EXHIBIT 10.3
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AGREEMENT AND PLAN OF EXCHANGE
by and among
GROUP MAINTENANCE AMERICA CORP.
and
THE HOLDERS OF A MAJORITY OF THE
OUTSTANDING COMMON STOCK
OF
AIRTRON, INC.
April 30, 1997
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Confidential information has been omitted from this document and has been filed
separately with the Securities and Exchange Commission. Each such omission has
been marked by "XXX".
TABLE OF CONTENTS
Page
1. THE CLOSING............................................................... 1
1.1. The Closing Date.................................................. 1
1.2. Power of Attorney; Section 351 Plan............................... 2
1.2.1. Power of Attorney......................................... 2
1.2.2. Section 351 Plan.......................................... 3
1.3. Transfer and Exchange of Stock and Other Rights................... 3
1.3.1. Transfer and Exchange of Company Common Stock, Warrants
and SARs.......................................................... 3
1.3.2. Application of Per Stockholder Aggregate Consideration.... 4
1.3.3. Transfer of GMAC Outstanding Stock to Parent.............. 7
1.3.4. Deliveries at Closing; Subsequent Deliveries.............. 7
1.3.5. Certain Compensation......................................10
1.4. Exchange of Stock.................................................10
1.4.1. Closing...................................................10
1.4.2. Delivery of Company Common Stock..........................10
1.4.3. Assignments...............................................11
1.4.4. Payment In Full Satisfaction of All Rights................11
1.5. Determination of Per Share Amounts and Other Matters..............11
1.5.1. Determination of Final Per Share Amounts..................11
1.5.2. Other Definitions.........................................13
1.5.3. Statement of Closing Consideration........................15
1.5.4. Non-Prejudicial...........................................17
2. REPRESENTATIONS AND WARRANTIES
OF THE MAJORITY STOCKHOLDERS...........................................17
2.1. Representations and Warranties of the Majority Stockholders.......17
2.1.1. Organization, Etc.........................................17
2.1.2. Subsidiaries..............................................17
2.1.3. Capitalization of the Company and the Company Subsidiaries
..........................................................17
2.1.4. Authority.................................................19
2.1.5. Consents..................................................19
2.1.6. Title.....................................................19
2.1.7. Defaults..................................................20
2.1.8. Power of Attorney.........................................20
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2.1.9. Proprietary Rights........................................20
2.1.10. Labor Matters.............................................21
2.1.11. Employee Benefits.........................................21
2.1.12. Maintenance...............................................23
2.1.13. Necessary Assets..........................................24
2.1.14. Certain Contracts.........................................24
2.1.15. Bond Requirements.........................................24
2.1.16. Other Disclosures.........................................25
2.1.17. Officers, Directors and Affiliates........................26
2.1.18. Investment Company........................................26
2.1.19. Financial Statements......................................26
2.1.20. Undisclosed Liabilities...................................27
2.1.21. Guaranties, Etc...........................................27
2.1.22. Taxes.....................................................28
2.1.23. Inventories and Receivables...............................28
2.1.24. Full Authority............................................28
2.1.25. Environmental Matters.....................................29
2.1.26. Legal Actions.............................................31
2.1.27. Specific Obligations......................................31
2.1.28. Information in ESOP Participant Disclosure Statement;
Information Statement.....................................31
2.1.29. No Material Adverse Change................................32
2.1.30. Disclosure................................................33
2.1.31. Condemnation..............................................34
2.1.32. Change in Laws............................................34
2.1.33. Company Material Adverse Effect...........................34
2.2. Several Representations and Warranties of the Stockholders........34
2.2.1. Stock Ownership, Etc......................................34
2.2.2. Authority.................................................34
2.2.3. Consents..................................................35
2.2.4. Defaults..................................................35
3. PARENT'S REPRESENTATIONS, WARRANTIES AND COVENANTS........................36
3.1. Representations and Warranties....................................36
3.1.1. Organization..............................................36
3.1.2. Subsidiaries..............................................36
3.1.3. Capitalization of Parent..................................36
3.1.4. Authority.................................................37
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3.1.5. Consents.................................................38
3.1.6. Title....................................................38
3.1.7. Defaults.................................................38
3.1.8. Power of Attorney........................................39
3.1.9. Proprietary Rights.......................................39
3.1.10. Labor Matters............................................39
3.1.11. Employee Benefits........................................39
3.1.12. Certain Contracts........................................41
3.1.13. Officers, Directors and Affiliates.......................41
3.1.14. Investment Company.......................................42
3.1.15. Financial Statements.....................................42
3.1.16. Undisclosed Liabilities..................................42
3.1.17. Guaranties, Etc..........................................42
3.1.18. Taxes....................................................43
3.1.19. Full Authority...........................................43
3.1.20. Environmental Matters....................................43
3.1.21. Legal Actions............................................44
3.1.22. Information in ESOP Participant Disclosure Statement;
Information Statement....................................44
3.1.23. No Material Adverse Change...............................45
3.1.24. Disclosure...............................................45
3.1.25. Parent Material Adverse Effect...........................45
4. CONDUCT PRIOR TO THE CLOSING AND CERTAIN OTHER MATTERS...................45
4.1. Company..........................................................45
4.1.1. Preservation of Business.................................45
4.1.2. Cooperation..............................................45
4.1.3. Insurance................................................46
4.1.4. Certain Notices..........................................46
4.1.5. Filings, Etc.............................................46
4.1.6. Compliance with Laws.....................................46
4.1.7. Encumbrances and Dispositions............................47
4.1.8. Negotiations.............................................47
4.1.9. Other Matters............................................47
4.1.10. Access...................................................50
4.1.11. Satisfaction of Conditions...............................50
4.1.12. Title Insurance..........................................50
4.1.13. Capital Budget...........................................51
4.2. Majority Stockholders............................................52
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4.3. Release..........................................................52
4.4. Parent...........................................................52
4.4.1. Preservation of Business.................................52
4.4.2. Cooperation..............................................53
4.4.3. Certain Notices..........................................53
4.4.4. Filings, Etc.............................................53
4.4.5. Compliance with Laws.....................................53
4.4.6. Other Matters............................................53
4.4.7. Access...................................................54
4.4.8. Satisfaction of Conditions...............................55
4.5. Certain Other Actions and Documents..............................55
4.5.1. Key Employee and Manager Employment Agreements...........55
4.5.2. Releases of Certain Majority Stockholders................55
4.5.3. Voting Agreement.........................................55
4.5.4. Transfer Restrictions....................................56
4.5.5. Adoption of Shareholders Agreement.......................56
4.6. Certain Elections................................................56
4.6.1. Securities Acquisition Election..........................56
4.6.2. Transfer Transaction Election............................57
4.6.3. Other....................................................58
4.7. Indemnification of Officers and Directors of the Company.........58
4.8. Minimum IPO Proceeds.............................................58
5. EMPLOYEE BENEFITS.........................................................59
5.1. ESOP; Employee Offering..........................................59
5.1.1. Suspension of ESOP Withdrawals...........................59
5.1.2. Purchase of ESOP Stock...................................59
5.1.3. Amendment and Restatement of the ESOP....................59
5.1.4. ESOP Disclosure Statement................................59
5.1.5. Employee Offering Memorandum.............................60
5.2. Deferred Compensation Plans......................................60
5.2.1. No Additional Rights.....................................60
5.3. Future Option Plans..............................................60
5.4. Split-Dollar Insurance Policy....................................61
5.5. Employee Benefits Generally......................................61
6. SURVIVAL, INDEMNIFICATIONS................................................61
6.1. Survival.........................................................61
6.2. Indemnification..................................................62
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6.2.1. Parent Indemnified Parties...............................62
6.2.2. Stockholder Indemnity....................................63
6.2.3. Parent Indemnity.........................................63
6.3. Limitations......................................................64
6.4. Notices..........................................................64
6.4.1. Indemnification Notice...................................64
6.4.2. Tax Proceeding Notices...................................65
6.5. Character of Indemnity Payments..................................67
7. CONDITIONS TO CLOSING.....................................................67
7.1. Parent...........................................................67
7.1.1. Representations, Warranties and Covenants of Stockholders
.........................................................67
7.1.2. Opinion..................................................67
7.1.3. No Casualty, Loss or Damage..............................68
7.1.4. Title Insurance..........................................68
7.1.5. Documents, Stock Certificates............................68
7.1.6. Consents.................................................68
7.1.7. Licenses, Etc............................................68
7.1.8. No Material Adverse Change...............................68
7.1.9. Financing................................................68
7.1.10. Discharge of Indebtedness, Releases, Etc.................69
7.1.11. Certain Corporate Actions................................69
7.1.12. ESOP and Amended and Restated Plan.......................69
7.1.13. Agreements and Actions under Articles 4 and 5............69
7.2. Conditions Precedent to Obligations of the Stockholders..........70
7.2.1. Representations, Warranties and Covenants of Parent......70
7.2.2. Legal Opinion............................................70
7.2.3. Documents................................................70
7.2.4. Consents.................................................70
7.2.5. No Material Adverse Change...............................70
7.2.6. Agreements and Actions Under Articles 4 and 5............71
7.2.7. Tax Opinion..............................................71
8. TERMINATION...............................................................71
8.1. Grounds for Termination..........................................71
8.1.1. Mutual Consent...........................................71
8.1.2. Optional.................................................71
8.1.3. Dispute..................................................72
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8.1.4. Legal Restraint..........................................72
8.2. Effect of Termination............................................72
9. MISCELLANEOUS.............................................................72
9.1. Notice...........................................................72
9.2. Further Documents................................................73
9.3. Assignability....................................................73
9.4. Exhibits and Schedules...........................................74
9.5. Entire Agreement.................................................74
9.6. Headings.........................................................75
9.7. CONTROLLING LAW AND JURISDICTION.................................75
9.8. Public Announcements.............................................75
9.9. Finder's Fees and Commissions....................................75
9.10. No Third Party Beneficiaries.....................................76
9.11. Amendments and Waivers...........................................76
9.12. No Employee Rights...............................................76
9.13. Non-Recourse.....................................................76
9.14. When Effective...................................................76
9.15. Takeover Statutes................................................76
9.16. Number and Gender of Words.......................................77
9.17. Invalid Provisions...............................................77
9.18. Multiple Counterparts............................................77
9.19. No Rule of Construction..........................................77
9.20. Preparation of Tax Returns for Pre-Closing Periods...............77
9.21. Amendment of Pre-Closing Tax Returns.............................78
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INDEX OF DEFINED TERMS
Term Page
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Adoption Agreement......................................................56
Aggregate Consideration................................................. 7
Aggregate Stock Interests............................................... 5
Agreement............................................................... 1
Amended and Restated Savings Plan.......................................59
Attorney-in-Fact........................................................ 2
Audit Notice............................................................65
Audited Financial Statements............................................27
Audited 1997 Financial Statements.......................................15
Closing.................................................................10
Closing Date............................................................ 1
Closing Per Share Cash Amount........................................... 7
Closing Per Share Common Stock Amount................................... 8
Closing Per Share Preferred Stock Amount................................ 8
Closing Per Stockholder Aggregate Consideration......................... 7
Code....................................................................10
Company................................................................. 1
Company Common Stock.................................................... 3
Company Contracts.......................................................24
Company Material Adverse Effect.........................................34
Company Plan Fiduciary..................................................22
Company Plans...........................................................21
Company Subsidiaries....................................................17
Controlled Group........................................................21
Deferred Compensation Plans.............................................60
Deferred Compensation Stock Interests................................... 4
Defined Expense Reductions..............................................13
Directly Held Company Common Stock...................................... 3
Disclosure Schedule.....................................................17
Division Vice Presidents Option......................................... 7
EBITDA..................................................................13
EBITDA Negative Adjustment..............................................11
EBITDA Positive Adjustment..............................................11
Election Notice.........................................................56
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Employee Offering Memorandum............................................60
Employment Agreements...................................................55
Environmental Claim.....................................................29
Environmental Liabilities...............................................30
Environmental Permit....................................................30
ERISA...................................................................21
ESOP....................................................................31
ESOP Participant Disclosure Statement...................................59
ESOP Stock Purchase Agreement...........................................59
Estimated Financial Statements..........................................27
Excise Tax..............................................................10
Final Outstanding Common Stock Number...................................13
Final Per Share Cash Amount.............................................12
Final Per Share Common Stock Amount.....................................12
Final Per Share Preferred Stock Amount..................................12
GAAP....................................................................13
Gross Up................................................................10
Hazardous Materials.....................................................30
Indemnified Party.......................................................64
Indemnifying Party......................................................64
Information Statement...................................................31
In-Service Distributions................................................59
IPO.....................................................................56
Long-Term Debt..........................................................13
Losses..................................................................62
Majority Stockholder Releases...........................................55
Majority Stockholders................................................... 1
Negative Adjustment Amount..............................................12
Negative Common Stock Number............................................14
Net After-Tax Income....................................................14
Net Stock Purchase Cost.................................................14
Net Working Capital.....................................................14
Net Worth...............................................................33
Net Working Capital Negative Adjustment.................................12
Net Working Capital Positive Adjustment.................................11
Neutral Accountants.....................................................58
Notice of Disagreement..................................................16
Notice of Dispute....................................................... 8
Notice of Objection.....................................................57
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Other Ownership Interests...............................................15
Other Stockholders...................................................... 1
Owner's Policies of Title Insurance.....................................51
Parent.................................................................. 1
Parent Acceptance Notice................................................57
Parent Common Stock..................................................... 4
Parent Common Stock Value............................................... 5
Parent Contracts........................................................41
Parent Controlled Group.................................................39
Parent Disclosure Schedule..............................................36
Parent Employee Stock Offering..........................................60
Parent Financial Statements.............................................42
Parent Indemnified Parties..............................................62
Parent Material Adverse Effect..........................................45
Parent Other Ownership Interests........................................36
Parent Plan Fiduciary...................................................40
Parent Plans............................................................40
Parent Preferred Stock.................................................. 4
Parent Preferred Stock Value............................................ 5
Parent Proprietary Rights...............................................39
Parent Rejection Notice.................................................57
Parent Subsidiaries.....................................................36
Pending Acquisition.....................................................37
Percentage Liability....................................................64
Permitted Assignee......................................................73
Permitted Exceptions....................................................51
Per Stockholder Aggregate Consideration................................. 4
Positive Adjustment Amount..............................................12
Power of Attorney....................................................... 2
Proceeding Notice.......................................................66
Proprietary Rights......................................................20
Receiving Stockholder...................................................66
Registration Rights Agreement...........................................56
Requirements of Environmental Law.......................................30
SARs.................................................................... 3
SAR Shares.............................................................. 3
SAR Value............................................................... 5
Second Election Notice..................................................57
Section 351 Plan........................................................ 3
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Securities Acquisition Consideration...................................56
Securities Acquisition Transaction.....................................56
Settlement Notice......................................................65
▇▇▇▇▇▇▇................................................................14
▇▇▇▇▇▇▇ Offering.......................................................14
Statement of Closing Consideration.....................................15
Statement of Final Per Share Amounts................................... 8
Stock Transfer Restriction Agreement...................................56
Stockholder............................................................ 2
Stockholders........................................................... 2
Stockholder Indemnified Parties........................................63
Surveys................................................................51
Survival Period........................................................61
Tax Notice.............................................................66
Tax Offset Bonus.......................................................10
Terminated Obligations.................................................69
Threshold..............................................................64
Title Commitments......................................................50
Title Insurance Property...............................................51
Transfer Transaction...................................................57
Unaudited Financial Statements.........................................27
Voting Agreement.......................................................55
Warrant Shares......................................................... 3
Warrant Value.......................................................... 5
Warrants............................................................... 3
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LIST OF EXHIBITS
Exhibit 1.2.2................................................... 3
Exhibit 1.3.1(a)................................................ 3
Exhibit 1.3.1(b)................................................ 4
Exhibit 1.3.4................................................... 9
Exhibit 1.4.2,..................................................10
Exhibit 1.5.2...................................................13
Exhibit 4.5.1...................................................55
Exhibit 4.5.3...................................................55
Exhibit 4.5.4(a)................................................56
Exhibit 4.5.4(b)................................................56
Exhibit 5.1.2...................................................59
Exhibit 7.1.2...................................................67
Exhibit 7.2.2...................................................70
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AGREEMENT AND PLAN OF EXCHANGE
THIS AGREEMENT AND PLAN OF EXCHANGE (this "Agreement") is made this 30th
day of April, 1997, by and among GROUP MAINTENANCE AMERICA CORP., a Texas
corporation ("Parent"), and the holders of a majority of the outstanding common
stock, $.01 par value per share, of AIRTRON, INC., a Delaware corporation (the
"Company") listed on the signature pages hereto under the caption "Majority
Stockholders" ("Majority Stockholders") and certain other stockholders of the
Company listed on the signature pages hereto under the caption "Other
Stockholders" ("Other Stockholders").
WHEREAS, Parent, the Majority Stockholders and the Other Stockholders
desire to provide for the transfer by the Majority Stockholders and the Other
Stockholders to Parent of certain outstanding shares of capital stock, warrants
and stock appreciation rights of the Company in exchange for cash, common stock
and preferred stock of Parent on the terms and subject to the conditions
provided for herein; and
WHEREAS, for federal income tax purposes, it is intended that such transfer
and exchange shall qualify as an exchange under the provisions of Section 351 of
the Internal Revenue Code of 1986, as amended and the rules and regulations
promulgated thereunder;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, and intending to be legally bound
hereby, the parties agree as follows:
1. THE CLOSING
1.1. The Closing Date. For purposes of this Agreement, the term "Closing
----------------
Date" shall mean May 2, 1997; provided, however, that Parent and the Attorney-
in-Fact (as defined below) may, at any time, designate any earlier date as the
Closing Date if they mutually determine that each of the conditions set forth in
Article 7 will be satisfied (or waived) on or before such earlier date. In the
event that one or more of the conditions in Article 7 has not been satisfied or
waived on any date scheduled to be the Closing Date, this Agreement shall not
terminate (unless pursuant to the exercise by one of the parties of such party's
rights under Article 8) and the Closing Date shall be rescheduled to such date
as may be mutually agreed by Parent and the Attorney-in-Fact or, if no such date
is mutually agreed upon within two days after the previously scheduled Closing
Date, the earliest date specified in a written notice delivered by Parent or the
Attorney-in-Fact to the other which is at least three days after the delivery of
such notice. For accounting and financial reporting purposes, the
effective date of the exchange contemplated hereby shall be the close of
business on April 30, 1997 unless otherwise agreed by Parent and the Attorney-
in-Fact.
1.2. Power of Attorney; Section 351 Plan.
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1.2.1. Power of Attorney. Each Majority Stockholder and each Other
-----------------
Stockholder (collectively, the "Stockholders" and individually, a
"Stockholder"), for himself or itself and his or its heirs, legal
representatives, successors and assigns, and, if acting in a fiduciary capacity,
as such fiduciary, hereby nominates, constitutes and appoints ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
his or its true and lawful agent, proxy and attorney-in-fact (the "Attorney-in-
Fact") with full power of substitution and full discretionary power and
authority, without the consent of such Stockholder and for and on such
Stockholder's behalf and in such Stockholder's name, place and stead, to perform
and consummate the transactions contemplated by this Agreement, including,
without limitation, (i) to execute and deliver all documents and instruments
which may be or are to be executed and delivered by such Stockholder pursuant to
or as contemplated by this Agreement and the Stockholder certificates under
Section 7.1.1; (ii) to effect any amendment to this Agreement, any Exhibit
hereto, and any document or instrument referred to in clause (i) and to grant
any waivers and consents thereunder that, in each case, the Attorney-in-Fact, in
his sole discretion, deems appropriate; (iii) to give, receive, execute and
deliver all notices, requests, admissions and other communications on behalf of
such Stockholder pursuant to this Agreement; (iv) to receive and distribute
distributions under this Agreement; (v) to undertake the defense of or initiate
any dispute, claim, action, suit, proceeding or other matter arising out of or
related to this Agreement or any of the transactions contemplated hereby which
the Attorney-in-Fact, in his sole discretion, deems appropriate; (vi) to settle
any such dispute, claim, action, suit, proceeding or matter and execute and
deliver all releases, waivers or other instruments in connection therewith;
(vii) to pay expenses incurred or which may be incurred by or on behalf of such
Stockholder in connection with this Agreement; and (viii) to vote or execute
written consents with respect to such Stockholder's Company Common Stock (as
defined below). The rights and powers hereinabove granted to the Attorney-in-
Fact are herein sometimes referred to as the "Power of Attorney". Each
Stockholder agrees that the Power of Attorney shall be deemed to be coupled with
an interest and irrevocable. Each Stockholder ratifies and confirms all that the
Attorney-in-Fact may do on such Stockholder's behalf pursuant to this Agreement
and agrees to indemnify and hold harmless the Attorney-in-Fact from and against
all losses, damages or liabilities for any action taken on behalf of such
Stockholder in connection with this Agreement in good faith without gross
negligence or willful misconduct; provided, however, that the liability of each
Stockholder under this sentence shall be limited to the value of the Per
Stockholder Aggregate Consideration (as defined below) paid, payable or
distributable in respect of the Company Common Stock,
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Warrants (as defined below), SARs (as defined below) and Deferred Compensation
Stock Interests (as defined below) held by such Stockholder as of the Closing
Date, immediately prior to the Closing (as defined below). By executing this
Agreement, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ accepts appointment as Attorney-in-Fact and agrees
to act as such. In the event of the resignation, death or inability to act of
the Attorney-in-Fact prior to the Closing Date, a successor shall be named by
the Stockholders holding a majority of the Company Common Stock held by all
Stockholders, and in the event of the resignation, death or inability to act of
the Attorney-in-Fact on or after the Closing Date, a successor shall be named by
the Stockholders who held, immediately prior to the Closing Date, a majority of
the Company Common Stock held by all Stockholders. If such Stockholders fail or
refuse to appoint such successor within 30 days from the date of such
resignation, death or inability to act, Parent shall name one of the
Stockholders as such successor by written notice to the Stockholders; provided,
however, that with respect to the Attorney-in-Fact's powers as proxy to vote or
give consents with respect to Company Common Stock hereunder, the Attorney-in-
Fact may substitute another person or entity hereunder as proxy, and in the
event the Attorney-in-Fact fails or refuses to do so prior to his resignation,
death or inability to act, each Stockholder may designate a successor proxy to
vote such Stockholder's shares of Company Common Stock or give consents with
respect thereto. Each such successor shall have all power, authority, rights and
privileges hereby conferred upon the original Attorney-in-Fact, and the term
"Attorney-in-Fact" as used in this Agreement shall be deemed to include each
such successor.
1.2.2. Section 351 Plan. Prior to the Closing Date, Parent shall
----------------
adopt, and Parent and the Stockholders shall execute and deliver, a Section 351
Plan in the form of Exhibit 1.2.2 (the "Section 351 Plan").
1.3. Transfer and Exchange of Stock and Other Rights.
-----------------------------------------------
1.3.1. Transfer and Exchange of Company Common Stock, Warrants and
-----------------------------------------------------------
SARs. Each Stockholder owns and holds, beneficially and of record, the number of
----
shares of common stock, par value $.01 per share, of the Company ("Company
Common Stock") listed beside such Stockholder's name on Exhibit 1.3.1(a) under
the caption "Company Common Stock" (the "Directly Held Company Common Stock"),
and, to the extent so listed, warrants ("Warrants") to purchase the number of
shares of Company Common Stock listed beside such Stockholder's name on Exhibit
1.3.1(a) under the caption "Warrants" ("Warrant Shares"), stock appreciation
rights ("SARs") applicable to that number of shares of Company Common Stock (the
"SAR Shares") listed beside such Stockholder's name on Exhibit 1.3.1(a) under
the caption "SARs" and interests (the "Deferred Compensation Stock Interests")
in the number of shares of Company Common Stock held in the Company's
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Deferred Compensation Plans (as defined below) listed beside such Stockholder's
name on Exhibit 1.3.1(a) under the caption "Deferred Compensation Plan Stock
Interest." On the Closing Date, each Stockholder shall transfer to Parent all of
such Stockholder's Directly Held Company Common Stock, Warrants and SARs and the
trustee(s) of the Deferred Compensation Plans under which such Stockholder has
Deferred Compensation Stock Interests shall transfer all of the shares of
Company Common Stock in which such Stockholder has a Deferred Compensation Stock
Interest in exchange for the right to receive an aggregate consideration (the
"Per Stockholder Aggregate Consideration"), to be allocated as set forth in
Section 1.3.2, to be determined as follows: (i) for each share of Directly Held
Company Common Stock and Company Common Stock in which such Stockholder has a
Deferred Compensation Stock Interest (a) cash equal to the Final Per Share Cash
Amount (as defined below), (b) that number of shares of Preferred Stock of
Parent, $.001 par value, having the rights, privileges, designations, powers and
limitations described in the Certificate of Designation attached hereto as
Exhibit 1.3.1(b) ("Parent Preferred Stock") equal to the Final Per Share
Preferred Stock Amount (as defined below), and (c) that number of shares of
Common Stock of Parent, $.001 par value ("Parent Common Stock") equal to the
Final Per Share Common Stock Amount (as defined below), and (ii) for each
Warrant Share for which a Warrant held by such Stockholder is exercisable, (a)
cash equal to the Final Per Share Cash Amount, minus $1.00 for each such Warrant
Share, (b) that number of shares of Parent Preferred Stock equal to the Final
Per Share Preferred Stock Amount, and (c) that number of shares of Parent Common
Stock equal to the Final Per Share Common Stock Amount, and (iii) for each SAR
Share (a) cash equal to the Final Per Share Cash Amount, minus (1) in the case
of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, $13.50 for each
SAR Share, or (2) in the case of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, $12.45 for each SAR Share, (b) that number of shares of Parent Preferred
Stock equal to the Final Per Share Preferred Stock Amount, and (c) that number
of shares of Parent Common Stock equal to the Final Per Share Common Stock
Amount. The number of shares of Parent Preferred Stock and Parent Common Stock
to which each Stockholder shall be entitled as each such Stockholder's Per
Stockholder Aggregate Consideration shall be rounded to the nearest whole share.
The Per Stockholder Aggregate Consideration shall be applied as follows:
1.3.2. Application of Per Stockholder Aggregate Consideration. The
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Per Stockholder Aggregate Consideration payable with respect to a Stockholder's
Aggregate Stock Interests (as defined below), determined as set forth in Section
1.3.1, shall be allocated after the final determination of the Final Per Share
Cash Amount, the Final Per Share Preferred Stock Amount and the Final Per Share
Common Stock Amount as provided in Section 1.3.4 as follows in the priority set
forth in (ii)-(v) below:
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(i) For purposes hereof, the term "Warrant Value" shall
mean an amount equal to the number of Warrant Shares held by such Stockholder as
set forth on Exhibit 1.3.1(a) multiplied by the sum of (a) the Final Per Share
Cash Amount minus $1.00, plus (b) the Final Per Share Preferred Stock Amount
multiplied by $1.00, plus (c) the Final Per Share Common Stock Amount multiplied
by $2.76. For purposes hereof, the term "SAR Value" shall mean an amount equal
to the number of SAR Shares to which the SARs held by such Stockholder are
applicable as set forth on Exhibit 1.3.1(a) multiplied by the sum of (a) the
Final Per Share Cash Amount minus (1) in the case of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, $13.50 for each SAR Share, or (2) in the case
of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, $12.45 for each SAR
Share, plus (b) the Final Per Share Preferred Stock Amount multiplied by $1.00,
plus (c) the Final Per Share Common Stock Amount multiplied by $2.76. For
purposes hereof, the term "Deferred Compensation Stock Value" shall mean an
amount equal to the number of shares of Company Common Stock in which a
Stockholder has a Deferred Compensation Stock Interest as set forth on Exhibit
1.3.1(a) multiplied by the sum of (a) the Final Per Share Cash Amount, plus (b)
the Final Per Share Preferred Stock Amount multiplied by $1.00, plus (c) the
Final Per Share Common Stock Amount multiplied by $2.76. For purposes hereof,
the term "Parent Preferred Stock Value" shall mean $1.00 per share of Parent
Preferred Stock, and the term "Parent Common Stock Value" shall mean $2.76 per
share of Parent Common Stock.
(ii) If a Stockholder transferred Warrants to Parent
pursuant to Section 1.3.1, the cash portion of the Per Stockholder Aggregate
Consideration for such Stockholder's Directly-Owned Common Stock, Warrants, SARs
and Deferred Compensation Stock Interests (collectively, the "Aggregate Stock
Interests") shall be allocated to such Warrants to reduce the Warrant Value to
zero, if such cash is sufficient in amount. If the cash portion of such Per
Stockholder Aggregate Consideration is less than the Warrant Value, such cash
shall be allocated to such Warrants and shall reduce the Warrant Value on a
dollar-for-dollar basis, and Parent Preferred Stock constituting part of such
Per Stockholder Aggregate Consideration shall, to the extent required to reduce
the Warrant Value to zero, be allocated to such Warrant and shall reduce the
Warrant Value on a dollar-for-dollar basis using the Parent Preferred Stock
Value for such purpose. If, after application of the Parent Preferred Stock
Value of all Parent Preferred Stock constituting a part of such Per Stockholder
Aggregate Consideration there remains any Warrant Value, the Parent Common Stock
constituting a part of such Per Stockholder Aggregate Consideration shall be
allocated to the extent required to reduce the remaining Warrant Value to zero,
using the Parent Common Stock Value for such purpose.
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(iii) If a Stockholder transferred SARs to Parent pursuant
to Section 1.3.1, the cash portion of the Per Stockholder Aggregate
Consideration for such Stockholder's Aggregate Stock Interests and not allocated
to such Stockholder's Warrants, if any, pursuant to clause (ii) above shall be
allocated to such SARs to reduce the SAR Value to zero, if such cash is
sufficient in amount. If such cash portion of the Per Stockholder Aggregate
Consideration is less than the SAR Value, such cash shall be allocated to such
SARs and shall reduce the SAR Value on a dollar-for-dollar basis, and Parent
Preferred Stock constituting part of such Per Stockholder Aggregate
Consideration and not allocated to such Stockholder's Warrants, if any, pursuant
to clause (ii) above shall be allocated to such SAR and shall reduce the SAR
Value on a dollar-for-dollar basis using the Parent Preferred Stock Value for
such purpose. If, after application of the Parent Preferred Stock Value of all
such Parent Preferred Stock constituting part of such Per Stockholder Aggregate
Consideration and not allocated to such Stockholder's Warrants, if any, pursuant
to clause (ii) above, there remains any SAR Value, the Parent Common Stock
constituting a part of such Per Stockholder Aggregate Consideration and not
allocated to such Stockholder's Warrants, if any, pursuant to clause (ii) above,
shall be allocated, to the extent required, to reduce the remaining SAR Value to
zero, using the Parent Common Stock Value for such purpose.
(iv) If a Stockholder's Deferred Compensation Stock
Interest was transferred to Parent pursuant to Section 1.3.1, the cash portion
of the Per Stockholder Aggregate Consideration for such Stockholder's Aggregate
Stock Interests and not allocated to such Stockholder's Warrants, if any,
pursuant to clause (ii) above, or to such Stockholder's SARS, if any, pursuant
to clause (iii) above shall be allocated to such Deferred Compensation Stock
Interests to reduce the Deferred Compensation Stock Value to zero, if such cash
is sufficient in amount. If such cash portion of the Per Stockholder Aggregate
Consideration is less than the Deferred Compensation Stock Value, such cash
shall be allocated to such Deferred Compensation Stock Interests and shall
reduce the Deferred Compensation Stock Value on a dollar-for-dollar basis, and
Parent Preferred Stock constituting a part of such Per Stockholder Aggregate
Consideration and not allocated to such Stockholder's Warrants, if any, pursuant
to clause (ii) above, or to such Stockholder's SARS, if any, pursuant to clause
(iii) above shall be allocated to such Deferred Compensation Stock Interest and
shall reduce the Deferred Compensation Stock Value on a dollar-for-dollar basis,
using the Parent Preferred Stock Value for such purpose. If, after application
of the Parent Preferred Stock Value of all such Parent Preferred Stock
constituting part of such Per Stockholder Aggregate
-6-
Consideration and not allocated to such Stockholder's Warrants, if any, pursuant
to clause (ii) above, or to such Stockholder's SARS, if any, pursuant to clause
(iii) above there remains any Deferred Compensation Stock Value, the Parent
Common Stock constituting a part of such Per Stockholder Aggregate Consideration
and not allocated to such Stockholder's Warrants, if any, pursuant to clause
(ii) above, or to such Stockholder's SARs, if any, pursuant to clause (iii)
above shall be allocated to the extent required to reduce the remaining Deferred
Compensation Stock Value to zero, using the Parent Common Stock Value for such
purpose. The cash, Parent Preferred Stock, if any, and Parent Common Stock, if
any, allocated to a Stockholder's Deferred Compensation Stock Interest under
this clause (iv) shall be delivered to the appropriate trustee(s) of the
appropriate Deferred Compensation Plan(s).
(v) The remaining Per Stockholder Aggregate Consideration
shall be applied pro-rata to such Stockholder's Directly Held Company Common
Stock.
(vi) For purposes of this Agreement, the term "Aggregate
Consideration" shall mean the aggregate of the Per Stockholder Aggregate
Considerations deliverable to all Stockholders hereunder.
1.3.3. Transfer of GMAC Outstanding Stock to Parent. On or prior to
--------------------------------------------
the Closing Date, the holders of the outstanding capital stock of GroupMAC
Management Co. (formerly named Group Maintenance America Corp.), a Delaware
corporation, shall transfer their shares of common stock of GroupMAC Management
Co. to Parent in exchange for Parent Common Stock on a one-for-one basis
pursuant to the Section 351 Plan.
1.3.4. Deliveries at Closing; Subsequent Deliveries. The Parent
--------------------------------------------
Employee Stock Offering (as defined below) will be concluded after the Closing
Date. In this regard:
(i) At the Closing, Parent shall deliver to each
Stockholder such Stockholder's "Closing Per Stockholder Aggregate Consideration"
which shall be the Per Stockholder Aggregate Consideration (other than Parent
Preferred Stock which shall only be delivered after the determination of the
allocation of the Per Stockholder Aggregate Consideration as provided in Section
1.3.2) which would otherwise be deliverable to such Stockholder hereunder,
assuming, however, that (a) for the purpose of determining the Final Per Share
Cash Amount (including the Net Stock Purchase Cost, as defined below), no gross
proceeds have been received by Parent in the Parent Employee Stock Offering or
in the granting of options and the exercise of such options to purchase shares
of Parent Preferred Stock and Parent Common Stock pursuant to a Rule 701 Plan
adopted by Parent for certain of the Company's Division Vice Presidents (the
"Division Vice Presidents Option") (the resulting Final Per Share Cash Amount
being sometimes referred to herein as the "Closing Per Share Cash Amount"); (b)
for the purpose of determining the Final Per Share Preferred Stock Amount, all
shares of Parent Preferred Stock offered in the Parent Employee Stock Offering
and in the Division Vice Presidents Option have been sold (the resulting Final
Per
-7-
Share Preferred Stock Amount being sometimes referred to herein as the "Closing
Per Share Preferred Stock Amount"); and (c) for the purpose of determining the
Final Per Share Common Stock Amount, all shares of Parent Common Stock offered
in the Parent Employee Stock Offering and in the Division Vice Presidents Option
have been sold (the resulting Final Per Share Common Stock Amount being
sometimes referred to herein as the "Closing Per Share Common Stock Amount").
(ii) No later than ten (10) business days after the
conclusion of the Parent Employee Stock Offering, Parent shall deliver to the
Attorney-in-Fact a statement showing the Net Stock Purchase Cost and the number
of shares of Parent Preferred Stock and Parent Common Stock, if any, issued in
the Parent Employee Stock Offering, and a calculation of the Final Per Share
Cash Amount, the Final Per Share Preferred Stock Amount and the Final Per Share
Common Stock Amount, after giving effect to the conclusion of the Parent
Employee Stock Offering, the issuance of Parent Preferred Stock and Parent
Common Stock, if any, pursuant thereto and the receipt by Parent of the gross
proceeds, if any, thereof (the "Statement of Final Per Share Amounts"). The
Statement of Final Per Share Amounts shall not contain any changes to the Final
Outstanding Common Stock Number, the EBITDA, the Defined Expense Reductions, the
Long-Term Debt or the Net Working Capital as finalized pursuant to Section
1.5.3.
(iii) After delivery to the Attorney-in-Fact of the
Statement of Final Per Share Amounts, the Attorney-in-Fact and his
representatives shall be afforded the opportunity to review and inspect all of
the financial records, work papers, schedules and other supporting papers
relating to the preparation of the Statement of Final Per Share Amounts, and to
consult with Parent and its representatives regarding the methods used in the
preparation of the Statement of Final Per Share Amounts.
(iv) The Final Per Share Cash Amount, the Final Per Share
Preferred Stock Amount and the Final Per Share Common Stock Amount as shown on
the Statement of Final Per Share Amounts shall be final, conclusive and binding
for purposes of this Agreement, unless the Attorney-in-Fact shall deliver to
Parent a written notice of disagreement ("Notice of Dispute") with any item or
items in the Statement of Final Per Share Amounts within 10 business days
following receipt of the Statement of Final Per Share Amounts, specifying in
reasonable detail the nature and extent of such disagreement; provided, however,
that no Notice of Dispute may be given with respect to the Final Outstanding
Common Stock Number, EBITDA, the Defined Expense Reductions, the Long-Term Debt
or the Net Working Capital unless any such item is changed pursuant to Section
1.5.3.
-8-
(v) Parent and the Attorney-in-Fact agree to negotiate in
good faith and use their best efforts to resolve any disagreement with respect
to the Statement of Final Per Share Amounts. If Parent and the Attorney-in-Fact
shall not reach such resolution within 40 days following receipt by Parent of a
Notice of Dispute, the dispute shall be referred to the Neutral Accountants (as
defined below), who shall resolve such dispute within 30 days after its
submission to them. Parent and the Attorney-in-Fact (if the dispute is resolved
by them or the Statement of Final Per Share Amounts otherwise becomes final
pursuant hereto without referral to the Neutral Accountants) or the Neutral
Accountants (if a dispute is resolved by them) shall set forth such resolution
in writing and such writing shall (1) include the Final Per Share Cash Amount,
the Final Per Share Preferred Stock Amount and the Final Per Share Common Stock
Amount, and (2) be final, conclusive and binding for purposes of this Agreement.
(vi) Within ten (10) business days following the final
determination of the Final Per Share Cash Amount, the Final Per Share Preferred
Stock Amount and the Final Per Share Common Stock Amount as provided in this
Section 1.3.4, Parent shall deliver to each Stockholder (1) the cash amount, if
any, by which the aggregate of the Final Per Share Cash Amounts payable to such
Stockholder, as finally determined pursuant hereto, exceeds the aggregate of the
Closing Per Share Cash Amounts paid to such Stockholder at the Closing; (2) the
number of shares of Parent Preferred Stock, if any, by which the aggregate of
the Final Per Share Preferred Stock Amounts deliverable to such Stockholder, as
finally determined pursuant hereto, exceeds the aggregate of the Closing Per
Share Preferred Stock Amounts delivered to such Stockholder at the Closing; and
(3) the number of shares of Parent Common Stock, if any, by which the aggregate
of the Final Per Share Common Stock Amounts deliverable to such Stockholder, as
finally determined pursuant hereto, exceeds the aggregate of the Closing Per
Share Common Stock Amounts delivered to such Stockholder at the Closing;
provided, however that if any such shares of Parent Preferred Stock or Parent
Common Stock would otherwise be allocable to a Stockholder's Warrants or SARs
pursuant to Section 1.3.2, Parent shall issue to such Stockholder, in lieu of
such shares of Parent Preferred Stock or Parent Common Stock, as the case may
be, warrants to purchase the same number of shares of Parent Preferred Stock or
Parent Common Stock, as the case may be, pursuant to warrants substantially in
the form of Exhibit 1.3.4 attached hereto, and the allocations in Section 1.3.2
shall be adjusted accordingly.
(vii) Parent and the Attorney-in-Fact shall each pay their
own costs incurred in connection with this Section 1.3.4, including the fees and
expenses of their respective attorneys and accountants, if any.
-9-
1.3.5. Certain Compensation. The Parent shall cause the Company to
--------------------
pay to those Stockholders holding Warrants, SARs or Deferred Compensation Stock
the Grossed Up Tax Offset Bonus (as defined below) as the Company is obligated
to pursuant to a Company Compensation Officer resolution dated February 14,
1997. The Grossed Up Tax Offset Bonus shall be equal to the aggregate of (i) the
federal, state and local income and franchise tax benefit to the Parent
(determined on a consolidated basis) and/or the Company attributable solely to
the excess of the Per Stockholder Aggregate Consideration allocated to the
Warrant, the SARs and the Deferred Compensation Stock held by a Stockholder as
of the Closing Date over the $45.00 per share thereof as of February 28, 1996
(and for which accruals of deferred taxes have been made (the "Tax Offset
Bonus") plus (ii) the federal, state and local income and franchise tax benefit
to the Parent (determined on a consolidated basis) and/or the Company
attributable solely to the Tax Offset Bonus (the "Gross Up"). If the Grossed Up
Tax Offset Bonus would be subject (in whole or in part) to an excise tax
pursuant to Sections 280G and 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") (such tax hereinafter referred to as the "Excise Tax") with
respect to a Stockholder, then the Grossed Up Tax Offset Bonus shall be reduced
to the extent necessary so that no portion of the Tax Offset Bonus to that
Stockholder is subject to Excise Tax. A tax benefit shall be deemed to be
realized only to the extent that a deduction with respect to his Warrants, SARs,
Deferred Compensation Stock and the Tax Offset Bonus creates an offset for taxes
otherwise payable or a tax refund actually received. Parent shall cause the
Company to pay to such Stockholder the amount of the Tax Offset Bonus and the
Gross Up no later than 10 days after Parent or the Company has filed its federal
income tax return for the tax year in which the Parent or the Company realizes
the tax benefit (including by net operating loss carryback or carryover) or
receives the tax refund from the taxing authority (whichever is applicable)
giving rise to the Tax Offset Bonus and the Gross Up, as the case may be.
1.4. Exchange of Stock.
-----------------
1.4.1. Closing. Subject to the satisfaction or waiver of each of
-------
the conditions set forth in Article 7, on the Closing Date, a closing shall
occur (the "Closing") at the offices of Bracewell & ▇▇▇▇▇▇▇▇▇, L.L.P., ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ for the purpose of delivering
the documents described herein at the Closing.
1.4.2. Delivery of Company Common Stock. At the Closing, Stock
--------------------------------
Certificates evidencing all of the Company Common Stock, the Warrants and the
SARs held by the Stockholders will be surrendered to Parent together with
properly completed and executed letters of transmittal in substantially the form
attached hereto as Exhibit 1.4.2, with
-10-
each signature thereon guaranteed by a commercial bank or notarized by a notary
public or similar official reasonably satisfactory to Parent.
1.4.3. Assignments. Except as provided in Article 5, assignment,
-----------
transfer or other disposition of record or beneficial ownership of any shares of
Company Common Stock, Warrants or SARs may not be made on or after the date
hereof.
1.4.4. Payment In Full Satisfaction of All Rights. The delivery of
------------------------------------------
the Per Stockholder Aggregate Consideration to the Stockholders in respect of
their shares of Company Common Stock, Warrants and SARs shall be deemed to be
payment in full satisfaction of all rights pertaining to the outstanding shares
of Company Common Stock, Warrants and SARs held by the Stockholders.
1.5. Determination of Per Share Amounts and Other Matters.
----------------------------------------------------
1.5.1. Determination of Final Per Share Amounts. To determine the
----------------------------------------
Final Per Share Amounts:
(i) The Final Outstanding Common Stock Number (as defined
below) shall be determined.
(ii) The EBITDA, the Defined Expense Reductions, the Long-
Term Debt, the Net Stock Purchase Cost and the Net Working Capital (as such
terms are defined below) shall be determined.
(iii) If EBITDA exceeds $XXX, such excess amount
shall be multiplied by XXX, and the resulting amount shall be the
"EBITDA Positive Adjustment" for purposes hereof. If $XXX exceeds
EBITDA, such excess amount shall be multiplied by XXX, and the
resulting amount shall be the "EBITDA Negative Adjustment" for purposes
hereof.
(iv) If the amount of consolidated current assets included
in Net Working Capital exceeds XXX times the amount of consolidated
current liabilities included in Net Working Capital by more than
$XXX, the excess shall be the "Net Working Capital Positive
Adjustment" for purposes hereof. If the amount of consolidated current
assets included in Net Working Capital does not exceed XXX times the
amount of consolidated current liabilities included in Net Working Capital
by more than $XXX, the amount which would be required to be added to
consolidated current assets in order to make the amount of consolidated
assets equal
-11-
Confidential information has been omitted from this page and has been filed
separately with the Securities and Exchange Commission. Each such omission has
been marked by "XXX".
to the sum of (a) XXX times consolidated current liabilities plus (b)
$XXX, shall be the "Net Working Capital Negative Adjustment" for
purposes hereof.
(v) The sum of (a) the EBITDA Negative Adjustment, if any,
and (b) the Net Working Capital Negative Adjustment, if any, shall be
deducted from the sum of (x) the EBITDA Positive Adjustment, if any, and
(y) the Net Working Capital Positive Adjustment, if any. If the result is a
positive number, it shall be the "Positive Adjustment Amount" for purposes
hereof. If the result is a negative number, it shall be the "Negative
Adjustment Amount" for purposes hereof.
(vi) To determine the "Final Per Share Cash Amount" for
purposes hereof, (a) if there is a Positive Adjustment Amount, the amount
of the Net Stock Purchase Cost, if any, and the amount of Long-Term Debt,
if any, shall be deducted from $XXX and the remainder shall be
divided by the Final Outstanding Common Stock Number; or (b) if there is a
Negative Adjustment Amount, the sum of (1) the amount of the Net Stock
Purchase Cost, if any, plus (2) XXX% of the Negative Adjustment Amount
plus (3) the amount of Long-Term Debt shall be deducted from $XXX
and the remainder shall be divided by the Final Outstanding Common Stock
Number;
(vii) To determine the "Final Per Share Common Stock Amount"
(a) if there is a Positive Adjustment Amount, the sum of (1) the number of
shares of Parent Common Stock sold in the Parent Employee Stock Offering
plus (2) the number of shares of Parent Common Stock issued in the ▇▇▇▇▇▇▇
Offering (as defined below) plus (3) the number of shares of Parent Common
Stock in the Division Vice Presidents Option shall be deducted from
11,630,350, and the remainder shall be divided by the Final Outstanding
Common Stock Number; or (b) if there is a Negative Adjustment Amount, the
result obtained by deducting from 11,630,350, the sum of (1) the number of
shares of Parent Common Stock sold in the Parent Employee Stock Offering,
plus (2) the number of shares of Parent Common Stock issued in the ▇▇▇▇▇▇▇
Offering, plus (3) the number of shares of Parent Common Stock sold in the
Division Vice Presidents Option, plus (4) the Negative Common Stock Number
(as defined below), and shall be divided by the Final Outstanding Common
Stock Number; and
(viii) To determine "Final Per Share Preferred Stock Amount"
(a) if there is a Positive Adjustment Amount, (1) the number of shares of
Parent Preferred Stock sold in the Parent Employee Stock Offering plus the
number of shares of Parent Preferred Stock issued in the ▇▇▇▇▇▇▇ Offering
plus the number of shares of
-12-
Confidential information has been omitted from this page and has been filed
separately with the Securities and Exchange Commission. Each such omission has
been marked by "XXX".
Parent Preferred Stock sold in the Division Vice Presidents Option shall be
deducted from 12,423,883 and (2) there shall be added thereto a number
equal to the Positive Adjustment Amount, and the result shall be divided by
the Final Outstanding Common Stock Number; and (b) if there is a Negative
Adjustment Amount, the sum of (1) the number equal to the number of whole
dollars constituting XXX% of the Negative Adjustment Amount, plus (2) the
number of shares of Parent Preferred Stock sold in the Parent Employee
Stock Offering plus the number of shares of Parent Preferred Stock issued
in the ▇▇▇▇▇▇▇ Offering plus the number of shares of Parent Preferred Stock
sold in the Division Vice Presidents Option shall be deducted from
12,423,883 and the result shall be divided by the Final Outstanding Common
Stock Number.
1.5.2. Other Definitions. The following terms shall have the
-----------------
following meanings for purposes of this Agreement:
(i) the term "Defined Expense Reductions" shall mean
the expense reductions described on Exhibit 1.5.2 attached hereto which
are documented to the reasonable satisfaction of Parent and its lenders;
(ii) the term "EBITDA" shall mean the sum of (a) Net
After-Tax Income (as defined below), plus (b) the amount of income and
franchise taxes deducted from Net After-Tax Income, plus (c) the amount of
depreciation and amortization deducted from Net After-Tax Income, plus (d)
the amount of interest expense deducted from Net After Tax Income, the
amounts in clauses (a) through (d) to be determined in accordance with U.S.
generally accepted accounting principles ("GAAP"), plus (e) the amount of
the Defined Expense Reductions;
(iii) the term "Final Outstanding Common Stock Number"
shall mean the number of outstanding shares of Company Common Stock issued
and outstanding, including shares of Company Common Stock held by the
Deferred Compensation Plans, and all Other Ownership Interests outstanding
immediately prior to the Closing, excluding the number of shares of Company
Common Stock held by Parent, any Parent Subsidiary, the Company or any
Company Subsidiary immediately prior to the Closing;
(iv) the term "Long-Term Debt" shall mean all long-
term liabilities of the Company and the Company Subsidiaries, on a
consolidated basis, as of February 28, 1997, including deferred taxes and
capitalized lease obligations, all as determined under GAAP, less the sum
of (i) $650,000, (ii) the amount of the
-13-
Confidential information has been omitted from this page and has been filed
separately with the Securities and Exchange Commission. Each such omission has
been marked by "XXX".
reduction in the amount outstanding as of the Closing Date of that certain
note in favor of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") payable by the Company
attributable to the purchase by ▇▇▇▇▇▇▇ of Parent Common Stock and Parent
Preferred Stock in that certain Offering of such stock to ▇▇▇▇▇▇▇ (the
"▇▇▇▇▇▇▇ Offering"), and (iii) any long term liability accounts
attributable to Deferred Compensation Plans, Warrants and SARs;
(v) the term "Negative Common Stock Number" shall
mean the result obtained by dividing the number equal to the number of
whole dollars constituting 50% of the Negative Adjustment Amount by 2.76.
(vi) the term "Net After-Tax Income" shall mean the
consolidated net income (or loss) of the Company and the Company
Subsidiaries for the fiscal year ending February 28, 1997 after deduction
for income, franchise and other taxes and without giving effect to non-
recurring gains and losses, interest income or investment income,
determined in accordance with GAAP; provided, however, that the effects on
consolidated net income (or loss) of the Company and the Company
Subsidiaries from the transactions described in Sections 4.1.4, 4.1.7,
4.1.8, 4.1.9, 4.1.13, 5.1.3 and 5.2 shall be included in the calculation of
Net After-Tax Income as if such transactions had occurred prior to the
close of business on February 28, 1997;
(vii) the term "Net Stock Purchase Cost" shall mean an
amount equal to the excess, if any, of the gross amount paid by Parent to
the ESOP (as defined in Section 2.1.28, below) pursuant to the ESOP Stock
Purchase Agreement (as defined in Section 5.1.2, below) over the gross
proceeds actually received by Parent in the Parent Employee Stock Offering
(as defined in Section 5.1.5, below) and in the Division Vice Presidents
Option;
(viii) the term "Net Working Capital" shall mean the
consolidated current assets of the Company and the Company Subsidiaries
minus the consolidated current liabilities of the Company and the Company
Subsidiaries as of February 28, 1997, all as determined under GAAP;
provided, however, that (a) all expenses of the Company, the Company
Subsidiaries or any Stockholder incurred in connection with the
transactions contemplated hereby which are paid or are payable by the
Company or any Company Subsidiary shall be included in consolidated current
liabilities but shall not be deducted in determining EBITDA, and provided
further, that (b) the effects on the consolidated net working capital of
the Company and the Company Subsidiaries of the transactions described in
Sections 4.1.4, 4.1.7,
-14-
4.1.8, 4.1.9, 4.1.13, 5.1.3 and 5.2 shall be included in the calculation of
Net Working Capital as if such transactions had occurred prior to the close
of business on February 28, 1997, and (c) the current liability accounts
attributable to the Deferred Compensation Plans, Warrants, SARs, year-end
operating bonuses and year-end special bonuses for the Majority
Stockholders and the current asset accounts relating thereto shall be
excluded from consolidated current assets and consolidated current
liabilities; and
(ix) the term "Other Ownership Interests" shall mean
any and all outstanding capital stock, convertible or exchangeable
securities, subscriptions, calls, options, warrants, rights or other
agreements or commitments of any character relating to the issuance or sale
of any shares of the capital stock of, or other equity or ownership
interest in, the Company, including, without limitation, the Warrants and
the SARs, and including the shares of Company Common Stock held by Parent,
any Parent Subsidiary or any Company Subsidiary immediately prior to the
Closing Date.
1.5.3. Statement of Closing Consideration.
----------------------------------
(i) As promptly as practicable, and in any event no later
than April 30, 1997, the Majority Stockholders shall cause to be prepared and
delivered to Parent the audited consolidated balance sheet, consolidated
statement of income and consolidated statement of cash flows of the Company and
the Company Subsidiaries as of and for the year ended February 28, 1997, with
the independent accountant's report thereon (the "Audited 1997 Financial
Statements"), together with a calculation, reviewed by such accountants, of the
Final Outstanding Common Stock Number, the Closing Per Share Cash Amount, the
Closing Per Share Preferred Stock Amount, the Closing Per Share Common Stock
Amount, and the Closing Per Stockholder Aggregate Consideration payable to each
Stockholder at Closing and the application thereof (the "Statement of Closing
Consideration").
(ii) After delivery to Parent of the Statement of Closing
Consideration, Parent and its representatives shall be afforded the opportunity
to review and inspect all of the financial records, work papers, schedules and
other supporting papers relating to the preparation of the Statement of Closing
Consideration, and to consult with the Company and its representatives, and the
Company's independent certified public accountants, if necessary, regarding the
methods used in the preparation of the Statement of Closing Consideration.
-15-
(iii) The Final Outstanding Common Stock Number, the Closing
Per Share Cash Amount, the Closing Per Share Preferred Stock Amount, the Closing
Per Share Common Stock Amount, and the Closing Per Stockholder Aggregate
Consideration payable to each Stockholder at Closing and the application thereof
as shown on the Statement of Closing Consideration shall be final, conclusive
and binding for purposes of this Agreement, unless Parent shall deliver to the
Attorney-in-Fact a written notice of disagreement ("Notice of Disagreement")
with any item or items in the Statement of Closing Consideration within 10
business days following receipt of the Statement of Closing Consideration,
specifying in reasonable detail the nature and extent of such disagreement.
(iv) Parent and the Attorney-in-Fact agree to negotiate in
good faith and use their best efforts to resolve any disagreement with respect
to the Final Outstanding Common Stock Number, the Closing Per Share Cash Amount,
the Closing Per Share Preferred Stock Amount, the Closing Per Share Common Stock
Amount, or the Closing Per Stockholder Aggregate Consideration payable at
Closing to each Stockholder or the application thereof, as set forth in the
Statement of Closing Consideration. Parent and the Attorney-in-Fact shall reach
such resolution within 40 days following receipt by the Attorney-in-Fact of a
Notice of Disagreement. In the event that such resolution is not reached within
the time prescribed in the previous sentence, Parent and the Attorney-in-Fact
shall have the right to terminate this Agreement pursuant to Section 8.1.3.
Parent and the Attorney-in-Fact shall set forth such resolution in writing and
such writing shall (a) include the Final Outstanding Common Stock Number, the
Closing Per Share Cash Amount, the Closing Per Share Preferred Stock Amount, the
Closing Per Share Common Stock Amount, and the Closing Per Stockholder Aggregate
Consideration payable to each Stockholder at Closing and the application
thereof, and (b) be final, conclusive and binding for purposes of this
Agreement.
(v) The Closing shall occur promptly following the final
determination of the Final Outstanding Common Stock Number, the Closing Per
Share Cash Amount, the Closing Per Share Preferred Stock Amount, the Closing Per
Share Common Stock Amount, and the Closing Per Stockholder Aggregate
Consideration payable to each Stockholder at Closing and the application
thereof, as provided in this Section 1.5.3, but in no event later than ten days
after such determination.
(vi) Parent and the Attorney-in-Fact shall each pay their
own costs incurred in connection with this Section 1.5.3, including the fees and
expenses of their respective attorneys and accountants, if any.
-16-
1.5.4. Non-Prejudicial. The adjustments in this Section 1.5 shall
---------------
not prejudice the rights and remedies of the parties under Article 6.
2. REPRESENTATIONS AND WARRANTIES
OF THE MAJORITY STOCKHOLDERS
2.1. Representations and Warranties of the Majority Stockholders.
-----------------------------------------------------------
Simultaneously with the execution and delivery of this Agreement, the Majority
Stockholders are delivering to Parent a disclosure schedule (the "Disclosure
Schedule"). The Majority Stockholders, jointly and severally, hereby represent
and warrant to Parent that:
2.1.1. Organization, Etc. The Company is a corporation duly
------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified or licensed as a foreign corporation authorized
to do business in the states of Ohio, Florida, Kansas, Indiana, Texas, Kentucky,
and in all other states in which any of its assets or properties may be situated
or where the business of the Company is conducted except where the failure to
obtain such qualification or license will not have a Company Material Adverse
Effect (as defined below).
2.1.2. Subsidiaries. Except for the corporations (the "Company
------------
Subsidiaries") described in Section 2.1.2 of the Disclosure Schedule, the
Company does not and will not prior to the Closing Date own or hold of record or
beneficially, directly or indirectly, 50% or more of the outstanding capital
stock, voting interests, or ownership interests in any corporation, partnership,
joint venture or other entity. Each Company Subsidiary is duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, as set forth in Section 2.1.2 of the Disclosure Schedule, and is
duly qualified or licensed as a foreign corporation authorized to do business in
each state in which any of its assets or properties may be situated or where its
business is conducted except where the failure to obtain such qualification or
license will not have a Company Material Adverse Effect.
2.1.3. Capitalization of the Company and the Company Subsidiaries.
----------------------------------------------------------
The total authorized capital stock of the Company is 3,000,000 shares of Company
Common Stock, of which 250,745.104 shares are issued and outstanding and of
which none are held in the treasury of the Company. The outstanding shares of
Company Common Stock have been duly and validly issued and are fully paid and
non-assessable. Except for the issued and outstanding Company Common Stock
described in the first sentence of this Section 2.1.3 and the Warrants
exercisable into 45,000 shares of Company Common Stock and the SARs (as defined
below) applicable to 33,768 shares of Company Common Stock, there are and will
-17-
be immediately prior to the Closing Date no Other Ownership Interests
outstanding and no agreements of any kind to which the Company is a party or
otherwise bound relating to the issuance, sale or transfer of any capital stock
of the Company or any Other Ownership Interests. After giving effect to the
transactions described in Articles 4 and 5 to be completed prior to the Closing
Date, the Company will have, immediately prior to the Closing Date, 250,745.104
shares of Company Common Stock issued and outstanding and no shares of Company
Common Stock will be held in treasury and no Other Ownership Interests will be
outstanding except for the Warrants and the SARs. The Company has and will have
immediately prior to the Closing Date no liability, contingent or otherwise, nor
has any claim been asserted or threatened by, any person, including without
limitation any holder or former holder of shares, options, warrants, or other
equity or voting or ownership interests or other securities of the Company, in
connection with pre-emptive or contractual subscription rights or the offer,
sale, purchase, redemption, surrender or cancellation of any shares, options,
warrants or other equity or voting or ownership interests or securities of the
Company. Except as disclosed in Section 2.1.3 of the Disclosure Schedule, since
March 1, 1996, the Company has not repurchased or redeemed any of its
outstanding capital stock. The Company has afforded Parent full access to the
minute books and capital stock and similar records of the Company, which books
and records are true, complete and accurate. The names and addresses of the
holders of record of all of the outstanding shares of Company Common Stock, the
number of shares of Company Common Stock held of record by each of such holders,
and the names and addresses of the holders of the Warrants and the SARs and the
number of Warrants and SARs held by each of such holders are set forth in
Section 2.1.3 of the Disclosure Schedule.
The authorized, issued and outstanding shares of capital stock of each
Company Subsidiary is set forth in Section 2.1.3 of the Disclosure Schedule.
All outstanding shares of capital stock of each Company Subsidiary are held, of
record and beneficially, free and clear of all liens, encumbrances or claims
whatsoever, by the holders listed and in the amounts shown in Section 2.1.3 of
the Disclosure Schedule. All outstanding shares of capital stock of each Company
Subsidiary have been duly and validly issued and are fully paid and non-
assessable. Except as described in Section 2.1.3 of the Disclosure Schedule, no
Company Subsidiary has any outstanding capital stock or any outstanding
convertible or exchangeable securities, subscriptions, calls, options, warrants,
rights or other agreements or commitments of any kind relating to the issuance
or sale of any shares of capital stock of, or other equity or ownership interest
in, any Company Subsidiary. There are no agreements of any kind relating to the
issuance, sale or transfer of any capital stock of any Company Subsidiary,
except as disclosed in Section 2.1.3 of the Disclosure Schedule. No Company
Subsidiary has any liability, contingent or otherwise, nor has any claim been
asserted or threatened by, any person, including without limitation any holder
or former holder of shares,
-18-
options, warrants, or other equity or voting or ownership interests or other
securities of any Company Subsidiary, in connection with pre-emptive or
contractual subscription rights or the offer, sale, purchase, redemption,
surrender or cancellation of any shares, options, warrants or other equity or
voting or ownership interests or securities of any Company Subsidiary. No
Company Subsidiary has repurchased or redeemed any of its outstanding capital
stock. The Company has afforded Parent full access to the minute books and
capital stock and similar records of the Company Subsidiaries, which books and
records are true, complete and accurate.
2.1.4. Authority. The Company has full right, power, legal
---------
capacity and authority to execute, deliver and perform all documents and
instruments referred to herein or contemplated hereby to be executed, delivered
and performed by the Company and to consummate the transactions contemplated
thereby. All documents and instruments referred to herein or contemplated hereby
to be executed and delivered by the Company, when duly executed and delivered by
the Company will constitute, legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms and
conditions, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether applied
in a proceeding at law or in equity).
2.1.5. Consents. Except as set forth in Section 2.1.5 of the
--------
Disclosure Schedule, no approval, consent, order or action of or filing with any
court, administrative agency, governmental authority or other third party is
required for the execution, delivery or performance by the Stockholders of this
Agreement or the execution, delivery or performance by the Company or the
Stockholders of the other documents and instruments referred to herein or
contemplated hereby to be executed, delivered or performed by the Company or any
Stockholder.
2.1.6. Title. Except for the Permitted Exceptions (as defined
-----
below) and as disclosed in Section 2.1.6 of the Disclosure Schedule, the Company
and the Company Subsidiaries own outright, and have, and shall at the Closing
Date have, full legal and beneficial title to all of their respective assets
free and clear of all liens, pledges, mortgages, security interests, conditional
sales contracts and encumbrances, including good and market able title to all of
their respective real property interests, free and clear of any mortgages,
security agreements, liens or encumbrances. The Company or a Company Subsidiary
has fee simple title to those real property interests described in Section 2.1.6
of the Disclosure Schedule as owned in fee by the Company or such Company
Subsidiary, subject to the Permitted Exceptions and to those matters disclosed
in Section 2.1.6 of the Disclosure
-19-
Schedule. The Company or a Company Subsidiary has leased, as lessee, the real
property and interests in real property described as leased by the Company or
such Company Subsidiary in Section 2.1.6 of the Disclosure Schedule. Section
2.1.6 of the Disclosure Schedule contains a summary description of all real
property and real property interests owned or leased as lessee by the Company or
any Company Subsidiary. The Company has made available to Parent true and
correct copies of all of the leases of real property to which the Company or any
Company Subsidiary is a party, including all amendments and other modifications
thereof.
2.1.7. Defaults. Except as set forth in Section 2.1.7 of the
--------
Disclosure Schedule, neither the Company nor any Company Subsidiary is in
default under, in breach of or in violation of, and the execution and delivery
of the documents and instruments referred to herein or contemplated hereby to be
executed and delivered by the Company and the consummation by the Company of the
transactions contemplated thereby and the performance by the Company of its
obligations thereunder will not constitute a violation of, conflict with, result
in a default under or cause the imposition upon the Company or any Company
Subsidiary of any additional adverse burden or condition under (i) any mortgage,
indenture, charter or bylaw provision, contract, agreement, lease, commitment or
other instrument of any kind to which the Company or any Company Subsidiary is a
party or by which the Company or any Company Subsidiary or any of their
respective properties or assets may be bound or affected or (ii) any law, rule
or regulation applicable to the Company or any Company Subsidiary or any court
injunction, order or decree, or any valid and enforceable order of any
governmental agency in effect having jurisdiction over the Company or any
Company Subsidiary, which default, breach, violation, conflict or imposition
described in this clause (ii) could adversely affect the ability of the
Stockholders to consummate the transactions contemplated hereby.
2.1.8. Power of Attorney. Except as set forth in Section 2.1.8 of
-----------------
the Disclosure Schedule, neither the Company nor any Company Subsidiary has
given to any person or party, and there is not currently existing, any power of
attorney of any type pertaining to the Company or any Company Subsidiary.
2.1.9. Proprietary Rights. To the best knowledge of the Company and
------------------
the Majority Stockholders, the Company and the Company Subsidiaries have full
and sufficient rights to use all trade names, brand names, trademarks, service
marks and logos and to use and practice all technology, proprietary information,
know-how or patented ideas, designs or inventions (collectively "Proprietary
Rights") necessary for the present operation of their businesses and the
marketing, distribution, sale and use (whether by the Company or any Company
Subsidiary or their direct or indirect customers) of the materials used and the
-20-
products sold by the Company and the Company Subsidiaries. To the best knowledge
of the Company and the Majority Stockholders, none of the ownership, access to,
use or practice of the Proprietary Rights by the Company or any Company
Subsidiary infringe on the rights of any other party and all Proprietary Rights
are valid and enforceable. Section 2.1.9 of the Disclosure Schedule contains a
list and summary description of the Proprietary Rights and a description of all
license fees and royalties (or the basis of the calculation thereof) required to
be paid now or in the future by the Company or any Company Subsidiary for the
use and practice of the Proprietary Rights.
2.1.10. Labor Matters. The employees of the Company and the Company
-------------
Subsidiaries are not subject to any collective bargaining agreements or other
contracts with a labor union, contingent or otherwise, nor are any such
employees represented by any labor union. Except as described in Section 2.1.10
of the Disclosure Schedule, to the best knowledge of the Company and the
Majority Stockholders, there are no unfair labor practice charges or complaints
pending against the Company or any Company Subsidiary involving employees now or
previously employed by the Company or any Company Subsidiary. Since March 1,
1996 there have not been any labor disputes or written and filed grievances or
claims involving employees of the Company or any Company Subsidiary or to the
best knowledge of the Company and the Majority Stockholders, any union
organizational efforts involving employees of the Company or any Company
Subsidiary.
2.1.11. Employee Benefits. Section 2.1.11 of the Disclosure
-----------------
Schedule lists all of the "Company Plans" (as defined below). Except as
described in Section 2.1.11 of the Disclosure Schedule, neither the Company nor
any Company Subsidiary nor any other organization which is a member of a
controlled group of organizations within the meaning of Sections 414(b), (c),
(m) or (o), of the Code of which the Company or any Company Subsidiary is a
member (the "Controlled Group") has any obligation, contingent or otherwise,
covering any of their employees under any employment or consulting agreement or
under any executive or employee's compensation plan, agreement or arrangement
including, without limitation, any "employee welfare benefit plan" as defined in
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), "employee pension benefit plan" as defined in Section 3(2) of ERISA
or any other pension, retirement, profit sharing, stock option, stock purchase,
bonus, fringe benefit, incentive, vacation, savings plan, health, welfare or
other employee or former employee benefit plan, program, policy or arrangement
(collectively referred to herein as "Company Plans"). No Company Plan is a
"defined benefit plan," as such term is defined in Section 3(35) of ERISA or a
"multi-employer plan" within the meaning of Section 3(37) of ERISA. Neither the
Company nor any Company Subsidiary nor any member of the Controlled Group
currently sponsors or maintains or has over the prior six (6) years maintained
or sponsored any
-21-
"employee benefit plan" as defined in Section 3(3) of ERISA which is subject to
Title IV of ERISA. There is no voluntary employees' beneficiary association
which is implementing any Company Plan. Except as disclosed in Section 2.1.11 of
the Disclosure Schedule, to the best knowledge of the Company and the Majority
Stockholders, neither the Company nor any Company Subsidiary nor any fiduciary
now or previously acting pursuant to any Company Plan ("Company Plan Fiduciary")
has breached or otherwise failed to comply with any provision of any Company
Plan, and there are no written and filed claims (other than for benefits in the
ordinary course), grievances, audits, investigations or suits pending against
the Company, any Company Subsidiary or any Company Plan Fiduciary under any
Company Plan. The Company has delivered copies of the following to Parent: (i)
the most recent Internal Revenue Service determination letter and any
outstanding request for a determination letter for each Company Plan; (ii)
collective bargaining agreements or other such contracts relating to the
benefits under any Company Plan; and (iii) Forms S-8, if any, (including any
amendments thereto) for any Company Plan.
With respect to each Company Plan which is an "employee pension
benefit plan" (within the meaning of ERISA Section 3(2)): (i) each Company Plan
which is "qualified" within the meaning of Section 401(a) of the Code has
received a favorable determination letter as to its qualification under the
Code, and, to the best knowledge of the Company and the Majority Stockholders,
nothing has occurred (whether by action or failure to act) which would cause the
loss of such qualification; (ii) no member of the Controlled Group has, with
respect to any such Company Plan, engaged in a prohibited transaction, as such
term is defined in Code Section 4975 or ERISA Section 406, which would subject
the Company, any Company Subsidiary or any Company Plan Fiduciary to any tax,
penalties or other liabilities resulting from prohibited transactions under Code
Section 4975 or under ERISA Sections 409 and 502 (i); (iii) no event has
occurred and no condition exists at the date hereof that would subject the
Company or any Company Subsidiary to any taxes under Code Sections 4972, 4977 or
4979 or to a fine under ERISA Section 502(c); and (iv) each member of the
Controlled Group has complied with the reporting and disclosure requirements of
ERISA.
With respect to any Company Plan which is an "employee welfare benefit
plan" (within the meaning of ERISA Section 3(1)): (i) each Company Plan which is
intended to meet the requirements for tax-favored treatment under Subchapter B
of Chapter 1 of the Code meets such requirements; (ii) there is no disqualified
benefit (as such term is defined in the Code Section 4976(b)) which would
subject the Company or any Company Subsidiary, Parent or the Surviving
Corporation to any taxes under Code Section 4976(a); (iii) each Company Plan
which is a group health plan (as such term is defined in Code Section 162(i)(2))
complies and has complied with the applicable requirements of Code Sec-
-22-
tion 4980B; (iv) all insurance premiums required to be paid thereunder as of the
Closing Date shall have been paid or accrued on the books of the Company as of
February 28, 1997; and (v) each member of the Controlled Group has complied with
the reporting and disclosure requirements of ERISA for reports and disclosures
required to be reported or disclosed prior to or as of the date hereof. Except
as described in Section 2.1.11 of the Disclosure Schedule, neither the Company
nor any Company Subsidiary nor the Controlled Group maintains any post-
retirement health and life insurance plans for employees and retirees. Except as
listed in Section 2.1.11 of the Disclosure Schedule or as provided in Articles 4
and 5 of this Agreement, neither the Company nor any Company Subsidiary has any
commitment, whether formal or informal and whether legally binding or not, to
create any additional Company Plan or to amend or modify any Company Plan, and
except as provided in Articles 4 and 5 of this Agreement, no benefits will
become payable under any Company Plan as a result of the consummation of the
transactions contemplated hereby. Except as disclosed in Section 2.1.11 of the
Disclosure Schedule, to the best knowledge of the Company and the Majority
Stockholders, each Company Plan may be terminated by its plan sponsor at any
time.
The transactions contemplated by this Agreement together with any
amounts paid or payable by the Company, any Company Subsidiary or any member of
the Controlled Group has not resulted in and will not result in payments to
"disqualified individuals" (as defined in Section 280G(c) of the Code) of the
Company, any Company Subsidiary or any member of the Controlled Group which,
individually or in the aggregate will constitute "excess parachute payments" (as
defined in Section 280G(b) of the Code) resulting in the imposition of the
excise tax under Section 4999 of the Code or the disallowance of deductions
under Section 280G of the Code. As of the Closing Date, except as otherwise
contemplated by Article 5 of this Agreement, the consummation of the
transactions contemplated hereby will not accelerate or increase any liability
under any Company Plan because of an acceleration or increase of any of the
rights or benefits to which employees may be entitled thereunder. Neither the
Company nor any Company Subsidiary has made or is obligated to make any
nondeductible contributions to any Company Plan.
2.1.12. Maintenance. Except as described in Section 2.1.12 of the
-----------
Disclosure Schedule, the operating assets and properties of the Company and the
Company Subsidiaries have been properly maintained and are in satisfactory
operating condition (except for ordinary wear and tear) which in the aggregate
will not have a Company Material Adverse Effect and are capable of being used in
the businesses conducted by the Company and the Company Subsidiaries without
present need for repair or replacement except in the ordinary course of
business.
-23-
2.1.13. Necessary Assets. At the Closing Date, the Company and the
----------------
Company Subsidiaries will own or have adequate and sufficient rights to use all
of the assets and properties, real, personal, tangible and intangible, which are
used in or necessary for the operation of their respective businesses as going
concerns on a basis consistent with past operations.
2.1.14. Certain Contracts. Section 2.1.14 of the Disclosure
-----------------
Schedule contains a true and correct list of each contract, lease, undertaking,
commitment, mortgage, indenture, note, security agreement, license and other
agreement of the Company or any Company Subsidiary in effect at February 28,
1997 (i) involving the expenditure or receipt of more than $100,000 over the
term thereof, (ii) containing provisions calling for the sale or purchase of raw
materials, products or services at prices that vary from the market prices of
such raw materials, products or services generally prevailing in customary third
party markets, (iii) which include "take or pay," "meet or release," "most
favored nations" or similar pricing or delivery arrangements, (iv) between the
Company and any Company Subsidiary or among any Company Subsidiaries, (v)
requiring the Company or any Company Subsidiary to indemnify or hold harmless
any other person or entity (other than in the ordinary course of business), (vi)
evidencing any warranty obligation of the Company or any Company Subsidiary with
respect to goods, services or products sold or leased by any of them, other than
in the ordinary course of business, or (vii) imposing on the Company or any
Company Subsidiary any confidentiality, non-disclosure or non-compete obligation
or containing any acceleration or termination provisions effective upon a change
of control of the Company, or a merger of the Company into another entity. The
contracts, leases, undertakings, commitments, mortgages, indentures, notes,
security agreements, leases, licenses and other agreements of the nature
described in clauses (i) through (vii) are some times collectively referred to
herein as the "Company Contracts". Except as set forth in Section 2.1.14 of the
Disclosure Schedule, neither the Company nor any Company Subsidiary nor any
other party thereto is in default under any Company Contract, nor does any
event, circumstance or situation exist which, with the passage of time or notice
or both will constitute a default by the Company or any Company Subsidiary or
any other party under any Company Contract or any judgment, order or decree of
any court or any government agency or instrumentality under which any person,
firm, corporation or other entity is or may be entitled to assert any rights
against the Company or any Company Subsidiary or their respective assets,
properties, businesses, operations or products. The Company has made available
to Parent true and correct copies of all of the Company Contracts.
2.1.15. Bond Requirements. Section 2.1.15 of the Disclosure
-----------------
Schedule contains a true and complete list and description of all bonds,
deposits, financial assurance
-24-
requirements and insurance coverage required to be submitted to regulatory
authorities or third parties for the continued ownership and operation of the
assets and properties of the Company and the Company Subsidiaries and for their
continued business operations.
2.1.16. Other Disclosures. The following documents and items
-----------------
pertaining to the Company and the Company Subsidiaries are included in Section
2116 of the Disclosure Schedule:
(i) Lists of the products of the Company and the Company
Subsidiaries, all product registrations used by the Company and the Company
Subsidiaries, and all material safety data sheets, toxicology studies and
environmental studies of the Company and the Company Subsidiaries;
(ii) A list containing the names, start dates and current annual
wage rates of all salaried and hourly regular full-time and part-time
employees of the Company and the Company Subsidiaries with salaries or
compensation of more than $50,000 per annum as of January 1, 1997, together
with a summary of the bonuses, additional compensation and other like
benefits, if any, paid or payable to such persons;
(iii) Legal descriptions of all real property owned in fee or
leased by the Company or any Company Subsidiary and a list of documents
reflecting any other real property interests owned of record or
beneficially or leased by the Company and the Company Subsidiaries;
(iv) A list of assets owned by the Company and the Company
Subsidiaries as of January 1, 1997 which have been capitalized and have an
unamortized value of $10,000 or more, including vehicles and rolling stock,
and a list of all leased equipment of the Company and the Company
Subsidiaries, including leased vehicles and rolling stock;
(v) A list of raw materials or other property located at any
property owned or leased as lessee by the Company or any Company Subsidiary
that has been consigned to the Company or any Company Subsidiary, or is
otherwise owned by a third party, and has a market value exceeding $5,000;
(vi) A list of each policy of insurance maintained by the Company
or any Company Subsidiary together with information on premiums, coverages,
insurers, expiration dates and deductibles;
-25-
(vii) A list of each bank, brokerage firm, trust company or other
financial institution in which the Company or any Company Subsidiary has an
account and the identity of each such account, and each bank in which the
Company or any Company Subsidiary has a safe deposit box, together with the
names of all persons authorized to draw on any such account or have access
to any such safe deposit box; and
(viii) A list and summary description of, or copies of, all
governmental licenses and permits (including Environmental Permits (as
defined below)) of the Company and the Company Subsidiaries.
2.1.17. Officers, Directors and Affiliates. Section 2.1.17 of the
----------------------------------
Disclosure Schedule lists all directors and officers of the Company and the
Company Subsidiaries as of the date hereof and their respective dates of service
and describes all transactions, contracts and other arrangements between the
Company or any Company Subsidiary and any officer, director, stockholder or
affiliate of the Company or any Company Subsidiary which (i) occurred or became
effective after ▇▇▇▇▇ ▇, ▇▇▇▇, (▇▇) occurred, became effective or existed prior
to March 1, 1994 and were not fully performed and terminated as of March 1,
1994, or (iii) constitutes a liability or obligation (contingent or direct) due
or to become due by the Company or any Company Subsidiary to any officer,
director, stockholder, or affiliate of the Company or any Company Subsidiary, in
each case other than the customary employee compensation and employee benefits
and customary arrangements with respect to expense reimbursements.
2.1.18. Investment Company. The Company is not, and will not be
------------------
immediately prior to the Closing Date, an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "holding company," a "subsidiary company"
of a "holding company" or an "affiliate" of a "holding company" or a "public
utility" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
2.1.19. Financial Statements. Except as described in Section 2.1.19
--------------------
of the Disclosure Schedule (i) the Audited Financial Statements (as defined
below) are true and correct in all material respects, and are fair presentations
of the consolidated financial position, results of operations and cash flows of
the Company and the Company Subsidiaries as of the dates and for the periods
indicated and to the best knowledge of the Company and Majority Stockholders,
have been prepared in accordance with GAAP, and (ii) the Unaudited Financial
Statements (as defined below) are true and correct in all material respects, and
are fair presentations of the consolidated financial position, results of
operations and cash flows of the Company and the Company Subsidiaries as of the
dates and for the periods indicated,
-26-
subject, in the case of interim statements, to normal year-end audit
adjustments, none of which, singly or in the aggregate, will be material and to
the best knowledge of the Company and Majority Stockholders, have been prepared
in accordance with GAAP and in a manner consistent with the Audited Financial
Statements. The books and records of the Company and the Company Subsidiaries
have been kept in reasonable detail and accurately and fairly reflect the
transactions of the Company and the Company Subsidiaries. The financial
statements of the Company and the Company Subsidiaries which are as of and for
the year ended February 28, 1995 are sometimes referred to herein as the
"Audited Financial Statements" and the consolidated financial statements of the
Company and the Company Subsidiaries which are as of and for the year ended
February 29, 1996 and those which are as of and for the eleven months ended
January 31, 1997 are sometimes referred to herein as the "Unaudited Financial
Statements." The estimated consolidated balance sheet, consolidated statement of
income and consolidated statement of cash flows of the Company and the Company
Subsidiaries as of and for the year ending February 28, 1997 and which are
listed in Section 2.1.19 of the Disclosure Schedule are sometimes referred to
herein as the "Estimated Financial Statements". The Estimated Financial
Statements are based on reasonable assumptions. The actual consolidated
financial position, results of operations, cash flows and long-term debt of the
Company and the Company Subsidiaries as of and for the year ending February 28,
1997, will not vary in any material respect from those reflected in the
Estimated Financial Statements, except for the issues related to deferred
compensation raised by KPMG Peat Marwick L.L.P. prior to the execution of this
Agreement, and to the best knowledge of the Company and the Majority
Stockholders, have been prepared in accordance with GAAP.
2.1.20. Undisclosed Liabilities. Except as and to the extent
-----------------------
disclosed or reserved against in the Estimated Financial Statements, or as
disclosed in Section 2.1.20 of the Disclosure Schedule, and except for
liabilities incurred in the ordinary course of business and otherwise not in
contravention of this Agreement after February 28, 1997, neither the Company nor
any Company Subsidiary has, to the best knowledge of the Company and the
Majority Stockholders, any liabilities or obligations of any nature (whether
absolute, contingent or otherwise).
2.1.21. Guaranties, Etc. Except as disclosed in Sections 2.1.14 or
----------------
2.1.21 of the Disclosure Schedule, neither the Company nor any Company
Subsidiary has outstanding, (i) any guarantee (whether direct or indirect)
whereby the Company or any Company Subsidiary is or may become liable for any
indebtedness or obligation of any other person or entity, (ii) any capital or
operating lease obligations in excess of $20,000 per year, or (iii) any
investment in the securities, obligations or other ownership interests of, or
loans or
-27-
advances to, any person or entity (other than nominal travel advances to
employees not exceeding $25,000 in the aggregate).
2.1.22. Taxes. The Company and the Company Subsidiaries have either
-----
accrued, discharged or caused to be discharged, as the same have become due, or
the Estimated Financial Statements contain adequate accruals and reserves for,
all taxes, interest thereon, fines and penalties of every kind and character,
attributable or relating to the properties of the Company and the Company
Subsidiaries, their respective businesses or operations or the revenues or
income derived therefrom for all periods through February 28, 1997, and the
assessment of any additional taxes that by law should have been reported or paid
or in accordance with GAAP should have been accrued as of February 28, 1997, is
not expected. All quarterly deposits of estimated taxes required to be paid by
the Company and the Company Subsidiaries through the Closing Date will have been
paid on or before the Closing Date. All taxes of the Company and the Company
Subsidiaries for any period after February 28, 1997 through the date hereof have
been paid or properly accrued on the books of the Company and the Company
Subsidiaries, as appropriate. There shall be no breach of the representations
and warranties in this Section 2.1.22 in connection with actions or omissions of
the Company or the Company Subsidiaries or the expectations of the Majority
Stockholders with respect to state taxes to the extent such actions, omissions
or expectations will not have a Company Material Adverse Effect. For the
purposes of the preceding sentence only, Company Material Adverse Effect shall
be measured on a state-by-state level.
2.1.23. Inventories and Receivables. All inventories of finished
---------------------------
goods reflected in the financial statements of the Company and the Company
Subsidiaries are salable in the ordinary course of business in the customary
markets of the Company and the Company Subsidiaries, and all inventories of raw
materials and goods in process of the Company and the Company Subsidiaries are
of sufficient quality to produce such finished goods inventory so salable.
Subject to normal reserves, except as disclosed in Section 2.1.23 of the
Disclosure Schedule, the accounts and notes receivable of the Company and the
Company Subsidiaries are valid and, to the best knowledge of the Company and the
Majority Stockholders, subject to no counterclaim, set-off or other deduction.
Subject to normal reserves, except as described in Section 2.1.23 of the
Disclosure Schedule, all accounts and notes receivable of the Company and the
Company Subsidiaries will be collected in full within 120 days from the Closing
Date.
2.1.24. Full Authority. Except as disclosed in Section 2.1.24 of
--------------
the Disclosure Schedule, the Company and the Company Subsidiaries have full
power, authority and legal right and have all licenses, permits, qualifications,
and other documentation necessary to own and/or operate their respective
businesses, properties and assets and to
-28-
carry on their respective businesses as being conducted on the date of this
Agreement, and such businesses are now being conducted and such assets and
properties are owned and/or are being operated in compliance with all applicable
laws and all ordinances, rules and regulations of any governmental department,
commission, board, bureau, agency or instrumentality of the United States, any
state or political subdivision thereof, or any foreign jurisdiction, and all
applicable court or administrative agency decrees, awards and orders, except
where the failure to comply will not have a Company Material Adverse Effect, and
there is no existing condition or state of facts which would give rise to a
violation thereof or a liability or default thereunder, except where a
violation, liability or default will not have a Company Material Adverse Effect.
2.1.25. Environmental Matters. Except as disclosed in Section
---------------------
2.1.25 of the Disclosure Schedule, (i) the Company and the Company Subsidiaries
have obtained and maintained in effect all Environmental Permits required with
respect to their respective properties, assets, businesses and operations and
such Environmental Permits are not subject to any appeals or further proceedings
or to any unsatisfied conditions, (ii) the Company and the Company Subsidiaries
and their respective properties, assets, businesses and operations have been and
are in compliance with all applicable Requirements of Environmental Law (as
defined below) and Environmental Permits, (iii) the Company and the Company
Subsidiaries and their respective properties, assets, businesses and operations
are not subject to any Environmental Claims, as defined below (direct or
contingent, and whether known or unknown) or Environmental Liabilities (as
defined below) arising from or based upon any act, omission, event, condition or
circumstance occurring or existing on or prior to the date hereof, including
without limitation, any such Environmental Claims or Environmental Liabilities
arising from the ownership or operation of assets, businesses or properties now
or previously owned or operated by the Company or any Company Subsidiary or
their respective predecessors, (iv) neither the Company nor any Company
Subsidiary has received any notice of any violation or alleged violation of any
Requirements of Environmental Law or Environmental Permit or any Environmental
Claim in connection with their respective now or previously owned or operated
assets, properties, businesses or operations, or, in each case, those of their
respective predecessors, and (v) there are no Hazardous Materials (as defined
below) on, in, above, around, adjacent to or under any of the properties,
assets, business or operations of the Company or any Company Subsidiary other
than those used in the ordinary course of business and within the Requirements
of Environmental Law.
For purposes hereof, the following terms shall have the following meanings:
"Environmental Claim" means any third party (including governmental
agencies, regulatory agencies and employees) action, lawsuit, claim, proceeding
(including claims or
-29-
proceedings under the Occupational Safety and Health Act or similar laws
relating to safety of employees) which seeks to impose liability for (i) noise;
(ii) pollution, contamination or destruction of, or loss or injury to or any
adverse effect upon the air, surface water, ground water or land; (iii) solid,
gaseous or liquid waste generation, handling, treatment, storage, disposal or
transportation; (iv) exposure to hazardous or toxic substances; (v) the safety
or health of employees or (vi) the manufacture, processing, distribution in
commerce, use, or storage of chemical substances. An "Environmental Claim"
includes, but is not limited to, a common law action, as well as a proceeding to
issue, modify or terminate an Environmental Permit of the Company or any Company
Subsidiary, or to adopt or amend a regulation to the extent that such a
proceeding attempts to redress violations of such an Environmental Permit as
alleged by any federal, state or local executive, legislative, judicial,
regulatory or administrative agency, board or authority.
"Environmental Liabilities" includes all costs arising from any
Environmental Claim or violation or alleged violation or circumstance or
condition which would give rise to a violation or liability under any
Environmental Permit or Requirement of Environmental Law under any theory of
recovery, at law or in equity, and whether based on negligence, strict liability
or otherwise, including but not limited to: remedial, removal, response,
abatement, investigative, monitoring, personal injury and damage to property,
and any other related costs, judgments, payments, expenses, losses, damages,
penalties, fines, liabilities and obligations, including reasonable attorney's
fees and court costs and reasonable remedial design and consulting fees.
"Environmental Permit" means any permit, license, registration,
certificate, order, consent, approval or other authorization required under any
applicable Requirements of Environmental Law.
"Hazardous Materials" means any pollutant, contaminant, flammable
explosives, radioactive materials, hazardous material, hazardous waste,
hazardous, extremely hazardous or toxic substances or related materials, and all
asbestos (friable or non-friable), petroleum derivatives, polychlorinated
biphenyls, flammable substances and materials regulated in connection with any
Requirements of Environmental Law.
"Requirements of Environmental Law" means all requirements imposed by any
law, rule, regulation, approval, decision, decree, ordinance, by-law having the
force of law or order of any federal, state or local executive, legislative,
judicial, regulatory or administrative agency, board or authority, which relate
to (i) noise; (ii) pollution or protection of the air, surface water, ground
water or land; (iii) solid, gaseous or liquid waste generation, treatment,
storage, use, processing, disposal or transportation; (iv) exposure to hazardous
or toxic
-30-
substances; (v) the safety or health of employees or (vi) regulation of the
manufacture, processing, distribution in commerce, use, or storage of chemical
substances.
2.1.26. Legal Actions. Except as described in Section 2.1.26 of the
-------------
Disclosure Schedule, no legal action, suit, proceeding, grievance, arbitration,
investigation, audit or claim by or before any court, arbitration panel or
governmental agency (including, without limitation, an Environmental Permit
proceeding, Environmental Claim or proceeding respecting or arising under
Requirements of Environmental Law) is pending or, to the knowledge of the
Company, any Company Subsidiary or any Majority Stockholder, threatened which
involves or may involve the Company or any Company Subsidiary or their
respective predecessors or any of their respective now or previously owned or
operated assets, properties, operations or business or the purchase, sale,
transportation or processing of materials or products.
2.1.27. Specific Obligations. Neither the Company nor any Company
--------------------
Subsidiary has any indebtedness for borrowed money, obligations under or in
respect of letters of credit or obligations in the nature of earnouts or
contingent payments or indebtedness for the purchase of property (except trade
payables incurred in the ordinary course of business) other than as set forth in
Sections 2.1.14, 2.1.21 or 2.1.27 of the Disclosure Schedule. Except as
disclosed in Sections 2.1.14, 2.1.21 or 2.1.27 of the Disclosure Schedule, no
prepayment penalties, premiums, success fees or other similar payments are
payable in connection with the prepayment of any of the foregoing.
2.1.28. Information in ESOP Participant Disclosure Statement;
-----------------------------------------------------
Information Statement. None of the information supplied or to be supplied by
---------------------
the Company to the Airtron, Inc. Profit Sharing and Stock Ownership Plan (the
"ESOP") or to participants therein in connection with the transactions
contemplated hereby, including the ESOP Participant Disclosure Statement (as
defined below) will, at the time it is distributed or communicated to the ESOP
or the ESOP participants, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
None of the information supplied or to be supplied from time to time
in writing by the Company specifically for inclusion in the Employee Offering
Memorandum (as defined below) or the confidential information statement to be
distributed to the Stockholders in connection with the transactions contemplated
hereby (the "Information Statement") will, at the time it is distributed,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
-31-
the statements therein, in light of the circumstances under which they are made,
not misleading.
Notwithstanding the foregoing, the Majority Stockholders make no
representation with respect to statements made in any of the foregoing documents
based on information supplied by Parent or any Parent Subsidiary in writing
specifically for inclusion therein.
2.1.29. No Material Adverse Change. Except as disclosed in Section
--------------------------
2.1.29 of the Disclosure Schedule, since December 31, 1996, the Company and the
Company Subsidiaries have conducted their respective businesses in the ordinary
and usual course and there has not been any change in the assets, business,
results of operations, financial condition, long-term debt, Net Worth (as
defined below), cash flows or prospects of the Company and the Company
Subsidiaries that has had or might have a Company Material Adverse Effect.
Except as disclosed in Section 2.1.29 of the Disclosure Schedule, the Company
and the Company Subsidiaries have:
(i) carried on their businesses in substantially the same manner
as heretofore conducted and not introduced any material new method of
management, operation or accounting, nor provided discounted services other
than in accordance with past practices;
(ii) maintained their properties, facilities, equipment and other
assets, including those held under leases, in good working order, condition
and repair, ordinary wear and tear excepted;
(iii) performed all of their obligations under all debt and lease
instruments and other agreements relating to or affecting their respective
businesses, assets, properties, equipment and rights, paid all vendors,
suppliers and other third parties (including mechanics and materialmen) as
and when their invoices have become due, and paid in full all payroll
obligations when due;
(iv) maintained their present debt and lease instruments (unless
the same have otherwise matured) and refrained from entering into new or
amended debt or lease instruments;
(v) kept in full force and effect their present insurance
policies or other comparable insurance coverage;
-32-
(vi) used their best efforts to maintain and preserve their
business organizations intact, retain their present employees and maintain
their relationships with suppliers, customers and others having business
relations with them;
(vii) refrained from effecting any change in their capital
structure and refrained from incurring any expenditures outside the normal
course of business, including any capital expenditures in excess of
$25,000;
(viii) refrained from starting or acquiring any new business;
(ix) maintained their present salaries and commission levels for
all officers, directors, employees and agents, except for reasonable
increases (in line with the Company's past practices) following the
Company's regular annual employee review;
(x) refrained from declaring or paying any bonuses, fees,
extraordinary commissions or any other unusual distributions to the
stockholders of the Company or any director, management personnel, sales
agent, employee or other personnel of the Company or any Company
Subsidiary; and
(xi) not, other than in the ordinary course of business,
discounted any receivables or taken any action to accelerate payment of any
receivable prior to its due date.
For purposes of this Agreement, the term "Net Worth" shall mean the
consolidated assets less the consolidated liabilities of the Company and the
Company Subsidiaries as determined under GAAP; provided, however, that for
purposes of Section 718, the effects on the consolidated assets and consolidated
liabilities of the Company and the Company Subsidiaries of the transactions
described in Sections 4.1.4, 4.1.7, 4.1.8, 4.1.9, 4.1.13, 5.1.3 and 5.2 shall be
excluded in the calculation of Net Worth as if such transactions had not
occurred prior to the close of business on February 28, 1997.
2.1.30. Disclosure. To the best knowledge of the Company and the
----------
Majority Stockholders, no representation or warranty by the Majority
Stockholders in this Agreement and no statement contained in the Disclosure
Schedule or any certificate delivered by the Company or the Majority
Stockholders to Parent or any Parent Subsidiary pursuant to this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit any material fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they are or were made, not
misleading.
-33-
2.1.31. Condemnation. Neither the Company nor any Company Subsidiary
------------
has received any notice of any condemnation or contemplated condemnation
proceedings which might affect any real property or real property interests
owned or leased by the Company or any Company Subsidiary.
2.1.32. Change in Laws. The Company and the Majority Stockholders
--------------
have no information or knowledge of the existence of, or of any change
contemplated by, any applicable laws, ordinances, or restrictions (whether
public or private), or any judicial or administrative action or any action by
adjacent landowners or natural or artificial conditions upon any real property
or real property interests owned or leased by the Company or any Company
Subsidiary, which might prevent, limit, impede or render more costly the
Surviving Corporation's continued use of such properties.
2.1.33. Company Material Adverse Effect. The term "Company Material
-------------------------------
Adverse Effect" shall mean an adverse effect on the properties, assets,
financial position, results of operations, long-term debt, cash flows or
contingent liabilities of the Company and the Company Subsidiaries in an amount
of $50,000 or more.
2.2. Several Representations and Warranties of the Stockholders. Each
----------------------------------------------------------
Stockholder, severally and not jointly, represents and warrants to Parent as
follows:
2.2.1. Stock Ownership, Etc. Such Stockholder owns, beneficially
---------------------
and of record, with full power to vote, the number of shares of Company Common
Stock, Warrants and SARs listed beside such Stockholder's name on Exhibit
1.3.1(a) attached hereto, and such shares, Warrants and SARs are so held by such
Stockholder free and clear of all liens, encumbrances and claims whatsoever;
provided, however, that with respect to each Stockholder holding such shares as
a trustee or custodian, such shares are held for the benefit of the respective
beneficiaries of the applicable trust or custodial arrangements and are subject
to the terms thereof. The interest, if any, of such Stockholder in the Company
Common Stock held by the Deferred Compensation Plans for the benefit of such
Stockholder is accurately set forth in Exhibit 1.3.1(a).
2.2.2. Authority. Such Stockholder has full right, power, legal
---------
capacity and authority to, and with respect to each Stockholder holding Company
Common Stock in a fiduciary capacity, such Stockholder has full power and
authority under the terms of the applicable trust, custodial or other
arrangements to (i) execute, deliver and perform this Agreement (including,
without limitation, to grant the Power of Attorney by such Stockholder) and to
execute, deliver and perform all other documents and instruments referred to
herein or contemplated hereby to be executed, delivered and performed by such
-34-
Stockholder, and (ii) consummate the transactions contemplated herein and
thereby. This Agreement (including the grant of the Power of Attorney by such
Stockholder) have been duly executed and delivered by such Stockholder and
constitutes, and all documents and instruments referred to herein or
contemplated hereby when duly executed and delivered by such Stockholder will
constitute, legal, valid and binding obligations of such Stockholder enforceable
against such Stockholder in accordance with their respective terms and
conditions, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether applied
in a proceeding at law or in equity).
2.2.3. Consents. No approval, consent, order or action of or
--------
filing with any court, administrative agency, governmental authority or other
third party is required for the execution, delivery or performance by such
Stockholder of this Agreement (including, without limitation, the grant of the
Power of Attorney by such Stockholder) or the other documents referred to herein
or contemplated hereby to be executed, delivered or performed by such
Stockholder. With respect to each Stockholder holding shares of Company Common
Stock in a fiduciary capacity, no consent, approval or prior notice to the
beneficiaries of such arrangement is required, or if required, has been
obtained.
2.2.4. Defaults. Except as disclosed in Section 2.2.4 of the
--------
Disclosure Schedule, the execution and delivery of this Agreement by such
Stockholder and of the other documents, agreements and instruments referred to
herein or contemplated hereby to be executed and delivered by such Stockholder,
the consummation by such Stockholder of the transactions contemplated hereby and
thereby and the performance by such Stockholder of such Stockholder's
obligations hereunder and thereunder will not constitute a violation of,
conflict with, or result in a default or a breach of fiduciary duty under (i)
any mortgage, indenture, charter, bylaw provision, contract, agreement, lease,
commitment or other instrument of any kind to which such Stockholder is a party
or under which such Stockholder's properties or assets may be bound or
affected , or (ii) any applicable trust, custodial or other arrangement pursuant
to which such Stockholder acts as fiduciary or (iii) any law, rule or regulation
applicable to such Stockholder or any court injunction, order or decree, or any
valid or enforceable order of any governmental agency having jurisdiction over
such Stockholder, which violation, conflict or default could adversely affect
the ability of such Stockholder to consummate and perform the transactions
contemplated hereby.
-35-
3. PARENT'S REPRESENTATIONS,
WARRANTIES AND COVENANTS
3.1. Representations and Warranties. Simultaneously with the execution and
------------------------------
delivery of this Agreement, Parent is delivering to the Attorney-in-Fact a
disclosure schedule (the "Parent Disclosure Schedule"). Parent hereby
represents and warrants to each of the Stockholders as follows:
3.1.1. Organization. Parent is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of Texas.
Parent is duly qualified or licensed as a foreign corporation authorized to do
business in all states in which any of its assets or properties may be situated
or where its business is conducted except where the failure to obtain such
qualification or license would not have a Parent Material Adverse Effect (as
defined below).
3.1.2. Subsidiaries. Except for the corporations described in
------------
Section 3.1.2 of the Parent Disclosure Schedule, and direct or indirect
subsidiary corporations of Parent formed after the date hereof and prior to the
Closing Date as may be disclosed in writing to the Attorney-in-Fact (the "Parent
Subsidiaries"), Parent does not and will not prior to the Closing Date own or
hold of record or beneficially, directly or indirectly, 50% or more of the
outstanding capital stock, voting interests, or ownership interests in any
corporation, partnership, joint venture or other entity. Each Parent Subsidiary
is or will be duly organized, validly existing and in good standing under the
laws of the state of its incorporation, and is prior to the Closing Date duly
qualified or licensed as a foreign corporation authorized to do business in each
state in which any of its assets or properties may be situated or where its
business is conducted except where the failure to obtain such qualification or
license will not have a Parent Material Adverse Effect.
3.1.3. Capitalization of Parent. The total authorized capital
------------------------
stock of Parent is 100,000,000 shares of Parent Common Stock, of which 4,028,363
shares are issued and outstanding, and 50,000,000 shares of preferred stock,
$.001 par value, none of which are issued or outstanding. The outstanding shares
of Parent Common Stock have been duly and validly issued and are fully paid and
non-assessable. Except for the agreements and instruments listed in Section
3.1.3 of the Parent Disclosure Schedule and except for securities which may be
issued in Pending Acquisitions (as defined below) there is and will be
immediately prior to the Closing Date no outstanding capital stock, convertible
or exchangeable securities, subscriptions, calls, options, warrants, rights or
other agreements or commitments of any character relating to the issuance or
sale of any shares of capital stock of, or other equity or ownership interest
in, Parent ("Parent Other Ownership Interests")
-36-
outstanding and no agreements of any kind to which Parent is a party or
otherwise bound relating to the issuance, sale or transfer of any capital stock
of Parent or any Parent Other Ownership Interests. Parent has and will have
immediately prior to the Closing Date no liability, contingent or otherwise, nor
has any claim been asserted or threatened by, any person, including without
limitation any holder or former holder of shares, options, warrants, or other
equity or voting or ownership interests or other securities of Parent, in
connection with pre-emptive or contractual subscription rights or the offer,
sale, purchase, redemption, surrender or cancellation of any shares, options,
warrants or other equity or voting or ownership interests or securities of
Parent. As of the Closing Date, the shares of Parent Preferred Stock and Parent
Common Stock to be delivered to holders of Company Common Stock, Warrants and
SARs pursuant to this Agreement will be duly authorized and, upon delivery to
such holders pursuant to this Agreement, validly issued fully paid and
nonassessable. Parent has not repurchased or redeemed any of its outstanding
capital stock. Parent has afforded the Attorney-in-Fact and the Stockholders
full access to the minute books and capital stock and similar records of the
Parent, which books and records are true, complete and accurate. The names and
addresses of the holders of record of five percent or more of the outstanding
shares of Parent Common Stock, the number of shares of Parent Common Stock held
of record by each of such holders, and the names and addresses of the holders of
all Parent Other Ownership Interests other than Parent Common Stock and the type
and amount of Parent Other Ownership Interest held by each of such holders are
set forth in Section 3.1.3 of the Parent Disclosure Schedule. For purposes of
this Agreement, the term "Pending Acquisition" shall mean any acquisition by
Parent or any Parent Subsidiary of outstanding capital stock or assets of any
other person or entity as to which a letter agreement in principle or memorandum
of understanding has been entered into prior to the Closing Date, the material
terms of which acquisition (to the extent known by Parent) are disclosed to the
Attorney-in-Fact in writing by Parent prior to the Closing Date.
3.1.4. Authority. Parent has full right, power, legal capacity and
---------
authority to execute, deliver and perform this Agreement and all documents and
instruments referred to herein or contemplated hereby and to consummate the
transactions contemplated herein and thereby. This Agreement has been duly
executed and delivered by Parent and constitutes, and all documents and
instruments referred to herein or contemplated hereby to be executed and
delivered by Parent, when executed and delivered by Parent will constitute,
legal, valid and binding obligations of Parent, enforceable in accordance with
their respective terms and conditions except as such enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether applied in a proceeding at law or in equity).
-37-
3.1.5. Consents. Except for the filings, if any, under applicable
--------
state securities or "blue sky" laws, no approval, consent, order or action of or
filing with any court, administrative agency, governmental authority or other
third party is required for the execution, delivery or performance by Parent of
this Agreement or the other documents and instruments referred to herein or
contemplated hereby to be executed, delivered or performed by Parent.
3.1.6. Title. Except as disclosed in Section 3.1.6 of the Parent
-----
Disclosure Schedule, Parent and the presently existing Parent Subsidiaries own
outright, and have full legal and beneficial title to all of their respective
assets free and clear of all liens, pledges, mortgages, security interests,
conditional sales contracts and encumbrances. As of the date hereof, Parent and
the existing Parent Subsidiaries own no real estate or interest in real estate
except for the leasehold interests described in Section 3.1.6 of the Parent
Disclosure Schedule. Section 3.1.6 of the Parent Disclosure Schedule contains a
description of all real property and real property interests leased as lessee by
Parent or any presently existing Parent Subsidiary.
3.1.7. Defaults. Neither Parent nor any existing Parent Subsidiary
--------
nor any Parent Subsidiary formed after the date hereof and prior to the Closing
Date is or will be prior to the Closing Date in default under, in breach of or
in violation of, and the execution, delivery and performance of this Agreement
and the other documents and instruments re ferred to herein or contemplated
hereby to be executed and delivered by Parent and the consummation by Parent of
the transactions contemplated hereby and thereby and the performance by Parent
of its obligations hereunder and thereunder will not constitute a violation of,
conflict with, or result in a default under or (except as contemplated by the
financing of the transactions contemplated hereby) cause the imposition upon
Parent or any Parent Subsidiary of any additional adverse burden or condition
under (i) any mortgage, indenture, charter or bylaw provision, contract,
agreement, lease, commitment or other instrument of any kind to which Parent or
any Parent Subsidiary is a party or by which Parent or any Parent Subsidiary or
any of their respective properties or assets may be bound or affected or (ii)
any law, rule or regulation applicable to Parent or any Parent Subsidiary or any
court injunction, order or decree, or any valid and enforceable order of any
governmental agency in effect as of the date hereof having jurisdiction over
Parent or any Parent Subsidiary, which default, breach, violation, conflict or
imposition described in this clause (ii) could adversely affect the ability of
Parent to consummate the transactions contemplated hereby.
-38-
3.1.8. Power of Attorney. Except as set forth in Section 3.1.8 of
-----------------
the Disclosure Schedule, Parent has not given to any person or party, and there
is not currently existing, any power of attorney of any type pertaining to the
Parent.
3.1.9. Proprietary Rights. To the best knowledge of Parent, Parent
------------------
and the Parent Subsidiaries will have at the Closing Date full and sufficient
rights to use all trade names, brand names, trademarks, service marks and logos
and to use and practice all technology, proprietary information, know-how or
patented ideas, designs or inventions (collectively "Parent Proprietary
Rights") necessary for the operation of their businesses and the marketing,
distribution, sale and use (whether by Parent or any Parent Subsidiary or their
direct or indirect customers) of the materials used and the products sold by
Parent and the Parent Subsidiaries. To the best knowledge of Parent, none of the
ownership, access to, use or practice of the Parent Proprietary Rights by Parent
or any Parent Subsidiary infringe on the rights of any other party and all
Parent Proprietary Rights are valid and enforceable. Parent has provided the
Company and the Attorney-in-Fact access to the documentation respecting the
Parent Proprietary Rights.
3.1.10. Labor Matters. To the best knowledge of Parent, the
-------------
employees of Parent and the existing Parent Subsidiaries are not subject to any
collective bargaining agreements or other contracts with a labor union,
contingent or otherwise, nor are any such employees represented by any labor
union. To the best knowledge of Parent, there are no unfair labor practice
charges or complaints pending against Parent or any existing Parent Subsidiary
involving employees now or previously employed by Parent or any existing Parent
Subsidiary. Since November 1, 1996 there have not been any labor disputes or
written and filed grievances or claims involving employees of Parent or any
existing Parent Subsidiary or to the best knowledge of Parent, any union
organizational efforts involving employees of Parent or any existing Parent
Subsidiary.
3.1.11. Employee Benefits. Section 3.1.11 of the Parent Disclosure
-----------------
Schedule lists all of the "Parent Plans" (as defined below). Except as described
in Section 3.1.11 of the Parent Disclosure Schedule, to the best knowledge of
Parent, neither Parent nor any existing Parent Subsidiary nor any other
organization which is a member of a controlled group of organizations within the
meaning of Sections 414(b), (c), (m) or (o), of the Code of which Parent or any
existing Parent Subsidiary is a member (the "Parent Controlled Group") has any
obligation, contingent or otherwise, covering any of their employees under any
employment or consulting agreement or under any executive or employee's
compensation plan, agreement or arrangement including, without limitation, any
"employee welfare benefit plan" as defined in Section 3(1) of ERISA, or any
other pension, retirement, profit sharing, stock option, stock purchase, bonus,
savings plan, health, welfare
-39-
or other employee or former employee benefit plan, program, policy or
arrangement (collectively referred to herein as "Parent Plans"). To the best
knowledge of Parent, neither Parent nor any Parent Subsidiary nor any members of
the Parent Controlled Group currently sponsors or maintains or has over the
prior six (6) years maintained or sponsored any "employee pension benefit plan"
as defined in Section 3(2) of ERISA. To the best knowledge of Parent, there is
no voluntary employees' beneficiary association which is implementing any Parent
Plan. Except as disclosed in Section 3.1.11 of the Parent Disclosure Schedule,
to the best knowledge of Parent, neither the Parent nor any existing Parent
Subsidiary nor any fiduciary now or previously acting pursuant to any Parent
Plan ("Parent Plan Fiduciary") has breached or otherwise failed to comply with
any provision of any Parent Plan, and there are no written and filed claims
(other than for benefits in the ordinary course) grievances, audits,
investigations or suits pending against Parent, any existing Parent Subsidiary
or any Parent Plan Fiduciary under any Parent Plan. Parent has delivered copies
of the following to the Company and the Attorney-in-Fact: (i) collective
bargaining agreements or other such contracts relating to the benefits under any
Parent Plan and (ii) Forms S-8, if any, (including any amendments thereto) for
any Parent Plan.
Except for the Amended and Restated Savings Plan (as defined below),
no Parent Plan is an "employee pension benefit plan" within the meaning of ERISA
Section 3(2).
To the best knowledge of Parent, with respect to any Parent Plan which
is an "employee welfare benefit plan" (within the meaning of ERISA Section
3(1)): (i) each Parent Plan which is intended to meet the requirements for tax-
favored treatment under Subchapter B of Chapter 1 of the Code meets such
requirements, (ii) there is no disqualified benefit (as such term is defined in
the Code Section 4976(b)) which would subject Parent or any Parent Subsidiary,
or the Surviving corporation to any taxes under Code Section 4976(a); (iii) each
Parent Plan which is a group health plan (as such term is defined in Code
Section 162(i)(2)) complies and has complied with the applicable requirements of
Code Section 4980B; and (iv) each member of the Parent Controlled Group has
complied with the reporting and disclosure requirements of ERISA for reports and
disclosures required to be reported or disclosed prior to or as of the date
hereof. Except as described in Section 3.1.11 of the Parent Disclosure
Schedule, to the best knowledge of Parent, neither the Parent nor any Parent
Subsidiary nor the Parent Controlled Group maintains any post-retirement health
and life insurance plans for employees and retirees. Except as listed in
Section 3.1.11 of the Parent Disclosure Schedule or as provided in Article 5 of
this Agreement, to the best knowledge of Parent, neither Parent nor any Parent
Subsidiary has any commitment, whether formal or informal and whether legally
binding or not, to create any additional parent Plan or to amend or modify any
Parent Plan, and except as provided in Article 5 of this
-40-
Agreement, no benefits will become payable under any Parent Plan as a result of
the consummation of the transactions contemplated hereby. To the best knowledge
of Parent, neither Parent nor any Parent Subsidiary has made or is obligated to
make any nondeductible contribution to any Parent Plan.
3.1.12. Certain Contracts. Section 3.1.12 of the Parent Disclosure
-----------------
Schedules lists each contract, lease, undertaking, commitment, mortgage,
indenture, note, security agreement, license and other agreement of Parent or
any existing Parent Subsidiary in effect on the date hereof (i) involving the
expenditure or receipt of more than $100,000 over the term thereof, (ii)
containing provisions calling for the sale or purchase of raw materials,
products or services at prices that vary from the market prices of such raw
materials, products or services generally prevailing in customary third party
markets, (iii) which include "take or pay," "meet or release," "most favored
nations" or similar pricing or delivery arrangements, (iv) between Parent and
any Parent Subsidiary or among any Parent Subsidiaries, (v) requiring Parent or
any Parent Subsidiary to indemnify or hold harmless any other person or entity,
(vi) evidencing any warranty obligation of Parent or any Parent Subsidiary with
respect to goods, services or products sold or leased by any of them, other than
in the ordinary course of business, or (vii) imposing on Parent or any Parent
Subsidiary any confidentiality, non-disclosure or non-compete obligation (except
those to which such access is prohibited pursuant to the terms thereof). The
contracts, leases, undertakings, commitments, mortgages, indentures, notes,
security agreements, leases, licenses and other agreements of the nature
described in clauses (i) through (vii) are sometimes collectively referred to
herein as the "Parent Contracts." Except as set forth in Section 3.1.12 of
the Parent Disclosure Schedule, neither Parent nor any existing Parent
Subsidiary nor any other party thereto is in default under any Parent Contract,
nor does any event, circumstance or situation exist which, with the passage of
time or notice or both will constitute a default by Parent or any existing
Parent Subsidiary or any other party under any such Parent Contract or any
judgment, order or decree of any court or any government agency or
instrumentality under which any person, firm, corporation or other entity is or
may be entitled to assert any rights against Parent or any existing Parent
Subsidiary or their respective assets, properties, businesses, operations or
products.
3.1.13. Officers, Directors and Affiliates. Section 3.1.13 of the
----------------------------------
Parent Disclosure Schedule lists all directors and officers of Parent and the
existing Parent Subsidiaries as of the date hereof and their respective dates of
service and describes all trans actions, contracts and other arrangements
between Parent or any existing Parent Subsidiary and any officer, director,
stockholder or affiliate of Parent or any existing Parent Subsidiary which (i)
occurred or became effective after ▇▇▇▇▇ ▇, ▇▇▇▇, (▇▇) occurred, became
effective or existed prior to March 1, 1994 and were not fully performed and
terminated as of ▇▇▇▇▇ ▇,
-▇▇-
▇▇▇▇, ▇▇ (▇▇▇) constitutes a liability or obligation (contingent or direct) due
or to become due by Parent or any existing Parent Subsidiary to any officer,
director, stockholder, or affiliate of Parent or any existing Parent Subsidiary,
in each case other than the customary employee compensation and employee
benefits and customary arrangements with respect to expense reimbursements.
3.1.14. Investment Company. Parent is not, and will not be
------------------
immediately prior to the Closing Date, an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "holding company," a "subsidiary company"
of a "holding company" or an "affiliate" of a "holding company" or a "public
utility" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
3.1.15. Financial Statements. Except as described in Section 3.1.15
--------------------
of the Parent Disclosure Schedule, the financial statements ("Parent Financial
Statements") listed in Section 3.1.15 of the Parent Disclosure Schedule are true
and correct in all material respects, and are fair presentations of the
consolidated financial position, results of operations and cash flows of
Parent and the existing Parent Subsidiaries as of the dates and for the periods
indicated and to the best knowledge of Parent, have been prepared in accordance
with GAAP. The books and records of Parent and the existing Parent Subsidiaries
have been kept in reasonable detail and accurately and fairly reflect the
transactions of Parent and the existing Parent Subsidiaries.
3.1.16. Undisclosed Liabilities. Except as and to the extent
-----------------------
disclosed or reserved against in the Parent Financial Statements, or as
disclosed in Section 3.1.16 of the Parent Disclosure Schedule, and except for
liabilities incurred in the ordinary course of business and otherwise not in
contravention of this Agreement after February 28, 1997, and except for
liabilities incurred in connection with Pending Acquisitions, neither Parent nor
any existing Parent Subsidiary has, to the best knowledge of Parent, any
liabilities or obligations of any nature (whether absolute, contingent or
otherwise).
3.1.17. Guaranties, Etc. Except as disclosed in Sections 3.1.12 or
----------------
3.1.17 of the Parent Disclosure Schedule, and except with respect to Pending
Acquisitions, neither Parent nor any existing Parent Subsidiary has outstanding,
(i) any guarantee (whether direct or indirect) whereby Parent or any existing
Parent Subsidiary is or may become liable for any indebtedness or obligation of
any other person or entity, (ii) any capital or operating lease obligations in
excess of $20,000 per year, or (iii) any investment in the securities,
obligations or other ownership interests of, or loans or advances to, any person
or entity (other than nominal travel advances to employees not exceeding $25,000
in the aggregate).
-42-
3.1.18. Taxes. Parent has either accrued, discharged or caused to
-----
be discharged, as the same have become due, or the Parent Financial Statements
contain adequate accruals and reserves for, all taxes, interest thereon, fines
and penalties of every kind and character, attributable or relating to the
properties of Parent and the existing Parent Subsidiaries, their respective
businesses or operations or the revenues or income derived therefrom for all
periods through December 31, 1996, and the assessment of any additional taxes
that by law should have been reported or paid or in accordance with GAAP should
have been accrued as of December 31, 1996, is not expected. All quarterly
deposits of estimated taxes required to be paid by Parent and the Parent
Subsidiaries through the Closing Date will have been paid on or before the
Closing Date. All other taxes of Parent and the Parent Subsidiaries for any
period after December 31, 1996 through the date hereof have been paid or
properly accrued on the books of Parent and the Parent Subsidiaries, as
appropriate.
3.1.19. Full Authority. Except as disclosed in Section 3.1.19 of
--------------
the Parent Disclosure Schedule, Parent and the Parent Subsidiaries will have, at
the Closing Date, full power, authority and legal right and have all licenses,
permits, qualifications, and other documentation necessary to own and/or
operate their respective businesses, properties and assets and to carry on their
respective businesses and at the Closing Date such businesses will be conducted
and such assets and properties will be owned and/or operated in compliance with
all applicable laws and all ordinances, rules and regulations of any
governmental department, commission, board, bureau, agency or instrumentality of
the United States, any state or political subdivision thereof, or any foreign
jurisdiction, and all applicable court or administrative agency decrees, awards
and orders, except where the failure to comply will not have a Parent Material
Adverse Effect, and there will be no then existing condition or state of facts
which would give rise to a violation thereof or a liability or default
thereunder, except where a violation, liability or default will not have a
Parent Material Adverse Effect.
3.1.20. Environmental Matters. Except as disclosed in Section
---------------------
3.1.20 of the Parent Disclosure Schedule, as of the date hereof, (i) Parent and
the Parent Subsidiaries have obtained and maintained in effect all Environmental
Permits required with respect to their respective properties, assets, businesses
and operations, and such Environmental Permits are not subject to any appeals or
further proceedings or to any unsatisfied conditions, (ii) Parent and the Parent
Subsidiaries and their respective properties, assets, businesses and operations
are in compliance with all applicable Requirements of Environmental Law and
Environmental Permits, (iii) Parent and the Parent Subsidiaries and their
respective properties, assets, businesses and operations are not subject to any
Environmental Claims (direct or contingent, and whether known or unknown) or
Environmental Liabilities arising from or based upon any act, omission, event,
condition or circumstance occurring or existing
-43-
on or prior to the date hereof, including without limitation, any such
Environmental Claims or Environmental Liabilities arising from or based upon the
ownership or operation of assets, businesses or properties now or previously
owned or operated by Parent or any Parent Subsidiary or their respective
predecessors, (iv) Parent has not received any notice of any violation or
alleged violation of any Requirements of Environmental Law or Environmental
Permit or any Environmental Claim in connection with its now or previously owned
or operated assets, properties, businesses or operations, or, in each case,
those of its predecessors, and (v) there are no Hazardous Materials on, in,
above, around, adjacent to ro under any of the properties, assets, business or
operations of Parent or any Parent Subsidiary other than those used in the
ordinary course of business and within the Requirements of Environmental Law.
3.1.21. Legal Actions. No legal action, suit, proceeding,
-------------
grievance, arbitration, investigation, audit or claim by or before any court,
arbitration panel or governmental agency (including, without limitation, an
Environmental Permit proceeding, Environmental Claim or proceeding respecting or
arising under Requirements of Environmental Law) is pending or, to the knowledge
of Parent, threatened which involves or may involve Parent or any existing
Parent Subsidiary or their respective predecessors or any of their respective
now or previously owned or operated assets, properties, operations or business
or the purchase, sale, transportation or processing of materials or products.
3.1.22. Information in ESOP Participant Disclosure Statement;
-----------------------------------------------------
Information Statement. None of the information supplied by Parent from time to
---------------------
time in writing specifically for the inclusion in the ESOP Participant
Disclosure Statement will, at the time it is distributed to the ESOP or the ESOP
participants, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
None of the information supplied by Parent from time to time in
writing specifically for inclusion in the Information Statement will, at the
date the Information Statement is distributed to the holders of Company Common
Stock, Warrants or SARs contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading.
The Employee Offering Memorandum will not, at the time it is
distributed to employees of the Company and the Company Subsidiaries, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary
-44-
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading.
Notwithstanding the foregoing, Parent makes no representation with
respect to statements made in any of the foregoing documents based on
information supplied by the Company in writing specifically for inclusion
therein.
3.1.23. No Material Adverse Change. Except as disclosed in Section
--------------------------
3.1.23 of the Parent Disclosure Schedule, since February 28, 1997, Parent and
the existing Parent Subsidiaries have conducted their respective businesses in
the ordinary and usual course and there has not been any change in the assets,
business, results of operations, financial condition, long-term debt, cash flows
or prospects of Parent and the existing Parent Subsidiaries that has had or
might have a Parent Material Adverse Effect.
3.1.24. Disclosure. To the best knowledge of Parent, no
----------
representation or warranty by Parent in this Agreement and no statement
contained in the Parent Disclosure Schedule or any certificate delivered by
Parent to the Attorney-in-Fact pursuant to this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit any
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they are or were made, not misleading.
3.1.25. Parent Material Adverse Effect. The term "Parent Material
------------------------------
Adverse Effect" shall mean an adverse effect on the properties, assets,
financial position, results of operations, long-term debt, cash flows or
contingent liabilities of Parent and the Parent Subsidiaries in an amount of
$50,000 or more.
4. CONDUCT PRIOR TO THE CLOSING AND CERTAIN OTHER MATTERS
4.1 Company. The Majority Stockholders further agree with Parent that:
-------
4.1.1. Preservation of Business. From the date hereof to the
------------------------
Closing Date, the Company and the Company Subsidiaries shall use their
reasonable efforts to maintain and preserve their business organizations intact,
retain their present employees, maintain their relationships with suppliers,
customers and others having business relations with them, and preserve the good
will of all persons dealing with the Company and the Company Subsidiaries.
4.1.2. Cooperation. From the date hereof to the Closing Date, each
-----------
Majority Stockholder, the Company and the Company Subsidiaries will cooperate
fully with
-45-
Parent as to arrangements for the consummation of the transactions contemplated
hereby in an orderly fashion.
4.1.3. Insurance. From the date hereof to the Closing Date, the
---------
Company and the Company Subsidiaries will maintain in full force and effect all
of their insurance now in effect (or other comparable insurance coverage)
covering their respective assets, operations and employees, and not default
(except where such default will not have a Company Material Adverse Effect or
have an adverse effect on the insurance coverage or insurance costs of the
Company or any Company Subsidiary) with respect to any provision of, and give
all notices and present all claims under, all insurance policies in a due and
timely fashion.
4.1.4. Certain Notices. From the date hereof to the Closing Date,
---------------
the Attorney-in-Fact will promptly notify Parent of the receipt by him, the
Company, any Company Subsidiary or any Majority Stockholder of any notice or
claim, written or oral, of (i) default or breach by the Company or any Company
Subsidiary under, or of any termination (other than at end of the stated term
thereof) or cancellation, or threat of termination (other than at end of the
stated term thereof) or cancellation, of any Company Contract, (ii) any loss of,
damage to or disposition of, any of the properties, assets or the products of
the Company or any Company Subsidiary of a value of $10,000 or more, singly or
in the aggregate (other than the sale or use of inventories in the ordinary
course of business), (iii) any claim or litigation, threatened or instituted, or
any other adverse event or occurrence involving or affecting the Company or any
Company Subsidiary or any of their respective assets, properties, operations,
businesses or employees, and (iv) any proposal made by any third party received
by the Company or any Company Subsidiary or of which any Majority Stockholder
obtains knowledge in respect of any sale or other disposition, direct or
indirect, of the assets (other than the sale or use of inventories in the
ordinary course of business), businesses or outstanding capital stock or other
ownership or voting interests of the Company or any Company Subsidiary.
4.1.5. Filings, Etc. From the date hereof to the Closing Date,
-------------
each Majority Stockholder, the Company and the Company Subsidiaries will make
all filings which are required to be made by them to lawfully consummate the
transactions contemplated hereby.
4.1.6. Compliance with Laws. From the date hereof to the Closing
--------------------
Date, the Company and the Company Subsidiaries will comply with and cause to be
complied with all applicable laws, rules, regulations and orders of all federal,
state and local governments or governmental agencies affecting or relating to
the Company or any Company Subsidiary
-46-
or their respective assets, properties, operations, businesses or employees
except where the failure to comply will not have a Company Material Adverse
Effect.
4.1.7. Encumbrances and Dispositions. Without the prior written
-----------------------------
consent of Parent, except to the extent disclosed in Section 4.1.7 of the
Disclosure Schedule, from the date hereof to Closing Date neither the Company
nor any Company Subsidiary shall sell, dispose of, distribute, encumber or enter
into any agreement or arrangement for the sale, disposition, distribution or
encumbrance of any of its assets or properties (other than the sale or use of
inventories in the ordinary course of business) or enter into any transaction,
the effect of which would be to materially diminish the amount or value of the
properties, assets or operations of the Company or any Company Subsidiary or
otherwise adversely affect its business.
4.1.8. Negotiations. From the date hereof to the Closing Date,
------------
except to the extent disclosed in Section 4.1.8 of the Disclosure Schedule,
neither the Company nor any Company Subsidiary nor any Stockholder shall,
directly or indirectly, offer to sell or dispose of, negotiate to sell, or
dispose of, have discussions with third parties with respect to the sale or
disposition of or sell any of the assets or properties of the Company or any
Company Subsidiary to or with any third party (other than the sale or use of
inventories in the ordinary course of business).
4.1.9. Other Matters. From the date hereof to the Closing Date,
-------------
unless otherwise agreed to by Parent, disclosed in Section 4.1.9 of the
Disclosure Schedule or expressly provided in Articles 4 and 5:
(i) there shall not be any declaration, setting aside or payment
of any dividend or any other distribution in respect of, or any purchase or
redemption by the Company or any Company Subsidiary of, any capital stock,
Other Ownership Interest or other voting interest of the Company or any
Company Subsidiary and neither the Stockholders nor any other holder of
capital stock of the Company or any Company Subsidiary shall otherwise
receive any bonuses, fees, extraordinary commissions or distributions of
property or assets of the Company or any Company Subsidiary from the
Company or any Company Subsidiary (except for normal compensation to
Stockholders who are employees) and the annual dividend for the fiscal year
ending February 28, 1997 of $.04 per share, paid January 31, 1997.
(ii) the Company and the Company Subsidiaries shall maintain
their present compensation and commission levels for all officers,
directors, employees and agents except for reasonable increases consistent
with past practice which are
-47-
made after the Company's regular annual employee review and the aggregate
impact of which will be reviewed with Parent; and neither the Company nor
any Company Subsidiary will grant or commit to grant any bonus, fees,
extraordinary commissions or other distributions to any director, officer,
agent or employee; provided that the Company may pay or accrue year-end
bonuses to management employees to the extent such bonuses are either paid
or accrued as current liabilities on the consolidated balance sheet of the
Company and the Company Subsidiaries as of February 28, 1997;
(iii) neither the Company nor any Company Subsidiary will make any
change in any accounting principle, classification, policy or practice;
(iv) there shall not be any amendment to the certificates of
incorporation or bylaws or other governing instruments of the Company or
any Company Subsidiary or any change in the capital structure of the
Company or any Company Subsidiary;
(v) there shall not be any merger or consolidation by the
Company or any Company Subsidiary with or into, or the acquisition by the
Company or any Company Subsidiary of all or substantially all of the
assets, capital stock or business of, any person, corporation, partnership,
association or other business organization or division of any thereof, or
the entry by the Company or any Company Subsidiary into any new line of
business;
(vi) the Company and the Company Subsidiaries shall maintain
their present debt and lease agreements and instruments (except those that
expire on their stated maturity or lease termination dates) and shall not
enter into any amendments thereto or new debt or lease agreements or
instruments, and there shall not be any increase by the Company or any
Company Subsidiary of any indebtedness for borrowed money or the issue
and/or sale by the Company or any Company Subsidiary of any debt securities
or letters of credit or any payments by the Company or any Company
Subsidiary of any indebtedness or interest thereon or other amounts (other
than regularly scheduled principal and interest payments and payments of
principal, interest and fees under revolving lines of credit);
(vii) the businesses of the Company and the Company Subsidiaries
will be conducted and operated (including the management of working
capital) only in the ordinary course consistent with past practice and
neither the Company nor any Company Subsidiary shall introduce any new
method of management or operation,
-48-
provide any discounted services or products, discount any receivables or
take any action to accelerate payment of any receivable prior to its due
date, except in accordance with past practices;
(viii) the Company and the Company Subsidiaries shall properly
maintain their respective operating assets, properties, facilities and
equipment, including those held under leases in good working order and
operating condition (except for ordinary wear and tear);
(ix) without the prior written consent of Parent, neither the
Company nor any Company Subsidiary will, other than in the ordinary course
of business, enter into any contract, lease, undertaking, commitment,
mortgage, indenture, note, security agreement, license or other agreement
(a) involving the receipt or expenditure of more than $10,000 over the term
thereof (b) containing provisions calling for the sale or purchase of raw
materials, product or service at prices that vary from the market prices of
such raw materials, products or services generally prevailing in customary
third party markets, (c) which include "take or pay", "meet or release",
"most favored nations" or similar pricing or delivery arrangements, (d)
between the Company and any Company Subsidiary or among any Company
Subsidiaries, (e) with any officer, director, stockholder or affiliate of
the Company or any Company Subsidiary, (f) requiring the Company or an
Company Subsidiary to indemnify or hold harmless any other person or
entity, (g) evidencing any warranty obligation of the Company or any
Company Subsidiary with respect to goods, services or products sold or
leased by any of them (other than warranties giving in the normal course of
business containing substantially the same terms as those presently in
effect), or (h) imposing on the Company or any Company Subsidiary any
confidentiality, non-disclosure or non-compete obligation;
(x) the Company and the Company Subsidiaries will perform all of
their obligations under all Company Contracts and all other debt and lease
agreements or instruments to which any of them are or become parties, will
pay all payables and invoices from vendors, suppliers and other third
parties (including mechanics and materialmen) as and when the same become
due and pay in full all payroll obligations when due; and
(xi) the Company and the Company Subsidiaries will refrain from
incurring any expenditures outside the normal course of business and will
not make any capital expenditure in excess of $10,000 without the prior
written consent of Parent.
-49-
4.1.10. Access. From the date of this Agreement until the Closing,
------
the Company will cooperate fully in permitting Parent and Parent's lenders,
underwriters and placement agents and their respective representatives,
advisers, consultants, appraisers, auditors, engineers and other experts to make
a full investigation of the properties, operations and financial condition of
the Company and the Company Subsidiaries; and afford Parent and Parent's
lenders, underwriters and placement agents and their respective representatives,
advisers, consultants, appraisers, auditors, engineers and other experts
reasonable access to the offices, buildings, real properties, machinery and
equipment, inventory and supplies, records, files, books of account, tax
returns, agreements and commitments and personnel of the Company and the Company
Subsidiaries. Without limitation of the foregoing, the Company shall provide
Parent with such reasonably available financial information (and schedules with
respect thereto) with respect to the Company or any Company Subsidiary as Parent
may reasonably request and will cooperate with and assist representatives of
Parent in the preparation of such financial information (and any opinions or
reports with respect thereto) with respect to the Company or any Company
Subsidiary as Parent may reasonably request. Notwithstanding the above, Parent,
Subsidiary and their respective lenders, underwriters and placement agents and
their respective representatives, advisors, consultants, appraisers, engineers
and other experts shall incur no liability with respect to control, operation or
management (or alleged control, operation or management) of the Company or any
Company Subsidiary as a result of the covenants in this Section 4.1.
4.1.11. Satisfaction of Conditions. Prior to the Closing Date, the
--------------------------
Majority Stockholders shall (i) use their reasonable efforts to obtain or cause
the Company and the Company Subsidiaries to obtain, as soon as possible, all
governmental approvals required to be obtained by the Company and the Company
Subsidiaries and make, as soon as possible, all filings with any governmental
authority required on the part of the Company and the Company Subsidiaries to
consummate the transactions contemplated hereby, (ii) use their reasonable
efforts to obtain, or cause the Company and the Company Subsidiaries to obtain,
as soon as possible, all other consents to and approvals required to be obtained
by the Company and the Company Subsidiaries to consummate the transactions
contemplated hereby, and (iii) otherwise use their reasonable efforts to satisfy
or cause to be satisfied the conditions set forth in Section 71 to the extent
that such satisfaction is within their control; provided, however, that this
Section 4111 shall not be construed to limit the rights of the Attorney-in-Fact
to terminate this Agreement as provided in Section 8.1.
4.1.12. Title Insurance. The Majority Stockholders shall cause the
---------------
Company to obtain and deliver to Parent, as soon as practicable, and in any
event at least 21 days prior to the Closing Date, commitments for title
insurance ("Title Commitments") issued by title insurance company(ies)
reasonably acceptable to Parent with respect to the
-50-
real property and real property interests described in Section 4.1.12 of the
Disclosure Schedule ("Title Insurance Property"), surveys of the Title Insurance
Property reasonably acceptable to Parent (the "Surveys") and duplicate sets of
legible copies of title exception documents with respect to any exception set
forth in the commitments. The Title Commitments shall set forth the state of
title to the Title Insurance Property together with all exceptions or conditions
to such title, including, but not limited to, all easements, restrictions,
rights-of-way, covenants, reservations and all other encumbrances affecting the
Title Insurance Property which would appear in an Owner's Policy of Title
Insurance (as defined below), if issued. The Title Commitments shall contain the
express commitment of the title underwriter to issue the Owner's Policies of
Title Insurance to the Company with the standard printed exceptions endorsed or
deleted in accordance with this Section 4.1.12. The Surveys shall be prepared in
accordance with the minimum detailed requirements for land title surveys jointly
adopted by ALTA and ACSM and currently in effect. Parent shall have the right to
approve such Surveys, including the boundaries and configuration of the
properties shown thereon. It is understood and agreed that the exact size,
location and legal description of the Title Insurance Property are to be
provided by the Surveys and, upon completion and approval of the Surveys, the
metes and bounds descriptions contained thereon shall be incorporated herein by
reference as the legal descriptions of the Title Insurance Property for all
purposes. At the Closing, the Majority Stockholders shall cause the Company to
deliver to Parent title insurance policies ("Owner's Policies of Title
Insurance") with respect to the Title Insurance Property, in an amount
reasonably acceptable to Parent, issued by such title insurance company(ies),
subject to those easements, reservations, restrictions, covenants, conditions
and other matters therein specified to the extent that the same do not, in the
reasonable judgment of Parent, render title unmarketable or adversely affect the
operation, value, use or enjoyment of the Title Insurance Property affected
thereby ("Permitted Exceptions"). The Owner's Policies of Title Insurance may be
subject to the Permitted Exceptions but shall contain no additional exceptions
other than the standard preprinted exceptions reasonably acceptable to Parent;
provided that (i) the standard preprinted exception, if any, for restrictive
covenants shall be deleted, except for Permitted Exceptions, (ii) the standard
preprinted survey exception, if any, shall be revised to read "Shortages in
area" only, (iii) there shall be no exception as to easements, or claims of
easements, not shown by the public records, nor any exception as to parties in
possession, and (iv) the exception as to the lien for taxes will be limited to
the year in which Closing occurs. The term "Permitted Exceptions" as used herein
with respect to any property other than real property and real property
interests shall mean a minor defect in title which does not adversely affect the
operation, value, use or enjoyment of such property.
4.1.13. Capital Budget. Section 4113 of the Disclosure Schedule
--------------
contains the budgeted capital expenditures of the Company and the Company
Subsidiaries from
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February 28, 1997 through May 31, 1997. Unless otherwise consented to by Parent,
from the date hereof to the Closing Date, the Company and the Company
Subsidiaries will make capital expenditures in accordance with such budget and
shall not make any additional capital expenditure.
4.2. Majority Stockholders. Each Majority Stockholder, severally and not
---------------------
jointly, further represents and warrants to Parent and covenants and agrees with
Parent that from the date hereof through the Closing Date, such Majority
Stockholder shall not, directly or indirectly, offer to sell or dispose of,
negotiate to sell, or dispose of, have discussions with third parties with
respect to the sale or disposition of or sell the assets or properties of the
Company or any Company Subsidiary to or with any third party (other than the
sale or use of inventories in the ordinary course of business).
4.3. Release. As of the Closing Date, each Stockholder does hereby (i)
-------
release, acquit and forever discharge the Company and the Company Subsidiaries
from any and all liabilities, obligations, claims, demands, actions or causes of
action arising from or relating to any event, occurrence, act, omission or
condition occurring or existing on or prior to the Closing Date, including,
without limitation, any claim for indemnity or contribution from the Company or
any Company Subsidiary in connection with the obligations or liabilities of the
Stockholders hereunder except, in each case (a) claims for indemnity under the
indemnification provisions described in Sections 4.6 and 6.2.3, (b) as to any
Stockholder who is an employee of the Company or any Company Subsidiary, salary
and benefits payable to such Stockholder as an employee in the ordinary course
of business; and (c) obligations of the Company for deferred compensation as
reflected in the Unaudited Financial Statements and the related payments to the
Majority Stockholders reflected in Section 1.3.5; (ii) waive all breaches,
defaults or violations of any agreement applicable to the Company Common Stock,
the Warrants or the SARs and agree that any and all such agreements are
terminated as of the Closing Date; and (iii) waive any and all pre-emptive or
other rights to acquire any shares of capital stock of the Company and release
any and all claims arising in connection with any prior default, violation or
failure to comply with or satisfy any such pre-emptive or other rights.
4.4. Parent. Parent further agrees with the Majority Stockholders that:
------
4.4.1. Preservation of Business. From the date hereof to the
------------------------
Closing Date, Parent and the existing Parent Subsidiaries shall use their
reasonable efforts to maintain and preserve their business organizations intact,
retain their present employees, maintain their relationships with suppliers,
customers and others having business relations with them, and preserve the good
will of all persons dealing with Parent and the existing Parent Subsidiaries.
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4.4.2. Cooperation. From the date hereof to the Closing Date,
-----------
Parent and the existing Parent Subsidiaries will cooperate fully with the
Majority Stockholders as to arrangements for the consummation of the
transactions contemplated hereby in an orderly fashion.
4.4.3. Certain Notices. From the date hereof to the Closing Date,
---------------
Parent will promptly notify the Attorney-in-Fact of the receipt by it or any
existing Parent Subsidiary of any notice or claim, written or oral, of (i)
default or breach by Parent or any existing Parent Subsidiary under, or of any
termination (other than at end of the stated term thereof) or cancellation, or
threat of termination (other than at end of the stated term thereof) or
cancellation, of any Parent Contract, (ii) any loss of, damage to or disposition
of, any of the properties, assets or the products of Parent or any existing
Parent Subsidiary of $10,000 or more, singly or in the aggregate (other than the
sale or use of inventories in the ordinary course of business), and (iii) any
claim or litigation, threatened or instituted, or any other adverse event or
occurrence involving or affecting Parent or any existing Parent Subsidiary or
any of their respective assets, properties, operations, businesses or employees.
4.4.4. Filings, Etc. From the date hereof to the Closing Date,
-------------
Parent and the existing Parent Subsidiaries will make all filings which are
required to be made by them to lawfully consummate the transactions contemplated
hereby.
4.4.5. Compliance with Laws. From the date hereof to the Closing
--------------------
Date, Parent and the existing Parent Subsidiaries will comply with and cause to
be complied with all applicable laws, rules, regulations and orders of all
federal, state and local governments or governmental agencies affecting or
relating to Parent or any existing Parent Subsidiary or their respective assets,
properties, operations, businesses or employees except where the failure to
comply will not have a Parent Material Adverse Effect.
4.4.6. Other Matters. From the date hereof to the Closing Date,
-------------
unless otherwise agreed to by the Attorney-in-Fact, disclosed in Section 4.3.6
of the Parent Disclosure Schedule, contemplated by any Pending Acquisition or
expressly provided in Article 5:
(i) there shall not be any declaration, setting aside or payment
of any dividend or any other distribution in respect of, or any purchase or
redemption by Parent or any Parent Subsidiary of, any capital stock, other
ownership interest or other voting interest of Parent or any Parent
Subsidiary and no holder of capital stock of Parent or any Parent
Subsidiary shall otherwise receive any assets of Parent or any
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Parent Subsidiary from Parent or any Parent Subsidiary (other than normal
compensation to holders of capital stock who are employees);
(ii) there shall not be any amendment to the articles of
incorporation or bylaws or other governing instruments of Parent or the
existing Parent Subsidiaries, or any change in the capital structure of the
Parent or any existing Parent Subsidiary;
(iii) the businesses of Parent and the existing Parent
Subsidiaries will be conducted and operated (including the management of
working capital) only in the ordinary course consistent with past practice;
(iv) Parent and the existing Parent Subsidiaries shall properly
maintain their respective operating assets, properties, facilities and
equipment, including those held under leases, in good working order and
operating condition (except for ordinary wear and tear);
(v) Parent and the existing Parent Subsidiaries will perform all
of their obligations under all Parent Contracts and all other debt and
lease agreements or instruments to which any of them are or become parties,
will pay all payables and invoices from vendors and suppliers as and when
the same become due and pay in full all payroll obligations when due.
4.4.7. Access. From the date of this Agreement until the Closing,
------
Parent will cooperate fully in permitting the Attorney-in-Fact and the
Stockholders and their respective representatives, advisers, consultants,
appraisers, auditors, engineers and other experts to make a full investigation
of the properties, operations and financial condition of Parent and the existing
Parent Subsidiaries; and afford the Attorney-in-Fact and the Stockholders and
their respective representatives, advisers, consultants, appraisers, auditors,
engineers and other experts reasonable access to the offices, buildings, real
properties, machinery and equipment, inventory and supplies, records, files,
books of account, tax returns, agreements and commitments and personnel of
Parent and the existing Parent Subsidiaries, including (to the extent permitted
under applicable confidentiality agreements), Parent's due diligence files with
respect to Pending Acquisitions. Without limitation of the foregoing, Parent
shall provide the Attorney-in-Fact and the Stockholders with such reasonably
available financial information (and schedules with respect thereto) with
respect to Parent or any existing Parent Subsidiary as they may reasonably
request. Notwithstanding the above, the Attorney-in-Fact, the Stockholders and
their respective representatives, advisors, consultants, appraisers, engineers
and other experts shall incur no liability with
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respect to control, operation or management (or alleged control, operation or
management) of Parent or any existing Parent Subsidiary as a result of the
covenants in this Section 4.4.
4.4.8. Satisfaction of Conditions. Prior to the Closing Date,
--------------------------
Parent shall (i) use its reasonable efforts to obtain, as soon as possible, all
governmental approvals required to be obtained by Parent and the Parent
Subsidiaries and make, as soon as possible, all filings with any governmental
authority required on the part of Parent and the Parent Subsidiaries to
consummate the transactions contemplated hereby, (ii) use its reasonable efforts
to obtain, as soon as possible, all other consents to and approvals required to
be obtained by Parent and the Parent Subsidiaries to consummate the transactions
contemplated hereby, and (iii) otherwise use its reasonable efforts to satisfy
the conditions set forth in Section 7.2 to the extent that such satisfaction is
within its control; provided, however, that this Section 4.4.8 shall not be
construed to limit the rights of Parent to terminate this Agreement as provided
in Section 8.1.
4.5. Certain Other Actions and Documents. Parent and the Majority
-----------------------------------
Stockholders further agree as follows:
4.5.1. Key Employee and Manager Employment Agreements. On the
----------------------------------------------
Closing Date, the Majority Stockholders agree to cause the employees of the
Company listed in Section 4.5.1 of the Disclosure Schedule and the Company to
execute and deliver employment agreements, in substantially the form attached
hereto as Exhibit 4.5.1 (appropriately completed in accordance with the
confidential letter dated the date hereof from Parent to the Attorney-in-Fact)
(the "Employment Agreements").
4.5.2. Releases of Certain Majority Stockholders. At or prior to
-----------------------------------------
the Closing, Parent shall cause any Majority Stockholder who has personally
guaranteed any of the indebtedness of the Company described in Section 4.5.2 of
the Disclosure Schedule to be released from any liability under any such
guaranty (the "Majority Stockholder Releases").
4.5.3. Voting Agreement. At or prior to the Closing, Parent shall
----------------
cause its shareholders named therein to execute and deliver a Voting Agreement
in substantially the form attached hereto as Exhibit 4.5.3 ("Voting
Agreement") pursuant to which the Majority Stockholders will be entitled to
designate two members of the Board of Directors of Parent until the IPO (as
defined below). The Majority Stockholders agree to execute and deliver the
Voting Agreement at or prior to the Closing.
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4.5.4. Transfer Restrictions. The Stockholders and Parent agree to
---------------------
execute and deliver at the Closing a Stock Transfer Restriction Agreement in
substantially the form attached hereto as Exhibit 4.5.4(a) ("Stock Transfer
Restriction Agreement") and a Registration Rights Agreement in substantially the
form attached hereto as Exhibit 4.5.4(b) ("Registration Rights Agreement").
4.5.5. Adoption of Shareholders Agreement. At the Closing, the
----------------------------------
Stockholders shall execute and deliver to Parent an adoption agreement (the
"Adoption Agreement") pursuant to which such Stockholders agree to be bound by
the Shareholders Agreement among Parent and its then existing shareholders, as
amended, a copy of which has been delivered to the Stockholders.
4.5.6. Information Statement. As soon as practicable, the Company
---------------------
and Parent shall distribute to each Stockholder the Information Statement.
4.6. Certain Elections. In the event that Parent has not effected an
-----------------
underwritten public offering of Parent Common Stock (other than any offering
pursuant to any registration statement (i) relating to any capital stock of
Parent or options, warrants or other rights to acquire any such capital stock
issued or to be issued primarily to directors, officers or employees of Parent,
(ii) relating to any employee benefit plan or interest therein, (iii) relating
principally to any preferred stock or debt securities of Parent, or (iv) filed
pursuant to Rule 145 under the Securities Act of 1933, as amended, or any
successor or similar provision) resulting in net cash proceeds to Parent of at
least $20,000,000 (the "IPO") on or before December 31, 1998:
4.6.1 Securities Acquisition Election. The Attorney-in-Fact may
-------------------------------
elect, by written notice to Parent delivered on or before January 31, 1999 (the
"Election Notice") to call upon Parent to acquire, for the cash amount equal
to the sum of (i) the value of the shares of Parent Common Stock and Parent
Preferred Stock issued in the ▇▇▇▇▇▇▇ Offering and in the Division Vice
Presidents Option and (ii) the Aggregate Consideration less the cash component
thereof, plus simple interest on such sum at the rate of 8% per annum from the
Closing Date to the date of the closing of such acquisition (the "Securities
Acquisition Consideration") (i) all of the shares of Parent Preferred Stock and
Parent Common Stock issued by Parent pursuant to this Agreement and (ii) all of
the Parent Preferred Stock and Parent Common Stock issued by Parent in the (a)
Parent Employee Stock Offering pursuant to Article 5, (b) the ▇▇▇▇▇▇▇ Offering
and (c) the Division Vice Presidents Option ("Securities Acquisition
Transaction"). In the event that Parent determines not to agree to acquire such
shares and in the Securities Acquisition Transaction, Parent shall, within 90
days of receipt of the Election Notice, give written notice to the Attorney-in-
Fact ("Parent
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Rejection Notice") that it has so determined not to agree to acquire such
shares. In the event Parent determines to agree to acquire such shares in the
Securities Acquisition Transaction, Parent shall, within 90 days of receipt of
the Election Notice, give written notice to the Attorney-in-Fact ("Parent
Acceptance Notice") that it agrees to acquire such shares. The Parent Acceptance
Notice shall also specify the date, time and place of the closing of the
Securities Acquisition Transaction; provided that such closing shall be held not
more than 60 days after delivery of the Parent Acceptance Notice. At such
closing, the Attorney-in-Fact shall deliver or cause to be delivered to Parent
or its designee stock certificates evidencing the Parent Preferred Stock and the
Parent Common Stock duly endorsed and in proper form for transfer on the stock
records of Parent with customary written warranties of good title, authority to
transfer and absence of liens or other exceptions to title hereto, and Parent or
its designee shall deliver or cause to be delivered to the Attorney-in-Fact the
Securities Acquisition Consideration and a letter containing customary
representations and warranties evidencing compliance with applicable securities
laws. If the Parent Acceptance Notice is not delivered to the Attorney-in-Fact
within 90 days of Parent's receipt of the Election Notice, Parent will
conclusively be deemed to have delivered a Parent Rejection Notice to the
Attorney-in-Fact on the 90th day after Parent's receipt of the Election Notice.
Upon delivery or deemed delivery of the Parent Rejection Notice, neither the
Attorney-in-Fact nor any holder of Parent Common Stock, or Parent Preferred
Stock shall have any rights to request Parent to acquire any of same pursuant to
this Section 461.
4.6.2. Transfer Transaction Election. Within 20 days after the
-----------------------------
delivery or deemed delivery of the Parent Rejection Notice, the Attorney-in-Fact
may, by written notice to Parent delivered within such 20 day period, (the
"Second Election Notice") require Parent to transfer the stock or assets of the
Company to the designees named in the Second Election Notice in a transaction
(the "Transfer Transaction") structured to (a) relieve Parent and its
affiliates of any liability on the then remaining indebtedness attributable to
the financing of the transactions contemplated hereby (including the matters
referred to in Articles 4 and 5), (b) take into account any capital Parent
invested in/or withdrew from the Company (other than for debt service on the
foregoing) from the Closing Date to the closing of the Transfer Transaction, and
(c) relieve Parent from or otherwise satisfy any income tax consequences to
Parent from the Transfer Transaction. The terms of the Transfer Transaction will
be such that Parent will receive no economic benefit or detriment therefrom. The
Second Election Notice will contain the addresses of the designees named therein
and all of the proposed terms (including the consideration payable to Parent or
the Company) of the Transfer Transaction. The proposed terms of the Transfer
Transaction contained in the Second Election Notice shall be final, conclusive
and binding for purposes of this Agreement unless Parent shall deliver to the
Attorney-in-Fact a written notice of disagreement ("Notice of Objection") with
any such proposed terms within 20 business days following receipt of the
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Second Election Notice, specifying in reasonable detail the nature and extent of
such disagreement. If within 10 business days following receipt by the Attorney-
in-Fact of a Notice of Objection Parent and Attorney-in-Fact are unable to
resolve any disagreement with respect to the proposed terms of the Transfer
Transaction as set forth in the Second Election Notice, the disagreement shall
be submitted for resolution to Ernst & Young (the "Neutral Accountants"), who
shall resolve the issues in dispute, and giving effect to such resolution,
determine the final terms of the Transfer Transaction. The Neutral Accountants
shall act as an arbitrator to determine and resolve only those issues in
dispute. The Neutral Accountants' resolution shall (i) be made within 30 days of
the submission of the dispute to them, (ii) be in accordance with this
Agreement, (iii) be set forth in a written statement delivered to Parent and the
Attorney-in-Fact, (iv) set forth the final terms of the Transfer Transaction,
and (v) be final, conclusive and binding for purposes of this Agreement.
4.6.3. Other. Parent will cooperate fully with the
-----
Attorney-in-Fact in obtaining any consent required from Parent's lenders to
effect a Securities Acquisition Transaction or a Transfer Transaction as
contemplated hereby. On the closing of a Transfer Transaction, all
noncompetition agreements between Parent and any employee of the Company who
does not continue employment with Parent or its affiliates will be terminated.
At the closing of a Securities Acquisition Transaction or a Transfer
Transaction, the parties will enter into mutual releases under which the parties
release all claims against each other which have arisen or could arise based on
events, acts or omissions occurring or existing prior to such closing.
4.7. Indemnification of Officers and Directors of the Company. Parent
--------------------------------------------------------
agrees that the Company shall maintain in effect for at least five (5) years
from the Closing Date the indemnification provisions in the certificate of
incorporation of the Company as presently in effect to the extent such
indemnification provisions would apply to acts or omissions of the present
officers and directors of the Company taken or made in connection with the
approval of the transactions contemplated hereby. Prior to Closing, Parent
shall arrange for and purchase director and officer liability insurance coverage
for the Majority Stockholders with coverage terms and provisions reasonably
satisfactory to the Majority Stockholders.
4.8. Minimum IPO Proceeds. Parent agrees that it will not effect the IPO
--------------------
if the gross selling price to the public thereunder is less than $2.76 per share
(adjusted for stock splits, reverse stock splits and stock dividends) without
the prior written consent of the Attorney-in-Fact.
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5. EMPLOYEE BENEFITS
The Majority Stockholders and Parent further agree as follows:
5.1. ESOP; Employee Offering.
-----------------------
5.1.1 Suspension of ESOP Withdrawals. Within five (5) days after
------------------------------
the date hereof, the Company and its appropriate committee(s) shall suspend any
further "In-Service Distributions" (as described in the ESOP) from any and all
Company Stock Accounts (as defined in the ESOP) and such suspension of
distributions may only be reinstated if the transaction contemplated hereby does
not close.
5.1.2. Purchase of ESOP Stock. As soon as practicable after the
----------------------
date hereof, the Company and its appropriate committee(s) shall take all actions
necessary to authorize the ESOP to sell to Parent, immediately prior to or at
the Closing Date, the Company Common Stock held by the ESOP, pursuant to a Stock
Purchase Agreement in substantially the form attached hereto as Exhibit 5.1.2
(the "ESOP Stock Purchase Agreement"), to authorize the ESOP to be amended and
restated to create the Amended and Restated Savings Plan (as defined below)
simultaneously with or immediately after the Closing Date and to allow, permit
and assist Parent to distribute any and all information, election forms and
notices to the participants of the ESOP to effect the amendment and restatement
of the ESOP to create the Amended and Restated Savings Plan, as described
herein.
5.1.3. Amendment and Restatement of the ESOP. As soon as
-------------------------------------
practicable after the date hereof, and prior to the Closing Date, Parent and the
Company shall amend and restate the ESOP to remove all provisions related to an
employee stock ownership plan and to create a retirement plan pursuant to Code
Section 401(k) for employees of the Company, containing an obligation by the
Parent to make contributions in the amount of $220,000 per year through the year
2007 and in form reasonably acceptable to the Attorney-in-Fact ("Amended and
Restated Savings Plan") pursuant to which all of the accounts in the ESOP will
be amended and restated in the Amended and Restated Savings Plan and under which
participants may elect to direct the Amended and Restated Savings Plan to invest
a portion of such participant's account in the Amended and Restated Savings Plan
in Parent Common Stock and Parent Preferred Stock, subject to the limitations
set forth therein.
5.1.4. ESOP Disclosure Statement. As soon as practicable after the
-------------------------
date hereof and prior to the Closing Date, the Company shall prepare a
disclosure statement ("ESOP Participant Disclosure Statement") to be delivered
to certain ESOP participants in
-59-
form reasonably acceptable to Parent, describing the rights of such participants
with respect to the ESOP and the Amended and Restated Savings Plan.
5.1.5. Employee Offering Memorandum. As soon as practicable after
----------------------------
the date hereof and prior to the Closing Date, Parent shall prepare an offering
memorandum ("Employee Offering Memorandum") to be delivered to certain ESOP
participants pursuant to which Parent shall offer (the "Parent Employee Stock
Offering") to each such participant who remains an employee of the Company after
the Closing Date the opportunity to elect to have such participant's Amended and
Restated Savings Plan account acquire, for cash, units consisting of shares of
Parent Common Stock and Parent Preferred Stock.
5.2. Deferred Compensation Plans. The Parent and the Majority Stockholders
---------------------------
agree that effective on or before February 28, 1997, the terms of all of the
nonqualified deferred compensation plans sponsored by the Company (collectively,
the "Deferred Compensation Plans") have been amended as described in Section
5.2 of the Disclosure Schedule.
5.2.1 No Additional Rights. Nothing in the Deferred Compensation
--------------------
Plans, as amended, shall be construed to grant to the participants in the
Deferred Compensation Plans any rights other than those of general creditors of
the Company and its successors. The participants' rights to benefit payments
under the Deferred Compensation Plans shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment or garnishment by the creditors of the participants. The individual
and collective rights of the participants under the Trusts and Deferred
Compensation Plans are now and shall remain purely contractual, are limited to
those of a general unsecured creditor of the Company (or its successors) and the
Deferred Compensation Plans constitute mere unsecured promises by the Company or
its successor to make payments in the future.
5.3. Future Option Plans. Parent intends to implement, after the IPO, one
-------------------
or more incentive stock option plans which will permit participation by
designated employees, the terms of which will be determined by a committee of
the Board of Directors of Parent, a majority of which will not be employed by
Parent or any Parent Subsidiary and will not be former owners, employees or
affiliates of entities acquired by Parent. It is Parent's intention that
participation in such plan by former employees of the Company who are then
employees of Parent or any Parent Subsidiary will be on a basis substantially
the same as such employees holding similar positions with Parent or a Parent
Subsidiary who were formerly employed by other entities acquired by Parent.
-60-
5.4. Split-Dollar Insurance Policy. The cash value or death benefits of
-----------------------------
that certain split-dollar insurance policy number 35 57804 issued by The
Guardian Life Insurance Company of America on the life of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ are
and shall continue to be held in the Deferred Compensation Plan of the Company
maintained for the benefit of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
5.5. Employee Benefits Generally. Parent shall, for at least six months
---------------------------
after the Closing Date, maintain employee benefits for employees of the Company
and the Company Subsidiaries which are generally comparable as a whole to the
benefits provided by the Company as of the Closing Date.
6. SURVIVAL, INDEMNIFICATIONS
6.1. Survival. The representations and warranties set forth in this
--------
Agreement and the other documents, instruments and agreements contemplated
hereby shall survive the Closing to the extent provided herein. The
representations and warranties of the Stockholders herein and in the documents
and instruments to be delivered by the Stockholders or the Company as
contemplated hereby, other than those in Sections 2.1.3, 2.1.4, 2.2.1 and 2.2.2,
shall survive for a period of thirty-six (36) months after Closing and the
representations and warranties of the Stockholders contained in Sections 2.1.3,
2.1.4, 2.2.1 and 2.2.2 shall survive for the maximum period permitted by
applicable law. The representations and warranties of Parent herein and in the
documents and instruments to be delivered by Parent as contemplated hereby,
other than those in Sections 3.1.3 and 3.1.4 shall survive for a period of
thirty-six (36) months after Closing and the representations and warranties of
Parent contained in Sections 3.1.3 and 3.1.4 shall survive for the maximum
period permitted by applicable law. The periods of survival of the
representations and warranties as stated above in this Section 6.1 are referred
to herein as the "Survival Period". The liabilities of the parties under their
respective representations and warranties shall expire as of the expiration of
the applicable Survival Period and no claim for indemnification may be made with
respect to any breach of any representation or warranty, the applicable Survival
Period of which shall have expired, except to the extent that written notice of
such breach shall have been given to the party against which such claim is
asserted on or before the date of such expiration. The covenants and agreements
of the parties herein and in other documents and instruments executed and
delivered in connection with the closing of the transactions contemplated hereby
shall survive for the maximum period permitted by law.
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6.2. Indemnification.
---------------
6.2.1. Parent Indemnified Parties. Subject to the provisions of
--------------------------
Sections 6.1 and 6.3, each Majority Stockholder shall indemnify, save and hold
harmless Parent, the Company, the Company Subsidiaries and their Permitted
Assignees (as defined below) and their respective officers, directors,
employees, representatives, agents, advisors and consultants and all of their
respective heirs, legal representatives, successors and assigns (collectively
the "Parent Indemnified Parties") from and against any and all damages,
liabilities, losses, claims, deficiencies, penalties, interest, expenses, fines,
assessments, charges and costs, including reasonable attorneys' fees and court
costs (calculated after taking into consideration the net tax benefits actually
realized by Parent or the Company from such items to the extent deductible,
depreciable or amortizable; provided, however, that if any indemnification
payment to be received by a Parent Indemnified Party will result in a tax burden
to such Parent Indemnified Party, such tax burden shall be netted against the
tax benefit realized by such Parent Indemnified Party) (collectively "Losses")
arising from, out of or in any manner connected with or based on:
(i) the breach of any covenant of the Company, or the failure by
the Company to perform, any obligation of the Company contained in the
documents or instruments executed and delivered by the Company in
connection with the transactions contemplated hereby;
(ii) any inaccuracy in or breach of any representation or warranty
contained in Section 2.1 or in the documents or instruments executed and
delivered by the Company in connection with the transactions contemplated
hereby;
(iii) indemnification payments required to be made and made by the
Company or any Company Subsidiary to their respective present or former
officers, directors, employees, agents, consultants, advisors or
representatives in respect of actions taken or omitted to be taken prior to
the Closing Date, except as otherwise provided in Section 4.7; and
(v) any act, omission, occurrence, event, condition or circumstance
occurring or existing at any time on or before the Closing Date and
involving or related to the assets, properties, business or operations now
or previously owned or operated by the Company or any Company Subsidiary
and not (a) disclosed in the Disclosure Schedule or (b) disclosed in the
Estimated Financial Statements.
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Any indemnification obligation of the Majority Stockholders may be satisfied, at
their option, by the payment of the Losses (i) in cash or immediately available
funds or (ii) 50% in cash or immediately available funds and 50% by delivery of
shares of Parent Common Stock, the number of which shall be computed on the
basis of the Parent Common Stock Value (subject to appropriate adjustments for
stock splits, dividends, combinations and the like).
6.2.2. Stockholder Indemnity. Subject to the provisions of Sections
---------------------
61 and 63, each Stockholder, severally and not jointly, hereby agrees to
indemnify, save and hold harmless the Parent Indemnified Parties from and
against any and all Losses arising from or as a consequence of (i) any
inaccuracy in or breach of any representation and warranty of such Stockholder
in Section 2.2 or in any document or instrument executed and delivered by such
Stockholder in connection with the transactions contemplated hereby and (ii) the
breach of any covenant of such Stockholder or the failure by such Stockholder to
perform any of such Stockholder's obligations contained herein or in any
document or instrument executed and delivered by such Stockholder in connection
with the transactions contemplated hereby.
6.2.3. Parent Indemnity. Subject to the provisions of Sections 6.1
----------------
and 6.3, Parent hereby agrees, from and after the Closing Date, to indemnify,
save and hold harmless each Stockholder and his or its heirs legal
representatives, successors and assigns (the "Stockholder Indemnified
Parties") from and against all Losses arising from, out of or in any manner
connected with or based on:
(i) any breach of any covenant of Parent or the failure by Parent
to perform any obligation of Parent contained herein or in the documents or
instruments required to be executed and delivered by Parent in connection
with the transactions contemplated hereby;
(ii) any inaccuracy in or breach of any representation or warranty
of Parent contained herein or in the documents or instruments executed and
delivered by Parent in connection with the transactions contemplated
hereby; and
(iii) any act, omission, event, condition or circumstance occurring
or existing at any time after (but not on or before) the Closing Date and
involving or relating to the assets, properties, businesses or operations
of the Company or any Company Subsidiary; provided, however, that clause
(iii) shall not apply to any Losses to the extent that such Losses result
from
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a Stockholder's acts or omissions after the Closing Date as an officer,
director and/or employee of Parent, the Company and/or any Company
Subsidiary.
The foregoing indemnities shall not limit or otherwise adversely affect the
Parent Indemnified Parties' rights of indemnity for Losses under Sections 6.2.1
and 6.2.2.
6.3. Limitations. No claim under Section 6.2.1 or Section 6.2.3 may be
-----------
made until the aggregate of all Losses for which claims for indemnification
under such Section exceeds $400,000 (the "Threshold"), but all Losses in
excess of the amount of the Threshold may be recovered under such Section once
the Threshold has been exceeded. The aggregate liability of the Majority
Stockholders under Section 6.2.1 shall not exceed $40,000,000. The aggregate
liability of Parent under Section 6.2.3 shall not exceed $40,000,000. Among the
Majority Stockholders, the liability of each Majority Stockholder for
indemnification for Losses under Section 6.2.1 shall not exceed the percentage
of such Losses reflected on the signature pages hereto under the caption
"Maximum Percentage Liability" ("Percentage Liability"); provided, however,
that, with respect to the Majority Stockholders' obligations to Parent under
Section 6.2.1, if any, such obligations shall be joint and several; and provided
further that in no event shall any Majority Stockholder be liable under Section
6.2.1 for an amount in excess of the sum of $40,000,000 multiplied by such
Majority Stockholder's Percentage Liability.
6.4. Notices.
-------
6.4.1. Indemnification Notice. The party (the "Indemnified Party")
----------------------
which may be entitled to indemnity hereunder shall give prompt notice to the
party obligated to give indemnity hereunder (the "Indemnifying Party") of the
assertion of any claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought hereunder. Any failure on the part of
any Indemnified Party to give the notice described in this Section 6.4.1 shall
relieve the Indemnifying Party of its obligations under this Article 6 only to
the extent that such Indemnifying Party has been prejudiced by the lack of
timely and adequate notice. Parent or the Company shall have the obligation to
assume the defense or settlement of any third-party claim, suit, action or
proceeding in respect of which indemnity may be sought hereunder, provided that
(a) the Indemnifying Party shall at all times have the right, at its option, to
participate fully therein, and (b) if the Parent or the Company does not proceed
diligently to defend the third-party claim, suit action or proceeding within ten
(10) days after receipt of notice of such third-party claim, suit, action or
proceeding, the Indemnifying Party shall have the right, but not the obligation,
to undertake the defense of any such third-party claim, suit, action or
proceeding. The Indemnifying Party shall not be required to indemnify the
Indemnified Party with respect to
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any amounts paid in settlement of any third-party suit, action, proceeding or
investigation entered into without the written consent of the Indemnifying
Party; provided, however, that if the Indemnified Party is a Parent Indemnified
Party, such third-party suit, action, proceeding or investigation may be settled
without the consent of the Indemnifying Party on ten (10) days' prior written
notice to the Indemnifying Party if such third-party suit, action, proceeding or
investigation is then unreasonably interfering with the business or operations
of the Company or any Company Subsidiary and the settlement is commercially
reasonable under the circumstances; and provided further, that if the
Indemnifying Party gives ten (10) days' prior written notice to the Indemnified
Party of a settlement offer which the Indemnifying Party desires to accept and
to pay all Losses with respect thereto ("Settlement Notice") and the
Indemnified Party fails or refuses to consent to such settlement within ten (10)
days after delivery of the Settlement Notice to the Indemnified Party, and such
settlement otherwise complies with the provisions of this Section 6.4.1, the
Indemnifying Party shall not be liable for Losses arising from such third-party
suit, action, proceeding or investigation in excess of the amount proposed in
such settlement offer. Notwithstanding the foregoing, no Indemnifying Party will
consent to the entry of any judgment or enter into any settlement without the
consent of the Indemnified Party, if such judgment or settlement imposes any
obligation or liability upon the Indemnified Party other than the execution,
delivery or approval thereof and customary releases of claims with respect to
the subject matter thereof. The parties shall cooperate in defending any such
third-party suit, action, proceeding or investigation, and the defending party
shall have reasonable access to the books and records, and personnel in the
possession or control of the Indemnified Party which are pertinent to the
defense. The parties agree that the Indemnified Party may join the Indemnifying
Party in any suit, action, claim or proceeding brought by a third party, as to
which any right of indemnity created by this Agreement would or might apply, for
the purpose of enforcing any right of the indemnity granted to such Indemnified
Party pursuant to this Agreement.
6.4.2. Tax Proceeding Notices.
----------------------
(i) Returns for Periods Prior to the Closing Date. In the event
---------------------------------------------
that Parent or the Company receives notice (the "Audit Notice") of any
examination, claim, adjustment or other proceeding with respect to any
federal, state, local or foreign income and other tax returns of the
Company for periods prior to the Closing Date (the "Audit"), Parent shall
notify the Attorney-in-Fact in writing thereof no later than the earlier of
(a) 30 days after receipt by the Parent or the Company of the Audit Notice
or (b) ten days prior to the deadline for responding to the Audit Notice.
The Majority Stockholders, through the Attorney-in-Fact and their duly
appointed
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representatives, shall have the sole right to handle, manage, negotiate,
resolve, settle or contest the Audit; provided, however, that the Majority
Stockholders shall not settle, compromise or abandon, without Parent's
prior written consent, any such Audit which, when offset by the then
present value of any tax benefits available to the Company or Parent by
reason of such settlement (taking into account as and when Parent
reasonably believes such tax benefits could be utilized to reduce the tax
liability of Parent or the Company), would adversely affect the tax
liability of Parent or the Company in any period to any extent (including,
but not limited to, the imposition of income tax deficiencies, the
reduction of asset basis or cost adjustments, the lengthening of any
amortization or depreciation deductions, or the reduction of loss or
carryforwards). Such consent shall not be unreasonably withheld and shall
not be necessary to the extent the Majority Stockholders have indemnified
Parent against the effects of any such settlement. The parties shall
cooperate with each other and with their respective affiliates, and will
consult with each other and will execute any and all documents necessary to
contest or settle the matter. Parent shall be entitled to participate in
all proceedings with respect thereto at its own expense.
(ii) Returns Including Tax Offset Bonus and Gross Up. In the event
-----------------------------------------------
Parent or the Company receives notice (the "Proceeding Notice") of any
examination, claim, adjustment, or other proceeding with respect to the tax
benefit realized by Parent or the Company with respect to the Warrants,
SARs or Deferred Compensation Stock or the Tax Offset Bonus as provided in
Section 1.3.5, Parent shall notify the Attorney-in-Fact in writing thereof
(the "Tax Notice") no later than the earlier of (a) 30 days after the
receipt by Parent or the Company of the Proceeding Notice or (b) ten days
prior to the deadline for responding to the Proceeding Notice. Each
Stockholder (a "Receiving Stockholder") who received a Tax Offset Bonus
and/or Gross Up shall be responsible for the payment of any taxes (but not
in excess of the amount of Grossed Up Tax Offset Bonus received by such
Receiving Stockholder), penalties and interest assessed against Parent or
the Company as a result of any examination, claim, adjustment, or other
proceeding the result of which reduces the federal, state and local income
and franchise tax benefits realized by Parent with respect to the Receiving
Stockholder's Warrants, SARs, Deferred Compensation Stock or Tax Offset
Bonus and shall make such payment directly to Parent within 30 days after
such assessment. The Receiving Stockholders shall be entitled at their
expense to control the contest of such examination, claim, adjustment, or
other
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proceeding, as it relates to the federal, state and local income and
franchise tax benefits realized by Parent or the Company with respect to
the Warrants, SARs or Deferred Compensation Stock or Tax Offset Bonus
provided the Attorney-in-Fact notifies Parent in writing that the Receiving
Stockholders desire to do so no later than the earlier of (i) 30 days after
receipt of the Tax Notice or (ii) five days prior to the deadline for
responding to the Proceeding Notice and provided further that the Receiving
Stockholders shall not settle any such examination, claim, adjustment or
other proceeding without the written consent of Parent, which consent shall
not be unreasonably withheld.
6.5. Character of Indemnity Payments. The parties agree that all
-------------------------------
indemnity payments made under this Section 6 shall constitute an adjustment to
the consideration received in the exchange.
7. CONDITIONS TO CLOSING
7.1. Parent. The obligations of Parent to consummate the transactions
------
contemplated by this Agreement shall be subject to satisfaction or waiver by
Parent at the Closing of all of the following conditions:
7.1.1. Representations, Warranties and Covenants of Stockholders. The
---------------------------------------------------------
Stockholders shall have complied with all of their agreements and covenants
contained herein to be performed at or prior to the Closing Date and all of the
representations and warranties of the Stockholders contained herein be accurate
and as of the Closing Date, with the same effect as though such representations
and warranties had been made at and as of the Closing Date and Parent shall have
received a certificate executed by each Stockholder to the effect that the
representations and warranties of such Stockholder contained herein are accurate
at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date.
7.1.2. Opinion. Coolidge, Wall, Womsley & Lombard Co., L.P.A. shall
-------
have provided a written opinion dated the Closing Date covering the matters set
forth in 2 Exhibit 7.1.2. In rendering such opinion, counsel may rely to the
extent deemed appropriate on the certificates of officers or employees of the
Company and public officials as to matters of fact and authenticity of documents
and on opinions of counsel in other states as to questions under the laws of
such states, and such other opinions as are reasonably acceptable to Parent.
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7.1.3. No Casualty, Loss or Damage. No casualty, loss or damage
---------------------------
shall have occurred on or prior to the Closing Date to any of the properties or
assets of the Company or any Company Subsidiary.
7.1.4. Title Insurance. Parent shall have received the Title
---------------
Commitments and the Owner's Policies of Title Insurance, Surveys and title
exception documents required under Section 4.1.12.
7.1.5. Documents, Stock Certificates. All documents, certificates,
-----------------------------
opinions, instruments and agreements required to be executed and delivered by
the Company or any Company Subsidiary or their respective officers or directors
or the Stockholders at the Closing as contemplated hereby or as may be
reasonably requested by Parent shall have been duly executed and delivered by
the Company, the Company Subsidiaries, or their respective officers or directors
or the Stockholders and shall have been received by Parent. Stock Certificates
representing all of the outstanding Company Common Stock, and all Warrants and
SARs owned by the Stockholders and properly completed letters of transmittal
shall have been received by Parent.
7.1.6. Consents. All consents and approvals of third parties or any
--------
regulatory body or authority, whether required contractually or by applicable
federal, state or local law, or otherwise necessary for the execution, delivery
and performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby shall have been received by Parent.
7.1.7. Licenses, Etc. The Company and the Company Subsidiaries shall
-------------
have obtained all such licenses and permits as are legally required for the
continued operation of their businesses after the Closing, except such licenses
and permits, the absence of which will not have a Company Material Adverse
Effect.
7.1.8. No Material Adverse Change. Since December 31, 1996, there
--------------------------
shall not have been any event that in the reasonable judgment of Parent
adversely affects the properties, assets, financial condition, results of
operations, cash flows, businesses or prospects of the Company or any Company
Subsidiary; and Parent shall be reasonably satisfied that the Net Worth as of
February 28, 1997 was at least $6,358,372.
7.1.9. Financing. Parent shall have obtained financing on terms and
---------
in amounts reasonably acceptable to it, to finance the payment of the cash
portion of the aggregate of the Closing Per Share Cash Amounts and the ongoing
financing needs of the Company and the Company Subsidiaries, and such financing
shall be available.
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7.1.10. Discharge of Indebtedness, Releases, Etc. The indebtedness
----------------------------------------
of the Company and the Company Subsidiaries referred to in Sections 2.1.14,
2.1.21 and 2.1.27, ("Terminated Obligations") shall have been paid in full or
refinanced on terms acceptable to Parent, and all holders of any such Terminated
Obligations shall have delivered to Parent, in form reasonably satisfactory to
the Parent and the lenders to Parent, such customary releases, termination
statements, consents, approvals or other documents or instruments re quired, in
the judgment of Parent, to release and terminate all liens, security interests,
claims, or rights of such holders against the Company or Parent or any of their
respective assets in connection therewith.
7.1.11. Certain Corporate Actions. All necessary directors and
-------------------------
stockholders resolutions, waivers and consents required to consummate the
transactions contemplated hereunder shall have been executed and delivered.
7.1.12. ESOP and Amended and Restated Plan. Parent shall have
----------------------------------
purchased all shares of Company Common Stock held by the ESOP and the ESOP shall
have been amended and restated to create the Amended and Restated Savings Plan.
7.1.13. Agreements and Actions under Articles 4 and 5. All other
---------------------------------------------
agreements required to be executed and delivered under Articles 4 and 5 prior to
the Closing, including the Employment Agreements, the Manager Employment
Agreements, the Majority Stockholder Releases, the Voting Agreement, the Stock
Transfer Restriction Agreement, the Registration Rights Agreement, the Adoption
Agreements and the amendments to the Deferred Compensation Plans shall have been
executed and delivered by the parties thereto other than Parent and all actions
required to be taken by parties other than Parent under Articles 4 and 5 prior
to the Closing shall have been duly and validly taken. The Parent Employee
Stock Offering shall have been completed and Parent shall have received the
proceeds thereof.
The consummation of the Closing shall not be deemed to be a waiver by
Parent of any of its rights or remedies against the Stockholders hereunder for
any breach of warranty, covenant or agreement by the Stockholders herein,
irrespective of any knowledge of or investigation made by or on behalf of
Parent; provided, however, that if the Attorney-in-Fact shall disclose in
writing to Parent prior to the Closing Date a specified breach of a specifically
identified representation, warranty, covenant or agreement of the Stockholder
herein by the Stockholder, and requests a waiver thereof by Parent, and Parent,
in its sole discretion, determines to waive any such specifically identified
breach in writing prior to the Closing Date, Parent, for itself and for each
Parent Indemnified Party shall be deemed to have waived their respective rights
and remedies hereunder for, and the Stockholders shall
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have no liability with respect to, any such specifically identified breach, to
the extent so identified by the Attorney-in-Fact and so waived by Parent.
7.2. Conditions Precedent to Obligations of the Stockholders. The
-------------------------------------------------------
obligations of the Stockholders to consummate the transactions contemplated by
this Agreement shall be subject to satisfaction or waiver by the Attorney-in-
Fact at or prior to the Closing of all of the following conditions:
7.2.1. Representations, Warranties and Covenants of Parent. Parent
---------------------------------------------------
shall have complied with all of its agreements and covenants contained herein to
be performed at or prior to the Closing Date, and all of the representations and
warranties of the Parent contained herein shall be accurate at and as of the
Closing Date with the same effect as though such representations and warranties
had been made at and as of the Closing Date, and the Attorney-in-Fact shall have
received certificates to such effect executed by the president or a vice
president and the treasurer of Parent.
7.2.2. Legal Opinion. The Attorney-in-Fact shall have received a
-------------
written opinion from ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, L.L.P., dated the Closing Date
covering the matters set forth in 2 Exhibit 7.2.2. In rendering such opinion,
counsel may rely to the extent deemed appropriate on the certificates of
officers or employees of Parent and of public officials as to matters of fact
and authenticity of documents and on opinions of counsel in other states as to
questions under the law of such states.
7.2.3. Documents. All documents, certificates, opinions,
---------
instruments and agreements required to be executed and delivered by Parent at
the Closing as contemplated hereby or as reasonably requested by the Attorney-
in-Fact shall have been duly executed and delivered by the Parent and shall have
been received by the Attorney-in-Fact.
7.2.4. Consents. All consents and approvals of third parties or any
--------
regulatory body or authority, whether required contractually or by applicable
federal, state or local law, or otherwise necessary for the execution, delivery
and performance of this Agreement by the Parent and the consummation by Parent
of the transactions contemplated hereby shall have been received by the
Attorney-in-Fact or shall have been waived by Attorney-in-Fact.
7.2.5. No Material Adverse Change. Since February 28, 1997, there
--------------------------
shall not have been any event that in the reasonable judgment of the Attorney-
in-Fact adversely affects the properties, assets, financial condition, results
of operations, cash flows, businesses or prospects of Parent.
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7.2.6. Agreements and Actions Under Articles 4 and 5. All other
---------------------------------------------
agreements required to be executed and delivered under Articles 4 and 5 prior to
the Closing, including the Employment Agreements, the Majority Stockholder
Release, the Voting Agreement, the Stock Transfer Restriction Agreement, the
Registration Rights Agreement, the Adoption Agreements, and the amendments to
the Deferred Compensation Plans shall have been executed and delivered by the
parties thereto other than the Company and the Stockholders and all actions
required to be taken by parties other than the Company and the Stockholders
under Articles 4 and 5 prior to the Closing shall have been duly and validly
taken. The Parent Employee Stock Offering shall have been completed and Parent
shall have received the proceeds thereof.
The consummation of the Closing shall not be deemed to be a waiver by the
Stockholders of any of their rights or remedies hereunder for breach of any
warranty, covenant or agreement herein by Parent irrespective of any knowledge
of or investigation with respect thereto made by or on behalf of any
Stockholder; provided, however, that if Parent shall disclose in writing to the
Attorney-in-Fact prior to the Closing a specified breach of a specifically
identified representation, warranty, covenant or agreement of Parent contained
herein by Parent, and requests a waiver thereof by the Attorney-in-Fact and the
Attorney-in-Fact, in his sole discretion, determines to waive any such
specifically identified breach in writing prior to the Closing, the Stockholders
shall be deemed to have waived their rights and remedies hereunder for, and
Parent shall have no liability or obligation to the Stockholders with respect
to, any such specifically identified breach, to the extent so identified by
Parent and waived by the Attorney-in-Fact.
7.2.7. Tax Opinion. The Stockholders shall have received an opinion
-----------
from KPMG Peat Marwick LLP to the effect that, for federal income tax purposes,
the transaction described in this Agreement will constitute an exchange under
Section 351 of the Code.
8. TERMINATION
8.1. Grounds for Termination. This Agreement may be terminated at any
-----------------------
time prior to the Closing Date:
8.1.1. Mutual Consent. By the written agreement of the Attorney-in-
--------------
Fact and Parent; or
8.1.2. Optional. By the Attorney-in-Fact or by Parent, by notice to
--------
the other, if the Closing shall have failed to occur by 5:00 p.m. Houston, Texas
time on July 1, 1997; or
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8.1.3. Dispute. By the Attorney-in-Fact or by Parent by notice to
-------
the other, if any disagreement with respect to the Statement of Final
Consideration is not resolved as set forth and within the time prescribed in
Section 1.5.3(iv).
8.1.4. Legal Restraint. By the Attorney-in-Fact or by Parent, by
---------------
notice to the other, if on the date scheduled for Closing any proceeding or
action shall have been filed seeking to restrain, enjoin or otherwise prevent
the consummation of this Agreement or the transactions contemplated hereby or
any order shall have been entered restraining or prohibiting consummation of the
transactions contemplated hereby.
8.2. Effect of Termination. If this Agreement is terminated as permitted
---------------------
under Section 8.1, such termination shall be without liability of any party to
any other party, except that such termination shall be without prejudice to any
and all remedies the parties may have against each other for breach of this
Agreement.
9. MISCELLANEOUS
9.1. Notice. Any notice, delivery or communication required or permitted
------
to be given under this Agreement shall be in writing, and shall be mailed,
postage prepaid, or delivered, to the addresses given below, or sent by telecopy
to the telecopy numbers set forth below, as follows:
To the Stockholders:
c/o ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Attorney-in-Fact
Airtron, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Coolidge, Wall, Womsley & Lombard
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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To Parent:
Group Maintenance America Corp.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
To the Company:
Airtron, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or other such address as shall be furnished in writing by any such party to the
other parties, and such notice shall be effective and be deemed to have been
given as of the date actually received.
To the extent any notice provision in any other agreement, instrument or
document required to be executed or executed by the parties in connection with
the transactions contemplated herein contains a notice provision which is
different from the notice provision contained in this Section 9.1 with respect
to matters arising under such other agreement, instrument or document, the
notice provision in such other agreement, instrument or document shall control.
9.2. Further Documents. The Stockholders shall, at any time and from time
-----------------
to time after the Closing, upon request by Parent and without further
consideration, execute and deliver such instruments or other documents and take
such further action as may be reasonably required in order to perfect any other
undertaking made by the Stockholders hereunder.
9.3. Assignability. Neither the Company nor any Stockholder shall assign
-------------
this Agreement in whole or in part without the prior written consent of Parent,
except by the operation of law. Upon notice to the Majority Stockholders (which
may be delivered to the Attorney-in-Fact), Parent and the Subsidiary and any
Permitted Assignee may assign this Agreement to any Permitted Assignee.
"Permitted Assignee" as used herein and shall include (i) any financial
institution (or its affiliates) providing financing (or refinancing) to
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Parent, the Company or any other direct or indirect wholly-owned subsidiary of
Parent; (ii) after the Closing Date, any person or entity, (iii) prior to the
Closing Date, any person or entity with the prior written consent of the
Attorney-in-Fact, which consent shall not be unreasonably withheld, and (iv)
after the Closing Date, any other person or entity that is a transferee or
assignee from any entity described in clause (i) as a result of any foreclosure,
sale or deed in lieu of foreclosure, deed or similar conveyance relating to the
exercise of rights under a security instrument. The warranties, representations,
obligations, agreements and indemnities (in Section 6 and elsewhere herein) and
the other documents contemplated hereby will inure to the benefit of the
Permitted Assignees to the extent they inure to the benefit of Parent herein.
Parent shall remain liable hereunder notwithstanding any assignment hereof by
it, unless otherwise consented to by the Attorney-in-Fact, which consent shall
not be unreasonably withheld. Any assignment made or attempted in violation of
this Section 9.3 shall be void and of no effect. This Agreement shall be binding
on the Stockholders, Parent, and their respective heirs, legal representatives,
successors and permitted assigns, provided, however, that this Agreement shall
not be binding upon the financial institutions, affiliates, purchasers or
grantees described in clauses (i), and (iv) of the third sentence of this
Section 9.3, but any such financial institutions, affiliates, purchasers or
grantees shall take this Agreement subject to all of the rights of the Attorney-
in-Fact and the Stockholders and the obligations of the Parent under this
Agreement. Notwithstanding the foregoing, no assignment by Parent, or by the
Company following the Closing Date, shall in any way increase any liability or
obligation of any Stockholder under this Agreement.
9.4. Exhibits and Schedules. The Exhibits and Schedules (and any
----------------------
appendices thereto) referred to in this Agreement and all amendments thereto
from the time of agreement thereto, are and shall be incorporated herein and
made a part hereof.
9.5. Entire Agreement. This Agreement constitutes the full understanding
----------------
of the parties, a complete allocation of risks between them and a complete and
exclusive statement of the terms and conditions of their agreement relating to
the subject matter hereof and supersedes any and all prior agreements, whether
written or oral, that may exist between the parties with respect thereto.
Except as otherwise specifically provided in this Agreement, no conditions,
usage of trade, course of dealing or performance, understanding or agreement
purporting to modify, vary, explain or supplement the terms or conditions of
this Agreement shall be binding unless hereafter made in writing and signed by
the party to be bound, and no modification shall be effected by the
acknowledgment or acceptance of documents containing terms or conditions at
variance with or in addition to those set forth in this Agreement. No waiver by
either party with respect to any breach or default or of any right or remedy and
no course of dealing, shall be deemed to constitute a continuing waiver of any
other breach or default or of any other right or remedy, unless such waiver be
expressed in
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writing signed by the party to be bound. Failure of a party to exercise any
right shall not be deemed a waiver of such right or rights in the future.
9.6. Headings. Headings as to the contents of particular articles and
--------
sections are for convenience only and are in no way to be construed as part of
this Agreement or as a limitation of the scope of the particular articles or
sections to which they refer.
9.7. CONTROLLING LAW AND JURISDICTION. THE VALIDITY, INTERPRETATION AND
--------------------------------
PERFORMANCE OF THIS AGREEMENT AND ANY DISPUTE CONNECTED HEREWITH SHALL BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.
9.8. Public Announcements. No press release, public announcement,
--------------------
confirmation or other information regarding this Agreement or the contents
hereof shall be made by any party without the prior consultation of the Company,
the Attorney-in-Fact, and Parent, except as may be necessary in the opinion of
counsel of any party to meet the requirements or regulations of any applicable
law, governmental unit or agency or stock exchange on which the securities of
such party may be listed. Notwithstanding the foregoing, the Company may make
appropriate disclosures of the general nature of the transaction contemplated
hereby to its employees, vendors and customers to protect the Company's good
will and to facilitate the Closing, and Parent may disclose pertinent
information regarding the transaction contemplated hereby to its existing and
prospective investors, lenders or investment bankers or financial advisors for
the purposes of obtaining financing (including a contemplated IPO). Parent may
also make appropriate disclosures of the general nature of the transaction
contemplated hereby and the identity, nature and scope of the Company's
operations to prospective acquisition candidates in its efforts to attract
additional acquisitions for Parent. Parent and the Company shall jointly approve
the contents of any press releases, written employee presentations or other
materials of potentially wide distribution that disclose or refer to the
transaction contemplated hereby, except for such press releases or other
communications required by law.
9.9. Finder's Fees and Commissions. Parent agrees to pay all costs and
-----------------------------
expenses resulting from any agreement, arrangement or understanding made or
alleged to have been made by Parent or any of its affiliates with any third
party for brokerage or finder's fees or other commissions in connection with
this Agreement, the documents and instruments referred to herein, or the
transactions contemplated hereby or thereby. The Majority Stockholders agree to
pay all costs and expenses resulting from any agreement, arrangement or
understanding made or alleged to have been made by any Majority Stockholder, the
Company or any of their respective affiliates with any third party for brokerage
or finder's
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fees or commissions in connection with this Agreement, the documents and
instruments referred to herein or the transactions contemplated hereby or
thereby; provided that the Company may agree to pay such costs or expenses to
the extent that such costs and expenses are included as a current liabilities
for purposes of determining Net Working Capital.
9.10. No Third Party Beneficiaries. Except as set forth in Article 6 and
----------------------------
Section 9.3, no person or entity not a party to this Agreement shall have rights
under this Agreement as a third party beneficiary or otherwise.
9.11. Amendments and Waivers. This Agreement may be amended by Parent and
----------------------
the Attorney-in-Fact to the extent permitted by applicable law. All amendments
to this Agreement must be by an instrument in writing signed on behalf of Parent
and the Attorney-in-Fact. Any term or provision of this Agreement may be waived
in writing at any time by the party which is entitled to the benefits thereof.
9.12. No Employee Rights. Nothing herein expressed or implied shall
------------------
confer upon any employee of the Company or any Company Subsidiary, any other
employee or legal representatives or beneficiaries of any thereof any rights or
remedies, including any right to employment or continued employment for any
specified period, of any nature or kind whatsoever under or by reason of this
Agreement, or shall cause the employment status of any employee to be other than
terminable at will.
9.13. Non-Recourse. No recourse for the payment of any amounts due
------------
hereunder or for any claim based on this Agreement or the transactions
contemplated hereby or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of Parent, the Company or any
Stockholder in this Agreement shall be had against any incorporator, organizer,
promoter, stockholder (other than Parent), officer, director, employee or
representative as such (other than the Stockholders as set forth herein), past,
present or future, of Parent or of any successor corporation, whether by virtue
of any constitution, statute or rule of law, or by enforcement of any assessment
or penalty or otherwise; it being expressly understood that all such liability
is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Agreement.
9.14. When Effective. This Agreement shall become effective only upon the
--------------
execution and delivery of (i) one or more counterparts of this Agreement by
Parent and each of the Stockholders.
9.15. Takeover Statutes. If any "fair price," "moratorium," "control
-----------------
share acquisition" or other form of anti-takeover statute or regulation shall
become applicable to
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the transactions contemplated hereby, Parent and the Company and their
respective members of their Boards of Directors shall grant such approvals and
take such actions as are necessary so that the transactions contemplated by this
Agreement may be consummated as promptly as practicable on the terms
contemplated herein and otherwise act to eliminate or minimize the effects of
such statute or regulation on the transactions contemplated herein.
9.16. Number and Gender of Words. Whenever herein the singular number is
--------------------------
used, the same shall include the plural where appropriate and words of any
gender shall include each other gender where appropriate.
9.17. Invalid Provisions. If any provision of this Agreement is held to
------------------
be illegal, invalid, or unenforceable under present or future laws, such
provisions shall be fully severable as if such invalid or unenforceable
provisions had never comprised a part of the Agreement; and the remaining
provisions of the Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be automatically as a part of this
Agreement, a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
Notwithstanding anything to the contrary contained herein, if any condition
precedent to Parent's obligations hereunder is held to be illegal, invalid or
unenforceable under present or future laws, then Parent, at Parent's sole
option, may terminate this Agreement by written notice delivered to the Company
and, thereafter, the parties hereto shall have no further obligations or
liabilities hereunder, one to the other.
9.18. Multiple Counterparts. This Agreement may be executed in a number
---------------------
of identical counterparts. If so executed, each of such counterparts is to be
deemed an original for all purposes and all such counterparts shall,
collectively, constitute one agreement, but, in making proof of this Agreement,
it shall not be necessary to produce or account for more than one such
counterpart.
9.19. No Rule of Construction. All of the parties hereto have been
-----------------------
represented by counsel in the negotiations and preparation of this Agreement;
therefore, this Agreement will be deemed to be drafted by each of the parties
hereto, and no rule of construction will be invoked respecting the authorship of
this Agreement.
9.20. Preparation of Tax Returns for Pre-Closing Periods. The Majority
--------------------------------------------------
Stockholders shall be responsible for preparing all tax returns due after the
Closing Date relating to periods ending before the Closing Date, at the
Company's expense.
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9.21. Amendment of Pre-Closing Tax Returns. The Parent shall not cause
------------------------------------
the Company to, nor shall the Company, without the prior written consent of the
Majority Stockholders, amend any federal or state income tax return of the
Company relating to a period ending before the Closing Date.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered on the date first hereinabove written.
GROUP MAINTENANCE AMERICA CORP.
By:_______________________________
Name:_____________________________
Title:____________________________
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Majority Stockholders
Number of
Shares
of Company
Common Stock Number of Shares
Number of Shares of Issuable on of Company
Company Common Exercise of Common Stock Maximum
Stock Held of Record Company Applicable to Percentage
Name and Beneficially Warrants Company SARs Liability
---- ---------------- -------- ------------ ---------
___________________ 21,870 15,000 4,128 24.2645%
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
___________________ 36,073 15,000 4,128 25.1103%
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
___________________ 4,746 15,000 4,128 18.8498%
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
___________________ 15,022 0 7,128 11.6457%
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
___________________ 10,196 0 7,128 11.7014%
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
___________________ 1,523 0 7,128 8.4283%
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Stockholders
Number of Shares
Number of Shares of Company
of Company Common Stock Number of Shares
Common Stock Issuable on Exercise of Company Common
Held of Record of Company Stock Applicable to
Name and Beneficially Warrants Company SARs
---- ---------------- -------- ------------
___________________________ 900 0 0
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
___________________________ 1,000 0 0
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
___________________________ 3,945 0 0
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
___________________________ 3,433 0 0
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
___________________________ 15,000 0 0
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
___________________________ 100 0 0
___________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, JTWROS
___________________________ 425 0 0
___________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇, JTWROS
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Number of Shares
Number of Shares of Company
of Company Common Stock Number of Shares
Common Stock Issuable on Exercise of Company Common
Held of Record of Company Stock Applicable to
Name and Beneficially Warrants Company SARs
---- ---------------- -------- ------------
By:_____________________________ 86,865 0 0
▇▇▇▇▇▇▇ ▇▇▇▇▇ Trust Company
as Trustee for: Airtron, Inc.
Incentive Compensation Trust,
Airtron, Inc. Deferred Com-
pensation Trust, and Airtron,
Inc. 1995 Supplemental
Retirement Trust "A"
Name:___________________________
Title:__________________________
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