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EXHIBIT 2.20
AGREEMENT AND PLAN OF MERGER
DATED AS OF
SEPTEMBER 11, 1998
AMONG
INTEGRATED ELECTRICAL SERVICES, INC.,
▇▇▇▇▇ ACQUISITION CORPORATION,
▇▇▇▇▇ ELECTRICAL CONSTRUCTORS, INC.
AND
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
J. ▇▇▇▇▇▇ ▇▇▇▇▇▇ AND ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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TABLE OF CONTENTS
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ARTICLE I - The Merger............................................................................1
Section 1.1 The Merger............................................................................1
Section 1.2 Conversion of Shares..................................................................2
Section 1.3 Surrender and Payment.................................................................2
Section 1.4 Withholding Rights....................................................................2
Section 1.5 Lost Certificates.....................................................................3
Section 1.6 Other Documents to be Delivered Immediately Prior to the Effective Time...............3
Section 1.7 Conditions to the Obligations of the Company Stockholders.............................4
Section 1.8 Conditions to the Obligations of IES..................................................5
Section 1.9 Termination...........................................................................5
ARTICLE II - The Surviving Corporation.............................................................6
Section 2.1 Certificate of Incorporation..........................................................6
Section 2.2 Bylaws................................................................................6
Section 2.3 Directors and Officers................................................................6
ARTICLE III - Representations and Warranties of the Company Stockholders............................6
Section 3.1 Organization and Qualification........................................................6
Section 3.2 Capitalization; Ownership.............................................................7
Section 3.3 Authorization.........................................................................8
Section 3.4 Consents and Approvals; No Violation..................................................8
Section 3.5 Affiliate Relationships...............................................................9
Section 3.6 Financial Statements..................................................................9
Section 3.7 Undisclosed Liabilities...............................................................9
Section 3.8 Accounts and Notes Receivables........................................................9
Section 3.9 Assets................................................................................10
Section 3.10 Material Contracts; Commitments and Customers.........................................11
Section 3.11 Operating Authority...................................................................11
Section 3.12 Bank Account Information..............................................................12
Section 3.13 Conduct of Business Since Company Unaudited Balance Sheet Date........................12
Section 3.14 Litigation; Orders....................................................................12
Section 3.15 Labor Matters.........................................................................12
Section 3.16 Compliance with Laws..................................................................13
Section 3.17 Insurance.............................................................................13
Section 3.18 Environmental Matters.................................................................13
Section 3.19 Taxes.................................................................................14
Section 3.20 Employee Benefit Plans................................................................16
Section 3.21 Brokerage Fees and Commissions........................................................18
ARTICLE IV - Representations and Warranties of IES.................................................18
Section 4.1 Organization and Qualification........................................................18
Section 4.2 Capitalization........................................................................18
Section 4.3 Authorization.........................................................................19
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Section 4.4 Consents and Approval; No Violation...................................................19
Section 4.5 SEC Filings...........................................................................19
Section 4.6 No Assurances.........................................................................20
Section 4.7 Stockholder's Equity..................................................................20
ARTICLE V - Additional Covenants and Agreements...................................................21
Section 5.1 Reasonable Best Efforts...............................................................21
Section 5.2 Certain Filings.......................................................................21
Section 5.3 Public Announcements..................................................................21
Section 5.4 Further Assurances....................................................................21
Section 5.5 Notices of Certain Events.............................................................21
Section 5.6 Release from Guarantees...............................................................22
Section 5.7 Future Cooperation....................................................................22
Section 5.8 Expenses..............................................................................22
Section 5.9 Repayment of Related Party Indebtedness...............................................22
Section 5.10 FIRPTA Certificate....................................................................23
Section 5.11 Preparation and Filing of Tax Returns.................................................23
Section 5.12 Antitrust Law Compliance..............................................................24
Section 5.13 Conduct of Business Pending Closing...................................................25
Section 5.14 Notification of Certain Matters.......................................................27
Section 5.15 Vehicles..............................................................................27
Section 5.16 Deferred Compensation.................................................................27
Section 5.17 Stock Options.........................................................................28
Section 5.18 Bonuses...............................................................................28
Section 5.19 Certain Employees and Office..........................................................28
Section 5.20 Tax Audit.............................................................................28
Section 5.21 Life Insurance........................................................................29
Section 5.22 Purchase of Assets....................................................................29
Section 5.23 Airplane Lease........................................................................29
Section 5.24 Stock Purchase Agreement..............................................................29
Section 5.25 Removal of Stock Certificate Legend...................................................29
ARTICLE VI - Indemnification.......................................................................30
Section 6.1 Indemnification by the Company Stockholders...........................................30
Section 6.2 Indemnification Related to Tax Liabilities............................................31
Section 6.3 Indemnification by IES................................................................31
Section 6.4 Indemnification Proceedings...........................................................32
Section 6.5 Sole Remedy...........................................................................32
Section 6.6 Limitations and Exceptions............................................................33
Section 6.7 No Third Party Beneficiaries..........................................................33
Section 6.8 Limitation Upon Indemnity.............................................................33
Section 6.9 Punitive Damages......................................................................33
ARTICLE VII - Noncompetition Covenants..............................................................33
Section 7.1 Prohibited Activities.................................................................33
Section 7.2 Equitable Relief......................................................................34
Section 7.3 Reasonable Restraint..................................................................35
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Section 7.4 Severability; Reformation.............................................................35
Section 7.5 Material and Independent Covenant.....................................................35
Section 7.6 Materiality...........................................................................35
ARTICLE VIII - Applicable Securities Laws/Transfer Restrictions......................................35
Section 8.1 Company Stockholders' Representations and Warranties Concerning Securities............36
Section 8.2 Transfer Restrictions.................................................................36
Section 8.3 Resales...............................................................................37
ARTICLE IX - Nondisclosure of Confidential Information.............................................37
Section 9.1 General...............................................................................37
Section 9.2 Equitable Relief......................................................................38
Section 9.3 Non-Public Information................................................................38
Section 9.4 Survival..............................................................................38
ARTICLE X - Miscellaneous.........................................................................38
Section 10.1 Governing Law.........................................................................38
Section 10.2 Entire Agreement......................................................................38
Section 10.3 Expenses and Fees.....................................................................38
Section 10.4 Notices...............................................................................38
Section 10.5 Successors and Assigns................................................................39
Section 10.6 Survival of Representations and Warranties............................................39
Section 10.7 Headings; Definitions.................................................................39
Section 10.8 Amendments and Waivers................................................................40
Section 10.9 Construction of Certain Provisions....................................................40
Section 10.10 Severability..........................................................................40
Section 10.11 Jurisdiction..........................................................................40
Section 10.12 Waiver of Jury Trial..................................................................41
Section 10.13 Specific Performance..................................................................41
Section 10.14 Counterparts; Effectiveness...........................................................41
Section 10.15 Mutual Indemnification Against Claims.................................................41
Section 10.16 Definitions and Usage.................................................................41
Section 10.17 Disclosure Schedule...................................................................45
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EXHIBITS AND SCHEDULES
Exhibit A Form of Employment Agreement
Exhibit B Form of Opinion of Counsel to Company Stockholders
Exhibit C Form of Certificate of Secretary of the Company
Exhibit D Form of Company Stockholder Release
Exhibit E Form of Company Director Resignation
Exhibit F Form of Company Affiliate Letter
Exhibit G Form of Company Stockholder Receipt
Exhibit H Form of Cross-Receipt
Exhibit I Form of Opinion of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Exhibit J Form of Certificate of Secretary of IES and Acquisition
Exhibit K Form of Stock Option Agreement
Schedule 2.3 Officers of Surviving Corporation
Schedule 3.1 Organization and Qualification of Company and Subsidiaries
Schedule 3.2(a) Ownership of Company Shares and Delivery Instructions
Schedule 3.2(b) Subsidiary Corporate History, Subsidiary Stock, Other Securities
and Non-Corporate Entity Participation
Schedule 3.4 Company Consents and Approvals; No Violation
Schedule 3.5 Affiliate Relationships
Schedule 3.6 Company Financial Statements
Schedule 3.7 Company Undisclosed Liabilities
Schedule 3.8 Company Accounts and Notes Receivables
Schedule 3.9 Company Assets
Schedule 3.10 Material Contracts, Commitments and Customers
Schedule 3.11 Company Operating Authority
Schedule 3.12 Company Bank Account Information
Schedule 3.13 Company Conduct of Business
Schedule 3.14 Company Litigation; Orders
Schedule 3.15 Company Labor Agreements
Schedule 3.17 Company Insurance
Schedule 3.18 Company Disposal Sites
Schedule 3.19 Company Taxes
Schedule 3.20 Company Employee Benefit Plans
Schedule 3.21 Company Brokerage Fees and Commissions
Schedule 5.6 Company Stockholder Guarantees
Schedule 5.9 Repayment of Advances, Receivables and Loans
Schedule 5.11 Merger Consideration and Liability Allocations
Schedule 5.13 Conduct of Business
Schedule 5.15 Vehicles
Schedule 5.16 Deferred Compensation
Schedule 5.17 Stock Options
Schedule 5.18 Bonuses
Schedule 5.22 Purchase of Assets
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of September 11,
1998 among Integrated Electrical Services, Inc., a Delaware corporation ("IES"),
▇▇▇▇▇ Acquisition Corporation, a South Carolina corporation and a wholly owned
subsidiary of IES ("Acquisition"), ▇▇▇▇▇ Electrical Constructors, Inc., a South
Carolina corporation ("Company"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, J. ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
who are all of the stockholders of the Company (together, the "Company
Stockholders").
RECITALS:
WHEREAS, the Boards of Directors of IES and the Company have
determined that the combination of IES and the Company is in the best interests
of the stockholders of IES and the Company, respectively;
WHEREAS, the Company Stockholders desire to sell to IES all of the
issued and outstanding shares of capital stock of the Company, free and clear of
all Liens (as defined in Section 10.16), and the Company Stockholders agree to
be bound by a covenant not to compete; and
WHEREAS, IES desires to acquire such shares of capital stock of the
Company as more fully set forth herein and enforce the covenant not to compete.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. (a) At the closing of the transactions
contemplated by this Agreement (the "Closing") and upon delivery of the
documents listed in Section 1.6, at the Effective Time (as hereinafter defined),
Acquisition shall be merged (the "Merger") with and into the Company in
accordance with the South Carolina Business Corporation Act, as amended ("South
Carolina Law"), whereupon the separate existence of Acquisition shall cease, and
the Company shall be the surviving corporation (the " Surviving Corporation").
(b) Immediately following the delivery of the documents listed in
Section 1.6, the Company and Acquisition will file Articles of Merger (the
"Certificate of Merger") with the South Carolina Secretary of State and make all
other filings or recordings required by South Carolina Law in connection with
the Merger. The Merger shall become effective at such time (the "Effective
Time") as the Certificate of Merger is duly filed with the South Carolina
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Secretary of State (or at such later time as may be agreed in writing by the
parties hereto and specified in the Certificate of Merger).
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, assets, powers, privileges, and franchises and be
subject to all of the obligations, liabilities, restrictions, and disabilities
of the Company and Acquisition, all as provided under South Carolina Law.
(d) The Closing of the transactions shall take place at the offices of
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A. in Greenville, South Carolina, at 10:00 a.m. eastern
standard time, on the first business day following the date first written above
in this Agreement.
SECTION 1.2. CONVERSION OF SHARES. At the Effective Time:
(a) (i) the shares of common stock, $1.00 par value, of the
Company ("Company Common Stock") outstanding immediately prior to the
Effective Time shall be converted into the right to receive, without
interest, an aggregate of 214,046 shares of common stock, $0.01 par value,
of IES ("IES Common Stock"), as equitably adjusted to give effect to any
stock split, stock dividend or stock combination or reclassification of
such shares occurring during the period from the date hereof to the
Closing, and (ii) IES shall pay cash consideration equal to $49,814,605.00
less the amount of deferred compensation paid to Company Stockholders
pursuant to Section 5.16, by wire transfer of immediately available funds
to the accounts designated by Company (collectively, the "Merger
Consideration"); and
(b) each share of common stock of Acquisition outstanding
immediately prior to the Effective Time shall be converted into and become
one share of common stock of the Surviving Corporation with the same
rights, powers, and privileges as the shares so converted and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation.
SECTION 1.3. SURRENDER AND PAYMENT. At the Effective Time, the Company
Stockholders will deliver to IES the certificates listed on Schedule 3.2(a) (the
"Certificates") representing all of the outstanding shares of Company Common
Stock, and IES will deliver, in exchange therefor, the Merger Consideration
divided among the Company Stockholders in accordance with the written
instructions provided in Schedule 3.2(a). The Certificates will be duly endorsed
(or accompanied by duly execute powers), with signatures of those Company
Stockholders not present at the Closing guaranteed by a commercial bank or by a
member firm of the New York Stock Exchange (the "NYSE") for any Company
Stockholder that is not present at the Closing of the Merger.
SECTION 1.4. WITHHOLDING RIGHTS. Each of the Surviving Corporation and IES
shall be entitled to deduct and withhold from the consideration otherwise
payable to any Person (as defined in Section 10.16) pursuant to this Article I
such amounts as it is required to deduct and withhold with respect to the making
of such payment under any provision of federal, state, local,
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or foreign tax law. To the extent that amounts are so withheld by the Surviving
Corporation or IES, as the case may be, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Company Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or IES, as the case may be, so
long as the Surviving Corporation or IES actually pays over such withheld
amounts to the proper authority.
SECTION 1.5. LOST CERTIFICATES. If any Certificate shall have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen, or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity against
any claim that may be made against it with respect to such Certificate, IES will
issue in exchange for such lost, stolen, or destroyed Certificate the Merger
Consideration to be paid in respect of the shares of Company Common Stock
represented by such Certificates as contemplated by this Article I.
SECTION 1.6. OTHER DOCUMENTS TO BE DELIVERED IMMEDIATELY PRIOR TO THE
EFFECTIVE TIME.
(a) At the Closing and immediately prior to the Effective Time, the
Company and the Company Stockholders will deliver to IES:
(i) Employment Agreements (the "Employment Agreements"), each in
the form attached hereto as EXHIBIT A, for each of the following employees
of the Company: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, J. ▇▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇;
(ii) an opinion of counsel to the Company Stockholders in the form
attached hereto as EXHIBIT B;
(iii) a Certificate of the Secretary of the Company in the form
attached hereto as EXHIBIT C;
(iv) a release executed by the Company Stockholders in the form
attached hereto as EXHIBIT D;
(v) the resignations of the directors of the Company in the form
attached hereto as EXHIBIT E;
(vi) the minute book and corporate seal of the Company;
(vii) letters from the affiliates of the Company in the form
attached hereto as EXHIBIT F;
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(viii) receipts executed by the Company Stockholders in the form
attached hereto as EXHIBIT G; and
(ix) a cross-receipt executed by the Company Stockholders in the
form attached hereto as EXHIBIT H.
(b) At the Closing and immediately prior to the Effective Time, IES
will deliver to the Company Stockholders:
(i) the Employment Agreements executed by a duly authorized
representative of Surviving Corporation for each of the employees listed in
Section 1.6(a)(i) above;
(ii) an opinion of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., Senior Vice President,
General Counsel and Secretary of IES in the form attached hereto as EXHIBIT
I;
(iii) a cross-receipt executed by IES in the form attached hereto
as EXHIBIT H; and
(iv) a Certificate of the Secretary of IES and Acquisition in the
form attached hereto as EXHIBIT J.
SECTION 1.7. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY STOCKHOLDERS. The
obligations of the Company Stockholders to consummate the Merger are subject to
the fulfillment, at or before the Closing, of all of the following conditions,
any one or more of which may be waived by the Company Stockholders:
(a) The representations and warranties of IES contained in this
Agreement shall be true as of the Closing.
(b) All of the obligations of IES to be performed at or before the
Closing pursuant to the terms of this Agreement shall have been duly
performed, including, without limitation, those set forth in Article I
hereof.
(c) The documents necessary to consummate the Merger shall have
been filed with the Secretary of State of the State of South Carolina.
(d) All waiting, review and investigation periods (and any
extensions thereof) applicable to the consummation of the Merger under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇") shall
have expired or been terminated.
SECTION 1.8. CONDITIONS TO THE OBLIGATIONS OF IES. The obligations of IES
to consummate the Merger are subject to the fulfillment, at or before the
Closing, of all of the following conditions, any one or more of which may be
waived by IES.
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(a) The representations and warranties of the Company Stockholders
contained in this Agreement shall be true as of the Closing.
(b) All of the obligations of the Company and the Company
Stockholders to be performed at or before the Closing pursuant to the terms
of this Agreement shall have been duly performed, including, without
limitation, those set forth in Article I hereof.
(c) The documents necessary to consummate the Merger shall have
been filed with the Secretary of State of the State of South Carolina.
(d) All waiting, review and investigation periods (and any
extensions thereof) applicable to the consummation of the Merger under the
HSR Act shall have expired or been terminated.
SECTION 1.9. TERMINATION. (a) This Agreement may be terminated at any time
prior to the Closing solely:
(i) by mutual consent of IES and the Company Stockholders;
(ii) by the Company Stockholders holding in the aggregate, a
majority vote of the issued and outstanding shares of Company Common Stock
on the one hand, or by IES, on the other hand, if the transactions
contemplated by this Agreement to take place at the Closing shall not have
been consummated by September 30, 1998, unless the failure of such
transactions to be consummated is due to (A) the failure of all waiting,
review and investigation periods (and any extensions thereof) applicable to
consummation of the Merger under the HSR Act to have expired or terminated
or (B) the willful failure of the party seeking to terminate this Agreement
to perform any of its material obligations under this Agreement to the
extent required to be performed by it prior to the Closing;
(iii) by the Company Stockholders, on the one hand, or by IES, on
the other hand, if a material breach or default shall be made by the other
party in the observance or in the due and timely performance of any of the
covenants or agreements contained herein, and the curing or waiver of such
default shall not have been made on or before the Closing; or
(iv) by any party hereto if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action (which order,
decree or ruling the parties hereto shall use all reasonable efforts to
lift), in each case restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling
or other action shall have become final and nonappealable.
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(b) Termination of this Agreement (i) shall have no effect upon
the Confidentiality Agreement dated May 18, 1998 between IES and Company
and such Confidentiality Agreement shall survive the termination of this
Agreement and continue in full force and effect and (ii) will in no way
limit any obligation or liability of any party based on or arising from a
breach or default by such party with respect to any of its representations,
warranties, covenants or agreements contained in this Agreement including,
but not limited to, legal costs and out of pocket expenses.
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1. CERTIFICATE OF INCORPORATION. The articles of incorporation of
Company in effect at the Effective Time as amended by the Certificate of Merger
shall be the articles of incorporation of the Surviving Corporation until
amended in accordance with applicable law.
SECTION 2.2. BYLAWS. The bylaws of Acquisition in effect at the Effective
Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 2.3. DIRECTORS AND OFFICERS. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the director of Acquisition at the Effective Time shall be
the sole director of the Surviving Corporation and (ii) the officers of the
Surviving Corporation shall be as set forth on Schedule 2.3 hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY STOCKHOLDERS
The Company Stockholders jointly and severally represent and warrant
to IES as follows upon execution of this Agreement and as of the Effective Time:
SECTION 3.1. ORGANIZATION AND QUALIFICATION. The Company, and each of its
subsidiaries, if any, are listed on Schedule 3.1 (the "Subsidiaries"), and each
is a corporation duly organized, validly existing, and in good standing under
the laws of the state of its incorporation and has the requisite corporate power
to carry on its business as it is now being conducted. The Company, and each of
the Subsidiaries, is duly qualified to conduct business as a foreign corporation
in every state of the United States in which its ownership or lease of property
or the conduct of its business and operations makes such qualification
necessary, except for such states in which the Company's or the Subsidiaries'
failure to be so qualified is not reasonably expected to have, individually or
in the aggregate, a Company Material Adverse Effect (as defined in Section
10.16). Schedule 3.1 contains a list of all jurisdictions in which the Company
and each of the Subsidiaries is authorized or qualified to do business. The
Company has heretofore delivered to IES true and complete copies of the articles
of incorporation and bylaws of the
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Company and each of the Subsidiaries, in each instance including any amendments
thereto, as currently in effect.
SECTION 3.2. CAPITALIZATION; OWNERSHIP. (a) The authorized capital stock of
the Company consists of 500,000 shares of Company Common Stock, of which 62,500
shares are issued and outstanding (the "Company Shares"). The Company Shares are
all of the issued and outstanding shares of capital stock of the Company and
have been duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive rights. There are not, as of the date
hereof, any outstanding or authorized subscriptions, options, warrants, calls,
rights, commitments, or any other agreements of any character (any of the
foregoing, a "Commitment") obligating the Company to issue any additional shares
of capital stock of the Company, or any other securities convertible into or
evidencing the right to subscribe for any shares of capital stock of the
Company. The Company Stockholders own the respective number of shares of Company
Common Stock set forth on Schedule 3.2(a) attached hereto, free and clear of all
Liens other than restrictions imposed by applicable securities laws. Each of the
Company Stockholders has full legal right, power and authority to exchange,
assign and transfer or cause to be exchanged, assigned or transferred their
respective shares of Company Common Stock. The delivery to IES of the Company
Shares pursuant to the terms of this Agreement will transfer valid title
thereto, free and clear of all Liens other than restrictions imposed by
applicable securities laws. No Company Stockholder has or will have appraisal or
similar rights as a result of the consummation of the transactions contemplated
by this Agreement.
(b) The authorized capital stock of each of the Subsidiaries consists
of the number and type of shares of capital stock set forth on Schedule 3.2(b)
(collectively, "Subsidiary Stock"). Schedule 3.2(b) also sets forth the number
and type of shares of Subsidiary Stock which are issued and outstanding
(collectively, "Subsidiary Shares"), the securities of any other corporation
owned by the Company or any of the Subsidiaries, as well as the names of any
joint venture, partnership or other noncorporate entity in which the Company or
any of the Subsidiaries is a participant. The Subsidiary Shares are all of the
issued and outstanding shares of capital stock of the Subsidiaries and are
directly or ultimately owned by the Company, free and clear of any Liens other
than restrictions imposed by applicable securities laws, and have been duly
authorized and validly issued and are fully paid and nonassessable and free of
preemptive rights. Also set forth on Schedule 3.2(b) is a listing of all names
under which the Company and the Subsidiaries have done business within the five
(5) year period ending on the date of this Agreement, as well as the names of
all predecessors of the Company and the Subsidiaries, including the names of any
entities from whom the Company or the Subsidiaries previously acquired
significant assets within the five (5) year period ending on the date of this
Agreement. There are, as of the date hereof, no Commitments obligating any of
the Subsidiaries to issue any additional shares of capital stock of any such
Subsidiaries, or any other securities convertible into or evidencing the right
to subscribe for any shares of capital stock of any such Subsidiary.
SECTION 3.3. AUTHORIZATION. The Company has the requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement. The Company Stockholders and the
Board of Directors of the
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Company have (a) determined that participating in the Merger is in the best
interests of the Company and its stockholders and (b) approved this Agreement
and the Merger. No other corporate proceedings on the part of the Company or the
Company Stockholders are necessary to authorize the execution and delivery of
this Agreement or the consummation by the Company and the Company Stockholders
of the transactions contemplated hereby. This Agreement has been duly
authorized, executed, and delivered by the Company and the Company Stockholders
and, assuming that it has been duly executed and delivered by IES and
Acquisition, constitutes the valid and binding obligation of the Company and the
Company Stockholders, enforceable against the Company and the Company
Stockholders in accordance with its terms.
SECTION 3.4. CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by the Company or the Company Stockholders, nor
the consummation by the Company or the Company Stockholders of the transactions
contemplated by this Agreement, will: (a) require any consent, approval,
authorization, or permit of, or filing with or notification to, any Governmental
Authority (as defined in Section 10.16), except (i) the filing of a Certificate
of Merger in accordance with South Carolina Law, (ii) any regulatory approvals
or routine governmental consents normally acquired after the consummation of
transactions such as transactions of the nature contemplated by this Agreement,
(iii) where the failure to obtain such consent, approval, authorization, or
permit, or to make such filing or notification, is not reasonably expected to
have, individually or in the aggregate, a Company Material Adverse Effect or
prevent or delay, in any material respect, the consummation of the transactions
contemplated by this Agreement, (iv) approvals required pursuant to the HSR Act,
or (v) as set forth on Schedule 3.4; (b) result in a default (or give rise to
any right of termination, cancellation, or acceleration) under any of the terms,
conditions, or provisions of any material contract, commitment or similar
agreement to which the Company or any of the Subsidiaries is a party, except (i)
as set forth on Schedule 3.4 or (ii) for such defaults (or rights of
termination, cancellation, or acceleration) as to which requisite waivers or
consents have been obtained or which are not reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect or prevent
or delay, in any material respect, the consummation of the transactions
contemplated by this Agreement; or (c) assuming compliance with the matters
referred to in Section 3.4(a), violate any order, writ, injunction, decree,
statute, rule, or regulation applicable to the Company, any of the Subsidiaries,
or any of their assets, except for violations which are not reasonably expected
to have, individually or in the aggregate, a Company Material Adverse Effect or
prevent or delay, in any material respect, the consummation of the transactions
contemplated by this Agreement. The Company is not, and the consummation of the
transactions contemplated by this Agreement will not result, in violation of its
Articles of Incorporation or Bylaws.
SECTION 3.5. AFFILIATE RELATIONSHIPS. Except as set forth on Schedule 3.5,
none of the Company Stockholders nor any affiliate of any of the Company
Stockholders, and no director, officer or employee of the Company or any of the
Subsidiaries, owns, directly or indirectly, in whole or in part, any property,
assets or right, tangible or intangible, which is associated with any property,
asset or right owned by the Company or any of the Subsidiaries or which the
Company or any of the Subsidiaries is operating or using or the use of which is
necessary for its business. Except for ownership of a publicly traded
corporation not more than two (2%) percent of the
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14
capital stock of which is owned by a Company Stockholder, Schedule 3.5 includes
a disclosure of any relationships which any of the Company Stockholders have, or
any director, officer or employee, of the Company or any of the Subsidiaries
has, with the Company or any of the Subsidiaries or any other corporation,
partnership, firm, association or business organization, entity or enterprise
which is a competitor, potential competitor, supplier or customer of the Company
or any of the Subsidiaries. The Persons named on Schedule 3.5 are the only
Persons who may be deemed affiliates of the Company under Rule 145 of the
Securities Act of 1933, as amended (the "1933 Act").
SECTION 3.6. FINANCIAL STATEMENTS. Attached as Schedule 3.6 are (a) the
audited consolidated balance sheet, statement of income and statement of cash
flows of the Company and the Subsidiaries as of and for the years ended
September 30, 1995, 1996 and 1997 (the "Company Audited Financial Statements")
and (b) the unaudited in-house consolidated balance sheet, statement of income
and statement of cash flows of the Company and the Subsidiaries as of and for
the nine months ended June 30, 1998 (the "Company Unaudited Financial
Statements"). The Company Audited Financial Statements present fairly in all
material respects the consolidated financial position, results of operations,
and changes in financial position of the Company and the Subsidiaries as of the
respective dates or for the respective periods to which they apply in accordance
with United States generally accepted accounting principles except as provided
therein, including notes thereto, consistently applied ("GAAP").
SECTION 3.7. UNDISCLOSED LIABILITIES. Except for the liabilities set forth
on Schedule 3.7 or as reflected, reserved against, or otherwise disclosed in the
Company Unaudited Financial Statements, neither the Company nor any of the
Subsidiaries had, at the date of the unaudited balance sheet included in the
Company Unaudited Financial Statements (the "Company Unaudited Balance Sheet
Date") and do not have, at the date hereof, any liabilities or obligations,
whether accrued, contingent, absolute, determined, determinable or otherwise,
that may have, individually or in the aggregate, a Company Material Adverse
Effect.
SECTION 3.8. ACCOUNTS AND NOTES RECEIVABLES. Schedule 3.8 sets forth an
accurate list as of the Company Unaudited Balance Sheet Date of the accounts and
notes receivable of the Company and the Subsidiaries, including receivables from
and advances to employees of the Company, employees of the Subsidiaries, and the
Company Stockholders. Included in Schedule 3.8 is an aging of all accounts and
notes receivable showing amounts due in 30-day aging categories. The trade and
other accounts receivable of the Company and the Subsidiaries which are
classified as current assets on the balance sheet as of the Company Unaudited
Balance Sheet Date are bona fide receivables, were acquired in the ordinary
course of business, are stated in accordance with GAAP and, subject to the
reserve for doubtful accounts, need not be written-off as uncollectible. Except
to the extent reflected on Schedule 3.8 or as reflected in the reserve for
doubtful accounts, such accounts and notes are collectible in the amount shown
on Schedule 3.8.
SECTION 3.9. ASSETS. Schedule 3.9 sets forth an accurate list of all real
and personal property included in "property and equipment" on the balance sheet
of the Company as of the Company Unaudited Balance Sheet Date and all other
tangible assets of the Company with a book value for federal income tax purposes
in excess of $5,000 (i) owned by the Company or the
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15
Subsidiaries as of the Company Unaudited Balance Sheet Date and (ii) acquired
since the Company Unaudited Balance Sheet Date, including in each case true,
complete and correct copies of leases for equipment with a term of six months or
more and for all real property leased by the Company or the Subsidiaries and
descriptions of all real property on which buildings, warehouses, workshops,
garages and other structures used in the operation of the business of the
Company and the Subsidiaries are situated. Schedule 3.9 indicates which of such
assets listed on Schedule 3.9 that are currently owned, or were owned within the
twelve (12) months preceding the date of this Agreement, by the Company
Stockholders or affiliates of the Company or the Company Stockholders. IES and
Acquisition are accepting all of the tangible assets, vehicles and other
machinery and equipment of the Company and the Subsidiaries listed on Schedule
3.9 in "As Is, Where Is" condition without regard to any condition of
merchantability or fitness for any particular purpose. All fixed assets used by
the Company and the Subsidiaries that are material to the operation of the
Company's and the Subsidiaries' business are either owned by the Company or the
Subsidiaries or leased under an agreement identified on Schedule 3.9. All leases
set forth on Schedule 3.9 are in full force and effect and constitute valid and
binding agreements of the parties thereto in accordance with their respective
terms subject to the Enforceability Exceptions (hereinafter defined).
Schedule 3.9 contains true, complete and correct copies of all real
property title reports and title insurance policies received or owned by the
Company and the Subsidiaries. Schedule 3.9 also includes a summary description
of all plans or projects involving the opening of new operations, expansion of
existing operations or the acquisition of any real property or existing
business, to which management of the Company and the Subsidiaries has devoted
effort or expenditure in the two-year period prior to the date of this
Agreement, which if pursued by the Company or the Subsidiaries would require
additional expenditures of capital.
The Company and the Subsidiaries have good and marketable title to the
tangible and intangible personal property and the real property owned and used
in their business, including the properties identified on Schedule 3.9, subject
to no mortgage, pledge, Lien, claim, conditional sales agreement, encumbrance or
charge, except for Liens reflected on Schedule 3.9, Liens for current taxes not
yet payable and assessments not in default, easements for utilities serving only
the property, and easements, covenants and restrictions and other exceptions to
title shown of record in the appropriate public records in the jurisdictions in
which the properties, assets and leasehold estates are located, which do not
adversely affect the Company's or the Subsidiaries' use of the property and
except that enforcement thereof may be limited by liquidation, conservatorship,
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditor's rights generally from time to time in effect and
except that equitable remedies are subject to judicial discretion (collectively,
the "Enforceability Exceptions").
SECTION 3.10. MATERIAL CONTRACTS, COMMITMENTS AND CUSTOMERS. Schedule 3.10
sets forth an accurate list as of the Company Unaudited Balance Sheet Date of
(i) all material contracts, commitments and similar agreements to which the
Company or any of the Subsidiaries is a party or by which they or any of their
property is bound (including, but not limited to, joint venture or partnership
agreements, contracts with any labor organizations, loan agreements,
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16
indemnity or guaranty agreements, bonds, mortgages, Liens, pledges or other
security agreements) which either cannot be canceled within 30 days or has a
value of more than $20,000, and the Company Stockholders have delivered true
copies of such agreements to IES and (ii) all customers representing 5% or more
of the Company's and the Subsidiaries' revenues, taken as a whole, in any of the
periods covered by the Company Audited Financial Statements or the Company
Unaudited Financial Statements. Except as disclosed on Schedule 3.10, all such
agreements are in full force and effect. In the three (3) year period ending on
the date of this Agreement, none of the Company's or the Subsidiaries' customers
or suppliers has canceled service or products, as appropriate. Except to the
extent set forth on Schedule 3.10, (a) the Company and the Subsidiaries have
complied with all material commitments and obligations and are not in default
under any contracts and agreements and no notice of default has been received
and (b) none of the Company's or the Subsidiaries' customers listed pursuant to
(ii) above has canceled or substantially reduced or is currently attempting or,
to the Knowledge of Company Stockholders, threatening to cancel or substantially
reduce its use of the Company's products or services. Except for cost-plus
contracts, neither the Company nor any of the Subsidiaries is a party to any
contract subject to a contractual right to price redetermination or
renegotiation.
SECTION 3.11. OPERATING AUTHORITY. Except as disclosed on Schedule 3.11,
the Company and each of the Subsidiaries, as applicable, possess all material
governmental licenses, permits, franchises, and other authorizations of any
Governmental Authority ("Licenses") that are necessary to the ownership or
operation of their business as currently conducted, and all such Licenses are in
full force and effect, except where the failure to possess any License or the
failure to be in full force and effect is not reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect, and neither
the Company nor any of the Subsidiaries is in default in any material respect
relating thereto. Except as disclosed on Schedule 3.11, no proceeding is pending
or, to the Company Stockholders' Knowledge, is threatened seeking the revocation
or limitation of any such License that is reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
Schedule 3.11 sets forth an accurate list and summary description as of the
Company Unaudited Balance Sheet Date of all Licenses, certificates, trademarks,
trade names, patents, patent applications and copyrights related to the assets
owned or held by the Company or the Subsidiaries. The Licenses and other rights
listed on Schedule 3.11 are valid, and the Company has not received any written
notice that any person intends to cancel, terminate or not renew any such
License or other right. The Company has conducted and is conducting its business
in compliance in all material respects with the requirements, standards,
criteria and conditions set forth in the Licenses and other rights listed on
Schedule 3.11 and is not in violation of any of the foregoing in any material
respect. Except as specifically provided in Schedule 3.11, the consummation of
the transactions contemplated by this Agreement will not result in a default
under or a breach or violation of, or adversely affect in a material respect the
rights and benefits afforded to the Company by, any such Licenses or other
rights.
SECTION 3.12. BANK ACCOUNT INFORMATION. Schedule 3.12 contains an accurate
list of the names and addresses of every bank and other financial institution in
which Company or any of the Subsidiaries maintains an account (whether checking,
savings or otherwise), lock box, or
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17
safe deposit box, and the account numbers and persons having signature authority
or legal access thereto.
SECTION 3.13. CONDUCT OF BUSINESS SINCE COMPANY UNAUDITED BALANCE SHEET
DATE. Except as expressly contemplated by this Agreement and except as set forth
on Schedule 3.13, since the Company Unaudited Balance Sheet Date, (a) the
business and operations of the Company and the Subsidiaries have been conducted
in the ordinary and usual course in all material respects in accordance with
past practices, (b) neither the Company nor any of the Subsidiaries has paid or
declared any dividend on, or made any distribution with respect to, or purchased
or redeemed any of its capital stock or paid any bonus to any Company
Stockholder and (c) no Company Material Adverse Effect has occurred and is
continuing.
SECTION 3.14. LITIGATION; ORDERS. Except as set forth on Schedule 3.14, as
of the date hereof, there are no Actions pending or, to the Company
Stockholders' Knowledge, threatened against the Company or any of the
Subsidiaries. Except as set forth on Schedule 3.14, as of the date hereof there
are no judgments or outstanding orders, injunctions, decrees, stipulations, or
awards (whether rendered by a court or administrative agency or by arbitration)
against the Company or any of the Subsidiaries.
SECTION 3.15. LABOR MATTERS. Except as set forth on Schedule 3.15, there
are no agreements with labor unions or associations representing employees of
the Company or any of the Subsidiaries. No material work stoppage against the
Company or any of the Subsidiaries is pending or, to the Company Stockholders'
Knowledge, threatened. Neither the Company nor any of the Subsidiaries has been
or is involved in or, to the Company Stockholders' Knowledge, is threatened with
any labor dispute, arbitration, lawsuit, or administrative proceeding relating
to labor matters involving the employees of the Company or the Subsidiaries
(excluding routine workers' compensation claims) that is reasonably expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
SECTION 3.16. COMPLIANCE WITH LAWS. Except as disclosed on Schedule 3.11,
the conduct of the business by the Company and each of the Subsidiaries complies
with all statutes, laws, regulations, ordinances, rules, judgments, orders, or
decrees applicable thereto (other than Environmental Laws (as hereinafter
defined) which are governed solely by Section 3.18), except for violations or
failures so to comply, if any, that would not have, individually or in the
aggregate, a Company Material Adverse Effect.
SECTION 3.17. INSURANCE. Schedule 3.17 sets forth a list of all insurance
policies currently in effect issued in favor of the Company and the Subsidiaries
which relate to their businesses, and all such policies are currently in force
and effect. True and complete copies of all such policies have been delivered to
IES. A true and complete list of all insurance loss runs and workers'
compensation claims received for the past three (3) policy years has been
delivered to IES. The insurance carried by the Company, which the Company
Stockholders believe to be adequate in character and amount, is with insurers
unaffiliated with any of the Company Stockholders or the Company. Except as set
forth on Schedule 3.17, none of such policies is a "claims made" policy. Within
the last five years, Company's insurance has not been canceled
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18
and the Company has not been denied coverage or experienced a substantial
increase in premiums or substantial reduction in coverage from one policy period
to the next period.
SECTION 3.18. ENVIRONMENTAL MATTERS. Except as disclosed on Schedule 3.18,
other than violations that would not have, individually or in the aggregate, a
Company Material Adverse Effect, the Company and the Subsidiaries are in
compliance with all applicable Environmental Laws. Except as disclosed on
Schedule 3.18, without limitation of the foregoing, there are no past, existing,
pending or, to the Company Stockholders' Knowledge, threatened actions, suits,
investigations, inquiries, proceedings or clean-up obligations by or to any
Governmental Authority relating to any Environmental Laws with respect to the
Company or any of the Subsidiaries, except for actions, suits, investigations,
inquiries, proceedings, and obligations that would not have, individually or in
the aggregate, a Company Material Adverse Effect. Except as indicated on
Schedule 3.18, to the Company Stockholders' Knowledge (i) there are no
underground storage tanks on, in or under any properties owned by the Company
and no underground storage tanks have been closed or removed from any of such
properties during the time such properties were owned or leased by the Company
and (ii) there is no asbestos or asbestos-containing material present in any of
the properties owned by the Company, and no asbestos has been removed from any
of such properties during the time such properties were owned or leased by the
Company. Except as disclosed on Schedule 3.18, neither the Company nor any of
its respective properties are subject to any material liabilities or
expenditures (fixed or contingent) relating to any suit, settlement, court
order, administrative order, regulatory requirement, judgment or claim asserted
or arising under any Environmental Law. All notices, permits, or similar
authorizations, if any, required to be obtained or filed in connection with the
operations of the Company or the Subsidiaries, including, without limitation,
treatment, storage, disposal, or release of a hazardous substance or solid waste
into the environment, have been duly obtained or filed, other than any such
notices, permits, or similar authorizations the failure of which to obtain or
file is not reasonably expected to have, individually or in the aggregate, a
Company Material Adverse Effect. The term "release" has the meaning specified in
CERCLA (as hereinafter defined), and the term "disposal" (or "disposed") has the
meaning specified in RCRA (as hereinafter defined). For the purposes hereof,
"Environmental Laws" shall mean any and all laws, statutes, ordinances, rules,
regulations, orders, or determinations of any Governmental Authority pertaining
to the environment in effect on the date of this Agreement and in effect at such
time in any and all jurisdictions in which the Company or any of the
Subsidiaries operate, including, without limitation, the Clean Air Act, as
amended, the Comprehensive Environmental Response, Compensation and Liability
Act, as amended ("CERCLA"), the Federal Water Pollution Control Act, as amended,
the Resource Conservation and Recovery Act, as amended ("RCRA"), the Safe
Drinking Water Act, as amended, the Toxic Substances Control Act, as amended,
comparable state and local laws and other material environmental protection laws
in effect on the date of this Agreement.
SECTION 3.19. TAXES. (a) Except as set forth on Schedule 3.19, (i) the
Company and each of the Subsidiaries have filed when due all Company Returns (as
defined in Section 10.16), and have, except for Taxes that are being contested
in good faith and set forth on Schedule 3.19, timely paid and discharged all Tax
obligations shown thereon and adequate reserves have been established on the
books of the Company for all Taxes for which the Company is liable but
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payment is not yet due, (ii) the Company Returns correctly and accurately
reflect in all material respects the facts regarding the income, business and
assets, operations, activities, status, or other matters of the Company and the
Subsidiaries, and any other information required to be shown thereon, and are
not subject to penalties under Section 6662 of the Code (as defined in
Section 10.16), relating to accuracy related penalties, or any corresponding
provision of applicable state, local, or foreign Tax law or any predecessor
provision of law, and (iii) neither the Company nor any of the Subsidiaries has
received any notice of any Tax deficiency outstanding, proposed, or assessed
against or allocable to it, nor has either of them executed any waiver of any
statute of limitations on the assessment or collection of any Tax, or executed
or filed with the Internal Revenue Service or any other governmental agency any
agreement now in effect extending the period for assessment or collection of any
Taxes against the Company or any of the Subsidiaries. No Liens for Taxes exist
upon the assets of the Company except Liens for Taxes that are not yet due.
Within the past five (5) years, the Company is not and has not been, subject to
Tax in any jurisdiction outside the United States. Except as disclosed on
Schedule 3.19, no litigation with respect to any Tax for which the Company is
asserted to be liable is pending or, to the Knowledge of the Company or any
Company Stockholder threatened. There are no requests for rulings or
determinations in respect of any Taxes pending between the Company and any
taxing authority. Except as disclosed on Schedule 3.19, no issues have been
raised and remain pending by any taxing authority in connection with the
examination of any Company Return. Except as disclosed on Schedule 3.19, all
deficiencies asserted and assessments made, if any, as a result of or in
connection with any examination have been paid in full or are fully reflected as
a liability in the Company Audited Financial Statements or Company Unaudited
Financial Statements. In the six (6) year period ending on the date of this
Agreement, the Company was not a party to any income tax allocation or sharing
agreement. All amounts required to be withheld by the Company and paid to
governmental agencies for income, social security, unemployment insurance,
sales, excise, use and other Taxes have been collected or withheld and paid to
the proper taxing authority or are not yet due to be paid. For purposes of this
Agreement, "Tax" or "Taxes" means taxes of any kind, levies, or other like
assessments, customs, duties, imposts, charges, or fees, including, without
limitation, income, gross receipts, ad valorem, value added, excise, real or
personal property, asset, sales, use, license, payroll, transaction, capital,
net worth and franchise taxes, estimated taxes, withholding, employment, social
security, workers compensation, utility, severance, production, unemployment
compensation, occupation, premium, windfall profits, transfer, and gains taxes
or other governmental taxes imposed or payable to the United States, or any
state, county, local, or foreign government or subdivision or agency thereof,
and in each instance such term shall include any interest, penalties, or
additions to tax attributable to or imposed with respect to any such Tax,
including penalties for the failure to file any Tax return or report.
(b) Except for the group of which the Company is currently the parent,
neither the Company nor any of the Subsidiaries has within the past six years
been a member of an affiliated group of corporations, within the meaning of
Section 1504 of the Code, other than as a common parent corporation.
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(c) None of the material assets of the Company or any of the
Subsidiaries is property that the Company is required to treat as being owned by
any other Person pursuant to the "safe harbor lease" provisions of former
Section 168(f)(8) of the Code.
(d) None of the assets of the Company or any of the Subsidiaries
directly or indirectly secures any debt the interest on which is Tax-exempt
under Section 103(a) of the Code.
(e) None of the assets of the Company or any of the Subsidiaries is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(f) Neither the Company nor any of the Subsidiaries has agreed to
make, nor is any of them required to make, any adjustment under Section 481(a)
of the Code by reason of a change in accounting method or otherwise.
(g) Neither the Company nor any of the Subsidiaries has participated
in, nor will any of them participate in prior to the Closing, an international
boycott within the meaning of Section 999 of the Code.
(h) Neither the Company nor any of the Subsidiaries has or had a
permanent establishment in any foreign country, as defined in any applicable tax
treaty or convention between the United States and such foreign country.
(i) Neither the Company nor any of the Subsidiaries has filed a
consent pursuant to the collapsible corporation provisions of Section 341(f) of
the Code (or any corresponding provision of state, local, or foreign income tax
law) or agreed to have Section 341(f)(2) of the Code (or any corresponding
provision of state, local, or foreign income tax law) apply to any disposition
of any asset owned by it.
(j) None of the Company nor any Company Stockholder is a "foreign
person" as that term is defined in Section 1445(f)(3) of the Code.
(k) The Company has not made, is not obligated to make and is not a
party to any agreement that would require it to make any payment that is not
deductible under Section 280G of the Code.
(l) Other than luxury automobiles, no asset of the Company is subject
to any provision of applicable law that eliminates or reduces the allowance for
depreciation or amortization in respect of that asset below the allowance
generally available to an asset of its type.
(m) The Company is an "S corporation" as that term is defined in
Section 1361(a)(1) of the Code and since becoming an S corporation on October 1,
1995 has not incurred any federal income tax liabilities.
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21
(n) Schedule 3.19 identifies each Subsidiary that is a "qualified
subchapter S subsidiary" within the meaning of Section 1361(b)(3)(B) of the
Code. Each Subsidiary so identified has been a qualified subchapter S subsidiary
at all times since the date shown on such schedule up to and including the date
of Closing.
(o) Neither the Company nor any qualified subchapter S subsidiary of
the Company has, in the past 10 years, (i) acquired assets from another
corporation in a transaction in which the Company's Tax basis for the acquired
assets was determined, in whole or in part, by reference to the Tax basis of the
acquired assets (or any other property) in the hands of the transferor or
(ii) acquired the stock of any corporation which is a qualified subchapter S
subsidiary.
SECTION 3.20. EMPLOYEE BENEFIT PLANS. (a) Except for oral employment
agreements terminable at will, Schedule 3.20 contains a list of all "employee
pension benefit plans" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) (sometimes referred to herein
as "Company Pension Plans"), "employee welfare benefit plans" (as defined in
Section 3(l) of ERISA, hereinafter a "Company Welfare Plan"), stock option,
stock purchase, incentive, bonus, deferred compensation plans or arrangements,
vacation, change in control, stay-on bonus plans or arrangements, and other
material employee compensation and fringe benefit plans or agreements,
maintained, contributed to, or pursuant to which the Company or any of the
Subsidiaries has or may have any liability, whether or not heretofore terminated
(all the foregoing being herein called "Company Benefit Plans"). The Company has
delivered to IES an accurate list (which is set forth on Schedule 3.20) showing
all officers and directors of the Company, listing all employment agreements
with such officers and directors of the Company, listing all employment
agreements with such officers and directors and the rate of compensation (and
the portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of (i) December 31, 1997 and (ii) the
date hereof. The Company has provided to IES true, complete and correct copies
of any written employment agreements for persons listed on Schedule 3.20. Since
December 31, 1997, except as disclosed on Schedule 3.20, there have been no
increases in the compensation payable or any special bonuses to any officer,
director, key employee or other employee, except ordinary salary increases
implemented on a basis consistent with past practices. The Company has made
available to IES true, complete, and correct copies of (1) each Company Benefit
Plan and any subsequently adopted amendments thereto (or, in the case of
unwritten Company Benefit Plans, descriptions thereof), (2) the most recent
annual report on Form 5500 filed with respect to each Company Benefit Plan (if
any such report was required), (3) the most recent summary plan description for
each Company Benefit Plan for which such a summary plan description is required
(with all summaries of material modifications provided after the most recent
summary plan description was distributed), (4) each trust agreement, group
annuity contract and service agreement relating to any Company Benefit Plan and
(5) each favorable determination letter from the Internal Revenue Service with
respect to each Company Benefit Plan that is intended to be qualified under
Section 401(a) of the Code.
(b) All Company Benefit Plans are and have been administered in
compliance with their terms and all applicable laws, including, without
limitation, ERISA and the Code,
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except where the failure to so administer the Company Benefit Plans or to comply
with such laws would not have, individually or in the aggregate, a Company
Material Adverse Effect. There are no pending or, to the Company Stockholders'
Knowledge, threatened investigations by any governmental entity, termination
proceedings, or other, suits or proceedings against or involving any Company
Benefit Plan. All such plans that are intended to qualify (the "Qualified
Plans") under Section 401(a) of the Code are, and have been so qualified and
have been determined by the Internal Revenue Service to be so qualified, and
copies of such determination letters are attached to Schedule 3.20. Except as
disclosed on Schedule 3.20, 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, actuarial reports, audits or tax
returns) have been timely filed or distributed, and copies thereof are included
as part of Schedule 3.20 hereof.
(c) All contributions to, and payments from, the Company Benefit Plans
required to be made in accordance with the Company Benefit Plans or applicable
law have been timely made. All accrued contribution obligations of the Company
with respect to any Company Benefit Plan have either been fulfilled in their
entirety or are fully reflected on the balance sheet in the Company Unaudited
Financial Statements.
(d) No Company Benefit Plan is subject to Section 302 or Title IV of
ERISA or Section 412 of the Code or is a "multiemployer plan" within the meaning
of Section 4001(a)(3) of ERISA or a "multiple employer's plan" within the
meaning of Section 413 of the Code.
(e) (i) No "prohibited transaction" (under Section 4975 of the Code or
Section 406 of ERISA) has occurred with respect to any Company Benefit Plan and
(ii) there has been no breach of any fiduciary duty with respect to any Company
Benefit Plan, other than, in the case of (i) and (ii), those that are not
reasonably expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(f) Neither the Company nor any of the Subsidiaries maintains or
contributes to any Company Welfare Plan that could not be unilaterally
terminated by the Company or any of the Subsidiaries at any time without
liability.
(g) Except as set forth on Schedule 3.20, there are no assets of any
Company Benefit Plan that are not readily tradeable on a national securities
exchange, including the Nasdaq Stock Market.
SECTION 3.21. BROKERAGE FEES AND COMMISSIONS. Except as set forth on
Schedule 3.21, neither the Company nor the Company Stockholders has incurred any
obligation or entered into any agreement for any investment banking, brokerage
or finder's fee, or commission in respect of the transactions contemplated by
this Agreement for which IES or the Company shall incur any liability.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF IES
IES represents and warrants to the Company Stockholders as follows
upon execution of this Agreement and as of the Effective Time:
SECTION 4.1. ORGANIZATION AND QUALIFICATION. Each of IES and Acquisition is
a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation, and IES has the requisite corporate
power to carry on its business as it is now conducted. IES is duly qualified to
conduct business as a foreign corporation in each jurisdiction in which its
ownership or lease of property or the conduct of its business and operations
makes such qualification necessary, except for such jurisdictions in which IES's
failure to be so qualified is not reasonably expected to have, individually or
in the aggregate, an IES Material Adverse Effect (as defined in Section 10.16).
SECTION 4.2. CAPITALIZATION. (a) The authorized capital stock of IES
consists of 100,000,000 shares of IES Common Stock, 2,655,709 shares of
restricted voting common stock and 10,000,000 shares of preferred stock. As of
March 31, 1998, there were outstanding 21,759,627 shares of IES Common Stock
(including no shares of treasury stock), 2,655,709 shares of restricted voting
common stock, and no shares of preferred stock. All outstanding shares of
capital stock of IES have been duly authorized and validly issued and are fully
paid and non-assessable and free of preemptive rights.
(b) The shares of IES Common Stock to be issued as part of the Merger
Consideration have been duly authorized and, when issued and delivered in
accordance with the terms of this Agreement, will have been validly issued and
will be fully paid and non-assessable, and the issuance thereof is not subject
to any preemptive or other similar right. The delivery of the Merger
Consideration to the Company Stockholders pursuant to the terms of this
Agreement will transfer valid title thereto, free and clear of all Liens.
SECTION 4.3. AUTHORIZATION. The execution, delivery and performance by IES
of this Agreement, and the consummation by IES and Acquisition of the
transactions contemplated hereby, are within the corporate powers of IES and
Acquisition and have been duly authorized by all necessary corporate action. No
other corporate proceedings on the part of IES or Acquisition are necessary to
authorize the execution and delivery of this Agreement or the consummation by
IES and Acquisition of the transaction contemplated hereby. This Agreement has
been duly authorized, executed and delivered by IES and Acquisition and
constitutes the valid and binding obligation of IES and Acquisition enforceable
against IES and Acquisition in accordance with its terms.
SECTION 4.4. CONSENTS AND APPROVAL; NO VIOLATION. Neither the execution and
delivery of this Agreement by IES and Acquisition, nor the consummation by IES
and Acquisition of the transactions contemplated by this Agreement, will: (a)
require any consent, approval, authorization, or permit of, or filing with or
notification to, any Governmental
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24
Authority, except (i) the filing of articles of merger in accordance with South
Carolina Law, (ii) compliance with any applicable requirements of the 1933 Act,
the Securities Exchange Act of 1934, as amended (the "1934 Act"), and foreign or
state securities or Blue Sky laws, (iii) any regulatory approvals or routine
governmental consents normally acquired after the consummation of transactions
such as transactions of the nature contemplated by this Agreement, (iv) where
the failure to obtain such consent, approval, authorization, or permit, or to
make such filing or notification, is not reasonably expected to have,
individually or in the aggregate, an IES Material Adverse Effect or prevent or
delay, in any material respect, the consummation of the transactions
contemplated by this Agreement or (v) approvals required pursuant to the HSR
Act; (b) result in a default (or give rise to any right of termination,
cancellation, or acceleration) under any of the terms, conditions, or provisions
of any agreement or other instrument binding upon IES or any of its
subsidiaries, except for such defaults (or rights of termination, cancellation,
or acceleration) as to which requisite waivers or consents have been obtained or
which are not reasonably expected to have, individually or in the aggregate, an
IES Material Adverse Effect or prevent or delay, in any material respect, the
consummation of the transactions contemplated by this Agreement; or (c) assuming
compliance with the matters referred to in Section 4.4(a), violate any order,
writ, injunction, decree, statute, rule, or regulation applicable to IES or any
of its subsidiaries or any of their assets, except for violations which are not
reasonably expected to have, individually or in the aggregate, an IES Material
Adverse Effect or prevent or delay, in any material respect, the consummation of
the transactions contemplated by this Agreement. Neither IES nor Acquisition is
in violation of their Articles of Incorporation or Bylaws, and the consummation
of the transactions contemplated by this Agreement will not result in violation
of the Articles of Incorporation or Bylaws of either of them.
SECTION 4.5. SEC FILINGS. (a) IES has filed with the Securities and
Exchange Commission ("SEC") all material forms, statements, reports and
documents (the "IES SEC Filings") required to be filed by it under the 1934 Act
and the rules and regulations thereunder.
(b) As of its filing date, each IES SEC Filing complied as to form in
all material respects with the applicable requirements of the 1934 Act.
(c) As of its filing date, each IES SEC Filing filed pursuant to the
1934 Act did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
(d) IES has previously delivered to the Company Stockholders copies of
IES's prospectus, dated April 30, 1998, as supplemented (the "Prospectus"). As
of its date, the Prospectus did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
SECTION 4.6. NO ASSURANCES. IES and Acquisition represent that none of the
following has been represented, guaranteed, or warranted to either of them by
Company or Company Stockholders or their agents or employees, or any other
person, expressly or by implication:
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25
(a) the profit to be realized, if any, as a result of the acquisition
of the shares of Company Common Stock;
(b) that the past performance or experience on the part of company, or
any officer, director or affiliate, their partners, salesmen, associates,
agents, or employees, or any other person, will in any way guarantee the actual
results of the ownership of the shares of Company Common Stock; or
(c) that any projections, budgets, forecasts or other forward looking
information constitute a guarantee, representation or warranty that such
predictions, forecasts or information can, or will, be achieved.
SECTION 4.7. STOCKHOLDER'S EQUITY. IES and Acquisition represent that they
are aware and understand that the transactions contemplated by this Agreement
will cause a loss to Company and a reduction in Company's stockholder's equity.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 5.1. REASONABLE BEST EFFORTS. Subject to the terms and conditions
of this Agreement, each party will use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper, or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement.
SECTION 5.2. CERTAIN FILINGS. The Company and IES shall cooperate with one
another (i) in determining whether any action by or in respect of, or filing
with, any Governmental Authority is required, or any actions, consents,
approvals, or waivers are required to be obtained from parties to any material
agreements, in connection with the consummation of the transactions contemplated
by this Agreement and (ii) in taking such actions or making such filings,
furnishing information required in connection therewith and seeking timely to
obtain such actions, consents, approvals, or waivers.
SECTION 5.3. PUBLIC ANNOUNCEMENTS. Prior to Closing, unless required under
law or regulation, without the prior consent of the other, which consent shall
not be unreasonably withheld, none of the parties hereto will issue, or permit
any agent or affiliate to issue, any press releases or otherwise make or permit
any agent or affiliate to make, any public statements with respect to this
Agreement or the transactions contemplated by this Agreement.
SECTION 5.4. FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Acquisition,
any deeds, bills of sale, assignments, or assurances and to take and do, in the
name and on behalf of the Company or Acquisition, any other actions and things
to vest, perfect, or confirm of record or otherwise in the Surviving Corporation
any and all
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right, title, and interest in, to, and under any of the rights, properties, or
assets of the Company acquired or to be acquired by the Surviving Corporation as
a result of, or in connection with, the Merger.
SECTION 5.5 NOTICES OF CERTAIN EVENTS. Each of the Company, the Company
Stockholders and IES shall promptly notify the other parties hereto of:
(a) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with
the transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this
Agreement;
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against, relating to, or
involving or otherwise affecting such party that relate to the consummation
of the transactions contemplated by this Agreement; and
(d) any material failure on its part to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.5(d) shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
SECTION 5.6. RELEASE FROM GUARANTEES. Following the Effective Time, IES and
the Surviving Corporation shall use reasonable efforts to have the Company
Stockholders released from the personal guarantees of the Company's indebtedness
identified on Schedule 5.6. In the event that IES cannot obtain releases of any
such guarantees on or prior to thirty (30) days subsequent to the Effective
Time, IES shall pay off or otherwise refinance or retire such indebtedness.
SECTION 5.7. FUTURE COOPERATION. The Company, Company Stockholders and IES
shall each deliver or cause to be delivered to the other following the Effective
Time such additional instruments as the other may reasonably request for the
purpose of fully carrying out this Agreement. The Company Stockholders will
cooperate and use their reasonable best efforts to have the present officers,
directors and employees of and independent accountants to the Company cooperate
with IES at and after Effective Time in furnishing information, evidence,
testimony and other assistance in connection with any actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Effective Time, including, without limitation, consent to
the inclusion of any independent auditor's report in documents filed by IES
under the 1933 Act or 1934 Act.
SECTION 5.8. EXPENSES. IES and the Company Stockholders will each pay their
own fees, expenses and disbursements of their respective agents,
representatives, accountants and
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27
counsel incurred in connection with the execution, delivery and performance of
this Agreement and any amendment thereto; provided, however, that IES shall pay
all expenses, including all attorneys' fees and filing fees, relating to any
filings required pursuant to the HSR Act.
SECTION 5.9. REPAYMENT OF RELATED PARTY INDEBTEDNESS. Concurrently with the
Closing, (i) the Company Stockholders shall repay to the Company all amounts
outstanding as advances to or receivables from the Company Stockholders and
(ii) the Company shall repay all amounts outstanding under loans to the Company
from the Company Stockholders. Such advances, receivables and loans, and the
amounts thereof, are listed on Schedule 5.9.
SECTION 5.10. FIRPTA CERTIFICATE. Each Company Stockholder will deliver to
IES a certificate to the effect that he is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
SECTION 5.11. PREPARATION AND FILING OF TAX RETURNS.
(a) The Company Stockholders shall file or cause to be filed all tax
returns of Company for all taxable periods that end on or before the Closing,
but in each case only after IES has reviewed such filings and consented thereto,
which consent shall not be unreasonably withheld. Such Company tax returns shall
be prepared by ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, Greenville, South Carolina.
(b) IES shall file or cause to be filed all tax returns of Company for
all taxable periods ending after the Closing.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any tax returns,
amended tax returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding in
respect of Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant tax returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by taxing authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file tax returns pursuant to this Agreement shall bear all costs of filing
such tax returns; provided, however, that the Company shall bear all costs
(other than costs subject to indemnity pursuant to this Agreement) of filing any
such Company tax returns.
(d) At the option of IES, the Company and each of the Company
Stockholders will join with IES in making an election under Section 338(h)(10)
of the Code (and any corresponding election under state, local, and foreign tax
law) with respect to the purchase and sale of the stock of the Company hereunder
(a "Section 338(h)(10) Election"). The Company will be liable for any Tax under
Section 1374 of the Code caused in connection with the deemed
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sale of the Company's assets (including the assets of any qualified subchapter S
subsidiary) caused by a Section 338(h)(10) Election. The Company Stockholders
will include any income, gain, loss, deduction, or other tax item resulting from
the Section 338(h)(10) Election on their Tax returns to the extent permitted by
applicable law. On or before March 15, 1999, the certified public accounting
firm of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, Greenville, South Carolina shall calculate each
Company Stockholder's federal and state income taxes for calendar year 1998 both
with a Section 338(h)(10) election and without a Section 338(h)(10) Election. If
a Company Stockholder's federal and state income taxes calculated with a Section
338(h)(10) Election exceeds the Company Stockholder's federal and state income
taxes without a Section 338(h)(10) Election, then IES shall have the opportunity
to review such calculation and, if in agreement, shall pay the difference to
such Company Stockholder within thirty (30) days following receipt of ▇▇▇▇▇▇
▇▇▇▇▇ & Company's written calculations to such account as the Company
Stockholder shall direct. If the parties are unable to agree upon such
calculation, they shall mutually pick an independent "Big Six" accounting firm
to make such calculation, which calculation equally shall be binding upon both
parties. The parties shall split equally the fees and expenses of such
accounting firm.
(e) The Company and the Company Stockholders agree that the Merger
Consideration and the liabilities of the Company and its qualified subchapter S
subsidiaries (plus other relevant items) will be allocated to the assets of the
Company and its qualified subchapter S subsidiaries for all purposes (including
Tax and financial accounting) in a manner consistent with the fair market values
set forth in Schedule 5.11 attached hereto. IES, the Company, the Subsidiaries,
and the Company Stockholders will file all Tax returns (including amended
returns and claims for refund) and information reports in a manner consistent
with such values.
(f) The Company and the Company Stockholders will not revoke the
Company's election to be taxed as an S corporation within the meaning of
Sections 1361 and 1362 of the Code. The Company and the Company Stockholders
will not take or allow any action that would result in the termination of the
Company's status as a validly electing S corporation within the meaning of
Sections 1361 and 1362 of the Code. Notwithstanding the previous two sentences,
the parties hereto recognize and acknowledge that the transactions contemplated
by this Agreement will terminate Company's status as an S corporation within the
meaning of Sections 1361 and 1362 of the Code.
(g) The Company income tax returns for the taxable year ending as a
result of the transactions in this Agreement shall be filed in accordance with
Section 1362(e)(3) of the Code and not in accordance with Section 1362(e)(2) of
the Code.
(h) For purposes of (a) filing the Company income Tax returns for the
taxable year ending as a result of the transactions in this Agreement, and
(b) the calculations of each Company Stockholder's federal and state income
Taxes for the calendar year with a Section 338(h)(10) Election, the Company and
the Company Stockholders agree to make the election described in Section
1.1368-1(g)(2) of the Treasury Regulations if such election results in lower
aggregate federal and state income Taxes for all Company Stockholders.
Additionally, for purposes of the calculations of each Company Stockholder's
federal and state income Taxes for
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the calendar year without a Section 338(h)(10) Election, the calculations will
be make by either making or not making the election described in Section
1.1368-1(g)(2), whichever results in the lower aggregate federal and state
income Taxes for all Company Stockholders, without regard to whether or not such
election is actually made in the Company income Tax returns as described in the
first sentence of this paragraph (h).
SECTION 5.12. ANTITRUST LAW COMPLIANCE. Not later than five (5) business
days after the date hereof, (a) the Company, (b) the Company Stockholders and
(c) IES shall prepare and file with the United States Department of Justice (the
"Department") and the Federal Trade Commission (the "FTC") the notification and
report form with respect to the transactions contemplated by this Agreement as
required pursuant to the HSR Act. The Company, the Company Stockholders and IES
shall each cooperate with the other in preparation of such filings and shall
promptly comply with any reasonable request by the Department or the FTC for
supplemental information and shall use their best efforts to obtain early
termination of the waiting period under the HSR Act. IES shall pay all expenses,
including all attorneys' fees and filing fees, relating to any filings required
by the HSR Act.
SECTION 5.13. CONDUCT OF BUSINESS PENDING CLOSING. (a) Between the date of
this Agreement and the Closing, the Company Stockholders will, and will cause
the Company to, except as set forth below on Schedule 5.13:
(i) carry on their respective businesses in substantially the same
manner as they have heretofore;
(ii) use all commercially reasonable efforts to maintain their
properties and facilities, including those held under leases, in as good
working order and condition as at present, ordinary wear and tear excepted;
(iii) perform in all material respects all of their respective
obligations under agreements relating to or affecting their respective
assets, properties or rights;
(iv) use all reasonable efforts to keep in full force and effect
present insurance policies or other comparable insurance coverage;
(v) use their commercially reasonable efforts to maintain and
preserve their business organization intact, retain their respective
present key employees and maintain their respective relationships with
suppliers, customers and others having business relations with the Company;
(vi) use reasonable efforts to maintain compliance with all
material permits, laws, rules and regulations, consent orders, and all
other orders of applicable courts, regulatory agencies and similar
Governmental Authorities;
(vii) maintain present debt and lease instruments in accordance
with their terms and not enter into new or amended debt or lease
instruments without the
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Knowledge and consent of IES (which consent shall not be unreasonably
withheld), provided that debt and/or lease instruments may be replaced
without the consent of IES if such replacement instruments are on terms at
least as favorable to the Company as the instruments being replaced;
(viii) maintain or reduce present salaries and commission levels
for all officers, directors, employees and agents except for ordinary and
customary bonus and salary increases for employees in accordance with past
practices; and
(ix) afford to the officers and authorized representatives of IES
reasonable access during normal business hours to all of the Company's
sites, properties, books and records and will furnish IES with such
additional financial and operating data and other information as to the
business and properties of the Company as IES may from time to time
reasonably request.
(b) Except as disclosed on Schedule 5.13, between the date hereof and
the Closing, the Company will not, without prior written consent of IES:
(i) make any change in their Articles of Incorporation or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase,
redeem, or otherwise acquire or retire for value any share of its stock;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except if it is in
the normal course of business (consistent with past practice) or involves
an amount not in excess of two percent (2%) of the Company's revenues for
fiscal year ended September 30, 1997;
(v) create or assume any mortgage, pledge or other Lien or
encumbrance upon any assets or properties whether now owned or hereafter
acquired, except with respect to purchase money Liens incurred in
connection with the acquisition of equipment with an aggregate cost not in
excess of two percent (2%) of the Company's revenues for fiscal 1997
necessary or desirable for the conduct of the businesses of the Company;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the
start-up of any new business;
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(viii) merge or consolidate or agree to merge or consolidate with
or into any other corporation;
(ix) waive any material rights or claims of the Company, provided
that the Company may negotiate and adjust bills and accounts in the course
of good faith disputes with customers in a manner consistent with past
practice;
(x) amend or terminate any material judgment, permit, license or
other right to the Company; or
(xi) enter into any other transaction outside the ordinary course
of its business.
(c) None of the Company Stockholders, the Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Effective Time or the termination of this Agreement in
accordance with its terms, directly or indirectly: (i) solicit or initiate the
submission of proposals or offers from any person for, (ii) participate in any
discussions pertaining to, (iii) enter into any agreement or understanding with
respect to, (iv) furnish any information to any person other than IES or its
authorized agents relating to, or (v) allow to occur, any acquisition, purchase
or sale of all or a material amount of the assets of, or any equity interest in,
the Company or a merger, consolidation or business combination of the Company.
SECTION 5.14. NOTIFICATION OF CERTAIN MATTERS. The Company Stockholders
shall give prompt notice to IES upon obtaining Knowledge of (i) the occurrence
or non-occurrence of any event which would be likely to cause any representation
or warranty of the Company Stockholders contained herein to be untrue or
inaccurate and (ii) any failure of any Company Stockholder or the Company to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such person hereunder. IES shall give prompt notice to the
Company Stockholders of (i) the occurrence or non-occurrence of any event which
would be likely to cause any representation or warranty of IES contained herein
to be untrue or inaccurate and (ii) any failure of IES to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder.
SECTION 5.15. VEHICLES. At Closing the parties to this Agreement agree that
each Company Stockholder may purchase for cash from Company the vehicle used by
such Stockholder as shown on Schedule 5.15 at the purchase price shown on
Schedule 5.15. Ownership of the vehicle that a Company Stockholder purchasers
will be transferred at Closing to such Company Stockholder free and clear of all
Liens by documents of title reasonably satisfactory to legal counsel for Company
Stockholders.
SECTION 5.16. DEFERRED COMPENSATION. Notwithstanding anything in this
Agreement to the contrary, prior to the date of Closing, each party to this
Agreement agrees that the Company shall pay in full all of its deferred
compensation liability pursuant to the Incentive Plan of ▇▇▇▇▇
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Electrical Constructors, Inc., dated March 6, 1989, as amended, in the amounts
and to the employees shown on Schedule 5.16, subject to applicable withholding
laws. The Company Stockholders receiving such deferred compensation payments
hereby accept such payments in full settlement of all amounts due them pursuant
to the Incentive Plan of ▇▇▇▇▇ Electrical Constructors, Inc. and hereby release
and discharge Company from all further liability under such plan, which plan is
hereby terminated. In the event the Company does not have adequate cash to make
such payments, then notwithstanding anything in this Agreement to the contrary,
the parties to this Agreement agree that the Company may borrow the amount of
money needed in order to pay in full such payments and such payments and
borrowing shall not be deemed a breach of any representation, warranty or
covenant of this Agreement.
SECTION 5.17. STOCK OPTIONS. Effective as of the Closing, IES shall grant
one hundred seventy-five thousand (175,000) options to acquire IES Common Stock
in the amounts and to those employees listed on Schedule 5.17. Further, as soon
as reasonably practicable following the Closing, IES shall deliver to each
employee listed on Schedule 5.17 a stock option agreement in the form attached
hereto as EXHIBIT K to evidence the grant of such options to such employees.
SECTION 5.18. BONUSES. As a condition for IES to enter into this Agreement,
IES has required that certain Company employees obtain a greater percentage of
the Company Common Stock which the Company has effected by paying bonus
compensation in the form of issuing shares of Company Common Stock. Prior to
date of Closing Company shall issue shares of Company Common Stock as bonus
compensation to those employees listed on Schedule 5.18 in the amount of shares
listed on Schedule 5.18, subject to receipt of cash equal to applicable
withholding requirements in accordance with law. The parties to this Agreement
agree that such bonus shall eliminate in their entirety all bonuses that
otherwise would be due any employee listed on Schedule 5.18 from Company for the
fiscal year ended September 30, 1998, including, but not limited to bonuses
payable pursuant to the Company's Amended and Restated Executive Bonus Plan.
Company and Company Stockholders hereby terminate the Amended and Restated
Executive Bonus Plan dated September 24, 1997 in its entirety effective as of
the Closing. The bonused shares of Company Stock issued to employees listed on
Schedule 5.18 will be acquired by Acquisition pursuant to Sections 1.2 and 1.3.
SECTION 5.19. CERTAIN EMPLOYEES AND OFFICES. IES and Company agree that
Surviving Corporation shall continue to employ ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ for
at least sixty (60) days following Closing at their same salary; provided,
however, that notwithstanding anything in this Agreement to the contrary, ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ may, at anytime after the Closing, offer to employ and employ either
or both ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇. IES and Company agree that ▇▇▇▇▇▇▇ ▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇ will continue to perform certain services for ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
during such sixty (60) day employment period. Further, during such sixty (60)
day period ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ shall continue to have exclusive
use of their current offices located in the Company office building in
Greenville, South Carolina.
SECTION 5.20. TAX AUDIT. In the event of an Internal Revenue Service, South
Carolina Department of Revenue and Taxation or other tax authority audit of the
Company for any period
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ending on or before the Closing, IES shall promptly notify the Company
Stockholders of the audit. The Company Stockholders shall have the right to
solely conduct the audit as well as the current Internal Revenue Service audit
in existence at the date of this Agreement. However, in the event of a tax
authority audit of the Company for any period for which IES, Acquisition or the
Company may have to indemnify the Company Stockholders, IES and Company
Stockholders shall have the right to jointly conduct the audit. IES shall not
agree, and shall not allow Surviving Corporation to agree, to any adverse tax
adjustment affecting the Company Stockholders without the prior written consent
of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, if living, or the personal representative of his estate if
he is deceased, which consent shall not be unreasonably withheld. The Company
Stockholders shall not agree, and, if deceased, their personal representative
shall not agree to any adverse tax adjustment affecting the Company, IES or
Acquisition or requiring an indemnity payment by such parties without the prior
written consent of IES, which consent shall not be unreasonably withheld.
SECTION 5.21. LIFE INSURANCE. No later than ten (10) days after Closing,
each Company Stockholder may purchase for cash any life insurance policy owned
by the Company and insuring such Company Stockholder's life for such policy's
cash surrender value. Further, no later than ten (10) days after Closing any
Company Stockholder, or their designee, may purchase for cash any life insurance
policy insuring such Company Stockholder's life that is collaterally assigned to
Company for the amount owed to Company pursuant to such collateral assignment.
If such policies are not purchased, the Company may terminate such policies and
retain any proceeds received.
SECTION 5.22. PURCHASE OF ASSETS. At or prior to Closing the parties to
this Agreement agree that ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ may purchase for cash from Company
the assets shown on Schedule 5.22 at the purchase price shown on Schedule 5.22.
Ownership of such assets will be transferred at Closing to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
free and clear of all Liens by documents of title reasonably satisfactory to
legal counsel for Company Stockholders.
SECTION 5.23. AIRPLANE LEASE. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and the Company hereby
terminate, effective as of the Closing, that certain Airplane Lease Agreement
between such parties relating to the Mitsubishi Solitaire Aircraft, Model
MV2B40.
SECTION 5.24. STOCK PURCHASE AGREEMENT. The Company Stockholders and the
Company agree that the Stock Purchase Agreement dated March 6, 1989 among such
parties is hereby terminated effective at the Closing.
SECTION 5.25. REMOVAL OF STOCK CERTIFICATE LEGEND. At any time on or after
the second anniversary of the Effective Time, IES shall promptly remove the
legend described in Section 8.2 from any stock certificate evidencing the IES
Common Stock upon the written request of the holder of any such stock
certificate.
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34
ARTICLE VI
INDEMNIFICATION
The Company Stockholders and IES each make the following covenants:
SECTION 6.1. INDEMNIFICATION BY THE COMPANY STOCKHOLDERS. The Company
Stockholders covenant and agree that they, jointly and severally, will
indemnify, defend, and hold harmless IES, the Company, and the Surviving
Corporation, and their respective officers, directors, employees, stockholders,
agents, representatives, and affiliates (the "IES Indemnitees") at all times
from and after the date of this Agreement from and against all claims, damages,
losses, liabilities (joint or several), obligations, penalties, defenses,
actions, lawsuits, proceedings, judgments, demands, assessments, adjustments,
costs, and expenses (including specifically, but without limitation, reasonable
fees, disbursements, and expenses of attorneys, accountants, other professional
advisors and of expert witnesses and costs of investigation and preparation)
(collectively, "Damages"), as they are incurred resulting from, relating to or
arising out of:
(a) any breach of or any allegation or claim by a third party
which, if true, would constitute a breach of any representation or warranty
of Company Stockholders set forth herein or in the Schedules or
certificates delivered in connection herewith;
(b) any breach or non-performance, partial or total, by the
Company or any of the Company Stockholders of any covenant or agreement of
the Company (or any affiliate or subsidiary thereof) or the Company
Stockholders (or any affiliate or subsidiary thereof) contained in this
Agreement, other than Company obligations due after Closing; or
(c) the remediation, cleanup, testing, analysis, removal,
containment, treatment, storage, disposal, release or other action required
by law or expense related to items, if any, set forth or described by
Schedule 3.18.
Notwithstanding anything in this Agreement to the contrary, any
Damages or other indemnification amounts owed or incurred by Company
Stockholders, on the one hand, or IES on the other hand, in this Agreement shall
be reduced by (i) reserves established by Company as of June 30, 1998 with
regard to a specific indemnity obligation, (ii) any insurance proceeds received
by Surviving Corporation or IES, on the one hand, or the Company Stockholders,
on the other hand, under insurance coverage; and (iii) any resulting tax
benefits.
Notwithstanding any provision to the contrary in this Agreement, in no
event whatsoever shall the aggregate liability of the Company Stockholders, on
the one hand, or IES, on the other hand, under this Agreement (including all
costs, expenses and attorneys' fees paid or incurred by IES, the Company and/or
the Company Stockholders in connection therewith or with respect to any
indemnification or the curing of any and all misrepresentations or breaches
under
- 29 -
35
this Agreement) exceed $18,000,000; provided, however, that the foregoing
limitation on liability shall not apply with respect to (i) indemnity
obligations under Section 6.1(a) relating to Section 3.2, Section 3.19 hereof or
(ii) with respect to indemnity obligations under Section 6.3(a) relating to
Section 4.2(b) hereof or (iii) the failure of IES and/or Acquisition to pay all
or any part of the Merger Consideration; (iv) with respect to any Damages that
relate to or occur as a result of fraudulent misrepresentations or fraudulent
actions; or (v) with respect to IES's obligations pursuant to Section 5.6.
SECTION 6.2. INDEMNIFICATION RELATED TO TAX LIABILITIES. Except for any Tax
under Section 1374 of the Code, the Company Stockholders shall retain liability,
and shall indemnify IES, for the payment of any Tax liabilities with respect to
the conduct of the business of the Company or the Subsidiaries during all
periods ending as of the day immediately prior to the Effective Time.
Notwithstanding any provision in this Agreement to the contrary, IES and
Surviving Corporation shall pay and be responsible for all taxes under Section
1374 of the Code incurred by Company due to the transactions described in this
Agreement, and Company's failure to have adequate Tax reserves for such Taxes
shall not be deemed a breach of any representation, warranty or covenant in this
Agreement. Further, if Section 5.20 hereof was complied with and a Company
Stockholder's 1998 federal and/or state income Tax liability is subsequently
increased by the Internal Revenue Service or any state income Tax authority
above the greater of the amount of income taxes determined by ▇▇▇▇▇▇▇ ▇▇▇▇▇ &
Company (a) with a Section 338(h)(10) Election and (b) without a Section
338(h)(10) Election, as a result of a successful challenge to a purchase price
reallocation resulting from the Section 338(h)(10) Election, IES will indemnify
and hold harmless each Company Stockholder for any resulting income tax,
penalties and interest within fifteen (15) days after such Company Stockholder
has paid such additional income Tax.
SECTION 6.3. INDEMNIFICATION BY IES. IES covenants and agrees that it will
indemnify, defend, and hold harmless the Company Stockholders (the "Stockholder
Indemnitees") at all times from and after the date of this Agreement from and
against all claims, damages, losses, liabilities (joint or several),
obligations, penalties, defenses, actions, lawsuits, proceedings, judgments,
demands, assessments, adjustments, costs, and expenses (including specifically,
but without limitation, reasonable fees, disbursements, and expenses of
attorneys, accountants, other professional advisors and of expert witnesses and
costs of investigation and preparation), (collectively, "Damages"), as they are
incurred, resulting from, relating to or arising out of:
(a) any breach of or any allegation or claim by a third party
which, if true, would constitute a breach of any representation or warranty
of IES and/or Acquisition set forth herein or in the Schedules or
certificates delivered in connection herewith; and
(b) any breach or non-performance, partial or total, by IES of any
covenant or agreement of IES (or any affiliate or subsidiary thereof)
contained in this Agreement.
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36
(c) the failure of IES and Surviving Corporation to fulfill their
obligations described in Section 5.6.
SECTION 6.4. INDEMNIFICATION PROCEEDINGS. Promptly after a party
indemnified pursuant to this Article VI ("Indemnitee") has received notice of or
has knowledge of any claim by a person not a party to this Agreement ("third
party") or the commencement of any action or proceeding by a third party, the
Indemnitee shall promptly, and in any event within fifteen (15) days of the
assertion of any claim or the discovery of any fact upon which Indemnitee
intends to base a claim for indemnification under this Agreement ("Indemnitee
Claim"), as a condition precedent to the Indemnitee Claim, give written notice
to the party or parties from whom indemnification is sought ("Indemnitor") of
such claim by the third party. Such notice shall state the nature and the basis
of such claim and a reasonable estimate of the amount thereof. In the event of
any Indemnitee Claim, Indemnitor, at its option, shall have the right to defend
or settle, at its own expense and by its own counsel, any such matter so long as
the Indemnitor pursues the same in good faith and diligently. If the Indemnitor
undertakes to defend or settle, it shall promptly notify the Indemnitee of its
intention to do so, and the Indemnitee shall cooperate with the Indemnitor and
its counsel in the defense thereof and in any settlement thereof.
Notwithstanding the foregoing, the Indemnitee shall have the right to
participate in any matter through counsel of its own choosing at Indemnitee's
own expense; provided that the Indemnitor's counsel shall always be lead counsel
and shall determine all litigation and settlement steps, strategy and the like.
Except as set forth in the preceding sentence, after the Indemnitor has notified
the Indemnitee of its intention to undertake to defend or settle any such
asserted liability, and for so long as the Indemnitor diligently pursues such
defense, the Indemnitor shall not be liable for any additional legal expenses
incurred by the Indemnitee in connection with any defense or settlement of such
asserted liability, except to the extent such participation is requested by the
Indemnitor, in which event the Indemnitee shall be reimbursed by the Indemnitor
for reasonable additional legal expenses and out-of-pocket expenses. If the
Indemnitor desires to accept a final and complete settlement of any such third
party claim and the Indemnitee refuses to consent to any such settlement which
contains a complete and irrevocable release of Indemnitee of all current and
future claims related to or arising out of the matter in dispute, then the
Indemnitor's liability under this Section with respect to such third party claim
shall be limited to the amount so offered in settlement by said third party. If
the Indemnitor does not undertake to defend such matter to which the Indemnitee
is entitled to indemnification hereunder, or fails diligently to pursue such
defense, the Indemnitee may undertake such defense through counsel of its
choice, at the cost and expense of the Indemnitor, and the Indemnitee may settle
such matter, without the consent of the Indemnitor, and the Indemnitor shall
immediately reimburse the Indemnitee for the amount paid in such settlement and
any other liabilities or expenses incurred (including all reasonable legal fees
and expenses) by the Indemnitee in connection therewith as such amounts,
liabilities, expenses and fees are incurred.
SECTION 6.5. SOLE REMEDY. In the absence of fraud or fraudulent
misrepresentation, the indemnification provisions set forth in this Article VI
shall be the exclusive basis for the assertion of a monetary claim pursuant to
the Agreement or for the breach of a representation or warranty made pursuant to
this Agreement.
- 31 -
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SECTION 6.6. LIMITATIONS AND EXCEPTIONS. Notwithstanding any provision of
this Agreement to the contrary, neither Company nor the Company Stockholders
shall be liable or responsible in any manner to IES or Acquisition whether for
indemnification or otherwise, except for the indemnity as expressly provided for
in this Article VI. Neither party nor parties shall have any liability under
this Article VI with respect to any Damages to the extent that such Damages are
caused by the failure of the other party or parties to provide prompt notice as
provided in Section 6.4.
SECTION 6.7. NO THIRD PARTY BENEFICIARIES. The foregoing indemnification is
given solely for the purpose of protecting the IES Indemnitees and the
Stockholder Indemnitees and shall not be deemed extended to, or interpreted in a
manner to confer any benefit, right, or cause of action upon, any other Person.
SECTION 6.8. LIMITATION UPON INDEMNITY. The Company Stockholders, on the
one hand, and IES, on the other hand, shall be entitled to indemnification from
the other under the provisions of this Article VI for all claims subject to
indemnification by such party, but only after such time that the amount of, and
to the extent that, such claims for which the Indemnitee is entitled to be paid
exceed, in the aggregate, $500,000, (the "Indemnification Threshold") at which
time the indemnifying parties shall be liable for all Damages in excess of (but
not including) the Indemnification Threshold; provided, however, that the
foregoing limitation on liability shall not apply with respect to (a) indemnity
obligations under (i) Section 6.1(a) relating to Section 3.2, (ii) any item
disclosed on Schedule 3.18 hereto and (iii) Section 3.19 hereof, or (b)
indemnity obligations under Section 6.3(a) relating to Section 4.2(b), or (c)
indemnity obligations under Section 6.2, or (d) obligations under Section 5.17,
or (e) indemnity obligations under Section 6.3(c) relating to Section 5.6, or
(f) obligations under Section 5.11(d), or (g) the failure of IES and/or
Acquisition to pay all or any part of the Merger Consideration; or (h) with
respect to any Damages that relate to or occur as a result of fraudulent
misrepresentations or fraudulent acts.
SECTION 6.9. PUNITIVE DAMAGES. Notwithstanding anything in this Agreement,
in the absence of fraud or fraudulent acts, no party hereto shall be entitled to
any punitive damages from any other party hereto.
ARTICLE VII
NONCOMPETITION COVENANTS
SECTION 7.1. PROHIBITED ACTIVITIES. The Company Stockholders will not, for
a period of five (5) years following the Effective Time, directly or indirectly,
for themselves or on behalf of or in conjunction with any other Person:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial or advisory capacity, whether as an
employee, independent contractor, consultant, or advisor, or as a sales
representative, in any business offering
- 32 -
38
electrical contracting or instrumentation in direct competition with IES or
any of its subsidiaries within 100 miles of where IES or any of its
subsidiaries conducts business, including any territory serviced by IES or
any of its subsidiaries (which subsidiaries, for purposes of this Article
VII, shall include, without limitation, the Company) (the "Territory");
(b) except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇, call upon any Person
who is, at that time, within the Territory, an employee of IES or any of
its subsidiaries for the purpose or with the intent of enticing such
employee away from or out of the employ of IES or any of its subsidiaries;
(c) call upon any Person who is, at that time, or which has been,
within one (1) year prior to that time, a customer of IES or any of its
subsidiaries within the Territory for the purpose of soliciting or selling
electrical contracting or instrumentation services or products in direct
competition with IES or any of its subsidiaries within the Territory;
(d) call upon any prospective acquisition candidate, on any
Company Stockholder's own behalf or on behalf of any competitor in the
electrical contracting or instrumentation business, which candidate, to the
actual knowledge of such Stockholder after due inquiry, was called upon by
IES or any subsidiary thereof or for which, to the actual knowledge of such
Company Stockholder after inquiry, IES or any subsidiary thereof made an
acquisition analysis, for the purpose of acquiring such entity; or
(e) disclose customers, whether in existence or proposed, of the
Company to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that the Company has in
the past disclosed such information to the public for valid business
reasons or as required by law or legal process.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Company Stockholder from acquiring, as a passive investor with
no involvement in the operations of the electrical contracting or
instrumentation business, not more than two percent (2%) of the capital stock of
a business providing services similar to those provided by IES whose stock is
publicly traded on a national securities exchange or over the counter.
SECTION 7.2. EQUITABLE RELIEF. Because of the difficulty of measuring
economic losses to IES as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to IES for
which it would have no other adequate remedy, each Company Stockholder agrees
that the foregoing covenant may be enforced by IES by injunctions, restraining
orders, and other equitable actions and agrees to waive any requirement for the
securing or posting of any bond in connection with the obtaining of any such
injunctive or other equitable relief.
SECTION 7.3. REASONABLE RESTRAINT. It is agreed by the parties hereto that
the foregoing covenants in this Article VII impose a reasonable restraint on the
Company
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39
Stockholders in light of the activities and business of IES on the date of the
execution of this Agreement and the current plans of IES; but it is also the
intent of IES and the Company Stockholders that such covenants be construed and
enforced in accordance with the changing activities, business, and locations of
IES and its subsidiaries throughout the term of this covenant.
SECTION 7.4. SEVERABILITY; REFORMATION. The covenants in this Article VII
are severable and separate, and the unenforceability of any specific covenant
shall not affect the continuing validity and enforceability of any other
covenant. In the event any court of competent jurisdiction shall determine that
the scope, time or territorial restrictions set forth in this Article VII 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 this
Agreement shall thereby be reformed.
SECTION 7.5. MATERIAL AND INDEPENDENT COVENANT. The Company Stockholders
acknowledge that their agreements with the covenants set forth in this Article
VII are material conditions to IES's agreement to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. All of the
covenants in this Article VII shall be construed as an agreement independent of
any other provision in this Agreement, and the existence of any claim or cause
of action of any Company Stockholder against IES or one of its subsidiaries,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by IES of such covenants. It is specifically agreed
that the five (5) year period during which the agreements and covenants of each
Company Stockholder made in this Article VII shall survive shall be computed by
excluding from such computation any time during which such Company Stockholder
is in violation of any provision of this Article VII. The covenants contained in
this Article VII shall not be affected by any breach of any other provision
hereby by any party hereto.
SECTION 7.6. MATERIALITY. The Company and the Stockholders hereby agree
that this covenant is a material and substantial part of this transaction.
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ARTICLE VIII
APPLICABLE SECURITIES LAWS/TRANSFER RESTRICTIONS
SECTION 8.1. COMPANY STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES
CONCERNING SECURITIES. As of the date hereof (which is the same date as the
Effective Time), the Company Stockholders hereby make the following
representations and warranties to and for the benefit of IES: (i) that the
Company Stockholders have been provided with copies of the Prospectus and have
been provided as much time and opportunity as they deemed appropriate to review
and study such Prospectus, and to consult with IES regarding the merits and
risks of the transactions contemplated by this Agreement; (ii) that the Company
Stockholders have had adequate opportunity to ask questions of and receive
answers from the officers of IES pertaining to the purchase of the IES Common
Stock pursuant to the Merger, and (iii) all such questions have been answered to
the satisfaction of the Company Stockholders, but receiving such information and
receiving such answers does not diminish in any respect the representations,
warranties and covenants of IES and Acquisition hereunder. The Company
Stockholders acknowledge that the shares of IES Common Stock to be delivered to
the Company Stockholders pursuant to this Agreement have not been registered
under the 1933 Act and therefore may not be resold without compliance with the
1933 Act. The IES Common Stock to be acquired by such Company Stockholders
pursuant to this Agreement is being acquired solely for their own respective
accounts, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution. The Company Stockholders are able to bear the economic risk of an
investment in the IES Common Stock to be acquired pursuant to this Agreement and
can afford to sustain a total loss of such investment. Each Company Stockholder
has substantial knowledge and experience in making investment decisions of this
type (or is relying on qualified purchaser representatives with such knowledge
and experience in making this decision), and is capable, either individually or
with such purchaser representatives, of evaluating the merits and risks of this
investment. Each Company Stockholder is an "accredited investor" as defined in
Rule 501(a) of the 1933 Act.
SECTION 8.2. TRANSFER RESTRICTIONS. Unless otherwise agreed by IES, except
for transfers to immediate family members who agree to be bound by the
restrictions set forth in this Section 8.2 (or trusts for the benefit of the
Company Stockholders or family members, or trusts in which a Company Stockholder
is both the grantor and the beneficiary, the trustees of which so agree) and
except in the event of the death of a Company Stockholder, for a period of two
years from the date of this Agreement, none of the Company Stockholders shall
sell, assign, exchange, transfer, appoint, or otherwise dispose of any shares of
IES Common Stock received by the Company Stockholders pursuant to this
Agreement. The certificates evidencing the IES Common Stock delivered to the
Company Stockholders pursuant to this Agreement will bear a legend substantially
in the form set forth below and containing such other information as IES may
deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF
WITHOUT THE WRITTEN CONSENT OF IES, AND THE ISSUER SHALL NOT BE REQUIRED TO
GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO THE SECOND
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ANNIVERSARY OF THE EFFECTIVE TIME. 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) AFTER THE DATE
SPECIFIED ABOVE.
SECTION 8.3. RESALES. (a) In the event of the death of a Company
Stockholder, to the extent that any Company Stockholder's estate desires to sell
any IES Common Stock received by such Company Stockholder pursuant to this
Agreement within a period of two (2) years from the date of this Agreement, IES
shall, as soon as reasonably practicable, use reasonable efforts to register
such stock for resale under its current acquisition shelf registration statement
(or any successor acquisition shelf registration statement) and ensure that such
registration statement remains available for resales of such stock.
(b) With a view to making available the benefits of certain rules and
regulations of the SEC that may permit the sale of the IES Common Stock received
hereunder to the public without registration, IES agrees to use its reasonable
efforts to:
(i) make and keep public information regarding IES available as
those terms are understood and defined in Rule 144 under the 1933 Act for a
period of two years and 3 months following the Effective Time; and
(ii) file with the SEC in a timely manner all reports and other
documents required of IES under the 1933 Act and the 1934 Act.
ARTICLE IX
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
SECTION 9.1. GENERAL. The Company Stockholders recognize and acknowledge
that they had in the past, currently have, and in the future may possibly have,
access to certain confidential information of the Company or the Surviving
Corporation, such as lists of customers or employees, operational policies, and
pricing and cost policies that are valuable, special, and unique assets of the
Company and will be valuable, special, and unique assets of the Surviving
Corporation. The Company Stockholders agree that for a period of two (2) years
following the Closing they will not disclose such confidential information to
any Person for any purpose or reason whatsoever (except such information as the
Company Stockholders may be required to disclose to any Governmental Authority
or to authorized representatives of IES or in accordance with legal process or
in order to enforce the terms of this Agreement). In the event of a breach or
threatened breach by the Company Stockholders of the provisions of this Section,
IES shall be entitled to an injunction restraining the Company Stockholders from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting IES from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages.
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42
SECTION 9.2. EQUITABLE RELIEF. 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
the Company, the Surviving Corporation, and/or IES would have no other adequate
remedy, the Company Stockholders agree that the foregoing covenants may be
enforced against them by injunctions, restraining orders, and other equitable
actions and agree to waive any requirement for the securing or posting of any
bond in connection with the obtaining of any such injunctive or other equitable
relief.
SECTION 9.3. NON-PUBLIC INFORMATION. The Company Stockholders hereby
acknowledge that if they become aware of "material non-public information" (as
defined under applicable securities laws) regarding IES, that they will be
required, under applicable securities laws, to refrain from trading in IES
securities or disclosing any such information while such information is
non-public.
SECTION 9.4. SURVIVAL. The obligations of the parties under this Article IX
shall survive the Closing of this Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without reference to
the choice of law principles thereof.
SECTION 10.2. ENTIRE AGREEMENT. This Agreement, together with the Schedules
and Exhibits hereto, constitute the entire agreement between the parties with
respect to the subject matter hereof, and there are no agreements,
understandings, representations, or warranties between the parties other than
those set forth or referred to herein.
SECTION 10.3. EXPENSES AND FEES. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such cost or
expense; provided, however, that IES shall pay all costs, including filing fees
and attorneys' fees, with regard to the HSR filings.
SECTION 10.4. NOTICES. All notices hereunder shall be sufficient upon
receipt for all purposes hereunder if in writing and delivered personally, sent
by documented overnight delivery service or, to the extent receipt is confirmed,
telecopy, telefax, or other electronic transmission service to the appropriate
address or number as set forth below.
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If to IES or Acquisition, to:
Integrated Electrical Services, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Company or the Company Stockholders, to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (before September 12, 1998)
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ (on or after September 12, 1998)
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 10.5. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that no party may assign, delegate, or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of each other party hereto, except IES or Acquisition may transfer or
assign, in whole or from time to time in part, to one or more of their
affiliates, the right to enter into the transactions contemplated by this
Agreement, but any such transfer or assignment will not relieve IES or
Acquisition of its obligations hereunder. This Agreement is not intended to
confer upon any Person not a party hereto any rights or remedies hereunder, and
no Person other than the parties hereto or such Persons described above is
entitled to rely on any representation, warranty, or covenant contained herein.
SECTION 10.6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the parties made herein and at the time of the
Closing or in writing delivered pursuant to the provisions of this Agreement
shall survive the consummation of the transactions contemplated hereby and any
examination on behalf of the parties for a period of two years, following which
date no party may bring any action or present any claim for a breach of any such
representation or warranty, provided, however, that the representations and
warranties in Sections 3.2, 3.19 and 4.2 and breaches that relate to or occur as
a result of fraudulent misrepresentations or fraudulent acts and the obligations
set forth in Section 5.11 and Section 6.2 will survive until the expiration of
the applicable statute of limitations and be enforceable in accordance with
Article VI; and, provided further, that such limitations will not affect any
claims pending at the time of such expiration for which timely written notice
pursuant to this Agreement has been given.
SECTION 10.7. HEADINGS; DEFINITIONS. The Section and Article headings
contained in this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement. All references
to Sections or Articles contained herein mean
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Sections or Articles of this Agreement unless otherwise stated. All capitalized
terms defined herein are equally applicable to both the singular and plural
forms of such terms.
SECTION 10.8. AMENDMENTS AND WAIVERS. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Any
party hereto may, only by an instrument in writing, waive compliance by any
other party hereto with any term or provision of this Agreement on the part of
such other party hereto to be performed or complied with. The waiver by any
party hereto of a breach of any term or provision of this Agreement shall not be
construed as a waiver of any subsequent breach.
SECTION 10.9. CONSTRUCTION OF CERTAIN PROVISIONS. It is understood and
agreed that the specification of any dollar amount in the representations and
warranties contained in this Agreement or the inclusion of any specific item in
the Schedules or Exhibits is not intended to imply that such amounts or higher
or lower amounts, or the items so included or other items, are or are not
material, and no party shall use the fact of the setting of such amounts or the
fact of the inclusion of any such item in the Schedules in any dispute or
controversy between the parties as to whether any obligation, item, or matter
not described herein or included in a Schedule or Exhibit is or is not material
for purposes of this Agreement. It is agreed that neither party shall allege
that a provision of this Agreement shall be construed against a party because
such party drafted such provision.
SECTION 10.10. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal, or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal, or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated by this
Agreement are fulfilled to the extent possible.
SECTION 10.11. JURISDICTION. Any legal action, suit, or proceeding in law
or equity arising out of or relating to this Agreement and transactions
contemplated by this Agreement may only be instituted in any state or federal
court in ▇▇▇▇▇▇ County, Houston, Texas, and each party agrees not to assert, by
way of motion, as a defense, or otherwise, in any such action, suit, or
proceeding, any claim that it is not subject personally to the jurisdiction of
such court, that its property is exempt or immune from attachment or execution,
that the action, suit, or proceeding is brought in an inconvenient forum, that
the venue of the action, suit, or proceeding is improper or that this Agreement,
or the subject matter hereof or thereof may not be enforced in or by such court.
Each party further irrevocably submits to the jurisdiction of any such court in
any such action, suit, or proceeding. Any and all service of process and any
other notice in any such action, suit, or proceeding shall be effective against
any party if given by registered or certified mail, return receipt requested, or
by any other means of mail which requires a signed receipt, postage prepaid,
mailed to such party at the address listed in Section 10.4. Nothing herein
contained shall be deemed to affect the right of any party to serve process in
any manner permitted by law.
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SECTION 10.12. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 10.13. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof in addition to any other
remedy to which they are entitled at law or in equity.
SECTION 10.14. COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other party. In making proof
of this Agreement, it shall not be necessary to produce or account for more than
one such counterpart. A telecopied facsimile of an executed counterpart of this
Agreement shall be sufficient to evidence the binding agreement of each party to
the terms hereof. However, each party agrees to promptly deliver to the other
parties an original, duly executed counterpart of this Agreement.
SECTION 10.15. MUTUAL INDEMNIFICATION AGAINST CLAIMS OF BROKERS. Each party
agrees to indemnify the other against all loss, cost, damages or expense arising
out of claims for fees or commissions of brokers employed or alleged to have
been employed by such party.
SECTION 10.16. DEFINITIONS AND USAGE. For the purposes of this Agreement:
"1933 Act" shall have the meaning specified in Section 3.5.
"1934 Act" shall have the meaning specified in Section 4.4.
"Acquisition" shall have the meaning specified in the introductory
paragraph of this Agreement.
"Actions" shall mean any actions, suits, arbitrations, inquiries,
proceedings or investigations by or before any Governmental Authority.
"affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with such Person.
"Agreement" shall have the meaning specified in the introductory
paragraph of this Agreement and Plan of Merger.
"CERCLA" shall have the meaning specified in Section 3.18.
"Certificates" shall have the meaning specified in Section 1.3.
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"Certificate of Merger" shall have the meaning specified in
Section 1.1(b).
"Closing" shall have the meaning specified in Section 1.1(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor thereto.
"Commitment" shall have the meaning specified in Section 3.2(a).
"Company" shall have the meaning specified in the introductory
paragraph of this Agreement.
"Company Audited Financial Statements" shall have the meaning
specified in Section 3.6.
"Company Benefit Plans" shall have the meaning specified in
Section 3.20(a).
"Company Common Stock" shall have the meaning specified in Section
1.2(a).
"Company Material Adverse Effect" shall mean any fact,
circumstance, event, or condition which has or would have a materially
adverse effect on the business, operations, properties, condition
(financial or otherwise), assets, liabilities, results of operations or
prospects of the Company and the Subsidiaries, taken as a whole, provided,
however, that Company Material Adverse Effect (and the word "material" and
phrases of like import) shall exclude any adverse changes or conditions as
and to the extent such changes or conditions relate to or result from
general economic conditions or other conditions affecting the industry in
which Company competes as a whole.
"Company Pension Plans" shall have the meaning specified in
Section 3.20(a).
"Company Returns" shall mean all returns, declarations, reports,
statements, and other documents required to be filed by the Company or the
Subsidiaries in respect of Taxes, and the term "Company Return" means any
one of the foregoing Company Returns.
"Company Shares" shall have the meaning specified in Section
3.2(a).
"Company Stockholders" shall have the meaning specified in the
introductory paragraph of this Agreement.
"Company Unaudited Balance Sheet Date" shall have the meaning
specified in Section 3.7.
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"Company Unaudited Financial Statements" shall have the meaning
specified in Section 3.6.
"Company Welfare Plan" shall have the meaning specified in Section
3.20(a).
"Damages" shall have the meaning specified in Section 6.1.
"Delaware Law" shall have the meaning specified in Section 1.1(a).
"Department" shall have the meaning specified in Section 5.12.
"disposal" or "disposed" shall have the meaning specified in
Section 3.18.
"Effective Time" shall have the meaning specified in Section
1.1(b).
"Employment Agreements" shall have the meaning specified in
Section 1.6(a)(i).
"Enforceability Exceptions" shall have the meaning specified in
Section 3.9.
"Environmental Laws" shall have the meaning specified in Section
3.18.
"ERISA" shall have the meaning specified in Section 3.20(a).
"FTC" shall have the meaning specified in Section 5.12.
"GAAP" shall have the meaning specified in Section 3.6.
"Governmental Authority" shall mean (a) the United States of
America, (b) any state, county, municipality, or other governmental
subdivision within the United States of America, and (c) any court or any
governmental department, commission, board, bureau, agency, or other
instrumentality of the United States of America or of any state, county,
municipality, water rights, taxing, or zoning authority, or other
governmental subdivision within the United States of America.
"HSR Act" shall have the meaning specified in Section 1.7(d).
"IES" shall have the meaning specified in the introductory
paragraph of this Agreement.
"IES Common Stock" shall have the meaning specified in Section
1.2(a).
"IES Indemnitees" shall have the meaning specified in Section 6.1.
"IES Material Adverse Effect" shall mean any fact, circumstance,
event, or condition which has or would have a materially adverse effect on
the business,
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operations, properties, condition (financial or otherwise), assets,
liabilities, results of operations or prospects of IES and its
subsidiaries, taken as a whole.
"IES SEC Filings" shall have the meaning specified in Section
4.5(a).
"Indemnification Threshold" shall have the meaning specified in
Section 6.8.
"Indemnitee" shall have the meaning specified in Section 6.4.
"Indemnitee Claim" shall have the meaning specified in Section
6.4.
"Indemnitor" shall have the meaning specified in Section 6.4.
"Knowledge" when used in relation to any Person shall mean the
actual (but not constructive) knowledge of such Person or such Person's
officers, without investigation, inquiry or verification.
"Licenses" shall have the meaning specified in Section 3.11.
"Liens" shall mean all liens, mortgages, security interests,
pledges, equities, claims, options, and other encumbrances of any kind.
"Merger" shall have the meaning specified in Section 1.1(a).
"Merger Consideration" shall have the meaning specified in Section
1.2(a).
"NYSE" shall have the meaning specified in Section 1.3.
"officer" means in the case of IES and the Company, any executive
officer of IES or the Company, as applicable, within the meaning of Rule
3b-7 of the 1934 Act.
"Person" shall mean an individual, partnership, corporation,
limited liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, Governmental Authority or
other legal entity of any kind.
"Prospectus" shall have the meaning specified in Section 4.5(d).
"Qualified Plans" shall have the meaning set forth in Section
3.20(b).
"RCRA" shall have the meaning specified in Section 3.18.
"release" shall have the meaning specified in Section 3.18.
"SEC" shall have the meaning specified in Section 4.5.
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"Section 338(h)(10) Election" shall have the meaning specified in
Section 5.11(d).
"Stockholder Indemnitees" shall have the meaning specified in
Section 6.3.
"Subsidiaries" shall have the meaning specified in Section 3.1.
"subsidiary" means, with respect to any Person, any entity of
which securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other Persons performing
similar functions are at any time directly or indirectly owned by such
Person.
"Subsidiary Shares" shall have the meaning specified in Section
3.2(b).
"Subsidiary Stock" shall have the meaning specified in Section
3.2(b).
"Surviving Corporation" shall have the meaning specified in
Section 1.1(a).
"Tax" or "Taxes" shall have the meaning specified in Section
3.19(a).
"Territory" shall have the meaning specified in Section 7.1(a).
"third party" shall have the meaning specified in Section 6.4.
A reference in this Agreement to any statute shall be to such statute
as amended from time to time, and the rules and regulations promulgated
thereunder.
SECTION 10.17. DISCLOSURE SCHEDULE. Anything disclosed at any place in this
Agreement or any Exhibit or Schedule shall be deemed to have been disclosed at
all places for purposes of this Agreement and any and all Exhibits or Schedules
to which said information relates.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
INTEGRATED ELECTRICAL SERVICES,
INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
Title: Secretary
-------------------------
▇▇▇▇▇ ACQUISITION CORPORATION
By: /s ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
Title: President
-------------------------
▇▇▇▇▇ ELECTRICAL CONSTRUCTORS,
INC.
By: /s/ J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------
Title: President
-------------------------
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Company Stockholder
/s/ J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Company Stockholder
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Company Stockholder
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Company Stockholder
/s/ J. ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
J. ▇▇▇▇▇▇ ▇▇▇▇▇▇, Company Stockholder
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Company Stockholder
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