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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): March 13, 1998
AMERICAN RESIDENTIAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-11849 76-0484996
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
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 November 13, 1998, American Residential Services, Inc., a Delaware
corporation (the "Company"), acquired T.A. Beach Corp., a Maryland corporation
("T.A. Beach"), through a merger of such entity with and into a wholly-owned
subsidiary of the Company, with T.A. Beach being the surviving corporation of
such merger (the "Acquisition"). The Company completed the Acquisition with T.A.
Beach pursuant to an Agreement and Plan of Reorganization dated November 13,
1998, among the Company; Beach Acquisition, LLC, a Delaware limited liability
company and a wholly-owned subsidiary of the Company; T.A. Beach; and Thomas A.
Beach, Jr., William L. Beach, Jr. and Nadine L. Collins, being all of the
stockholders of T.A. Beach. As consideration for the Acquisition, the Company
paid $2,500,000.00 in cash to the stockholders of T.A. Beach and also provided
to such stockholders $1,000,000.00 in Convertible Senior Subordinated Notes,
Series A, made by the Company, which Notes bear interest at the rate of 7 1/2%
per annum. The aforesaid Convertible Notes may be redeemed by the Company at its
option during the twelve (12) month period beginning April 15 in the year
indicated (April 20 in the case of 2000), with the redemption price (as a
percentage of the principal amount to be redeemed) being: 2000 - 104.14%; 2001 -
103.11%; 2002 -102.07%; 2003 - 101.04%. The original issue date of the
Convertible Notes was November 13, 1998. The Convertibility Commencement Date of
the Convertible Notes will be November 14, 1999, and the initial conversion
price is fixed at a rate of $12.00 per share of the Company's common stock.
T.A. Beach provides installation, maintenance, repair and replacement
of electrical systems in commercial facilities. T.A Beach is headquartered in
Rockville, 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.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Provision for the financial statements of T.A. Beach Corp., 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 for pro forma financial information of 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 November 13, 1998 by
and among American Residential Service, Inc.; Beach Acquisition, LLC;
T.A. Beach Corp.; and the Stockholders named therein.
2.2 Standard Provisions for Business Combinations
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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/ John D. Held
--------------------------------
Name & Title Sr. Vice President
----------------------
Date: November 25, 1998
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EXHIBIT 2.1
________________________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
dated as of November 13, 1998
by and among
AMERICAN RESIDENTIAL SERVICES, INC.,
BEACH ACQUISITION, LLC,
T. A. BEACH CORP.
and
the STOCKHOLDERS named herein
________________________________________________________________________________
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
November 13, 1998, by and among American Residential Services, Inc., a Delaware
corporation ("ARS"); Beach Acquisition, LLC, a Delaware limited liability
company, and a wholly owned subsidiary of ARS ("ARS Sub"); T. A. Beach Corp., a
Maryland corporation (the "Company"); and the persons listed on the signature
page hereof under the caption "Stockholders" (collectively, the "Stockholders,"
and each of those persons, individually, a "Stockholder").
PRELIMINARY STATEMENT
The parties to this Agreement have determined that it is in their best
long-term interests to effect a business combination by means of a Merger
pursuant to which ARS Sub will merge into the Company on the terms and subject
to the conditions set forth herein (that Merger being the "Acquisition").
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 Sub Employment Agreements" means the Employment Agreements in the
-----------------------------
form thereof attached hereto as Exhibit 1-A to be entered into as of the
Effective Date between the Company and Thomas A. Beach, Jr., William L.
Beach, Jr., Todd D. Callaway and Debra A. Fisher.
"Calculated Value" has the meaning specified in Schedule 2(D).
----------------
"Ceiling Amount" means $3,500,000.00; provided, however, that, for
--------------
purposes of Section 7.06(b), the Ceiling Amount is $1,000,000.00.
"Closing" has the meaning specified in Paragraph 3.
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"Closing Date" means November 13, 1998 or such later date as to which
------------
ARS and the Company may agree in writing.
"Company" means T. A. Beach Corp., a Maryland corporation.
-------
"Company Capital Stock" means the Common Stock, without par value, of
---------------------
the Company.
"Counsel for the Company and the Stockholders" means Ralph R.
--------------------------------------------
Polachek, Esq.
"Current Balance Sheet" means the balance sheet of the Company as of
---------------------
July 31, 1998.
"Current Balance Sheet Date" means August 31, 1998.
--------------------------
"DLLCA" means the Delaware Limited Liability Company Act.
-----
"Effective Date" means the Closing Date.
--------------
"Facilities" means a portion of the real property and improvements
----------
located at 12331 Carroll Avenue, Rockville, Maryland 20852, 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 Thomas A. Beach, Jr., one of the
Stockholders, and his wife, Joan A. Beach, will lease the Facilities to the
Company for the period and on the other terms specified therein.
"Initial Financial Statements" means the balance sheets of the Company
----------------------------
as of August 31, 1996, 1997 and 1998 and the related statements of
operations and retained earnings for each of the Company's fiscal years in
the three-year period ended August 31, 1998, which the Company has
delivered to ARS.
"MGCL" means Maryland General Corporation Law.
----
"Pro Rata Share" of a Stockholder means: (a) 75% in the case of
--------------
Thomas A. Beach, Jr., (b) 20% in the case of William L. Beach, Jr., and (c)
5% in the case of Nadine L. Collins.
"Responsible Officer" means Thomas A. Beach, Jr.
-------------------
"Standard Provisions" has the meaning specified in Paragraph 4.
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"Surviving Corporation" means the Company, which is to be designated
---------------------
in the Articles of Merger and Certificate of Merger as the surviving
corporation of the Merger.
"Threshold Amount" means 1% of the Ceiling Amount.
----------------
Paragraph 2. (A) Articles of Merger. Subject to the terms and
------------------
conditions hereof, the Company will cause Articles 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 ("SDAT") and the
Certificate of Merger with the Office of the Secretary of State of the State of
Delaware.
(B) The Effective Time. The effective time of the Merger (the
------------------
"Effective Time") will be the time on the Effective Date which the Articles of
Merger specify or, if the Articles of Merger do 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) ARS Sub will be merged with and into the Company in accordance with the
provisions of the MGCL and the DLLCA, (2) ARS Sub will cease to exist as a
separate legal entity, (3) the articles of incorporation of the Company will be
amended to change the Company's authorized shares of capital stock to 1,000
shares, par value $1.00 per share, of Common Stock, (4) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
MGCL and the DLLCA, (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 the Company
then in effect (after giving effect to the amendment to the Company's articles
of incorporation specified in clause (3) of this sentence) 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, (6) 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
(7) 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 the aggregate principal amount of Convertible Notes
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as provided in Schedule 2(D) (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) all of the percentage interests of the ARS Sub outstanding
immediately prior to the Effective Time will be converted into shares of
Common Stock, par value $1.00 per share, of the Surviving Corporation and
the shares of Common Stock of the Surviving Corporation issued on that
conversion 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 Stockholders, as holders of certificates representing 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 the aggregate principal amount of Convertible Notes
included in the Acquisition Consideration payable in respect of that certificate
pursuant to Paragraph 2(D). All shares of Convertible Notes issuable in the
Merger will be deemed for all purposes to have been issued by ARS at the
Effective Time.
(2) Each 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 that
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. Each
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) At or before the Effective Time, the Company will distribute to
Thomas A. Beach, Jr. that certain 1989 Navy Mercedes Benz 560 SL Convertible,
VIN# WDBBA46D1KA097581.
(4) At or before the Effective Time, the Company will distribute to
William L.
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Beach, Jr., that certain 1998 Black Jeep Grand Cherokee, VIN# 1J4GZ46S4WC292917
and the Company will pay off in full the certain indebtedness associated with
such vehicle, which indebtedness as of October 13, 1998, was approximately
$24,770.26.
(5) At or before the Effective Time, or as soon thereafter as
appropriate statements can be received from the life insurance underwriter,
Thomas L. Beach, Jr. may purchase from the Company that certain split-dollar
life insurance policy, Policy No. 92258411, owned by the Company issued by
Transamerica Life Companies insuring the life of Thomas A. Beach with a face
amount of $250,000.00, by paying to the Company the amount required to release
the Company's collateral security interest and terminate the split dollar
agreement, to be based on calculations received from the underwriter.
(6) At or before the Effective Time, the Company will repay that
certain indebtedness owed to Thomas A. Beach, Jr. as evidenced by that
Promissory Note dated May 3, 1994, made by the Company and payable to the order
of Thomas A. Beach, Jr., which amount as of the Closing Date will be
approximately $253,041.67 and Thomas A. Beach, Jr. will repay to the Company the
amount of $3,987.65, representing his indebtedness to the Company.
(7) ARS will provide at Closing a Letter of Credit in the amount of
$1,000,000.00, with an expiration date of October 31, 1998 to secure Thomas A.
Beach, Jr. from any liability that he may incur in connection with that certain
Continuing Agreement of Indemnity-Contractor's Form dated August 8, 1989, by and
between the Company, Reliance Insurance Company, Thomas A. Beach, Jr. and Joan
A. Beach relating to the issuance of payment and performance bonds by Reliance
Insurance Company on the Company's behalf prior to the Closing Date. Thomas A.
Beach, Jr., has agreed that upon his release from any liability under such
Continuing Agreement of Indemnity he will assist ARS in cancelling such letter
of credit.
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 and the DLLCA, (i) the execution of Articles of Merger
and Certificate of Merger (a) meeting the requirements of the MGCL and the DLLCA
respectively, and (b) providing that the Merger will become effective on the
Effective Date and (ii) the filing of those Articles of Merger with the State
Department of Assessments and Taxation of the State of Maryland and the
Certificate of Merger with the Office of the Secretary of State of the State of
Delaware), (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 Bell, Boyd & Lloyd, Suite 1200, 1615 L Street, N.W.,
Washington, D.C., at 10:00 a.m., Eastern Standard Time, or at such later time on
the Closing Date as ARS shall specify by written notice to Thomas A. Beach, Jr.
Paragraph 4. Incorporation of Standard Provisions.
------------------------------------
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(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) Article VII of the Standard Provisions hereby is amended by adding
thereto the following section:
Section 7.7 Certain Additional Indemnities (a) The Company and
------------------------------
Thomas A. Beach, Jr, one of the Stockholders, 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,
resulting from, arising out of, or relating to the following:
(a) The alleged repurchase, including any failure to repurchase,
of 255 shares of the Company's stock from Electrical Security
Corporation.
(b) The judgment entered in the Circuit Court of Loudoun County,
Virginia against Lynn C. Armentrout, Personal Representative of
the Estate of Albert Webster Bassett, and T. A. Beach Corp. by
Gina Elkon in the amount of $66,245.12 plus interest at the rate
of 9% per annum from the date of judgment. The Stockholders
agree to diligently pursue, following the Closing, the obtaining
of a release of the Company from the judgment.
Paragraph 5. 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 6. Notices. For purposes of Section 10.06, notices shall
-------
be addressed to the Stockholders and the Company, as follows:
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(A) if to a Stockholder, addressed to him or her at:
Mr. Thomas A. Beach, Jr.
13420 Glen Lea Way
Rockville, Maryland 20850
Mr. William L. Beach, Jr.
9 Apache Court
Gaithersburg, Maryland 20760
or
Ms. Nadine L. Collins
7 Fairwood Court
Rockville, Maryland 20850
; and
(B) if to the Company, addressed to it at:
12331 Carroll Avenue
Rockville, Maryland 20852
Fax: (301) 231-7236
Attn: Thomas A. Beach, Jr., President
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Ralph R. Polachek, Esq.
25588 Poland Road
Chantilly, Virginia 20152-1922
Fax: (703) 648-3253
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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
BEACH ACQUISITION, LLC
By: /s/ John D. Held
----------------------------
John D. Held
President
T. A. BEACH CORP.
By: /s/ Thomas A. Beach, Jr.
----------------------------
Thomas A. Beach, Jr.
President
Stockholders:
/s/ Thomas A. Beach, Jr.
-------------------------------
Thomas A. Beach, Jr.
/s/ William L. Beach, Jr.
-------------------------------
William L. Beach, Jr.
/s/ Nadine L. Collins
-------------------------------
Nadine L. Collins
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SCHEDULE 2(C)
to the
Agreement and Plan of Reorganization
to which
American Residential Services, Inc.
and
T. A. Beach Corp.
are parties
A. Words and terms used in this Schedule which are defined in the
captioned Agreement are used herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows: Thomas N. Amonett, Jr., Howard S. Hoover, Jr.
and John D. Held.
C. The officers of the Surviving Corporation immediately after the
Effective Time are as follows:
Chairman of the Board............ Howard S. Hoover, Jr.
President........................ Thomas N. Amonett
Vice President................... Harry O. Nicodemus, IV
Vice President and Secretary..... John D. Held
Controller....................... Debra A. Fisher
Treasurer........................ A. Jefferson Walker III
Assistant Secretary.............. Michelle Morton
End of Schedule
<PAGE>
SCHEDULE 2(D)
to the
Agreement and Plan of Reorganization
to which
American Residential Services, Inc.
and
T. A. Beach Corp.
are parties
A. Words and terms used in this Schedule which are defined in the
captioned Agreement are used herein as therein defined.
B. The aggregate Acquisition Consideration will be comprised of (1)
$2,500,00.00 in cash, and (2) $1,000,00.00 aggregate principal amount of
Convertible Notes. The Convertible Notes included in the Acquisition
Consideration will be Convertible Senior Subordinated Notes, Series A of ARS,
which will bear interest at the rate of 7.5% per annum. If those Convertible
Notes are redeemed by ARS at its option pursuant to the Convertible Notes
Indenture during the 12-month period beginning April 15 in the year indicated
(April 20, in the case of 2000), the redemption price (as a percentage of the
principal amount to be redeemed) will be: 2000 -- 104.14%; 2001 -- 103.11%;
2002 -- 102.07%; and 2003 -- 101.04%. The Original Issue Date of those
Convertible Notes will be the date on which the Effective Time occurs, the
Convertibility Commencement Date of those Convertible Notes will be one day
after the first anniversary of that Original Issue Date and the Initial
Conversion Price will be fixed at a rate of $12.00 per share of ARS Common
Stock, which price may be higher or lower than the fair market value of such
stock on the Closing Date or the date of conversion.
C. Each Stockholder will be entitled to receive his [or her] Pro
Rata Share of the Acquisition Consideration pursuant to Paragraph 2(D), subject
to the provisions of Paragraphs 2(E) and 2(F).
D. The Acquisition Consideration is being paid to the parties set
forth and in the amounts indicated in the attached Schedule 2(D)(1).
End of Schedule
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EXHIBIT 2.2
Annex 1
AMERICAN RESIDENTIAL SERVICES, INC.
STANDARD PROVISIONS
FOR
BUSINESS COMBINATIONS
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TABLE OF CONTENTS
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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. ........................................ 6
Section 2.14. Compliance With Laws...................................................... 7
Section 2.15. Certain Environmental Matters............................................. 8
Section 2.16. Liabilities and Obligations............................................... 9
Section 2.17. Receivables............................................................... 9
Section 2.18. Real Properties........................................................... 9
Section 2.19. Other Tangible Assets..................................................... 10
Section 2.20. Proprietary Rights........................................................ 10
Section 2.21. Relations With Governments, etc........................................... 10
Section 2.22. Commitments............................................................... 10
Section 2.23. Inventories............................................................... 12
Section 2.24. Insurance................................................................. 12
Section 2.25. Employee Matters.......................................................... 12
Section 2.26. Compliance With ERISA. etc................................................ 15
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Section 2.27. Taxes.................................................................... 17
Section 2.28. Government Contracts..................................................... 18
Section 2.29. Absence of Changes....................................................... 18
Section 2.30. Bank Relations; Powers of Attorney....................................... 20
Section 2.31. Current Prospectus....................................................... 20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ARS............................................... 20
Section 3.01. Organization; Power...................................................... 21
Section 3.02. Authorization; Enforceability; Absence of Conflicts; Required Consents... 21
Section 3.03. Charter Documents........................................................ 22
Section 3.04. Capital Stock of ARS; Convertible Notes.................................. 22
Section 3.05. No Litigation............................................................ 23
Section 3.06. SEC Reports and Filings.................................................. 23
Section 3.07. Organization and Power of ARS Sub........................................ 23
Section 3.08. ARS Sub: Authorization; Enforceability; Absence of Conflicts; Required
Consents................................................................. 23
ARTICLE IV
Section 4.01. Access and Cooperation; Due Diligence.................................... 24
Section 4.02. Conduct of Business Pending the Effective Time........................... 25
Section 4.03. Prohibited Activities.................................................... 25
Section 4.04. No Shop.................................................................. 27
Section 4.05. Notice to Bargaining Agents.............................................. 27
Section 4.06. Notification of Certain Matters.......................................... 27
Section 4.07. Supplemental Information................................................. 28
Section 4.08. Additional Financial Statements.......................................... 28
Section 4.09. Termination of Plans..................................................... 28
Section 4.10. Disposition of Unwanted Assets........................................... 29
Section 4.11. HSR Act Matters.......................................................... 29
Section 4.12. NYSE Listing............................................................. 29
ARTICLE V
Section 5.01. Conditions to the Obligations of Each Party.............................. 29
Section 5.02. Conditions to the Obligations of the Company and the Stockholders........ 30
Section 5.03. Conditions to the Obligations of ARS and ARS Sub......................... 30
ARTICLE VI COVENANTS FOLLOWING THE EFFECTIVE TIME............................................... 31
Section 6.01. Preparation and Filing of Tax Returns.................................... 31
Section 6.02. Removal of Guaranties.................................................... 31
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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................................ 33
Section 7.03. Indemnification of Stockholder Indemnified Parties........................ 34
Section 7.04. Conditions of Indemnification............................................. 34
Section 7.05. Remedies Not Exclusive.................................................... 36
Section 7.06. Limitations on Indemnification............................................ 36
ARTICLE VIII LIMITATIONS ON COMPETITION.......................................................... 37
Section 8.01. Prohibited Activities..................................................... 37
Section 8.02. Damages................................................................... 38
Section 8.03. Reasonable Restraint...................................................... 38
Section 8.04. Severability; Reformation................................................. 38
Section 8.05. Independent Covenant...................................................... 38
Section 8.06. Materiality............................................................... 39
ARTICLE IX DEFINITIONS AND DEFINITIONAL PROVISIONS............................................... 39
Section 9.01. Defined Terms............................................................. 39
Section 9.02. Other Defined Terms....................................................... 53
Section 9.03. Other Definitional Provisions............................................. 53
Section 9.04. Captions.................................................................. 53
ARTICLE X GENERAL PROVISIONS..................................................................... 54
Section 10.01. Treatment of Confidential Information..................................... 55
Section 10.02. Brokers and Agents........................................................ 55
Section 10.03. Assignment; No Third Party Beneficiaries.................................. 55
Section 10.04. Entire Agreement; Amendment; Waivers...................................... 56
Section 10.05. Expenses.................................................................. 56
Section 10.06. Notices................................................................... 56
Section 10.07. Governing Law............................................................. 57
Section 10.08. Exercise of Rights and Remedies........................................... 57
Section 10.09. Time...................................................................... 57
Section 10.10. Reformation and Severability.............................................. 57
Section 10.11. Remedies Cumulative....................................................... 57
Section 10.12. Release................................................................... 57
ARTICLE XI TERMINATION........................................................................... 58
</TABLE>
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Section 11.01. Termination of This Agreement............................................... 58
Section 11.02. Liabilities in Event of Termination......................................... 59
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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 1.1. 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 1.2. 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
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Company's Charter Documents or the Governmental Requirements of the Company's
Organization State, whichever are controlling, to approve this Agreement and the
consummation of the Acquisition and the other transactions contemplated hereby.
Section 1.3. 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 1.4. 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 1.5. 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 1.6. 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
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course of business of the Company or that Company Subsidiary.
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 2.1. 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 2.2. 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 2.3. 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
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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, 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 2.4. 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.
-4-
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Section 2.5. 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 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 2.6. 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 2.7. 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
-5-
<PAGE>
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 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 2.8. 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 2.9. 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.
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<PAGE>
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.
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
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<PAGE>
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.
(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; (b) there has been no release (as defined
in Environmental Laws) of any Solid Wastes, Hazardous Wastes, or Hazardous
Substances at, from, in or on any site owned or operated by the Company or any
Company Subsidiary which, if all relevant facts were known to the relevant
Governmental Authorities, could cause the Company or a Company Subsidiary to
incur liability for remediation or other corrective action, could form the basis
for a claim against the Company or a Company Subsidiary, or could require deed
recordation or other notice with respect to the property; (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; (d) no
storage tanks exist on or under any of the properties owned or operated by the
Company or any Company Subsidiary; (e) neither the Company nor any Company
Subsidiary will be required under existing Environmental Laws to install
additional environmental or pollution control equipment, upgrade or modify
equipment or facilities, or make other capital expenditures in order to comply,
or remain in compliance, with Environmental Laws; (f) neither the Company nor
any Company Subsidiary is operating or required to be operating under any
compliance order, schedule, decree or agreement, any consent decree, order or
agreement, and/or any corrective action decree, order or agreement issued or
entered into under any Environmental Law; (g) there are no obligations,
undertakings or liabilities arising out of or relating to Environmental Laws
that the Company has agreed to, assumed or
-8-
<PAGE>
retained, by contract or otherwise; (h) there is no asbestos nor any asbestos-
containing material on or at any facility, site or other property owned or
operated by the Company or any Company Subsidiary; and (i) there has been no
release (as defined in Environmental Laws) of any Solid Wastes, Hazardous Wastes
or Hazardous Substances on the property of a third party that was caused by the
Company or any Company Subsidiary or for which the Company or any Company
Subsidiary could be liable. 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 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
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.
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<PAGE>
(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 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.
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<PAGE>
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;
(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
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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 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
employees, directors and consultants and independent contractors of each of the
Company and the Company Subsidiaries.
(b) Employment Agreements. Schedule 2.25 lists all Employment
---------------------
Agreements
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<PAGE>
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 that remain executory on the date hereof, that are to become
effective after the date hereof or with respect to which the Company or any
Company Subsidiary may have any liability. 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.
(d) ERISA Benefit Plans. Schedule 2.25 (i) lists (A) each ERISA
-------------------
Pension Benefit Plan (1) the funding requirements of which (under section 302 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 of the Company or a Company Subsidiary is, or at any time
during the six-year period ending on the date hereof 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 the six-year period ending on the date hereof 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 as amended to date, and (B) each trust agreement related thereto as
amended to date. 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
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<PAGE>
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) Delivery of Documents. With respect to each Plan, the Company
---------------------
has heretofore delivered to ARS, as applicable, complete and correct copies of
each of the following documents:
(i) the Plan and any amendments thereto (or if the Plan is not a
written agreement, a description thereof);
(ii) the most recent summary plan description and summaries of
material modifications thereto;
(iii) the trust agreement, group annuity contract or other funding
agreement that provides for the funding of the Plan;
(iv) the most recent financial statement;
(v) the most recent determination letter received from the IRS with
respect to each Plan that is intended to qualify under section 401 of the
Code;
(vi) any agreement pursuant to which the Company is obligated to
indemnify any person;
(vii) the three most recent annual Form 5500 reports filed with the
Service;
(viii) the most recent statement filed with the Department of Labor
pursuant to 29 U.S.C. (S) 2520.104-23;
(ix) a written summary of the legal basis for an exemption from the
obligation to file annual Form 5500 reports; and
(x) the three most recent annual Form 990 and 1041 reports filed
with the Service.
(h) Labor Compliance. Each of the Company and the Company
----------------
Subsidiaries has been and is in compliance in all material respects with all
applicable Governmental
-14-
<PAGE>
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
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).
(i) 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.
(j) 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.
(k) 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
-15-
<PAGE>
the Code (the "Qualified Plans") are so qualified and the terms of the Plans, as
amended to date, have been determined by the IRS to be so qualified (or
applications for determination letters have been timely submitted to the IRS
within the applicable remedial amendment periods under section 401(b) of the
Code). To the extent that any Qualified Plans have not been amended to comply
with applicable Governmental Requirements, the applicable remedial amendment
periods under section 401(b) of the Code permitting retroactive amendment of
these Qualified Plans have 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) Filing and Delivery of Reports and Disclosure Documents. With
-------------------------------------------------------
respect to each Plan, all reports and other documents required under ERISA, the
Code or other applicable law to be filed with any governmental agency or
distributed to current and former plan participants or beneficiaries have been
timely filed or distributed.
(d) 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 or ERISA Affiliate Pension Plan previously,
now, or hereafter maintained or contributed to by the Company, any Company
Subsidiary or any of their 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 that
was not timely and properly reported to the Pension Benefit Guaranty
Corporation;
(iv) the valuation of assets of each 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 that are "group health plans" subject to
section 4980B of the Code or section 607(l) or 609 of ERISA and related
regulations (relating to the
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<PAGE>
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 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 that 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.
(e) 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.
(f) 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.
(g) Excise Taxes, Damages and Penalties. No act, omission or
-----------------------------------
transaction has
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<PAGE>
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.
(h) 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.
(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 partor 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
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<PAGE>
"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.
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
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<PAGE>
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;
(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:
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<PAGE>
(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.
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 3.1. 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 3.2. 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
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<PAGE>
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 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 3.3. Charter Documents. No breach or violation of any Charter
-----------------
Document of ARS has occurred and is continuing.
Section 3.4. 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
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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 execu 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 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 3.5. 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
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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, 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 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 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 4.1. 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
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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
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 4.2. 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;
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<PAGE>
(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 4.3. 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);
(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;
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<PAGE>
(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;
(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 4.4. 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
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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 4.5. 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 4.6. 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 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 4.7. 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
(b), 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), are having
or will have a Material Adverse Effect, ARS will be entitled either (i) to
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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 hereof in the Supplemental
Information.
Section 4.8. 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
(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 4.9. 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.
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<PAGE>
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 5.1. 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 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 5.2. 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 5.3. 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
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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;
(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.
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ARTICLE VI
COVENANTS FOLLOWING THE EFFECTIVE TIME
Section 6.1. 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 6.2. 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 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
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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).
ARTICLE VII
INDEMNIFICATION
Section 7.1. 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
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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), (ii) any nonfulfillment of any covenant or agreement on the part of
the Stockholders or the Company under this Agreement or (iii) any Environmental
Liability arising from or related to any event, condition, action or incident
existing or occurring prior to the Closing Date (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 7.3. 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,
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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 7.4. 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.
(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
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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 a 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 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
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<PAGE>
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 7.5. 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 7.6. 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), other than an ARS Indemnified Loss under Section 7.02(a)(iii), 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),
other than an ARS Indemnified Loss under Section 7.02(a)(iii), 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.
Any ARS Indemnified Loss under Section 7.02(a)(iii) shall be indemnified in full
(whether or not disclosed on any schedule attached to this agreement or
otherwise), subject to the Ceiling Amount limitations set forth in the preceding
sentence, and shall be excluded from ARS Indemnified Losses for purposes of
determining if the ARS Indemnified Losses under Section 7.02(a) exceed the
Threshold Amount. For purposes of determining the amount of 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
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<PAGE>
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 8.1. 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 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
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<PAGE>
(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 8.2. 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 8.3. 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 8.4. 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 8.5. 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.
The covenants contained in this Article VIII shall not be affected by any breach
of any other provision hereof by any party hereto.
Section 8.6. 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.
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ARTICLE IX
DEFINITIONS AND DEFINITIONAL PROVISIONS
Section 9.1. 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.
--------------------
"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.
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"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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<PAGE>
"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
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<PAGE>
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 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
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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.
"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).
"Environmental Liabilities" mean any and all Damage Claims (including
-------------------------
any remedial, removal, response, abatement, clean-up, investigative and/or
monitoring costs and associated legal expenses) incurred or imposed (a)
pursuant to any agreement, order, notice of responsibility, directive
(including directives embodied in Environmental Laws), injunctions,
judgments or similar documents (including settlements) arising out of, in
connection with, or under Environmental Laws, or (b) pursuant to any claim
by a governmental entity or authority or any other person for personal
injury, property damage, damage to natural resources, remediation, or
payment or reimbursement of response costs incurred or expended by such
governmental entity or authority or other person pursuant to common law or
statute and related to the use or release of Solid Wastes, Hazardous Wastes
or Hazardous Substances.
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<PAGE>
"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.
"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
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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 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.
----------------
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<PAGE>
"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 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.
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<PAGE>
"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.
"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 or benefit
-----------------------
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, or with respect to which the Company or a Company
Subsidiary may have any liability, (a) including, but not limited to, 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
-48-
<PAGE>
dependent care plans, cafeteria plans, employee assistance programs,
scholarship programs, retention incentive agreements, golden parachute
agreements, vacation policies, and other similar arrangements, and all
employee welfare benefit plans as defined in section 3(1) of ERISA,
including but not limited to, plans that provide medical, surgical or
hospital care benefits or benefits in the event of sickness, accident,
disability, death or unemployment, 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 (other
than pursuant to ERISA or section 412(n) of the Code); (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; (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.
"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,
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<PAGE>
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
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
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<PAGE>
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(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.
"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
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<PAGE>
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 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
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<PAGE>
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.
"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,
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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 that 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 9.2. 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 9.3. 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, 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.
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<PAGE>
(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 9.4. 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 10.1. 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 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
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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 10.2. 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 10.3. 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 10.4. 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 hereof shall not be construed or interpreted as, or deemed to be, a
waiver of any other term or condition hereof.
Section 10.5. 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
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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 10.6. 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.
Section 10.7. 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 10.8. 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
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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 10.9. 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 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
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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 11.1. 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
(d) by ARS if it is entitled to do so as provided in Section 4.07.
Section 11.2. Liabilities in Event of Termination. If this Agreement
-----------------------------------
is terminated
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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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