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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 8-K
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CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: JUNE 26, 1998
(DATE OF EARLIEST EVENT REPORTED: JUNE 11, 1998)
GROUP MAINTENANCE AMERICA CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 1-13565 76-0535259
(STATE OR OTHER (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION)
8 GREENWAY PLAZA, SUITE 1500 HOUSTON, 77046
TEXAS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 860-0100
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 12, 1998, Group Maintenance America Corp. (the "Company") completed
the acquisition of Atlantic Industrial Constructors, a Maryland corporation
("Atlantic Industrial") pursuant to a merger (the "Merger") of Atlantic
Industrial with and into Atlantic Industrial Acquisition Corp., a wholly-owned
subsidiary of the Company ("AIAC"). The Merger was effected in accordance with
the Agreement and Plan of Merger (the "Merger Agreement") dated as of June 11,
1998, among the Company, AIAC, Atlantic Industrial, and the shareholders of
Atlantic Industrial. A copy of the Merger Agreement has been filed as an
exhibit to this Current Report on Form 8-K and is incorporated herein by
reference. In the Merger, AIAC was the surviving corporation and changed its
name to "Atlantic Industrial Constructors, Inc." The purchase price paid or to
be paid by the Company for Atlantic Industrial consists of $15.0 million in
cash, notes in the amount of $2.9 million relating to distributions of
subchapter S corporation earnings and 1.1 million shares of the Company's
common stock, par value $.001 per share ("Common Stock"), and options to
purchase 73,000 shares of Common Stock.
Prior to the Merger, the stockholders of Atlantic Industrial were Giles C.
Upshur and T. Evan Williams. After the Merger, Messrs. Upshur and Williams
will be employed by the surviving corporation.
Atlantic Industrial fabricates and installs process pipe and structural
steel; provides engineered heavy lifting and transportation services; installs
mechanical equipment; and provides millwright, alignment, plant maintenance
and aircraft passenger boarding bridge services. Its revenues for fiscal 1997
were $37.0 million and income from operations was $6.5 million. The assets of
Atlantic Industrial consist primarily of cash, accounts receivable, inventory,
equipment, vehicles and goodwill. The Company expects that Atlantic Industrial
will continue to conduct its business in substantially the same manner as
conducted before the Merger.
The cash portion of the consideration paid by the Company in connection with
the Merger was provided pursuant to loans made under a Credit Agreement dated
as of June 12, 1998 (the "Credit Agreement"), among the Company, certain
subsidiaries of the Company, Chase Bank of Texas, National Association, as
Agent, Paribas and ABN AMRO Bank, N.V., as Co-Agents, and the banks named
therein (the "Lenders"). Under the Credit Agreement, a syndicate of banks
agreed to provide up to $125 million of financing to the Company on a secured
basis. A list of the Lenders is set forth on Exhibit 99 which is incorporated
herein by reference.
ITEM 5. OTHER EVENTS.
On June 11 and 12, 1998, the Company acquired six companies, including
Atlantic Industrial (which is described in Item 2 of this Current Report on
Form 8-K). Also on June 12, 1998, the Company amended and restated its Credit
Agreement which, among other things, increased the amount of funding
available.
ACQUISITIONS
In addition to Atlantic Industrial, the Company recently acquired Colonial
Air Conditioning, Inc. of Hartford, Connecticut ("Colonial"); Laney's, Inc. of
Fargo, North Dakota ("Laney's"); Noron, Inc. of Toledo, Ohio ("Noron"); Air
Conditioning and Heating Service, Inc., of Longmont, Colorado ("A&H"); and
Team Mechanical, Inc. of Salt Lake City, Utah ("Team Mechanical").
Colonial provides heating, ventilation, and air conditioning services to
commercial and residential customers primarily in the Hartford, Connecticut,
area. Its revenues for fiscal 1997 were $6.8 million and its income from
operations was $181,000.
Laney's installs and services heating, ventilation, and air conditioning
systems primarily in the Fargo, North Dakota, area. Its revenues for fiscal
1997 were $7.6 million and its income from operations was $406,000.
Noron provides heating, ventilation, and air conditioning services to
commercial customers primarily in the Toledo, Ohio, area. Its revenues for
fiscal 1997 were $2.2 million and its income from operations was $48,000.
2
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A&H provides heating, ventilation and air conditioning services to
residential customers primarily in the Longmont, Colorado, area. Its revenues
for fiscal 1997 were $4.3 million and its income from operations was $37,000.
Team Mechanical provides heating, ventilation, and air conditioning
construction and maintenance, repair and replacement services for large
commercial and industrial customers primarily in the Salt Lake City area. Its
revenues for fiscal 1997 were $13.7 million and its income from operations was
$304,000.
CREDIT AGREEMENT
The Company amended and restated its credit agreement dated December 11,
1997 primarily to expand the amount available for borrowing from $75,000,000
to $125,000,000. Other changes made by the new credit agreement include (i)
permitting indebtedness in addition to indebtedness under the new credit
agreement, (ii) increasing the amount of letters of credit available for
issuance, (iii) increasing the amount of Common Stock that the Company may
purchase, (iv) increasing the size of businesses that the Company may acquire
without lender approval, and (vii) deleting the minimum tangible net worth
covenant. All of the banks that were parties to the earlier credit agreement
are parties to the new agreement and two new banks were included in the
lending syndicate.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of businesses acquired.
Financial statements with respect to Atlantic Industrial are not included
with this report but will be filed by amendment on or before August 25, 1998.
(b) Pro forma financial information.
Pro forma financial statements of the Company reflecting the acquisition of
Atlantic Industrial are not included with this report but will be filed by
amendment on or before August 25, 1998.
(c) Exhibits.
The following exhibits are filed with this report:
2.1
Agreement and Plan of Merger dated as of June 11, 1998 among the Company,
Atlantic Industrial Acquisition Corp., Atlantic Industrial Constructors,
Inc. and the shareholders of Atlantic Industrial Constructors, Inc.
99List of Lenders under the Credit Agreement.
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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.
GROUP MAINTENANCE AMERICA CORP.
/s/ Randolph W. Bryant
By: _________________________________
Randolph W. Bryant
Senior Vice President
and General Counsel
Date: June 26, 1998
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INDEX OF EXHIBITS
2.1
Agreement and Plan of Merger dated as of June 11, 1998 among the Company,
Atlantic Industrial Acquisition Corp., Atlantic Industrial Constructors,
Inc. and the shareholders of Atlantic Industrial Constructors, Inc.
99List of Lenders under the Credit Agreement.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
GROUP MAINTENANCE AMERICA CORP.
ATLANTIC ACQUISITION CORP.
ATLANTIC INDUSTRIAL CONSTRUCTORS, INC.
AND
THE HOLDERS OF THE
OUTSTANDING CAPITAL STOCK
OF
ATLANTIC INDUSTRIAL CONSTRUCTORS, INC.
JUNE 11, 1998
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TABLE OF CONTENTS
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1. THE MERGER........................................................................... 1
1.1 The Merger.................................................................... 1
1.2 Effective Time of the Merger.................................................. 1
1.3 Closing....................................................................... 1
1.4 Effects of the Merger......................................................... 2
1.4.1 At the Effective Time................................................. 2
1.4.2 Effects on the Surviving Corporation.................................. 2
1.5 Written Consents and Other Actions............................................ 2
1.5.1 Unanimous Written Consent of the Shareholders and Board............... 2
1.5.2 Written Consent of the Sole Shareholder of Merger Sub................. 2
1.5.3 All Other Necessary Actions........................................... 2
1.6 Conversion of Stock........................................................... 3
1.6.1 Merger Sub Capital Stock.............................................. 3
1.6.2 Cancellation of the Company Treasury Stock............................ 3
1.6.3 Merger Consideration.................................................. 3
1.7 Exchange of and Payment for Stock............................................. 3
1.7.1 Delivery of Company Common Stock and Closing Merger Consideration..... 3
1.7.2 Assignments........................................................... 4
1.7.3 Payment In Full Satisfaction of All Rights............................ 4
1.8 Determination of Closing Merger Consideration................................. 4
1.8.1 Statement............................................................. 4
1.9 Post-Closing Determination of Final Merger Consideration...................... 4
1.9.1 Statement............................................................. 4
1.9.2 Review................................................................ 4
1.9.3 Disputes.............................................................. 5
1.9.4 Resolution by Parties................................................. 5
1.9.5 Final Determination................................................... 5
1.9.6 Expenses.............................................................. 5
1.10 Plan of Reorganization........................................................ 6
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS................. 6
2.1 Exhibit 2..................................................................... 6
2.2 Stock Ownership............................................................... 6
2.3 Authority..................................................................... 6
2.4 Consents...................................................................... 6
2.5 Brokers and Finders........................................................... 6
3. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND MERGER SUB........................ 7
3.1 Representations and Warranties................................................ 7
3.1.1 Organization.......................................................... 7
3.1.2 Capitalization of the Parent.......................................... 7
3.1.3 Authority............................................................. 7
3.1.4 Consents.............................................................. 7
3.1.5 Defaults.............................................................. 7
3.1.6 Investment Company.................................................... 8
3.1.7 Financial Statements.................................................. 8
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3.1.8 Taxes................................................................. 8
3.1.9 Full Authority........................................................ 8
3.1.10 Disclosure............................................................ 8
3.1.11 Parent Material Adverse Effect........................................ 8
3.1.12 Tax-Free Reorganization............................................... 9
3.1.13 Brokers and Finders................................................... 10
3.1.14 Parent Common Stock................................................... 10
3.2 Representations and Warranties Concerning the Merger Sub...................... 10
3.2.1 Organization and Standing............................................. 10
3.2.2 Capital Structure..................................................... 10
3.2.3 Authority............................................................. 10
4. CERTAIN COVENANTS, AGREEMENTS AND PRE-CLOSING MATTERS.............................. 10
4.1 Agreements of the Shareholders to be Effective Upon Closing................... 10
4.1.1 Covenant Not to Compete............................................... 11
4.1.2 Release............................................................... 11
4.2 Elimination of Expense........................................................ 12
4.3 Purchase of Certain Receivables............................................... 12
4.4 Certain Payables and Receivables.............................................. 12
4.5 Pre-Closing Covenants and Agreements.......................................... 12
4.6 Confidentiality............................................................... 12
4.7 Tax-Free Reorganization....................................................... 13
4.8 Company Plans................................................................. 13
4.9 Discharge of Indebtedness, Releases, Etc...................................... 13
4.10 HSR Act....................................................................... 13
4.11 Options....................................................................... 13
4.12 Income Tax Distribution....................................................... 13
4.13 Limited Guaranty.............................................................. 14
4.14 Tax Payment................................................................... 14
4.15 Employee Options.............................................................. 14
5. CONDITIONS PRECEDENT; CLOSING DELIVERIES........................................... 14
5.1 Conditions Precedent to the Obligations of the Parent and Merger Sub.......... 14
5.1.1 Accuracy of Representations and Warranties............................ 14
5.1.2 Performance of Covenants.............................................. 14
5.1.3 Legal Actions or Proceedings.......................................... 14
5.1.4 Approvals............................................................. 15
5.1.5 Closing Deliveries.................................................... 15
5.1.6 No Casualty, Loss or Damage........................................... 15
5.1.7 Licenses, etc......................................................... 15
5.1.8 No Material Adverse Change............................................ 15
5.1.9 Certain Corporate Actions............................................. 15
5.1.10 HSR Act............................................................... 15
5.2 Conditions Precedent to the Obligations of the Shareholders and the Company... 15
5.2.1 Accuracy of Representations and Warranties............................ 15
5.2.2 Performance of Covenants.............................................. 16
5.2.3 Legal Actions or Proceedings.......................................... 16
5.2.4 Approvals............................................................. 16
5.2.5 Closing Deliveries.................................................... 16
5.2.6 HSR Act............................................................... 16
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5.3 Deliveries by the Shareholders at the Closing................................. 16
5.3.1 Closing Certificates.................................................. 16
5.3.2 Stock Transfer Restriction Agreement.................................. 16
5.3.3 Employment Agreements................................................. 16
5.3.4 Lease Agreement....................................................... 16
5.3.5 Opinion of Counsel for the Shareholders and the Company............... 17
5.3.6 Documents, Stock Certificates......................................... 17
5.4 Deliveries by the Parent at the Closing....................................... 17
5.4.1 Closing Certificates.................................................. 17
5.4.2 Opinion of Counsel for the Parent and Merger Sub...................... 17
5.4.3 Closing Merger Consideration.......................................... 17
5.4.4 Other Agreements...................................................... 18
6. SURVIVAL, INDEMNIFICATIONS......................................................... 18
6.1 Survival...................................................................... 18
6.2 Indemnification............................................................... 19
6.2.1 Parent Indemnified Parties............................................ 19
6.2.2 Parent Indemnity...................................................... 19
6.3 Limitations................................................................... 20
6.4 Procedures for Indemnification................................................ 20
6.4.1 Notice................................................................ 20
6.4.2 Legal Defense......................................................... 21
6.4.3 Settlement............................................................ 21
6.4.4 Cooperation........................................................... 21
7. TERMINATION........................................................................ 22
7.1 Grounds for Termination....................................................... 22
7.1.1 Mutual Consent........................................................ 22
7.1.2 Optional By the Company............................................... 22
7.1.3 Optional By the Parent................................................ 22
7.1.4 Breach By the Parent or Merger Sub.................................... 22
7.1.5 Breach by the Company or the Shareholders............................. 22
7.2 Effect of Termination......................................................... 22
8. MISCELLANEOUS...................................................................... 22
8.1 Notice........................................................................ 22
8.2 Further Documents............................................................. 23
8.3 Assignability................................................................. 23
8.4 Exhibits and Schedules........................................................ 23
8.5 Sections and Articles......................................................... 23
8.6 Entire Agreement.............................................................. 24
8.7 Headings...................................................................... 24
8.8 CONTROLLING LAW............................................................... 24
8.9 Public Announcements.......................................................... 24
8.10 No Third Party Beneficiaries.................................................. 24
8.11 Amendments and Waivers........................................................ 24
8.12 No Employee Rights............................................................ 25
8.13 Non-Recourse.................................................................. 25
8.14 When Effective................................................................ 25
8.15 Takeover Statutes............................................................. 25
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8.16 Number and Gender of Words.................................................... 25
8.17 Invalid Provisions............................................................ 25
8.18 Multiple Counterparts......................................................... 25
8.19 No Rule of Construction....................................................... 25
8.20 Expenses...................................................................... 26
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LIST OF EXHIBITS
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Exhibit 1.............................................Determination of Final Merger Consideration
Exhibit 1.5.1.......Written Consent of the Shareholders of Atlantic Industrial Constructors, Inc.
Exhibit 1.5.2...................Written Consent of Sole Shareholder of Atlantic Acquisition Corp.
Exhibit 1.7.................................................................Letter of Transmittal
Exhibit 2......................................................................Certain Statements
Exhibit 2.2.....................................................Ownership of Company Common Stock
Exhibit 2.4..........................................Required Consents - Shareholders and Company
Exhibit 3.1.4..........................................................Required Consents - Parent
Exhibit 4.5.....................................................................Certain Covenants
Exhibit 4.8.....................................................Company Plans to Remain in Effect
Exhibit 4.9................................................................Terminated Obligations
Exhibit 4.12..............................................................Form of Promissory Note
Exhibit 4.15-1..................................................................Stock Option Plan
Exhibit 4.15-2.......................................Employees Who May Be Granted Company Options
Exhibit 4.15-3................................................Nonqualified Stock Option Agreement
Exhibit 4.15-4.............................Nonqualified Stock Option Agreement - Steven V. Sadler
Exhibit 5.3.2................................................Stock Transfer Restriction Agreement
Exhibit 5.3.3....................List of Employees to Execute and Deliver an Employment Agreement
Exhibit 5.3.3A-1.....................................................Form of Employment Agreement
Exhibit 5.3.3A-2.....................................................Form of Employment Agreement
Exhibit 5.3.4.....................................................................Lease Agreement
Exhibit 5.3.5...............................Opinion of Counsel to the Shareholder and the Company
Exhibit 5.4.2.....................................Opinion of Counsel to the Parent and Merger Sub
</TABLE>
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INDEX OF DEFINED TERMS
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Accountants........................................................................... 5
Agreement............................................................................. 1
Applicable Corporate Law.............................................................. 1
Cash Tax Distribution................................................................. 13
Closing............................................................................ 1, 21
Closing Date.......................................................................... 1
Code.................................................................................. 1
Company............................................................................... 1
Company Common Stock.................................................................. 1
Converted Share....................................................................... 3
Effective Time........................................................................ 1
HSR Act............................................................................... 13
Indemnified Party..................................................................... 20
Indemnifying Party.................................................................... 20
Lease................................................................................. 16
Losses................................................................................ 19
Merger................................................................................ 1
Merger Sub............................................................................ 1
Notice of Dispute..................................................................... 5
Parent................................................................................ 1
Parent Common Stock................................................................... 1
Parent Financial Statements........................................................... 8
Parent Indemnified Parties............................................................ 19
Parent Material Adverse Effect........................................................ 8
Parent Related Documents.............................................................. 7
Prospectus............................................................................ 7
Redemption Agreement.................................................................. 6
Securities Act........................................................................ 10
Settlement Notice..................................................................... 21
Shareholder Related Document.......................................................... 6
Shareholders.......................................................................... 1
Statement of Closing Consideration.................................................... 4
Statement of Final Per Share Amounts.................................................. 4
Stock Certificate..................................................................... 3
Survival Period....................................................................... 18
Surviving Corporation................................................................. 1
Tax Notes............................................................................. 13
Terminated Obligations................................................................ 13
Threshold............................................................................. 20
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") made effective as of
June 11, 1998, by and among Group Maintenance America Corp., a Texas corporation
(the "Parent"), Atlantic Acquisition Corp., a Virginia corporation ("Merger
Sub"), Atlantic Industrial Constructors, Inc., a Virginia corporation (the
"Company"), and the undersigned holders of all of the outstanding capital stock
of the Company (the "Shareholders").
WHEREAS, the respective Boards of Directors of the Parent, Merger Sub and
the Company have each approved the merger of the Company with and into Merger
Sub (the "Merger") pursuant to this Agreement and the applicable statutes of the
State of Texas and the Commonwealth of Virginia and pursuant to the Merger each
issued and outstanding share of Common Stock, $1.00 par value per share, of the
Company ("Company Common Stock") will be converted into the right to receive
certain shares of common stock, $.001 par value per share, of the Parent
("Parent Common Stock"), and certain cash consideration, all as provided herein;
WHEREAS, the Merger has been approved, as required by applicable law, by
the Parent, acting as sole shareholder of Merger Sub, and by the Shareholders;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties hereto agree as follows:
1. THE MERGER
1.1 The Merger. Subject to the terms and conditions hereof, and in
accordance with the Virginia Stock Corporation Act (the "Applicable Corporate
Law") upon the Effective Time (as defined in Section 1.2), the Company shall be
merged with and into Merger Sub. Merger Sub, as the surviving entity following
the Merger, is sometimes referred to in this Agreement as the "Surviving
Corporation."
1.2 Effective Time of the Merger. In accordance with the requirements of
applicable law, appropriate Articles of Merger under the Applicable Corporate
Law shall be prepared, executed and submitted for filing with the State
Corporation Commission of the Commonwealth of Virginia as soon as practicable
following the Closing (as defined below). The date of such filing is referred
to in this Agreement as the "Effective Time."
1.3 Closing. The closing of the Merger ("Closing") will take place at
10:00 a.m. at the offices of Bracewell & Patterson, L.L.P., in Houston, Texas on
June 12, 1998 ("Closing Date"); provided that each of the conditions precedent
to the obligations of the parties to effect the Merger set forth in Article 5 of
this Agreement are then satisfied or waived by the applicable party. The
parties may agree in writing on another date, time or place for the Closing. At
the Closing, the parties will deliver or cause to be delivered the documents
described in Sections 5.3 and 5.4 below.
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1.4 Effects of the Merger.
1.4.1 At the Effective Time. At the Effective Time, (i) the Company
shall merge with and into Merger Sub and as a result thereof, the separate
existence of the Company shall cease, (ii) the Articles of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation, except that the Articles
of Incorporation of Merger Sub shall be amended to provide that the name of the
Surviving Corporation shall be changed to "Atlantic Industrial Constructors,
Inc.," (iii) the Bylaws of Merger Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, and (iv) the
directors and officers of Merger Sub immediately prior to the Effective Time
shall become the directors and officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected or appointed, as the case may be.
1.4.2 Effects on the Surviving Corporation. As of and after the
Effective Time, the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises of a public as well as of a private nature
previously belonging to the Company and Merger Sub; and all property (real,
personal and mixed), and all debts due on whatever account, including
subscriptions to shares, and all other choses in action, and all and every other
interest of or belonging to or due to each of the Company and Merger Sub shall
be transferred to, and vested in, the Surviving Corporation without further act
or deed; and all such property, rights and privileges, powers and franchises and
all and every other interest shall be thereafter the property of the Surviving
Corporation as they were of the Company and Merger Sub; and the title to any
real estate, or interest therein, whether by deed or otherwise, shall not revert
or be in any way impaired by reason of the Merger. The Surviving Corporation
shall be responsible and liable for all the liabilities and obligations of the
Company and Merger Sub, and any claim existing, or action or proceeding pending,
by or against the Company or Merger Sub may be prosecuted against the Surviving
Corporation. Neither the rights of creditors nor any liens upon the property of
the Company or Merger Sub shall be impaired by the Merger, and all debts,
liabilities and duties of each of the Company and Merger Sub shall attach to the
Surviving Corporation, and may be enforced against it to the same extent as if
such debts, liabilities and duties had been incurred or contracted by it, all in
accordance with the Applicable Corporate Law and the terms of this Agreement.
1.5 Written Consents and Other Actions.
1.5.1 Unanimous Written Consent of the Shareholders and Board.
Contemporaneously with the execution hereof, each of the Shareholders in his
capacities as a shareholder and a director is executing and delivering to the
Company a Joint Unanimous Written Consent in substantially the form of Exhibit
1.5.1 attached hereto.
1.5.2 Written Consent of the Sole Shareholder of Merger Sub.
Contemporaneously with the execution hereof, the Parent is executing and
delivering to Merger Sub a written consent of the sole shareholder of Merger
Sub, in the form of Exhibit 1.5.2 attached hereto, pursuant to the applicable
provisions of the Applicable Corporate Law, adopting this Agreement.
1.5.3 All Other Necessary Actions. In addition to the actions set
forth in Sections 1.5.1 and 1.5.2, the Parent, Merger Sub and the Company will
take all actions necessary in accordance with the Applicable Corporate Law and
their respective articles of incorporation and bylaws to cause the Merger to be
consummated on, and subject to, the terms set forth in this Agreement and the
Applicable Corporate Law.
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1.6 Conversion of Stock. As of the Effective Time, by virtue of the
Merger and without further action on the part of any holder of shares of Company
Common Stock or any holder of shares of capital stock of Merger Sub:
1.6.1 Merger Sub Capital Stock. Each share of capital stock of Merger
Sub issued and outstanding at the Effective Time shall remain outstanding and
shall be unchanged at and after the Merger and immediately following the
Effective Time shall constitute all of the issued and outstanding capital stock
of the Surviving Corporation.
1.6.2 Cancellation of the Company Treasury Stock. All shares of
Company Common Stock that are owned by the Company as treasury stock or by any
of its subsidiaries shall be canceled and retired and shall cease to exist and
no stock of the Parent or other consideration shall be delivered in exchange
therefor.
1.6.3 Merger Consideration. Each share of Company Common Stock (other
than shares to be canceled in accordance with Section 1.6.2) shall be converted
into the right to receive (i) that number of shares of Parent Common Stock equal
to the Final Per Share Common Stock Amount (as defined in Exhibit 1 attached
hereto), (ii) cash equal to the Final Per Share Cash Amount (as defined in
Exhibit 1 attached hereto), and (iii) fulfillment by the Surviving Corporation
of its obligations under Section 4.14. Each share of Company Common Stock so
converted into the right to receive cash equal to the Final Per Share Cash
Amount and shares of Parent Common Stock equal to the Final Per Share Common
Stock Amount (a "Converted Share") shall, by virtue of the Merger and without
any action on the part of the holder thereof, at the Effective Time no longer be
outstanding and shall at such time be canceled and retired and shall cease at
such time to exist, and each holder of a certificate which prior to the
Effective Time validly evidenced any such Converted Share (a "Stock
Certificate") shall thereafter cease to have any rights with respect to such
Converted Share, except, upon the surrender of the Stock Certificate and a duly
executed and completed letter of transmittal in accordance with Section 1.7, the
right to receive such cash and Parent Common Stock at the times and in the
manner set forth herein.
1.7 Exchange of and Payment for Stock.
1.7.1 Delivery of Company Common Stock and Closing Merger
Consideration. Prior to the Closing, the Parent will deliver to each of the
Shareholders a letter of transmittal, in substantially the form attached hereto
as Exhibit 1.7, to be used for the purpose of surrendering Stock Certificates
to the Parent in exchange for the right to receive the Final Per Share Cash
Amount and the Final Per Share Common Stock Amount for each Converted Share
evidenced by such Stock Certificate. All of the Company Common Stock held by
the Shareholders will be surrendered by the Shareholders to the Parent together
with properly completed and executed letters of transmittal (with each such
signature guaranteed by a commercial bank or notarized by a notary public or
similar official reasonably satisfactory to the Parent), and at the Closing the
Parent (i) shall cause to be delivered to the Shareholders in cash or in
immediately available funds the Closing Per Share Cash Amount (as defined in
Exhibit 1 attached hereto) less the Holdback (as defined below) and (ii) shall
notify and direct the Parent's stock transfer agent to prepare and deliver to
the Shareholders certificates based on the Closing Per Share Common Stock Amount
(as defined in Exhibit 1 attached hereto) applicable to each of the Converted
Shares evidenced by the Stock Certificates properly surrendered (with properly
executed and completed letters of transmittal) by the Shareholders to the Parent
(with a copy of such notice delivered to the Shareholders). At the Closing, the
Shareholders agree and hereby authorize Parent to withhold on a pro rata basis
(determined by the number of Shares of Company Common Stock held by each
Shareholder) an aggregate of $1,950,000 of the Final Aggregate Cash Amount
("Holdback") to be applied to the Shareholders' obligation with respect to
accounts receivables under Section
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4.3 below, if any, and the Shareholders' obligations under Section 4.3 below
with respect to retainages, if any, that the Shareholders shall be obligated to
purchase under Section 4.3 within 120 days following the Closing Date. Within
ten (10) days of the satisfaction of such obligation, that portion, if any, of
the Holdback not needed to satisfy the Shareholders' obligation with respect to
accounts receivable and the retainages under Section 4.3 shall be paid to the
Shareholders (pro rata on the same basis as contributed to the Holdback) by
Parent together with interest thereon at the rate of 6% per annum from the
Closing Date.
1.7.2 Assignments. The assignment, transfer or other disposition of
record or beneficial ownership of any shares of Company Common Stock may not be
made on or after the date hereof other than pursuant to this Agreement.
1.7.3 Payment In Full Satisfaction of All Rights. The delivery of the
Closing Per Share Cash Amount to the Shareholders with respect to the
Shareholders' Converted Shares and delivery to the Shareholders of the
notification of the Parent's stock transfer agent with respect to the Closing
Per Share Common Stock Amount shall be deemed to be payment in full satisfaction
of all rights pertaining to the outstanding Converted Shares except for (i) the
right to receive certificates evidencing the shares of Parent Common Stock as
determined under Section 1.6.3 and (ii) the right to receive additional shares
of Parent Common Stock and cash pursuant to Section 1.9.
1.8 Determination of Closing Merger Consideration.
1.8.1 Statement. The Parent shall deliver to the Shareholders a
statement setting forth a calculation of the Closing Outstanding Common Stock
Number (as defined in Exhibit 1 attached hereto), the Closing Per Share Cash
Amount, the Closing Per Share Common Stock Amount and the Closing Merger
Consideration (as defined in Exhibit 1 attached hereto), payable to the
Shareholders at Closing (the "Statement of Closing Consideration"). The Closing
Outstanding Common Stock Number, the Closing Per Share Cash Amount, the Closing
Per Share Common Stock Amount and the Closing Merger Consideration, as set forth
in the Statement of Closing Consideration, shall be final, conclusive and
binding for purposes of this Agreement, subject only to the provisions of
Section 1.9 of this Agreement.
1.9 Post-Closing Determination of Final Merger Consideration.
1.9.1 Statement. No later than 45 days after the Closing, the Parent
shall deliver to the Shareholders a statement showing the Final Outstanding
Common Stock Number (as defined in Exhibit 1), the Final Per Share Cash Amount,
the Final Per Share Common Stock Amount and the Total Consideration (as defined
in Exhibit 1 attached hereto) (the "Statement of Final Per Share Amounts").
1.9.2 Review. After delivery to the Shareholders of the Statement of
Final Per Share Amounts, the Shareholders and the Shareholders' representatives
shall be afforded the opportunity to review and inspect all of the financial
records, work papers, schedules and other supporting papers relating to the
preparation of the Statement of Final Per Share Amounts, and to consult with the
Parent and its representatives regarding the methods used in the preparation of
the Statement of Final Per Share Amounts.
1.9.3 Disputes. The Final Outstanding Common Stock Number, the Final
Per Share Cash Amount, the Final Per Share Common Stock Amount and the Total
Consideration as shown on the Statement of Final Per Share Amounts shall be
final, conclusive and binding for purposes of this Agreement, unless the
Shareholders shall deliver to the Parent a written notice of disagreement
("Notice of Dispute") with any item or items in the Statement of Final Per Share
Amounts within 20 business days following receipt of the Statement of Final Per
Share Amounts, specifying in reasonable detail the nature and extent of such
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disagreement. If a Notice of Dispute is not properly given within such time,
the Final Outstanding Common Stock Number, the Final Per Share Cash Amount, the
Final Per Share Common Stock Amount and the Final Merger Consideration as set
forth in the Statement of Final Per Share Amounts shall be final, conclusive and
binding for purposes of this Agreement.
1.9.4 Resolution by Parties. If a Notice of Dispute is properly
given, the Parent and the Shareholders agree to negotiate in good faith and use
their best efforts to resolve any disagreement with respect to the Statement of
Final Per Share Amounts. If the Parent and the Shareholders shall not reach such
resolution within 30 days following receipt by the Parent of a properly given
Notice of Dispute, KPMG Peat Marwick LLP (the "Accountants") shall resolve such
dispute within 30 days after its submission to them. The Parent and the
Shareholders (if the dispute is resolved by them or the Statement of Final Per
Share Amounts otherwise becomes final pursuant hereto without referral to the
Accountants) or the Accountants (if a dispute is resolved by them) shall set
forth such resolution in writing and such writing shall (i) set forth the Final
Outstanding Common Stock Number, the Final Per Share Cash Amount, the Final Per
Share Common Stock Amount and the Total Consideration and (ii) be final,
conclusive and binding for purposes of this Agreement.
1.9.5 Final Determination. Within 10 business days following the
final determination of the Final Outstanding Common Stock Number, the Final Per
Share Cash Amount. the Final Per Share Common Stock Amount and the Total
Consideration as provided in this Section 1.9, (i) the Parent shall deliver to
the Shareholders (a) the cash amount, if any, by which the aggregate of the
Final Per Share Cash Amounts payable to the Shareholders, as finally determined
pursuant hereto, exceeds the aggregate of the Closing Per Share Cash Amounts
paid to the Shareholders at the Closing; and (b) the number of shares of Parent
Common Stock, if any, by which the aggregate of the Final Per Share Common Stock
Amounts deliverable to the Shareholders, as finally determined pursuant hereto,
exceeds the aggregate of the Closing Per Share Common Stock Amounts delivered to
the Shareholders at the Closing; or (ii) the Shareholders shall deliver to the
Parent (a) the cash amount, if any, by which the aggregate of the Closing Per
Share Cash Amounts paid to the Shareholders at the Closing exceeds the aggregate
of the Final Per Share Cash Amounts payable to the Shareholders as finally
determined pursuant hereto; and (b) the number of shares of Parent Common Stock,
if any, by which the aggregate of the Closing Per Share Common Stock Amounts
delivered to the Shareholders at the Closing exceeds the aggregate of the Final
Per Share Common Stock Amounts deliverable to the Shareholders as finally
determined pursuant hereto.
1.9.6 Expenses. The Parent and the Shareholders shall each pay their
own costs incurred in connection with this Section 1.9, including the fees and
expenses of their respective attorneys and accountants, if any.
1.10 Plan of Reorganization. This Agreement is intended by the parties
hereto to constitute and shall be deemed to be a "plan of reorganization" with
in the meaning of Section 368 of the Internal Revenue Code of 1986, as amended,
and Treasury regulations promulgated thereunder.
2. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS
The Company and each Shareholder, jointly and severally, hereby represent
and warrant to the Parent and Merger Sub as follows:
2.1 Exhibit 2. The statements in Exhibit 2 attached hereto are true and
correct.
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2.2 Stock Ownership. Each Shareholder owns, beneficially and of record,
with full power to vote, the number of shares of Company Common Stock set forth
beside each Shareholder's name on Exhibit 2.2 and such shares are so held by
such Shareholder free and clear of all liens, encumbrances and adverse claims
whatsoever.
2.3 Authority. Each Shareholder has full right, power, legal capacity and
authority to (i) execute, deliver and perform this Agreement, and all other
documents and instruments referred to herein or contemplated hereby to be
executed, delivered and performed by such Shareholder (each a "Shareholder
Related Document") and (ii) consummate the transactions contemplated herein and
thereby. This Agreement has been duly executed and delivered by each
Shareholder and constitutes, and any Shareholder Related Document, when duly
executed and delivered by the Shareholder named a party therein will constitute,
legal, valid and binding obligations of such Shareholder enforceable against the
Shareholder in accordance with their respective terms and conditions, except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether applied in a proceeding
at law or in equity).
2.4 Consents. Except as provided in Exhibit 2.4, no approval, consent,
order or action of or filing with any court, administrative agency, governmental
authority or other third party is required for the execution, delivery or
performance by the Shareholders of this Agreement or any Shareholder Related
Document. The execution, delivery and performance by the Shareholders of this
Agreement and any Shareholder Related Documents do not violate any mortgage,
indenture, contract, agreement, lease or commitment or other instrument of any
kind to which any Shareholder are a party or by which any Shareholder or such
Shareholder's assets or properties may be bound (other than the Redemption and
Shareholders Cross-Purchase Agreement among the Company and the Shareholders
dated January 1, 1991 (the "Redemption Agreement"), which Redemption Agreement
shall be terminated as of the Closing) or affected or any law, rule or
regulation applicable to such Shareholder or any court injunction, order or
decree or any valid and enforceable order of any governmental agency in effect
as of the date hereof having jurisdiction over such Shareholder.
2.5 Brokers and Finders. Neither the Company nor any of the Shareholders
have employed any broker, finder or agent, or incurred any broker's fee or
finder's fee or commission, with respect to the transactions referred to herein
or contemplated hereby, nor has any of them dealt with anyone purporting to act
in the capacity of a finder or broker with respect thereto.
3. REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND MERGER SUB
3.1 Representations and Warranties. The Parent hereby represents and
warrants to the Shareholders and the Company as follows:
3.1.1 Organization. The Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas. The
Parent is duly qualified or licensed as a foreign corporation authorized to do
business in all states in which any of its assets or properties may be situated
or where its business is conducted except where the failure to obtain such
qualification or license would not have a Parent Material Adverse Effect (as
defined below).
3.1.2 Capitalization of the Parent. As of the date of the Prospectus
(as hereinafter defined), the total authorized and issued capital stock of
Parent is as set forth in the Prospectus dated May 6, 1998, as supplemented by
the Prospectus Supplement dated May 14, 1998 and the Prospectus Supplement
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dated June 10, 1998 (the "Prospectus"). The outstanding shares of Parent Common
Stock have been duly and validly issued and are fully paid and non-assessable.
3.1.3 Authority. The Parent has the requisite power and authority to
execute, deliver and perform this Agreement and all documents and instruments
referred to herein or contemplated hereby (the "Parent Related Documents") and
to consummate the transactions contemplated herein and thereby. This Agreement
has been duly executed and delivered by the Parent and constitutes, and all the
Parent Related Documents, when executed and delivered by the Parent will
constitute, legal, valid and binding obligations of the Parent, enforceable in
accordance with their respective terms and conditions except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (whether applied in a proceeding at law or in
equity).
3.1.4 Consents. Except as provided on Exhibit 3.1.4, no approval,
consent, order or action of or filing with any court, administrative agency,
governmental authority or other third party is required for the execution,
delivery or performance by the Parent of this Agreement or the Parent Related
Documents or the consummation by the Parent of the transactions contemplated
hereby, except for the filing of the Articles of Merger with the State
Corporation Commission of Virginia. The execution, delivery and performance by
Parent of this Agreement and any Parent Related Documents do not violate any
mortgage, indenture, contract, agreement, lease or commitment or other
instrument of any kind to which the Parent is a party or by which the Parent or
the Parent's assets or properties may be bound or affected or any law, rule or
regulation applicable to the Parent or any court injunction, order or decree or
any valid and enforceable order of any governmental agency in effect as of the
date hereof having jurisdiction over the Parent.
3.1.5 Defaults. The Parent is not in default under or in violation
of, and the execution, delivery and performance of this Agreement and the Parent
Related Documents and the consummation by the Parent of the transactions
contemplated hereby and thereby will not result in a default under or in
violation of (i) any mortgage, indenture, charter or bylaw provision, contract,
agreement, lease, commitment or other instrument of any kind to which the Parent
is a party or by which the Parent or any of its properties or assets may be
bound or affected or (ii) any law, rule or regulation applicable to the Parent
or any court injunction, order or decree, or any valid and enforceable order of
any governmental agency in effect as of the date hereof having jurisdiction over
the Parent, which default or violation prevents the Parent from consummating the
transactions contemplated hereby or is reasonably likely to have a Parent
Material Adverse Effect.
3.1.6 Investment Company. The Parent is not an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "holding company," a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
3.1.7 Financial Statements. The Parent has provided certain financial
statements to the Shareholders in the Prospectus ("Parent Financial Statements")
and such Parent Financial Statements have been prepared in accordance with GAAP
and fairly present the consolidated financial position, results of operations
and cash flows of the Parent and its then existing consolidated subsidiaries as
of the dates and for the periods indicated, subject to normal year-end
adjustments and any other adjustments described therein or in the notes or
schedules thereto. The books and records of the Parent have been kept in
reasonable detail and accurately and fairly reflect the transactions of the
Parent.
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3.1.8 Taxes. The Parent has either accrued, discharged or caused to
be discharged, as the same have become due, or the Parent Financial Statements
contain adequate accruals and reserves for, all taxes, interest thereon, fines
and penalties of every kind and character, attributable or relating to the
properties and business of the Parent for the period ended covered by the Parent
Financial Statements.
3.1.9 Full Authority. The Parent has the corporate power and
authority and has obtained all licenses, permits, qualifications, and other
documentation (including permits required under applicable Environmental Law, as
defined in Exhibit 2) necessary to own and/or operate its businesses, properties
and assets and to carry on its businesses as being conducted on the date of this
Agreement, except such licenses, permits, qualifications or other documentation,
the failure to obtain which is not reasonably likely to result in a Parent
Material Adverse Effect, and such businesses are now being conducted and such
assets and properties are being owned and/or operated in compliance with all
applicable laws (including Environmental Law), ordinances, rules and regulations
of any governmental agency of the United States, any state or political
subdivision thereof, or any foreign jurisdiction, all applicable court or
administrative agency decrees, awards and orders and all such licenses, permits,
qualifications and other documentation, except where the failure to comply will
not have a Parent Material Adverse Effect, and there is no existing condition or
state of facts that would give rise to a violation thereof or a liability or
default thereunder that is reasonably likely to have a Parent Material Adverse
Effect.
3.1.10 Disclosure. No representation or warranty by the Parent in this
Agreement and no statement contained in any final prospectus delivered by the
Parent to the Shareholders pursuant to this Agreement contains any untrue
statement of a material fact or omits any material fact necessary in order to
make the statements herein or therein, in light of the circumstances under which
they are or were made, not misleading.
3.1.11 Parent Material Adverse Effect. The term "Parent Material
Adverse Effect" shall mean an adverse effect on the properties, assets,
financial position, results of operations, long-term debt, other indebtedness,
cash flows or contingent liabilities of the Parent and its consolidated
subsidiaries, taken as a whole, in an amount of $100,000 or more.
3.1.12 Tax-Free Reorganization. With respect to the qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the Code:
(i) The Parent has no plan or intention to sell, exchange or
otherwise dispose or liquidate the Surviving Corporation, to merge the
Surviving Corporation with or into any other corporation, to sell or
otherwise dispose of its Surviving Corporation Common Stock except for
transfers of Surviving Corporation Common Stock to corporations of which
the Parent has control (within the meaning of Section 368(a) of the Code)
at the time of such transfer, or to cause the Surviving Corporation to sell
or otherwise dispose of any of its assets or of any assets acquired in the
Merger, except for dispositions made in the ordinary course of business or
transfers of assets to a corporation of which the Surviving Corporation has
control (within the meaning of Section 368(a) of the Code) at the time of
such transfer.
(ii) The Parent has no plan or intention to cause the Surviving
Corporation, after the Merger, to issue additional shares of its stock that
would result in the Parent losing control of the Surviving Corporation
within the meaning of Section 368(c) of the Code.
(iii) Following the Merger, the Surviving Corporation will continue
the Company's historic business or use a significant portion of its
historic business assets in a business.
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(iv) Except as provided in Section 8.20 below, if the Merger is
effected, the Parent and Merger Sub will each pay their respective
expenses, if any, incurred in connection with the Merger.
(v) The Parent Common Stock that will be issued in connection with
the Merger is voting stock within the meaning of Section 368(c) of the
Code.
(vi) At the Effective Time, neither the Parent nor Merger Sub will
have any outstanding warrants, options, convertible securities, or any
other right pursuant to which any person could acquire stock in the Parent
or Merger Sub which, if exercised or converted, would affect the Parent's
acquisition or retention of control of the Surviving Corporation.
(vi) Neither the Parent nor Merger Sub is an investment company as
defined in Section 368(a)(2)(F) of the Code.
(vi) None of the Parent Common Stock received by the Shareholders as
a part of the Final Merger Consideration will be separate consideration
for, or allocable to, any employment agreement.
(ix) Neither the Parent nor Merger Sub is under the jurisdiction of
a court in a case under Title 11 of the United States Code, or a
receivership, foreclosure, or similar proceeding in a federal or state
court.
3.1.13 Brokers and Finders. The Parent has not employed any broker,
finder or agent, or incurred any broker's fee or commission, with respect to any
transactions referred to herein or contemplated hereby and has not dealt with
anyone purporting to act in the capacity of a finder or broker with respect
thereto.
3.1.14 Parent Common Stock. All shares of Parent Common Stock to be
issued by Parent pursuant to the Merger, when issued in accordance with this
Agreement, will be registered under the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder (the "Securities Act"), will be
listed for trading on the New York Stock Exchange and will be validly issued,
fully paid and nonassessable and, subject to the requirements of Rules 144 and
145 promulgated pursuant to the Securities Act and the Stock Transfer
Restriction Agreement, will be freely tradeable without restrictions.
3.2 Representations and Warranties Concerning the Merger Sub. The Parent
and Merger Sub, jointly and severally, hereby represent and warrant to the
Shareholders and the Company as follows:
3.2.1 Organization and Standing. Merger Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Virginia.
3.2.2 Capital Structure. The authorized capital stock of Merger Sub
consists of 5,000 shares of common stock, par value $.01 per share, 1,000 of
which are validly issued and outstanding, fully paid and nonassessable and are
owned by the Parent free and clear of all liens, encumbrances and adverse
claims.
3.2.3 Authority. Merger Sub has the corporate power and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the
performance by Merger Sub of its obligations hereunder and the consummation of
the transactions contemplated hereby have been duly authorized by its Board of
Directors
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and the Parent as its sole shareholder, and, except for the corporate
filings required by state law, no other corporate proceedings on the part of
Merger Sub are necessary to authorize this Agreement and the transaction
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Merger Sub and (assuming the due authorization, execution and
delivery hereof by the Company) constitutes a valid and binding obligation of
Merger Sub enforceable against Merger Sub in accordance with its terms, except
as such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether applied in a proceeding
at law or in equity).
4. CERTAIN COVENANTS, AGREEMENTS AND PRE-CLOSING MATTERS
4.1 Agreements of the Shareholders to be Effective Upon Closing.
Effective upon Closing, and without further action on the part of any party or
other person, the Shareholders covenant and agree as follows:
4.1 Covenant Not to Compete.
(i) For the consideration of $250,000 in cash to be paid by the
Parent to each of the Shareholders on the Closing Date and in recognition
that the covenants by the Shareholders in this Section are a material
inducement to the Parent to enter into and perform this Agreement, each
Shareholder agrees that for the period from the Closing Date to the later
to occur of (a) the date which is five years after the Closing Date or (b)
the date which is two years following any termination of such Shareholder's
employment with the Surviving Corporation or any of its affiliates (as
defined in Exhibit 2), regardless of the reason for such termination, such
Shareholder will not represent, engage in, carry on, or have a financial
interest in, directly or indirectly, individually, as a member of a
partnership or limited liability company, equity owner, shareholder (other
than as a shareholder of less than one percent of the issued and
outstanding stock of a publicly-held company whose gross assets exceed $100
million), investor, owner, officer, director, trustee, manager, employee,
agent, associate or consultant engage in (I) any business which directly
competes with any of the services or products produced, sold, conducted,
developed, or in the process of development by the Company on the Closing
Date (or, if clause (b) above is applicable, on the date of termination of
the Shareholder's employment), including any aspect of the commercial or
industrial heating, ventilation, air conditioning, plumbing and piping,
millwright, rigging and electrical industries within the State of North
Carolina or the State of Virginia, or (II) any business which, directly or
indirectly, engages in the jetway fabrication, installation, refurbishing
or servicing business in any state in the United States located east of the
Mississippi River.
(ii) The Shareholders agree that the limitations set forth herein on
each Shareholder's rights to compete with the Parent and its affiliates as
set forth in clause (i) are reasonable and necessary for the protection of
Parent and its affiliates. In this regard, each Shareholder specifically
agrees that the limitations as to period of time and geographic area, as
well as all other restrictions on his activities specified herein, are
reasonable and necessary for the protection of the Parent and its
affiliates. Each Shareholder agrees that, in the event that the provisions
of this Section should ever be deemed to exceed the scope of business, time
or geographic limitations permitted by applicable law, such provisions
shall be and are hereby reformed to the maximum scope of business, time or
geographic limitations permitted by applicable law.
(iii) Each Shareholder agrees that the remedy at law for any breach
by such Shareholder of this Section 4.1.1 will be inadequate and that the
Parent shall be entitled to injunctive relief.
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4.1.2 Release. Effective as of the Effective Time, the Shareholders
do hereby (i) release, acquit and forever discharge the Surviving Corporation
from any and all liabilities, obligations, claims, demands, actions or causes of
action arising from or relating to any event, occurrence, act, omission or
condition occurring or existing on or prior to the Effective Time, including,
without limitation, any claim for indemnity or contribution from the Surviving
Corporation in connection with the obligations or liabilities of the
Shareholders hereunder, except for salary and benefits payable to the
Shareholders as an employee in the ordinary course of business, claims of the
Shareholders pursuant to Section 6.2.2 of this Agreement, and claims for amounts
owed under this Agreement, including, without limitation, under the Tax Notes
(as defined below); (ii) waive all breaches, defaults or violations of any
agreement applicable to the Company Common Stock, including, without limitation,
the Redemption Agreement, but other than the right to receive the consideration
for such Stock provided for hereunder, and agree that any and all such
agreements are terminated as of the Effective Time, and (iii) waive any and all
preemptive or other rights to acquire any shares of capital stock of the Company
and release any and all claims arising in connection with any prior default,
violation or failure to comply with or satisfy any such preemptive or other
rights, including, without limitation, under the Redemption Agreement.
4.2 Elimination of Expense. Prior to Closing, the Shareholders will
produce evidence to the satisfaction of the Parent and its lenders that the
expenses of the Company as described on Attachment A to Exhibit 1 hereto have
been eliminated as expenses of the Surviving Corporation as of and following the
Closing Date.
4.3 Purchase of Certain Receivables. If any accounts receivable (other
than retainages) included in the assets of the Company for purposes of
determining the Total Consideration pursuant to Exhibit 1 remain unpaid in full
on the date that occurs 120 days following the Closing, the Shareholders shall,
upon written request by the Parent made on or before the date that occurs 150
days following the Closing, purchase the same from the Surviving Corporation,
without recourse, for the uncollected face amount thereof (net of any reserve
therefor for bad debts on the books of the Company on the Closing). Such
purchase by the Shareholders shall be pro rata based on their ownership of the
shares of Company Common Stock on the Closing Date. If any retainages included
in the assets of the Company as of the Balance Sheet Date remain unpaid in full
(after considering any reserves with respect thereto as of the Balance Sheet
Date) on the date that occurs 120 days following the completion of the project
to which they relate, the Shareholders shall, upon written request by the
Surviving Corporation, purchase same from the Surviving Corporation, without
recourse, for the cash amount equal to the uncollected face amount thereof. If
the Shareholders are required to purchase any accounts receivable or retainages
pursuant to this Section 4.3, then, upon the request of the Shareholders, the
Surviving Corporation and its employees shall provide reasonable assistance
(including testimony) during normal business hours to the Shareholders in
collecting such accounts receivable or retainages
4.4 Certain Payables and Receivables. On or prior to Closing, the
Shareholders shall cause to be paid in full in cash all accounts receivable,
notes receivable and advances payable by the Shareholders to the Company and the
Company shall pay in full in cash all accounts payable, notes payable (except
any Tax Notes (as defined) which shall be paid according to their terms) and
advances payable by the Company to the Shareholders.
4.5 Pre-Closing Covenants and Agreements. The Shareholders and the
Company jointly and severally agree as set forth in Exhibit 4.5 attached
hereto.
4.6 Confidentiality. Prior to the Effective Time, none of the Parent,
Merger Sub, the Company or the Shareholders will disclose the terms of this
Agreement or the Merger to any person other than their
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respective directors, officers, agents or representatives, except as otherwise
provided herein or unless required by law. The Company may make appropriate
disclosures of the general nature of the Merger to its employees, vendors and
customers to protect the Company's goodwill and to facilitate the Closing. The
Parent and Merger Sub may disclose pertinent information regarding the Merger
[to its existing and prospective investors, lenders, or investment bankers or
financial advisors] for the purpose of obtaining financing and may describe this
Agreement and the transactions contemplated hereby in any registration statement
filed by the Parent under the Securities Act and in reports filed by the Parent
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder, and may file this Agreement as an exhibit to
any thereof. [The Parent may also make appropriate disclosures of the general
nature of the Merger and the identity, nature and scope of the Company's
operations to prospective acquisition candidates in connection with the Parent's
efforts to effect additional acquisitions.] Each party will have mutual approval
rights with respect to written employee presentations concerning the prospective
merger.
4.7 Tax-Free Reorganization. Unless the other parties shall otherwise
agree in writing, none of the Shareholders, the Parent, Merger Sub, the Company
or the Surviving Corporation shall knowingly take or fail to take any action,
that would jeopardize the qualification of the Merger as a reorganization
withing the meaning of Section 368(a) of the Code.
4.8 Company Plans. Except as otherwise contemplated by this Agreement,
the Company Plans (as defined in Exhibit 2) described on Exhibit 4.8 in effect
at the date of this Agreement will remain in effect unless otherwise determined
by the Parent after the Effective Time.
4.9 Discharge of Indebtedness, Releases, Etc. Within thirty (30) days
after the Effective Time, the Parent shall cause the indebtedness of the Company
referred to in Exhibit 4.9 attached hereto ("Terminated Obligations") to be paid
in full or refinanced on terms acceptable to the Parent. Such payment shall
have no effect on the Total Consideration.
4.10 HSR Act. The Parent, the Shareholders and the Company shall take all
reasonable actions necessary to make all filings, if any, required under The
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act") in
connection with the transaction contemplated hereby and to obtain the
termination or expiration of the waiting period thereunder.
4.11 Options. Following the Closing, the Parent shall issue under the 1998
Parent Stock Awards Plan to those employees of the Company as shall be agreed to
by the parties hereto at such time, options to purchase the number of shares of
Parent Common Stock equal to 5.3% of the number of shares of Parent Common Stock
(provided that if such calculation shall result in the issuance of a fractional
share, such amount shall be rounded up to the nearest whole number) issued to
the Shareholders pursuant to this Agreement. Prior to the Closing Date, the
Company shall deliver to the Parent a list of proposed recipients of such
options, which shall have been prepared in accordance with the Parent's 1998
Parent Stock Awards Plan guidelines, and the Company and the Parent shall
mutually agree on the actual recipients of such options.
4.12 Income Tax Distribution. At or prior to the Closing, the Shareholders
shall cause the Company to pay to the Shareholders as a dividend and as a
distribution of accumulated S Corporation earnings of all tax periods through
the Effective Time a cash amount, which may be reasonably estimated, equal to
the net taxable income of the Company as determined for Federal income tax
purposes for the Company as an S Corporation less any prior distributions made
by the Company to the Shareholders with respect to such earnings ("Cash Tax
Distribution"). In the event that there is insufficient cash of the
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Company to make the Cash Tax Distribution either in whole or in part, the
Company may issue short term notes payable to the Shareholders in amounts equal
to the amount of the Cash Tax Distribution less the amount of cash actually
distributed to the Shareholders as part of the Cash Tax Distribution ("Tax
Notes") in the form of Exhibit 4.12. The Tax Notes, if issued, shall (i) be
issued prior to the Effective Time, (ii) bear interest at a rate not to exceed
six percent (6%) per annum, (iii) provide that the principal and all accrued
interest shall be due and payable six (6) months after the date of the Tax
Notes, and (iv) impose no prepayment penalty. All cash payments of the Cash Tax
Distribution and all amounts of any Tax Notes shall be deducted from the cash
portion of the Total Consideration.
4.13 Limited Guaranty. The Parent absolutely and unconditionally
guarantees to the Shareholders the payment of all sums now owing or which may in
the future be owing by the Company pursuant to the Tax Notes and the performance
of all obligations of the Surviving Corporation thereunder, when the same are
due and payable or vest, whether on demand, at stated maturity, by acceleration
or otherwise, and whether for principal, interest and/or any other amounts due
under the Tax Notes. The Parent agrees that its obligations under this Section
4.13 shall survive any renewal, extension or modification of the Tax Notes
approved by Merger Sub.
4.14 Tax Payment. The Surviving Corporation shall be responsible for all
taxes incurred by the Company or its Shareholders based on the income of the
Company and by the Company between the Balance Sheet Date and the Closing date
and shall reimburse the Shareholders for any tax liability actually incurred by
the Shareholders in respect thereof.
4.15 Employee Options. Contemporaneously herewith, the existing Company
options for 94.55790 shares of the Company Common Stock as listed on Exhibit
4.15-2 will be exchanged for Parent options to purchase an aggregate of
73,421.85 shares of Parent Common Stock (collectively, the "Employee Options"),
pursuant to the terms of the Atlantic Industrial Constructors, Inc. Stock Option
Plan and Nonqualified Stock Option Agreement (collectively, the "Option
Agreements"), attached hereto as Exhibits 4.15-1, 4.15-3 and 4.15-4. Upon the
Closing, the Parent shall assume all of the rights, interests and obligations of
the Company under the Option Agreements.
5. CONDITIONS PRECEDENT; CLOSING DELIVERIES
5.1 Conditions Precedent to the Obligations of the Parent and Merger Sub.
The obligations of the Parent and Merger Sub to effect the Merger under this
Agreement are subject to the satisfaction of each of the following conditions,
unless waived by the Parent in writing to the extent permitted by applicable
law:
5.1.1 Accuracy of Representations and Warranties. The
representations and warranties of the Shareholders and the Company contained in
this Agreement, in Exhibit 2 and the Disclosure Schedule referred to therein
and the other Exhibits provided by the Shareholders or the Company pursuant to
this Agreement or in any closing certificate or document delivered to the Parent
pursuant hereto shall be true and correct at and as of the Closing Date as
though made at and as of that time other than such representations and
warranties as are specifically made as of another date, and the Shareholders and
the Company shall each have delivered to the Parent and Merger Sub a certificate
to that effect.
5.1.2 Performance of Covenants. The Shareholders and the Company
shall have performed and complied with all covenants of this Agreement to be
performed or complied with by them at or prior to the Closing Date, and the
Shareholders and the Company shall each have delivered to the Parent and Merger
Sub a certificate to that effect.
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5.1.3 Legal Actions or Proceedings. No legal action or proceeding
shall have been instituted after the date hereof against the Company or against
the Parent or Merger Sub arising by reason of the acquisition of the Company
pursuant to this Agreement, which is reasonably likely (i) to restrain, prohibit
or invalidate the consummation of the transactions contemplated by this
Agreement, (ii) to have a Company Material Adverse Effect or (iii) to have a
Parent Material Adverse Effect after giving effect to the consummation of the
transactions contemplated by this Agreement, and the Shareholders and the
Company shall each have delivered to the Parent and Merger Sub a certificate to
the effect none of the foregoing shall have occurred with respect to it.
5.1.4 Approvals. The Company and the Shareholders shall have
procured all of the consents, approvals and waivers of third parties or any
regulatory body or authority, whether required contractually or by applicable
law or otherwise necessary for the execution, delivery and performance of this
Agreement (including the Company Related Documents and the Shareholder Related
Documents) by the Company and the Shareholders prior to the Closing Date, and
the Shareholders and the Company shall each have delivered to the Parent and
Merger Sub a certificate to that effect.
5.1.5 Closing Deliveries. All documents required to be executed or
delivered at Closing by the Shareholders pursuant to Section 5.3 of this
Agreement shall have been so executed and delivered.
5.1.6 No Casualty, Loss or Damage. No casualty, loss or damage shall
have occurred on or prior to the Effective Time to any of the properties or
assets of the Company.
5.1.7 Licenses, etc. The Company shall have obtained all such
licenses and permits as are legally required for the continued operation of the
business after the Effective Time, except such licenses and permits, the absence
of which will not have a Company Material Adverse Effect.
5.1.8 No Material Adverse Change. Since the Balance Sheet Date (as
defined in Exhibit 2), there shall not have occurred any event that has a
Company Material Adverse Effect.
5.1.9 Certain Corporate Actions. All necessary director and
shareholder resolutions, waivers and consents required to consummate the
transactions contemplated hereunder shall have been executed and delivered.
5.1.10 HSR Act. All required filings, if any, under HSR Act with
respect to the transactions contemplated hereby shall have been made and the
waiting periods thereunder shall have been terminated or shall have expired.
5.2 Conditions Precedent to the Obligations of the Shareholders and the
Company. The obligations of the Shareholders and the Company under this
Agreement are subject to the satisfaction of each of the following conditions,
unless waived by the Shareholders and the Company in writing to the extent
permitted by applicable law:
5.2.1 Accuracy of Representations and Warranties. The representations
and warranties of the Parent and Merger Sub contained in this Agreement or in
any closing certificate or document delivered to the Shareholders or the Company
pursuant hereto shall be true and correct on and as of the Closing Date as
though made at and as of that date other than such representations and
warranties as are specifically made as of another date, and the Parent and
Merger Sub shall have delivered to the Shareholders and the Company a
certificate to that effect.
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5.2.2 Performance of Covenants. The Parent and Merger Sub shall have
performed and complied with all covenants of this Agreement to be performed or
complied with by them at or prior to the Closing Date and the Parent and Merger
Sub shall have delivered to the Shareholders and the Company a certificate to
such effect.
5.2.3 Legal Actions or Proceedings. No legal action or proceeding
shall have been instituted after the date hereof against the Company or against
the Parent or Merger Sub arising by reason of the acquisition of the Company
pursuant to this Agreement, which is reasonably likely (i) to restrain, prohibit
or invalidate the consummation of the transactions contemplated by this
Agreement, (ii) to have a Company Material Adverse Effect or (iii) to have a
Parent Material Adverse Effect after giving effect to the consummation of the
transactions contemplated by this Agreement, and the Parent and the Merger Sub
shall each have delivered to the Shareholders and the Company a certificate to
the effect none of the foregoing shall have occurred with respect to it.
5.2.4 Approvals. The Parent shall have procured all of the consents,
approvals and waivers specified in Exhibit 3.1.4 prior to the Closing Date, and
the Parent shall have delivered to the Shareholders and the Company a
certificate to that effect.
5.2.5 Closing Deliveries. All documents required to be executed or
delivered at Closing by the Parent pursuant to Section 5.4 of this Agreement
shall have been so executed and delivered.
5.2.6 HSR Act. All required filings, if any, under the HSR Act with
respect to the transactions contemplated hereby shall have been made and the
waiting periods thereunder shall have been terminated or shall have expired.
5.3 Deliveries by the Shareholders at the Closing. At the Closing,
simultaneously with the deliveries by the Parent specified in Section 5.4 below,
and in addition to any deliveries required to be made by the Shareholders and
the Company pursuant to any other transaction document at the Closing, the
Shareholders shall deliver or cause to be delivered to the Parent the following:
5.3.1 Closing Certificates. The Shareholders and the Company shall
deliver the certificates required pursuant to Sections 5.1.1, 5.1.2, 5.1.3 and
5.1.4.
5.3.2 Stock Transfer Restriction Agreement. Each Shareholder shall
execute and deliver a Stock Transfer Restriction Agreement on the Closing Date,
effective as of the Effective Time, substantially in the form set forth in
Exhibit 5.3.2.
5.3.3 Employment Agreements. Each of the Shareholders and the
individual specified on 1 Exhibit 5.3.3, shall execute and deliver an Employment
Agreement with the Company on the Closing Date, effective as of the Effective
Time, substantially in the forms set forth in Exhibit 5.3.3A-1 or 5.3.3A-2.
5.3.4 Lease Agreement. The Shareholders shall cause the owner of the
property located at 4500 Oakleys Lane in Richmond, Virginia to execute and
deliver a lease agreement with the Surviving Corporation substantially in the
form attached as Exhibit 5.3.4. (the "Lease").
5.3.5 Opinion of Counsel for the Shareholders and the Company. The
Shareholders shall deliver the favorable opinion of LeClair Ryan, a Professional
Corporation, counsel to the Shareholders and the Company, dated the Effective
Time, substantially in the form and to the effect set forth in Exhibit 5.3.6
attached hereto.
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5.3.6 Documents, Stock Certificates. The Shareholders shall execute
and deliver the documents, certificates, opinions, instruments and agreements
required to be executed and delivered by the Company or its officers or
directors or the Shareholders at the Closing as contemplated hereby or as may be
reasonably requested by the Parent and shall deliver or cause to be delivered
the documents and evidence required under Section 4. Stock Certificates
representing all of the outstanding Company Common Stock and properly executed
and completed letters of transmittal shall be delivered by the Shareholders to
the Parent.
The consummation of the Closing shall not be deemed to be a waiver by
the Parent or the Surviving Corporation of any of their rights or remedies
against the Company or any of the Shareholders hereunder for any breach of
warranty, covenant or agreement by the Company or any of the Shareholders herein
irrespective of any knowledge of or investigation made by or on behalf of the
Parent or Merger Sub; provided, however, that if the Company shall disclose in
writing to the Parent prior to the Closing Date a specified breach of a
specifically identified representation, warranty, covenant or agreement of the
Company or the Shareholders herein by the Company or any of the Shareholders,
and requests a waiver thereof by the Parent, and the Parent shall waive any such
specifically identified breach in writing prior to the Closing Date, the Parent
and the Surviving Corporation, for themselves and for each Parent Indemnified
Party (as defined below), shall be deemed to have waived their respective rights
and remedies hereunder for, and the Shareholders shall have no liability with
respect to, any such specifically identified breach, to the extent so identified
by the Company and so waived by the Parent. Notwithstanding the foregoing, the
disclosure of any information, item or matter on the Disclosure Schedule shall
be deemed to modify or state an exception to the representation or warranty to
which it corresponds.
5.4 Deliveries by the Parent at the Closing. At the Closing,
simultaneously with the deliveries by the Shareholders specified in Section 5.3
above, and in addition to any other deliveries to be made by the Parent and
Merger Sub pursuant to any other transaction document at the Closing, the Parent
shall deliver or cause to be delivered to the Shareholders the following:
5.4.1 Closing Certificates. The Parent and Merger Sub shall deliver
the certificates required pursuant to Sections 5.2.1, 5.2.2, 5.2.3 and 5.2.4.
5.4.2 Opinion of Counsel for the Parent and Merger Sub. The Parent
shall deliver the favorable opinion of its legal counsel dated the Effective
Time, substantially in the form and to the effect set forth in Exhibit 5.4.2.
5.4.3 Closing Merger Consideration. The Parent shall deliver the
Closing Merger Consideration to the Shareholders by delivering the Closing Per
Share Cash Amount for the Converted Shares (less the Holdback) and providing
evidence to the Shareholders' of notification of the Parent's stock transfer
agent with respect to issuance of certificates representing the Closing Per
Share Common Stock Amount applicable to the Converted Shares, including a copy
of such notification.
5.4.4 Other Agreements. The Parent shall have delivered the
employment agreements described in Section 5.3.3. of this Agreement.
The consummation of the Closing shall not be deemed to be a waiver by
the Shareholders of any of the Shareholders' rights or remedies hereunder for
breach of any warranty, covenant or agreement herein by the Parent or Merger Sub
irrespective of any knowledge of or investigation with respect thereto made by
or on behalf of any Shareholders; provided, however, that if the Parent shall
disclose in writing to the Shareholders prior to the Closing a specified breach
of a specifically identified representation, warranty,
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covenant or agreement of the Parent or Merger Sub contained herein by the Parent
or Merger Sub, and requests a waiver thereof by the Company and the
Shareholders, and the Company and the Shareholders shall waive any such
specifically identified breach in writing prior to the Closing, the Company and
the Shareholders, for themselves and their heirs, legal representatives,
successors and assigns, shall be deemed to have waived their rights and remedies
hereunder for, and the Parent and Merger Sub shall have no liability or
obligation with respect to, any such specifically identified breach, to the
extent so identified by the Parent and waived by the Company and the
Shareholders.
6. SURVIVAL, INDEMNIFICATIONS
6.1 Survival. The representations and warranties set forth in this
Agreement and the other documents, instruments and agreements contemplated
hereby shall survive after the date hereof to the extent provided herein. The
representations and warranties of the Shareholders and the Company herein and in
the Shareholder Related Documents and the Company Related Documents (as defined
in Exhibit 2) other than those of the Shareholders and the Company in Sections
2.2, 2.3, 2.4 and in Sections 2 and 3 of Exhibit 2 and those which are breached
as a result of fraud or wilful misrepresentation shall survive for a period of
12 months after the Closing Date and the representations and warranties of the
Shareholders and the Company contained in Sections 2.2, 2.3, 2.4 and in Sections
2 and 3 of Exhibit 2 and those which are breached as a result of fraud or wilful
misrepresentation shall survive for the maximum period permitted by applicable
law. The representations and warranties of the Parent herein and in the Parent
Related Documents, other than those in Sections 3.1.3 and 3.1.4, shall survive
for a period of 12 months after the Closing Date and the representations and
warranties of the Parent contained in Sections 3.1.3 and 3.1.4 shall survive for
the maximum period permitted by applicable law. The periods of survival of the
representations and warranties as stated above in this Section 6.1 are referred
to herein as the "Survival Period." The liabilities of the parties under their
respective representations and warranties shall expire as of the expiration of
the applicable Survival Period and no claim for indemnification may be made with
respect to any breach of any representation or warranty under Section 6.2.1(i),
(ii) and/or (iii), the applicable Survival Period of which shall have expired,
except to the extent that written notice of such breach shall have been given to
the party against which such claim is asserted on or before the date of such
expiration. No claim for indemnification can be brought under or with respect
to Section 6.2.1(iv) and/or (v) below following the expiration of 18 months
after the Closing Date. The covenants and agreements of the parties herein
(including but not limited to Exhibit 4.5) and in other documents and
instruments executed and delivered in connection with the closing of the
transactions contemplated hereby shall survive for the maximum period permitted
by law.
6.2 Indemnification.
6.2.1 Parent Indemnified Parties. Subject to the provisions of
Sections 6.1 and 6.3 hereof, the Shareholders shall indemnify, save and hold
harmless the Parent, the Surviving Corporation, Merger Sub and any of their
assignees (including lenders) and all of their respective officers, directors,
employees, representatives, agents, advisors and consultants and all of their
respective heirs, legal representatives, successors and assigns (collectively
the "Parent Indemnified Parties") from and against any and all damages,
liabilities, losses, loss of value (including the value of adverse effects on
cash flow or earnings), claims, deficiencies, penalties, interest, expenses,
fines, assessments, charges and costs, including reasonable attorneys' fees and
court costs (collectively "Losses") arising from, out of or in any manner
connected with or based on:
(i) the breach of any covenant of a Shareholder or the Company or
the failure by any Shareholder or the Company to perform any obligation of
such Shareholders or the Company contained herein or in any Company Related
Document or Shareholder Related Document;
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(ii) any inaccuracy in or breach of any representation or warranty
of any Shareholder contained herein or in any Shareholder Related Document;
(iii) any inaccuracy in or breach of any representation or warranty
of the Company contained herein or in any Company Related Document;
(iv) indemnification payments made by the Company or the Surviving
Corporation to the Company's present or former officers, directors,
employees, agents, consultants, advisors or representatives in respect of
actions taken or omitted to be taken prior to the Closing; and
(v) any act, omission, occurrence, event, condition or circumstance
occurring or existing at any time on or before the Effective Time and
involving or related to the assets, properties, business or operations now
or previously owned or operated by the Company and not (a) disclosed with
reasonable specificity in the Disclosure Schedule or (b) disclosed in the
Company Financial Statements (as defined in Exhibit 2).
6.2.2 Parent Indemnity. Subject to the provisions of Sections 6.1
and 6.3, the Parent shall indemnify, save and hold harmless the Shareholders and
each Shareholder's heirs, legal representatives, successors and assigns from and
against all Losses arising from, out of or in any manner connected with or based
on:
(i) any breach of any covenant of the Parent or Merger Sub or the
failure by the Parent or Merger Sub to perform any of its obligations
contained herein or in the Parent Related Documents;
(ii) any inaccuracy in or breach of any representation or warranty
of the Parent or Merger Sub contained herein or in the Parent Related
Documents;
(iii) any failure by the Surviving Corporation to satisfy the
Terminated Obligations pursuant to Section 4.9 of this Agreement and to
secure the release of any personal guarantees issued by any Shareholder;
and
(iv) any act, omission, event, condition or circumstance occurring
or existing at any time after (but not on or before) the Effective Time and
involving or relating to the assets, properties, businesses or operations
of the Company; provided, however, that this clause (iii) shall not apply
to any Losses to the extent that such Losses result from any Shareholder's
acts or omissions after the Effective Time as an officer, director and/or
employee of the Parent, the Surviving Corporation and/or any other
affiliate of the Parent.
The foregoing indemnities shall not limit or otherwise adversely affect the
Parent Indemnified Parties' rights of indemnity for Losses under Section 6.2.1.
6.3 Limitations. No claim under Section 621 may be made until the
aggregate of all Losses for which claims for indemnification are made under such
Section exceeds $100,000 (the "Threshold"), but subject to limitations of this
Section 6.3, all Losses in excess of the Threshold may be recovered under such
Section once the Threshold has been exceeded.
The amount of any Losses otherwise recoverable by the Parent shall be reduced by
the amount of any Losses recovered by the Surviving Corporation or any other
Parent Indemnified Parties with respect to the same
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claim, and the amount of any Losses otherwise recoverable by the Surviving
Corporation or any other Parent Indemnified Parties, pursuant to Section 6.2.1,
shall be reduced by the amount of any Losses recovered by the Parent hereunder
with respect to the same claim. The aggregate liability of the Shareholders
under Sections 6.2.1(ii) and (iii) shall (i) be net of and reduced by (a) any
cash amounts actually received by the Parent or the Surviving Corporation as
insurance proceeds as the result solely of or relating to the claims giving rise
to such Shareholder's liability, and (b) any amount of taxes that are determined
by the Accountant not to be due and owing as the result solely of the claims
giving rise to such Shareholder's liability, and (ii) not exceed an amount equal
to the Total Consideration with the Parent Common Stock being valued at the
Parent Common Stock Value for such purpose. The aggregate liability of the
Parent under Section 6.2.2(ii) shall (i) be net of (a) any cash amounts actually
received by the Shareholders as insurance proceeds as the result solely of the
claims giving rise to such Parent's liability, and (b) any amount of taxes that
are determined by the Accountant not to be due and owing as the result solely of
the claims giving rise to such Parent's liability, and (ii) not exceed the cash
amount equal to the Total Consideration with the Parent Common Stock being
valued at the Parent Common Stock Value for such purpose. Except for claims
pursuant to Section 6.2.1.(i) of this Agreement, claims involving fraud or
intentional or negligent misrepresentation and claims arising under any
agreement that is an exhibit to this Agreement, the indemnification rights
contained in this Article 6 shall be the sole remedy of the parties hereto with
respect to the subject matter of this Agreement.
6.4 Procedures for Indemnification.
6.4.1 Notice. The party (the "Indemnified Party") that may be
entitled to indemnity hereunder shall give prompt notice to any party obligated
to give indemnity hereunder (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any suit, action or proceeding in respect of which
indemnity may be sought hereunder. Any failure on the part of any Indemnified
Party to give the notice described in this Section 6.4.1 shall relieve the
Indemnifying Party of its obligations under this Article 6 only to the extent
that such Indemnifying Party has been prejudiced by the lack of timely and
adequate notice (except that the Indemnifying Party shall not be liable for any
expenses incurred by the Indemnified Party during the period in which the
Indemnified Party failed to give such notice). Thereafter, the Indemnified Party
shall deliver to the Indemnifying Party, promptly (and in any event within 10
days thereof) after the Indemnified Party's receipt thereof, copies of all
notices and documents (including court papers) received by the Indemnified Party
relating to such claim, action, suit or proceeding. Each of the parties hereto
agrees that any claims for indemnification hereunder against the Shareholders
for which the Shareholders are responsible may be satisfied by the Shareholders
(in whole or in part), at the election of each individual Shareholder, using
shares of Parent Common Stock owned by them, such shares being valued at the
Parent Common Stock Value for such purpose; provided, however, the word
"Closing" in Exhibit 1 shall be then defined as the date of delivery of any
notice under this Section 6.4.1.
6.4.2 Legal Defense. The Parent shall have the obligation to assume
the defense or settlement of any third-party claim, suit, action or proceeding
in respect of which indemnity may be sought hereunder, provided that (i) the
Shareholders shall at all times have the right, at the Shareholders' option, to
participate fully therein, and (ii) if the Parent does not proceed diligently to
defend the third-party claim, suit, action or proceeding within 10 days after
receipt of notice of such third-party claim, suit, action or proceeding, the
Shareholders shall have the right, but not the obligation, to undertake the
defense of any such third-party claim, suit, action or proceeding.
6.4.3 Settlement. The Indemnifying Party shall not be required to
indemnify the Indemnified Party with respect to any amounts paid in settlement
of any third-party suit, action, proceeding or investigation entered into
without the written consent of the Indemnifying Party; provided, however, that
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if the Indemnified Party is a Parent Indemnified Party, such third-party suit,
action, proceeding or investigation may be settled without the consent of the
Indemnifying Party on 20 days' prior written notice to the Indemnifying Party if
such third-party suit, action, proceeding or investigation is then unreasonably
interfering with the business or operations of the Company or the Surviving
Corporation, the Indemnifying Party has failed to respond to requests to
participate in the settlement negotiations, the Parent has proceeded to
reasonably defend the suit and the settlement is commercially reasonable under
the circumstances; and provided further, that if the Indemnifying Party gives 10
days' prior written notice to the Indemnified Party of a settlement offer which
the Indemnifying Party desires to accept and to pay all Losses with respect
thereto ("Settlement Notice") and the Indemnified Party fails or refuses to
consent to such settlement within 10 days after delivery of the Settlement
Notice to the Indemnified Party, and such settlement otherwise complies with the
provisions of this Section 6.4, the Indemnifying Party shall not be liable for
Losses arising from such third-party suit, action, proceeding or investigation
in excess of the amount proposed in such settlement offer. Notwithstanding the
foregoing, no Indemnifying Party will consent to the entry of any judgment or
enter into any settlement without the consent of the Indemnified Party, if such
judgment or settlement imposes any obligation or liability upon the Indemnified
Party other than the execution, delivery or approval thereof and customary
releases of claims with respect to the subject matter thereof.
6.4.4 Cooperation. The parties shall cooperate in defending any such
third-party suit, action, proceeding or investigation, and the defending party
shall have reasonable access to the books and records, and personnel in the
possession or control of the Indemnified Party that are pertinent to the
defense. The Indemnified Party may join the Indemnifying Party in any suit,
action, claim or proceeding brought by a third party, as to which any right of
indemnity created by this Agreement would or might apply, for the purpose of
enforcing any right of the indemnity granted to such Indemnified Party pursuant
to this Agreement.
7. TERMINATION
7.1 Grounds for Termination. This Agreement may be terminated at any time
prior to the Closing Date:
7.1.1 Mutual Consent. By the written agreement of the Company and
the Parent; or
7.1.2 Optional By the Company. By the Company by written notice to
the Parent, if the Closing shall have failed to occur by 5:00 p.m. Houston,
Texas time on June 30, 1998, but only if neither the Company nor any Shareholder
has breached this Agreement or have failed to perform any of their respective
obligations under this Agreement;
7.1.3 Optional By the Parent. By the Parent, by written notice to
the Company, if the Closing shall have failed to occur by 5:00 p.m. Houston,
Texas time on June 30, 1998, but only if neither the Parent nor Merger Sub has
breached this Agreement or has failed to perform any of its obligations under
this Agreement;
7.1.4 Breach By the Parent or Merger Sub. By the Company, by written
notice to the Parent, if either the Parent or Merger Sub has breached this
Agreement or failed to perform any of its obligations under this Agreement; or
7.1.5 Breach by the Company or the Shareholders. By the Parent, by
written notice to the Company, if the Company or any Shareholder has breached
this Agreement or has failed to perform any of their respective obligations
under this Agreement.
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7.2 Effect of Termination. If this Agreement is terminated as permitted
under Section 7.1, such termination shall be without liability of any party to
any other party, except that such termination shall be without prejudice to any
and all remedies the parties may have against each other for breach of this
Agreement.
8. MISCELLANEOUS
8.1 Notice. Any notice, delivery or communication required or permitted
to be given under this Agreement shall be in writing, and shall be mailed,
postage prepaid, or delivered, to the addresses given below, or sent by telecopy
to the telecopy numbers set forth below, as follows:
To the Company (prior to the Effective Time) or the Shareholders:
Atlantic Industrial Constructors, Inc.
4500 Oakleys Lane
Richmond, Virginia 23231
Attn: Mr. Giles C. Upshur, III
Telecopy: (804) 222-6638
To the Parent or Merger Sub or the Surviving Corporation:
Group Maintenance America Corp.
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
Attn: President
Telecopy: (713) 626-4766
or other such address as shall be furnished in writing by any such party to the
other parties, and such notice shall be effective and be deemed to have been
given as of the date actually received.
To the extent any notice provision in any other agreement, instrument or
document required to be executed or executed by the parties in connection with
the transactions contemplated herein contains a notice provision which is
different from the notice provision contained in this Section 8.1 with respect
to matters arising under such other agreement, instrument or document, the
notice provision in such other agreement, instrument or document shall control.
8.2 Further Documents. The Shareholders shall, at any time and from time
to time after the date hereof, upon request by the Parent and without further
consideration, execute and deliver such instruments or other documents and take
such further action as may be reasonably required in order to perfect any other
undertaking made by the Shareholders hereunder.
8.3 Assignability. The Shareholders shall not assign this Agreement in
whole or in part without the prior written consent of the Parent, except by the
operation of law. The Parent may assign its rights under this Agreement, the
Company Related Documents and the Shareholder Related Documents without the
consent of any Shareholders or the Company, provided that such assignment is to
an Affiliate of the Parent and shall in no way change the consideration to be
received by the Shareholders hereunder or result in the failure of the
transaction to qualify as a tax-free reorganization. After the Effective Time,
the Surviving
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Corporation may assign its rights under this Agreement, the Company Related
Documents and the Shareholder Related Documents without the consent of the
Shareholders.
8.4 Exhibits and Schedules. The Exhibits and Schedules (and any
appendices thereto) referred to in this Agreement are and shall be incorporated
herein and made a part hereof.
8.5 Sections and Articles. Unless the context otherwise requires, all
Sections, Articles and Exhibits referred to herein are, respectively, sections
and articles of, and exhibits to, this Agreement and all Schedules referred to
herein are schedules constituting a part of the Disclosure Schedule.
8.6 Entire Agreement. This Agreement constitutes the full understanding
of the parties, a complete allocation of risks between them and a complete and
exclusive statement of the terms and conditions of their agreement relating to
the subject matter hereof and supersedes any and all prior agreements, whether
written or oral, that may exist between the parties with respect thereto.
Except as otherwise specifically provided in this Agreement, no conditions,
usage of trade, course of dealing or performance, understanding or agreement
purporting to modify, vary, explain or supplement the terms or conditions of
this Agreement shall be binding unless hereafter made in writing and signed by
the party to be bound, and no modification shall be effected by the
acknowledgment or acceptance of documents containing terms or conditions at
variance with or in addition to those set forth in this Agreement. No waiver by
any party with respect to any breach or default or of any right or remedy and no
course of dealing shall be deemed to constitute a continuing waiver of any other
breach or default or of any other right or remedy, unless such waiver be
expressed in writing signed by the party to be bound. Failure of a party to
exercise any right shall not be deemed a waiver of such right or rights in the
future.
8.7 Headings. Headings as to the contents of particular articles and
sections are for convenience only and are in no way to be construed as part of
this Agreement or as a limitation of the scope of the particular articles or
sections to which they refer.
8.8 CONTROLLING LAW. THE VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS
AGREEMENT AND ANY DISPUTE CONNECTED HEREWITH SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT THE
APPLICABLE CORPORATE LAW MANDATORILY APPLIES WITH RESPECT THERETO.
8.9 Public Announcements. After the Effective Time, the Shareholders
shall make no press release, public announcement, or public confirmation or
disclose any other information regarding this Agreement or the contents hereof.
8.10 No Third Party Beneficiaries. Except as set forth in Article 6, no
person or entity not a party to this Agreement shall have rights under this
Agreement as a third party beneficiary or otherwise.
8.11 Amendments and Waivers. This Agreement may be amended by the Parent,
Merger Sub and the Company, by action taken by their Boards of Directors to the
extent permitted by applicable law; provided, however, that no such amendment
shall (i) alter or change any provision of this Agreement, the alteration or
change of which must be adopted by the holders of capital stock of the Company
under the certificate or articles of incorporation of the Company or the
Applicable Corporate Law, or (ii) alter or change this Section 8.11, unless each
such alteration or change is adopted by the holders of shares of capital stock
of the Company as may be required by the certificate or articles of
incorporation of the Company or the Applicable Corporate Law. Prior to the
Effective Time, all amendments to this Agreement must be by
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an instrument in writing signed on behalf of the Parent, Merger Sub, the Company
and the Shareholders. After the Effective Time, all amendments to this Agreement
must be by an instrument in writing signed on behalf of the Parent and the
Shareholders. Any term or provision of this Agreement (other than the
requirements for shareholder approvals) may be waived in writing at any time by
the party which is, or whose Shareholders are, entitled to the benefits thereof.
8.12 No Employee Rights. Nothing herein expressed or implied shall confer
upon any employee of the Company, any other employee or legal representatives or
beneficiaries of any thereof any rights or remedies, including any right to
employment or continued employment for any specified period, of any nature or
kind whatsoever under or by reason of this Agreement, or shall cause the
employment status of any employee to be other than terminable at will.
8.13 Non-Recourse. No recourse for the payment of any amounts due
hereunder or for any claim based on this Agreement or the transactions
contemplated hereby or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Parent in this Agreement shall
be had against any incorporator, organizer, promoter, shareholder, officer,
director, employee or representative as such (other than the Shareholders as set
forth herein), past, present or future, of the Parent or of any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Agreement.
8.14 When Effective. This Agreement shall become effective only upon the
execution and delivery of one or more counterparts of this Agreement by each of
the Parent, Merger Sub, the Company and the Shareholders.
8.15 Takeover Statutes. If any "fair price," "moratorium," control share
acquisition" or other form of anti-takeover statute or regulation shall become
applicable to the transactions contemplated hereby, the Parent and the Company
and their respective members of their Boards of Directors shall grant such
approvals and take such actions as are necessary so that the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated herein and otherwise act to eliminate or minimize the
effects of such statute or regulation on the transactions contemplated herein.
8.16 Number and Gender of Words. Whenever herein the singular number is
used, the same shall include the plural where appropriate and words of any
gender shall include each other gender where appropriate.
8.17 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws, such provisions
shall be fully severable as if such invalid or unenforceable provisions had
never comprised a part of the Agreement; and the remaining provisions of the
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be automatically as a part of this Agreement, a provision
as similar in terms to such illegal, invalid or unenforceable provision as may
be possible and be legal, valid and enforceable.
8.18 Multiple Counterparts. This Agreement may be executed in a number of
identical counterparts. If so executed, each of such counterparts is to be
deemed an original for all purposes and all such counterparts shall,
collectively, constitute one agreement, but, in making proof of this Agreement,
it shall not be necessary to produce or account for more than one such
counterpart.
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8.19 No Rule of Construction. All of the parties hereto have been
represented by counsel in the negotiations and preparation of this Agreement;
therefore, this Agreement will be deemed to be drafted by each of the parties
hereto, and no rule of construction will be invoked respecting the authorship of
this Agreement.
8.20 Expenses. Each of the parties shall bear all of their own expenses in
connection with the negotiation and closing of this Agreement and the
transactions contemplated hereby, except that Merger Sub shall assume and after
the Closing pay the first $40,000 of such expenses incurred by the Company
(which expenses the parties acknowledge are solely and directly (related to the
Merger); provided that the Company may pay the costs of any broker, legal
counsel, accountants (including the fees and costs of the Accountants, other
than the fees and costs of the Accountants generated pursuant to Section 1.9.6
of this Agreement) or other advisors engaged by the Shareholders (to the extent,
and only to the extent, that any such payment will not jeopardize the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code).
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered on
the date first hereinabove written.
PARENT:
GROUP MAINTENANCE AMERICA CORP.
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
MERGER SUB:
Atlantic Acquisition Corp.
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
SHAREHOLDERS:
-----------------------------------------------
Giles C. Upshur, III
-----------------------------------------------
Thomas E. Williams
COMPANY:
Atlantic Industrial Constructors, Inc.
By:
--------------------------------------------
Giles C. Upshur, III, President
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EXHIBIT 99
LIST OF LENDERS
ABN AMRO Bank, N.V.
Bank of America Texas, N.A.
Chase Bank of Texas, National Association
(formerly Texas Commerce Bank National Association)
Credit Lyonnais
National City Bank, Kentucky
Paribas
Union Bank of California
