against
the Company, or to the knowledge of the Company, threatened against the Company
concerning any Environmental Permit, Hazardous Material or any Company Hazardous
Materials Activity. To the knowledge of the Company and the Shareholders, there
are no past or present actions, activities, circumstances, conditions, events,
or incidents that could involve the Company (or any person or entity whose
liability the Company has retained or assumed, either by contract or operation
of law) in any environmental litigation, or impose upon the Company (or any
person or entity whose liability the Company has retained or assumed, either by
contract or operation of law) any environmental liability including, without
limitation, common law tort liability.
24
5.28 RELATIONS WITH GOVERNMENTS. To the knowledge of the Company and
the Shareholders, the Company has not made, offered or agreed to offer anything
of value to any governmental official, political party or candidate for
government office, nor has it otherwise taken any action 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.
5.29 DISCLOSURE. The Company has delivered or made available to CCC
and Newco true and complete copies of each agreement, contract, commitment or
other document (or summaries thereof) that is referred to specifically in the
Schedules or that has been requested by CCC. Without limiting any exclusion,
exception or other limitation contained in any of the representations and
warranties made herein, this Agreement and the schedules hereto do not and will
not include any untrue statement of a material fact or omit to state a material
fact necessary to make the statements herein or therein not misleading. If any
Shareholder becomes aware of any fact or circumstance which would change a
representation or warranty of any Shareholder in this Agreement or any
representation made on behalf of the Company, the Shareholders (through the
Representative (as defined in Section 13.14) or otherwise) shall immediately
give notice of such fact or circumstance to CCC. However, such notification
shall not relieve the Company or the Shareholders of their respective
obligations under this Agreement.
5.30 CCC PROSPECTUS; SECURITIES REPRESENTATIONS. Each Shareholder has
received and reviewed a copy of the prospectus dated March 5, 1998 including all
supplements thereto (as supplemented, the "CCC Prospectus") contained in CCC's
--------------
shelf registration statement on Form S-1 (File No. 333-42317). Each Shareholder
(a) has such knowledge and experience in business and financial matters and such
knowledge concerning the business, operations and financial condition of the
Company that such Shareholder is capable of evaluating the merits and risks of
an investment in the shares of CCC Common Stock, (b) fully understands the
nature, scope, and duration of the limitations on transfer contained herein, in
the Affiliate Agreement (if applicable), and under applicable law, and (c) can
bear the economic risk of any investment in the shares of CCC Common Stock and
can afford a complete loss of such investment. Each Shareholder, or such
Shareholders' purchaser representative, has had an adequate opportunity to ask
questions and receive answers (and has asked such questions and received answers
to his satisfaction) from the officers of CCC concerning the business,
operations and financial condition of CCC. Except as required by applicable
law, the Shareholders have no contract, undertaking, agreement or arrangement,
written or oral, with any other person to sell, transfer or grant participation
in any shares of CCC Common Stock to be acquired by such Shareholder in the
Merger.
5.31 AFFILIATES. SCHEDULE 5.31 lists each of the persons who is, in
the reasonable judgment of the Company and the Shareholders, an affiliate of the
Company within the meaning of Rule 145 (each such person an "Affiliate" with
---------
respect to the Company) promulgated under the 1933 Act.
5.32 LOCATION OF CHIEF EXECUTIVE OFFICES. SCHEDULE 5.32 sets forth
the location of the Company's chief executive offices.
5.33 LOCATION OF EQUIPMENT AND INVENTORY. Set forth on SCHEDULE 5.33
is a list of all locations where a filing is required under the UCC (as defined
below) with respect to Inventory and Equipment held on the date hereof by the
Company. For purposes of this Agreement, (a) the term "Inventory" shall mean
---------
any "inventory" as such term is defined in the Uniform Commercial Code as in
effect on the date hereof in the State of Texas (the "UCC") owned by the Company
---
as of the date hereof, and, in any event, shall include, but shall not be
limited to, all merchandise, inventory and goods, and all additions,
substitutions and replacements thereof, wherever located, together with all
goods, supplies, incidentals,
25
packaging materials, labels, materials and any other items used or usable in
manufacturing, processing, packaging or shipping same; in all stages of
production, and all proceeds therefrom; and (b) the term "Equipment" shall mean
---------
any "equipment" as such term is defined in the UCC owned by the Company as of
---------
the date hereof, and, in any event, shall include, but shall not be limited to,
all machinery, equipment, furnishings, fixtures and vehicles owned by the
Company, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto.
6. REPRESENTATIONS OF CCC AND NEWCO
To induce the Company and each Shareholder to enter into this
Agreement and consummate the transactions contemplated hereby, each of CCC and
Newco represents and warrants to the Company and the Shareholders as follows
(for purposes of this Agreement, the phrases "knowledge of CCC," "knowledge of
---------------- ------------
Newco," "CCC's knowledge," or "'Newco's knowledge" or words of similar import,
----- ---------------- ------------------
mean the actual knowledge of the directors and officers of each of CCC and
Newco.
6.1 DUE ORGANIZATION. Each of CCC and Newco is a corporation duly
organized, validly existing and in good standing under the laws of its state of
organization, and each is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective businesses 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 effect on the business, operations,
properties, assets or condition, financial or otherwise, of CCC or Newco. Copies
of the Certificate of Incorporation, Articles of Incorporation and the Bylaws,
each as amended, of CCC and Newco (collectively, the "CCC Charter Documents")
---------------------
have been made available to the Company. Neither CCC nor Newco is in violation
of any CCC Charter Document.
6.2 CCC COMMON STOCK. The shares of CCC Common Stock to be delivered
to the Shareholders pursuant to this Agreement, when delivered in accordance
with the terms of this Agreement, will be duly authorized and validly issued
shares of CCC capital stock, fully paid and nonassessable. All of the shares of
CCC Common Stock to be issued to the Shareholders in accordance herewith will be
offered, issued, sold and delivered by CCC in compliance with all applicable
state and federal laws concerning the issuance of securities and none of such
shares was or will be issued in violation of the preemptive rights of any
shareholder of CCC.
6.3 AUTHORIZATION; VALIDITY OF OBLIGATIONS. CCC and Newco have all
requisite corporate power and authority to enter into this Agreement and the
transactions contemplated hereby. Each of CCC and Newco has the full legal
right and authority to enter into this Agreement and the transactions
contemplated hereby. The execution and delivery of this Agreement by CCC and
Newco and the performance by each of CCC and Newco of the transactions
contemplated herein will, prior to Closing, have been duly and validly
authorized by the respective Boards of Directors of CCC and Newco, and this
Agreement will, prior to Closing, been duly and validly authorized by all
necessary corporate action. This Agreement is a legal, valid and binding
obligation of each of CCC and Newco enforceable against CCC and Newco in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
6.4 NO CONFLICTS. Except as set forth on SCHEDULE 6.4, the
execution, delivery and performance of this Agreement, the consummation of the
transactions contemplated hereby and the fulfillment of the terms hereof will
not:
26
(a) conflict with, or result in a breach or violation of the CCC
Charter Documents;
(b) conflict with, or result in a default (or would constitute a
default but for a requirement of notice or lapse of time or both) under any
document, agreement or other instrument to which either CCC or Newco is a party,
or by which either CCC or Newco is bound, or result in the creation or
imposition of any lien, charge or encumbrance on any of CCC's or Newco's
properties pursuant to (i) any law or regulation to which either CCC or Newco or
any of their respective property is subject, or (ii) any judgment, order or
decree to which CCC or Newco is bound or any of their respective property is
subject;
(c) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of CCC or Newco;
(d) violate any material law, order, judgment, rule, regulation,
decree or ordinance to which CCC or Newco is subject, or by which CCC or Newco
is bound; or
(e) require the consent of any third party.
6.5 CAPITALIZATION OF CCC AND OWNERSHIP OF CCC STOCK. The authorized
capital stock of CCC consists of 250,000,000 shares of Common Stock, of which
34,216,310 shares were outstanding on March 12, 1998, and 500,000 shares of
Convertible Non-Voting Common Stock, par value $.001 per share, of which 500,000
shares were outstanding on March 12, 1998. The authorized capital stock of
Newco consists of 100 shares of Common Stock, of which 100 shares are
outstanding. All of the issued and outstanding shares of Newco are owned
beneficially, and of record by CCC. All of the issued and outstanding shares of
CCC Common Stock are duly authorized and validly issued shares of CCC, fully
paid and non-assessable. All of the issued and outstanding shares of CCC Common
Stock have been offered, issued, sold and delivered by CCC in compliance with
all applicable state and federal laws concerning the issuance of securities and
none of such shares were issued in violation of the preemptive rights of any
shareholder of CCC.
6.6 CONFORMITY WITH LAW; LITIGATION.
(a) Neither CCC nor Newco is in violation of any law 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 either of them which would have a material adverse effect on
the business operations, properties, assets or condition, financial or otherwise
of CCC and its subsidiaries taken as a whole. CCC has conducted and is
conducting its business in substantial compliance 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 of any of the foregoing which
might have a material adverse effect on the business operations, properties,
assets or conditions, financial or otherwise of CCC and its subsidiaries taken
as a whole.
(b) There are no claims, actions, suits or proceedings, pending or,
to the knowledge of CCC or Newco, threatened against or affecting CCC or Newco
at law or in equity, or before any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them that would have a material adverse
effect and no notice of any such claim, action, suit or proceeding, whether
pending or threatened, has been received.
27
There are no judgments, orders, injunctions, decrees, stipulations or awards
(whether rendered by a court or administrative agency or by arbitration) against
CCC or Newco or against any of the properties of either of them which would have
a material adverse effect on the business operations, properties, assets or
conditions, financial or otherwise of CCC and its subsidiaries taken as a whole.
6.7 DISCLOSURE. Without limiting any exclusion, exception or other
limitation contained in any of the representations and warranties made herein,
this Agreement, the Schedules hereto and all other documents and information
relating to CCC (excluding any information related to the Company or the
Shareholders) furnished to the Company, the Shareholders and their
representatives pursuant hereto do not and will not include any untrue statement
of material fact or omit to state a material fact necessary to make the
statements herein or therein not misleading. If CCC or Newco becomes aware of
any fact or circumstances which would change a representation or warranty of CCC
or Newco in this Agreement, CCC and Newco shall immediately give notice of such
fact or circumstance to the Shareholders and the Company. However, such
notification shall not relieve CCC or Newco of their respective obligations
under this Agreement.
6.8 CCC PROSPECTUS. The CCC Prospectus, in the form delivered to the
Shareholders pursuant to Section 5.30 hereof, does not contain, as of the date
hereof, with respect to the sale of shares of CCC Common Stock to the
Shareholders hereunder, any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The balance sheet of CCC (including the related notes)
included in the CCC Prospectus presents fairly, in all material respects, the
financial position of CCC as of the date thereof in conformity with GAAP.
6.9 REGISTRATION STATEMENT. The Shares to be delivered pursuant to
this Agreement will be issued pursuant to a Shelf Registration Statement on Form
S-1 filed with the United States Securities and Exchange Commission (the
"Registration Statement") on February 27, 1998 and declared effective on March
-----------------------
5, 1998. To the knowledge of CCC, no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceeding for that
purpose shall have been instituted or threatened by the SEC. The Shares will be
subject to the contractual restrictions on resale set forth in Section 7.10
below and will be tradable in accordance with the requirements of Rule 145(d)
under the 1933 Act.
6.10 INVESTMENT INTENT. CCC is acquiring the shares of the Company
for investment purposes only, for its own account and not as a nominee or agent
for any other Person, and not with a view to or for resale in connection with
any distribution thereof within the meaning of the 1933 Act, and can bear the
economic risk of an investment in the shares of the Company and can afford a
complete loss of such investment.
7. COVENANTS
7.1 TAX MATTERS.
(a) The following provisions shall govern the allocation of
responsibility as between the Shareholders, on the one hand, and the Surviving
Corporation, on the other, for certain tax matters following the Closing Date:
28
(i) The Representative shall cause to be prepared and cause to
be filed, within the time and in the manner provided by law, all Tax Returns of
the Company for all periods ending on or before the Closing Date that are due
after the Closing Date. The Shareholders shall pay to the Surviving Corporation
on or before the due date of such Tax Returns the amount of all Taxes shown as
due on such Tax Returns to the extent that such Taxes are not reflected in the
current liability accruals for Taxes (excluding reserves for deferred Taxes)
shown on the Company's books and records as of the Closing Date. Such Returns
shall be prepared and filed in accordance with applicable law and in a manner
consistent with past practices and shall be subject to review and approval by
CCC. To the extent reasonably requested by the Shareholders or required by law,
CCC and the Surviving Corporation shall participate in the filing of any Tax
Returns filed pursuant to this paragraph.
(ii) The Surviving Corporation shall prepare or cause to be
prepared and file or cause to be filed any Tax Returns for Tax periods which
begin before the Closing Date and end after the Closing Date. The Shareholders
shall pay to the Surviving Corporation within fifteen (15) days after the date
on which Taxes are paid with respect to such periods an amount equal to the
portion of such Taxes which relates to the portion of such taxable period ending
on the Closing Date to the extent such Taxes are not reflected in the current
liability accruals for Taxes (excluding reserves for deferred Taxes) shown on
the Company's books and records as of the Closing Date. Notwithstanding the
preceding sentence, the Shareholders shall not be responsible for any tax that
may arise under Section 4978 of the Code as a result of the consummation of the
Merger. For purposes of this Section 7.1, in the case of any Taxes that are
imposed on a periodic basis and are payable for a taxable period that includes
(but does not end on) the Closing Date, the portion of such Tax which relates to
the portion of such taxable period ending on the Closing Date shall (A) in the
case of any Taxes other than Taxes based upon or related to income or receipts,
be deemed to be the amount of such Tax for the entire taxable period multiplied
by a fraction the numerator of which is the number of days in the taxable period
ending on the Closing Date and the denominator of which is the number of days in
the entire taxable period, and (B) in the case of any Tax based upon or related
to income or receipts be deemed equal to the amount which would be payable if
the relevant taxable period ended on the Closing Date. Any credits relating to a
taxable period that begins before and ends after the Closing Date shall be taken
into account as though the relevant taxable period ended on the Closing Date.
All determinations necessary to give effect to the foregoing allocations shall
be made in a manner consistent with prior practice of the Company. The Surviving
Corporation will pay over to the Shareholders any Tax refunds attributable to
Tax periods ending on or before the Closing Date; provided that either (i) the
Company paid the Taxes subject to the refund, (ii) such Taxes were reflected in
the current liability accruals for Taxes (excluding reserves for deferred Taxes)
shown on the Company's books and records as of the Closing Date, or (iii) that
the Shareholders paid to the Company or to the applicable taxing authority,
pursuant to this Section 7.1(a), the Taxes subject to the refund(s).
(iii) CCC and the Surviving Corporation on the one hand and
the Shareholders on the other hand shall (A) cooperate fully, as reasonably
requested, in connection with the preparation and filing of Tax Returns
pursuant to this Section 7.1 and any audit, litigation or other proceeding with
respect to Taxes; (B) make available to the other, as reasonably requested, all
information, records or documents with respect to Tax matters pertinent to the
Company for all periods ending prior to or including the Closing Date; and (C)
preserve information, records or documents relating to Tax matters pertinent to
the Company that is in their possession or under their control until the
expiration of any applicable statute of limitations or extensions thereof.
(iv) The Shareholders shall timely pay all transfer,
documentary, sales, use, stamp, registration and other Taxes and fees arising
from or relating to the transactions contemplated by
29
this Agreement, and the Shareholders shall, at their own expense, file all
necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration, and other Taxes and fees. If
required by applicable law, CCC and the Surviving Corporation will join in the
execution of any such Tax Returns and other documentation.
7.2 ACCOUNTS RECEIVABLE. In the event that all Accounts Receivable
(other than those specified on SCHEDULE 5.12 are not collected in full (net of
reserves specified in Section 5.12 and retainage) within 180 days after the
Closing (or with respect to those Accounts Receivable specified on SCHEDULE
5.12, within the number of days after the Closing specified on such SCHEDULE)
then, at the request of the Surviving Corporation, the Shareholders shall pay
(based on their percentage ownership of the Company immediately prior to the
Effective Time) the Surviving Corporation an amount equal to the Accounts
Receivable not so collected, and upon receipt of such payment the Surviving
Corporation shall assign to the Shareholders making the payment all of their
rights with respect to the uncollected Accounts Receivable giving rise to the
payment and shall also thereafter promptly remit any excess collections received
by it with respect to such assigned Accounts Receivable. The Surviving
Corporation shall provide reasonable assistance to the Shareholders with
collections of the uncollected Accounts Receivable.
7.3 [INTENTIONALLY OMITTED]
7.4 RELATED PARTY AGREEMENTS. All Related Party Agreements, other
than those listed on SCHEDULE 7.4, will be terminated at the Closing by the
Company and/or Shareholder parties thereto. Reasonably promptly following the
Closing and at the expense of CCC, the Shareholders shall, if requested by CCC,
direct a third party, which shall be reasonably acceptable to CCC, to evaluate
if the rents with respect to each lease that is a Related Party Agreement (other
than those listed on SCHEDULE 7.4) are greater than those for comparably
situated properties in the same geographic market as of the date the Related
Party Agreement was entered into or as of the date of such evaluation. To the
extent that such third party reasonably determines that the rents payable with
respect to any such lease are 25% or more than for comparably situated
properties both as of the date the Related Party Agreement was entered into and
the date of the evaluation, the parties will negotiate in good faith to adjust
such rents to market rates.
7.5 COOPERATION.
(a) The Company, the Shareholders, CCC and Newco shall each deliver
or cause to be delivered to the other on the Closing Date, and at such other
times and places as shall be reasonably agreed to, such instruments as the other
may reasonably request for the purpose of carrying out this Agreement. In
connection therewith, if required, the president or chief financial officer of
the Company shall execute any documentation reasonably required by CCC's
Accountant (in connection with such accountants' audit or review of the Company)
or the Nasdaq National Market.
(b) The Shareholders and the Company shall cooperate and use their
reasonable efforts to have the present officers, directors and employees of the
Company cooperate with CCC on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
filing obligations, actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Closing Date.
(c) Each party hereto shall cooperate in attempting to obtain all
consents and approvals that are required under this Agreement to effect the
transactions contemplated hereby or that
30
are advisable in order that any Material Contract remain in effect after the
Merger and without giving rise to any right to termination, cancellation or
acceleration or loss of any right or benefit. In addition, each party hereto
shall otherwise use their best efforts to consummate the transaction
contemplated hereby and to fulfill their obligations under this Agreement. The
Company and the Shareholders and Newco and CCC shall each diligently make, and
cooperate with the other in using their best efforts (excluding out of pocket
expenditures) to obtain or cause to be obtained prior to the Closing Date all
such consents without any change in the terms or conditions of any contract or
license that could reasonably be expected to be materially less advantageous to
the Surviving Corporation than those pertaining under the contract or license as
in effect on the date of this Agreement. The Company and Shareholders shall
advise CCC and Newco of any difficulties experienced in obtaining any of the
consents and of any conditions proposed, considered, or requested for any of the
consents. CCC and Newco agree to use their best efforts to assist the Company
and Shareholders in obtaining such consents, and to take such reasonable actions
necessary or desirable to obtain such consents, including without limitation,
executing such instruments and other documents as may be required in connection
with obtaining such consents.
(d) The Company, the Shareholders and CCC shall file any information
and documents that remain to be filed under the HSR Act as promptly as
practicable at such time as such items are required to be filed. The Parties
hereby agree to (a) cooperate with each other in connection with such HSR Act
filings, which cooperation shall include furnishing the other with any
information or documents that may be reasonably required in connection with such
filings; (b) promptly file, after any request by the Federal Trade Commission
("FTC") or Department of Justice ("DOJ") and after appropriate negotiation with
the FTC or DOJ of the scope of such request, any information or documents
requested by the FTC or DOJ; and (c) furnish each other with any correspondence
from or to, and notify each other of any other communications with, the FTC or
DOJ that relates to the transactions contemplated hereunder, and to the extent
practicable, to permit each other to participate in any conferences with the FTC
or DOJ.
7.6 CONDUCT OF BUSINESS PENDING CLOSING. Except as set forth on
SCHEDULE 7.6, between the date hereof and the Effective Time, the Company will
(except as requested or agreed by CCC):
(a) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation or
accounting;
(b) maintain its properties, facilities and equipment and other
assets in as good working order and condition as at present, ordinary wear and
tear excepted;
(c) perform in the ordinary course of business all of its obligations
under debt and lease instruments and other agreements relating to or affecting
its assets, properties, equipment or rights;
(d) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments other than in the ordinary course of
business without the consent of CCC;
(e) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(f) use its best efforts to maintain and preserve its business
organization intact, retain its present key employees and maintain its
relationships and present agreements with suppliers, customers and others having
business relations with the Company;
31
(g) maintain compliance in all material respects with all permits,
rules, laws and regulations, consent orders and the like; and
(h) maintain present salaries and commission levels for all officers,
directors, employees, agents, representatives and independent contractors,
except in the ordinary course of business consistent with past practice or as
required by contract or law.
7.7 ACCESS TO INFORMATION. Between the date of this Agreement and
the Closing Date, the Company will afford to the officers and authorized
representatives of CCC during normal business hours and with reasonable prior
notice access to (i) all of the sites, properties, books and records of the
Company and (ii) such additional financial and operating data and other
information as to the business and properties of the Company as CCC may from
time to time reasonably request, including without limitation, access upon
reasonable request to the Company's employees, customers, vendors, suppliers and
creditors. No information or knowledge obtained in any investigation pursuant
to this Section 7.7 shall affect or be deemed to modify any representation or
warranty contained in this Agreement or the conditions to the obligations of the
parties to consummate the Merger. However, if CCC becomes aware of a breach of
any warranty or representation by the Company or any Shareholder, CCC shall
promptly notify the Company and the Representative of same.
7.8 PROHIBITED ACTIVITIES. Except as set forth in SCHEDULE 7.8,
between the date hereof and the Effective Time, the Company will not, without
the prior written consent of CCC:
(a) make any change in its Articles of Incorporation or Bylaws,
or authorize or propose the same;
(b) issue, deliver or sell, authorize or propose the issuance,
delivery or sale of any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind, or authorize or propose
any change in its equity capitalization, or issue or authorize the issuance of
any debt securities, except (a) as required under any currently existing
?employee benefit plan? (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended), any currently existing employment
agreement or any currently existing buy sell agreements, (b) shares issued upon
exercise of options or other rights outstanding as of the date hereof, or (c)
shares, if any, required to be issued under the tax-qualified employee stock
ownership plan;
(c) declare or pay any dividend, or make any distribution (whether in
cash, stock or property) in respect of its stock whether now or hereafter
outstanding, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock except as provided above in
subsection (b), or purchase, redeem or otherwise acquire or retire for value any
shares of its stock;
(d) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, or guarantee any indebtedness,
except in the ordinary course of business and consistent with past practice in
an amount in excess of $50,000 individually;
(e) except in the ordinary course of business consistent with past
practice or as required by contract or law, increase the compensation payable or
to become payable to any officer, director, Shareholder, employee, agent,
representative or independent contractor; make any bonus or
32
management fee payment to any such person (except for accrued and unpaid
bonuses); make any loans or advances; adopt or amend any Plan; or grant any
severance or termination pay;
(f) create or assume any mortgage, pledge or other lien or
encumbrance (other than Permitted Encumbrances) upon any assets or properties
whether now owned or hereafter acquired;
(g) sell, assign, lease, pledge or otherwise transfer or dispose of
any property or equipment except in the ordinary course of business consistent
with past practice;
(h) acquire or negotiate for the acquisition of (by merger,
consolidation, purchase of a substantial portion of assets or otherwise) any
business or the start-up of any new business, or otherwise acquire or agree to
acquire any assets that are material, individually or in the aggregate, to the
Company;
(i) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(j) waive any material rights or claims of the Company, provided that
the Company may negotiate and adjust bills in the course of good faith disputes
with customers in a manner consistent with past practice;
(k) commit a material breach of or amend or terminate any material
agreement, permit, license or other right except for any amendments or
terminations in the ordinary course of business;
(l) enter into any other transaction (i) that is not negotiated at
arm?s length with a third party not affiliated with the Company or any officer,
director or Shareholder of the Company or (ii) outside the ordinary course of
business consistent with past practice or (iii) prohibited hereunder;
(m) commence a lawsuit other than for routine collection of bills;
(n) revalue any of its assets, including without limitation, writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business consistent with past practice;
(o) make any tax election other than in the ordinary course of
business and consistent with past practice, change any tax election, adopt any
tax accounting method other than in the ordinary course of business and
consistent with past practice, change any tax accounting method, file any Tax
Return (other than any estimated tax returns, payroll tax returns or sales tax
returns) or any amendment to a Tax Return, enter into any closing agreement,
settle any tax claim or assessment, or consent to any tax claim or assessment,
without the prior written consent of CCC; or
(p) take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 7.8(a) through (o) above, or any action which
would make any of the representations and warranties of the Company and the
Shareholders contained in this Agreement untrue or result in any of the
conditions set forth in Articles 8 and 9 not being satisfied.
7.9 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
Company shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under applicable collective
33
bargaining agreements, if requested by CCC, and shall provide CCC with proof
that any required notice has been sent.
7.10 SALES OF CCC COMMON STOCK.
(a) Except with the consent of CCC, no Shareholder will, directly or
indirectly, offer, sell, contract to sell, pledge or otherwise dispose of any
shares of CCC Common Stock received by such Shareholder in the Merger as the
Base Merger Consideration prior to the first anniversary of the Closing.
Thereafter, up to one-third of the shares of CCC Common Stock received by a
Shareholder as part of the Base Merger Consideration may be resold at any time
after the first anniversary of the Closing, an additional one-third may be
resold beginning eighteen months after the Closing by each Shareholder and the
remaining one-third may be resold beginning on the second anniversary of the
Closing. Except with the consent of CCC, no shareholder will, directly or
indirectly, offer, sell, contract to sell, pledge or otherwise dispose of any
shares of CCC Common Stock received by such Shareholder as the Contingent Merger
Consideration prior to 19 months after the Closing Date. Thereafter, up to 50%
of the shares of CCC Common Stock received by a Shareholder as part of the
Contingent Merger Consideration may be resold at any time beginning 19 months
after the Closing Date and the remaining 50% may be resold beginning 23 months
after the Closing Date. Notwithstanding anything in the foregoing to the
contrary, a Shareholder may transfer shares of CCC Common Stock to a Related
Party for estate planning purposes, provided that such Related Party transferee
(i) acknowledges the contractual restrictions relating to the transfer of such
shares set forth in this Section 7.10 and (ii) agrees to be bound by the same.
For purposes hereof, "Related Part" means, with respect to any Person that is
an individual, any spouse, lineal descendant (including by adoption), executor,
administrator, trustee, legatee or beneficiary of such Person or any other
Person controlled by such Person. For purposes hereof, "Person" means an
individual, corporation, association, partnership, joint venture, trust, estate,
limited liability company, limited liability partnership or other entity or
organization. Transfers of shares of CCC Common Stock by employees of CCC also
are subject to CCC policies against ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and the misuse of material
non-public information and compliance with applicable securities laws and rules.
Persons who become affiliates of CCC may be subject to additional restrictions
on the trading of their CCC Common Shares pursuant to applicable law.
(b) Each Shareholder agrees to sell the shares of CCC Common Stock to
be received by such Shareholder in the Merger only in accordance with the
requirements, if any, of applicable law, including, without limitation, Rule
145(d) promulgated under the 1933 Act or any successor to such rule. CCC
acknowledges that the provisions of this Section 7.10(b) will be satisfied as to
any sale by a Shareholder of the CCC Common Stock that the Shareholder may
acquire pursuant to the Merger by a broker?s letter and a letter from the
Shareholder with respect to that sale stating that the applicable requirements
of Rule 145(d)(1) have been met or are inapplicable by virtue of Rule 145(d)(2)
or Rule 145(d)(3).
(c) The certificate or certificates evidencing the shares of CCC
Common Stock to be delivered to the Shareholders in the Merger will bear
restrictive legends substantially in the following forms as long as applicable:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), MAY APPLY. IF RULE 145
--------------
APPLIES, PRIOR TO [ONE YEAR FROM THE EFFECTIVE DATE], THESE SHARES
--------------------------------
MAY ONLY BE TRANSFERRED IN
34
ACCORDANCE WITH THE PROVISIONS OF RULE 145(D)(1) OR ANOTHER
APPLICABLE EXEMPTION UNDER THE SECURITIES ACT. WITHOUT LIMITING
THE FOREGOING, IF RULE 145 APPLIES, AFTER [ONE YEAR FROM THE
-----------------
EFFECTIVE DATE], THESE SHARES MAY BE TRANSFERRED BY
--------------
NON-AFFILIATES OF THE ISSUER UNDER RULE 145(D)(2) SO LONG AS THE
ISSUER IS CURRENT IN ITS REPORTING OBLIGATIONS UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OR UNDER ANOTHER
APPLICABLE EXEMPTION UNDER THE SECURITIES ACT. WITHOUT LIMITING
THE FOREGOING, AFTER [TWO YEARS FROM THE EFFECTIVE DATE], THESE
---------------------------------
SHARES MAY BE TRANSFERRED BY NON-AFFILIATES OF THE ISSUER WITHOUT
RULE 145 RESTRICTIONS IN ACCORDANCE WITH RULE 145(D)(3).
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CONTRACTUAL RESTRICTIONS ON TRANSFER EXPIRING ON ______________,
PURSUANT TO THAT CERTAIN AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 15, 1998 (THE "AGREEMENT"), BY AND AMONG THE
---------
ISSUER, CCC ACQUIRING CO. NO. 10, ▇▇▇▇▇▇ ENGINEERING, INC.
(THE "COMPANY") AND THE SHAREHOLDERS OF THE COMPANY. PRIOR
-------
TO THE EXPIRATION OF SUCH HOLDING PERIOD, SUCH SHARES MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED AND THE ISSUER SHALL NOT BE
REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, TRANSFER OR
ASSIGNMENT EXCEPT TO THE EXTENT SUCH SALE, TRANSFER OR ASSIGNMENT
IS IN COMPLIANCE WITH THE AGREEMENT. UPON THE WRITTEN REQUEST OF
THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER
AGENT) WHEN THE HOLDING PERIOD HAS EXPIRED.
7.11 CCC STOCK OPTIONS. CCC shall make available to the Surviving
Corporation for distribution at the discretion of the President of the Surviving
Corporation options to purchase up to 250,000 shares of CCC Common Stock to be
granted to the key employees of the Surviving Corporation (who were not, unless
otherwise approved by CCC, Shareholders) on or shortly after the Closing in
accordance with CCC's policies and under the terms of CCC's 1997 Long-Term
Incentive Plan. The exercise price of such options shall be equal to the fair
market value of the underlying shares of CCC Common Stock on the date of grant
and such options shall have vesting provisions established by the Compensation
Committee of the Board of Directors of CCC. The options issued under the terms
of this Section 7.11 shall be nonqualified stock options that shall become
exercisable over no more than a four year period with at least 25% of such
options vesting each year (with the four year period commencing on the Closing
Date) and shall expire on the tenth anniversary of the date of grant provided
the optionee is still an employee. The shares of CCC Common Stock underlying
such options shall be registered under the 1933 Act and approved for listing on
Nasdaq.
7.12 TAX COVENANT. CCC, Newco and the Company shall treat the Merger
for income tax purposes as a reorganization within the meaning of Section 368(a)
of the Code and any comparable state or local tax statute.
7.13 TAX FREE REORGANIZATION PROTECTION. Prior to the Effective Time,
CCC, Newco, the Shareholders and the Company will each use their best efforts to
cause the Merger to qualify, and prior to the Effective Time and on and after
the Closing Date, will refrain from taking any actions that would
35
result in the Merger failing to qualify, as a reorganization as defined under
Code Section 368(a)(1)(A) and Section 368(a)(2)(D). After the Effective Time,
CCC, Newco, the Shareholders and the Company will refrain from taking any
actions that would cause the stock paid to the Shareholders pursuant to Section
2.3 of this Agreement to be taxable to the Shareholders upon receipt.
7.14 D&O INSURANCE AND INDEMNIFICATION OF DIRECTORS AND OFFICERS. All
rights to indemnification for acts or omissions occurring prior to the Closing
now existing in favor of the current or former directors, officers, employees or
agents of the Company required by applicable law, under the Company's Charter
Documents, or any other agreement between any such director, officer, employee
or agent of the Company and the Company and any other now existing obligation of
the Company to indemnify directors or officers for acts or omissions occurring
prior to the Closing shall survive the Merger and shall continue in full force
and effect in accordance with their terms for a period of not less than six (6)
years from the Effective Time and, to the extent the Surviving Corporation fails
to perform its obligations with respect thereto, CCC shall perform such
obligations. In addition, CCC will provide to each director and officer of the
Surviving Corporation, during the term of his service, D&O insurance having
coverage at least as comprehensive as the D&O insurance currently maintained by
CCC.
7.15 GOVERNMENT CONTRACTS. To the extent applicable, it is the
intention of the Company to transfer to Newco and novate the government
contracts listed on SCHEDULE 5.19 and to obtain the required governmental
recognition of Newco as the Company's successor in interest to such government
contracts. Recognizing that applicable government regulations may not permit
the Company to transfer the Company's government contracts and obtain novation
of those contracts prior to the Closing, the Company and Newco agree to
cooperate and diligently pursue contract novation pursuant to applicable and
required government procedures.
7.16 CCC STOCK. Between the date of this Agreement and the Effective
Time, CCC shall not declare, pay or set aside any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its equity securities or directly or indirectly redeem, purchase or otherwise
acquire or offer to acquire any shares of its equity securities, other than any
such action which would not result in any adjustment to the Base Merger
Consideration or the Contingent Merger Consideration pursuant to Section 2.2(b)
and 2.3(e).
7.17 EMPLOYEE BENEFITS MATTERS. For the twelve month period
commencing as of the Closing Date, CCC and any successor thereto shall continue
to maintain all Plans maintained by the Company as of the Closing Date for the
benefit of all employees of CCC or any entity related to CCC under the terms of
Code Sections 414(b), (c), (m) or (o) who are engaged in the performance of
services with respect to the business conducted by the Company prior to the
Closing Date. Any amendment, modification, or termination of any Plan of the
Company maintained by CCC or its successor during any period such Plan is
required to be maintained in accordance with this Section 7.16 shall only be
made if CCC and the president of the Surviving Corporation or his successor, in
his capacity as an employee of CCC or any affiliate thereof, shall mutually
agree to such amendment, modification, or termination.
7.18 GUARANTEED DEBT. It is understood and agreed that the
Shareholders will seek to have all personal guarantees (by pledge of assets or
otherwise) of any Shareholder released in connection with consummation of the
Merger and that CCC will cooperate with the Shareholders in such effort.
Following the Closing CCC will not and will cause the Surviving Corporation not
to draw under any line of credit or other indebtedness the repayment of which
has been personally guaranteed by a Shareholder
36
(by pledge of assets or otherwise) unless and until such personal guarantee
(including any pledge of assets) has been fully released.
7.19 REPAYMENT OF RECEIVABLE. On or before the 180th day immediately
following the Closing CCC shall cause the Surviving Corporation to repay in full
all amounts then outstanding under the ▇▇▇▇▇▇ Note described on Schedule 5.8
hereto.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CCC AND NEWCO
The obligation of CCC and Newco to effect the Merger is subject to the
satisfaction or waiver, at or before the Effective Time, of the following
conditions and deliveries:
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. (a)
All of the representations and warranties of the Shareholders and the Company
contained in this Agreement shall be true, correct and complete on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date except (i) to the extent any such
representation or warranty is expressly stated only as of a specified earlier
date or dates, in which case such representation and warranty shall be true and
accurate as of such earlier specified date or dates (but also subject to clause
(iii) of this Section 8.1(a)), (ii) for changes that are permitted or
contemplated pursuant to this Agreement or (iii) where the consequence of the
matter set forth in such representation and warranty having failed to be true
and accurate as of the date when made, on the Closing Date or on such earlier
specified date would not, in the reasonable discretion of CCC and Newco, have a
Material Adverse Effect, (b) all of the terms, covenants, agreements and
conditions of this Agreement to be complied with, performed or satisfied by the
Company and the Shareholders on or before the Closing Date shall have been duly
complied with, performed or satisfied, except to the extent that the consequence
of the failure of the Company and the Shareholders to have so complied with,
performed or satisfied would not have a Material Adverse Effect; and (c) a
certificate to the foregoing effects dated the Closing Date and signed on behalf
of the Company and by the Shareholders shall have been delivered to CCC.
8.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
CCC's proposed acquisition of the Company, limiting or restricting CCC's conduct
or operation of the business of the Company (or its own business) following the
Merger or restraining or prohibiting the Company or the Shareholders from
consummating the transactions contemplated hereby shall be in effect, nor shall
any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending. There shall be no action, suit, claim or proceeding of
any nature having a reasonable likelihood of success pending or threatened
against CCC, Newco, the Shareholders or the Company, their respective properties
or any of their officers or directors, that could materially and adversely
affect the business, assets, financial condition or results of operations of CCC
and its subsidiaries taken as a whole or the Company; provided, however, that
CCC and Newco shall be required to effect the Merger (and this condition shall
be deemed satisfied) if the foregoing matters (including those set forth in
Section 8.1 above), taken together, would not, in the reasonable discretion of
CCC and Newco, have a Material Adverse Effect.
8.3 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse changes in the business, operations, properties, assets, or condition
(financial or otherwise) of the Company since
37
the date of this Agreement; and CCC shall have received a certificate signed by
each Shareholder dated the Closing Date to such effect with respect to the
Company only; provided, however, that CCC and Newco shall be required to effect
the Merger (and this condition shall be deemed satisfied) if the foregoing
matters, taken together, would not, in the reasonable discretion of CCC and
Newco, have a Material Adverse Effect.
8.4 CONSENTS AND APPROVALS. All consents marked with an asterisk on
SCHEDULE 5.3 or SCHEDULE 5.14 (the "Required Consents"), shall have been
-----------------
obtained. No action by the DOJ or FTC challenging or seeking to enjoin the
consummation of the transactions contemplated hereby shall be pending.
8.5 OPINION OF COUNSEL. CCC shall have received an opinion from
counsel to the Company and the Shareholders, dated the Closing Date, in
substantially the form of EXHIBIT 8.5.
8.6 CHARTER DOCUMENTS. CCC shall have received (a) a copy of the
Articles of Incorporation of the Company certified by an appropriate authority
in the state of its incorporation and (b) a copy of the Bylaws of the Company
certified by the Secretary of the Company.
8.7 QUARTERLY FINANCIAL STATEMENTS. CCC shall have received from the
Company completed quarterly financial statements for any quarter ending after
the date of the Interim Financials in a form reasonably satisfactory to CCC.
8.8 FIRPTA COMPLIANCE. The Company shall have delivered to CCC a
properly executed statement in a form reasonably acceptable to CCC for purposes
of satisfying CCC's obligations under Treas. Reg. (S) 1.1445-2(b).
8.9 EMPLOYMENT AGREEMENTS. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall enter into, at
Closing, an employment agreement with the Surviving Corporation in substantially
the form of EXHIBIT 8.9A hereto. Each Shareholder, other than ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
shall enter into, at Closing, an employment agreement with the Surviving
Corporation in substantially the form of EXHIBIT 8.9B hereto.
8.10 AFFILIATE AGREEMENTS. The Shareholders listed on SCHEDULE 5.31
shall have entered into an Affiliate Agreement in the form set forth as EXHIBIT
8.10.
8.11 SHAREHOLDERS' RELEASE. The Shareholders shall each have
delivered to CCC an instrument dated the Closing Date in the form of EXHIBIT
8.11.
8.12 RELATED PARTY RECEIVABLES AND AGREEMENTS. Except with respect to
the items on SCHEDULE 8.12, all employees, shareholders, directors, officers and
Affiliates of the Company shall have repaid in full all obligations to the
Company in respect of borrowings or advances. The Related Party Agreements set
forth in SCHEDULE 8.12 shall have been terminated as of the Closing.
8.13 CLOSING NET WORTH. The Closing Net Worth of the Company shall be
at least $6,000,000 and the Shareholders shall have delivered to CCC a
certificate to that effect.
38
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS
The obligation of the Shareholders and the Company to effect the
Merger are subject to the satisfaction or waiver, at or before the Effective
Time, of the following conditions and deliveries:
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
of the representations and warranties of CCC and Newco contained in this
Agreement shall be true, correct and complete on and as of the Closing Date with
the same effect as though such representations and warranties had been made as
of such date; all of the terms, covenants, agreements and conditions of this
Agreement to be complied with, performed or satisfied by CCC and Newco on or
before the Closing Date shall have been duly complied with, performed or
satisfied; and a certificate to the foregoing effects dated the Closing Date and
signed by the President or any Vice President of CCC shall have been delivered
to the Company and the Shareholders.
9.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
CCC's proposed acquisition of the Company, limiting or restricting CCC's conduct
or operation of the business of the Company (or its own business) following the
Merger or restraining or prohibiting the Company or the Shareholders from
consummating the transactions contemplated hereby shall be in effect, nor shall
any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending. There shall be no action, suit, claim or proceeding of
any nature having a reasonable likelihood of success pending or threatened,
against CCC, Newco, the Shareholders, or the Company, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, financial condition, results of
operations or prospects of CCC and its subsidiaries taken as a whole.
9.3 CONSENTS AND APPROVALS. All necessary consents of, and filings
with, any governmental authority or agency or third party relating to the
consummation by CCC and Newco of the transactions contemplated herein, shall
have been obtained and made. Any waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated, and no
action by the DOJ or FTC challenging or seeking to enjoin the consummation of
the DOJ transactions contemplated hereby shall be pending.
9.4 EMPLOYMENT AGREEMENTS. The Surviving Corporation shall have
afforded ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ the opportunity to enter into, at Closing, an employment
agreement with the Surviving Corporation in substantially the form of EXHIBIT
8.9A hereto. The Surviving Corporation shall have afforded each Shareholder,
other than ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, the opportunity to enter into, at Closing, an
employment agreement with the Surviving Corporation in substantially the form of
EXHIBIT 8.9B hereto.
9.5 REGISTRATION STATEMENT. No stop order suspending the effectiveness
of the Registration Statement shall have been issued and no proceeding for that
purpose shall have been instituted or threatened by the SEC and the shares of
CCC Common Stock to be issued as part of the Base Merger Consideration shall
have been approved for listing on Nasdaq.
9.6 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse changes in the business, operations, properties, assets, or condition
(financial or otherwise) of CCC and its subsidiaries, taken as a whole, since
the date of this Agreement, and the Shareholders shall have received
39
a certificate signed by CCC and Newco dated the Closing Date to such effect;
provided, however, that the Shareholders and the Company shall be required to
effect the Merger (and this condition shall be deemed satisfied) if the
foregoing matters, taken together, would not, in the reasonable discretion of
the Shareholders and the Company, have a material adverse effect on the business
operations, properties, assets or conditions, financial or otherwise, of CCC and
its subsidiaries taken as a whole.
9.7 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION. The persons set
forth on SCHEDULE 1.2(C) shall have been appointed, effective at the Effective
Time, to serve as officers and directors of the Surviving Corporation.
10. INDEMNIFICATION
10.1 GENERAL INDEMNIFICATION BY THE SHAREHOLDERS. The Shareholders
(other than the Shareholders set forth on SCHEDULE 5 who shall not be required
to indemnify any party hereunder), jointly and severally, covenant and agree to
indemnify, defend, protect and hold harmless CCC, Newco and the Surviving
Corporation and their respective officers, directors, employees, shareholders,
assigns, successors and affiliates (individually, a "CCC Indemnified Party" and
---------------------
collectively, the "CCC Indemnified Parties") from, against and in respect of:
-----------------------
(a) all liabilities, losses, claims, damages, punitive damages,
causes of action, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands, assessments, adjustments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages), costs and expenses
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description) (collectively, "Damages") suffered,
-------
sustained, incurred or paid by the CCC Indemnified Parties in connection with,
resulting from or arising out of, directly or indirectly:
(i) any breach of any representation or warranty of the
Shareholders or the Company set forth in this Agreement or any Schedule or
certificate, delivered by or on behalf of any Shareholder or the Company in
connection herewith; or
(ii) any nonfulfillment of any covenant or agreement by the
Shareholders or, prior to the Effective Time, the Company, under this Agreement;
or
(iii) the assertion against any CCC Indemnified Party of any
Damages relating to the business, operations or assets of the Company prior to
the Closing Date or the actions or omissions of the directors, officers,
shareholders, employees or agents of the Company prior to the Closing Date,
other than Damages arising from matters expressly disclosed in the Company
Financial Statements, this Agreement or the Schedules to this Agreement; or
(iv) the matters disclosed on SCHEDULES 5.23 (conformity with
law; litigation), 5.27 (environmental matters), and any receivables from related
persons that are listed on SCHEDULE 8.12 and are not repaid pursuant to their
terms; and
(b) any and all Damages incident to any of the foregoing or to
the enforcement of this Section 10.1.
40
10.2 GENERAL INDEMNIFICATION BY CCC AND NEWCO. CCC and Newco,
jointly and severally, covenant and agree to indemnify, defend, protect and hold
harmless the Shareholders and their respective officers, directors, employees,
shareholders, assigns, successors and affiliates (individually, a "Shareholder
-----------
Indemnified Party" and collectively, the "Shareholder Indemnified Parties")
----------------- -------------------------------
from, against and in respect of:
(a) all Damages suffered, sustained, incurred or paid by the
Shareholder Indemnified Parties in connection with, resulting from or arising
out of, directly or indirectly:
(i) any breach of any representation or warranty of CCC or
Newco set forth in this Agreement or any Schedule or certificate, delivered by
or on behalf of any CCC or Newco in connection herewith; or
(ii) any nonfulfillment of any covenant or agreement by CCC
or Newco under this Agreement;
(b) any and all Damages incident to any of the foregoing or to
the enforcement of this Section 10.2.
10.3 LIMITATION AND EXPIRATION. Notwithstanding the above:
(a) there shall be no liability for indemnification under Section
10.1 or Section 10.2 unless and until the aggregate amount of Damages exceeds
one percent (1%) of the Base Merger Consideration (the "Indemnification
---------------
Threshold"), at which time the Indemnifying Party (defined in Section 10.4
below) shall be liable for all Damages from the first dollar; provided, however,
that the Indemnification Threshold shall not apply to (i) Damages arising out of
any breaches of the covenants of the Shareholders set forth in this Agreement or
representations and warranties made in Sections 5.4 (capital stock of the
Company), 5.5 (transactions in capital stock), 5.18 (material contracts and
commitments), 5.23 (conformity with law; litigation), 5.24 (taxes), 5.27
(environmental matters), or resulting from any receivables from related persons
that are listed on Schedule 8.13 and are not repaid pursuant to their terms;
(ii) Damages described in Section 10.1(a)(iv), or (iii) Damages arising out of
any breaches of the covenants of CCC or Newco set forth in this Agreement or
representations and warranties made in Section 6.2 (CCC Common Stock), 6.5
(Capitalization), Section 6.6 (litigation), 6.8 (CCC Prospectus), or 6.9
(Registration Statement);
(b) the aggregate amount of any liability for Damages of the
Shareholders, CCC and Newco under this Article 10 shall not exceed 50% of the
Merger Consideration except with regard to any Damages that occur as a result of
fraudulent misrepresentations or fraudulent acts of the Shareholders, CCC or
Newco, as applicable;
(c) the indemnification obligations under this Article 10, or under
any certificate or writing furnished in connection herewith, shall terminate at
the date that is the later of clause (i) or (ii) of this Section 10.3(c):
(i) (1) except as to representations, warranties, and
covenants specified in clause (i)(2) of this Section 10.3(c), the first
anniversary of the Closing Date, or
41
(2) (x) with respect to representations and warranties of
the Shareholders contained in Sections 5.22 (employee benefit plans), 5.24
(taxes), 5.27 (environmental matters), and the indemnification set forth in
Sections 10.1(a)(ii) (with respect to pre-closing covenants only), 10.1(a)(iii),
10.1(a)(iv), or 10.2(a)(ii) (with respect to pre-closing covenants only) on (A)
the date that is six (6) months after the expiration of the longest applicable
federal or state statute of limitation (including extensions thereof agreed to
by the party from whom indemnification is sought), or (B) if there is no
applicable statute of limitation, (i) four (4) years after the Closing Date if
the Claim is related to the cost of investigating, containing, removing, or
remediating a release of Hazardous Material into the environment, or (ii) two
(2) years after the Closing Date for any other Claim covered by clause (i)(2)(B)
of this Section 10.3(c), (y) with respect to covenants of the Shareholders to be
performed after the Closing Date until fully performed and discharged, and (z)
with respect to the covenants or agreements of CCC and Newco to be performed
after the Closing Date until fully performed and discharged; or
(ii) with respect to a particular claim or demand, the final
resolution of such claim or demand (but not any other claim or demand) pending
as of the relevant dates described in clause (i) of this Section 10.3(c) (such
claims referred to as "Pending Claims");
--------------
(d) in no event will any CCC Indemnified Party be entitled to joint
and several indemnification hereunder for the breach by any Shareholder of the
provisions of Article 11 or Article 12 hereof; it being understood and agreed
that the CCC Indemnified Party shall be entitled to indemnification only from
the Shareholder breaching Article 11 or Article 12, as applicable.
(e) the Shareholders shall have no liability under this Article 10 in
respect of any Damages the full value of which have been recouped by CCC as a
result of (i) the payment by the Shareholders to the Surviving Corporation or
CCC of uncollected Accounts Receivable pursuant to Section 7.2 or (ii) CCC's not
having to pay to the Shareholders any portion of the Contingent Merger
Consideration because of any failure to achieve the targets set forth in Section
2.3(a) (i) herein.
(f) After the Effective Time, indemnification pursuant to this
Section 10 shall be the sole and exclusive remedy of any Indemnified Party for
any breach of any representation, warranty, covenant or other agreement herein
or otherwise arising out of or in connection with the transactions contemplated
by this Agreement or the operations of the Company, whether such claim may be
asserted as a breach of contract, tort, a violation or breach of the 1933 Act or
the rules and regulations promulgated thereunder or otherwise, except with
regard to Damages that occur as a result of fraudulent misrepresentations or
fraudulent acts of the Company, the Shareholders, CCC or Newco, as applicable.
10.4 INDEMNIFICATION PROCEDURES. All claims or demands for
indemnification under this Article 10 ("Claims") shall be asserted and resolved
------
as follows:
(a) In the event that any CCC Indemnified Party or Shareholder
Indemnified Party, as applicable (in either case, an "Indemnified Party") has a
-----------------
Claim against any party obligated to provide indemnification pursuant to this
Article 10 (individually and collectively, the "Indemnifying Party") which does
------------------
not involve a Claim being asserted against or sought to be collected by a third
party, the Indemnified Party shall with reasonable promptness notify the
Indemnifying Party of such Claim, specifying the nature of such Claim and the
amount or the estimated amount thereof to the extent then feasible (the "Claim
-----
Notice"). If the Indemnifying Party does not notify the Indemnified Party
------
within thirty days after the date of delivery of the Claim Notice that the
Indemnifying Party disputes such Claim, with a statement of the basis of such
position, the amount of such Claim shall be conclusively
42
deemed a liability of the Indemnifying Party hereunder. In case an objection is
made in writing in accordance with this Section 10.4(a), the Indemnified Party
shall respond in a written statement to the objection within thirty days and,
for sixty days thereafter, attempt in good faith to agree upon the rights of the
respective parties with respect to such Claim (and, if the parties should so
agree, a memorandum setting forth such agreement shall be prepared and signed by
both parties).
(b) (i) In the event that any Claim for which the Indemnifying
Party would be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a third party (a "Third Party Claim"), the Indemnified
-----------------
Party shall deliver a Claim Notice including a copy of the claim if such claim
was made in writing to the Indemnifying Party. The Indemnifying Party shall have
thirty days from the date of delivery of the Claim Notice to notify the
Indemnified Party (A) whether the Indemnifying Party disputes liability to the
Indemnified Party hereunder with respect to the Third Party Claim, and, if so,
the basis for such a dispute, and (B) if such party does not dispute liability,
whether or not the Indemnifying Party desires, at the sole cost and expense of
the Indemnifying Party, to defend against the Third Party Claim, provided that
the Indemnified Party is hereby authorized (but not obligated) to file any
motion, answer or other pleading and to take any other action which the
Indemnified Party shall deem necessary or appropriate to protect the Indemnified
Party's interests.
(ii) In the event that the Indemnifying Party timely notifies
the Indemnified Party that the Indemnifying Party does not dispute the
Indemnifying Parties' obligation to indemnify with respect to the Third Party
Claim, the Indemnifying Party shall defend the Indemnified Party against such
Third Party Claim by appropriate proceedings, provided that, unless the
Indemnified Party otherwise agrees in writing, the Indemnifying Party may not
settle any Third Party Claim (in whole or in part) if such settlement does not
include a complete and unconditional release of the Indemnified Party. If the
Indemnified Party desires to participate in, but not control, any such defense
or settlement the Indemnified Party may do so at its sole cost and expense. The
Indemnified Party shall cooperate with the Indemnifying Party's defense against
any third-party claim. If the Indemnifying Party elects not to defend the
Indemnified Party against a Third Party Claim, whether by failure of such party
to give the Indemnified Party timely notice as provided herein or otherwise,
then the Indemnified Party, without waiving any rights against such party, may
settle or defend against such Third Party Claim in the Indemnified Party's sole
discretion and the Indemnified Party shall be entitled to recover from the
Indemnifying Party the amount of any settlement or judgment and, on an ongoing
basis, all indemnifiable costs and expenses of the Indemnified Party with
respect thereto, including interest from the date such costs and expenses were
incurred.
(iii) If at any time, in the reasonable opinion of the
Indemnified Party, notice of which shall be given in writing to the Indemnifying
Party, any Third Party Claim seeks material prospective relief which could have
an adverse effect on the assets, liabilities, financial condition or results of
operations of the Indemnified Party (or on the Surviving Corporation but only if
the Indemnified Party is CCC and/or Newco in such an instance), the Indemnified
Party shall have the right to control or assume (as the case may be) the defense
of any such Third Party Claim; provided, however, that the Indemnified Party
will not settle any such Third Party Claim without the prior consent of the
Indemnifying Party, which consent shall not be unreasonably withheld. If the
Indemnified Party elects to exercise such right, the Indemnifying Party shall
have the right to participate in, but not control, the defense of such Third
Party Claim at the sole cost and expense of the Indemnifying Party.
(c) Subject to the provisions of Section 10.3, the Indemnified
Party's failure to give reasonably prompt notice as required by this Section
10.4 of any actual, threatened or possible claim or
43
demand which may give rise to a right of indemnification hereunder shall not
relieve the Indemnifying Party of any liability which the Indemnifying Party may
have to the Indemnified Party unless the failure to give such notice materially
and adversely prejudices the Indemnifying Party.
(d) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under this Article 10, provided that the Indemnified
Party shall be obligated to make reasonable efforts to continue pursuing any
payment pursuant to the terms of any insurance policy or to assign its rights
under such policy to the Indemnifying Party.
10.5 SURVIVAL OF REPRESENTATIONS WARRANTIES. The representations of
each of the Company, the Shareholders, CCC and Newco will survive the Closing
until, and will expire upon, the termination of the indemnification obligations
as provided in Section 10.3(e).
10.6 RIGHT TO SET OFF. CCC shall have the right, but not the
obligation, to set off, in whole or in part, against the Pledged Assets, amounts
finally determined under Section 10.4 to be owed to CCC by the Shareholders
under Section 10.1 hereof.
11. NONCOMPETITION
11.1 PROHIBITED ACTIVITIES. Except as described on SCHEDULE 11.1
hereto or as otherwise provided in an employment agreement with CCC or a
subsidiary of CCC, the Surviving Corporation or any other subsidiary of CCC,
each Shareholder agrees that for a period of two years following the Closing
Date, he/she shall not:
(a) engage, as an officer, director, shareholder, owner, partner,
member, joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant, advisor, or sales representative, in any
electrical contracting (including, without limitation, construction, maintenance
and/or design) business selling any products or services in direct competition
with CCC or any of its subsidiaries within 100 miles of any office of CCC or any
office of any of its subsidiaries (the "Territory");
---------
(b) call upon any person who is, at that time, within the Territory,
an employee of CCC or any subsidiary of CCC in a managerial capacity for the
purpose or with the intent of enticing such employee away from or out of the
employ of CCC or any subsidiary of CCC;
(c) call upon any person within the Territory who is, at that time, or
has been, within one year prior to that time, a customer of CCC or any
subsidiary of CCC, for the purpose of soliciting or selling products or services
in direct competition with CCC or any subsidiary of CCC within the Territory;
(d) call upon any person who is, at the time, or has been, within one
year prior to that time, a customer of CCC and/or any subsidiary or affiliate of
CCC with whom the Shareholder has had personal contact for the purpose of
soliciting or selling products or services in direct competition with CCC and/or
any subsidiary or affiliate of CCC; or
(e) on the Shareholder's behalf or on behalf of any competitor, call
upon any person as a prospective acquisition candidate who was, to the
Shareholder?s knowledge, either called upon by
44
CCC or a subsidiary of CCC as a prospective acquisition candidate or was the
subject of an acquisition analysis by CCC or any subsidiary of CCC. The
Shareholder, to the extent lacking the knowledge described in the preceding
sentence, shall immediately cease all contact with any prospective acquisition
candidate upon being informed, in writing, that CCC or any subsidiary of CCC had
so called upon such candidate or made an acquisition analysis thereof.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Shareholder subject to this Article 11 from acquiring as an
investment not more than one percent of the outstanding voting capital stock of
a competing business, whose stock is traded on a national securities exchange or
through the automated quotation system of a registered securities association.
11.2 DAMAGES. Because of the difficulty of measuring economic losses
to CCC and the Surviving Corporation as a result of the breach of the foregoing
covenant, and because of the immediate and irreparable damage that would be
caused to CCC and the Surviving Corporation for which they would have no other
adequate remedy, each Shareholder subject to this Article 11 agrees that, in
the event of a breach by them of the foregoing covenant, the covenant may be
enforced by CCC or the Surviving Corporation by, without limitation, injunctions
and restraining orders.
11.3 REASONABLE RESTRAINT. It is agreed by the parties that the
foregoing covenants in this Article 11 impose a reasonable restraint on the
Shareholders subject to this Article 11 in light of the activities and business
of CCC on the date of the execution of this Agreement and the current and future
plans of CCC and the Surviving Corporation (as successors to the businesses of
the Company).
11.4 SEVERABILITY; REFORMATION. The covenants in this Article 11 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
11.5 INDEPENDENT COVENANT. All of the covenants in this Article 11
shall be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the Shareholders
against the Company, the Surviving Corporation or CCC, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
of such covenants. It is specifically agreed that the period of two years
stated above, shall be computed by excluding from such computation any time
during which any Shareholder subject to this Article 11 is in violation of any
provision of this Article 11 and any time during which there is pending in any
court of competent jurisdiction any action (including any appeal from any
judgment) brought by any person, whether or not a party to this Agreement, in
which action CCC or the Surviving Corporation seeks to enforce the agreements
and covenants of the Shareholders set forth in this Article 11 or in which any
person contests the validity of such agreements and covenants or their
enforceability or seeks to avoid their performance or enforcement; provided,
however, that if any Shareholder is found not to be in violation of the
agreements or covenants in any such activity the period during which the action
was pending shall not be excluded from such computation.
11.6 MATERIALITY. CCC, the Company and each Shareholder hereby agree
that the covenants set forth in this Article 11 are a material and substantial
part of the transactions contemplated by this Agreement, and that no portion of
the Base Merger Consideration or the Contingent Merger Consideration shall be
paid for or allocated to the covenants set forth in this Article 11.
45
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
12.1 CONFIDENTIALITY.
(a) None of the parties hereto will use or disclose to third parties
(except as may be necessary for the consummation of the transactions
contemplated hereby, or as required by law, including, without limitation, in
connection with legal proceedings relating to this Agreement and the
transactions contemplated hereby, or otherwise pursuant to subpoena or the
request of a governmental authority, and then only with prior notice to the
other parties hereto, including delivery of a copy of the subpoena or request,
if applicable) this Agreement, any information (including, without limitation,
financial information) received from any other party hereto or its agents in the
course of investigating, negotiating and performing the transactions
contemplated by this Agreement or any confidential information of the Company or
the Surviving Corporation received or that any such party receives in the future
relating to the Company or the Surviving Corporation (such as lists of
customers, operational policies and pricing and cost policies that are valuable,
special and unique assets of the Company or the Surviving Corporation or the
business of the Company or the Surviving Corporation; provided, however, that
each party may disclose such information to such party's officers, directors,
employees, lenders, advisors, attorneys and accountants who need to know such
information in connection with the consummation of the transactions contemplated
by this Agreement and who are informed by such party of the confidential nature
of such information. Nothing shall be deemed to be confidential information
that: (1) is already in such party's possession, provided that such information
is not known by such party to be subject to another confidentiality agreement
with or other obligation of secrecy to the other party hereto or another party,
or (2) becomes generally available to the public other than as a result of a
disclosure by such party or such party's officers, directors, employees,
lenders, advisors, attorneys or accountants, or (3) becomes available to such
party on a non-confidential basis from a source other than the other party
hereto or its advisors, provided that such source is not known by such party to
be bound by a confidentiality agreement with or other obligation of secrecy to
the other party hereto or another party, or (4) is developed independently by
either party without resort to the confidential information of the other party.
In the event this Agreement is terminated and the transactions contemplated
hereby abandoned, each party will return to the other party all written
confidential information (including all documents, work papers and other written
confidential material) obtained by the such party from any other party, or
developed by such party based on confidential information, in connection with
the transactions contemplated by this Agreement.
(b) No party shall publish any press release or make any other public
announcement concerning this Agreement or the transactions contemplated hereby
without the prior written consent of each other party, which shall not be
withheld unreasonably; provided, however, that nothing contained in this
Agreement shall prevent any party, after notification to each other party, from
making any filings with governmental authorities that, in its judgment, may be
required or advisable in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
12.2 DAMAGES. Because of the difficulty of measuring economic losses
as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which they would have
no other adequate remedy, CCC, the Surviving Corporation and the Shareholders
agree that, in the event of a breach by any of them of the foregoing covenant,
the covenant may be enforced against them by injunctions and restraining orders.
Nothing herein shall be construed
46
as prohibiting any party from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages.
13. GENERAL
13.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing Date solely:
(a) by mutual written consent of the Boards of Directors of CCC
and the Company; or
(b) by the holders of a majority of the voting stock of the Company
and the Company as a group on the one hand, or by CCC, on the other hand, if the
Closing shall not have occurred on or before April 30, 1998, provided that the
right to terminate this Agreement under this Section 13.1(b) shall not be
available to either party (with the Shareholders and the Company deemed to be a
single party for this purpose) whose material misrepresentation, breach of
warranty or failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur on or before such
date; or
(c) by the holders of a majority of the voting stock of the Company
and the Company as a group on the one hand, or by CCC, on the other hand, if
there is or has been a material breach, failure to fulfill or default on the
part of the other party (with the Shareholders and the Company deemed to be a
single party for this purpose) of any of the representations and warranties
contained herein or in the due and timely performance and satisfaction of any of
the covenants, agreements or conditions contained herein, and the curing of such
default shall not have been made on or before the Closing Date; or
(d) by the holders of a majority of the voting stock of the Company
and the Company as a group on the one hand, or by CCC, on the other hand, if
there shall be a final nonappealable order of a federal or state court in effect
preventing consummation of the Merger; or there shall be any action taken, or
any statute, rule or regulation or order enacted, promulgated or issued or
deemed applicable to the Merger by any governmental entity which would make the
consummation of the Merger illegal; or
13.2 EFFECT OF TERMINATION. (a) In the event of termination of this
Agreement by either or both of CCC and/or the holders of the majority of the
voting stock of the Company and the Company (with such Shareholders and the
Company deemed to be a single party for purposes of this Section 13.2) pursuant
to Section 13.1, prompt written notice thereof shall forthwith be given to the
other party and this Agreement shall terminate and the transactions contemplated
hereby shall be abandoned without further action by any of the parties hereto,
but subject to and without limiting any of the rights of the parties specified
herein in the event a party is in default or breach in any material respect of
its obligations under this Agreement. If this Agreement is terminated as
provided herein:
(i) None of the parties hereto nor any of their respective
partners, directors, officers, shareholders, employees, agents, or affiliates
shall have any liability or further obligation hereunder except with respect to
Article 12 and Article 13; and
47
(ii) All filings, applications and other submissions relating
to the transactions contemplated hereby as to which termination has occurred
shall, to the extent practicable, be withdrawn from the agency or other person
to which made.
(b) (i) If this Agreement is terminated pursuant to Section
13.1 and any party shall be in material breach of any of its obligations,
representations, warranties or covenants set forth in this Agreement, the other
party shall have the right to pursue all legal or equitable remedies for breach
of contract or otherwise, and
(ii) Without limiting the generality of the foregoing, or any
applicable law, neither CCC and Newco, on the one hand, nor the Company and the
Shareholders, on the other hand, may rely on the failure of any condition
precedent set forth in Articles 8 and 9 to be satisfied as a ground for
termination of this Agreement by such party if such failure was caused by such
party's (or parties') failure to act in good faith, or a breach of or failure to
perform its representations, warranties, covenants or other obligations in
accordance with the terms hereof.
13.3 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of CCC and the other parties hereto, and the heirs and legal
representatives of the Shareholders.
13.4 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement sets forth
the entire understanding of the parties hereto with respect to the transactions
contemplated hereby. Each of the Schedules to this Agreement is incorporated
herein by this reference and expressly made a part hereof. Any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement. This
Agreement shall not be amended or modified except by a written instrument duly
executed by each of the parties hereto. Any extension or waiver by any party of
any provision hereto shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
13.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered (which deliveries may be made by telefax)
shall be deemed to be an original, and all of which counterparts taken together
shall constitute but one and the same instrument.
13.6 BROKERS AND AGENTS. CCC and Newco (as a group) and the Company
and each Shareholder (as a group) each represents and warrants to the other that
except as set forth in SCHEDULE 13.6, it/they has/have not employed any broker
or agent in connection with the transactions contemplated by this Agreement and
agrees to indemnify the other against all losses, damages or expenses relating
to or arising out of claims for fees or commission of any broker or agent
employed or alleged to have been employed by such party.
13.7 EXPENSES. CCC has paid and will pay the fees, expenses and
disbursements of CCC and Newco and their agents, representatives, accountants
and counsel incurred in connection with the subject matter of this Agreement.
The Shareholders (and not the Company) have paid and will pay the fees, expenses
and disbursements of the Shareholders, the Company, and their agents,
representatives, financial advisers, accountants and counsel incurred in
connection with the subject matter of this Agreement. It is agreed that the
fees and expenses relating to any HSR Act filing will be split between CCC on
the one hand and the Shareholders on the other. At the election of the
Shareholders, any of the foregoing
48
fees contemplated under this SECTION 13.7 payable by them will be paid by CCC or
the Company and not the Shareholders, provided that the aggregate amount of the
Base Merger Consideration is reduced by the amount of such expenses with any
such reduction to have no effect on the calculation of the Actual Earn Out EBIT
or the payment of the Contingent Merger Consideration.
13.8 SPECIFIC PERFORMANCE; REMEDIES. Each party hereto acknowledges
that the other parties will be irreparably harmed and that there will be no
adequate remedy at law for any violation by any of them of any of the covenants
or agreements contained in this Agreement, including without limitation, the
noncompetition provisions set forth in Article 11 and the confidentiality
obligations set forth in Article 12. It is accordingly agreed that, in addition
to any other remedies which may be available upon the breach of any such
covenants or agreements, each party hereto shall have the right to obtain
injunctive relief to restrain a breach or threatened breach of, or otherwise to
obtain specific performance of, the other parties, covenants and agreements
contained in this Agreement.
13.9 NOTICES. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
If to CCC, Newco or the Surviving Corporation to:
Consolidation Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attn: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇
Executive Vice President, General Counsel and Secretary
(Telefax: 202/833-1274)
with a required copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: N. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
If to any Shareholder to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
c/o Walker Engineering, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: ▇-▇▇▇ ▇▇▇-▇▇▇▇
49
with a required copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Canterbury, Stuber, Elder, ▇▇▇▇▇ & ▇▇▇▇▇▇▇
One Lincoln Centre
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
13.10 GOVERNING LAW. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
Delaware, without giving effect to any of the conflicts of laws provisions
thereof that would require the application of the substantive laws of any other
jurisdiction.
13.11 SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstances is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application of
such provision to such person or circumstances in any other jurisdiction, shall
not be affected thereby, and to this end the provisions of this Agreement shall
be severable. The preceding sentence is in addition to and not in place of the
severability provisions in Section 11.4.
13.12 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provision of
this Agreement is intended, nor will any provision be interpreted, to provide or
to create any third party beneficiary rights or any other rights of any kind in
any client, customer, affiliate, shareholder, employee or partner of any party
hereto or any other person or entity.
13.13 FURTHER REPRESENTATIONS. Each party to this Agreement
acknowledges and represents that it has been represented by its own legal
counsel in connection with the transactions contemplated by this Agreement, with
the opportunity to seek advice as to its legal rights from such counsel. Each
party further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement.
13.14 REPRESENTATIVE. Each of the Shareholders hereby appoints
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ as his exclusive agent and attorney-in-fact to act on his behalf
with respect to any and all matters, claims, controversies, or disputes arising
out of the terms of this Agreement (the "Representative"). Each Shareholder
--------------
further agrees that upon the vote of the Shareholders holding a majority of the
stock of the Company immediately preceding the Closing (the "Shareholder
-----------
Approval") the Representative shall have the power to take any and all actions
--------
which the Representative believes are necessary or appropriate or in the best
interests of the Shareholders, as fully as if the Shareholders were acting on
their own behalf, including without limitation, consenting to, and settling any
and all claims, disputes or controversies arising hereunder (including without
limitation the calculation and payment of the Merger Consideration), conducting
all negotiations with and otherwise dealing with CCC and the Surviving
Corporation and engaging counsel, accountants and other representatives in
connection with the foregoing matters. CCC and the Surviving Corporation shall
have the right to rely on any actions taken
50
or omitted to be taken by the Representative as being the act or omission of the
Shareholders, without the need for any inquiry, and any such actions or
omissions shall be binding upon the Shareholders. The Shareholders shall have
the right to change the identity of the Representative upon Shareholder Approval
and shall deliver to CCC and the Surviving Corporation prompt written notice of
any such change of identity, which upon receipt by CCC and the Surviving
Corporation will effect said change. The Shareholders agree to hold the
Representative free and harmless from and indemnify the Representative against
any and all loss, damage or liability which he may sustain as a result of any
action taken in good faith hereunder, including, without limitation, any legal
fees and expenses.
13.15 UNANIMOUS WRITTEN CONSENT OF SHAREHOLDERS. The execution of
this Agreement by all of the Shareholders shall constitute unanimous written
consent of all of the shareholders of the Company approving the Articles of
Merger within the meaning of the State Corporate Laws.
[Execution Page Following]
51
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CONSOLIDATION CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Executive Vice President
CCC ACQUIRING CO. NO. 10
By: /s/ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇
--------------------------------------
▇. ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ENGINEERING, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President
SHAREHOLDERS:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇▇
------------------------------------------
▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
52
Index of Defined Terms
----------------------
1933 Act...................................... 3
Accounts Receivable........................... 12
Actual Earn Out EBIT.......................... 4
Affiliate..................................... 25
Affiliates.................................... 56
Agreement..................................... 1, 35
Articles of Merger............................ 1
Audited Financials............................ 11
Balance Sheet Date............................ 11
Base Merger Consideration..................... 3
CCC........................................... 1
CCC Charter Documents......................... 26
CCC Common Stock.............................. 2
CCC Indemnified Parties....................... 40
CCC Indemnified Party......................... 40
CCC Prospectus................................ 25
CCC's Accountant.............................. 4
CCC's knowledge............................... 26
Certificates.................................. 6
Charter Documents............................. 9
Claim Notice.................................. 42
Claims........................................ 42
Closing....................................... 8
Closing Date.................................. 8
COBRA......................................... 19
Code.......................................... 1
Company....................................... 1, 35
Company Common Stock.......................... 1
Company Financial Statements.................. 11
Company Hazardous Materials Activities........ 24
Company's knowledge........................... 9
Constituent Corporations...................... 1
Contingent Merger Consideration............... 4
Contingent Merger Consideration Payment Date.. 5
controlled group.............................. 19
Damages....................................... 40
DOJ........................................... 31
Earn Out EBIT Notice.......................... 4
Earn Out Period Average Price................. 5
Effective Time................................ 8
employee benefit plan......................... 32
Environmental Permits......................... 24
Equipment..................................... 26
ERISA......................................... 18
First Year Earn Out Amount.................... 4
FTC........................................... 31
53
GAAP.......................................... 4
golden parachute.............................. 18
group health plans............................ 19
Hazardous Material............................ 24
Indemnification Threshold..................... 41
Indemnified Party............................. 42
Indemnifying Party............................ 42
Intellectual Property......................... 14
Interim Balance Sheet......................... 11
Interim Period Average........................ 3
Inventory..................................... 25
knowledge of CCC.............................. 26
knowledge of Newco............................ 26
knowledge of the Company...................... 9
leased Real Property.......................... 13
liabilities................................... 12
Lien.......................................... 10
Material Adverse Effect....................... 9
Material Contracts............................ 15
Maximum Earn Out Amount....................... 4
Merger........................................ 1
Merger Consideration.......................... 6
Merger Documents.............................. 8
Merger Price.................................. 3
multiemployer pension plan.................... 19
New Accounting Firm........................... 5
Newco......................................... 1
Newco's knowledge............................. 26
PBGC.......................................... 18
Pending Claims................................ 42
Permits....................................... 12
Permitted Encumbrances........................ 13
Person........................................ 34
Plans......................................... 18
Pledged Assets................................ 7
Prime Rate.................................... 5
Qualified Plans............................... 18
Registration Statement........................ 28
Related Party................................. 34
Related Party Agreements...................... 15
Release Date.................................. 8
reportable events............................. 19
Representative................................ 50
Required Consents............................. 38
Revised Earn Out EBIT......................... 5
Second Year Earn Out Amount................... 4
SECURITIES ACT................................ 34
Shareholder................................... 1
Shareholder Approval.......................... 50
54
Shareholder Indemnified Parties............... 41
Shareholders.................................. 1
State Corporate Laws.......................... 1
Surviving Corporation......................... 1
Tax........................................... 21
Tax Return.................................... 21
tax-free reorganization....................... 1
Territory..................................... 44
Third Party Claim............................. 43
UCC........................................... 25
Year-End Net Worth............................ 11
55
SCHEDULES
1.1 Articles of Merger
1.2(c) Directors and Officers of Surviving Corporation
5 Shareholders deemed to be making only limited representations or
warranties under the Agreement
5.1 Due Organization
5.3 No Conflicts
5.4 Capital Stock of the Company
5.5 Transactions in Capital Stock
5.6(a) Subsidiaries
5.6(b) Other Holdings of Company
5.6(c) Promissory Notes
5.7 Predecessor Status
5.8 Shareholder Claims
5.10 Financial Statements
5.11 Liabilities and Obligations; Capital Expenditures; Indebtedness as
of the Balance Sheet Date
5.12 Accounts and Notes Receivable
5.14 Permits
5.15(c) Real Property
5.15(c)(i) Liens securing indebtedness for borrowed money that CCC or one of
its affiliates has agreed to assume at Closing.
5.16(a) Personal Property
5.17 Intellectual Property
5.18(a) Material Contracts
5.18(c) Outstanding balances on all loans or credit agreements
5.18(d) Breaches/defaults/terminations/liens on Material Contracts caused by
transaction
5.19 Government Contracts
5.20 Insurance
5.21 Labor and Employment Matters
5.22 Employment Benefit Plans
5.23(a) Conformity with Law
5.23(b) Litigation
5.25 Absence of Changes
5.26 Deposit Accounts; Powers of Attorney
5.27(a) Hazardous Material
5.27(b) Hazardous Materials Activity
5.27(c) Environmental Permits
5.31 "Affiliates" under the 1933 Act
5.32 Location of chief executive offices
5.33 Location of Equipment and Inventory
6.4 No Conflicts (CCC and Newco)
7.4 Related Party Agreements
7.6 Conduct of Business Pending Closing
7.8 Prohibited Activities
8.12 Related Party Receivables and Agreements
11.1 Prohibited Activities
13.6 Brokers and Agents
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EXHIBITS
1.2(a) Articles of Incorporation of Newco
1.2(b) Bylaws of Newco
8.5 Opinion of Counsel
8.9A ▇▇▇▇▇▇ Employment Agreement
8.9B Other Employment Agreement
8.10 Affiliate Agreements
8.11 Shareholders' Releases
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