EXHIBIT 2.03
_______________________________________________________________________________
_______________________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CONSOLIDATION CAPITAL CORPORATION,
CCC4 ACQUISITION CO.,
GARFIELD ELECTRIC COMPANY
AND
THE SHAREHOLDERS NAMED HEREIN
MADE EFFECTIVE AS OF FEBRUARY 27, 1998.
________________________________________________________________________________
________________________________________________________________________________
Table of Contents
Page
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1. THE MERGER.......................................................... 2
1.1 The Merger............................................... 2
1.2 Articles of Incorporation; Regulations, Directors
and Officers............................................ 2
1.3 Effects of the Merger.................................... 2
2. CONVERSION AND EXCHANGE OF STOCK.................................... 3
2.1 Manner of Conversion..................................... 3
2.2 Base Merger Consideration................................ 4
2.3 Contingent Merger Consideration.......................... 5
2.4 Exchange of Certificates and Payment of Cash............. 8
3. POST CLOSING ADJUSTMENT; PLEDGED ASSETS............................. 9
3.1 Post-Closing Adjustment.................................. 9
3.2 Pledged Assets........................................... 11
4. CLOSING............................................................. 12
4.1 Location and Date........................................ 12
4.2 Effect................................................... 12
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDERS........................................................ 12
5.1 Due Organization......................................... 13
5.2 Authorization; Validity.................................. 13
5.3 No Conflicts............................................. 13
5.4 Capital Stock of the Company............................. 14
5.5 Transactions in Capital Stock............................ 14
5.6 Subsidiaries, Stock, and Notes........................... 14
5.7 Predecessor Status....................................... 14
5.8 Absence of Claims Against the Company.................... 15
5.9 Company Financial Condition.............................. 15
5.10 Financial Statements..................................... 15
5.11 Liabilities and Obligations.............................. 15
5.12 Accounts and Notes Receivable............................ 16
5.13 Books and Records........................................ 16
5.14 Permits.................................................. 16
5.15 Real Property............................................ 17
5.16 Personal Property........................................ 18
5.17 Intellectual Property.................................... 18
5.18 Material Contracts and Commitments....................... 19
5.19 Government Contracts..................................... 20
5.20 Insurance................................................ 21
5.21 Labor and Employment Matters............................. 21
5.22 Employee Benefit Plans................................... 21
5.23 Conformity with Law; Litigation.......................... 23
5.24 Taxes.................................................... 24
5.25 Absence of Changes....................................... 25
5.26 Deposit Accounts; Powers of Attorney..................... 27
5.27 Environmental Matters.................................... 27
5.28 Relations with Governments............................... 28
5.29 Disclosure............................................... 28
5.30 CCC Prospectus; Securities Representations............... 28
5.31 Affiliates............................................... 29
5.32 Location of Chief Executive Offices...................... 29
5.33 Location of Equipment and Inventory...................... 29
6. REPRESENTATIONS OF CCC AND NEWCO.................................... 29
6.1 Due Organization......................................... 29
6.2 CCC Common Stock......................................... 30
6.3 Authorization; Validity of Obligations................... 30
6.4 No Conflicts............................................. 30
6.5 Capitalization of CCC and Ownership of CCC Stock......... 31
6.6 Conformity with Law; Litigation.......................... 31
6.7 Disclosure............................................... 31
6.8 CCC Prospectus........................................... 31
6.9 Registration Statement................................... 32
6.10 Investment Intent........................................ 32
7. COVENANTS........................................................... 32
7.1 Tax Matters.............................................. 32
7.2 Accounts Receivable...................................... 33
Intentionally omitted.................................................... 33
7.4 Related Party Agreements................................. 33
7.5 Cooperation.............................................. 34
7.6 Conduct of Business Pending Closing...................... 35
7.7 Access to Information.................................... 35
7.8 Prohibited Activities.................................... 36
7.9 Notice to Bargaining Agents.............................. 37
7.10 Sales of CCC Common Stock................................ 37
7.11 CCC Stock Options........................................ 39
7.12 Tax Covenant............................................. 39
7.13 CCC Board Seat........................................... 39
7.14 D&O Insurance and Indemnification of Directors
and Officers............................................ 39
7.15 Tax Free Reorganization Protection....................... 40
7.16 Consulting Payment....................................... 40
7.17 Government Contracts..................................... 40
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7.18 CCC Stock................................................ 40
7.19 Employee Benefits Matters................................ 40
7.20 Supplemental Financial Certificate....................... 41
7.21 Holding Company.......................................... 41
7.22 Intentionally Omitted.................................... 41
7.23 Indemnification of Shareholder's Purchaser
Representative.......................................... 41
7.24 Guaranteed Debt.......................................... 42
7.25 Shareholder Debt......................................... 42
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CCC AND NEWCO............ 42
8.1 Representations and Warranties; Performance of
Obligations............................................. 42
8.2 No Litigation............................................ 43
8.3 No Material Adverse Change............................... 43
8.4 Consents and Approvals................................... 43
8.5 Opinion of Counsel....................................... 43
8.6 Charter Documents........................................ 43
8.7 Quarterly Financial Statements........................... 43
8.8 Delivery of Closing Financial Certificate................ 43
8.9 FIRPTA Compliance........................................ 44
8.10 Employment Agreements.................................... 44
8.11 Affiliate Agreements..................................... 44
8.12 Shareholders' Release.................................... 44
8.13 Related Party Receivables and Agreements................. 44
8.14 Consummation of Group Merger Transaction................. 44
8.15 Intentionally Omitted.................................... 44
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS........................................................ 44
9.1 Representations and Warranties; Performance of
Obligations............................................. 44
9.2 No Litigation............................................ 44
9.3 Consents and Approvals................................... 45
9.4 Employment Agreements.................................... 45
9.5 Tax Certificate Delivery................................. 45
9.6 Satisfaction With Shareholder Release and Affiliate
Agreements.............................................. 45
9.7 Tax Opinion.............................................. 45
9.8 Consummation of Group Merger Transaction................. 45
9.9 Employee Plan Fiduciary Condition........................ 45
9.10 Board Expansion.......................................... 45
9.11 Registration Statement................................... 45
9.12 No Material Adverse Change............................... 46
9.13 Officers and Directors of Surviving Corporation.......... 46
9.14 Interim Balance Sheet.................................... 46
10. INDEMNIFICATION..................................................... 46
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10.1 General Indemnification by the Shareholders.............. 46
10.2 General Indemnification by CCC and Newco................. 47
10.3 Limitation and Expiration................................ 47
10.4 Indemnification Procedures............................... 49
10.5 Survival of Representations Warranties................... 50
10.6 Right to Set Off......................................... 50
11. NONCOMPETITION...................................................... 51
11.1 Prohibited Activities.................................... 51
11.2 Damages.................................................. 51
11.3 Reasonable Restraint..................................... 52
11.4 Severability; Reformation................................ 52
11.5 Independent Covenant..................................... 52
11.6 Materiality.............................................. 52
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION........................... 52
12.1 Confidentiality.......................................... 52
12.2 Damages.................................................. 53
13. GENERAL............................................................. 53
13.1 Termination.............................................. 53
13.2 Effect of Termination.................................... 54
13.3 Successors and Assigns................................... 54
13.4 Entire Agreement; Amendment; Waiver...................... 54
13.5 Counterparts............................................. 55
13.6 Brokers and Agents....................................... 55
13.7 Expenses................................................. 55
13.8 Specific Performance; Remedies........................... 55
13.9 Notices.................................................. 56
13.10 Governing Law............................................ 56
13.11 Severability............................................. 57
13.12 Absence of Third Party Beneficiary Rights................ 57
13.13 Further Representations.................................. 57
13.14 Group Representative and Shareholder Representative...... 57
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
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entered into this 27th day of February, 1998, by and among Consolidation Capital
Corporation, a Delaware corporation ("CCC"), CCC4 Acquisition Co., an Ohio
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corporation and a newly-formed, wholly-owned subsidiary of CCC ("Newco"), and
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Garfield Electric Company, an Ohio corporation (the "Company"), and Garfield W.
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▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (each a "Shareholder" and
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collectively, the "Shareholders").
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BACKGROUND
WHEREAS, the Shareholders are the owners of the issued and outstanding
capital stock of the Company as set forth herein (the "Company Common Stock");
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WHEREAS, the respective Boards of Directors of Newco and the Company deem
it advisable and in the best interests of Newco and the Company (each of which
are sometimes herein referred to as the "Constituent Corporations") and their
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respective shareholders that the Company merge with and into Newco (the
"Merger") pursuant to this Agreement, the Agreement and Plan of Merger (defined
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below) and the applicable provisions of the laws of the State of Ohio.
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, CCC is entering into an Agreement and Plan of Reorganization
substantially similar to this Agreement with each of SKC Electric, Inc., a
Kansas corporation ("Company 1"), Riviera Electric Construction Co., a Colorado
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corporation ("Company 2"), Indecon, Inc., an Ohio corporation ("Company 3"),
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Tri-City Electrical Contractors, Inc., a Florida corporation ("Company 4"),
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▇▇▇▇▇▇ Electric, an Arizona corporation ("Company 5") and Town & Country
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Electric, Inc., a Wisconsin corporation ("Company 6"); and together with Company
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1, Company 2, Company 3, Company 4, Company 5 and Company 6 shall be known
collectively as the "Other Group Companies") (the Other Group Companies,
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together with the Company, shall be known hereafter collectively as the "Group
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Companies" and each shall be known individually as a "Group Company"; and this
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Agreement together with the other agreements referenced in this clause
applicable to the Other Group Companies shall be known hereafter collectively as
the "Group Company Agreements");
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WHEREAS, the Boards of Directors of each of the Constituent Corporations
have approved and adopted this Agreement as a plan of reorganization (a "tax-
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free reorganization") within the provisions of Sections 368(a)(1)(A) and
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368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code"); and
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WHEREAS, in order to induce CCC to enter into this Agreement and the other
agreements comprising the Group Company Agreements, the Company and the
Shareholders desire to execute and deliver this Agreement, the effect of which,
taken together with the transactions contemplated by the remaining Group Company
Agreements (such transactions, including the transaction contemplated by this
Agreement, being known hereafter collectively as the "Group Merger
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Transaction"), will have a direct and beneficial impact on the Company and the
Shareholders.
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1 THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 4.2), the
Company shall be merged with and into Newco pursuant to this Agreement and the
Agreement and Plan of Merger (the "Plan of Merger") substantially in the form
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attached as SCHEDULE 1.1 hereto, and the separate corporate existence of the
Company shall cease. Newco, as it exists from and after the Effective Time, is
sometimes referred to as the "Surviving Corporation." The new corporations into
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which each of the Other Group Companies will merge in the Group Merger
Transaction are referred to collectively, together with the Surviving
Corporation, as the Surviving Group Companies. The Surviving Corporation's name
will be changed to that of the Company immediately after the Effective Time.
1.2 ARTICLES OF INCORPORATION; REGULATIONS, DIRECTORS AND OFFICERS. At
the Effective Time:
(a) The Articles of Incorporation of Newco, as in effect immediately
prior to the Effective Time, which are attached as EXHIBIT 1.2(A), shall be the
Articles of Incorporation of the Surviving Corporation unless and until
thereafter amended as provided therein and under the laws of the State of Ohio
(the "State Corporate Laws"), provided, that the provisions relating to the
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indemnification of officers and directors contained therein as amended at the
Effective Time shall not be amended until the sixth (6th) anniversary of the
Closing Date (as defined in Section 4.1).
(b) The Regulations of Newco, as in effect immediately prior to the
Effective Time, which are attached as EXHIBIT 1.2(B), shall be the Regulations
of the Surviving Corporation unless and until thereafter amended as provided
therein and under the State Corporate Laws; provided, that the provisions
relating to the indemnification of officers and directors contained therein
shall not be amended until the sixth (6th) anniversary of the Closing Date.
(c) The directors of the Surviving Corporation shall be as set forth
on SCHEDULE 1.2(C) until their successors are elected and qualified, and the
initial officers of the Surviving Corporation shall be as set forth on SCHEDULE
1.2(C) until their successors are elected and qualified.
1.3 EFFECTS OF THE MERGER. The Merger shall have the effects provided
therefor by the State Corporate Laws. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time (i) all the rights,
privileges, immunities, powers and franchises, of a public as well as of a
private nature, and all property, real, personal and mixed, and all debts due on
whatever account, including without limitation subscriptions to shares, and all
other choses in action, and all and every other interest of or belonging to or
due to the Company or Newco shall be taken and deemed to be transferred to, and
vested in, the Surviving Corporation without further act or deed;
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and all property, rights and privileges, immunities, powers and franchises and
all and every other interest shall be thereafter as effectually the property of
the Surviving Corporation, as they were of the Company and Newco, and (ii) all
debts, liabilities, duties and obligations of the Company and Newco shall become
the debts, liabilities, duties and obligations of the Surviving Corporation and
the Surviving Corporation shall thenceforth be responsible and liable for all
the debts, liabilities, duties and obligations of the Company and Newco and
neither the rights of creditors nor any liens upon the property of the Company
or Newco shall be impaired by the Merger, and may be enforced against the
Surviving Corporation.
2. CONVERSION AND EXCHANGE OF STOCK
2.1 MANNER OF CONVERSION. At the Effective Time, by virtue of the Merger
and without any action on the part of CCC, Newco, the Company or the
Shareholders, the shares of capital stock of each of the Constituent
Corporations shall be converted as follows:
(a) Capital Stock of Newco. Each issued and outstanding share of
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capital stock of Newco shall continue to be issued and outstanding and shall
represent shares of stock of the Surviving Corporation. Each stock certificate
of Newco evidencing ownership of any such shares shall continue to evidence
ownership of such shares of capital stock of the Surviving Corporation.
(b) Cancellation of Certain Shares of Capital Stock of the Company.
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All shares of capital stock of the Company that are owned, legally or equitably,
directly or indirectly by the Company shall be canceled and no stock of CCC or
other consideration shall be delivered in exchange therefor.
(c) Conversion of Capital Stock of the Company. Subject to Section
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2.1(d), and Sections 2.2, 2.3, 2.4, 3.1 and 3.2, each issued and outstanding
share of Company Common Stock (other than shares to be canceled pursuant to
Section 2.1(b)), immediately prior to the Effective Time shall automatically be
canceled and extinguished and converted, without any action on the part of the
holder thereof, into the right to receive at the time and in the amounts
described in this Agreement (i) an amount of cash equal to the cash portion of
the Base Merger Consideration (as defined in Section 2.2(a)) divided by the
number of shares of Company Common Stock held by the Shareholders, (other than
shares to be canceled pursuant to Section 2.1(b)), (ii) that number of shares of
CCC common stock, $.001 par value ("CCC Common Stock"), valued at the Merger
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Price (as defined in Section 2.2(a)), that is equal in value to the CCC Common
Stock portion of the Base Merger Consideration (as defined in Section 2.2(a))
divided by the number of shares of Company Common Stock held by the
Shareholders; (other than shares to be canceled pursuant to Section 2.1(b)),
(iii) an amount of cash equal to 50% of the Contingent Merger Consideration (as
defined in Section 2.3(a)) divided by the number of shares of Company Common
Stock held by the Shareholders (other than shares to be canceled pursuant to
Section 2.1(b)), and (iv) that number of shares of CCC Common Stock, valued at
the Earn Out Period Average Price (as defined in Section 2.3(b)), that is equal
in value to 50% of the Contingent Merger Consideration divided by the number of
shares of Company Common Stock held by the Shareholders (other than shares to be
canceled
3
pursuant to Section 2.1(b)). All such shares of Company Common Stock, when so
converted, shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the consideration therefor upon the
surrender of such certificate in accordance with Sections 2.2 and 2.3 of this
Agreement.
(d) Fractional Shares. No fractional shares of CCC Common Stock shall
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be issued pursuant to this Agreement, but in lieu thereof each holder of shares
of Company Common Stock who would otherwise be entitled to receive a fraction of
a share of CCC Common Stock shall receive from CCC an amount of cash equal to
the Merger Price or the Earn Out Period Average Price, as applicable (as defined
in Sections 2.2(a) and 2.3(b) respectively), multiplied by the fraction of a
share of CCC Common Stock to which such holder would otherwise be entitled. The
fractional share interests of each Shareholder shall be aggregated, so that no
Shareholder shall receive cash in an amount greater than the value of one full
share of CCC Common Stock.
2.2 BASE MERGER CONSIDERATION.
(a) For purposes of this Agreement, the "Base Merger Consideration"
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shall be $5,734,260, as adjusted pursuant to this Section 2.2 and Section 3.1.
Of the Base Merger Consideration, $2,867,130 shall be paid in cash at Closing
(as defined in Section 4.1) in immediately available funds. The remaining
$2,867,130 of the Base Merger Consideration shall be paid at Closing in shares
of CCC Common Stock valued at a price per share (the "Merger Price") equal to
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the sum of (i) the closing price of CCC Common Stock on January 29, 1998, plus
(ii) the closing price of CCC Common Stock on the last trading day prior to the
Closing Date, plus (iii) the "Interim Period Average" (as such term is defined
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below), divided by 3. Interim Period Average means the sum of the closing
prices of CCC Common Stock on every trading day from and including the date
referenced in clause (i) above and through and including the date referenced in
clause (ii) above, divided by the number of trading days included in such
period. The closing price of CCC Common Stock on a trading day, for purposes of
this calculation, shall be the day's last trade price as reported on the Nasdaq
National Market (or if no trade price is reported for any such day, the average
of the last bid and ask prices for the CCC Common Stock). The shares of CCC
Common Stock to be issued in respect of the Base Merger Consideration (subject
to adjustment as provided in this Section 2.2 and Section 3.1) shall be
registered under the Securities Act of 1933, as amended (the "1933 Act"), and
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approved for quotation on the Nasdaq National Market.
(b) The calculation of the Base Merger Consideration takes into
account (i) the Net Worth (as defined below) of the Company as of February 28,
1998, calculated in accordance with generally accepted accounting principles
("GAAP") consistently applied, but in any event excluding any increases in
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intangible assets of the Company since the end of the Company's most recently
ended fiscal year and until February 28, 1998 (as certified pursuant to Section
8.8, the "Company's Closing Net Worth"), and (ii) the Earnings before Interest
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and Taxes (as defined below) of the Company, computed in accordance with GAAP
consistently applied throughout the period involved but adjusted to reflect the
nonrecurring items that are specified on SCHEDULE 2.2(B) hereto, for the twelve
month period ended at the close of the Company's most recently ended fiscal year
(as
4
certified pursuant to Section 8.8, the "Company's 1997 Adjusted EBIT"). The
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calculation of the Base Merger Consideration assumes that (A) the total (the
"Group Closing Net Worth") of the Company's Closing Net Worth and the net worth
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of each of the Other Group Companies as of February 28, 1998 (calculated and
certified in the manner specified in each of the Group Company Agreements) is
equal to or greater than $31,000,000 (the "Group Net Worth Target") and (B) the
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total (the "Group 1997 Adjusted EBIT") of the Company's 1997 Adjusted EBIT and
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the Earnings before Interest and Taxes of each of the Other Group Companies for
the twelve month period ended at the close of each Group Company's most recently
ended fiscal year (calculated and certified in the manner specified in each of
the Group Company Agreements) shall have been equal to or greater than
$19,734,000 (the "Group 1997 Adjusted EBIT Target"). For the purposes of this
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Section 2.2, "Net Worth" is equal to total assets less total liabilities,
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"Earnings before Interest and Taxes" is equal to net income (A) plus interest
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expense, income taxes, extraordinary items, cumulative effect of accounting
changes and discontinued operations and (B) less interest income and the "Group
Closing Net Worth" shall include the following items related to the ESOP for SKC
Electric, Inc. which are reflected on the balance sheet for SKC Electric, Inc.:
(A) "ESOP common stock purchase obligations" and (B) ESOP related Debt (current
and long term) and (C) "Unearned ESOP common stock."
(c) If the Group Closing Net Worth is lower than the Group Net Worth
Target, then the Merger Consideration (as defined in Section 2.4(a)) to be
delivered to the Shareholders may, at CCC's election, be reduced either (i) at
the Closing, by the product of (A) the difference between the Group Net Worth
Target and the Group Closing Net Worth times (B) 4.1% (which reduction shall be
pro rata in cash and in CCC Common Stock valued at the Merger Price in the same
proportions as the cash and CCC Common Stock components of the Base Merger
Consideration as provided in Section 2.2(a)) or (ii) after completion of the
Post-Closing Audit (as defined in Section 3.1(b)), in accordance with Section
3.1(b).
(d) If the Group 1997 Adjusted EBIT is less than the Group 1997
Adjusted EBIT Target, then the Merger Consideration to be delivered to the
Shareholders may, at CCC's election, be reduced either (i) at the Closing, by an
amount equal to seven multiplied by the product of (A) the difference between
the Group 1997 Adjusted EBIT Target and the Group 1997 Adjusted EBIT times (B)
4.1% (which reduction shall be pro rata in cash and in CCC Common Stock valued
at the Merger Price in the same proportions as the cash and CCC Common Stock
components of the Base Merger Consideration as provided in Section 2.2(a)) or
(ii) after completion of the Post-Closing Audit (as defined in Section 3.1(b)),
in accordance with Section 3.1(b). If the Group 1997 Adjusted EBIT is higher
than the Group 1997 Adjusted EBIT Target, then the Merger Consideration to be
delivered to the Shareholders at Closing shall be increased at the Closing by an
amount equal to seven multiplied by the product of (A) the difference between
the Group 1997 Adjusted EBIT and the Group 1997 Adjusted EBIT Target up to a
maximum of $1 million times (B) 4.1%. The amount by which the Group 1997
Adjusted EBIT exceeds the Group 1997 Adjusted EBIT Target, up to a maximum of $1
million, is hereafter referred to as the "EBIT Increase."
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(e) If, on or prior to the Effective Time, CCC should split or combine
the CCC Common Stock, or pay a stock dividend or other stock distribution in CCC
Common Stock, or other
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wise change the CCC Common Stock into any other securities, or make any other
dividend or distribution on the CCC Common Stock (other than normal quarterly
dividends, as the same may be adjusted from time to time and in the ordinary
course), then the number of shares of CCC Common Stock issuable as the Base
Merger Consideration will be appropriately adjusted to reflect such split,
combination, dividend or other distribution or change.
2.3 CONTINGENT MERGER CONSIDERATION.
(a) For purposes of this Agreement, but subject to the provisions of
subsections (i), (ii), and (iii) below, the "Contingent Merger Consideration"
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shall mean an amount up to $1,641,600.
(i) $1,641,600 (the "Maximum Earn Out Amount") will be paid,
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subject to the provisions of subsection (ii) and (iii) below, if the Earnings
before Interest and Taxes of the Surviving Group Companies (as defined below),
for the one year period after February 28, 1998 (the "Group Actual Earn Out
---------------------
EBIT") is at least equal to the sum of $25,020,000 and the amount, if any, of
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the EBIT Increase (the "Maximum Earn Out Threshold"). Price Waterhouse LLP,
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CCC's independent accountant ("CCC's Accountant"), will determine the Group
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Actual Earn Out EBIT and deliver prompt notice of such amount to the
Shareholders (the "Earn Out EBIT Notice") with supporting documentation. The
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Shareholders (through the Group Representative as defined in Section 13.14(a))
shall have the right to inspect, audit and make extracts from all of the
records, files and books of account of CCC relating to the Group Actual Earn Out
EBIT for purposes of verifying the amount of the consideration payable pursuant
to Section 2.3, at reasonable times during business hours, upon advance notice
to CCC. For purposes of this Section 2.3, "Earnings before Interest and Taxes of
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the Surviving Group Companies" is equal to net income computed in accordance
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with GAAP consistently applied of the Group Companies reflected on the books and
records of the Surviving Group Companies and the Holding Company (as defined in
Section 7.21 below), which net income (A) shall not reflect (1) the amortization
of goodwill and other intangibles recognized by CCC in connection with the
acquisition of the Group Companies or any future acquisitions, (2) expenses
(including corporate overhead) of CCC other than those expenses incurred for the
benefit of the Surviving Group Companies that do not duplicate expenses incurred
by the Surviving Group Companies nor exceed the amounts of similar expenses
incurred in the most recently ended fiscal year by the Group Companies prior to
the Closing, or (3) the tax that arises under Section 4978 of the Code, (B)
shall reflect (1) depreciation and amortization of assets of the Surviving Group
Companies except to the extent such amounts result from an increase in the book
value of the assets resulting from the Group Merger Transaction and (2) the
expenses under the employment agreement of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇. with the Holding
Company and other expenses reasonably necessary for the operation of the Holding
Company in connection with its actions as parent of the Surviving Group
Companies and (C) shall be adjusted by (1) adding the amounts of any interest
expense, income taxes, extraordinary items, cumulative effect of accounting
changes and discontinued operations of the Surviving Group Companies and (2)
subtracting the amount of any interest income of the Surviving Group Companies.
CCC's Accountant will calculate the Contingent Merger Consideration for each
Surviving Group Company and the Group Actual Earn Out EBIT applying the same
accounting principles applied by such Group Company (on a company by company
basis),
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with all such computations made (and definitions used) in the same way the
computations were made (and definitions were used) by such Group Company prior
to the Closing and will conform to the methods of accounting utilized
consistently during the calendar years 1996, 1997 and 1998 for each such Group
Company, provided in each case that such computations were in accordance with
GAAP. If, after the Closing, CCC's Accountant makes conforming adjustments to
unify the accounting principles utilized by each of the Group Companies, such
adjustments shall have no effect on the calculations made by CCC's Accountant
for purposes of this Section 2.3. CCC will provide the Surviving Corporation
with a schedule on a quarterly basis detailing expenses incurred for the benefit
of the Surviving Group Companies, such schedule to be prepared on a comparative
basis to expenses incurred in the prior year by the Group Companies for the same
items.
(ii) If the Group Actual Earn Out EBIT is equal to or less than
the sum of $22,043,000 and the amount, if any, of the EBIT Increase (the "Earn
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Out Threshold"), then no Contingent Merger Consideration will be paid to the
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Shareholders.
(iii) If the Group Actual Earn Out EBIT is greater than the Earn
Out Threshold but less than the Maximum Earn Out Threshold (the difference
between the Maximum Earn Out Threshold and the Earn Out Threshold being
hereinafter referred to as the "Earn Out Range"), then the Contingent Merger
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Consideration will equal the product determined by multiplying (A) the Specified
Percentage (as defined below) by (B) the Maximum Earn Out Amount. For purposes
of this Agreement, the "Specified Percentage" shall mean a fraction, the
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numerator of which is the amount by which the Group Actual Earn Out EBIT exceeds
the Earn Out Threshold and the denominator of which is the Earn Out Range.
(b) The shareholders of the Group Companies (through the Group
Representative) shall have thirty (30) days from the receipt of the Earn Out
EBIT Notice to notify CCC if they dispute the amount of the Group Actual Earn
Out EBIT. If CCC has not received notice of any such dispute within such 30-day
period, the Group Actual Earn Out EBIT contained in the Earn Out EBIT Notice
shall be final. If, however, the shareholders (through the Group
Representative) have delivered notice of such a dispute to CCC within such 30-
day period, then CCC shall, pursuant to Section 2.3(c) below, pay such amount of
the Contingent Merger Consideration that is not subject to any dispute and CCC's
Accountant shall select an independent accounting firm that has not represented
any of the parties hereto within the preceding two (2) years and is one of the
six largest accounting firms in the United States (or four largest firms if the
mergers of accounting firms proposed as of the date of this Agreement have been
completed) (each, a "New Accounting Firm") to review the amount of the Group
-------------------
Actual Earn Out EBIT, the books of the Surviving Group Companies, including the
Surviving Corporation, and the Earn Out EBIT Notice (and related information) to
determine the amount, if any, that the Group Actual Earn Out EBIT is in error.
Such New Accounting Firm shall be confirmed by the former shareholders of the
Group Companies through the Group Representative and CCC within five (5) days of
its selection, unless there is an actual conflict of interest. The New
Accounting Firm shall make its determination of the Actual Group Earn Out EBIT
(the "Revised Earn Out EBIT") if any, within thirty (30) days of its selection.
---------------------
The Revised Earn Out EBIT shall be final and binding on the parties hereto, and,
upon such determination, CCC shall be entitled or required to adjust the
Contingent Merger Consideration
7
accordingly. If the Revised Earn Out EBIT is higher than the Group Actual Earn
Out EBIT, CCC shall pay to the Shareholders interest, at the Prime Rate (defined
below), on the deficiency from the date that is fifteen months after the Closing
Date. The costs of the New Accounting Firm shall be borne by CCC if the Revised
Earn Out EBIT is higher than the Group Actual Earn Out EBIT and by the former
shareholders of the Group Companies in all other cases. For purposes of this
Section, the term "Prime Rate" shall mean the annual rate of interest announced
----------
by Citibank, N.A. in New York, New York as its prime rate in effect on the
Contingent Merger Consideration Payment Date.
(c) The Contingent Merger Consideration described in SECTION 2.3 (A),
reduced as provided in Section 3.1(c) as appropriate, will be paid 50% in cash
and 50% in shares of CCC Common Stock and will be paid in a single lump payment
by federal wire transfer of same day funds promptly following the determination
of the Group Actual Earn Out EBIT by CCC's Accountant, which shall be made in a
timely fashion following expiration of the one (1) year period after the
Closing, but in no event shall such payment be made later than the date that is
fifteen months after the Closing Date unless the Shareholders dispute the Group
Actual Earn Out EBIT in accordance with Section 2.3(b) hereof. For purposes of
determining the number of shares of CCC Common Stock that are issuable as part
of the Contingent Merger Consideration, the value of each such share shall be
equal to the Earn Out Period Average Price. The "Earn Out Period Average Price"
-----------------------------
means the quotient of (i) the sum of the closing price of a share of CCC Common
Stock on the Nasdaq National Market on each trading day from and including the
date that is thirty (30) trading days prior to and including the last day of the
one year period after the Closing Date (or if no trade price is reported for any
such day, the average of the last bid and ask prices for the CCC Common Stock),
divided by (ii) 30. The date or dates on which the Contingent Merger
Consideration is paid to the Shareholders is hereinafter referred to as the
"Contingent Merger Consideration Payment Date." The certificates evidencing CCC
Common Stock received as part of the Merger Consideration shall be issued in the
denominations and names of the Shareholders as set forth in written instructions
delivered by the Shareholders to CCC at least five (5) business days prior to
the Closing Date and the Contingent Merger Consideration Date, as applicable.
The shares of CCC Common Stock to be issued in respect of the Contingent Merger
Consideration shall be registered under the 1933 Act and approved for quotation
on the Nasdaq National Market.
(d) If, on or prior to a Contingent Merger Consideration Payment Date,
CCC should split or combine the CCC Common Stock, or pay a stock dividend or
other stock distribution in CCC Common Stock, or otherwise change the CCC Common
Stock into any other securities, or make any other dividend or distribution on
the CCC Common Stock (other than normal quarterly dividends, as the same may be
adjusted from time to time and in the ordinary course), then the number of
shares of CCC Common stock issuable as the Contingent Merger Consideration will
be appropriately adjusted to reflect such split, combination, dividend or other
distribution or change.
(e) If, at any time on or before the first anniversary of the Closing
Date, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇'▇ employment agreement with the Surviving Corporation
is terminated by the Surviving Corporation (or its successor), in its capacity
as employer, without cause (as defined in ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇'▇ employment
agreement), CCC immediately thereupon shall pay to the Shareholders an
8
amount equal to the Maximum Earn Out Amount. CCC acknowledges that such a
payment would constitute liquidated damages and not a penalty.
(f) Except for actions taken by CCC or Newco at the direction of
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, in his capacity as President of the Surviving Corporation,
or one of the Presidents of the other Surviving Group Companies, in his capacity
as President of such Surviving Group Company, during the one year period after
the Closing (the "Earn Out Period"), CCC and Newco (i) will operate the
---------------
businesses of the Surviving Group Companies diligently and in the ordinary
course and (ii) will not take any actions that would materially change the
operations of the businesses of the Surviving Group Companies, including any
action that would prevent any of the Surviving Group Companies (A) from
conducting its business in the ordinary course or (B) from taking any action
necessary to preserve the businesses of the Surviving Group Companies, to keep
available to the Surviving Group Companies its employees (with the same salary
and bonus structure), or to preserve the Surviving Group Companies'
relationships with customers, suppliers and others having business relations
with it.
(g) In the event CCC, Newco or any of their subsidiaries takes any
action or omits to take any action which has a direct, quantifiable, negative
impact on the Earnings before Interest and Taxes of the Surviving Group
Companies or the businesses of the Group Companies as currently being conducted;
then, in any such event, the parties, in good faith, shall make reasonable
adjustments in the calculation of the Group Actual Earn Out EBIT as may be
necessary to neutralize the impact of any such action or omission.
(h) CCC and Newco agree that separate books and records will be kept
for each of the Group Companies during the Earn Out Period.
2.4 EXCHANGE OF CERTIFICATES AND PAYMENT OF CASH.
(a) Delivery of Consideration. At Closing, in exchange for the
-------------------------
outstanding shares of capital stock of the Company, CCC shall cause to be made
available to the Shareholders the Base Merger Consideration (including cash in
an amount sufficient for payment in lieu of fractional shares pursuant to
Section 2.1(d)), as adjusted pursuant to Section 2.2, with all cash payments to
be made by federal wire transfer of immediately available funds pursuant to wire
transfer instructions provided by the Shareholders at least two business days
prior to Closing. The certificates evidencing the CCC Common Stock component of
the Base Merger Consideration and the Contingent Merger Consideration (the cash
and the CCC Common Stock components of the Base Merger Consideration and the
Contingent Merger Consideration are referred to together as the "Merger
------
Consideration") shall bear appropriate legends pursuant to the terms of this
-------------
Agreement and any applicable Affiliate Agreement (as described in Section 8.11),
and CCC shall be entitled to issue appropriate stop transfer instructions to its
transfer agent consistent with the terms of this Agreement and any applicable
Affiliate Agreement.
(b) Certificate Delivery Requirements. At the Effective Time, the
---------------------------------
Shareholders shall deliver to CCC the certificates (the "Certificates")
------------
representing Company Common Stock
9
owned by them, accompanied by blank stock powers duly executed by each
respective Shareholder and with all necessary transfer tax and other revenue
stamps, acquired at the Shareholder's expense, affixed and canceled. Each
Shareholder shall promptly cure any deficiencies with respect to the stock
powers accompanying such Certificates. The Certificates so delivered shall
forthwith be canceled. Until delivered as contemplated by this Section 2.4(b),
each Certificate shall be deemed at any time after the Effective Time to
represent the right to receive upon such surrender the number of shares of CCC
Common Stock and the amount of cash as provided by this Article 2 and the
applicable provisions of the State Corporate Laws.
(c) No Further Ownership Rights in Capital Stock of the Company. All
-----------------------------------------------------------
CCC Common Stock and cash to be delivered (including CCC Common Stock delivered
but withheld pursuant to Section 3.2(a)) upon the surrender for exchange of
shares of Company Common Stock in accordance with the terms hereof shall be
deemed to have been delivered in full satisfaction of all rights pertaining to
such shares of Company Common Stock, and, following the Effective Time, the
Shareholders shall have no further rights to, or ownership in, shares of capital
stock of the Company. There shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Company
Common Stock which were issued and outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Section 2.4.
(d) Lost, Stolen or Destroyed Certificates. If any certificates
--------------------------------------
evidencing shares of Company Common Stock shall have been lost, stolen or
destroyed, then CCC shall cause payment to be made in exchange for such lost,
stolen or destroyed certificates, upon the delivery to CCC of an affidavit of
that fact by the holder thereof, of such shares of CCC Common Stock and cash as
provided in Section 2.1; provided, however that CCC may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against CCC
with respect to the certificates alleged to have been lost, stolen or destroyed.
(e) No Liability. Notwithstanding anything to the contrary in this
------------
Section 2.4, none of the Surviving Corporation or any party hereto shall be
liable to a holder of shares of Company Common Stock for any amount paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
3. POST CLOSING ADJUSTMENT; PLEDGED ASSETS
3.1 POST-CLOSING ADJUSTMENT.
(a) The Base Merger Consideration shall be subject to adjustment as
specified in this Section 3.1.
(b) Within ninety (90) days following the Effective Time, CCC shall
cause CCC's Accountant to audit (the "Post-Closing Audit") the books of the
------------------
Company to determine the accuracy
10
of the information relating to the Company's Closing Net Worth and the Company's
1997 Adjusted EBIT as set forth on the Financial Certificates (as defined in
Section 7.20) and on the financial certificates of the Other Group Companies. In
determining the accuracy of such information reflected on the Financial
Certificates in the course of the Post-Closing Audit, CCC's Accountant shall
apply the same accounting methodology used by the Company or the Shareholders,
as applicable, in preparing such information; provided that CCC's Accountant
shall not be obligated to apply such methodology to the extent inconsistent with
GAAP (as modified by Section 2.2(b) above). The Shareholders shall cooperate
with CCC and CCC's Accountant after the Closing Date in furnishing information,
documents, evidence and other assistance to CCC's Accountant to facilitate the
completion of the Post-Closing Audit within the aforementioned time period.
Without limiting the generality of the foregoing, within two weeks after the
Closing, the Shareholders shall provide CCC's Accountant with the information
and/or documents reasonably requested by them. CCC's Accountant will test the
Company's Closing Net Worth, the Group Closing Net Worth, the Company's 1997
Adjusted EBIT and the Group 1997 Adjusted EBIT based upon the Post-Closing Audit
and the post-closing audits of the Other Group Companies. In the event that
CCC's Accountant determines (i) a different amount than the Group Closing Net
Worth (the "Actual Closing Net Worth") or (ii) a different amount than the Group
------------------------
1997 Adjusted EBIT (the "Actual 1997 Adjusted EBIT" ), CCC shall promptly
-------------------------
deliver a written notice with supporting documentation (the "Financial
---------
Adjustment Notice") to the shareholders of the Group Companies, including the
-----------------
Shareholders, setting forth (A) the determination made by CCC's Accountant of
the Actual Closing Net Worth and the Actual 1997 Adjusted EBIT, (B) the amount
of the cash portion of the Base Merger Consideration that would have been
payable at Closing pursuant to Section 2.2(c) had the Actual Closing Net Worth
and the Actual 1997 Adjusted EBIT been used instead of the Group Closing Net
Worth and the Group 1997 Adjusted EBIT to determine the need for any adjustments
to the Base Merger Consideration pursuant to Sections 2.2(c) and 2.2(d),
respectively, and (C) the number of shares issued as part of the Base Merger
Consideration that would have been issuable at Closing had the Actual Closing
Net Worth and the Actual Adjusted EBIT been used to determine the need for any
adjustments to the Base Merger Consideration as set forth in (B) above. The
differences between the respective amounts set forth in (B) and (C) and the
amounts of the cash and the CCC Common Stock components of the Base Merger
Consideration paid pursuant to Section 2.2 (a), as adjusted pursuant to Sections
2.2(c) or 2.2(d), is referred to hereafter as the "Merger Consideration
--------------------
Adjustment." Any increase in the Base Merger Consideration resulting from such
----------
Merger Consideration Adjustment shall be owed by CCC to the Shareholders. Any
decrease in such Base Merger Consideration resulting from such Merger
Consideration Adjustment shall be owed by the Shareholders to CCC. If, on or
prior to the payment of the Merger Consideration Adjustment, CCC should split or
combine the CCC Common Stock, or pay a stock dividend or other stock
distribution in CCC Common Stock, or otherwise change the CCC Common Stock into
any other securities, or make any other dividend or distribution on the CCC
Common Stock (other than normal quarterly dividends, as the same may be adjusted
from time to time and in the ordinary course), then the number of shares of CCC
Common Stock issuable as part of the Merger Consideration Adjustment will be
appropriately adjusted to reflect such split, combination, dividend or other
distribution or change. The shares of CCC Common Stock, if any, to be issued in
respect of the Merger Consideration Adjustment shall be registered under the
1933 Act and approved for quotation on the Nasdaq National Market.
11
(c) The shareholders of the Group Companies, including the
Shareholders, through the Group Representative, shall have thirty (30) days from
the receipt of the Financial Adjustment Notice to notify CCC if they dispute
such Financial Adjustment Notice. If CCC has not received notice of any such
dispute within such 30-day period, (i) CCC shall be entitled to receive promptly
pro rata from the Shareholders (which may, at CCC's sole discretion, be from the
Pledged Assets as defined in, and subject to the provisions of, Section 3.2
and/or the Contingent Merger Consideration) any Merger Consideration Adjustment
owed to CCC and (ii) the Shareholders shall be entitled to receive promptly from
CCC any Merger Consideration Adjustment owed to the Shareholders. If, however,
the Shareholders (through the Group Representative) have delivered notice of
such a dispute to CCC within such 30-day period, then CCC's Accountant shall
select a New Accounting Firm to review the books of the Group Companies
including, the Surviving Corporation, the Financial Certificates and the
Financial Adjustment Notice (and related information) to determine the amount,
if any, of the revised Merger Consideration Adjustment (the "Actual Merger
-------------
Consideration Adjustment"). Such New Accounting Firm shall be confirmed by the
------------------------
Shareholders through the Group Representative and CCC within five (5) days of
its selection, unless there is an actual conflict of interest. The New
Accounting Firm shall make its determination of the Actual Merger Consideration
Adjustment, if any, within thirty (30) days of its selection. The determination
made by the New Accounting Firm shall be final and binding on the parties
hereto, and, upon such determination, CCC shall be entitled to receive pro rata
from the Shareholders (which may, at CCC's sole discretion, be from the Pledged
Assets as defined in, and subject to the provisions of, Section 3.2 and/or the
Contingent Merger Consideration) the Actual Merger Consideration Adjustment or
the Shareholders shall be entitled to receive from CCC the Actual Merger
Consideration Adjustment, as applicable. The costs of the New Accounting Firm
shall be borne by the party (either CCC or the shareholders of the Group
Companies, including the Shareholders) whose amounts, on the Financial
Adjustment Notice or its Financial Certificates, as applicable (the "Proposed
--------
Numbers"), were further from the determination of the New Accounting Firm of
-------
what the amounts should have been (the "Revised Numbers"), or equally by CCC and
---------------
the shareholders of the Group Companies, including the Shareholders, in the
event that the Revised Numbers are equidistant between the original amounts.
3.2 PLEDGED ASSETS.
(a) As collateral security for the payment of any Merger Consideration
Adjustment or any indemnification obligations of the Shareholders pursuant to
(and subject to the limitations of) Article 10, the Shareholders shall, and by
execution hereof do hereby, transfer, pledge and assign to CCC, for the benefit
of CCC, a security interest in the following assets (collectively, with respect
to all of the Shareholders, the "Pledged Assets"):
--------------
(i) at the option of the Shareholders, such Shareholders' pro
rata portion of cash and/or shares of CCC Common Stock with a value, based on
the Merger Price, equal to ten percent (10%) of the Base Merger Consideration
subject to adjustment pursuant to Section 2.2 or Section 3.1 hereof, and the
certificates and instruments, if any, representing or evidencing such
Shareholder's Pledged Assets;
12
(ii) all securities hereafter delivered to any Shareholder with
respect to or in substitution for the Shareholder's Pledged Assets, all
certificates and instruments representing or evidencing such securities, and all
cash and non-cash dividends and other property at any time received, receivable
or otherwise distributed in respect of or in exchange for any or all thereof;
and in the event such Shareholder receives any such property, such Shareholder
shall hold such property in trust for CCC and shall immediately deliver such
property to CCC to be held hereunder as Pledged Assets; and
(iii) all cash and non-cash proceeds of all of the foregoing
property and all rights, titles, interests, privileges and preferences
appertaining or incident to the foregoing property.
(b) Each certificate, if any, evidencing a Shareholder's Pledged
Assets issued in his or her name in the Merger shall be delivered to CCC
directly by the transfer agent, such certificate bearing no restrictive or
cautionary legend other than those imprinted by the transfer agent at CCC's
request in accordance with the terms and provisions of this Agreement. Each
Shareholder shall, at the Closing, deliver to CCC, for each such certificate, a
stock power duly signed in blank by him. Any cash comprising a Shareholder's
Pledged Assets shall be withheld by CCC from distribution to the Shareholder and
placed by CCC into an interest bearing custodial account that is not commingled
with any assets of CCC or any of its subsidiaries. All shares of CCC Common
Stock comprising a Shareholder's Pledged Assets shall not be commingled with the
assets of CCC or any of its subsidiaries.
(c) The Pledged Assets shall be available to satisfy any Merger
Consideration Adjustment and any indemnification obligations of each Shareholder
pursuant to (and subject to the limitations of) Article 10 until the date which
is one year after the Effective Time (the "Release Date"). On the Release Date,
------------
CCC shall release such pledge and return or cause to be returned to the
Shareholders the Pledged Assets (including the interest earned on any cash
portion of the Pledged Assets of each Shareholder and including dividends and
distributions with respect to shares of CCC Common Stock subject to pledge),
less Pledged Assets having an aggregate value equal to the amount of (i), in the
discretion of CCC, the Actual Merger Consideration Adjustment under Section 3.1,
(ii) any finally adjudicated claim (to the extent not fully satisfied) or any
pending claim for indemnification made by any Indemnified Party (as defined in
Article 10) subject to the limitations of Article 10, and (iii) any
indemnification obligations of any Shareholder pursuant to Article 10 subject to
the limitations of Article 10 to the extent previously paid from the Pledged
Assets. For purposes of the preceding sentence and Article 10, the CCC Common
Stock held as Pledged Assets shall be valued at (x) the Merger Price with
respect to the Actual Merger Consideration Adjustment under Section 3.1 and (y)
the average of the closing price on the Nasdaq National Market per share of CCC
Common Stock for the five trading days prior to the satisfaction of an
indemnification obligation (or if no trade price is reported for any such day,
the average of the last bid and ask prices for the CCC Common Stock) with
respect to indemnification obligations pursuant to Article 10. Notwithstanding
the foregoing or anything to the contrary herein, the Shareholders shall be
entitled to satisfy any claims relating to the Pledged Assets, including but not
13
limited to any indemnification pursuant to Article 10 hereof or any Merger
Consideration Adjustment, with cash, in lieu of shares of CCC Common Stock
constituting Pledged Assets.
(d) While any shares of CCC Common Stock remain subject to the pledge
set forth herein, and pending the disbursement thereof in accordance with this
Section 3.2, the Shareholders shall have all the rights of shareholders of CCC
with respect to such shares (including without limitation the right to vote such
shares in accordance with their respective interest therein and the right to
receive dividends and distributions thereon), except (i) the right of possession
thereof, (ii) the right to sell, assign, pledge, hypothecate or otherwise
dispose of such shares or any interest therein and (iii) the right to possession
of any dividends or other distributions received in respect thereof.
(e) Notwithstanding the foregoing provisions of this Section 3.2, the
Pledged Assets of any Shareholder that is a Profit Sharing Plan (as defined in
Section 5.22(j)) shall be held by a third party agent and upon terms reasonably
acceptable to CCC and the fiduciaries of such Shareholder.
4. CLOSING
4.1 LOCATION AND DATE. The consummation of the Merger and the other
transactions contemplated by this Agreement (the "Closing") shall take place at
-------
the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇, on March 10, 1998, providing that all conditions to Closing shall have
been satisfied or waived, or at such other time, place and date as CCC, the
Company and the Shareholders may mutually agree, which date shall be referred to
as the "Closing Date."
------------
4.2 EFFECT. On the Closing Date, a certificate of merger, or other
appropriate documents executed in accordance with the State Corporate Laws (the
"Merger Documents"), together with any required officers' certificates, shall be
----------------
filed in accordance with the provisions of the State Corporate Laws. The Merger
shall become effective upon such filings or at such later time as may be
specified in such filings (the "Effective Time").
--------------
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
To induce CCC and Newco to enter into this Agreement and consummate the
transactions contemplated hereby, each of the Company (with respect to
representations relating to the Company only) and the Shareholders (other than
those Shareholders set forth on SCHEDULE 5 who shall not be deemed to be making
any representations or warranties under this Agreement except the
representations and warranties with respect to themselves set forth in Section
5.2, 5.3, 5.4, 5.8 and 5.30), jointly and severally, represent and warrant to
CCC and Newco, as follows (for purposes of
14
this Agreement, the phrases "knowledge of the Company" or the "Company's
------------------------ ---------
"knowledge," or words of similar import, mean the actual knowledge of the
---------
directors and officers of the Company.
5.1 DUE ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business in the places and
in the manner as now conducted except where the failure to be so authorized,
qualified or licensed would not have a material adverse effect on the business,
operations, properties, assets or condition, financial or otherwise, of the
Company taken as a whole, provided that the foregoing shall not include any
material adverse effect attributable to (a) factors affecting the electrical
contracting industry generally, (b) general national, regional or local economic
or financial conditions, (c) changes in governmental or legislative laws, rules
or regulations, or (d) actions taken by CCC or any affiliate of CCC ("Material
--------
Adverse Effect"). SCHEDULE 5.1 hereto contains (i) a list of all jurisdictions
--------------
in which the Company conducts business and (ii) a list of all jurisdictions in
which the Company is authorized or qualified to do business as a foreign
corporation. The Company is in good standing in all jurisdictions where the
failure to be in good standing would have a Material Adverse Effect. The Company
has delivered to CCC or given CCC access to true, complete and correct copies of
the Articles of Incorporation and Regulations of the Company. Such Articles of
Incorporation and Regulations are collectively referred to as the "Charter
Documents." The Company is not in violation of any Charter Documents. The minute
-----------------
books, original stock ledger and corporate seal of the Company have been made
available to CCC and are correct and, except as set forth in SCHEDULE 5.1,
complete in all material respects.
5.2 AUTHORIZATION; VALIDITY. The Company has the requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. Each Shareholder has the full legal right and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the performance by the Company of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the Company and
the Shareholders and this Agreement has been duly and validly authorized by all
necessary corporate action. This Agreement is a legal, valid and binding
obligation of the Company and the Shareholders, enforceable against the Company
and the Shareholders in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
5.3 NO CONFLICTS. Except as set forth on SCHEDULES 5.3 OR 5.14, the
execution, delivery and performance of this Agreement, the consummation of the
transactions contemplated hereby, and the fulfillment of the terms hereof will
not:
(a) conflict with, or result in a breach or violation of, any of the
Charter Documents;
(b) other than such as would not, individually or in the aggregate,
have a Material Adverse Effect, conflict with, or result in a default (or an
event that would constitute a default but
15
for the requirement of notice or lapse of time or both) under, any document,
agreement or other instrument to which the Company or any Shareholder is a party
or by which the Company or any Shareholder is bound, or result in the creation
or imposition of any lien, charge or encumbrance on any of the Company's
properties pursuant to (i) any law or regulation to which the Company or any
Shareholder or any of their respective property is subject, or (ii) any
judgment, order or decree to which the Company or any Shareholder is bound or
any of their respective property is subject;
(c) result in termination or any impairment of any material permit,
license, franchise, surety bond, insurance coverage, contractual right or other
authorization of the Company;
(d) violate any material law, order, judgment, rule, regulation,
decree or ordinance to which the Company or any Shareholder is subject or by
which the Company or any Shareholder is bound; or
(e) require the consent of any third party.
5.4 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists of 5,000 shares of common stock, no par value, SCHEDULE 5.4
sets forth the shares that are issued and outstanding shares of the capital
stock of the Company, such shares have been duly authorized and validly issued,
are fully paid and nonassessable and are owned of record and beneficially by the
Shareholders in the respective amounts set forth on SCHEDULE 5.4, free and clear
of all Liens (defined below). All of the issued and outstanding shares of the
capital stock of the Company were offered, issued, sold and delivered by the
Company in compliance with all applicable state and federal laws concerning the
issuance of securities. Further, none of such shares was issued in violation of
any preemptive rights. There are no voting agreements or voting trusts with
respect to any of the outstanding shares of the capital stock of the Company.
For purposes of this Agreement, "Lien" means any mortgage, security interest,
----
pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or otherwise), charge, preference, priority or other security
agreement, option, warrant, attachment, right of first refusal, preemptive,
conversion, put, call or other claim or right, restriction on transfer (other
than restrictions imposed by federal and state securities laws), or preferential
arrangement of any kind or nature whatsoever (including any restriction on the
transfer of any assets, any conditional sale or other title retention agreement,
any financing lease involving substantially the same economic effect as any of
the foregoing and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction).
5.5 TRANSACTIONS IN CAPITAL STOCK. Except as disclosed in SCHEDULE 5.5,
no option, warrant, call, subscription right, conversion right or other contract
or commitment of any kind exists of any character, written or oral, which may
obligate the Company to issue, sell or otherwise cause to become outstanding any
shares of capital stock. Except as disclosed in SCHEDULE 5.5, the Company has
no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof.
16
5.6 SUBSIDIARIES, STOCK, AND NOTES.
(a) Except as set forth on SCHEDULE 5.6(A), the Company has no
subsidiaries.
(b) Except as set forth on SCHEDULE 5.6(B), the Company does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity, nor is the Company,
directly or indirectly, a participant in any joint venture, partnership or other
noncorporate entity.
(c) Except as set forth on SCHEDULE 5.6(C), there are no promissory
notes that have been issued to, or are held by, the Company.
5.7 PREDECESSOR STATUS. SCHEDULE 5.7 sets forth a list of all names of
all predecessor companies of the Company, including the names of any entities
from which the Company previously acquired substantially all of the assets.
Except as set forth in SCHEDULE 5.7, the Company has never been a subsidiary or
division of another corporation.
5.8 ABSENCE OF CLAIMS AGAINST THE COMPANY. Except as set forth in
SCHEDULE 5.8, no Shareholder has any claims against the Company.
5.9 COMPANY FINANCIAL CONDITION. The Company's net worth calculated in
accordance with GAAP, consistently applied, including intangible assets, as of
the end of its most recently ended fiscal year (the "Year-End Net Worth") was
------------------
not less than $1,161,450.
5.10 FINANCIAL STATEMENTS. SCHEDULE 5.10 includes (a) true, complete and
correct copies of the Company's audited balance sheet as of December 31, 1997
(the "Balance Sheet Date") and 1996 (December 31, 1997 being the end of its most
------------------
recently completed fiscal year), and income statements and statements of cash
flows for the years ended December 31, 1997, 1996 and 1995 (collectively, the
"Audited Financials") together with the Interim Balance Sheet, as defined
-------------------
herein, the "Company Financial Statements"). Except as noted on the auditors'
----------------------------
report accompanying the Audited Financials, the Company Financial Statements
have been prepared in accordance with GAAP consistently applied, subject to, in
the case of the Interim Financials, (i) the exceptions stated on SCHEDULE 5.10,
and (ii) the omission of footnote information. Except as set forth in SCHEDULE
5.10 or as noted on the accompanying auditor's report, each balance sheet
included in the Company Financial Statements presents fairly the financial
condition of the Company as of the date indicated thereon, and each of the
income statements included in the Company Financial Statements presents fairly
the results of its operations for the periods indicated thereon, in each case in
accordance with GAAP.
17
5.11 LIABILITIES AND OBLIGATIONS.
(a) The Company is not liable for or subject to any liabilities except
for:
(i) those liabilities reflected on the Interim Balance Sheet,
as defined herein, and not previously paid or discharged;
(ii) those liabilities arising in the ordinary course of its
business consistent with past practice under any contract, commitment or
agreement that is not required to be listed on SCHEDULE 5.18(A) and those
liabilities under any contract, commitment or agreement specifically disclosed
on any Schedule to this Agreement.
(iii) those liabilities incurred since the Balance Sheet Date in
the ordinary course of business consistent with past practice, which liabilities
are not, individually or in the aggregate, material; and
(iv) those liabilities set forth on SCHEDULE 5.11.
(b) The Company has provided to CCC, in the case of those liabilities
which are not fixed or are contested, its good faith estimate of the maximum
amount which may be payable.
(c) SCHEDULE 5.11 also includes a summary description of all plans or
projects involving the opening of new operations, expansion of any existing
operations or the acquisition of any real property or existing business, to
which management of the Company has made any material expenditure in the two-
year period prior to the date of this Agreement, which if pursued by the Company
or the Surviving Corporation would require additional material expenditures of
capital.
(d) For purposes of this Section 5.11, the term "liabilities" shall
-----------
include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued, absolute, contingent, mature,
unmatured or otherwise and whether known or unknown, fixed or unfixed, ▇▇▇▇▇▇ or
inchoate, liquidated or unliquidated, secured or unsecured. SCHEDULE 5.11
contains a complete list of all indebtedness of the Company as of the Balance
Sheet Date.
5.12 ACCOUNTS AND NOTES RECEIVABLE. Attached hereto as SCHEDULE 5.12 is an
accurate list, as of a date not more than five (5) business days prior to the
date hereof, of the accounts and notes receivable of the Company (including
without limitation receivables from and advances to employees, former employees
and the Shareholders), which includes an aging of all accounts and notes
receivable showing amounts due in 30-day aging categories (collectively, the
"Accounts Receivable"). On the Closing Date, the Company will deliver to CCC an
-------------------
accurate list, as of a date not more than five (5) business days prior to the
Closing Date, of the Accounts Receivable. All Accounts Receivable represent
valid obligations arising from sales actually made or services actually
performed in the ordinary course of business or such other valid obligations
arising from receivables from and advances to employees, former employees or the
Shareholders. The Accounts Receivable
18
are current and collectible net of any respective reserves shown on the
Company's books and records (which reserves are adequate and calculated
consistent with past practice). Subject to such reserves and except for
retainage, each of the Accounts Receivable will be collected in full, without
any set-off, within ninety (90) days after the Closing Date (or with respect to
those Accounts Receivable specified on SCHEDULE 5.12, within the number of days
after the Closing specified for each such Account Receivable). To the Company's
knowledge, there is no contest, claim, or right of set-off, other than rebates
and returns in the ordinary course of business, under any contract with any
obligor of an Account Receivable relating to the amount or validity of such
Account Receivable.
5.13 BOOKS AND RECORDS. The Company has made and kept books and records
and accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Company.
5.14 PERMITS. Except as set forth on SCHEDULE 5.14, the Company owns or
holds all material licenses, franchises, permits and other governmental
authorizations, including without limitation permits, titles (including without
limitation motor vehicle titles and current registrations), fuel permits,
licenses and franchises necessary for the continued operation of its business as
it is currently being conducted (the "Permits"). The Permits are valid, and the
-------
Company has not received any notice that any governmental authority intends to
modify, cancel, terminate or fail to renew any Permit. Except as set forth on
SCHEDULE 5.14, no present or former officer, manager, member or employee of the
Company or any affiliate thereof, or any other person, firm, corporation or
other entity, owns or has any proprietary, financial or other interest (direct
or indirect) in any Permits. The Company has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the Permits and other applicable orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing, except
where such non-compliance or violation would not have a Material Adverse Effect.
Except as set forth on SCHEDULES 5.3 or 5.14, the transactions contemplated by
this Agreement will not result in a default under, or a breach or violation of,
or adversely affect the rights and benefits afforded to the Company by, any
Permit.
5.15 REAL PROPERTY.
(a) For purposes of this Agreement, "Real Property" means all of the
-------------
Company's interest in real property, without limitation, fee estates, leaseholds
and subleaseholds, purchase options, easements, licenses, rights to access, and
rights of way, and all buildings and other improvements thereon, owned or used
by the Company, together with any additions thereto or replacements thereof.
(b) The Company has no fee ownership in any Real Property.
(c) SCHEDULE 5.15(C) contains an accurate description as of the date
of this Agreement of all Real Property (including street address, legal
description (where known), owner and Company's use thereof) and, to the
Company's knowledge, any Liens other than for: (A) liens for current taxes not
yet due and payable, (B) easements, covenants, conditions, restrictions, rights
of way and title defects reflected in the public records, and any matters which
would be reflected in
19
a current, accurate survey of the owned Real Property and which do not
individually, or in the aggregate, materially interfere with the right or
ability of CCC to use or operate the owned Real Property as the owned Real
Property is currently used by the Company, (C) liens securing indebtedness for
borrowed money that CCC or one of its affiliates has agreed to assume at
Closing, as set forth on SCHEDULE 5.15(C)(I), (D) landlord's liens and liens for
property taxes not delinquent, (E) statutory liens that were created in the
ordinary course of business not delinquent, (F) restrictions or rights granted
to governmental authorities under applicable law, (G) zoning, building, or
similar restrictions relating to or affecting property, and (H) all matters of
record, including leasehold interests in real property owned by others and
operating leases for personal property and leased interests in property leased
to others (collectively, "Permitted Encumbrances").
----------------------
(d) Except as set forth on SCHEDULE 5.15(D): (i) the Company holds no
interest as landlord in any Real Property; (ii) the Company has a valid
leasehold interest in all the Real Property listed as leased by the Company on
SCHEDULE 5.15(C) (the "leased Real Property"); (iii) the Company is not in
--------------------
default of any of its obligations under any lease relating to the leased Real
Property, nor has an event occurred which, with the giving of notice or the
passage of time, could become an event of default; (iv) the Company has no
knowledge of any default by the landlord under any lease relating to the leased
Real Property; (v) the Company has paid all rent under each lease relating to
the leased Real Property with respect to the period through the Closing Date;
and (vi) the Company has not exercised any termination or purchase option under
any lease relating to the leased Real Property nor has the Company exercised any
renewal or extension under any lease relating to the leased Real Property with
respect to any renewal or extension period that will commence after the date
hereof (other than renewals or extensions that have been disclosed to CCC).
(e) The Company has provided CCC with true and complete copies of each
lease relating to the leased Real Property and all amendments, renewals,
extensions, modifications or supplements thereto, and all correspondence
pursuant to which any party to any of such leases declared a default thereunder
or provided notice of the exercise of any option granted to such party under
such lease.
(f) Except as provided on SCHEDULES 5.15(C) OR 5.3, none of the leases
relating to the leased Real Property requires the consent or approval of any
party thereto in connection with the consummation of the transactions
contemplated hereby.
5.16 PERSONAL PROPERTY.
(a) SCHEDULE 5.16(A) sets forth a complete and accurate list of all
personal property included on the Interim Balance Sheet and all other personal
property owned or leased by the Company with a current book value for any one
item in excess of $10,000 both (i) as of the Balance Sheet Date and (ii)
acquired since the Balance Sheet Date, including in each case true, complete and
correct copies of leases for material equipment and an indication as to which
assets are currently owned, or were formerly owned, by any Shareholder or
business or personal affiliates of any Shareholder or of the Company.
20
(b) The Company currently owns or leases all personal property
necessary to conduct the business and operations of the Company as they are
currently being conducted.
(c) All of the trucks and other material machinery and equipment of
the Company, including those listed on SCHEDULE 5.16(A), are in good working
order and condition, ordinary wear and tear excepted. All leases set forth on
SCHEDULE 5.16(A) are in full force and effect and constitute valid and binding
agreements of the Company, and the Company is not in breach of any of their
material terms. All fixed assets used by the Company that are material to the
operation of its business are either owned by the Company or leased under an
agreement listed on SCHEDULE 5.16(A).
5.17 INTELLECTUAL PROPERTY.
(a) The Company and its subsidiaries own or possess adequate and
enforceable licenses or other rights to use (including foreign rights), all
copyrights, patents, trade names, trade secrets, registered and unregistered
trademarks, service marks, trade dress, franchises, domain names and similar
rights now used or employed in the business of the Company and its subsidiaries
(the "Intellectual Property") and such rights will not cease to be valid rights
---------------------
of the Company and its subsidiaries by reason of the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
(b) SCHEDULE 5.17 sets forth a list of all of the Intellectual
Property of the Company and its subsidiaries. SCHEDULE 5.17 also sets forth: (i)
for each patent, the number, normal expiration date and subject matter for each
country in which such patent has been issued, or, if applicable, the application
number, date of filing and subject matter for each country; (ii) for each
trademark and service mark, the application serial number or registration
number, the classes of goods and services covered and the expiration date for
each country in which a trademark or service mark has been registered; and (iii)
for each copyright, the number and date of filing for each country in which a
copyright has been filed. SCHEDULE 5.17 includes all unregistered and common law
rights to Intellectual Property that are material to the Company. The
Intellectual Property listed on SCHEDULE 5.17 is all such property used by the
Company or any of its subsidiaries in connection with their businesses. True,
correct and complete copies of all patents (including all pending applications),
trademark and service mark registrations and pending applications, and copyright
registrations and pending applications, owned, controlled, created or used by or
on behalf of the Company and its subsidiaries have been provided to CCC. All
pending patent applications have been duly filed.
(c) Neither the Company nor any of its subsidiaries has any obligation
to compensate any person for the use of any Intellectual Property, and neither
the Company nor any of its Subsidiaries has granted to any person any license,
option, or other rights to use in any manner any of its Intellectual Property,
whether requiring the payment of royalties or not, other than licenses to the
Company of franchises or licenses in the ordinary course of business.
21
(d) Neither the Company nor any of its subsidiaries has received any
notice of invalidity or infringement of any rights of others with respect to the
Intellectual Property. No person has notified the Company or any of its
subsidiaries that it is claiming any ownership of or right to use such
Intellectual Property. No person, to the knowledge of the Company, is infringing
upon any such Intellectual Property in any way, except where such use would not
have a Material Adverse Effect on the Company. To the knowledge of the Company
after reasonable investigation, the use of the Intellectual Property by the
Company and its subsidiaries does not and will not conflict with, infringe upon
or otherwise violate the valid rights of any third party in or to such
Intellectual Property, and no action has been instituted against or notices
received by the Company or any subsidiary that are presently outstanding
alleging that the use of the Intellectual Property infringes upon or otherwise
violates any rights of a third party in or to such Intellectual Property.
5.18 MATERIAL CONTRACTS AND COMMITMENTS.
(a) As of the date of this Agreement, SCHEDULE 5.18(A) contains a
complete and accurate list of each contract, commitment, lease, instrument,
agreement, license or permit, written or oral, to which the Company is a party
or by which it or its properties are bound (including without limitation, joint
venture or partnership agreements, contracts with any labor organizations,
employment agreements, consulting agreements, loan agreements, indemnity or
guaranty agreements, bonds, mortgages, options to purchase land, liens, pledges
or other security agreements) (i) to which the Company on the one hand and on
the other hand any affiliate of the Company or any officer, director or
shareholder of the Company are parties ("Related Party Agreements"); (ii) that
------------------------
may give rise to obligations or liabilities exceeding, during the current term
thereof, $50,000 individually, or that may generate revenues or income
exceeding, during the current term thereof, $50,000 individually (collectively
with the Related Party Agreements, the "Material Contracts"); or (iii) that
------------------
provides rights to indemnification to any current or former directors, officers,
employees or agents of the Company. Other than as disclosed on SCHEDULE 5.18(A),
the Company has provided CCC with access to true, complete and correct copies of
the Material Contracts. Other than as disclosed on SCHEDULE 5.18(A) the Company
has complied with all of its material commitments and obligations, is not in
default under any of the Material Contracts, has no contracts under which the
work has been substantially delayed or changed for which proper compensation is
not expected, has no pending or expected claims in excess of $50,000 against a
prime contractor or owner in connection with completed work or work in progress,
and has no notice of default has been received with respect to any thereof, and
there are no Material Contracts that were not negotiated at arm's length.
(b) Each Material Contract, except those terminated pursuant to
Section 7.4, is valid and binding on the Company and is in full force and effect
and, to the knowledge of the Company and the Shareholders, is not subject to any
default thereunder by any party obligated to the Company pursuant thereto.
(c) The outstanding balance on all loans or credit agreements either
(i) between the Company and any Person in which any Shareholder owns a material
interest, or (ii) guaranteed by the Company for the benefit of any Person in
which any Shareholder owns a material interest, are set forth in SCHEDULE
5.18(C) as of the date indicated therein.
22
(d) The pledge, hypothecation or mortgage of all or substantially all
of the Company's assets (including, without limitation, a pledge of the
Company's contract rights under any Material Contract) will not, except as set
forth on SCHEDULE 5.18(D), (i) result in the breach or violation of, (ii)
constitute a default under, (iii) create a right of termination under, or (iv)
result in the creation or imposition of (or the obligation to create or impose)
any lien upon any of the assets of the Company (other than a lien created
pursuant to the pledge, hypothecation or mortgage described at the start of this
Section 5.18(d)) pursuant to any of the terms and provisions of, any Material
Contract to which the Company is a party or by which the property of the Company
is bound.
5.19 GOVERNMENT CONTRACTS.
(a) Except as set forth on SCHEDULE 5.19, the Company is not a party
to any government contracts (i) with any local government agency or
instrumentality that may give rise to obligations or liabilities exceeding,
prior to any renewal thereof, $50,000 individually, or that may generate
revenues or income exceeding, prior to any renewal thereof, $50,000
individually, or (ii) with any agency or instrumentality of the United States
Government or any state government.
(b) The Company has not been suspended or debarred from bidding on
contracts or subcontracts for any agency or instrumentality of the United States
Government or any state or local government, nor, to the knowledge of the
Company and the Shareholders, has any suspension or debarment action been
threatened or commenced. To the knowledge of the Company and the Shareholders,
there is no valid basis for the Company's suspension or debarment from bidding
on contracts or subcontracts for any agency of the United States Government or
any state or local government.
(c) Except as set forth on SCHEDULE 5.19, as of the date of this
Agreement, the Company has not been, nor is it now being, audited, or
investigated by any government agency, or the inspector general or auditor
general or similar functionary of any agency or instrumentality, nor, to the
knowledge of the Company and the Shareholders, has such audit or investigation
been threatened.
(d) Except as set forth on SCHEDULE 5.19, as of the date of this
Agreement, the Company has no material dispute pending before a contracting
office of, nor any current claim (other than the Accounts Receivable) pending
against, any agency or instrumentality of the United States Government or any
state or local government, relating to a contract.
(e) As of the date of this Agreement, the Company has not, with
respect to any government contract, received a cure notice advising the Company
that it is or was in default or would, if it failed to take remedial action, be
in default under such contract.
(f) The Company has not submitted any inaccurate, untruthful, or
misleading cost or pricing data, certification, bid, proposal, report, claim, or
any other information relating to a
23
contract to any agency or instrumentality of the United States Government or any
state or local government that would be contrary to any current rules and
regulations.
(g) To the knowledge of the Company and the Shareholders, no employee,
agent, consultant, representative, or affiliate of the Company is in receipt or
possession of any competitor or government proprietary or procurement sensitive
information related to the Company's business under circumstances where there is
reason to believe that such receipt or possession is unlawful or unauthorized.
(h) Each of the Company's government contracts has been issued,
awarded or novated to the Company in the Company's name.
(i) Except as set forth on SCHEDULE 5.19, the Company's cost
accounting records are presently in conformance with the requirements of the
Federal Acquisition Regulations to the extent applicable.
5.20 INSURANCE. SCHEDULE 5.20 sets forth, as of the date of this
Agreement, an accurate list of all insurance policies carried by the Company and
all insurance loss runs or workers' compensation claims received for the past
two policy years. The Company has delivered to CCC or given CCC access to true,
complete and correct copies of all current insurance policies, all of which are
in full force and effect. All premiums payable under all such policies have been
paid and the Company is otherwise in full compliance with the terms of such
policies. Such policies of insurance are of the type and in amounts that to the
knowledge of the Company, are customarily carried by persons conducting
businesses similar to that of the Company. The insurance carried by the Company
with respect to its properties, assets and business is, to the Company's
knowledge, with financially sound insurers. To the knowledge of the Company,
there have been no threatened terminations of, or material premium increases
with respect to, any of such policies.
5.21 LABOR AND EMPLOYMENT MATTERS. Except as set forth in SCHEDULE 5.21,
as of the date of this Agreement, with respect to employees of and service
providers to the Company:
(a) the Company is and has been in compliance in all material respects
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, including without limitation
any such laws respecting minimum wage and overtime payments, employment
discrimination, workers' compensation, family and medical leave, the Immigration
Reform and Control Act, and occupational safety and health requirements, and has
not and is not engaged in any unfair labor practice;
(b) there is not now, nor within the past three years has there been,
any unfair labor practice complaint against the Company pending or, to the
Company's knowledge, threatened, before the National Labor Relations Board or
any other comparable authority;
24
(c) there is not now, nor within the past three years has there been,
any labor strike, slowdown or stoppage actually pending or, to the Company's
knowledge, threatened, against or directly affecting the Company;
(d) to the Company's knowledge, no labor representation organization
effort exists nor has there been any such activity within the past three years;
(e) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to the Company's knowledge, no
claims therefor exist or have been threatened;
(f) the employees of the Company are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against the Company or currently being negotiated by the
Company; and
(g) to the knowledge of the Company, all persons classified by the
Company as independent contractors do satisfy and have satisfied the
requirements of law to be so classified, and the Company has fully and
accurately reported their compensation on IRS Forms 1099 when required to do so.
5.22 EMPLOYEE BENEFIT PLANS. Attached hereto as SCHEDULE 5.22 are complete
and accurate copies of all employee benefit plans, all employee welfare benefit
plans, all employee pension benefit plans, all multiemployer plans and all
multiple employer welfare arrangements (as defined in Sections 3(3), (1), (2),
(37) and (40), respectively, of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), which are currently maintained and/or sponsored by
-----
the Company, or to which the Company currently contributes, or has an obligation
to contribute in the future (including, without limitation, any such plan or
arrangement created by any agreements, including any employment agreements and
any other agreements containing "golden parachute" provisions and deferred
----------------
compensation agreements disclosed in SCHEDULE 5.18(A)), together with copies of
any trusts related thereto and a classification of employees covered thereby
(collectively, the "Plans"). To the best of the Company's knowledge, SCHEDULE
-----
5.22 sets forth each plan or arrangement that would have been an employee
pension or welfare benefit plan but for its termination within the past three
years.
To the best of the Company's knowledge, all Plans are in material
compliance with all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable laws, and, in all material
respects, have been administered, operated and managed in material accordance
with the governing documents. All Plans that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Code have been determined by the
---------------
Internal Revenue Service to be so qualified, and copies of the current plan
determination letters, most recent actuarial valuation reports, if any, most
recent Form 5500, or, as applicable, Form 5500-C/R filed with respect to each
such Qualified Plan or employee welfare benefit plan and most recent trustee or
custodian report, are included as part of SCHEDULE 5.22. To the Company's
knowledge, to the extent that any Qualified Plans have not been amended to
comply with applicable law, the remedial amendment period
25
permitting retroactive amendment of such Qualified Plans has not expired and
will not expire within 120 days after the Closing Date. To the Company's
knowledge, all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries
(including, but not limited to, annual reports, summary annual reports,
actuarial reports, PBGC-1 Forms, audits or tax returns) have been timely filed
or distributed except to the extent that the failure to file or distribute such
reports or documents would not subject the Company to any material penalty. None
of: (i) any Shareholder; (ii) to the knowledge of the Company, any Plan; or
(iii) the Company has engaged in any transaction prohibited under the provisions
of Section 4975 of the Code or Section 406 of ERISA which could result in the
imposition of a material penalty under ERISA or a material tax under the Code,
except in accordance with an applicable exemption or except any such prohibited
transaction that results from the conversion of the ESOP to a Profit Sharing
Plan (as defined) in Section 5.22(j) below [and the consequent holding by the
Profit Sharing Plan of a promissory note in favor of the Company.] No Plan has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and the Company does not currently have (nor
at the Closing Date will have) any direct or indirect liability whatsoever
(including being subject to any statutory lien to secure payment of any such
liability), to the Pension Benefit Guaranty Corporation ("PBGC") with respect to
----
any such Plan under Title IV of ERISA or to the Internal Revenue Service for any
excise tax or penalty; and neither the Company nor any member of a "controlled
----------
group" (as defined in ERISA Section 4001(a)(14)) currently has (or at the
-----
Closing Date will have) any obligation whatsoever to contribute to any
"multiemployer pension plan" (as defined in ERISA Section 4001(a)(13), nor has
--------------------------
any withdrawal liability whatsoever (whether or not yet assessed) arising under
or capable of assertion under Title IV of ERISA (including, but not limited to,
Sections 4201, 4202, 4203, 4204, or 4205 thereof) been incurred by any Plan.
Further, within the last three years, except as set forth on SCHEDULE 5.22:
(a) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without notice to and,
where required, approval by the Internal Revenue Service;
(b) no Plan which is subject to the provisions of Title IV of ERISA
has been terminated;
(c) there have been no "reportable events" (as that phrase is defined
-----------------
in Section 4043 of ERISA) with respect to any Plan which were not properly
reported;
(d) the valuation of assets of any Qualified Plan subject to Title IV
of ERISA, as of the Closing Date, shall equal or exceed the actuarial present
value of all accrued pension benefits under such Qualified Plan in accordance
with the assumptions contained in the Regulations of the PBGC governing the
funding of terminated defined benefit plans;
(e) with respect to Plans which qualify as "group health plans" under
------------------
Section 4980B of the Internal Revenue Code and Section 607(1) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), and to the Company's knowledge, the Company has complied (and on the
-----
Closing Date will have complied), in all material respects with
26
all reporting, disclosure, notice, election and other benefit continuation
requirements imposed thereunder as and when applicable to such plans, and the
Company has no (and will incur no) direct or indirect liability and is not (and
will not be) subject to any material loss, assessment, excise tax penalty, loss
of federal income tax deduction or other sanction, arising on account of or in
respect of any direct or indirect failure by the Company, at any time prior to
the Closing Date, to comply with any such federal or state benefit continuation
requirement, which is capable of being assessed or asserted before or after the
Closing Date directly or indirectly against the Company with respect to such
group health plans;
(f) the Company has not been a member of a "controlled group" as
defined in ERISA Section 4001(a)(14);
(g) there is no pending litigation, arbitration, or disputed claim,
settlement or adjudication proceeding (other than routine claims for benefits)
and to the Company's knowledge, there is no threatened litigation, arbitration
or disputed claim, settlement or adjudication proceeding, or any governmental or
other proceeding, or investigation with respect to any Plan, or any disputed
claim, settlement or adjudication (other than routine claims for benefits) with
respect to any fiduciary, administrator, party in interest or sponsor thereof
(in their capacities as such);
(h) as required in accordance with GAAP, the Company Financial
Statements as of the Balance Sheet Date reflect the approximate total pension,
medical and other benefit expense for all Plans as of the date thereof, and no
material funding changes or irregularities not reflected thereon would cause
such Company Financial Statements to be inaccurate; and
(i) the Company has not incurred liability under Section 4062 of
ERISA.
(j) The Company has converted any employee stock ownership Plan (the
"ESOP") maintained by the Company to a profit sharing plan which does not
-----
provide for pass-through voting by its participants (the "Profit Sharing Plan").
-------------------
5.23 CONFORMITY WITH LAW; LITIGATION.
(a) Except as set forth on SCHEDULE 5.23(A), the Company is not in
violation of any law or regulation or under any order of any court or federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction which would have a Material
Adverse Effect on the Company. The Company has conducted and is conducting its
business in substantial compliance with the requirements, standards, criteria
and conditions set forth in applicable federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation of any of the foregoing which might have a
Material Adverse Effect on the Company.
(b) Except as set forth on SCHEDULE 5.23(B), as of the date of this
Agreement, there are no claims, actions, suits or proceedings, pending or, to
the knowledge of the Company, threatened against or affecting the Company at law
or in equity, or before or by any federal, state,
27
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it and no notice of any claim, action,
suit or proceeding, whether pending or threatened, has been received which might
have a Material Adverse Effect on the Company. As of the date of this Agreement,
there are no judgments, orders, injunctions, decrees, stipulations or awards
(whether rendered by a court or administrative agency or by arbitration) against
the Company or against any of its properties or business which might have a
Material Adverse Effect on the Company.
5.24 TAXES.
(a)
(i) The Company has timely filed all Tax Returns (as defined
below) due on or before the Closing Date and all such Tax Returns are true,
correct and complete in all material respects.
(ii) The Company has paid in full on a timely basis all Taxes
(as defined below).
(iii) The amount of the Company's liability for unpaid Taxes as
of the Balance Sheet Date did not exceed the amount of the current liability
accruals for Taxes (excluding reserves for deferred Taxes) shown on the Interim
Balance Sheet, and the amount of the Company's liability for unpaid Taxes for
all periods or portions thereof ending on or before the Closing Date will not
exceed the amount of the current liability accruals for Taxes (excluding
reserves for deferred Taxes) as such accruals are reflected on the books and
records of the Company on the Closing Date.
(iv) There are no ongoing examinations or claims against the
Company for Taxes, and no notice of any audit, examination or claim for Taxes,
whether pending or threatened, has been received.
(v) The Company has a taxable year ended on December 31, in
each year commencing from the incorporation of the Company.
(vi) The Company currently utilizes the accural method of
accounting for income Tax purposes and such method of accounting has not changed
since incorporation. The Company has not agreed to, and is not and will not be
required to, make any adjustments under Code Section 481(a) as a result of a
change in accounting methods.
(vii) The Company has withheld and paid over to the proper
governmental authorities all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid to any employee, independent contractor, creditor or third
party.
28
(viii) Copies of (A) any Tax examinations, (B) extensions of
statutory limitations for the collection or assessment of Taxes and (C) the Tax
Returns of the Company for the last five fiscal years have been made available
to CCC.
(ix) There are (and as of immediately following the Closing
there will be) no Liens on the assets of the Company relating to or attributable
to Taxes, except for Permitted Encumbrances.
(x) To the Company's knowledge, there is no basis for the
assertion of any claim relating to or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company or otherwise
have an adverse effect on the Company or its business.
(xi) There are no contracts, agreements, plans or arrangements,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of the Company that, individually or collectively,
could give rise to any payment (or portion thereof) that would not be deductible
pursuant to Sections 280G, 404 or 162 of the Code.
(xii) The Company is not, and has not been at any time, a party
to a tax sharing, tax indemnity or tax allocation agreement, and the Company has
not assumed the tax liability of any other person under contract.
(xiii) To the knowledge of the Company and the Shareholders,
neither the Company nor any Shareholder has taken any action or refrained from
taking any action that would cause the Merger not to qualify as a reorganization
as defined under Code Section 368(a)(1)(A) and Section 368(a)(2)(D).
(b) INTENTIONALLY OMITTED.
(c) For purposes of this Agreement:
(i) the term "Tax" shall include any tax or similar governmental
---
charge, impost or levy (including without limitation income taxes, franchise
taxes, transfer taxes or fees, sales taxes, use taxes, gross receipt taxes,
value added taxes, employment taxes, excise taxes, ad valorem taxes, property
taxes, withholding taxes, payroll taxes, minimum taxes or windfall profit taxes)
together with any related penalties, fines, additions to tax or interest imposed
by the United States or any state, county, local or foreign government or
subdivision or agency thereof; and
(ii) the term "Tax Return" shall mean any return (including any
----------
information return), report, statement, schedule, notice, form, estimate or
declaration of estimated tax relating to or required to be filed with any
governmental authority in connection with the determination, assessment,
collection or payment of any Tax.
29
5.25 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its business in the ordinary course and, between the Balance Sheet
Date and the date of this Agreement except as contemplated herein or as set
forth on SCHEDULE 5.25, there has not been:
(a) any change that by itself or together with other changes has had a
Material Adverse Effect;
(b) any damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting the properties or business of the
Company;
(c) any change in the authorized capital of the Company or in its
outstanding securities or any change in its ownership interests or any grant of
any options, warrants, calls, conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution in
respect of the capital stock, or any direct or indirect redemption, purchase or
other acquisition of any of the capital stock of the Company, except for
distributions relating to the payment of taxes;
(e) any increase in the compensation, bonus, sales commissions or fee
arrangements payable or to become payable by the Company to any of its officers,
directors, Shareholders, employees, consultants or agents, except in the
ordinary course of business consistent with past practice or as required by
contract or law;
(f) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character, which has had a Material Adverse
Effect;
(g) any sale or transfer, or any agreement to sell or transfer, any
material assets property or rights of the Company to any person, including
without limitation any Shareholder and his affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, including without limitation any
indebtedness or obligation of any Shareholder and his affiliates owing to the
Company, provided that the Company may negotiate and adjust bills in the course
of good faith disputes with customers in a manner consistent with past practice;
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of the Company or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(j) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the ordinary
course of business of the Company;
(k) any waiver of any material rights or claims of the Company;
30
(l) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party other
than in the ordinary course of business;
(m) any transaction by the Company outside the ordinary course of
business;
(n) any capital commitment by the Company exceeding $50,000
individually;
(o) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company or the
revaluation by the Company of any of its assets;
(p) any creation or assumption by the Company of any mortgage, pledge,
security interest or lien or other encumbrance on any asset (other than
Permitted Encumbrances, liens arising under existing lease financing
arrangements which are not material and liens for Taxes not yet due and
payable);
(q) any entry into, amendment of, relinquishment, termination or non-
renewal by the Company of any contract, lease transaction, commitment or other
right or obligation requiring aggregate payments by the Company in excess of
$50,000 with respect to such contract, lease, transaction, commitment or other
right or obligation other than in the ordinary course of business;
(r) any loan by the Company to any person or entity, incurring by the
Company, of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others;
(s) the commencement or notice or, to the knowledge of the Company and
the Shareholders, threat of commencement, of any lawsuit or proceeding against,
or investigation of, the Company or any of its affairs; or
(t) negotiation or agreement by the Company or any officer or employee
thereof to do any of the things described in the preceding clauses (a) through
(s) (other than negotiations with CCC and its representatives regarding the
transactions contemplated by this Agreement).
5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 5.26 sets forth a
complete and accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which the Company has
any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
31
(d) the name of each person authorized to draw thereon or have access
thereto; and
(e) the name of each person, corporation, firm or other entity holding
a general or special power of attorney from the Company and a description of the
terms of such power.
5.27 ENVIRONMENTAL MATTERS.
(a) Hazardous Material. To the knowledge of the Company and its
------------------
Shareholders, other than as set forth on SCHEDULE 5.27(A), no underground
storage tanks and no substance that has been designated by any Governmental
Entity or by applicable federal, state, local or other applicable law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum, urea-
formaldehyde and all substances listed as hazardous substances pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office, janitorial, and similar
supplies properly and safely maintained (a "Hazardous Material"), are present
------------------
in, on or under any property, including the land and the improvements, ground
water and surface water thereof, that the Company has at any time owned,
operated, occupied or leased (including the Real Property). SCHEDULE 5.27(A)
identifies all underground and aboveground storage tanks, and the capacity, age,
and contents of such tanks, which to the knowledge of the Company and the
Shareholders, are located on Real Property owned or leased by the Company.
(b) Hazardous Materials Activities. Except as set forth on SCHEDULE
------------------------------
5.27(B), to its knowledge, the Company has not transported, stored, used,
manufactured, disposed of or released, or exposed its employees or others to,
Hazardous Materials in violation of any law in effect on or before the Closing
Date, nor has the Company disposed of, transported, sold, or manufactured any
product containing a Hazardous Material (collectively, "Company Hazardous
-----------------
Materials Activities") in violation of any rule, regulation, treaty or statute
--------------------
promulgated by any Governmental Entity in effect prior to or as of the date
hereof to prohibit, regulate or control Hazardous Materials or any Company
Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental approvals,
-------
permits, licenses, clearances and consents (the "Environmental Permits")
---------------------
necessary for the conduct of the Company's Hazardous Material Activities and
other business of the Company as such activities and business are currently
being conducted. All Environmental Permits are in full force and effect. The
Company (A) is in compliance in all material respects with all terms and
conditions of the Environ mental Permits and (B) is in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the laws of all Governmental Entities relating to pollution or
protection of the environment or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder. To the Company's knowledge, there are
32
no circumstances that may prevent or interfere with such compliance in the
future. SCHEDULE 5.27(C) includes a listing and description of all Environmental
Permits currently held by the Company.
(d) Environmental Liabilities. No action, proceeding, revocation
-------------------------
proceeding, amendment procedure, writ, injunction or claim is pending against
the Company, or to the knowledge of the Company, threatened against the Company
concerning any Environmental Permit, Hazardous Material or any Company Hazardous
Materials Activity. To the knowledge of the Company and the Shareholders, there
are no past or present actions, activities, circumstances, conditions, events,
or incidents that could involve the Company (or any person or entity whose
liability the Company has retained or assumed, either by contract or operation
of law) in any environmental litigation, or impose upon the Company (or any
person or entity whose liability the Company has retained or assumed, either by
contract or operation of law) any environmental liability including, without
limitation, common law tort liability.
5.28 RELATIONS WITH GOVERNMENTS. To the knowledge of the Company and the
Shareholders, the Company has not made, offered or agreed to offer anything of
value to any governmental official, political party or candidate for government
office, nor has it otherwise taken any action that would cause the Company to be
in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any
law of similar effect.
5.29 DISCLOSURE. The Company has delivered or made available to CCC and
Newco true and complete copies of each agreement, contract, commitment or other
document (or summaries thereof) that is referred to specifically in the
Schedules or that has been requested by CCC. Without limiting any exclusion,
exception or other limitation contained in any of the representations and war
ranties made herein, this Agreement and the schedules hereto do not and will not
include any untrue statement of a material fact or omit to state a material fact
necessary to make the statements herein or therein not misleading. If any
Shareholder becomes aware of any fact or circumstance which would change a
representation or warranty of any Shareholder in this Agreement or any
representation made on behalf of the Company, the Shareholders (through the
Representative (as defined in Section 13.14) or otherwise) shall immediately
give notice of such fact or circumstance to CCC. However, such notification
shall not relieve the Company or the Shareholders of their respective
obligations under this Agreement.
5.30 CCC PROSPECTUS; SECURITIES REPRESENTATIONS. Each Shareholder has
received and reviewed a copy of the prospectus dated January 21, 1998 including
all supplements thereto (as supplemented, the "CCC Prospectus") contained in
--------------
CCC's shelf registration statement on Form S-1 (File No. 333-42317). Each
Shareholder, or, to the knowledge of such Shareholder, such Shareholder's
purchaser representative, (a) has such knowledge and experience in business and
financial matters and such knowledge concerning the business, operations and
financial condition of the Other Group Companies that such Shareholder is
capable of evaluating the merits and risks of an investment in the shares of CCC
Common Stock, (b) fully understands the nature, scope, and duration of the
limitations on transfer contained herein, in the Affiliate Agreement (if
applicable), and under applicable law, and (c) can bear the economic risk of any
investment in the shares of CCC Common Stock and can afford a complete loss of
such investment. Each Shareholder, or such
33
Shareholders' purchaser representative, has had an adequate opportunity to ask
questions and receive answers (and has asked such questions and received answers
to his satisfaction) from the officers of CCC and the Other Group Companies
concerning the business, operations and financial condition of CCC and the Other
Group Companies, respectively. Except as required by applicable law, the
Shareholders have no contract, undertaking, agreement or arrangement, written or
oral, with any other person to sell, transfer or grant participation in any
shares of CCC Common Stock to be acquired by such Shareholder in the Merger.
Each Shareholder acknowledges and agrees that CCC has not and will not provide
such Shareholder or any other party with a prospectus for the Shareholder's use
in selling CCC Common Stock.
5.31 AFFILIATES. SCHEDULE 5.31 lists each of the persons who is, in the
reasonable judgment of the Company and the Shareholders, an affiliate of the
Company within the meaning of Rule 145 (each such person an "Affiliate" with
---------
respect to the Company) promulgated under the 1933 Act.
5.32 LOCATION OF CHIEF EXECUTIVE OFFICES. SCHEDULE 5.32 sets forth the
location of the Company's chief executive offices.
5.33 LOCATION OF EQUIPMENT AND INVENTORY. Set forth on SCHEDULE 5.33 is a
list of all locations where a filing is required under the UCC (as defined
below) with respect to Inventory and Equipment held on the date hereof by the
Company. For purposes of this Agreement, (a) the term "Inventory" shall mean
---------
any "inventory" as such term is defined in the Uniform Commercial Code as in
effect on the date hereof in the State of Ohio (the "UCC") owned by the Company
---
as of the date hereof, and, in any event, shall include, but shall not be
limited to, all merchandise, inventory and goods, and all additions,
substitutions and replacements thereof, wherever located, together with all
goods, supplies, incidentals, packaging materials, labels, materials and any
other items used or usable in manufacturing, processing, packaging or shipping
same; in all stages of production, and all proceeds therefrom; and (b) the term
"Equipment" shall mean any "equipment" as such term is defined in the UCC owned
---------
by the Company as of the date hereof, and, in any event, shall include, but
shall not be limited to, all machinery, equipment, furnishings, fixtures and
vehicles owned by the Company, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto.
6. REPRESENTATIONS OF CCC AND NEWCO
To induce the Company and each Shareholder to enter into this Agreement and
consummate the transactions contemplated hereby, each of CCC and Newco
represents and warrants to the Company and the Shareholders as follows (for
purposes of this Agreement, the phrases "knowledge of CCC," "knowledge of
---------------- ------------
Newco," "CCC's knowledge," or "Newco's knowledge" or words of similar import,
----- --------------- -----------------
mean the actual knowledge of the directors and officers of each of CCC and
Newco.
6.1 DUE ORGANIZATION. Each of CCC and Newco is a corporation duly
organized, validly existing and in good standing under the laws of its state of
organization, and each is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public
34
authorities to carry on their respective businesses in the places and in the
manner as now conducted, except where the failure to be so authorized, qualified
or licensed would not have a material adverse effect on the business,
operations, properties, assets or condition, financial or otherwise, of CCC or
Newco. Copies of the Certificate of Incorporation, Articles of Incorporation,
Bylaws and the Regulations, each as amended, of CCC and Newco (collectively, the
"CCC Charter Documents") have been made available to the Company.
---------------------
Neither CCC nor Newco is in violation of any CCC Charter Document.
6.2 CCC COMMON STOCK. The shares of CCC Common Stock to be delivered to
the Shareholders pursuant to this Agreement, when delivered in accordance with
the terms of this Agreement, will be duly authorized and validly issued shares
of CCC capital stock, fully paid and nonassessable. All of the shares of CCC
Common Stock to be issued to the Shareholders in accordance herewith will be
offered, issued, sold and delivered by CCC in compliance with all applicable
state and federal laws concerning the issuance of securities and none of such
shares was or will be issued in violation of the preemptive rights of any
shareholder of CCC.
6.3 AUTHORIZATION; VALIDITY OF OBLIGATIONS. CCC and Newco have all
requisite corporate power and authority to enter into this Agreement and the
transactions contemplated hereby. Each of CCC and Newco has the full legal
right and authority to enter into this Agreement and the transactions
contemplated hereby. The execution and delivery of this Agreement by CCC and
Newco and the performance by each of CCC and Newco of the transactions
contemplated herein have been duly and validly authorized by the respective
Boards of Directors of CCC and Newco, and this Agreement has been duly and
validly authorized by all necessary corporate action. This Agreement is a
legal, valid and binding obligation of each of CCC and Newco enforceable against
CCC and Newco in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
6.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the CCC
Charter Documents;
(b) conflict with, or result in a default (or would constitute a
default but for a requirement of notice or lapse of time or both) under any
document, agreement or other instrument to which either CCC or Newco is a party,
or by which either CCC or Newco is bound, or result in the creation or
imposition of any lien, charge or encumbrance on any of CCC's or Newco's
properties pursuant to (i) any law or regulation to which either CCC or Newco or
any of their respective property is subject, or (ii) any judgment, order or
decree to which CCC or Newco is bound or any of their respective property is
subject;
(c) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of CCC or Newco;
35
(d) violate any material law, order, judgment, rule, regulation,
decree or ordinance to which CCC or Newco is subject, or by which CCC or Newco
is bound; or
(e) require the consent of any third party;
(f) conflict with, result in a breach of, or result in a default under
any document, agreement or instrument to which ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ is a party,
or by which ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ is bound.
6.5 CAPITALIZATION OF CCC AND OWNERSHIP OF CCC STOCK. The authorized
capital stock of CCC consists of 250,000,000 shares of Common Stock, of which
30,292,857 shares were outstanding on February 26, 1998, and 500,000 shares of
Convertible Non-Voting Common Stock, par value $.001 per share, of which 500,000
shares were outstanding on February 26, 1998. The authorized capital stock of
Newco consists of 1,000 shares of Common Stock, of which 100 shares are
outstanding. All of the issued and outstanding shares of Newco are owned
beneficially, and of record by CCC. All of the issued and outstanding shares of
CCC Common Stock are duly authorized and validly issued shares of CCC, fully
paid and non-assessable. All of the issued and outstanding shares of CCC Common
Stock have been offered, issued, sold and delivered by CCC in compliance with
all applicable state and federal laws concerning the issuance of securities and
none of such shares was issued in violation of the preemptive rights of any
shareholder of CCC.
6.6 CONFORMITY WITH LAW; LITIGATION.
(a) Neither CCC nor Newco is in violation of any law or regulation or
under any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them which would have a material adverse effect on
the business operations, properties, assets or condition, financial or otherwise
of CCC and its subsidiaries taken as a whole. CCC has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing which
might have a material adverse effect on the business operations, properties,
assets or conditions, financial or otherwise of CCC and its subsidiaries taken
as a whole.
(b) There are no claims, actions, suits or proceedings, pending or, to
the knowledge of CCC or Newco, threatened against or affecting CCC or Newco at
law or in equity, or before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them that would have a material adverse effect and
no notice of any such claim, action, suit or proceeding, whether pending or
threatened, has been received. There are no judgments, orders, injunctions,
decrees, stipulations or awards (whether rendered by a court or administrative
agency or by arbitration) against CCC or Newco or against any of the properties
of either of them which would have a material adverse effect on the
36
business operations, properties, assets or conditions, financial or otherwise of
CCC and its subsidiaries taken as a whole.
6.7 DISCLOSURE. Without limiting any exclusion, exception or other
limitation contained in any of the representations and warranties made herein,
this Agreement, the Schedules hereto and all other documents and information
furnished to the Company, the Shareholders and their representatives pursuant
hereto do not and will not include any untrue statement of material fact or omit
to state a material fact necessary to make the statements herein or therein not
misleading. If CCC or Newco becomes aware of any fact or circumstances which
would change a representation or warranty of CCC or Newco in this Agreement, CCC
and Newco shall immediately give notice of such fact or circumstance to the
Shareholders and the Company. However, such notification shall not relieve CCC
or Newco of their respective obligations under this Agreement.
6.8 CCC PROSPECTUS. The CCC Prospectus, in the form delivered to the
Shareholders pursuant to Section 5.30 hereof, does not contain, as of the date
hereof, with respect to the sale of shares of CCC Common Stock to the
Shareholders hereunder, any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The balance sheet of CCC (including the related notes)
included in the CCC Prospectus presents fairly, in all material respects, the
financial position of CCC as of the date thereof in conformity with GAAP.
6.9 REGISTRATION STATEMENT. The Shares to be delivered pursuant to this
Agreement will be issued pursuant to a Shelf Registration Statement on Form S-1
filed with the United States Securities and Exchange Commission (the
"Registration Statement") on January 21, 1998 and declared effective on January
-----------------------
26, 1998. To the knowledge of CCC, no stop order suspending the effectiveness
of the Registration Statement shall have been issued and no proceeding for that
purpose shall have been instituted or threatened by the SEC. The Shares will be
subject to the contractual restrictions on resale set forth in Section 7.10
below and will be tradable in accordance with the requirements of Rule 145(d)
under the 1933 Act.
6.10 INVESTMENT INTENT. CCC is acquiring the shares of the Company for
investment purposes only, for its own account and not as a nominee or agent for
any other Person, and not with a view to or for resale in connection with any
distribution thereof within the meaning of the 1933 Act, and can bear the
economic risk of an investment in the shares of the Company and can afford a
complete loss of such investment.
37
7. COVENANTS
7.1 TAX MATTERS.
(a) The following provisions shall govern the allocation of
responsibility as between the Shareholders, on the one hand, and the Surviving
Corporation, on the other, for certain tax matters following the Closing Date:
(i) The Representative shall cause to be prepared and cause to
be filed, within the time and in the manner provided by law, all Tax Returns of
the Company for all periods ending on or before the Closing Date that are due
after the Closing Date. The Shareholders shall pay to the Surviving Corporation
on or before the due date of such Tax Returns the amount of all Taxes shown as
due on such Tax Returns to the extent that such Taxes are not reflected in the
current liability accruals for Taxes (excluding reserves for deferred Taxes)
shown on the Company's books and records as of the Closing Date. Such Returns
shall be prepared and filed in accordance with applicable law and in a manner
consistent with past practices and shall be subject to review and approval by
CCC. To the extent reasonably requested by the Shareholders or required by law,
CCC and the Surviving Corporation shall participate in the filing of any Tax
Returns filed pursuant to this paragraph.
(ii) The Surviving Corporation shall prepare or cause to be
prepared and file or cause to be filed any Tax Returns for Tax periods which
begin before the Closing Date and end after the Closing Date. The Shareholders
shall pay to the Surviving Corporation within fifteen (15) days after the date
on which Taxes are paid with respect to such periods an amount equal to the
portion of such Taxes which relates to the portion of such taxable period ending
on the Closing Date to the extent such Taxes are not reflected in the current
liability accruals for Taxes (excluding reserves for deferred Taxes) shown on
the Company's books and records as of the Closing Date. Notwithstanding the
preceding sentence, the Shareholders shall not be responsible for any tax that
may arise under Section 4978 of the Code as a result of the consummation of the
Merger. For purposes of this Section 7.1, in the case of any Taxes that are
imposed on a periodic basis and are payable for a taxable period that includes
(but does not end on) the Closing Date, the portion of such Tax which relates to
the portion of such taxable period ending on the Closing Date shall (A) in the
case of any Taxes other than Taxes based upon or related to income or receipts,
be deemed to be the amount of such Tax for the entire taxable period multiplied
by a fraction the numerator of which is the number of days in the taxable period
ending on the Closing Date and the denominator of which is the number of days in
the entire taxable period, and (B) in the case of any Tax based upon or related
to income or receipts be deemed equal to the amount which would be payable if
the relevant taxable period ended on the Closing Date. Any credits relating to a
taxable period that begins before and ends after the Closing Date shall be taken
into account as though the relevant taxable period ended on the Closing Date.
All determinations necessary to give effect to the foregoing allocations shall
be made in a manner consistent with prior practice of the Company. The Surviving
Corporation will pay over to the Shareholders any Tax refunds attributable to
Tax periods ending on or before the Closing Date; provided that either (i) the
Company paid the Taxes subject to the refund, (ii) such Taxes were reflected in
the current liability accruals for Taxes (excluding reserves
38
for deferred Taxes) shown on the Company's books and records as of the Closing
Date, or (iii) that the Shareholders paid to the Company or to the applicable
taxing authority, pursuant to this Section 7.1(a), the Taxes subject to the
refund(s).
(iii) CCC and the Surviving Corporation on the one hand and the
Shareholders on the other hand shall (A) cooperate fully, as reasonably
requested, in connection with the preparation and filing of Tax Returns pursuant
to this Section 7.1 and any audit, litigation or other proceeding with respect
to Taxes; (B) make available to the other, as reasonably requested, all
information, records or documents with respect to Tax matters pertinent to the
Company for all periods ending prior to or including the Closing Date; and (C)
preserve information, records or documents relating to Tax matters pertinent to
the Company that is in their possession or under their control until the
expiration of any applicable statute of limitations or extensions thereof.
(iv) The Shareholders shall timely pay all transfer,
documentary, sales, use, stamp, registration and other Taxes and fees arising
from or relating to the transactions contemplated by this Agreement, and the
Shareholders shall, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration, and other Taxes and fees. If required by applicable law,
CCC and the Surviving Corporation will join in the execution of any such Tax
Returns and other documentation.
(b) Intentionally Omitted.
7.2 ACCOUNTS RECEIVABLE. In the event that all Accounts Receivable (other
than those specified on SCHEDULE 5.12 are not collected in full (net of reserves
specified in Section 5.12 and retainage) within ninety (90) days after the
Closing (or with respect to those Accounts Receivable specified on SCHEDULE
5.12, within the number of days after the Closing specified on such SCHEDULE)
then, at the request of the Surviving Corporation, the Shareholders shall pay
(based on their percentage ownership of the Company immediately prior to the
Effective Time) the Surviving Corporation an amount equal to the Accounts
Receivable not so collected, and upon receipt of such payment the Surviving
Corporation shall assign to the Shareholders making the payment all of their
rights with respect to the uncollected Accounts Receivable giving rise to the
payment and shall also thereafter promptly remit any excess collections received
by it with respect to such assigned Accounts Receivable. The Surviving
Corporation shall provide reasonable assistance to the Shareholders with
collections of the uncollected Accounts Receivable.
7.3 INTENTIONALLY OMITTED.
7.4 RELATED PARTY AGREEMENTS. All Related Party Agreements, other than
those listed on SCHEDULE 7.4, including, without limitation, the guarantees of
indebtedness by the Company, will be terminated at the Closing by the Company
and/or the Shareholder party thereto and all Accounts Receivable and other
amounts due to the Company from any affiliate of the Company, other than current
amounts due for administrative services, will be paid at or before the Closing.
Reasonably promptly following the Closing and at the expense of CCC, the
Shareholders shall direct a third
39
party, which shall be reasonably acceptable to CCC, to evaluate if the rents
with respect to each lease that is a Related Party Agreement (other than those
listed on SCHEDULE 7.4) are greater than those for comparably situated
properties in the same geographic market as of the date the Related Party
Agreement was entered into or as of the date of such evaluation. To the extent
that such third party reasonably determines that the rents payable with respect
to any such lease are 25% or more than for comparably situated properties both
as of the date the Related Party Agreement was entered into and the date of the
evaluation, the parties will negotiate in good faith to adjust such rents to
market rates.
7.5 COOPERATION.
(a) The Company, the Shareholders, CCC and Newco shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such instruments as the other may
reasonably request for the purpose of carrying out this Agreement. In connection
therewith, if required, the president or chief financial officer of the Company
shall execute any documentation reasonably required by CCC's Accountant (in
connection with such accountants' audit or review of the Company) or the Nasdaq
National Market.
(b) The Shareholders and the Company shall cooperate and use their
reasonable efforts to have the present officers, directors and employees of the
Company cooperate with CCC on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
filing obligations, actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Closing Date.
(c) Each party hereto shall cooperate in attempting to obtain all
consents and approvals that are required under this Agreement to effect the
transactions contemplated hereby or that are advisable in order that any
Material Contract remain in effect after the Merger and without giving rise to
any right to termination, cancellation or acceleration or loss of any right or
benefit. In addition, each party hereto shall otherwise use their best efforts
to consummate the transaction contemplated hereby and to fulfill their
obligations under this Agreement. The Company and the Shareholders and Newco
and CCC shall each diligently make, and cooperate with the other in using their
best efforts (excluding out of pocket expenditures) to obtain or cause to be
obtained prior to the Closing Date all such consents without any change in the
terms or conditions of any contract or license that could reasonably be expected
to be materially less advantageous to Newco than those pertaining under the
contract or license as in effect on the date of this Agreement. The Company and
Shareholders shall advise CCC and Newco of any difficulties experienced in
obtaining any of the consents and of any conditions proposed, considered, or
requested for any of the consents. CCC and Newco agree to use their best
efforts to assist the Company and Shareholders in obtaining such consents, and
to take such reasonable actions necessary or desirable to obtain such consents,
including without limitation, executing such instruments and other documents as
may be required in connection with obtaining such consents.
(d) The Company, the Shareholders and CCC shall file any information
and documents that remain to be filed under the HSR Act as promptly as
practicable at such time as such
40
items are required to be filed. The Parties hereby agree to (a) cooperate with
each other in connection with such HSR Act filings, which cooperation shall
include furnishing the other with any information or documents that may be
reasonably required in connection with such filings; (b) promptly file, after
any request by the Federal Trade Commission ("FTC") of the Department of Justice
("DOJ") and after appropriate negotiation with the FTC or DOJ of the scope of
such request, any information or documents requested by the FTC or DOJ; and (c)
furnish each other with any correspondence from or to, and notify each other of
any other communications with, the FTC or DOJ that relates to the transactions
contemplated hereunder, and to the extent practicable, to permit each other to
participate in any conferences with the FTC or DOJ.
7.6 CONDUCT OF BUSINESS PENDING CLOSING. Except as set forth on SCHEDULE
7.6, between the date hereof and the Effective Time, the Company will (except as
requested or agreed by CCC):
(a) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation or
accounting;
(b) maintain its properties, facilities and equipment and other assets
in as good working order and condition as at present, ordinary wear and tear
excepted;
(c) perform in the ordinary course of business all of its obligations
under debt and lease instruments and other agreements relating to or affecting
its assets, properties, equipment or rights;
(d) maintain present debt and lease instruments and not enter into new
or amended debt or lease instruments other than in the ordinary course of
business without the consent of CCC;
(e) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(f) use its best efforts to maintain and preserve its business
organization intact, retain its present key employees and maintain its
relationships and present agreements with suppliers, customers and others having
business relations with the Company;
(g) maintain compliance in all material respects with all permits,
rules, laws and regulations, consent orders and the like; and
(h) maintain present salaries and commission levels for all officers,
directors, employees, agents, representatives and independent contractors,
except in the ordinary course of business consistent with past practice or as
required by contract or law.
7.7 ACCESS TO INFORMATION. Between the date of this Agreement and the
Closing Date, the Company will afford to the officers and authorized
representatives of CCC during normal
41
business hours and with reasonable prior notice access to (i) all of the sites,
properties, books and records of the Company and (ii) such additional financial
and operating data and other information as to the business and properties of
the Company as CCC may from time to time reasonably request, including without
limitation, access upon reasonable request to the Company's employees,
customers, vendors, suppliers and creditors. No information or knowledge
obtained in any investigation pursuant to this Section 7.7 shall affect or be
deemed to modify any representation or warranty contained in this Agreement or
the conditions to the obligations of the parties to consummate the Merger.
However, if CCC becomes aware of a breach of any warranty or representation by
the Company or any Shareholder, CCC shall promptly notify the Company and the
Representative of same.
7.8 PROHIBITED ACTIVITIES. Except as set forth in SCHEDULE 7.8, between
the date hereof and the Effective Time, the Company will not, without the prior
written consent of CCC:
(a) make any change in its Articles of Incorporation or Regulations,
or authorize or propose the same;
(b) issue, deliver or sell, authorize or propose the issuance,
delivery or sale of any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind, or authorize or propose
any change in its equity capitalization, or issue or authorize the issuance of
any debt securities, except (a) as required under any currently existing
"employee benefit plan" (as defined in Section 3(3) of ERISA) any currently
existing employment agreement or any currently existing buy sell agreements, (b)
shares issued upon exercise of options or other rights outstanding as of the
date hereof, or (c) shares, if any, required to be issued under the tax-
qualified employee stock ownership plan;
(c) declare or pay any dividend, or make any distribution (whether in
cash, stock or property) in respect of its stock whether now or hereafter
outstanding, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock except as provided above in
subsection (b), or purchase, redeem or otherwise acquire or retire for value any
shares of its stock;
(d) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, or guarantee any indebtedness,
except in the ordinary course of business and consistent with past practice in
an amount in excess of $50,000 individually;
(e) except in the ordinary course of business consistent with past
practice or as required by contract or law, increase the compensation payable or
to become payable to any officer, director, Shareholder, employee, agent,
representative or independent contractor; make any bonus or management fee
payment to any such person (except for accrued and unpaid bonuses); make any
loans or advances; adopt or amend any Plan; or grant any severance or
termination pay;
42
(f) create or assume any mortgage, pledge or other lien or encumbrance
(other than Permitted Encumbrances) upon any assets or properties whether now
owned or hereafter acquired;
(g) sell, assign, lease, pledge or otherwise transfer or dispose of
any property or equipment except in the ordinary course of business consistent
with past practice;
(h) acquire or negotiate for the acquisition of (by merger,
consolidation, purchase of a substantial portion of assets or otherwise) any
business or the start-up of any new business, or otherwise acquire or agree to
acquire any assets that are material, individually or in the aggregate, to the
Company;
(i) merge or consolidate or agree to merge or consolidate with or into
any other corporation;
(j) waive any material rights or claims of the Company, provided that
the Company may negotiate and adjust bills in the course of good faith disputes
with customers in a manner consistent with past practice;
(k) commit a material breach of or amend or terminate any material
agreement, permit, license or other right except for any amendments or
terminations in the ordinary course of business;
(l) enter into any other transaction (i) that is not negotiated at
arm's length with a third party not affiliated with the Company or any officer,
director or Shareholder of the Company or (ii) outside the ordinary course of
business consistent with past practice or (iii) prohibited hereunder;
(m) commence a lawsuit other than for routine collection of bills;
(n) revalue any of its assets, including without limitation, writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business consistent with past practice;
(o) make any tax election other than in the ordinary course of
business and consistent with past practice, change any tax election, adopt any
tax accounting method other than in the ordinary course of business and
consistent with past practice, change any tax accounting method, file any Tax
Return (other than any estimated tax returns, payroll tax returns or sales tax
returns) or any amendment to a Tax Return, enter into any closing agreement,
settle any tax claim or assessment, or consent to any tax claim or assessment,
without the prior written consent of CCC; or
(p) take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 7.8(a) through (o) above, or any action which
would make any of the representations and
43
warranties of the Company and the Shareholders contained in this Agreement
untrue or result in any of the conditions set forth in Articles 8 and 9 not
being satisfied.
7.9 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, if requested
by CCC, and shall provide CCC with proof that any required notice has been sent.
7.10 SALES OF CCC COMMON STOCK.
(a) Except with the consent of CCC, no Shareholder will, directly or
indirectly, offer, sell, contract to sell, pledge or otherwise dispose of any
shares of CCC Common Stock received by such Shareholder in the Merger as the
Base Merger Consideration prior to the first anniversary of the Closing.
Thereafter, up to one-third of the shares of CCC Common Stock received by a
Shareholder as part of the Base Merger Consideration may be resold at any time
after the first anniversary of the Closing, an additional one-third may be
resold beginning eighteen months after the Closing by each Shareholder and the
remaining one-third may be resold beginning on the second anniversary of the
Closing. Except with the consent of CCC, no shareholder will, directly or
indirectly, offer, sell, contract to sell, pledge or otherwise dispose of any
shares of CCC Common Stock received by such Shareholder as the Contingent Merger
Consideration prior to 19 months after the Closing Date. Thereafter, up to 50%
of the shares of CCC Common Stock received by a Shareholder as part of the
Contingent Merger Consideration may be resold at any time beginning 19 months
after the Closing Date and the remaining 50% may be resold beginning 23 months
after the Closing Date. Notwithstanding anything in the foregoing to the
contrary, a Shareholder may transfer shares of CCC Common Stock to a Related
Party for estate planning purposes, provided that such Related Party transferee
(i) acknowledges the contractual restrictions relating to the transfer of such
shares set forth in this Section 7.10 and (ii) agrees to be bound by the same .
For purposes hereof, "Related Party" means, with respect to any Person that is
an individual, any spouse, lineal descendant (including by adoption), executor,
administrator, trustee, legatee or beneficiary of such Person or any other
Person controlled by such Person. For purposes hereof, "Person" means an
individual, corporation, association, partnership, joint venture, trust, estate,
limited liability company, limited liability partnership or other entity or
organization. Transfers of shares of CCC Common Stock by employees of CCC also
are subject to CCC policies against ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and the misuse of material
non-public information and compliance with applicable securities laws and rules.
Persons who become affiliates of CCC may be subject to additional restrictions
on the trading of their CCC Common Shares pursuant to applicable law.
Notwithstanding anything in the foregoing to the contrary, no Shareholder that
is a Profit Sharing Plan shall be restricted in the transfer of any shares of
CCC Common Stock received by such Shareholder as part of the Base Merger
Consideration or as part of the Contingent Merger Consideration to the extent
the transfer is required by applicable law or (i) with respect to the shares of
CCC Common Stock received as part of the Base Merger Consideration, following
the first anniversary of the Closing Date or (ii) with respect to the shares of
CCC Common Stock received as part of the Contingent Merger Consideration,
following six months after the receipt of such shares with respect to 100% of
such shares and following three months after the receipt of such shares with
respect to 50% of such shares,
44
it being agreed that any shares of Common Stock received by the Profit Sharing
Plan after the resolution of a dispute as to the amount of the Group Actual Earn
Out EBIT shall be considered to have been received for purposes of this transfer
restriction as the same time as the Profit Sharing Plan received the rest of the
shares of Common Stock issued as Contingent Merger Consideration.
(b) Each Shareholder acknowledges and agrees that CCC will not provide
such Shareholder with a prospectus for such Shareholder's use in selling the
shares of CCC Common Stock to be received by such Shareholder in the Merger, and
agrees to sell such shares only in accordance with the requirements, if any, of
applicable law, including, without limitation, Rule 145(d) promulgated under the
1933 Act or any successor to such rule. CCC acknowledges that the provisions of
this Section 7.10(b) will be satisfied as to any sale by a Shareholder of the
CCC Common Stock that the Shareholder may acquire pursuant to the Merger by a
broker's letter and a letter from the Shareholder with respect to that sale
stating that the applicable requirements of Rule 145(d)(1) have been met or are
inapplicable by virtue of Rule 145(d)(2) or Rule 145(d)(3).
(c) The certificate or certificates evidencing the shares of CCC
Common Stock to be delivered to the Shareholders in the Merger will bear
restrictive legends substantially in the following forms as long as applicable:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), MAY APPLY. IF
--------------
RULE 145 APPLIES, PRIOR TO MARCH 10, 1999, THESE SHARES MAY ONLY
BE TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF RULE
145(D)(1) OR ANOTHER APPLICABLE EXEMPTION UNDER THE SECURITIES
ACT. WITHOUT LIMITING THE FOREGOING, IF RULE 145 APPLIES, AFTER
MARCH 10, 1999, THESE SHARES MAY BE TRANSFERRED BY NON-
AFFILIATES OF THE ISSUER UNDER RULE 145(D)(2) SO LONG AS THE
ISSUER IS CURRENT IN ITS REPORTING OBLIGATIONS UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OR UNDER ANOTHER
APPLICABLE EXEMPTION UNDER THE SECURITIES ACT. WITHOUT LIMITING
THE FOREGOING, AFTER MARCH 10, 2000, THESE SHARES MAY BE
TRANSFERRED BY NON-AFFILIATES OF THE ISSUER WITHOUT RULE 145
RESTRICTIONS IN ACCORDANCE WITH RULE 145(D)(3).
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CONTRACTUAL RESTRICTIONS ON TRANSFER EXPIRING ON ______________,
PURSUANT TO THAT CERTAIN AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF FEBRUARY 27, 1998 (THE "AGREEMENT"), BY AND AMONG THE
---------
ISSUER, CCC4 ACQUISITION CO., GARFIELD ELECTRIC, COMPANY, (THE
"COMPANY") AND THE SHAREHOLDERS OF THE COMPANY. PRIOR TO THE
-------
EXPIRATION OF SUCH HOLDING PERIOD, SUCH SHARES MAY NOT BE SOLD,
45
TRANSFERRED OR ASSIGNED AND THE ISSUER SHALL NOT BE REQUIRED TO
GIVE EFFECT TO ANY ATTEMPTED SALE, TRANSFER OR ASSIGNMENT EXCEPT
TO THE EXTENT SUCH SALE, TRANSFER OR ASSIGNMENT IS IN COMPLIANCE
WITH THE AGREEMENT. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE
LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) WHEN
THE HOLDING PERIOD HAS EXPIRED.
(d) Intentionally omitted.
7.11 CCC STOCK OPTIONS. CCC shall make available to the Surviving
Corporation for distribution at the discretion of the President of the Surviving
Corporation options to purchase up to 16,990 shares of CCC Common Stock to be
granted to the key employees of the Surviving Corporation (who were not, unless
otherwise approved by CCC, Shareholders, other than Shareholders who, as of the
date of this Agreement, owned less than three and one half (3 1/2) percent of
the capital stock of the Company) on or after the Closing in accordance with
CCC's policies and under the terms of CCC's 1997 Long-Term Incentive Plan. The
exercise price of such options shall be equal to the fair market value of the
underlying shares of CCC Common Stock on the date of grant and such options
shall have vesting provisions established by the Compensation Committee of the
Board of Directors of CCC. The options issued under the terms of this Section
7.11 shall be nonqualified stock options that shall become exercisable over no
more than a four year period with at least 25% of such options vesting each year
(with the four year period commencing on the Closing Date) and shall expire on
the tenth anniversary of the date of grant provided the optionee is still an
employee. The shares of CCC Common Stock underlying such options shall be
registered under the 1933 Act and approved for listing on Nasdaq.
7.12 TAX COVENANT. CCC, Newco and the Company shall treat the Merger for
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code and any comparable state or local tax statute.
7.13 CCC BOARD SEAT. At the Closing, the Board of Directors of CCC shall
expand its number and elect a representative selected by the Group Companies and
reasonably acceptable to CCC to fill such newly created seat. Thereafter, CCC
will use its best efforts to cause such individual (or his successor, who shall
be selected by a vote of a majority of the presidents of the Surviving Group
Companies and who must also be reasonably acceptable to CCC) to remain on the
CCC Board of Directors; provided, however, that CCC shall not be liable should
the shareholders of CCC not re-elect such individual to a new term on the CCC
Board of Directors.
7.14 D&O INSURANCE AND INDEMNIFICATION OF DIRECTORS AND OFFICERS. All
rights to indemnification for acts or omissions occurring prior to the Closing
now existing in favor of the current or former directors, officers, employees or
agents of the Company required, by applicable law, under the Company's Charter
Documents, or any other agreement between any such director, officer, employee
or agent of the Company and the Company and any other now existing obligation
46
of the Company to indemnify directors or officers for acts or omissions
occurring prior to the Closing shall survive the Merger and shall continue in
full force and effect in accordance with their terms for a period of not less
than six (6) years from the Effective Time and, to the extent the Surviving
Corporation fails to perform its obligations with respect thereto, CCC shall
perform such obligations. In addition, CCC will provide to each director and
officer of the Surviving Corporation, during the term of his service, D&O
insurance having coverage at least as comprehensive as the D&O insurance
currently maintained by CCC.
7.15 TAX FREE REORGANIZATION PROTECTION. Prior to the effective time, CCC,
Newco, the Shareholders and the Company will each use their best efforts to
cause the Merger to qualify, and prior to the Effective Time and on and after
the Closing Date, will refrain from taking any actions that would result in the
Merger failing to qualify, as a reorganization as defined under Code Section
368(a)(1)(A) and Section 368(a)(2)(D). After the Effective Time, CCC, Newco, the
Shareholders and the Company will refrain from taking any actions that would
cause the stock paid to the Shareholders pursuant to Section 2.3 of this
Agreement to be taxable to the Shareholders upon receipt.
7.16 CONSULTING PAYMENT. At Closing, and in consideration for his
agreement to serve CCC on a consulting basis after the Closing, ▇▇▇▇ ▇▇▇▇▇▇▇▇
will receive from CCC, by company check, $250,000 plus options to purchase
50,000 shares of CCC Common Stock, at a purchase price equal to the fair market
value of the underlying shares of CCC Common Stock on the Closing Date and
exercisable immediately for 25,000 shares and exercisable with respect to the
remaining 25,000 shares at the end of the one year period after the Closing Date
(it being agreed that such options shall be issued in accordance with CCC's 1997
Long-Term Incentive Plan and will have the vesting provisions established by the
Compensation Committee of the Board of Directors of CCC).
7.17 GOVERNMENT CONTRACTS. To the extent applicable, it is the intention
of the Company to transfer to Newco and novate the government contracts listed
on SCHEDULE 5.19 and to obtain the required governmental recognition of Newco as
the Company's successor in interest to such government contracts.
Recognizing that applicable government regulations may not permit the
Company to transfer the Company's government contracts and obtain novation of
those contracts prior to the Closing, the Company and Newco agree to cooperate
and diligently pursue contract novation pursuant to applicable and required
government procedures.
7.18 CCC STOCK. Between the date of this Agreement and the Effective Time,
CCC shall not declare, pay or set aside any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its equity securities or directly or indirectly redeem, purchase or otherwise
acquire or offer to acquire any shares of its equity securities, other than any
such action which would result in any adjustment to the Base Merger
Consideration or the Contingent Merger Consideration pursuant to Section 2.2(e)
and 2.3(d).
47
7.19 EMPLOYEE BENEFITS MATTERS. For the twelve month period commencing as
of the Closing Date, CCC and any successor thereto shall continue to maintain
all Plans maintained by the Company as of the Closing Date for the benefit of
all employees of CCC or any entity related to CCC under the terms of Code
Sections 414(b), (c), (m) or (o) who are engaged in the performance of services
with respect to the business conducted by the Company prior to the Closing Date.
Any amendment, modification, or termination of any Plan of the Company
maintained by CCC or its successor during any period such Plan is required to be
maintained in accordance with this Section 7.19 shall only be made if CCC and
the president of the Company or his successor, in his capacity as an employee of
CCC or any affiliate thereof, shall mutually agree to such amendment,
modification, or termination. Without limitation on the foregoing, CCC or any
successor thereto shall maintain an employee benefit pension plan within the
meaning of ERISA Section 3(2) which plan will continue to hold such qualifying
employer securities, as defined in ERISA Section 407(d)(5), as may be required
to avoid the imposition of any excise tax under Code Section 4978 with respect
to any employee stock ownership plan having engaged in a transaction to which
Code Section 1042 applies for such period as may be required to avoid the
imposition of such excise tax. Notwithstanding the foregoing, it is acknowledged
that CCC and the Surviving Corporation shall not pay for any country club
memberships, and any country club memberships, other than the existing
Wetherington Country Club membership, shall be terminated at or before Closing,
or the expenses related to more than one vehicle per employee.
7.20 SUPPLEMENTAL FINANCIAL CERTIFICATE. The Shareholders shall, within
thirty (30) days following Closing (a copy of which shall be attached to the
Supplemental Financial Certificate), cause the preparation of a balance sheet
(the "Closing Balance Sheet") for the Company as of February 28, 1998 and
---------------------
deliver to CCC a certificate (the "Supplemental Financial Certificate"; and
----------------------------------
together with the Closing Financial Certificate, the "Financial Certificates"),
----------------------
signed on behalf of the Shareholders by the Representative, setting forth:
(a) the Company's Closing Net Worth; and
(b) a certification that the Closing Balance Sheet (a copy of which
shall be attached to the Supplemental Financial Certificate) presents fairly the
financial condition of the Company as of the Closing Date.
All costs associated with the preparation of the Supplemental Financial
Certificate (including the costs associated with preparing the Closing Balance
Sheet) shall be borne by the Shareholders and not by the Company or CCC.
7.21 HOLDING COMPANY. Promptly following the Closing, CCC will contribute
all of the shares of capital stock of each Surviving Group Company to
Consolidation Capital Corporation Electrical Services, Inc., a first tier,
wholly-owned subsidiary of CCC (the "Holding Company"). As the sole shareholder
of Holding Company, CCC, at Closing, will (i) cause ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇. to be
appointed its Chief Executive Officer, (ii) cause the Holding Company to enter
into an employment agreement with Mr. ▇▇▇▇ substantially in the form attached
to the Group Company Agreement
48
for Company 1, and (iii) elect ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., ▇. ▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ as its board of directors.
7.22 INTENTIONALLY OMITTED.
7.23 INDEMNIFICATION OF SHAREHOLDER'S PURCHASER REPRESENTATIVE. Until the
first anniversary of the Closing, CCC shall pay all costs and expenses
(including the value of any claims or awards) of any Shareholder's purchaser
representative that arise out of any claim or lawsuit related to the
transactions contemplated hereby. On the first anniversary of the Closing, the
Shareholders shall reimburse CCC, by surrender of Pledged Assets or otherwise,
for 50% of such costs and expenses; it being understood and agreed that any such
expense shall not affect the calculation of Group Actual Earn Out EBIT or the
payment of the Contingent Merger Consideration; and provided, however, that the
-------- -------
Shareholders shall not be obligated to reimburse CCC for 50% of any such costs
and expenses that arise out of any lawsuit in which CCC shall be found to be
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act), and the Shareholders shall be obligated to reimburse CCC
for all such costs and expenses that arise out of any lawsuit in which the
Company or any of the Shareholders shall be found to be guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act).
Following the first anniversary of the Closing, the Shareholders and CCC shall
equally share and be obligated to pay equal portions of all such costs and
expenses; provided, however, that the Shareholders on the one hand and CCC on
-------- -------
the other hand shall not be liable to so share and pay any such portion of costs
and expenses that arise out of any lawsuit in which CCC on the one hand or the
Company or the Shareholders on the other hand shall be found to be guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act). CCC and the Shareholders shall direct a third party, mutually
acceptable to CCC and the Shareholders to estimate an amount sufficient to cover
the costs and expenses of any claim pending on the first anniversary of the
Closing Date and the Shareholders shall such escrow amount of shares of CCC
Common Stock or cash from the Pledged Assets to cover their 50% of such costs
and expenses. The terms of the escrow shall be mutually satisfactory to CCC and
the Shareholders. Notwithstanding anything to the contrary herein, the
Shareholders shall be entitled to satisfy any claim relating to the Pledged
Assets with cash, in lieu of shares of CCC Common Stock constituting Pledged
Assets. If the payment by CCC of all costs and expenses of any Shareholder's
purchaser representative pursuant to the first sentence of this Section 7.23 is
unavailable, then CCC, in lieu of making such payment, shall contribute to the
amount paid or payable by such Shareholder's purchaser representative as a
result of any such claim or lawsuit in such proportion as is appropriate to
reflect the relative fault of such Shareholder's purchaser representative, on
the one hand, and CCC, on the other hand, in connection with the actions or
inactions giving rise to such claim or lawsuit, as well as any other relevant
equitable considerations, including, without limitation, the parties' relative
intent, knowledge and access to information. The obligations of the
Shareholders pursuant to this Section 7.23 shall be on a joint and several
basis.
7.24 GUARANTEED DEBT. It is understood and agreed that the Shareholders
will seek to have all personal guarantees (including any pledge of assets) of
any Shareholder released in connection with consummation of the Merger and that
CCC will cooperate with the Shareholders
49
in such effort. Following the Closing CCC will not and will cause the Surviving
Corporation not to draw under any line of credit or other indebtedness the
repayment of which has been personally guaranteed by a Shareholder (by pledge of
assets or otherwise) unless and until such personal guarantee has been fully
released.
7.25 SHAREHOLDER DEBT. Each Shareholder shall repay in full any
indebtedness owed the Company by such Shareholder at or prior to Closing.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CCC AND NEWCO
The obligation of CCC and Newco to effect the Merger is subject to the
satisfaction or waiver, at or before the Effective Time, of the following
conditions and deliveries:
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. (a) All
of the representations and warranties of the Shareholders and the Company
contained in this Agreement shall be true, correct and complete on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date except (i) to the extent any such
representation or warranty is expressly stated only as of a specified earlier
date or dates, in which case such representation and warranty shall be true and
accurate as of such earlier specified date or dates (but also subject to clause
(iii) of this Section 8.1(a)), (ii) for changes that are permitted or
contemplated pursuant to this Agreement or (iii) where the consequence of the
matter set forth in such representation and warranty having failed to be true
and accurate as of the date when made, on the Closing Date or on such earlier
specified date would not, in the reasonable discretion of CCC and Newco, have a
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Adverse Effect, as defined below; (b) all of the terms,
covenants, agreements and conditions of this Agreement to be complied with,
performed or satisfied by the Company and the Shareholders on or before the
Closing Date shall have been duly complied with, performed or satisfied, except
to the extent that the consequence of the failure of the Company and the
Shareholders to have so complied with, performed or satisfied would not have a
Material Adverse Effect; and (c) a certificate to the foregoing effects dated
the Closing Date and signed on behalf of the Company and by the Shareholders
shall have been delivered to CCC. For purposes of this Agreement, "▇▇▇▇▇
▇▇▇▇▇▇▇▇ Adverse Effect" means a material adverse effect on the business,
operations, properties, assets or condition, financial or otherwise, of the
Group Companies taken as a whole, provided that the foregoing shall not include
any material adverse effect attributable to (a) factors affecting the electrical
contracting industry generally, (b) general national, regional or local economic
or financial conditions, (c) change in governmental or legislative laws, rules
or regulations, or (d) actions taken by CCC or any affiliate of CCC.
8.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
CCC's proposed acquisition of the Company, limiting or restricting CCC's conduct
or operation of the business of the Company (or its own business) following the
Merger or restraining or prohibiting the Company or the Shareholders from
consummating the transactions contemplated hereby shall be in effect, nor shall
any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any
50
of the foregoing be pending. There shall be no action, suit, claim or proceeding
of any nature having a reasonable likelihood of success pending or threatened
against CCC, Newco, the Shareholders or the Company, their respective properties
or any of their officers or directors, that could materially and adversely
affect the business, assets, financial condition or results of operations of CCC
and its subsidiaries taken as a whole or the Company; provided, however, that
CCC and Newco shall be required to effect the Merger (and this condition shall
be deemed satisfied) if the foregoing matters (including those set forth in
Section 8.1 above), taken together, would not, in the reasonable discretion of
CCC and Newco, have a ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Adverse Effect.
8.3 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
changes in the business, operations, properties, assets, or condition (financial
or otherwise) of the Group Companies, taken as a whole, since the date of this
Agreement; and CCC shall have received a certificate signed by each Shareholder
dated the Closing Date to such effect with respect to the Company only;
provided, however, that CCC and Newco shall be required to effect the Merger
(and this condition shall be deemed satisfied) if the foregoing matters, taken
together, would not, in the reasonable discretion of CCC and Newco, have a ▇▇▇▇▇
▇▇▇▇▇▇▇▇ Adverse Effect.
8.4 CONSENTS AND APPROVALS. All consents marked with an asterisk on
SCHEDULE 5.3 or SCHEDULE 5.14 (the "Required Consents"), shall have been
-----------------
obtained. No action by the DOJ or FTC challenging or seeking to enjoin the
consummation of the transactions contemplated hereby shall be pending.
8.5 OPINION OF COUNSEL. CCC shall have received an opinion from counsel
to the Company and the Shareholders, dated the Closing Date, in substantially
the form of EXHIBIT 8.5.
8.6 CHARTER DOCUMENTS. CCC shall have received (a) a copy of the Articles
of Incorporation of the Company certified by an appropriate authority in the
state of its incorporation and (b) a copy of the Regulations of the Company
certified by the Secretary of the Company.
8.7 QUARTERLY FINANCIAL STATEMENTS. CCC shall have received from the
Company completed quarterly financial statements for any quarter ending after
the date of the Interim Financials in a form reasonably satisfactory to CCC.
8.8 DELIVERY OF CLOSING FINANCIAL CERTIFICATE. CCC shall have received a
certificate (the "Closing Financial Certificate"), dated as of the Closing Date,
-----------------------------
signed on behalf of the Company and by the Shareholders, setting forth:
(a) the net worth of the Company as of the last day of its most
recently ended fiscal year;
(b) the net worth of the Company as of January 31, 1998; and
(c) the Company's 1997 Adjusted EBIT.
51
8.9 FIRPTA COMPLIANCE. The Company shall have delivered to CCC a properly
executed statement in a form reasonably acceptable to CCC for purposes of
satisfying CCC's obligations under Treas. Reg. (S) 1.1445-2(b).
8.10 EMPLOYMENT AGREEMENTS. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall enter into, at
Closing, an employment agreement with the Surviving Corporation in substantially
the form of EXHIBIT 8.10 hereto.
8.11 AFFILIATE AGREEMENTS. The Shareholders listed on SCHEDULE 5.31 shall
have entered into an Affiliate Agreement in the form set forth as EXHIBIT 8.11.
8.12 SHAREHOLDERS' RELEASE. The Shareholders shall each have delivered to
CCC an instrument dated the Closing Date in the form of EXHIBIT 8.12.
8.13 RELATED PARTY RECEIVABLES AND AGREEMENTS. Except with respect to the
items on SCHEDULE 8.13, all employees, shareholders, directors, officers and
Affiliates of the Company shall have repaid in full all obligations to the
Company in respect of borrowings or advances. The Related Party Agreements set
forth in SCHEDULE 8.13 shall have been terminated as of the Closing.
8.14 CONSUMMATION OF GROUP MERGER TRANSACTION. The Group Merger
Transaction shall occur contemporaneously with the consummation of the
transactions contemplated by this Agreement.
8.15 INTENTIONALLY OMITTED.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS
The obligation of the Shareholders and the Company to effect the Merger are
subject to the satisfaction or waiver, at or before the Effective Time, of the
following conditions and deliveries:
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All of
the representations and warranties of CCC and Newco contained in this Agreement
shall be true, correct and complete on and as of the Closing Date with the same
effect as though such representations and warranties had been made as of such
date; all of the terms, covenants, agreements and conditions of this Agreement
to be complied with, performed or satisfied by CCC and Newco on or before the
Closing Date shall have been duly complied with, performed or satisfied; and a
certificate to the foregoing effects dated the Closing Date and signed by the
President or any Vice President of CCC shall have been delivered to the Company
and the Shareholders.
9.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
CCC's proposed acquisition of the Company, limiting or restricting CCC's
52
conduct or operation of the business of the Company (or its own business)
following the Merger or restraining or prohibiting the Company or the
Shareholders from consummating the transactions contemplated hereby shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending. There shall be no action,
suit, claim or proceeding of any nature having a reasonable likelihood of
success pending or threatened, against CCC, Newco, the Shareholders, or the
Company, their respective properties or any of their officers or directors, that
could materially and adversely affect the business, assets, financial condition,
results of operations or prospects of CCC and its subsidiaries taken as a whole.
9.3 CONSENTS AND APPROVALS. All necessary consents of, and filings with,
any governmental authority or agency or third party relating to the consummation
by CCC and Newco of the transactions contemplated herein, shall have been
obtained and made. Any waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and no action by
the Department of Justice or Federal Trade Commission challenging or seeking to
enjoin the consummation of the transactions contemplated hereby shall be
pending.
9.4 EMPLOYMENT AGREEMENTS. The Surviving Corporation shall have afforded
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ the opportunity to enter into, at Closing, an employment
agreement with the Surviving Corporation in substantially the form of EXHIBIT
8.10 hereto.
9.5 TAX CERTIFICATE DELIVERY. A certificate substantially in the form
attached hereto as EXHIBIT 9.5, dated the Closing Date and signed by the
President or any Vice President of CCC and Newco, shall have been delivered to
tax counsel for the Shareholders.
9.6 SATISFACTION WITH SHAREHOLDER RELEASE AND AFFILIATE AGREEMENTS. Each
Shareholder shall be reasonably satisfied with the form of the Affiliate
Agreement and Shareholder Release to be executed by them pursuant to Section
8.11 and Section 8.12.
9.7 TAX OPINION. The Shareholders shall have received from Dow, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, PLLC, tax counsel to the Shareholders, that the Merger qualifies as a
reorganization as defined under Code Section 368(a)(1)(A).
9.8 CONSUMMATION OF GROUP MERGER TRANSACTION. The Group Merger
Transaction shall occur contemporaneously with the consummation of the
transactions contemplated by this Agreement.
9.9 EMPLOYEE PLAN FIDUCIARY CONDITION. The appropriate fiduciaries of the
Profit Sharing Plan shall have received a current valuation report and fairness
opinion in such form as may be acceptable to such fiduciaries from a source
acceptable to such fiduciaries and such fiduciaries shall have determined, in
the exercise of their sole discretion, that the consummation of the transactions
contemplated herein at the Closing is fair to and in the best interests of the
participants and beneficiaries of the Profit Sharing Plan.
53
9.10 BOARD EXPANSION. CCC shall have increased the size of its Board of
Directors to six members and, as contemplated by Section 7.13, a representative
of the Group Companies shall have been duly elected to such Board of Directors.
9.11 REGISTRATION STATEMENT. No stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceeding for that
purpose shall have been instituted or threatened by the SEC and the shares of
CCC Common Stock to be issued as part of the Base Merger Consideration shall
have been approved for listing on Nasdaq.
9.12 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
changes in the business, operations, properties, assets, or condition (financial
or otherwise) of CCC and its subsidiaries, taken as a whole, since the date of
this Agreement, and the Shareholders shall have received a certificate signed by
CCC and Newco dated the Closing Date to such effect; provided, however, that the
Shareholders and the Company shall be required to effect the Merger (and this
condition shall be deemed satisfied) if the foregoing matters, taken together,
would not, in the reasonable discretion of the Shareholders and the Company,
have a material adverse effect on the business operations, properties, assets or
conditions, financial or otherwise, of CCC and its subsidiaries taken as a
whole.
9.13 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION. The persons set
forth on SCHEDULE 1.2(C) shall have been appointed, effective at the Effective
Time, to serve as officers and directors of the Surviving Corporation.
9.14 INTERIM BALANCE SHEET. The Company shall deliver to CCC true,
complete and correct copies of the Company's unaudited balance sheet (the
"Interim Balance Sheet") as of January 31, 1998 and income statement and
statement of cash flow, for the one-month period then ended (collectively the
"Interim Financials").
------------------
10. INDEMNIFICATION
10.1 GENERAL INDEMNIFICATION BY THE SHAREHOLDERS. The Shareholders (other
than the Shareholders set forth on SCHEDULE 5 who shall not be required to
indemnify any party hereunder), jointly and severally, covenant and agree to
indemnify, defend, protect and hold harmless CCC, Newco and the Surviving
Corporation and their respective officers, directors, employees, shareholders,
assigns, successors and affiliates (individually, a "CCC Indemnified Party" and
---------------------
collectively, the "CCC Indemnified Parties") from, against and in respect of:
-----------------------
(a) all liabilities, losses, claims, damages, punitive damages,
causes of action, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands, assessments, adjustments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages), costs and expenses
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description)
54
(collectively, "Damages") suffered, sustained, incurred or paid by the CCC
-------
Indemnified Parties in connection with, resulting from or arising out of,
directly or indirectly:
(i) any breach of any representation or warranty of the
Shareholders or the Company set forth in this Agreement or any Schedule or
certificate, delivered by or on behalf of any Shareholder or the Company in
connection herewith; or
(ii) any nonfulfillment of any covenant or agreement by the
Shareholders or, prior to the Effective Time, the Company, under this Agreement;
or
(iii) the assertion against any CCC Indemnified Party of any
Damages relating to the business, operations or assets of the Company prior to
the Closing Date or the actions or omissions of the directors, officers,
shareholders, employees or agents of the Company prior to the Closing Date,
other than Damages arising from matters expressly disclosed in the Company
Financial Statements, this Agreement or the Schedules to this Agreement; or
(iv) the matters disclosed on SCHEDULES 5.23 (conformity with
law; litigation), 5.24 (taxes), 5.27 (environmental matters), any receivables
from related persons that are not repaid at or before the Closing and all claims
of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ as a shareholder, former shareholder, or former employee
(except, in the case of claims of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, to the extent that Damages
do not exceed $149,096); and
(b) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 10.1.
10.2 GENERAL INDEMNIFICATION BY CCC AND NEWCO. CCC and Newco, jointly and
severally, covenant and agree to indemnify, defend, protect and hold harmless
the Shareholders and their respective officers, directors, employees,
shareholders, assigns, successors and affiliates (individually, a "Shareholder
-----------
Indemnified Party" and collectively, the "Shareholder Indemnified Parties")
----------------- -------------------------------
from, against and in respect of:
(a) all Damages suffered, sustained, incurred or paid by the
Shareholder Indemnified Parties in connection with, resulting from or arising
out of, directly or indirectly:
(i) any breach of any representation or warranty of CCC or Newco
set forth in this Agreement or any Schedule or certificate, delivered by or on
behalf of any CCC or Newco in connection herewith; or
(ii) any nonfulfillment of any covenant or agreement by CCC or
Newco under this Agreement;
(b) subsequent to the Effective Time, all Damages (whether arising
before, on or after the Effective Time) suffered, sustained, incurred, or paid
by the Shareholder Indemnified
55
Parties in connection with, resulting from, or arising out of, directly or
indirectly, any conversion of the ESOP to a Profit Sharing Plan as described in
Section 5.22(j) herein; and
(c) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 10.2.
10.3 LIMITATION AND EXPIRATION. Notwithstanding the above:
(a) there shall be no liability for indemnification under Section
10.1 or Section 10.2 unless and until the aggregate amount of Damages exceeds
one percent (1%) of the Base Merger Consideration (the "Indemnification
---------------
Threshold"), at which time the Indemnifying Party (defined in Section 10.4
---------
below) shall be liable for all Damages from the first dollar; provided, however,
that the Indemnification Threshold shall not apply to (i) adjustments to the
Merger Consideration as set forth in Sections 2.2 and 3.1, which adjustments
shall not constitute Damages; (ii) Damages arising out of any breaches of the
covenants of the Shareholders set forth in this Agreement or representations and
warranties made in Sections 5.4 (capital stock of the Company), 5.5
(transactions in capital stock), 5.18 (material contracts and commitments), 5.23
(conformity with law; litigation), 5.24 (taxes), or 5.27 (environmental
matters), or resulting from any receivables from related persons that are listed
on Schedule 8.13 and are not repaid pursuant to their terms; (iii) Damages
described in Section 10.1(a)(iv), or (iv) Damages arising out of any breaches of
the covenants of CCC or Newco set forth in this Agreement or representations and
warranties made in Section 6.2 (CCC Common Stock), 6.5 (Capitalization), Section
6.6 (Litigation), 6.8 (CCC Prospectus), or 6.9 (Registration Statement);
(b) the aggregate amount of any liability for Damages of the
Shareholders, CCC and Newco under this Article 10 shall not exceed 50% of the
Merger Consideration except with regard to any Damages that occur as a result of
fraudulent misrepresentations or fraudulent acts of the Shareholders, CCC or
Newco, as applicable;
(c) the indemnification obligations under this Article 10, or under
any certificate or writing furnished in connection herewith, shall terminate at
the date that is the later of clause (i) or (ii) of this Section 10.3(c):
(i)
(1) except as to representations, warranties, and covenants
specified in clause (i)(2) of this Section 10.3(c), the first anniversary of the
Closing Date, or
(2) (w) with respect to representations and warranties of
the Shareholders contained in Sections 5.22 (employee benefit plans), 5.24
(taxes), 5.27 (environmental matters), and the indemnification set forth in
Sections 10.1(a)(ii) (with respect to pre-closing covenants only), 10.1(a)(iii),
10.1(a)(iv), or 10.2(a)(ii) (with respect to pre-closing covenants only) on (A)
the date that is six (6) months after the expiration of the longest applicable
federal or state statute of limitation (including extensions thereof agreed to
by the party from whom indemnification is sought), or (B) if there is no
applicable statute of limitation, (i) four (4) years after the Closing
56
Date if the Claim is related to the cost of investigating, containing,
removing, or remediating a release of Hazardous Material into the environment,
or (ii) two (2) years after the Closing Date for any other Claim covered by
clause (i)(2)(B) of this Section 10.3(c), (x) with respect to covenants of the
Shareholders to be performed after the Closing Date until fully performed and
discharged, (y) with respect to covenants of CCC and Newco contained in Section
7.15 or the representations, warranties and covenants set forth in the
certificate delivered by or on behalf of CCC and Newco pursuant to Section 9.5,
until the expiration of the longest applicable federal or state statute of
limitations (including extensions thereof agreed to by the party from whom
indemnification is sought), and (z) with respect to the covenants or agreements
of CCC and Newco to be performed after the Closing Date until fully performed
and discharged; or
(ii) with respect to a particular claim or demand, the final
resolution of such claim or demand (but not any other claim or demand) pending
as of the relevant dates described in clause (i) of this Section 10.3(c) (such
claims referred to as "Pending Claims");
--------------
(d) in no event will any CCC Indemnified Party be entitled to
indemnification hereunder for the breach of a representation, warranty or
covenant where the identical subject matter thereof has also resulted in, or
caused, a Merger Consideration Adjustment to the Base Merger Consideration
pursuant to Section 3.1;
(e) in no event will any CCC Indemnified Party be entitled to any
indemnification hereunder from any Shareholder that is an employee benefit plan
within the meaning of ERISA Section 3(3) to the extent that such indemnification
could: (i) result in a transaction prohibited under ERISA Section 406 or Code
Section 4975; (ii) give rise to a claim for breach of any such plan
fiduciaries' duties with respect to such plan; or (iii) otherwise violate any
applicable provision of ERISA or the Code; or
(f) in no event will any CCC Indemnified Party be entitled to joint
and several indemnification hereunder for the breach by any Shareholder of the
provisions of Article 11 or Article 12 hereof; it being understood and agreed
that the CCC Indemnified Party shall be entitled to indemnification only from
the Shareholder breaching Article 11 or Article 12, as applicable.
(g) the Shareholders shall have no liability under this Article 10 in
respect of any Damages the full value of which have been recouped by CCC as a
result of (i) the payment by the Shareholders to the Surviving Corporation or
CCC of uncollected Accounts Receivable pursuant to Section 7.2 or (ii) CCC's not
having to pay to the Shareholders any portion of the Contingent Merger
Consideration because of any failure to achieve the targets set forth in Section
2.3(a) (i) herein.
(h) After the Effective Time, indemnification pursuant to this Section
10 shall be the sole and exclusive remedy of any Indemnified Party for any
breach of any representation, warranty, covenant or other agreement herein or
otherwise arising out of or in connection with the transactions contemplated by
this Agreement or the operations of the Company, whether such claim may be
asserted as a breach of contract, tort, a violation or breach of the 1933 Act or
the rules and regulations promulgated thereunder or otherwise, except with
regard to Damages that occur as a
57
result of fraudulent misrepresentations or fraudulent acts of the Company, the
Shareholders, CCC or Newco, as applicable.
10.4 INDEMNIFICATION PROCEDURES. All claims or demands for indemnification
under this Article 10 ("Claims") shall be asserted and resolved as follows:
------
(a) In the event that any CCC Indemnified Party or Shareholder
Indemnified Party, as applicable (in either case, an "Indemnified Party") has a
-----------------
Claim against any party obligated to provide indemnification pursuant to this
Article 10 (individually and collectively, the "Indemnifying Party") which does
------------------
not involve a Claim being asserted against or sought to be collected by a third
party, the Indemnified Party shall with reasonable promptness notify the
Indemnifying Party of such Claim, specifying the nature of such Claim and the
amount or the estimated amount thereof to the extent then feasible (the "Claim
-----
Notice"). If the Indemnifying Party does not notify the Indemnified Party
------
within thirty days after the date of delivery of the Claim Notice that the
Indemnifying Party disputes such Claim, with a statement of the basis of such
position, the amount of such Claim shall be conclusively deemed a liability of
the Indemnifying Party hereunder. In case an objection is made in writing in
accordance with this Section 10.4(a), the Indemnified Party shall respond in a
written statement to the objection within thirty days and, for sixty days
thereafter, attempt in good faith to agree upon the rights of the respective
parties with respect to such Claim (and, if the parties should so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties).
(b)
(i) In the event that any Claim for which the Indemnifying Party
would be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a third party (a "Third Party Claim"), the Indemnified
-----------------
Party shall deliver a Claim Notice including a copy of the claim if such claim
was made in writing to the Indemnifying Party. The Indemnifying Party shall have
thirty days from the date of delivery of the Claim Notice to notify the
Indemnified Party (A) whether the Indemnifying Party disputes liability to the
Indemnified Party hereunder with respect to the Third Party Claim, and, if so,
the basis for such a dispute, and (B) if such party does not dispute liability,
whether or not the Indemnifying Party desires, at the sole cost and expense of
the Indemnifying Party, to defend against the Third Party Claim, provided that
the Indemnified Party is hereby authorized (but not obligated) to file any
motion, answer or other pleading and to take any other action which the
Indemnified Party shall deem necessary or appropriate to protect the Indemnified
Party's interests.
(ii) In the event that the Indemnifying Party timely notifies the
Indemnified Party that the Indemnifying Party does not dispute the Indemnifying
Parties' obligation to indemnify with respect to the Third Party Claim, the
Indemnifying Party shall defend the Indemnified Party against such Third Party
Claim by appropriate proceedings, provided that, unless the Indemnified Party
otherwise agrees in writing, the Indemnifying Party may not settle any Third
Party Claim (in whole or in part) if such settlement does not include a complete
and unconditional release of the Indemnified Party. If the Indemnified Party
desires to participate in, but not control, any such defense or settlement the
Indemnified Party may do so at its sole cost and expense. The
58
Indemnified Party shall cooperate with the Indemnifying Party's defense against
any third-party claim. If the Indemnifying Party elects not to defend the
Indemnified Party against a Third Party Claim, whether by failure of such party
to give the Indemnified Party timely notice as provided herein or otherwise,
then the Indemnified Party, without waiving any rights against such party, may
settle or defend against such Third Party Claim in the Indemnified Party's sole
discretion and the Indemnified Party shall be entitled to recover from the
Indemnifying Party the amount of any settlement or judgment and, on an ongoing
basis, all indemnifiable costs and expenses of the Indemnified Party with
respect thereto, including interest from the date such costs and expenses were
incurred.
(iii) If at any time, in the reasonable opinion of the
Indemnified Party, notice of which shall be given in writing to the Indemnifying
Party, any Third Party Claim seeks material prospective relief which could have
an adverse effect on the assets, liabilities, financial condition or results of
operations of the Indemnified Party (or on the Surviving Corporation but only if
the Indemnified Party is CCC and/or Newco in such an instance), the Indemnified
Party shall have the right to control or assume (as the case may be) the defense
of any such Third Party Claim; provided, however, that the Indemnified Party
will not settle any such Third Party Claim without the prior consent of the
Indemnifying Party, which consent shall not be unreasonably withheld. If the
Indemnified Party elects to exercise such right, the Indemnifying Party shall
have the right to participate in, but not control, the defense of such Third
Party Claim at the sole cost and expense of the Indemnifying Party.
(c) Subject to the provisions of Section 10.3, the Indemnified
Party's failure to give reasonably prompt notice as required by this Section
10.4 of any actual, threatened or possible claim or demand which may give rise
to a right of indemnification hereunder shall not relieve the Indemnifying Party
of any liability which the Indemnifying Party may have to the Indemnified Party
unless the failure to give such notice materially and adversely prejudices the
Indemnifying Party.
(d) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under this Article 10, provided that the Indemnified
Party shall be obligated to make reasonable efforts to continue pursuing any
payment pursuant to the terms of any insurance policy or to assign its rights
under such policy to the Indemnifying Party.
10.5 SURVIVAL OF REPRESENTATIONS WARRANTIES. The representations of each
of the Company, the Shareholders, CCC and Newco will survive the Closing until,
and will expire upon, the termination of the indemnification obligations as
provided in Section 10.3(e).
10.6 RIGHT TO SET OFF. CCC shall have the right, but not the obligation,
to set off, in whole or in part, against the Pledged Assets, amounts finally
determined under Section 10.4 to be owed to CCC by the Shareholders under
Section 10.1 hereof, and subject to the limitations in Sections 3.2(c) and 10.3
hereof.
59
11. NONCOMPETITION
11.1 PROHIBITED ACTIVITIES. Except as described on SCHEDULE 11.1 hereto or
as otherwise provided in an employment agreement with CCC or a subsidiary of
CCC, the Surviving Corporation or any other subsidiary of CCC, each Shareholder
agrees that for a period of two years following the Closing Date, he/she shall
not:
(a) engage, as an officer, director, shareholder, owner, partner,
member, joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant, advisor, or sales representative, in any
business selling any products or services in direct competition with the Holding
Company or any of its subsidiaries within 100 miles of any office of the Holding
Company or any office of any of the Holding Company's subsidiaries (the
"Territory");
----------
(b) call upon any person who is, at that time, within the Territory,
an employee of the Holding Company or any subsidiary of the Holding Company in a
managerial capacity for the purpose or with the intent of enticing such employee
away from or out of the employ of the Holding Company or any subsidiary of the
Holding Company;
(c) call upon any person within the Territory who is, at that time,
or has been, within one year prior to that time, a customer of the Holding
Company or any subsidiary of the Holding Company, for the purpose of soliciting
or selling products or services in direct competition with the Holding Company
or any subsidiary of the Holding Company within the Territory;
(d) call upon any person who is, at the time, or has been, within one
year prior to that time, a customer of CCC and/or any subsidiary or affiliate of
CCC with whom the Shareholder has had personal contact for the purpose of
soliciting or selling products or services in direct competition with CCC and/or
any subsidiary or affiliate of CCC; or
(e) on the Shareholder's behalf or on behalf of any competitor, call
upon any person as a prospective acquisition candidate who was, to the
Shareholder's knowledge, either called upon by the Holding Company or a
subsidiary of the Holding Company as a prospective acquisition candidate or was
the subject of an acquisition analysis by the Holding Company or any subsidiary
of the Holding Company. The Shareholder, to the extent lacking the knowledge
described in the preceding sentence, shall immediately cease all contact with
any prospective acquisition candidate upon being informed, in writing, that the
Holding Company or any subsidiary of the Holding Company had so called upon such
candidate or made an acquisition analysis thereof.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any Shareholder subject to this Article 11 from acquiring as an
investment not more than one percent of the outstanding voting capital stock of
a competing business, whose stock is traded on a national securities exchange or
through the automated quotation system of a registered securities association.
11.2 DAMAGES. Because of the difficulty of measuring economic losses to
CCC and the Surviving Corporation as a result of the breach of the foregoing
covenant, and because of the
60
immediate and irreparable damage that would be caused to CCC and the Surviving
Corporation for which they would have no other adequate remedy, each Shareholder
subject to this Article 11 agrees that, in the event of a breach by them of the
foregoing covenant, the covenant may be enforced by CCC or the Surviving
Corporation by, without limitation, injunctions and restraining orders.
11.3 REASONABLE RESTRAINT. It is agreed by the parties that the foregoing
covenants in this Article 11 impose a reasonable restraint on the Shareholders
subject to this Article 11 in light of the activities and business of CCC on the
date of the execution of this Agreement and the current and future plans of CCC
and the Surviving Corporation (as successors to the businesses of the Company).
11.4 SEVERABILITY; REFORMATION. The covenants in this Article 11 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
11.5 INDEPENDENT COVENANT. All of the covenants in this Article 11 shall
be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the Shareholders
against the Company, the Surviving Corporation or CCC, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
of such covenants. It is specifically agreed that the period of two years
stated above, shall be computed by excluding from such computation any time
during which any Shareholder subject to this Article 11 is in violation of any
provision of this Article 11 and any time during which there is pending in any
court of competent jurisdiction any action (including any appeal from any
judgment) brought by any person, whether or not a party to this Agreement, in
which action CCC or the Surviving Corporation seeks to enforce the agreements
and covenants of the Shareholders set forth in this Article 11 or in which any
person contests the validity of such agreements and covenants or their
enforceability or seeks to avoid their performance or enforcement; provided,
however, that if any Shareholder is found not to be in violation of the
agreements or covenants in any such activity the period during which the action
was pending shall not be excluded from such computation.
11.6 MATERIALITY. CCC, the Company and each Shareholder hereby agree that
the covenants set forth in this Article 11 are a material and substantial part
of the transactions contemplated by this Agreement, and that no portion of the
Base Merger Consideration or the Contingent Merger Consideration shall be paid
for or allocated to the covenants set forth in this Article 11.
61
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
12.1 CONFIDENTIALITY.
(a) None of the parties hereto will use or disclose to third parties
(except as may be necessary for the consummation of the transactions
contemplated hereby, or as required by law, including, without limitation, in
connection with legal proceedings relating to this Agreement and the
transactions contemplated hereby, or otherwise pursuant to subpoena or the
request of a governmental authority, and then only with prior notice to the
other parties hereto, including delivery of a copy of the subpoena or request,
if applicable) this Agreement, any information (including, without limitation,
financial information) received from any other party hereto or its agents in the
course of investigating, negotiating and performing the transactions
contemplated by this Agreement or any confidential information of the Company or
the Surviving Corporation received or that any such party receives in the future
relating to the Company or the Surviving Corporation (such as lists of
customers, operational policies and pricing and cost policies that are valuable,
special and unique assets of the Company or the Surviving Corporation or the
business of the Company or the Surviving Corporation; provided, however, that
each party may disclose such information to such party's officers, directors,
employees, lenders, advisors, attorneys and accountants who need to know such
information in connection with the consummation of the transactions contemplated
by this Agreement and who are informed by such party of the confidential nature
of such information. Nothing shall be deemed to be confidential information
that: (1) is already in such party's possession, provided that such information
is not known by such party to be subject to another confidentiality agreement
with or other obligation of secrecy to the other party hereto or another party,
or (2) becomes generally available to the public other than as a result of a
disclosure by such party or such party's officers, directors, employees,
lenders, advisors, attorneys or accountants, or (3) becomes available to such
party on a non-confidential basis from a source other than the other party
hereto or its advisors, provided that such source is not known by such party to
be bound by a confidentiality agreement with or other obligation of secrecy to
the other party hereto or another party, or (4) is developed independently by
either party without resort to the confidential information of the other party.
In the event this Agreement is terminated and the transactions contemplated
hereby abandoned, each party will return to the other party all written
confidential information (including all documents, work papers and other written
confidential material) obtained by the such party from any other party, or
developed by such party based on confidential information, in connection with
the transactions contemplated by this Agreement.
(b) No party shall publish any press release or make any other public
announcement concerning this Agreement or the transactions contemplated hereby
without the prior written consent of each other party, which shall not be
withheld unreasonably; provided, however, that nothing contained in this
Agreement shall prevent any party, after notification to each other party, from
making any filings with governmental authorities that, in its judgment, may be
required or advisable in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
62
12.2 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, CCC, the Surviving Corporation and the Shareholders agree that,
in the event of a breach by any of them of the foregoing covenant, the covenant
may be enforced against them by injunctions and restraining orders. Nothing
herein shall be construed as prohibiting any party from pursuing any other
available remedy for such breach or threatened breach, including the recovery of
damages.
13. GENERAL
13.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date solely:
(a) by mutual written consent of the Boards of Directors of CCC and
the Company; or
(b) by the holders of a majority of the voting stock of the Company
and the Company as a group on the one hand, or by CCC, on the other hand, if the
Closing shall not have occurred on or before March 15, 1998, provided that the
right to terminate this Agreement under this Section 13.1(b) shall not be
available to either party (with the Shareholders and the Company deemed to be a
single party for this purpose) whose material misrepresentation, breach of
warranty or failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur on or before such
date; or
(c) by the holders of a majority of the voting stock of the Company
and the Company as a group on the one hand, or by CCC, on the other hand, if
there is or has been a material breach, failure to fulfill or default on the
part of the other party (with the Shareholders and the Company deemed to be a
single party for this purpose) of any of the representations and warranties
contained herein or in the due and timely performance and satisfaction of any of
the covenants, agreements or conditions contained herein, and the curing of such
default shall not have been made on or before the Closing Date; or
(d) by the holders of a majority of the voting stock of the Company
and the Company as a group on the one hand, or by CCC, on the other hand, if
there shall be a final nonappealable order of a federal or state court in effect
preventing consummation of the Merger; or there shall be any action taken, or
any statute, rule or regulation or order enacted, promulgated or issued or
deemed applicable to the Merger by any governmental entity which would make the
consummation of the Merger illegal; or
13.2 EFFECT OF TERMINATION. (a) In the event of termination of this
Agreement by either or both of CCC and/or the holders of the majority of the
voting stock of the Company and the Company (with such Shareholders and the
Company deemed to be a single party for purposes of this Section 13.2) pursuant
to Section 13.1, prompt written notice thereof shall forthwith be given to the
other party and this Agreement shall terminate and the transactions contemplated
hereby shall be
63
abandoned without further action by any of the parties hereto, but subject to
and without limiting any of the rights of the parties specified herein in the
event a party is in default or breach in any material respect of its obligations
under this Agreement. If this Agreement is terminated as provided herein:
(i) None of the parties hereto nor any of their respective
partners, directors, officers, shareholders, employees, agents, or affiliates
shall have any liability or further obligation hereunder except with respect to
Section 7.22, Article 12 and Article 13; and
(ii) All filings, applications and other submissions relating
to the transactions contemplated hereby as to which termination has occurred
shall, to the extent practicable, be withdrawn from the agency or other person
to which made.
(b) (i) If this Agreement is terminated pursuant to Section 13.1
and any party shall be in material breach of any of its obligations,
representations, warranties or covenants set forth in this Agreement, the other
party shall have the right to pursue all legal or equitable remedies for breach
of contract or otherwise, and
(ii) Without limiting the generality of the foregoing, or any
applicable law, neither CCC and Newco, on the one hand, nor the Company and the
Shareholders, on the other hand, may rely on the failure of any condition
precedent set forth in Articles 8 and 9 to be satisfied as a ground for
termination of this Agreement by such party if such failure was caused by such
party's (or parties') failure to act in good faith, or a breach of or failure to
perform its representations, warranties, covenants or other obligations in
accordance with the terms hereof.
13.3 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of CCC
and the other parties hereto, and the heirs and legal representatives of the
Shareholders.
13.4 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement sets forth the
entire understanding of the parties hereto with respect to the transactions
contemplated hereby. Each of the Schedules to this Agreement is incorporated
herein by this reference and expressly made a part hereof. Any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement. This
Agreement shall not be amended or modified except by a written instrument duly
executed by each of the parties hereto. Any extension or waiver by any party of
any provision hereto shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
13.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered (which deliveries may be made by telefax)
shall be deemed to be an original, and all of which counterparts taken together
shall constitute but one and the same instrument.
64
13.6 BROKERS AND AGENTS. CCC and Newco (as a group) and the Company and
each Shareholder (as a group) each represents and warrants to the other that
except as set forth in this Section 13.6, it/they has/have not employed any
broker or agent in connection with the transactions contemplated by this
Agreement and agrees to indemnify the other against all losses, damages or
expenses relating to or arising out of claims for fees or commission of any
broker or agent employed or alleged to have been employed by such party.
13.7 EXPENSES. CCC has paid and will pay the fees, expenses and
disbursements of CCC and Newco and their agents, representatives, accountants
and counsel incurred in connection with the subject matter of this Agreement.
In addition, CCC will pay all fees and expenses relating to obtaining licenses,
permits, surety bonds, insurance, transfer applications, business credit reports
and the related qualifications for Newco, the other subsidiaries newly formed by
CCC to effect the Group Merger Transaction and the Surviving Group Companies,
including the Surviving Corporation, up to an aggregate amount of $100,000. Any
such fees and expenses of the Surviving Group Companies in excess of $100,000
shall be split between CCC on the one hand and the shareholders of the Group
Companies on the other. Except with respect to FMI Corporation and the part of
the fee to ▇▇▇▇ ▇▇▇▇▇▇▇▇ referred to below, the Shareholders (and not the
Company) have paid and will pay the fees, expenses and disbursements of the
Shareholders, the Company, and their agents, representatives, financial
advisers, accountants and counsel incurred in connection with the subject matter
of this Agreement. It is agreed that the fees and expenses relating to any HSR
Act filing will be split between CCC on the one hand and the Shareholders on the
other. In addition, it is understood and agreed that CCC shall be solely
responsible to pay to FMI Corporation a fee equal to 3% of the Base Merger
Consideration plus the Contingent Merger Consideration paid pursuant to this
Agreement and ▇▇▇▇ ▇▇▇▇▇▇▇▇ professional fees equal to $250,000, and the parties
set forth on SCHEDULE 13.7 hereof shall be solely responsible to pay ▇▇▇▇
▇▇▇▇▇▇▇▇ an amount previously agreed to by the parties for professional fees.
At the election of the Shareholders, any of the foregoing fees contemplated
under this SECTION 13.7 payable by them will be paid by CCC or the Company and
not the Shareholders, provided that the aggregate amount of the Base Merger
Consideration is reduced by the amount of such expenses with any such reduction
to have no effect on the calculation of the Group Actual Earn Out EBIT or the
payment of the Contingent Merger Consideration.
13.8 SPECIFIC PERFORMANCE; REMEDIES. Each party hereto acknowledges that
the other parties will be irreparably harmed and that there will be no adequate
remedy at law for any violation by any of them of any of the covenants or
agreements contained in this Agreement, including without limitation, the
noncompetition provisions set forth in Article 11 and the confidentiality
obligations set forth in Article 12. It is accordingly agreed that, in addition
to any other remedies which may be available upon the breach of any such
covenants or agreements, each party hereto shall have the right to obtain
injunctive relief to restrain a breach or threatened breach of, or otherwise to
obtain specific performance of, the other parties, covenants and agreements
contained in this Agreement.
13.9 NOTICES. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed
65
given if delivered personally or sent by ▇▇▇▇▇▇▇ (with confirmation of receipt),
by registered or certified mail, postage prepaid, or by recognized courier
service, as follows:
If to CCC, Newco or the Surviving Corporation to:
Consolidation Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attn: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇
Executive Vice President, General Counsel and Secretary
(Telefax: 202/833-1274)
with a required copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
(Telefax: 202/467-7176)
If to any Shareholder to:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
(Telefax: 513/ 979-7424)
with a required copy to:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇, Kite & Stanford, LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
(Telefax: 513/ 241-4490)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
13.10 GOVERNING LAW. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State of Delaware,
without giving effect to any of
66
the conflicts of laws provisions thereof that would require the application of
the substantive laws of any other jurisdiction.
13.11 SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstances is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstances in any other jurisdiction, shall not be affected
thereby, and to this end the provisions of this Agreement shall be severable.
The preceding sentence is in addition to and not in place of the severability
provisions in Section 11.4.
13.12 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. Except as set forth in
Section 7.11, no provision of this Agreement is intended, nor will any provision
be interpreted, to provide or to create any third party beneficiary rights or
any other rights of any kind in any client, customer, affiliate, shareholder,
employee or partner of any party hereto or any other person or entity.
13.13 FURTHER REPRESENTATIONS. Each party to this Agreement acknowledges
and represents that it has been represented by its own legal counsel in
connection with the transactions contemplated by this Agreement, with the
opportunity to seek advice as to its legal rights from such counsel. Each party
further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement.
13.14 GROUP REPRESENTATIVE AND SHAREHOLDER REPRESENTATIVE. (a) Each of
the Shareholders hereby appoints ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇. as his exclusive agent and
attorney-in-fact to act on his behalf with respect to any and all matters,
claims, controversies, or disputes arising out of the calculation of the Merger
Consideration (the "Group Representative"). Each Shareholder understands that
--------------------
the Group Representative will represent the shareholders of the Surviving Group
Companies. Each Shareholder further agrees that (i), in the case of a dispute
regarding the base merger consideration paid by CCC pursuant to the Group
Company Agreements (the "Total Base Merger Consideration"), the approval of the
-------------------------------
former shareholders of the Group Companies which received a majority of the
Total Base Merger Consideration, and (ii), in the case of a dispute regarding
the contingent merger consideration to be paid by CCC pursuant to the Group
Company Agreements (the "Total Contingent Merger Consideration"), the approval
-------------------------------------
of the former shareholders of the Group Companies which would be entitled to
receive a majority of the Total Contingent Merger Consideration (the required
vote pursuant to (i) and (ii) above is referred to as the "Approval of the Group
---------------------
Company Shareholders"), the Group Representative shall have the power to take
--------------------
any and all actions which the Group Representative believes are necessary or
appropriate or in the best interests of all of the shareholders of the Group
Companies for and on behalf of such shareholders, as fully as if they were
acting on their own behalf, including without limitation, consenting to, and
settling any and all claims, disputes or controversies arising with regard to
the calculation of the Merger Consideration. CCC and the Surviving Group
Companies shall have the right to rely on any actions taken or omitted to be
taken by the Group Representative as being the act or omission of the
Shareholders, without the need for any inquiry, and any such actions or
omissions shall be binding upon the Shareholders. In addition, the shareholders
of the Group Companies shall have the right to change the identity of the Group
Representative upon the Approval of the Group Company Shareholders, and shall
deliver to CCC and the Surviving Group Companies prompt written notice
67
of any such change of identity, which upon receipt by CCC and the Surviving
Group Companies will effect said change. Except to the extent prohibited by law,
the Shareholders agree to hold the Group Representative free and harmless from
and indemnify the Group Representative against any and all loss, damage or
liability which he may sustain as a result of any action taken in good faith
hereunder, including, without limitation, any legal fees and expenses.
(b) Each of the Shareholders hereby appoints ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as
his exclusive agent and attorney-in-fact to act on his behalf with respect to
any and all matters, claims, controversies, or disputes arising out of the terms
of this Agreement (the "Representative"), other than those contained in Section
--------------
13.14(a) above. Each Shareholder further agrees that upon the vote of the
Shareholders holding a majority of the stock of the Company immediately
preceding the Closing (the "Shareholder Approval") the Representative shall have
--------------------
the power to take any and all actions which the Representative believes are
necessary or appropriate or in the best interests of the Shareholders, as fully
as if the Shareholders were acting on their own behalf, including without
limitation, consenting to, and settling any and all claims, disputes or
controversies arising hereunder, conducting all negotiations with and otherwise
dealing with CCC and the Surviving Corporation and engaging counsel, accountants
and other representatives in connection with the foregoing matters. CCC and the
Surviving Corporation shall have the right to rely on any actions taken or
omitted to be taken by the Representative as being the act or omission of the
Shareholders, without the need for any inquiry, and any such actions or
omissions shall be binding upon the Shareholders. The Shareholders shall have
the right to change the identity of the Representative upon Shareholder Approval
and shall deliver to CCC and the Surviving Corporation prompt written notice of
any such change of identity, which upon receipt by CCC and the Surviving
Corporation will effect said change. The Shareholders agree to hold the
Representative free and harmless from and indemnify the Representative against
any and all loss, damage or liability which he may sustain as a result of any
action taken in good faith hereunder, including, without limitation, any legal
fees and expenses.
[Execution Page Following]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
CONSOLIDATION CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Executive Vice President
CCC4 ACQUISITION CO.
By: /s/ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇
----------------------------------------------
▇. ▇▇▇▇▇▇▇ ▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
SHAREHOLDERS:
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Index of Defined Terms
----------------------
Section
-------
1933 Act...................................................................2.2(a)
Accounts Receivable..........................................................5.12
Actual Adjusted EBIT.......................................................3.1(a)
Actual 1997 Adjusted EBIT..................................................3.1(b)
Actual Merger Consideration Adjustment.....................................3.1(c)
Affiliate....................................................................5.31
Agreement.................................................................7.10(c)
Approval of the Group Company Shareholders..................................13.14
Audited Financials...........................................................5.10
Balance Sheet Date...........................................................5.10
Base Merger Consideration..................................................2.2(a)
CCC.........................................................................INTRO
CCC Charter Documents.........................................................6.1
CCC Common Stock...........................................................2.1(c)
CCC Indemnified Parties......................................................10.1
CCC Indemnified Party........................................................10.1
CCC Prospectus...............................................................5.30
CCC's knowledge.................................................................6
CCC's Accountant........................................................2.3(a)(i)
Certificates...............................................................2.4(b)
Charter Documents.............................................................5.1
Claim Notice..............................................................10.4(a)
Claims.......................................................................10.4
Closing.......................................................................4.1
Closing Balance Sheet........................................................7.20
Closing Date..................................................................4.1
Closing Financial Certificate.................................................8.8
COBRA.....................................................................5.22(e)
Code.....................................................................Recitals
Company..................................................................Recitals
Company 1................................................................Recitals
Company 2................................................................Recitals
Company 3................................................................Recitals
Company 4................................................................Recitals
Company 5................................................................Recitals
Company 6................................................................Recitals
Company Common Stock.....................................................Recitals
Company Financial Statements.................................................5.10
Company Hazardous Materials Activities....................................5.27(b)
Company's knowledge.............................................................5
Company's 1997 Adjusted EBIT...............................................2.2(b)
Company's Closing Net Worth................................................2.2(b)
Constituent Corporations.................................................Recitals
Contingent Merger Consideration............................................2.3(a)
controlled group.............................................................5.22
Conversion Indemnitee........................................................7.22
Damages...................................................................10.1(a)
Earn Out EBIT Notice....................................................2.3(a)(i)
Earn Out Period............................................................2.3(f)
Earn Out Period Average Price..............................................2.3(c)
Earn Out Range........................................................2.3(a)(iii)
Earn Out Threshold.....................................................2.3(a)(ii)
Earnings before Interest and Taxes.........................................2.2(b)
Earnings before Interest and Taxes of the Surviving Group Companies.....2.3(a)(i)
EBIT Increase..............................................................2.2(d)
Effective Time................................................................4.2
Environmental Permits.....................................................5.27(c)
Equipment....................................................................5.33
ERISA........................................................................5.22
ESOP......................................................................5.22(j)
Financial Adjustment Notice................................................3.1(b)
Financial Certificates.......................................................7.20
GAAP.......................................................................2.2(b)
golden parachute.............................................................5.22
Group 1997 Adjusted EBIT...................................................2.2(b)
Group 1997 Adjusted EBIT Target............................................2.2(b)
Group Actual Earn Out EBIT..............................................2.3(a)(i)
Group Closing Net Worth....................................................2.2(b)
Group Companies..........................................................Recitals
Group Company............................................................Recitals
Group Company Agreements.................................................Recitals
group health plans........................................................5.22(e)
Group Merger Transaction.................................................Recitals
Group Net Worth Target.....................................................2.2(b)
Group Representative........................................................13.14
Hazardous Material........................................................5.27(a)
Holding Company..............................................................7.21
Indemnification Threshold....................................................10.3
Indemnified Party.........................................................10.4(a)
Indemnifying Party........................................................10.4(a)
Intellectual Property.....................................................5.17(a)
Interim Balance Sheet........................................................9.14
Interim Financial............................................................9.14
Interim Period Average.....................................................2.2(a)
Inventory....................................................................5.33
knowledge of CCC................................................................6
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knowledge of Newco..............................................................6
knowledge of the Company........................................................5
Laws.................................................................5.15(c)(iii)
leased Real Property......................................................5.15(d)
liabilities...............................................................5.11(d)
Lien..........................................................................5.4
Material Adverse Effect.......................................................5.1
Material Contracts........................................................5.18(a)
Maximum Earn Out Amount.................................................2.3(a)(i)
Maximum Earn Out Threshold..............................................2.3(a)(i)
Merger...................................................................Recitals
Merger Consideration.......................................................2.4(a)
Merger Consideration Adjustment............................................3.1(b)
Merger Documents..............................................................4.2
Merger Price...............................................................2.2(a)
multiemployer pension plan...................................................5.22
Net Worth..................................................................2.2(b)
New Accounting Firm........................................................2.3(b)
Newco....................................................................Recitals
Newco's knowledge...............................................................6
Other Group Companies....................................................Recitals
PBGC.........................................................................5.22
Pending Claims........................................................10.3(c)(ii)
Permits......................................................................5.14
Permitted Encumbrances.................................................5.15(c)(i)
Agreement and Plan of Merger..................................................1.1
Plans........................................................................5.22
Pledged Assets.............................................................3.2(a)
Post-Closing Audit.........................................................3.1(b)
Prime Rate.................................................................2.3(b)
Profit Sharing Plan.......................................................5.22(j)
Proposed Numbers...........................................................3.1(c)
Qualified Plans..............................................................5.22
Real Property.............................................................5.15(a)
Registration Statement........................................................6.9
Related Party Agreements..................................................5.18(a)
Release Date...............................................................3.2(c)
reportable events.........................................................5.22(c)
Representative...........................................................13.14(a)
Required Consents.............................................................8.4
Revised Earn Out EBIT......................................................2.3(b)
Revised Numbers............................................................3.1(c)
Securities Act............................................................7.10(c)
Specified Percentage..................................................2.3(a)(iii)
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State Corporate Laws..........................................................1.2
State Corporation Laws........................................................1.2
Shareholder.................................................................Intro
Shareholder Approval.....................................................13.14(b)
Shareholder Indemnified Parties..............................................10.2
Shareholder Indemnified Party................................................10.2
Structures............................................................5.15(c)(ii)
Supplemental Financial Certificate...........................................7.20
Surviving Corporation.........................................................1.1
Tax....................................................................5.24(c)(i)
Tax Return............................................................5.24(c)(ii)
tax-free reorganization..................................................Recitals
Territory.................................................................11.1(a)
Third Party Claim......................................................10.4(b)(i)
Title Commitment..............................................................7.3
Title Policy..................................................................7.3
Total Base Merger Consideration.............................................13.14
Total Contingent Merger Consideration.......................................13.14
UCC..........................................................................5.33
Year-End Net Worth............................................................5.9
iv