EXHIBIT 2.1
AMENDED AND RESTATED AGREEMENT AND PLAN OF ORGANIZATION
dated as of December 11, 1997
by and among
QUANTA SERVICES, INC.
PAR ELECTRICAL CONTRACTORS, INC.
and
the Stockholders named herein
TABLE OF CONTENTS
1. TRANSFER AND EXCHANGE................................................. 1
2. DELIVERY OF CONSIDERATION............................................. 2
2.1 Consideration.................................................... 2
2.2 Certificates..................................................... 2
2.3 QSI Stock........................................................ 2
3. CLOSING............................................................... 2
4. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS............ 3
4.1 Due Organization................................................ 3
4.2 Authorization................................................... 4
4.3 Capital Stock of the Company.................................... 4
4.4 Transactions in Capital Stock................................... 4
4.5 No Bonus Shares................................................. 5
4.6 Subsidiaries.................................................... 5
4.7 Predecessor Status; etc......................................... 5
4.8 Spin-Off by the Company......................................... 5
4.9 Financial Statements............................................ 5
4.10 Liabilities and Obligations..................................... 5
4.11 Accounts and Notes Receivable................................... 6
4.12 Permits and Intangibles......................................... 7
4.13 Environmental Matters........................................... 7
4.14 Personal Property............................................... 8
4.15 Significant Customers; Material Contracts and Commitments....... 8
4.16 Real Property................................................... 9
4.17 Insurance; Bonding.............................................. 9
4.18 Compensation; Employment Agreements; Organized Labor Matters....10
4.19 Employee Plans..................................................10
4.20 Compliance with ERISA...........................................11
4.21 Conformity with Law; Litigation.................................12
4.22 Taxes...........................................................12
4.23 No Violations...................................................14
4.24 Government Contracts............................................14
4.25 Absence of Changes..............................................15
4.26 Deposit Accounts; Powers of Attorney............................16
4.27 Validity of Obligations.........................................16
4.28 Relations with Governments......................................16
4.29 Disclosure......................................................16
4.30 Prohibited Activities...........................................17
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4.31 Authority; Ownership............................................17
4.32 Preemptive Rights...............................................17
5. REPRESENTATIONS OF QSI................................................18
5.1 Due Organization................................................18
5.2 Authorization...................................................18
5.3 Capital Stock of QSI............................................18
5.4 Transactions in Capital Stock...................................19
5.5 Subsidiaries....................................................19
5.6 Financial Statements............................................19
5.7 Liabilities and Obligations.....................................19
5.8 Conformity with Law; Litigation.................................19
5.9 No Violations...................................................20
5.10 Validity of Obligations.........................................20
5.11 QSI Stock.......................................................20
5.12 Business; Real Property; Material Agreements....................20
5.13 Taxes...........................................................21
5.14 No Intention to Dispose of Company Stock........................21
5.15 Other Founding Companies........................................21
6. COVENANTS PRIOR TO CLOSING............................................21
6.1 Access and Cooperation; Due Diligence...........................21
6.2 Conduct of Business Pending Closing.............................22
6.3 Prohibited Activities...........................................23
6.4 No Shop.........................................................24
6.5 Notice to Bargaining Agents.....................................24
6.6 Agreements......................................................24
6.7 Notification of Certain Matters.................................24
6.8 Amendment of Schedules..........................................25
6.9 Cooperation in Preparation of Registration Statement............26
6.10 Final Financial Statements......................................27
6.11 Further Assurances..............................................27
6.12 Authorized Capital..............................................27
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY.......27
7.1 Representations and Warranties..................................27
7.2 Performance of Obligations......................................28
7.3 No Litigation...................................................28
7.4 Opinion of Counsel..............................................28
7.5 Registration Statement..........................................28
7.6 Consents and Approvals..........................................28
7.7 Good Standing Certificates......................................28
7.8 No Material Adverse Change......................................29
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7.9 Closing of IPO..................................................29
7.10 Secretary's Certificate.........................................29
7.11 Employment Agreements...........................................29
7.12 Directors and Officers Insurance................................29
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF QSI............................29
8.1 Representations and Warranties..................................29
8.2 Performance of Obligations......................................30
8.3 No Litigation...................................................30
8.4 Secretary's Certificate.........................................30
8.5 No Material Adverse Effect......................................30
8.6 Stockholders' Release...........................................30
8.7 Termination of Related Party Agreements.........................30
8.8 Opinion of Counsel..............................................30
8.9 Consents and Approvals..........................................31
8.10 Good Standing Certificates......................................31
8.11 Registration Statement..........................................31
8.12 Employment Agreements...........................................31
8.13 Closing of IPO..................................................31
8.14 FIRPTA Certificate..............................................31
8.15 Insurance.......................................................31
8.16 Lockup Agreement................................................31
9. COVENANTS OF QSI AND THE STOCKHOLDERS AFTER CLOSING 31
9.1 Release From Guarantees; Repayment of Certain Obligations.......31
9.2 Preservation of Tax Treatment...................................32
9.3 Preparation and Filing of Returns...............................32
9.4 Directors and Officers..........................................33
9.5 Maintenance of Books............................................33
10. INDEMNIFICATION.......................................................33
10.1 General Indemnification by Stockholders.........................33
10.2 Indemnification by QSI..........................................34
10.3 Third Person Claims.............................................35
10.4 Exclusive Remedy................................................36
10.5 Limitations on Indemnification..................................36
11. TERMINATION OF AGREEMENT..............................................37
11.1 Termination.....................................................37
11.2 Liabilities in Event of Termination.............................38
12. NONCOMPETITION........................................................38
12.1 Prohibited Activities...........................................38
12.2 Damages.........................................................39
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12.3 Reasonable Restraint......................................... 39
12.4 Severability; Reformation.................................... 39
12.5 Independent Covenant......................................... 39
12.6 Materiality.................................................. 39
12.7 Limitations.................................................. 39
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.......................... 40
13.1 Stockholders................................................. 40
13.2 QSI.......................................................... 40
13.3 Damages...................................................... 41
13.4 Survival..................................................... 41
14. TRANSFER RESTRICTIONS.............................................. 41
14.1 Transfer Restrictions........................................ 41
15. FEDERAL SECURITIES ACT REPRESENTATIONS............................. 42
15.1 Compliance with Law.......................................... 42
15.2 Economic Risk; Sophistication................................ 42
16. REGISTRATION RIGHTS................................................ 43
16.1 Piggyback Registration Rights................................ 43
16.2 Registration Procedures...................................... 43
16.3 Underwriting Agreement....................................... 43
16.4 Availability of Rule 144..................................... 44
17. GENERAL............................................................ 44
17.1 Cooperation.................................................. 44
17.2 Successors and Assigns....................................... 44
17.3 Entire Agreement............................................. 44
17.4 Counterparts................................................. 44
17.5 Brokers and Agents........................................... 44
17.6 Expenses..................................................... 45
17.7 Notices...................................................... 45
17.8 Governing Law................................................ 46
17.9 Exercise of Rights and Remedies.............................. 46
17.10 Time......................................................... 46
17.11 Reformation and Severability................................. 46
17.12 Remedies Cumulative.......................................... 46
17.13 Captions..................................................... 46
17.14 Amendments and Waivers....................................... 47
17.15 Incorporation by Reference................................... 47
17.16 Defined Terms................................................ 47
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INDEX TO SCHEDULES
4.1 Organization; Charter Documents
4.3 Authorized Capital Stock
4.4 Transactions in Capital Stock
4.5 Bonus Shares
4.6 Subsidiaries
4.7 Predecessor Status
4.8 Spin-Offs
4.9 Financial Statements
4.10 Liabilities and Obligations
4.11 Accounts and Notes Receivable
4.12 Permits and Intangibles
4.13 Environmental Matters
4.14 Personal Property
4.15 Significant Customers; Material Contracts and Commitments
4.16 Real Property
4.17 Insurance; Bonding
4.18 Compensation; Employment Agreements; Organized Labor Matters
4.19 Employee Plans
4.21 Violations of Law; Litigation
4.22 Taxes
4.23 Necessary Consents
4.24 Government Contracts
4.25 Absence of Changes
4.26 Deposit Accounts; Powers of Attorney
4.30 Prohibited Activities
4.31 Company Stock Ownership; Liens on Company Stock
5.1 QSI Charter and Bylaws
5.3 QSI Stock Ownership
5.4 Transactions in Capital Stock
5.6 Financial Statements
5.7 Liabilities and Obligations
5.8 Conformity with Law; Litigation
5.9 Required Consents - QSI
5.12 Business; Real Property; Material Agreements
5.13 Taxes
6.2 Conduct of Business Pending Closing - Exceptions
6.3 Prohibited Activities - Exceptions
6.5 Proof of Notice Under Collective Bargaining Agreements
6.6 Termination Agreements
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INDEX TO ANNEXES
Annex I Consideration
Annex II Employment Agreement Form
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AMENDED AND RESTATED AGREEMENT AND PLAN OF ORGANIZATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF ORGANIZATION (the
"Agreement") is made effective as of December 11, 1997, by and among Quanta
Services, Inc., a Delaware corporation formerly known as Fabal Construction,
Inc. ("QSI"), PAR Electrical Contractors, Inc., a Missouri corporation (the
"Company"), and ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇, who are referred to collectively
herein as the "Stockholders." Capitalized terms used in this Agreement and not
otherwise defined are defined in Section 17.16 hereof.
WHEREAS, the parties have previously executed that certain Agreement and
Plan of Organization dated October 29, 1997, and have agreed to certain
amendments and revisions thereto pursuant to that certain Amended and Restated
Agreement and Plan of Organization dated as of November 10, 1997, and that
certain Amendment No. 1 To Amended and Restated Agreement and Plan of
Organization, dated as of November 24, 1997 (collectively, the "Original
Agreement");
WHEREAS, the parties wish to amend and restate the Original Agreement in
its entirety to reflect certain agreed to amendments and revisions;
WHEREAS, the respective Boards of Directors of QSI and the Company deem it
advisable and in the best interests of QSI and the Company and their respective
stockholders that QSI acquire all of the Company's outstanding shares of capital
stock pursuant to this Agreement;
WHEREAS, QSI is concurrently entering into an Amended and Restated
Agreement and Plan of Organization (collectively, the "Other Agreements") with
each of Potelco, Inc., Union Power Construction Company and TRANS TECH
Electric, Inc., and their respective stockholders (the Company, together with
each of the entities with which QSI has entered into the Other Agreements, are
collectively referred to herein as the "Founding Companies");
WHEREAS, this Agreement, the Original Agreement, the Other Agreements and
the IPO of QSI Stock constitute the "QSI Plan of Organization";
WHEREAS, the Stockholders and the Boards of Directors and the stockholders
of QSI and each of the Other Founding Companies have approved and adopted the
QSI Plan of Organization as an integrated plan pursuant to which QSI will
acquire the capital stock or assets of each of the Founding Companies in
exchange for shares of QSI Stock and cash concurrent with the IPO of QSI Stock
and which is intended to qualify as an exchange meeting the requirements of
Section 351 of the Code; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. TRANSFER AND EXCHANGE
On the Funding and Consummation Date, (a) each Stockholder shall transfer,
convey, assign and deliver to QSI, and QSI shall acquire and accept from such
Stockholder, all of such Stockholder's outstanding shares of Company Stock, free
and clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind.
2. DELIVERY OF CONSIDERATION
2.1 CONSIDERATION. On the Funding and Consummation Date the Stockholders,
who are on that date the holders of all outstanding certificates representing
Company Stock, shall, upon surrender of such certificates, receive the number of
shares of QSI Stock and the amount of cash set forth on Annex I hereto, said
cash to be payable by certified check or wire transfer. QSI shall have the
right, in its sole discretion, to revise the consideration set forth on Annex I
at any time prior to the Closing Date based upon the trailing twelve month
revenue performance of the Company; provided that if either the cash or stock
portion of such consideration is adjusted downward by more than 5%, the Company
or any Stockholders shall have the right to terminate this Agreement by giving
written notice of their intention to do so not later than fifteen days following
receipt of notice of the adjustment. Also set forth on Annex I are actions
permitted to be taken by the Company with respect to disposition of its assets
prior to the Closing Date.
2.2 CERTIFICATES. The Stockholders shall deliver to QSI at the Closing
the certificates representing Company Stock, duly endorsed in blank by the
appropriate Stockholder, or accompanied by blank stock powers, and with all
necessary transfer tax and other revenue stamps, acquired at the Company's
expense, affixed and canceled. Each Stockholder agrees promptly to cure any
deficiencies with respect to the endorsement of the interest certificates or
other documents of conveyance with respect to such Company Stock or with respect
to the stock powers accompanying the Company Stock.
2.3 QSI STOCK. All QSI Stock received by the Stockholders pursuant to
this Agreement shall, except for restrictions on resale or transfer described in
Sections 14 and 15 hereof, have the same rights as all of the other shares of
outstanding QSI Stock by reason of the provisions of the Certificate of
Incorporation of QSI or as otherwise provided by the Delaware General
Corporation Law (the "Delaware GCL"). All voting rights of such QSI Stock
received by the Stockholders shall be fully exercisable by the Stockholders and
the Stockholders shall not be deprived nor restricted in exercising those
rights. On the Funding and Consummation Date, QSI shall have no class of
capital stock issued and outstanding other than the QSI Stock. Notwithstanding
anything herein to the contrary, the sponsors of QSI will hold a class of stock
which will be identical to the QSI Stock, except that holders of such class of
stock will have the right to elect only one or two directors and with such other
limited voting rights as recommended by counsel.
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3. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary to
prepare to (i) effect the transfer and delivery of the shares of Company Stock
as contemplated by Section 1 hereof and (ii) effect the delivery of the
consideration referred to in Section 2 hereof; provided, however, that such
actions shall not include the actual completion of the transfer and delivery of
the shares of Company Stock or the delivery of the consideration by certified
check(s) or wire transfer(s) referred to in Section 2 hereof, each of which
actions shall only be taken upon the Funding and Consummation Date as herein
provided. The taking of the actions described in clauses (i) and (ii) above
(the "Closing") shall take place on the closing date (the "Closing Date") at the
offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇. On the Funding and Consummation Date (x) all transactions contemplated
by this Agreement, including the delivery of the shares of Company Stock and the
delivery of shares of QSI Stock and certified check(s) or wire transfer(s) in an
amount equal to the cash portion of the consideration which the Stockholders
shall be entitled to receive pursuant to Section 2 hereof shall occur and (y)
the closing with respect to the IPO shall be completed. The date on which the
actions described in the preceding clauses (x) and (y) occur shall be referred
to as the "Funding and Consummation Date." Except as provided in Sections 7 and
8 hereof with respect to actions to be taken on the Funding and Consummation
Date, during the period from the Closing Date to the Funding and Consummation
Date this Agreement may only be terminated by a party if the underwriting
agreement in respect of the IPO is terminated pursuant to the terms of such
agreement. This Agreement shall in any event terminate if the Funding and
Consummation Date has not occurred within 15 business days of the Closing Date.
Time is of the essence.
4. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
Each of the Company and the Stockholders jointly and severally represents
and warrants that all of the following representations and warranties in this
Section 4(A) are true at the date of this Agreement and, subject to Section 6.8
hereof, shall be true at the time of Closing and the Funding and Consummation
Date. Each of the Company and the Stockholders agrees that such representations
and warranties shall survive the Funding and Consummation Date for a period of
two years (the last day of such period being the "Expiration Date"), except that
(i) the warranties and representations set forth in Section 4.22 hereof shall
survive until such time as the limitations period has run for all Tax periods
ended on or prior to or including the Funding and Consummation Date, which shall
be deemed to be the Expiration Date for Section 4.22, (ii) the warranties and
representations set forth in Section 4.29(c) hereof shall survive until such
time as the limitations period has run for determining the Tax treatment of the
transaction contemplated herein, and (iii) solely for purposes of determining
whether a claim for indemnification under Section 10.1(iii) hereof has been made
on a timely basis, and solely to the extent that in connection with the IPO, QSI
actually incurs liability under the 1933 Act, the 1934 Act, or any other federal
or state securities laws as a result of a breach of a representation or warranty
by the Company or a Stockholder, the
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representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for such purposes. For purposes of this Section 4, the term
"Company" shall mean and refer to the Company and all of its Subsidiaries.
4.1 DUE ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and the Company is duly authorized and qualified to do business
under all applicable laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as now
conducted, except (i) as set forth on Schedule 4.1 or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, affairs, prospects, properties, assets or condition
(financial or otherwise), of the Company taken as a whole (as used herein with
respect to the Company, or with respect to any other person, a "Material Adverse
Effect"). Schedule 4.1 sets forth the jurisdiction in which the Company is
incorporated and contains a list of all such jurisdictions in which the Company
is authorized or qualified to do business. True, complete and correct copies of
the Certificate of Incorporation and Bylaws, each as amended, of the Company
(the "Charter Documents") are all attached hereto as Schedule 4.1. The stock
records of the Company, as heretofore made available to QSI, are correct and
complete in all material respects. There are no minutes in the possession of
the Company or the Stockholders that have not been made available to QSI, and
all of such minutes are correct and complete in all respects. Except as set
forth on Schedule 4.1, the most recent minutes of the Company, which are dated
no earlier than ten business days prior to the date hereof, affirm and ratify
all prior acts of the Company, and of its officers and directors on behalf of
the Company.
4.2 AUTHORIZATION. (i) The representatives of the Company executing this
Agreement have the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into and perform this Agreement, and all required approvals
of the equity holders and the Board of Directors of the Company have been
obtained.
4.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company is as set forth on Schedule 4.3. All of the issued and outstanding
shares of the capital stock of the Company are owned by the Stockholders in the
amounts set forth in Schedule 4.3 and further, except as set forth on Schedule
4.3, are owned free and clear of all liens, security interests, pledges,
charges, voting trusts, restrictions, encumbrances and claims of every kind.
All of the issued and outstanding shares of the capital stock of the Company
have been duly authorized and validly issued, are fully paid and nonassessable,
are owned of record and beneficially by the Stockholders and further, such
shares were offered, issued, sold and delivered by the Company in compliance
with all applicable state and federal laws concerning the issuance of
securities. Further, none of such shares were issued in violation of the
preemptive rights of any past or present equity holder of the Company.
4.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 4.4,
the Company has not acquired any Company Stock since January l, 1994. Except as
set forth on Schedule 4.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates the
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Company to issue any of its authorized but unissued capital stock; (ii) the
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof; and (iii) neither
the voting stock structure of the Company nor the relative ownership of shares
among any of its respective equity holders has been altered or changed in
contemplation of the transactions contemplated hereby and/or the QSI Plan of
Organization. Schedule 4.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list of all outstanding
options, warrants or other rights to acquire shares of the Company's stock and
the material terms of such outstanding options, warrants or other rights.
4.5 NO BONUS SHARES. Except as set forth on Schedule 4.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses.
4.6 SUBSIDIARIES. Schedule 4.6 attached hereto lists the name of each of
the Company's subsidiaries (each, a "Subsidiary"), and sets forth the number and
class of the authorized capital stock of each Subsidiary and the number of
shares or interests of each Subsidiary which are issued and outstanding, all of
which shares or interests (except as set forth on Schedule 4.6) are owned by the
Company, free and clear of all liens, security interests, pledges, voting
trusts, equities, restrictions, encumbrances and claims of every kind. Except
as set forth on Schedule 4.6, the Company does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the Company, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
4.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 4.7 is a listing of
all names of all predecessor companies of the Company, including the names of
any entities acquired by the Company (by stock purchase, merger or otherwise) or
owned by the Company or from whom the Company previously acquired material
assets. Except as disclosed on Schedule 4.7, the Company has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
4.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 4.8, there
has not been any sale, spin-off or split-up of material assets of either the
Company or any other person or entity that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the Company ("Affiliates") since January 1, 1994.
4.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 4.9 are copies of
the following financial statements of the Company and any Subsidiaries (the
"Company Financial Statements"): the Company's audited Consolidated Balance
Sheets, if any, as of December 31, 1996, 1995 and 1994 and Consolidated
Statements of Income, Cash Flows and Retained Earnings, if any, for each of the
years in the three-year period ended December 31, 1996, and Consolidated
Statements of Income, Cash Flows and Retained Earnings for the nine-month period
ending September 30, 1997 and Consolidated Balance Sheets as of September 30,
1997 (September 30, 1997 being hereinafter
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referred to as the "Balance Sheet Date"). Except as set forth on Schedule 4.9,
such Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated. Except as set forth on Schedule 4.9, such Consolidated
Balance Sheets as of September 30, 1997, December 31, 1996, 1995 and 1994
present fairly the financial position of the Company and each Subsidiary, if
any, as of the dates indicated thereon, and such Consolidated Statements of
Income, Cash Flows and Retained Earnings present fairly the results of
operations for the periods indicated thereon.
4.10 LIABILITIES AND OBLIGATIONS. The Company has delivered to QSI an
accurate list (which is set forth on Schedule 4.10) as of the Balance Sheet Date
of (i) all liabilities of the Company which are not reflected on the balance
sheet of the Company at the Balance Sheet Date or otherwise reflected in the
Company Financial Statements at the Balance Sheet Date (other than liabilities
incurred in the ordinary course of business), (ii) any liabilities of the
Company in excess of $50,000 and (iii) all loan agreements, indemnity or
guaranty agreements, bonds, mortgages, liens, pledges or other security
agreements in each case evidencing indebtedness in excess of $15,000, including
copies thereof. Except as set forth on Schedule 4.10, since the Balance Sheet
Date the Company has not incurred any material liabilities of any kind,
character and description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business. The Company has also delivered to QSI on Schedule 4.10, in the
case of those contingent liabilities related to pending or threatened
litigation, or other liabilities which are not fixed or are being contested, the
following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim, suit or
proceeding;
(ii) the name of each court or agency before which such claim, suit
or proceeding is pending; and
(iii) the date such claim, suit or proceeding as instituted; and
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
4.11 ACCOUNTS AND NOTES RECEIVABLE. The Company has delivered to QSI
an accurate list (which is set forth on Schedule 4.11) of the accounts and notes
receivable of the Company, as of the Balance Sheet Date, including any such
amounts which are not reflected in the balance sheet as of the Balance Sheet
Date, and including receivables from and advances to employees and the
Stockholders. The Company shall also provide to QSI (x) an accurate list of all
receivables obtained
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subsequent to the Balance Sheet Date up to the Closing Date and (y) an aging of
all accounts and notes receivable showing amounts due in 30 day aging categories
(the "A/R Aging Reports"). Except to the extent reflected on Schedule 4.11 or as
disclosed by the Company to QSI in a writing accompanying the A/R Aging Reports,
the accounts, notes and other receivables shown on Schedule 4.11 and on the A/R
Aging Reports represent bona-fide obligations and are and shall be collectible
in the amounts shown, net of reserves reflected in the balance sheet as of the
Balance Sheet Date with respect to accounts receivable as of the Balance Sheet
Date, and net of reserves reflected in the books and records of the Company
(consistent with the methods used for the balance sheet) with respect to
accounts receivable of the Company after the Balance Sheet Date.
4.12 PERMITS AND INTANGIBLES. The Company holds all licenses, franchises,
permits and other governmental authorizations the absence of any of which could
have a Material Adverse Effect on its business, and the Company has delivered to
QSI an accurate list and summary description (which is set forth on Schedule
4.12) of all such licenses, franchises, permits and other governmental
authorizations, including permits, titles, licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights owned or
held by the Company (including interests in software or other technology
systems, programs and intellectual property) (it being understood and agreed
that a list of all environmental permits and other environmental approvals is
set forth on Schedule 4.13). To the Knowledge of the Company, the licenses,
franchises, permits and other governmental authorizations listed on Schedules
4.12 and 4.13 are valid, and the Company has not received any notice that any
governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. The Company has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in the licenses, franchises,
permits and other governmental authorizations listed on Schedules 4.12 and 4.13
and is not in violation of any of the foregoing except where such noncompliance
or violation would not have a Material Adverse Effect on the Company. Except as
specifically provided on Schedule 4.12, the transactions contemplated by this
Agreement will not result in a default under or a breach or violation of, or
adversely affect the rights and benefits afforded to the Company by, any such
licenses, franchises, permits or government authorizations.
4.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 4.13, (i)
the Company has complied with and is in compliance with all federal, state,
local and foreign statutes (civil and criminal), laws, ordinances, regulations
and rules, and all judgments, orders and decrees to which it is a party,
applicable to it or any of its properties, assets, operations and businesses
relating to environmental protection (collectively "Environmental Laws")
including, without limitation, Environmental Laws relating to air, water, land
and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Wastes and Hazardous Substances including petroleum and
petroleum products (as such terms are defined in any applicable Environmental
Law); (ii) the Company has obtained and adhered to all necessary permits and
other approvals necessary to treat, transport, store, dispose of and otherwise
handle Hazardous Wastes and Hazardous Substances, a list of all of which permits
and approvals is set forth on Schedule 4.13; (iii) there have been no releases
or threats of releases (as defined in Environmental Laws) at, from, in or on any
property owned or operated by the Company except as permitted by Environmental
Laws; (iv) the Company Knows of no on-site or off-site location to which the
Company has transported or disposed
7
of Hazardous Wastes and Hazardous Substances or arranged for the transportation
of Hazardous Wastes and Hazardous Substances, which site is the subject of any
federal, state, local or foreign enforcement action or any other investigation
which could lead to any claim against the Company or QSI for any clean-up cost,
remedial work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; and (v) the
Company has no contingent liability in connection with any release of any
Hazardous Waste or Hazardous Substance into the environment.
4.14 PERSONAL PROPERTY. The Company has delivered to QSI an accurate
list (which is set forth on Schedule 4.14) of (x) all personal property included
in "depreciable plant, property and equipment" on the balance sheet of the
Company as of the Balance Sheet Date or that will be included on any balance
sheet of the Company prepared after the Balance Sheet Date, (y) all other
personal property owned by the Company with a value in excess of $10,000 (i) as
of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z)
all leases and agreements in respect of personal property with a value in excess
of $10,000, including, true, complete and correct copies of all such leases and
agreements. The Company shall indicate on Schedule 4.14 those assets leased or
used by the Company that are currently owned, or that were formerly owned, by
Stockholders, relatives of Stockholders, or Affiliates of the Company. Except
as set forth on Schedule 4.14, (i) all personal property used by the Company in
its business is either owned by the Company or leased by the Company pursuant to
a lease included on Schedule 4.14, (ii) all of the personal property listed on
Schedule 4.14 is in good working order and condition, ordinary wear and tear
excepted and (iii) all leases and agreements included on Schedule 4.14 are in
full force and effect and constitute valid and binding agreements of the parties
(and their successors) thereto in accordance with their respective terms.
The Assets constitute all of the property and assets used in, and/or
necessary to operate, the business of the Company as it is now being conducted
and as contemplated to be conducted on and after the Funding and Consummation
Date.
4.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. The
Company has delivered to QSI an accurate list (which is set forth on Schedule
4.15) of (i) all significant customers, it being understood and agreed that a
"significant customer," for purposes of this Section 4.15, means a customer (or
person or entity) representing 5% or more of the Company's annual revenues as of
the Balance Sheet Date. Except to the extent set forth on Schedule 4.15, none
of the Company's significant customers (or persons or entities that are sources
of a significant number of customers) have canceled or substantially reduced or,
to the Knowledge of the Company, are currently attempting or threatening to
cancel a contract or substantially reduce utilization of the services provided
by the Company.
The Company has listed on Schedule 4.15 all material contracts, commitments
and similar agreements to which the Company is a party or by which it or any of
its properties are bound (including, but not limited to, contracts with
significant customers, joint venture or partnership agreements, contracts with
any labor organizations, strategic alliances and options to purchase land),
8
other than contracts, commitments and agreements otherwise listed on Schedules
4.10, 4.14 or 4.16, (a) in existence as of the Balance Sheet Date and (b)
entered into since the Balance Sheet Date, and in each case has delivered or
made available true, complete and correct copies of such agreements to QSI. The
Company has complied with all material commitments and obligations pertaining to
it, and is not in default under any contracts or agreements listed on Schedule
4.15 and no notice of default under any such contract or agreement has been
received. Where required under such contracts or agreements, the Company has
furnished notice of the QSI Plan of Organization to third parties and has, where
required, obtained consent from third parties to enter into the transactions
contemplated by this Agreement. The Company has also indicated on Schedule 4.15
a summary description of all plans or projects involving the opening of new
operations, expansion of existing operations, the acquisition of any personal
property, business or assets requiring, in any event, the payment of more than
$100,000 by the Company.
Notwithstanding the foregoing, it is agreed and understood that the
Company's customers competitively bid most contracts and that there can be no
assurance that the Company will win future competitive bids.
4.16 REAL PROPERTY. Schedule 4.16 includes a list of all real property
owned or leased by the Company (i) as of the Balance Sheet Date and (ii)
acquired since the Balance Sheet Date, and all other interests in real property,
if any, used by the Company in the conduct of its business. The Company has good
and insurable title to the real property owned by it, including those reflected
on Schedule 4.14, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
(i) liens reflected on Schedules 4.10 or 4.16 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the Registry of Deeds for the County
in which the properties, assets and leasehold estates are located which do
not materially adversely affect the current use of the property.
Schedule 4.16 contains, without limitation, true, complete and correct
copies of all title reports and title insurance policies currently in possession
of the Company with respect to real property owned by the Company.
The Company has also delivered to QSI an accurate list of real property
leased by the Company (which list is set forth on Schedule 4.16), together with
true, complete and correct copies of all leases and agreements in respect of
such real property leased by the Company (which copies are attached to Schedule
4.16), and an indication as to which such properties, if any, are currently
9
owned, or were formerly owned, by Stockholders or business or personal
affiliates of the Company or Stockholders. Except as set forth on Schedule
4.16, all of such leases included on Schedule 4.16 are in full force and effect
and constitute valid and binding agreements of the parties (and their
successors) thereto in accordance with their respective terms.
4.17 INSURANCE; BONDING. (a) The Company has delivered to QSI, as
set forth on and attached to Schedule 4.17, (i) an accurate list as of the
Balance Sheet Date of all insurance policies carried by the Company, (ii) an
accurate list and copies of all insurance loss runs for the past five (5) policy
years and (iii) true, complete and correct copies of all insurance policies
which were in effect the past three (3) years and which are currently in effect.
Such insurance policies evidence all of the insurance that the Company is
required to carry pursuant to all of its contracts and other agreements and
pursuant to all applicable laws. All of such insurance policies are currently
in full force and effect and shall remain in full force and effect through the
Funding and Consummation Date. No insurance carried by the Company has ever
been canceled by the insurer and the Company has never been unable to obtain
insurance coverage for its assets and operations.
(b) Schedule 4.17 includes an accurate list of all performance bonds
securing obligations of the Company, together with the amount bonded and any
guaranty issued by a Stockholder or other third party with respect thereto.
4.18 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
The Company has delivered to QSI an accurate list (which is set forth on
Schedule 4.18) showing all officers, directors and key employees of the Company,
listing all employment and severance agreements with such officers, directors
and key employees and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of each of
such persons (i) as of the Balance Sheet Date and (ii) as of the date hereof.
The Company has provided to QSI true, complete and correct copies of any
employment agreements for persons listed on Schedule 4.18. Since the Balance
Sheet Date, 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,
or except as set forth on Schedule 4.18.
Except as set forth on Schedule 4.18, (i) the Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
arrangement with any labor union, (ii) no employees of the Company are
represented by any labor union or covered by any collective bargaining
agreement, (iii) no campaign to establish such representation is in progress and
(iv) there is no pending or, to the best of the Company's Knowledge, threatened
labor dispute involving the Company and any group of its employees nor has the
Company experienced any labor interruptions over the past three years. The
Company believes its relationship with employees to be good.
4.19 EMPLOYEE PLANS. The Company has delivered to QSI an accurate
schedule (Schedule 4.19) showing all employee benefit plans currently sponsored
or maintained or contributed to by, or which cover the current or former
employees or directors of the Company, all employment and severance agreements
and other agreements or arrangements containing "golden parachute" or other
10
similar provisions, and all deferred compensation agreements, together with
true, complete and correct copies of such plans, agreements and any trusts
related thereto, and classifications of employees covered thereby as of the
Balance Sheet Date. Except for the employee benefit plans, if any, described on
Schedule 4.19, the Company does not sponsor, maintain or contribute to any plan,
program, fund or arrangement that constitutes an "employee pension benefit
plan," nor has the Company any obligation to contribute to or accrue or pay any
benefits under any deferred compensation or retirement funding arrangement on
behalf of any employee or employees (such as, for example, and without
limitation, any individual retirement account or annuity, any "excess benefit
plan" (within the meaning of Section 3(36) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or any non-qualified deferred
compensation arrangement). For the purposes of this Agreement, the term
"employee pension benefit plan" shall have the same meaning as is given that
term in Section 3(2) of ERISA. The Company has not sponsored, maintained or
contributed to any employee pension benefit plan other than the plans,
agreements, arrangement and trusts set forth on Schedule 4.19, nor is the
Company required to contribute to any retirement plan pursuant to the provisions
of any collective bargaining agreement establishing the terms and conditions or
employment of any of the Company's employees.
Except as otherwise listed on Schedule 4.19, the Company is not now, and
cannot as a result of its past activities become, liable to the Pension Benefit
Guaranty Corporation or to any multiemployer employee pension benefit plan
under the provisions of Title IV of ERISA.
Except as otherwise listed on Schedule 4.19, all employee benefit plans,
agreements, arrangements and trusts listed on Schedule 4.19 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations.
Except as otherwise listed on Schedule 4.19, all accrued contribution
obligations of the Company with respect to any plan listed on Schedule 4.19 have
either been fulfilled in their entirety or are fully reflected on the balance
sheet of the Company as of the Balance Sheet Date.
4.20 COMPLIANCE WITH ERISA. Except as disclosed on Schedule 4.19, all
such plans, agreements, arrangements and trusts of the Company that are
currently maintained or contributed to by the Company or cover employees or
former employees of the Company listed on Schedule 4.19 that are intended to
qualify under Section 401(a) of the Code (the "Qualified Plans") are, and have
been so qualified and have been determined by the Internal Revenue Service to
be so qualified. Except as disclosed on Schedule 4.19, 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, audit reports or Tax Returns) have been timely filed or distributed.
Except as disclosed on Schedule 4.19, neither Stockholders, any such plan listed
on Schedule 4.19, nor the Company has engaged in any transaction prohibited
under the provisions of Section 4975 of the Code or Section 406 of ERISA.
Except as disclosed on Schedule 4.19, no such plan listed on Schedule 4.19 has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and the Company has not incurred any liability
for excise tax
11
or penalty due to the Internal Revenue Service nor any liability to the Pension
Benefit Guaranty Corporation. The Stockholders further represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice of and approval by
the Internal Revenue Service;
(ii) no such plan listed on Schedule 4.19 subject to the provisions
of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed on
Schedule 4.19;
(iv) the Company has not incurred liability under Section 4062 of
ERISA; and
(v) no circumstances exist pursuant to which the Company could have
any direct or indirect liability whatsoever (including, but not limited to,
any liability to any multi employer plan or the Pension Benefit Guaranty
Corporation under Title IV of ERISA or to the Internal Revenue Service for
any excise tax or penalty, or being subject to any Statutory Lien to
secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the
Company that is, or at any time was, a member of a "controlled group" (as
defined in Section 412(n)(6)(B) of the Code) that includes the Company.
4.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedules 4.21 or 4.13, the Company is not in violation of any law or regulation
which would have a Material Adverse Effect, or of any order of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over the Company; and
except to the extent set forth on Schedules 4.10 or 4.13, there are no claims,
actions, suits or proceedings, commenced or, to the Knowledge of the Company,
threatened, against or affecting the Company, at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over the Company
and no notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received. The Company has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in applicable federal, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations, including all
such permits, licenses, orders and other governmental approvals set forth on
Schedules 4.12 and 4.13, and is not in violation of any of the foregoing.
4.22 TAXES. (i) For purposes of this Section 4.22 only, the term "Company"
shall include each Subsidiary, if any.
(ii) All Returns required to have been filed by the Company have
been timely filed (taking into account duly granted extensions) and are
true, correct and complete in all
12
respects. Except as disclosed in Schedule 4.22, (i) the Company is not
currently the beneficiary of any extension of time within which to file any
Return, and (ii) no claim has ever been made by any governmental authority
in a jurisdiction where the Company does not file Returns that the Company
is or may be subject to taxation by that jurisdiction, which claim has not
been resolved as of the date hereof.
(iii) All Taxes of the Company which have become due (without regard
to any extension of the time for payment and whether or not shown on any
Return) have been paid. The Company has withheld and paid over all Taxes
required to have been withheld and paid over by it and has complied with
all information reporting and back-up withholding requirements relating to
Taxes. There are no liens with respect to Taxes on any of the assets of
the Company, other than liens for Taxes not yet due and payable or for
Taxes disclosed in Schedule 4.22 that are being contested in good faith
through appropriate proceedings and for which adequate reserves have been
established in the Company Financial Statements.
(iv) The unpaid Taxes of the Company for all periods ending on or
before the Balance Sheet Date did not exceed the amount of the current
liability accruals for Taxes (exclusive of reserves for deferred Taxes
established to reflect timing differences) reflected on the face of the
balance sheet of the Company as of the Balance Sheet Date, and the unpaid
Taxes of the Company for all periods ending on or before the Funding and
Consummation Date will not exceed the amount of such current liability
accruals reflected on the balance sheet of the Company as of September 30,
1997 as adjusted for Company operations in the ordinary course of business
through the Funding and Consummation Date in accordance with generally
accepted accounting principles applied on a consistent basis and, to the
extent consistent therewith, the most recent custom and practices of the
Company.
(v) No deficiencies exist or have been asserted or are expected to
be asserted (verbally or in writing) with respect to Taxes of the Company
and the Company has not received notice nor does it expect to receive
notice (verbally or in writing) that it has not filed a Return or paid any
Taxes required to be filed or paid by it. No audit, examination,
investigation, action, suit, claim or proceeding relating to the
determination, assessment or collection of any Tax of the Company is
currently in process, pending or threatened (verbally or in writing).
Except as disclosed in Schedule 4.22, no waiver or extension of any statute
of limitations relating to the assessment or collection of any Tax of the
Company is in effect. There are no outstanding requests for rulings with
any Tax authority relating to Taxes of the Company.
(vi) Except as disclosed in Schedule 4.22, the Company is not and
has never been (i) a party to any tax sharing agreement or arrangement
(formal or informal, verbal or in writing), or (ii) a member of an
affiliated group of corporations (within the meaning of Code Section 1504)
filing a consolidated federal income Return, or any similar group under
analogous provisions of other law.
13
(vii) The Company is not liable for the unpaid Taxes of any person
other than the Company under Treasury Regulation Section 1.1502-6 or any
similar provision of state, local or foreign law, or by contract or
otherwise.
(viii) The Company has delivered to QSI true and complete copies of
all federal, state, local and foreign income Returns filed by the Company
for its three (3) most recently ended taxable years, together with all
related examination reports, statements of deficiencies and closing and
other agreements. Schedule 4.22 indicates which, if any, of such Returns
have been, or currently are, the subject of any audit, examination or other
Tax proceeding.
(ix) The Company (i) has not filed a consent under Code Section
341(f) concerning collapsible corporations; (ii) has not made any payments,
obligated itself to make any payments or become a party to any agreement
that under any circumstance could obligate it or any successor or assignee
of it to make any payments that are not or will not be deductible under
Code Section 280G, or that would be subject to excise Tax under Code
Section 4999; (iii) is not a "foreign person" as defined in Code Section
1445(f)(3); (iv) is not and has not been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii); (v) does not
own and has not owned any interest in any "controlled foreign corporation"
as defined in Code Section 957 or "passive foreign investment company" as
defined in Code Section 1296; (vi) is not and has not been a party to any
agreement or arrangement for which partnership Returns are required to be
filed; (vii) does not own any asset that is subject to a "safe harbor
lease" within the meaning of Code Section 168(f)(8), as in effect prior to
amendment by the Tax Equity and Fiscal Responsibility Act of 1982; (viii)
does not own any "tax-exempt use property" within the meaning of Code
Section 168(h) or "tax exempt bond financed property" within the meaning of
Code Section 168(g)(5); and (ix) has not agreed to and is not required to
make any adjustment under Code Section 481(a) by reason of a change in
accounting method or otherwise.
4.23 NO VIOLATIONS. The Company is not in violation of any Charter
Document. Neither the Company nor, to the Knowledge of the Company, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 4.12, 4.13, 4.14, 4.15 or 4.16, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth on Schedule 4.23, (a) the
rights and benefits of the Company under the Material Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the Material Documents or the Charter Documents. Except as set
forth on Schedule 4.23, none of the Material Documents requires notice to, or
the consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect, and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. Except as set forth on Schedule 4.23, none of the
Material Documents by its terms prohibits the use or publication by the
14
Company or QSI of the name of any other party to such Material Document, and
none of the Material Documents prohibits or restricts the Company from freely
providing services to any other customer or potential customer of the Company,
QSI or any Other Founding Company.
4.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 4.24, the
Company is not now a party to any governmental contract subject to price
redetermination or renegotiation.
4.25 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set
forth on Schedule 4.25 or any other Schedule of the Company attached hereto,
there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Company;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
Company;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption, purchase
or other acquisition of any of the capital stock of the Company;
(v) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by the Company to any of its
officers, directors, Stockholders, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting the
business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the Company to any person,
including, without limitation, the Stockholders and their affiliates;
(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, including without limitation any
indebtedness or obligation of any Stockholder or any affiliate thereof;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
15
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which the Company is a party;
(xiii) any transaction by the Company outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by the Company.
4.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The Company has delivered to
QSI an accurate schedule (which is set forth on Schedule 4.26) as of the date of
the Agreement of:
(i) the name of each financial institution in which the Company has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 4.26 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or special power of attorney
from the Company and a description of the terms of such power.
4.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the Company and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
Company and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms except as limited
by bankruptcy, insolvency or other similar laws of general application relating
to or affecting the enforcement of creditors' rights generally, and the
individual(s) signing this Agreement on behalf of the Company have the legal
power, authority and capacity to bind the Company.
4.28 RELATIONS WITH GOVERNMENTS. The Company has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government
16
office nor has it otherwise taken any action which would cause the Company to be
in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any
law of similar effect.
4.29 DISCLOSURE. (a) This Agreement, including the schedules hereto and all
other documents and information made available to QSI and its representatives in
writing pursuant hereto or thereto, present fairly the business and operations
of the Company for the time periods with respect to which such information was
requested. The Company's rights under the documents delivered pursuant hereto
would not be materially adversely affected by, and no statement made herein
would be rendered untrue in any material respect by, any other document to which
the Company is a party, or to which its properties are subject, or by any other
fact or circumstance regarding the Company (which fact or circumstance was, or
should reasonably, after due inquiry, have been known to the Company) that is
not disclosed pursuant hereto or thereto.
(b) The Company and the Stockholders acknowledge and agree (i) that there
exists no firm commitment, binding agreement, or promise or other assurance of
any kind, whether express or implied, oral or written, that a Registration
Statement will become effective or that the IPO pursuant thereto will occur at a
particular price or within a particular range of prices or occur at all; and
(ii) that, except as otherwise expressly provided elsewhere in this Agreement,
neither QSI nor any of its officers, directors, agents or representatives nor
any Underwriter shall have any liability to the Company, the Stockholders or any
other person affiliated or associated with the Company for any failure of the
Registration Statement to become effective, the IPO to occur at a particular
price or within a particular range of prices or to occur at all.
(c) No Stockholder has any present plan, intention, commitment, binding
agreement or arrangement to dispose of any shares of QSI Stock to be received by
such Stockholder as a result of the transactions contemplated by this Agreement,
and each Stockholder agrees that, for a period of two years from the Funding and
Consummation Date, except pursuant to Section 16 hereof, he or she will not
dispose of any shares of QSI Stock received by them as described in Section 2.1.
4.30 PROHIBITED ACTIVITIES. Except as set forth on Schedule 4.30 or as
contemplated by Annex I, the Company has not, between the Balance Sheet Date and
the date hereof, taken any of the actions set forth in Section 6.3 (Prohibite d
Activities).
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each Stockholder severally represents and warrants that the representations
and warranties set forth below are true as of the date of this Agreement and,
subject to Section 6.8 hereof, shall be true at the time of Closing and on the
Funding and Consummation Date, and that the representations and warranties set
forth in Sections 4.31 and 4.32 shall survive until the second anniversary of
the Funding and Consummation Date, which shall be the Expiration Date for
purposes of those Sections.
4.31 AUTHORITY; OWNERSHIP. Such Stockholder has the full legal right,
power and authority to enter into this Agreement. Such Stockholder owns
beneficially and of record all of the shares of the Company Stock identified on
Schedule 4.31 as being owned by such Stockholder, and,
17
except as set forth on Schedule 4.31, such Company Stock is owned free and clear
of all liens, encumbrances and claims of every kind.
4.32 PREEMPTIVE RIGHTS. Such Stockholder does not have, or hereby
waives, any preemptive or other right to acquire shares of Company Stock that
such Stockholder has or may have had on the date hereof other than rights of any
Stockholder to acquire QSI Stock pursuant to any option granted by QSI.
5. REPRESENTATIONS OF QSI
QSI represents and warrants that all of the following representations and
warranties in this Section 5 are true at the date of this Agreement and, subject
to Section 6.8 hereof, shall be true at the time of Closing and the Funding and
Consummation Date, and that such representations and warranties shall survive
the Funding and Consummation Date for a period of two years (the last day of
such period being the "Expiration Date"), except that (i) the warranties and
representations set forth in Section 5.13 hereof shall survive until such time
as the limitations period has run for all Tax periods ended on or prior to the
Funding and Consummation Date, which shall be deemed to be the Expiration Date
for Section 5.13 and (ii) solely for purposes of determining whether a claim for
indemnification under Section 10.2(iv) hereof has been made on a timely basis,
and solely to the extent that in connection with the IPO, QSI actually incurs
liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes.
5.1 DUE ORGANIZATION. QSI is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware, and is
duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on its
business in the places and in the manner as now conducted except where the
failure to be so authorized or qualified would not have a Material Adverse
Effect. True, complete and correct copies of the Certificate of Incorporation
and Bylaws, each as amended, of QSI (the "QSI Charter Documents") are all
attached hereto as Schedule 5.1.
5.2 AUTHORIZATION. (i) The representative of QSI executing this Agreement
has the authority to enter into and bind QSI to the terms of this Agreement and
(ii) QSI has the full legal right, power and authority to enter into and perform
this Agreement.
5.3 CAPITAL STOCK OF QSI. Immediately prior to the Funding and
Consummation Date, the authorized capital stock of QSI will consist of at least
40,000,000 shares of QSI Stock, of which the number of issued and outstanding
shares will be as set forth in the Registration Statement, and 5,000,000 shares
of preferred stock, $.01 par value, of which no shares will be issued and
outstanding. All of the issued and outstanding shares of the capital stock of
QSI are owned by the persons set forth on Schedule 5.3 hereof, in each case,
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind. Upon consummation
of the IPO, the number of outstanding shares of QSI will be as set forth in the
18
Registration Statement. All of the issued and outstanding shares of the capital
stock of QSI have been duly authorized and validly issued, are fully paid and
nonassessable, are owned of record and beneficially by the persons set forth on
Schedule 5.3, and further, such shares were offered, issued, sold and delivered
by QSI in compliance with all applicable state and federal laws concerning the
issuance of securities. Further, none of such shares was issued in violation of
the preemptive rights of any past or present Stockholder of QSI.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth on Schedule 5.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates QSI to issue any of its
authorized but unissued capital stock; and (ii) QSI has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. Schedule 5.4 also includes complete and
accurate copies of all stock option or stock purchase plans, including a list,
accurate as of the date hereof, of all outstanding options, warrants or other
rights to acquire shares of the stock of QSI.
5.5 SUBSIDIARIES. QSI has no subsidiaries except for the companies to
become subsidiaries of QSI pursuant to this Agreement and each of the Other
Agreements as of the Funding and Consummation Date. Except as set forth in the
preceding sentence, QSI does not presently own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
business entity, and QSI is not, directly or indirectly, a participant in any
joint venture, partnership or other non-corporate entity.
5.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.6 are copies of
the following financial statements (the "QSI Financial Statements") of QSI,
which reflect the results of its operations from inception: FCI's unaudited
Balance Sheet as of September 30, 1997 and Statements of Income, Cash Flows and
Retained Earnings for the period from inception through September 30, 1997.
Such QSI Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as noted thereon or on Schedule 5.6). Except as set
forth on Schedule 5.6, such Balance Sheets as of September 30, 1997 present
fairly the financial position of QSI as of such date, and such statements of
Income, Cash Flows and Retained Earnings present fairly the results of
operations for the period indicated.
5.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 5.7, QSI
has no material liabilities, contingent or otherwise, except as set forth in or
contemplated by this Agreement and the Other Agreements and except for fees and
expenses incurred in connection with the transactions contemplated hereby and
thereby.
5.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 5.8, QSI is not in violation of any law or regulation which would have
a Material Adverse Effect, or of any order of any court or federal, state,
municipal or other governmental department, commission,
19
board, bureau, agency or instrumentality having jurisdiction over QSI; and
except to the extent set forth on Schedule 5.8, there are no material claims,
actions, suits or proceedings, pending or, to the Knowledge of QSI, threatened,
against or affecting QSI, at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over QSI and no notice of any
claim, action, suit or proceeding, whether pending or threatened, has been
received. QSI has conducted and is conducting its business in compliance with
the requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations and is not in violation of any of
the foregoing. Assuming the representations and warranties of the Company and
the Stockholders contained herein are complete and correct in all respects
(other than representations and warranties with respect to compliance with
laws), this Agreement does not violate any federal or state securities laws,
rules or regulations.
5.9 NO VIOLATIONS. QSI is not in violation of any QSI Charter Document.
Neither QSI or, to the Knowledge of QSI, any other party thereto, is in default
under any lease, instrument, agreement, license or permit to which QSI is a
party, or by which QSI or any of its properties are bound (collectively, the
"QSI Documents"); and (a) the rights and benefits of QSI under the QSI Documents
will not be adversely affected by the transactions contemplated hereby and (b)
the execution of this Agreement and the performance of the obligations hereunder
and the consummation of the transactions contemplated hereby will not result in
any violation or breach or constitute a default under, any of the terms or
provisions of the QSI Documents or the QSI Charter Documents. Except as set
forth on Schedule 5.9, none of the QSI Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit.
5.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by QSI and the performance of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of QSI and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of QSI, enforceable against QSI in
accordance with its terms except as limited by bankruptcy, insolvency or other
similar laws of general application relating to or affecting the enforcement of
creditors' rights generally, and the individual signing this Agreement on behalf
of QSI has the legal power, authority and capacity to bind QSI.
5.11 QSI STOCK. At the time of issuance thereof, the QSI Stock to be
delivered to the Stockholders pursuant to this Agreement will constitute valid
and legally issued shares of QSI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 14 and 15 hereof,
will be identical in all material and substantive respects to the QSI Stock
issued and outstanding as of the date hereof and the QSI Stock to be issued
pursuant to the Other Agreements by reason of the provisions of the Delaware
GCL. The shares of QSI Stock to be issued to the Stockholders pursuant to this
Agreement will not be registered under the 1933 Act, except as provided in
Section 16 hereof.
20
5.12 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. QSI has not
conducted any operations or business since inception other than activities
related to the QSI Plan of Organization. QSI does not own and has not at any
time owned any real property or any material personal property and is not a
party to any other agreement, except as listed on Schedule 5.12 and except that
QSI is a party to the Other Agreements and the agreements contemplated thereby
and to such agreements as will be filed as Exhibits to the Registration
Statement.
5.13 TAXES. (i) All Returns required to have been filed by QSI have
been timely filed (taking into account duly granted extensions) and are true,
correct and complete in all respects. Except as disclosed in Schedule 5.13, (i)
QSI is not currently the beneficiary of any extension of time within which to
file any Return, and (ii) no claim has ever been made by any governmental
authority in a jurisdiction where QSI does not file Returns that QSI is or may
be subject to taxation by that jurisdiction.
(ii) All Taxes of QSI which have become due (without regard to any
extension of the time for payment and whether or not shown on any Return)
have been paid. QSI has withheld and paid over all Taxes required to have
been withheld and paid over and has complied with all information reporting
and back-up withholding requirements relating to Taxes. There are no liens
with respect to Taxes on any of the assets of QSI, other than liens for
Taxes not yet due and payable or for Taxes disclosed in Schedule 5.13 that
are being contested in good faith through appropriate proceedings and for
which adequate reserves have been established in the QSI Financial
Statements.
(iii) No deficiencies exist or have been asserted or are expected to
be asserted (verbally or in writing) with respect to Taxes of QSI and QSI
has not received notice nor does it expect to receive notice (verbally or
in writing) that it has not filed a Return or paid any Taxes required to be
filed or paid by it. No audit, examination, investigation, action, suit,
claim or proceeding relating to the determination, assessment or collection
of any Tax of QSI is currently in process, pending or threatened (verbally
or in writing). Except as disclosed in Schedule 5.13, no waiver or
extension of any statute of limitations relating to the assessment or
collection of any Tax of QSI is in effect. There are no outstanding
requests for rulings with any Tax authority relating to Taxes of QSI.
5.14 NO INTENTION TO DISPOSE OF COMPANY STOCK. QSI is acquiring the
Company Stock pursuant hereto for its own account for investment purposes and
does not have any present plan, intention, commitment, binding agreement, or
arrangement to dispose of the Company Stock.
5.15 OTHER FOUNDING COMPANIES. QSI has reviewed representations and
warranties from the Other Founding Companies in the Other Agreements that are
substantially similar to those made by the Company and the Shareholders herein.
21
6. COVENANTS PRIOR TO CLOSING
6.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Funding and Consummation Date, the Company will afford to the
officers and authorized representatives of QSI and the Other Founding Companies
access to all of the Company's sites, properties, books and records and will
furnish QSI with such additional financial and operating data and other
information as to the business and properties of the Company as QSI or the Other
Founding Companies may from time to time reasonably request. The Company will
cooperate with QSI and the Other Founding Companies and their respective
representatives, including FCI's auditors and counsel, in the preparation of any
documents or other material (including the Registration Statement) which may be
required in connection with any documents or materials required by this
Agreement. QSI, the Stockholders and the Company shall treat all information
obtained in connection with the negotiation and performance of this Agreement or
the due diligence investigations conducted with respect to the Other Founding
Companies as confidential in accordance with the provisions of Section 13
hereof. In addition, QSI will cause each of the Other Founding Companies to
enter into a provision similar to this Section 6.1 requiring each such Other
Founding Company, its Stockholders, directors, officers, representatives,
employees and agents to keep confidential any information obtained by such Other
Founding Company.
(b) Between the date of this Agreement and the Funding and Consummation
Date, QSI will afford to the officers and authorized representatives of the
Company access to all of FCI's sites, properties, books and records and all due
diligence, agreements, documents and information of or concerning the Founding
Companies and will furnish the Company with such additional financial and
operating data and other information as to the business and properties of QSI as
the Company may from time to time reasonably request. QSI will cooperate with
the Company, its representatives, auditors and counsel in the preparation of any
documents or other material which may be required in connection with any
documents or materials required by this Agreement. The Company will cause all
information obtained in connection with the negotiation and performance of this
Agreement to be treated as confidential in accordance with the provisions of
Section 13 hereof.
6.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Funding and Consummation Date, the Company shall, except (x)
as set forth on Schedule 6.2, (y) as requested by QSI or (z) as consented to by
QSI (which consent shall not be unreasonably withheld):
(i) carry on its business in substantially the same manner as it
has heretofore and introduce any new method of management, operation or
accounting;
(ii) maintain its 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 its obligations under
agreements relating to or affecting its assets, properties or rights;
22
(iv) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(v) maintain and preserve its business organization intact, use its
best efforts to retain its present key employees and relationships with
suppliers, customers and others having business relations with the Company;
(vi) maintain compliance with all 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 and not enter into
new or amended debt or lease instruments, provided that debt and/or lease
instruments may be replaced if such replacement instruments are on terms at
least as favorable to the Company as the instruments being replaced; and
(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.
6.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 6.3 or as set
forth on Annex I, between the date hereof and the Funding and Consummation Date,
the Company shall not, without prior written consent of QSI:
(i) make any change in its Articles of Incorporation or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 4.4;
(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 shares 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 $10,000;
(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of the Company; (2)(A) liens for Taxes either not yet due or
being contested in good faith and by appropriate proceedings (and for which
contested Taxes
23
adequate reserves have been established in the Company Financial
Statements) or (B) materialmen's, mechanics', workers', repairmen's,
employees' or other like liens arising in the ordinary course of business
(the liens set forth in clause (2) being referred to herein as "Statutory
Liens"), or (3) liens set forth on Schedules 4.10 and/or 8.16 hereto;
(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;
(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 or claims in the ordinary
course of business in a manner consistent with past practice, provided,
further, that such adjustments shall not be deemed to be included on
Schedule 4.11 unless specifically listed thereon;
(x) commit a material breach or, except in the ordinary course of
business consistent with past practices, amend or terminate any material
agreement, permit, license or other right of the Company; or
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder.
6.4 NO SHOP. None of the Stockholders, the Company, or 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 Funding and Consummation Date 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 or entity for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person or entity other than QSI
or its authorized agents relating to any acquisition or purchase 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.
6.5 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable
24
collective bargaining agreements, and shall provide QSI on Schedule 6.5 with
proof that any required notice has been sent.
6.6 AGREEMENTS. The Stockholders and the Company shall terminate (i) any
Stockholders agreements, voting agreements, voting trusts, options, warrants and
employment agreements between the Company and any employee listed on Schedule
7.11 hereto and (ii) any existing agreement between the Company and any
Stockholder, on or prior to the Funding and Consummation Date. Copies of such
termination agreements are listed on Schedule 6.6 and copies thereof are
attached hereto.
6.7 NOTIFICATION OF CERTAIN MATTERS. The Stockholders and the Company
shall give prompt notice to QSI of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the Company or the Stockholders contained herein
to be untrue or inaccurate in any material respect at or prior to the Closing
and (ii) any material failure of any Stockholder or the Company to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by such person hereunder. QSI shall give prompt notice to the Company of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would be likely to cause any representation or warranty of QSI contained
herein to be untrue or inaccurate in any material respect at or prior to the
Closing and (ii) any material failure of QSI to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder. The delivery of any notice pursuant to this Section 6.7 that is not
accompanied by a proposed amendment or supplement to a schedule pursuant to
Section 6.8 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 6.8, (ii) modify the conditions set forth in Sections 7
and 8, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
6.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the anticipated
effectiveness of the Registration Statement to supplement or amend promptly the
Schedules hereto with respect to any matter hereafter arising or discovered
which, if existing or known at the date of this Agreement, would have been
required to be set forth or described in the Schedules, provided, however, that
supplements and amendments to Schedules 4.10, 4.11, 4.14, 4.15 and 4.18 shall
only have to be delivered at the Closing Date, unless such Schedule is to be
amended to reflect an event occurring other than in the ordinary course of
business. Notwithstanding the foregoing sentence, no amendment or supplement to
a Schedule prepared by the Company that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless QSI and
a majority of the Founding Companies other than the Company consent to such
amendment or supplement; and provided further, that no amendment or supplement
to a schedule prepared by QSI that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless a
majority of the Founding Companies consent to such amendment or supplement. For
all purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 7.1 and 8.1 have been
fulfilled, the Schedules hereto shall be deemed to be the schedules as amended
or supplemented pursuant to this Section 6.8. In the event that one of the
Other
25
Founding Companies seeks to amend or supplement a schedule pursuant to Section
6.8 of one of the Other Agreements, and such amendment or supplement constitutes
or reflects an event or occurrence that would have a Material Adverse Effect on
such Other Founding Company, QSI shall give the Company notice promptly after it
has Knowledge thereof. If QSI and a majority of the Founding Companies consent
to such amendment or supplement, which consent shall have been deemed given by
QSI or any Founding Company if no response is received within 72 hours following
receipt of notice of such amendment or supplement (or sooner if required by the
circumstances under which such consent is requested), but the Company does not
give its consent, the Company may terminate this Agreement pursuant to Section
11.l(iv) hereof. In the event that the Company seeks to amend or supplement a
Schedule pursuant to this Section 6.8, and QSI and a majority of the Other
Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
11.1(i) hereof. In the event that QSI seeks to amend or supplement a Schedule
pursuant to this Section 6.8 and a majority of the Founding Companies do not
consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 11.1(i) hereof. No party to
this Agreement shall be liable to any other party if this Agreement shall be
terminated pursuant to the provisions of this Section 6.8.
6.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The Company and
Stockholders shall furnish or cause to be furnished to QSI and the Underwriters
all of the information concerning the Company and the Stockholders required for
inclusion in, and will cooperate with QSI and the Underwriters in the
preparation of, the Registration Statement and the prospectus included therein
(including audited and unaudited financial statements, prepared in accordance
with generally accepted accounting principles, in form suitable for inclusion in
the Registration Statement). The Company and the Stockholders agree promptly to
advise QSI if at any time during the period in which a prospectus relating to
the offering is required to be delivered under the 1933 Act, any information
contained in the prospectus concerning the Company or the Stockholders becomes
incorrect or incomplete in any material respect, and to provide the information
needed to correct such inaccuracy. QSI will give the Company and the
Stockholders an opportunity to review and comment on the Registration Statement
and all amendments thereto prior to filing. Insofar as the information relates
solely to the Company or the Stockholders, the Company represents and warrants
as to such information with respect to itself, and each Stockholder represents
and warrants, as to such information with respect to the Company and himself or
herself, that the Registration Statement will not include an 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 in
which they were made, not misleading and that each Stockholder and the Company
has had the opportunity to review and approve such information. If, prior to
the 25th day after the date of the final prospectus of QSI utilized in
connection with the IPO, the Company or the Stockholders become aware of any
fact or circumstance which would change (or, if after the Funding and
Consummation Date, would have changed) a representation or warranty of the
Company or the Stockholders in this Agreement or would affect any document
delivered pursuant hereto in any material respect, the Company and the
Stockholders shall immediately give notice of such fact or circumstance to QSI.
However, subject to the provisions of Section 6.8, such notification shall not
relieve either the Company or the Stockholders of their respective obligations
under this Agreement,
26
and, subject to the provisions of Section 6.8, at the sole option of QSI, the
truth and accuracy of any and all warranties and representations of the Company,
or on behalf of the Company and of Stockholders at the date of this Agreement
and on the Closing Date and on the Funding and Consummation Date, shall be a
precondition to the consummation of this transaction.
6.10 FINAL FINANCIAL STATEMENTS. The Company shall provide prior to
the Funding and Consummation Date, and QSI shall have had sufficient time to
review, the unaudited consolidated balance sheets of the Company as of the end
of all fiscal quarters following the Balance Sheet Date, and the unaudited
consolidated statement of income, cash flows and retained earnings of the
Company for all fiscal quarters ended after the Balance Sheet Date, disclosing
no material adverse change in the financial condition of the Company or the
results of its operations from the financial statements as of the Balance Sheet
Date. Except as set forth on Schedule 6.10, such financial statements shall
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
therein). Except as noted in such financial statements, all of such financial
statements will present fairly the results of operations of the Company for the
periods indicated thereon and shall be for such dates and time periods as
required by Regulation S-X under the 1933 Act and the 1934 Act.
6.11 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or convenient
to carry out the transactions contemplated hereby.
6.12 AUTHORIZED CAPITAL. QSI shall maintain its authorized capital
stock as set forth in the Registration Statement filed with the SEC except for
such changes in authorized capital stock as are made to respond to comments made
by the SEC or requirements of any exchange or automated trading system for which
application is made to register the QSI Stock.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of Stockholders and the Company with respect to actions to
be taken on the Closing Date are subject to the satisfaction or waiver on or
prior to the Closing Date of all of the following conditions. The obligations
of the Stockholders and the Company with respect to actions to be taken on the
Funding and Consummation Date are subject to the satisfaction or waiver on or
prior to the Funding and Consummation Date of the conditions set forth in
Sections 7.2, 7.3, 7.8 and 7.9. From and after the Closing Date or, with
respect to the conditions set forth in Sections 7.2, 7.3, 7.8 and 7.9, from and
after the Funding and Consummation Date, all conditions not satisfied shall be
deemed to have been waived, except that no such waiver shall be deemed to affect
the survival of the representations and warranties of QSI contained in Section 5
hereof:
7.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
QSI contained in Section 5 shall be true and correct in all material respects as
of the Closing Date as though such representations and warranties had been made
as of that time; and a certificate to the
27
foregoing effect dated the Closing Date and signed by the President or any Vice
President of QSI shall have been delivered to the Stockholders.
7.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and
conditions of this Agreement to be complied with and performed by QSI on or
before the Closing Date and the Funding and Consummation Date shall have been
duly complied with and performed in all material respects; and certificates to
the foregoing effect dated the Closing Date and the Funding and Consummation
Date and signed by the President or any Vice President of QSI shall have been
delivered to the Stockholders.
7.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the transactions contemplated hereby or the IPO and no governmental
agency or body shall have taken any other action or made any request of the
Company as a result of which the management of the Company deems it inadvisable
to proceed with the transactions hereunder.
7.4 OPINION OF COUNSEL. The Company and the Underwriters shall have
received an opinion from counsel for QSI, dated the Closing Date, in the form
mutually agreed upon by the parties. The Company and the Stockholders shall
also have received a written opinion from, at the discretion of QSI, either
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P. or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, L.L.P., which satisfactorily concludes
that the exchange of Company Stock for QSI Stock will qualify as a transaction
meeting the requirements of Section 351 of the Code. In rendering such opinion,
the opinion given may require and, to the extent it deems necessary or
appropriate, may rely upon representations made in certificates of officers of
QSI and the Company.
7.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the underwriters named therein shall have
agreed to acquire shares of QSI Stock on a firm commitment basis, subject to the
conditions set forth in the underwriting agreement, on terms such that the
aggregate value of the cash and the number of shares of QSI Stock to be received
by the Stockholders is not less than the amount set forth on Annex I as adjusted
as permitted herein.
7.6 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transaction contemplated herein shall have been obtained and made.
7.7 GOOD STANDING CERTIFICATES. QSI shall have delivered to the Company a
certificate, dated as of a date no later than ten days prior to the Closing
Date, duly issued by the Delaware Secretary of State and in each state in which
QSI is authorized to do business, showing that QSI is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for QSI for all periods prior to the Closing have been filed and paid.
28
7.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to QSI which would constitute a Material Adverse Effect,
and QSI shall not have suffered any material loss or damages to any of its
properties or assets, whether or not covered by insurance, which change, loss or
damage materially affects or impairs the ability of QSI to conduct its business.
7.9 CLOSING OF IPO. The closing of the sale of the QSI Stock to the
Underwriters in the IPO and the acquisitions of the Other Founding Companies
pursuant to the Other Agreements shall have occurred simultaneously with the
Funding and Consummation Date hereunder.
7.10 SECRETARY'S CERTIFICATE. The Company shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of QSI, certifying the truth and correctness of attached copies of FCI's
Certificate of Incorporation (including amendments thereto), Bylaws (including
amendments thereto), and resolutions of the board of directors and, if required,
the Stockholders of QSI approving FCI's entering into this Agreement and the
consummation of the transactions contemplated hereby. Such certificate or
certificates also shall be addressed to the Underwriters and copies thereof
shall be delivered to the Underwriters.
7.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule
7.11 shall have been afforded the opportunity to enter into an employment
agreement substantially in the form of Annex II hereto.
7.12 DIRECTORS AND OFFICERS INSURANCE. QSI shall have obtained
Directors and Officers Liability Insurance in amounts that are customary and
commercially reasonable.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF QSI
The obligations of QSI with respect to actions to be taken on the Closing
Date are subject to the satisfaction or waiver on or prior to the Closing Date
of all of the following conditions. The obligations of QSI with respect to
actions to be taken on the Funding and Consummation Date are subject to the
satisfaction or waiver on or prior to the Funding and Consummation Date of the
conditions set forth in Sections 8.2, 8.3, 8.5 and 8.13. From and after the
Closing Date or, with respect to the conditions set forth in Sections 8.2, 8.3,
8.5 and 8.13, from and after the Funding and Consummation Date, all conditions
not satisfied shall be deemed to have been waived, except that no such waiver
shall be deemed to affect the survival of the representations and warranties of
the Company contained in Section 4 hereof.
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the Stockholders and the Company contained in this Agreement shall be true and
correct in all material respects as of the Closing Date and the Funding and
Consummation Date with the same effect as though such representations and
warranties had been made on and as of such date; and the Stockholders shall have
delivered to QSI certificates dated the Closing Date and signed by them to such
effect.
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8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and
conditions of this Agreement to be complied with or performed by the
Stockholders and the Company on or before the Closing Date or the Funding and
Consummation Date, as the case may be, shall have been duly performed or
complied with in all material respects; and the Stockholders and the Company
shall have delivered to QSI certificates dated the Closing Date and the Funding
and Consummation Date, respectively, and signed by them to such effect.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the transactions contemplated hereby or the IPO and no governmental
agency or body shall have taken any other action or made any request of QSI as a
result of which the management of QSI deems it inadvisable to proceed with the
transactions hereunder.
8.4 SECRETARY'S CERTIFICATE. QSI shall have received a certificate, dated
the Closing Date and signed by the secretary of the Company, certifying the
truth and correctness of attached copies of the Company's Certificate of
Incorporation (including amendments thereto), Bylaws (including amendments
thereto), and resolutions of the board of directors and the Stockholders
approving the Company's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate also shall be addressed to
the Underwriters and a copy thereof shall be delivered to the Underwriters.
8.5 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Company
to conduct its business.
8.6 STOCKHOLDERS' RELEASE. The Stockholders shall have delivered to QSI
an instrument dated the Closing Date releasing the Company from (i) any and all
claims of the Stockholders against the Company and (ii) obligations of the
Company to the Stockholders, except for (x) items specifically identified on
Schedules 4.10 and 4.16 as being claims of or obligations to the Stockholders,
(y) continuing obligations to Stockholders relating to their employment by the
Company and (z) obligations arising under this Agreement or the transactions
contemplated hereby.
8.7 TERMINATION OF RELATED PARTY AGREEMENTS. All existing agreements
between the Company and the Stockholders shall have been canceled effective
prior to or as of the Funding and Consummation Date.
8.8 OPINION OF COUNSEL. QSI shall have received an opinion from Counsel
to the Company and the Stockholders, dated the Closing Date, in the form
mutually agreed to by the parties, and the Underwriters shall have received a
copy of the same opinion addressed to the Underwriters.
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8.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 4.23 shall have been
obtained.
8.10 GOOD STANDING CERTIFICATES. The Company shall have delivered to
QSI a certificate, dated as of a date no earlier than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by QSI, in each state in
which the Company is authorized to do business, showing the Company is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the Company for all periods prior to the
Closing have been filed and paid.
8.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
8.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule
7.11 shall have entered into an employment agreement substantially in the form
of Annex II hereto.
8.13 CLOSING OF IPO. The closing of the sale of the QSI Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
8.14 FIRPTA CERTIFICATE. Each Stockholder shall have delivered to QSI
a certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury Regulations promulgated under the Code.
8.15 INSURANCE. QSI shall have been named as an additional insured on
all liability, theft, casualty and property insurance policies of the Company
and certificates of insurance to that effect shall have been delivered to QSI.
8.16 LOCKUP AGREEMENT. Each Stockholder shall have signed an agreement with
the Underwriters, in form and substance identical to agreements signed by the
Founding Stockholders in connection with the Other Agreements, by which such
Stockholder covenants to hold all of the QSI Stock acquired hereunder for a
period of at least 180 days after the Funding and Consummation Date.
9. COVENANTS OF QSI AND THE STOCKHOLDERS AFTER CLOSING
9.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. QSI shall,
within ninety (90) days of the Funding and Consummation Date, use commercially
reasonable efforts to have the Stockholders and any spouse of a Stockholder
released from any and all indemnities on bonds and guarantees on any
indebtedness or contractual
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obligations that they personally guaranteed and from any and all pledges of
assets that they pledged to secure such indebtedness for the benefit of the
Company, with all such indemnities on bonds and guarantees on indebtedness or
contractual obligations being assumed by QSI. QSI shall indemnify and hold
harmless Stockholders and any spouse of a Stockholder from the payment of any
indemnities on bonds, guaranties on any indebtedness or contractual obligations
that they personally guaranteed prior to the Closing Date and from any and all
pledges of assets that they pledged to secure such indebtedness for the benefit
of the Company, provided that such indebtedness or obligations are either
related to the business of the Company as being conducted at the Closing Date or
are made in order to facilitate distributions contemplated under this Agreement.
The indemnification contained in this Section shall not be subject to the time
and other limitations on indemnification contained in Sections 10.2 and 10.5
hereof.
9.2 PRESERVATION OF TAX TREATMENT. (a) Except as contemplated by this
Agreement or the Registration Statement, after the Funding and Consummation
Date, QSI shall not and shall not permit any of its subsidiaries to undertake
any act that would prevent qualification of the transaction as an exchange
meeting the requirements of Code Section 351, including:
(i) the retirement or reacquisition, directly or indirectly, of all
or part of the QSI Stock issued in connection with the transactions
contemplated hereby; or
(ii) the entering into of financial arrangements for the benefit of
the Stockholders.
(b) Except as contemplated by this Agreement or the Registration Statement,
after the Funding and Consummation Date, the Stockholders shall not undertake
any act that would prevent qualification of the transaction as an exchange
meeting the requirements of Code Section 351.
(c) Each of the Company, QSI and each Stockholder shall comply with the
reporting requirements of Section 1.351-3 of the Treasury Regulations
promulgated under the Code, and shall not take any position on any Return
inconsistent with characterization of the transaction as an exchange meeting the
requirements of Code Section 351.
9.3 PREPARATION AND FILING OF RETURNS.
(i) The Company shall duly, accurately and timely (with regard to
any duly granted extension), file or cause to be filed all Returns required
to be filed on behalf of the Company or any Subsidiary for all taxable
periods that end on or before the Funding and Consummation Date.
(ii) QSI shall duly, accurately and timely (with regard to any duly
granted extension) file or cause to be filed all Returns required to be
filed on behalf of the Company or any Subsidiary for all taxable periods
ending after the Funding and Consummation Date.
(iii) 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 Return, amended Return or claim for refund, determining a liability for
Taxes or a right to refund of Taxes or in conducting any audit or
32
other proceeding in respect of Taxes. Such cooperation and information
shall include providing copies of all relevant portions of relevant
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 Returns pursuant
to this Agreement shall bear all costs of filing such Returns.
(iv) Each of the Company, QSI and each Stockholder shall comply with
the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as a
transfer to a controlled corporation under Section 351(a) of the Code.
9.4 DIRECTORS AND OFFICERS. The persons named in the Registration
Statement shall be appointed as directors and elected as officers of QSI, as and
to the extent set forth in the Registration Statement, promptly following the
effective date of the Registration Statement. The QSI Board of Directors will
consist of nine members, up to two of whom shall be existing directors of QSI
and five of whom shall be from the Founding Companies (two nominees from PAR
Electrical Contractors, Inc. and one from each of Potelco, Inc., Union Power
Construction Company and TRANS TECH Electric, Inc.). QSI shall make
arrangements to compensate each Director for attending meetings of the Board of
Directors and to reimburse them for related expenses.
9.5 MAINTENANCE OF BOOKS. QSI will cause the Company (a) to maintain the
books and records of the Company existing prior to the Closing Date for a period
of six years after the Closing Date and (b) to make such books and records
available to the Stockholders for any reasonable purpose.
10. INDEMNIFICATION
The Stockholders and QSI each make the following covenants that are
applicable to them, respectively:
10.1 GENERAL INDEMNIFICATION BY STOCKHOLDERS. The Stockholders
covenant and agree that they, jointly and severally, will indemnify, defend,
protect and hold harmless QSI and the Company at all times, from and after the
date of this Agreement, from and against all claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) (collectively, "Claims") incurred by QSI or the Company for which
QSI or the Company deliver notice of such Claims to the Stockholders prior to
the Expiration Date and which Claims are as a result of or arising from (i) any
breach of the representations and warranties of the Stockholders or the Company
set forth herein or on the schedules or certificates delivered in
33
connection herewith; (ii) any breach of any agreement on the part of the
Stockholders under this Agreement; (iii) any liability under the 1933 Act, the
1934 Act or other federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating to the Company or the Stockholders, and
provided to QSI or its counsel by the Company or the Stockholders contained in
the Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
Company or the Stockholders required to be stated therein or necessary to make
the statements therein not misleading; (iv) the matters described on Schedule
10.1(iv) (relating to specifically identified matters such as ongoing claims
and/or litigation), which schedule shall be prepared by QSI; (v) any liability
asserted against QSI or the Company from matters occurring prior to the Closing
Date and not listed on any Schedule of the Company, where such liability would
have been required to be listed on a Schedule; (vi) all Taxes of the Company
with respect to any taxable period ending on or before the Funding and
Consummation Date (or for any taxable period beginning before and ending after
the Funding and Consummation Date to the extent allocable to the portion of such
period beginning before and ending on the Funding and Consummation Date) to the
extent such Taxes exceed the amount of the current liability accruals for Taxes
(exclusive of reserves for deferred Taxes established to reflect timing
differences) reflected on the balance sheet of the Company as of September 30,
1997 as adjusted for Company operations in the ordinary course of business
through the Funding and Consummation Date in accordance with generally accepted
accounting principles consistently applied and, to the extent consistent
therewith, the most recent custom and practices of the Company; provided that
the portion of any periodic Tax attributable to a taxable year or period
beginning before and ending after the Funding and Consummation Date shall be
determined by apportioning the Tax for the entire year or period based upon the
number of days in the year or period, except that any such Tax measured by
income or receipts shall be apportioned based upon actual results of operations
through the end of the Funding and Consummation Date; (vii) all liabilities of
the Company, if any, for the Taxes of any other person, pursuant to Code Section
1.1502-6 or other law, as a transferee or successor, by contract or otherwise;
or (viii) all Transfer and other Taxes arising from the transactions
contemplated by this Agreement; provided, however, (A) that in the case of any
indemnity arising pursuant to clause (iii) such indemnity shall not inure to the
benefit of QSI or the Company to the extent that such untrue statement (or
alleged untrue statement) was made in, or omission (or alleged omission)
occurred in, any preliminary prospectus and the Stockholders provided, in
writing, corrected information to QSI counsel and to QSI for inclusion in the
final prospectus, and such information was not so included or properly
delivered, and (B) that no Stockholder shall be liable for any indemnification
obligation pursuant to this Section 10.1 to the extent attributable to a breach
of any representation, warranty or agreement made herein individually by any
other Stockholder.
10.2 INDEMNIFICATION BY QSI. QSI covenants and agrees that it will
indemnify, defend, protect and hold harmless the Stockholders at all times from
and after the date of this Agreement from and against all Claims incurred by the
Company or the Stockholders for which the Company or the Stockholders deliver
notice of such Claims to QSI prior to the Expiration Date and which Claims are
as a result of or arising from (i) any breach by QSI of its representations and
warranties set forth herein or on the schedules or certificates attached hereto,
(ii) any nonfulfillment of any
34
agreement on the part of QSI under this Agreement, (iii) any liability under the
1933 Act, the 1934 Act or other federal or state law or regulation, at common
law or otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to QSI or any of the Other Founding
Companies contained in any preliminary prospectus, the Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to QSI or any of the Other Founding
Companies required to be stated therein or necessary to make the statements
therein not misleading, or (iv) the matters described on Schedule 10.2(iv)
(relating to specifically identified matters), which schedule shall be prepared
by the Stockholders.
10.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter the
"Indemnified Party") has received notice of or has Knowledge of any claim by a
person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 10.1 or 10.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle (such settlement to be subject to the consent of the
Indemnified Party, as hereinafter provided), at its own expense and by its own
counsel, any such matter so long as the Indemnifying Party pursues the same in
good faith and diligently, provided that the Indemnifying Party shall not settle
any criminal proceeding without the written consent of the Indemnified Party. If
the Indemnifying Party undertakes to defend or settle, it shall promptly notify
the Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. All Indemnified Parties shall use the
same counsel, which shall be the counsel selected by the Indemnifying Party,
provided that if counsel to the Indemnifying Party shall have a conflict of
interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, the Indemnified Party shall have the right to participate in
such matter through counsel of its own choosing and the Indemnifying Party will
reimburse the Indemnified Party for the reasonable expenses of its counsel.
Further, absent a conflict, the Indemnified Party may select counsel and have
such counsel participate in such matter at the sole cost of the Indemnified
Party. After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability, and for
so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except (i) as set forth in the preceding sentence
and (ii) to the extent such participation is requested by the Indemnifying
Party, in which event the Indemnified Party shall be reimbursed by the
Indemnifying Party for reasonable additional legal expenses and out-of-pocket
expenses. If the Indemnifying Party desires to accept a final and complete
settlement of any such Third Person claim and the Indemnified Party refuses to
consent to such settlement, then the Indemnifying Party's liability under this
Section with respect to such Third Person claim shall be limited to the amount
so offered in
35
settlement by said Third Person. If the Indemnifying Party does not undertake to
defend such matter to which the Indemnified Party is entitled to indemnification
hereunder, or fails diligently to pursue such defense, the Indemnified Party may
undertake such defense through counsel of its choice, at the cost and expense of
the Indemnifying Party, and the Indemnifying Party shall reimburse the
Indemnified Party for the amount paid in such settlement and any other
liabilities or expenses incurred by the Indemnified Party in connection
therewith, provided, however, that under no circumstances shall the Indemnified
Party settle any Third Person claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
All settlements hereunder shall effect a complete release of the Indemnified
Party, unless the Indemnified Party otherwise agrees in writing. The parties
hereto will make appropriate adjustments for insurance proceeds in determining
the amount of any indemnification obligation under this Section.
10.4 EXCLUSIVE REMEDY. The indemnification provided for in this
Section 10 shall (except as prohibited by ERISA) be the exclusive remedy in any
action seeking damages or any other form of monetary relief brought by any party
to this Agreement against another party, provided, however, that nothing herein
shall be construed to limit the right of a party, in a proper case, to seek
injunctive relief for a breach of this Agreement.
10.5 LIMITATIONS ON INDEMNIFICATION. No Indemnified Party shall
assert any claim for indemnification hereunder against an Indemnifying Party
until such time as, and solely to the extent that, the aggregate of all claims
which such Indemnified Party may have against such Indemnifying Party shall
exceed $75,000, provided, however, that QSI, the Company and the other persons
or entities indemnified pursuant to Section 10.1 may assert and shall be
indemnified for any claim under Section 10.1(v) at any time, regardless of
whether the aggregate of all claims which such persons may have against any
Stockholder or all Stockholders exceeds $75,000, it being understood that the
amount of any such claim under such Sections shall not be counted towards such
$75,000 amount; and further provided that the $75,000 amount shall be reduced to
$5,000 for claims under Sections 10.l(i) to the extent it relates to breaches of
the representations and warranties set forth in Section 4.22, 10.1(vi),
10.1(vii) and 10.1(viii) (except for claims with respect to taxes due as a
result of an Internal Revenue Service audit related to percentage of completion
of related contracts, in which case the amount shall be reduced to $50,000) it
being understood that the amount of any such claim under such Sections shall not
be counted towards such $75,000 amount; and further provided that the
Stockholders and the other persons or entities indemnified pursuant to Section
10.2 may assert and shall be indemnified for any claim under Section 10.2(v) at
any time, regardless of whether the aggregate of all claims which such persons
may have against QSI exceeds $75,000, it being understood that the amount of any
such claim under Section 10.2(v) shall not be counted towards such $75,000
amount. No person shall be entitled to indemnification under this Section 10 if
and to the extent that: (a) such person's claim for indemnification is directly
or indirectly related to and substantially the result of a breach by such person
of any representation, warranty, covenant or other agreement set forth in this
Agreement; or (b) such person receives a tax benefit equal to or in excess of
the amount of such claim as a result of the claim or loss for which
indemnification is sought.
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Notwithstanding any other term of this Agreement, no Indemnifying Party
shall be liable under this Section 10 for an amount which exceeds the amount of
proceeds received by the Stockholders in connection with the transactions
contemplated hereby. Indemnity obligations hereunder of the Stockholders may be
satisfied through the payment of cash or the delivery of QSI Stock, or a
combination thereof, at the Stockholder's election. For purposes of calculating
the value of the QSI Stock received or delivered by the Stockholders (for
purposes of determining the limitation on indemnity set forth in the second
preceding sentence and the amount of any indemnity paid), QSI Stock shall be
valued at its initial public offering price as set forth in the Registration
Statement. Any indemnification payment made by the Stockholders pursuant to
this Section 10 shall be deemed to be a reduction in the consideration received
by the Stockholders pursuant to Section 2.
Without limitation of any of the foregoing, the limitations set forth in
this Section shall not apply to breaches of representations, warranties or
covenants set forth in Sections 4.29(c), 5.13, 5.14, 9.2 and 9.3 hereof.
11. TERMINATION OF AGREEMENT
11.1 TERMINATION. This Agreement may be terminated by written notice
from the party asserting termination to the other parties at any time prior to
the Funding and Consummation Date solely:
(i) by mutual consent of the boards of directors of QSI and the
Company;
(ii) by the Stockholders or the Company (acting through its board of
directors), on the one hand, or by QSI (acting through its board of
directors), on the other hand, if the transactions contemplated by this
Agreement to take place at the Closing shall not have been consummated by
June 1, 1998, unless the failure of such transactions to be consummated is
due to the willful failure of the party seeking to terminate this Agreement
to perform any of its obligations under this Agreement to the extent
required to be performed by it prior to or on the Funding and Consummation
Date;
(iii) by the Stockholders or Company, on the one hand, or by QSI, 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, agreements or conditions contained herein, and the curing of
such default shall not have been made on or before the Funding and
Consummation Date;
(iv) pursuant to Section 2.1 hereof;
(v) pursuant to Section 6.8 hereof; or
(vi) pursuant to Section 3 hereof.
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11.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section 6.8
hereof, the termination of this Agreement 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 and
audit costs and out of pocket expenses relating to the transactions contemplated
hereby. No party hereto shall be liable to any other party if the Agreement is
terminated under Sections 11.1(i), (ii) (except as set forth therein), (iv), (v)
or (vi).
12. NONCOMPETITION
12.1 PROHIBITED ACTIVITIES. Provided that QSI shall have complied
with and performed all of its obligations hereunder and that the Stockholders
shall have received payment in full of the consideration described in Section 2,
the Stockholders shall not, for a period of five (5) years following the Funding
and Consummation Date, for any reason whatsoever, directly or indirectly, for
themselves or on behalf of or in conjunction with any other person, persons,
company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any electrical engineering and construction business in
direct competition with QSI or any of the subsidiaries thereof, within 100
miles of where the Company or any of its subsidiaries conducted business
prior to the effectiveness of the Funding and Consummation Date (the
"Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of QSI (including the subsidiaries thereof) in a
sales representative or managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of QSI
(including the subsidiaries thereof), provided that each Stockholder shall
be permitted to call upon and hire any member of his or her immediate
family;
(iii) call upon any person or entity which is at that time, or which
has been, within one (l) year prior to the Funding and Consummation Date, a
customer of QSI (including the subsidiaries thereof), of the Company or of
any of the Other Founding Companies within the Territory for the purpose of
soliciting or selling products or services in direct competition with QSI
within the Territory;
(iv) call upon any prospective acquisition candidate, on the
Company's or any Stockholder's own behalf or on behalf of any competitor in
the electrical engineering and construction business, which candidate, to
the actual Knowledge of the Company or such Stockholder after due inquiry,
was called upon by QSI (including the subsidiaries thereof) or for which,
to the actual Knowledge of the Company or such Stockholder after due
inquiry, QSI (or any subsidiary thereof) made an acquisition analysis, for
the purpose of acquiring such entity; or
38
(v) 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 types of persons to whom
disclosure is then presently contemplated for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any Stockholder from acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter.
12.2 DAMAGES. Because of the difficulty of measuring economic losses
to QSI as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to QSI for which it would
have no other adequate remedy, each Stockholder agrees that the foregoing
covenant may be enforced by QSI or the Company in the event of breach by such
Stockholder, by injunctions and restraining orders.
12.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 12 impose a reasonable restraint on the
Stockholders in light of the activities and business of QSI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of QSI.
12.4 SEVERABILITY; REFORMATION. The covenants in this Section 12 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
12.5 INDEPENDENT COVENANT. All of the covenants in this Section 12
shall be construed as an agreement independent of any other provision in this
Agreement. It is specifically agreed that the period of five (5) years stated
at the beginning of this Section 12, during which the agreements and covenants
of each Stockholder made in this Section 12 shall be effective, shall be
computed by excluding from such computation any time during which such
Stockholder is in violation of any provision of this Section 12. The covenants
contained in Section 12 shall have no effect if the transactions contemplated by
this Agreement are not consummated nor may such covenants be enforced by any
party to this Agreement that is in breach of its obligations hereunder.
12.6 MATERIALITY. The Stockholders hereby agree that the covenants in
this Section 12 are a material and substantial part of this transaction.
12.7 LIMITATIONS. In the event that any Stockholder who is employed
by QSI or the Company pursuant to an employment agreement is terminated without
cause (as defined in such employment agreement), the provisions of this Section
12 shall no longer be valid or enforceable by QSI or the Company. If such
employment agreement contains provisions relating to the same subject
39
matter as this Section 12 that are less restrictive than set forth in this
Section 12, the provisions of such employment agreement shall control.
13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
13.1 STOCKHOLDERS. The Company and the 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, the
Other Founding Companies, and/or QSI, such as operational policies, trade
secrets and pricing and cost policies that are valuable, special and unique
assets of the Company's, the Other Founding Companies' and/or FCI's respective
businesses. The Company and the Stockholders agree that they shall not disclose
such confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except (a) to authorized
representatives of QSI, (b) following the Closing, such information may be
disclosed by the Stockholders as is required in the course of performing their
duties for QSI or the Company and (c) to counsel and other advisers, provided
that such advisers (other than counsel) agree to the confidentiality provisions
of this Section 13.1, unless (i) such information is or becomes known to the
public generally or to businesses operating in the construction industry through
no fault of the Company and the Stockholders, (ii) disclosure is required by law
or the order of any governmental authority under color of law, provided,
however, that prior to disclosing any information pursuant to this clause (ii),
the Company and the Stockholders shall, if possible, give two days' prior
written notice thereof to QSI and provide QSI with the opportunity within such
two-day period to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by the Company or any of the Stockholders of the provisions of
this Section, QSI shall be entitled to an injunction restraining the Company and
such Stockholders from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting QSI from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages. In the event the transactions contemplated by this
Agreement are not consummated, the Company and the Stockholders shall have none
of the above-mentioned restrictions on their ability to disseminate confidential
information with respect to the Company.
13.2 QSI. QSI recognizes and acknowledges that QSI had in the past
and currently has access to certain confidential information of the Company,
such as operational policies, trade secrets, and pricing and cost policies that
are valuable, special and unique assets of the Company's business. QSI agrees
that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
the Company, (b) to counsel and other advisers, provided, however, that such
advisors (other than counsel) agree to the confidentiality provisions of this
Section 13.2 and (c) to the Other Founding Companies and their representatives
pursuant to Section 6.1(a), unless (i) such information becomes known to the
public generally through no fault of QSI, (ii) disclosure is required by law or
the order of any governmental authority under color of law, provided, however,
that prior to disclosing any information pursuant to this clause (ii), QSI
shall, unless otherwise
40
required by law or such order, give two days' prior written notice thereof to
the Company and the Stockholders and provide the Company and the Stockholders
with the opportunity within such two-day period to contest such disclosure, or
(iii) the disclosing party reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing party. In the
event of a breach or threatened breach by QSI of the provisions of this Section,
the Company and the Stockholders shall be entitled to an injunction restraining
QSI from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting the Company and the Stockholders from
pursuing any other available remedy for as such breach or threatened breach,
including the recovery of damages.
13.3 DAMAGES. Because of the difficulty of measuring economic losses
as a result of the breach of the foregoing covenants in Section 13.1 and 13.2,
and because of the immediate and irreparable damage that would be caused for
which they would have no other adequate remedy, the parties hereto agree that,
in the event of a breach by any of them of the foregoing covenants, the covenant
may be enforced against the other parties by injunctions and restraining orders.
13.4 SURVIVAL. The obligations of the parties under this Article 13
shall survive the termination of this Agreement for a period of three years from
(a) the Funding and Consummation Date if the transactions contemplated hereby
are consummated or (b) the date hereof if the transactions contemplated hereby
are not consummated.
14. TRANSFER RESTRICTIONS
14.1 TRANSFER RESTRICTIONS. Except for transfers to Affiliates of the
Stockholders who agree to be bound by the restrictions set forth in this Section
14.1, for a period of two years from the Funding and Consummation Date, except
pursuant to Section 16 hereof, the Stockholders shall not sell, assign,
exchange, transfer, distribute or otherwise dispose of any shares of QSI Stock
received by them as described in Section 2.1. The certificates evidencing the
QSI Stock delivered to the Stockholders pursuant to Section 2 of this Agreement
shall bear a legend substantially in the form set forth below and containing
such other information as QSI may deem necessary or appropriate: THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED
OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT
OR OTHER DISPOSITION, PRIOR TO SECOND ANNIVERSARY OF FUNDING AND CONSUMMATION
DATE. 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.
15. FEDERAL SECURITIES ACT REPRESENTATIONS
Each Stockholder acknowledges that the shares of QSI Stock to be delivered
to such Stockholder pursuant to this Agreement have not been and will not be
registered under the 1933 Act
41
and therefore may not be resold without compliance with the 1933 Act. The QSI
Stock to be acquired by such Stockholder pursuant to this Agreement is being
acquired solely for its own account, for investment purposes only, and with no
present intention of distributing, selling or otherwise disposing of it in
connection with a distribution.
15.1 COMPLIANCE WITH LAW. Each of the Stockholders covenants,
warrants and represents that none of the shares of QSI Stock issued to the
Stockholders will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all of
the applicable provisions of the 1933 Act and the rules and regulations of the
SEC. All of the QSI Stock shall bear the following legend in addition to the
legend required under Section 14 of this Agreement: THE SHARES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND
MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE
ACT AND APPLICABLE SECURITIES LAW.
15.2 ECONOMIC RISK; SOPHISTICATION. Each Stockholder is able to bear
the economic risk of an investment in the QSI Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has such
Knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the proposed investment in the QSI Stock.
The Stockholders have had an adequate opportunity to ask questions and receive
answers from the officers of QSI concerning any and all matters relating to the
transactions described herein including, without limitation, the background and
experience of the current and proposed officers and directors of QSI, the plans
for the operations of the business of QSI, the business, operations and
financial condition of the Founding Companies other than the Company, and any
plans for additional acquisitions and the like. The Stockholders have asked any
and all questions in the nature described in the preceding sentence and all
questions have been answered to their satisfaction.
16. REGISTRATION RIGHTS
16.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Funding
and Consummation Date, whenever QSI proposes to register any QSI Stock for its
own or others account under the 1933 Act for a public offering, other than (i)
any shelf registration of shares to be used as consideration for acquisitions of
additional businesses by QSI and (ii) registrations relating to employee benefit
plans, QSI shall give the Stockholders prompt written notice of its intent to do
so. Upon the written request of the Stockholders given within 30 days after
receipt of such notice, QSI shall cause to be included in such registration all
of the QSI Stock issued to the Stockholders pursuant to this Agreement which the
Stockholders request, provided that QSI shall have the right to reduce the
number of shares included in such registration to the extent that inclusion of
such shares could, in the opinion of tax counsel to QSI or its independent
auditors, jeopardize the qualification of the transactions contemplated hereby
and by the Registration Statement as an exchange meeting the requirements of
Code Section 351. In addition, if QSI is advised in writing in good faith by
any managing underwriter of an underwritten offering of the securities being
offered pursuant to any registration statement under this Section 16.1 that the
number of shares to be sold by persons other than QSI is greater than the number
of such shares which can be offered without
42
adversely affecting the offering, QSI may reduce pro rata the number of shares
offered for the accounts of such persons (based upon the number of shares
desired to be sold by such person) to a number deemed satisfactory by such
managing underwriter, provided, that, notwithstanding Section 14.1 hereof, for
each such offering made by QSI after the IPO, such reduction shall be made first
by reducing the number of shares to be sold by persons other than QSI, the
Company and the Other Founding Companies or the Stockholders thereof who receive
shares of QSI Stock pursuant to the Other Agreements (collectively, the Company
and the Other Founding Companies or the Stockholders thereof who receive shares
of QSI Stock pursuant to the Other Agreements being referred to herein as the
"Founding Stockholders"), and thereafter, if a further reduction is required, by
reducing the number of shares to be sold by the Founding Stockholders.
16.2 REGISTRATION PROCEDURES. All expenses incurred in connection
with the registrations under this Article 16 (including all registration,
filing, qualification, legal, printer and accounting fees, but excluding
underwriting commissions and discounts), shall be borne by QSI. In connection
with registrations under Section 16.1, QSI shall (i) use its best efforts to
prepare and file with the SEC as soon as reasonably practicable, a registration
statement with respect to the QSI Stock and use its best efforts to cause such
registration to promptly become and remain effective for a period of at least 45
days (or such shorter period during which the Founding Stockholders shall have
sold all QSI Stock which they requested to be registered); (ii) use its best
efforts to register and qualify the QSI Stock covered by such registration
statement under applicable state securities laws as the holders shall reasonably
request for the distribution for the QSI Stock; and (iii) take such other
actions as are reasonable and necessary to comply with the requirements of the
1933 Act and the regulations thereunder to enable the Founding Stockholders to
sell their shares pursuant thereto.
16.3 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Section 16.1 covering an underwritten registration public offering,
QSI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions
(including indemnification provisions) as are customary in the securities
business for such an arrangement between such managing underwriters and
companies of FCI's size and investment stature.
16.4 AVAILABILITY OF RULE 144. QSI shall not be obligated to register
shares of QSI Stock held by the Stockholder at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to the Stockholders.
17. GENERAL
17.1 COOPERATION. The Company, Stockholders and QSI shall each deliver or
cause to be delivered to the other on the Funding and Consummation Date, and at
such other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The Company shall cooperate and use its reasonable efforts to
have the present officers, directors and the employees of the Company cooperate
with QSI on and after the Funding and Consummation Date in furnishing
information, evidence, testimony and other assistance in connection with any tax
return filing obligations, actions, proceedings,
43
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Funding and Consummation Date.
17.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of QSI, and the heirs and legal representatives of the Stockholders.
17.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company and QSI and supersede any prior agreement and understanding relating
to the subject matter of this Agreement, including but not limited to any letter
of intent entered into by any of the parties hereto. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the Stockholders, the Company and QSI, acting
through their respective officers or trustees, duly authorized by their
respective Boards of Directors.
17.4 COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
17.5 BROKERS AND AGENTS. Except as disclosed on Schedule 17.5, each
party represents and warrants that it employed no broker or agent in connection
with this transaction and agrees to indemnify the other parties hereto against
all loss, cost, damages or expense arising out of claims for fees or commission
of brokers employed or alleged to have been employed by such indemnifying party.
17.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, QSI will pay the fees, expenses and disbursements of QSI
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by QSI under this Agreement, including the fees and
expenses of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ L.L.P., ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P., and any other person
or entity retained by QSI, and the costs of preparing the Registration
Statement. The Stockholders shall pay the fees, expenses and disbursements of
the Stockholders, the Company and their respective agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto, including all costs and expenses incurred
in the performance and compliance with all conditions to be performed by the
Company and the Stockholders under this Agreement, including the fees and
expenses of accountants and legal counsel to the Company and the Stockholders.
Notwithstanding the foregoing, if the transactions contemplated by this
Agreement are consummated, QSI shall reimburse the Stockholders for such
reasonable fees, expenses and disbursements upon the closing of the IPO up to
$15,000 plus such
44
additional fees, expenses and disbursements as are set forth on Schedule 17.6.
In addition, each Stockholder shall pay all sales, use, transfer, real property
transfer, recording, gains, stock transfer and other similar taxes and fees
("Transfer Taxes") imposed in connection with the transactions contemplated
hereby, other than Transfer Taxes, if any, imposed by the State of Delaware.
Each Stockholder shall file all necessary documentation and Returns with respect
to such Transfer Taxes. In addition, each Stockholder acknowledges that he or
she, and not the Company or QSI, shall pay all taxes due upon receipt of the
consideration payable pursuant to Section 2 hereof, and shall assume all tax
risks and liabilities of such Stockholder in connection with the transactions
contemplated hereby.
17.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party.
(a) If to QSI, addressed to it at:
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇
(b) If to the Stockholders, addressed to them in care of the Company.
(c) If to the Company, addressed to it at:
PAR Electrical Contractors, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
P. O. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 17.7 from time to time.
17.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Delaware.
45
17.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
17.10 TIME. Time is of the essence with respect to this Agreement.
17.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
17.12 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
17.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
17.14 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived only with
the written consent of QSI, the Company and the Stockholders. Any amendment or
waiver effected in accordance with this Section 17.14 shall be binding upon each
of the parties hereto, any other person receiving QSI Stock in connection with
the transactions contemplated hereby and each future holder of such QSI Stock.
17.15 INCORPORATION BY REFERENCE. To the extent that an item is
disclosed in a particular schedule or a subsection of a particular schedule and
such item is readily apparent on its face as being applicable to another
schedule or another subsection of the same schedule, such item shall be deemed
incorporated by reference in such schedule or such other subsection under the
same schedule.
17.16 DEFINED TERMS. Unless the context otherwise requires,
capitalized terms used in this Agreement or in any schedule attached hereto and
not otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
46
"Affiliates" has the meaning set forth in Section 4.8.
"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 4.11.
"Assets" has the meaning set forth in Section 6.13.
"Balance Sheet Date" has the meaning set forth in Section 4.9.
"Charter Documents" has the meaning set forth in Section 4.1.
"Closing" has the meaning set forth in Section 3.
"Closing Date" has the meaning set forth in Section 3.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" means the capital stock of the Company.
"Delaware GCL" has the meaning set forth in Section 2.3.
"Demand Registration" has the meaning set forth in Section 16.2.
"Environmental Laws" has the meaning set forth in Section 4.13.
"ERISA" has the meaning set forth in Section 4.19.
"Expiration Date" has the meaning set forth in Section 4(A).
"QSI" has the meaning set forth in the first paragraph of this Agreement.
"QSI Charter Documents" has the meaning set forth in Section 5.1.
"QSI Financial Statements" has the meaning set forth in Section 5.6.
"QSI Plan of Organization" has the meaning set forth in the fourth recital
of this Agreement.
"QSI Stock" means the common stock, par value $.01 per share, of QSI.
"Founding Companies" has the meaning set forth in the third recital of this
Agreement.
47
"Founding Stockholders" has the meaning set forth in Section 16.1.
"Funding and Consummation Date" has the meaning set forth in Section 3.
"Indemnification Threshold" has the meaning set forth in Section 10.5.
"Indemnified Party" has the meaning set forth in Section 10.3.
"Indemnifying Party" has the meaning set forth in Section 10.3.
"IPO" means the initial public offering of QSI Stock pursuant to the
Registration Statement.
"Knowledge" or "Knows," when referring to the Knowledge of the Company or
QSI or what the Company or QSI Knows, means the actual knowledge of any director
or officer of the Company or QSI, as the case may be, and the knowledge that an
ordinarily prudent person acting reasonably in a similar capacity as such
director or officer should have after reasonable investigation into the relevant
subject matter.
"Material Adverse Effect" has the meaning set forth in Section 4.1.
"Material Documents" has the meaning set forth in Section 4.23.
"Other Agreements" has the meaning set forth in the third recital of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other than
the Company.
"Plans" has the meaning set forth in Section 4.19.
"Pricing" means the date of determination by QSI and the Underwriters of
the public offering price of the shares of QSI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Closing Date.
"Qualified Plans" has the meaning set forth in Section 4.20.
"Registration Statement" means that certain registration statement on Form
S-1 covering the shares of QSI Stock to be issued in the IPO.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
48
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 6.3.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Subsidiary" has the meaning set forth in Section 4.6.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Territory" has the meaning set forth in Section 12.1.
"Third Person" has the meaning set forth in Section 10.3.
"Transfer Taxes" has the meaning set forth in Section 17.6.
"Underwriters" means the prospective underwriters in the IPO, as identified
in the Registration Statement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
QUANTA SERVICES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Its: Chief Financial Officer
------------------------------------
PAR ELECTRICAL CONTRACTORS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Its: President
------------------------------------
/s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇
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