<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): May 12, 1998
AMERICAN RESIDENTIAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-11849 76-0484996
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
POST OAK TOWER
5051 WESTHEIMER, SUITE 725
HOUSTON, TEXAS 77056-5604
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (713) 599-0100
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 12, 1998, American Residential Services, Inc., a Delaware
corporation (the "Company"), acquired Freestate Electrical Service Company,
Inc., a Maryland corporation ("Freestate Service"), and Freestate Electrical
Construction Company, a Maryland corporation ("Freestate Construction", and
collectively with Freestate Service, "Freestate"), through mergers of such
entities with and into wholly owned subsidiaries of the Company, with such
wholly owned subsidiaries of the Company being the surviving corporations of
those mergers (the "Acquisitions"). The Company completed the acquisition of
Freestate Service pursuant to an Agreement and Plan of Reorganization dated May
12, 1998, among the Company, Freestate Electrical Acquisition, Inc., a Maryland
corporation and a wholly owned subsidiary of the Company, Freestate Service and
Michael F. Dugan, the sole stockholder of Freestate Service. The Company
completed the acquisition of Freestate Construction pursuant to an Agreement and
Plan of Reorganization dated May 12, 1998, among the Company, Freestate
Acquisition, Inc., a Maryland corporation and a wholly owned subsidiary of the
Company, Freestate Construction and Michael F. Dugan, a stockholder of Freestate
Construction. As consideration for Freestate Construction, the Company issued
an aggregate of 496,470 shares of its common stock to the stockholders of
Freestate Construction, and as consideration for Freestate Service, the Company
paid $5,185,000 in cash to the sole stockholder of Freestate Service. The
parties determined the consideration for the Acquisitions through arms-length
negotiations.
Freestate provides installation, maintenance, repair and
replacement of electrical systems in commercial facilities. Freestate is
headquartered in Beltsville, Maryland and serves the Baltimore, Maryland,
Washington, D.C., and northern Virginia areas. The Company intends to utilize
the acquired operations in the manner previously operated.
A copy of the Company's May 13, 1998 press release that relates
to the Acquisitions, among other things, is attached as Exhibit 99 hereto and
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Provision of the financial statements for Freestate Service and
Freestate Construction which this item requires is currently impracticable.
The Company will file those financial statements in an amendment to this
Current Report as soon as practicable, but not later than 60 days after the
required filing date hereof.
(b) PRO FORMA FINANCIAL INFORMATION.
Provision of pro forma financial information for the Company
which this item requires is currently impracticable. The Company will file
that information in the amendment referred to in paragraph (a) of this item.
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(c) EXHIBITS
2.1 Agreement and Plan of Reorganization dated as of May 12, 1998 by
and among American Residential Services, Inc., Freestate
Electrical Acquisition, Inc., Freestate Electrical Service
Company, Inc. and the Stockholder named therein.
2.2 Agreement and Plan of Reorganization dated as of May 12, 1998 by
and among American Residential Services, Inc., Freestate
Acquisition, Inc., Freestate Electrical Construction Company and
the Stockholder named therein.
2.3 Standard Provisions for Business Combinations.
99 Press release issued May 13, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
AMERICAN RESIDENTIAL SERVICES, INC.
By: /s/ HARRY O. NICODEMUS, IV
-----------------------------------------
Harry O. Nicodemus, IV
Senior Vice President, Chief Financial
Officer and Chief Accounting Officer
Date: May 27, 1998
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization dated as of May 12, 1998 by
and among American Residential Services, Inc., Freestate
Electrical Acquisition, Inc., Freestate Electrical Service
Company, Inc. and the Stockholder named therein.
2.2 Agreement and Plan of Reorganization dated as of May 12, 1998 by
and among American Residential Services, Inc., Freestate
Acquisition, Inc., Freestate Electrical Construction Company and
the Stockholder named therein.
2.3 Standard Provisions for Business Combinations.
99 Press release issued May 13, 1998.
</TABLE>
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EXHIBIT 2.1
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AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 12, 1998
BY AND AMONG
AMERICAN RESIDENTIAL SERVICES, INC.,
FREESTATE ELECTRICAL ACQUISITION, INC.,
FREESTATE ELECTRICAL SERVICE COMPANY, INC.
AND
THE STOCKHOLDER NAMED HEREIN
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Forward Merger; Section 368(a)(2)(D); Single Stockholder
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made as of May 12, 1998, by and among American Residential Services, Inc., a
Delaware corporation ("ARS"), Freestate Electrical Acquisition, Inc., a
Maryland corporation and a wholly owned subsidiary of ARS ("ARS Sub"),
Freestate Electrical Service Company, Inc., a Maryland corporation (the
"Company"), and the person listed on the signature page hereof under the
caption "Stockholder" (the "Stockholder").
PRELIMINARY STATEMENT
The parties to this Agreement have determined it is in their best
long-term interests to effect a business combination by means of a Merger
pursuant to which the Company will merge into ARS Sub on the terms and subject
to the conditions set forth herein (that Merger being the "Acquisition").
The respective boards of directors of ARS, ARS Sub and the
Company have approved and adopted this Agreement to effect a reorganization
under Section 368(a)(2)(D) of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and undertakings contained herein, the parties
hereto hereby agree as follows:
Paragraph 1. Certain Defined Terms. As used in this Agreement,
the following terms have the meanings assigned to them below in this Paragraph
1. Capitalized terms used in this Agreement and not defined below in this
Paragraph 1 have the meanings assigned to them in the Preliminary Statement,
Article IX of the Standard Provisions or the Special Provisions, as the case
may be.
"Acquired Business" means the Company.
"Acquisition Consideration" has the meaning specified in
Paragraph 2.
"ARS Award Agreement" means the award agreement pursuant to which
ARS, on the Closing Date, will grant to Gregg S. Kaderabek, pursuant to
the American Residential Services, Inc. 1997 Employee Incentive Plan, or
other similar stock option plan, a nonqualified option to purchase
12,500 shares of ARS Common Stock, exercisable as to 33 1/3% of the
shares underlying such option on the date of grant and as to 33 1/3% of
the shares underlying the option annually thereafter, at a per share
exercise price equal to the fair market value of a share of ARS Common
Stock on the New York Stock Exchange on the date of the grant.
"Calculated Value" has the meaning specified in Schedule 2(B).
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"Ceiling Amount" means, in the aggregate with the "Ceiling
Amount" as set forth in the Construction Company Agreement, $10,370,000;
provided, however, that, for purposes of Section 7.06(b), the Ceiling
Amount means, in the aggregate with the "Ceiling Amount" as set forth in
the Construction Company Agreement, (x) $8,415,000 until such time as
the debt evidenced by the Promissory Notes referred to in Schedule 2.16
is discharged and (y) $5,185,000 after the date that all the debt
evidenced by the Promissory Notes referred to in Schedule 2.16 is
discharged. Each of the parties to this Agreement intend that the
Ceiling Amount set forth in this Agreement and the Ceiling Amount set
forth in the Construction Company Agreement will not, in the aggregate,
exceed the amounts set forth in the preceding sentence (e.g., if there
are Stockholder Indemnified Losses under the Construction Company
Agreement in the amount of $100,000, than such $100,000 amount will be
credited against the Ceiling Amounts under this Agreement and the
Construction Company Agreement.)
"Closing" has the meaning specified in Paragraph 3.
"Closing Date" means May 12, 1998 or such later date as to which
ARS and the Company may agree in writing.
"Company" means Freestate Electrical Service Company, Inc., a
Maryland corporation.
"Company Capital Stock" means the Common Stock, no par value, of
the Company.
"Construction Company Agreement" means the Agreement and Plan of
Reorganization, dated as of the date hereof, by and among ARS, Freestate
Acquisition, Inc., Freestate Electrical Construction Company and the
Stockholder.
"Counsel for the Company and the Stockholder" means Bell, Boyd &
Lloyd.
"Current Balance Sheet" means the balance sheet of the Company as
of December 31, 1997.
"Current Balance Sheet Date" means December 31, 1997.
"Effective Date" means the Closing Date.
"Facilities" means the real property and improvements located at
6623 Mid-Cities Avenue, Beltsville, Maryland (exclusive of the telephone
antenna), as more fully described in the Facilities Lease.
"Facilities Lease" means the lease in the form thereof attached
hereto as Exhibit 1-B pursuant to which 6623 Mid Cities, LLC, a Maryland
limited liability company, will lease the Facilities to ARS Sub for the
period and on the terms specified therein.
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"Gordon Attorney Fees" has the meaning specified in Section 6.06.
"Initial Financial Statements" means the balance sheets of the
Company as of December 31, 1996 and 1997 and the related statements of
operations and retained earnings for each of the Company's fiscal years
in the two-year period ended December 31, 1997.
"MGCL" means the Maryland General Corporation Law.
"Responsible Officer" mean Michael F. Dugan.
"Special Provisions" has the meaning specified in Paragraph 5.
"Standard Provisions" has the meaning specified in Paragraph 4.
"Surviving Corporation" means ARS Sub, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Threshold Amount" means $140,000; provided that the Threshold
Amount shall be reduced from time to time by an amount equal to any
Gordon Attorney Fees actually paid by ARS or any of its affiliates.
Paragraph 2. (A) Certificate of Merger. Subject to the terms
and conditions hereof, the Company will cause a Certificate of Merger to be
duly executed and delivered on or promptly after the Closing Date and filed
with the State Department of Assessments and Taxation of the State of Maryland.
(B) The Effective Time. The effective time of the Merger (the
"Effective Time") will be the time on the Effective Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 5:00 p.m., Houston, Texas time, on the Effective Date.
(C) Certain Effects of the Merger. At and as of the Effective
Time, (1) the Company will be merged with and into ARS Sub in accordance with
the provisions of the MGCL, (2) the Company will cease to exist as a separate
legal entity, (3) the articles of incorporation of ARS Sub will be amended to
change the name of the corporation to "Freestate Electrical Service Company,
Inc.," (4) ARS Sub will be the Surviving Corporation and, as such, will, all
with the effect provided by the MGCL, (a) possess all the properties and
rights, and be subject to all the restrictions and duties, of the Company and
ARS Sub and (b) be governed by the laws of the State of Maryland, (5) the
Charter Documents of ARS Sub then in effect (after giving effect to the
amendment to ARS Sub's articles of incorporation described in clause (3)
hereof) will become and thereafter remain (until changed in accordance with (a)
applicable law (in the case of the articles of incorporation) or (b) their
terms (in the case of the bylaws)) the Charter Documents of the Surviving
Corporation, (5) the initial board of directors of the Surviving Corporation
will be the persons named in Schedule 2(C), and those persons will hold the
office of director of the Surviving Corporation, subject to the
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provisions of the applicable laws of the State of Maryland and the Charter
Documents of the Surviving Corporation, and (6) the initial officers of the
Surviving Corporation will be as set forth in Schedule 2(C), and each of those
persons will serve in each office specified for that person in Schedule 2(C),
subject to the provisions of the Charter Documents of the Surviving
Corporation, until that person's successor is duly elected to, and, if
necessary, qualified for, that office.
(D) Effect of the Merger on Capital Stock. As of the
Effective Time, as a result of the Merger and without any action on the part of
any holder thereof:
(1) the shares of Company Capital Stock issued and outstanding
immediately prior to the Effective Time will (a) be converted into the
right to receive, subject to the provisions of Paragraph 2(E), without
interest, on surrender of the certificates evidencing those shares, the
amount of cash as provided in Schedule 2(B) (the "Acquisition
Consideration"), (b) cease to be outstanding and to exist and (c) be
canceled and retired;
(2) each share of Company Capital Stock held in the treasury
of the Company or any Company Subsidiary will (a) cease to be
outstanding and to exist and (b) be canceled and retired; and
(3) each share of the Common Stock, par value $1.00 per share,
of ARS Sub issued and outstanding immediately prior to the Effective
Time will remain unchanged and such shares will constitute all the
issued and outstanding shares of Capital Stock of the Surviving
Corporation.
Each holder of a certificate representing shares of Company Capital Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, subject to the provisions of Paragraph 2(E), without
interest, the Acquisition Consideration and the additional cash, if any, owing
with respect to those shares as provided in Paragraph 2(F).
(E) Delivery, Exchange and Payment. (1) At or after the
Effective Time: (a) the Stockholder, as the holder of certificates
representing all the outstanding shares of Company Capital Stock, will, on
surrender of those certificates to ARS (or any agent that may be appointed by
ARS for purposes of this Paragraph 2(E)), receive, subject to the provisions of
this Paragraph 2(E), the Acquisition Consideration.
(2) The Stockholder will deliver to ARS (or any agent that may
be appointed by ARS for purposes of this Paragraph 2(E)) on or before the
Closing Date the certificates representing all the Company Capital Stock owned
by the Stockholder, duly endorsed in blank, or accompanied by stock powers in
blank duly executed, by that Person, and with all necessary transfer tax and
other revenue stamps, acquired at that Person's expense, affixed and canceled.
The Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting,
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or in the stock powers accompanying, the certificates representing Company
Capital Stock delivered by that Person.
Paragraph 3. The Closing. On or before the Closing Date, the
parties hereto will take all actions necessary to (A) effect the Acquisition
(including, as permitted by the MGCL, (i) the execution of a Certificate of
Merger (a) meeting the requirements of the MGCL and (b) providing that the
Merger will become effective on the Effective Date and (ii) the filing of the
Certificate of Merger with the State Department of Assessments and Taxation of
the State of Maryland, (B) verify the existence and ownership of the
certificates evidencing the Company Capital Stock to be exchanged for the
Acquisition Consideration pursuant to Paragraph 2(E) and (C) satisfy the
document delivery requirements on which the obligations of the parties to
effect the Acquisition and the other transactions contemplated hereby are
conditioned by the provisions of Article V (all those actions collectively
being the "Closing"). The Closing will take place at the offices of Baker &
Botts, L.L.P., 910 Louisiana, Houston, Texas at 10:00 a.m., Houston time, or at
such later time on the Closing Date as ARS shall specify by written notice to
Michael F. Dugan.
Paragraph 4. Incorporation of Standard Provisions.
(a) The American Residential Services, Inc. Standard Provisions
for Business Combinations, marked "Form 98-1 (BC)" and attached hereto as Annex
1 (the "Standard Provisions"), hereby are incorporated in this Agreement by
this reference and constitute a part of this Agreement with the same force and
effect as if set forth at length herein.
(b) Section 2.14(b) hereby is amended by adding "written"
before "notice" in clause (ii)(A) thereof.
(c) Section 2.15 hereby is amended by (i) deleting "and which
relate to the reporting by the Company and each Company Subsidiary" from clause
(a) and inserting in lieu thereof "which requires reporting by the Company and
each Company Subsidiary to applicable Governmental Authorities," (ii) adding
"at a material cost" after "remediation" in clause (b) and (iii) adding "deed"
before "restrictions" in clause (b).
(d) Section 3.07 hereby is amended by deleting the word
"directly" in the last sentence of Section 3.07 and inserting in lieu thereof
the word "indirectly."
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(e) Article III hereby is amended by adding Sections 3.09,
3.10, 3.11 and 3.12 as follows:
Section 3.09. Financial Statements and Reports. The
audited financial statements in the Form 10-K filed by ARS with the SEC
for fiscal year 1997 have been prepared in accordance with GAAP applied
on a consistent basis (except as may be indicated therein or in the
notes thereto) and fairly present the financial position of ARS and its
Subsidiaries as at the date thereof and the results of their operations
and changes in financial position for the period then ended.
Section 3.10. Absence of Undisclosed Liabilities. Except
as set forth in the Form 10-K filed by ARS with the SEC for fiscal year
1997, neither ARS nor any of its Subsidiaries (i) had as of December 31,
1997, any material liability which was then required to be accrued,
reserved against or otherwise disclosed in the consolidated financial
statements of ARS and its Subsidiaries under GAAP or (ii) has incurred
after December 31, 1997, any such material liability except in the
ordinary course of business and consistent with past practice.
Section 3.11. Absence of Certain Changes or Events.
Since December 31, 1997, there has not been any material adverse change
in the consolidated financial condition, consolidated results of
operations of ARS and its Subsidiaries taken as a whole. As of the
Closing Date, the shares of ARS Common Stock to be delivered to the
Stockholder will be shares which have been (i) duly registered by ARS
pursuant to the Registration Statement and (ii) authorized for listing
on the New York Stock Exchange, subject to notice of issuance.
Section 3.12. No Other Litigation. Except as set forth
in the Current Prospectus, there are no actions at law, investigations,
proceedings, suits in equity or claims pending or, to the knowledge of
ARS, threatened, against or affecting ARS and its consolidated
Subsidiaries, taken as a whole, which in the aggregate is likely to
result in a material adverse effect on the business or financial
condition of ARS and its consolidated Subsidiaries taken as a whole.
(f) Section 5.02 hereby is amended by deleting clause (b) and
inserting in lieu thereof the following:
(b) all the following conditions:
(1) Representations and Warranties. All the
representations and warranties of ARS in Article III shall be
true and correct as of the Closing Date as though made at that
time;
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(2) Delivery of Documents. ARS and ARS
Sub shall have delivered to the Stockholder and the
Company:
(i) an ARS officer's certificate, in the
form of Exhibit 5.02-1 signed by ARS'
President, respecting the representations
and warranties of ARS in Article III and
compliance with the covenants by ARS and ARS
Sub in Article IV; and
(ii) an opinion dated the Effective Date
and addressed to the Company and the
Stockholder substantially in the form of
Exhibit 5.02-2.
(g) Section 6.01 hereby is amended by adding the following as
the last two sentences:
Notwithstanding the foregoing, the Stockholder will be responsible for
filing the Company's federal income tax return for, and will pay out of
his own funds all federal income taxes attributable to the Company's
operations during, the Company's final year as a subchapter S
corporation under the Code, which will be deemed for purposes of this
Agreement to be the period beginning on January 1, 1998 and ending on
the Closing Date. The Stockholder will be solely responsible for the
expenses he incurs in performing his obligations pursuant to the
preceding sentence.
(h) Section 6.02 hereby is amended by adding the following at
the end thereof:
Notwithstanding the foregoing, ARS will cause the Promissory Notes
executed by Company and Freestate Electrical Construction Company in
favor of First Virginia Bank, which are referred to in Schedule 2.16,
and all indebtedness outstanding thereunder to be discharged on or
before August 1, 1998.
(i) Article VI of the Standard Provisions hereby is amended by
adding thereto the following Sections, which will be and read in their entirety
as follows:
Section 6.04. Use of Names. ARS shall cause the Company, and
its successors and assigns, to continue to use the name "Freestate
Electrical Service Company" for a period of three years after the
Closing Date, or such earlier date as ARS and Mr. Dugan may agree.
Section 6.05. Key Employee Stock Options. On the Closing Date,
ARS will grant to Gregg S. Kaderabek a nonqualified option to purchase
12,500 shares of ARS Common Stock, exercisable as to 33 1/3% of the
shares underlying such option on the date of grant and as to 33 1/3% of
the shares underlying the option annually thereafter, at a per share
exercise price equal to the fair market value of a share of ARS Common
Stock on the New York
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Stock Exchange on the date of the grant, such grant to be made pursuant
to the terms and conditions of an ARS Award Agreement which will be
provided to such individual promptly after the Closing Date.
Section 6.06. Certain Additional Indemnities. (a) The Company
and the Stockholder jointly and severally agree, without regard to the
Threshold Amount limitations set forth in Article VII, to indemnify ARS
and ARS Sub against all Damage Claims (excluding any fees and actual
disbursements by attorneys incurred in connection with such Damage
Claims (such fees and disbursements collectively and in the aggregate
referred to herein as "Gordon Attorney Fees")), resulting from, arising
out of or relating to the following:
(i) The complaint filed by Lamont Gordon against
Freestate Electric in the United States District Court for
the District of Columbia, Case Number 1:98CV00907,
disclosed on Schedule 2.12; and
(ii) The charge of discrimination filed on July
1, 1997 with the Equal Employment Opportunity Commission
against Freestate Electric by Lamont Gordon against
Freestate Electric alleging race discrimination, disclosed
on Schedule 2.12.
(b) The Gordon Attorney Fees shall be paid by ARS.
(j) Section 7.04(e) hereby is amended by deleting the number
15 therefrom and inserting the number 30.
(k) Section 8.01 hereby is amended by deleting clause (a) in
its entirety and inserting in lieu thereof the following:
(a) engage as a director, officer or in any similar
managerial capacity or as an owner, co-owner, financier or other
investor of or in any business selling any products or providing
any services in competition with the Acquired Business or ARS or
any Subsidiary of ARS (ARS and its Subsidiaries collectively
being "ARS" for purposes of this Article VIII) within any
Territory in which the Acquired Business was engaged in business
on the date hereof or immediately prior to the Effective Date
(for purposes of this Article VIII, the term "Territory" means
any area within a radius of 100 miles of Beltsville, Maryland);
(l) Section 9.01 hereby is amended by (i) inserting "written
requirement" before "authorization" in the definition of "Governmental
Approval" and (ii) adding "written" before "requirement" in the definition of
"Governmental Requirement."
Paragraph 5. Incorporation of Special Provisions. The following
documents attached hereto as Addenda (the "Special Provisions") hereby are
incorporated in this Agreement by this
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reference and constitute a part of this Agreement with the same force and
effect as if set forth at length herein:
(A) Addendum A(D)(2) -- "Special Provisions Relating to
Section 368(a)(2)(D) Reorganizations"; and
Paragraph 6. Counterparts. This Agreement may be executed in
multiple counterparts, each of which will be an original, but all of which
together will constitute one and the same instrument.
Paragraph 7. Notices. For purposes of Section 10.06, notices
shall be addressed to the Stockholder and the Company, as follows:
(A) if to the Stockholder, addressed to him at:
Michael F. Dugan
16012 Burton's Lane
Laurel, Maryland 20702
; and
(B) if to the Company, addressed to it at:
6623 Mid-Cities Avenue
Beltsville, Maryland 20705
Fax No.: (301) 595-5120
Attn: Michael F. Dugan
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Bell, Boyd & Lloyd
1615 L Street, N.W.
Suite 1200
Washington, D.C. 20036
Fax No.: 202-463-0678
Attn: Edward A. Bloom
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
AMERICAN RESIDENTIAL SERVICES, INC.
By: /s/ JOHN D. HELD
----------------------------------
John D. Held
Senior Vice President
FREESTATE ELECTRICAL ACQUISITION, INC.
By: /s/ JOHN D. HELD
----------------------------------
John D. Held
Vice President
FREESTATE ELECTRICAL SERVICE
COMPANY, INC.
By: /s/ MICHAEL F. DUGAN
----------------------------------
Michael F. Dugan
President
Stockholder:
/s/ MICHAEL F. DUGAN
---------------------------------------
Michael F. Dugan
<PAGE> 12
Addendum A(2)(D)
AMERICAN RESIDENTIAL SERVICES, INC.
SPECIAL PROVISIONS RELATING TO
SECTION 368(a)(2)(D) REORGANIZATIONS
A. Defined Terms. Words and terms used in this Addendum
which are defined elsewhere in the Agreement in which this Addendum is
incorporated by reference are used herein as defined therein.
B. Representation and Warranty of ARS. ARS represents and
warrants to each Stockholder that all the following representations and
warranties of ARS in this Section B will, as of the Effective Time, be true and
correct:
(1) At the Effective Time, ARS will own all the stock of ARS
Sub. ARS Sub will not issue any of its Capital Stock in the Merger.
(2) At the Effective Time, ARS will have no plan or intention
to lose control, within the meaning of Section 368(c) of the Code, of
ARS Sub after the Merger occurs.
(3) At the Effective Time, ARS will have no plan or intention
(a) to liquidate ARS Sub, (b) to merge ARS Sub with or into another
corporation, (c) to sell or otherwise dispose of the stock of ARS Sub,
(d) to cause ARS Sub to sell or otherwise dispose of any of its assets,
except for dispositions in the ordinary course of business and transfers
described in Section 368(a)(2)(C) of the Code or (e) to reacquire any
ARS Common Stock issued in the Merger.
(4) ARS and the members of the Treas. Reg. Section 1.368-
1(d)(4)(ii) "qualified group" of which ARS is a member will, following
the Merger, continue the historic business of Company or use a
significant portion of Company's historic business assets in a business.
(5) At the Effective Time, ARS will not be an investment
company, within the meaning of Section 368(a)(2)(F)(iii) of the Code
(that is, ARS will not be either a regulated investment company, a real
estate investment trust or a corporation 50% or more of the value of
whose total assets are stock and securities and 80% or more of the value
of whose total assets are assets held for investment after applying the
conventions set out in such Section 368(a)(2)(F)). For purposes of
making the 50% and 80% determinations under the preceding sentence,
stock and securities in any subsidiary of ARS shall be disregarded, and
ARS shall be deemed to own its ratable share of that subsidiary's
assets, and a corporation shall be deemed to be a subsidiary of ARS if
ARS owns 50% or more of the combined
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voting power of all classes of stock entitled to vote, or 50% or more of
the total value of shares of all classes of stock outstanding, of that
corporation.
For purposes of Section 7.01, the representations and warranties made in this
Section B shall be deemed to be included in Article III.
C. Representation and Warranty of Each Stockholder. Each
Stockholder represents and warrants to ARS and each other Stockholder that all
the following representations and warranties of the Stockholder in this Section
C will, as of the Effective Time, be true and correct:
(1) At the Effective Time, the Stockholder will receive in the
Merger shares of ARS Common Stock the value of which at the Effective
Time is 50% or more of the sum of (A) the value at the Effective Time of
all the Company Capital Stock held immediately prior to the Merger by
the Stockholder and (B) the value at the Effective Time of any other
instruments (such as debt of the Company which is guaranteed by the
Stockholder) which are classified for federal income tax purposes as
stock of the Company (collectively, "Shares") and which are held
immediately prior to the Merger by the Stockholder. For purposes of the
preceding sentence, the Shares that are outstanding immediately prior to
the Merger includes Shares exchanged for cash in lieu of fractional
shares of ARS Common Stock as well as Shares sold, exchanged or
otherwise disposed of prior to the Merger by reason of this Agreement or
otherwise as part of the plan of the Merger provided for herein, and the
value of all Shares outstanding immediately prior to the Merger shall be
determined with regard to any assets distributed by the Company by
reason of this Agreement or otherwise as part of the plan of the Merger
provided for herein.
(2) The Stockholder is not related to ARS and will not after
the Merger, but in connection with the Merger, transfer to ARS or to any
person who is related to ARS any of the ARS Common Stock which such
Stockholder received in the Merger. Each of the phrases "related" and
"in connection with" has the meaning which is assigned thereto in Treas.
Reg. Section 1.368-1(e)(2); provided that a transfer of ARS Common
Stock in respect of an indemnity obligation of the Stockholder pursuant
to this Agreement is not "in connection with" the Merger if such
transfer was not expected at the Effective Time.
(3) In the Merger, ARS Sub will acquire "substantially all of
the properties" of the Company within the meaning of Section
368(a)(2)(D) of the Code and ARS Sub will so acquire at least 90% of the
fair market value of the net assets and at least 70% of the gross assets
held by the Company immediately prior to the Effective Time. For
purposes of the preceding sentence, amounts paid by the Company to
dissenters, amounts paid by the Company to shareholders who receive cash
or other property and the Company assets used to pay its reorganization
expenses and all redemptions and distributions (except for regular,
normal dividends) made by the Company immediately preceding the
Effective Time, pursuant to this Agreement or otherwise as part of the
plan of the Merger provided for herein, will be included as assets of
the Company held immediately prior to the Merger.
12
<PAGE> 14
(4) The liabilities of the Company assumed by ARS Sub in the
Merger and the liabilities of the Company to which the assets of the
Company are subject at the Effective Time will have been incurred by the
Company in the ordinary course of its business.
(5) At the Effective Time, the sum of the adjusted basis of
each of the assets of the Company which is transferred to ARS Sub in the
Merger will equal or exceed the sum of (a) the liabilities of the
Company assumed by ARS Sub in the Merger and (b) the liabilities of the
Company to which the assets of the Company are subject at the Effective
Time.
(6) Immediately prior to the Effective Time, neither the
Company nor any member of the affiliated group, within the meaning of
Section 1504(a) of the Code, of which the Company is the common parent
will hold any debt of ARS or any debt of any member of ARS's affiliated
group within that same meaning.
(7) At the Effective Time, the Company will not be under the
jurisdiction of a court in a Title 11 or similar case, within the
meaning of Section 368(a)(3)(A) of the Code.
(8) At the Effective Time, the Company will not be an
investment company, within the meaning of Section 368(a)(2)(F)(iii) of
the Code (that is, the Company will not be either a regulated investment
company, a real estate investment trust or a corporation 50% or more of
the value of whose total assets are stock and securities and 80% or more
of the value of whose total assets are assets held for investment after
applying the conventions set out in such Section 368(a)(2)(F)). In
making the 50% and 80% determinations pursuant to the preceding
sentence, stock and securities in any subsidiary of the Company shall
be disregarded, the Company shall be deemed to own its ratable share of
the subsidiary's assets and a corporation shall be deemed to be a
subsidiary of the Company if the Company owns 50% or more of the
combined voting power of all classes of stock of that corporation
entitled to vote, or 50% or more of the total value of shares of all
classes of stock of that corporation outstanding.
For purposes of Section 7.01, the representations and warranties made in this
Section C shall be deemed to be included in Article II.
D. Covenant of ARS. ARS will assure that ARS Sub has
sufficient assets to repay any Indebtedness referred to in Section 6.02.
End of Addendum
13
<PAGE> 1
EXHIBIT 2.2
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 12, 1998
BY AND AMONG
AMERICAN RESIDENTIAL SERVICES, INC.,
FREESTATE ACQUISITION, INC.,
FREESTATE ELECTRICAL CONSTRUCTION COMPANY
AND
THE STOCKHOLDER NAMED HEREIN
- --------------------------------------------------------------------------------
Forward Merger; Section 368(a)(2)(D); Registered Stock; Single Stockholder
<PAGE> 2
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made as of May 12, 1998, by and among American Residential Services, Inc., a
Delaware corporation ("ARS"), Freestate Acquisition, Inc., a Maryland
corporation and a wholly owned subsidiary of ARS ("ARS Sub"), Freestate
Electrical Construction Company, a Maryland corporation (the "Company"), and
the person listed on the signature page hereof under the caption "Stockholder"
(the "Stockholder").
PRELIMINARY STATEMENT
The parties to this Agreement have determined it is in their best
long-term interests to effect a business combination by means of a Merger
pursuant to which the Company will merge into ARS Sub on the terms and subject
to the conditions set forth herein (that Merger being the "Acquisition").
The respective boards of directors of ARS, ARS Sub and the
Company have approved and adopted this Agreement to effect a reorganization
under Section 368(a)(2)(D) of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and undertakings contained herein, the parties
hereto hereby agree as follows:
Paragraph 1. Certain Defined Terms. As used in this Agreement,
the following terms have the meanings assigned to them below in this Paragraph
1. Capitalized terms used in this Agreement and not defined below in this
Paragraph 1 have the meanings assigned to them in the Preliminary Statement,
Article IX of the Standard Provisions or the Special Provisions, as the case
may be.
"Acquired Business" means the Company.
"Acquisition Consideration" has the meaning specified in
Paragraph 2.
"ARS Award Agreement" means the award agreement pursuant to which
ARS, on the Closing Date, will grant to Willard M. Hayden, pursuant to
the American Residential Services, Inc. 1997 Employee Incentive Plan, or
other similar stock option plan, a nonqualified option to purchase 12,
500 shares of ARS Common Stock, exercisable as to 33 1/3% of the shares
underlying such option on the date of grant and as to 33 1/3 of the
shares underlying such option annually thereafter, at a per share
exercise price equal to the fair market value of a share of ARS Common
Stock on the New York Stock Exchange on the date of the grant.
"Calculated Value" has the meaning specified in Schedule 2(B).
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<PAGE> 3
"Ceiling Amount" means, in the aggregate with the "Ceiling
Amount" as set forth in the Service Company Agreement, $10,370,000;
provided, however, that, for purposes of Section 7.06(b), the Ceiling
Amount means, in the aggregate with the "Ceiling Amount" as set forth in
the Service Company Agreement, (x) $8,415,000 until such time as the
debt evidenced by the Promissory Notes referred to in Schedule 2.16 is
discharged and (y) $5,185,000 after the date that all the debt evidenced
by the Promissory Notes referred to in Schedule 2.16 is discharged.
Each of the parties to this Agreement intend that the Ceiling Amount set
forth in this Agreement and the Ceiling Amount set forth in the Service
Company Agreement will not, in the aggregate, exceed the amounts set
forth in the preceding sentence (e.g., if there are Stockholder
Indemnified Losses under the Service Company Agreement in the amount of
$100,000, than such $100,000 amount will be credited against the Ceiling
Amounts under this Agreement and the Service Company Agreement.)
"Closing" has the meaning specified in Paragraph 3.
"Closing Date" means May 12, 1998 or such later date as to which
ARS and the Company may agree in writing.
"Company" means Freestate Electrical Construction Company, a
Maryland corporation.
"Company Capital Stock" means the Common Stock, par value $1.00
per share, of the Company.
"Counsel for the Company and the Stockholder" means Bell, Boyd &
Lloyd.
"Current Balance Sheet" means the balance sheet of the Company as
of December 31, 1997.
"Current Balance Sheet Date" means December 31, 1997.
"Effective Date" means the Closing Date.
"Employee Stockholders" means the employee stockholders of the
Company set forth on Attachment A to Schedule 2(B).
"Facilities" means the real property and improvements located at
6623 Mid-Cities Avenue, Beltsville, Maryland (exclusive of the telephone
antenna), as more fully described in the Facilities Lease.
"Facilities Lease" means the lease in the form thereof attached
hereto as Exhibit 1-B pursuant to which 6623 Mid Cities, LLC, a Maryland
limited liability company, will lease the Facilities to ARS Sub for the
period and on the terms specified therein.
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<PAGE> 4
"Gordon Attorney Fees" has the meaning specified in Section 6.06.
"Initial Financial Statements" means the balance sheets of the
Company as of December 31, 1996 and 1997 and the related statements of
operations and retained earnings for each of the Company's fiscal years
in the two-year period ended December 31, 1997.
"MGCL" means the Maryland General Corporation Law.
"Responsible Officer" means Michael F. Dugan.
"Service Company Agreement" means the Agreement and Plan of
Reorganization, dated as of the date hereof, by and among ARS, Freestate
Electrical Acquisition, Inc., Freestate Electrical Service Company, Inc.
and the Stockholder.
"Special Provisions" has the meaning specified in Paragraph 5.
"Standard Provisions" has the meaning specified in Paragraph 4.
"Surviving Corporation" means ARS Sub, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Threshold Amount" means $140,000; provided that the Threshold
Amount shall be reduced from time to time by an amount equal to any
Gordon Attorney Fees actually paid by ARS or any of its affiliates.
Paragraph 2. (A) Certificate of Merger. Subject to the terms
and conditions hereof, the Company will cause a Certificate of Merger to be
duly executed and delivered on or promptly after the Closing Date and filed
with the State Department of Assessments and Taxation of the State of Maryland.
(B) The Effective Time. The effective time of the Merger (the
"Effective Time") will be the time on the Effective Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 5:00 p.m., Houston, Texas time, on the Effective Date.
(C) Certain Effects of the Merger. At and as of the Effective
Time, (1) the Company will be merged with and into ARS Sub in accordance with
the provisions of the MGCL, (2) the Company will cease to exist as a separate
legal entity, (3) the articles of incorporation of ARS Sub will be amended to
change the name of the corporation to "Freestate Electrical Construction
Company," (4) ARS Sub will be the Surviving Corporation and, as such, will, all
with the effect provided by the MGCL, (a) possess all the properties and
rights, and be subject to all the restrictions and duties, of the Company and
ARS Sub and (b) be governed by the laws of the State of Maryland, (5) the
Charter Documents of ARS Sub then in effect (after giving effect to the
amendment to ARS Sub's articles of incorporation described in clause (3)
hereof) will become and thereafter remain
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<PAGE> 5
(until changed in accordance with (a) applicable law (in the case of the
articles of incorporation) or (b) their terms (in the case of the bylaws)) the
Charter Documents of the Surviving Corporation, (5) the initial board of
directors of the Surviving Corporation will be the persons named in Schedule
2(C), and those persons will hold the office of director of the Surviving
Corporation, subject to the provisions of the applicable laws of the State of
Maryland and the Charter Documents of the Surviving Corporation, and (6) the
initial officers of the Surviving Corporation will be as set forth in Schedule
2(C), and each of those persons will serve in each office specified for that
person in Schedule 2(C), subject to the provisions of the Charter Documents of
the Surviving Corporation, until that person's successor is duly elected to,
and, if necessary, qualified for, that office.
(D) Effect of the Merger on Capital Stock. As of the
Effective Time, as a result of the Merger and without any action on the part of
any holder thereof:
(1) the shares of Company Capital Stock issued and outstanding
immediately prior to the Effective Time will (a) be converted into the
right to receive, subject to the provisions of Paragraph 2(E), without
interest, on surrender of the certificates evidencing those shares, the
amount of cash and fractional shares of ARS Common Stock determined as
provided in Schedule 2(B) (the "Acquisition Consideration"), (b) cease
to be outstanding and to exist and (c) be canceled and retired;
(2) each share of Company Capital Stock held in the treasury
of the Company or any Company Subsidiary will (a) cease to be
outstanding and to exist and (b) be canceled and retired; and
(3) each share of the Common Stock, par value $1.00 per share,
of ARS Sub issued and outstanding immediately prior to the Effective
Time will remain unchanged and such shares will constitute all the
issued and outstanding shares of Capital Stock of the Surviving
Corporation.
Each holder of a certificate representing shares of Company Capital Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, subject to the provisions of Paragraph 2(E), without
interest, the Acquisition Consideration and the additional cash, if any, owing
with respect to those shares as provided in Paragraph 2(F).
(E) Delivery, Exchange and Payment. (1) At or after the
Effective Time: (a) the Stockholder, as the holder of certificates
representing all the outstanding shares of Company Capital Stock, will, on
surrender of those certificates to ARS (or any agent that may be appointed by
ARS for purposes of this Paragraph 2(E)), receive, subject to the provisions of
this Paragraph 2(E) and Paragraph 2(F), the Acquisition Consideration; and (b)
until any certificate representing Company Capital Stock has been surrendered
and replaced pursuant to this Paragraph 2(E), that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares of ARS
Common Stock included in the Acquisition Consideration payable in respect of
that certificate pursuant to
-4-
<PAGE> 6
Paragraph 2(D). All shares of ARS Common Stock issuable in the Merger will be
deemed for all purposes to have been issued by ARS at the Effective Time.
(2) The Stockholder will deliver to ARS (or any agent that may
be appointed by ARS for purposes of this Paragraph 2(E)) on or before the
Closing Date the certificates representing all the Company Capital Stock owned
by the Stockholder, duly endorsed in blank, or accompanied by stock powers in
blank duly executed, by that Person, and with all necessary transfer tax and
other revenue stamps, acquired at that Person's expense, affixed and canceled.
The Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting, or in the stock
powers accompanying, the certificates representing Company Capital Stock
delivered by that Person.
(3) No dividends (or interest) or other distributions declared
or earned after the Effective Time with respect to ARS Common Stock and payable
to the holders of record thereof after the Effective Time will be paid to the
holder of any unsurrendered certificates representing shares of Company Capital
Stock for which shares of ARS Common Stock have been issued in the Merger until
those certificates are surrendered as provided herein, but (a) on that
surrender ARS will cause to be paid, to the Person in whose name the
certificates representing such shares of ARS Common Stock shall then be issued,
the amount of dividends or other distributions previously paid with respect to
such whole shares of ARS Common Stock with a record date, or which have
accrued, subsequent to the Effective Time, but prior to surrender, and the
amount of any cash payable to such Person for and in lieu of fractional shares
pursuant to Paragraph 2(F) and (b) at the appropriate payment date or as soon
as practicable thereafter, ARS will cause to be paid to that Person the amount
of dividends or other distributions with a record date, or which have been
accrued, subsequent to the Effective Time, but which are not payable until a
date subsequent to surrender, which are payable with respect to such whole
shares of ARS Common Stock, subject in all cases to any applicable escheat
laws. No interest will be payable with respect to the payment of such
dividends or other distributions or cash for and in lieu of fractional shares
on surrender of outstanding certificates.
(F) Notwithstanding any other provision herein, no fractional
shares of ARS Common Stock will be issued, and if the Stockholder would be
entitled hereunder to receive a fractional share of ARS Common Stock but for
this Paragraph 2(F), the Stockholder will be entitled hereunder to receive a
cash payment for and in lieu thereof in the amount (rounded upward to the
nearest whole cent) equal to the Stockholder's fractional interest in a share
of ARS Common Stock multiplied by the Calculated Value.
Paragraph 3. The Closing. On or before the Closing Date, the
parties hereto will take all actions necessary to (A) effect the Acquisition
(including, as permitted by the MGCL, (i) the execution of a Certificate of
Merger (a) meeting the requirements of the MGCL and (b) providing that the
Merger will become effective on the Effective Date and (ii) the filing of the
Certificate of Merger with the State Department of Assessments and Taxation of
the State of Maryland, (B) verify the existence and ownership of the
certificates evidencing the Company Capital Stock to be
-5-
<PAGE> 7
exchanged for the Acquisition Consideration pursuant to Paragraph 2(E) and (C)
satisfy the document delivery requirements on which the obligations of the
parties to effect the Acquisition and the other transactions contemplated
hereby are conditioned by the provisions of Article V (all those actions
collectively being the "Closing"). The Closing will take place at the offices
of Baker & Botts, L.L.P., 910 Louisiana, Houston, Texas at 10:00 a.m., Houston
time, or at such later time on the Closing Date as ARS shall specify by written
notice to Michael F. Dugan.
Paragraph 4. Incorporation of Standard Provisions.
(a) The American Residential Services, Inc. Standard Provisions
for Business Combinations, marked "Form 98-1 (BC)" and attached hereto as Annex
1 (the "Standard Provisions"), hereby are incorporated in this Agreement by
this reference and constitute a part of this Agreement with the same force and
effect as if set forth at length herein.
(b) Section 2.14(b) hereby is amended by adding "written"
before "notice" in clause (ii)(A) thereof.
(c) Section 2.15 hereby is amended by (i) deleting "and which
relate to the reporting by the Company and each Company Subsidiary" from clause
(a) and inserting in lieu thereof "which requires reporting by the Company and
each Company Subsidiary to applicable Governmental Authorities," (ii) adding
"at a material cost" after "remediation" in clause (b) and (iii) adding "deed"
before "restrictions" in clause (b).
(d) Section 3.07 hereby is amended by deleting the word
"directly" in the last sentence of Section 3.07 and inserting in lieu thereof
the word "indirectly."
(e) Article III hereby is amended by adding Sections 3.09,
3.10, 3.11 and 3.12 as follows:
Section 3.09. Financial Statements and Reports. The
audited financial statements in the Form 10-K filed by ARS with the SEC
for fiscal year 1997 have been prepared in accordance with GAAP applied
on a consistent basis (except as may be indicated therein or in the
notes thereto) and fairly present the financial position of ARS and its
Subsidiaries as at the date thereof and the results of their operations
and changes in financial position for the period then ended.
Section 3.10. Absence of Undisclosed Liabilities. Except
as set forth in the Form 10-K filed by ARS with the SEC for fiscal year
1997, neither ARS nor any of its Subsidiaries (i) had as of December 31,
1997, any material liability which was then required to be accrued,
reserved against or otherwise disclosed in the consolidated financial
statements of ARS and its Subsidiaries under GAAP or (ii) has incurred
after December 31, 1997, any such material liability except in the
ordinary course of business and consistent with past practice.
-6-
<PAGE> 8
Section 3.11. Absence of Certain Changes or Events.
Since December 31, 1997, there has not been any material adverse change
in the consolidated financial condition, consolidated results of
operations of ARS and its Subsidiaries taken as a whole. As of the
Closing Date, the shares of ARS Common Stock to be delivered to the
Stockholder will be shares which have been (i) duly registered by ARS
pursuant to the Registration Statement and (ii) authorized for listing
on the New York Stock Exchange, subject to notice of issuance.
Section 3.12. No Other Litigation. Except as set forth
in the Current Prospectus, there are no actions at law, investigations,
proceedings, suits in equity or claims pending or, to the knowledge of
ARS, threatened, against or affecting ARS and its consolidated
Subsidiaries, taken as a whole, which in the aggregate is likely to
result in a material adverse effect on the business or financial
condition of ARS and its consolidated Subsidiaries taken as a whole.
(f) Section 5.02 hereby is amended by deleting clause (b) and
inserting in lieu thereof the following:
(b) all the following conditions:
(1) Representations and Warranties. All the
representations and warranties of ARS in Article III shall be
true and correct as of the Closing Date as though made at that
time;
(2) Delivery of Documents. ARS and ARS Sub
shall have delivered to the Stockholder and the Company:
(i) an ARS officer's certificate, in the
form of Exhibit 5.02-1 signed by ARS'
President, respecting the representations
and warranties of ARS in Article III and
compliance with the covenants by ARS and ARS
Sub in Article IV; and
(ii) an opinion dated the Effective Date
and addressed to the Company and the
Stockholder substantially in the form of
Exhibit 5.02-2.
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<PAGE> 9
(g) Section 6.01 hereby is amended by adding the following as
the last two sentences:
Notwithstanding the foregoing, the Stockholder will be responsible for
filing the Company's federal income tax return for, and will pay out of
his own funds all federal income taxes attributable to the Company's
operations during, the Company's final year as a subchapter S
corporation under the Code, which will be deemed for purposes of this
Agreement to be the period beginning on January 1, 1998 and ending on
the Closing Date. The Stockholder will be solely responsible for the
expenses he incurs in performing his obligations pursuant to the
preceding sentence.
(h) Section 6.02 hereby is amended by adding the following at
the end thereof:
Notwithstanding the foregoing, ARS will cause the Promissory Notes
executed by Company and Freestate Electrical Service Company, Inc. in
favor of First Virginia Bank-Maryland, which are referred to in Schedule
2.16, and all indebtedness outstanding thereunder to be discharged on or
before August 1, 1998.
(i) Article VI of the Standard Provisions hereby is amended by
adding thereto the following Sections, which will be and read in their entirety
as follows:
Section 6.04. Use of Names. ARS shall cause the Company, and
its successors and assigns, to continue to use the name "Freestate
Electrical Construction Company" for a period of three years after the
Closing Date, or such earlier date as ARS and Mr. Dugan may agree.
Section 6.05. Key Employee Stock Options. On the Closing Date,
ARS will grant to Willard M. Hayden an option to purchase 12,500 shares
of ARS Common Stock, exercisable as to 33 1/3 of the shares of the
underlying such option on the date of grant and as to 33 1/3% of the
shares underlying the option annually thereafter, at a per share
exercise price equal to the fair market value of a share of ARS Common
Stock on the New York Stock Exchange on the date of the grant, each such
grant to be made pursuant to the terms and conditions of an ARS Award
Agreement which will be provided to such individual promptly after the
Closing Date.
Section 6.06. Certain Additional Indemnities. (a) The Company
and the Stockholder jointly and severally agree, without regard to the
Threshold Amount limitations set forth in Article VII, to indemnify ARS
and ARS Sub against all Damage Claims (excluding any fees and actual
disbursements by attorneys in connection with such Damage Claims (such
fees and disbursements collectively and in the aggregate referred to
herein as "Gordon Attorney Fees")), resulting from, arising out of or
relating to the following:
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<PAGE> 10
(i) The complaint filed by Lamont Gordon against
Freestate Electric in the United States District Court for
the District of Columbia, Case Number 1:98CV00907,
disclosed on Schedule 2.12; and
(ii) The charge of discrimination filed on July
1, 1997 with the Equal Employment Opportunity Commission
against Freestate Electric by Lamont Gordon against
Freestate Electric alleging race discrimination, disclosed
on Schedule 2.12.
(b) The Gordon Attorney Fees shall be paid by ARS.
(j) Section 7.04(e) hereby is amended by deleting the number
15 therefrom and inserting the number 30.
(k) Section 8.01 hereby is amended by deleting clause (a) in
its entirety and inserting in lieu thereof the following:
(a) engage as a director, officer or in any similar
managerial capacity or as an owner, co-owner, financier or other
investor of or in any business selling any products or providing
any services in competition with the Acquired Business or ARS or
any Subsidiary of ARS (ARS and its Subsidiaries collectively
being "ARS" for purposes of this Article VIII) within any
Territory in which the Acquired Business was engaged in business
on the date hereof or immediately prior to the Effective Date
(for purposes of this Article VIII, the term "Territory" means
any area within a radius of 100 miles of Beltsville, Maryland);
(l) Section 9.01 hereby is amended by (i) inserting "written
requirement" before "authorization" in the definition of "Governmental
Approval" and (ii) adding "written" before "requirement" in the definition of
"Governmental Requirement."
Paragraph 5. Incorporation of Special Provisions. The following
documents attached hereto as Addenda (the "Special Provisions") hereby are
incorporated in this Agreement by this reference and constitute a part of this
Agreement with the same force and effect as if set forth at length herein:
(A) Addendum A(D)(2) -- "Special Provisions Relating to
Section 368(a)(2)(D) Reorganizations"; and
(B) Addendum R -- "Special Provisions Relating to the ARS
Common Stock Included in the Acquisition Consideration."
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<PAGE> 11
Paragraph 6. Counterparts. This Agreement may be executed in
multiple counterparts, each of which will be an original, but all of which
together will constitute one and the same instrument.
Paragraph 7. Notices. For purposes of Section 10.06, notices
shall be addressed to the Stockholder and the Company, as follows:
(A) if to the Stockholder, addressed to him at:
Michael F. Dugan
16012 Burton's Lane
Laurel, Maryland 20702
; and
(B) if to the Company, addressed to it at:
6623 Mid-Cities Avenue
Beltsville, Maryland 20705
Fax No.: (301) 595-5120
Attn: Michael F. Dugan
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Bell, Boyd & Lloyd
1615 L Street, N.W.
Suite 1200
Washington, D.C. 20036
Fax No.: 202-463-0678
Attn: Edward A. Bloom
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
AMERICAN RESIDENTIAL SERVICES, INC.
By: /s/ JOHN D. HELD
---------------------------------
John D. Held
Senior Vice President
FREESTATE ACQUISITION, INC.
By: /s/ JOHN D. HELD
---------------------------------
John D. Held
Vice President
FREESTATE ELECTRICAL CONSTRUCTION
COMPANY
By: /s/ MICHAEL F. DUGAN
---------------------------------
Michael F. Dugan
President
Stockholder:
/s/ MICHAEL F. DUGAN
-------------------------------------
Michael F. Dugan
<PAGE> 13
Addendum A(2)(D)
AMERICAN RESIDENTIAL SERVICES, INC.
SPECIAL PROVISIONS RELATING TO
SECTION 368(a)(2)(D) REORGANIZATIONS
A. Defined Terms. Words and terms used in this Addendum
which are defined elsewhere in the Agreement in which this Addendum is
incorporated by reference are used herein as defined therein.
B. Representation and Warranty of ARS. ARS represents and
warrants to each Stockholder that all the following representations and
warranties of ARS in this Section B will, as of the Effective Time, be true and
correct:
(1) At the Effective Time, ARS will own all the stock of ARS
Sub. ARS Sub will not issue any of its Capital Stock in the Merger.
(2) At the Effective Time, ARS will have no plan or intention
to lose control, within the meaning of Section 368(c) of the Code, of
ARS Sub after the Merger occurs.
(3) At the Effective Time, ARS will have no plan or intention
(a) to liquidate ARS Sub, (b) to merge ARS Sub with or into another
corporation, (c) to sell or otherwise dispose of the stock of ARS Sub,
(d) to cause ARS Sub to sell or otherwise dispose of any of its assets,
except for dispositions in the ordinary course of business and transfers
described in Section 368(a)(2)(C) of the Code or (e) to reacquire any
ARS Common Stock issued in the Merger.
(4) ARS and the members of the Treas. Reg. Section 1.368-
1(d)(4)(ii) "qualified group" of which ARS is a member will, following
the Merger, continue the historic business of Company or use a
significant portion of Company's historic business assets in a business.
(5) At the Effective Time, ARS will not be an investment
company, within the meaning of Section 368(a)(2)(F)(iii) of the Code
(that is, ARS will not be either a regulated investment company, a real
estate investment trust or a corporation 50% or more of the value of
whose total assets are stock and securities and 80% or more of the value
of whose total assets are assets held for investment after applying the
conventions set out in such Section 368(a)(2)(F)). For purposes of
making the 50% and 80% determinations under the preceding sentence,
stock and securities in any subsidiary of ARS shall be disregarded, and
ARS shall be deemed to own its ratable share of that subsidiary's
assets, and a corporation shall be deemed to be a subsidiary of ARS if
ARS owns 50% or more of the combined
12
<PAGE> 14
voting power of all classes of stock entitled to vote, or 50% or more of
the total value of shares of all classes of stock outstanding, of that
corporation.
For purposes of Section 7.01, the representations and warranties made in this
Section B shall be deemed to be included in Article III.
C. Representation and Warranty of Each Stockholder. Each
Stockholder represents and warrants to ARS and each other Stockholder that all
the following representations and warranties of the Stockholder in this Section
C will, as of the Effective Time, be true and correct:
(1) At the Effective Time, the Stockholder will receive in the
Merger shares of ARS Common Stock the value of which at the Effective
Time is 50% or more of the sum of (A) the value at the Effective Time of
all the Company Capital Stock held immediately prior to the Merger by
the Stockholder and (B) the value at the Effective Time of any other
instruments (such as debt of the Company which is guaranteed by the
Stockholder) which are classified for federal income tax purposes as
stock of the Company (collectively, "Shares") and which are held
immediately prior to the Merger by the Stockholder. For purposes of the
preceding sentence, the Shares that are outstanding immediately prior to
the Merger includes Shares exchanged for cash in lieu of fractional
shares of ARS Common Stock as well as Shares sold, exchanged or
otherwise disposed of prior to the Merger by reason of this Agreement or
otherwise as part of the plan of the Merger provided for herein, and the
value of all Shares outstanding immediately prior to the Merger shall be
determined with regard to any assets distributed by the Company by
reason of this Agreement or otherwise as part of the plan of the Merger
provided for herein.
(2) The Stockholder is not related to ARS and will not after
the Merger, but in connection with the Merger, transfer to ARS or to any
person who is related to ARS any of the ARS Common Stock which such
Stockholder received in the Merger. Each of the phrases "related" and
"in connection with" has the meaning which is assigned thereto in Treas.
Reg. Section 1.368-1(e)(2); provided that a transfer of ARS Common
Stock in respect of an indemnity obligation of the Stockholder pursuant
to this Agreement is not "in connection with" the Merger if such
transfer was not expected at the Effective Time.
(3) In the Merger, ARS Sub will acquire "substantially all of
the properties" of the Company within the meaning of Section
368(a)(2)(D) of the Code and ARS Sub will so acquire at least 90% of the
fair market value of the net assets and at least 70% of the gross assets
held by the Company immediately prior to the Effective Time. For
purposes of the preceding sentence, amounts paid by the Company to
dissenters, amounts paid by the Company to shareholders who receive cash
or other property and the Company assets used to pay its reorganization
expenses and all redemptions and distributions (except for regular,
normal dividends) made by the Company immediately preceding the
Effective Time, pursuant to this Agreement or otherwise as part of the
plan of the Merger provided for herein, will be included as assets of
the Company held immediately prior to the Merger.
13
<PAGE> 15
(4) The liabilities of the Company assumed by ARS Sub in the
Merger and the liabilities of the Company to which the assets of the
Company are subject at the Effective Time will have been incurred by the
Company in the ordinary course of its business.
(5) At the Effective Time, the sum of the adjusted basis of
each of the assets of the Company which is transferred to ARS Sub in the
Merger will equal or exceed the sum of (a) the liabilities of the
Company assumed by ARS Sub in the Merger and (b) the liabilities of the
Company to which the assets of the Company are subject at the Effective
Time.
(6) Immediately prior to the Effective Time, neither the
Company nor any member of the affiliated group, within the meaning of
Section 1504(a) of the Code, of which the Company is the common parent
will hold any debt of ARS or any debt of any member of ARS's affiliated
group within that same meaning.
(7) At the Effective Time, the Company will not be under the
jurisdiction of a court in a Title 11 or similar case, within the
meaning of Section 368(a)(3)(A) of the Code.
(8) At the Effective Time, the Company will not be an
investment company, within the meaning of Section 368(a)(2)(F)(iii) of
the Code (that is, the Company will not be either a regulated investment
company, a real estate investment trust or a corporation 50% or more of
the value of whose total assets are stock and securities and 80% or more
of the value of whose total assets are assets held for investment after
applying the conventions set out in such Section 368(a)(2)(F)). In
making the 50% and 80% determinations pursuant to the preceding
sentence, stock and securities in any subsidiary of the Company shall
be disregarded, the Company shall be deemed to own its ratable share of
the subsidiary's assets and a corporation shall be deemed to be a
subsidiary of the Company if the Company owns 50% or more of the
combined voting power of all classes of stock of that corporation
entitled to vote, or 50% or more of the total value of shares of all
classes of stock of that corporation outstanding.
For purposes of Section 7.01, the representations and warranties made in this
Section C shall be deemed to be included in Article II.
D. Covenant of ARS. ARS will assure that ARS Sub has
sufficient assets to repay any Indebtedness referred to in Section 6.02.
End of Addendum
14
<PAGE> 16
Addendum R
AMERICAN RESIDENTIAL SERVICES, INC.
SPECIAL PROVISIONS RELATING TO
THE ARS COMMON STOCK
INCLUDED IN THE ACQUISITION CONSIDERATION
A. Defined Terms. Words and terms used in this Addendum
which are defined elsewhere in the Agreement in which this Addendum is
incorporated by reference are used herein as defined therein.
B. Certificates Representing ARS Common Stock. The shares of
ARS Common Stock to be delivered to each Stockholder pursuant to Paragraph 2
will be represented by three certificates, two of which ("Certificate A" and
"Certificate B") each shall represent the number of whole shares of ARS Common
Stock as shall most nearly approximate, but not exceed, 33 1/3% of the total
number of whole shares of ARS Common Stock to be delivered to that Stockholder
pursuant to Paragraph 2 and the third of which shall represent the balance of
that total number of whole shares.
C. Restrictions on Transfer of ARS Common Stock. (1) Each
Stockholder agrees with ARS that, during the Applicable Restricted Period, the
Stockholder will not voluntarily: (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (1) any shares of
ARS Common Stock represented by Certificate A or Certificate B or (2) any
interest in (including any option to buy or sell) any of those shares of ARS
Common Stock, in whole or in part, and ARS will have no obligation to, and
shall not, treat any such attempted transfer as effective for any purpose; or
(b) engage in any transaction, whether or not with respect to any shares of ARS
Common Stock or any interest therein, the intent or effect of which is to
reduce the risk of owning the shares of ARS Common Stock represented by
Certificate A or Certificate B (including, for example, engaging in put, call,
short-sale, straddle or similar market transactions); provided, however, that
this Section C shall not restrict any transfer of ARS Common Stock represented
by Certificate A or Certificate B to any of that Stockholder's Related Persons
who agree in writing to be bound by the provisions of Section 10.01 and this
Section C. As used in this Section C, "Applicable Restricted Period" means
with respect to the shares of ARS Common Stock delivered to any Stockholder
pursuant to Paragraph 2: (a) the two-year period ending on the second
anniversary of the Effective Date, in the case of the shares of ARS Common
Stock represented by that Stockholder's Certificate A; and (b) the one-year
period ending on the first anniversary of the Effective Date, in the case of
the shares of ARS Common Stock represented by that Stockholder's Certificate B.
Each Stockholder agrees with ARS that each of Certificate A and Certificate B
delivered to that Stockholder pursuant to Paragraph 2 will bear a legend
substantially in the form set forth below and containing such other information
as ARS may deem necessary or appropriate:
15
<PAGE> 17
EXCEPT PURSUANT TO THE TERMS OF THE [TITLE OF ACQUISITION AGREEMENT]
AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND THE OTHER PARTIES
THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
VOLUNTARILY 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 VOLUNTARY SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION,
APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES, DURING THE
[ONE/TWO]-YEAR PERIOD ENDING ON __________ [DATE THAT IS THE SECOND
ANNIVERSARY OF THE EFFECTIVE DATE IN THE CASE OF CERTIFICATE A AND THE
FIRST ANNIVERSARY OF THE EFFECTIVE DATE IN THE CASE OF CERTIFICATE B.]
ON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER
AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY RELATED STOP ORDER
PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
(2) Each Stockholder, severally and not jointly with any other
Person acknowledges that the shares of ARS Common Stock to be delivered to that
Stockholder pursuant to Paragraph 2 will, as a result of the restrictions on
their transferability which are imposed by this Agreement during the Applicable
Restricted Periods, have a value materially less on the Effective Date than the
value of then freely tradable shares of ARS Common Stock.
End of Addendum
16
<PAGE> 1
EXHIBIT 2.3
Annex 1
AMERICAN RESIDENTIAL SERVICES, INC.
STANDARD PROVISIONS
FOR
BUSINESS COMBINATIONS
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
ARTICLE I REPRESENTATIONS AND WARRANTIES OF EACH
STOCKHOLDER . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. Ownership and Status of Company Capital Stock . . . . . 1
Section 1.02. Power of the Stockholder; Approval of the Acquisition . 1
Section 1.03. No Conflicts or Litigation . . . . . . . . . . . . . . 2
Section 1.04. No Brokers . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.05. Preemptive and Other Rights; Waiver . . . . . . . . . . 2
Section 1.06. Control of Related Businesses . . . . . . . . . . . . . 2
Section 1.07. Current Prospectus . . . . . . . . . . . . . . . . . . 3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE STOCKHOLDERS . . . . . . . . . . . . . . . . . 3
Section 2.01. Organization . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.02. Qualification . . . . . . . . . . . . . . . . . . . . . 3
Section 2.03. Authorization; Enforceability; Absence of Conflicts;
Required Consents . . . . . . . . . . . . . . . . . . . 3
Section 2.04. Charter Documents and Records; No Violation. . . . . . 4
Section 2.05. No Defaults . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.06. Company Subsidiaries; Controlling Affiliates . . . . . . 5
Section 2.07. Capital Stock of the Company and the Company
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.08. Transactions in Capital Stock . . . . . . . . . . . . . 6
Section 2.09. No Bonus Shares . . . . . . . . . . . . . . . . . . . . 6
Section 2.10. Predecessor Status; etc. . . . . . . . . . . . . . . . . 6
Section 2.11. Related Party Agreements . . . . . . . . . . . . . . . . 6
Section 2.12. Litigation . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.13. Financial Statements; Disclosure . . . . . . . . . . . . 7
Section 2.14. Compliance With Laws . . . . . . . . . . . . . . . . . . 7
Section 2.15. Certain Environmental Matters . . . . . . . . . . . . . 8
Section 2.16. Liabilities and Obligations . . . . . . . . . . . . . . 8
Section 2.17. Receivables . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.18. Real Properties . . . . . . . . . . . . . . . . . . . . 9
Section 2.19. Other Tangible Assets . . . . . . . . . . . . . . . . . 9
Section 2.20. Proprietary Rights . . . . . . . . . . . . . . . . . . . 10
Section 2.21. Relations With Governments, etc. . . . . . . . . . . . . 10
Section 2.22. Commitments . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.23. Inventories . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
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<TABLE>
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Section 2.24. Insurance . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.25. Employee Matters . . . . . . . . . . . . . . . . . . . . 12
Section 2.26. Compliance With ERISA, etc. . . . . . . . . . . . . . . 14
Section 2.27. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.28. Government Contracts . . . . . . . . . . . . . . . . . . 18
Section 2.29. Absence of Changes . . . . . . . . . . . . . . . . . . . 18
Section 2.30. Bank Relations; Powers of Attorney . . . . . . . . . . . 19
Section 2.31. Current Prospectus . . . . . . . . . . . . . . . . . . . 19
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ARS . . . . . . . . . 20
Section 3.01. Organization; Power . . . . . . . . . . . . . . . . . . 20
Section 3.02. Authorization; Enforceability; Absence of Conflicts;
Required Consents . . . . . . . . . . . . . . . . . . . 20
Section 3.03. Charter Documents . . . . . . . . . . . . . . . . . . . 21
Section 3.04. Capital Stock of ARS; Convertible Notes . . . . . . . . 21
Section 3.05. No Litigation . . . . . . . . . . . . . . . . . . . . . 22
Section 3.06. SEC Reports and Filings . . . . . . . . . . . . . . . . 22
Section 3.07. Organization and Power of ARS Sub. . . . . . . . . . . . 22
Section 3.08. ARS Sub: Authorization; Enforceability; Absence of
Conflicts; Required Consents . . . . . . . . . . . . . . 22
ARTICLE IV COVENANTS EXTENDING TO THE EFFECTIVE TIME . . . . . . . 23
Section 4.01. Access and Cooperation; Due Diligence . . . . . . . . . 23
Section 4.02. Conduct of Business Pending the Effective Time . . . . . 24
Section 4.03. Prohibited Activities . . . . . . . . . . . . . . . . . 24
Section 4.04. No Shop . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.05. Notice to Bargaining Agents . . . . . . . . . . . . . . 26
Section 4.06. Notification of Certain Matters . . . . . . . . . . . . 26
Section 4.07. Supplemental Information . . . . . . . . . . . . . . . . 27
Section 4.08. Additional Financial Statements . . . . . . . . . . . . 27
Section 4.09. Termination of Plans. . . . . . . . . . . . . . . . . . 28
Section 4.10. Disposition of Unwanted Assets . . . . . . . . . . . . . 28
Section 4.11. HSR Act Matters . . . . . . . . . . . . . . . . . . . . 28
Section 4.12. NYSE Listing . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE V CONDITIONS TO CLOSING AND CONSUMMATION . . . . . . . . . 28
Section 5.01. Conditions to the Obligations of Each Party . . . . . . 28
Section 5.02. Conditions to the Obligations of the Company and the
Stockholders . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
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Section 5.03. Conditions to the Obligations of ARS and ARS Sub . . . . 29
ARTICLE VI COVENANTS FOLLOWING THE EFFECTIVE TIME . . . . . . . . . 30
Section 6.01. Preparation and Filing of Tax Returns . . . . . . . . . 30
Section 6.02. Removal of Guaranties . . . . . . . . . . . . . . . . . 30
Section 6.03. Undertakings by Certain Stockholders . . . . . . . . . . 31
ARTICLE VII INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . 32
Section 7.01. Survival of Representations and Warranties . . . . . . . 32
Section 7.02. Indemnification of ARS Indemnified Parties . . . . . . . 32
Section 7.03. Indemnification of Stockholder Indemnified Parties . . . 33
Section 7.04. Conditions of Indemnification . . . . . . . . . . . . . 33
Section 7.05. Remedies Not Exclusive . . . . . . . . . . . . . . . . . 35
Section 7.06. Limitations on Indemnification . . . . . . . . . . . . . 35
ARTICLE VIII LIMITATIONS ON COMPETITION . . . . . . . . . . . . . . . 36
Section 8.01. Prohibited Activities . . . . . . . . . . . . . . . . . 36
Section 8.02. Damages . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.03. Reasonable Restraint . . . . . . . . . . . . . . . . . . 37
Section 8.04. Severability; Reformation . . . . . . . . . . . . . . . 37
Section 8.05. Independent Covenant . . . . . . . . . . . . . . . . . . 37
Section 8.06. Materiality . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE IX DEFINITIONS AND DEFINITIONAL PROVISIONS . . . . . . . . 38
Section 9.01. Defined Terms . . . . . . . . . . . . . . . . . . . . . 38
Section 9.02. Other Defined Terms . . . . . . . . . . . . . . . . . . 51
Section 9.03. Other Definitional Provisions . . . . . . . . . . . . . 51
Section 9.04. Captions . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE X GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . 52
Section 10.01. Treatment of Confidential Information . . . . . . . . 52
Section 10.02. Brokers and Agents . . . . . . . . . . . . . . . . . . 53
Section 10.03. Assignment; No Third Party Beneficiaries . . . . . . . 53
Section 10.04. Entire Agreement; Amendment; Waivers . . . . . . . . . 53
Section 10.05. Expenses . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.06. Notices . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.07. Governing Law . . . . . . . . . . . . . . . . . . . . 54
Section 10.08. Exercise of Rights and Remedies . . . . . . . . . . . 55
</TABLE>
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Section 10.09. Time . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 10.10. Reformation and Severability . . . . . . . . . . . . . 55
Section 10.11. Remedies Cumulative . . . . . . . . . . . . . . . . . 55
Section 10.12. Release . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE XI TERMINATION . . . . . . . . . . . . . . . . . . . . . 56
Section 11.01. Termination of This Agreement . . . . . . . . . . . . 56
Section 11.02. Liabilities in Event of Termination . . . . . . . . . 57
</TABLE>
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ARTICLE I
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each of the Stockholders represents and warrants to ARS that, as
applied solely to himself, all the following representations and warranties in
this Article I are as of the date of this Agreement, and will be, as amended or
supplemented pursuant to Section 4.07, on the Closing Date and immediately
prior to the Effective Time, true and correct:
Section 1.01. Ownership and Status of Company Capital Stock. The
Stockholder is the record and beneficial owner or, if the Stockholder is a
trust or the estate of a deceased natural person, the legal owner of the number
of shares of the Company Capital Stock set forth, by each class, and by each
series in each class thereof, opposite the Stockholder's name in Schedule 1.01,
free and clear of all Liens, except for the Liens set forth in Schedule 1.01,
all of which will be released at or before the Closing Date.
Section 1.02. Power of the Stockholder; Approval of the
Acquisition. (a) The Stockholder has the full power, legal capacity and
authority to execute and deliver this Agreement and each other Transaction
Document to which the Stockholder is a party and to perform the Stockholder's
obligations in this Agreement and in all other Transaction Documents to which
the Stockholder is a party. This Agreement constitutes, and each such other
Transaction Document, when executed in the Stockholder's individual capacity
and delivered by the Stockholder, will constitute, the legal, valid and binding
obligation of the Stockholder, enforceable against the Stockholder in
accordance with its terms, except as that enforceability may be (i) limited by
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and (ii) subject
to general principles of equity (regardless of whether that enforceability is
considered in a proceeding in equity or at law). If the Stockholder is an
Entity, the Stockholder has obtained, in accordance with all applicable
Governmental Requirements and its Charter Documents, all approvals and the
taking of all actions necessary for the authorization, execution, delivery and
performance by the Stockholder of this Agreement and the other Transaction
Documents to which the Stockholder is a party. If the Stockholder is acting
otherwise than in his individual capacity (whether as an executor or a guardian
or in any other fiduciary or representative capacity), all actions on the part
of the Stockholder and all other Persons (including any court) necessary for
the authorization, execution, delivery and performance by the Stockholder of
this Agreement and the other Transaction Documents to which the Stockholder is
a party have been duly taken.
(b) The Stockholder, acting in each capacity in which he is
entitled, by reason of the Company's Charter Documents or the Governmental
Requirements of the Company's Organization State or for any other reason, to
vote to approve or disapprove the consummation of the Acquisition, has voted
all the shares of the Company Capital Stock owned by him and entitled to a vote
or votes on that matter, in any one or more of the manners prescribed or
permitted by the Company's Charter Documents or the Governmental Requirements
of the Company's Organization
-1-
<PAGE> 7
State, whichever are controlling, to approve this Agreement and the
consummation of the Acquisition and the other transactions contemplated hereby.
Section 1.03. No Conflicts or Litigation. The execution,
delivery and performance in accordance with their respective terms by the
Stockholder of this Agreement and the other Transaction Documents to which the
Stockholder is a party do not and will not (a) violate or conflict with any
Governmental Requirement, (b) breach or constitute a default under any
agreement or instrument to which the Stockholder is a party or by which the
Stockholder or any of the shares of the Company Capital Stock owned by the
Stockholder is bound, (c) result in the creation or imposition of, or afford
any Person the right to obtain, any Lien upon any of the shares of the Company
Capital Stock owned by the Stockholder (or upon any revenues, income or profits
of the Stockholder therefrom) or (d) if the Stockholder is an Entity, violate
the Stockholder's Charter Documents. No Litigation is pending or, to the
knowledge of the Stockholder, threatened to which the Stockholder is or may
become a party which (a) questions or involves the validity or enforceability
of any of the Stockholder's obligations under any Transaction Document or (b)
seeks (or reasonably may be expected to seek) (i) to prevent or delay the
consummation by the Stockholder of the transactions contemplated by this
Agreement to be consummated by the Stockholder or (ii) damages in connection
with any consummation by the Stockholder of the transactions contemplated by
this Agreement.
Section 1.04. No Brokers. The Stockholder has not, directly or
indirectly, in connection with this Agreement or the transactions contemplated
hereby (a) employed any broker, finder or agent or (b) agreed to pay or
incurred any obligation to pay any broker's or finder's fee, any sales
commission or any similar form of compensation.
Section 1.05. Preemptive and Other Rights; Waiver. Except for
the right of the Stockholder to receive shares of ARS Common Stock as a result
of the Acquisition or to acquire ARS Common Stock pursuant to the conversion of
any Convertible Note, if any, to be delivered to the Stockholder pursuant to
Paragraph 2 or any written option granted by ARS to the Stockholder, the
Stockholder either (a) does not own or otherwise have any statutory or
contractual preemptive or other right of any kind (including any right of first
offer or refusal) to acquire any shares of the Company Capital Stock or ARS
Common Stock or (b) hereby irrevocably waives each right of that type the
Stockholder does own or otherwise has.
Section 1.06. Control of Related Businesses. Except as set forth
in Schedule 1.06, the Stockholder is not, alone or with one or more other
Persons, the controlling Affiliate of any Entity, business or trade (other than
the Company and the Company Subsidiaries, if the Stockholder is an Affiliate of
the Company) that (a) is engaged in any line of business which is the same as
or similar to any line of business in which the Company or any Company
Subsidiary is engaged or (b) is, or has within the three-year period ending on
the date of this Agreement, engaged in any transaction with the Company or any
Company Subsidiary, except for transactions in the ordinary course of business
of the Company or that Company Subsidiary.
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Section 1.07. Current Prospectus. The Stockholder acknowledges receipt
of the Current Prospectus and represents that he has carefully reviewed the
information contained therein.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent
and warrant to, and agree with, ARS that all the following representations and
warranties in this Article II are as of the date of this Agreement, and will
be, as amended or supplemented pursuant to Section 4.07, on the Closing Date
and immediately prior to the Effective Time, true and correct:
Section 2.01. Organization. Schedule 2.01 sets forth the
Organization State of each of the Company and the Company Subsidiaries. Each
of the Company and the Company Subsidiaries (a) is a corporation duly
organized, validly existing and in good standing under the laws of its
Organization State, (b) has all requisite corporate power and authority under
those laws and its Charter Documents to own or lease and to operate its
properties and to carry on its business as now conducted and (c) is duly
qualified and in good standing as a foreign corporation in all jurisdictions in
which it owns or leases property or in which the carrying on of its business as
now conducted so requires except where the failure to be so qualified, singly
or in the aggregate, would not have a Material Adverse Effect.
Section 2.02. Qualification. Schedule 2.02 lists all the
jurisdictions in which each of the Company and the Company Subsidiaries is
authorized or qualified to own or lease and to operate its properties or to
carry on its business as now conducted, and neither the Company nor any Company
Subsidiary owns, leases or operates any properties, or carries on its business,
in any jurisdiction not listed in Schedule 2.02 which is Material to the
Acquired Business.
Section 2.03. Authorization; Enforceability; Absence of
Conflicts; Required Consents. (a) The execution, delivery and performance by
the Company of this Agreement and each other Transaction Document to which it
is a party, and the effectuation of the Acquisition and the other transactions
contemplated hereby and thereby, are within its corporate or other power under
its Charter Documents and the applicable Governmental Requirements of its
Organization State and have been duly authorized by all proceedings, including
actions permitted to be taken in lieu of proceedings, required under its
Charter Documents and those Governmental Requirements.
(b) This Agreement has been, and each of the other Transaction
Documents to which the Company is a party, when executed and delivered to ARS
(or, in the case of the Certificates of Merger, if any, the applicable
Governmental Authorities), will have been, duly executed and delivered by the
Company and is, or when so executed and delivered will be, the legal,
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valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as that enforceability may be (i) limited by
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and (ii) subject
to general principles of equity (regardless of whether that enforceability is
considered in a proceeding in equity or at law).
(c) The execution, delivery and performance in accordance with
their respective terms by the Company of the Transaction Documents to which it
is a party have not and will not (i) violate, breach or constitute a default
under (A) the Charter Documents of any of the Company and the Company
Subsidiaries, (B) any Governmental Requirement applicable to any of the Company
and the Company Subsidiaries or (C) any Material Agreement of the Company, (ii)
result in the acceleration or mandatory prepayment of any Indebtedness, or any
Guaranty not constituting Indebtedness, of any of the Company and the Company
Subsidiaries or afford any holder of any of that Indebtedness, or any
beneficiary of any of those Guaranties, the right to require any of the Company
and the Company Subsidiaries to redeem, purchase or otherwise acquire,
reacquire or repay any of that Indebtedness, or to perform any of those
Guaranties, (iii) cause or result in the imposition of, or afford any Person
the right to obtain, any Lien upon any property or assets of any of the Company
and the Company Subsidiaries (or upon any revenues, income or profits of any of
the Company and the Company Subsidiaries therefrom) or (iv) result in the
revocation, cancellation, suspension or material modification, in any single
case or in the aggregate, of any Governmental Approval possessed by any of the
Company and the Company Subsidiaries at the date hereof and necessary for the
ownership or lease or the operation of its properties or the carrying on of its
business as now conducted, including any necessary Governmental Approval under
each applicable Environmental Law and Professional Code.
(d) Except for (i) the filing of the Certificates of Merger,
if any, with the applicable Governmental Authorities, (ii) as may be required
by the HSR Act or the applicable state securities or blue sky laws, no
Governmental Approvals are required to be obtained, and no reports or notices
to or filings with any Governmental Authority are required to be made, by any
of the Company and the Company Subsidiaries for the execution, delivery or
performance by the Company of the Transaction Documents to which it is a party,
the enforcement against the Company of its obligations thereunder or the
effectuation of the Acquisition and the other transactions contemplated
thereby.
Section 2.04. Charter Documents and Records; No Violation. The
Company has caused true, complete and correct copies of the Charter Documents,
each as in effect on the date hereof, and the minute books and similar
corporate or other Entity records of each of the Company and the Company
Subsidiaries to be delivered or otherwise made available to ARS. No breach or
violation of any Charter Document of any of the Company and the Company
Subsidiaries has occurred and is continuing.
Section 2.05. No Defaults. No condition or state of facts
exists, or, with the giving of notice or the lapse of time or both, would
exist, which (a) entitles any holder of any outstanding
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Indebtedness, or any Guaranty not constituting Indebtedness, of any of the
Company and the Company Subsidiaries, or a representative of that holder, to
accelerate the maturity, or require a mandatory prepayment, of that
Indebtedness or Guaranty, or affords that holder or its representative, or any
beneficiary of that Guaranty, the right to require any of the Company and the
Company Subsidiaries to redeem, purchase or otherwise acquire, reacquire or
repay any of that Indebtedness, or to perform that Guaranty in whole or in
part, (b) entitles any Person to obtain any Lien (other than a Permitted Lien)
upon any properties or assets constituting any part of the Acquired Business
(or upon any revenues, income or profits of any of the Company and the Company
Subsidiaries therefrom) or (c) constitutes a violation or breach of, or a
default under, any Material Agreement of the Company by any of the Company and
the Company Subsidiaries.
Section 2.06. Company Subsidiaries; Controlling Affiliates.
Schedule 2.01 either (a) sets forth the form of organization, legal name, and
Organization State of each Company Subsidiary or (b) correctly states no Entity
is a Company Subsidiary. Except as disclosed in Schedule 2.06, each Company
Subsidiary is a wholly owned Subsidiary of the Company. In the case of any
Company Subsidiary that is not a wholly owned Subsidiary of the Company,
Schedule 2.06 sets forth, by each class and each series within each class, the
number of outstanding shares (or other percentage ownership interests) of
Capital Stock of the Company Subsidiary, (a) the Company's aggregate direct and
indirect ownership of those shares (or interests) and (b) the name and address
of record and percentage ownership of those shares (or interests) of each
holder of record thereof other than the Company or a Company Subsidiary. No
Lien exists on any outstanding Capital Stock of any Company Subsidiary which is
owned directly or indirectly by the Company other than (a) the Liens, if any,
described in Schedule 2.06, all of which will be released at or before the
Effective Time, and (b) Permitted Liens. Except as set forth in Schedule 2.06,
the Company does not own, of record or beneficially, directly or indirectly
through any Person, and does not control, directly or indirectly through any
Person or otherwise, any Capital Stock or any option, warrant or right to
acquire Capital Stock of any Entity other than a Company Subsidiary. Schedule
2.06 sets forth the name of each Person who at the time the Acquisition is
submitted for vote or consent to the Stockholders, is, was or will be an
Affiliate of the Company by reason of that Person's control of the Company.
Section 2.07. Capital Stock of the Company and the Company
Subsidiaries. Schedule 2.07 sets forth, by each class and by each series within
each class, the total number of shares of authorized Company Capital Stock and
the total number of such shares that have been issued and are now outstanding.
Except as set forth in Schedule 2.07: (a) no shares of Company Capital Stock
are held by the Company or any Company Subsidiary as treasury shares; and (b)
no outstanding options, warrants or rights to acquire Capital Stock of the
Company or any Company Subsidiary exist. All the issued and outstanding
Capital Stock of each of the Company and the Company Subsidiaries (a) have been
duly authorized and validly issued in accordance with the applicable
Governmental Requirements of their issuer's Organization State and Charter
Documents and (b) are fully paid and nonassessable. Neither the Company nor
any Company Subsidiary has issued or sold any of its outstanding Capital Stock
in breach or violation of (a) any applicable statutory or contractual
preemptive rights, or any other rights of any kind (including any rights of
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<PAGE> 11
first offer or refusal), of any Person or (b) the terms of any options,
warrants or rights to acquire its Capital Stock which then were outstanding.
No Person has, otherwise than solely by reason of that Person's right, if any,
to vote shares of the Capital Stock of the Company or any Company Subsidiary it
holds, any right to vote on any matter with the holders of Capital Stock of the
Company or any Company Subsidiary.
Section 2.08. Transactions in Capital Stock. Except as set forth
in Schedule 2.08: (a) the Company has no obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire or reacquire any of its equity
securities or any interests therein or to pay any dividend or make any
distribution in respect thereof; and (b) no transaction has been effected, and
no action in contemplation of the transactions described in this Agreement has
been taken, respecting the equity ownership of either the Company or any
Company Subsidiary.
Section 2.09. No Bonus Shares. Except as set forth in Schedule
2.09, no outstanding Company Capital Stock was issued for less than the fair
market value thereof at the time of issuance or was issued in exchange for any
consideration other than cash.
Section 2.10. Predecessor Status; etc. Schedule 2.10 lists all
the legal and assumed names of all predecessor companies for the past five
years of the Company, including the names of any Entities from which the
Company previously acquired material assets. Except as disclosed in Schedule
2.10, the Company has not been a Subsidiary or division of another corporation
or a part of an acquisition that later was rescinded.
Section 2.11. Related Party Agreements. Schedule 2.11 sets
forth all Related Party Agreements in effect on the date hereof. Except for
those Related Party Agreements specifically referred to in Schedule 2.11 as
"Retained Related Party Agreements" (the "Retained Related Party Agreements"),
each Related Party Agreement in effect on the date hereof will have been
terminated, and all Indebtedness of each Related Person and its Affiliates owed
to any of the Company and the Company Subsidiaries will have been paid in full,
prior to the Effective Time, and no Related Party Agreement then will exist.
The terms and conditions of each of the Retained Related Party Agreements are
no less favorable to the Company than the Company reasonably could have
expected to obtain in an arm's-length transaction with a Person other than an
Affiliate of the Company, the rentals provided for in the Retained Related
Party Agreements constituting leases of property to the Acquired Business do
not and will not exceed fair market rentals of the properties being rented or
leased under those Retained Related Party Agreements and the payments provided
to be made by the Company or any Company Subsidiary in the other Retained
Related Party Agreements do not exceed the fair market value of the goods or
other property provided to or the services performed for the Acquired Business.
Section 2.12. Litigation. Except as disclosed in Schedule 2.12,
no Litigation is pending or, to the knowledge of the Company or any
Stockholder, threatened to which the Company or any Company Subsidiary is or
may become a party.
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Section 2.13. Financial Statements; Disclosure. (a) Financial
Statements. (i) The Financial Statements (including in each case the related
schedules and notes, if any) delivered to ARS present fairly, in all material
respects, the financial position of the Acquired Business at the respective
dates of the balance sheets included therein and the results of operations and
cash flows of the Acquired Business for the respective periods set forth
therein and have been prepared in accordance with GAAP (subject, in the case of
interim financial statements, to normal and recurring year-end adjustments and
the absence of footnote disclosure). As of the date of any balance sheet
included in the Financial Statements delivered to ARS, neither the Company nor
any Company Subsidiary then had any outstanding Indebtedness to any Person or
any liabilities of any kind (including contingent obligations, tax assessments
or unusual forward or long-term commitments), or any unrealized or anticipated
loss, which in the aggregate then were Material to the Company and required to
be reflected in those Financial Statements or in the notes related thereto in
accordance with GAAP which were not so reflected.
(ii) Since the Current Balance Sheet Date, no change has
occurred in the business, operations, properties or assets, liabilities,
condition (financial or other) or results of operations of the Company or any
Company Subsidiary that could reasonably be expected, either alone or together
with all other such changes, to have a Material Adverse Effect.
(b) Disclosure. As of the date hereof, all Information that
has been made available to ARS by or on behalf of the Company prior to the date
of this Agreement in connection with the transactions contemplated hereby is,
taken together, true and correct in all material respects and does not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which those statements were
made.
Section 2.14. Compliance With Laws. (a) Except as disclosed in
Schedule 2.14: (i) each of the Company and the Company Subsidiaries possesses,
or, if required by the applicable Environmental Laws (including those relating
to the maintenance, repair or servicing of appliances, equipment or other
products containing chlorofluorocarbons or hydrochlorofluorocarbons) and
Professional Codes, one or more of its employees as required by those
Environmental Laws and Professional Codes possesses, all necessary master
licenses and similar Governmental Approvals required for the conduct of its
business; and (ii) each of the Company and the Company Subsidiaries and such
one or more of its employees are in compliance in all material respects with
the terms and conditions of all Governmental Approvals necessary for the
ownership or lease and the operation of its properties (including all the
facilities and sites it owns or holds under any lease) and the carrying on of
its business as now conducted. Schedule 2.14 discloses all the Governmental
Approvals so possessed (other than permits for particular jobs for customers as
may be required under the applicable Professional Codes). All the Governmental
Approvals so listed are valid and in full force and effect and, except as
disclosed in Schedule 2.14, neither the Company nor any Company Subsidiary has
received, nor to the knowledge of any Stockholder, has any employee of either
received, any notice from any Governmental Authority of its intention to
cancel, terminate or not renew any of those Governmental Approvals.
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(b) Except as disclosed in Schedule 2.14, each of the Company
and the Company Subsidiaries: (i) has been and continues to be in compliance
in all material respects with all Governmental Requirements applicable to it or
any of its presently or previously owned or operated properties (including all
the facilities and sites now or previously owned or held by it under any
lease), businesses or operations, including all applicable Governmental
Requirements under ERISA, Environmental Laws, Professional Codes and Service
Company Laws; and (ii)(A) neither the Company nor any Company Subsidiary has
received, nor to the knowledge of the Company has any employee of either
received, any notice from any Governmental Authority which asserts, or raises
the possibility of assertion of, any noncompliance with any of those
Governmental Requirements and (B) to the knowledge of each of the Company, the
Company Subsidiaries and the Stockholders, no condition or state of facts
exists which would provide a valid basis for any such assertion.
Section 2.15. Certain Environmental Matters. Except as disclosed
in Schedule 2.15: (a) the Company and each Company Subsidiary have complied in
all material respects, and remain in compliance in all material respects, with
the provisions of all Environmental Laws applicable to any of them or any of
their respective presently owned or operated facilities, sites or other
properties, businesses and operations and which relate to the reporting by the
Company and each Company Subsidiary of all sites presently owned or operated by
any of them where Solid Wastes, Hazardous Wastes or Hazardous Substances have
been treated, stored, disposed of or otherwise handled; (b) no release (as
defined in those Environmental Laws) at, from, in or on any site owned or
operated by the Company or any Company Subsidiary has occurred which, if all
relevant facts were known to the relevant Governmental Authorities, reasonably
could be expected to require remediation to avoid deed record notices,
restrictions, liabilities or other consequences that would not be applicable if
that release had not occurred; (c) neither the Company nor any Company
Subsidiary (or any agent or contractor of either) has transported or arranged
for the transportation of any Solid Wastes, Hazardous Wastes or Hazardous
Substances to, or disposed or arranged for the disposition of any Solid Wastes,
Hazardous Wastes or Hazardous Substances at, any off-site location that could
lead to any claim against the Company, any Company Subsidiary, ARS or any
Subsidiary of ARS, as a potentially responsible party or otherwise, for any
clean-up costs, remedial work, damage to natural resources, personal injury or
property damage, including any claim under CERCLA; and (d) no storage tanks
exist on or under any of the properties owned or operated by the Company or any
Company Subsidiary from which any Solid Wastes, Hazardous Wastes or Hazardous
Substances have been released into the surrounding environment. The Company
has provided ARS with copies (or if not available, accurate written summaries)
of all environmental investigations, studies, audits, reviews and other
analyses conducted by or on behalf, or which otherwise are in the possession,
of the Company or any Company Subsidiary respecting any facility, site or other
property presently owned or operated by the Company and each Company
Subsidiary.
Section 2.16. Liabilities and Obligations. Schedule 2.16 lists
all present liabilities, of every kind, character and description and whether
accrued, absolute, fixed, contingent or otherwise, of each of the Company and
the Company Subsidiaries which (a) exceed or reasonably could be expected to
exceed $10,000 and (b) (i) had been incurred prior to the Current Balance Sheet
Date, but are not reflected on the Current Balance Sheet, or (ii) were
incurred after the Current
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Balance Sheet Date otherwise than in the ordinary course of business and
consistent with past practice. Schedule 2.16 also lists and describes, for
each of the Company and the Company Subsidiaries, each of its outstanding
secured and unsecured Guaranties not constituting its Indebtedness and, for
each of those Guaranties, whether any Stockholder or Related Person or
Affiliate of any Stockholder is a Person whose obligation is covered by that
Guaranty, and if that item is secured by any property or asset of the Company
or any Company Subsidiary, the nature of that security.
Section 2.17. Receivables. Except as set forth in Schedule 2.17,
all the accounts and notes or other advances receivable of the Company and the
Company Subsidiaries reflected on the Current Balance Sheet were collected, or
are valid and enforceable claims arising in the ordinary course of business
and, to the knowledge of the Company, are collectible, in the respective
amounts so reflected, net of the reserves, if any, reflected in the Current
Balance Sheet.
Section 2.18. Real Properties. (a) Schedule 2.18 lists and
correctly describes in all material respects: (i) all real properties owned by
any of the Company and the Company Subsidiaries and, for each of those
properties, the address thereof and the use thereof in the business of the
Company and the Company Subsidiaries, and (ii) all real properties of which any
of the Company and the Company Subsidiaries is the lessee and, for each of
those properties, the address thereof and the lease (including its expiration
date and any renewal options) relating thereto.
(b) The Company has provided ARS with true, complete and
correct copies of all title reports and insurance policies owned or in the
possession of any of the Company and the Company Subsidiaries and relating to
any of the real properties listed as being owned in Schedule 2.18. Except as
set forth in Schedule 2.18 or those reports and policies, and except for
Permitted Liens, the Company or a Company Subsidiary owns in fee, and has good,
valid and marketable title to, free and clear of all Liens, each property
listed in Schedule 2.18 as being owned.
(c) The Company has provided ARS with true, correct and
complete copies of all leases under which the Company or a Company Subsidiary
is leasing each of the properties listed in Schedule 2.18 as being leased and,
except as set forth in Schedule 2.18, (i) each of those leases is, to the
knowledge of the Company, valid and binding on the lessor party thereto, and
(ii) the lessee party thereto has not sublet any of the leased space to any
Person other than the Company or a Company Subsidiary.
(d) The fixed assets of each of the Company and the Company
Subsidiaries are affixed only to one or more of the real properties listed in
Schedule 2.18 and, except as set forth in Schedule 2.18, are maintained in
accordance with reasonable commercial operating practices and adequate for the
purposes for which they presently are being used or held for use, ordinary wear
and tear excepted.
Section 2.19. Other Tangible Assets. (a) Schedule 2.19
discloses all leases, including capital leases, that are Material to the
Company under which the Company or a Company
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<PAGE> 15
Subsidiary is leasing its property, plant and equipment and other tangible
assets other than real properties. Except as set forth in Schedule 2.19, (i)
each of those leases is, to the knowledge of the Company, valid and binding on
the lessor party thereto and (ii) the lessee party thereto has not sublet any
of the leased property to any Person other than the Company or a Company
Subsidiary.
(b) Except as set forth in Schedule 2.19, all the property,
plant and equipment of the Company and its Subsidiaries are in good working
order and condition, ordinary wear and tear excepted, and adequate for the
purposes for which they presently are being used or held for use.
(c) In each case, free and clear of all Liens except for
Permitted Liens and as set forth in Schedule 2.19, each of the Company and the
Company Subsidiaries has good and valid title to, or holds under a lease valid
and binding on the lessor party thereto, all its tangible personal properties
and assets (including its property, plant and equipment) that individually is
or in the aggregate are Material to the Company.
Section 2.20. Proprietary Rights. Except as set forth in
Schedule 2.20, each of the Company and the Company Subsidiaries owns, free and
clear of all Liens other than Permitted Liens, or has the legal right to use
all Proprietary Rights that are necessary to the conduct of its business as now
conducted, in each case free, to their knowledge, of any claims or
infringements. Schedule 2.20 (a) lists these Proprietary Rights and (b)
indicates those owned by the Company or any Company Subsidiary and, for those
not listed as so owned, the agreement or other arrangement pursuant to which
they are possessed. Except as set forth in Schedule 2.20, (a) no consent of
any Person will be required for the use of any of these Proprietary Rights by
ARS or any Subsidiary of ARS following the Effective Time and (b) no
governmental registration of any of these Proprietary Rights has lapsed or
expired or been canceled, abandoned, opposed or the subject of any
reexamination request.
Section 2.21. Relations With Governments, etc. Neither the
Company nor any Company Subsidiary has made, offered or agreed to offer
anything of value to any governmental official, political party or candidate
for government office which would cause the Company or any Company Subsidiary
to be in violation of the Foreign Corrupt Practices Act of 1977 or any
Governmental Requirement to a similar effect.
Section 2.22. Commitments. Schedule 2.22 sets forth a complete
list of each of the following to which any of the Company and the Company
Subsidiaries is a party or by which any of its properties is bound and which
presently remains executory in whole or in any part:
(a) each partnership, joint venture or cost-sharing agreement;
(b) each guaranty or suretyship, indemnification or
contribution agreement or performance bond;
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(c) each instrument, agreement or other obligation evidencing
or relating to Indebtedness of any of the Company and the Company
Subsidiaries or to money lent or to be lent to another Person involving
more than $25,000;
(d) each contract to purchase or sell real property;
(e) each agreement with dealers or sales or commission agents,
public relations or advertising agencies, accountants or attorneys
(other than in connection with this Agreement and the transactions
contemplated hereby) involving total payments within any 12-month period
in excess of $25,000 and which is not terminable without penalty and on
no more than 30 days' prior notice;
(f) each agreement for the acquisition or provision of
services, supplies, equipment, inventory, fixtures or other property
involving more than $25,000 in the aggregate;
(g) each contract containing any noncompetition covenant;
(h) each agreement providing for the purchase from a supplier
of all or substantially all the requirements of the Company or any
Company Subsidiary of a particular product or service; and
(i) each other agreement or commitment not made in the
ordinary course of business that is Material to the Acquired Business.
True, correct and complete copies of all written items listed above, and true,
correct and complete written descriptions of all oral items listed above, have
heretofore been delivered or made available to ARS. Except as set forth in
Schedule 2.22: (a) there are no existing or asserted defaults, events of
default or events, occurrences, acts or omissions that, with the giving of
notice or lapse of time or both, would constitute defaults or events of default
under any of the items listed above which are Material to the Acquired Business
by any of the Company and the Company Subsidiaries or, to the knowledge of the
Company, any other party thereto; and (b) no penalties have been incurred, nor
are amendments pending, with respect to the items listed above which are
Material to the Acquired Business. The items listed above are in full force
and effect and are valid and enforceable obligations of the Company or the
Company Subsidiaries parties thereto and, to the knowledge of the Company, the
other parties thereto in accordance with their respective terms, and no
defenses, off-sets or counterclaims have been asserted or, to the knowledge of
the Company, may be made by any party thereto (other than by the Company or a
Company Subsidiary), nor has the Company or a Company Subsidiary, as the case
may be, waived any rights thereunder.
Section 2.23. Inventories. Except as set forth in Schedule 2.23,
all inventories, net of reserves determined in accordance with GAAP, of each of
the Company and the Company Subsidiaries which are classified as such on the
Current Balance Sheet are, to the knowledge of the
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<PAGE> 17
Company, merchantable and salable or usable in the ordinary course of business
of the Acquired Business. The Acquired Business does not depend on any single
vendor for its inventories the loss of which could have a Material Adverse
Effect.
Section 2.24. Insurance. Schedule 2.24 sets forth a list of all
insurance policies carried by each of the Company and the Company Subsidiaries.
The Company has previously provided ARS with: (a) a complete list of all
insurance loss runs and worker's compensation claims received for the most
recently ended three policy years; and (b) true, complete and correct copies of
all insurance policies carried by each of the Company and the Company
Subsidiaries which are in effect, all of which (i) have been issued by insurers
of recognized responsibility and (ii) currently are, and will remain without
interruption through the Effective Date, in full force and effect. Except as
set forth in Schedule 2.24: (a) no insurance carried by the Company or any
Company Subsidiary has been canceled by the insurer during the past five years,
and neither the Company nor any Company Subsidiary has been denied coverage
during the past ten years; and (b) neither the Company nor any Company
Subsidiary or Stockholder has received any notice or other communication from
any issuer of any such insurance policy of any material increase in any
deductibles, retained amounts or the premiums payable thereunder, and, to the
knowledge of the Company and the Stockholders, no such increase in deductibles,
retainages or premiums is threatened.
Section 2.25. Employee Matters. (a) Cash Compensation. Schedule
2.25 sets forth a complete written list of the names, titles and rates of
annual cash compensation, at the Current Balance Sheet Date and at the date
hereof (and the portions thereof attributable to salary or the equivalent,
fixed bonuses, discretionary bonuses and other cash compensation, respectively)
of all key employees, nonemployee officers, nonemployee directors and key
consultants and independent contractors of each of the Company and the Company
Subsidiaries who receive annualized cash compensation of greater than $100,000.
(b) Employment Agreements. Schedule 2.25 lists all Employment
Agreements remaining executory in whole or in part on the date hereof, and the
Company has provided ARS with true, complete and correct copies of all those
Employment Agreements. Neither the Company nor any Company Subsidiary is a
party to any oral Employment Agreement.
(c) Other Compensation Plans. Schedule 2.25 lists all Other
Compensation Plans either remaining executory on the date hereof or to become
effective after the date hereof. The Company has provided ARS with a true,
correct and complete copy of each of those Other Compensation Plans that is in
writing and an accurate written description of each of those Other Compensation
Plans that is not written. Except as set forth in Schedule 2.25, each of the
Other Compensation Plans, including each that is a Welfare Plan, may be
unilaterally amended or terminated by the Company or any Company Subsidiary
without liability to any of them, except as to benefits accrued thereunder
prior to that amendment or termination.
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(d) ERISA Benefit Plans. Schedule 2.25 (i) lists (A) each
ERISA Pension Benefit Plan (1) the funding requirements of which (under Section
301 of ERISA or Section 412 of the Code) are, or at any time during the six-
year period ending on the date hereof were, in whole or in part, the
responsibility of the Company or any Company Subsidiary or (2) respecting which
the Company or any Company Subsidiary is, or at any time during that period
was, a "contributing sponsor" or an "employer" as defined in Sections
4001(a)(13) and 3(5), respectively, of ERISA (each plan described in this
clause (A) being a "Company ERISA Pension Plan"), (B) each other ERISA Pension
Benefit Plan respecting which an ERISA Affiliate is, or at any time during that
period was, such a "contributing sponsor" or "employer" (each plan described in
this clause (B) being an "ERISA Affiliate Pension Plan") and (C) each other
ERISA Employee Benefit Plan that is being, or at any time during that period
was, sponsored, maintained or contributed to by the Company or any Company
Subsidiary (each plan described in this clause (C) and each Company ERISA
Pension Plan being a "Company ERISA Benefit Plan"), (ii) states the termination
date of each Company ERISA Benefit Plan and ERISA Affiliate Pension Plan that
has been terminated and (iii) identifies for each ERISA Affiliate Pension Plan
the relevant ERISA Affiliates. The Company has provided ARS with (i) true,
complete and correct copies of (A) each Company ERISA Benefit Plan and ERISA
Affiliate Pension Plan, (B) each trust agreement related thereto and (C) all
amendments to those plans and trust agreements. Except as set forth in
Schedule 2.25, (i) neither the Company nor any Company Subsidiary is, or at any
time during the six-year period ended on the date hereof was, a member of any
ERISA Group that currently includes, or included when the Company or a Company
Subsidiary was a member, among its members any Person other than the Company
and the Company Subsidiaries and (ii) no Person is an ERISA Affiliate of the
Company or any Company Subsidiary (other than the Company or any Company
Subsidiary in the case of any other Company Subsidiary or any Company
Subsidiary in the case of the Company, if the Company and the Company
Subsidiaries comprise an ERISA Group).
(e) Employee Policies and Procedures. Schedule 2.25 lists all
Employee Policies and Procedures. The Company has provided ARS with a copy of
all written Employee Policies and Procedures and a written description of all
material unwritten Employee Policies and Procedures.
(f) Unwritten Amendments. Except as described in Schedule
2.25, no material unwritten amendments have been made, whether by oral
communication, pattern of conduct or otherwise, with respect to any of the
Employment Agreements, Other Compensation Plans or Employee Policies and
Procedures.
(g) Labor Compliance. Each of the Company and the Company
Subsidiaries has been and is in compliance in all material respects with all
applicable Governmental Requirements respecting employment and employment
practices, terms and conditions of employment and wages and hours, and neither
the Company nor any Company Subsidiary is liable for any arrears of wages or
penalties for failure to comply with any of the foregoing. Neither the Company
nor any Company Subsidiary has engaged in any unfair labor practice or
discriminated on the basis of race, color, religion, sex, national origin, age,
disability or handicap in its employment conditions or practices. Except as
set forth in Schedule 2.25, there are no (i) unfair labor practice charges or
complaints or
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<PAGE> 19
racial, color, religious, sex, national origin, age, disability or handicap
discrimination charges or complaints pending or, to the knowledge of the
Company, threatened against the Company or any of the Company Subsidiaries
before any Governmental Authority (nor, to the knowledge of the Company, does
any valid basis therefor exist) or (ii) existing or, to the knowledge of the
Company, threatened labor strikes, disputes, grievances, controversies or other
labor troubles affecting the Company or any of the Company Subsidiaries (nor,
to the knowledge of the Company, does any valid basis therefor exist).
(h) Unions. Except as set forth in Schedule 2.25, (i) neither
the Company nor any Company Subsidiary or ERISA Affiliate has ever been a party
to any agreement with any union, labor organization or collective bargaining
unit, (ii) no employees of the Company or any Company Subsidiary are
represented by any union, labor organization or collective bargaining unit and
(iii) to the knowledge of the Company, none of the employees of the Company or
any Company Subsidiary have threatened to organize or join a union, labor
organization or collective bargaining unit.
(i) Change of Control Benefits. Except as set forth in
Schedule 2.25, neither the Company nor any of the Company Subsidiaries is a
party to any agreement, or has established any policy, practice or program,
requiring it to make a payment or provide any other form of compensation or
benefit or vesting rights to any person performing services for the Company or
any of the Company Subsidiaries which would not be payable or provided in the
absence of this Agreement or the consummation of the transactions contemplated
by this Agreement, including any parachute payment under Section 280G of the
Code.
(j) Retirees. Neither the Company nor any of the Company
Subsidiaries has any obligation or commitment to provide medical, dental or
life insurance benefits to or on behalf of any of its employees who may retire
or any of its former employees who have retired except as may be required
pursuant to the continuation of coverage provisions of Section 4980B of the
Code and the applicable parallel provisions of ERISA.
Section 2.26. Compliance With ERISA, etc. (a) Compliance. Each
of the Company ERISA Benefit Plans and Other Compensation Plans (each, a
"Plan") (i) is in substantial compliance with all applicable provisions of
ERISA, as well as with all other applicable Governmental Requirements, and (ii)
has been administered, operated and managed in accordance with its governing
documents.
(b) Qualification. All Plans that are intended to qualify
under Section 401(a) of the Code (the "Qualified Plans") are so qualified and
have been determined by the IRS to be so qualified (or application for
determination letters have been timely submitted to the IRS). The Company has
provided ARS with true, complete and correct copies of the current plan
determination letters, most recent actuarial valuation reports, if any, most
recent Form 5500, or, as applicable, Form 5500-C/R, filed with respect to each
such Qualified Plan and most recent trustee or custodian report. To the extent
that any Qualified Plans have not been amended to comply with applicable
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Governmental Requirements, the remedial amendment period permitting retroactive
amendment of these Qualified Plans has not expired and will not expire within
120 days after the Effective Time. All reports and other documents required to
be filed with any governmental agency or distributed to plan participants or
beneficiaries have been timely filed or distributed.
(c) No Prohibited Transactions, etc. None of the
Stockholders, any Plan or the Company or any Company Subsidiary has engaged in
any Prohibited Transaction. No Plan has incurred an accumulated funding
deficiency, as defined in Section 412(a) of the Code and Section 302(a) of
ERISA, and no circumstances exist pursuant to which the Company or any Company
Subsidiary could have any direct or indirect liability whatsoever (including
being subject to any statutory Lien to secure payment of any such liability),
to the Pension Benefit Guaranty Corporation under Title IV of ERISA or to the
IRS for any excise tax or penalty with respect to any Plan now or hereafter
maintained or contributed to by the Company or any of its ERISA Affiliates.
Further:
(i) there have been no terminations, partial terminations or
discontinuances of contributions to any Qualified Plan without a
determination by the IRS that such action does not adversely affect the
tax-qualified status of that plan;
(ii) no Termination Event has occurred;
(iii) no Reportable Event has occurred with respect to any Plan
which was not properly reported;
(iv) the valuation of assets of any Qualified Plan, as of the
Effective Time, shall equal or exceed the actuarial present value of all
"benefit liabilities" (within the meaning of Section 4001(a)(16) of
ERISA) under that plan in accordance with the assumptions contained in
the regulations of the Pension Benefit Guaranty Corporation governing
the funding of terminated defined benefit plans;
(v) with respect to Plans qualifying as "group health plans"
under Section 4980B of the Code or Section 607(l) or 609 of ERISA and
related regulations (relating to the benefit continuation rights imposed
by "COBRA" or qualified medical child support orders), the Company, each
Company Subsidiary and the Stockholders have complied (and at the
Effective Time will have complied) in all material respects with all
reporting, disclosure, notice, election and other benefit continuation
and coverage requirements imposed thereunder as and when applicable to
those plans, and neither the Company nor any Company Subsidiary has
incurred (or will incur) any direct or indirect liability or is (or will
be) subject to any loss, assessment, excise tax penalty, loss of federal
income tax deduction or other sanction, arising on account of or in
respect of any direct or indirect failure by the Company, any Company
Subsidiary or any Stockholder, at any time prior to the Effective Time,
to comply with any such federal or state benefit continuation or
coverage requirement, which is capable of being assessed or asserted
before or after the Effective Time directly or
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<PAGE> 21
indirectly against the Company, any Company Subsidiary, any Stockholder,
ARS or any Subsidiary of ARS with respect to any of those group health
plans;
(vi) the Financial Statements as of the Current Balance Sheet
Date reflect the approximate total pension, medical and other benefit
liability for all Plans, and no material funding changes or
irregularities are reflected thereon which would cause those Financial
Statements to be not representative of prior periods; and
(vii) neither the Company nor any Company Subsidiary has
incurred liability under Section 4062 of ERISA.
(d) Multiemployer Plans. Except as set forth in Schedule
2.26, neither the Company nor any Company Subsidiary, and no ERISA Affiliate of
any of them, is, or at any time during the six-year period ended on the date
hereof was, obligated to contribute to a Multiemployer Plan. Neither the
Company nor any Company Subsidiary, and no ERISA Affiliate of any of them, has
made a complete or partial withdrawal from a Multiemployer Plan so as to incur
withdrawal liability as defined in Section 4201 of ERISA. Schedule 2.26 lists
for each Multiemployer Plan on such Schedule the Company's best estimate of the
amount of withdrawal liability that would be incurred if the Company and each
of its ERISA Affiliates were to make a complete withdrawal from such
Multiemployer Plan as of the Closing Date. Except as set forth in Schedule
2.26, the aggregate amount of such withdrawal liability if the Company and each
of its ERISA Affiliates were to make a complete withdrawal from each such
Multiemployer Plan would not exceed $25,000.
(e) Claims and Litigation. Except as set forth in Schedule
2.26, no Litigation or claims (other than routine claims for benefits) are
pending or, to the knowledge of the Company, threatened against, or with
respect to, any of the Plans or with respect to any fiduciary, administrator or
sponsor thereof (in their capacities as such), or any party-in-interest
thereof.
(f) Excise Taxes, Damages and Penalties. No act, omission or
transaction has occurred which would result in the imposition on the Company or
any Company Subsidiary of (i) breach of fiduciary duty liability damages under
Section 409 of ERISA, (ii) a civil penalty assessed pursuant to subsection (c),
(i) or (l) of Section 502 of ERISA or (iii) any excise tax under applicable
provisions of the Code with respect to any Plan.
(g) Welfare Trusts. Any trust funding a Plan, which is
intended to be exempt from federal income taxation pursuant to Section
501(c)(9) of the Code, satisfies the requirements of that section and has
received a favorable determination letter from the IRS regarding that exempt
status and has not, since receipt of the most recent favorable determination
letter, been amended or operated in a way that would adversely affect that
exempt status.
Section 2.27. Taxes. (a) Each of the following representations
and warranties in this Section 2.27 is qualified to the extent set forth in
Schedule 2.27.
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(b) All Returns required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries is liable have been
duly and timely filed with the appropriate Taxing Authority, each Tax shown to
be payable on each such Return has been paid, each Tax payable by the Company
or a Company Subsidiary has been timely paid and adequate reserves have been
established on the consolidated books of the Company and the Company
Subsidiaries for all Taxes for which any of the Company and the Company
Subsidiaries is liable, but the payment of which is not yet due. Neither the
Company nor any Company Subsidiary is, or ever has been, liable for any Tax
payable by reason of the income or property of a Person other than the Company
or a Company Subsidiary. Each of the Company and the Company Subsidiaries has
timely filed true, correct and complete declarations of estimated Tax in each
jurisdiction in which any such declaration is required to be filed by it. No
Liens for Taxes exist upon the assets of the Company or any Company Subsidiary
except Liens for Taxes which are not yet due. Neither the Company nor any
Company Subsidiary is, or ever has been, subject to Tax in any jurisdiction
outside of the United States. No Litigation with respect to any Tax for which
the Company or any Company Subsidiary is asserted to be liable is pending or,
to the knowledge of the Company or any Stockholder, threatened and no basis
which the Company or any Stockholder believes to be valid exists on which any
claim for any such Tax can be asserted against the Company or any Company
Subsidiary. There are no requests for rulings or determinations in respect of
any Taxes pending between the Company or any Company Subsidiary and any Taxing
Authority. No extension of any period during which any Tax may be assessed or
collected and for which the Company or any Company Subsidiary is or may be
liable has been granted to any Taxing Authority. Neither the Company nor any
Company Subsidiary is or has been a party to any tax allocation or sharing
agreement. All amounts required to be withheld by any of the Company and the
Company Subsidiaries and paid to governmental agencies for income, social
security, unemployment insurance, sales, excise, use and other Taxes have been
collected or withheld and paid to the proper Taxing Authority. The Company and
each Company Subsidiary have made all deposits required by law to be made with
respect to employees' withholding and other employment taxes.
(c) Neither the Company nor any Company Subsidiary or
Stockholder is a "foreign person," as that term is referred to in Section
1445(f)(3) of the Code.
(d) The Company has not filed a consent pursuant to Section
341(f) of the Code or any comparable provision of any other tax statute and has
not agreed to have Section 341(f)(2) of the Code or any comparable provision of
any other tax statute apply to any disposition of an asset. The Company has
not made, is not obligated to make and is not a party to any agreement that
could require it to make any payment that is not deductible under Section 280G
of the Code. No asset of the Company or of any Company Subsidiary is subject
to any provision of applicable law which eliminates or reduces the allowance
for depreciation or amortization in respect of that asset below the allowance
generally available to an asset of its type. No accounting method changes of
the Company or of any Company Subsidiary exist or are proposed or threatened
which could give rise to an adjustment under Section 481 of the Code.
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<PAGE> 23
Section 2.28. Government Contracts. Neither the Company nor any
Company Subsidiary is a party to any governmental contract subject to price
redetermination or renegotiation.
Section 2.29. Absence of Changes. Since the Current Balance
Sheet Date, except as set forth in Schedule 2.29, none of the following has
occurred with respect to the Company or any Company Subsidiary:
(a) any circumstance, condition, event or state of facts
(either singly or in the aggregate), other than conditions generally
affecting the Air Conditioning and Refrigeration Contracting, Electrical
Contracting or Plumbing businesses, which has caused, is causing or will
cause a Material Adverse Effect;
(b) any change in its authorized Capital Stock or in any of
its outstanding Capital Stock or options, warrants or rights to acquire
its Capital Stock;
(c) any Restricted Payment, except any declaration or payment
of dividends by any Company Subsidiary solely to the Company;
(d) any increase in, or any commitment or promise to increase,
the rates of cash compensation as of the date hereof, or the amounts or
other benefits paid or payable under any Company ERISA Pension Plan or
Other Compensation Plan, except for ordinary and customary bonuses and
salary increases for employees (other than the Stockholders or their
family members) at the times and in the amounts consistent with its
past practice;
(e) any work interruptions, labor grievances or claims filed,
or any similar event or condition of any character, that will have a
Material Adverse Effect following the Effective Time;
(f) any distribution, sale or transfer of, or any commitment
to distribute, sell or transfer, any of its assets or properties of any
kind which singly is or in the aggregate are Material to the Acquired
Business, other than distributions, sales or transfers in the ordinary
course of its business and consistent with its past practices to Persons
other than the Stockholders and their family members and Affiliates;
(g) any cancellation, or agreement to cancel, any
Indebtedness, obligation or other liability owing to it, including any
Indebtedness, obligation or other liability of any Stockholder or any
Related Person or Affiliate thereof, provided that it may negotiate and
adjust bills in the course of good faith disputes with customers in a
manner consistent with past practice;
(h) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of its
assets, property or rights or requiring consent of any Person to the
transfer and assignment of any such assets, property or rights;
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<PAGE> 24
(i) 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 its business consistent with its past
practices;
(j) any waiver of any of its rights or claims that singly is
or in the aggregate are Material to the Acquired Business;
(k) any transaction by it outside the ordinary course of its
business or not consistent with its past practices;
(l) any incurrence by it of any Indebtedness or any Guaranty
not constituting its Indebtedness, or any commitment to incur any
Indebtedness or any such Guaranty;
(m) any investment in the Capital Stock, options, warrants,
rights to acquire the Capital Stock or the Indebtedness of any Person
other than short-term United States Treasury obligations or short-term
certificates of deposit of a commercial bank or trust company;
(n) except in accordance with the Company's consolidated
capital expenditure budget for the Company's current fiscal year, any
capital expenditure or series of related capital expenditures by the
Company and the Company Subsidiaries collectively in excess of $50,000,
or commitments by the Company and the Company Subsidiaries to make
capital expenditures totaling in excess of $50,000; or
(o) any cancellation or termination of a Material Agreement of
the Acquired Business.
Section 2.30. Bank Relations; Powers of Attorney. Schedule 2.30
sets forth:
(a) the name of each financial institution in which the
Company or any Company Subsidiary has borrowing or investment
arrangements, deposit or checking accounts or safe deposit boxes;
(b) the types of those arrangements and accounts, including,
as applicable, names in which accounts or boxes are held, the account or
box numbers and the name of each Person authorized to draw thereon or
have access thereto; and
(c) the name of each Person holding a general or special power
of attorney from the Company or any Company Subsidiary and a description
of the terms of each such power.
Section 2.31. Current Prospectus. The Company has received the
Current Prospectus and the Board of Directors of the Company had ample
opportunity to review the contents thereof prior to approving the transactions
contemplated hereby.
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<PAGE> 25
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ARS
ARS represents and warrants to the Company and each Stockholder
that all the following representations and warranties in this Article III are
as of the date of this Agreement, and will be on the Closing Date and
immediately prior to the Effective Time, true and correct:
Section 3.01. Organization; Power. ARS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority under the laws of
that State and its Charter Documents to own or lease and to operate its
properties presently and following the Effective Time and to carry on its
business as now conducted and as proposed to be conducted following the
Effective Time.
Section 3.02. Authorization; Enforceability; Absence of
Conflicts; Required Consents. (a) The execution, delivery and performance by
ARS of this Agreement and each other Transaction Document to which it is a
party, and the effectuation of the Acquisition and the other transactions
contemplated hereby and thereby, are within its corporate power under its
Charter Documents and the applicable Governmental Requirements of the State of
Delaware and have been duly authorized by all proceedings, including actions
permitted to be taken in lieu of proceedings, required under its Charter
Documents and the applicable Governmental Requirements of its Organization
State.
(b) This Agreement has been, and each of the other Transaction
Documents to which ARS is a party, when executed and delivered to the other
parties thereto (or, in the case of the Certificates of Merger, if any, the
applicable Governmental Authorities), will have been, duly executed and
delivered by it and is, or when so executed and delivered will be, its legal,
valid and binding obligation, enforceable against it in accordance with its
terms, except as that enforceability may be (i) limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and (ii) subject to general
principles of equity (regardless of whether that enforceability is considered
in a proceeding in equity or at law).
(c) The execution, delivery and performance in accordance with
their respective terms by ARS of the Transaction Documents to which it is a
party have not and will not (i) violate, breach or constitute a default under
(A) the Charter Documents of ARS, (B) any Governmental Requirement applicable
to ARS or (C) any Material Agreement of ARS, (ii) result in the acceleration or
mandatory prepayment of any Indebtedness, or any Guaranty not constituting
Indebtedness, of ARS or afford any holder of any of that Indebtedness, or any
beneficiary of any of those Guaranties, the right to require ARS to redeem,
purchase or otherwise acquire, reacquire or repay any of that Indebtedness, or
to perform any of those Guaranties, (iii) cause or result in the imposition of,
or afford any Person the right to obtain, any Lien upon any property or assets
of ARS (or upon any revenues, income or profits of ARS therefrom), other than
negative pledge covenants of ARS respecting the Capital Stock of its
Subsidiaries and its other assets and Liens securing the obligations
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<PAGE> 26
of ARS under its credit facilities, or (iv) result in the revocation,
cancellation, suspension or material modification, in any single case or in the
aggregate, of any Governmental Approval possessed by ARS at the date hereof and
necessary for the ownership or lease and the operation of its properties or the
carrying on of its business as now conducted, including any necessary
Governmental Approval under each applicable Environmental Law and Professional
Code.
(d) Except for (i) the filing of the Certificates of Merger,
if any, with the applicable Governmental Authorities, and (ii) as may be
required by the HSR Act or the applicable state securities or blue sky laws, no
Governmental Approvals are required to be obtained, and no reports or notices
to or filings with any Governmental Authority are required to be made, by ARS
for the execution, delivery or performance by ARS of the Transaction Documents
to which it is a party, the enforcement against ARS of its obligations
thereunder or the effectuation of the Acquisition and the other transactions
contemplated thereby.
Section 3.03. Charter Documents. No breach or violation of any
Charter Document of ARS has occurred and is continuing.
Section 3.04. Capital Stock of ARS; Convertible Notes. (a) As
of the date hereof, the authorized capital stock of ARS is comprised of (i)
50,000,000 shares of ARS Common Stock and (ii) 10,000,000 shares of preferred
stock, $.001 par value per share. All shares of ARS Common Stock, if any, to
be issued pursuant to Paragraph 2, or on conversion of the Convertible Notes,
if any, to be issued pursuant to Paragraph 2, when issued, (i) will have been
duly authorized and validly issued in accordance with the DGCL and the Charter
Documents of ARS and (ii) will be fully paid and nonassessable. None of the
shares of ARS Common Stock, if any, to be issued pursuant to Paragraph 2, or on
conversion of the Convertible Notes, if any, to be issued pursuant to Paragraph
2, will, when issued, have been issued in breach or violation of (i) any
applicable statutory or contractual preemptive rights, or any other rights of
any kind (including any rights of first offer or refusal), of any Person or
(ii) the terms of any then outstanding options, warrants or other rights it has
issued to acquire ARS Common Stock.
(b) ARS has all requisite corporate power and authority to execute,
deliver and perform its obligations under, and has duly and validly authorized,
the Convertible Notes Indenture, and the Convertible Notes Indenture is a valid
and binding agreement of ARS, enforceable against ARS in accordance with its
terms, except as enforcement thereof may be subject to the effect of (i) any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally, (ii) general
principles of equity (regardless of whether that enforcement is considered in a
proceeding in equity or at law) and (iii) any implied covenant of good faith
and fair dealing. ARS has all requisite corporate power and authority to
issue, execute, deliver and perform its obligations under, and has duly
authorized, the Convertible Notes, if any, to be issued pursuant to Paragraph
2, and those Convertible Notes, when executed by ARS and authenticated by the
Convertible Notes Trustee in accordance with the Convertible Notes Indenture
and delivered pursuant to Paragraph 2, will have been validly issued and
delivered and will constitute valid and binding obligations of ARS entitled to
the benefits of the Convertible Notes
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<PAGE> 27
Indenture and enforceable against ARS in accordance with their terms, except as
enforcement thereof may be subject to the effect of (i) any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally, (ii) general principles of
equity (regardless of whether that enforcement is considered in a proceeding in
equity or at law) and (iii) any implied covenant of good faith and fair
dealing.
Section 3.05. No Litigation. No Litigation is pending or, to the
knowledge of ARS, threatened to which ARS is or may become a party which (a)
questions or involves the validity or enforceability of any obligation of ARS
under any Transaction Document, (b) seeks (or reasonably may be expected to
seek) (i) to prevent or delay consummation by ARS of the transactions
contemplated by this Agreement to be consummated by ARS or (ii) damages from
ARS in connection with any such consummation.
Section 3.06. SEC Reports and Filings. Since September 30, 1996,
ARS has filed with the SEC all material forms, statements, reports and other
documents (including all exhibits, amendments and supplements thereto) required
to be filed by ARS under the Exchange Act, all of which (a) complied in all
material respects with the applicable requirements of the Exchange Act and (b)
have been made available to the Company and each of the Stockholders. ARS has
delivered copies of the Current Prospectus to the Company and each of the
Stockholders. As of its issue date, the Current Prospectus did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section 3.07. Organization and Power of ARS Sub. ARS Sub is a
corporation duly organized and validly existing under the laws of its
Organization State and has all requisite corporate power and authority under
the laws of that State and its Charter Documents to carry on its business as
now conducted and as proposed to be conducted following the Effective Time.
All outstanding shares of Capital Stock of ARS Sub are owned directly by ARS.
Section 3.08. ARS Sub: Authorization; Enforceability; Absence of
Conflicts; Required Consents. (a) The execution, delivery and performance by
ARS Sub of this Agreement and each other Transaction Document to which it is a
party, and the effectuation of the Acquisition and the other transactions
contemplated hereby and thereby, are within its corporate power under its
Charter Documents and the applicable Governmental Requirements of its
Organization State and have been duly authorized by all proceedings, including
actions permitted to be taken in lieu of proceedings, required under its
Charter Documents and the applicable Governmental Requirements of its
Organization State.
(b) This Agreement has been, and each of the other Transaction
Documents to which ARS Sub is a party, when executed and delivered to the other
parties thereto (or, in the case of the Certificates of Merger, the applicable
Governmental Authorities), will have been, duly executed and delivered by it
and is, or when so executed and delivered will be, its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as that
enforceability
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<PAGE> 28
may be (i) limited by any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and (ii) subject to general principles of equity (regardless of
whether that enforceability is considered in a proceeding in equity or at law).
(c) The execution, delivery and performance in accordance with
their respective terms by ARS Sub of the Transaction Documents to which it is a
party have not and will not violate, breach or constitute a default under (i)
the Charter Documents of ARS Sub, (ii) any Governmental Requirement applicable
to ARS Sub or (iii) any Material Agreement of ARS Sub.
(d) Except for (i) the filing of the Certificates of Merger,
if any, with the applicable Governmental Authorities, and (ii) as may be
required by the HSR Act or the applicable state securities or blue sky laws, no
Governmental Approvals are required to be obtained, and no reports or notices
to or filings with any Governmental Authority are required to be made, by ARS
Sub for the execution, delivery or performance by ARS Sub of the Transaction
Documents to which it is a party, the enforcement against ARS Sub of its
obligations thereunder or the effectuation of the Acquisition and the other
transactions contemplated thereby.
ARTICLE IV
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Section 4.01. Access and Cooperation; Due Diligence. (a) From
the date hereof and until the Effective Time, the Company will (i) afford to
the Representatives of ARS reasonable access to all the key employees, sites,
properties, books and records of each of the Company and the Company
Subsidiaries, (ii) provide ARS with such additional financial and operating
data and other information relating to the business and properties of each of
the Company and the Company Subsidiaries as ARS may from time to time
reasonably request and (iii) cooperate with ARS and its Representatives in the
preparation of any documents or other material that may be required in
connection with any Transaction Document. Each Stockholder and the Company
will treat all Confidential Information obtained by them in connection with the
negotiation and performance of this Agreement as confidential in accordance
with the provisions of Section 10.01.
(b) Each of the Company and the Stockholders will use its best
efforts to secure, as soon as practicable after the date hereof, all approvals
or consents of third Persons as may be necessary to consummate the transactions
contemplated hereby.
(c) From the date hereof and until the Effective Time, ARS
will (i) afford to the Representatives of the Company and the Stockholders
access to all sites, properties, books and records of ARS, (ii) provide the
Company with such additional financial and operating data and other information
relating to the business and properties of ARS as the Company or any
Stockholder may from time to time reasonably request and (iii) cooperate with
the Company and the
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Stockholders and their respective Representatives in the preparation of any
documents or other material which may be required in connection with any
Transaction Documents.
(d) If this Agreement is terminated pursuant to Article XI,
ARS promptly will return all written Confidential Information of the Company it
then possesses to the Company.
Section 4.02. Conduct of Business Pending the Effective Time.
From the date hereof and until the Effective Time, the Company will, and will
cause each Company Subsidiary to:
(a) carry on its businesses in substantially the same manner
as it has heretofore and not introduce any material new method of
management, operation or accounting;
(b) maintain its properties and facilities, including those
held under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(c) perform all its obligations under agreements relating to
or affecting its assets, properties and other rights;
(d) keep in full force and effect without interruption all its
present insurance policies or other comparable insurance coverage;
(e) use reasonable commercial efforts to (i) maintain and
preserve its business organization intact, (ii) retain its present
employees and (iii) maintain its relationships with suppliers, customers
and others having business relations with it;
(f) comply with all applicable Governmental Requirements; and
(g) except as required or expressly permitted by this
Agreement, maintain the instruments and agreements governing its
outstanding Indebtedness and leases on their present terms and not enter
into new or amended Indebtedness or lease instruments or agreements
involving amounts over $10,000 in any case or $100,000 in the aggregate,
without the prior written consent of ARS (which consent will not be
unreasonably withheld).
Section 4.03. Prohibited Activities. From the date hereof and
until the Effective Time, without the prior written consent of ARS or unless as
required or expressly permitted by this Agreement, the Company will not, and
will not permit any Company Subsidiary to:
(a) make any change in its Charter Documents;
(b) issue any of its Capital Stock or issue or otherwise
create any options, warrants or rights to acquire any of its Capital
Stock;
(c) make any Restricted Payment (other than as provided in
Schedule 4.03);
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(d) make any investments (other than short-term United States
Treasury obligations or short-term certificates of deposit of a
commercial bank or trust company) in the Capital Stock (or options,
warrants or rights to acquire the Capital Stock) or Indebtedness of any
Person;
(e) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures in a single
transaction or a series of related transactions involving an aggregate
amount of more than $50,000 otherwise than in the ordinary course of its
business and consistent with its past practice;
(f) increase or commit or promise to increase the cash
compensation payable or to become payable to any officer, director,
stockholder, employee or agent, consultant or independent contractor of
any of the Company and the Company Subsidiaries or make any
discretionary bonus or management fee payment to any such Person, except
bonuses or salary increases to employees (other than the Stockholders or
their family members) at the times and in the amounts consistent with
its past practice;
(g) create, assume or permit to be created or imposed any
Liens (other than Permitted Liens) upon any of its assets or properties,
whether now owned or hereafter acquired, except for purchase money Liens
incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of $25,000 and necessary or desirable for
the conduct of the business of any of the Company and the Company
Subsidiaries;
(h) (i) adopt, establish, amend or terminate any ERISA
Employee Benefit Plan, or any Other Compensation Plan or Employee
Policies and Procedures or (ii) take any discretionary action, or omit
to take any contractually required action, if that action or omission
could either (A) deplete the assets of any ERISA Employee Benefit Plan
or any Other Compensation Plan or (B) increase the liabilities or
obligations under any such plan;
(i) sell, assign, lease or otherwise transfer or dispose of
any of its owned or leased property or equipment otherwise than in the
ordinary course of its business and consistent with its past practice;
(j) negotiate for the acquisition of any business or the
start-up of any new business;
(k) merge, consolidate or effect a share exchange with, or
agree to merge, consolidate or effect a share exchange with, any other
Entity;
(l) waive any of its material rights or claims, provided that
it may negotiate and adjust bills in the course of good faith disputes
with customers in a manner consistent with past practice;
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(m) commit a material breach of or amend or terminate any
Material Agreement of the Company or the Acquired Business or any
Governmental Approvals Material to the Acquired Business; or
(n) enter into any other transaction that is not in the
ordinary course of its business and consistent with its past practice or
that is prohibited hereby.
Section 4.04. No Shop. Each of the Company and the Stockholders
agrees that, from the date hereof and until the first to occur of the Effective
Time or the termination of this Agreement in accordance with Article XI,
neither the Company nor any Stockholder, nor any of their respective officers
and directors shall, and the Company and each Stockholder will direct and use
their best efforts to cause each of their respective Representatives not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including any proposal or
offer to the Stockholders) with respect to a merger, acquisition, consolidation
or similar transaction involving, or any purchase of all or any significant
portion of the assets or any equity securities of, the Company or engage in any
activities, discussions or negotiations concerning, or provide any Confidential
Information respecting, the Acquired Business or ARS to, or have any
discussions with, any Person relating to such an offer or proposal or otherwise
facilitate any effort or attempt to make or implement such an offer or
proposal. The Company and each Stockholder will: (a) immediately cease and
cause to be terminated any existing activities, discussions or negotiations
with any Persons conducted heretofore with respect to any of the foregoing, and
each will take the steps necessary to inform the Persons referred to in the
first sentence of this Section 4.04 of the obligations undertaken in this
Section 4.04; and (b) notify ARS immediately if any such inquiries or proposals
are received by, any such information is requested from or any such discussions
or negotiations are sought to be initiated or continued with the Company or any
Stockholder.
Section 4.05. Notice to Bargaining Agents. Prior to the Closing
Date, the Company will (a) satisfy any requirement for notice of the
transactions contemplated by this Agreement under applicable collective
bargaining agreements and (b) provide ARS with proof that any required notice
has been sent.
Section 4.06. Notification of Certain Matters. The Stockholders
and the Company shall give prompt notice to ARS of (a) the existence or
occurrence of each condition or state of facts which will or reasonably could
be expected to cause any representation or warranty of the Company or any
Stockholder contained herein to be untrue or incorrect in any material respect
at or prior to the Closing Date and (b) 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 that Person hereunder. ARS shall give
prompt notice to the Company of (a) the existence or occurrence of each
condition or state of facts which will or reasonably could be expected to cause
any representation or warranty of ARS contained herein to be untrue or
inaccurate at or prior to the Closing Date and (b) any material failure of ARS
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
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Section 4.06 shall not be deemed to (a) modify the representations or
warranties herein of the party delivering that notice, or any other party,
which modification may be made only pursuant to Section 4.07, (b) modify the
conditions set forth or referred to in Article V or (c) limit or otherwise
affect the remedies available hereunder to the party receiving that notice.
Section 4.07. Supplemental Information. Each of the Company and
the Stockholders agrees that, with respect to the representations and
warranties of that party contained in this Agreement, that party will have the
continuing obligation until the Closing Date to provide ARS promptly with such
additional supplemental information (collectively, the "Supplemental
Information"), in the form of (a) amendments to then existing Schedules or (b)
additional Schedules as would be necessary, in the light of the circumstances,
conditions, events and states of facts then known to the Company or any
Stockholder, to make each of those representations and warranties true and
correct as of the Closing Date. For purposes only of determining whether the
conditions to the obligations of ARS which are specified in Section 5.03 have
been satisfied, and not for any purpose under Article VII, the Schedules as of
the Closing Date shall be deemed to be the Schedules as of the date hereof as
amended or supplemented by the Supplemental Information provided to ARS prior
to the Closing pursuant to this Section 4.07; provided, however, that if the
Supplemental Information so provided discloses the existence of circumstances,
conditions, events or states of facts which, in any combination thereof, (a)
have had a Material Adverse Effect which was not reflected in the determination
of the Ceiling Amount or, in the sole judgment of ARS (which shall be
conclusive for purposes of this Section 4.07 and Article XI, but not for any
purpose of Article VII), (b) are having or will have a Material Adverse Effect,
ARS will be entitled either (i) to terminate this Agreement pursuant to Section
11.01(d) or (ii) to treat as ARS Indemnified Losses for all purposes of Article
VII (which treatment will not prejudice the right of any Stockholders under
Article VII to contest Damage Claims made by ARS in respect of those ARS
Indemnified Losses) all Damages to the Acquired Business which are attributable
to the circumstances, conditions, events and states of facts first disclosed
herein after the date hereof in the Supplemental Information.
Section 4.08. Additional Financial Statements. The Company will
furnish to ARS:
(a) as soon as available and in any event within 30 days after
the end of each of the Company's fiscal quarters which ends prior to the
Effective Time, an unaudited balance sheet of the Acquired Business as
of the end of that fiscal quarter and the related statements of income
or operations, cash flows and stockholders' or other owners' equity for
that fiscal quarter and for the period of the Company's fiscal year
ended with that quarter, in each case (i) setting forth in comparative
form the figures for the corresponding portion of the Company's previous
fiscal year and (ii) prepared in accordance with GAAP applied on basis
consistent (A) throughout the periods indicated (excepting footnotes)
and (B) with the basis on which the Initial Financial Statements
including the Current Balance Sheet were prepared; and
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(b) if requested by ARS and promptly following any such
request, such summary operating or other financial information of the
Acquired Business as of the end of either the first or second fiscal
month in any of the Company's fiscal quarters as ARS may request.
Section 4.09. Termination of Plans. If requested by ARS, the
Company will, or will cause the applicable Company Subsidiary to, if permitted
by all applicable Governmental Requirements to do so, terminate each Plan
identified in Schedule 2.25 as a "Plan To Be Terminated Prior to the Effective
Time" prior to the Effective Time.
Section 4.10. Disposition of Unwanted Assets. The Company will
make all arrangements and take all such actions as are necessary and
satisfactory to ARS to dispose, prior to the Effective Time, of those assets of
the Company or the Company Subsidiaries which are listed in Schedule 4.10.
Section 4.11. HSR Act Matters. If ARS shall determine that
filings pursuant to and under the HSR Act are necessary or appropriate in
connection with the effectuation of the Acquisition, and advises the Company in
writing of that determination, the Company promptly will compile and file (or
will cause its "ultimate parent entity" (as determined for purposes of the HSR
Act) to file) under the HSR Act such information respecting it as the HSR Act
requires of an Entity to be acquired, and the expiration or termination of the
applicable waiting period and any extension thereof under the HSR Act shall be
deemed a condition precedent set forth in Section 5.01.
Section 4.12. NYSE Listing. ARS shall use its reasonable business
efforts to have the shares of ARS Common Stock issuable in the Acquisition, if
any, and issuable on the conversion of the Convertible Notes issuable in the
Acquisition, if any, approved for listing on the New York Stock Exchange,
subject to official notice of issuance, at or prior to the Effective Time.
ARTICLE V
CONDITIONS TO CLOSING AND CONSUMMATION
Section 5.01. Conditions to the Obligations of Each Party. The
obligation of each party hereto to take the actions contemplated to be taken by
that party at the Closing is subject to the satisfaction on or before the
Closing Date of each of the following conditions or waiver pursuant to Section
10.04:
(a) No Litigation. No Litigation shall be pending on the
Closing Date to restrain, prohibit or otherwise interfere with, or to
obtain material damages or other relief from ARS or any Subsidiary of
ARS in connection with, the consummation of the Acquisition;
(b) Governmental Approvals. All Governmental Approvals (other
than the acceptance for filing of the Certificates of Merger, if any)
required to be obtained by any of
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the Company, ARS and ARS Sub in connection with the consummation of the
Acquisition shall have been obtained; and
(c) NYSE Listing. All shares of ARS Common Stock issuable in
the Acquisition, if any, and all shares of ARS Common Stock issuable on
the conversion of Convertible Notes issuable in the Acquisition, if any,
shall have been approved for listing on the New York Stock Exchange,
subject to official notice of issuance.
Section 5.02. Conditions to the Obligations of the Company and
the Stockholders. The obligations of the Company and each Stockholder with
respect to actions to be taken by them at or before the Closing Date and the
actions to be taken on the Closing Date are subject to the satisfaction, or the
waiver by the Company on behalf of itself and each Stockholder pursuant to
Section 10.04 on or before the Closing Date, of (a) all the conditions set
forth in Schedule 5.02, if any, and (b) the condition that all the
representations and warranties of ARS in Article III shall be true and correct
as of the Closing Date as though made at that time.
Section 5.03. Conditions to the Obligations of ARS and ARS Sub.
The obligations of ARS and ARS Sub with respect to actions to be taken by them
at or before the Closing Date are subject to the satisfaction, or the waiver by
ARS pursuant to Section 10.04, on or before the Closing Date of (a) all the
conditions set forth in Schedule 5.03, if any, and (b) all the following
conditions:
(1) Representations and Warranties. All the representations
and warranties of the Stockholders and the Company in Articles I and II
and in the Special Provisions, if any, shall be true and correct as of
the Closing as though made at that time;
(2) Delivery of Documents. The Stockholders and the Company
shall have delivered to ARS:
(A) a Company officer's certificate, in the form of
Exhibit 5.03-1 signed by the Company's President, respecting the
representations and warranties of the Stockholders and the
Company in Articles I and II and in the Special Provisions, if
any, and compliance with the covenants of the Stockholders and
the Company in Article IV and in the Special Provisions, if any;
(B) a Company secretary's certificate, in substantially
the form of Exhibit 5.03-2 signed by the Company's Secretary,
respecting the Charter Documents of the Company, resolutions of
the Board of Directors and stockholders of the Company and the
incumbency and signatures of certain officers of the Company;
(C) from each Stockholder, a certificate to the effect
that no withholding is required under Section 1445 of the Code
and in the form of Exhibit 5.03-3, with the blanks appropriately
filled, duly executed and delivered by that Stockholder;
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(D) an opinion dated the Effective Date and addressed
to ARS from Counsel for the Company and the Stockholders
substantially in the form of Exhibit 5.03-4;
(E) from each officer and director of the Company and
each Company Subsidiary, if any, a notice of resignation
substantially in the form of Exhibit 5.03-5; and
(F) for each of the Company and the Company
Subsidiaries, a certificate, dated within 15 days prior to the
Closing Date, duly issued by the appropriate Governmental
Authorities in its Organization State and in each other
jurisdiction listed for it in Schedule 2.02, showing it to be in
good standing and authorized to do business in its Organization
State and those other jurisdictions and that all state franchise
and/or income tax returns and taxes due by it in its Organization
State and those other jurisdictions for all periods prior to the
Closing Date have been filed and paid.
ARTICLE VI
COVENANTS FOLLOWING THE EFFECTIVE TIME
Section 6.01. Preparation and Filing of Tax Returns. Each party
hereto will, and will cause its 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
other proceeding in respect of Taxes. This cooperation and information shall
include providing copies of all relevant portions of the relevant Returns,
together with such accompanying schedules and work papers, documents relating
to rulings or other determinations by Taxing Authorities and records concerning
the ownership and Tax bases of property as are relevant which a party
possesses. Each party will make its employees, if any, reasonably available on
a mutually convenient basis at its cost to provide an 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
attributable to the preparation and filing of those Returns.
Section 6.02. Removal of Guaranties. ARS will use its reasonable
best efforts to ensure that, within 90 days after the Effective Time, either
(a) the Stockholder Guaranties, if any, listed in Schedule 6.02 are terminated
or (b) the Indebtedness to which those Guaranties relate is retired; provided,
however, that if ARS is unable to effect the termination of any of those
Guaranties or the retirement of any of that Indebtedness, ARS will indemnify
and hold harmless each Stockholder from and against any liabilities, claims,
demands, judgments, losses, costs, damages or expenses whatsoever (including
reasonable attorneys' fees) that such Stockholder may sustain, suffer
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or incur and that result from or arise out of or relate to that Guaranty or
that Indebtedness, as the case may be.
Section 6.03. Undertakings by Certain Stockholders. Each
Stockholder who is a Restricted Person covenants that: (a) the Stockholder
will not publicly offer or sell or solicit an offer to buy any of the shares of
ARS Common Stock, or any part of the Convertible Notes (or any shares of ARS
Common Stock issued on conversion of those Convertible Notes), issued to the
Stockholder pursuant to Paragraph 2 unless: (i) those securities are sold in
compliance with paragraphs (c), (e), (f) and (g) of Securities Act Rule 144;
(ii) those securities have been registered under the Securities Act for resale
pursuant to a registration statement then in effect; (iii) the Stockholder is
not an Affiliate of ARS, a period of at least one year (or such shorter period
as the SEC may prescribe for purposes of Securities Act Rule 145(d)(2)) has
elapsed since the Effective Time and ARS meets the requirements of Securities
Act Rule 144(c); or (iv) the Stockholder is not, and has not been for at least
three months, an Affiliate of ARS and a period of at least two years (or such
shorter period as the SEC may prescribe for purposes of Securities Act Rule
145(d)(3)) has elapsed since the Effective Time; and (b) if the Stockholder
does sell, assign, pledge, hypothecate, transfer or otherwise dispose of any of
those securities to any Restricted Person, the Stockholder will cause that
Restricted Person to execute and deliver to ARS a written agreement pursuant to
which that Restricted Person agrees to be bound by the provisions of this
Section 6.03 with respect to those securities. Each Restricted Person bound by
the provisions of this Section 6.03 agrees with ARS that all certificates
evidencing shares of ARS Common Stock, or Convertible Notes (or any shares of
ARS Common Stock issued on conversion of those Convertible Notes), issued
pursuant to Paragraph 2 will bear the following legend while owned of record or
beneficially by that Restricted Person:
THE SECURITIES REPRESENTED HEREBY WERE ISSUED IN A TRANSACTION
CONSTITUTING A "BUSINESS COMBINATION" WITHIN THE MEANING OF RULE 145
UNDER THE SECURITIES ACT OF 1933 TO A PERSON WHO WAS AN "AFFILIATE" OF A
PARTY TO THAT TRANSACTION (OTHER THAN THE ISSUER) PURSUANT TO THE [TITLE
OF ACQUISITION AGREEMENT] AMONG THE ISSUER, [NAME OF COMPANY] AND THE
OTHER PERSONS PARTIES THERETO AND MAY NOT BE SOLD OR OTHERWISE DISPOSED
OF WITHOUT COMPLIANCE WITH THE PROVISIONS OF THAT AGREEMENT AND THE
REGISTRATION PROVISIONS OF THE SECURITIES ACT OF 1933 OR AN APPLICABLE
EXEMPTION THEREFROM. A COPY OF THE [TITLE OF ACQUISITION AGREEMENT] MAY
BE OBTAINED FREE OF CHARGE BY CONTACTING THE ISSUER'S GENERAL COUNSEL AT
(713) 599-0100.
As used in this Section 6.03, "Restricted Person" means at any time: (a) each
Stockholder named as an Affiliate of the Company in Schedule 2.06; and (b) each
other Person who, pursuant to Securities Act Rule 144(a)(2), would be treated
together at that time with any Stockholder named as an Affiliate of the Company
in Schedule 2.06 as a single "person" for purposes of determining the
compliance of that "person" with Securities Act Rule 144(e).
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ARTICLE VII
INDEMNIFICATION
Section 7.01. Survival of Representations and Warranties. All
the provisions of this Agreement will survive the Closing and Effective Time
indefinitely notwithstanding any investigation at any time made by or on behalf
of any party hereto or the provision of any Supplemental Information pursuant
to Section 4.07, provided that the representations and warranties set forth in
(or deemed by any of the Special Provisions to be set forth in) Articles I, II
and III and in any certificate delivered in connection herewith with respect to
any of those representations and warranties will terminate and expire on the
second anniversary of the Effective Date, except as follows: (a) the
representations and warranties of the Stockholders which relate expressly or by
necessary implication to Taxes, ERISA or other employment or labor matters will
survive until the expiration of the applicable statutes of limitations
(including all periods of extension and tolling); (b) the representations and
warranties of the Stockholders which relate expressly or by necessary
implication to the environment or Environmental Laws will survive for a period
of five years from the Effective Date; (c) the representations and warranties
of the Stockholders set forth in Sections 1.01 and 1.02 will survive forever;
(d) if the Company is not included in the Acquired Business, the
representations and warranties of the Company specified in Schedule 7.01, if
any, will survive forever and the representations and warranties of the Company
in Article II will expire as when the representations and warranties of the
Stockholders to the same effect expire; and (e) if the Company is included in
the Acquired Business, the representations and warranties of the Company will
terminate and expire at the Effective Time. After a representation and
warranty has terminated and expired, no indemnification will or may be sought
pursuant to this Article VII on the basis of that representation and warranty
by any Person who would have been entitled pursuant to this Article VII to
indemnification on the basis of that representation and warranty prior to its
termination and expiration, provided that: (a) the amount of that claim, if
against the Company or any Stockholder, shall be taken into account in
determining whether the aggregate amount of all claims against the Company or
that Stockholder has exceeded the Threshold Amount or that Stockholder's Pro
Rata Share of the Threshold Amount for purposes of Section 7.06; and (b) in the
case of each representation and warranty that will terminate and expire as
provided in this Section 7.01, no claim presented in writing for
indemnification pursuant to this Article VII on the basis of that
representation and warranty prior to its termination and expiration will be
affected in any way by that termination and expiration.
Section 7.2. Indemnification of ARS Indemnified Parties. (a)
Subject to the applicable provisions of Sections 7.01 and 7.06, the
Stockholders covenant and agree that they, jointly and severally, will
indemnify each ARS Indemnified Party against, and hold each ARS Indemnified
Party harmless from and in respect of, all Damage Claims that arise from, are
based on or relate or otherwise are attributable to (i) any breach of the
representations and warranties of the Stockholders or the Company set forth
herein (other than in Article I) or in certificates delivered in connection
herewith (other than in respect of certificates relating only to the
representations and warranties in Article I), or (ii) any nonfulfillment of any
covenant or agreement on the part of the
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Stockholders or the Company under this Agreement (each such Damage Claim and
each Damage Claim described in Section 7.02(b) being an "ARS Indemnified
Loss").
(b) Each Stockholder, severally and not jointly with any other
Person, covenants and agrees that he will indemnify each ARS Indemnified Party
against, and hold each ARS Indemnified Party harmless from and in respect of,
all Damage Claims that arise from, are based on or relate or otherwise are
attributable to (i) any breach of the representations and warranties of that
Stockholder solely as to that Stockholder set forth in Article I or in
certificates delivered by that Stockholder and relating to those
representations and warranties or (ii) any nonfulfillment of any several
agreement on the part of that Stockholder in this Agreement.
Section 7.03. Indemnification of Stockholder Indemnified Parties.
ARS covenants and agrees that it will indemnify each Stockholder Indemnified
Party against, and hold each Stockholder Indemnified Party harmless from and in
respect of, all Damage Claims that arise from, are based on or relate or
otherwise are attributable to (a) any breach by ARS of its representations and
warranties set forth herein or in its certificates, if any, delivered to the
Company or the Stockholders in connection herewith or (b) any nonfulfillment of
any covenant or agreement on the part of ARS or ARS Sub in this Agreement (each
such Damage Claim being a "Stockholder Indemnified Loss").
Section 7.04. Conditions of Indemnification. (a) All claims for
indemnification under this Agreement shall be asserted and resolved as follows
in this Section 7.04.
(b) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (i) notify the party from whom
indemnification is sought (the "Indemnifying Party") of any third-party claim
or claims asserted against the Indemnified Party ("Third Party Claim") that
could give rise to a right of indemnification under this Agreement and (ii)
transmit to the Indemnifying Party a written notice ("Claim Notice") describing
in reasonable detail the nature of the Third Party Claim, a copy of all papers
served with respect to that claim (if any), an estimate of the amount of
damages attributable to the Third Party Claim to the extent feasible (which
estimate shall not be conclusive of the final amount of that claim) and the
basis for the Indemnified Party's request for indemnification under this
Agreement. Except as set forth in Section 7.01, the failure to promptly
deliver a Claim Notice shall not relieve the Indemnifying Party of its
obligations to the Indemnified Party with respect to the related Third Party
Claim except to the extent that the resulting delay is materially prejudicial
to the defense of that claim. Within 15 days after receipt of any Claim Notice
(the "Election Period"), the Indemnifying Party shall notify the Indemnified
Party (i) whether the Indemnifying Party disputes its potential liability to
the Indemnified Party under this Article VII with respect to that Third Party
Claim and (ii) if the Indemnifying Party does not dispute its potential
liability to the Indemnified Party with respect to that Third Party Claim,
whether the Indemnifying Party desires, at the sole cost and expense of the
Indemnifying Party, to defend the Indemnified Party against that Third Party
Claim.
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(c) If the Indemnifying Party does not dispute its potential
liability to the Indemnified Party and notifies the Indemnified Party within
the Election Period that the Indemnifying Party elects to assume the defense of
the Third Party Claim, then the Indemnifying Party shall have the right to
defend, at its sole cost and expense, that Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this Section 7.04(c), and the Indemnified
Party will furnish the Indemnifying Party with all information in its
possession with respect to that Third Party Claim and otherwise cooperate with
the Indemnifying Party in the defense of that Third Party Claim; provided,
however, that the Indemnifying Party shall not enter into any settlement with
respect to any Third Party Claim that purports to limit the activities of, or
otherwise restrict in any way, any Indemnified Party or any Affiliate of any
Indemnified Party without the prior consent of that Indemnified Party (which
consent may be withheld in the sole discretion of that Indemnified Party). The
Indemnified Party is hereby authorized, at the sole cost and expense of the
Indemnifying Party, to file, during the Election Period, any motion, answer or
other pleadings that the Indemnified Party shall deem necessary or appropriate
to protect its interests or those of the Indemnifying Party. The Indemnified
Party may participate in, but not control, any defense or settlement of any
Third Party Claim controlled by the Indemnifying Party pursuant to this Section
7.04(c) and will bear its own costs and expenses with respect to that
participation; provided, however, that if the named parties to any such action
(including any impleaded parties) include both the Indemnifying Party and the
Indemnified Party, and the Indemnified Party has been advised by counsel that
there may be one or more legal defenses available to it which are different
from or additional to those available to the Indemnifying Party, then the
Indemnified Party may employ separate counsel at the expense of the
Indemnifying Party, and, on its written notification of that employment, the
Indemnifying Party shall not have the right to assume or continue the defense
of such action on behalf of the Indemnified Party.
(d) If the Indemnifying Party (i) within the Election Period
(A) disputes its potential liability to the Indemnified Party under this
Article VII, (B) elects not to defend the Indemnified Party pursuant to Section
7.04(c) or (C) fails to notify the Indemnified Party that the Indemnifying
Party elects to defend the Indemnified Party pursuant to Section 7.04(c) or
(ii) elects to defend the Indemnified Party pursuant to Section 7.04(c) but
fails diligently and promptly to prosecute or settle the Third Party Claim,
then the Indemnified Party shall have the right to defend, at the sole cost and
expense of the Indemnifying Party (if the Indemnified Party is entitled to
indemnification hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnified Party to a final conclusion or settled. The Indemnified Party
shall have full control of such defense and proceedings. Notwithstanding the
foregoing, if the Indemnifying Party has delivered a written notice to the
Indemnified Party to the effect that the Indemnifying Party disputes its
potential liability to the Indemnified Party under this Article VII and if that
dispute is resolved in favor of the Indemnifying Party, the Indemnifying Party
shall not be required to bear the costs and expenses of the Indemnified Party's
defense pursuant to this Section 7.04 or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the Indemnified
Party shall reimburse the Indemnifying Party in full for all reasonable costs
and expenses of such litigation. The Indemnifying Party may
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participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section 7.04(d), and the Indemnifying Party
shall bear its own costs and expenses with respect to that participation.
(e) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that does not involve a Third Party
Claim, the Indemnified Party shall transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, an estimate of the amount of Damages attributable to that claim to
the extent feasible (which estimate shall not be conclusive of the final amount
of that claim) and the basis of the Indemnified Party's request for
indemnification under this Agreement. If the Indemnifying Party does not
notify the Indemnified Party within 15 days from its receipt of the Indemnity
Notice that the Indemnifying Party disputes the claim specified by the
Indemnified Party in the Indemnity Notice, that claim shall be deemed a
liability of the Indemnifying Party hereunder. If the Indemnifying Party has
timely disputed that claim, as provided above, that dispute shall be resolved
by proceedings in an appropriate court of competent jurisdiction if the parties
do not reach a settlement of that dispute within 30 days after notice of that
dispute is given.
(f) Payments of all amounts owing by an Indemnifying Party
pursuant to this Article VII relating to a Third Party Claim shall be made
within 30 days after the latest of (i) the settlement of that Third Party
Claim, (ii) the expiration of the period for appeal of a final adjudication of
that Third Party Claim or (iii) the expiration of the period for appeal of a
final adjudication of the Indemnifying Party's liability to the Indemnified
Party under this Agreement in respect of that Third Party Claim. Payments of
all amounts owing by an Indemnifying Party pursuant to Section 7.04(e) shall be
made within 30 days after the later of (i) the expiration of the 30-day
Indemnity Notice period or (ii) the expiration of the period for appeal of a
final adjudication of the Indemnifying Party's liability to the Indemnified
Party under this Agreement.
Section 7.05. Remedies Not Exclusive. The remedies provided in
this Agreement shall not be exclusive of any other rights or remedies available
to any other party, either at law or in equity.
Section 7.06. Limitations on Indemnification. (a)
Notwithstanding the provisions of Section 7.02(a), neither the Company nor any
of the Stockholders shall be required to indemnify or hold harmless any of the
ARS Indemnified Parties on account of any ARS Indemnified Loss under Section
7.02(a) unless the liability of the Company and the Stockholders in respect of
that ARS Indemnified Loss, when aggregated with the liability of the Company
and the Stockholders in respect of all ARS Indemnified Losses under Section
7.02(a), exceeds, and only to the extent the aggregate amount of all those ARS
Indemnified Losses does exceed, the Threshold Amount. In no event shall (i)
the aggregate joint and several liability of the Company and the Stockholders
under this Agreement, including Section 7.02(a), exceed the Ceiling Amount or
(ii) the aggregate liability of each Stockholder under this Agreement,
including Sections 7.02(a) and 7.02(b), exceed that Stockholder's Pro Rata
Share of the Ceiling Amount. For purposes of determining the amount of
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ARS Indemnified Losses, no effect will be given to any resulting Tax benefit to
any ARS Indemnified Party.
(b) Notwithstanding the provisions of Section 7.03, ARS shall
not be required to indemnify or hold harmless any of the Stockholder
Indemnified Parties on account of any Stockholder Indemnified Loss unless the
liability of ARS in respect of that Stockholder Indemnified Loss, when
aggregated with the liability of ARS in respect of all Stockholder Indemnified
Losses, exceeds, and only to the extent the aggregate amount of all those
Stockholder Indemnified Losses does exceed, the Threshold Amount. In no event
shall ARS be liable under this Agreement, including Section 7.04, for any
amount in excess of the Ceiling Amount. For purposes of determining the amount
of Stockholder Indemnified Losses, no effect will be given to any resulting Tax
benefit to any Stockholder Indemnified Party.
ARTICLE VIII
LIMITATIONS ON COMPETITION
Section 8.01. Prohibited Activities. Each Stockholder agrees,
severally and not jointly with any other Person, that he will not, during the
period beginning on the date hereof and ending on the third anniversary of the
Closing Date, directly or indirectly, for any reason, for his own account or on
behalf of or together with any other Person:
(a) engage as a director, officer or in any similar managerial
capacity or as an owner, co-owner, financier or other investor of or in
any business selling any products or providing any services in
competition with the Acquired Business or ARS or any Subsidiary of ARS
(ARS and its Subsidiaries collectively being "ARS" for purposes of this
Article VIII) within any Territory surrounding any service facility in
which the Acquired Business was engaged in business on the date hereof
or immediately prior to the Effective Date (for purposes of this Article
VIII, the "Territory" surrounding any service facility will be (i) the
city, town or village in which that service facility is located, (ii)
the county or parish in which that service facility is located, (iii)
the counties or parishes contiguous to the county or parish in which
that service facility is located, (iv) the area located within 50 miles
of that service facility, (v) the area located within 100 miles of that
service area and (vi) the area in which that service facility regularly
provides services at the locations of its customers);
(b) call on any natural person who is at that time employed by
the Acquired Business or ARS in any managerial capacity with the purpose
or intent of attracting that person from the employ of the Acquired
Business or ARS, provided that the Stockholder may call on and hire any
of his family members;
(c) call on, solicit or perform services for, either directly
or indirectly, any Person that at that time is, or at any time within
one year prior to that time was, a customer of the
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Acquired Business or ARS or any prospective customer that had or, to the
knowledge of the Stockholder, was about to receive a business proposal
from ARS, in any case within any Territory (i) for the purpose of
soliciting or selling any product or service in competition with the
Acquired Business or ARS in that Territory and (ii) with the knowledge
of that customer relationship; or
(d) call on any Entity which has been called on by ARS in
connection with a possible acquisition by ARS, with the knowledge of
that Entity's status as such an acquisition candidate, for the purpose
of acquiring that Entity or arranging the acquisition of that Entity by
any Person other than ARS.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 5% of the outstanding capital stock of a competing Entity if
that class of capital stock is listed on a national stock exchange or included
in the Nasdaq National Market.
Section 8.02. Damages. Because of the difficulty of measuring
economic losses to ARS as a result of any breach by a Stockholder of his
covenants in Section 8.01, and because of the immediate and irreparable damage
that could be caused to ARS for which it would have no other adequate remedy,
each Stockholder agrees that ARS may enforce the provisions of Section 8.01 by
injunctions and restraining orders against that Stockholder if he breaches any
of those provisions.
Section 8.03. Reasonable Restraint. The parties hereto each
agree that Sections 8.01 and 8.02 impose a reasonable restraint on the
Stockholders in light of the activities and business of ARS on the date hereof,
the current business plans of ARS and the investment, if any, by each
Stockholder in ARS as a result of the Acquisition.
Section 8.04. Severability; Reformation. The covenants in this
Article VIII are severable and separate, and the unenforceability of any
specific covenant in this Article VIII is not intended by any party hereto to,
and shall not, affect the provisions of any other covenant in this Article
VIII. If any court of competent jurisdiction shall determine that the scope,
time or territorial restrictions set forth in Section 8.01 are unreasonable as
applied to any Stockholder, the parties hereto, including that Stockholder,
acknowledge their mutual intention and agreement that those restrictions be
enforced to the fullest extent the court deems reasonable, and thereby shall be
reformed to that extent as applied to that Stockholder and any other
Stockholder similarly situated.
Section 8.05. Independent Covenant. All the covenants in this
Article VIII are intended by each party hereto to, and shall, be construed as
an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of any Stockholder against ARS,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by ARS of any covenant in this Article VIII. It is
specifically agreed that the period specified in Section 8.01 shall be computed
in the case of each Stockholder by excluding from that computation any time
during which that Stockholder is in violation of any provision of Section 8.01.
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The covenants contained in this Article VIII shall not be affected by any
breach of any other provision hereof by any party hereto.
Section 8.06. Materiality. The Company and each Stockholder,
severally and not jointly with any other Person, hereby agree that this
Article VIII is a material and substantial part of the transactions
contemplated hereby.
ARTICLE IX
DEFINITIONS AND DEFINITIONAL PROVISIONS
Section 9.01. Defined Terms. As used in this Agreement, the
following terms have the meanings assigned to them below:
"Acquired Business" has the meaning specified in Paragraph 1.
"Acquisition" has the meaning specified in the Preliminary
Statement.
"Acquisition Consideration" has the meaning specified in
Paragraph 2.
"Agreement" means this Agreement, including all attached
Schedules, Annexes, Addenda and Exhibits, as each of the same may be
amended, modified or supplemented from time to time pursuant to the
provisions hereof or thereof.
"Affiliate" means, as to any specified Person, any other Person
that, directly or indirectly through one or more intermediaries or
otherwise, controls, is controlled by or is under common control with
the specified Person. As used in this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person (whether through
ownership of Capital Stock of that Person, by contract or otherwise).
"Air Conditioning and Refrigeration Contracting" means the
design, installation, construction, maintenance, service, repair,
alteration or modification of any appliance, equipment or other product
used in environmental air conditioning or filtering, commercial
refrigeration or process cooling or heating systems.
"ARS" means American Residential Services, Inc., a Delaware
corporation.
"ARS Common Stock" means the common stock, par value $.001 per
share, of ARS.
"ARS Indemnified Loss" has the meaning specified in Section 7.02.
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"ARS Indemnified Party" means ARS and its Affiliates and each of
their respective officers, directors, employees, agents and counsel;
provided, however, that no Person who indemnifies ARS Indemnified
Parties in this Agreement in his capacity as a Stockholder will be an
ARS Indemnified Party for purposes of this Agreement.
"ARS Sub" means the Subsidiary of ARS, if any, which is a party
to this Agreement.
"Capital Stock" means, with respect to: (a) any corporation, any
share, or any depositary receipt or other certificate representing any
share, of an equity ownership interest in that corporation; and (b) any
other Entity, any share, membership or other percentage interest, unit
of participation or other equivalent (however designated) of an equity
interest in that Entity.
"Ceiling Amount" has the meaning specified in Paragraph 1.
"Certificate of Merger" means, if the Acquisition is effected by
means of a Merger, (a) the articles or certificate of merger respecting
that Merger which contains the information required by the laws of
Surviving Corporation's Organization State to effect that Merger and, if
the Organization State of any Entity merged into the Surviving
Corporation in that Merger is not the Organization State of the
Surviving Corporation, (b) the articles or certificate of merger
respecting that Merger which contains the information required by the
laws of that merged Entity's Organization State to effect that Merger.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980.
"Charter Documents" means, with respect to any Entity at any
time, in each case as amended, modified and supplemented at that time,
the articles or certificate of formation, incorporation or organization
(or the equivalent organizational documents) of that Entity, (b) the
bylaws or limited liability company agreement or regulations (or the
equivalent governing documents) of that Entity and (c) each document
setting forth the designation, amount and relative rights, limitations
and preferences of any class or series of that Entity's Capital Stock or
of any rights in respect of that Entity's Capital Stock.
"Claim Notice" has the meaning specified in Section 7.04.
"Closing" has the meaning specified in Paragraph 3.
"Closing Date" has the meaning specified in Paragraph 1.
"Code" means the Internal Revenue Code of 1986.
"Company" has the meaning specified in Paragraph 1.
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"Company Capital Stock" has the meaning specified in the
Paragraph 1.
"Company ERISA Benefit Plan" has the meaning specified in Section
2.25.
"Company ERISA Pension Plan" has the meaning specified in Section
2.25.
"Company Subsidiary" means at any time any Entity that is a
Subsidiary of the Company at that time.
"Confidential Information" means, with respect to any Person, all
trade secrets and other confidential, nonpublic and/or proprietary
information of that Person, including information derived from reports,
investigations, research, work in progress, codes, marketing and sales
programs, capital expenditure projects, cost summaries, pricing
formulae, contract analyses, financial information, projections,
confidential filings with any Governmental Authority and all other
confidential, nonpublic concepts, methods of doing business, ideas,
materials or information prepared or performed for, by or on behalf of
that Person.
"Convertibility Commencement Date" means, with respect to any
Convertible Note, the first date on which that Convertible Note may be
converted into shares of ARS Common Stock.
"Convertible Notes" means the convertible subordinated notes of
ARS which are issuable or issued from time to time under the Convertible
Notes Indenture.
"Convertible Notes Indenture" means the Indenture dated as of
July 31, 1997 between ARS and U.S. Trust Company of Texas, N.A., as
Trustee, as the same may be amended, modified or supplemented from time
to time.
"Convertible Notes Trustee" means at any time the Person acting
as trustee under the Convertible Notes Indenture at that time.
"Counsel for ARS" means John D. Held, Esq., in his capacity as
General Counsel and an officer of ARS.
"Current Balance Sheet" has the meaning specified in Paragraph 1.
"Current Balance Sheet Date" has the meaning specified in
Paragraph 1.
"Current Prospectus" means: (a) at any time prior to the filing
by ARS with the SEC of the second post-effective amendment to the
Registration Statement, the prospectus dated December 17, 1997 and filed
with the SEC pursuant to Securities Act Rule 424(b), as supplemented to
that time; and (b) at any time after the filing of a post-effective
amendment
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to the Registration Statement which has become and then remains
effective under the Securities Act, the prospectus included in that
post-effective amendment at the time it became effective, except that if
the prospectus first furnished to the Stockholders after that post-
effective amendment became effective for use in connection with the
Acquisition differs from the prospectus included in that post-effective
amendment at the time it became effective (whether or not that
prospectus so furnished was required to be filed with the SEC pursuant
to Securities Act Rule 424(b)), the prospectus so furnished, as it may
be supplemented from time to time, is the "Current Prospectus."
"Damage" to any specified Person means any cost, damage
(including any consequential, exemplary, punitive or treble damage) or
expense (including reasonable fees and actual disbursements by
attorneys, consultants, experts or other Representatives and Litigation
costs) to, any fine of or penalty on or any liability (including loss of
earnings or profits) of any other nature of that Person; provided, that
if any Indemnified Party should have a claim against any Indemnifying
Party that does not involve a Third Party Claim and for which the
Indemnified Party seeks indemnification pursuant to Section 7.04(e), the
amount of Damages attributable to that claim will not include any amount
representing consequential, exemplary, punitive or treble damage.
"Damage Claim" means, as asserted (a) against any specified
Person, any claim, demand or Litigation made or pending against the
specified Person for Damages to any other Person, or (b) by the
specified Person, any claim or demand of the specified Person against
any other Person for Damages to the specified Person.
"DGCL" means the Delaware General Corporation Law.
"Effective Date" has the meaning specified in Paragraph 1.
"Effective Time" has the meaning specified in Paragraph 2.
"Election Period" has the meaning specified in Section 7.04.
"Electrical Contracting" means the design, installation,
construction, maintenance, service, repair, alteration or modification
of any electrical wires or wiring apparatus or system, fixtures and
appliances used or to be used for the transmission of electricity for
light, heat, power or signaling in or about buildings where any natural
person or persons live, work or assemble.
"Employee Policies and Procedures" means at any time all employee
manuals and all material policies, procedures and work-related rules
that apply at that time to any employee, nonemployee director or officer
of, or any other natural person performing consulting or other
independent contractor services for, the Company or any Company
Subsidiary.
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"Employment Agreement" means at any time any (a) agreement to
which the Company or any Company Subsidiary is a party which then
relates to the direct or indirect employment or engagement, or arises
from the past employment or engagement, of any natural person by the
Company or any Company Subsidiary, whether as an employee, a nonemployee
officer or director, a consultant or other independent contractor, a
sales representative or a distributor of any kind, including any
employee leasing or service agreement and any noncompetition agreement,
and (b) agreement between the Company or any Company Subsidiary and any
Person which arises from the sale of a business by that Person to the
Company or any Company Subsidiary and limits that Person's competition
with the Company or any Company Subsidiary.
"Entity" means any sole proprietorship, corporation, partnership
of any kind having a separate legal status, limited liability company,
business trust, unincorporated organization or association, mutual
company, joint stock company or joint venture.
"Environmental Laws" means any and all Governmental Requirements
relating to the environment or worker health or safety, including
ambient air, surface water, land surface or subsurface strata, or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or
wastes (including Solid Wastes, Hazardous Wastes or Hazardous
Substances) or noxious noise or odor into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, recycling, removal, transport or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous
substances or wastes (including petroleum, petroleum distillates,
asbestos or asbestos-containing material, polychlorinated biphenyls,
chlorofluorocarbons (including chlorofluorocarbon-12) or hydrochloro-
fluorocarbons).
"ERISA" means the Employee Retirement Income Security Act of
1974.
"ERISA Affiliate" means, with respect to any specified Person at
any time, any other Person, including an Affiliate of the specified
Person, that is, or at any time within six years of that time was, a
member of any ERISA Group of which the specified Person is or was a
member at the same time.
"ERISA Affiliate Pension Plan" has the meaning specified in
Section 2.25.
"ERISA Employee Benefit Plan" means any "employee benefit plan"
as defined in Section 3(3) of ERISA and includes any ERISA Pension
Benefit Plan.
"ERISA Group" means any "group of organizations" within the
meaning of Section 414(b), (c), (m) or (o) of the Code or any
"controlled group" as defined in Section 4001(a)(14) of ERISA.
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"ERISA Pension Benefit Plan" means any "employee pension benefit
plan", as defined in Section 3(2) of ERISA, including any plan that is
covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code (excluding any Multiemployer Plan).
"Exchange Act" means the Securities Exchange Act of 1934.
"Financial Statements" means the Initial Financial Statements and
the other financial statements of the Company and the Company
Subsidiaries, if any, delivered to ARS pursuant to Section 4.08 prior to
the Effective Time.
"GAAP" means generally accepted accounting principles and
practices in the United States as in effect from time to time which have
been concurred in by Arthur Andersen LLP and have been or are applied on
a basis consistent (except for changes concurred in by Arthur Andersen
LLP) with the most recent Financial Statements delivered to ARS prior to
the Effective Time.
"Governmental Approval" means at any time any authorization,
consent, approval, permit, franchise, certificate, license, implementing
order or exemption of, or registration or filing with, any Governmental
Authority, including any certification or licensing of a natural person
to engage in a profession or trade or a specific regulated activity, at
that time.
"Governmental Authority" means (a) any national, state, county,
municipal or other government, domestic or foreign, or any agency,
board, bureau, commission, court, department or other instrumentality of
any such government, or (b) any Person having the authority under any
applicable Governmental Requirement to assess and collect Taxes for its
own account.
"Governmental Requirement" means at any time (a) any law,
statute, code, ordinance, order, rule, regulation, judgment, decree,
injunction, writ, edict, award, authorization or other requirement of
any Governmental Authority in effect, and as then may be interpreted by
applicable Governmental Authorities, at that time or (b) any obligation
included in any certificate, certification, franchise, permit or license
issued by any Governmental Authority or resulting from binding
arbitration, including any requirement under common law, at that time.
"Guaranty" means, for any specified Person, without duplication,
any liability, contingent or otherwise, of that Person guaranteeing or
otherwise becoming liable for any obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, and
including any liability of the specified Person, direct or indirect, (a)
to purchase or pay (or advance or supply funds for the purchase or
payment of) that obligation or to purchase (or to advance or supply
funds for the purchase of) any security for the payment of that
obligation, (b) to purchase property, securities or services for the
purpose
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of assuring the owner of that obligation of its payment or (c) to
maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the
primary obligor to pay that obligation; provided, that the term
"Guaranty" does not include endorsements for collection or deposit in
the ordinary course of the endorser's business.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976.
"Indebtedness" of any Person means, without duplication, (a) any
liability of that Person (i) for borrowed money or arising out of any
extension of credit to or for the account of that Person (including
reimbursement or payment obligations with respect to surety bonds,
letters of credit, banker's acceptances and similar instruments), for
the deferred purchase price of property or services or arising under
conditional sale or other title retention agreements, other than trade
payables arising in the ordinary course of business, (ii) evidenced by
notes, bonds, debentures or similar instruments, (iii) in respect of
capital leases or (iv) in respect of interest rate protection
agreements, (b) any liability secured by any Lien upon any property or
assets of that Person (or upon any revenues, income or profits of that
Person therefrom), whether or not that Person has assumed that liability
or otherwise become liable for the payment thereof or (c) any liability
of others of the type described in the preceding clause (a) or (b) in
respect of which that Person has incurred, assumed or acquired a
liability by means of a Guaranty.
"Indemnity Notice" has the meaning specified in Section 7.04.
"Indemnified Party" has the meaning specified in Section 7.04.
"Indemnifying Party" has the meaning specified in Section 7.04.
"Information" means written information, including (a) data,
certificates, reports and statements (excluding Financial Statements)
and (b) summaries of unwritten agreements, arrangements, contracts,
plans, policies, programs or practices or of unwritten amendments or
modifications of, supplements to or waivers under any of the foregoing
documents.
"Initial Conversion Price" means, with respect to any Convertible
Note, the initial price per share, subject to adjustment as provided in
the Convertible Notes Indenture, at which that Convertible Note may be
converted into shares of ARS Common Stock pursuant to the Convertible
Notes Indenture.
"Initial Financial Statements" has the meaning specified in
Paragraph 1.
"Initial Target Value" means, with respect to any Convertible
Note, the initial average price per share, subject to adjustment
pursuant to the Convertible Notes Indenture, at which the ARS Common
Stock must trade, as contemplated by Schedule 2(D), before that
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Convertible Note becomes convertible into shares of ARS Common Stock at
the option of ARS.
"IRS" means the Internal Revenue Service.
"Lien" means, with respect to any property or asset of any Person
(or any revenues, income or profits of that Person therefrom) (in each
case whether the same is consensual or nonconsensual or arises by
contract, operation of law, legal process or otherwise), (a) any
mortgage, lien, security interest, pledge, attachment, levy or other
charge or encumbrance of any kind thereupon or in respect thereof or (b)
any other arrangement under which the same is transferred, sequestered
or otherwise identified with the intention of subjecting the same to, or
making the same available for, the payment or performance of any
liability in priority to the payment of the ordinary, unsecured
creditors of that Person, including any "adverse claim" (as defined in
the applicable Uniform Commercial Code) in the case of any Capital
Stock. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any asset that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to that asset.
"Litigation" means any action, case, proceeding, claim,
grievance, suit or investigation or other proceeding conducted by or
pending before any Governmental Authority or any arbitration proceeding.
"Material" means, as applied to any Entity or the Acquired
Business, material to the business, operations, property or assets,
liabilities, financial condition or results of operations of that Entity
and its Subsidiaries considered as a whole or the Acquired Business, as
the case may be.
"Material Adverse Effect" means, with respect to the consequences
of any fact or circumstance (including the occurrence or non-occurrence
of any event) to the Acquired Business, that such fact or circumstance
has caused, is causing or will cause, directly, indirectly or
consequentially, singly or in the aggregate with other facts and
circumstances, any Damages in excess of the Threshold Amount.
"Material Agreement" of any Entity means any contract or
agreement (a) to which that Entity or any of its Subsidiaries is a
party, or by which that Entity or any of its Subsidiaries is bound or to
which any property or assets of that Entity or any of its Subsidiaries
is subject and (b) which is Material to that Entity.
"Merger" means a transaction as a result of which the Acquisition
is effected and in which either (a) ARS Sub is merged with or into the
Company or (b) the Company is merged with or into ARS or ARS Sub, as the
case may be.
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"Multiemployer Plan" means a "multiemployer" plan as defined in
Section 4001(a)(3) of ERISA, Section 414 of the Code or Section 3(37) of
ERISA.
"Organization State" means, as applied to (a) any corporation,
its state or other jurisdiction of incorporation, (b) any limited
liability company or limited partnership, the state or other
jurisdiction under whose laws it is organized and existing in that legal
form, and (c) any other Entity, the state or other jurisdiction whose
laws govern that Entity's internal affairs.
"Original Issue Date" means, with respect to any Convertible Note
issued in the Acquisition, the Effective Date of the Acquisition.
"Other Compensation Plan" means any compensation arrangement,
plan, policy, practice or program established, maintained or sponsored
by the Company or any Company Subsidiary, or to which the Company or any
Company Subsidiary contributes, on behalf of any of its employees,
nonemployee directors or officers or other natural persons performing
consulting or other independent contractor services for the Company or
any Company Subsidiary, (a) including all such arrangements, plans,
policies, practices or programs providing for severance pay, deferred
compensation, incentive, bonus or performance awards or the actual or
phantom ownership of any Capital Stock or options, warrants or rights to
acquire Capital Stock of the Company or any Company Subsidiary, but (b)
excluding all Company ERISA Pension Plans and Employment Agreements.
"Permitted Liens" means, as applied to the property or assets of
any Person (or any revenues, income or profits of that Person
therefrom): (a) Liens for Taxes if the same are not at the time due and
delinquent; (b) Liens of carriers, warehousemen, mechanics, laborers and
materialmen for sums not yet due; (c) Liens incurred in the ordinary
course of that Person's business in connection with workmen's
compensation, unemployment insurance and other social security
legislation (other than pursuant to ERISA or Section 412(n) of the
Code); (d) Liens incurred in the ordinary course of that Person's
business in connection with deposit accounts or to secure the
performance of bids, tenders, trade contracts, statutory obligations,
surety and appeal bonds, performance and return-of-money bonds and other
obligations of like nature; (e) easements, rights-of-way, reservations,
restrictions and other similar encumbrances incurred in the ordinary
course of that Person's business or existing on property and not
materially interfering with the ordinary conduct of that Person's
business or the use of that property; (f) defects or irregularities in
that Person's title to its real properties which do not materially (i)
diminish the value of the surface estate or (ii) interfere with the
ordinary conduct of that Person's business or the use of any of such
properties; (g) any interest or title of a lessor of assets being leased
by any Person pursuant to any capital lease disclosed in Schedule 2.19
or any lease that, pursuant to GAAP, would be accounted for as an
operating lease; and (h) Liens securing purchase money Indebtedness
disclosed in Schedule 2.18 or 2.19 so long as such Liens do not attach
to any property or assets other than the properties or assets purchased
with the proceeds of such Indebtedness.
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"Person" means any natural person, Entity, estate, trust, union
or employee organization or Governmental Authority or, for the purpose
of the definition of "ERISA Affiliate," any trade or business.
"Plan" has the meaning specified in Section 2.26.
"Plumbing" means the installation, repair, service or maintenance
of any piping, fixtures, appurtenances or appliances in and about
buildings where any natural person or persons live, work or assemble for
a supply of gas, water or liquids, or any combination thereof, or for
the disposal of waste water or sewage.
"Plumbing Laws" means any and all Governmental Requirements
related to Plumbing, such as Governmental Requirements relating to the
planning, superintending, installation, alteration, repair, service and
renovation of any pipeline, fixtures, appurtenances, appliances or drain
or waste pipes, and including Governmental Requirements relating to the
licensing of natural persons as plumbers of any classification.
"Professional Codes" means any and all Governmental Requirements
relating to the licensing or other regulation of the business of Air
Conditioning and Refrigeration Contracting, Electrical Contracting,
Plumbing or other residential or commercial on-site services, including
building, electric and mechanical codes, Plumbing Laws and Governmental
Requirements relating to any Person who issues and performs, or arranges
to perform, services pursuant to any agreement or contract whereby, for
a fee, a Person undertakes, for a specified period of time, to maintain,
repair or replace all or any part of the structural components, the
appliances or the electrical, plumbing, heating, cooling or air-
conditioning systems on any residential or commercial property.
"Prohibited Transaction" means any transaction that is prohibited
under Section 4975 of the Code or Section 406 of ERISA and not exempt
under Section 4975 of the Code or Section 408 of ERISA.
"Proprietary Rights" means (a) patents, applications for patents
and patent rights, (b) in each case, whether registered, unregistered or
under pending registration, trademark rights, trade names, trade name
rights, corporate names, business names, trade styles or dress, service
marks and logos and other trade designations and copyrights and (c), in
the case of the Company or any Company Subsidiary, all agreements
relating to the technology, know-how or processes used in any business
of the Company or any Company Subsidiary.
"Pro Rata Share" means for each Stockholder the fraction
expressed as a percentage and set forth either in Paragraph 1 or in a
Schedule to Paragraph 2, (a) the numerator of which is the number of
shares of outstanding Company Capital Stock owned by that Person, as set
forth in a Schedule to Paragraph 2, and (b) the denominator of which is
the total
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number of shares of outstanding Company Capital Stock owned by all
Stockholders as set forth in a Schedule to Paragraph 2.
"Qualified Plans" has the meaning specified in Section 2.26.
"Registration Statement" means the registration statement on Form
S-4 (Registration No. 333-31815), as amended from time to time by one or
more post-effective amendments thereto, filed by ARS with the SEC to
register shares of ARS Common Stock and Convertible Notes under the
Securities Act for offering and sale in connection with business
combination and other acquisition transactions, including the
Acquisition.
"Related Party Agreement" means any contract or other agreement,
written or oral, (a) to which the Company or any Company Subsidiary is a
party or is bound or by which any property of the Company or any Company
Subsidiary is bound or may be subject and (b) (i) to which any
Stockholder or any of that Stockholder's Related Persons or Affiliates
also is a party, or (ii) of which any Stockholder or any of that
Stockholder's Related Persons or Affiliates is a beneficiary.
"Related Person" of a Stockholder means: (a) if that Stockholder
is a natural person, (i) any family member of that Stockholder, (ii) any
estate of that Stockholder or any family member of that Stockholder,
(iii) the trustee of any trust of which all the beneficiaries are
Related Persons of that Stockholder and (iv) any Entity the entire
equity interest in which is owned by any one or more of that Stockholder
and Related Persons of that Stockholder; and (b) if that Stockholder is
an Entity, estate or trust, (i) any Person who owns an equity interest
in that Stockholder on the date hereof, (ii) any Person who would be a
Related Person under clause (a) of this definition of a natural person
who is an ultimate beneficial owner of that Stockholder or (iii) any
other Entity the entire equity interest in which is owned by any one or
more of that Stockholder and Related Persons of that Stockholder.
"Reportable Event" means, with respect to any Company ERISA
Pension Plan, (a) the occurrence of any of the events set forth in
Section 4043(b) or (c) (other than a Reportable Event as to which the
provision of 30 days' notice to the Pension Benefit Guaranty Corporation
is waived under applicable regulations), 4062(e) or 4063(a) of ERISA
with respect to that plan, (b) any event requiring the Company or any
ERISA Affiliate to provide security to that plan under Section
401(a)(29) of the Code or (c) any failure to make a payment required by
Section 412(m) of the Code with respect to that plan.
"Representatives" means, with respect to any Person, the
directors, officers, employees, Affiliates, accountants (including
independent certified public accountants), advisors, attorneys,
consultants or other agents of that Person, or any other representatives
of that Person or of any of those directors, officers, employees,
Affiliates, accountants (including independent certified public
accountants), advisors, attorneys, consultants or other agents.
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"RCRA" means the Resource Conservation and Recovery Act of 1976.
"Restricted Payment" means, with respect to any Entity at any
time, any of the following effected by that Entity: (a) any declaration
or payment of any dividend or other distribution, direct or indirect, on
account of any Capital Stock of that Entity or any Affiliate of that
Entity or (b) any direct or indirect redemption, retirement, purchase or
other acquisition for value of, or any direct or indirect purchase,
payment or sinking fund or similar deposit for the redemption,
retirement, purchase or other acquisition for value of, or to obtain the
surrender of, any then outstanding Capital Stock of that Entity or any
Affiliate of that Entity or any then outstanding warrants, options or
other rights to acquire or subscribe for or purchase unissued or
treasury Capital Stock of that Entity or any Affiliate of that Entity.
"Retained Related Party Agreement" has the meaning specified in
Section 2.11.
"Returns" of any Person means the returns, reports or statements
(including any Information returns) any Governmental Requirement
requires to be filed by that Person for purposes of any Tax.
"Section 338(h)(10) Purchase" means a transaction as a result of
which the Acquisition is effected by means of a Stock Purchase and in
connection with which ARS or ARS Sub makes an election under Section
338(h)(10) of the Code with respect to its purchase of the Company
Capital Stock.
"Section 351 Transaction" means, if the Acquisition is structured
as a transaction qualifying for the deferral of federal income tax under
Section 351 of the Code, that transaction.
"Section 368 Reorganization" means, if the Acquisition is
structured as a transaction qualifying as a reorganization under Section
368 of the Code, that transaction.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933.
"Service Company Laws" means any and all Governmental
Requirements regulating, relating to or otherwise applicable to the
terms and conditions, offering, issuance, sale or performance of home
protection contracts, home warranties, home warranty contracts,
insurance contracts, maintenance contracts, residential service
contracts, service contracts, service warranties, written warranties and
other consumer contracts relating to the insuring, maintaining,
repairing or selling of real or personal property, including the
California Home Protection Act (Ins. Code, Div. 2, Pt. 7), the
provisions of the California Civil Code relating to service contracts
and warranties, the provisions of Title 38 of the Connecticut Insurance
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Code relating to home warranty contracts and service agreements, the
Florida Service Warranty Associations Act (Title 37, Ch. 634, Part III),
Title 33 of the Official Code of Georgia (including Section 304.5-070),
the Maine Home Service Contracts Act (Title 32, Ch. 113, Subch. V), the
Massachusetts Home Warranty Companies Act (Ch. 175, Sections 149 et
seq.), the Mississippi Home Warranties Act (Sections 83-47-1 et seq.),
the provisions of Missouri law relating to the unauthorized transaction
of insurance business, the provisions of the Nevada Insurance Statutes
relating to insurance for home protection (Sections 690B.100 et seq.),
the provisions of the New Hampshire Code of Administrative Rules
relating to home warranty insurance (NH ADC Ch. Ins. 2500 et seq.), the
New Mexico Insurance Code (including Section 59A-1-5), the provisions of
Ch. 58, Article 1 of the North Carolina General Statutes relating to
warranties, the Ohio Home Warranty Companies Act (Ins. Code Ch. 3957),
the Oklahoma Service Warranty Insurance Act (Title 36, Sections 6601-
6639), the provisions of the Oregon Statutes relating to service
contracts and insurance (including casualty and home protection
insurance), the Texas Residential Service Company Act (Art. 6573b,
V.T.C.S.), the provisions of the Utah Insurance Code relating to
warranties and service contracts, the Virginia Home Protection Companies
Act (Ins. Code, Ch. 26) and the provisions of the Wisconsin
Administrative Code relating to the issuance of warranties.
"Solid Wastes, Hazardous Wastes or Hazardous Substances" have the
meanings ascribed to those terms in CERCLA, RCRA or any other
Environmental Law applicable to the business or operations of the
Company or any Company Subsidiary which imparts a broader meaning to any
of those terms than does CERCLA or RCRA.
"Special Provisions" means the Special Provisions of ARS, if any,
referred to in Paragraph 5 and incorporated by reference in this
Agreement.
"Stockholder Indemnified Loss" has the meaning specified in
Section 7.03.
"Stockholder Indemnified Party" means (a) each Stockholder and
each of that Stockholder's Affiliates (other than the Company or,
following the Effective Time, ARS or any of its Subsidiaries, if the
Stockholder is an Affiliate of ARS), agents and counsel and (b) prior to
the Effective Time, the Company and each of its officers, directors,
employees, agents and counsel who are not Stockholder Indemnified
Parties within the meaning of clause (a) of this definition.
"Stock Purchase" means a transaction as a result of which the
Acquisition is effected by means of the purchase by ARS or ARS Sub from
the Stockholders of all the outstanding Company Capital Stock.
"Subsidiary" of any specified Person at any time, means any
Entity a majority of the Capital Stock of which is at that time owned or
controlled, directly or indirectly, by the specified Person.
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"Supplemental Information" has the meaning specified in Section
4.07.
"Surviving Corporation" means, if the Acquisition is effected by
means of Merger, the Company or the Person to be designated in the
Certificate of Merger as the surviving corporation of that merger.
"Tax" or "Taxes" means all 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 or
assessments of any nature whatever imposed by any Governmental
Requirement, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
"Taxing Authority" means any Governmental Authority having or
purporting to exercise jurisdiction with respect to any Tax.
"Termination Event" means, with respect to any Company ERISA
Pension Plan, (a) any Reportable Event with respect to that plan which
is likely to result in the termination of that plan, (b) the termination
of, or the filing of a notice of intent to terminate, that plan or the
treatment of any amendment to that plan as a termination under Section
4041(c) of ERISA or (c) the institution of proceedings to terminate, or
the appointment of a trustee to administer, that plan under Section 4042
of ERISA.
"Third Party Claim" has the meaning specified in Section 7.04.
"Threshold Amount" has the meaning specified in Paragraph 1.
"Transaction Document" means this Agreement and the other written
agreements, documents, instruments and certificates executed pursuant to
or in connection with this Agreement including those specified or
referred to in Article V to be delivered at or before the Closing, all
as amended, modified or supplemented from time to time.
"Welfare Plan" means an "employee welfare benefit plan" as
defined in Section 3(1) of ERISA.
Section 9.02. Other Defined Terms. Words and terms used in these
Standard Provisions which are defined elsewhere in this Agreement are used
herein as therein defined.
Section 9.03. Other Definitional Provisions. (a) Except as
otherwise specified herein, all references herein to any Governmental
Requirement defined or referred to herein, including the Code, CERCLA, ERISA,
the Exchange Act, RCRA and the Securities Act, shall be deemed references to
that Governmental Requirement or any successor Governmental Requirement,
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as the same may have been amended or supplemented from time to time, and any
rules or regulations promulgated thereunder.
(b) When used in this Agreement, the words "herein," "hereof"
and "hereunder" and words of similar import refer to this Agreement as a whole
and not to any provision of this Agreement, and the words "Article,"
"Paragraph," "Section," "Annex," "Addendum," "Schedule" and "Exhibit" refer to
Articles, Paragraphs and Sections of, and Annexes, Addenda, Schedules and
Exhibits to, this Agreement unless otherwise specified.
(c) Whenever the context so requires, the singular number
includes the plural and vice versa, and a reference to one gender includes the
other gender and the neuter.
(d) The word "including" (and, with correlative meaning, the
word "include") means including, without limiting the generality of any
description preceding such word, and the words "shall" and "will" are used
interchangeably and have the same meaning.
Section 9.04. Captions. Captions to Articles, Paragraphs,
Sections and subsections of, and Annexes, Addenda, Schedules and Exhibits to,
this Agreement or any other Transaction Document are included for convenience
of reference only, and such captions shall not constitute a part of this
Agreement or any other Transaction Document for any other purpose or in any way
affect the meaning or construction of any provision of this Agreement or any
other Transaction Document.
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Treatment of Confidential Information. (a) Each
of the Company and the Stockholders, severally and not jointly with any other
Person, acknowledges that it has or may have had in the past, currently has and
in the future may have access to Confidential Information of the Company and
the Company Subsidiaries and ARS and its Subsidiaries. Each of the Company and
the Stockholders, severally and not jointly with any other Person, agrees that
it will keep confidential all such Confidential Information furnished to it
and, except with the specific prior written consent of ARS, will not disclose
such Confidential Information to any Person except (a) Representatives of ARS
and (b) its own Representatives, provided that these Representatives (other
than counsel) agree to the confidentiality provisions of this Section 10.01;
provided, however, that Confidential Information shall not include such
information as (i) becomes known to the public generally through no fault of
any Stockholder, (ii) is required to be disclosed by law or the order of any
Governmental Authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), each Stockholder shall, if
possible, give prior written notice thereof to ARS and provide ARS with the
opportunity to contest such disclosure, or (iii) the disclosing party
reasonably believes is required to be disclosed in connection with the defense
of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by any Stockholder of the
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provisions of this Section 10.01 with respect to any Confidential Information,
ARS shall be entitled to an injunction restraining such Stockholder from
disclosing, in whole or in part, that Confidential Information. Nothing herein
shall be construed as prohibiting ARS from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 10.01(a), and
because of the immediate and irreparable damage that would be caused to ARS for
which it would have no other adequate remedy, each of the Company and the
Stockholders agrees that ARS may enforce the provisions of Section 10.01(a) by
injunctions and restraining orders against each of them who breaches any of
those provisions.
(c) The obligations of the parties under this Section 10.01
shall survive the termination of this Agreement.
Section 10.02. Brokers and Agents. The Stockholders jointly and
severally represent and warrant to ARS that the Company has not directly or
indirectly employed or become obligated to pay any broker or similar agent in
connection with the transactions contemplated hereby and agree, without regard
to the Threshold Amount limitations set forth in Article VII, to indemnify ARS
against all Damage Claims arising out of claims for any and all fees and
commissions of brokers or similar agents employed or promised payment by the
Company.
Section 10.03. Assignment; No Third Party Beneficiaries. This
Agreement and the rights of the parties hereunder may not be assigned (except
by operation of law) and shall be binding on and inure to the benefit of the
parties hereto, the successors of ARS, and the heirs and legal representatives
of the Stockholders (and, in the case of any trust, the successor trustees of
that trust). Neither this Agreement nor any other Transaction Document is
intended, or shall be construed, deemed or interpreted, to confer on any Person
not a party hereto or thereto any rights or remedies hereunder or thereunder,
except as provided in Section 10.12 or Article VII or as otherwise provided
expressly herein or therein.
Section 10.04. Entire Agreement; Amendment; Waivers. This
Agreement and the documents delivered pursuant hereto constitute the entire
agreement and understanding among the Stockholders, the Company, ARS Sub and
ARS and supersede all prior agreements and understandings, both written and
oral, relating to the subject matter of this Agreement. This Agreement may be
amended, modified or supplemented, and any right hereunder may be waived, if,
but only if, that amendment, modification, supplement or waiver is in writing
and signed by the Stockholders entitled to receive at least 80% of the total
Acquisition Consideration, the Company and ARS; provided, however, that no such
amendment, modification, supplement or waiver will be effective unless it is
signed by each Stockholder affected thereby to the extent that it (a) changes
the several nature of that Stockholder's representations and warranties (to the
extent they are not already joint and several as provided in Article II and
Section 10.02), (b) reduces the amount, or changes the components, of the
Acquisition Consideration that Stockholder is entitled to receive pursuant to
Section 1.4, or (c) amends or waives this sentence. The waiver of any of the
terms and conditions
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hereof shall not be construed or interpreted as, or deemed to be, a waiver of
any other term or condition hereof.
Section 10.05. Expenses. Whether or not the transactions
contemplated hereby are consummated, (a) ARS will pay the fees, expenses and
disbursements of ARS and its Subsidiaries and their Representatives which are
incurred in connection with the subject matter of this Agreement and any
amendments thereto, including all costs and expenses incurred in the
performance of and compliance with all conditions to be performed by ARS under
this Agreement, and (b) the Stockholders will pay from personal funds, and not
from funds of the Company or any Company Subsidiary, all sales, use, transfer
and other similar taxes and fees incurred in connection with the transactions
contemplated hereby including the fees, expenses and disbursements of counsel
for the Company and the Stockholders incurred in connection with the subject
matter of this Agreement. The Stockholders will file all necessary
documentation and Returns with respect to all sales, use, transfer and other
similar taxes and fees they are required by this Section 10.05 to pay. In
addition, each Stockholder acknowledges that he, and not the Company or ARS or
the Surviving Corporation, will pay all Taxes due upon receipt of the
consideration payable to that Stockholder pursuant to the transactions
contemplated by this Agreement.
Section 10.06. Notices. All notices required or permitted
hereunder shall be in writing, and shall be deemed to be delivered and received
(a) if personally delivered or if delivered by telex, telegram, facsimile or
courier service, when actually received by the party to whom notice is sent or
(b) if delivered by mail (whether actually received or not), at the close of
business on the third Houston, Texas business day next following the day when
placed in the mail, postage prepaid, certified or registered, addressed to the
appropriate party or parties, at the address of such party set forth below (or
at such other address as such party may designate by written notice to all
other parties in accordance herewith):
(i) if to ARS or any of its Subsidiaries, addressed to it at:
American Residential Services, Inc.
Post Oak Tower, Suite 725
5051 Westheimer Rd.
Houston, Texas 77056-5604
Attn.: John D. Held, Esq.
Senior Vice President, General Counsel and
Secretary
Fax No.: 713-599-0200
; and
(ii) if to the Company or any of the Stockholders, addressed to
such Person as set forth in Paragraph 7.
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Section 10.07. Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT
REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF.
Section 10.08. Exercise of Rights and Remedies. Except as
otherwise provided herein, no delay or omission in the exercise of any right,
power or remedy accruing to any party hereto as a result of any breach or
default hereunder by any other party hereto shall impair any such right, power
or remedy, nor shall it be construed, deemed or interpreted 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
construed, deemed or interpreted as a waiver of any other breach or default
hereunder occurring before or after that waiver.
Section 10.09. Time. Time is of the essence in the performance
of this Agreement in all respects.
Section 10.10. Reformation and Severability. If any provision
of this Agreement is invalid, illegal or unenforceable, that provision 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 hereto as
expressed herein, and if such a modification is not possible, that 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.
Section 10.11. 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.
Section 10.12. Release. Subject to the limitations set forth in
the last sentence in this Section 10.12, each Stockholder hereby
unconditionally and irrevocably releases and forever discharges, effective as
of and forever after the Effective Time, to the fullest extent permitted by
applicable law, all past, present and future ARS Indemnified Parties
(including, after the Effective Time, each of the Company and the Company
Subsidiaries which is a Subsidiary of ARS immediately after the Effective Time)
(collectively, the "Released Parties") from any and all debts, liabilities,
obligations, claims, demands, actions or causes of action, suits, judgments or
controversies of any kind whatsoever (collectively, "Pre-Acquisition Claims")
against the Company and the Company Subsidiaries, if any, or any of them that
arises out of or is based on any agreement or understanding or act or failure
to act (INCLUDING ANY ACT OR FAILURE TO ACT THAT CONSTITUTES ORDINARY OR GROSS
NEGLIGENCE OR RECKLESS OR WILLFUL, WANTON MISCONDUCT), misrepresentation,
omission, transaction, fact, event or other matter occurring prior to the
Effective Time (whether based at law or in equity or otherwise, foreseen or
unforeseen, matured or unmatured, known or unknown, accrued or not accrued)
(collectively, "Pre-Acquisition Matters"), including: (a) claims by the
Stockholder with respect to repayment of loans or indebtedness; (b) any rights,
titles and interests in, to or under any agreements, arrangements or
understandings to which the Stockholder is a party; and (c) claims by the
Stockholder with respect to dividends, violation of preemptive
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rights, or payment of salaries or other compensation or in any way arising out
of or in connection with the Stockholder's employment with the Company or any
Company Subsidiary, the cessation of that employment, the Stockholder's status
as an officer, director or stockholder of the Company or otherwise (but
excluding any and all claims in respect of (i) accrued and unpaid amounts
owing to the Stockholder pursuant to each Employment Agreement disclosed in
Schedule 2.25 to which the Stockholder is a party, (ii) accrued and unpaid cash
compensation owing to the Stockholder in the normal and ordinary course of
business and consistent with past practices, (iii) benefits accrued under each
Company ERISA Benefit Plan or Other Compensation Plan, the existence of which
has been disclosed in Schedule 2.25, and (iv) amounts or other obligations
owing to the Stockholder, directly or indirectly, pursuant to each Retained
Related Party Agreement, if any, which is disclosed in Schedule 2.11 and to
which the Stockholder, directly or indirectly, is a party). The Stockholder
further agrees not to file or bring any Litigation before any Governmental
Authority on the basis of or respecting any Pre-Acquisition Claim concerning
any Pre-Acquisition Matter against any Related Party. Each Stockholder (a)
acknowledges that he or she fully comprehends and understands all the terms of
this Section 10.12 and their legal effects and (b) expressly represents and
warrants that (i) he or she is competent to effect the release made in this
Section 10.12 knowingly and voluntarily and without reliance on any statement
or representation of any Released Party or its Representatives and (ii) he or
she had the opportunity to consult with an attorney of his or her choice
regarding this Section 10.12. This Section 10.12 shall not affect the rights
of the Stockholders under this Agreement or any other Transaction Document.
ARTICLE XI
TERMINATION
Section 11.01. Termination of This Agreement. This Agreement may
be terminated at any time prior to the Effective Time solely:
(a) by the mutual written consent of ARS and the Company;
(b) by the Stockholders or the Company, on the one hand, or by
ARS, on the other hand, if the transactions contemplated by this Agreement to
take place at the Closing shall not have been consummated by the close of
business on the 90th day after the date of this Agreement, unless the failure
of such transactions to be consummated results from the willful failure of the
party (or in the case of the Stockholders and the Company, any of them) seeking
to terminate this Agreement to perform or adhere to any agreement required
hereby to be performed or adhered to by it prior to or on the Closing Date;
(c) by the Stockholders or the Company, on the one hand, or by
ARS, on the other hand, if a material breach or default shall be made by the
other party (or in the case of the Stockholders and the Company, any of them)
in the observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein; or
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(d) by ARS if it is entitled to do so as provided in Section
4.07.
Section 11.02. Liabilities in Event of Termination. If this
Agreement is terminated pursuant to Section 11.01, there shall be no liability
or obligation on the part of any party hereto except (a) as provided in Section
10.05 and (b) to the extent that such liability is based on the breach by that
party of any of its representations, warranties or covenants set forth in this
Agreement.
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EXHIBIT 99
[AMERICAN RESIDENTIAL SERVICES, INC. LETTERHEAD]
FOR IMMEDIATE RELEASE CONTACT: Jennifer L. Tweeton
98-05 (713) 599-9015
AMERICAN RESIDENTIAL ANNOUNCES $32 MILLION IN ACQUIRED REVENUES
(HOUSTON) May 13, 1998 -- American Residential Services, Inc. (NYSE - "ARS"),
a leading provider of residential and commercial heating, air conditioning,
plumbing, electrical and appliance services, today announced that it has closed
five transactions with annualized revenues totaling approximately $32 million.
These acquisitions were closed in the first quarter and second quarter to-date.
Three of the companies provide residential heating and air conditioning repair
and replacement services in the Las Vegas and Raleigh markets as well as
electrical repair and new installation services in the Raleigh market. The
other two companies were acquired by ARS' wholly-owned subsidiary, American
Mechanical Services (AMS), and provide commercial heating and air conditioning
services in Colorado Springs and electrical services in the Baltimore,
Washington, DC and Northern Virginia market areas. Four transactions will be
accounted for as purchase transactions, and one will be accounted for as a
pooling-of-interest transaction. Terms of the transactions were not disclosed.
"These five acquisitions increase our revenue run rate to almost half a billion
dollars," stated Gorden Timmons, Chief Operating Officer, "and will serve to
strengthen our service lines in key markets where we already have a significant
presence. The AMS acquisition in the Northeast will also expand our commercial
service capabilities in that area to include electrical services. We are
pleased to see that our acquisition pipeline continues to remain full with
premier service companies."
American Residential Services is engaged principally in providing comprehensive
maintenance, repair, replacement and new equipment installation services for
heating, air conditioning, plumbing, electrical, indoor air quality systems and
major home appliances, primarily in existing homes, homes under construction
and commercial buildings.
This press release may contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements are
based on current plans and expectations of ARS and involve risks and
uncertainties that could cause actual future activities and results of
operations to be materially different from those set forth in the
forward-looking statements. Important factors that could cause actual results
to differ include, among others, risks associated with acquisitions,
fluctuations in operating results because of acquisitions and variations in
stock prices, competition, and risks of operations and integration of the newly
acquired businesses.
* *
