<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 15, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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AMERICAN PLUMBING & MECHANICAL, INC.*
(Exact name of Registrant as specified in its charter)
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DELAWARE 1711 76-0577626
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
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1502 AUGUSTA, SUITE 425
HOUSTON, TEXAS 77057
(713) 243-7350
(Address, including zip code, and telephone number,
including area code, of Registrant's Principal Executive Offices)
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DAVID C. BAGGETT
SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY
1502 AUGUSTA, SUITE 425
HOUSTON, TEXAS 77057
(713) 243-7350
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
DAVID P. OELMAN
ANDREWS & KURTH L.L.P.
600 TRAVIS, SUITE 4200
HOUSTON, TEXAS 77002
(713) 220-4200
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective Amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE(1)
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11 5/8% Series B Senior Subordinated
Notes due 2008...................... $125,000,000 100% $125,000,000 $34,750
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Guarantees of 11 5/8% Series B Senior
Subordinated Notes due 2008......... -- -- -- (2)
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(1) Calculated in accordance with Rule 457(f)(2). For purposes of this
calculation, the Offering Price per Series B Note was assumed to be the
stated principal amount of each Series A Note that may be received by the
Registrant in the exchange transaction in which the Series B Notes will be
offered.
(2) Pursuant to Rule 457(n), no registration fee is required for the Guarantees
of the Senior Exchange Notes registered hereby.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
* The subsidiaries of American Plumbing & Mechanical, Inc. will guarantee the
securities being registered hereby and therefore are also registrants.
Information about these additional registrants appears on the following pages.
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<PAGE> 2
ADDITIONAL REGISTRANTS
CHRISTIANSON ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
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TEXAS 1711 74-1588887
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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CHRISTIANSON SERVICE COMPANY
(Exact name of registrant as specified in its charter)
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TEXAS 1711 74-2810094
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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G.G.R. LEASING CORPORATION
(Exact name of registrant as specified in its charter)
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TEXAS 1711 74-2250428
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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R.C.R. PLUMBING, INC.
(Exact name of registrant as specified in its charter)
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CALIFORNIA 1711 95-3139393
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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J.A. CROSON COMPANY
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
OHIO 1711 31-0784594
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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<PAGE> 3
FRANKLIN FIRE SPRINKLER COMPANY
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
OHIO 1711 31-1232113
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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J.A. CROSON COMPANY OF FLORIDA
(Exact name of registrant as specified in its charter)
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FLORIDA 1711 59-2944806
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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TEEPE'S RIVER CITY MECHANICAL, INC.
(Exact name of registrant as specified in its charter)
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OHIO 1711 31-1056529
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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KEITH RIGGS PLUMBING, INC.
(Exact name of registrant as specified in its charter)
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ARIZONA 1711 86-0265707
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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POWER PLUMBING, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 1711 76-0255723
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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<PAGE> 4
NELSON MECHANICAL CONTRACTORS, INC.
(Exact name of registrant as specified in its charter)
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FLORIDA 1711 59-1266315
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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SHERWOOD MECHANICAL, INC.
(Exact name of registrant as specified in its charter)
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CALIFORNIA 1711 33-0085731
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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MILLER MECHANICAL CONTRACTORS, INC.
(Exact name of registrant as specified in its charter)
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GEORGIA 1711 58-1303603
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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<PAGE> 5
INFORMATION CONTAINED HEREIN is subject to completion or amendment. A
registration statement relating to these securities has been filed with the SEC.
These securities may not be sold nor may offers to buy be accepted prior to the
time the registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED JUNE 15, 1999
PROSPECTUS
$125,000,000
[AMERICAN PLUMBING & MECHANICAL, INC. LOGO]
AMERICAN PLUMBING & MECHANICAL, INC.
OFFER TO EXCHANGE
$1,000 PRINCIPAL AMOUNT OF 11 5/8% SERIES B NOTES DUE 2008
FOR EACH $1,000 PRINCIPAL AMOUNT OF EXISTING
11 5/8% SERIES A NOTES DUE 2008
($125,000,000 IN PRINCIPAL AMOUNT OUTSTANDING)
THE EXCHANGE OFFER
- - Expires 5:00 p.m., New York City time, , 1999, unless extended.
- - Subject to customary conditions, which we may waive, the exchange offer is not
conditioned upon a minimum aggregate principal amount of existing notes being
tendered.
- - All existing notes tendered according to the procedures in this prospectus and
not withdrawn will be exchanged.
- - The exchange offer is not subject to any condition other than that it not
violate applicable laws or any applicable interpretation of the staff of the
SEC.
THE EXCHANGE NOTES
- - The terms of the exchange notes to be issued in the exchange offer are
substantially identical to the existing notes, except that we have registered
the exchange notes with the SEC. In addition, the exchange notes will not be
subject to the transfer restrictions the existing notes are subject to, and
provisions relating to an increase in the stated interest rate on the existing
notes will be eliminated.
- - The exchange notes will be senior subordinated obligations of American
Plumbing & Mechanical, Inc. They are subordinate to our senior debt. As of
, 1999, we had senior debt outstanding of approximately $
million.
- - Interest on the exchange notes will accrue from , 1999 at the rate
of 11 5/8% per year, payable semi-annually in arrears on each April 15 and
October 15, beginning October 15, 1999.
- - The exchange notes will be fully and unconditionally guaranteed by our
guarantor subsidiaries.
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YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 11 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
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NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE> 6
TABLE OF CONTENTS
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PAGE
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Summary..................................................... 1
Risk Factors................................................ 11
Forward-Looking Statements.................................. 20
The Exchange Offer.......................................... 21
The Company................................................. 31
Use of Proceeds............................................. 34
Capitalization.............................................. 35
Selected Historical Financial Data.......................... 36
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 38
Business.................................................... 55
Management.................................................. 68
Certain Transactions........................................ 72
Principal Stockholders...................................... 80
Description of Other Indebtedness........................... 81
Description of The Notes.................................... 83
Registration Rights......................................... 118
Plan of Distribution........................................ 118
Legal Matters............................................... 119
Experts..................................................... 119
Where You Can Find More Information......................... 119
Index to Financial Statements............................... F-1
</TABLE>
i
<PAGE> 7
SUMMARY
This summary highlights some information from this prospectus, but does not
contain all material features of the exchange offer. Please read the detailed
information appearing elsewhere in this prospectus.
In this prospectus, the terms "we," "us," "our," "our company" and "AMPAM"
refer to American Plumbing & Mechanical, Inc., including the founding companies
unless the context otherwise requires. The term "founding companies" refers to
Christianson Enterprises, Inc., G.G.R. Leasing Corporation and Christianson
Service Company (collectively, "Christianson"), R.C.R. Plumbing, Inc. ("RCR"),
Teepe's River City Mechanical, Inc. ("Teepe's"), Keith Riggs Plumbing, Inc.
("Keith Riggs"), J.A. Croson Company and Franklin Fire Sprinkler Company,
(collectively, "Croson Ohio"), J.A. Croson Company of Florida ("Croson
Florida"), Power Plumbing, Inc. and subsidiaries ("Power"), Nelson Mechanical
Contractors, Inc. ("Nelson"), Sherwood Mechanical, Inc. ("Sherwood") and Miller
Mechanical Contractors, Inc. ("Miller"). The following summary contains basic
information about this exchange offer. It may not contain all the information
that is important to you. For a more complete understanding of this exchange
offer, we encourage you to read this entire document and to consult with your
own legal and tax advisors.
THE EXCHANGE OFFER
On May 19, 1999, we completed a private offering of 11 5/8% Senior
Subordinated Notes due 2008. The notes were sold for a total purchase price of
$122,417,500.
We entered into a registration rights agreement with the initial purchasers
in the private offering in which we agreed to deliver to you this prospectus and
to use our best efforts to complete the exchange offer by November 15, 1999.
This exchange offer entitles you to exchange your notes for notes with identical
terms that are registered with the SEC. If the exchange offer is not completed
by November 15, 1999, the interest rate on the notes will be increased by 0.25%
per year for each 90-day period during which the exchange offer is not
completed. The maximum amount by which the interest rate will be increased is
0.5% in total. After the exchange offer is complete, you will no longer be
entitled to any exchange or registration rights for your notes. You should read
the discussion under the heading "The Exchange Offer" beginning on page and
"Description of the Notes" beginning on page for further information about the
exchange notes.
The Exchange Offer......... We are offering to exchange up to $125,000,000 of
the exchange notes for up to $125,000,000 of the
existing notes. Existing notes may be exchanged
only in $1,000 increments.
The terms of the exchange notes are identical in
all material respects to the existing notes except
the exchange notes will not be subject to transfer
restrictions and holders of exchange notes will
have no registration rights. Also, the exchange
notes will not contain provisions for an increase
in their stated interest rate.
Resale..................... We believe the notes issued in the exchange offer
may be offered for resale, resold and otherwise
transferred by you without compliance with the
registration and prospectus delivery provisions of
the Securities Act provided that:
- the notes received in the exchange offer are
acquired in the ordinary course of your business;
- you are not participating and have no
understanding with any person to participate in
the distribution of the notes issued to you in
the exchange offer; and
- you are not an affiliate of ours.
1
<PAGE> 8
Each broker-dealer issued notes in the exchange
offer for its own account in exchange for notes
acquired by the broker-dealer as a result of
market-making or other trading activities must
acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in
connection with any resale of the notes issued in
the exchange offer. A broker-dealer may use this
prospectus for an offer to resell, resale or other
retransfer of the notes issued to it in the
exchange offer.
Expiration Date............ 5:00 p.m., New York City time, on , 1999,
unless we extend the exchange offer. It is possible
that we will extend the exchange offer until all
existing notes are tendered. You may withdraw
existing notes you tendered at any time before
, 1999. See "The Exchange
Offer -- Expiration Date; Extensions; Amendments."
Accrued Interest on the
Exchange Notes and the
Existing Notes........... The exchange notes will bear interest at a rate of
11 5/8% per year, payable semi-annually on April 15
and October 15, commencing October 15, 1999. April
1 and October 1 are the record dates for
determining holders entitled to interest payments.
Conditions to the Exchange
Offer...................... The exchange offer is subject only to the following
conditions:
- the compliance of the exchange offer with
securities laws;
- the tender of the existing notes;
- the representation by the holders of the existing
notes that the exchange notes they will receive
are being acquired by them in the ordinary course
of their business and that at the time the
exchange offer is completed the holder had no
plan to participate in the distribution of the
exchange notes; and
- No judicial or administrative proceeding shall
have been threatened that would limit us from
proceeding with the exchange offer.
Procedures for Tendering
Existing Notes Held in
the Form of Book-Entry
Interests................ The existing notes were issued as global securities
and were deposited with State Street Bank and Trust
Company when they were issued. State Street Bank
and Trust Company issued a certificate-less
depositary interest in each note, which represents
a 100% interest in the note, to The Depository
Trust Company. Beneficial interests in the notes
held by participants in DTC, which we will refer to
as notes held in book-entry form, are shown on, and
transfers of the notes can be made only through,
records maintained in book-entry form by DTC and
its participants.
If you are a holder of a note held in the form of a
book-entry interest and you wish to tender your
book-entry interest for exchange in the exchange
offer, you must transmit to State Street Bank and
Trust
2
<PAGE> 9
Company, as exchange agent, before the expiration
date of the exchange offer:
EITHER
- a properly completed and executed letter of
transmittal, which accompanies this prospectus,
or a facsimile of the letter of transmittal,
including all other documents required by the
letter of transmittal, to the exchange agent at
the address on the cover page of the letter of
transmittal;
OR
- a computer-generated message transmitted by means
of DTC's Automated Tender Offer Program system
and received by the exchange agent and forming a
part of a confirmation of book entry transfer in
which you acknowledge and agree to be bound by
the terms of the letter of transmittal;
AND, EITHER
- a timely confirmation of book-entry transfer of
your outstanding notes into the exchange agent's
account at DTC, according to the procedure for
book-entry transfers described in this prospectus
under the heading "The Exchange
Offer -- Book-Entry Transfer" beginning on page
25, must be received by the exchange agent on or
prior to the expiration date;
OR
- the documents necessary for compliance with the
guaranteed delivery procedures described below.
Procedures for Tendering
Existing Notes........... If you wish to accept the exchange offer, sign and
date the letter of transmittal, and deliver the
letter of transmittal, along with the existing
notes and any other required documentation, to the
exchange agent. By executing the letter of
transmittal, you will represent to us that, among
other things:
- the exchange notes you receive will be acquired
in the ordinary course of your business;
- you have no arrangement with any person to
participate in the distribution of the exchange
notes; and
- you are not an affiliate of AMPAM or, if you are
an affiliate, you will comply with the
registration and prospectus delivery requirements
of the Securities Act to the extent applicable.
Special Procedures for
Beneficial Owners.......... If you are a beneficial owner whose existing notes
are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
wish to tender those existing notes in the exchange
offer, please contact the registered holder as soon
as possible and instruct them to tender on your
behalf and comply with the instructions in this
prospectus.
3
<PAGE> 10
Guaranteed Delivery
Procedures................. If you wish to tender your existing notes, you may
do so according to the guaranteed delivery
procedures described in this prospectus under the
heading "The Exchange Offer -- Guaranteed Delivery
Procedures."
Withdrawal Rights.......... You may withdraw existing notes you tender by
furnishing a notice of withdrawal to the exchange
agent containing the information described under
the heading "The Exchange Offer -- Withdrawal of
Tenders" at any time before 5:00 p.m. New York City
time on , 1999.
Acceptance of Existing
Notes and Delivery of
Exchange Notes........... We will accept for exchange any and all existing
notes that are properly tendered before the
expiration date. See "The Exchange
Offer -- Procedures for Tendering." The same
conditions described under the heading "The
Exchange Offer -- Conditions" will apply. The
exchange notes will be delivered promptly following
the expiration date.
Exchange Agent............. State Street Bank and Trust Company is serving as
exchange agent for the exchange offer.
See "The Exchange Offer" for more detailed information concerning the terms of
the exchange offer.
4
<PAGE> 11
SUMMARY OF TERMS OF EXCHANGE NOTES
The form and terms of the notes to be issued in the exchange offer are the
same as the form and terms of existing notes except that the notes to be issued
in the exchange offer will be registered under the Securities Act and,
accordingly, will not bear legends restricting their transfer. Also, the
exchange notes will not contain the penalty interest provisions related to the
registration of the existing notes that are in the existing notes. The notes
issued in the exchange offer will evidence the same debt as the outstanding
notes, and both the existing notes and the exchange notes are governed by the
same indenture.
Issuer..................... American Plumbing & Mechanical, Inc.
1502 Augusta, Suite 425
Houston, Texas 77057
(713) 243-7350
Total Amount............... $125,000,000 total principal amount of 11 5/8%
Senior Subordinated Notes due 2008.
Maturity................... October 15, 2008.
Interest Payment Dates..... April 15 and October 15, beginning October 15,
1999.
Guarantees................. Each of our direct subsidiaries will jointly and
severally guarantee the exchange notes. Future
subsidiaries also may be required to guarantee the
exchange notes. The guarantees are full and
unconditional. If we cannot make payments on the
notes when they are due, our guarantor subsidiaries
must make them. See "Description of the
Notes -- The Guarantees."
Ranking.................... The exchange notes and the subsidiary guarantees
are referred to as senior subordinated debt because
they are, by their terms, ranked behind our
existing and future senior indebtedness and ranked
ahead of our existing and future subordinated
indebtedness in right of payment. Because the
exchange notes are subordinated, in the event of
bankruptcy, liquidation or dissolution, holders of
the exchange notes will not receive any payment
until holders of senior indebtedness and guarantor
senior indebtedness have been paid in full. The
exchange notes and the subsidiary guarantees:
- rank equally with our other senior subordinated
debt;
- rank ahead of all of our subordinated debt; and
- rank below our senior indebtedness.
The terms "senior indebtedness" and "guarantor
senior indebtedness" are defined in the
"Description of the Notes -- Certain Definitions"
section of this prospectus.
As of March 31, 1999, we had $3.1 million of
consolidated senior indebtedness outstanding.
Optional Redemption........ We may redeem some or all of the exchange notes at
any time on or after April 15, 2004 at the
redemption prices listed under the heading
"Description of the Notes -- Optional Redemption."
Optional Redemption
Following Sales of
Equity................... Before April 15, 2002, we may redeem up to 35% of
the total principal amount of the exchange notes
with the net proceeds of sales of equity in AMPAM
at the price listed in the section "Description of
the
5
<PAGE> 12
Notes" under the heading "Optional Redemption," if
at least 65% of the total principal amount of the
exchange notes originally issued remains
outstanding after the redemption.
Change of Control.......... If we sell assets or if a change of control occurs,
we may be required to offer to repurchase the
exchange notes at the prices listed in the section
"Description of the Notes," under the heading
"Change of Control."
Basic Covenants of the
Indenture.................. The indenture governing the exchange notes contains
covenants that, among other things, restrict our
ability and the ability of our restricted
subsidiaries to:
- borrow money;
- pay dividends on stock or purchase stock;
- make investments;
- use our assets as security in other transactions;
- sell material assets or merge with or into other
companies;
- sell stock in our subsidiaries; and
- restrict the ability of our subsidiaries to pay
dividends and make other payments.
These covenants are subject to important exceptions
and qualifications, which are described in the
section "Description of the Notes" under the
heading "Material Covenants" in this prospectus.
Risk Factors............... See "Risk Factors" for a discussion of factors you
should carefully consider before deciding to invest
in the notes.
OUR COMPANY
We believe we are the largest company in the United States focused
primarily on the plumbing and mechanical contracting services industry. On April
1, 1999, we combined the operations of the ten founding companies, which
individually are leading regional providers of plumbing and mechanical
contracting services, and commenced operations as one company. We believe that
by combining these regional leaders into one professional organization, we have
created a national provider which we expect to strengthen and broaden our
relationships with our consolidating customer base and enhance our operating
efficiency. The ten founding companies have been in business for an average of
approximately 31 years and, in 1998, performed plumbing and mechanical
contracting services in 24 states. On a pro forma basis for the fiscal year
ended December 31, 1998, we generated revenues and EBITDA of $322.2 million and
$39.6 million, respectively.
Almost all construction and renovation in the United States creates demand
for plumbing and mechanical contracting services. Depending upon the exact scope
of the work, we estimate that the plumbing and mechanical contracting services
work we perform generally accounts for approximately 8% to 12% of the total
construction cost of a commercial and institutional project and approximately 5%
to 10% of the total construction cost of a residential project. In 1992, the
most recent year for which data are available from the United States Department
of Commerce, the value of new construction and repair and maintenance work
completed by plumbing and mechanical contractors totaled approximately $28
billion, including approximately $17 billion from plumbing services and $11
billion from mechanical services.
6
<PAGE> 13
OUR COMPETITIVE STRENGTHS
We believe several factors give us a competitive advantage in our industry,
including our:
- strong customer relationships and market leadership;
- geographically diverse operations;
- large and highly skilled work force;
- diverse business mix; and
- experienced management team.
OUR BUSINESS STRATEGY
Our goal is to build on our position as a leading provider of plumbing and
mechanical contracting services in the residential and commercial/institutional
markets by:
- increasing our market share and the profitability of our operations; and
- pursuing a selective acquisition strategy.
OUR OPERATING STRATEGY
We intend to leverage the geographical presence and competitive strengths
of our founding and subsequently acquired companies with the objective of
continuing strong internal growth. The key elements of our operating strategy
are:
- achieve purchasing savings and other economies of scale;
- continue to attract, develop and retain qualified plumbers and management
personnel;
- increase off-site prefabrication of plumbing and mechanical systems and
components;
- emphasize "value engineering" and design-and-build capability;
- increase use of technology;
- leverage geographic presence to obtain and retain multi-location
customers; and
- broaden scope of specialty services.
OUR ACQUISITION STRATEGY
We believe that the highly fragmented nature of the plumbing and mechanical
contracting services industry offers significant opportunities for us to pursue
our acquisition strategy. Key elements of our acquisition strategy include:
- increase geographic coverage; and
- expand our service capabilities.
7
<PAGE> 14
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
The following summary unaudited pro forma financial data for AMPAM, is
adjusted for
- the effects of the acquisition of the founding companies;
- the effects of other pro forma adjustments to our historical financial
statements; and
- the original issuance of the notes and our use of the proceeds from that
sale.
For financial reporting purposes, Christianson is considered to be the
accounting acquiror. This data includes our results of operations as if the
acquisitions and related transactions were closed on January 1 of the respective
period presented. This data does not necessarily indicate the results that we
would have obtained had these events actually occurred on January 1 of the
respective period presented, or our future results. During the periods presented
below, our founding companies were not under common control or management and,
therefore, the data presented may not be comparable to or indicative of future
performance. The unaudited pro forma financial data is based on preliminary
estimates, available information and some assumptions that our management deems
appropriate. Since the information in this table is only a summary and does not
provide all of the information contained in our financial statements, including
the related notes, you should read "-- Selected Individual Founding Company
Financial Data," "Capitalization," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements and
Unaudited Pro Forma Combined Financial Statements and related notes thereto
included elsewhere in this prospectus.
<TABLE>
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YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1998(A) MARCH 31, 1999(A)
-------------------- ------------------
($ IN THOUSANDS) ($ IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................. $322,203 $ 88,005
Cost of revenues (including depreciation)................. 255,461 66,732
-------- --------
Gross profit.............................................. 66,742 21,273
Selling, general and administrative expenses(b)........... 31,255 9,026
Goodwill amortization(c).................................. 2,696 674
-------- --------
Income from operations.................................... 32,791 11,573
Other income (expenses)(d)................................ (14,046) (3,178)
-------- --------
Income before provision for income taxes.................. 18,745 8,395
Provision for income taxes(e)............................. 8,362 3,537
-------- --------
Net income................................................ $ 10,383 $ 4,858
======== ========
OTHER FINANCIAL DATA AND RATIOS:
EBITDA(f)................................................. $ 39,583 $ 13,611
EBITDA margin............................................. 12.3% 15.5%
Total interest expense.................................... 15,453 3,863
Interest expense on net debt(g)........................... 14,701 3,675
Depreciation and amortization............................. 6,172 1,541
Capital expenditures...................................... 2,838 899
Ratio of EBITDA to total interest expense................. 2.6x 3.5x
Ratio of EBITDA to interest expense on net debt(g)........ 2.7x 3.7x
Ratio of earnings to fixed charges(h)..................... 2.1x 3.0x
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1999(A)
------------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 10,861
Working capital........................................... 30,919
Total assets.............................................. 210,060
Total debt (including current maturities)................. 125,486
Redeemable preferred stock(i)............................. 13,635
Total stockholders' equity................................ 17,683
</TABLE>
Footnotes on following page
8
<PAGE> 15
- ---------------
(a) Gives effect to the acquisitions of the founding companies and other
related pro forma adjustments, as if all of these transactions had occurred
on January 1 of the respective periods presented and to the portion of the
proceeds from the private placement of notes to be used to repay existing
outstanding indebtedness, as if these transactions had occurred on January
1 of the respective period presented for purposes of the Statement of
Operations Data and Other Financial Data and Ratios and on March 31, 1999
for purposes of Balance Sheet Data.
(b) Reflects an aggregate of approximately $14.7 million and $0.3 million in
pro forma reductions for the year ended December 31, 1998, and the three
months ended March 31, 1999, respectively, in salary, bonus and benefits of
the owners of the founding companies to which they have agreed
prospectively and the effect of revisions to various lease agreements
between the founding companies and stockholders of the founding companies.
Also, for the three months ended March 31, 1999, reflects the reduction of
other income to eliminate the gain on disposal of assets related to AMPAM's
acquisition of the founding companies.
Certain members of management and founders received stock and/or stock
options in connection with the organization of our company. The applicable
accounting rules require that the stock issued to some members of our
management be treated as compensation expense. As a result of this
treatment, we recorded a non-recurring non-cash charge on April 1, 1999 of
approximately $7.7 million which will reduce our EBITDA and net income and
will be reflected in our second quarter results. See "Unaudited Pro Forma
Combined Financial Statements" and the Notes thereto.
(c) Reflects amortization of the goodwill to be recorded as a result of the
acquisitions over a 40-year period and computed on the basis described in
the notes to the unaudited pro forma combined financial statements.
(d) Reflects the reduction in historical interest expense related to historical
debt of the founding companies which was transferred to stockholders of the
founding companies, along with the related nonoperating assets of the
founding companies, in connection with the acquisitions. Also reflects the
interest cost on the debt incurred on April 1, 1999 to finance the
acquisitions.
(e) Assumes that all pre-tax income before non-deductible goodwill and other
permanent items is subject to a 39% overall tax rate.
(f) "EBITDA" means net income before interest expense, taxes, depreciation and
amortization. EBITDA should not be considered in isolation from or as an
alternative to net income as an indicator of our operating performance, or
as an alternative to cash flow from operating activities and other
consolidated income or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of profitability
or liquidity. EBITDA measures presented may not be comparable to other
similarly titled measures of other companies. We believe EBITDA is a widely
accepted financial indicator of a company's ability to service debt.
(g) For the purpose of this calculation "net debt" represents total debt
(excluding redeemable preferred stock) less cash and cash equivalents.
(h) For the purpose of this calculation, "earnings" represents income from
operations before income tax expense, plus fixed charges. "Fixed charges"
consist of interest, whether expensed or capitalized, amortization of debt
expense and an estimated portion of rentals representing interest expense.
Approximately $114.6 million of indebtedness assumed for pro forma purposes
to be outstanding at March 31, 1999 was retired with a portion of the
proceeds from the original issuance of notes.
(i) The redeemable preferred stock has a $0.01 par value per share. Currently,
there are 1,048,820 shares of Series A Preferred Stock issued and
outstanding with a liquidation preference of $13.6 million.
9
<PAGE> 16
SELECTED INDIVIDUAL FOUNDING COMPANY FINANCIAL DATA
The following table presents some summary historical statement of
operations data of the founding companies for each of the three most recent
fiscal years. The historical statement of operations data below have not been
adjusted for the pro forma adjustments related to contractually agreed
reductions in salaries, bonuses and benefits, or any other pro forma
adjustments, reflected in the Unaudited Pro Forma Combined Financial Statements
included elsewhere in this prospectus. The statement of operations data
presented below have been audited for the periods reflected in their historical
financial statements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED(A) MARCH 31
------------------------------ -------------------
1996(B) 1997 1998 1998 1999
-------- -------- -------- ------- -------
($ IN THOUSANDS) ($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Christianson:
Revenues.................................................. $ 50,330 $ 50,909 $ 63,374 $12,744 $16,824
Gross profit.............................................. 12,127 13,405 17,670 3,720 5,434
RCR:
Revenues.................................................. $ 40,430 $ 49,738 $ 63,293 $13,200 $19,441
Gross profit.............................................. 5,328 7,361 11,689 2,456 4,080
Teepe's:
Revenues.................................................. $ 35,400 $ 42,687 $ 50,627 $11,449 $10,546
Gross profit.............................................. 4,990 5,517 6,579 1,383 1,259
Keith Riggs:
Revenues.................................................. $ 27,080 $ 29,680 $ 34,464 $ 7,279 $ 8,917
Gross profit.............................................. 3,097 3,815 4,499 1,084 1,448
Croson Ohio:
Revenues.................................................. $ 26,185 $ 27,029 $ 25,234 $ 5,927 $ 7,247
Gross profit.............................................. 3,880 4,059 4,796 827 1,166
Croson Florida:
Revenues.................................................. $ 11,722 $ 18,095 $ 28,142 $ 6,148 $ 8,274
Gross profit.............................................. 2,422 4,179 7,659 1,490 2,792
Power:
Revenues.................................................. $ 14,039 $ 17,010 $ 17,109 $ 3,501 $ 5,620
Gross profit.............................................. 1,853 2,330 2,738 327 1,598
Nelson:
Revenues.................................................. $ 12,507 $ 12,844 $ 15,058 $ 4,110 $ 4,670
Gross profit.............................................. 3,397 3,960 4,951 1,641 2,160
Sherwood:
Revenues.................................................. $ 8,261 $ 11,482 $ 13,556 $ 3,721 $ 3,969
Gross profit.............................................. 1,628 1,615 2,490 976 501
Miller:
Revenues.................................................. $ 10,603 $ 8,042 $ 11,346 $ 2,791 $ 2,497
Gross profit.............................................. 1,845 2,236 3,671 822 835
COMBINED:
Total revenues............................................ $236,557 $267,516 $322,203 $70,870 $88,005
Gross profit.............................................. 40,567 48,477 66,742 14,726 21,273
</TABLE>
- ---------------
(a) The fiscal years presented are the years ended December 31, 1996, 1997 and
1998 for all founding companies, except for Croson Ohio, Sherwood and
Miller, for which the fiscal years presented are the years ended September
30, 1996, 1997 and 1998; Nelson, for which the fiscal years presented are
the years ended April 30, 1997 and December 31, 1997 and 1998; and
Christianson, for which the fiscal years presented are August 31, 1996 and
December 31, 1997 and 1998. For the three months ended December 31, 1998,
Croson Ohio, Sherwood, and Miller had combined revenues of $16,329 and gross
profit of $3,341.
(b) With respect to some of the founding companies, the statement of operations
data for the 1996 fiscal year was derived from internal company financial
records that have not been audited by any independent accountants.
Accordingly, you are cautioned not to place undue reliance on this
information. Nevertheless, management believes that the financial
information shown in this table may be helpful in understanding the past
operations of the founding companies.
10
<PAGE> 17
RISK FACTORS
You should carefully consider the following factors as well as the other
information contained in this registration statement before deciding to invest
in the notes.
- -- WE RECENTLY ACQUIRED THE FOUNDING COMPANIES AND CONDUCTED NO BUSINESS UNTIL
APRIL 1, 1999. IF TOO MUCH OF MANAGEMENT'S TIME IS SPENT ATTENDING TO
INTEGRATING THE OPERATIONS, OUR OPERATIONS COULD SUFFER.
Our company was founded in June 1998 but we had not conducted any
operations or generated any revenues until April 1, 1999 when we acquired the
founding companies. As a result, we have no combined historical financial
results as one company for investors to evaluate. The unaudited pro forma
combined financial results of the founding companies cover periods during which
the founding companies and AMPAM were not under common control or management
and, therefore, may not accurately depict our future financial or operating
results. In addition, historical financial results for the individual founding
companies do not necessarily indicate the future results of our combined
company.
- -- AS A RESULT OF OUR AGGRESSIVE ACQUISITION PROGRAM, WE HAVE GENERATED WHAT WE
BELIEVE IS A SUBSTANTIAL AMOUNT OF DEBT. OUR CURRENT DEBT LEVEL COULD LIMIT
OUR ABILITY TO FUND FUTURE WORKING CAPITAL NEEDS AND INCREASE OUR EXPOSURE
DURING ADVERSE ECONOMIC CONDITIONS. ADDITIONALLY, OUR DEBT LEVEL COULD
PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.
We have now and, after the offering, will continue to have a significant
amount of debt. The following chart, with dollar amounts in thousands, shows
some important credit statistics and is presented assuming we had completed the
original issuance of the notes and applied the proceeds from such sale as of
March 31, 1999:
<TABLE>
<S> <C>
Total indebtedness.......................................... $125,486
Redeemable preferred stock.................................. $ 13,635
Stockholders' equity........................................ $ 17,683
Ratio of earnings to fixed charges.......................... 2.7x
</TABLE>
Our substantial indebtedness could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations with respect to
the notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to fund future working capital, capital expenditures
and other general corporate requirements;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
- place us at a disadvantage compared to our competitors that have less
debt; and
- limit, along with the financial and other restrictive covenants in our
indebtedness, among other things, our ability to borrow additional funds.
Additionally, failing to comply with those covenants could result in an
event of default which, if not cured or waived, could have a material
adverse effect on us.
See "Description of the Notes -- Optional Redemption" and "-- Change of
Control" and "Description of Other Indebtedness."
- -- YOUR RIGHT TO RECEIVE PAYMENTS ON THESE NOTES IS JUNIOR TO OUR EXISTING
INDEBTEDNESS AND POSSIBLY ALL OF OUR FUTURE BORROWINGS. FURTHER, THE
GUARANTEES OF THESE NOTES ARE JUNIOR TO ALL OUR GUARANTORS' EXISTING
INDEBTEDNESS AND POSSIBLY TO ALL THEIR FUTURE BORROWINGS.
The notes and the subsidiary guarantees rank behind all of our and our
subsidiary guarantors' existing indebtedness and all of our and their future
borrowings, except any future indebtedness that expressly provides that it ranks
equal with, or subordinated in right of payment to, the notes and the
guarantees. As
11
<PAGE> 18
a result, upon any distribution to our creditors or the creditors of the
guarantors in a bankruptcy, liquidation or reorganization or similar proceeding
relating to us or the guarantors or our or their property, the holders of senior
indebtedness of our company and the subsidiary guarantors will be entitled to be
paid in full in cash before any payment may be made with respect to the notes or
the subsidiary guarantees.
In addition, all payments on the notes and the subsidiary guarantees will
be blocked in the event of a payment default on senior indebtedness and may be
blocked for up to 179 consecutive days in the event of non-payment defaults on
senior indebtedness.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to our company or the guarantors, holders of the notes will
participate with trade creditors and all other holders of subordinated
indebtedness of our company and the guarantors in the assets remaining after we
and the subsidiary guarantors have paid all of the senior indebtedness. However,
because the indenture requires that amounts otherwise payable to holders of the
notes in a bankruptcy or similar proceeding be paid to holders of senior
indebtedness instead, holders of the notes may receive less, ratably, than
holders of trade payables in any proceeding of this type. In any of these cases,
we and the subsidiary guarantors may not have sufficient funds to pay all of our
creditors and holders of notes may receive less, ratably, than the holders of
senior indebtedness.
Assuming we completed the original issuance of the notes and applied the
proceeds on March 31, 1999, these notes and the subsidiary guarantees would have
been subordinated to approximately $3.1 million of senior indebtedness and
approximately $95 million would have been available for borrowing as senior
indebtedness under our credit facility. We will be permitted to borrow
substantial additional indebtedness, including senior indebtedness, in the
future under the terms of the indenture.
- -- TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH.
OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL.
Our ability to make payments on and to refinance our indebtedness,
including the exchange notes, and to fund planned capital expenditures will
depend on our ability to generate cash in the future. This, to an extent, is
subject to general economic, financial, competitive, legislative, regulatory and
other factors that are beyond our control.
We cannot assure you that our business will generate sufficient cash flow
from operations, that currently anticipated cost savings and operating
improvements will be realized on schedule or that future borrowings will be
available to us under our credit facility in an amount sufficient to enable us
to pay our indebtedness, including the exchange notes, or to fund our other
liquidity needs. We may need to refinance all or a portion of our indebtedness,
including the notes, on or before maturity. We cannot assure you that we will be
able to refinance any of our indebtedness, including our credit facility and the
exchange notes, on commercially reasonable terms or at all.
- -- DESPITE CURRENT INDEBTEDNESS LEVELS, WE AND OUR SUBSIDIARIES MAY STILL BE
ABLE TO INCUR SUBSTANTIALLY MORE DEBT. THIS COULD FURTHER EXACERBATE THE
RISKS DESCRIBED ABOVE.
We may be able to incur substantial additional indebtedness in the future.
Although the indenture contains limitations on our ability to incur additional
indebtedness, it does not prohibit us from doing so and any and all additional
indebtedness could be senior indebtedness. In addition, we have a credit
facility that provides for borrowings up to $95 million, all of which would
constitute senior indebtedness. The senior status of this additional debt means
that if we were to dissolve, all senior indebtedness would be repaid in full
before any amount would be paid to the holders of the notes. If new debt is
added to our current debt levels and the current debt levels of our
subsidiaries, the related risks that we and they now face could intensify.
See "Capitalization," "Selected Historical Financial Data," "Description of
the Notes -- Optional Redemption" and "-- Change of Control" and "Description of
Other Indebtedness."
12
<PAGE> 19
- -- DOWNTURNS IN CONSTRUCTION COULD ADVERSELY AFFECT OUR BUSINESS BECAUSE A
SIGNIFICANT PORTION OF OUR BUSINESS IS DEPENDENT ON LEVELS OF NEW
CONSTRUCTION ACTIVITY.
Our business primarily involves the installation of plumbing and mechanical
systems in newly constructed and renovated residential, commercial, industrial
and institutional structures. The level of new commercial and institutional
installations is affected by fluctuations in the level of new construction of
commercial and institutional buildings in the markets in which we operate. The
commercial/institutional market is impacted by local economic conditions,
changes in interest rates, changes in governmental and institutional
appropriations for construction and other related factors. The residential
market is similarly affected by changes in general and local economic
conditions, such as the following:
- employment and income levels;
- interest rates and other factors affecting the availability and cost of
financing;
- tax implications for home buyers;
- consumer confidence; and
- housing demand.
In addition, economic growth in our areas of operations has increased
substantially in the last several years, enabling us to achieve historic levels
of revenue and net income for the 1998 fiscal year. We can provide no assurances
that these levels of growth can be sustained in the future. A material downturn
in our areas of operations would result in a decline in the number of
residential and commercial housing starts, which could negatively affect our
business, financial condition and results of operations.
- -- OUR PRO FORMA FINANCIAL STATEMENTS ASSUME A RATE AT WHICH WE WILL WRITE OFF
THE SIGNIFICANT GOODWILL ON OUR BALANCE SHEET AND THIS MAY OVERSTATE OUR PRO
FORMA EARNINGS. THIS AND OTHER ACQUISITION RELATED ACCOUNTING ISSUES COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR FUTURE FINANCIAL RESULTS.
The acquisition of the founding companies has been accounted for using the
purchase method of accounting, and the total purchase price has been allocated
to the assets and liabilities of the companies acquired based upon the fair
values of the assets and liabilities. As a result, we will have significant non-
cash charges for depreciation and amortization expense related to the fixed
assets and "goodwill" that were acquired in the acquisition. Our balance sheet
includes an amount designated as "goodwill" that on a pro forma as adjusted
basis at March 31, 1999 represented 51% of assets and 609% of stockholders'
equity. In addition, we will pay additional consideration in the form of cash
and stock in the event that adjusted net income of the founding companies for
the year ended December 31, 1999 exceeds targeted levels. These payments, if
any, would result in additional "goodwill." Goodwill arises when an acquiror
pays more for a business than the fair value of the tangible and separately
measurable intangible net assets. Generally accepted accounting principles
require that this and all other intangible assets be amortized over the period
benefited. AMPAM's management has determined that the period to be benefitted by
the amounts designated as goodwill is 40 years and will write off that goodwill
as a noncash operating expense over this period.
On May 19, 1999, the Financial Accounting Standards Board tentatively
decided to reduce the current maximum write-off period of 40 years for goodwill
to 20 years for most companies. We understand the 20-year write-off period may
apply only to acquisitions occurring after a future date the FASB will set. We
understand the FASB will issue a formal proposal on this subject for public
comment later in the year.
If this FASB proposal results in a change in generally accepted accounting
principles we may be required to accelerate the rate at which we recognize
expense resulting from our goodwill. Any such acceleration would cause our
reported earnings to decrease for some period of time.
In addition to the goodwill amortization issue described above, some
members of management and founders received stock in connection with the
organization of our company. The applicable accounting rules require that the
stock issued to some of these members of our management be treated as
compensation expense. As a result of this treatment, we recorded a non-recurring
non-cash charge on April 1, 1999 of approximately $7.7 million which will reduce
our EBITDA and net income and is
13
<PAGE> 20
reflected in our second quarter results. See "Unaudited Pro Forma Combined
Financial Statements" and the Notes thereto.
- -- A FAILURE ON OUR PART TO SUCCESSFULLY INTEGRATE THE FOUNDING COMPANIES COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR FUTURE FINANCIAL RESULTS.
The founding companies have been operating and will continue to operate as
separate independent entities, and we cannot guarantee that we will be able to
integrate these businesses on an economic basis. In addition, we cannot
guarantee that the recently assembled management group will be able to oversee
the combined entity and effectively implement our operating or growth
strategies. Until we establish centralized accounting and other administrative
systems, we will rely on the systems used by the founding companies. If we are
unable to successfully coordinate and integrate the founding companies and
future acquisitions into AMPAM, including their accounting and administrative
functions and other banking and insurance functions and computer systems, then
our business, financial condition and results of operations may be materially
and adversely affected.
- -- OUR GROWTH COULD BE DIFFICULT TO MANAGE. AN ACTIVELY GROWING COMPANY LIKE
OURS REQUIRES THE CONSTANT ATTENTION OF ITS MANAGEMENT. IF TOO MUCH OF OUR
MANAGEMENT'S TIME IS SPENT ATTENDING TO THE GROWTH OF AMPAM, OUR OPERATIONS
COULD SUFFER.
If we are unable to manage our growth, or if we are unable to attract and
retain additional qualified management, there could be a material adverse effect
on our financial condition and results of operations. As we continue to grow,
there can be no assurance that our management group will be able to oversee
AMPAM and effectively implement our operating or growth strategies. We expect
our management will expend time and effort in evaluating, completing and
integrating acquisitions and opening new facilities. We cannot guarantee that
our systems, procedures and controls will be adequate to support our expanding
operations, including the timely receipt of financial information from acquired
companies.
A key point of our business strategy is to grow by acquiring other plumbing
and mechanical contracting service companies. We cannot guarantee that we will
be able to acquire additional businesses or integrate and manage them
successfully. We cannot assure you that the businesses we acquire will achieve
sales and profitability that justify our investment.
Acquisitions we make may involve additional issues, including:
- adverse short-term effects on our financial results;
- diversion of our management's attention;
- dependence on retention, hiring and training of key personnel; and
- risks associated with unanticipated problems or legal liabilities.
Although we believe we are the first company to focus primarily on
consolidating the plumbing and mechanical contracting service industry, we also
believe that the industry will continue to experience consolidation on both a
national and a regional level as existing consolidators focusing on related
industries pursue their acquisition strategies or as other companies develop
acquisition objectives similar to those of our company. In addition, we cannot
guarantee that other existing companies consolidating related industries or
yet-to-be-formed companies will not also adopt a similar focus and compete with
our company for acquisition candidates in plumbing and mechanical contracting
services and related industries. These competitors may have greater financial
resources than our company to finance acquisitions and internal growth
opportunities and might be willing to pay higher prices for the same acquisition
opportunities. This competition could have the effect of increasing the price
for acquisitions or reducing the number of suitable acquisition candidates. If
these types of acquisitions can be made, we cannot give any assurance that
businesses acquired will achieve sales and profitability that justify the
investment.
14
<PAGE> 21
- -- IF WE ARE UNABLE TO OBTAIN A SIGNIFICANT AMOUNT OF ADDITIONAL CAPITAL, WE MAY
NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR GROWTH STRATEGY WHICH COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR FUTURE FINANCIAL RESULTS.
The expansion of our company through our acquisition program will require
significant capital. The timing, size and success of our acquisition efforts and
the associated capital commitments cannot be readily predicted. We currently
intend to use common stock for a portion of the consideration used in future
acquisitions. If potential acquisition candidates are unwilling to accept common
stock as part of the consideration for the sale of their businesses, we may be
required to use more of our cash resources, if available, to pursue our
acquisition program. If we do not have enough cash resources, our growth could
be limited unless we are able to obtain additional capital through future debt
or equity financings, including borrowings under existing credit facilities. If
incurred, this indebtedness would increase our leverage, may make us more
vulnerable to economic downturns and may limit our ability to withstand
competitive pressures.
We have put into place a credit facility to be used for working capital,
capital expenditures and other general corporate purposes. Although we believe
this credit facility will be sufficient, we cannot guarantee that it will be
able to entirely fund our acquisition program. Additionally, this credit
facility includes financial covenants that limit our operations and financial
flexibility. As a result, we might be limited in our ability to pursue our
acquisition strategy successfully which could have a negative impact on our
financial results.
- -- FUTURE ACQUISITIONS COULD CHANGE OUR CAPITAL AND DEBT STRUCTURE AND COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.
Although AMPAM does not currently have any agreements or understandings
with respect to the acquisition of any company or business, AMPAM may in the
future enter into discussions or negotiations with potential acquisition
candidates engaged in the plumbing, mechanical, utility installation or HVAC or
related businesses. Negotiations may result in agreements to acquire one or more
companies or businesses or their assets. In connection with any acquisition of
this type, the consideration payable by AMPAM may consist of shares of common
stock, cash, promissory notes or other securities of AMPAM or a combination of
these types of consideration. Accordingly, if AMPAM enters into agreements to
acquire one or more companies or businesses after the date of this prospectus,
the capitalization of AMPAM is likely to differ, possibly significantly, from
the capitalization reflected in this prospectus. In particular, the number of
shares of common stock that would be issued and outstanding, the amount of
indebtedness and the amount of working capital as of the date of the closing of
any future acquisitions may be significantly different from the amounts
reflected in this prospectus. In addition, if AMPAM enters into agreements to
acquire one or more companies or businesses after the date of this prospectus,
the pro forma financial statements of AMPAM are likely to differ from the pro
forma financial statements included in this prospectus.
- -- THERE IS CURRENTLY A SHORTAGE OF QUALIFIED PLUMBERS AND TECHNICIANS. SINCE
THE MAJORITY OF OUR WORK IS PERFORMED BY PLUMBERS AND TECHNICIANS, THIS
SHORTAGE COULD LIMIT OUR ABILITY TO GROW.
We are dependent upon an adequate supply of skilled personnel to complete
our plumbing and mechanical contracts on time. The supply of skilled personnel
is sensitive to economic and competitive conditions and the level of demand for
plumbing and mechanical contracting services. Many companies in the plumbing and
mechanical contracting services industry are currently experiencing shortages of
qualified personnel, and as a result there is significant competition for
skilled labor. Accordingly, our ability to increase productivity and
profitability may be limited by our ability to employ, train and retain the
skilled personnel necessary to meet our service requirements. In addition, labor
shortages could result in wage
15
<PAGE> 22
increases, which could reduce our operating margins and have a negative effect
on our financial condition and results of operations. We cannot guarantee that,
among other things:
- we will be able to maintain the skilled labor force necessary to operate
efficiently;
- our labor expenses will not increase as a result of a shortage in the
skilled labor supply; or
- we will not have to curtail internal growth as a result of labor
shortages.
- -- THE LOSS OF A GROUP OF KEY PERSONNEL, EITHER AT THE CORPORATE OR OPERATING
LEVEL, COULD ADVERSELY AFFECT OUR BUSINESS.
Because we intend to continue to operate on a decentralized basis, our
operations will continue to depend on the efforts and experience of our
executive officers and the senior management of the founding companies.
Furthermore, we will depend on the senior management of companies that may be
acquired in the future. Although we have entered into employment agreements with
some of our executive officers, we cannot guarantee that any individual will
continue in their capacity for any particular period of time. We have not
entered into employment agreements with some of the members of management of the
founding companies. Also, we may not enter into employment agreements with
members of management of additional companies that we may acquire in the future.
The loss of key personnel or the inability to hire and retain qualified
employees could have a material adverse effect on our business, financial
condition and results of operations. We do not maintain key man life insurance.
- -- THE HIGHLY COMPETITIVE NATURE OF OUR INDUSTRY COULD AFFECT OUR PROFITABILITY
BY REDUCING OUR PROFIT MARGINS.
The plumbing and mechanical contracting services industry is highly
fragmented and competitive. The industry is generally served by a large number
of small, owner-operated private companies and by several large companies that
provide plumbing and mechanical contracting services (often on an ancillary
basis to an HVAC business) on a regional or national basis. We will compete with
other consolidators, including those focused on the HVAC business, that also
provide some plumbing and mechanical contracting services. We could also face
competition in the future from other competitors entering the market. Some of
our competitors may have greater financial resources or may achieve greater
efficiencies which may allow these competitors the ability to provide a greater
range of services, provide services in a larger number of locations or offer
services at lower prices. In some geographic regions, we may not be eligible to
compete for contracts because our employees are not subject to collective
bargaining agreements.
- -- THE ESTIMATES WE USE IN PLACING BIDS COULD BE MATERIALLY INCORRECT. THE USE
OF INCORRECT ESTIMATES COULD RESULT IN LOSSES ON A FIXED PRICE CONTRACT.
THESE LOSSES COULD BE MATERIAL TO OUR BUSINESS.
Nearly all of our plumbing and mechanical contracting services are
performed under fixed price contracts, so the risk of cost overruns on a given
project is generally borne by our company. Our ability to remain profitable
depends in part on our ability to accurately estimate the material and labor
costs of completing plumbing and mechanical installation projects. From time to
time, market conditions in a given geographic area can cause increases in
skilled labor costs, and disruptions in the supply of plumbing and mechanical
materials can cause cost increases, either directly or through delays in
delivery of materials. Costs can also be affected by delays caused by weather,
other contractors working on a given project or other factors beyond our
control. Increases in costs caused by any of these factors could have material
adverse effects on our business, financial condition and results of operation.
- -- OUR INDUSTRY EXPERIENCES UPTURNS AND DOWNTURNS, DEPENDING ON THE SEASON OF
THE YEAR AND THIS COULD HAVE AN ADVERSE EFFECT ON OUR QUARTERLY OPERATING
RESULTS.
The plumbing and mechanical contracting services industry is influenced by
seasonal declines in operations and demand that affect the construction
business. These declines can result in lower activity levels during the first
and fourth quarters than in other periods. There can be no assurance that our
combined geographic, service and product mix will be sufficient to overcome any
declines that may occur
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in the future or that seasonal patterns will not emerge. Quarterly results may
also be materially affected by the timing of acquisitions, the timing and
magnitude of costs relating to the assimilation of acquired companies and
regional economic conditions. Accordingly, performance in any particular quarter
may not indicate the results which can be expected for any other quarter or for
the entire year.
- -- THE FOUNDING COMPANIES HAVE SIGNIFICANT CUSTOMER CONCENTRATION AND IF A
FOUNDING COMPANY WERE TO LOSE A SIGNIFICANT CUSTOMER, THIS COULD HAVE A
MATERIAL ADVERSE EFFECT ON THE RESULTS OF OPERATIONS OF THAT PARTICULAR
SUBSIDIARY.
Although no individual customer of AMPAM accounts for more than 5% of our
revenues, some founding companies have customers that account for up to 63% of
their revenues. Although the loss of anyone of these customers would not have a
material adverse affect on us, this type of loss could significantly and
negatively affect the business, financial condition and results of operations of
a founding company.
- -- WE ARE REQUIRED TO COMPLY WITH A NUMBER OF OPERATIONAL AND LICENSING
REQUIREMENTS. IF WE WERE TO LOSE A LICENSE OR WERE UNABLE TO OBTAIN A RENEWAL
OF A LICENSE, OUR ABILITY TO OPERATE IN A PARTICULAR AREA MAY BE IMPAIRED
Our business and the activities of our plumbing and mechanical contracting
service providers are subject to various federal, state and local laws,
regulations, ordinances and policies. Areas of governmental involvement include:
- the licensing and certification of plumbers and technicians;
- our advertising, warranties and disclosures to its customers;
- the bidding process required to obtain plumbing and mechanical contracts;
and
- the applicable plumbing, mechanical and building codes with which we must
comply.
Most states require at least one of our employees to be a licensed master
plumber, and many jurisdictions regulate the number and level of license holders
who must be present on a construction site during the installation of plumbing
and mechanical systems. Some jurisdictions require us to obtain a building
permit for each plumbing or mechanical project. In addition, we must comply with
labor laws and regulations, including those that relate to verification by
employers of legal immigration or work permit status of employees.
We believe that each of the founding companies holds all of the licenses
and permits required to conduct business in the jurisdictions in which we
operate, and our employees in each of these jurisdictions have knowledge of the
specifications of the applicable construction codes. However, as a result of our
expansion, in the future we may operate in jurisdictions where we will need to
employ persons with the required licenses and knowledge and we cannot guarantee
that we will be able to do so. Furthermore, applicable regulations may change
and may increase expenses or cause project delays. We cannot guarantee that
existing or new laws or regulations applicable to our business will not have a
material adverse effect on our business, financial condition and results of
operations.
- -- COMPLIANCE WITH OR ENVIRONMENTAL, HEALTH AND SAFETY REGULATIONS COULD HAVE A
SIGNIFICANT NEGATIVE EFFECT ON OUR FINANCIAL RESULTS.
We are subject to safety standards established and enforced by the
Occupational Safety and Health Administration and environmental laws and
regulations relating to the use, storage, transportation and disposal of various
materials. To the extent that we perform work involving air conditioning and
refrigeration systems, we are subject to additional restrictions and regulations
governing the availability, handling and recycling of refrigerants. While we
believe that we are in substantial compliance with all applicable laws and
regulations, these regulations may change and may increase expenses or cause
project delays. We cannot guarantee that existing or new laws or regulations
applicable to our business will not have a material adverse effect on our
business, financial condition and results of operations.
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Some of the founding companies utilize underground or aboveground storage
tanks for motor fuels and other materials. Many of the founding companies'
facilities are located in industrial sectors, where contamination may result
from the activities of prior occupants or neighbors. Some environmental laws and
regulations impose liability on the operator of a tank or a facility at which
contamination is present, regardless of fault. While we know of no contamination
affecting any of the tanks or facilities which it will operate, we cannot
guarantee that undiscovered contamination does not exist, and that this
contamination will not have a material adverse effect on our business, financial
condition and results of operations.
- -- OUR OPERATIONS ARE SUBJECT TO NUMEROUS PHYSICAL HAZARDS ASSOCIATED WITH THE
CONSTRUCTION OF PLUMBING AND MECHANICAL SYSTEMS. IF AN ACCIDENT OCCURS,
CLAIMS AGAINST US COULD EXCEED LEVELS COVERED BY OUR INSURANCE AND COULD
SIGNIFICANTLY HARM OUR BUSINESS.
The nature of our business exposes us to potential claims for personal
injury or death resulting from injuries to our employees and other persons,
property damage and negligence, intentional misconduct or defective materials or
workmanship in connection with the installation, repair or maintenance of
plumbing, mechanical and maintenance systems. Claims made by our customers may
be based on the warranties we provide with respect to materials or workmanship
or may be based on common law or state statutes relating to the conduct of
contractors. Although each of the founding companies is covered by comprehensive
insurance, subject to deductibles, various types of claims, such as claims for
punitive damages or damages arising from intentional misconduct, are generally
not covered by insurance. We cannot guarantee that existing or future claims
would not exceed our level of insurance or the level of insurance of the
founding companies, or that insurance will continue to be available on
economically reasonable terms, if at all.
- -- WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE
CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE AND TO SIMULTANEOUSLY REPAY
THE CREDIT FACILITY. ADDITIONALLY, WE MAY NOT HAVE THE ABILITY TO RAISE THE
FUNDS NECESSARY TO REPAY THE NOTES AND THE CREDIT FACILITY SIMULTANEOUSLY IF
PAYMENT UNDER THE CREDIT FACILITY IS ACCELERATED FOLLOWING AN EVENT OF
DEFAULT THAT IN TURN CAUSES AN EVENT OF DEFAULT UNDER THE INDENTURE.
On the occurrence of specific kinds of change of control events we will be
required to offer to repurchase all outstanding notes and may also be required
to repay all amounts outstanding under our credit facility. Similarly, if we are
in default under our credit facility, it could trigger a default under the
notes, requiring us to both repay all amounts outstanding under the credit
facility as well as all of the outstanding notes. It is possible that we will
not have sufficient funds at the time of the change of control to make the
required repurchase of notes or that restrictions in our credit facility will
not allow these repurchases. The same applies in the case of an event of
default. In addition, important corporate events, like leveraged
recapitalizations that would increase the level of our indebtedness, would not
constitute a "Change of Control" under the indenture. See "Description of the
Notes -- Change of Control" and "--Events of Default."
- -- FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO
VOID GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN PAYMENTS RECEIVED FROM
GUARANTORS. THESE STATUTES COULD CAUSE THE GUARANTEES TO BE WORTHLESS TO YOU.
ALSO, IF YOU HAVE RECEIVED PAYMENTS FROM OUR GUARANTORS, YOU COULD BE
REQUIRED TO FORFEIT THOSE PAYMENTS.
Under the federal bankruptcy laws and comparable provisions of state
fraudulent transfer laws, a guarantee could be voided, or claims in respect of a
guarantee could be subordinated to all other debts of that guarantor if, among
other things, the guarantor, at the time it incurred the indebtedness evidenced
by its guarantee received less than reasonably equivalent value or fair
consideration for the incurrence of this guarantee, and;
- was insolvent or rendered insolvent by reason of the incurrence;
- or was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
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<PAGE> 25
- intended to incur, or believed that it would incur, debts beyond its
ability to pay these debts as they mature.
In addition, any payment by that guarantor under the terms of its guarantee
could be voided and required to be returned to the guarantor or to a fund for
the benefit of the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
- the sum of its debts, including contingent liabilities, were greater than
the fair saleable value of all of its assets; or
- if the present fair saleable value of its assets were less than the
amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become absolute
and mature; or
- it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that each subsidiary guarantor, after giving
effect to its guarantee of these notes, will not be insolvent, will not have
unreasonably small capital for the business in which it is engaged and will not
have incurred debts beyond its ability to pay these debts as they mature. There
can be no assurance, however, as to what standard a court would apply in making
these determinations or that a court would agree with our conclusions in this
regard.
- -- YOU CANNOT BE SURE THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THESE
NOTES.
Prior to this offering, there was no public market for these notes. Firms
making a market in these notes may cease their market-making at any time. In
addition, the liquidity of the trading market in these notes, and the market
price quoted for these notes, may be adversely affected by changes in the
overall market for high yield securities and by changes in our financial
performance or prospects or in the prospects for companies in our industry
generally. As a result, you cannot be sure than an active trading market will
develop for these notes.
- -- COMPUTER SYSTEMS WE RELY ON MAY FAIL TO RECOGNIZE YEAR 2000. A FAILURE COULD
RESULT IN DISRUPTIONS OF OUR OPERATIONS AND OUR ACCOUNTING SYSTEMS.
We are in the process of identifying and evaluating potential issues for
its information technology and third party relationships associated with the
date change in the year 2000. We have not yet fully assessed any year 2000
remedial costs, but we are in the process of identifying and developing
solutions to the year 2000 issues. Although we are not currently able to
quantify the cost of corrective actions, we do not expect that these actions
will materially exceed the cost of normal software upgrades and replacements
expected to occur through the year 2000. We believe that all necessary work will
be completed in a timely fashion, but we cannot guarantee that the systems of
other companies on which we rely will be converted within the same time frame.
We are attempting to obtain assurances from vendors, business partners, and
others with which we conduct business that their systems will be year 2000
compliant. If as a result of foregoing process we determine that a material
business interruption may occur due to the year 2000 issue, we will attempt to
implement an appropriate contingency plan. Any material failure of our company
or others to bring the computer systems on which we rely into compliance with
year 2000 requirements could result in additional costs of corrective actions
and delays in preparing contract bids, receiving payment on completed contracts,
integrating the reporting systems of the founding companies and implementing our
strategies. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Year 2000."
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FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties, and assumptions about our company, including, among other things:
- Our anticipated growth strategies,
- Our ability to make acquisitions,
- Our ability to integrate acquired businesses,
- Our ability to gain efficiencies through consolidation,
- Anticipated trends in our businesses,
- Future expenditures for capital projects,
- Our ability to continue to control costs and maintain quality, and
- Our ability to compete.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties, and assumptions, the forward-looking
events discussed in this prospectus might not occur.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We sold the existing notes on May 19, 1999, to Fleet Securities, Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc One Capital Markets,
Inc. and Credit Lyonnais Securities (USA), Inc. under a purchase agreement.
These initial purchasers then sold the existing notes to qualified institutional
buyers in reliance on Rule 144A under the Securities Act. As a condition to the
purchase of the existing notes by the initial purchasers, AMPAM and the
guarantors entered into a registration rights agreement with the initial
purchasers, which requires, among other things, that promptly following the sale
of the existing notes, AMPAM and the guarantors:
- file with the Commission the registration statement related to the
exchange notes;
- use their reasonable best efforts to cause the registration statement to
become effective under the Securities Act; and
- offer to the holders of the existing notes the opportunity to exchange
their existing notes for a like principal amount of exchange notes upon
the effectiveness of the registration statement.
The exchange notes will be issued without a restrictive legend and may be
reoffered and resold without restrictions or limitations under the Securities
Act. A copy of the registration rights agreement has been filed as an exhibit to
the registration statement of which this prospectus is a part. The term "holder"
means any person in whose name existing notes are registered on AMPAM's books.
Based on existing interpretations of the Securities Act by the staff of the
SEC described in several no-action letters to third parties, and subject to the
following sentence, we believe that the exchange notes issued in the exchange
offer may be offered for resale, resold and otherwise transferred by their
holders, other than broker-dealers or "affiliates" of AMPAM, without further
compliance with the registration and prospectus delivery provisions of the
Securities Act. However, any purchaser of notes who is an affiliate of AMPAM or
who intends to participate in the exchange offer for the purpose of distributing
the exchange notes, or any broker-dealer who purchased the notes from AMPAM to
resell under Rule 144A or any other available exemption under the Securities
Act:
- will not be able to rely on the interpretations by the staff of the
Commission described in the above-mentioned no-action letters;
- will not be able to tender its notes in the exchange offer; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer of the notes
unless the sale or transfer is made under an exemption from these
requirements.
We do not intend to seek our own no-action letter, and there is no
assurance that the staff of the Commission would make a similar determination
regarding the exchange notes as it has in these no-action letters to third
parties. See "Plan of Distribution."
As a result of the filing and effectiveness of the registration statement
of which this prospectus is a part, AMPAM and the guarantors will not be
required to pay an increased interest rate on the existing notes. Following the
closing of the exchange offer, holders of existing notes not tendered will not
have any further registration rights except in limited circumstances requiring
the filing of a shelf registration statement, and the existing notes will
continue to be subject to restrictions on transfer. Accordingly, the liquidity
of the market for the existing notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions stated in this prospectus and
in the letter of transmittal, we will accept all existing notes properly
tendered and not withdrawn prior to 5:00 p.m. New York City
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time, on the expiration date. After authentication of the exchange notes by the
trustee or an authenticating agent, we will issue $1,000 principal amount of
exchange notes in exchange for each $1,000 principal amount of outstanding
existing notes accepted in the exchange offer. Holders may tender some or all of
their existing notes in denominations of $1,000 or any integral multiple of
$1,000.
Each holder of the notes who wishes to exchange notes in the exchange offer
will be required to represent that:
- it is not an affiliate of AMPAM or any guarantor;
- any exchange notes to be received by it were acquired in the ordinary
course of its business; and
- it has no arrangement with any person to participate in the distribution
of the exchange notes.
Each broker-dealer that receives exchange notes for its own account under
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the exchange notes. The letter of transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be judged to have admitted that it is an "underwriter" within the
meaning of the Securities Act. The SEC has taken the position that participating
broker-dealers may fulfill their prospectus delivery requirements related to the
exchange notes with the prospectus contained in the exchange offer registration
statement, other than a resale of an unsold allotment from the original sale of
the notes. AMPAM will be required to allow participating broker-dealers to use
the prospectus contained in the exchange offer registration statement following
the exchange offer, in connection with the resale of exchange notes received in
exchange for notes acquired by participating broker-dealers for their own
account as a result of market-making or other trading activities. We will not be
required to allow participating broker-dealers to use this prospectus if we
determine, after being advised by our attorneys, that the continued use of the
prospectus would (1) require us to disclose material information that we have a
legitimate business reason for keeping confidential or (2) interfere with a
material transaction in which AMPAM or our subsidiaries is involved. See "Plan
of Distribution."
The form and terms of the exchange notes are identical in all material
respects to the form and terms of the existing notes except that:
- the exchange notes will be issued in a transaction registered under the
Securities Act;
- the exchange notes will not be subject to transfer restrictions; and
- provisions relating to an increase in the stated interest rate on the
existing notes provided for in some circumstances will be eliminated.
The exchange notes will evidence the same debt as the existing notes. The
exchange notes will be issued under and entitled to the benefits of the
indenture.
As of the date of this prospectus, $125,000,000 aggregate principal amount
of the existing notes was outstanding. In connection with the issuance of the
existing notes, we arranged for the existing notes, which were initially
purchased by qualified institutional buyers as defined under Rule 144A under the
Securities Act, to be issued and transferable in book-entry form through the
facilities of the depositary, acting as depositary. The exchange notes will also
be issuable and transferable in book-entry form through the depositary.
This prospectus, together with the accompanying letter of transmittal, is
initially being sent to all registered holders as of the close of business on
, 1999. We intend to conduct the exchange offer as required by the
Exchange Act, and the rules and regulations of the Commission under the Exchange
Act, including Rule 14e-1, to the extent applicable.
Rule 14e-1 describes unlawful tender practices under the Exchange Act. This
section requires us, among other things:
- to hold our exchange offer open for twenty business days;
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- to give ten days notice of any change in the terms of this offer; and
- to issue a press release in the event of an extension of the exchange
offer.
The exchange offer is not conditioned upon any minimum aggregate principal
amount of existing notes being tendered, and holders of the existing notes do
not have any appraisal or dissenters' rights under the General Corporation Law
of the State of Delaware or under the indenture in connection with the exchange
offer. We shall be considered to have accepted existing notes tendered according
to the procedures in this prospectus when, as and if we have given oral or
written notice of acceptance to the exchange agent. See "-- Exchange Agent." The
exchange agent will act as agent for the tendering holders for the purpose of
receiving exchange notes from us and delivering exchange notes to those holders.
If any tendered existing notes are not accepted for exchange because of an
invalid tender or the occurrence of other events described in this prospectus,
certificates for these unaccepted existing notes will be returned, at our cost,
to the tendering holder of the existing notes as promptly as practicable after
the expiration date.
Holders who tender existing notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes related to the exchange of existing
notes in the exchange offer. We will pay all charges and expenses, other than
applicable taxes, in connection with the exchange offer. See "-- Solicitation of
Tenders; Fees and Expenses."
NEITHER THE BOARD OF DIRECTORS OF AMPAM NOR AMPAM MAKES ANY RECOMMENDATION
TO HOLDERS OF EXISTING NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING
ALL OR ANY PORTION OF THEIR EXISTING NOTES UNDER TO THE EXCHANGE OFFER.
MOREOVER, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION. HOLDERS OF
EXISTING NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER IN THE EXCHANGE
OFFER AND, IF SO, THE AMOUNT OF EXISTING NOTES TO TENDER AFTER READING THIS
PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISORS, IF
ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" shall mean 5:00 p.m., New York City time, on
, 1999, unless we, in our sole discretion, extend the exchange offer,
in which case the term "expiration date" shall mean the latest date to which the
exchange offer is extended.
We expressly reserve the right, in our sole discretion:
(1) to delay acceptance of any existing notes, to extend the exchange
offer or to terminate the exchange offer and to refuse to accept existing
notes not previously accepted, if any of the conditions described in this
prospectus under "-- Conditions" shall have occurred and shall not have
been waived by us (if permitted to be waived by us), by giving oral or
written notice of the delay, extension or termination to the exchange
agent; and
(2) to amend the terms of the exchange offer in any manner.
Any delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice of the delay in
acceptance by us to the registered holders of the existing notes. If the
exchange offer is amended in a manner determined by us to constitute a material
change, we will promptly disclose the amendment in a manner reasonably
calculated to inform the holders of the amendment.
Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, we shall have no obligation to publish, advise, or otherwise
communicate any public announcement, other than by making a timely release to
the Dow Jones News Service.
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You are advised that AMPAM may extend the exchange offer because some
portion of the notes may not tender on a timely basis. In order to give these
noteholders the ability to participate in the exchange and to avoid the
significant reduction in liquidity associated with holding an unexchanged note,
AMPAM may elect to extend the exchange offer.
INTEREST ON THE EXCHANGE NOTES
The exchange notes will bear interest from the date of issuance of the
existing notes that are tendered in exchange for the exchange notes (or the most
recent date on which interest was paid or provided for on the existing notes
surrendered for the exchange notes). Accordingly, holders of existing notes that
are accepted for exchange will not receive interest that is accrued but unpaid
on the existing notes at the time of tender. Interest on the exchange notes will
be payable semi-annually on each April 15 and October 15, commencing on October
15, 1999.
PROCEDURES FOR TENDERING
Only a holder may tender its existing notes in the exchange offer. To
tender in the exchange offer, a holder must complete, sign and date the letter
of transmittal or a facsimile of the letter of transmittal, have the signatures
guaranteed if required by the letter of transmittal, and mail or otherwise
deliver the letter of transmittal or the facsimile, together with the existing
notes (unless the tender is being effected under the procedure for book-entry
transfer described below) and any other required documents, to the exchange
agent, prior to 5:00 p.m. New York City time, on the expiration date.
Any financial institution that is a participant in the depositary's
book-entry transfer facility system may make book-entry delivery of the existing
notes by causing the depositary to transfer the existing notes into the exchange
agent's account using the depositary's procedure for the transfer. Although
delivery of existing notes may be effected through book-entry transfer into the
exchange agent's account at the depositary, the letter of transmittal (or
facsimile), with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received by the exchange
agent at its address listed in this prospectus under "-- Exchange Agent" prior
to 5:00 p.m., New York City time, on the expiration date. DELIVERY OF DOCUMENTS
TO THE DEPOSITARY USING ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT.
The tender by a holder will constitute an agreement between the holder,
AMPAM and the exchange agent according to the terms and subject to the
conditions described in this prospectus and in the letter of transmittal.
In the case of a broker-dealer that receives exchange notes for its own
account in exchange for existing notes which were acquired by it as a result of
market-making or other trading activities, the letter of transmittal will also
include an acknowledgment that the broker-dealer will deliver a copy of this
prospectus in connection with the resale by it of exchange notes received in the
exchange offer. See "Plan of Distribution."
THE METHOD OF DELIVERY OF EXISTING NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDERS. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR EXISTING NOTES SHOULD BE SENT TO US. HOLDERS MAY
ALSO REQUEST THAT THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES EFFECT THE TENDER FOR HOLDERS IN EACH CASE AS DESCRIBED IN
THIS PROSPECTUS AND IN THE LETTER OF TRANSMITTAL.
Any beneficial owner whose existing notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on his behalf. If the beneficial owner wishes to
tender on his own behalf, the beneficial owner must, prior to completing and
executing the letter of transmittal and delivering his existing notes, either
make appropriate arrangements to register ownership of
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the existing notes in the owner's name or obtain a properly completed bond power
from the registered holder. The transfer of record ownership may take
considerable time.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act unless the existing notes tendered with the
letter of transmittal are tendered (1) by a registered holder who has not
completed the box entitled "Special Registration Instructions" or "Special
Delivery Instructions" of the letter of transmittal or (2) for the account of an
eligible institution. If the letter of transmittal is signed by a person other
than the registered holder, the existing notes must be endorsed or accompanied
by appropriate bond powers which authorize the person to tender the existing
notes on behalf of the registered holder, in either case signed as the name of
the registered holder or holders appears on the existing notes. If the letter of
transmittal or any existing notes or bond powers are signed or endorsed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, those
persons should so indicate when signing, and unless waived by us, evidence
satisfactory to us of their authority to so act must be submitted with the
letter of transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered existing notes will be
determined by us in our sole discretion. This determination will be final and
binding. We reserve the absolute right to reject any and all existing notes not
properly tendered or any existing notes our acceptance of which would, in the
opinion of our counsel, be unlawful. We also reserve the absolute right to waive
any irregularities or conditions of tender as to particular existing notes. Our
interpretation of the terms and conditions of the exchange offer (including the
instructions in the letter of transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of existing notes must be cured within the time as we shall determine. Although
we intend to notify holders of defects or irregularities related to tenders of
existing notes, neither we, the exchange agent nor any other person shall be
under any duty to give notification of defects or irregularities related to
tenders of existing notes nor shall any of them incur liability for failure to
give notification. Tenders of existing notes will not be considered to have been
made until the irregularities have been cured or waived. Any existing notes
received by the exchange agent that we determine are not properly tendered or
the tender of which is otherwise rejected by us and as to which the defects or
irregularities have not been cured or waived by us will be returned by the
exchange agent to the tendering holder unless otherwise provided in the letter
of transmittal, as soon as practicable following the expiration date.
In addition, we reserve the right in our sole discretion to (1) purchase or
make offers for any existing notes that remain outstanding subsequent to the
expiration date, or, as described under "-- Termination," to terminate the
exchange offer and (2) to the extent permitted by applicable law, purchase
existing notes in the open market, in privately negotiated transactions or
otherwise. The terms of these purchases or offers may differ from the terms of
the exchange offer.
BOOK-ENTRY TRANSFER
We understand that the exchange agent will make a request promptly after
the date of this prospectus to establish accounts for the existing notes at the
DTC for the purpose of facilitating the exchange offer, and subject to their
establishment, any financial institution that is a participant in the book-entry
transfer facility's system may make book-entry delivery of existing notes by
causing the book-entry transfer facility to transfer the existing notes into the
exchange agent's account for the existing notes using the book-entry transfer
facility's procedures for transfer. Although delivery of existing notes may be
effected through book-entry transfer into the exchange agent's account at the
book-entry transfer facility, an appropriate letter of transmittal properly
completed and duly executed with any required signature guarantee and all other
required documents must in each case be transmitted to and received or confirmed
by the exchange agent at its address listed below on or prior to the expiration
date, or, if the guaranteed delivery procedures
25
<PAGE> 32
described below are complied with, with the time period provided under the
procedures. Delivery of documents to the book-entry transfer facility does not
constitute delivery to the exchange agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their existing notes and (1) whose existing
notes are not immediately available, or (2) who cannot deliver their existing
notes, the letter of transmittal or any other required documents to the exchange
agent prior to the expiration date, or if the holder cannot complete the
procedure for book-entry transfer on a timely basis, may effect a tender if:
- the tender is made through an eligible institution;
- prior to the expiration date, the exchange agent receives from an
eligible institution a properly completed and duly executed notice of
guaranteed delivery (by facsimile transmittal, mail or hand delivery)
setting forth the name and address of the holder, the certificate number
or numbers of the holder's existing notes and the principal amount of the
existing notes tendered, stating that the tender is being made, and
guaranteeing that, within five business days after the expiration date,
the letter of transmittal (or facsimile), together with the
certificate(s) representing the existing notes to be tendered in proper
form for transfer and any other documents required by the letter of
transmittal will be deposited by the eligible institution with the
exchange agent; and
- the properly completed and executed letter of transmittal (or a
facsimile), together with the certificate(s) representing all tendered
existing notes in proper form for transfer (or confirmation of a
book-entry transfer into the exchange agent's account at the depositary
of existing notes delivered electronically) and all other documents
required by the letter of transmittal are received by the exchange agent
within three business days after the expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their existing notes according to the
guaranteed delivery procedures described above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, tenders of existing notes
may be withdrawn at any time prior to 5:00 p.m., New York City time, on the
expiration date.
To withdraw a tender of existing notes in the exchange offer, a written or
facsimile transmission notice of withdrawal must be received by the exchange
agent at its address listed below prior to 5:00 p.m., New York City time, on the
expiration date. Any notice of withdrawal must:
- specify the name of the person having deposited the existing notes to be
withdrawn (the "depositor");
- identify the existing notes to be withdrawn (including the certificate
number or numbers and principal amount of the existing notes or, in the
case of existing notes transferred by book-entry transfer, the name and
number of the account at the depositary to be credited);
- be signed by the depositor in the same manner as the original signature
on the letter of transmittal by which the existing notes were tendered
(including any required signature guarantee) or be accompanied by
documents of transfer sufficient to permit the trustee for the existing
notes to register the transfer of the existing notes into the name of the
depositor withdrawing the tender; and
- specify the name in which any of these existing notes are to be
registered, if different from that of the depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of the withdrawal notices will be determined by us, whose determination
shall be final and binding on all parties. Any existing notes so withdrawn will
be judged not to have been tendered according to the procedures in this
prospectus for purposes of the exchange offer, and no exchange notes will be
issued in exchange for those
26
<PAGE> 33
existing notes unless the existing notes so withdrawn are validly retendered.
Any existing notes that have been tendered but are not accepted for exchange
will be returned to the holder of the existing notes without cost to the holder
as soon as practicable after withdrawal, rejection of tender or termination of
the exchange offer. Properly withdrawn existing notes may be retendered by
following one of the procedures described above under "-- Procedures for
Tendering" at any time prior to the Expiration Date.
CONDITIONS
The exchange offer is subject only to the following conditions:
- the compliance of the exchange offer with securities laws;
- the tender of the existing notes;
- the representation by the holders of the existing notes that the exchange
notes they will receive are being acquired by them in the ordinary course
of their business and that at the time the exchange offer is completed
the holder had no plan to participate in the distribution of the exchange
notes; and
- no judicial or administrative proceeding shall have been threatened that
would limit us from proceeding with the exchange offer.
EXCHANGE AGENT
State Street Bank and Trust Company, the trustee under the indenture, has
been appointed as exchange agent for the exchange offer. In this capacity, the
exchange agent has no fiduciary duties and will be acting solely on the basis of
our directions. Requests for assistance and requests for additional copies of
this prospectus or of the letter of transmittal should be directed to the
exchange agent addressed as follows:
<TABLE>
<S> <C>
By Mail: State Street Bank and Trust Company
Corporate Trust Department
P.O. Box 778
Boston, Massachusetts 02102-0778
By Hand Delivery or Overnight Courier: State Street Bank and Trust Company
Corporate Trust
Window, Fifth Floor
2 Avenue DeLafayette
Boston, Massachusetts 02111-1724
Facsimile Transmission: (617) 664-5395
Confirm by Telephone: (617) 664-5587
</TABLE>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS LISTED
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS DESCRIBED
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF THE LETTER OF TRANSMITTAL.
SOLICITATION OF TENDERS; FEES AND EXPENSES
We will bear the expenses of requesting that holders of existing notes
tender those notes for exchange notes. The principal solicitation under the
exchange offer is being made by mail. Additional solicitations may be made by
our officers and regular employees and our affiliates in person, by telegraph,
telephone or telecopier.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer. We, however, will pay the exchange
agent reasonable and customary fees for its services and will reimburse the
exchange agent for its reasonable out-of-pocket costs and expenses in connection
with the exchange offer and will indemnify the exchange agent for all losses and
claims incurred by it as a result of the exchange
27
<PAGE> 34
offer. We may also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of this prospectus, letters of transmittal and related documents to the
beneficial owners of the existing notes and in handling or forwarding tenders
for exchange.
We will pay the expenses to be incurred in connection with the exchange
offer, including fees and expenses of the exchange agent and trustee and
accounting and legal fees and printing costs.
You will not be obligated to pay any transfer tax in connection with the
exchange, except if you instruct us to register new notes in the name of, or
request that notes not tendered or not accepted in the exchange offer be
returned to, a person other than you, you will be responsible for the payment of
any applicable transfer tax.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the same carrying value as the
existing notes, as reflected in our accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by us upon the closing of the exchange offer. We will amortize the
expenses of the exchange offer over the term of the exchange notes.
FEDERAL INCOME TAX CONSEQUENCES
This general discussion of United States federal income tax consequences
applies to you if you are a United States holder, you acquired existing notes at
original issue for cash and you exchange those existing notes for exchange notes
in the exchange offer. This discussion only applies to you if you purchased
existing notes in the exchange offer for an amount equal to the "issue price" of
the notes and hold the exchange notes as a "capital asset," generally, for
investment, under Section 1221 of the Internal Revenue Code. This summary,
however, does not consider state, local or foreign tax laws. In addition, it
does not include all of the rules which may affect the United States tax
treatment of your investment in the exchange notes. For example, special rules
not discussed here may apply to you if you are, including without limitation:
- a broker-dealer, a dealer in securities or a financial institution;
- an insurance company;
- a tax-exempt organization;
- holding the exchange notes through partnerships or other pass-through
entities; or
- holding the exchange notes as part of a hedge, straddle or other risk
reduction or constructive sale transaction.
This discussion only represents our best attempt to describe some federal
income tax consequences that may apply to you based on current United States
federal tax law. This discussion may in the end inaccurately describe the
federal income tax consequences which are applicable to you because the law may
change, possibly retroactively, and because the IRS or any court may disagree
with this discussion.
This summary may not cover your particular circumstances because it does
not consider foreign, state or local tax rules, disregards federal tax rules,
and does not describe future changes in federal tax rules. Please consult your
tax advisor concerning the application of United States federal income tax laws,
as well as the laws of any state, local or foreign taxing jurisdiction, to your
particular situation rather than relying on this general description.
28
<PAGE> 35
UNITED STATES HOLDER
You are a United States holder if you hold notes and you are:
- a citizen or resident of the United States;
- a corporation or partnership created or organized in the United States or
under the laws of the United States or of any political subdivision;
- an estate the income of which is subject to United States federal income
tax regardless of its source; or
- a trust, if (1) a United States court can exercise primary supervision
over the administration of the trust and one or more United States
persons can control all substantial decisions of the trust, or (2) the
trust was in existence on August 20, 1996 and has properly elected to
continue to be treated as a United States person.
RECEIPT OF EXCHANGE NOTES
Because the economic terms of the exchange notes and the existing notes are
identical, your exchange of existing notes for exchange notes under the exchange
offer will not constitute a taxable exchange of the existing notes. As a result:
- you will not recognize taxable gain or loss when you receive exchange
notes in exchange for existing notes;
- your holding period in the exchange notes will include your holding
period in the existing notes; and
- your basis in the exchange notes will equal your basis in the existing
notes.
SALE OR OTHER TAXABLE DISPOSITION OF EXCHANGE NOTES
You must recognize taxable gain or loss on the sale, exchange, redemption,
retirement or other taxable disposition of an exchange note. The amount of your
gain or loss equals the difference between the amount you receive for the
exchange note in cash or other property, valued at fair market value, minus the
amount attributable to accrued qualified stated interest on the exchange note,
minus your adjusted tax basis in the exchange note. Your initial tax basis in an
exchange note equals the price you paid for the existing note which you
exchanged for the exchange note increased by amounts previously includable in
income as original issue discount and reduced by any payments other than
payments of qualified stated interest made on the notes.
Your gain or loss will generally be a long-term capital gain or loss if
your holding period in the exchange note is more than one year. Otherwise, it
will be a short-term capital gain or loss. Payments attributable to accrued
qualified stated interest which you have not yet included in income will be
taxed as ordinary interest income.
BACKUP WITHHOLDING
You may be subject to a 31% backup withholding tax on payments of interest,
principal and premium on, and any proceeds upon the sale or disposition of, an
exchange note. Some holders, including, among others, corporations and some
tax-exempt organizations, are generally not subject to backup withholding. In
addition, the 31% backup withholding tax will not apply to you if you provide
your taxpayer identification number in the prescribed manner unless:
- the IRS notifies us or our agent that the taxpayer identification number
you provided is incorrect;
- you fail to report interest and dividend payments that you receive on
your tax return and the IRS notifies us or our agent that withholding is
required; or
- you fail to certify under penalties of perjury that you are not subject
to backup withholding.
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<PAGE> 36
You should consult your tax advisor as to your qualification for exemption
from backup withholding and the procedure for obtaining an exemption. If the 31%
backup withholding tax does apply to you, you may use the amounts withheld as a
refund or credit against your federal income tax liability as long as you
provide necessary information to the IRS.
PARTICIPATION IN THE EXCHANGE OFFER; UNTENDERED NOTES
Participation in the exchange offer is voluntary. Holders of the existing
notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
As a result of the making of, and upon acceptance for exchange of all
existing notes tendered under the terms of, this exchange offer, we will have
fulfilled a covenant contained in the terms of the registration rights
agreement. Holders of the existing notes who do not tender their certificates in
the exchange offer will continue to hold the certificates and will be entitled
to all the rights, and subject to the limitations applicable to the existing
notes, under the indenture, except for any rights under the registration rights
agreement that by their term terminate or cease to have further effect as a
result of the making of this exchange offer. See "Description of the Notes." All
untendered existing notes will continue to be subject to the restrictions on
transfer described in the indenture. To the extent that existing notes are
tendered and accepted in the exchange offer, the trading market for untendered
existing notes could be adversely affected. This is because there will probably
be many fewer remaining existing notes outstanding following the exchange,
significantly reducing the liquidity of the untendered notes.
We may in the future seek to acquire untendered existing notes in the open
market or through privately negotiated transactions, through subsequent exchange
offers or otherwise. We intend to make any acquisitions of existing notes
following the applicable requirements of the Exchange Act, and the rules and
regulations of the Commission under the Exchange Act, including Rule 14e-1, to
the extent applicable. We have no present plan to acquire any existing notes
that are not tendered in the exchange offer or to file a registration statement
to permit resales of any existing notes that are not tendered in the exchange
offer.
30
<PAGE> 37
THE COMPANY
We believe we are the largest company in the United States focused
primarily on the plumbing and mechanical contracting services industry. On April
1, 1999, we combined the operations of the ten founding companies, which
individually are leading regional providers of plumbing and mechanical
contracting services, and commenced operations as one company. We believe that
by combining these regional leaders into one professional organization, we have
created a national provider which we expect to strengthen and broaden our
relationships with our consolidating customer base and enhance our operating
efficiency. The ten founding companies have been in business for an average of
approximately 31 years and, in 1998 performed plumbing and mechanical
contracting services in 24 states. On a pro forma basis for the fiscal year
ended December 31, 1998, we generated revenues and EBITDA of $322.2 million and
$39.6 million, respectively. A brief description of each of the founding
companies is set forth below.
CHRISTIANSON ENTERPRISES, INC., G.G.R. LEASING CORPORATION AND CHRISTIANSON
SERVICE COMPANY. Christianson Enterprises was founded as a sole proprietorship
in 1950, was originally incorporated as W. G. Christianson Co. in 1968 and was
reorganized as Christianson Enterprises, Inc. in 1988. G.G.R. Leasing
Corporation was founded in 1982 and does business as "Professional Services,
Inc." Christianson Service Company was founded in 1997. Christianson is
headquartered outside Austin, Texas, with additional facilities in San Antonio
and San Marcos, Texas, and operates principally in central Texas. For the 1998
fiscal year, Christianson had revenues of approximately $63.4 million,
principally from the residential market, with projects including new home and
apartment complex work. Christianson also has specialized expertise in providing
maintenance and repair services. At December 31, 1998, Christianson had
approximately 461 employees. Robert A. Christianson, the Chief Executive Officer
of Christianson, is expected to sign a five-year employment contract with AMPAM
to act as its Chief Executive Officer and became a director of AMPAM following
the acquisitions.
R.C.R. PLUMBING, INC. RCR was founded in 1977 and is headquartered in
Riverside, California, east of Los Angeles, with additional facilities in Las
Vegas, Nevada and in Canoga Park, California in the San Fernando Valley. RCR
operates principally in southern California and southern Nevada. For the 1998
fiscal year, RCR had revenues of approximately $63.3 million from both the
commercial/institutional and residential markets, with projects including new
home and apartment complex construction. In addition to plumbing contracting
services, RCR has specialized expertise in residential and commercial HVAC
systems installation, fire sprinkler installation and various other mechanical
contracting services. At December 31, 1998, RCR had approximately 770 employees.
Robert C. Richey the Chief Executive Officer of RCR, is expected to sign a
five-year employment agreement with AMPAM to act as its Chief Operating Officer
and became a director of AMPAM following the acquisitions.
TEEPE'S RIVER CITY MECHANICAL, INC. Teepe's was founded in 1953 and is
headquartered in Cincinnati, Ohio, with an additional facility in Columbus,
Ohio. Teepe's operates principally in the Cincinnati, Columbus and Dayton, Ohio
metropolitan areas and in northern Kentucky and southeastern Indiana. For the
1998 fiscal year, Teepe's had revenues of approximately $50.6 million,
principally from the commercial/institutional new construction market, with
projects including schools, dormitories, hotels, prisons and office buildings.
At March 31, 1999, Teepe's had approximately 200 employees. Steven M. Teepe, the
Chief Executive Officer of Teepe's and Scott W. Teepe, Sr., the President of
Teepe's, each signed a five-year employment agreement with AMPAM to continue in
their present positions with Teepe's and Scott W. Teepe, Sr. also became a
director of AMPAM following the acquisitions. Since the date of their
acquisition by AMPAM, Teepe's and Croson Ohio have combined their businesses and
operations.
KEITH RIGGS PLUMBING, INC. Keith Riggs was founded in 1948 and is
headquartered outside Phoenix, Arizona with an additional facility also outside
Phoenix. Keith Riggs operates throughout the Phoenix metropolitan area. For the
1998 fiscal year, Keith Riggs had revenues of approximately $34.5 million,
principally from the residential market. Keith Riggs also has specialized
expertise in providing maintenance and repair services. At December 31, 1998,
Keith Riggs had approximately 350 employees. Gerald M. Riggs, the President, Sam
Sherwood, the Vice President and Gary N. Goodman, the Assistant Secretary
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<PAGE> 38
and Assistant Treasurer of Keith Riggs each signed a five-year employment
agreement with AMPAM to continue in their present positions with Keith Riggs and
Sam Sherwood also became a director of AMPAM following the acquisitions.
J. A. CROSON COMPANY AND FRANKLIN FIRE SPRINKLER COMPANY. J. A. Croson
Company was founded in 1959, and Franklin Fire Sprinkler Company was founded in
1988. Croson Ohio is headquartered in Columbus, Ohio and operates principally in
the Columbus metropolitan area and central and southern Ohio. For the 1998
fiscal year, Croson Ohio had revenues of approximately $25.2 million,
principally from plumbing and mechanical contracting services provided to
commercial/institutional market with contracting projects including office
buildings, penal facilities, schools, university buildings, hospitals and waste
water and water purification projects. Croson Ohio also has specialized
expertise in designing and building fire protection systems in the institutional
and commercial/institutional markets. At March 31, 1999, Croson Ohio had
approximately 165 employees. David Croson, the President of Croson Ohio, signed
a five-year employment agreement with AMPAM to continue in his present position
with Croson Ohio and became a director or AMPAM following the acquisitions.
Since the date of their acquisition by AMPAM, Croson Ohio and Teepe's have
combined their business and operations.
J. A. CROSON COMPANY OF FLORIDA. Croson Florida was founded in 1989, is
headquartered in Orlando, Florida, with additional offices in Mount Dora and
Tampa, Florida, and operates principally in Orlando, Tampa, Naples/Ft. Myers and
other areas of southern and central Florida. For the 1998 fiscal year, Croson
Florida had revenues of approximately $28.1 million, principally from plumbing
and mechanical contracting services provided to the commercial/institutional
market, with projects including time-share condominiums, apartment complexes,
hotels and assisted-living facilities. At December 31, 1998, Croson Florida had
280 employees. James A. Croson, the Chief Executive Officer of Croson Florida,
and Mark F. LaTourelle, the President of Croson Florida, each signed a five-year
employment agreement with AMPAM to continue in their present positions with
Croson Florida, and James A. Croson became a director of AMPAM following the
acquisitions. James A. Croson is the father of David A. Croson, the President of
Croson Ohio.
POWER PLUMBING INC. Power was founded in 1988 and is headquartered in
Houston, Texas. It operates principally in Houston, Dallas and Austin, Texas,
but also performs services in the area outside Washington, D.C. on a
project-by-project basis. For the 1998 fiscal year, Power had revenues of
approximately $17.1 million, principally from plumbing and mechanical
contracting services provided to the residential and commercial/institutional
markets, with projects including apartment complexes and assisted-living
facilities. In addition, Power offers on-site utility services for private
developers. At December 31, 1998, Power had approximately 72 employees. James N.
Power, the President of Power, and Guy N. Mathieu, the Vice President of Power,
each signed a five-year employment agreement with AMPAM to continue in their
present positions with Power following the acquisitions.
NELSON MECHANICAL CONTRACTORS, INC. Nelson was founded in 1964 and is
headquartered in Pensacola, Florida, with a branch office in northern Virginia
outside Washington D.C. Nelson operates principally along the Florida and
Alabama Gulf Coast, but also performs services in other parts of the
southeastern United States on a project-by-project basis. For the 1998 calendar
year, Nelson had revenues of approximately $15.1 million, principally from
plumbing and mechanical contracting services provided to the
commercial/institutional market, with projects including apartment complexes,
motels, hotels, nursing homes, office buildings, highrise condominiums, dental
and medical clinics, shopping centers and various buildings at the U.S. Naval
Air Station in Pensacola, Florida and Elgin Air Force Base in Ft. Walton Beach,
Florida. In addition, Nelson offers on-site utility services for private
developers including underground work on water and sewer systems, well pumping
stations, natural gas distribution systems, and communication and power
conduits. At December 31, 1998, Nelson had approximately 180 employees. Gilbert
Nelson, the President of Nelson, signed a five-year employment agreement with
AMPAM to continue in his present position with Nelson following the
acquisitions.
SHERWOOD MECHANICAL, INC. Sherwood was founded in 1976, is headquartered
outside San Diego, California, and operates principally in southern California,
but also performs services in other parts of the
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<PAGE> 39
southwestern United States on a project-by-project basis. For the 1998 fiscal
year, Sherwood had revenues of approximately $13.6 million, principally from the
commercial/institutional market, with projects including hotels, apartment
complexes, hospitals, medical laboratories, prisons and waste water and water
purification plants. In addition to plumbing contracting services, Sherwood
offers on-site utility services for private developers. At December 31, 1998,
Sherwood had approximately 170 employees. Robert W. Sherwood, the President of
Sherwood, signed a five-year employment agreement with AMPAM to continue in his
present position with Sherwood and became a director of AMPAM following the
acquisitions.
MILLER MECHANICAL CONTRACTORS, INC. Miller was founded in 1977, is
headquartered in Marietta, Georgia, and operates principally in the Atlanta,
Georgia metropolitan area, but also performs services in other parts of the
southeastern United States on a project-by-project basis. For the 1998 fiscal
year, Miller had revenues of approximately $11.3 million, principally from the
multifamily residential and commercial/institutional markets, with specialized
expertise in apartment complexes and extended-stay motels. At December 31, 1998,
Miller had approximately 80 employees. Joseph E. Miller, Vice President of
Miller, signed a five-year employment agreement with AMPAM to continue his
employment with Miller and became a director of AMPAM following the
acquisitions.
------------------------
Sterling City Capital, LLC is a private investment firm that focuses on
selective investments in companies which plan to execute consolidation
strategies within fragmented industries. Sterling City Capital, LLC and its
principal, C. Byron Snyder, have founded or invested in numerous public and
private companies, including Carriage Services, Inc., a publicly traded death
care company, and Integrated Electrical Services, Inc., a publicly traded
electrical service company. C. Byron Snyder is also an active member on boards
of directors for several private companies as well as Carriage Services, Inc.
and Integrated Electrical Services, Inc.
------------------------
American Plumbing & Mechanical, Inc. was incorporated in Delaware in June
1998. Its executive offices are located at 1502 Augusta, Suite 425, Houston,
Texas 77057, and its telephone number is (713) 243-7350.
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<PAGE> 40
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes. In consideration for issuing the exchange notes as contemplated in this
prospectus, we will receive in exchange existing notes in like principal amount.
The existing notes surrendered in exchange for exchange notes will be retired
and canceled and cannot be reissued. Issuance of the exchange notes will not
result in a change in our amount of outstanding debt.
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<PAGE> 41
CAPITALIZATION
The following table sets forth the capitalization of AMPAM as of March 31,
1999 on a pro forma combined basis after giving effect to the acquisitions and
related transactions and giving effect to the original issuance of the notes and
the application of the proceeds therefrom. This table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Combined Liquidity and Capital Resources" and the
Unaudited Pro Forma Financial Statements of AMPAM and the notes thereto,
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF
MARCH 31,
1999
--------------
PRO FORMA(a)
--------------
(IN THOUSANDS)
<S> <C>
Cash........................................................ $ 10,861
========
Long-term obligations (including current maturities):
Credit facility........................................... $ --
Senior Notes.............................................. 122,418(b)
Other debt................................................ 3,068(c)
--------
Total debt.................................................. 125,486
--------
Redeemable preferred stock(d)............................... 13,635
--------
Stockholders' equity(e)..................................... 17,683
--------
Total capitalization.............................. $156,804
========
</TABLE>
- ---------------
(a) Gives effect to the acquisition of the founding companies and other
related pro forma adjustments, as if all of these transactions had
occurred on March 31, 1999 and to the private placement of the notes and
the application of the net proceeds to repay outstanding indebtedness, as
if these transactions had occurred on March 31, 1999.
(b) Net of unamortized discount of $2,582,000.
(c) Consists of capital lease obligations.
(d) The redeemable preferred stock has a $0.01 par value per share. Currently,
there are 1,048,820 shares of Series A Preferred Stock issued and
outstanding with a liquidation preference of $13.6 million.
(e) Consists of common stock with a $0.01 par value per share. There are
105,000,000 shares authorized and 12,182,207 shares issued and
outstanding. This includes 2,423,517 issued and outstanding shares of
restricted common stock (5,000,000 authorized). All of these shares of
restricted common stock have been issued to Sterling City Capital, LLC,
the management of AMPAM and other individuals. See "Certain
Transactions -- Organization of AMPAM." Excludes (i) any additional shares
that may be issued as additional consideration to the former stockholders
of the founding companies and (ii) 2,142,115 shares which may be issued
upon exercise of stock options which were granted upon consummation of the
acquisitions. See "Certain Transactions -- Acquisition of Founding
Companies." Also includes common stock and additional paid-in capital of
$22.6 million and a retained deficit of $4.9 million. Pro forma adjusted
amount of stockholders equity reflects the write-off of deferred loan
costs and the extinguishment of recorded warrant value associated with the
repayment of the subordinated loan.
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<PAGE> 42
SELECTED HISTORICAL FINANCIAL DATA
AMPAM acquired the founding companies simultaneously on April 1, 1999. For
financial statement presentation purposes, Christianson has been identified as
the "accounting acquirer." As the accounting acquiror, for accounting purposes
under SEC SAB No. 97, Christianson is treated as
- having acquired all the other founding companies (even though AMPAM
legally made these acquisitions),
- having merged with AMPAM (with purchase accounting reflected for
AMPAM's non-management stock ownership) and
- representing the financial history of AMPAM prior to April 1, 1999.
The following selected historical financial data for Christianson (not combined
or pro forma for the acquisition of the founding companies) as of December 31,
1997 and 1998 and August 31, 1996, and for the years ended August 31, 1995 and
1996, the four-month period ended December 31, 1996 and the years ended December
31, 1997 and 1998 and for the three months ended March 31, 1999, have been
derived from the audited financial statements of Christianson included elsewhere
in this Prospectus and reflect all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of such data. The selected
historical financial data as of March 31, 1999 and for the three months ended
March 31, 1998, and as of August 31, 1993, 1994 and 1995 and for the years ended
August 31, 1993 and 1994, have been derived from the unaudited financial
statements of Christianson and, in the opinion of the Company management,
reflect all adjustments consisting of normal recurring adjustments necessary for
a fair presentation of such data. The results of operations for the three months
ended March 31, 1999 should not be regarded as indicative of the results that
may be expected for the full year.
<TABLE>
THREE
MONTHS
ENDED
FOUR MONTHS FOUR MONTHS YEAR ENDED MARCH
YEARS ENDED AUGUST 31, ENDED ENDED DECEMBER 31, 31,
--------------------------- DECEMBER 31, DECEMBER 31, ----------------- -------
1994 1995 1996 1995 1996 1997 1998 1998
------- ------- ------- ------------ ------------- ------- ------- -------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
(CHRISTIANSON):
Revenues....................... $43,284 $39,449 $50,330 $14,619 $15,576 $50,909 $63,374 $12,744
Cost of revenues (including
depreciation)................ 31,327 29,805 38,203 11,044 11,868 37,504 45,704 9,024
------- ------- ------- ------- ------- ------- ------- -------
Gross profit................... 11,957 9,644 12,127 3,575 3,708 13,405 17,670 3,720
Selling, general and
administrative expenses...... 11,834 8,977 11,051 3,430 5,142 11,497 17,078 3,253
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations(a)................ 123 667 1,076 145 (1,434) 1,908 592 467
Interest and other income,
net.......................... 133 171 267 225 32 59 56 (18)
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before provision
for income taxes............. 256 838 1,343 370 (1,402) 1,967 648 449
Provision (benefit) for income
taxes........................ 67 258 345 74 (56) 77 32 20
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)(a)........... $ 189 $ 580 $ 998 $ 296 $(1,346) $ 1,890 $ 616 $ 429
======= ======= ======= ======= ======= ======= ======= =======
OTHER FINANCIAL DATA AND RATIOS
(CHRISTIANSON):
Ratio of earnings to fixed
charges(b)................... 3.7x 7.3x 9.9x 8.6x -- 8.8x 3.4x 3.7x
Income (loss) from operations
per common share............. $ 2.39 $ 7.32 $ 13.59 $ 3.74 $(18.11) $ 23.21 $ 7.20 $ 5.22
<CAPTION>
1999
-------
<S> <C>
STATEMENT OF OPERATIONS DATA
(CHRISTIANSON):
Revenues....................... $16,824
Cost of revenues (including
depreciation)................ 11,390
-------
Gross profit................... 5,434
Selling, general and
administrative expenses...... 1,863
-------
Income (loss) from
operations(a)................ 3,571
Interest and other income,
net.......................... (7)
-------
Income (loss) before provision
for income taxes............. 3,564
Provision (benefit) for income
taxes........................ 162
-------
Net income (loss)(a)........... $ 3,402
=======
OTHER FINANCIAL DATA AND RATIOS
(CHRISTIANSON):
Ratio of earnings to fixed
charges(b)................... 19.1x
Income (loss) from operations
per common share............. $ 41.39
</TABLE>
36
<PAGE> 43
<TABLE>
<CAPTION>
AS OF AUGUST 31, AS OF DECEMBER 31, AS OF
------------------------- ------------------ MARCH 31,
1994 1995 1996 1997 1998 1999
------ ------ ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD) (CHRISTIANSON):
Working capital........................................... $2,967 $3,343 $ 9,891 $4,279 $ 4,792 $ 8,256
Total assets.............................................. 6,718 5,822 11,607 7,634 11,210 15,876
Long-term obligations, net of current maturities.......... 699 584 425 329 349 532
Total stockholders' equity................................ $3,560 $4,140 $ 3,792 $5,685 $ 6,301 $ 9,703
</TABLE>
- ---------------
(a) The loss from operations and the level of net income in historical periods
is primarily attributable to the level of owner's compensation paid during
those periods.
(b) For the purpose of this calculation "earnings" represents income from
operations before income tax expense, plus fixed charges. "Fixed charges"
consist of interest, whether expensed or capitalized, amortization of debt
expense and an estimated portion of rentals representing interest expense.
As a result of the loss incurred for the four months ended December 31,
1996, earnings were insufficient to cover fixed charges by $1.4 million in
that period.
37
<PAGE> 44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the Unaudited
Pro Forma Combined Financial Statements and the founding companies' Financial
Statements and related notes thereto and "Selected Historical Financial Data"
appearing elsewhere in this prospectus.
We believe we are the largest company in the United States focused
primarily on the plumbing and mechanical contracting services industry. On April
1, 1999, we combined the operations of the ten founding companies, which
individually are leading regional providers of plumbing and mechanical
contracting services, and commenced operations as one company. AMPAM's revenues
are derived primarily from plumbing and mechanical contracting services provided
to residential, commercial and institutional customers. Revenues from
construction contracts are generally accounted for on a percentage-
of-completion basis. Maintenance and repair revenues are recognized as the
services are performed. Of AMPAM's 1998 pro forma revenues, approximately 54%
were derived from residential services and approximately 46% were derived from
commercial and institutional services. Costs and estimated earnings in excess of
billings on uncompleted contracts are recorded as an asset and billings in
excess of costs and estimated earnings on uncompleted contracts are recorded as
a liability on the balance sheet. Provisions for estimated losses on uncompleted
contracts are made in the period in which the losses are determined. Changes in
job performance, job conditions, estimated profitability and final contract
settlements may result in revisions to costs and income, and their effects are
recognized in the period in which the revisions are determined.
Cost of revenues consists primarily of salaries and benefits of employees
and materials, which represented approximately 28% and 51% of pro forma cost of
revenues in 1998 respectively, as well as, subcontracted services, depreciation,
fuel and other vehicle expenses and equipment rentals. A number of the founding
companies also include salaries of estimators, insurance and other indirect
costs in the cost of revenues. AMPAM's gross margin, which is gross profit
expressed as a percentage of revenues, depends on the relative proportions of
costs related to labor and materials. On projects in which a higher percentage
of the cost of revenues consists of labor costs, AMPAM typically achieves higher
gross margins than on projects in which materials represent more of the cost of
revenues. Selling, general and administrative expenses consist primarily of
compensation and related benefits for owners, management and administrative
salaries and benefits, insurance, advertising, office rent and utilities,
communications and professional fees. In connection with the acquisitions, some
owners and some key employees of the founding companies agreed to reductions in
their compensation and related benefits that would have totaled $14.7 million
for the 1998 fiscal year. Such reductions in salaries, bonuses and benefits have
been reflected as a pro forma adjustment in the Unaudited Pro Forma Combined
Statement of Operations and are reflected in the terms of employment agreements
with AMPAM. See "Unaudited Pro Forma Combined Financial Statements" and the
Notes thereto.
AMPAM believes that it will realize savings from:
- greater volume discounts from suppliers of materials, parts and supplies;
- lower labor costs resulting from scheduling efficiencies and reduced down
time;
- increased use of off-site prefabricated components; and
- increased use of technology.
Offsetting these savings will be costs related to AMPAM's new corporate
management, costs of being a reporting company and costs of integrating the
companies acquired in the acquisitions. See "Business -- Operating Strategy."
The plumbing and mechanical contracting services industry is influenced by
seasonal factors, which generally result in lower activity levels during colder
winter months than other periods. As a result,
38
<PAGE> 45
AMPAM expects that its revenues and results of operations will generally be
lower in the first and fourth quarters of each fiscal year, and higher in the
second and third quarters. See "Risk Factors -- Our industry experiences upturns
and downturns, depending on the season of the year and this could have an
adverse effect on our quarterly operating results."
The acquisition of the founding companies has been accounted for using the
purchase method of accounting, and the total purchase price has been allocated
to the assets and liabilities of the companies acquired based upon the fair
values of the assets and liabilities. As a result, we will have significant non-
cash charges for depreciation and amortization expense related to the fixed
assets and "goodwill" that were acquired in the acquisition. Our balance sheet
includes an amount designated as "goodwill" that on a pro forma basis at March
31, 1999 was $107.8 million, representing 51% of assets and 609% of
stockholders' equity. In addition, we may pay additional consideration in the
form of cash and stock in the event that adjusted net income of the founding
companies for the year ended December 31, 1999 exceeds targeted levels. Any
payments of this type would result in additional "goodwill." Our balance sheet
and earnings will be similarly impacted by future acquisitions.
In addition to the goodwill amortization issue described above, members of
management and founders received stock and/or stock options in connection with
the organization of AMPAM. The applicable accounting rules require that the
stock issued to some members of our management be treated as compensation
expense. As a result of this treatment, we recorded a non-recurring, non-cash
charge on April 1, 1999 of approximately $7.7 million which will reduce our
EBITDA and net income and will be reflected in our second quarter results. See
"Unaudited Pro Forma Combined Financial Statements" and the Notes thereto.
SUPPLEMENTAL UNAUDITED COMBINED FINANCIAL INFORMATION
To facilitate a meaningful comparison, the following discussion and
analysis is based on the combined historical results of the founding companies.
The following supplemental unaudited combined financial information for the
periods presented do not purport to present those of the combined founding
companies in accordance with generally accepted accounting principles, which do
not allow for the aggregating of financial data for entities that are not under
common ownership. The following discussion represents merely a summation of the
revenues, cost of revenues (including depreciation), gross profit, selling,
general and administrative expenses and income from operations of the individual
founding companies on a historical basis and excludes the effects of the pro
forma adjustments that are included in the Unaudited Pro Forma Combined
Statements appearing elsewhere in this prospectus. Selling, general and
administrative expenses for periods prior to the acquisitions reflect the
effects of historical salary and distributions to the owners of the founding
companies. The data will not be comparable to, and may not be indicative of,
AMPAM's post-combination results of operations because:
- the founding companies were not under common control or management and
some founding companies had different tax structures (generally, S
corporations) during the periods presented;
- AMPAM will use the purchase method to establish a new basis of accounting
to record the acquisitions;
- AMPAM will incur incremental costs for its corporate management and the
costs of being a public company;
- the combined data do not reflect reductions in salary, bonus and benefits
of the owners of the founding companies occurring in connection with the
acquisitions; and
- the combined data do not reflect the potential benefits and cost savings
AMPAM expects to realize when operating as a combined entity.
Nevertheless, management believes that the aggregate financial information
shown below is helpful in understanding the past operations of the founding
companies.
39
<PAGE> 46
The following table sets forth supplemental unaudited combined financial
information of the founding companies on a historical basis and as a percentage
of total revenue for the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(A) THREE MONTHS ENDED MARCH 31,
-------------------------------------------------- -------------------------------
1996(B) 1997 1998 1998 1999
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.............. $236,557 100% $267,516 100% $322,203 100% $ 70,870 100% $88,005 100%
Cost of revenues...... 195,990 83 219,039 82 255,461 79 56,144 79 66,732 76%
-------- --- -------- --- -------- --- -------- --- ------- ---
Gross profit........ 40,567 17 48,477 18 66,742 21 14,726 21 21,273 24
Selling, general and
administrative
expenses............ 29,659 13 35,568 13 45,909 14 10,186 14 10,185 11
-------- --- -------- --- -------- --- -------- --- ------- ---
Income from
operations........ $ 10,908 4% $ 12,909 5% $ 20,833 7% $ 4,540 7% $11,088 13%
======== === ======== === ======== === ======== === ======= ===
</TABLE>
- ---------------
(a) The fiscal years presented are the years ended December 31, 1996, 1997 and
1998, for all founding companies, except for Croson Ohio, Sherwood and
Miller, for which the fiscal years presented are the years ended September
30, 1996, 1997 and 1998 Nelson, for which the fiscal years presented are
April 30, 1997, December 31, 1997 and 1998 and Christianson for which the
fiscal years presented are August 31, 1996, December 31, 1997 and 1998. For
the three months ended December 31, 1998, Croson Ohio, Sherwood and Miller
had combined revenues of $16,329 and income from operations of $2,146.
(b) Because the 1996 information includes some unaudited 1996 data you are
cautioned not to place undue reliance on this information. Nevertheless,
management believes that this information may be helpful in understanding
the past operations of the founding companies.
Three months ended March 31, 1999 compared to the three months ended March 31,
1998
Revenues increased approximately $17.1 million, or 24%, from $70.9 million
for the three months ended March 31, 1998 to $88.0 million for the three months
ended March 31, 1999. The increase in combined revenues occurred primarily at
RCR, Croson Ohio and Christianson. RCR's revenues increased $6.2 million, or
47%, from the three months ended March 31, 1998 to the three months ended March
31, 1999, primarily as a result of continued growth at the Canoga Park,
California and Las Vegas, Nevada locations. Croson Ohio's revenues increased
$4.9 million, or 39%, from the three months ended March 31, 1998 to the three
months ended March 31, 1999, primarily as a result of an increase in projects.
Christianson's revenues increased $4.1 million, or 32%, from the three months
ended March 31, 1998 to the three months ended March 31, 1999, primarily as a
result of the favorable housing market in Austin and the surrounding areas.
Gross profit increased $6.6 million, or 44%, from $14.7 million for the
three months ended March 31, 1998 to $21.3 for the three months ended March 31,
1999. The increase in combined gross profit occurred primarily due to increases
in gross profit of $1.7 million, or 46%, at Christianson, $1.6 million, or 66%,
at RCR, $1.3 million, or 87%, at Croson Florida, and $1.3 million, or 389%, at
Power. The increase is primarily a result of the increased revenues and
increased gross margins of each of these companies. Combined gross margin
increased from 21% in the first three months of 1998 to 24% in the first three
months of 1999. Power's gross margin increased to 28% for the first three months
of 1999 from 9% for the first three months of 1998, primarily as a result of
improvements in the bidding environment. Croson Florida's, Christianson's, and
RCR's gross margins increased from 24%, 29%, and 19%, respectively, in the first
three months of 1998 to 34%, 32%, and 21%, respectively, in the first three
months of 1999, primarily due to increased prices resulting from the increased
demand for the companies' services.
40
<PAGE> 47
Combined selling, general and administrative expenses remained constant at
$10.2 million for the three months ended March 31, 1998 and 1999.
Fiscal year ended December 31, 1998 compared to fiscal year ended December 31,
1997
Combined revenues increased approximately $54.7 million, or 20%, from
$267.5 million for the 1997 fiscal year to $322.2 million for the 1998 fiscal
year. The increase in combined revenues occurred primarily at RCR, Christianson,
Croson Florida and Teepe's. RCR's revenues increased $13.6 million, or 27%, from
$49.7 million for the 1997 fiscal year to $63.3 million for the 1998 fiscal
year, primarily as a result of an increase in the number and size of projects
and contracts, reflecting the growth from two new facilities in Canoga Park,
California and Las Vegas, Nevada. Christianson's revenues increased $12.5
million, or 24.5%, from $50.9 million for the 1997 fiscal year to $63.4 million
for the 1998 fiscal year, primarily as a result of increased market share, more
favorable contract pricing and increased construction activity in the Austin and
central Texas housing market. Croson Florida's revenues increased $10.0 million,
or 56%, from $18.1 million for the 1997 fiscal year to $28.1 million for the
1998 fiscal year, primarily due to expanded operations and contract volumes at
Croson Florida's facility in the Tampa/Fort Meyers, Florida area. Teepe's
revenues increased $7.9 million, or 19%, from $42.7 million for the 1997 fiscal
year to $50.6 million for the 1998 fiscal year, primarily as a result of an
increase in large commercial construction contracts in the Columbus, Ohio area
as well as continued growth in governmental and institutional projects. The most
significant increase in revenues among the other founding companies was an
increase of $4.8 million, or 16%, which occurred at Keith Riggs, primarily as a
result of increased demand for services due to increased housing starts and also
due to increased maintenance revenues.
Combined gross profit increased $18.2 million, or 38%, from $48.5 million
for the 1997 fiscal year to $66.7 million for the 1998 fiscal year, generally as
a result of increased market share, more favorable pricing and increased
construction activity in AMPAM's markets. The increase in combined gross profit
occurred primarily due to increases in gross profit of $4.3 million, or 32%, at
Christianson, $4.3 million, or 59%, at RCR, and $3.5 million, or 83%, at Croson
Florida. The increase in combined gross profit is primarily attributable to
increased revenues and increased margins of each of these companies. Combined
gross margin increased to 21% for the 1998 fiscal year from 18% for the 1997
fiscal year. Christianson's gross margin increased to 28% for the 1998 fiscal
year from 26% for the 1997 fiscal year, primarily as a result of small price
increases for new home construction and increased maintenance revenues. RCR's
gross margin increased to 18% for the 1998 fiscal year from 15% for the 1997
fiscal year, primarily due to improved pricing on many contracts as a result of
increased demand for RCR's services as well as due to efficiencies gained
through additional experience in the Canoga Park, California and Las Vegas,
Nevada markets. Croson Florida's gross margin increased to 27% for the 1998
fiscal year from 23% for the 1997 fiscal year, primarily as a result of
favorable pricing of its contracts in the Tampa/Fort Meyers, Florida area.
Selling, general and administrative expenses increased $10.4 million, or
29%, from $35.6 million for the 1997 fiscal year to $46.0 million for the 1998
fiscal year. This increase occurred primarily due to an increase in selling,
general and administrative expenses of $5.6 million at Christianson and $2.7
million at RCR. The increase in Christianson's selling, general and
administrative expenses was primarily attributable to an increase in officer
compensation and to increases in administrative costs due to the increased
volume of contracts. RCR's increase was primarily attributable to an increase in
administrative support required by the increased revenues.
Fiscal year ended December 31, 1997 compared to fiscal year ended December 31,
1996
Revenues increased approximately $30.9 million, or 13%, from $236.6 million
for the 1996 fiscal year to $267.5 million for the 1997 fiscal year. The
increase in combined revenues occurred primarily at RCR, Teepe's and Croson
Florida. RCR's revenues increased $9.3 million, or 23%, from 1996 to 1997,
primarily as a result of the opening of two new facilities in early 1997.
Teepe's revenues increased $7.3 million, or 21%, from 1996 to 1997, primarily as
a result of an increase in large commercial construction contracts serviced from
Teepe's new facility in Columbus, Ohio which opened in August of 1997. Croson
Florida's
41
<PAGE> 48
revenues increased $6.4 million, or 54%, from 1996 to 1997, primarily as a
result of an increase in the number and size of contracts and revenues from a
new facility in Tampa/Fort Meyers, Florida. All of the remaining seven founding
companies reported an increase between the 1997 and 1996 fiscal year, except for
Miller, which reported a decrease of $2.6 million, due to the fact that in 1997
Miller ceased to provide HVAC services which it had begun providing to a major
customer in 1996.
Gross profit increased $7.9 million, or 19%, from $40.6 million for the
1996 fiscal year, to $48.5 million for the 1997 fiscal year. The increase in
combined gross profit occurred primarily due to increases in gross profit of
$2.0 million, or 38%, at RCR, $1.8 million, or 73%, at Croson Florida and $1.3
million, or 11%, at Christianson. The increase in combined gross profit is
primarily attributable to increased revenues and increased gross margins of each
of these companies. Combined gross margin increased slightly from 17% during the
1996 fiscal year to 18% during the 1997 fiscal year. RCR's gross margin
increased to 15% for the 1997 fiscal year from 13% for the 1996 fiscal year.
Croson Florida's gross margin increased to 23% during the 1997 fiscal year from
21% during the 1996 fiscal year, primarily as a result of Croson Florida's new
facility in the Tampa/Fort Meyers, Florida market and favorable overall pricing
of contracts. Christianson's gross margin increased to 26% for the 1997 fiscal
year from 24% for the 1996 fiscal year, primarily due to continued discounts on
materials purchases and incentive compensation programs.
Selling, general and administrative expenses increased $5.9 million, or
20%, from $29.7 million in the 1996 fiscal year to $35.6 million in the 1997
fiscal year, generally from increased contract volumes and opening of new
facilities. This increase occurred primarily due to an increase in selling,
general and administrative expenses of $1.7 million at RCR, $1.1 million at
Croson Florida and $0.7 million at Teepe's. The increase in RCR's selling,
general and administrative expenses was primarily attributable to an increase in
administrative support required by the increased contract volume and costs
related to two start-up divisions. Croson Florida's increase was attributable to
the opening of a new facility in Tampa/ Fort Meyers, Florida, which includes
increases in administrative salaries and additional rent and travel expenses.
Teepe's increase was primarily attributable to an increase in administrative
support required by the increased revenues and one-time start-up costs
associated with the opening of Teepe's facility in Columbus, Ohio.
LIQUIDITY AND CAPITAL RESOURCES
On a pro forma basis as adjusted for the original issuance of the notes, as
of March 31, 1999, AMPAM would have had approximately $30.9 million of working
capital, and $125.5 million of outstanding indebtedness including capital lease
obligations totaling $3.1 million.
On a historical combined basis, the founding companies generated $8.3
million of cash from operating activities for the three months ended March 31,
1999, which includes owners compensation payments of $0.5 million in excess of
the payments to be made to the owners in accordance with their respective
employment agreements. Net cash provided by investing activities for the three
months ended March 31, 1999, was $2.2 million on a combined basis and was
primarily proceeds from sales of property and equipment. Net cash used in
financing activities for the three months ended March 31, 1999, was $6.6 million
on a combined basis and was primarily used for debt repayment and capital
distributions.
On April 1, 1999, AMPAM entered into a credit facility with The First
National Bank of Chicago. The total commitment under the credit facility is $95
million, of which AMPAM drew approximately $70.3 million at the closing of the
acquisitions to fund a portion of the cash portion of acquisition consideration.
All of these amounts were repaid with proceeds of the original issuance of the
notes, leaving the full commitment of the credit facility available for
borrowings after closing subject to the borrowing conditions set forth in the
credit facility. See "Description of Other Indebtedness."
On April 1, 1999, AMPAM also entered into a subordinated loan with Fleet
Corporate Finance, Inc. The total commitment under the subordinated loan is
approximately $30 million, all of which was drawn at closing. AMPAM used all of
this amount to fund a part of the cash portion of the acquisition
42
<PAGE> 49
consideration. The entire amount of the subordinated loan was repaid with the
proceeds of the original issuance of the notes.
AMPAM anticipates that its cash flow from operations will provide
sufficient cash to enable AMPAM to meet its working capital needs, debt service
requirements and planned capital expenditures for property and equipment through
the foreseeable future. Combined capital expenditures for the founding companies
for the 1998 fiscal year were $2.8 million.
AMPAM intends to continue pursuing attractive acquisition opportunities. We
currently intend to acquire companies for a mix of stock and cash. The timing,
size or success of any acquisition effort and the associated potential capital
commitments cannot be predicted. AMPAM expects to fund future acquisitions
primarily with working capital, cash flow from operations and borrowings,
including any unborrowed portion of the credit facility, as well as issuances of
additional equity.
Due to the relatively low levels of inflation experienced in the 1996, 1997
and 1998 fiscal years, inflation did not have a significant effect on the
results of the combined founding companies in those fiscal years, or on any of
the founding companies, individually.
CHRISTIANSON RESULTS OF OPERATIONS
Christianson is headquartered outside Austin, Texas, with an additional
office in San Antonio, Texas, and operates principally in central Texas. The
following table sets forth selected statement of operations data and data as a
percentage of revenues for the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
AUGUST 31, ------------------------------ ------------------------------
1996 1997 1998 1998 1999
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................. $50,330 100% $50,909 100% $63,374 100% $12,744 100% $16,824 100%
Cost of revenues.......... 38,203 76 37,504 74 45,704 72 9,024 71 11,390 68
------- --- ------- --- ------- --- ------- --- ------- ---
Gross profit............ 12,127 24 13,405 26 17,670 28 3,720 29 5,434 32
Selling, general and
administrative
expenses................ 11,051 22 11,497 23 17,078 27 3,253 26 1,863 11
------- --- ------- --- ------- --- ------- --- ------- ---
Income from
operations............ $ 1,076 2% $ 1,908 3% $ 592 1% $ 467 3% $ 3,571 21%
======= === ======= === ======= === ======= === ======= ===
</TABLE>
Three months ended March 31, 1999 compared to the three months ended March 31,
1998
Revenues increased $4.1 million, or 32%, from $12.7 million for the three
months ended March 31, 1998 to $16.8 million for the three months ended March
31, 1999, primarily due to price increases for new home construction contracts
and increases in the number of construction contracts resulting from the
favorable housing market in Austin and surrounding areas.
Gross profit increased $1.7 million, or 46%, during the three months ended
March 31, 1999 to $5.4 million, and gross margin increased to 32% in the first
three months of 1999 from 29% in the first three months of 1998 as a result of
price increases for new home construction contracts and increased maintenance
and service revenues.
Selling, general and administrative expenses decreased $1.4 million, or
43%, from $3.3 million for the three months ended March 31, 1998 to $1.9 million
for the three months ended March 31, 1999. The decrease was a result of a
decrease in officer compensation, offset by an increase in overhead related to
the overall growth in the business. The total officers' compensation for the
three months ended March 31, 1999 was $0.4 million compared to $2.1 million for
the three months ended March 31, 1998 due to agreed upon compensation
reductions.
43
<PAGE> 50
Year ended December 31, 1998 compared to the year ended December 31, 1997
Revenues increased $12.5 million, or 25%, from $50.9 million for the year
ended December 31, 1997 to $63.4 million for the year ended December 31, 1998,
primarily due to increased market share as a result of contracts with new
builder customers, small increases in contract pricing and increased
construction activity in the Austin and central Texas housing market.
Gross profit increased $4.3 million, or 32%, during the year ended December
31, 1998 to $17.7 million, and gross margin increased to 28% in 1998 from 26% in
1997 as a result of small increases in contract pricing and increased
maintenance and service revenues.
Selling, general and administrative expenses increased $5.6 million, or
49%, from $11.5 million for the year ended December 31, 1997 to $17.1 million
for the year ended December 31, 1998. The increase was attributable to an
increase in officer compensation and increases in administrative costs due to
the increased volume of contracts. The total officers' compensation for the year
ended December 31, 1998 was $10.7 million.
Year ended December 31, 1997 compared to the year ended August 31, 1996
Revenues increased $0.6 million, or 1%, from $50.3 million for the year
ended August 31, 1996 to $50.9 million for the 1997 fiscal year, primarily as a
result of increased construction activity in Christianson's areas of operations.
Gross profit increased $1.3 million, or 11%, during the 1997 fiscal year to
$13.4 million, and gross margin increased to 26% during the 1997 fiscal year
from 24% during the 1996 fiscal year as a result of continued discounts on
materials purchases and incentive compensation programs.
Selling, general and administrative expenses increased $0.4 million, or 4%,
from $11.1 million for the 1996 fiscal year to $11.5 million for the 1997 fiscal
year. The increase was attributable to an increase in rent expenses and real
property taxes after Christianson's relocation to a new headquarters facility in
November 1997 offset by a $0.3 million reduction in total officers' compensation
for the year ended December 31, 1997 which was $6.6 million.
LIQUIDITY AND CAPITAL RESOURCES
Christianson generated approximately $3.7 million of net cash from
operating activities for the three months ended March 31, 1999 primarily due to
net income before depreciation and deferred income taxes of $3.5 million and a
decrease in working capital of $0.2 million. Net cash used in investing
activities was approximately $0.1 million related to the purchase of property
and equipment. Net cash used in financing activities was approximately $0.1
million, primarily related to the repayment of long-term debt.
At March 31, 1999, Christianson had working capital of $8.3 million and
total debt of $1.0 million.
Christianson generated approximately $2.5 million of net cash from
operating activities for year ended December 31, 1998 primarily due to net
income before depreciation and deferred income taxes of $1.3 million and a
decrease in working capital of $1.2 million. Net cash used in investing
activities was approximately $0.2 million related to the purchase of property
and equipment. Net cash used in financing activities was approximately $0.5
million, primarily related to the repayment of long-term debt.
At December 31, 1998, Christianson had working capital of $4.8 million and
total debt of $0.8 million.
RCR RESULTS OF OPERATIONS
RCR is headquartered in Riverside, California, east of Los Angeles, with
additional facilities in Las Vegas, Nevada and Canoga Park, California in the
San Fernando Valley. The following table sets forth
44
<PAGE> 51
selected statement of operations data and data as a percentage of revenues for
the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------------------------------------- ------------------------------
1996 1997 1998 1998 1999
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................. $40,430 100% $49,738 100% $63,293 100% $13,200 100% $19,441 100%
Cost of revenues.......... 35,102 87 42,377 85 51,604 82 10,744 81 15,361 79
------- --- ------- --- ------- --- ------- --- ------- ---
Gross profit............ 5,328 13 7,361 15 11,689 18 2,456 19 4,080 21
Selling, general and
administrative
expenses................ 3,979 10 5,712 12 8,370 13 1,724 13 2,452 13
------- --- ------- --- ------- --- ------- --- ------- ---
Income from
operations............ $ 1,349 3% $ 1,649 3% $ 3,319 5% $ 732 6% $ 1,628 8%
======= === ======= === ======= === ======= === ======= ===
</TABLE>
Three months ended March 31, 1999 compared to the three months ended March 31,
1998
Revenues increased $6.2 million, or 47%, from $13.2 million for the three
months ended March 31, 1998 to $19.4 million for the three months ended March
31, 1999, primarily as a result of continued growth generated by the two newer
facilities in Canoga Park, California and Las Vegas, Nevada.
Gross profit increased $1.6 million, or 66%, during the three months ended
March 31, 1999 to $4.0 million, and gross margin increased to 21% in the first
three months of 1999 from 19% in the first three months of 1998 as a result of
increases in pricing on many contracts reflecting increased demand for RCR's
services and cost efficiencies achieved in the additional markets serviced by
the two newer facilities.
Selling, general and administrative expenses increased $0.8 million, or
42%, from $1.7 million for the three months ended March 31, 1998 to $2.5 million
for the three months ended March 31, 1999. The increase was attributable to an
increase in administrative support related to the continued growth generated by
the newer facilities.
Year ended December 31, 1998 compared to the year end December 31, 1997
Revenues increased $13.6 million, or 27%, from $49.7 million for the year
ended December 31, 1997 to $63.3 million for the year ended December 31, 1998,
primarily as a result of an increase in the number and size of projects and
contracts, reflecting the growth from two new facilities in Canoga Park,
California and Las Vegas, Nevada.
Gross profit increased $4.3 million, or 59%, during the year ended December
31, 1998 to $11.7 million, and gross margin increased to 18% in 1998 from 15% in
1997 as a result of improved pricing on many contracts as well as due to
efficiencies gained through additional experience in the Canoga Park and Las
Vegas markets.
Selling, general and administrative expenses increased $2.7 million, or
47%, from $5.7 million for the December 31, 1997 to $8.4 million for the
December 31, 1998. The increase was attributable to an increase in
administrative support required by the increased contract volumes.
Year ended December 31, 1997 compared to the year ended December 31, 1996
Revenues increased $9.3 million, or 23%, from $40.4 million for the 1996
fiscal year to $49.7 million for the 1997 fiscal year, primarily as a result of
the opening of two new operating divisions in early 1997 in Canoga Park,
California and Las Vegas, Nevada.
Gross profit increased $2.0 million, or 38%, during the 1997 fiscal year to
$7.4 million as a result of an increase in revenues for two new facilities in
Canoga Park, California and Las Vegas, Nevada and improvements in gross margin.
Gross margin increased slightly to 15% during the year ended December 31, 1997
from 13% during the 1996 fiscal year.
45
<PAGE> 52
Selling, general and administrative expenses increased $1.7 million, or
44%, from $4.0 million for the 1996 fiscal year to $5.7 million for the 1997
fiscal year. The increase was attributable to an increase in administrative
support required by the increased contract volumes and costs related to two
start-up divisions.
TEEPE'S RESULTS OF OPERATIONS
Teepe's is headquartered in Cincinnati, Ohio, with an additional facility
added in August of 1997 in Columbus, Ohio. The following table sets forth
selected statement of operations data as a percentage of revenues for the
periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------------------------------------- ------------------------------
1996 1997 1998 1998 1999
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................. $35,400 100% $42,687 100% $50,627 100% $11,449 100% $10,546 100%
Cost of revenues.......... 30,410 86 37,170 87 44,048 87 10,066 88 9,287 88
------- --- ------- --- ------- --- ------- --- ------- ---
Gross profit............ 4,990 14 5,517 13 6,579 13 1,383 12 1,259 12
Selling, general and
administrative
expenses................ 3,414 10 4,158 10 4,779 9 1,205 10 1,126 11
------- --- ------- --- ------- --- ------- --- ------- ---
Income from
operations............ $ 1,576 4% $ 1,359 3% $ 1,800 4% $ 178 2% $ 133 1%
======= === ======= === ======= === ======= === ======= ===
</TABLE>
Three months ended March 31, 1999 compared to the three months ended March 31,
1998
Revenues decreased $0.9 million, or 8%, from $11.4 million for the three
months ended March 31, 1998 to $10.5 million for the three months ended March
31, 1999, primarily due to the fact that the majority of the projects in
progress during the first three months of 1999 were in the beginning stages, the
phase in which less revenues are earned.
Gross profit decreased $0.1 million, or 9%, from $1.4 million during the
three months ended March 31, 1998 to $1.3 million during the three months ended
March 31, 1998, as a result of the decrease in revenues discussed above. Gross
margin remained constant for the three months ended March 31, 1998 and 1999 at
12%.
Selling, general and administrative expenses decreased $0.1 million, or 7%,
from $1.2 million for the three months ended March 31, 1998 to $1.1 million for
the three months ended March 31, 1999. The decrease is a result of certain cost
reduction measures implemented by management coupled with the voluntary
termination of certain members of the office staff who have not been replaced.
Year ended December 31, 1998 compared to the year ended December 31, 1997
Revenues increased $7.9 million, or 19%, from $42.7 million for the year
ended December 31, 1997 to $50.6 million for the year ended December 31, 1998,
primarily as a result of an increase in large commercial construction contracts
in the Columbus, Ohio area as well as continued growth in governmental and
institutional projects.
Gross profit increased $1.1 million, or 19%, from $5.5 million during the
year ended December 31, 1997 to $6.6 million during the year ended December 31,
1998, as a result of an increased number of successful bids with higher gross
margins and further expansion in the Columbus, Ohio market. Gross margin
remained constant for 1997 and 1998 at 13%.
Selling, general and administrative expenses increased $0.6 million, or
15%, from $4.2 million for the year ended December 31, 1997 to $4.8 million for
the year ended December 31, 1998. The increase was attributable to an increase
in administrative support required by the higher level of revenues and due to
additional overhead associated with the opening of a new facility in the
Columbus, Ohio area.
46
<PAGE> 53
Year ended December 31, 1997 compared to the year ended December 31, 1996
Revenues increased $7.3 million, or 21%, from $35.4 million for the 1996
fiscal year to $42.7 million for the 1997 fiscal year, primarily as a result of
an increase in large commercial construction contracts performed from a new
facility in Columbus, Ohio which opened in August of 1997.
Gross profit increased $0.5 million, or 11%, from $5.0 million during the
1996 fiscal year to $5.5 million during the 1997 fiscal year, and gross margin
decreased to 13% during the 1997 fiscal year from 14% during the 1996 fiscal
year as a result of further efforts to expand into the Columbus, Ohio market.
Selling, general and administrative expenses increased $0.7 million, or
22%, from $3.4 million for the 1996 fiscal year to $4.2 million for the 1997
fiscal year. The increase was attributable to an increase in administrative
support required by the increased contract volumes and one-time start-up costs
associated with the opening of a new facility in Columbus, Ohio.
KEITH RIGGS RESULTS OF OPERATIONS
Keith Riggs is headquartered in Phoenix, Arizona. The following table sets
forth selected statement of operations data and data as a percentage of revenues
for the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------ ------------------------------
1997 1998 1998 1999
------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................................. $29,680 100% $34,464 100% $ 7,279 100% $ 8,917 100%
Cost of revenues.......................... 25,865 87 29,965 87 6,190 85 7,469 84
------- --- ------- --- ------- --- -------
Gross profit............................ 3,815 13 4,499 13 1,089 15 1,448 16
Selling, general and administrative
expenses................................ 2,583 9 2,943 9 655 9 706 8
------- --- ------- --- ------- --- -------
Income from operations.................. $ 1,232 4% $ 1,556 4% $ 434 6% $ 742 8%
======= === ======= === ======= === ======= ===
</TABLE>
Three months ended March 31, 1999 compared to the three months ended March 31,
1998
Revenues increased $1.6 million, or 23%, from $7.3 million for the three
months ended March 31, 1998 to $8.9 million for the three months ended March 31,
1999, primarily due to an increase in average billing rates and demand for Keith
Riggs' services as a result of the increased construction activity in the
Phoenix metropolitan area.
Gross profit increased $0.3 million, or 33%, from $1.1 million during the
three months ended March 31, 1998 to $1.4 million during the three months ended
March 31, 1999, and gross margin increased to 16% during the first three months
of 1999 from 15% during the first three months of 1998, as a result of price
increases offset by increased labor and other cost efficiencies associated with
additional contract volumes.
Selling, general and administrative expenses remained relatively constant
at $0.7 million for the three months ended March 31, 1998 and 1999.
Year ended December 31, 1998 compared to the year ended December 31, 1997
Revenues increased $4.8 million, or 16%, from $29.7 million for the year
ended December 31,1997 to $34.5 million for the year ended December 31, 1998,
primarily as a result of increased demand for Keith Riggs' services due to
increased housing starts.
Gross profit increased $0.7 million, or 18%, from $3.8 million during the
year ended December 31, 1997 to $4.5 million during the year ended December 31,
1998, as a result of increased revenues from new housing starts.
Selling, general and administrative expenses increased $0.4 million, or
14%, from $2.6 million for the year ended December 31,1997 to $2.9 million for
the year ended December 31, 1998. The increase was attributable to an increase
in administrative support required by the increased contract volumes.
47
<PAGE> 54
CROSON OHIO RESULTS OF OPERATIONS
Croson Ohio is headquartered in Columbus, Ohio. The following table sets
forth selected statement of operations data and data as a percentage of revenues
for the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, SIX MONTHS ENDED MARCH 31,
----------------------------------------------- ------------------------------
1996 1997 1998 1998 1999
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................. $26,185 100% $27,029 100% $25,234 100% $12,330 100% $17,194 100%
Cost of revenues.......... 22,305 85 22,970 85 20,438 81 10,500 85 14,407 84
------- --- ------- --- ------- --- ------- --- ------- ---
Gross profit............ 3,880 15 4,059 15 4,796 19 1,830 15 2,787 16
Selling, general and
administrative
expenses................ 2,263 9 2,217 8 2,032 8 894 7 1,232 7
------- --- ------- --- ------- --- ------- --- ------- ---
Income from
operations............ $ 1,617 6% $ 1,842 7% $ 2,764 11% $ 936 8% $ 1,555 9%
======= === ======= === ======= === ======= === ======= ===
</TABLE>
Six months ended March 31, 1999 compared to the six months ended March 31,
1998
Revenues increased $4.9 million or 39%, from $12.3 million for the six
months ended March 31, 1998 to $17.2 million for the six months ended March 31,
1999, primarily as a result of additional HVAC and plumbing projects.
Gross profit increased $1.0 million, or 52%, from $1.8 million during the
six months ended March 31, 1998 to $2.8 million during the six months ended
March 31, 1999, and gross margin increased nominally to 16% in 1999 from 15% in
1998 as a result of increased prices, as well as cost efficiencies, for
wastewater treatment plant projects.
Selling, general and administrative expenses increased $0.3 million, or 38%
from $0.9 million for the six months ended March 31, 1998 to $1.2 million for
the six months ended March 31, 1999, primarily as a result of an increase in
advertising and supply expense related to the combination of Croson Ohio's and
Teepe's operations as well as an increase in administrative salaries.
Year ended September 30, 1998 compared to the year ended September 30, 1997
Revenues decreased $1.8 million or 7%, from $27.0 million for the year
ended September 30, 1997 to $25.2 million for the year ended September 30, 1998,
primarily as a result of a decrease in new starts due to strong competition in
Ohio.
Gross profit increased $0.7 million, or 18%, from $4.1 million during the
year ended September 30, 1997 to $4.8 million during the year ended September
30, 1998, and gross margin increased to 19% in 1998 from 15% in 1997 as a result
of increased revenues and prices on wastewater treatment plant projects, as well
as improved margins for specific jobs.
Selling, general and administrative expenses decreased $0.2 or 8% from $2.2
million for the year ended September 30, 1997 to $2.0 million for the year ended
September 30, 1998, primarily as a result of a decrease in administrative
salaries due to the retirement of a key employee. In addition, Croson Ohio
replaced the profit sharing plan with a discretionary bonus plan, which resulted
in less expense.
Year ended September 30, 1997 compared to the year ended September 30, 1996
Revenues increased $0.8 million, or 3%, from $26.2 million for the 1996
fiscal year to $27.0 million for the 1997 fiscal year, primarily as a result of
larger contracts for mechanical contracting services for wastewater and
purification projects, offset by smaller plumbing contracting services contracts
due to increased competition in the Columbus, Ohio area.
Gross profit increased $0.2 million, or 5%, from $3.9 million during the
1996 fiscal year to $4.1 million during the 1997 fiscal year, as a result of
increased revenues. Gross margin remained relatively constant at 15% for the
1996 and 1997 fiscal years.
48
<PAGE> 55
Selling, general and administrative expenses remained relatively constant
at approximately $2.2 million in 1996 and 1997.
CROSON FLORIDA RESULTS OF OPERATIONS
Croson Florida is headquartered in Orlando, Florida, with additional
facilities in Sorrento and Tampa, Florida. The following table sets forth
selected statement of operations data and data as a percentage of revenues for
the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------------------------------------- ----------------------------
1996 1997 1998 1998 1999
------------- ------------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................... $11,722 100% $18,095 100% $28,142 100% $6,148 100% $8,274 100%
Cost of revenues............ 9,300 79 13,916 77 20,483 73 4,658 76 5,482 66
------- --- ------- --- ------- --- ------ --- ------ ---
Gross profit.............. 2,422 21 4,179 23 7,659 27 1,490 24 2,792 34
Selling, general and
administrative expenses... 1,050 9 2,213 12 2,960 10 718 12 869 11
------- --- ------- --- ------- --- ------ --- ------ ---
Income from operations.... $ 1,372 12% $ 1,966 11% $ 4,699 17% $ 772 12% $1,923 23%
======= === ======= === ======= === ====== === ====== ===
</TABLE>
Three months ended March 31, 1999 compared to the three months ended March 31,
1998
Revenues increased $2.2 million, or 35%, from $6.1 million for the three
months ended March 31, 1998 to $8.3 million for the three months ended March 31,
1999, primarily due to continued growth and contract volumes in the newer
Tampa/Fort Meyer, Florida operation.
Gross profit increased $1.3 million or, 87%, from $1.5 million during the
three months ended March 31, 1998 to $2.8 million during the three months ended
March 31, 1999, and gross margin increased to 34% in the first three months of
1999 from 24% in the first three months of 1998 as a result of price increases
reflecting the demand for Croson Florida's services and costs efficiencies
obtained from additional experience in the newer operation.
Selling, general and administrative expenses increased $0.2 million, or
21%, from $0.7 million for the three months ended March 31, 1998 to $0.9 million
for the three months ended March 31, 1999. The increase was due to an increase
in compensation and an increase in the number of employees needed at the newer
Tampa/Fort Meyer facility.
Year ended December 31, 1998 compared to the year ended December 31, 1997
Revenues increased $10.0 million, or 56%, from $18.1 million for the year
ended December 31, 1997 to $28.1 million for the year ended December 31, 1998,
primarily due to expanded operations and contract volumes at Croson Florida's
facility in the Tampa/Fort Meyers, Florida area.
Gross profit increased $3.5 million or, 83%, during the year ended December
31, 1998 to $7.7 million, and gross margin increased to 27% in 1998 from 23% in
1997 as a result of favorable pricing of contracts in the Tampa/Fort Meyers,
Florida area.
Selling, general and administrative expenses increased $0.8 million, or
34%, from $2.2 million for the year ended December 31, 1997 to $3.0 million for
the year ended December 31, 1998. The increase was attributable to an increase
in workforce and salaries after the opening of the Tampa/Fort Meyers, Florida
facility, as well as increases in bonus and incentive pay.
Year ended December 31, 1997 compared to the year ended December 31, 1996
Revenues increased $6.4 million, or 54%, from $11.7 million for the 1996
fiscal year to $18.1 million for the 1997 fiscal year, primarily as a result of
an increase in the number and size of contracts and revenues from Croson
Florida's new facility in Tampa/Fort Meyers, Florida.
49
<PAGE> 56
Gross profit increased $1.8 million, or 73%, during the 1997 fiscal year to
$4.2 million, and gross margin increased to 23% during the 1997 fiscal year from
21% during the 1996 fiscal year as a result of the new facility in the
Tampa/Fort Meyers, Florida market and favorable overall pricing of contracts.
Selling, general and administrative expenses increased $1.1 million, or
111%, from $1.1 million for the 1996 fiscal year to $2.2 million for the 1997
fiscal year. The increase was attributable to the opening of the new facility in
Tampa/Fort Meyers, Florida, which included increases in administrative salaries
and additional rent and travel expenses.
POWER RESULTS OF OPERATIONS
Power is headquartered in Houston, Texas. The following table sets forth
selected statement of operations data and this data as a percentage of revenues
for the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------ ----------------------------
1997 1998 1998 1999
------------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................................... $17,010 100% $17,109 100% $3,501 100% $5,620 100%
Cost of revenues............................ 14,680 86 14,371 84 3,174 91 4,022 72
------- --- ------- --- ------ --- ------ ---
Gross profit.............................. 2,330 14 2,738 16 327 9 1,598 28
Selling, general and administrative
expenses.................................. 1,128 7 1,268 7 217 6 346 6
------- --- ------- --- ------ --- ------ ---
Income from operations.................... $ 1,202 7% $ 1,470 9% $ 110 3% $1,252 22%
======= === ======= === ====== === ====== ===
</TABLE>
Three months ended March 31, 1999 compared to the three months ended March 31,
1998
Revenues increased $2.1 million, or 61%, from $3.5 million for the three
months ended March 31, 1998 to $5.6 million for the three months ended March 31,
1999, primarily as a result of an increase in the demand for Power's services,
which has increased the volume of projects.
Gross profit increased $1.3 million, or 389%, during the three months ended
March 31, 1999 to $1.6 million, and gross margin increased to 28% in the three
months ended March 31, 1999 from 9% in the three months ended March 31, 1998 as
a result of an improved bidding environment resulting from the increase in
demand and slightly lower materials costs. In addition, Power began achieving
cost efficiencies associated with gaining experience working with certain
builders with whom recurring work was performed and further cost reductions were
achieved as a result of Power's business being provided primarily in the Houston
area versus areas outside Houston.
Selling, general and administrative expenses increased $0.1 million, or
59%, from $0.2 million for the three months ended March 31, 1998 to $0.3 million
for the three months ended March 31, 1999. The increase was attributable to a
slight increase in administrative payroll and payroll related costs as well as
an increase in communication costs and in travel and entertainment expenses.
Year ended December 31, 1998 compared to the year ended December 31, 1997
Revenues increased slightly by $0.1 million, or 1%, from $17.0 million for
the year ended December 31, 1997 to $17.1 million for the year ended December
31, 1998, primarily as a result of favorable market conditions in Houston,
offset by the limited capacity to accept additional work.
Gross profit increased $0.4 million, or 18%, during the year ended December
31, 1998 to $2.7 million, and gross margin increased to 16% in the year ended
December 31, 1998 from 14% in the year ended December 31, 1997 as a result of a
decrease in material prices, partially offset by an increase in labor rates.
Selling, general and administrative expenses increased $0.2 million, or
12%, from $1.1 million for the year ended December 31, 1997 to $1.3 million for
the year ended December 31, 1998. The increase was attributable to an increase
in administrative salary expense and increased employee benefits.
50
<PAGE> 57
NELSON RESULTS OF OPERATIONS
Nelson is headquartered in Pensacola, Florida. The following table sets
forth selected statement of operations data and data as a percentage of revenues
for the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
ELEVEN
YEAR ENDED APRIL 30, MONTHS ENDED
------------------------------ MARCH 31,
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues................................................. $12,507 100% $14,240 100% $14,039 100%
Cost of revenues......................................... 9,110 73 9,641 68 9,349 67
------- --- ------- --- ------- ---
Gross profit........................................... 3,397 27 4,599 32 4,690 33
Selling, general and administrative expenses............. 2,408 19 2,458 17 1,914 13
------- --- ------- --- ------- ---
Income from operations................................. $ 989 8% $ 2,141 15% $ 2,776 20%
======= === ======= === ======= ===
</TABLE>
Eleven months ended March 31, 1999 compared to the year ended April 30, 1998
Revenues of $14.0 million were earned during the eleven months ended March
31, 1999 compared to $14.2 million earned during the year ended April 30, 1998.
Fiscal year 1999 revenues are on pace to exceed fiscal year 1998 revenues as a
result of the continued growth in underground utility installation and building
pipe replacement projects.
Gross profit of $4.7 million was earned for the eleven months ended March
31, 1999 compared to $4.6 million earned during the year ended April 30, 1998.
Fiscal year 1999 gross profit is on pace to exceed fiscal year 1998 gross profit
as a result of material and labor cost efficiencies associated with building
pipe replacement contracts. Gross margin increased nominally to 33% in 1999 from
32%.
Selling, general and administrative expenses were $1.9 million for the
eleven months ended March 31, 1999 compared to $2.5 million for the year ended
April 30, 1998, which would result in a decrease for the fiscal year. The
decrease is due to a reduction in officer compensation.
Year ended April 30, 1998 compared to the year ended April 30, 1997
Revenues increased $1.7 million, or 14%, from $12.5 million for the 1997
fiscal year to $14.2 million for the 1998 fiscal year, primarily as a result of
an increase in contracts for underground utility installation and existing
building pipe replacement, partially offset by the effects of the wet winter
season in the panhandle region of Florida.
Gross profit increased $1.2 million, or 35%, during the year ended April
30, 1998 to $4.6 million, and gross margin increased to 32% during the 1998
fiscal year from 27%, during the 1997 fiscal year as a result of increased
margins on materials required for some building pipe replacement contracts, and
reduced labor costs associated with Nelson's underground utility contracts.
Selling, general and administrative expenses increased $0.1 million, or 2%,
from $2.4 million for the 1997 fiscal year to $2.5 million for the 1998 fiscal
year. The increase was attributable to an increase in office labor expense.
SHERWOOD RESULTS OF OPERATIONS
Sherwood is headquartered in San Diego, California. The following table
sets forth selected statement of operations data and data as a percentage of
revenues for the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, SIX MONTHS ENDED MARCH 31,
------------------------------ ----------------------------
1997 1998 1998 1999
------------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................................... $11,482 100% $13,556 100% $6,607 100% $7,690 100%
Cost of revenues............................ 9,867 86 11,066 82 5,372 81 6,446 84
------- --- ------- --- ------ --- ------ ---
Gross profit.............................. 1,615 14 2,490 18 1,235 19 1,244 16
Selling, general and administrative
expenses.................................. 1,505 13 2,189 16 850 13 1,198 15
------- --- ------- --- ------ --- ------ ---
Income from operations.................... $ 110 1% $ 301 2% $ 385 6% $ 46 1%
======= === ======= === ====== === ====== ===
</TABLE>
51
<PAGE> 58
Six months ended March 31, 1999 compared to the six months ended March 31,
1998
Revenues increased $1.1 million, or 16%, from $6.6 million for the six
months ended March 31, 1998 to $7.7 million for the six months ended March 31,
1999, primarily as a result of an increase in private projects, principally
hotels.
Gross profit remained constant at $1.2 million for the three months ended
March 31, 1998 and 1999; however gross margin decreased to 16% in the six months
1999 from 19% in 1998 as a result of inefficiency for two specific projects due
to contract period extension.
Selling, general and administrative expenses increased $0.3 million, or
40%, from $0.9 million for the six months ended March 31, 1998 to $1.2 million
for the six months ended March 31, 1999. The increase was attributable to
continued development of the pre-fab department, creation of a Special Projects
division, and expansion of the Design department.
Year ended September 30, 1998 compared to the year ended September 30, 1997
Revenues increased $2.1 million, or 18%, from $11.5 million for the year
ended September 30, 1997 to $13.6 million for the year ended September 30, 1998,
primarily as a result of the expansion into more on-site utility services, and
an increase in public works projects and private projects, principally hotels.
Gross profit increased $0.9 million, or 54%, during 1998 to $2.5 million,
and gross margin increased to 18% in 1998 from 14% in 1997 as a result of
Sherwood's new prefabrication process and improved market conditions as well as
an increase in the number of private sector projects.
Selling, general and administrative expenses increased $0.7 million, or
45%, from $1.5 million for the year ended September 30, 1997 to $2.2 million for
the year ended September 30, 1998. The increase was attributable to an increase
in costs related to the relocation to a new facility and an increase in staffing
necessary to manage growing operations. In addition, Sherwood incurred a one
time charge related to a litigation settlement of approximately $0.3 million.
MILLER RESULTS OF OPERATIONS
Miller is headquartered in Marietta, Georgia. The following table sets
forth selected statement of operations data and data as a percentage of revenues
for the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, SIX MONTHS ENDED MARCH 31,
----------------------------- ----------------------------
1997 1998 1998 1999
------------ ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues..................................... $8,042 100% $11,346 100% $5,369 100% $5,158 100%
Cost of revenues............................. 5,806 72 7,675 68 3,713 69 3,346 65
------ --- ------- --- ------ --- ------ ---
Gross profit............................... 2,236 28 3,671 32 1,656 31 1,812 35
Selling, general and administrative
expenses................................... 2,023 25 2,531 22 1,224 21 892 17
------ --- ------- --- ------ --- ------ ---
Income (loss) from operations.............. $ 213 3% $ 1,140 10% $ 432 8% $ 920 18%
====== === ======= === ====== === ====== ===
</TABLE>
Six months ended March 31, 1999 compared to the six months ended March 31,
1998
Revenues decreased $0.2 million, or 4%, from $5.4 million for the six
months ended March 31, 1998 to $5.2 million for the six months ended March 31,
1999, primarily as a result of a reduction in projects with a significant
customer.
Gross profit increased $0.1 million, or 9%, from $1.7 million during the
six months ended March 31, 1998 to $1.8 million during the six months ended
March 31, 1999, and gross margin increased to 35% in the six months ended March
31, 1999 from 31% in the six months ended March 31, 1998 as a result of
favorable pricing and improved efficiencies resulting from experience obtained
in performing similar projects.
Selling, general and administrative expenses decreased $0.3 million, or
27%, from $1.2 million for the six months ended March 31, 1998 to $0.9 million
for the six months ended March 31, 1999. The decrease was attributable to a
reduction in officer compensation.
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Year ended September 30, 1998 compared to the year ended September 30, 1997
Revenues increased $3.3 million, or 41%, from $8.0 million for the year
ended September 30, 1997 to $11.3 million for the year ended September 30, 1998,
primarily as a result of an increase in multifamily housing starts and increased
contract volumes in Miller's areas of operations.
Gross profit increased $1.4 million, or 64%, from $2.2 million during the
year ended September 30, 1997 to $3.7 million for the year ended September 30,
1998 as a result of the increase in revenues and gross margins. Gross margin
increased to 32% in 1998 from 28% in 1997 as a result of small increases in
contract pricing and increased productivity.
Selling, general and administrative expenses increased $0.5 million, or
25%, from $2.0 million for the year ended September 30, 1997 to $2.5 million for
the year ended September 30, 1998. The increase was attributable to an increase
in officer and employee bonus compensation.
YEAR 2000
Year 2000 Issue. Many software applications, hardware and equipment and
embedded chip systems identify dates using only the last two digits of the year.
These products may be unable to distinguish between dates in the year 2000 and
dates in the year 1900. That inability (referred to as the "Year 2000" issue),
if not addressed, could cause applications, equipment or systems to fail or
provide incorrect information after December 31, 1999, or when using dates after
December 31, 1999. This in turn could have an adverse effect on AMPAM due to
AMPAM's direct dependence on its own applications, equipment and systems and
indirect dependence on those of other entities with which AMPAM must interact.
Risk of Non-Compliance and Contingency Plans. The major applications which
pose the greatest Year 2000 risks for AMPAM if implementation of the Year 2000
compliance program is not successful are AMPAM's project estimating and
management systems, and its financial systems applications, including related
third-party software. Potential problems if the Year 2000 compliance program is
not successful could include disruptions of AMPAM's revenue generation and
collection from its customers and purchasing and payments to its vendors and the
inability to perform its other financial and accounting functions. AMPAM
operates on a decentralized basis with each individual reporting unit having
independent information technology (IT) and non-IT systems. AMPAM's Year 2000
compliance program is focused on the systems which could materially affect its
business. AMPAM has completed a preliminary assessment of its significant
operating units and believes that the systems at these companies are or will
shortly be Year 2000 compliant. AMPAM currently has assessed its remaining Year
2000 risk as low because:
- AMPAM is not dependent on any key customers or suppliers (none represent
as much as 5% of AMPAM's sales or purchases, respectfully),
- AMPAM has many separate PC based systems and is not dependent on any one
system,
- many of AMPAM's processes are performed using spreadsheets and/or other
manual processes which are not technologically dependent,
- AMPAM performs construction and service maintenance on site for its
customers, the work performed is manual in nature and not dependent on
automated information technology systems to be completed, and
- AMPAM currently believes that most of its systems that have Year 2000
compliance issues are based on prepackaged third-party software that can
be upgraded at nominal costs through vendor supported upgrades.
As a result, AMPAM believes that its reasonably likely worst case Year 2000
scenario is a temporary inability for it to process the accounting transactions
representing its business activity using automated information systems at some
of its operating units.
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<PAGE> 60
The goal of AMPAM's year 2000 project is to ensure that all of the critical
systems and processes which are under the direct control of AMPAM remain
functional. However, because some systems and processes may be interrelated with
systems outside of the control of AMPAM, there can be no assurance that all
implementations will be successful. Accordingly, as part of the Year 2000
project, contingency and business plans are in the process of being developed to
respond to potential failures that may occur. Such contingency and business
plans are scheduled to be completed by the fourth quarter of fiscal 1999. To the
extent appropriate, these plans will include emergency back up and recovery
procedures, remediation of existing systems with system upgrades or installation
of new systems and replacing electronic applications with manual processes. Due
to the uncertain nature of contingency planning, there can be no assurances that
these plans actually will be sufficient to reduce the risk of material impacts
on AMPAM's operations due to Year 2000 issues. AMPAM has ongoing information
systems development and implementation projects, none of which have experienced
delays due to its Year 2000 compliance program.
Compliance Program. In order to address the Year 2000 issue, AMPAM has
established a project team to assure that key automated systems and related
processes will remain functional through year 2000. The team is addressing the
project in the following stages: (1) awareness, (2) assessment, (3) remediation,
(4) testing and (5) implementation of the necessary modifications. The key
automated systems consist of (a) project estimating, management and financial
systems applications, (b) hardware and equipment, (c) embedded chip systems and
(d) third-party developed software. The evaluation of the Year 2000 issue
includes the evaluation of the Year 2000 exposure of third parties material to
the operations of AMPAM.
AMPAM State of Readiness. The awareness phase of the Year 2000 project has
begun with a corporate-wide awareness program which will continue to be updated
throughout the life of the project. AMPAM believes that there is not a material
risk related to its non-IT systems because AMPAM is primarily a manual service
provider and does not rely on these types of systems. The assessment phase of
the project involves for both IT and non-IT systems, among other things, efforts
to obtain representations and assurances from third parties, including third
party vendors, that their hardware and equipment, embedded chip systems and
software being used by or impacting AMPAM or any of its business units are or
will be modified to by Year 2000 compliant. To date, AMPAM does not expect that
responses from third parties will be conclusive. However, because AMPAM is not
dependent on any key customers or suppliers, AMPAM does not believe that a
disruption in service with any third party would have a material adverse effect
on its business, results of operations or financial condition. The remediation
phase involves identifying the changes which are required to be implemented by
system for them to be Year 2000 compliant. The testing and implementation phases
involve verifying that the identified changes address the Year 2000 problems
identified through testing the system as part of implementing SUCH changes.
Management expects that the remediation, testing and implementation phases will
be substantially completed during the third and fourth quarters of fiscal 1999.
Costs to Address Year 2000 Compliance Issues. While the total cost to AMPAM
of the Year 2000 project is still being evaluated, AMPAM's management currently
estimates that the costs to be incurred by AMPAM in 1999 associated with the
assessing and testing applications, hardware and equipment, embedded chip
systems, and third party developed software will be less than $500,000, which
will be funded with existing operating cash flows and AMPAM will deduct from
income as incurred. AMPAM believes that software vendor Year 2000 releases
should address the majority of AMPAM's Year 2000 issues. These costs were
primarily related to the assessment phase of the project. AMPAM expects that the
majority of its costs related to the Year 2000 project to be incurred in the
third and fourth quarters of its 1999 fiscal year. Because AMPAM's internal
systems are PC-based, management does not expect the costs to AMPAM of the Year
2000 project to have a material adverse effect on AMPAM's financial position,
results of operations or cash flows.
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<PAGE> 61
BUSINESS
We believe AMPAM is the largest company in the United States focused
primarily on the plumbing and mechanical contracting services industry. On April
1, 1999, AMPAM combined the operations of the ten founding companies, which
individually are leading regional providers of plumbing and mechanical
contracting services, and commenced operations as one company. AMPAM believes
that by combining these regional leaders into one professional organization,
AMPAM has created a national provider which it expects to strengthen and broaden
AMPAM's relationships with its consolidating customer base and enhance its
operating efficiency. The ten founding companies have been in business for an
average of approximately 31 years and, in 1998 performed plumbing and mechanical
contracting services in 24 states. On a pro forma basis for the fiscal year
ended December 31, 1998, AMPAM generated revenue and EBITDA of $322.2 million
and $39.6 million, respectively.
Plumbing contracting includes the installation of integrated domestic water
systems, sanitary waste and vent systems, irrigation systems, fire protection
systems and natural gas piping systems. Mechanical contracting includes the
installation of mechanical and process piping and tubing systems that convey hot
and chilled water, steam, medical gases, fuels and other liquid and gaseous
substances. Both plumbing and mechanical systems include related equipment
(water heaters, boilers, chillers, pumps, sprinklers and drains) and fixtures
(basins, toilets, sinks, tubs, faucets, spigots and valves). AMPAM also provides
renovation/retrofitting and maintenance and repair services for plumbing and
mechanical systems on a per-visit basis and under short-term and long-term
maintenance contracts.
AMPAM provides plumbing and mechanical contracting services in the
residential and commercial/ institutional markets. The residential market
includes single family and multifamily homes and low-rise apartments. The
commercial/institutional market includes retail establishments, office
buildings, high-rise apartments and condominiums, theaters and restaurants,
hotels and casinos, waste water and water purification plants, manufacturing
plants and other industrial complexes, and public and private institutional
buildings, including schools, hospitals, dormitories, assisted-living centers,
military and other governmental facilities, stadiums, arenas, convention
centers, airports and prisons. During fiscal 1998, approximately 54%, and 46% of
AMPAM's pro forma revenues were derived from the residential, and
commercial/institutional markets, respectively. Of AMPAM's
commercial/institutional revenue, approximately 43% was derived from
institutional customers.
AMPAM's strategy is to conduct its operations on a decentralized basis,
including among other things, retaining the operating names of its founding
companies in their respective regions. Senior management at the founding
companies will retain primary responsibility for operations, profitability and
growth of their respective business units. AMPAM believes that a decentralized
operating strategy, balanced by centralized financial and accounting controls,
will retain the entrepreneurial approach of the founding companies and preserve
AMPAM's knowledge of its individual markets, its extensive brand name
recognition and strong customer relationships. In addition, AMPAM believes that
this decentralized operating strategy will enable it to better respond to future
customer demand and changing market conditions.
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The following table contains information for each founding company as well
as our combined operations:
<TABLE>
<CAPTION>
Revenues
---------------------------
YEARS IN PRIMARY TARGET MARKET FISCAL 1996-1998
FOUNDING COMPANY OPERATION MARKET(S) SERVED SEGMENT(S)(1) 1998 CAGR(2)
- ---------------- --------- ------------------- ------------- ------ ---------
($ in millions)
<S> <C> <C> <C> <C> <C>
Christianson............................. 49 Central Texas Residential $ 63.4 12.2%
RCR...................................... 22 Southern California Residential 63.3 25.1%
and Nevada and CI
Croson Ohio/Teepe's(3)................... 43 Ohio Valley, CI 75.8 11.0%
Southwestern
Indiana, Northern
Kentucky
Keith Riggs.............................. 51 Greater Phoenix Residential 34.5 12.8%
Croson Florida........................... 10 Southern and Residential 28.1 54.9%
Central Florida and CI
Power.................................... 11 Greater Houston, Residential 17.1 10.4%
Dallas and Austin and CI
Nelson................................... 35 Florida and CI 15.1 9.7%
Alabama
Gulf Coast
Sherwood................................. 23 Southern California CI 13.6 28.1%
Miller................................... 22 Greater Atlanta Residential 11.3 3.4%
and CI
------ -----
COMBINED.... $322.2 16.7%
====== =====
</TABLE>
- ---------------
(1) "CI" means a commercial/institutional market segment.
(2) "CAGR" means compound annual growth rate. With respect to some of the
founding companies, the statement of operations data for the 1996 fiscal
year was derived from internal financial company records that have not been
audited by any independent accountants. Because the 1996-1998 CAGR of these
companies, and of AMPAM on a combined basis, includes some unaudited 1996
data you are cautioned not to place undue reliance on this information.
Nevertheless, management believes that the financial information shown above
may be helpful in understanding the past operations of the founding
companies.
(3) Immediately following their acquisition, we combined the business and
operations of Croson Ohio and Teepe's. Croson Ohio's fiscal 1998 revenues
were $25.2 million and Teepe's fiscal 1998 revenues were $50.6 million.
INDUSTRY OVERVIEW
General. Virtually all construction and renovation in the United States
generates demand for plumbing and mechanical contracting services. Depending
upon the exact scope of work, AMPAM estimates that the plumbing and mechanical
contracting work it performs generally accounts for approximately 8% to 12% of
the total construction cost of the related commercial and institutional projects
and approximately 5% to 10% of the total construction cost of the related
residential projects. In 1992, the most recent year for which data are available
from the United States Department of Commerce, the total value of new
construction and repair and maintenance work completed by plumbing and
mechanical contractors totaled approximately $28 billion, including
approximately $17 billion from plumbing services and $11 billion from mechanical
services.
The plumbing and mechanical contracting service industry is highly
fragmented and we estimate it to include at least 40,000 companies. These
companies are generally small, owner-operated, independent contractors who serve
customers in a local market and therefore have limited access to capital for
investment in infrastructure, technology and expansion. According to our
estimates, approximately 200, or 0.5% of all industry participants, had annual
sales greater than $20 million, and no single company accounted for more than
1.0% of total expenditures for plumbing and mechanical contracting services in
the United States.
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<PAGE> 63
Residential Market. Residential customers include regional and national
homebuilders and apartment and condominium developers. Typical residential
plumbing projects include the installation, maintenance and repair of domestic
water systems, sanitary waste and vent systems, lawn and garden irrigation
systems, fire protection systems and natural gas piping systems. The residential
construction market has increasingly become dominated by large regional and
national homebuilders, who have been rapidly consolidating or merging, and
national apartment or multifamily residential developers. AMPAM believes that
these large customers generally select plumbing and mechanical contractors with
a large, trained workforce that is able to meet the customer's location and
scheduling requirements and to provide reliable, high-quality services.
Substantially all of AMPAM's residential contracts are obtained on negotiated
terms through ongoing customer relationships versus through a competitive bid
process. The residential market has repetitive floor plans which enables AMPAM
to utilize its prefabrication techniques. In this way, AMPAM can increase
productivity and profitability by reducing construction time, labor costs and
skill requirements. In addition to installation, the residential market includes
substantial demand for maintenance and repair services, which are provided both
on a per visit basis and under short-term and long-term contracts.
The residential market depends primarily on the number of single family and
multifamily home starts, which are in turn affected by interest rates, tax
considerations and general economic conditions. The founding companies serve
many of the more rapidly growing metropolitan areas, including Houston, San
Antonio, and Austin, Texas, Phoenix, Arizona, Las Vegas, Nevada, Atlanta,
Georgia, Orlando, Florida and Riverside and the San Fernando Valley, California.
These metropolitan areas have experienced significant new construction activity
for single family homes and low-rise multifamily residences over the last
several years and demographic trends indicate continued growth in these areas.
In 1998, AMPAM installed plumbing systems in over 20,000 new or renovated homes.
AMPAM's residential plumbing and mechanical contracting service revenues have
grown at an average compound annual rate of approximately 16% from the 1996
fiscal year through the 1998 fiscal year.
Commercial/Institutional Market. Commercial and institutional customers
include general contractors, commercial developers, consulting engineers,
architects, owners and managers of retail establishments, office buildings,
apartments and condominiums, theaters and restaurants, hotels and casinos,
operators of waste water and water purification plants, manufacturing and other
industrial corporations, schools, hospitals, military and other governmental
agencies, stadiums, arenas and convention centers, airports and prisons.
High-rise residential projects are viewed as commercial rather than residential
projects because of the nature of the installation techniques and plumbing codes
involved. Because of the long-term nature of the budgetary processes involved,
government and institutional construction projects tend to be less affected by
economic downturns. In 1998, approximately 43% of AMPAM's revenues from the
commercial/institutional market were attributable to governmental and
institutional projects.
Typically, plumbing and mechanical contracting services for the
commercial/institutional market involve the installation, maintenance and repair
of integrated systems that transport hot and chilled water, domestic water,
steam, medical gas, fuels and other liquid and gaseous substances and the
related equipment, such as water heaters, boilers, chillers, and pumps.
Commercial and institutional plumbing and mechanical construction is most often
performed by a subcontractor for a general contractor, although a plumbing and
mechanical contractor may also perform services directly as a prime contractor.
Commercial/institutional contracts are obtained through a competitive bid
process or on negotiated terms through ongoing customer relationships. Many
larger projects have substantial bonding requirements that eliminate smaller
contractors from the bidding process because of inadequate financial resources
or capacity. As with the residential market, AMPAM is increasingly able in the
commercial and institutional markets to prefabricate system components off-site,
and these items are transported to the job site ready to be installed. The
commercial/institutional market also involves maintenance and repair of plumbing
and mechanical systems. AMPAM provides plumbing and mechanical contracting
services for the commercial/ institutional market in several of the country's
growth areas, including the southeastern, southwestern and western United
States. From the 1996 fiscal year through the 1998 fiscal year, AMPAM's revenues
from plumbing and mechanical contracting services for commercial and
institutional customers have grown at an average compound annual rate of
approximately 18% per year.
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<PAGE> 64
Industry Trends. Significant consolidation has occurred among a number of
the industry's principal customers, such as homebuilders, apartment and
condominium developers and other commercial developers, REITs and other real
estate concerns and national contractors and construction managers.
Additionally, we believe the privitization of, or outsourcing by, water
utilities in many areas of the country may provide us with additional customer
opportunities. AMPAM has also witnessed significant consolidation within its
supply channels. We believe these consolidations present an opportunity for a
large, more proficient and professional company, like us, to consolidate and
provide plumbing and mechanical contracting services on a regional and national
basis.
AMPAM believes that smaller, traditional plumbing and mechanical
contractors may find it increasingly difficult to compete for plumbing and
mechanical contracting projects due to scarcity of qualified manpower, customer
demand for broader geographic coverage and the associated licensing
requirements, costs associated with automating project bidding and estimating,
bonding and insurance requirements (including workers' compensation and
liability insurance) and manufacturers' discounts available to volume
purchasers. In the residential sector, AMPAM believes homebuilders will be
increasingly searching for contractors they can use in multiple capacities, a
"preferred provider," and that AMPAM will be able to take advantage of this
opportunity because of its size and diversity of operations.
COMPETITIVE STRENGTHS
We believe several factors give us a competitive advantage in our industry,
including our:
- Strong Customer Relationships and Market Leadership. We believe that our
strong customer relationships and market reputation allows us the ability
to obtain a high percentage of negotiated contracts, which are
economically more favorable for us than competitive bid situations.
Currently, approximately 75% of our business has been obtained through
negotiated contracts. Our long-standing relationships also result in a
significant amount of repeat business as well as the opportunity for
cross-selling our services;
- Geographically Diverse Operations. In 1998, we provided plumbing and
mechanical contracting services in 24 states. We have operations in the
higher growth southwest, southeast and western regions of the United
States. We believe our broad geographic coverage will allow us to build
and strengthen our relationships with large regional and national
customers and will reduce the impact of local and regional economic
downturns as well as minimize seasonal variations in activity;
- Large Highly Skilled Work Force. We believe our size, national scope,
stable and recurring project base, and comprehensive benefits packages
and training programs allow us to attract and retain the most highly
qualified personnel in the industry. We currently employee over 2,100
technicians which enables us to deliver quality service with greater
reliability than many of our competitors. This is particularly important
given a current industry shortage of qualified plumbers;
- Diverse Business Mix. We believe that our balanced customer base of
residential, commercial, governmental and institutional work and our
ability to offer both plumbing and mechanical contracting services
provide us with greater stability both in revenues and cash flow. On a
pro forma basis, no single customer represented more than 5% of our total
1998 revenues; and
- Experienced Management Team. Our chief executive and chief operating
officer combined have over 65 years of experience in plumbing and
mechanical contracting services and have developed extensive industry
relationships. In addition, the presidents of our operating companies
have an average of over 28 years in the industry and have established
reputations in their local markets. The combined management team of AMPAM
holds more than 76% of our company's outstanding common stock.
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<PAGE> 65
OUR BUSINESS STRATEGY
Our goal is to build on our position as a leading provider of plumbing and
mechanical contracting services in the residential and commercial/institutional
markets by (1) increasing our market share and the profitability of our
operations; and (2) pursuing a selective acquisition strategy.
OPERATING STRATEGY
We intend to leverage the geographical presence and competitive
strengths of our founding and subsequently acquired companies with the
objective of continuing strong internal growth. We also believe that there
are significant opportunities to increase the profitability of our business
through the implementation of various best practices used by some of the
founding companies throughout our operations. AMPAM has formed a Best
Practices Committee consisting of various members of the management of the
founding companies and smaller forum groups composed of representatives of
similarly situated companies, all of which will meet regularly to
facilitate communication and sharing of best practices. The key elements of
our operating strategy are:
- Achieve Purchasing Savings and Other Economies of Scale. As a result of
AMPAM's size, it believes it will achieve substantial cost savings by
purchasing copper, steel, cast iron, PVC and ABS pipe, plumbing fixtures,
boilers, chillers and air handling equipment, pumps, drains, sprinkler
systems and other materials. Our size will also enable us to purchase and
negotiate rebates directly from manufacturers for high volume items. In
1998, AMPAM's materials purchases were 51% of its total combined cost of
revenues. In addition, AMPAM believes it can reduce costs associated
with:
(1) purchasing or leasing and routine maintenance of vehicles, cranes,
backhoes, loaders, highlifts and other heavy equipment;
(2) bonding, casualty and liability insurance;
(3) health insurance and related benefits;
(4) retirement benefits administration;
(5) marketing and advertising; and
(6) accounting, financial management and legal services;
- Continue to Attract, Develop and Retain Qualified Plumbers and Management
Personnel. AMPAM intends to provide:
(1) stock-based compensation for a large portion of its employees;
(2) progressive performance-based compensation for management;
(3) recruitment and training programs to provide a steady labor
supply, including state-registered apprenticeship programs;
(4) advancement opportunities for talented employees within the larger
public company; and
(5) a broad-based health, disability and life insurance and retirement
benefits program which is often not available from smaller
plumbing and mechanical contracting services businesses;
- Increase Off-site Prefabrication of Plumbing and Mechanical Systems and
Components. AMPAM intends to increase the use of prefabricated components
in the installation of plumbing and mechanical systems. Prefabrication
generally involves measuring, cutting and assembling pipe segments and
attaching various fittings and valves, which is particularly useful in
the residential market where standard floor plans are often repeated.
These fabricated segments are then numerically ordered and packaged
together for installation at the job site. Prefabrication increases
consistency and quality of work products and allows AMPAM to reduce
on-site labor costs, materials costs and accelerate its on-site
production schedule. In some of our regions, we have
59
<PAGE> 66
experienced a high degree of success in lowering labor costs, reducing
materials usage and increasing standardization by fabricating portions of
the plumbing and mechanical systems prior to installation at the job
site. By sharing the most sophisticated and efficient prefabrication
techniques currently utilized in some of our operating regions, AMPAM
believes that it can increase the use of prefabrication to achieve
meaningful cost reductions for AMPAM as a whole;
- Emphasize "Value Engineering" and Design-and-Build Capability. In
addition to the traditional installation of plumbing systems to the
specifications set forth in architectural or engineering plans, AMPAM
also provides "value engineering" and design-and-build capability. "Value
engineering" involves the modification or enhancement of existing plans
for plumbing and mechanical systems to improve efficiency and
cost-effectiveness. AMPAM also provides full design-and-build services
using its technical expertise to create designs for plumbing and
mechanical systems. By providing this more sophisticated level of
service, AMPAM is able to integrate itself with the customer earlier in
the design process, thereby generating higher margins and differentiating
itself from the competition;
- Increase Use of Technology. AMPAM intends to take advantage of new and
innovative technology currently utilized in some of our operating
regions. AMPAM will use computer-assisted contract bid preparation and
historical cost analysis in order to reduce the variances between the
estimates used in the contract bidding process and the actual costs
incurred. Additionally, AMPAM will expand its use of technology,
including computer-aided design or "CAD" display stations used for
project design and engineering;
- Leverage Geographic Presence to Obtain and Retain Multi-Location
Customers. AMPAM intends to enhance the sales and marketing programs of
the founding companies to target large regional and national
homebuilders, apartment and condominium developers and other commercial
developers, REITs and other real estate concerns and national contractors
and construction managers. AMPAM believes that significant demand exists
from these companies to utilize the services of a single plumbing and
mechanical contractor that has demonstrated consistent quality,
dependability, bonding pre-qualification and financial stability; and
- Broaden Scope of Specialty Services. AMPAM intends to broaden its service
capabilities within its existing operating areas to provide an expanded
range of plumbing and mechanical services without any significant
incremental investment in infrastructure. Such complementary services
include installation and maintenance of on-site and off-site utility
systems, fire protection systems and HVAC systems.
ACQUISITION STRATEGY
We believe that the highly fragmented nature of the plumbing and
mechanical contracting services industry offers significant opportunities
for us to pursue our acquisition strategy. We have an acquisition team
focused on identifying profitable acquisition candidates with leading
market positions, stable operating histories, prospects for growth, strong
management and entrepreneurial skills. We currently intend to acquire
companies for a mix of common stock and cash. We are evaluating and have
entered into confidentiality agreements with several acquisition
candidates. Key elements of our acquisition strategy include:
- Increase Geographic Coverage. We believe that increasing our geographical
presence will allow us to build and strengthen our relationships with
large, regional and national customers and will reduce the impact of
local and regional economic downturns as well as minimize seasonal
variations in activity. We intend to pursue acquisition candidates that
serve geographic markets that we do not currently serve and have an
appropriate customer base to integrate with or complement our existing
business; and
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<PAGE> 67
- Expand Our Service Capabilities. We will seek to acquire companies that
offer diverse services which broaden our service capabilities within
existing operational areas. We intend to pursue acquisition candidates
who:
- serve the commercial/institutional market in locations where we
currently focus on the residential market, or vice versa;
- offer expertise in higher margin complex installation projects, like
waste water and water purification plants; and
- focus on maintenance and repair services.
SERVICES
Plumbing. Plumbing services provided by AMPAM consist primarily of the
installation of systems that convey domestic water throughout a building,
systems that transport sanitary waste out of a building to a sewer connection
and systems that transport natural gas to various equipment or appliances such
as heaters, boilers, ovens and stoves. A domestic water system typically
includes separate piping for hot and chilled water as well as a number of
fixtures such as sinks, bathtubs and showers and may also include the
installation of interior or exterior sprinkler systems and other specialty
purpose fixtures. A sanitary waste and vent system includes toilets, urinals and
piping to transport sanitary waste. A natural gas system typically includes
piping and connections to transport natural gas, including valves and other
equipment to regulate the natural gas flow. AMPAM also provides repair and
maintenance services for plumbing systems, primarily for systems which AMPAM
initially installed.
For both residential and commercial/institutional customers, plumbing
contracting projects begin with project design and engineering in which the
locations, configuration and specifications for the plumbing systems to be
installed are determined. Whether the design is provided by the customer or
produced by AMPAM utilizing CAD technology, the type, size and design of piping,
fittings, valves, fixtures and other equipment is typically input into AMPAM's
computer systems which handle estimation, materials ordering and job scheduling
functions. Where appropriate, AMPAM plans to integrate its most advanced systems
into additional locations and areas of its operations to increase automation and
efficiency. Substantially all of the equipment and component parts AMPAM
installs are purchased from third-party wholesale suppliers or directly from the
manufacturers and resold to the customer as part of the contracted installation.
Orders and deliveries are coordinated to match the project schedule. Whenever
possible, a significant portion of the plumbing and piping assembly will be
prefabricated at AMPAM facilities in order to reduce on-site installation time,
increase quality control and reduce material costs. Such prefabrication
generally involves measuring, cutting and assembling pipe segments and attaching
various fittings and valves. These prefabricated segments are then numerically
ordered and packaged together for installation at the job site.
Once the job moves onto the construction site, connections are made to the
municipal sewage system and supply and drainage piping is installed within the
construction "footings" along the building's perimeter. Risers are installed
which extend this piping above the level of the foundation. These risers are
designed either to be contained within the walls for extension into upper floors
or to connect with fixtures to be installed in specified locations on ground
level floors. After the foundation is poured and as framing for the walls and
floors of the upper levels of the building are constructed, piping systems are
extended to supply the fixtures and systems throughout the building.
Simultaneously, venting systems are installed which ultimately extend through
the roof of the structure. Once the walls have been covered and flooring,
ceilings and roofing completed, fixtures (including sinks, hot water heaters,
toilets, baths, faucets and spigots) are installed and the system is connected
to the water main and gas supply. Typically, plumbing personnel are on-site
during all phases of construction, as AMPAM assigns separate, specialized
plumbing crews to each specific required task (water and gas connections and
pressure testing, sewage connections, ground level piping, wall and ceiling
extensions and fixture installation). AMPAM believes that it increases its
efficiency and labor productivity by training crews to perform specialized
tasks. Municipal inspectors
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also generally tour a job site several times during the construction process to
assure compliance with the applicable plumbing codes.
Mechanical. Mechanical contracting services provided by AMPAM consist
primarily of the installation of mechanical and process piping and tubing,
including systems which convey hot and chilled water, steam, medical gas, fuels
and other liquid and gaseous substances, as well as the installation of related
equipment and fixtures which store, pump, regulate and measure the distribution
of these substances. In some cases, these mechanical systems installed by AMPAM
are critical to the underlying business of the future tenant, as in the case of
water treatment plants, chemical plants and medical laboratories. Mechanical
contracting services provided by AMPAM also include the installation of the
piping portion of HVAC systems, including the piping and tubing used to convey
hot and chilled water to the heating or cooling systems and the related boilers,
chillers, cooling towers, pumps, valves and control devices. See "-- HVAC"
below. AMPAM also provides repair and maintenance services for mechanical
systems on a per visit and short-term and long-term contract basis, primarily
for systems which AMPAM initially installed.
Mechanical contracting projects begin with project design and engineering
which may be produced by AMPAM or specified by the customer. In response to
customer demand, AMPAM may develop some or all of the design parameters using
its CAD programs or may "value engineer" customer supplied specifications in
order to suggest more efficient installation configurations or lower cost
components. Prefabrication at AMPAM facilities may also be employed to
efficiently pre-assemble various piping and mechanical configurations prior to
deployment at the construction site. Most mechanical projects begin after the
foundation has been poured with the installation of distribution piping and duct
systems within the walls and between the floor and ceilings in accordance with
technical design specifications. Once the distribution and main service lines
have been installed, service branches to various equipment are completed, and
the equipment and controls are then balanced and commissioned.
HVAC. In some regions, we also offer HVAC contracting services as a
complement to our plumbing and mechanical businesses. HVAC systems typically
involve piping and air-handling components. The piping component, as described
above, often is classified as a mechanical contracting service. The air-
handling component of an HVAC system includes the ductwork and ventilation
systems that carry air as opposed to hot or chilled water or other liquids or
gaseous substances. Equipment and fixtures related to the air-handling component
of an HVAC system include heaters, compressors, air handlers and air
conditioning units. Typically, HVAC installation projects begin with the
customer providing the architectural plans and mechanical drawings for the
building to be constructed. The process of on-site installation is similar to
that required for mechanical systems, with the installation of distribution
ductwork followed by the connection of service branches and the installation of
the appropriate HVAC equipment.
Maintenance and Repair. Maintenance and repair contracting services are
generally provided on a per visit basis and through short-term and long-term
maintenance contracts. Revenue from repair and maintenance contracting services
has historically fluctuated, representing a larger portion of the overall
revenue of the founding companies when existing manpower capacity is not already
implemented on installation projects. AMPAM plans to expand its maintenance and
repair business through greater focus on promoting these services.
OPERATIONS
Contracting. Residential work is generally obtained by relationships and
referrals, with pricing being negotiated between the homebuilder and the
plumbing subcontractor. Commercial and institutional work is typically awarded
through a competitive bid process, which is often limited to approved bidders
who meet bonding and other requirements. Often large projects attract fewer
bidders because smaller contractors are unable to meet the bonding and manpower
capacity requirements. Contracts may provide precise specifications for the work
to be completed, require the contractor to design and build the plumbing system
or may permit the contractor to provide revised specifications for the project.
AMPAM's plumbing contracts are generally structured on a fixed cost basis,
although repair and maintenance contracting
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services are generally provided for on a fixed periodic fee or an hourly fee.
Revenues from a single residential plumbing contracting service project range
from approximately $350,000 to $550,000 for installation in a typical low-rise
apartment complex to approximately $1.5 million for installation in a typical
300-residence subdivision of new homes or approximately $5,000 per home.
Revenues from a single commercial or institutional mechanical contracting
project generally ranges from approximately $500,000 to $10 million, depending
upon the size of the building involved, the nature of the plumbing and
mechanical contracting services involved and the specific equipment and fixtures
to be installed. For example, revenue from a plumbing and mechanical project
involving a ten-floor high-rise apartment building may range from approximately
$650,000 to $1,000,000, whereas the revenues from a large plumbing and
mechanical contracting service project such as a stadium or industrial complex
may range from $5 million to $10 million.
Engineering and Design. We have engineering and design capabilities which
enable us to offer a higher level of service to our customers. These
capabilities may be offered in-house or obtained from third parties, as
appropriate. CAD systems may be used to "value engineer" the project by
providing cost saving alternatives to the specifications and designs provided by
the customer or to actually design and build the plumbing and mechanical systems
to be installed. CAD systems can be used to automate the production of
blueprints, specifications and a schedule of required assemblies and to assist
in selecting the materials and equipment to be used. AMPAM plans to further
develop its "value engineering" and design-and-build capabilities to capture the
higher margins justifiable on account of the cost savings passed on to the
customer.
Purchasing. AMPAM purchases copper, steel, cast iron, PVC and ABS pipe,
valves, hangers, fire protection and sprinkler systems and plumbing fixtures,
drains, water heaters, boilers, chillers, air handling units and pumps and other
materials from a number of manufacturers. AMPAM purchases these materials
directly from the manufacturer or through wholesalers and other distributors. In
some instances, AMPAM receives discounts from wholesalers in return for prompt
payment, and AMPAM plans to negotiate with wholesalers to receive discounts
whenever possible. AMPAM estimates that its cost of materials purchased
represents approximately 51% of AMPAM's costs of revenues. As a result of its
size following the acquisitions, AMPAM also plans to negotiate directly with the
national manufacturers to participate in rebate programs offered by these
manufacturers. AMPAM also believes it will be able to lower its costs for
- the purchase or lease and maintenance of vehicles;
- bonding, casualty and liability insurance;
- health insurance and related benefits;
- retirement benefits administration;
- marketing and advertising; and
- a variety of accounting, information, financial management and legal
services.
Management Information Systems and Controls. AMPAM intends to centralize
consolidated accounting and financial reporting activities at its corporate
headquarters while basic accounting activities will continue to be conducted at
the operating level. In addition, where an operating unit has a system in place
that is inadequate for its existing or near-term needs, AMPAM will implement
standards that will allow for greater consistency. In addition, several of the
founding companies, serving both the residential and commercial/institutional
markets, possess sophisticated (and in several cases proprietary) software
systems which handle estimation, materials ordering and job scheduling
functions. Where appropriate, AMPAM plans to integrate these advanced systems
into additional areas of its operations.
Recruiting and Training. Recruiting and training will primarily occur at
the local level for each operating unit of AMPAM, but will also be supplemented
by national programs. AMPAM will share best practices in recruiting, selection
and training, to take advantage of the successful human resources, training and
apprenticeship programs developed by some of the founding companies. AMPAM plans
to offer state-
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registered apprenticeship programs which use local inspectors and AMPAM
supervisory personnel as instructors. Upon completion of the program, each
apprentice will be a licensed plumber and placed on a AMPAM project where
needed. AMPAM believes it will be able to attract highly qualified candidates as
a result of its national size, potential for growth and advancement as well as
its health, disability and life insurance and retirement benefits packages and
stock-based compensation plans.
Advertising and Marketing. AMPAM uses both local advertising and local
direct sales forces to market its commercial and residential services in its
geographic markets. AMPAM intends to preserve the value of the long-standing
trade names and customer identification enjoyed by the individual operating
units.
CUSTOMERS
AMPAM has a diverse customer base with no one customer accounting for more
than 5% of AMPAM's pro forma combined revenues for the year ended December 31,
1998. As a result of an emphasis on quality and reliability, the founding
companies have been responsible for developing and maintaining successful
relationships with key customers. AMPAM intends to continue this emphasis on
superior quality and customer service in order to maintain these relationships.
We have provided plumbing and mechanical contracting services to numerous
customers in the residential and commercial/institutional markets and for a wide
variety of intended tenants and owners, some of which are listed below:
<TABLE>
<CAPTION>
COMMERCIAL/ INSTITUTIONAL TENANTS/ OWNERS RESIDENTIAL
------------------------- --------------- -----------
<S> <C> <C>
Ashland Chemical Company AMC Theatre Beazer Homes USA, Inc.
Barton Mallow Bank One Corporation Centex Corporation
Camden Development Company Callaway Golf Company Del Webb Corporation
Clark Construction Company Citibank D. R. Horton, Inc.
Finger Construction Company Doubletree Corporation The Fortress Group, Inc.
Fluor Daniel, Inc. Embassy Suites Hotels Kaufman and Broad Home
Greenbelt Construction Company Fidelity Investments Corporation
Hamilton County, Ohio Marriott Hotels Lennar Corporation
Hubert, Hunt & Nichols Nordstrom, Inc. Newmark Home Corporation
JPI Construction The Proctor & Gamble Company Pulte Corporation
Lincoln Property Trust Samsung Electronics Co., Ltd. The Ryland Group, Inc.
Ohio State University Sears, Roebuck and Co. Toll Brothers, Inc.
Post Properties, Inc. Sony Corporation Trammel Crow Residential
A. G. Spanos Construction, United Airlines, Inc. Construction
Inc. USAA Insurance Company UDC Homes, Inc.
Spaw Glass Corporation Walmart Stores
State of Florida
State of Ohio
Trammel Crow Company
Turner Construction Company
Winegardner & Hammonds
</TABLE>
PROPERTY AND EQUIPMENT
AMPAM operates a fleet of approximately 1,500 owned and leased service
trucks, vans and support vehicles, as well as heavy machinery including cranes,
backhoes, dump trucks and high-lifts. It believes these vehicles generally are
adequate for AMPAM's current operations.
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At March 31, 1999, AMPAM maintained 31 facilities in eight states. All of
these facilities are leased by AMPAM. AMPAM's current warehouses, shops, and
administrative offices are currently as follows:
<TABLE>
<CAPTION>
LOCATION SQUARE FEET USE
- -------- ----------- ---
<S> <C> <C>
Glendale, Arizona................................. 6,588 Office/Warehouse
Mesa, Arizona..................................... 7,648 Office/Warehouse/Shop
Mesa, Arizona..................................... 5,675 Office/Warehouse/Shop
Mesa, Arizona..................................... 8,550 Office/Warehouse/Shop
Adelanto, California.............................. 10,000 Office/Warehouse
Canoga Park, California........................... 15,900 Office/Warehouse
Poway, California................................. 14,500 Office/Warehouse
Riverside, California............................. 35,000 Office/Warehouse
San Diego, California............................. 13,000 Office/Warehouse
Tustin, California................................ 1,500 Office
Mount Dora, Florida............................... 1,700 Office
Orlando, Florida.................................. 21,000 Office/Warehouse
Orlando, Florida.................................. 6,000 Shop
Pensacola, Florida................................ 20,000 Office/Warehouse
Tampa Bay, Florida................................ 7,000 Warehouse
Marietta, Georgia................................. 24,000 Office/Warehouse
Marietta, Georgia................................. 10,000 Warehouse
Las Vegas, Nevada................................. 19,000 Office/Warehouse
Cincinnati, Ohio.................................. 24,000 Office
Cincinnati, Ohio.................................. 5,700 Office/Warehouse
Columbus, Ohio.................................... 9,550 Office/Warehouse
Columbus, Ohio.................................... 20,100 Office/Warehouse
Houston, Texas.................................... 4,200 Office
Houston, Texas.................................... 1,250 Warehouse
Round Rock, Texas................................. 7,800 Office
Round Rock, Texas................................. 900 Office
Round Rock, Texas................................. 34,900 Office/Warehouse
Round Rock, Texas................................. 4,000 Office
Round Rock, Texas................................. 30,900 Office/Warehouse
San Antonio, Texas................................ 14,500 Office/Warehouse
Woodbridge, Virginia.............................. 1,500 Office
</TABLE>
In addition to the facilities listed above, AMPAM may operate on a
short-term basis in other locations as may be required from time to time to
perform its contracts. AMPAM leases its principal and administrative offices in
Houston, Texas.
AMPAM believes that its properties are generally adequate for its present
needs. Furthermore, AMPAM believes that suitable additional or replacement space
will be available as required.
COMPETITION
The plumbing and mechanical contracting services industry is highly
fragmented and competitive and is generally served by a large number of small,
owner-operated private companies as well as several companies that provide some
of our plumbing and mechanical contracting services(often ancillary to a HVAC
focus) on a regional or national basis. Additionally, AMPAM could face
competition in the future from other competitors entering the market. Certain of
AMPAM's competitors may have greater financial and other resources than AMPAM
and may have lower overhead cost structures that may enable them to provide
services at lower prices than AMPAM. AMPAM believes that the primary competitive
factors in
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the plumbing and mechanical contracting services industry are high quality
service, reliability and price. Other competitive factors in the plumbing and
mechanical contracting services industry include:
- the availability of qualified and licensed plumbers and mechanics;
- safety record;
- cost structure;
- relationships with customers;
- relationships with plumbing component manufacturers;
- geographic diversity;
- ability to reduce project costs;
- access to technology;
- experience in specialized plumbing applications; and
- ability to obtain bonding.
Although AMPAM believes it is the first company to focus primarily on
consolidating the plumbing and mechanical contracting services industry, it will
compete with other existing companies for acquisitions and there can be no
assurance that other existing companies consolidating related industries or
yet-to-be-formed companies will not also adopt a similar focus. In particular,
other existing companies which are consolidating various aspects of the
residential and commercial contracting industry have focused on acquiring
companies that provide residential and commercial plumbing repair services and
residential and commercial HVAC installation and repair services. Some of these
existing companies have acquired companies engaged in the plumbing and
mechanical contracting services business with respect to new installations;
however, these companies have not represented a significant portion of the
overall revenues of the acquiring companies. Competition from existing companies
or yet-to-be-formed companies could have the effect of increasing the price for
acquisitions or reducing the number of suitable acquisition candidates. See
"Risk Factors -- The highly competitive nature of our industry could affect our
profitability by reducing our profit margins."
REGULATION
Operations and Licensing. AMPAM's business and the activities are subject
to various federal, state and local laws, regulations, ordinances and policies
relating to, among other things:
- the licensing and certification of plumbers and technicians;
- AMPAM's advertising, warranties and disclosures to its customers;
- the bidding process required to obtain plumbing and mechanical contracts;
and
- the applicable plumbing, mechanical and building codes with which AMPAM
must comply.
Most states require at least one of AMPAM's employees to be a licensed
master plumber, and many jurisdictions regulate the number and level of license
holders who must be present on a construction site during the installation of
plumbing and mechanical systems. Some jurisdictions require AMPAM to obtain a
building permit for each plumbing or mechanical project. In addition, AMPAM must
comply with labor laws and regulations, including those that relate to
verification by employers of legal immigration or work permit status of
employees.
Environment, Health and Safety. AMPAM is subject to safety standards
established and enforced by the Occupational Safety and Health Administration
and environmental laws and regulations relating to the use, storage,
transportation and disposal of various materials. To the extent that AMPAM
performs work involving air conditioning and refrigeration systems, it is
subject to additional restrictions and regulations
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governing the availability, handling and recycling of various refrigerants, due
to the phase-out of ozone-depleting substances under the Montreal Protocol and
the Clean Air Act.
LEGAL PROCEEDINGS
Each of the founding companies has, from time to time, been a party to
litigation arising in the normal course of its business, most of which involves
claims for personal injury or property damage incurred in connection with its
operations. Management believes that none of these actions will have a material
adverse effect on the financial condition or results of operations of AMPAM.
EMPLOYEES
At April 1, 1999, AMPAM had approximately 2,700 employees. Currently, none
of AMPAM's employees are members of unions or work under a collective bargaining
agreement. AMPAM believes that its relationship with its employees is
satisfactory.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of April 1, 1999 concerning
AMPAM's directors and executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- ---- --------
<S> <C> <C>
C. Byron Snyder....................... 50 Chairman of the Board of Directors
Robert A. Christianson................ 53 President, Chief Executive Officer and
Director
Robert C. Richey...................... 48 Senior Vice President, Chief Operating
Officer and Director
David C. Baggett...................... 37 Senior Vice President, Chief Financial
Officer, Secretary and Director
David A. Croson....................... 44 Director
James A. Croson....................... 67 Director
Joseph E. Miller...................... 46 Director
Albert W. Niemi, Jr. ................. 56 Director
Susan O. Rheney....................... 39 Director
Robert W. Sherwood.................... 48 Director
Sam B. Sherwood....................... 43 Director
Scott W. Teepe, Sr. .................. 41 Director
</TABLE>
All officers serve at the discretion of the Board of Directors and are
expected to enter into employment agreements with AMPAM. See "-- Employment
Agreements."
C. Byron Snyder. Mr. Snyder has been Chairman of the Board of AMPAM since
its inception. Mr. Snyder is the President of Sterling City Capital, LLC, a
Houston-based private investment company that focuses on selective investments
in companies which plan to execute consolidation strategies within fragmented
industries. He was the owner and President of Relco Refrigeration Co., a
distributor of refrigerator equipment which he acquired in 1992 and which was
merged in February 1998 into Hospitality Companies, Inc. Mr. Snyder is a
director of Hospitality Companies, Inc., a supplier of food equipment and
heating/air conditioning products to the hospitality industry. Prior to 1992,
Mr. Snyder was the owner and Chief Executive Officer of Southwestern Graphics
International, Inc., a diversified holding company which owned Brandt & Lawson
Printing Co., a Houston-based general printing business, and Acco Waste Paper
Company, an independent recycling business. Mr. Snyder is a director of Carriage
Services, Inc., a publicly held death care company and Chairman of the Board of
Directors of Integrated Electrical Services, Inc., a publicly held electrical
contracting and maintenance services consolidator.
Robert A. Christianson. Mr. Christianson became Chief Executive Officer and
a director of AMPAM following the acquisitions. Mr. Christianson has been Chief
Executive Officer of Christianson Enterprises, Inc., since it was founded in
1980. He also served in management positions with its predecessor company. He
has over 35 years experience in the plumbing and mechanical contracting services
industry. He is a past president of the Austin Association of Plumbing, Heating
and Cooling Contractors and a past secretary of the Plumbing, Heating and
Cooling Contractors of Texas.
Robert C. Richey. Mr. Richey became Chief Operating Officer and a director
of AMPAM following the acquisitions. Mr. Richey has been Chief Executive Officer
of R.C.R. Plumbing, Inc. since it was founded in 1977. He has over 30 years
experience in the plumbing and mechanical contracting services industry.
David C. Baggett. Mr. Baggett has been the Senior Vice President and Chief
Financial Officer of AMPAM since August 1998 and became a director of AMPAM
following the acquisitions. Prior to that, he served as the Senior Vice
President and Chief Financial Officer of Kelley Oil & Gas Corporation from
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March 1997 until August 1998. Before joining Kelley Oil & Gas Corporation, Mr.
Baggett was the partner in charge of energy and corporate finance for the
Houston office of the accounting and consulting firm of Deloitte & Touche LLP.
David A. Croson. Mr. David Croson became a director of AMPAM following the
acquisitions. Mr. David Croson was President and Chief Executive officer of J.
A. Croson Company and Franklin Fire Sprinkler Company. Mr. David Croson is the
son of Mr. James Croson.
James A. Croson. Mr. James Croson became a director of AMPAM following the
acquisitions. Mr. Croson was President of Croson Florida from 1989 until 1997
and Chief Executive Officer from 1998 to present. Mr. James Croson is the father
of Mr. David Croson.
Joseph E. Miller. Mr. Miller became a director of AMPAM following the
acquisitions. Mr. Miller has been Vice President of Miller Mechanical
Contractors, Inc. since that company was formed in 1977 and acts as the Chief
Operating Officer. Mr. Miller is past-President of the Georgia Association of
Plumbing, Heating and Cooling Contractors.
Albert W. Niemi, Jr. Dr. Niemi is the John and Debbie Tolleson Dean of the
Edwin L. Cox School of Business at Southern Methodist University where his areas
of expertise include economic growth, economic forecasting and American business
history. Before Dr. Niemi's arrival at Southern Methodist University, he served
as dean of the Terry College of Business from 1982 through 1996. He also served
as dean of the School of Business at the University of Alabama at Birmingham for
the 1996-1997 academic year.
Susan O. Rheney. Ms. Rheney has been a director of AMPAM since April, 1999.
Ms. Rheney is a principal of The Sterling Group, Inc., a private financial
organization engaged in the acquisition and ownership of operating businesses,
where she has served as Vice President since 1992. Ms. Rheney is also a director
of Texas Petrochemical Holdings, Inc. and AXIA Group, Inc.
Robert W. Sherwood. Mr. Robert Sherwood became a director of AMPAM
following the acquisitions. Mr. Robert Sherwood has been President and Chief
Executive Officer of Sherwood Mechanical, Inc. since he founded that company in
1976. Mr. Robert Sherwood is the current President of the San Diego chapter of
Associated Builders and Contractors and is the current Chairman of the Plumbing
Industry Committee of the California Contractors Alliance. Robert W. Sherwood
and Sam B. Sherwood are not related to each other.
Sam B. Sherwood. Mr. Sam Sherwood became a director of AMPAM following the
acquisitions. Mr. Sam Sherwood has been Vice President of Keith Riggs Plumbing,
Inc. since 1989. Robert W. Sherwood and Sam B. Sherwood are not related to each
other.
Scott W. Teepe, Sr. Mr. Teepe became a director of AMPAM following the
acquisitions. Mr. Teepe was Vice President of Teepe's River City Mechanical,
Inc. from 1984 until 1998 and has been President since 1998.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors established an Audit Committee and a Compensation
Committee. The Audit Committee recommends the appointment of auditors and
oversees the accounting and audit functions of AMPAM. The Compensation Committee
determines the salaries and bonuses of executive officers and administers the
1999 Stock Plan. Messrs. J. Croson, Miller and Niemi serve as members of AMPAM's
Audit Committee and Messrs. R. Sherwood, Christianson and Ms. Rheney serve as
members of AMPAM's Compensation Committee. Any future material transactions
between AMPAM and its management and affiliates, including approval of executive
employment agreements and the issuance of securities other than through the 1999
Stock Plan and the 1999 Directors Stock Plan, will be subject to prior review
and approval by the members of the Board of Directors without an interest in the
transaction.
The Board of Directors is divided into three classes of directors, with
directors serving staggered three-year terms, expiring at the annual meeting of
stockholders following the 1999 fiscal year (Class I),
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2000 fiscal year (Class II) and 2001 fiscal year (Class III), respectively. At
each annual meeting of stockholders, one class of directors is elected for a
full term of three years to succeed that class of directors whose terms are
expiring. The Board of Directors is classified as follows: Messrs. J. Croson, S.
Sherwood, Snyder and Miller are Class I directors, Messrs. R. Sherwood, D.
Croson, Christianson and Niemi are Class II directors and Messrs. Teepe,
Baggett, Richey and Ms. Rheney are Class III directors.
DIRECTOR COMPENSATION
Directors who are employees of AMPAM or a subsidiary do not receive
additional compensation for serving as directors. Each director who is not an
employee of AMPAM or a subsidiary will receive a fee of $2,000 for attendance at
each Board of Directors meeting and $1,000 for each committee meeting (unless
held on the same day as a Board of Directors meeting). Directors of AMPAM will
be reimbursed for any reasonable out-of-pocket expenses incurred in attending
meetings of the Board of Directors or committees THEREOF, and for other expenses
reasonably incurred in their capacity as directors of AMPAM. Each non-employee
director receives stock options to purchase 5,000 shares of common stock upon
initial election to the Board of Directors and thereafter an annual grant of
5,000 options at each annual meeting on which the non-employee director
continues to serve. See "-- 1999 Stock Plan."
EXECUTIVE COMPENSATION
The annualized base salaries of AMPAM's most highly compensated executive
officers are as follows: Robert A. Christianson -- $220,000; Robert C. Richey
-- $220,000 and David C. Baggett -- $190,000.
EMPLOYMENT AGREEMENTS
AMPAM is currently negotiating and expects to enter into an employment
agreement with each executive officer of AMPAM on substantially the same terms
and conditions as described in this and the following paragraphs. These
agreements will prohibit the officer from disclosing AMPAM's confidential
information and trade secrets and will generally restricts these individuals
from competing with AMPAM for a period of two years after the date of the
termination of employment with AMPAM. Each of the agreements will have an
initial term of five years and will provide for an annual extension at the end
of its initial term, unless either party timely notifies the other that the term
will not be extended, and will be terminable by AMPAM or by the officer upon
thirty days' written notice. The employment agreements will provide that AMPAM
will pay each officer the annual salary set forth above under "-- Executive
Compensation," which may be increased by the Board of Directors. Such agreements
will also provide that each officer will be reimbursed for out-of-pocket
business expenses and will be eligible to participate in all benefit plans and
programs as are maintained from time to time by AMPAM. All employment agreements
will provide that if the officer's employment is terminated by AMPAM without
"cause" or is terminated by the officer for "good reason," the officer will be
entitled to receive a lump sum severance payment at the effective time of
termination equal to the base salary (at the rate then in effect) for some
period of time. In this type of an event, the time period during which the
officer is restricted from competing with AMPAM will be shortened.
The employment agreements will contain provisions concerning a
change-in-control of AMPAM, including the following:
- in the event the officer's employment is terminated within two years
following the change in control by AMPAM other than for "cause" or by the
officer for "good reason," or the officer is terminated by AMPAM within
three months prior to the change in control at the request of the
acquiror in anticipation of the change in control, the officer will be
entitled to receive a lump sum severance amount equal to the greater of
(a) three years' base salary (at the rate then in effect) or (b) the base
salary for whatever period is then remaining on the initial term, and the
provisions which restrict competition with AMPAM will not apply;
- in any change-of-control situation, the officer may elect to terminate
his employment by giving five business days' written notice prior to the
closing of the transaction giving rise to the change-in-
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control, which will be considered to be a termination of employment by the
officer for "good reason," and the provisions of the employment agreement
governing the same will apply, except that the severance amount otherwise
payable will be doubled (but not to exceed six times the officer's base
pay) (if the successor does not give written notice of its acceptance of
AMPAM's obligations under the employment agreement at least ten business
days prior to the anticipated closing date, the severance amount will be
tripled, but not to exceed nine times base salary), and the provisions
which restrict competition with AMPAM will not apply; and
- if any payment to the officer is subject to the 20% excise tax on excess
parachute payments, the officer will be made "whole" on a net after-tax
basis.
A change in control is generally defined to occur upon:
- the acquisition by any person of 20% or more of the total voting power of
the outstanding securities of AMPAM;
- the first purchase pursuant to a tender or exchange offer for common
stock;
- the approval of some types of mergers, sale of substantially all the
assets, or dissolution of AMPAM; or
- a change in a majority of the members of AMPAM's Board of Directors.
In general, a "parachute payment" is any "payment" made by AMPAM in the
nature of compensation that is contingent on a change in control of AMPAM and
includes the present value of the accelerations of vesting and the payment of
options and other deferred compensation amounts upon a change in control. If the
aggregate, present value of the parachute payments to individuals, including
officers, equals or exceeds three times that individual's "base amount"
(generally, the individual's average annual compensation from AMPAM for the five
calendar years ending before the date of the change in control), then all
parachute amounts in excess of the base amount are "excess" parachute payments.
An individual will be subject to a 20% excise tax on excess parachute amounts
and AMPAM will not be entitled to a tax deduction for these payments.
1999 STOCK PLAN
The Board of Directors of AMPAM adopted the 1999 Stock Plan. The purpose of
the 1999 Stock Plan is to provide officers, employees, directors and consultants
with additional incentives by increasing their ownership interests in AMPAM.
Individual awards under the Plan may take the form of one or more of:
- non-qualified stock options ("NQSOs");
- stock appreciation rights ("SARs");
- restricted stock;
- phantom stock;
- performance awards;
- bonus stock awards;
- other stock-based awards, i.e., awards not otherwise provided for, the
value of which are based in whole or in part upon the value of the
common stock; and
- cash awards that may or may not be based on the achievement of
performance goals (collectively, "Awards").
The performance goals for Awards, until changed, include target levels of
net income, cash flows, return on equity, profit margins, sales, stock price,
reductions in cost of goods sold and earnings per share.
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'The Compensation Committee or AMPAM's Chief Executive Officer, to the extent
duties are delegated to the Chief Executive by the Compensation Committee,
administers the 1999 Stock Plan and selects the individuals who will receive
awards and establish the terms and conditions of those awards. The maximum
number of shares of common stock that may be subject to outstanding awards,
determined immediately prior to the grant of any award, may not exceed the
greater of 3,700,000 shares of common stock or 15% of the aggregate number of
shares of common stock then outstanding. Shares of common stock which are
attributable to awards which have expired, terminated or been canceled or
forfeited are available for issuance or use in connection with future awards.
The maximum number of shares of common stock with respect to which any person
may receive options and SARs in any calendar year is 200,000 shares. With
respect to other forms of awards, the maximum award that may be granted to any
individual in any calendar year cannot exceed $5.0 million (determined as of the
date of the grant of the award). Options and SARs may have exercise prices as
the Compensation Committee, in its discretion, determines.
The 1999 Stock Plan will remain in effect for 10 years, unless earlier
terminated by the Board of Directors. The 1999 Stock Plan may be amended by the
Board of Directors or the Compensation Committee without the consent of the
stockholders of AMPAM, except that any amendment will be subject to stockholder
approval if required by any federal or state law or regulation or by the rules
of any stock exchange or automated quotation system on which the common stock
may then be listed or quoted.
NQSOs to purchase 200,000 shares of common stock have been granted to David
C. Baggett, Chief Financial Officer and NQSOs to purchase 1,942,115 shares of
common stock have been granted to other members of management of AMPAM,
employees of the founding companies and holders of the preferred stock. Each of
the foregoing options have an exercise price of $7.00. These options will vest
at the rate of 20% per year, commencing on the first anniversary of grant and
will expire at the earliest of:
- ten years from the date of grant;
- three months following termination of employment or service, other
than due to death or disability; or
- one year following a termination of employment or service due to death
or disability.
CERTAIN TRANSACTIONS
ORGANIZATION OF AMPAM
AMPAM (1) issued 3,392,517 shares of common stock and restricted common
stock, to Sterling City Capital, LLC, the management of AMPAM and other
individuals and (2) granted options to purchase 2,142,115 shares of common stock
to various officers and employees of AMPAM, holders of the preferred stock and
other persons. The following executive officers and directors of AMPAM have been
issued the following number of shares of common stock and restricted common
stock, respectively: Mr. Snyder -- 0 and 1,598,901 (these shares are held in the
name of Sterling City Capital, LLC), Mr. Christianson -- 300,000 and 108,372,
respectively, Mr. Richey -- 150,000 and 54,186, respectively, Mr.
Baggett -- 300,000 and 108,372, respectively.
Sterling City Capital, LLC advanced funds to AMPAM to pay for the expenses
related to the acquisitions. The advances totaled approximately $3.5 million
through the closing of the acquisitions and were repaid concurrently with
closing of the acquisitions in the form of a sponsor note. This note was repaid
with the proceeds of the original issuance of the notes.
ACQUISITION OF FOUNDING COMPANIES
At the closing of the acquisitions, AMPAM purchased all the issued and
outstanding capital stock of the founding companies, at which time each founding
company became a wholly-owned subsidiary of AMPAM. The acquisition consideration
was negotiated by the parties and was based primarily upon the pro forma
adjusted net income of each founding company for prior historical periods, the
amounts of
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indebtedness and working capital of each of the founding companies as well as
the future prospects of the businesses of each of the founding companies. The
acquisition consideration delivered upon the closing of the acquisitions
consisted of:
- $99.9 million in cash (which represents a portion of the $106.3 million
total cash consideration, subject to adjustment as discussed below, to be
paid to the stockholders of the founding companies);
- $5.8 million of seller notes;
- 8,898,618 shares of common stock; and
- 1,048,820 shares of preferred stock. Only some of the stockholders of
Christianson received shares of preferred stock, and these stockholders
did not receive any seller notes or shares of common stock.
Included in the $99.9 million cash acquisition consideration paid upon
closing was a portion of the cash payments to be made to the stockholders of the
founding companies based upon the level of working capital of that founding
company as of the closing date. In the event that the adjusted level of working
capital as of the closing date is more or less than the unadjusted level, the
cash portion of the acquisition consideration payable to that stockholder will
be adjusted accordingly. The stockholders of each founding company were also
entitled to distributions of nonoperating assets of the founding company
(subject to assumption of related liabilities), retained earnings of the
founding company (if a C corporation) or the positive amount of the accumulated
adjustment account (if an S corporation). In addition to the acquisition
consideration and other payments and distributions described above, the
stockholders of each founding company (including some of the former stockholders
of Christianson) may receive additional consideration in the event the founding
company generates actual adjusted net income for the year ending December 31,
1999, in excess of a designated target level of net income for that period.
ACQUISITION CONSIDERATION
In addition to the $99.9 million in cash consideration and 8,898,618 shares
of common stock issued to stockholders of the companies, AMPAM issued
approximately $5.8 million in seller notes and 1,048,820 shares of preferred
stock. The principal features of the seller notes and preferred stock are set
forth below.
Seller Notes
Principal Amount and Interest Rate. Concurrently with the closing of the
acquisitions, AMPAM issued $5.8 million principal amount of seller notes due
three years from the date of issuance. The seller notes bore interest at the
rate of 10% per annum, and any overdue payments also bore interest at a rate of
10%.
Interest Payment Dates. Interest on the seller notes was payable quarterly,
commencing 90 days from the date of issuance.
Ranking. The seller notes were unsecured obligations of AMPAM, subordinated
in right of payment to any and all existing and future senior indebtedness of
AMPAM, including the credit facility.
Redemption at the Option of AMPAM. The seller notes were redeemable at any
time, at the option of AMPAM, in whole or from time to time in part, at a price
equal to 100% of the principal amount plus accrued and unpaid interest, if any,
to the date of redemption.
Redemption at the Option of Holders. In the event AMPAM completed a
qualified financing each of the holders of the seller notes would have had a
one-time "put right," but not an obligation, to require AMPAM to repurchase the
seller notes held by any holder, together with any accrued and unpaid interest,
if any, to the date of redemption, subject to some limitations. A "qualified
financing" meant the completion by AMPAM of (i) an initial public offering of
common stock or (ii) a private placement or
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public offering of unsecured, senior subordinated or subordinated notes from
which AMPAM would have received at least $75 million in gross proceeds. The
consummation of the original issuance of the notes was a "qualified financing"
and all of the seller notes have been repaid in full.
Series A Redeemable Preferred Stock
Shares and Liquidation Value. An aggregate of 1,048,820 shares of preferred
stock were issued to some of the stockholders of Christianson at the closing of
the acquisitions. These Christianson stockholders received their acquisition
consideration solely in the form of cash and shares of preferred stock. The
preferred stock is cumulative, redeemable and convertible. The aggregate
liquidation value of the preferred stock is $13,634,660, plus accrued and unpaid
dividends, as adjusted proportionately for any stock dividends, combinations,
splits or other similar events with respect to those shares.
Dividends. The holders of the preferred stock are entitled to receive
dividends at an annual rate of 10% based on the "liquidation value" of the
preferred stock. The dividends are payable in cash semiannually in arrears. The
dividend payment dates are June 30 and December 31, beginning on June 30, 1999.
Ranking. The preferred stock ranks senior to all other classes of AMPAM's
capital stock, including the common stock, in right of liquidation, dividends
and distributions.
Voting Rights. Except as set forth below, the preferred stock is not
entitled to vote as a separate class, but votes together with the holders of
shares of all other classes of capital stock of AMPAM as one class on all
matters submitted to a vote of AMPAM's stockholders. Each holder of shares of
preferred stock is entitled to the number of votes equal to the largest number
of full shares of common stock into which all shares of preferred stock held by
a holder could be converted at the record date for the determination of the
stockholders entitled to vote on those matters. In all cases where the holders
of shares of preferred stock are required by law to vote separately as a class,
the holders are entitled to one vote for each share.
Without the affirmative vote of the holders of not less than a majority of
the shares of preferred stock, voting together as a single class, AMPAM may not
issue preferred stock having equal or superior rights to the preferred stock,
repurchase common stock or amend its charter documents in a manner which is
adverse to the holders of preferred stock.
Additionally, at any time and for so long as either (i) AMPAM has failed to
punctually pay when due any redemption payment or (ii) dividends payable on the
preferred stock have been in arrears and unpaid for a period of forty days,
AMPAM shall not, without the affirmative vote of the holders of not less than a
majority of the shares of preferred stock, voting together as a single class:
- incur any additional indebtedness for borrowed money other than
borrowings under any credit facility to which AMPAM is a party at that
time and as then in effect;
- effect any (a) sale, lease, assignment, transfer or other conveyance of
the assets of AMPAM or its subsidiaries which individually or in the
aggregate would constitute a significant subsidiary, (b) consolidation or
merger involving AMPAM or any of its subsidiaries, or (c) dissolution,
liquidation or winding-up of AMPAM or any of its subsidiaries;
- make (or permit any subsidiary to make) any loan or advance to, or own
any stock or other securities of, any subsidiary or other corporation,
partnership, or other entity unless it is wholly owned by AMPAM and
except for any loans and advances which do not in the aggregate exceed
$250,000;
- make any loan or advance to any person, including, without limitation,
any employee or director of AMPAM or any subsidiary, except advances and
similar expenditures in the ordinary course of business; or
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- acquire, by purchase, exchange, merger or otherwise, all or substantially
all of the properties or assets of any other corporation or entity.
Redemption. The preferred stock is redeemable at AMPAM's option, at any
time and from time to time, in whole or in part, prior to an initial public
offering of common stock for the greater of (i) the fair market value of the
preferred stock and (ii) $13.00 per share of preferred stock, plus, in each
case, accrued and unpaid dividends thereon. After an initial public offering of
common stock, AMPAM has the right to redeem the preferred stock at any time and
from time to time, in whole or in part, at a price equal to the trading price of
the common stock at the time of redemption but in no event for less than $13.00
per share of preferred stock, plus accrued and unpaid dividends. After the third
anniversary of the date of issuance, the holders of the preferred stock may
require AMPAM to redeem the preferred stock. In each case, the redemption price
per share will be equal to the liquidation value plus accrued and unpaid
dividends through the date of redemption.
Convertibility. Prior to the filing of a registration statement by AMPAM
with the Securities and Exchange Commission with respect to an initial public
offering of common stock, the holders of preferred stock may convert the
preferred stock into common stock on a share-for-share basis.
AMPAM may convert the preferred stock following the completion of an
initial public offering of common stock on a share-for-share basis, unless this
conversion would result in the holder of preferred stock receiving common stock
having a value of less than $13.00 per share, in which case the conversion would
be made at a conversion ratio equal to the liquidation value (without inclusion
of accrued but unpaid dividends) divided by the price per share to the public in
the initial public offering of common stock.
ADDITIONAL CONSIDERATION
In addition to the acquisition consideration and the other payments and
distributions described above, the stockholders of each founding company, other
than Christianson, are entitled to receive additional consideration in the event
that founding company generates actual adjusted net income for the year ended
December 31, 1999 in excess of a designated target level of net income for that
period. This target net income for each founding company is generally an amount
equal to 107.5% of the founding company's pro forma adjusted net income for the
12-month period ended June 30, 1998.
In the event that the adjusted net income for a founding company for the
year ending December 31, 1999 exceeds the target net income for that period, the
stockholders of that founding company will be entitled to receive additional
consideration, subject to a maximum amount of additional consideration as
described below, having a value equal to the product obtained by multiplying (1)
50% of the difference between adjusted net income of the founding company for
that period and the target net income by (2) ten. The amount of additional
consideration payable to the stockholders of a founding company eligible for
additional consideration is subject to a maximum limitation of 15% of the total
value of acquisition consideration paid to that stockholder upon the closing of
the acquisitions. Any additional consideration payable to stockholders of a
founding company will be paid 50% in cash and 50% in shares of common stock of
AMPAM. AMPAM's obligation to pay the cash portion of the additional
consideration is subject to the covenants, limitations and restrictions
contained in AMPAM's outstanding debt and equity instruments then in existence.
Additionally, seven of the previous stockholders of Christianson, including
Robert A. Christianson, entered into employment agreements with Christianson
and/or AMPAM, effective upon the closing of the acquisitions. As part of the
compensation to be received by these individuals through their employment
agreements, they are entitled to receive additional consideration based on the
adjusted net income for Christianson for the year ending December 31, 1999 in
the same manner, subject to the same restrictions and determined by the same
methodology as described above for the stockholders of the other founding
companies.
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COVENANT NOT TO COMPETE
Pursuant to the agreements relating to the acquisitions, all of the former
stockholders of each of the founding companies have agreed not to compete with
AMPAM in the plumbing and mechanical contracting services business for a period
of two years after the closing of the acquisitions. In addition, some of the
management personnel of each of the founding companies will enter into
employment agreements through which these persons will agree not to compete with
AMPAM in the plumbing and mechanical contracting services business for a period
of two years after the termination of their affiliation with AMPAM. In
connection with the acquisitions, AMPAM and the owners of the founding companies
have agreed to indemnify each other for breaches of representations and
warranties and other matters, subject to limitations.
COMMON STOCK REDEMPTION RIGHTS
Redemption Trigger. In the event that within three years of the closing of
the acquisitions, (1) AMPAM has not consummated an initial public offering of
common stock and (2) any stockholder of any founding company has not received
cash (including the proceeds from the public or private sale of common stock and
the receipt of principal payments, if any, on the seller notes held by that
stockholder) equal to or exceeding 50% of the aggregate value of the acquisition
consideration received by each stockholder through his or her respective
acquisition agreement, each stockholder will have a "put right," to require
AMPAM to purchase a number of shares of common stock representing 10% of the
total number of shares of common stock then owned by that stockholder, subject
to the limitations described below. The purchase price for this redemption will
be $13.00 per share of common stock.
Minimum Redemption; Limitations. If the events specified in clauses (1) and
(2) above, have not occurred within the time specified, AMPAM will be obligated
to purchase annually from each eligible stockholder no less than 10% of the
common stock held by that stockholder; provided, however, that an eligible
stockholder will not be entitled to exercise his or her put right if and to the
extent that the stockholder's founding company has not achieved the target net
income for that founding company for the year preceding the year the stockholder
seeks to exercise his put right. AMPAM's obligation to effect these redemptions
will be subject to the covenants, limitations and restrictions contained in
AMPAM's outstanding private or public debt and equity instruments then in
existence.
Additional Redemptions. In the event an initial public offering of common
stock has not been consummated, to the extent the stockholders who have received
greater than 50% of their acquisition consideration in cash wish to tender
common stock to AMPAM for purchase, AMPAM will use its commercially reasonable
efforts to continue to repurchase annually up to 10% of the common stock held by
those stockholders. AMPAM's obligation to make any additional redemptions will
also be subject to any covenants, limitations or restrictions contained in
AMPAM's outstanding private or public debt and equity instruments then in
existence.
Termination of Redemption Obligation. The put rights with respect to any
individual stockholder will terminate upon receipt by a stockholder of 50% of
his acquisition consideration in cash. This termination will not, however, limit
the stockholder's ability to participate in the additional redemptions described
above. Notwithstanding the foregoing, all of AMPAM's redemption obligations
under the acquisition agreements will terminate on the earlier to occur of (1)
an initial public offering of common stock, (2) any sale of all or substantially
all of AMPAM's assets in one transaction or series of transactions, (3) any
merger or consolidation which involves AMPAM and in which AMPAM is not the
surviving entity or (4) any transaction after which the shares of common stock,
if any, which are then held by persons other than the holders of common stock as
of the closing date of the acquisitions constitute 50% or more of the shares of
common stock outstanding as of the date of the closing of the transaction.
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ACQUISITION CONSIDERATION PAID TO OFFICERS AND DIRECTORS
Individuals who are executive officers or directors of AMPAM received the
following portions of the acquisition consideration for their interests in the
founding companies.
<TABLE>
<CAPTION>
SHARES OF
SELLER COMMON OWNER
FOUNDING COMPANY CASH(1) NOTES(1) STOCK(1) AMOUNTS(1)
---------------- ------- --------- ----------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Christianson
Robert A. Christianson.................................... $ 3,706 -- 665,166 $ 35
RCR
Robert C. Richey(2)....................................... 8,473 $1,412 1,412,230 193
Teepe's
Scott W. Teepe, Sr........................................ 2,052 990 532,760(3) 159
Keith Riggs
Sam B. Sherwood(4)........................................ 921 -- 169,451 12
Croson Florida
James A. Croson........................................... 1,906 -- 463,225 92
Croson Ohio
David A. Croson........................................... 4,066 -- 720,334(5) 648
Sherwood
Robert W. Sherwood........................................ 1,765 294 294,120 450
Miller
Joseph E. Miller.......................................... 1,838 306 300,461(6) 47
------- ------ --------- ------
Total............................................... $24,727 $3,002 4,557,747 $1,636
======= ====== ========= ======
</TABLE>
- ---------------
(1) Does not include any additional consideration that may be payable to the
stockholders of the founding companies. Owner amounts are estimates and
assume the transactions were consummated on December 31, 1998.
(2) The acquisition consideration was paid to the Robert C. Richey Family Trust.
(3) Excludes 9,000 of the 18,000 shares of common stock that AMPAM has agreed to
contribute to a deferred compensation plan for the benefit of some of the
employees of Teepe's.
(4) The acquisition consideration was paid to the Sam B. Sherwood and Vicki S.
Sherwood Trust.
(5) Excludes 76,928 shares of common stock that AMPAM has agreed to contribute
to deferred compensation plans for the benefit of some of the employees of
Croson Ohio.
(6) Excludes 5,880 shares of common stock that AMPAM has agreed to contribute to
a deferred compensation plan for the benefit of some of the employees of
Miller.
OTHER TRANSACTIONS INVOLVING CERTAIN OFFICERS, DIRECTORS AND SHAREHOLDERS
Christianson leases some facilities from the Glen T. Christianson Family
Trusts, W. George Christianson, Jr. Family Trusts, Robert A. Christianson Family
Trusts, and Wilburn G. Christianson Family Trusts. Amounts paid through these
leases were $156,000 for the 1996 fiscal year, $466,000 for the 1997 fiscal year
and $492,000 for the 1998 fiscal year. Future minimum lease payments under these
noncancelable operating leases are $495,000 for 1999, $554,000 for 2000,
$559,000 for 2001, $69,000 for 2002 and $24,000 for 2003. AMPAM believes that
these rents are not in excess of the fair rental value for these facilities.
Glen Christianson and George Christianson are brothers of and Wilburn
Christianson is the father of Robert Christianson who is the Chief Executive
Officer and a director of AMPAM.
Through December 31, 1995, Christianson subcontracted its construction
labor to Contractor Resources, Inc., a company which is wholly-owned by Robert
Christianson. Christianson was charged for this labor based on Contractor
Resources' actual costs. For the 1996 fiscal year, and the four months ended
December 31, 1995, subcontractor labor costs reflected within cost of revenues
in the accompanying statements of operations were $2,663,000 and $2,663,000,
respectively. This relationship was terminated effective December 31, 1995.
Also through December 31, 1995, Contractor Resources provided workers'
compensation insurance to Christianson's employees through a self-insurance
program. Contractor Resources charged Christianson an agreed-upon rate for this
insurance based on an estimate of the cost of workers' compensation insurance as
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a subscriber under the Texas risk pool. Claims were administered and paid by
Contractor Resources. For the 1996 fiscal year, and the four months ended
December 31, 1995, workers' compensation insurance costs reflected within cost
of revenues in the accompanying statements of operations were $268,000 and
$268,000, respectively. This relationship was terminated effective December 31,
1995.
Effective January 1, 1999, Christianson entered into a 7 year operating
agreement with Contractor Resources to lease some furniture for an annual lease
payment of $63,000.
Also, Robert Christianson's employment agreement with AMPAM contains a
provision whereby Robert Christianson may earn additional consideration. See
"Certain Transactions -- Acquisition of Founding Companies -- Additional
Consideration."
G.G.R. Leasing Corporation, d.b.a. Professional Services, Inc.
("Professional Services"), a company in which Robert Christianson had a
one-third ownership interest prior to the closing of the acquisitions, provided
various administrative and management services to Christianson Enterprises, Inc.
In connection with these services, Professional Services charged a fee to
Christianson. For the 1996 fiscal year, and the four months ended December 31,
1995, Professional Services charged Christianson $225,000 and $225,000,
respectively. These amounts are included within other income in the accompanying
statements of operations. As discussed above, the relationship was terminated
December 31, 1995; therefore, no fees were charged subsequent to this date.
Mr. Richey was a part owner in a partnership which leased vehicles to RCR
at rates approximating market. During 1996, the partnership contributed these
leased vehicles to RCR, at their historical cost, less accumulated depreciation.
Upon the contribution of these assets, the net book value approximated zero. Mr.
Richey is the Chief Operating Officer and a director of AMPAM.
A partnership owned by Mr. Richey leased steel storage containers to RCR at
rates approximating market rates. During 1996, the partnership contributed all
of RCR's leased steel storage containers. These assets were contributed at the
approximate historical cost, less accumulated depreciation, of approximately
$37,000.
A partnership owned by Mr. Richey leased some equipment to RCR, at rates
approximating market rates. RCR incurred lease expense under this arrangement of
approximately $87,000, $52,000 and $77,000 for the 1996, 1997 and 1998 fiscal
years, respectively.
RCR funds three life insurance policies for Mr. Richey and some other
parties affiliated with RCR. Two of the policies name RCR as the beneficiary.
Total payments for these policies approximated $41,000, $29,000 and $12,000 for
the 1996, 1997 and 1998 fiscal years.
RCR leases some facilities from Mr. Richey. Lease expense related to these
buildings totaled approximately $220,000, $220,000 and $220,000 for the 1996,
1997 and 1998 fiscal years, respectively. Future minimum lease payments under
this lease are approximately $233,400 for 1999, $240,400 for 2000, and $123,500
for 2001. AMPAM believes that this rent is not in excess of the fair rental
value for this property.
In 1997, Teepe's entered into an operating lease for some facilities with
Teepe, Ltd., of which Scott W. Teepe, Sr. and Steven M. Teepe each own 50%. The
lease expires in August 2003 with an option to renew for two five-year terms.
The lease calls for monthly lease payments of approximately $5,000. Total rent
paid under this lease was $18,000 and $55,000 in 1997 and 1998, respectively.
Future minimum yearly lease payments under this lease are $60,000 for 1999
through 2003. AMPAM believes that this rent is not in excess of the fair rental
value for this property. Steven M. Teepe's brother, Scott W. Teepe, Sr., is a
director of AMPAM.
As of December 31, 1997 and 1998, Teepe's has an outstanding loan to Steven
M. Teepe. The loan is classified as other receivables for balance sheet
presentation. The loan to Steven M. Teepe had an outstanding balance of $114,000
and $122,940 at December 31, 1997 and 1998, respectively. The loan bears
interest at the blended federal rate (5.9% at December 31, 1997 and 1998). Total
interest income related to this loan was $7,000 for the 1997 and 1998 fiscal
years.
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In July 1998, Teepe's sold some property to an entity controlled by Scott
W. Teepe, Sr. Concurrent with the sale, Teepe's entered into a lease with the
entity for the same property. The lease calls for monthly lease payments of
approximately $12,000.
On March 1, 1995, Croson Ohio sold some facilities to David Croson for
$500,000. Croson Ohio now leases these facilities from David Croson. David
Croson's mortgage on these facilities is guaranteed by Croson Ohio. In 1996,
1997 and 1998, Croson Ohio made yearly lease obligation payments to David Croson
in the amount of $99,600. As of September 30, 1997 and 1998, Croson Ohio owed
David Croson $537,743 and $484,155, respectively. Future minimum lease payments
are $213,000 for 1999, $159,000 for 2000, $106,000 for 2001, $100,000 for 2002,
and $241,000 for each year thereafter. David Croson and his father, James
Croson, are both directors of AMPAM.
Croson Florida leases some property and facilities from James Croson under
a noncancelable operating lease expiring in September 2002. Rent expense under
this Lease was approximately $32,000 for each of the 1996 and 1997 fiscal years,
and $24,000 for the 1998 fiscal year. Future minimum yearly lease payments under
this lease are approximately $22,000. AMPAM believes that these rents are not in
excess of the fair rental value for these properties.
Croson Florida has a Subordinated Note Agreement with James Croson, with a
balance of $434,000 at December 31, 1997 and $0 at December 31, 1998. Interest
is due quarterly at the rate of prime plus 2% (9.75% at December 31, 1998).
Principal is due in full on December 15, 2002.
During the 1996 and 1997 fiscal years, Croson Florida purchased supplies
from Eastway Supplies, Inc., a company in which James Croson had a 35% ownership
interest. Croson Florida's purchases totaled approximately $81,000, $48,000 and
$0 for the 1996, 1997 and 1998 fiscal year, respectively. No amounts were owed
to Croson Florida at December 31, 1997 and 1998. James Croson was also a
director of Eastway Supplies, Inc., until 1996. At December 31, 1997, James
Croson no longer owned any interest in Eastway Supplies, Inc.
Sherwood entered into a construction contract with Poway Land Associates,
LLC, which is 90% owned by Mr. Sherwood. The total contract receivable balance
as of September 30, 1997 and 1998 was approximately $302,000 and $88,000,
respectively. Sherwood recorded construction revenue and gross margin for this
contract of approximately $457,000 and $23,000 for 1997, and approximately
$475,000 and $(112,000) for 1998, respectively. Mr. Sherwood is a director of
AMPAM.
Poway Land Associates, LLC, leases some facilities to Sherwood. Amounts
paid through this lease were $78,000 for the 1997 fiscal year and $97,000 for
the 1998 fiscal year. Future minimum lease payments under the lease, which
expire in May 2003 are $126,000 for 1999, $129,000 for 2000, $133,000 for 2001,
$137,000 for 2002, and $129,000 for 2003. AMPAM believes that the leases are not
in excess of fair rental value for these facilities.
As of September 30, 1998 and 1997, Mr. Sherwood had an outstanding loan to
Sherwood with a balance of $63,000 and $83,000, respectively. The indebtedness
was originally incurred in June 1997.
Miller purchased various materials and supplies from North Georgia Supply
and Appliance Company, a company in which Joseph H. Miller is a part owner.
Miller also bills salaries, insurance, and office supplies to North Georgia
Supply and Appliance Company. Miller purchased approximately $1,940,000 of
material and supplies from North Georgia Supply and Appliance Company in 1997,
and $3,048,000 in 1998. Miller had receivables of $195,334 due from North
Georgia Supply and Appliance Company at September 30, 1997 and $8,241 at
September 30, 1998.
Miller leases some facilities from Joseph H. Miller under a lease agreement
that expires on September 30, 2005. Rent expense for the years ended September
30, 1997 and 1998 was $90,000. Future yearly lease payments for fiscal years
1999 through 2005 are $90,000. AMPAM believes that this rent is not in excess of
the fair rental value for this property. Joseph E. Miller, a director of AMPAM,
is the son of Joseph H. Miller.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of AMPAM's common stock, by (i) all persons known to AMPAM to be the
beneficial owner of 5% or more of the common stock, (ii) each director and
nominee for director, (iii) each executive officer and (iv) all executive
officers and directors as a group. Unless otherwise indicated, the address of
each person is c/o American Plumbing & Mechanical, Inc., 1502 Augusta, Suite
425, Houston, Texas 77057. All persons listed have sole voting and investment
power with respect to their shares unless otherwise indicated.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
------------------------
SHARES PERCENT
----------- --------
<S> <C> <C>
Sterling City Capital, LLC.................................. --(2) --
C. Byron Snyder............................................. --(2) --
Robert A. Christianson...................................... 965,166(3) 8.9
Robert C. Richey............................................ 1,562,230(4) 14.5
David C. Baggett............................................ 300,000(5) 2.8
David A. Croson(6).......................................... 720,334 6.7
James A. Croson............................................. 463,225 4.3
Joseph E. Miller(7)......................................... 300,461 2.8
Albert W. Niemi, Jr.(8)..................................... -- --
Susan O. Rheney(9).......................................... -- --
Robert W. Sherwood.......................................... 294,120 2.7
Sam B. Sherwood............................................. 169,451(10) 1.6
Scott W. Teepe, Sr.(11)..................................... 532,760 4.9
---------- ----
All executive officers and directors as a group (10
persons).................................................. 5,307,747 49.1
</TABLE>
- ---------------
(1) Assumes conversion of the 1,048,820 shares of preferred stock into the
same number of shares of common stock. Does not assume the conversion of
2,423,517 shares of restricted common stock which converts on a
one-for-one basis into common stock upon the occurrence of an initial
public offering or significant corporate event.
(2) Excludes 1,598,901 shares of restricted common stock owned by Sterling City
Capital, LLC.
(3) Excludes 108,372 shares of restricted common stock.
(4) Of these shares, 1,412,230 are held by the Robert C. Richey Trust and
150,000 shares are held by Robert C. Richey. Excludes 54,186 shares of
restricted common stock held by Robert C. Richey.
(5) Excludes 108,372 shares of restricted common stock.
(6) Excludes 76,928 shares of common stock that AMPAM has agreed to contribute
to deferred compensation plans for the benefit of some of the employees of
Croson Ohio.
(7) Excludes 5,880 shares of common stock that AMPAM has agreed to contribute
to a deferred compensation plan for the benefit of some of the employees of
Miller.
(8) Southern Methodist University, 6212 Bishop Blvd., Room 200A, Dallas, TX
75275.
(9) The Sterling Group, 8 Greenway Plaza, Suite 702, Houston, TX 77046.
(10) All of these shares are held by the Sam B. Sherwood and Vicki S. Sherwood
Trust.
(11) Excludes 10,000 of the 20,000 shares of common stock that AMPAM has agreed
to contribute to a deferred compensation plan for the benefit of some of
the employees of Teepe's.
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DESCRIPTION OF OTHER INDEBTEDNESS
Assuming the original issuance of the notes had occurred on March 31, 1999,
AMPAM's indebtedness would have consisted of approximately $3.1 million of
capital lease obligations. In addition AMPAM will be able to borrow up to $95.0
million under its credit facility, subject to the conditions set forth in the
credit facility. The terms of our credit facility are substantially as follows:
Commitment; Interest Rates. The credit facility is a senior secured
revolving credit facility in an aggregate principal amount of $95 million which
includes a sublimit for the issuance of standby letters of credit. Amounts
borrowed under the credit facility were used to fund a part of the cash portion
of the acquisition consideration and will be used to fund future acquisitions
and to provide financing for general corporate purposes. The credit facility
bears interest, at the option of AMPAM, at the base rate of the arranging bank
plus an applicable margin or at LIBOR plus an applicable margin. The applicable
margin will fluctuate based on AMPAM's ratio of funded debt to EBITDA. The
applicable margin will be between 1.50% and 2.50% above LIBOR or 0.00% and 1.00%
above the arranging banks base rate.
Repayment; Maturity. Interest will be payable no less frequently than
quarterly in arrears. The term of the credit facility will be three years from
the date of the closing of the acquisitions (April 1, 1999), and all principal
amounts borrowed thereunder will be payable in full at maturity.
Security and Guarantees. The obligations of AMPAM under the credit facility
are secured by a first priority perfected security interest in (1) all the
accounts receivable, inventory, equipment and other personal property of AMPAM
and (2) all of the capital stock owned by AMPAM of its existing or later-formed
domestic subsidiaries. Also, the obligations of AMPAM are guaranteed by the
founding companies.
Prepayments. AMPAM is required to make prepayments or commitment reductions
on the credit facility in an amount equal to:
- 100% of the cash proceeds from any property insurance recoveries not
promptly applied toward the repair or replacement of the damaged
property;
- 100% of the net proceeds of the sale of any equity securities; and
- 100% of the net proceeds of any public or private debt financing.
Conditions and Covenants. The obligations of the lenders under the credit
facility are subject to the satisfaction of conditions precedent customary under
similar credit facilities or otherwise appropriate under the circumstances.
AMPAM is subject to customary negative covenants contained in the credit
facility, including without limitation covenants that restrict, subject to
specified exceptions:
- the incurrence of additional indebtedness;
- asset sales;
- capital expenditures;
- mergers, acquisitions, consolidations and liquidations;
- transactions with affiliates;
- permitted investments; and
- the ability of AMPAM to make various payments (including payments of the
cash portion of the additional consideration and for redemption of common
stock), to incur guaranty obligations and to incur additional liens.
The credit facility also contains customary affirmative covenants, including:
- the delivery of financial statements, reports, accountants' letters,
projections, officers' certificates and other information requested by
the lenders;
- the continuation of business and maintenance of material rights and
privileges;
- the payment of other obligations;
- maintenance of property and insurance;
- maintenance of books and records;
- compliance with environmental laws;
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<PAGE> 88
- the right of the lenders to inspect AMPAM's property and books; and
- notice of defaults, litigation and other material events.
In addition, the credit facility requires AMPAM to maintain compliance
with a number of specified financial covenants including:
- a maximum ratio of funded total debt to EBITDA of no more than 4.0 to 1.0
calculated on a rolling four quarter basis;
- a maximum ratio of funded senior debt to EBITDA of no more than 2.5 to
1.0 calculated on a rolling four quarter basis;
- a minimum fixed charge coverage ratio of at least 1.0x to 1.25x
calculated on a rolling four quarter basis; and
- a minimum net worth with quarterly step-ups equal to 75% of positive net
income and 100% of net proceeds from equity issuances.
Events of Default. The credit facility includes events of default that are
usual and customary under similar credit facilities, including without
limitation, failure to pay principal, failure to pay interest or fees, cross
default on other indebtedness:
- change of control of AMPAM;
- breach of covenants;
- material judgments rendered against AMPAM;
- ERISA events; and
- a material inaccuracy in any representation or warranty. The occurrence
of any of these events of default could result in the acceleration of
AMPAM's obligations under the credit facility which, in turn, could have
a material adverse effect on AMPAM's operations.
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DESCRIPTION OF THE NOTES
You can find the definitions of capitalized terms used in the following
description under the subheading "-- Certain Definitions." In this description,
the words "AMPAM," "we," "our," "ours," and "us" refers only to American
Plumbing & Mechanical, Inc. and not to any of its subsidiaries.
We will issue the exchange notes under an indenture among AMPAM, the
guarantors and State Street Bank and Trust Company, as trustee. The terms of the
notes include those stated in the indenture and those made part of the indenture
by reference to the Trust Indenture Act of 1939.
The following description is a summary of the material provisions of the
indenture. It does not restate the indenture in its entirety. We urge you to
read the indenture because it, and not this description, defines your rights as
holders of these notes. We have filed a copy of the indenture as an exhibit to
the registration statement which includes this prospectus.
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
THE NOTES
These notes:
- are general obligations of AMPAM;
- are subordinated in right of payment to all existing and future Senior
Indebtedness of AMPAM;
- are senior in right of payment to any future Subordinated Indebtedness of
AMPAM; and
- are fully and unconditionally guaranteed by the guarantors.
THE GUARANTEES
These notes are guaranteed by all of the current direct subsidiaries of
AMPAM.
The guarantees of these notes:
- are general obligations of each guarantor;
- are subordinated in right of payment to all existing and future Guarantor
Senior Indebtedness; and
- are senior in right of payment to any future Subordinated Indebtedness of
each guarantor.
As of the date of the indenture, all of our subsidiaries were Restricted
Subsidiaries. However, under the circumstances described below, we will be
permitted to designate some of our subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants in the indenture. Unrestricted Subsidiaries will not guarantee these
notes.
As of the date of this prospectus, all of our subsidiaries were guarantors
of these notes. It is possible that in the future not all of our Restricted
Subsidiaries will guarantee these notes. In the event of a bankruptcy,
liquidation or reorganization of any of these non-guarantor subsidiaries, these
non-guarantor subsidiaries will pay the holders of their debt and their trade
creditors before they will be able to distribute any of their assets to us.
MATURITY, INTEREST AND PRINCIPAL
We will issue exchange notes with a maximum aggregate principal amount of
$125 million. We will issue exchange notes in denominations of $1,000 and
integral multiples of $1,000. The exchange notes will mature on October 15,
2008.
Interest on these notes will accrue at the rate of 11 5/8% per year and
will be payable semi-annually in arrears on April 15 and October 15, commencing
on October 15, 1999. We will make each interest
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<PAGE> 90
payment to the holders of record of these notes on the April 1 and October 1
immediately before each payment date.
Interest on these notes will accrue from the date the existing notes were
issued or, if interest has already been paid, from the date it was most recently
paid. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
OPTIONAL REDEMPTION
After April 15, 2004, we may redeem all or a part of these notes upon not
less than 30 nor more than 60 days' notice, at the redemption prices (expressed
as percentages of principal amount) set forth below, plus accrued and unpaid
interest, if any, to the redemption date, if redeemed during the 12-month period
beginning April 15 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2004........................................................ 106.000%
2005........................................................ 104.000%
2006........................................................ 102.000%
2007 and thereafter......................................... 100.000%
</TABLE>
In addition, at any time, or from time to time, on or prior to April 15,
2002, AMPAM may, at its option, use the net cash proceeds of one or more Public
Equity Offerings to redeem up to an aggregate of 35% of the principal amount of
the notes originally issued, at a redemption price equal to 111.625% of the
principal amount of the notes plus accrued and unpaid interest, if any, thereon
to the redemption date; if that at least 65% of the originally issued principal
amount of notes remains outstanding immediately after the occurrence of this
redemption. In order to effect this redemption with the proceeds of any Public
Equity Offering, AMPAM must consummate this redemption not later than 60 days
after the closing of any Public Equity Offering.
SELECTION AND NOTICE
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
- if the notes are listed, in compliance with the requirements of the
principal national securities exchange on which the notes are listed; or
- if the notes are not listed, on a pro rata basis, by lot or by any method
the trustee shall determine to be fair and appropriate.
No notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each holder of notes to be redeemed at its registered
address.
If any note is to be redeemed in part only, the notice of redemption that
relates to that note shall state the portion of the principal amount to be
redeemed. A new note in principal amount equal to the unredeemed portion of the
original note will be issued in the name of the holder of the original note upon
cancellation of the original note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on notes or portions of them called for redemption, unless AMPAM defaults
in the payment of the redemption price.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, AMPAM shall be obligated to
make an offer to purchase all of the outstanding notes at a purchase price equal
to 101% of the principal amount of the
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notes plus accrued and unpaid interest, if any, on the notes to the date the
offer is completed. AMPAM shall be required to purchase all notes properly
tendered and not withdrawn.
In order to effect a Change of Control offer, AMPAM must mail to each
holder of notes notice of the Change of Control offer no later than 30 days
after the Change of Control takes place. We must complete the offer on a
business day not less than 30 days nor more than 60 days after the mailing of
the notice of the Change of Control. We are required to keep the offer open for
at least 20 business days. The notice governs the terms of the offer and states
the procedures that holders of notes must follow to accept the offer.
If a Change of Control offer is made, AMPAM cannot give any assurance that
it will have available funds sufficient to pay the purchase price for all of the
notes that might be delivered by holders of notes seeking to accept the Change
of Control offer. In addition, AMPAM cannot give any assurance that its debt
instruments will permit an offer to be made. AMPAM's credit facility does not
permit AMPAM to make a Change of Control offer. In order to make this type of
offer, AMPAM would be required to pay off the credit facility in full or seek a
waiver from the lenders under the credit facility to allow AMPAM to make the
Change of Control offer.
The occurrence of a Change of Control is also an event of default under the
credit facility and would entitle the lenders under the credit facility to
accelerate all amounts owing under the credit facility. Any future credit
agreements or other agreements relating to Senior Indebtedness to which AMPAM
becomes a party may contain similar restrictions and provisions. Moreover, the
exercise by the holders of their rights to require AMPAM to repurchase the notes
could cause a default under indebtedness of the type described, even if the
Change of Control itself does not, due to the financial effect of this type of
repurchase on AMPAM. AMPAM's failure to make a Change of Control offer, even if
prohibited by AMPAM's debt instruments, would constitute a default under the
indenture. See "Risk Factors."
AMPAM shall not be required to make a Change of Control offer upon a Change
of Control if a third party makes the Change of Control offer at the same
purchase price, at the same time and otherwise in compliance with the
requirements applicable to a Change of Control offer made by AMPAM and purchases
all notes validly tendered and not withdrawn under a Change of Control offer.
In addition, AMPAM shall not be required to make a Change of Control offer,
as provided above, if, in connection with or in contemplation of any Change of
Control, it has made an offer to purchase any and all notes validly tendered at
a cash price equal to or higher than the Change of Control purchase price and
has purchased all notes properly tendered in accordance with the terms of this
alternate offer.
The provisions of the indenture may not afford Note holders protection in
the event of a highly leveraged transaction, reorganization, restructuring,
merger or similar transaction involving AMPAM if the transaction is not a
transaction defined as a "Change of Control." The existence of a holder's right
to require AMPAM to repurchase the notes upon a Change of Control may deter a
third party from acquiring AMPAM in a transaction that constitutes, or results
in, a Change of Control.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of AMPAM and its Subsidiaries taken as a whole. Although there is
a limited body of case law interpreting the phrase "substantially all," there is
no precise established definition of the phrase under applicable law.
Accordingly, the ability of a holder of notes to require AMPAM to repurchase
their notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of AMPAM and its Subsidiaries taken
as a whole may be uncertain.
AMPAM will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations, to the extent these laws or regulations are
applicable, in connection with a repurchase of notes resulting from a Change of
Control. Any violation of the provisions of the indenture relating to this type
of offer shall not be considered to be a default or an event of default.
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<PAGE> 92
SUBORDINATION
The payment of principal, premium and interest, if any, on these notes will
be subordinated to the prior payment in full of all Senior Indebtedness of
AMPAM. The credit facility provides that the subordination provisions of the
notes may not be modified or amended without the prior written consent of the
lenders under the credit facility.
The holders of Senior Indebtedness (including, in the case of Designated
Senior Indebtedness, any interest accruing subsequent to the filing of a
petition for bankruptcy regardless of whether interest is an allowed claim in
the bankruptcy proceeding) will be entitled to receive payment in full before
the holders of notes will be entitled to receive any payment related to the
notes (except that holders of notes may receive and retain Permitted Junior
Securities and payments made from the trust described under "-- Legal Defeasance
or Covenant Defeasance of Indenture"), in the event of any distribution to
creditors of AMPAM:
- in a liquidation, dissolution or winding up of AMPAM;
- in any insolvency or bankruptcy case or proceeding or any receivership,
liquidation, reorganization or other similar case or proceeding relating
to AMPAM or its assets;
- in an assignment for the benefit of creditors; or
- in any marshalling of our assets and liabilities.
We also may not make any payment in respect of the notes (except in
Permitted Junior Securities or from the trust described under "-- Legal
Defeasance or Covenant Defeasance of Indenture") if:
- a payment default on Senior Indebtedness occurs and is continuing and the
trustee and AMPAM receive a notice from representatives of the holders of
the Senior Indebtedness; or
- any other default occurs and is continuing on Designated Senior
Indebtedness that permits holders of the Designated Senior Indebtedness
to accelerate its maturity and the earlier of either of the following;
(a) the trustee and AMPAM receive a notice of the default from
representatives of the holders of the Designated Senior Indebtedness or
(b) if the default is the result of the acceleration of the maturity of
the notes, the date of the acceleration.
Payments on the notes may and shall be resumed:
- in the case of a payment default, upon the date on which the default is
cured, waived or ceases to exist or the Senior Indebtedness is paid in
full or indefeasibly discharged; and
- in case of a nonpayment default, the earlier of
(a) the date on which the nonpayment default is cured, waived or ceases
to exist or the Senior Indebtedness is paid in full or indefeasibly
discharged;
(b) 179 days after the date on which the notice of default is received
or the date of acceleration, unless the maturity of any Designated
Senior Indebtedness has been accelerated; or
(c) the receipt of notice from those representatives of the holders of
Designated Senior Indebtedness who gave the original notice of default
stating that payments may be resumed.
No new notice of default may be delivered unless and until 360 days have
elapsed since the effectiveness of the immediately prior notice of default. No
nonpayment default shall be the basis for a subsequent notice of default unless
that default will have been cured or waived for a period of not less than 90
days.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of AMPAM, holders of these notes
may recover less ratably than creditors of AMPAM who are holders of Senior
Indebtedness.
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On a pro forma basis after giving effect to the sale of the notes and the
application of the estimated net proceeds therefrom, AMPAM and the guarantors
would have had, without duplication, approximately $3.5 million of Senior
Indebtedness and guarantor Senior Indebtedness outstanding as of December 31,
1998. The indenture will limit, but not prohibit, the incurrence by AMPAM of
additional Indebtedness which is senior to the notes and will prohibit the
incurrence by AMPAM of Indebtedness which is subordinated in right of payment to
any other indebtedness of AMPAM and senior in right of payment to the notes.
GUARANTEES
The guarantors will jointly and severally guarantee our obligations under
these notes. The guarantees are full and unconditional. Each guarantee will be
subordinated to the prior payment in full of all guarantor Senior Indebtedness.
The obligations of each guarantor under its guarantee will be limited as
necessary to prevent that guarantee from constituting a fraudulent conveyance
under applicable law.
Each guarantor may consolidate with or merge into or sell its assets to us
or another guarantor without limitation, or with other persons upon the terms
and conditions described in the indenture. See "-- Consolidation, Merger, Sale
of Assets, Etc." In the event all or substantially all of the assets or the
capital stock of a guarantor is sold or the guarantor is designated an
Unrestricted Subsidiary as allowed by the terms of the indenture, then the
guarantors guarantee will be automatically and unconditionally discharged and
released.
Separate financial statements of the guarantors are not included in this
prospectus because the guarantors are jointly and severally liable with respect
to AMPAM's obligations under the notes, and the aggregate net assets, earnings
and equity of the guarantors and AMPAM are substantially equivalent to the net
assets, earnings and equity of AMPAM on a consolidated basis.
MATERIAL COVENANTS
LIMITATION ON INDEBTEDNESS. AMPAM will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or in any manner become directly or indirectly liable,
contingently or otherwise for the payment of any Indebtedness (including any
Acquired Indebtedness) other than Permitted Indebtedness; provided, however,
that AMPAM and any guarantor will be permitted to incur Indebtedness (including
Acquired Indebtedness), if:
- the Consolidated Fixed Charge Coverage Ratio of AMPAM is at least 2.0 to
1; and
- no default or event of default would occur or be continuing.
LIMITATION ON RESTRICTED PAYMENTS. AMPAM will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other distribution or
payment on or in respect of capital stock of AMPAM or any of its
Restricted Subsidiaries or make any payment to the direct or indirect
holders of capital stock of AMPAM or any of its Restricted Subsidiaries
(other than dividends or distributions payable solely in capital stock
of AMPAM (other than Redeemable capital stock or in options, warrants or
other rights to purchase capital stock of AMPAM (other than Redeemable
capital stock)) (other than the declaration or payment of dividends or
other distributions to the extent declared or paid to AMPAM or any
guarantor);
(b) purchase, redeem or otherwise acquire or retire for value any
capital stock of AMPAM or any of its Restricted Subsidiaries or any
options, warrants or other rights to purchase any capital stock (other
than any securities owned by AMPAM or a Restricted Subsidiary);
(c) make any principal payment on, or purchase, defease, redeem or
otherwise acquire or retire for value, prior to any scheduled maturity,
scheduled repayment, scheduled sinking fund payment or other Stated
Maturity, any Subordinated Indebtedness (other than any Subordinated
Indebtedness owed to AMPAM or a guarantor); or
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(d) make any Investment (other than any Permitted Investment) in any
person (payments or Investments described in the preceding clauses (a),
(b), (c) and (d) are collectively referred to as "Restricted Payments"),
unless, after giving effect to the proposed Restricted Payment (the
amount of any Restricted Payment, if other than cash, shall be the fair
market value of the asset(s) proposed to be transferred by AMPAM or the
Restricted Subsidiary, as the case may be, under the Restricted
Payment):
(A) no default or event of default shall have occurred and be
continuing;
(B) after giving pro forma effect to the Restricted Payment, AMPAM
would be able to incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in accordance with the "Limitation on
Indebtedness" covenant described above; and
(C) the aggregate amount of all Restricted Payments declared or made
from and after the Issue Date would not exceed the sum of:
(1) 50% of the aggregate Consolidated Net Income of AMPAM accrued
on a cumulative basis during the period beginning on April 1,
1999 and ending on the last day of the fiscal quarter ending
immediately prior to the date of the proposed Restricted Payment
for which consolidated financial statements are available (or, if
the aggregate cumulative Consolidated Net Income of AMPAM for the
period shall be a loss, minus 100% of the loss);
(2) the aggregate net cash proceeds received by AMPAM as capital
contributions to AMPAM after the Issue Date and which constitute
shareholders' equity of AMPAM in accordance with GAAP;
(3) the aggregate net cash proceeds received by AMPAM from the
issuance or sale of capital stock, excluding redeemable capital
stock, of AMPAM to any person other than to a Subsidiary of AMPAM
after the Issue Date;
(4) the aggregate net cash proceeds received by AMPAM from any
person, other than a Subsidiary of AMPAM, upon the exercise of
any options, warrants or rights to purchase shares of capital
stock (other than redeemable capital stock) of AMPAM after the
Issue Date;
(5) the aggregate net cash proceeds received after the Issue Date
by AMPAM from any person, other than a subsidiary of AMPAM, from
the issuance and sale of debt securities that have been converted
into or exchanged for capital stock of AMPAM (other than
Redeemable capital stock) to the extent the debt securities were
originally sold for cash, plus the aggregate amount of cash
received by AMPAM, other than from a subsidiary of AMPAM, at the
time of the conversion or exchange;
(6) to the extent not otherwise included in AMPAM's Consolidated
Net Income, in the case of the disposition or repayment of any
Investment constituting a Restricted Payment after the Issue
Date, an amount equal to the lesser of the return of capital with
respect to the Investment and the initial amount of the
Investment, in either case, less the cost of the disposition of
the Investment;
(7) so long as the Designation was treated as a Restricted
Payment made after the Issue Date, with respect to any
Unrestricted Subsidiary that has been redesignated as a
Restricted Subsidiary after the Issue Date in accordance with "--
Limitation on Designations of Unrestricted Subsidiaries" below,
the fair market value of AMPAM's interest in the Subsidiary at
the time of the redesignation. However, this amount shall not in
any case exceed the Designation Amount with respect to the
Restricted Subsidiary upon its Designation; and
(8) $4.0 million.
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For purposes of the preceding clause (C)(4), the value of the aggregate net
proceeds received by AMPAM upon the issuance of capital stock upon the exercise
of options, warrants or rights will be the net cash proceeds received upon the
issuance of the options, warrants or rights plus the incremental amount received
by AMPAM upon the exercise of the options, warrants or rights.
None of the foregoing provisions will prohibit, so long as, in the case of
clauses (5) and (6) below, there is no default or event of default continuing:
(1) the payment of any dividend or distribution within 60 days after the
date of its declaration, if at the date of declaration this payment
would be permitted by the first paragraph of this covenant;
(2) the redemption, repurchase or other acquisition or retirement of any
shares of any class of capital stock of AMPAM in exchange for, or out of
the net cash proceeds of a substantially concurrent issue and sale of,
other shares of capital stock of AMPAM (other than Redeemable capital
stock) to any person (other than to a Subsidiary of AMPAM); provided,
however, that the net cash proceeds are excluded from clause (C) above;
(3) any redemption, repurchase or other acquisition or retirement of
Subordinated Indebtedness of AMPAM in exchange for, or out of the net
cash proceeds of a substantially concurrent issue and sale of, (A)
capital stock (other than redeemable capital stock) of AMPAM to any
person (other than to a Subsidiary of AMPAM); provided, however, that
any net cash proceeds of this type are excluded from clause (C) of the
first paragraph of this covenant; or (B) other Subordinated Indebtedness
of AMPAM which:
- has no scheduled principal payment prior to the 91st day after the
Maturity Date;
- has an Average Life to Stated Maturity greater than the remaining
Average Life to Stated Maturity of the notes; and
- is subordinated to the notes to at least the same extent as the
Subordinated Indebtedness so purchased, exchanged, redeemed,
acquired or retired;
(4) payments to purchase capital stock of AMPAM from management or
employees of AMPAM or any of its Subsidiaries or their authorized
representatives, upon the death, disability or termination of employment
of these employees, in aggregate amounts under this clause (4) not to
exceed $1.0 million in any fiscal year of AMPAM;
(5) the payment of regularly scheduled semi-annual dividends in respect
of the Seller Preferred Stock in an aggregate amount not to exceed $1.4
million in any one year;
(6) the payment of the aggregate liquidation preference of the Seller
Preferred Stock at final maturity in an aggregate amount not to exceed
$14.0 million;
(7) the application of the net proceeds of the private placement of
notes to which this registration statement relates;
(8) cash payments in lieu of fractional shares issuable as dividends on
preferred securities of AMPAM or any of its Restricted Subsidiaries, in
aggregate amounts under this clause (8) not to exceed $20,000 in any
fiscal year of AMPAM;
(9) repurchases of capital stock considered to have occurred upon
exercise of stock options if that capital stock represents a portion of
the exercise price of options previously described;
(10) the payment of the redemption price of rights issued through any
shareholders, rights plan not in excess of $0.05 per right and not in
excess of $1.0 million in the aggregate;
(11) the payment of "Additional Consideration" (as defined in the
Acquisition Agreements) in the manner and in the amounts as provided in
the Acquisition Agreements as in effect on the Issue Date and described
in the Offering Memorandum, in an aggregate amount not to exceed
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$16.2 million; provided, however, that AMPAM's Consolidated Fixed Charge
Coverage Ratio at that time is at least 3.25 to 1; and
(12) the payment of amounts constituting post-closing adjustments to the
former stockholders of the founding companies in respect of (A) working
capital adjustments for which AMPAM received assets of comparable value
and (B) unpaid cash consideration reflected in the pro forma financial
statements of AMPAM on the Issue Date, in each case, in accordance with
the Acquisition Agreements as in effect on the Issue Date.
Any payments made pursuant to clauses (1), (4), (6), (10) and (11) of this
paragraph shall be taken into account in calculating the amount of Restricted
Payments made from and after the Issue Date.
In computing Consolidated Net Income of AMPAM under clause (C)(1) of the
first paragraph of this covenant:
- AMPAM shall use audited financial statements for the portions of the
relevant period for which audited financial statements are available on
the date of determination and unaudited financial statements and other
current financial data based on the books and records of AMPAM for the
remaining portion of that period; and
- AMPAM shall be permitted to rely in good faith on the financial
statements and other financial data derived from the books and records of
AMPAM that are available on the date of determination.
If AMPAM makes a Restricted Payment which, at the time the Restricted Payment is
made would in the good faith determination of AMPAM be permitted under the
requirements of the indenture, that Restricted Payment shall be considered to
have been made in compliance with the indenture notwithstanding any subsequent
adjustments made in good faith to AMPAM's financial statements affecting
Consolidated Net Income of AMPAM for any period.
LIMITATION ON LIENS. AMPAM will not, and will not permit any of its
Restricted Subsidiaries to, directly and indirectly, create, incur, assume or
suffer to exist any Liens of any kind securing Indebtedness upon any of its
property or assets, or any proceeds therefrom, unless the notes are equally and
ratably secured (except that Liens securing Subordinated Indebtedness shall be
expressly subordinate to Liens securing the notes to the same extent that
Subordinated Indebtedness is subordinate to the notes), except for:
- Liens securing Senior Indebtedness and guarantor Senior Indebtedness;
- Liens securing the notes;
- Liens securing Indebtedness which is incurred to refinance Indebtedness
which has been secured by a Lien (other than a Lien in favor of AMPAM or
a Restricted Subsidiary) permitted under the indenture and which has been
incurred in accordance with the provisions of the indenture; provided,
however, that these Liens do not extend to or cover any property or
assets of AMPAM or any of its Restricted Subsidiaries not securing the
Indebtedness so refinanced; and
- Permitted Liens.
DISPOSITION OF PROCEEDS OF ASSET SALES. AMPAM will not, and will not permit
any of its Restricted Subsidiaries to, make any Asset Sale unless:
- AMPAM or a Restricted Subsidiary, as the case may be, receives
consideration at the time of the Asset Sale at least equal to the fair
market value of the shares or assets sold or otherwise disposed of; and
- at least 75% of the consideration in the Asset Sale, plus all other Asset
Sales since the Issue Date on a cumulative basis, consists of cash or
Cash Equivalents;
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For purposes of this provision, the following shall be regarded as cash:
- the amount of any Indebtedness (as shown on the most recent balance sheet
of AMPAM or the Restricted Subsidiary) of AMPAM or a Restricted
Subsidiary that is assumed by the transferee of the assets as a result of
which AMPAM and its Restricted Subsidiaries are no longer liable thereon;
and
- any securities, notes or other obligations received by AMPAM or a
Restricted Subsidiary from a transferee that are converted within 60 days
into cash or Cash Equivalents (to the extent of the cash or Cash
Equivalents received).
Within 360 days after the receipt of any Net Cash Proceeds from an Asset
Sale, AMPAM or the Restricted Subsidiary may apply the Net Cash Proceeds at its
option:
- to repay, and permanently reduce the commitments under Senior
Indebtedness or Guarantor Senior Indebtedness;
- to an investment in properties and assets that replace the properties and
assets that were the subject of an Asset Sale;
- to an investment in properties and assets that are used or useful in the
business of AMPAM and its Restricted Subsidiaries conducted at that time;
or
- to an investment in capital stock of a person, the principal portion of
whose assets qualify under either of the previous two points in
businesses reasonably related thereto or in capital stock of a person,
the principal portion of whose assets consist of these types property or
assets.
Any Net Cash Proceeds from any Asset Sale that are neither used to repay,
and permanently reduce the commitments under, Senior Indebtedness or Guarantor
Senior Indebtedness in accordance with their terms nor invested in replacement
assets within this 360-day period will constitute "Excess Proceeds" subject to
disposition as provided below. However, that any Net Cash Proceeds from any
Asset Sale which are used to repay Senior Indebtedness or Guarantor Senior
Indebtedness but are subsequently invested in replacement assets within this
360-day period will not constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds equals or exceeds $10 million,
AMPAM shall make an offer to purchase, from all holders of the notes and any
then outstanding Pari Passu Indebtedness required to be repurchased or repaid on
a permanent basis in connection with an Asset Sale, an aggregate principal
amount of notes and any then outstanding Pari Passu Indebtedness equal to the
Excess Proceeds as follows:
- (A) AMPAM shall make an offer to purchase from all holders of the notes
in accordance with the procedures set forth in the indenture the maximum
principal amount (expressed as a multiple of $1,000) of notes that may be
purchased out of an amount equal to the product of the Excess Proceeds,
multiplied by a fraction, the numerator of which is the outstanding
principal amount of the notes and the denominator of which is the sum of
the outstanding principal amount of the notes and Pari Passu
Indebtedness, if any of all notes tendered, and (B) to the extent
required by the Pari Passu Indebtedness and provided there is a permanent
reduction in the principal amount of the Pari Passu Indebtedness, AMPAM
shall make an offer to purchase Pari Passu Indebtedness in an amount
equal to the excess of the Excess Proceeds over the Asset Sale offer
amount;
- The offer price for the notes shall be payable in cash in an amount equal
to 100% of the principal amount of the notes tendered in connection with
an Asset Sale Offer, plus accrued and unpaid interest, if any, to the
date the Asset Sale Offer is consummated, in accordance with the
procedures set forth in the indenture. To the extent that the aggregate
Offered Price of the notes tendered in connection with an Asset Sale
Offer is less than the Asset Sale Offer Amount relating thereto or the
aggregate amount of the Pari Passu Indebtedness that is purchased or
repaid in connection with the Pari Passu Offer is less than the Pari
Passu Indebtedness Amount, AMPAM may use the Asset
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Sale Deficiency for general corporate purposes, subject to the
limitations contained in the indenture; and
- If the aggregate total price of notes validly tendered and not withdrawn
by holders exceeds the amount offered, notes to be purchased will be
selected on a pro rata basis. Upon completion of the offers described
above, the amount of Excess Proceeds shall be reset to zero.
AMPAM will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations, to the extent these laws and regulations are
applicable, in the event that an Asset Sale occurs and AMPAM is required to
purchase notes as described above, and any violation of the provisions of the
indenture relating to the offer described above occurring as a result of this
compliance shall not be considered a default or an event of default.
LIMITATION ON ISSUANCES AND SALES OF RESTRICTED SUBSIDIARY STOCK. AMPAM
will not
- permit any Restricted Subsidiary to issue any capital stock (other than
to AMPAM or a Restricted Subsidiary); and
- permit any Person (other than AMPAM and/or one or more Restricted
Subsidiaries) to own any capital stock of any Restricted Subsidiary.
This covenant shall not prohibit:
- the issuance and sale of all, but not less than all, of the issued and
outstanding capital stock of any Restricted Subsidiary owned by AMPAM or
any of its Restricted Subsidiaries in compliance with the other
provisions of the indenture; or
- the ownership by directors of directors' qualifying shares or the
ownership by foreign nationals of capital stock of any Restricted
Subsidiary, to the extent mandated by applicable law.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. AMPAM will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, enter into
any transaction or series of related transactions (including, without
limitation, the sale, transfer, disposition, purchase, exchange or lease of
assets, property or services) with, or for the benefit of, any of its
Affiliates, except:
(a) on terms that are no less favorable to AMPAM or the Restricted
Subsidiary, as the case may be, than those which could have been
obtained at the time in a comparable transaction or series of related
transactions from persons who are not Affiliates of AMPAM,
(b) with respect to a transaction or series of related transactions
involving aggregate payments or value equal to or greater than $5
million, AMPAM shall have delivered an officers' certificate to the
trustee certifying that this transaction or transactions comply with the
preceding clause (a) and have been approved by the Disinterested Members
of the Board of Directors of AMPAM; provided, however that AMPAM may, if
there are no Disinterested Members of the Board of Directors or at its
option, obtain and deliver to the trustee the written opinion referred
to in clause (c) below in lieu of an officers' certificate and
(c) with respect to a transaction or series of related transactions
involving aggregate payments or value equal to or greater than $10
million, AMPAM shall have delivered to the trustee the officers'
certificate referred to in clause (b) which includes a certification
that this transaction or transactions have been approved by a majority
of the Disinterested Members of the Board of Directors of AMPAM or, in
the event there are no Disinterested Members of the Board of Directors,
that AMPAM has obtained a written opinion from an independent nationally
recognized investment banking firm, accounting firm or appraisal firm,
in each case specializing or having a specialty in the type and subject
matter of the transaction or series of transactions at issue, which
opinion shall be to the effect set forth in clause (a) above or shall
state that SUCH transaction or series of related transactions is fair
from a financial point of view to AMPAM or the Restricted Subsidiary.
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Notwithstanding the foregoing, the restrictions set forth in this covenant shall
not apply to
- transactions between or among AMPAM and its Restricted Subsidiaries;
- customary directors' fees, indemnification and similar arrangements,
consulting fees, employee salaries, bonuses or employment agreements,
compensation or employee benefit arrangements and incentive arrangements
with any officer, director or employee of AMPAM or any Restricted
Subsidiaries entered into in the ordinary course of business;
- any dividends made in compliance with "-- Limitation on Restricted
Payments" above;
- loans and advances to officers, directors and employees of AMPAM or any
Restricted Subsidiary made in the ordinary course of business in an
aggregate amount not to exceed $1,000,000 outstanding at any one time;
- transactions in connection with agreements in effect on the Issue Date;
- written agreements assumed in connection with Asset Acquisitions with
persons who were not Affiliates prior to the transactions; provided,
however, that these agreements were not entered into in connection with
or in contemplation of an Asset Acquisition;
- leases of property or equipment entered into in the ordinary course of
business on terms that are substantially similar to those which could
have been obtained at the time in a comparable transaction with
non-Affiliates; or
- any sale or other issuance for cash of capital stock (other than
Redeemable capital stock) of AMPAM.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. AMPAM will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to:
- pay dividends, in cash or otherwise, or make any other distributions on
or in respect of its capital stock to AMPAM or any other Restricted
Subsidiary,
- pay any Indebtedness owed to AMPAM or any other Restricted Subsidiary,
- make loans or advances to AMPAM or any other Restricted Subsidiary,
- transfer any of its properties or assets to AMPAM or any other Restricted
Subsidiary or
- guarantee any Indebtedness of AMPAM or any other Restricted Subsidiary.
However, the following encumbrances or restrictions are allowed:
- those existing under or by reason of applicable law or any applicable
rule, regulation or order;
- customary nonassignment provisions of any contract or any lease governing
a leasehold interest of AMPAM or any Restricted Subsidiary;
- customary restrictions on transfers of property subject to a Lien
permitted under the indenture (including purchase money Liens permitted
under the indenture);
- any agreement or other instrument of a person acquired by AMPAM or any
Restricted Subsidiary in existence at the time of the acquisition (but
not created in contemplation of such an acquisition), which encumbrance
or restriction is not applicable to any person, or the properties or
assets of any person, other than the person, or the property or assets of
the person, so acquired;
- an agreement entered into for the sale or disposition of capital stock or
assets of a Restricted Subsidiary or an agreement entered into for the
sale of specified assets (in either case, so long as the encumbrance or
restriction, by its terms, terminates on the earlier of the termination
of the agreement or the consummation of the agreement and so long as the
restriction applies only to the capital stock or assets to be sold);
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- any agreement in effect on the Issue Date (including, without limitation,
the credit facility);
- those existing under or by reason of the indenture and the guarantees;
and
- any agreement that amends, extends, refinances, renews or replaces any
agreement described in the foregoing clauses; provided, however, that the
terms and conditions of any agreement of this type are not materially
less favorable to the holders of the notes with respect to these
encumbrances or restrictions than those under the agreement amended,
extended, refinanced, renewed or replaced.
LIMITATION ON DESIGNATIONS OF UNRESTRICTED SUBSIDIARIES. AMPAM may
designate after the Issue Date any Restricted Subsidiary as an "Unrestricted
Subsidiary" under the indenture (a "Designation") only if:
- no default shall have occurred and be continuing at the time of or after
giving effect to a Designation;
- AMPAM would be permitted to make an Investment (other than a Permitted
Investment covered by clause (x) of that definition) at the time of the
Designation pursuant to the first paragraph of "-- Limitation on
Restricted Payments" above in an amount (the "Designation Amount") equal
to the fair market value of AMPAM's interest in the Subsidiary on that
date; and
- AMPAM would be permitted under the indenture to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the covenant
described under "-- Limitation on Indebtedness" at the time of the
Designation (assuming the effectiveness of the Designation).
In the event of any Designation of this type, AMPAM shall be regarded as
having made an Investment constituting a Restricted Payment under the covenant
"-- Limitation on Restricted Payments" for all purposes of the indenture in the
Designation Amount.
AMPAM shall not, and shall not cause or permit any Restricted Subsidiary
to, at any time:
- provide credit support for or subject any of its property or assets
(other than the capital stock of any Unrestricted Subsidiary) to the
satisfaction of, any Indebtedness of any Unrestricted Subsidiary;
- be directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary; or
- be directly or indirectly liable for any Indebtedness which provides that
the holder of that Indebtedness may (upon notice, lapse of time or both)
declare a default thereon or cause payment to be accelerated or payable
prior to its final Stated Maturity upon the occurrence of a default with
respect to any Indebtedness of any Unrestricted Subsidiary.
The Designation of any Subsidiary as an Unrestricted Subsidiary shall
automatically include the Designation of all Subsidiaries of that
Subsidiary as Unrestricted Subsidiaries.
AMPAM may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
- no default shall have occurred and be continuing at the time of and after
giving effect to the Revocation; and
- all Liens and Indebtedness of the Unrestricted Subsidiary outstanding
immediately following the Revocation would, if incurred at that time,
have been permitted to be incurred under the indenture.
All Designations and Revocations must be evidenced by Board Resolutions of
AMPAM delivered to the trustee certifying compliance with the foregoing
provisions.
LIMITATION ON THE ISSUANCE OF SUBORDINATED INDEBTEDNESS. AMPAM will not,
and will not permit any guarantor to, directly or indirectly, incur any
Indebtedness (including Acquired Indebtedness) that is expressly subordinate or
junior in right of payment to any other Indebtedness of AMPAM or that
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guarantor and senior in right of payment to the notes or the guarantee of that
guarantor, as the case may be.
ADDITIONAL SUBSIDIARY GUARANTEES. If AMPAM or any of its Restricted
Subsidiaries acquires, creates or designates another Restricted Subsidiary
organized under the laws of the United States or any of its possessions or
territories, any State of the United States or the District of Columbia, then
this newly acquired, created or designated Restricted Subsidiary shall, within
30 days after the date of its acquisition, creation or designation, whichever is
later, execute and deliver to the trustee a supplemental indenture in form
reasonably satisfactory to the trustee through which that Subsidiary shall
unconditionally guarantee (on a senior subordinated basis) all of AMPAM's
obligations under the notes and the indenture on the terms set forth in the
indenture; provided, however, that this Restricted Subsidiary shall not be
obligated to become a guarantor in the manner set forth above if this Restricted
Subsidiary is not, either individually or when considered in the aggregate with
all other Restricted Subsidiaries that are not guarantors, a Significant
Subsidiary. Thereafter, this Restricted Subsidiary shall be a guarantor for all
purposes of the indenture. Any Restricted Subsidiary that is not a guarantor
shall become a guarantor in the manner provided above within 30 days of that
time as it becomes, either individually or when considered in the aggregate with
all other Restricted Subsidiaries that are not guarantors, a Significant
Subsidiary. AMPAM at its option may also cause any other Restricted Subsidiary
to so become a guarantor.
REPORTING REQUIREMENTS. For so long as the notes are outstanding, whether
or not AMPAM is subject to Section 13(a) or 15(d) of the Exchange Act, or any
successor provisions, AMPAM shall file with the SEC the annual reports,
quarterly reports and other documents which AMPAM would have been required to
file with the SEC under Section 13(a) or 15(d) or any successor provisions if
AMPAM were so subject, these documents to be filed with the SEC on or prior to
the respective dates by which AMPAM would have been required so to file these
documents if AMPAM were so subject. AMPAM shall also in any event within 15 days
after each required filing date file with the trustee, copies of the annual
reports, quarterly reports and other documents which AMPAM would be required to
file with the SEC if the notes were then registered under the Exchange Act and
to make this information available to holders of notes upon request. In
addition, if AMPAM is not subject to the reporting requirements of the Exchange
Act, for so long as any notes remain outstanding, AMPAM will furnish to the
holders of notes and prospective investors, upon their request, the information
required to be delivered under Rule 144A(d)(4) under the Securities Act.
CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
AMPAM will not, in any transaction or series of transactions, merge or
consolidate with or into, or sell, assign, convey, transfer, lease or otherwise
dispose of all or substantially all of its properties and assets to, any person
or persons, and AMPAM will not permit any of its Restricted Subsidiaries to
enter into any transaction of this type or series of transactions if that
transaction or series of transactions, in the aggregate, would result in a sale,
assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of AMPAM and its Restricted
Subsidiaries, on a consolidated basis, to any other person or persons, unless:
- either (1) if the transaction or series of transactions is a merger or
consolidation, AMPAM or the Restricted Subsidiary, as the case may be,
shall be the surviving person of the merger or consolidation, or (2) the
person formed by the consolidation or into which AMPAM or the Restricted
Subsidiary, as the case may be, is merged or to which the properties and
assets of AMPAM or the Restricted Subsidiary, as the case may be, are
disposed of shall be a corporation organized and existing under the laws
of the United States of America, any state or the District of Columbia
and shall expressly assume by a supplemental indenture executed and
delivered to the trustee, in form satisfactory to the trustee, all the
obligations of AMPAM under the notes, the indenture and the registration
rights agreement, and in each case, the indenture shall remain in full
force and effect;
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- immediately after giving effect to the transaction or series of
transactions on a pro forma basis, no default or event of default shall
have occurred and be continuing; and
- except in the case of any merger of AMPAM with any Restricted Subsidiary
or any merger of guarantors, AMPAM or the surviving entity, as the case
may be, after giving effect to the transaction or series of transactions
on a pro forma basis on the assumption that the transaction or
transactions had occurred on the first day of the period of four fiscal
quarters ending immediately prior to the consummation of the transaction
or transactions, with the appropriate adjustments with respect to the
transaction or transactions being included in the pro forma calculation,
could incur $1.00 of additional Indebtedness in accordance with the
"Limitation on Indebtedness" covenant described above.
Upon any consolidation, merger or any sale, assignment, conveyance,
transfer, lease or other disposition in accordance with the immediately
preceding paragraphs, the successor person formed by the consolidation or into
which AMPAM or a Restricted Subsidiary, as the case may be, is merged or the
successor person to which the sale, assignment, conveyance, transfer, lease or
other disposition is made shall succeed to, and be substituted for, and may
exercise every right and power of AMPAM under the notes, the indenture and/or
the registration rights agreement, as the case may be, with the same effect as
if the successor had been named as AMPAM in the notes, the indenture and/or the
registration rights agreement, as the case may be, and, except in the case of a
lease, AMPAM or the Restricted Subsidiary shall be released and discharged from
its obligations under the notes and the indenture.
For all purposes of the indenture and the notes (including, without
limitation, the provision of this covenant and the covenants described in
"-- Material Covenants -- Limitation on Indebtedness," "-- Limitation on
Restricted Payments," and "-- Limitation on Liens"), Subsidiaries of any
surviving person shall, upon the transaction or series of related transactions,
become Restricted Subsidiaries unless and until designated Unrestricted
Subsidiaries under and in accordance with "-- Limitation on Designations of
Unrestricted Subsidiaries" and all Indebtedness, and all Liens on property or
assets, of AMPAM and the Restricted Subsidiaries in existence immediately after
the transaction or series of related transactions will be considered to have
been incurred upon the transaction or series of related transactions.
EVENTS OF DEFAULT
The following are "events of default" under the indenture:
(1) default in the payment of the principal of or premium, if any, when
due and payable, on any of the notes (at Stated Maturity, upon optional
redemption, required purchase or otherwise) (whether or not prohibited
by the subordination provisions of the indenture); or
(2) default in the payment of an installment of interest on any of the
notes, when due and payable, for 30 days (whether or not prohibited by
the subordination provisions of the indenture); or
(3) default in the performance or breach of any covenant or agreement of
AMPAM under the indenture (other than a default in the performance or
breach of a covenant or agreement which is specifically dealt with in
clause (1), (2) or (4)) and this default or breach shall continue for a
period of 30 days after written notice has been given, by certified
mail,
- to AMPAM by the trustee or
- to AMPAM and the trustee by the holders of at least 25% in aggregate
principal amount of the outstanding notes; or
(4) failure by AMPAM to comply with the provisions described under the
captions "Consolidation, Merger and Sale of Assets, Etc.," "-- Material
Covenants -- Disposition of Proceeds of Asset Sales" or "Change of
Control"; or
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(5) default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness under
which AMPAM or any Restricted Subsidiary then has outstanding
Indebtedness in excess of $10 million, individually or in the aggregate,
and
- the default or defaults include a failure to make a payment of
principal,
- the Indebtedness is already due and payable in full or
- the default or defaults have resulted in the acceleration of the
maturity of this Indebtedness;
provided, that if any default described above is cured or waived or any
acceleration rescinded, or the Indebtedness is repaid, within a period
of 10 days from the continuation of the default beyond the applicable
grace period or the occurrence of the acceleration, as the case may be,
the event of default under the indenture and any consequential
acceleration of the notes shall be automatically rescinded, so long as
the rescission does not conflict with any judgment or decree; or
(6) one or more judgments, orders or decrees of any court or regulatory
or administrative agency of competent jurisdiction for the payment of
money in excess of $10 million, either individually or in the aggregate
(net of applicable insurance coverage which is acknowledged in writing
by the insurer or which has been determined to be applicable by a final
nonappealable determination by a court of competent jurisdiction), shall
be entered against AMPAM or any Restricted Subsidiary or any of their
respective properties and shall not be discharged and there shall have
been a period of 60 days after the date on which any period for appeal
has expired and during which a stay of enforcement of this judgment,
order or decree shall not be in effect; or
(7) the entry of a decree or order by a court having jurisdiction in the
premises (A) for relief in respect of AMPAM or any Significant
Subsidiary or one or more Restricted Subsidiaries that, taken together,
would constitute a Significant Subsidiary, in an involuntary case or
proceeding under the Federal Bankruptcy Code or any other federal, state
or foreign bankruptcy, insolvency, reorganization or similar law or (B)
adjudging AMPAM or any Significant Subsidiary or one or more Restricted
Subsidiaries that, taken together, would constitute a Significant
Subsidiary, bankrupt or insolvent, or approving a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of AMPAM or any Significant Subsidiary or one or more Restricted
Subsidiaries that taken together, would constitute a Significant
Subsidiary, under the Federal Bankruptcy Code or any other similar
federal, state or foreign law, or appointing a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or other similar
official) of AMPAM or any Significant Subsidiary or one or more
Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary or of any substantial part of any of their
properties, or ordering the winding up or liquidation of any of their
affairs, and the continuance of any decree or order unstayed and in
effect for a period of 60 consecutive days; or
(8) the institution by AMPAM or any Significant Subsidiary or one or
more Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary of a voluntary case or proceeding under the
Federal Bankruptcy Code or any other similar federal, state or foreign
law or any other case or proceedings to be adjudicated a bankrupt or
insolvent, or the consent by AMPAM or any Significant Subsidiary or one
or more Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary to the entry of a decree or order for relief in
respect of AMPAM or a Significant Subsidiary or group of Restricted
Subsidiaries in any involuntary case or proceeding under the Federal
Bankruptcy Code or any other similar federal, state or foreign law or to
the institution of bankruptcy or insolvency proceedings against AMPAM or
a Significant Subsidiary or group of Restricted Subsidiaries, or the
filing by AMPAM or any Significant Subsidiary or one or more Restricted
Subsidiaries that, taken together, would constitute a Significant
Subsidiary of a petition or answer or consent seeking reorganization or
relief under the Federal Bankruptcy Code or any other similar federal,
state or foreign law, or the consent by it to the filing of any petition
of this type or to the appointment of
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or taking possession by a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or other similar official) of any of AMPAM or
any Significant Subsidiary or one or more Restricted Subsidiaries that,
taken together, would constitute a Significant Subsidiary or of any
substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due or the taking of
corporate action by AMPAM or any Significant Subsidiary or one or more
Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary in furtherance of any action of this type; or
(9) any of the Guarantees of any Significant Subsidiary or one or more
Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary ceases to be in full force and effect or any of
these Guarantees is declared to be null and void and unenforceable or
any of these Guarantees is found to be invalid or any guarantors denies
its liability under its Guarantee, other than by reason of release of
the guarantor in accordance with the terms of the indenture.
If an event of default (other than those covered by clause (7) or (8)
above) shall occur and be continuing, the trustee, by notice to AMPAM, or the
holders of at least 25% in aggregate principal amount of the notes then
outstanding, by notice to the trustee and AMPAM, may declare the principal of,
premium, if any, and accrued and unpaid interest, if any, on all of the
outstanding notes due and payable immediately on which declaration, all amounts
payable in respect of the notes shall be due and payable. If an event of default
specified in clause (7) or (8) above occurs and is continuing, then the
principal of, premium, if any, and accrued and unpaid interest, if any, on all
the outstanding notes shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the trustee or any holder of
notes.
After a declaration of acceleration under the indenture, but before a
judgment or decree for payment of the money due has been obtained by the
trustee, the holders of a majority in aggregate principal amount of the
outstanding notes, by written notice to AMPAM and the trustee, may rescind the
declaration if:
- AMPAM or any guarantor has paid or deposited with the trustee a sum
sufficient to pay
(a) all sums paid or advanced by the trustee under the indenture and the
reasonable compensation, expenses, disbursements and advances of the
trustee, its agents and counsel,
(b) all overdue interest on all notes,
(c) the principal of and premium, if any, on any notes which have become
due otherwise than by the declaration of acceleration and interest
thereon at the rate borne by the notes, and
(d) to the extent that payment of interest is lawful, interest upon
overdue interest and overdue principal at the rate borne by the
notes which has become due otherwise than by a declaration of
acceleration;
- the rescission would not conflict with any judgment or decree of a court
of competent jurisdiction; and
- all events of default, other than the non-payment of principal of,
premium, if any, and interest on the notes that has become due solely by
a declaration of acceleration, have been cured or waived.
No holder of any of the notes will have any right to institute any
proceeding with respect to the indenture or any remedy thereunder, unless the
holders of at least 25% in aggregate principal amount of the outstanding notes
have made written request, and offered reasonable indemnity, to the trustee to
institute a proceeding of this type as trustee under the notes and the
indenture, the trustee has failed to institute a proceeding of this type within
45 days after receipt of notice and the trustee, within the 45-day period, has
not received directions inconsistent with the written request by holders of a
majority in aggregate principal amount of the outstanding notes. Such
limitations will not apply, however, to a suit
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instituted by a holder of a note for the enforcement of the payment of the
principal of, premium, if any, or interest on the note on or after the
respective due dates expressed in the note.
During the existence of an event of default, the trustee will be required
to exercise the rights and powers vested in it under the indenture and use the
same degree of care and skill in its exercise of these rights as a prudent
person would exercise under the circumstances in the conduct of that person's
own affairs. Subject to the provisions of the indenture relating to the duties
of the trustee, in case an event of default shall occur and be continuing, the
trustee under the indenture will not be under any obligation to exercise any of
its rights or powers under the indenture at the request or direction of any of
the holder unless the holders shall have offered to the trustee reasonable
security or indemnity. Subject to provisions concerning the rights of the
trustee, the holders of a majority in aggregate principal amount of the
outstanding notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee, or exercising
any trust or power conferred on the trustee under the indenture.
If a default or an event of default occurs and is continuing and is known
to the trustee, the trustee shall mail to each holder of the notes notice of the
default or event of default within 30 days after obtaining knowledge of the
default or event of default. Except in the case of a default or an event of
default in payment of principal of premium, if any, or interest on any notes,
the trustee may withhold the notice to the holders of these notes if a committee
of its trust officers in good faith determines that withholding the notice is in
the interest of the Noteholders.
AMPAM must furnish to the trustee annual and quarterly statements as to the
performance by AMPAM of its obligations under the indenture and as to any
default in this performance. AMPAM also will be required to notify the trustee
within five business days of any event which is, or after notice or lapse of
time or both would become, an event of default.
NO LIABILITY FOR CERTAIN PERSONS
No director, officer, employee or stockholder of AMPAM, nor any director,
officer or employee of any guarantor, as such, will have any liability for any
obligations of AMPAM or any guarantor under the notes, the guarantees or the
indenture based on, in respect of, or by reason of the obligations described or
their creation. Each holder by accepting a Note waives and releases all
liability of this type. The foregoing waiver and release are an integral part of
the consideration or the issuance of the notes. Such waiver may not be effective
to waive liabilities under the federal securities laws.
LEGAL DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
AMPAM may, at its option and at any time, terminate the obligations of
AMPAM and the guarantors with respect to the outstanding notes ("Legal
Defeasance") to the extent set forth below. Such Legal Defeasance means that
AMPAM shall be considered to have paid and discharged the entire Indebtedness
represented by the outstanding notes, except for:
- the rights of holders of outstanding notes to receive payment in respect
of the principal of, premium, if any, and interest on these notes when
payments are due;
- AMPAM's obligations to issue temporary notes, register the transfer or
exchange of any notes, replace mutilated, destroyed, lost or stolen notes
and maintain an office or agency for payments in respect of the notes;
- the rights, powers, trusts, duties and immunities of the trustee; and
- the Legal Defeasance provisions of the indenture. In addition, AMPAM may,
at its option and at any time, elect to terminate the obligations of
AMPAM and the guarantors with respect to covenants in the indenture, some
of which are described under "-- Material Covenants" above, and any
subsequent failure to comply with these obligations shall not constitute
a default or an event of default with respect to the notes.
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In order to exercise either Legal Defeasance or Covenant Defeasance:
- AMPAM or any guarantor must irrevocably deposit with the trustee, in
trust, for the benefit of the holders of the notes, cash in United States
dollars, U.S. Government Obligations (as defined in the indenture), or
any combination, in amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding notes to
redemption or maturity (except lost, stolen or destroyed notes which have
been replaced or paid);
- AMPAM shall have delivered to the trustee an opinion of counsel to the
effect that the holders of the outstanding notes will not recognize
income, gain or loss for federal income tax purposes as a result of this
Legal Defeasance or Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times
as would have been the case if this Legal Defeasance or Covenant
Defeasance had not occurred (in the case of Legal Defeasance, this
opinion must refer to and be based upon a ruling of the Internal Revenue
Service or a change in applicable federal income tax laws);
- no default or event of default shall have occurred and be continuing on
the date of this deposit (other than a default or event of default
relating to the borrowing of funds to be applied to this deposit);
- the Legal Defeasance or Covenant Defeasance shall not cause the trustee
to have a conflicting interest with respect to any securities of AMPAM;
- the Legal Defeasance or Covenant Defeasance shall not result in a breach
or violation of, or constitute a default under, any agreement or
instrument to which AMPAM is a party or by which it is bound;
- AMPAM shall have delivered to the trustee an opinion of counsel to the
effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
- AMPAM shall have delivered to the trustee an officers' certificate
stating that the deposit was not made by AMPAM with the intent of
preferring the holders of the notes over the other creditors of AMPAM
with the intent of hindering, delaying or defrauding creditors of AMPAM
or others;
- no event or condition shall exist that would prevent AMPAM from making
payments of the principal of, premium, if any, and interest on the notes
on the date of the deposit or at any time ending on the 91st day after
the date of the deposit; and
- AMPAM shall have delivered to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent under the
indenture to either Legal Defeasance or Covenant Defeasance, as the case
may be, have been complied with.
AMPAM may exercise its Legal Defeasance option notwithstanding its prior
exercise of its Covenant Defeasance option.
SATISFACTION AND DISCHARGE
The indenture will be discharged and will cease to be of further effect as
to all outstanding notes when:
- either
(a) all the notes theretofore authenticated and delivered (except
lost, stolen or destroyed notes which have been replaced or repaid
and notes for whose payment money has theretofore been deposited in
trust or segregated and held in trust by AMPAM and thereafter repaid
to AMPAM or discharged from the trust) have been delivered to the
trustee for cancellation or
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(b) all notes not theretofore delivered to the trustee for
cancellation have become due and payable or will become due and
payable at their Stated Maturity within one year, or are to be called
for redemption within one year under arrangements satisfactory to the
trustee for the serving of notice of redemption by the trustee in the
name, and at the expense, of AMPAM, and AMPAM or any guarantor has
irrevocably deposited or caused to be deposited with the trustee
funds in an amount sufficient to pay and discharge the entire
Indebtedness on the notes not theretofore delivered to the trustee
for cancellation, for principal of, premium, if any, and interest on
the notes to the date of deposit or to the Stated Maturity or date
for redemption, as the case may be, together with irrevocable
instructions from AMPAM directing the trustee to apply these funds to
the payment of the notes at Stated Maturity or redemption, as the
case may be;
- AMPAM or the guarantors have paid all other sums payable under the
indenture by AMPAM or the guarantors; and
- AMPAM has delivered to the trustee an officers' certificate and an
opinion of counsel which, taken together, state that all conditions
precedent under the indenture relating to the satisfaction and discharge
of the indenture have been complied with.
AMENDMENTS AND WAIVERS
From time to time, AMPAM and the guarantors, when authorized by a
resolution of its Board of Directors, and the trustee may, without the consent
of the holders of any outstanding notes, amend or modify the indenture or the
notes for specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies, qualifying, or maintaining the qualification of, the
indenture under the Trust Indenture Act, to provide for the assumption of
AMPAM's or any guarantor's obligations in the case of a merger or consolidation
or sale of all or substantially all of AMPAM's assets, or to make any change
that would provide any additional rights or benefits to the holders of the
notes, in each case, as long as any change of this type does not adversely
affect the rights of any holder of notes. Other amendments and modifications of
the indenture or the notes may be made by AMPAM, the guarantors and the trustee
with the consent of the holders of not less than a majority of the aggregate
principal amount of the outstanding notes; provided, however, that no
modification of this type or amendment may, without the consent of the holder of
each outstanding Note affected thereby:
- change the Stated Maturity of the principal of, or any installment of
interest on, any Note or alter the redemption provisions of the notes;
- reduce the principal amount of (or the premium, if any, on), or interest
on, any notes;
- change the currency in which any notes or any premium or the interest
thereon is payable;
- reduce the above-stated percentage in principal amount of outstanding
notes that must consent to an amendment or modification of the indenture
or the notes;
- impair the right to institute suit for the enforcement of any payment on
or with respect to the notes or the guarantees;
- reduce the percentage in aggregate principal amount of outstanding notes
necessary to waive compliance with provisions of the indenture or to
waive various defaults under the indenture;
- amend or modify the obligation of AMPAM to make and consummate a Change
of Control Offer after the occurrence of a Change of Control or make and
consummate the Asset Sale Offer with respect to any Asset Sale that has
been consummated or modify any of the provisions or definitions with
respect thereto;
- release any guarantor from its obligations under its guarantee or the
Indenture otherwise than in accordance with the terms of the Indenture;
or
- modify or change any provision of the indenture or the related
definitions affecting the subordination or ranking of the notes or any
guarantee in a manner which adversely affects the Noteholders.
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The holders of not less than a majority in aggregate principal amount of
the outstanding notes may on behalf of the holders of all the notes waive (1)
compliance by AMPAM with restrictive provisions of the indenture and (2) any
past defaults under the indenture, except a default in the payment of the
principal of, premium, if any, or interest on any Note, or in respect of a
covenant or provision which under the indenture cannot be modified or amended
without the consent of the holder of each Note outstanding.
THE TRUSTEE
The indenture provides that, except during the continuance of an event of
default, the trustee thereunder will perform only those duties as are
specifically set forth in the indenture. If an event of default has occurred and
is continuing, the trustee will exercise the rights and powers vested in the
trustee under the indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of a person's own affairs.
The indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the trustee thereunder,
should it become a creditor of AMPAM, to obtain payment of claims in cases or to
realize on property received by it in respect of any claims of the type
previously described, as security or otherwise. The trustee may engage in other
transactions; provided, however, that if it acquires any conflicting interest
(as defined in the Trust Indenture Act), it must eliminate this conflict or
resign.
State Street Bank and Trust Company, is the trustee under the indenture.
GOVERNING LAW
The indenture and the notes are governed by the laws of the State of New
York.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a person (a) assumed in
connection with an Asset Acquisition from that person or (b) existing at the
time this person becomes or is merged into a Subsidiary of any other person.
"Acquisition Agreements" means, collectively, the acquisition agreements
dated February 11, 1999 between AMPAM and each of the stockholders of the
founding companies through which AMPAM acquired the founding companies.
"Affiliate" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with that specified person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of this person,
whether through the ownership of Voting Stock, by agreement or otherwise;
provided, however, that beneficial ownership of 10% or more of the Voting Stock
of a person shall be considered to be control.
"Asset Acquisition" means (a) an Investment by AMPAM or any Restricted
Subsidiary in any other person through which this person shall become a
Restricted Subsidiary, or shall be merged with or into AMPAM or any Restricted
Subsidiary, or (b) the acquisition by AMPAM or any Restricted Subsidiary of the
assets of any person which constitute all or substantially all of the assets of
this person, any division or line of business of this person or, other than in
the ordinary course of business, any other properties or assets of this person.
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"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition by AMPAM or any Restricted Subsidiary to any person other than AMPAM
or a Restricted Subsidiary, of:
- any capital stock of any Restricted Subsidiary;
- all or substantially all of the properties and assets of any division or
line of business of AMPAM or any Restricted Subsidiary; or
- any other properties or assets of AMPAM or any Restricted Subsidiary
outside of the ordinary course of business, other than sales of obsolete,
damaged or used equipment or other equipment or inventory sales in the
ordinary course of business, sales of assets in one or a series of
related transactions for an aggregate consideration of less than $2.0
million and sales of accounts receivable for financing purposes.
For the purposes of this definition the term "Asset Sale" shall not include:
- any sale, issuance, conveyance, transfer, lease or other disposition of
properties or assets that is governed by the provisions described under
"-- Consolidation, Merger, Sale of Assets, Etc."; or
- a Restricted Payment that is permitted by the covenant described under
"-- Material Covenants -- Limitation on Restricted Payments", or the
trade or exchange by AMPAM or any Restricted Subsidiary of any property
or assets owned or held by AMPAM or the Restricted Subsidiary for any
property or assets owned or held by another person, provided that the
fair market value of the properties traded or exchanged by AMPAM or the
Restricted Subsidiary (including any cash or Cash Equivalents to be
delivered by AMPAM or the Restricted Subsidiary) is reasonably equivalent
to the fair market value of the properties (together with any cash or
Cash Equivalents) to be received by AMPAM or the Restricted Subsidiary,
and provided further that any cash or Cash Equivalents of this type shall
be considered to constitute Net Cash Proceeds of an Asset Sale for
purposes of the covenant described under "Material
Covenants -- Disposition of Proceeds of Asset Sales."
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in the
sale and leaseback transaction including any period for which the lease has been
extended or may, at the option of lessor, be extended. Such present value shall
be calculated using a discount rate equal to the rate of interest implicit in
this transaction, determined in accordance with GAAP.
"Average Life to Stated Maturity" means, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing: the sum of
the products of
(a) the number of years (and any portion of years) from the date of the
determination to the date or dates of each successive scheduled
principal payment (including, without limitation, any sinking fund or
mandatory redemption payment requirements) of this Indebtedness, and
(b) the amount of each principal payment
by the sum of all principal payments.
"Board of Directors" means the board of directors of a company or its
equivalent, including managers of a limited liability company, general partners
of a partnership or trustees of a business trust, or any duly authorized
committee of the board.
"capital stock" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents of this person's
capital stock or equity participations, and any rights, warrants or options
exchangeable for or convertible into capital stock and including, without
limitation, with respect to partnerships, limited liability companies or
business trusts, ownership interests and any other interest or participation
that confers on a person the right to receive a share of the profits and losses
of, or distributions of assets of, partnerships, limited liability companies or
business trusts of this type.
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"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under GAAP, and, for the purpose of
the indenture, the amount of an obligation at any date shall be the capitalized
amount of this lease at that date, determined in accordance with GAAP.
"Cash Equivalents" means, at any time,
(a) any evidence of Indebtedness, maturing not more than two years after
that time, issued or guaranteed by the United States Government or any
of its agencies (provided that the full faith and credit of the United
States of America is pledged in support of this Indebtedness);
(b) commercial paper, maturing not more than 270 days from the date of
issue, rated at least A-2 by Standard & Poor's Ratings Group or P-2 by
Moody's Investors Service, Inc.;
(c) any certificate of deposit or bankers acceptance, maturing not more
than one year after that time, or overnight Federal Funds transactions
that are issued or sold by a banking institution that is a member of the
Federal Reserve System and has a combined capital and surplus and
undivided profits of not less than $500 million;
(d) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (a) above entered
into with any bank meeting the specifications of clause (c) above; and
(e) investments in funds investing primarily in investments of the types
described in clauses (a) through (d) above.
"Change of Control" means the occurrence of any of the following events:
- any "Person" or "group" (as these terms are used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
person shall be considered to have "beneficial ownership" of all
securities that the person has the right to acquire, whether this right
is exercisable immediately or only after the passage of time), directly
or indirectly, of more than 50% of the total Voting Stock of AMPAM;
- AMPAM consolidates with, or merges with or into, another person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person, or any person consolidates
with, or merges with or into, AMPAM in any event through a transaction in
which the outstanding Voting Stock of AMPAM is converted into or
exchanged for cash, securities or other property, other than any
transaction where:
- the outstanding Voting Stock of AMPAM is converted into or exchanged
for Voting Stock (other than Redeemable capital stock) of the
surviving or transferee corporation; and
- immediately after the transaction no "person" or "group" (as these
terms are used in Sections 13 (d) and 14(d) of the Exchange Act) is
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be considered to have
"beneficial ownership" of any securities that this person has the
right to acquire, whether this right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than
50% of the total Voting Stock of the surviving or transferee
corporation;
- during any consecutive two-year period, individuals who at the beginning
of this period constituted the Board of Directors of AMPAM (together with
any new directors whose election by the Board of Directors or whose
nomination for election by the stockholders of AMPAM was approved by a
vote of 66 2/3% of the directors then still in office who were either
directors at the beginning of this period or whose election or nomination
for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of AMPAM then in office;
or
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- AMPAM is liquidated or dissolved or adopts a plan of liquidation.
"common stock" means the common stock of AMPAM, par value $0.01 per share.
"Consolidated Cash Flow Available for Fixed Charges" as of any date of
determination means, with respect to any person for any period, the Consolidated
Net Income of a person for a period plus, to the extent deducted from
Consolidated Net Income during this period, the sum of, without duplication, the
amounts for this period, taken as a single accounting period, of (a)
Consolidated Non-cash Charges, (b) Consolidated Interest Expense and (c)
Consolidated Income Tax Expense (other than income tax expense (either positive
or negative) attributable to extraordinary gains or losses) less all cash
payments during this period relating to non-cash charges that were added back in
determining Consolidated Cash Flow Available for Fixed Charges in any prior
period.
"Consolidated Fixed Charge Coverage Ratio" as of any date of determination
means, with respect to any person, the ratio of the aggregate amount of
Consolidated Cash Flow Available for Fixed Charges of this person for the four
full fiscal quarters, treated as one period, for which financial information in
respect of which is available immediately preceding the date of the transaction
(the "Transaction Date") giving rise to the need to calculate the Consolidated
Fixed Charge Coverage Ratio (this four full fiscal quarter period referred to as
the "Four Quarter Period") to the aggregate amount of Consolidated Fixed Charges
of this person for this Four Quarter Period. For purposes of making the
computation referred to above, Consolidated Cash Flow Average for Fixed Charges
and Consolidated Fixed Charges shall be calculated giving pro forma effect (in a
manner consistent with Rule 11-02 of Regulation S-X to the following events
(without duplication):
- any Asset Sale or Asset Acquisition occurring since the first day of the
Four Quarter Period (including to the date of calculation) as if the
acquisition or disposition occurred at the beginning of the Four Quarter
Period (including giving effect to (A) the amount of any reduction in
expenses related to any compensation, remuneration or other benefit paid
or provided to any employee, consultant, Affiliate or equity owner of the
entity involved in any Asset Sale or Asset Acquisition to the extent the
costs are eliminated or reduced (or public announcement has been made of
the intent to eliminate or reduce these costs) prior to the date of this
calculation and not replaced and (B) the amount of any reduction in
general, administrative or overhead costs of the entity involved in any
Asset Sale or Asset Acquisition of this type);
- the incurrence of Indebtedness giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio and (if applicable) the
application of the net proceeds therefrom, including to refinance other
indebtedness, as if the Indebtedness were incurred at the beginning of
the Four Quarter Period;
- the incurrence, repayment or retirement of any other Indebtedness by
AMPAM and its Restricted Subsidiaries since the first day of the Four
Quarter Period and prior to the date of making this calculation as if the
Indebtedness or obligations were incurred, prepaid or retired at the
beginning of the Four Quarter Period (except that in making this
computation, the amount of Indebtedness under any revolving credit
facility shall be computed based upon the average daily balance of the
Indebtedness during the Four Quarter Period); and
- elimination of Consolidated Cash Flow Available for Fixed Charges and
Consolidated Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, but, with respect to Consolidated
Fixed Charges, only to the extent that the obligations giving rise to
Consolidated Fixed Charges will not be obligations of the referent person
or any of its Restricted Subsidiaries following the Transaction Date.
In calculating Consolidated Fixed Charges for purposes of determining the
denominator (but not the numerator) of the Consolidated Fixed Charge Coverage
Ratio,
- interest on outstanding Indebtedness determined on a fluctuating basis as
of the Transaction Date and which will continue to be so determined
thereafter shall be considered to have accrued at a
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fixed rate per annum equal to the rate of interest on this Indebtedness
in effect on the Transaction Date; and
- if interest on any Indebtedness actually incurred on the Transaction Date
may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a Eurocurrency interbank offered rate, or other
rates, then the interest rate in effect on the Transaction Date will be
considered to have been in effect during the Four Quarter Period. If this
person or any of its Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third person, the above provisions shall
give effect to the incurrence of this guaranteed Indebtedness as if the
person or the Subsidiary had directly incurred or otherwise assumed this
guaranteed Indebtedness.
"Consolidated Fixed Charges" means, with respect to any person for any
period, the sum of, without duplication, the amounts for this period of:
- Consolidated Interest Expense; and
- the product of (a) the aggregate amount of dividends and other
distributions paid, accrued or scheduled to be paid during this period in
respect of Redeemable capital stock or Preferred Stock of that person and
its Restricted Subsidiaries on a consolidated basis (other than dividends
or distributions paid solely in shares of capital stock (other than
Redeemable capital stock)) times (b) a fraction, the numerator of which
is one and the denominator of which is one minus the then current
effective consolidated federal, state and local tax rate of the person,
expressed as a decimal.
"Consolidated Income Tax Expense" means, with respect to any person for any
period, the provision for federal, state, local and foreign income taxes of this
person and its Restricted Subsidiaries for that period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any person for any
period, without duplication, the sum of:
- the interest expense of a person and its Restricted Subsidiaries for a
period as determined on a consolidated basis in accordance with GAAP,
including, without limitation;
(a) an amortization of debt discount, capitalized debt issuance costs
and original issue discount,
(b) the net cost under Interest Rate Protection Obligations (including
any amortization of discounts);
(c) the interest portion of any deferred payment obligation;
(d) all commissions, discounts and other fees and charges owed with
respect to letters of credit, bankers' acceptance financing or similar
facilities;
(e) all accrued interest; and
(f) imputed interest with respect to Attributable Debt; and
- the interest component of Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by this person and its Restricted
Subsidiaries during the period as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income" means, with respect to any person, for any
period, the consolidated net income (or loss) of that person and its Restricted
Subsidiaries for the period as determined in accordance with GAAP, adjusted, to
the extent included in calculating the net income, by excluding, without
duplication:
- all items classified as extraordinary gains or losses (net of fees and
expenses relating to the transaction giving rise thereto) on an after-tax
basis;
- net income (or loss) of any person combined with the person or one of its
Restricted Subsidiaries on a "pooling of interests" basis attributable to
any period prior to the date of combination;
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- gains or losses in respect of any Asset Sales by the person or one of its
Restricted Subsidiaries (net of fees and expenses relating to the
transaction giving rise thereto), on an after-tax basis;
- the net income of any Restricted Subsidiary of the person to the extent
that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is not at the time permitted,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholders;
- any gain or loss realized as a result of the cumulative effect of a
change in accounting principles;
- the net income of any person, other than a Restricted Subsidiary of the
referent person, except to the extent of cash dividends or distributions
paid to the referent person or to a Restricted Subsidiary of the referent
person by the person;
- any restoration to income of any contingency reserve in excess of
$100,000 in the aggregate for any one fiscal quarter, except to the
extent that provision for this reserve was made out of Consolidated Net
Income accrued at any time following the Issue Date and reflected on the
financial statements of the person;
- in the case of a successor to the referent person by consolidation or
merger or as a transferee of the referent person's assets, any earnings
of the successor corporation prior to the consolidation, merger or
transfer of assets; and
- one-time non-cash charges reducing net income resulting from stock issued
to management of AMPAM in connection with AMPAM's organization.
"Consolidated Non-cash Charges" means, with respect to any person for any
period, the aggregate depreciation, amortization (including amortization of
goodwill and other intangibles) and other non-cash charges of that person and
its Restricted Subsidiaries to the extent that reducing Consolidated Net Income
of that person and its Restricted Subsidiaries for that period, determined on a
consolidated basis in accordance with GAAP excluding non-cash charges (other
than any non-cash charge reflected on the financial statements of that person on
the Issue Date) which require an accrual of or a reserve for cash charges for
any future period.
"credit facility" means the Credit Agreement dated as of March 31, 1999
among AMPAM, the First National Bank of Chicago, as Agent, LC Issuer and lender,
Credit Lyonnais, New York Branch, as Documentation Agent, and the Lenders named
in the agreement, including any notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended (including any amendment and restatement of it), modified, extended,
renewed, refunded, substituted or replaced or refinanced from time to time,
including any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including increasing the amount of available borrowings
thereunder or adding Subsidiaries of AMPAM as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under the agreement or any
successor or replacement agreement and whether by the same or any other agents,
creditor, lender or group of creditors or lenders.
"default" means any event that is, or after notice or passage of time or
both would be, an event of default.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under
the credit facility and (ii) any other Senior Indebtedness which (a) at the time
of the determination is equal to or greater than $25 million in aggregate
principal amount and (b) is specifically designated by AMPAM in the instrument
evidencing the Senior Indebtedness as "Designated Senior Indebtedness."
"Disinterested Member of the Board of Directors of AMPAM" means, with
respect to any transaction or series of related transactions, a member of the
Board of Directors of AMPAM other than a member who has any material direct or
indirect financial interest in or with respect to that transaction or series of
related transactions or is an Affiliate, or an officer, director or an employee
of any person (other
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than AMPAM) who has any direct or indirect financial interest in or with respect
to that transaction or series of related transactions (in each case other than
an interest arising solely from the beneficial ownership of capital stock of
AMPAM).
"event of default" has the meaning set forth under "-- Events of Default".
"Exchange Act" means the Securities Exchange Act of 1934.
"fair market value" means, with respect to any asset, the price (after
taking into account any liabilities relating to these assets) which could be
negotiated in an arm's length free market transaction between a willing seller
and a willing buyer, neither of which is under pressure or compulsion to
complete the transaction. Fair market value shall be determined by the
Disinterested Members of the Board of Directors of AMPAM in good faith.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in other statements by an other
entity as may be approved by a significant segment of the accounting profession
of the United States of America, which are in effect from time to time.
"guarantee" means, as applied to any obligation:
- a guarantee (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), direct or indirect, in
any manner, of any part or all of the obligation; and
- an agreement, direct or indirect, contingent or otherwise, the practical
effect of which is to assure in any way the payment or performance (or
payment of damages in the event of nonperformance) of all or any part of
this obligation, including, without limiting the foregoing, the payment
of amounts available to be drawn down under letters of credit of another
person. When used as a verb, "guarantee" shall have a corresponding
meaning.
"Guarantor Senior Indebtedness" of a guarantor means the principal of,
premium, if any, and interest on any Indebtedness of this guarantor, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or under which the same is outstanding expressly provides
that the Indebtedness shall not be senior in right of payment to the guarantor's
guarantee. Without limiting the generality of the foregoing, (x) "Guarantor
Senior Indebtedness" shall include all monetary obligations of every nature
under the credit facility, including the principal of, premium, if any, and
interest on all obligations of every nature of the guarantor from time to time
owed to the lenders under the credit facility, including, without limitation,
principal of and interest on, reimbursement obligations under letters of credit
and all fees, indemnities and expenses payable under, the credit facility, and
(y) in the case of amounts owing under the credit facility and Guarantees of
Designated Senior Indebtedness, "Guarantor Senior Indebtedness" shall include
interest accruing thereon subsequent to the occurrence of an event of default
specified in clause (7) or (8) under "-- Events of Default" relating to the
guarantor, whether or not the claim for the interest is allowed under any
applicable Bankruptcy Code. Notwithstanding the foregoing, "Guarantor Senior
Indebtedness" shall not include:
- Indebtedness evidenced by the notes or the guarantees;
- Indebtedness that is expressly subordinate or Junior in right of payment
to any other Indebtedness of the guarantor;
- Indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, is by its terms
without recourse to the guarantor;
- Indebtedness which is represented by Redeemable capital stock;
- to the extent it constitutes Indebtedness, any liability for federal,
state, local or other taxes owed or owing by the guarantor;
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- Indebtedness of the guarantor to AMPAM or a Subsidiary of AMPAM or any
other Affiliate of AMPAM or any of the Affiliate's Subsidiaries;
- that portion of any Indebtedness which is incurred by the guarantor in
violation of the indenture; and
- trade payables.
"Indebtedness" means, with respect to any person, without duplication:
- all liabilities of a person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and
other accrued current liabilities incurred in the ordinary course of
business, but including, without limitation, all obligations, contingent
or otherwise, of a person in connection with any letters of credit,
bankers' acceptance or other similar credit transaction, if, and to the
extent, any of the foregoing would appear as a liability on a balance
sheet of a person prepared in accordance with GAAP;
- all obligations of a person evidenced by bonds, notes, debentures or
other similar instruments, if, and to the extent, any of the foregoing
would appear as a liability on a balance sheet of a person prepared in
accordance with GAAP;
- all indebtedness of a person created or arising under any conditional
sale or other title retention agreement with respect to property acquired
by a person (even if the rights and remedies of the seller or lender
under an agreement in the event of a default are limited to repossession
or sale of property), but excluding consignments and trade accounts
payable arising in the ordinary course of business that are not overdue
by 90 days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted;
- all Capitalized Lease Obligations of a person;
- all Indebtedness referred to in the preceding clauses of other persons
and all dividends of other persons, the payment of which is secured by
(or for which the holder of Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon property
(including, without limitation, accounts and contract rights) owned by a
person, even though that person has not assumed or become liable for the
payment of the Indebtedness (the amount of this obligation being
considered to be the lesser of the fair market value of that property or
asset or the amount of the obligation so secured);
- all guarantees of Indebtedness referred to in this definition by a
person;
- all Redeemable capital stock of a person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued
dividends;
- all Interest Rate Protection Obligations of a person; and
- all Attributable Debt in respect of sale and leaseback transactions of a
person;
provided, that the term "Indebtedness" shall not include:
- Indebtedness arising from agreements of AMPAM or any Restricted
Subsidiary providing for indemnification, adjustment or holdback of
purchase price or similar obligations, in each case, incurred or assumed
in connection with the acquisition or disposition of any business, assets
or a Subsidiary, other than guarantees of Indebtedness incurred by any
person acquiring all or any portion of this business, assets or
Subsidiary for the purpose of financing this acquisition; or
- obligations under performance bonds, performance guarantees, surety
bonds, appeal bonds or similar obligations incurred in the ordinary
course of business and consistent with past practices.
For purposes hereof, the "maximum fixed repurchase price" of any Redeemable
capital stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of this Redeemable capital stock as if this
Redeemable capital stock were purchased on any date on which
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Indebtedness shall be required to be determined under the indenture, and if the
price is based upon, or measured by, the fair market value of the Redeemable
capital stock, the fair market value shall be approved in good faith by the
board of directors of the issuer of the Redeemable capital stock; provided,
however, that if the Redeemable capital stock is not at the date of
determination permitted or required to be repurchased, the "maximum fixed
repurchase price" shall be the book value of the Redeemable capital stock. In
the case of Indebtedness issued with original issue discount, the amount of the
Indebtedness shall be the accreted value of the Indebtedness as of that date.
"Interest Rate Protection Agreement" means, with respect to any person, any
arrangement with any other person whereby, directly or indirectly a person is
entitled to receive from time to time periodic payments calculated by applying
either a floating or a fixed rate of interest on a stated notional amount in
exchange for periodic payments made by a person calculated by applying a fixed
or a floating rate of interest on the same notional amount and shall include,
without limitation, interest rate swaps, caps, floors, collars and similar
agreements or arrangements designed to protect against or manage a person's
exposure to fluctuations in interest rates.
"Interest Rate Protection Obligations" means the net obligations of any
person under any Interest Rate Protection Agreements.
"Investment" means, with respect to any person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by a person of any capital stock bonds,
notes, debentures or other securities or evidences of Indebtedness issued by,
any other person; provided, however, that the term "Investment" shall not
include:
- extensions of trade credit on commercially reasonable terms in accordance
with normal trade practices; and
- Interest Rate Protection Obligations entered into in the ordinary course
of business.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim or other
encumbrance upon or with respect to any property of any kind. A person shall be
considered to own subject to a Lien any property which that person has acquired
or holds subject to the interest of a vendor or lessor under any conditional
sale agreement, capital lease or other title retention agreement.
"Maturity Date" means October 15, 2008.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds of
the sale received by AMPAM or any Restricted Subsidiary in the form of cash or
Cash Equivalents including payments in respect of deferred payment obligations
when received in the form of cash or Cash Equivalents (except to the extent that
these obligations are financed or sold with recourse to AMPAM or any Restricted
Subsidiary) net of:
- brokerage commissions and other fees and expenses (including, without
limitation, fees and expenses of legal counsel and investment bankers,
recording fees, transfer fees and appraisers' fees) related to this Asset
Sale;
- provisions for all taxes payable as a result of this Asset Sale;
- amounts required to be paid to an person (other than AMPAM or any
Restricted Subsidiary) owning a beneficial interest in the assets subject
to the Asset Sale;
- payments made to permanently retire Indebtedness where payment of this
Indebtedness is secured by the assets or properties the subject of this
Asset Sale; and
- appropriate amounts to be provided by AMPAM or any Restricted Subsidiary,
as the case may be, as a reserve required in accordance with GAAP against
any liabilities associated with this Asset
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Sale and retained by AMPAM or any Restricted Subsidiary, as the case may be,
after this Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated
with this Asset Sale;
provided, that any amounts remaining after adjustments, revaluations or
liquidations of reserves shall constitute Net Cash Proceeds.
"Pari Passu Indebtedness" means any Indebtedness of AMPAM that is pari
passu in right of payment to the notes.
"Permitted Indebtedness" means, without duplication:
(a) Indebtedness of AMPAM and the guarantors evidenced by the notes
issued on the date of the Indenture, the Exchange notes and the
guarantees;
(b) Indebtedness of AMPAM and any guarantor under the credit facility in
an aggregate principal amount at any one time outstanding not to exceed
$125 million, less any amounts permanently repaid in accordance with the
covenant described under "-- Material Covenants -- Disposition of
Proceeds of Asset Sales";
(c) Indebtedness of AMPAM or any guarantor outstanding on the Issue
Date;
(d) Indebtedness of AMPAM or any Restricted Subsidiary incurred in
respect of bankers' acceptances and letters of credit in the ordinary
course of business, including Indebtedness evidenced by letters of
credit issued in the ordinary course of business to support the
insurance or self-insurance obligations of AMPAM or any of its
Restricted Subsidiaries (including to secure workers' compensation and
other similar insurance coverages), in an aggregate amount not to exceed
$5.0 million at any time, but excluding letters of credit issued in
respect of or to secure money borrowed;
(e) (1) Interest Rate Protection Obligations of AMPAM or a guarantor
covering Indebtedness of AMPAM or a guarantor and (2) Interest Rate
Protection Obligations of any Restricted Subsidiary covering Permitted
Indebtedness or Acquired Indebtedness of the Restricted Subsidiary;
provided, however, that, in the case of either clause (1) or (2), (x)
any Indebtedness to which any Interest Rate Protection Obligations
correspond bears interest at fluctuating interest rates and is otherwise
permitted to be incurred under the "Limitation on Indebtedness" covenant
and (y) the notional principal amount of any Interest Rate Protection
Obligations that exceeds 105% of the principal amount of the
Indebtedness to which Interest Rate Protection Obligations relate shall
not constitute Permitted Indebtedness;
(f) Indebtedness of a Restricted Subsidiary owed to and held by AMPAM or
another Restricted Subsidiary, except that:
- any transfer of Indebtedness by AMPAM or a Restricted Subsidiary
(other than to AMPAM or another Restricted Subsidiary);
- the sale, transfer or other disposition by AMPAM or any Restricted
Subsidiary of capital stock of a Restricted Subsidiary which is owed
Indebtedness of another Restricted Subsidiary so that it shall no
longer be a Restricted Subsidiary; and
- the Designation of a Restricted Subsidiary which is owed Indebtedness
of another Restricted Subsidiary as an Unrestricted Subsidiary shall,
in each case, be an incurrence of Indebtedness by a Restricted
Subsidiary subject to the other provisions of the indenture;
(g) Indebtedness of AMPAM owed to and held by a Restricted Subsidiary
which is unsecured and expressly subordinated in right of payment to the
payment and performance of the obligations of AMPAM under the indenture
and the notes, except that:
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- any transfer of Indebtedness by a Restricted Subsidiary (other than to
another Restricted Subsidiary);
- the sale, transfer or other disposition by AMPAM or any Restricted
Subsidiary of capital stock of a Restricted Subsidiary which is owed
Indebtedness of AMPAM so that it shall no longer be a Restricted
Subsidiary; and
- the Designation of a Restricted Subsidiary which is owed Indebtedness
of AMPAM shall, in each case, be an incurrence of Indebtedness by
AMPAM, subject to the other provisions of the indenture;
(h) Indebtedness of AMPAM or any guarantor represented by Capitalized
Lease Obligations, mortgage financings or purchase money obligations, in
each case incurred for the purpose of financing all or any part of the
purchase price or cost of construction or improvement of property, plant
or equipment used in the business of AMPAM or a guarantor, in an
aggregate principal amount not to exceed $15 million at any time
outstanding;
(i) Subordinated Indebtedness of AMPAM, in an aggregate principal amount
not to exceed $10 million at any time outstanding, that is convertible
into common stock and issued in connection with an Asset Acquisition of
a business engaged in the plumbing and mechanical contracting and
maintenance services businesses and any other businesses reasonably
related thereto;
(j) Indebtedness of AMPAM, in addition to that described in clauses (a)
through (i) of this definition, in an aggregate principal amount not to
exceed $15 million at any time outstanding;
(k) (1) Indebtedness of AMPAM, the proceeds of which are used solely to
refinance (whether by amendment, renewal, extension or refunding)
Indebtedness of AMPAM or any of the guarantors incurred under the
Consolidated Fixed Charge Coverage Ratio test of the proviso of the
"Limitation on Indebtedness" covenant or clause (a) or (c) of this
definition and (2) Indebtedness of any guarantor the proceeds of which
are used solely to refinance (whether by amendment, renewal, extension
or refunding) Indebtedness of this guarantor incurred under the
Consolidated Fixed Charge Coverage Ratio test of the proviso of the
"Limitation on Indebtedness" covenant or clause (c) or (k) of this
definition; provided, that (x) the principal amount of Indebtedness
incurred under this clause (k) (or if the Indebtedness provides for an
amount less than the principal amount of this Indebtedness to be due and
payable upon a declaration of acceleration of maturity of this
Indebtedness, the original issue price of this Indebtedness) shall not
exceed the sum of the principal amount of Indebtedness so refinanced,
plus the amount of any premiums and fees required to be paid in
connection with this refinancing under the terms of this Indebtedness,
and (y) any Indebtedness incurred under this clause (k) (A) has an
Average Life to Stated Maturity greater than the remaining Average Life
to Stated Maturity of the notes and (B) is subordinated to the notes or
the guarantees, as the case may be, at least to the same extent that the
Indebtedness being refinanced is subordinated to the notes or the
guarantees, as the case may be;
(l) Indebtedness of any Restricted Subsidiary that constitutes Acquired
Indebtedness not incurred in contemplation of the acquisition of a
Restricted Subsidiary; provided, however, that this Indebtedness is
repaid within 90 days following the consummation of the Asset
Acquisition in which AMPAM acquired this Restricted Subsidiary; and
(m) guarantees by AMPAM or guarantees by a guarantor of Indebtedness
that was permitted to be incurred under the indenture.
For purposes of determining compliance with the "Limitation on
Indebtedness" covenant, (A) in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the clauses
of the preceding paragraph, or is entitled to be incurred under the proviso of
the "Limitation on Indebtedness" covenant, AMPAM, in its sole discretion, shall
classify the item of
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Indebtedness and only be required to include the amount and type of this
Indebtedness in one clause of this type and (B) the amount of Indebtedness
issued at a price that is either less or greater than the principal amount of
the Indebtedness shall be equal to the amount of the liability in respect of the
Indebtedness determined in conformity with GAAP.
"Permitted Investments" means any of the following:
- Investments in AMPAM or in a Restricted Subsidiary;
- Investments in another person, if as a result of the Investment (A) the
other person becomes a Restricted Subsidiary or (B) the other person is
merged or consolidated with or into, or transfers or conveys all or
substantially all of its assets to AMPAM or a Restricted Subsidiary;
- Investments representing capital stock or obligations issued to AMPAM or
any of its Restricted Subsidiaries in settlement of debts created in the
ordinary course of business or claims against any other person by reason
of a composition or readjustment of debt or a reorganization of any
debtor of AMPAM or the Restricted Subsidiary or in satisfaction of
judgments;
- Investments in Interest Rate Protection Agreements on commercially
reasonable terms entered into by AMPAM or any of its Restricted
Subsidiaries in the ordinary course of business in connection with the
operations of the business of AMPAM or its Restricted Subsidiaries to
hedge against fluctuations in interest rates on its outstanding
Indebtedness;
- Investments in the notes;
- Investments in Cash Equivalents;
- Investments acquired by AMPAM or any Restricted Subsidiary in connection
with an Asset Sale permitted under "-- Material Covenants -- Disposition
of Proceeds of Asset Sales" to the extent these Investments are non-cash
proceeds as permitted under the covenant;
- any Investment to the extent that the consideration therefor is capital
stock (other than Redeemable capital stock) of AMPAM;
- any loans or other advances made under any employee benefit plans
(including plans for the benefit of directors) or employment agreements
or other compensation arrangements (including for the purchase of capital
stock by these employees), in each case as approved by the Board of
Directors of AMPAM in its good faith judgment, not to exceed $1 million
at any one time outstanding; and
- other Investments not to exceed $2 million at any time outstanding.
"Permitted Junior Securities" means capital stock of AMPAM or debt
securities that are subordinated to all Senior Indebtedness (and any debt
securities issued in exchange for Senior Indebtedness) to at least the same
extent as the notes are subordinated to Senior Indebtedness.
"Permitted Liens" means the following types of Liens:
(a) any Lien existing as of the date of the indenture;
(b) any Lien securing Acquired Indebtedness created prior to (and not
created in connection with, or in contemplation of) the incurrence of
the Indebtedness by AMPAM or any Restricted Subsidiary, if this Lien
does not attach to any property or assets of AMPAM or any Restricted
Subsidiary other than the property or assets subject to the Lien prior
to this incurrence;
(c) Liens in favor of AMPAM or a guarantor;
(d) Liens on and pledges of the capital stock of any Unrestricted
Subsidiary securing any Indebtedness of this Unrestricted Subsidiary;
(e) Liens for taxes, assessments or governmental charges or claims, to
the extent any changes or claims of this type constitute Indebtedness,
either (1) not delinquent or (2) contested in good
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faith by appropriate proceedings and as to which AMPAM or its Restricted
Subsidiaries shall have set aside on its books these reserves as may be
required under GAAP;
(f) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance or
other kinds of social security, old age pension or public liability
obligations;
(g) Liens to secure Indebtedness (including Capitalized Lease
Obligations) permitted by clause (h) under the definition of "Permitted
Indebtedness" covering only the assets acquired with this indebtedness;
(h) Liens securing Interest Rate Protection Obligations permitted to be
entered into under "-- Limitation on Indebtedness";
(i) judgment and attachment Liens not giving rise to an event of default
or Liens created by or existing from any litigation or legal proceeding
that are currently being contested in good faith by appropriate
proceedings and for which adequate reserves have been made;
(j) Liens in favor of collecting or payor banks having a right of
setoff, revocation, refund or chargeback with respect to money or
instruments of AMPAM or any Subsidiary on deposit with or in possession
of this bank; and
(k) Liens not otherwise permitted by clauses (a) through (j) that are
incurred in the ordinary course of business of AMPAM or any Restricted
Subsidiary with respect to Indebtedness that does not exceed $5 million
at any one time outstanding.
"person" means any individual, corporation, partnership (general or
limited), limited liability company, joint venture, association, joint-stock
Company, trust, unincorporated organization or government or any agency or
political subdivision of the entities previously described.
"Preferred Stock," as applied to any person, means capital stock of any
class or series (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of this person, over shares
of capital stock of any other class or series of this person.
"Public Equity Offering" means any public sale of common stock of AMPAM in
connection with a registration statement filed with the SEC in accordance with
the Securities Act (other than any public offerings with respect to AMPAM's
common stock registered on Form S-8 or Form S4).
"Redeemable capital stock" means any class or series of capital stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is or upon the happening of an
event or passage of time would be required to be redeemed prior to the 91st day
after the Maturity Date or is redeemable at the option of the holder of the
Redeemable capital stock at any time prior to the 91st day after the Maturity
Date, or is convertible into or exchangeable for debt securities at any time
prior to the 91st day after the Maturity Date; provided, however, that (i)
capital stock will not constitute Redeemable capital stock solely because the
holders of the Redeemable capital stock have the right to require AMPAM to
repurchase or redeem this capital stock upon the occurrence of a Change of
Control or an Asset Sale and (ii) the common stock of AMPAM will not constitute
Redeemable capital stock solely because of the redemption trigger features
described under "Certain Transactions--Acquisition of Founding Companies--Common
Stock Redemption Rights."
"Restricted Subsidiary" means any Subsidiary of AMPAM that is not an
Unrestricted Subsidiary.
"Seller Preferred Stock" means the 10% Cumulative Redeemable Convertible
Preferred Stock, Series A of AMPAM.
"Senior Indebtedness" means the principal of, premium, if any, and interest
on any Indebtedness of AMPAM, whether outstanding on the Issue Date or created
afterwards, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or in connection
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with which the same is outstanding expressly provides that this Indebtedness
shall not be senior in right of payment to the notes. Without limiting the
generality of the foregoing, (x) "Senior Indebtedness" shall include all
monetary obligations of every nature under the credit facility, including the
principal of, premium, if any, and interest on all obligations of every nature
of AMPAM from time to time owed to the lenders under the credit facility,
including, without limitation, principal of and interest on, reimbursement
obligations under letters of credit, and all fees, indemnities and expenses
payable under, the credit facility and (y) in the case of Designated Senior
Indebtedness, "Senior Indebtedness" shall include interest accruing thereon
subsequent to the occurrence of any event of default specified in clause (vii)
or (viii) under "-- Events of Default" relating to AMPAM, whether or not the
claim for this interest is allowed under any applicable Bankruptcy Code.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (a)
Indebtedness evidenced by the notes, (b) Indebtedness that is expressly
subordinate or junior in right of payment to any other Indebtedness of AMPAM,
(c) Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is by its terms without
recourse to AMPAM, (d) Indebtedness which is represented by Redeemable capital
stock, (e) to the extent it constitutes Indebtedness, any liability for federal,
state, local or other taxes owed or owing by AMPAM, (f) Indebtedness of AMPAM to
a Subsidiary of AMPAM or any other Affiliate of AMPAM or any of this Affiliate's
Subsidiaries, (g) that portion of any Indebtedness which is incurred by AMPAM in
violation of the indenture and (h) trade payables.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated under the Securities Act, as this Regulation is in effect on the
date of the indenture.
"Stated Maturity" means, when used with respect to any note or any
installment of interest on that note, the date specified in this note as the
fixed date on which the principal of this note or the installment of interest is
due and payable, and when used with respect to any other Indebtedness, means the
date specified in the instrument governing that Indebtedness as the fixed date
on which the principal of that Indebtedness, or any installment of interest
thereon, is due and payable.
"Subordinated Indebtedness" means, with respect to AMPAM, Indebtedness of
AMPAM which is expressly subordinated in right of payment to the notes.
"Subsidiary" means, with respect to any person, (1) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
that person, by one or more Subsidiaries of that person or by that person and
one or more Subsidiaries of that person and (2) any other person (other than a
corporation), including, without limitation, a partnership, limited liability
company, business trust or joint venture, in which that person, one or more of
its Subsidiaries of that person or that person and one or more of its
Subsidiaries, directly or indirectly, at the date of determination of that
person, have at least majority ownership interest entitled to vote in the
election of directors, managers or trustees of that person (or other person
performing similar functions). For purposes of this definition, any directors'
qualifying shares or investments by foreign nationals mandated by applicable law
shall be disregarded in determining the ownership of a Subsidiary.
"Unrestricted Subsidiary" means (1) each Subsidiary of AMPAM designated as
a Subsidiary of AMPAM under and in compliance with the covenant described under
"-- Material Covenants -- Limitation on Designations of Unrestricted
Subsidiaries" and (2) each Subsidiary of any Subsidiary described in clause (1)
of this definition.
"Voting Stock" means any class or classes of capital stock through which
the holders of the capital stock have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any person.
BOOK-ENTRY; DELIVERY AND FORM
Notes offered and sold to QIBs in reliance on Rule 144A under the
Securities Act will be represented by a single, permanent global note in
definitive, fully registered book-entry form (the "Global Security")
115
<PAGE> 122
which will be registered in the name of a nominee of DTC and deposited on behalf
of purchasers of the notes represented thereby with a custodian for DTC for
credit to the respective accounts of the purchasers (or to such other accounts
as they may direct) at DTC.
THE GLOBAL SECURITY. AMPAM expects that, under procedures established by
DTC, ownership of the notes will be shown on, and the transfer of ownership of
the notes will be effected only through, records maintained by DTC or its
nominee (with respect to interests of Participants (as defined below)) and the
records of Participants (with respect to interests of persons other than
Participants). Such accounts initially will be designated by or on behalf of the
Initial Purchasers and ownership of beneficial interests in the Global Security
will be limited to persons who have accounts with DTC ("Participants") or
persons who hold interests through Participants. QIBs may hold their interests
in the Global Security directly through DTC if they are Participants in this
system, or indirectly through organizations which are Participants in this
system.
So long as DTC or its nominee is the registered owner or holder of any of
the notes, DTC or its nominee will be considered the sole owner or holder of the
notes represented by the Global Security for all purposes under the indenture
and under the notes represented thereby. No beneficial owner of an interest in
the Global Security will be able to transfer the interest except in accordance
with the applicable procedures of DTC in addition to those provided for under
the indenture. The laws of some states require that some persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interest in the Global Security to the persons
will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants (as defined
in this prospectus), the ability of a person having beneficial interests in the
Global Security to pledge these interests to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of the
interests, may be affected by the lack of a physical certificate evidencing
these interests.
Payments of the principal of, premium, if any, and interest on the notes
represented by the Global Security will be made to DTC or its nominee, as the
case may be, as the registered owner of the Global Security. None of AMPAM, the
trustee or any paying agent under the indenture will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Security or for maintaining,
supervising or reviewing any records relating to the beneficial ownership
interest.
AMPAM expects that DTC or its nominee, upon receipt of any payment of the
principal of, premium, if any, and interest on the notes represented by the
Global Security, will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the Global Security as
shown in the records of DTC or its nominee. AMPAM also expects that payments by
Participants to owners of beneficial interests in the Global Security held
through Participants will be governed by standing instructions and customary
practice as is now the case with securities held for the accounts of customers
registered in the names of nominees for these customers. Such payment will be
the responsibility of the Participants.
DTC has advised AMPAM that DTC will take any action permitted to be taken
by a holder of notes (including the presentation of notes for exchange as
described below) only at the direction of one or more Participants to whose
account the DTC interests in the Global Security are credited and only in
respect of the aggregate principal amount as to which the Participant or
Participants has or have given direction.
DTC has advised AMPAM as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered under the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
Participants and facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
accounts of its Participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and various other organizations.
Indirect access to the DTC system is available to others like banks, brokers,
116
<PAGE> 123
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the Global Security among Participants of
DTC, is it under no obligation to perform these procedures, and these procedures
may be discontinued at any time. Neither AMPAM nor the trustee will have any
responsibility for the performance by DTC or its direct or indirect participants
of their obligations under the rules and procedures governing their operations.
CERTIFICATED SECURITIES. Interests in the Global Security will be exchanged
for Certificated Securities if DTC notifies AMPAM that it is unwilling or unable
to continue as depositary for the Global Security, or DTC ceases to be a
"Clearing Agency" registered under the Exchange Act, and a successor depositary
is not appointed by AMPAM within 90 days. Upon the occurrence of any of the
events described in the preceding sentence, AMPAM will cause the appropriate
Certificated Securities to be delivered.
117
<PAGE> 124
REGISTRATION RIGHTS
AMPAM has entered into a registration rights agreement with the initial
purchasers under which AMPAM and the guarantors have agreed, for the benefit of
the holders of the notes, at AMPAM's cost, to use their reasonable best efforts:
- to file with the SEC the registration statement of which this prospectus
is a part related to the exchange offer of the exchange notes within 60
days after the Issue Date;
- to cause this exchange offer registration statement to be declared
effective under the Securities Act within 150 days of the Issue Date;
- to keep this exchange offer registration statement effective until the
closing of the exchange offer; and
- to cause this exchange offer to be completed within 180 days of the Issue
Date.
Under the registration rights agreement, AMPAM is required to allow
participating broker-dealers to use the prospectus contained in the exchange
offer registration statement (subject to "black out" periods) following the
exchange offer, in connection with the resale of exchange notes received in
exchange for notes acquired by those participating broker-dealers for their own
account as a result of market-making or other trading activities.
The registration rights agreement shall be governed by, and construed
under, the laws of the State of New York. If you have further questions about
registration rights, you should refer to the registration rights agreement, a
copy of which is available upon request to AMPAM. The registration rights
agreement is also attached as an exhibit to this registration statement. In
addition, the information described above concerning interpretations of and
positions taken by the staff of the SEC is not intended to constitute legal
advice, and prospective investors should consult their own advisors on these
matters.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of the exchange notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange notes received in exchange for existing notes where the
existing notes were acquired as a result of market-making activities or other
trading activities.
AMPAM will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
in the exchange offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions, through the writing
of options on the exchange notes or a combination of these methods of resale, at
market prices prevailing at the time of resale, at prices related to those
prevailing market prices or at negotiated prices. Any resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any broker-dealer or
the purchasers of any exchange notes. Any broker-dealer that resells exchange
notes that were received by it for its own account in the exchange offer and any
broker or dealer that participates in a distribution of the exchange notes may
be an "underwriter" within the meaning of the Securities Act and any profit on
any resale of exchange notes and any commission or concessions received by any
person may be considered underwriting compensation under the Securities Act. The
letter of transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be regarded as an admission
that it is an "underwriter," within the meaning of the Securities Act.
AMPAM has agreed to pay all expenses incident to the exchange offer
(including the expenses of one counsel for the holders of the notes), other than
commissions or concessions of any broker-dealers, and will indemnify the holders
of the notes (including any broker-dealers) against some liabilities, including
liabilities under the Securities Act.
118
<PAGE> 125
LEGAL MATTERS
The validity of the notes offered hereby will be passed upon for AMPAM by
Andrews & Kurth L.L.P., Houston, Texas.
EXPERTS
The audited financial statements of AMPAM and the founding companies
included elsewhere in this prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included in this prospectus in reliance upon the authority of
said firm as experts in accounting and auditing in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement under the Securities
Act on Form S-4 related to the exchange notes offered by this prospectus. As
allowed by SEC rules, this prospectus does not contain all the information
contained in the registration statement. If you have a question on any contract,
agreement or other document filed as an exhibit to the registration statement,
please see the exhibits for a more complete description of the matter involved.
Before filing this registration statement, we have not been subject to the
periodic reporting and other informational requirements of the U.S. Securities
Exchange Act of 1934. We have agreed that, whether or not we are required to do
so by the rules and regulations of the Commission (and within 15 days of the
date that is or would be prescribed thereby), for so long as any of the notes
remain outstanding, we will furnish to the holders of the notes and file with
the Commission (unless the Commission will not accept that filing) (1) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on forms 10-Q and 10-K if we were
required to file forms, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and, with respect to the annual
information only, a report thereon by our independent auditors and (2) all
reports that would be required to be filed with the Commission on Form 8-K if we
were required to file these reports. In addition, for so long as any of the
notes remain outstanding, we have agreed to make available, upon request, to any
prospective purchaser of the notes and beneficial owner of the notes in
connection with the sale of the notes the information required by Rule
144A(d)(4) under the Securities Act. Information may be obtained from us at 1502
Augusta, Suite 425, Houston, Texas 77057, Attention: Secretary.
119
<PAGE> 126
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
AMERICAN PLUMBING & MECHANICAL, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Introduction to Unaudited Pro Forma Combined Financial
Statements............................................. F-3
Unaudited Pro Forma Combined Balance Sheet................ F-4
Unaudited Pro Forma Combined Statements of Operations..... F-5
Notes to Unaudited Pro Forma Combined Financial
Statements............................................. F-7
AMERICAN PLUMBING & MECHANICAL, INC.
Report of Independent Public Accountants.................. F-12
Balance Sheets............................................ F-13
Statements of Operations.................................. F-14
Statements of Cash Flows.................................. F-15
Statements of Stockholders' Equity........................ F-16
Notes to Financial Statements............................. F-17
FOUNDING COMPANIES:
CHRISTIANSON ENTERPRISES, INC. AND COMBINED COMPANIES
Report of Independent Public Accountants.................. F-24
Combined Balance Sheets................................... F-25
Combined Statements of Operations......................... F-26
Combined Statements of Cash Flows......................... F-27
Combined Statements of Stockholders' Equity............... F-28
Notes to Combined Financial Statements.................... F-29
RCR PLUMBING, INC. (dba RCR COMPANIES, INC.)
Report of Independent Public Accountants.................. F-38
Balance Sheets............................................ F-39
Statements of Operations.................................. F-40
Statements of Cash Flows.................................. F-41
Statements of Stockholders' Equity........................ F-42
Notes to Financial Statements............................. F-43
TEEPE'S RIVER CITY MECHANICAL, INC.
Report of Independent Public Accountants.................. F-50
Balance Sheets............................................ F-51
Statements of Operations.................................. F-52
Statements of Cash Flows.................................. F-53
Statements of Stockholders' Equity........................ F-54
Notes to Financial Statements............................. F-55
KEITH RIGGS PLUMBING, INC.
Report of Independent Public Accountants.................. F-63
Balance Sheets............................................ F-64
Statements of Operations.................................. F-65
Statements of Cash Flows.................................. F-66
Statements of Stockholders' Equity........................ F-67
Notes to Financial Statements............................. F-68
J.A. CROSON COMPANY AND FRANKLIN FIRE SPRINKLER COMPANY
Report of Independent Public Accountants.................. F-75
Combined Balance Sheets................................... F-76
Combined Statements of Operations......................... F-77
Combined Statements of Cash Flows......................... F-78
Combined Statements of Stockholders' Equity............... F-79
Notes to Combined Financial Statements.................... F-80
</TABLE>
F-1
<PAGE> 127
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
J.A. CROSON COMPANY OF FLORIDA
Report of Independent Public Accountants.................. F-87
Balance Sheets............................................ F-88
Statements of Operations.................................. F-89
Statements of Cash Flows.................................. F-90
Statements of Stockholders' Equity........................ F-91
Notes to Financial Statements............................. F-92
POWER PLUMBING, INC. AND SUBSIDIARIES
Report of Independent Public Accountants.................. F-99
Consolidated Balance Sheets............................... F-100
Consolidated Statements of Operations..................... F-101
Consolidated Statements of Cash Flows..................... F-102
Consolidated Statements of Stockholders' Equity........... F-103
Notes to Consolidated Financial Statements................ F-104
NELSON MECHANICAL CONTRACTORS, INC.
Report of Independent Public Accountants.................. F-112
Balance Sheets............................................ F-113
Statements of Operations.................................. F-114
Statements of Cash Flows.................................. F-115
Statements of Stockholders' Equity........................ F-116
Notes to Financial Statements............................. F-117
SHERWOOD MECHANICAL, INC.
Report of Independent Public Accountants.................. F-123
Balance Sheets............................................ F-124
Statements of Operations.................................. F-125
Statements of Cash Flows.................................. F-126
Statements of Stockholders' Equity........................ F-127
Notes to Financial Statements............................. F-128
MILLER MECHANICAL CONTRACTORS, INC. AND SUBSIDIARY
Report of Independent Public Accountants.................. F-136
Balance Sheets............................................ F-137
Statements of Operations.................................. F-138
Statements of Cash Flows.................................. F-139
Statement of Stockholders' Equity......................... F-140
Notes to Consolidated Financial Statements................ F-141
</TABLE>
F-2
<PAGE> 128
AMERICAN PLUMBING & MECHANICAL, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma combined financial statements give effect
to (a) the acquisitions by American Plumbing & Mechanical, Inc. (AMPAM), of the
outstanding capital stock of Christianson, RCR, Teepe's, Keith Riggs, Croson
Ohio, Croson Florida, Power, Nelson, Sherwood and Miller, and related
transactions, and (b) the issuance of the 11 5/8% Senior Subordinated Notes due
2008 and application of the net proceeds therefrom. The acquisitions occurred on
April 1, 1999 and have been accounted for using the purchase method of
accounting. Christianson has been reflected as the accounting acquiror for
financial statement presentation purposes.
The unaudited pro forma combined balance sheet gives effect to the
acquisitions and related transactions, and the issuance of the notes, as if they
had occurred on March 31, 1999. The unaudited pro forma combined statements of
operations give effect to these transactions as if they had occurred on January
1 of the respective period presented.
These pro forma combined financial statements should be read in conjunction
with the financial statements of each of the Founding Companies included
elsewhere herein.
AMPAM has preliminarily analyzed the savings that it expects to be realized
from reductions in salaries, bonuses and certain benefits, including lease
payments to the owners. To the extent the owners of the founding companies have
contractually agreed to prospective changes in salary, bonuses, benefits and
lease payments, these changes have been reflected in the unaudited pro forma
combined statements of operations. With respect to other potential cost savings,
AMPAM cannot fully quantify these savings. Any potential cost savings are
expected to be partially offset by costs related to AMPAM's new corporate
management and by the costs associated with being a public company. However,
because these costs cannot be accurately quantified at this time, they have not
been included in the pro forma combined financial information of AMPAM.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions that AMPAM management deems appropriate and
may be revised as additional information becomes available. The pro forma
financial data do not purport to represent what AMPAM's combined financial
position or results of operations would actually have been if such transactions
in fact had occurred on those dates and are not necessarily representative of
AMPAM's combined financial position or results of operations for any future
period. Since the founding companies were not under common control or
management, historical combined results may not be comparable to, or indicative
of, future performance. The unaudited pro forma combined financial statements
should be read in conjunction with the historical financial statements and notes
thereto included elsewhere in this offering memorandum. See also "Risk Factors"
included elsewhere herein.
F-3
<PAGE> 129
AMERICAN PLUMBING & MECHANICAL, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1999
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
KEITH CROSON CROSON
CHRISTIANSON RCR TEEPE'S RIGGS OHIO FLORIDA POWER NELSON SHERWOOD
------------ ------- ------- ------ ------- ------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents......... $ 5,439 $ 1,420 $ 749 $ 171 $ 379 $ 57 $3,083 $ 601 $ 11
Accounts receivable --
Contract, net................... 6,652 12,813 8,247 4,776 6,302 4,994 3,748 2,034 2,467
Other receivables............... 224 9 36 227 47 -- 264 123 --
Costs and estimated earnings in
excess of billings on
uncompleted contracts........... 350 2,090 1,533 -- 2,951 1,140 239 1,055 825
Inventories....................... 1,182 1,374 210 696 247 2 -- 400 274
Prepaid expenses and other current
assets.......................... 40 22 558 -- 14 539 415 613 455
------- ------- ------- ------ ------- ------ ------ ------ ------
Total current assets........ 13,887 17,728 11,333 5,870 9,940 6,732 7,749 4,826 4,032
PROPERTY AND EQUIPMENT, net........ 1,989 4,175 3,384 1,161 1,567 996 79 1,018 439
OTHER ASSETS....................... -- -- 416 -- -- -- -- -- 13
GOODWILL, NET...................... -- -- -- -- -- -- -- -- --
------- ------- ------- ------ ------- ------ ------ ------ ------
Total assets................ $15,876 $21,903 $15,133 $7,031 $11,507 $7,728 $7,828 $5,844 $4,484
======= ======= ======= ====== ======= ====== ====== ====== ======
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations..................... $ 505 $ 646 $ 934 $ 212 $ 986 $ 840 $ -- $ -- $ 814
Accounts payable and accrued
expenses........................ 4,504 7,379 6,856 2,606 2,940 1,100 1,829 308 1,595
Advances payable to stockholder... -- -- -- -- -- -- -- -- --
Billings in excess of costs and
estimated earnings on
uncompleted contracts........... 622 2,537 1,291 -- 1,081 593 1,799 205 229
Other current liabilities......... -- -- -- -- -- -- 167 4,788 238
------- ------- ------- ------ ------- ------ ------ ------ ------
Total current liabilities... 5,631 10,562 9,081 2,818 5,007 2,533 3,795 5,301 2,876
LONG-TERM OBLIGATIONS, net of
current maturities................ 532 576 596 456 557 -- -- -- 98
SUBORDINATED LOAN.................. -- -- -- -- -- -- -- -- --
SELLER NOTES....................... -- -- -- -- -- -- -- -- --
DEFERRED TAXES..................... 10 -- -- -- -- -- 6 -- 157
OTHER LONG-TERM LIABILITIES........ -- -- 1,064 -- -- -- -- -- --
COMMITMENTS AND CONTINGENCIES
SERIES A REDEEMABLE PREFERRED
STOCK............................. -- -- -- -- -- -- -- -- --
STOCKHOLDERS' EQUITY:
Restricted Common Stock........... -- -- -- -- -- -- -- -- --
Common Stock and additional
paid-in capital................. 93 231 1 259 16 651 1 1,089 284
Retained earnings................. 9,610 10,938 4,391 3,685 5,927 4,544 4,026 (546) 1,069
Treasury stock.................... -- (404) -- (187) -- -- -- -- --
Receivable from stockholders...... -- -- -- -- -- -- -- -- --
------- ------- ------- ------ ------- ------ ------ ------ ------
Total stockholders'
equity..................... 9,703 10,765 4,392 3,757 5,943 5,195 4,027 543 1,353
------- ------- ------- ------ ------- ------ ------ ------ ------
Total liabilities and
stockholders' equity....... $15,876 $21,903 $15,133 $7,031 $11,507 $7,728 $7,828 $5,844 $4,484
======= ======= ======= ====== ======= ====== ====== ====== ======
<CAPTION>
PRO FORMA PRO FORMA
MILLER AMPAM ADJUSTMENTS COMBINED
------ ------ ----------- ---------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents......... $1,985 $ 37 $ (3,071) $ 10,861
Accounts receivable --
Contract, net................... 1,284 -- -- 53,317
Other receivables............... 127 -- -- 1,057
Costs and estimated earnings in
excess of billings on
uncompleted contracts........... 72 -- -- 10,255
Inventories....................... 532 -- -- 4,917
Prepaid expenses and other current
assets.......................... 22 (202) 2,476
------ ------ -------- --------
Total current assets........ 4,022 37 (3,273) 82,883
PROPERTY AND EQUIPMENT, net........ 225 -- (2,038) 12,995
OTHER ASSETS....................... -- 5,618 307 6,354
GOODWILL, NET...................... -- -- 107,828 107,828
------ ------ -------- --------
Total assets................ $4,247 $5,655 $102,824 $210,060
====== ====== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations..................... $ 26 $ -- $ (3,737) $ 1,226
Accounts payable and accrued
expenses........................ 892 2,032 4,281 36,322
Advances payable to stockholder... -- 3,622 (3,622) --
Billings in excess of costs and
estimated earnings on
uncompleted contracts........... 866 -- -- 9,223
Other current liabilities......... -- -- -- 5,193
------ ------ -------- --------
Total current liabilities... 1,784 5,654 (3,078) 51,964
LONG-TERM OBLIGATIONS, net of
current maturities................ 37 -- 121,408 124,260
SUBORDINATED LOAN.................. -- -- -- --
SELLER NOTES....................... -- -- -- --
DEFERRED TAXES..................... 12 -- 1,269 1,454
OTHER LONG-TERM LIABILITIES........ -- -- -- 1,064
COMMITMENTS AND CONTINGENCIES
SERIES A REDEEMABLE PREFERRED
STOCK............................. -- -- 13,635 13,635
STOCKHOLDERS' EQUITY:
Restricted Common Stock........... -- 24 -- 24
Common Stock and additional
paid-in capital................. 74 9 19,896 22,604
Retained earnings................. 2,340 -- (50,929) (4,945)
Treasury stock.................... -- -- 591 --
Receivable from stockholders...... -- (32) 32 --
------ ------ -------- --------
Total stockholders'
equity..................... 2,414 1 (30,410) 17,683
------ ------ -------- --------
Total liabilities and
stockholders' equity....... $4,247 $5,655 $102,824 $210,060
====== ====== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-4
<PAGE> 130
AMERICAN PLUMBING & MECHANICAL, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
KEITH CROSON CROSON
CHRISTIANSON RCR TEEPE'S RIGGS OHIO FLORIDA POWER NELSON SHERWOOD
------------ ------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES........................... $63,374 $63,293 $50,627 $34,464 $25,234 $28,142 $17,109 $15,058 $13,556
COST OF REVENUES (including
depreciation).................... 45,704 51,604 44,048 29,965 20,438 20,483 14,371 10,107 11,066
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit............... 17,670 11,689 6,579 4,499 4,796 7,659 2,738 4,951 2,490
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES......................... 17,078 8,370 4,779 2,943 2,032 2,960 1,268 1,759 2,189
GOODWILL AMORTIZATION.............. -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from operations..... 592 3,319 1,800 1,556 2,764 4,699 1,470 3,192 301
OTHER INCOME (EXPENSE):
Interest, net.................... (14) (270) (43) (73) (9) (108) 30 (18) (83)
Other, net....................... 70 (11) (177) 97 (7) -- 83 184 3
------- ------- ------- ------- ------- ------- ------- ------- -------
Other income (expense),
net...................... 56 (281) (220) 24 (16) (108) 113 166 (80)
------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME BEFORE PROVISION FOR INCOME
TAXES............................ 648 3,038 1,580 1,580 2,748 4,591 1,583 3,358 221
PROVISION FOR INCOME TAXES......... 32 24 666 -- 33 -- 612 -- 207
------- ------- ------- ------- ------- ------- ------- ------- -------
NET INCOME......................... 616 3,014 914 1,580 2,715 4,591 971 3,358 14
PREFERRED DIVIDENDS................ -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS..................... $ 616 $ 3,014 $ 914 $ 1,580 $ 2,715 $ 4,591 $ 971 $ 3,358 $ 14
======= ======= ======= ======= ======= ======= ======= ======= =======
PRO FORMA NET INCOME AVAILABLE TO
COMMON STOCKHOLDERS PER SHARE....
SHARES USED IN COMPUTING PRO FORMA
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS PER SHARE(1)........
<CAPTION>
PRO FORMA PRO FORMA
MILLER AMPAM ADJUSTMENTS COMBINED
------- ------ ----------- ----------
<S> <C> <C> <C> <C>
REVENUES........................... $11,346 $ -- $ -- $ 322,203
COST OF REVENUES (including
depreciation).................... 7,675 -- -- 255,461
------- ------ -------- ----------
Gross profit............... 3,671 -- -- 66,742
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES......................... 2,531 -- (14,654) 31,255
GOODWILL AMORTIZATION.............. -- -- 2,696 2,696
------- ------ -------- ----------
Income from operations..... 1,140 -- 11,958 32,791
OTHER INCOME (EXPENSE):
Interest, net.................... 35 -- (13,783) (14,336)
Other, net....................... 13 -- -- 255
------- ------ -------- ----------
Other income (expense),
net...................... 48 -- (13,783) (14,081)
------- ------ -------- ----------
INCOME BEFORE PROVISION FOR INCOME
TAXES............................ 1,188 -- (1,825) 18,710
PROVISION FOR INCOME TAXES......... 463 -- 6,290 8,327
------- ------ -------- ----------
NET INCOME......................... 725 -- (8,115) 10,383
PREFERRED DIVIDENDS................ -- -- 1,363 1,363
------- ------ -------- ----------
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS..................... $ 725 $ -- $ (9,478) $ 9,020
======= ====== ======== ==========
PRO FORMA NET INCOME AVAILABLE TO
COMMON STOCKHOLDERS PER SHARE.... $ 0.73
==========
SHARES USED IN COMPUTING PRO FORMA
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS PER SHARE(1)........ 12,369,780
==========
</TABLE>
- ---------------
(1) Includes (a) 3,471,162 shares of common stock and restricted common stock
issued to Sterling City Capital LLC, the management of AMPAM and certain
other individuals and (b) 8,898,618 shares issued to acquire founding
companies. These share amounts exclude additional shares of common stock
that may be issued to the stockholders of the founding companies if certain
targeted earnings thresholds are satisfied during the year ended December
31, 1999. See "Certain Transaction -- Acquisition of Founding
Companies -- Additional Consideration" included elsewhere herein. These
share amounts also exclude 2,142,115 shares of common stock subject to
options granted in connection with the acquisitions at an exercise price
equal to their then fair market value.
See accompanying notes to unaudited pro forma combined financial statements.
F-5
<PAGE> 131
AMERICAN PLUMBING & MECHANICAL, INC. AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
KEITH CROSON CROSON
CHRISTIANSON RCR TEEPE'S RIGGS OHIO FLORIDA POWER NELSON SHERWOOD
------------ ------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES........................... $16,824 $19,441 $10,546 $ 8,917 $ 7,247 $ 8,274 $ 5,620 $ 4,670 $ 3,969
COST OF REVENUES (including
depreciation).................... 11,390 15,361 9,287 7,469 6,081 5,482 4,022 2,510 3,468
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit............... 5,434 4,080 1,259 1,448 1,166 2,792 1,598 2,160 501
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES......................... 1,863 2,452 1,126 706 676 869 346 1,029 660
GOODWILL AMORTIZATION.............. -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from operations..... 3,571 1,628 133 742 490 1,923 1,252 1,131 (159)
OTHER INCOME (EXPENSE):
Interest, net.................... (16) (30) (49) 2 (4) (7) 19 (71) (25)
Other, net....................... 9 613 5 228 (9) -- 4 425 1
------- ------- ------- ------- ------- ------- ------- ------- -------
Other income (expense),
net...................... (7) 583 (44) 230 (13) (7) 23 354 (24)
------- ------- ------- ------- ------- ------- ------- ------- -------
INCOME BEFORE PROVISION FOR INCOME
TAXES............................ 3,564 2,211 89 972 477 1,916 1,275 1,485 (183)
PROVISION FOR INCOME TAXES......... 162 26 27 -- (6) -- 488 -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
NET INCOME......................... 3,402 2,185 62 972 483 1,916 787 1,485 (183)
PREFERRED DIVIDENDS................ -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS..................... $ 3,402 $ 2,185 $ 62 $ 972 $ 483 $ 1,916 $ 787 $ 1,485 $ (183)
======= ======= ======= ======= ======= ======= ======= ======= =======
PRO FORMA NET INCOME AVAILABLE TO
COMMON STOCKHOLDERS PER SHARE....
SHARES USED IN COMPUTING PRO FORMA
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS PER SHARE(1)........
<CAPTION>
PRO FORMA PRO FORMA
MILLER AMPAM ADJUSTMENTS COMBINED
------- ------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES........................... $ 2,497 $ -- $ -- $88,005
COST OF REVENUES (including
depreciation).................... 1,662 -- -- 66,732
------- ------- ------- -------
Gross profit............... 835 -- -- 21,273
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES......................... 458 -- (1,159) 9,026
GOODWILL AMORTIZATION.............. -- -- 674 674
------- ------- ------- -------
Income from operations..... 377 -- 485 11,573
OTHER INCOME (EXPENSE):
Interest, net.................... 16 -- (3,407) (3,572)
Other, net....................... 14 -- (896) 394
------- ------- ------- -------
Other income (expense),
net...................... 30 -- (4,303) (3,178)
------- ------- ------- -------
INCOME BEFORE PROVISION FOR INCOME
TAXES............................ 407 -- (3,818) 8,395
PROVISION FOR INCOME TAXES......... 173 -- 2,667 3,537
------- ------- ------- -------
NET INCOME......................... 234 -- (6,485) 4,858
PREFERRED DIVIDENDS................ -- -- 341 341
------- ------- ------- -------
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS..................... $ 234 $ -- $(6,826) $ 4,517
======= ======= ======= =======
PRO FORMA NET INCOME AVAILABLE TO
COMMON STOCKHOLDERS PER SHARE.... $ 0.37
=======
SHARES USED IN COMPUTING PRO FORMA
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS PER SHARE(1)........ 12,369,780
==========
</TABLE>
- ---------------
(1) Includes (a) 3,471,162 shares of common stock and restricted common stock
issued to Sterling City Capital LLC, the management of AMPAM and certain
other individuals and (b) 8,898,618 shares issued to acquire founding
companies. These share amounts exclude additional shares of common stock
that may be issued to the stockholders of the founding companies if certain
targeted earnings thresholds are satisfied during the year ended December
31, 1999. See "Certain Transaction -- Acquisition of Founding
Companies -- Additional Consideration" included elsewhere herein. These
share amounts also exclude 2,142,115 shares of common stock subject to
options granted in connection with the acquisitions at an exercise price
equal to their then fair market value.
See accompanying notes to unaudited pro forma combined financial statements.
F-6
<PAGE> 132
AMERICAN PLUMBING & MECHANICAL, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. GENERAL:
American Plumbing & Mechanical, Inc. (AMPAM) was founded to be the leading
national provider of plumbing and mechanical contracting services to the
residential and commercial/institutional markets. AMPAM conducted no operations
prior to April 1, 1999, when it acquired the founding companies concurrently
with entering into the credit facility and the subordinated loan.
The historical financial statements reflect the financial position and
results of operations of the founding companies and were derived from the
respective founding companies' financial statements. The periods included in
these financial statements for the individual founding companies are for the
year ended December 31, 1998, except for Miller, Sherwood and Croson Ohio for
which the period is the twelve months ended September 30, 1998.
2. ACQUISITION OF FOUNDING COMPANIES:
On April 1, 1998, AMPAM acquired all of the outstanding capital stock and
other equity interests of the founding companies. The acquisitions were
accounted for using the purchase method of accounting, with Christianson being
reflected as the accounting acquiror. As the accounting acquiror, for accounting
purposes under SEC SAB No. 97, Christianson is treated as (a) having acquired
all the other founding companies (even though AMPAM legally made such
acquisitions), (b) having merged with AMPAM (with purchase accounting reflected
for AMPAM's non-management stock ownership) and (c) representing the financial
history of AMPAM prior to April 1, 1999.
The consideration paid to the stockholders of the founding companies,
excluding the accounting acquiror (Christianson) was $46.3 million in cash, $4.3
million in seller notes and 7,972,000 shares of common stock. This initial
consideration excludes certain additional shares of common stock and cash that
may be issued to the stockholders of the founding companies if certain targeted
earnings thresholds are satisfied during the year ended December 31, 1999, which
could increase goodwill and amortization of goodwill from the amounts reflected
herein. See "Certain Transactions -- Acquisition of Founding
Companies -- Additional Consideration" included elsewhere herein for further
discussion. The table below does not reflect net transfers of $30.6 million
which represent the distribution of owner amounts such as excess working
capital, distribution of various founding companies' retained earnings,
distribution of various founding companies' S corporation accumulated adjustment
accounts and the distribution of nonoperating assets, net of nonoperating
liabilities, a portion of which were transferred to the owners in connection
with the acquisitions of the founding companies as of March 31, 1999. The excess
working capital distributions are subject to adjustment based upon finalization
of the founding companies working capital balances as of March 31, 1999.
3. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS:
The following tables summarize unaudited pro forma combined balance sheet
adjustments related to the acquisitions and related transactions, and the
issuance of the notes (in thousands):
<TABLE>
<CAPTION>
ADJUSTMENT
---------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
-------- ------- -------- -------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS --
Cash and cash
equivalents............. $(10,000) $ -- $ -- $ -- $ -- $ 98,576 $(97,676) $(5,622) $ 11,651
Prepaid expenses and other
current assets.......... -- (202) -- -- -- -- -- -- --
-------- ------- -------- -------- ------- -------- -------- ------- --------
Total current assets.... (10,000) (202) -- -- -- 98,576 (97,676) (5,622) 11,651
Property and equipment,
net....................... -- (2,038) -- -- -- -- -- -- --
Other long-term assets...... -- -- -- (5,618) -- 1,675 -- -- 4,250
Goodwill, net............... -- -- -- 107,828 -- -- -- -- --
-------- ------- -------- -------- ------- -------- -------- ------- --------
Total assets............ $(10,000) $(2,240) $ -- $102,210 $ -- $100,251 $(97,676) $(5,622) $ 15,901
======== ======= ======== ======== ======= ======== ======== ======= ========
<CAPTION>
PRO FORMA
ADJUSTMENTS
-----------
<S> <C>
ASSETS
CURRENT ASSETS --
Cash and cash
equivalents............. $ (3,071)
Prepaid expenses and other
current assets.......... (202)
--------
Total current assets.... (3,273)
Property and equipment,
net....................... (2,038)
Other long-term assets...... 307
Goodwill, net............... 107,828
--------
Total assets............ $102,824
========
</TABLE>
F-7
<PAGE> 133
AMERICAN PLUMBING & MECHANICAL, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
ADJUSTMENT
---------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
-------- ------- -------- -------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES --
Current maturities of
long-term obligations... $ 12,372 $ -- $ 34,585 $ 46,318 $ -- $ -- $(97,012) $ -- $ --
Accounts payable and
accrued expenses........ 6,313 -- -- -- -- -- -- (2,032) $ --
Advances payable to
stockholder............. -- -- -- -- -- -- -- (3,622) --
-------- ------- -------- -------- ------- -------- -------- ------- --------
Total current
liabilities........... 18,685 -- 34,585 46,318 -- -- (97,012) (5,654) --
LONG-TERM DEBT, net......... -- (346) -- -- -- 70,251 (664) 52,167
SUBORDINATED LOAN........... -- -- -- -- -- 29,700 -- -- (29,700)
SELLER NOTES................ -- -- 1,491 4,275 -- -- -- -- (5,766)
DEFERRED TAXES.............. -- -- -- 1,269 -- -- -- -- --
SERIES A REDEEMABLE
PREFERRED STOCK........... -- -- 13,635 -- -- -- -- -- --
STOCKHOLDERS' EQUITY --
Common Stock and
additional paid-in
capital................. -- -- (49,711) 61,610 7,697 -- -- -- 300
Warrants.................. -- -- -- -- -- 300 -- -- (300)
Retained earnings......... (28,685) (1,894) -- (11,853) (7,697) -- -- -- (800)
Treasury Stock............ -- -- -- 591 -- -- -- -- --
Receivable from
stockholders............ -- -- -- -- -- -- -- 32 --
-------- ------- -------- -------- ------- -------- -------- ------- --------
Total stockholders'
equity................ (28,685) (1,894) (49,711) 50,348 -- 300 -- 32 (800)
-------- ------- -------- -------- ------- -------- -------- ------- --------
Total liabilities and
stockholders'
equity................ $(10,000) $(2,240) $ -- $102,210 $ -- $100,251 $(97,676) $(5,622) $ 15,901
======== ======= ======== ======== ======= ======== ======== ======= ========
<CAPTION>
PRO FORMA
ADJUSTMENTS
-----------
<S> <C>
CURRENT LIABILITIES --
Current maturities of
long-term obligations... $ (3,737)
Accounts payable and
accrued expenses........ 4,281
Advances payable to
stockholder............. (3,622)
--------
Total current
liabilities........... (3,078)
LONG-TERM DEBT, net......... 121,408
SUBORDINATED LOAN........... --
SELLER NOTES................ --
DEFERRED TAXES.............. 1,269
SERIES A REDEEMABLE
PREFERRED STOCK........... 13,635
STOCKHOLDERS' EQUITY --
Common Stock and
additional paid-in
capital................. 19,896
Warrants.................. --
Retained earnings......... (50,929)
Treasury Stock............ 591
Receivable from
stockholders............ 32
--------
Total stockholders'
equity................ (30,410)
--------
Total liabilities and
stockholders'
equity................ $102,824
========
</TABLE>
Pro Forma Adjustments:
(a) Records the transfer in connection with the acquisitions of $28.7 million
of owner amounts, representing previously undistributed S corporation
accumulated adjustment accounts, previously undistributed retained
earnings of C corporations and excess working capital to the owners of the
founding companies. A portion of such amount was funded using $12.4
million of notes payable to the owners which was retired with proceeds of
the credit facility and the subordinated loan and $10.0 million of
available operating cash from the founding companies. The remaining $6.3
million of excess working capital (subject to adjustment as described
above) will be paid to the owners of the founding companies upon
finalization of the working capital balances as of March 31, 1999.
(b) Records the distribution of $1.9 million of nonoperating assets, net of
nonoperating liabilities, to certain stockholders of the founding
companies as part of the owner amounts prior to the acquisitions.
(c) Records a liability for the cash, seller notes and the preferred stock of
the acquisition consideration paid to Christianson, the accounting
acquirer, and records the merger of AMPAM and Christianson as part of the
acquisitions.
(d) Records the purchase of the founding companies by AMPAM, consisting of
notes payable incurred to finance the $46.3 million in cash, $4.3 million
in seller notes, 8.1 million shares of common stock valued at its
estimated fair market value of $6.91 per share and 2.1 million shares of
restricted common stock issued to Sterling City Capital, LLC and certain
individuals or consultants valued at its estimated fair market value of
$5.53 per share. Also records estimated transaction costs (including
accounting, legal and other) of $5.5 million, $2.0 million of which were
related to the acquisitions and $3.5 million of which were related to the
common stock issuance. The total purchase price was approximately $120.6
million resulting in purchase price in excess of net assets acquired
(goodwill) of $107.8 million. Also, records deferred taxes for differences
between the
F-8
<PAGE> 134
AMERICAN PLUMBING & MECHANICAL, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
financial reporting and tax basis of assets and liabilities, including on
certain of the founding companies that have historically elected S
corporation status for tax purposes as if they were C corporations.
Excludes additional shares of common stock and cash that may be issued to
the stockholders of the founding companies if certain targeted earnings
thresholds are satisfied during the year ended December 31, 1999. See
"Certain Transactions -- Acquisition of Founding Companies -- Additional
Consideration" included elsewhere herein.
The following reconciles the combined historical net assets of the
founding companies to the fair value of net assets acquired (in
thousands):
<TABLE>
<CAPTION>
ACQUIRED
FOUNDING
TOTAL COMBINED LESS: CHRISTIANSON CORPORATIONS
-------------- ------------------ ------------
<S> <C> <C> <C>
Historical net assets....................... $ 48,093 $(9,703) $ 38,390
Transfer of owner amount (see (a) and (b)
above)................................. (30,579) 6,057 (24,522)
Purchase adjustments -- deferred taxes... (1,269) 157 (1,112)
-------- ------- --------
Net assets after transfers and purchase
adjustments............................ $ 16,245 $(3,489) $ 12,756
======== ======= ========
</TABLE>
(e) Reflects the effects on the pro forma balance sheet of a $7.7 million
non-recurring, non-cash compensation charge which management expects to
record related to the issuance of stock to certain members of AMPAM's
management. This charge has not been reflected in the pro forma combined
statements of operations because these costs are non-recurring, non-cash
costs of the acquisitions and related financings.
(f) Records the borrowings of $70.3 million under the credit facility (net of
financing costs of $1.2 million) and $30.0 million under the subordinated
loan net of financing costs of $0.5 million and a discount of $0.3 million
related to the estimated fair value of the warrants issued in connection
with the subordinated loan.
(g) Reflects the repayment of $97.0 million of short-term debt and $0.8
million of long-term debt assumed by AMPAM with proceeds obtained from the
subordinated loan and the credit facility.
(h) Reflects the repayment of the advances from Sterling City Capital, LLC and
other payables for transaction expenses and reflects the collection of the
receivable from the stockholders of AMPAM.
(i) Records the net cash proceeds of this notes offering, the deferral of $4.8
million of related debt issuance costs and the use of such proceeds to
repay the subordinated loan and credit facility advances. Also reflects
the write off of $0.5 million of deferred loan costs and $0.3 million of
discount related to the subordinated loan and the write off of $0.3
million recorded value of the warrants issued in connection with the
subordinated loan and which will be cancelled in connection with the
repayment of the subordinated loan.
F-9
<PAGE> 135
AMERICAN PLUMBING & MECHANICAL, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS ADJUSTMENTS:
The following tables summarize unaudited pro forma combined statement of
operations adjustments for the year ended December 31, 1998 related to the
acquisitions and related transactions, and the issuance of the notes (in
thousands):
<TABLE>
<CAPTION>
ADJUSTMENT
------------------------------------------------- PRO FORMA
(A) (B) (C) (D) (E) ADJUSTMENTS
-------- ------- -------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Selling, general and
administrative expenses......... $(14,654) $ -- $ -- $ -- $ -- $(14,654)
Goodwill amortization............. -- 2,696 -- -- -- 2,696
-------- ------- -------- ------- ------- --------
Income from
operations............ 14,654 (2,696) -- -- -- 11,958
Interest expense.................. -- -- (13,783) -- -- (13,783)
-------- ------- -------- ------- ------- --------
Income before income
taxes................. 14,654 (2,696) (13,783) -- -- (1,825)
Provisions for income taxes....... -- -- -- 6,290 -- 6,290
-------- ------- -------- ------- ------- --------
Net income........................ 14,654 (2,696) (13,783) (6,290) -- (8,115)
Preferred dividends............... -- -- -- -- 1,363 1,363
-------- ------- -------- ------- ------- --------
Net income available to common
shareholders.................... $ 14,654 $(2,696) $(13,783) $(6,290) $(1,363) $ (9,478)
======== ======= ======== ======= ======= ========
</TABLE>
The following tables summarize unaudited pro forma combined statement of
operations adjustments for the three months ended March 31, 1999 related to the
acquisitions (in thousands):
<TABLE>
<CAPTION>
ADJUSTMENT
--------------------------------------------- PRO FORMA
(A) (B) (C) (D) (E) ADJUSTMENTS
------- ----- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Selling, general and administrative
expenses........................... $(1,159) $ -- $ -- $ -- $ -- $(1,159)
Goodwill amortization................ -- 674 -- -- -- 674
------- ----- ------- ------- ------- -------
Income from operations..... 1,159 (674) -- -- -- 485
Interest expense..................... -- -- (3,407) -- -- (3,407)
Other income......................... (896) -- -- -- -- (896)
------- ----- ------- ------- ------- -------
Income before income
taxes.................... 263 (674) (3,407) -- -- (3,818)
Provisions for income taxes.......... -- -- -- 2,667 -- 2,667
------- ----- ------- ------- ------- -------
Net income........................... 263 (674) (3,407) (2,667) -- (6,485)
Preferred dividends.................. -- -- -- -- 341 341
------- ----- ------- ------- ------- -------
Net income available to common
shareholders....................... $ 263 $(674) $(3,407) $(2,667) $ (341) $(6,826)
======= ===== ======= ======= ======= =======
</TABLE>
Pro Forma Adjustments:
(a) Reflects the reduction in salaries, bonuses, benefits and lease payments
to the owners of the founding companies. These reductions in salaries,
bonuses, benefits and lease payments have been agreed to prospectively in
accordance with the terms of employment and lease agreements executed as
part of the acquisitions. The employment agreements are primarily for five
years, contain restrictions related to competition and provide severance
for termination of employment in certain circumstances. Also, for the
three months ended March 31, 1999, reflects the reduction of other income
to eliminate the gain on disposal of assets related to AMPAM's acquisition
of the founding companies.
F-10
<PAGE> 136
AMERICAN PLUMBING & MECHANICAL, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Upon consummation of the acquisitions, AMPAM also expects to record a
non-recurring, non-cash compensation charge of $7.7 million related to
shares of common stock and restricted common stock owned by management.
Such charge represents the fair value of management's shares less the
amount paid for such shares. The issuances of the management shares were
made in connection with the organization of AMPAM, and no further
issuances of this nature are anticipated.
(b) Reflects the amortization of goodwill to be recorded as a result of these
acquisitions over a 40-year estimated life, which is management's estimate
as the period to be benefitted. Upon consummation of the acquisitions,
AMPAM will record on its balance sheet $107.8 million of goodwill,
representing the excess of the purchase price for the founding companies
over the fair value of the net assets to be acquired. Neither the goodwill
amortization nor the compensation charge will be deductible for federal
income tax purposes.
(c) Reflects the net effect on interest expense related to the $114.6 million
portion of the original issuance of the notes to be used to repay existing
debt at an estimated rate of 11 5/8% per annum and related amortization of
unamortized debt discount and offering costs
(d) Reflects the incremental provision for federal and state income taxes at a
39% overall tax rate, before nondeductible goodwill and other permanent
items, relating to the other statements of operations adjustments and for
income taxes on the pretax income of founding companies that have
historically elected S corporation tax status.
(e) Reflects the dividends which would have been owed to the shareholders of
the redeemable preferred stock.
F-11
<PAGE> 137
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Plumbing & Mechanical, Inc.
We have audited the accompanying balance sheet of American Plumbing &
Mechanical, Inc. as of December 31, 1998, and March 31, 1999, and the related
statements of operations, cash flows and stockholders' equity for the period
from inception (June 29, 1998) through December 31, 1998, and for the three
months ended March 31, 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Plumbing &
Mechanical, Inc. as of December 31, 1998, and March 31, 1999, and the results of
its operations and its cash flows for the period from inception (June 29, 1998)
through December 31, 1998, and for the three months ended March 31, 1999, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
June 14, 1999
F-12
<PAGE> 138
AMERICAN PLUMBING & MECHANICAL, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ ----------
<S> <C> <C>
CASH AND CASH EQUIVALENTS................................... $ -- $ 37,291
OTHER ASSETS................................................ -- 45,000
DEFERRED TRANSACTION COSTS.................................. 4,520,976 5,573,373
---------- ----------
Total assets...................................... $4,520,976 $5,655,664
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE............................................ $1,954,692 $2,032,463
AMOUNTS DUE TO STOCKHOLDERS................................. 2,565,284 3,622,201
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 10,000,000 authorized,
none issued and outstanding............................ -- --
Restricted common stock, $.01 par value, 5,000,000 shares
authorized, 2,417,517 shares issued and outstanding.... 24,175 24,175
Common stock, $.01 par value, 100,000,000 authorized,
900,000 shares issued and outstanding.................. 9,000 9,000
Additional paid-in capital................................ -- --
Receivable from stockholders.............................. (32,175) (32,175)
Retained earnings......................................... -- --
---------- ----------
Total stockholders' equity........................ 1,000 1,000
---------- ----------
Total liabilities and stockholders' equity........ $4,520,976 $5,655,664
========== ==========
</TABLE>
Reflects a 1,683-for-one stock split effected in March 1999.
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE> 139
AMERICAN PLUMBING & MECHANICAL, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION
(JUNE 29, FOR THE THREE
1998) MONTHS
THROUGH ENDED
DECEMBER 31, MARCH 31,
1998 1999
------------ -------------
<S> <C> <C>
REVENUES.................................................... $ -- $ --
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ -- --
----------- -----------
INCOME BEFORE INCOME TAXES.................................. -- --
PROVISION FOR INCOME TAXES.................................. -- --
----------- -----------
NET INCOME.................................................. $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE> 140
AMERICAN PLUMBING & MECHANICAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
INCEPTION
(JUNE 29, FOR THE THREE
1998) MONTHS
THROUGH ENDED
DECEMBER 31, MARCH 31,
1998 1999
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ -- $ --
Adjustments to reconcile net income to net cash used in
operating activities --
Changes in assets and liabilities --
Increase in other assets............................. -- (45,000)
Increase in deferred transaction costs............... (4,520,976) (1,052,397)
Increase in amounts due to stockholders.............. 2,565,284 1,056,917
Increase in accounts payable......................... 1,954,692 77,771
----------- -----------
Net cash provided (used) in operating
activities...................................... (1,000) 37,291
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Initial capitalization.................................... 1,000 --
----------- -----------
Net cash provided by financing activities......... 1,000 --
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... -- 37,291
CASH AND CASH EQUIVALENTS, beginning of period.............. -- --
----------- -----------
CASH AND CASH EQUIVALENTS, end of period.................... $ -- $ 37,291
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE> 141
AMERICAN PLUMBING & MECHANICAL, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
RESTRICTED
COMMON STOCK COMMON STOCK ADDITIONAL RECEIVABLE TOTAL
------------------- ---------------- PAID-IN FROM RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS EARNINGS EQUITY
--------- ------- ------- ------ ---------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INITIAL CAPITALIZATION AND
SUBSEQUENT SHARE ISSUANCE,
June 29, 1998................ 2,417,517 $24,175 900,000 $9,000 $-- $(32,175) $-- $1,000
NET INCOME (LOSS).............. -- -- -- -- -- -- -- --
--------- ------- ------- ------ --- -------- --- ------
BALANCE, December 31, 1998..... 2,417,517 24,175 900,000 9,000 -- (32,175) -- 1,000
NET INCOME (LOSS).............. -- -- -- -- -- -- -- --
--------- ------- ------- ------ --- -------- --- ------
BALANCE, March 31, 1999........ 2,417,517 $24,175 900,000 $9,000 $-- $(32,175) $-- $1,000
========= ======= ======= ====== === ======== === ======
</TABLE>
Reflects a 1,683-for-one stock split effected in March 1999.
The accompanying notes are an integral part of these financial statements.
F-16
<PAGE> 142
AMERICAN PLUMBING & MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
American Plumbing & Mechanical, Inc., a Delaware corporation (AMPAM or the
"Company"), was organized in June 1998 to be the leading provider of plumbing
and mechanical contracting services in the United States, focusing primarily on
the commercial/institutional and residential markets. On April 1, 1999, AMPAM
acquired ten U.S. businesses (see Note 4, the Acquisitions) and completed the
initial financings (see Note 5). On May 19, 1999, the Company completed
additional financings (see Note 6) and intends to continue to acquire through
merger or purchase similar companies to expand its national or regional
operations.
AMPAM has not conducted any operations, and all activities to date have
related to the Acquisitions. All expenditures of the Company to March 31, 1999
were funded by its founder and then primary stockholder, Sterling City Capital,
LLC, on behalf of the Company. AMPAM has treated these costs as deferred
transaction costs in the accompanying balance sheet. The ability of AMPAM to
generate future income is dependent upon the ability of the Company to manage
the integration of the acquisitions as well as the effect on the combined
companies of the following factors which are discussed in more detail in "Risk
Factors" -- substantial indebtedness and potential incurrence of additional debt
that would be senior to the notes offer (discussed in Note 6), absence of
combined operating history and dependence on future operating performance,
exposure to cyclicality and downturns in construction, availability of skilled
labor, management of growth, reliance on acquisitions, competition, dependence
on key personnel, amortization of goodwill and acquisition and other related
accounting issues, availability of acquisition financing, use of fixed price
contracting and potential materials and labor cost escalations, the Year 2000
issue, potential adverse effect of future acquisitions, potential inability of
the Company to repurchase the notes from the offering (discussed in Note 6) upon
a change of control, lack of a trading market for the notes, seasonality and
fluctuation of quarterly operating results, concentration of customers,
regulations, liability and insurance.
2. STOCKHOLDERS' EQUITY:
Common Stock
In connection with the organization and initial capitalization of AMPAM,
the Company issued 2,092,401 shares of restricted common stock at $.01 par value
(restricted common stock). AMPAM has subsequently issued 1,225,116 additional
shares of restricted common stock and common stock to certain management of
AMPAM and other individuals. The shares of restricted common stock have rights
similar to shares of common stock, except that such shares are entitled to elect
one member of the board of directors and are entitled to one-fourth of one vote
for each share held on all other matters, and are subordinate in liquidation to
all other classes of stock. Each share of restricted common stock will convert
into common stock upon the occurrence of certain events. Consequently, as of
December 31, 1998 and as restated for the 1,683-for-one stock split discussed
below, the Company had issued a total of 1,598,901 shares to Sterling City
Capital, LLC and an aggregate of 1,718,616 shares to the executive management of
the Company and other individuals. The shares issued prior to December 1998 were
recorded at their estimated fair value at that time of $.01 par value. The fair
value at that time of all such shares was based on specific factors related to
the Company and the transaction including restrictions on transferability and
sale, the time value of money during the holding period and the substantive
progress of the transaction at each issuance date. On April 1, 1999, the Company
expects to reflect the shares previously issued to Sterling City Capital, LLC
and certainconsultants as acquisition costs (i.e., goodwill) in connection with
the acquisitions. Additionally, the Company expects to record a nonrecurring,
noncash compensation charge related to the shares issued on April 1, 1999 to
management of $7.7 million which will represent the difference between the
estimated fair value ($6.91 for common stock and $5.53 for restricted common
stock) and their recorded values. The management and Sterling City Capital, LLC
F-17
<PAGE> 143
AMERICAN PLUMBING & MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
shares were issued in contemplation of the acquisitions, and no further stock
issuances of this nature are anticipated.
AMPAM effected a 1,683-for-one stock split in March 1999 for each share of
restricted common stock and each share of common stock of the Company then
outstanding. In addition, the Company increased the number of authorized shares
of common stock to 100,000,000 and increased the number of authorized shares of
$.01 par value preferred stock to 10,000,000. The effects of the stock split and
the increase in the shares of authorized common stock have been retroactively
reflected on the balance sheet, statement of stockholders' equity and in the
accompanying notes. Additionally, the difference between the initial
capitalization value and the par value of total shares outstanding subsequent to
the stock split has been reflected as a receivable from stockholders.
Preferred Stock
An aggregate of 1,048,820 shares of preferred stock was issued to certain
stockholders of Christianson at the closing of the acquisitions. Such
Christianson stockholders received their acquisition consideration solely in the
form of cash and shares of preferred stock. The preferred stock is cumulative,
redeemable and convertible and will be recorded at its estimated fair value of
$13 per share.
The holders of the preferred stock are entitled to receive dividends at an
annual rate of 10% based on the liquidation value (as defined below). The
dividends will be payable in cash semiannually in arrears. The dividend payment
dates are June 30 and December 31, beginning on June 30, 1999. The holders of
the preferred stock are also entitled to receive additional dividends on an
equal share for share basis with the common stock to the extent that the Company
has paid cumulative dividends on a base amount of $13.00 per share of common
stock, as proportionately adjusted for any stock dividends, combinations, splits
or other similar events with respect to such shares, a common stock base amount.
However, the right of the holders of the preferred stock to receive this
preferential dividend will extinguish 40 days after the 25th day following the
date of the final prospectus related to an initial public offering of the
Company's common stock. After such time, the holders will be entitled to share
equally, on a per share basis, in any dividends of the Company with the holders
of common stock.
The preferred stock is senior to all other classes of the Company's capital
stock (including the common stock) in right of liquidation, dividends and
distributions.
The liquidation value of the preferred stock is $13.00 per share, plus
accrued and unpaid dividends, as adjusted proportionately for any stock
dividends, combinations, splits or other similar events with respect to such
shares, a liquidation value. In addition, the preferred stock shares equally, on
a per share basis, with the common stock after each share is paid the common
stock base amount plus a cumulative amount of dividends equal to 10% from the
later to occur of the date of issuance of the preferred stock or the date of
issuance of such share of common stock.
Except under certain circumstances, the preferred stock is not entitled to
vote as a separate class, but votes together with the holders of shares of all
other classes of capital stock of the Company as one class on all matters
submitted to a vote of the Company's stockholders. Each holder of shares of
preferred stock is entitled to the number of votes equal to the largest number
of full shares of common stock into which all shares of preferred stock held by
such holder could be converted at the record date for the determination of the
stockholders entitled to vote on such matters. In all cases where the holders of
shares of preferred stock are required by law to vote separately as a class,
such holders are entitled to one vote for each such share.
The preferred stock is redeemable at the Company's option at any time and
from time to time, in whole or in part prior to an initial public offering of
AMPAM common stock or an "IPO" for the greater of (i) the fair market value of
the preferred stock and (ii) $13.00 per share of preferred stock, plus, in
F-18
<PAGE> 144
AMERICAN PLUMBING & MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
each case, accrued and unpaid dividends thereon. After an IPO, the Company has
the right to redeem the preferred stock at any time and from time to time, in
whole or in part, at a price equal to the trading price of the common stock at
the time of redemption but in no event for less than $13.00 per share of
preferred stock, plus accrued and unpaid dividends. After the third anniversary
of the date of issuance, the holders of the preferred stock may require the
Company to redeem the preferred stock. In each such case, the redemption price
per share will be equal to the liquidation value plus accrued and unpaid
dividends through the date of redemption.
Prior to the filing of a registration statement by the Company with the
Securities and Exchange Commission with respect to an IPO, the holders of
preferred stock may convert the preferred stock into common stock on a
share-for-share basis. Not later than the twenty-fifth day after the date of the
final prospectus relating to such IPO, the Company will give notice to each
holder of preferred stock to the effect that the preferred stock will
automatically convert into shares of common stock on the 40th day thereafter
unless such holder gives the Company written notice on or before such date that
such holder elects such conversion not occur with respect to such holder's
shares of preferred stock. In the event the Company does not receive such notice
on or before such date, the preferred stock shall be converted into common stock
at a conversion ratio equal to the liquidation value (without inclusion of
accrued but unpaid dividends) divided by the price per share to the public in
the IPO, effective as of such date.
The Company may convert the preferred stock following the consummation of
an IPO on a share-for-share basis, unless such conversion would result in the
holder of preferred stock receiving common stock having a value of less than
$13.00 per share, in which case the conversion would be made at a conversion
ratio equal to the liquidation value (without inclusion of accrued but unpaid
dividends) divided by the price per share to the public in the IPO.
Other Preferred Stock
Additionally, the board of directors of the Company may authorize the
issuance from time to time shares of one or more new classes or series of
preferred stock. Subject to the provisions of the Company's amended and restated
certificate of incorporation and limitations prescribed by law, the board of
directors is expressly authorized to adopt resolutions to issue the shares, to
fix the number of shares and to change the number of shares constituting any
series, and to provide for or change the voting powers, designations,
preferences and relative, participating, optional or other special rights,
qualifications, limitations or restrictions thereof, including dividend rights
(including whether dividends are cumulative), dividend rates, terms of
redemption (including sinking fund provisions), redemption prices, conversion
rights and liquidation preferences of the shares constituting any class or
series of the preferred stock, in each case without any further action or vote
by the stockholders. The Company has no current plans to issue any shares of
preferred stock of any class or series other than the preferred stock.
Stock Plan
In February 1999, the Company's board of directors and stockholders
approved the Company's 1999 Stock Plan, or the "stock plan", which provides for
the granting or awarding of incentive or nonqualified stock options, stock
appreciation rights, restricted or phantom stock, and other incentive awards to
directors, officers, key employees and consultants of the Company. The number of
shares authorized and reserved for issuance under the stock plan is the greater
of 3.7 million shares or 15% of the aggregate number of shares of common stock
outstanding. The terms of the option awards will be established by the
Compensation Committee of the Company's board of directors. The Company granted
nonqualified stock options to purchase a total of approximately 2.1 million
shares of common stock to key employees of the Company at the consummation of
the acquisitions. These options vest at the rate of 20 percent per year,
commencing on the first anniversary of the grant date and will expire at the
earliest of ten years from the
F-19
<PAGE> 145
AMERICAN PLUMBING & MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
date of grant, three months following termination of employment other than due
to death or disability, or one year following termination of employment due to
death or disability.
3. STOCK-BASED COMPENSATION:
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," allows entities to choose between a new fair value
method of accounting for employee stock options or similar equity instruments
and the current method of accounting prescribed by Accounting Principles Board
(APB) Opinion No. 25 under which compensation expense is recorded to the extent
that the fair market value of the related stock is in excess of the options
exercise price at date of grant. Entities electing to remain with the accounting
in APB Opinion No. 25 must make pro forma disclosures of net income and earnings
per share as if the fair value method of accounting prescribed in SFAS No. 123
had been applied. The Company will measure compensation expense attributable to
stock options based on the method prescribed in APB Opinion No. 25 and will
provide the required pro forma disclosure of net income and earnings per share,
as applicable, in the notes to future consolidated annual financial statements.
4. FOUNDING COMPANY ACQUISITIONS:
On April 1, 1999 AMPAM acquired the following entities contemporaneously
with the related initial financings. The entities acquired were:
Christianson Enterprises, Inc., Christianson Service Company and
Professional Services, Inc. (collectively, Christianson)
R.C.R. Plumbing, Inc.
Teepe's River City Mechanical, Inc.
Keith Riggs Plumbing, Inc.
J. A. Croson Company and Franklin Fire Sprinkler Company
J. A. Croson Company of Florida
Power Plumbing, Inc.
Nelson Mechanical Contractors, Inc.
Sherwood Mechanical, Inc.
Miller Mechanical Contractors, Inc.
The Company's results of operations will include the founding companies
beginning April 1, 1999. Prior to April 1, 1999 the Company's results of
operations will be reflected as those of Christianson, since it has been
identified as the accounting acquiror.
The acquisition consideration delivered upon the closing of the
acquisitions consisted of (i) $99.9 million in cash (which represents a portion
of the $106.3 million cash consideration, subject to adjustment as discussed
below, to be paid to the stockholders of the founding companies), (ii) $5.8
million of seller notes, (iii) 8,898,618 shares of common stock and (iv)
1,048,820 shares of preferred stock. Additionally, approximately 2.1 million
shares of restricted common stock issued to Sterling City Capital, LLC and
certain consultants will be reflected as goodwill as part of the acquisition
transactions.
Included in the $99.9 million cash acquisition consideration paid upon
closing was a portion of the cash payments to be made to the stockholders of the
founding companies based upon the level of working capital of such founding
company as of the closing date. In the event that the adjusted level of working
capital as of the closing date is more or less than the unadjusted level, the
cash portion of the acquisition consideration payable to such stockholder will
be adjusted accordingly. The stockholders of each founding company were also
entitled to distributions of certain nonoperating assets of such founding
company
F-20
<PAGE> 146
AMERICAN PLUMBING & MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(subject to assumption of related liabilities), retained earnings of such
founding company (if a C corporation) or the positive amount of the accumulated
adjustment account (if an S corporation). In addition to the acquisition
consideration and other payments and distributions described above, the
stockholders of each founding company (including certain former shareholders of
Christianson) may receive additional consideration in the event such founding
company generates actual adjusted net income for the year ending December 31,
1999, in excess of a designated target level of net income for that period. Any
additional stock issued or cash paid will be recorded as additional
consideration and, accordingly, will be reflected as goodwill in the financial
statements of the Company.
The acquisitions will result in a substantial amount of goodwill recorded
on the Company's balance sheet. Goodwill from the acquisitions to be amortized
on a straight-line basis over 40 years. The Company's management will
periodically evaluate recorded goodwill balances, net of accumulated
amortization, for impairment based on the undiscounted cash flows associated
with the asset compared to the carrying amount of that asset.
In addition, the Company has entered into employment agreements with
certain key executives of the founding companies and is currently negotiating
and expects to enter into employment agreements with the executive officers of
AMPAM. These employment agreements will generally prohibit such individuals from
disclosing confidential information and trade secrets, and restrict such
individuals from competing with the Company for a period of two years following
termination of employment. The initial term of these employment agreements is
five years with provisions for annual extensions at the end of the initial term.
5. INITIAL FINANCINGS
On April 1, 1999, the Company obtained debt financing in the form of a
credit facility, a subordinated loan, seller notes and a note to Sterling City
Capital, LLC or a sponsor note, which all comprise the initial financings. The
key terms of these debt instruments are as follows:
The Credit Facility
The credit facility is a senior secured revolving credit facility in an
aggregate principal amount of $95 million. Amounts borrowed under the credit
facility were used to fund a part of the cash portion of the acquisition
consideration and will be used to fund future acquisitions and to provide
financing of general corporate purposes. The credit facility bears interest, at
the option of the Company, at the base rate of the arranging bank plus an
applicable margin or at LIBOR plus an applicable margin. The applicable margin
fluctuates based on the Company's ratio of funded debt to EBITDA and will be
between 1.50% and 2.50% above LIBOR or 0.00% and 1.00% above the arranging banks
base rate. Interest is payable no less frequently than quarterly in arrears. The
term of the credit facility is three years from the date of closing of the
acquisitions and all principal amounts borrowed will be payable in full at
maturity.
The credit facility is secured by (1) the accounts receivable, the seller
notes, inventory, equipment and other personal property of the Company and (2)
all of the capital stock owned by AMPAM of its existing or later-formed domestic
subsidiaries. The Company is required to make prepayments or commitment
reductions on the credit facility under certain circumstances.
The credit facility requires the Company to maintain compliance with
certain specified financial covenants including maximum ratios of funded debt to
EBITDA, a minimum fixed charge coverage ratio, a minimum net worth and other
restrictive covenants. Additionally, the terms of the credit facility limit the
ability of the Company to incur additional indebtedness, dispose of assets, make
acquisitions or other investments and to make various other payments.
F-21
<PAGE> 147
AMERICAN PLUMBING & MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
As of April 1, 1999, $70.3 million was outstanding on the credit facility.
The Company repaid such outstanding amount in full with the proceeds from the
offering discussed in Note 6.
The Subordinated Loan
The subordinated loan was a senior subordinated loan in an aggregate
principal amount of $30.0 million. The subordinated loan was a senior
subordinated obligation of the Company, subordinated to all other of the
Company's senior debt (including the credit facility) and senior to all other
subordinated debt of the Company (including the seller notes). Amounts borrowed
under the subordinated loan were used to fund a portion of the cash acquisition
consideration. The subordinated loan bore interest at an annual rate equal to
three months LIBOR plus 350 basis points. Interest was payable quarterly in
arrears.
Concurrently with entering into the subordinated loan, AMPAM deposited into
escrow, for the benefit of the lenders, warrants to purchase common stock. The
warrants terminated when the subordinated loan was repaid, upon closing of the
offering discussed in Note 6. The Company recorded the warrants as an increase
to stockholder's equity for their estimated fair value (approximately $0.3
million) and a corresponding discount to the subordinated loan recorded value.
The discount was amortized as additional interest expense.
As of April 1, 1999, $30.0 million was outstanding on the subordinated
loan. The Company repaid such outstanding amount in full with the proceeds from
the offering discussed below. Upon repayment, the Company wrote off deferred
loan issuance costs of $0.5 million and the discount of approximately $0.3
million.
The Seller Notes
The Company issued $5.8 million principal amount of seller notes due on
April 1, 2002. The seller notes bore interest at the rate of 10% per annum.
Interest on the seller notes was payable quarterly, commencing 90 days from
the date of issuance. The seller notes were unsecured obligations of the
Company, subordinated in the right of payment to any and all existing and future
senior indebtedness of the Company (including the credit facility and the
subordinated loan). The seller notes were repaid upon completion of the offering
discussed in Note 6.
The Sponsor Note
The Company issued a subordinated note payable to Sterling City Capital,
LLC on April 1, 1999 in settlement of the amounts due to stockholders of $3.5
million ($2.5 million at December 31, 1998). The sponsor note was due on April
1, 2002 and bore interest payable quarterly at the annual rate of 10%. The
sponsor note was redeemed by the Company upon completion of the offering
discussed in Note 6.
6. THE OFFERING AND THE EXCHANGE OFFERING
On May 19, 1999, the Company completed an offering of $125.0 million of
senior subordinated notes due in 2008. The notes are subordinated to all
existing and future senior indebtedness of the Company and are guaranteed by
each of the Company's current and future subsidiaries. The Company has the
option to redeem the notes at any time on or after 2004, at specified redemption
prices. Before 2002, the Company also has the option, under certain
circumstances, to redeem up to 35% of the aggregate principal amount of the
notes at specified redemption prices. Additionally, the Company is required
under certain circumstances to repurchase the notes at specified redemption
prices in the event of a change in control.
Additionally, the terms of the notes limit the ability of the Company to,
among other things, incur additional indebtedness, dispose of assets, make
acquisitions, make other investments, pay dividends and to
F-22
<PAGE> 148
AMERICAN PLUMBING & MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
make various other payments. In conjunction with this offering, the Company
entered into a registration rights agreement whereby the Company agreed to file
a registration statement within 60 days after the close of the offering that
would enable noteholders to exchange their privately placed notes for publicly
registered notes with substantially identical terms. Additionally, the Company
agreed, among other things, to use their reasonable best efforts to cause the
registration statement to become effective within 150 days after the close of
the offering and to be completed within 180 days after the close of the
offering. If the Company does not comply with their obligations (including their
reasonable best efforts) under the registration rights agreement, the interest
rate on the notes will increase.
The net proceeds from the offering of approximately $117.7 million, were
used (1) to repay the outstanding indebtedness ($70.3 million as of April 1,
1999) under the $95.0 million credit facility discussed above (2) to repay the
$30.0 million subordinated loan (3) to repay the seller notes and the sponsor
note ($9.3 million as of April 1, 1999) and (4) for general corporate purposes.
The Company is currently in the process of registering the privately placed
notes with the Securities and Exchange Commission and, accordingly, intends to
meet their obligations, as described above, under the registration rights
agreement. No assurance can be made that the exchange offering will be
completed.
F-23
<PAGE> 149
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Christianson Enterprises, Inc.,
and Combined Companies:
We have audited the accompanying combined balance sheets of Christianson
Enterprises, Inc., and Combined Companies (the Company) as of December 31, 1997
and 1998 and March 31, 1999, and the related combined statements of operations,
cash flows and stockholders' equity for the year ended August 31, 1996, the four
months ended December 31, 1996, the years ended December 31, 1997 and 1998 and
the three months ended March 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Company as of
December 31, 1997 and 1998 and March 31, 1999, and the results of their
operations and their cash flows for each of the year ended August 31, 1996, the
four months ended December 31, 1996, the years ended December 31, 1997 and 1998,
and the three months ended March 31, 1999 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Austin, Texas
May 14, 1999
F-24
<PAGE> 150
CHRISTIANSON ENTERPRISES, INC.
AND COMBINED COMPANIES
COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
---------------- MARCH 31
1997 1998 1999
------ ------- --------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 165 $ 1,980 $ 5,439
Accounts receivable --
Contract, net.......................................... 4,835 6,301 6,652
Other.................................................. 166 93 221
Related parties........................................ 32 3 3
Inventories............................................... 376 450 1,182
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 143 273 350
Prepaid expenses and other current assets................. 165 233 40
------ ------- -------
Total current assets.............................. 5,882 9,333 13,887
PROPERTY AND EQUIPMENT, net................................. 1,590 1,699 1,989
OTHER ASSETS................................................ 162 178 --
------ ------- -------
Total assets...................................... $7,634 $11,210 $15,876
====== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of capital lease obligations........... $ 396 $ 480 $ 505
Accounts payable and accrued expenses..................... 944 3,213 4,165
Accounts payable, related parties......................... 17 37 --
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 174 611 622
Income taxes payable...................................... 66 169 339
Deferred income taxes..................................... 6 31 --
------ ------- -------
Total current liabilities......................... 1,603 4,541 5,631
LONG-TERM LIABILITIES:
Capital lease obligations, net of current maturities...... 329 349 532
Deferred income taxes..................................... 17 19 10
------ ------- -------
Total liabilities................................. 1,949 4,909 6,173
------ ------- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value and 1,000,000 shares
authorized for each of Christianson Enterprises, Inc.
(CEI), GGR Leasing Corporation (GGR) and Christianson
Service Company (CSC), 1,200, 78,000 and 3,000 issued
and outstanding for CEI, GGR and CSC, respectively..... 82 82 82
Additional paid-in capital................................ 11 11 11
Retained earnings......................................... 5,592 6,208 9,610
------ ------- -------
Total stockholders' equity........................ 5,685 6,301 9,703
------ ------- -------
Total liabilities and stockholders' equity........ $7,634 $11,210 $15,876
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-25
<PAGE> 151
CHRISTIANSON ENTERPRISES, INC.
AND COMBINED COMPANIES
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOUR MONTHS YEAR ENDED THREE MONTHS ENDED
YEAR ENDED ENDED DECEMBER 31 DECEMBER 31 MARCH 31
AUGUST 31, --------------------- ----------------- ---------------------
1996 1995 1996 1997 1998 1998 1999
---------- ----------- ------- ------- ------- ----------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES.................. $50,330 $14,619 $15,576 $50,909 $63,374 $12,744 $16,824
COST OF REVENUES
(Including
depreciation)........... 38,203 11,044 11,868 37,504 45,704 9,024 11,390
------- ------- ------- ------- ------- ------- -------
Gross profit......... 12,127 3,575 3,708 13,405 17,670 3,720 5,434
------- ------- ------- ------- ------- ------- -------
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES................ 11,051 3,430 5,142 11,497 17,078 3,253 1,863
------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations......... 1,076 145 (1,434) 1,908 592 467 3,571
------- ------- ------- ------- ------- ------- -------
OTHER INCOME (EXPENSE):
Interest and dividend
income............... 109 24 39 126 102 4 11
Interest expense........ (92) (29) (33) (102) (116) (37) (27)
Other................... 250 230 26 35 70 15 9
------- ------- ------- ------- ------- ------- -------
Other income
(expense), net..... 267 225 32 59 56 (18) (7)
------- ------- ------- ------- ------- ------- -------
INCOME (LOSS) BEFORE
PROVISION FOR INCOME
TAXES................... 1,343 370 (1,402) 1,967 648 449 3,564
PROVISION (BENEFIT) FOR
INCOME TAXES............ 345 74 (56) 77 32 20 162
------- ------- ------- ------- ------- ------- -------
NET INCOME (LOSS)......... $ 998 $ 296 $(1,346) $ 1,890 $ 616 $ 429 $ 3,402
======= ======= ======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-26
<PAGE> 152
CHRISTIANSON ENTERPRISES, INC.
AND COMBINED COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOUR MONTHS YEAR ENDED THREE MONTHS ENDED
YEAR ENDED ENDED DECEMBER 31 DECEMBER 31 MARCH 31
AUGUST 31, --------------------- ----------------- --------------------
1996 1995 1996 1997 1998 1998 1999
---------- ----------- ------- ------- ------- ----------- ------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)............... $ 998 $ 296 $(1,346) $ 1,890 $ 616 $ 429 $3,402
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities --
Depreciation and
amortization................ 461 152 184 595 673 159 136
Loss on disposal of property
and equipment............... 1 -- 14 1 -- -- 1
Deferred income taxes......... 145 (53) (135) 49 (35) (9) (8)
Changes in operating assets
and liabilities --
(Increase) decrease in --
Accounts receivable...... (870) 421 1,425 (648) (1,363) (115) (479)
Inventories.............. (160) (282) (269) 411 (75) (473) (732)
Prepaid expenses and
other current assets... (234) (234) (80) (16) (153) -- 263
Increase (decrease) in --
Accounts payable and
accrued expenses....... 2,008 2,958 2,312 (5,631) 2,290 3,943 1,102
Other current
liabilities............ 6 123 207 14 540 -- 11
------ ------ ------- ------- ------- ------ ------
Net cash provided by
(used in) operating
activities............. 2,355 3,381 2,312 (3,335) 2,493 3,934 3,696
------ ------ ------- ------- ------- ------ ------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions of property and
equipment..................... (269) (76) (61) (166) (167) (15) (92)
------ ------ ------- ------- ------- ------ ------
Net cash used in
investing
activities........... (269) (76) (61) (166) (167) (15) (92)
------ ------ ------- ------- ------- ------ ------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings of long-term debt.... 103 103 -- -- -- -- --
Payments of long-term debt...... (454) (149) (147) (425) (511) (134) (145)
------ ------ ------- ------- ------- ------ ------
Net cash used in
financing
activities........... (351) (46) (147) (425) (511) (134) (145)
------ ------ ------- ------- ------- ------ ------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............ 1,735 3,259 2,104 (3,926) 1,815 3,785 3,459
CASH AND CASH EQUIVALENTS,
beginning of period............. 252 252 1,987 4,091 165 165 1,980
------ ------ ------- ------- ------- ------ ------
CASH AND CASH EQUIVALENTS, end of
period.......................... $1,987 $3,511 $ 4,091 $ 165 $ 1,980 $3,950 $5,439
====== ====== ======= ======= ======= ====== ======
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for --
Interest...................... $ 92 $ 29 $ 33 $ 102 $ 116 $ 29 $ 27
Income taxes.................. 200 127 80 28 29 -- --
Capital lease additions......... 630 141 -- 460 615 197 394
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-27
<PAGE> 153
CHRISTIANSON ENTERPRISES, INC.
AND COMBINED COMPANIES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, August 31, 1995.................... 79,200 $79 $11 $ 4,050 $ 4,140
Net income................................ -- -- -- 998 998
------ --- --- ------- -------
BALANCE, August 31, 1996.................... 79,200 79 11 5,048 5,138
Net loss.................................. -- -- -- (1,346) (1,346)
------ --- --- ------- -------
BALANCE, December 31, 1996.................. 79,200 79 11 3,702 3,792
Formation of Christianson Service
Company................................ 3,000 3 -- -- 3
Net income................................ -- -- -- 1,890 1,890
------ --- --- ------- -------
BALANCE, December 31, 1997.................. 82,200 82 11 5,592 5,685
Net income................................ -- -- -- 616 616
------ --- --- ------- -------
BALANCE, December 31, 1998.................. 82,200 82 11 6,208 6,301
Net income................................ -- -- -- 3,402 3,402
------ --- --- ------- -------
BALANCE, March 31, 1999..................... 82,200 $82 $11 $ 9,610 $ 9,703
====== === === ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-28
<PAGE> 154
CHRISTIANSON ENTERPRISES, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Christianson Enterprises, Inc., a Texas Corporation, and its wholly owned
subsidiaries, together with Christianson Service Company and GGR Leasing
Corporation, both Texas Corporations (the Combined Companies), which are owned
by the stockholders of Christianson Enterprises, Inc., are collectively referred
to herein as the "Company." The Company provides plumbing and air conditioning
installation and repair services primarily for single-family residential markets
in Texas. The Company performs the majority of its services under fixed-price
contracts which generally span three months.
The Company and its stockholders entered into a definitive agreement with
American Plumbing & Mechanical, Inc. (AMPAM), pursuant to which all outstanding
shares of the Company's common stock were exchanged for cash, notes and shares
of AMPAM common and preferred stock concurrently with the consummation of the
related financing.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation and Combination
The accompanying financial statements present Christianson Enterprises,
Inc., consolidated with its wholly owned subsidiaries, together with
Christianson Service Company and GGR Leasing Corporation on a combined basis.
All significant intercompany transactions have been eliminated in consolidation
and combination.
Effective December 31, 1997, Christianson Enterprises, Inc., and its
subsidiaries changed their year ends from August 31 to December 31. Christianson
Service Company and GGR Leasing Corporation have each reported on a December 31
year-end since inception. For the years ended August 31, 1995 and 1996, the
results of operations for Christianson Service Company and GGR Leasing
Corporation have been conformed to an August 31 year-end. Generally accepted
accounting principles have been consistently applied to the financial statements
for all periods presented.
Interim Financial Information
The interim financial statements for the four months ended December 31,
1995, and the three months ended March 31, 1998, are unaudited and have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the Company's management, the unaudited
interim financial statements contain all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation. The results
of operations for the interim periods are not necessarily indicative of the
results for the entire fiscal year.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Inventories
Inventories consist of parts and supplies held for use in the ordinary
course of business and are stated at the lower of cost or market using the
first-in, first-out (FIFO) method.
F-29
<PAGE> 155
CHRISTIANSON ENTERPRISES, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statement of operations.
Revenue Recognition
The Company recognizes revenue when services are performed except when work
is being performed under a construction contract. Revenues from construction
contracts are recognized on the percentage-of-completion method measured by the
percentage of cost incurred to date to total estimated costs for each contract.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor and depreciation
costs. Provisions for the total estimated losses on uncompleted contracts are
made in the period in which such losses are determined. Changes in job
performance, job conditions, estimated profitability and final contract
settlements may result in revisions to costs and income and their effects are
recognized in the period in which the revisions are determined. An amount equal
to contract costs attributable to claims is included in revenues when
realization is probable and the amount can be reliably estimated.
The current asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The current liability, "Billings in excess of costs and estimated
earnings on uncompleted contracts," represents billings in excess of revenues
recognized.
Warranty Costs
For certain contracts, the Company warrants labor for one year after
completion of a plumbing or air conditioning installation. The Company generally
warrants labor for 90 days after plumbing and air conditioner repairs. A reserve
for warranty costs is recorded based upon the historical level of warranty
claims and management's estimate of future costs.
Provision for Doubtful Accounts
The Company provides an allowance for doubtful accounts based upon an
estimate of uncollectable balances.
Officers' Compensation
Total officers' compensation for the years ended August 31, 1996, and
December 31, 1997 and 1998, the four months ended December 31, 1995 and 1996,
and the three months ended March 31, 1999, was $6,905,000, $6,643,000,
$10,701,000, $2,257,000 (unaudited), $3,763,000, and $400,000, respectively.
Such amounts are included within selling, general and administrative expenses in
the accompanying statements of operations.
Income Taxes
Effective January 1, 1997, Christianson Enterprises, Inc., including its
wholly owned subsidiaries, elected S Corporation status. Christianson Service
Company and GGR Leasing Corporation have elected
F-30
<PAGE> 156
CHRISTIANSON ENTERPRISES, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
S Corporation status. Under S Corporation status, as defined by the Internal
Revenue Code, the Company itself is not subject to taxation for federal
purposes; rather, the stockholders report their share of the Company's taxable
earnings or losses in their personal tax returns. Certain states do not
recognize S Corporation status for purposes of state taxation. Consequently, the
provision for current and deferred income taxes for the years ended December 31,
1997, 1998 and the three months ended March 31, 1999, consists of only state
income taxes. The Company terminated its S Corporation status concurrently with
the effective date of the merger discussed in Note 13.
The Company follows the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." Under this method, deferred assets and
liabilities are recorded for future tax consequences of temporary differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
underlying assets or liabilities are recovered or settled.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities,
disclosures of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Realization of Long-Lived Assets
The Company has adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
Accordingly, in the event that facts and circumstances indicate that property
and equipment or other assets may be impaired, an evaluation of recoverability
would be performed. If an evaluation is required, the estimated future
undiscounted cash flows associated with the asset are compared to the asset's
carrying amount to determine if an impairment of such property is necessary. The
effect of any impairment would be to expense the difference between the fair
value of such property and its carrying value. Adoption of this standard did not
have a material effect on the financial position or results of operations of the
Company.
Reclassifications
Certain reclassifications have been made to the prior-year financial
statements to conform to the current-year presentation.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Contract receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
---------------- MARCH 31,
1997 1998 1999
------ ------ ---------
<S> <C> <C> <C>
Billed.................................................. $4,957 $6,402 $6,739
Allowance for uncollectible accounts.................... (122) (101) (87)
------ ------ ------
Contract receivables, net............................... $4,835 $6,301 $6,652
====== ====== ======
</TABLE>
F-31
<PAGE> 157
CHRISTIANSON ENTERPRISES, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Activity in the Company's allowance for doubtful accounts receivable
consists of the following (in thousands):
<TABLE>
<CAPTION>
FOUR MONTHS ENDED YEAR ENDED THREE MONTHS
YEAR ENDED DECEMBER 31 DECEMBER 31 ENDED
AUGUST 31, ------------------ ----------- MARCH 31,
1996 1995 1996 1997 1998 1999
---------- ----------- ---- ---- ---- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period.... $ 74 $74 $117 $109 $122 $101
Additions to costs and expenses... 74 25 2 63 59 10
Deductions for uncollectible
receivables written off and
recoveries...................... (31) (6) (10) (50) (80) (24)
---- --- ---- ---- ---- ----
Balance at end of period.......... $117 $93 $109 $122 $101 $ 87
==== === ==== ==== ==== ====
</TABLE>
Plumbing and air conditioning installation contracts in progress are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
----------------- MARCH 31,
1997 1998 1999
------- ------- ---------
<S> <C> <C> <C>
Costs incurred on contracts in progress................. $ 1,200 $ 1,848 $ 3,569
Estimated earnings, net of losses....................... 1,100 4,259 3,200
------- ------- -------
2,300 6,107 6,769
Less -- Billings to date................................ (2,331) (6,445) (7,041)
------- ------- -------
$ (31) $ (338) $ (272)
======= ======= =======
Costs and estimated earnings in excess of billings on
uncompleted contracts................................. $ 143 $ 273 $ 350
Billings in excess of costs and estimated earnings on
uncompleted contracts................................. (174) (611) (622)
------- ------- -------
$ (31) $ (338) $ (272)
======= ======= =======
</TABLE>
Accounts payable and accrued expenses consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------- MARCH 31,
1997 1998 1999
---- ------ ---------
<S> <C> <C> <C>
Accounts payable, trade.................................. $239 $2,101 $$2,845
Accrued warranty......................................... 315 410 410
Accrued payroll.......................................... 25 132 475
Accrued bonuses.......................................... 74 173 --
Accrued vacation......................................... 258 205 205
Self-insurance reserve................................... -- 115 153
Other accrued expenses................................... 33 77 77
---- ------ ------
$944 $3,213 $4,165
==== ====== ======
</TABLE>
F-32
<PAGE> 158
CHRISTIANSON ENTERPRISES, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT, NET:
Property and equipment, net consists of the following (in thousands):
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31
USEFUL LIVES ----------------- MARCH 31,
IN YEARS 1997 1998 1999
------------ ------- ------- ---------
<S> <C> <C> <C> <C>
Vehicles and equipment.......................... 5 $ 4,531 $ 5,180 $ 5,507
Office equipment................................ 5-7 403 378 391
------- ------- -------
4,934 5,558 5,898
Less -- Accumulated depreciation and
amortization.................................. (3,344) (3,859) (3,909)
------- ------- -------
Property and equipment, net................... $ 1,590 $ 1,699 $ 1,989
======= ======= =======
</TABLE>
Capital leases of approximately $1,666,000, $1,529,000 and $1,118,000 as of
March 31, 1999, December 31, 1998 and 1997 are included in vehicles and
equipment.
5. LONG-TERM DEBT:
Long-term debt consists of capital lease obligations. The maturities of
capital lease obligations are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ ---------
<S> <C> <C>
1999........................................................ $ 522 $ 421
2000........................................................ 328 402
2001........................................................ 95 309
----- ------
Total lease payments.............................. 945 1,132
Less -- Amounts representing interest....................... (116) (95)
----- ------
Present value of minimum lease payments..................... 829 1,037
Less -- Current maturities.................................. (480) (505)
----- ------
Capital lease obligations, net of current maturities........ $ 349 $ 532
===== ======
</TABLE>
6. LEASES:
The Company leases facilities under operating leases from related parties.
The Company also leases certain vehicles and equipment under operating leases
from third parties. Lease expiration dates vary, and approximate lease payments
were as follows (in thousands):
<TABLE>
<CAPTION>
RELATED THIRD
PARTIES PARTIES
------- -------
<S> <C> <C>
Four months ended December 31 --
1995 (unaudited).......................................... $ 52 $15
1996...................................................... 52 11
Year ended August 31, 1996.................................. 156 43
Year ended December 31 --
1997...................................................... 466 33
1998...................................................... 492 18
Three months ended March 31, 1999........................... 135 35
</TABLE>
F-33
<PAGE> 159
CHRISTIANSON ENTERPRISES, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under these noncancelable operating leases
are as follows (in thousands):
<TABLE>
<CAPTION>
RELATED THIRD
PARTIES PARTIES
------- -------
<S> <C> <C>
Year ending December 31 --
1999...................................................... $ 495 $19
2000...................................................... 554 2
2001...................................................... 559 --
2002...................................................... 69 --
2003...................................................... 24 --
------ ---
$1,701 $21
====== ===
</TABLE>
7. INCOME TAXES:
Federal and state income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
FOUR MONTHS YEAR ENDED THREE MONTHS
YEAR ENDED ENDED DECEMBER 31 DECEMBER 31 ENDED
AUGUST 31, ------------------- ------------ MARCH 31,
1996 1995 1996 1997 1998 1999
---------- ----------- ---- ---- ---- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Federal --
Current.............. $155 $105 $ 71 $ -- $ -- $ --
Deferred............. 126 (49) (64) (16) -- --
State --
Current.............. 45 22 8 28 67 170
Deferred............. 19 (4) (71) 65 (35) (8)
---- ---- ---- ---- ---- ----
$345 $ 74 $(56) $ 77 $ 32 $162
==== ==== ==== ==== ==== ====
</TABLE>
Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate rate of 35 percent to income
(loss) before provision for income taxes as follows (in thousands):
<TABLE>
<CAPTION>
FOUR MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER 31 DECEMBER 31 THREE MONTHS ENDED
AUGUST 31, ------------------- ------------- MARCH 31,
1996 1995 1996 1997 1998 1999
---------- ----------- ----- ----- ----- ------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Provision (benefit) at the
statutory rate.................. $ 470 $130 $(491) $ 688 $ 227 $ 1,247
Increase (decrease) resulting
from --
Earnings of combined
corporations taxed as S
Corporations................. (199) (78) 501 (688) (227) (1,247)
Permanent differences, primarily
meals and entertainment...... 31 10 (3) 5 -- --
State income tax, net of benefit
for federal deduction........ 43 12 (63) 88 32 162
Reversal of C Corporation
federal deferred taxes....... -- -- -- (16) -- --
----- ---- ----- ----- ----- -------
$ 345 $ 74 $ (56) $ 77 $ 32 $ 162
===== ==== ===== ===== ===== =======
</TABLE>
F-34
<PAGE> 160
CHRISTIANSON ENTERPRISES, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income tax provisions result from temporary differences in the
recognition of income and expenses for financial reporting purposes and for tax
purposes. The tax effects of these temporary differences, representing deferred
tax assets and liabilities, result principally from the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------ MARCH 31,
1997 1998 1999
---- ---- ---------
<S> <C> <C> <C>
Deferred income tax assets --
Reserves and accrued expenses............................ $ 25 $ 62 $ 34
Other.................................................... 1 -- (4)
---- ---- ----
Total deferred income tax assets................. 26 62 30
---- ---- ----
Deferred income tax liabilities --
Property and equipment................................... (17) (15) (10)
Revenue recognition...................................... (32) (23) --
Other.................................................... -- (12) --
---- ---- ----
Total deferred income tax liabilities............ (49) (50) (10)
---- ---- ----
Net deferred income tax assets (liabilities)..... $(23) $ 12 $ 20
==== ==== ====
</TABLE>
The net deferred tax assets and liabilities are comprised of the following
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------ MARCH 31,
1997 1998 1999
---- ---- ---------
<S> <C> <C> <C>
Deferred tax assets --
Current................................................... $ 26 $ 56 $ 34
Long-term................................................. -- 6 --
---- ---- ----
Total deferred income tax assets.................. 26 62 34
---- ---- ----
Deferred tax liabilities --
Current................................................... (32) (31) (4)
Long-term................................................. (17) (19) (10)
---- ---- ----
Total deferred income tax liabilities............. (49) (50) (14)
---- ---- ----
Net deferred income tax assets (liabilities)........... $(23) $ 12 $ 20
==== ==== ====
</TABLE>
Effective January 1, 1997, Christianson Enterprises, Inc., elected S
Corporation status. As such, Christianson Enterprises, Inc., was no longer
directly responsible for any federal deferred tax liability. The removal of the
federal deferred tax liability of $16,000 at December 31, 1996, is recognized in
the 1997 statement of operations for the year ended December 31, 1997.
8. STOCKHOLDERS' EQUITY:
Effective May 13, 1998, the outstanding shares of common stock of
Christianson Enterprises, Inc., were split 10 for 1. This split has been
reflected retroactively for all periods presented in the accompanying financial
statements.
Shares of common stock of Christianson Enterprises, Inc., are not
transferable unless they are first offered for sale to Christianson Enterprises,
Inc. and secondly to the other shareholders of Christianson Enterprises, Inc.
F-35
<PAGE> 161
CHRISTIANSON ENTERPRISES, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
9. RELATED-PARTY TRANSACTIONS:
Leases
As discussed in Note 6, the Company leases its facilities and its furniture
and fixtures in Austin and San Antonio, Texas, from related parties. It is
management's opinion that such leases are at market value.
Other
Through December 31, 1995, the Company subcontracted its construction labor
to a related party. The Company was charged for such labor based on the related
party's actual costs. For the year ended August 31, 1996, and the four months
ended December 31, 1995, subcontractor labor costs reflected within cost of
revenues in the accompanying statements of operations were $2,663,000 and
$2,663,000 (unaudited), respectively. This relationship was terminated effective
December 31, 1995.
Also through December 31, 1995, the related party provided workers'
compensation insurance to its employees through a self-insurance program. The
related party charged the Company an agreed-upon rate for such insurance based
on an estimate of the cost of workers' compensation insurance as a subscriber
under the Texas risk pool. Claims were administered and paid by the related
party. For the year ended August 31, 1996, and the four months ended December
31, 1995, workers' compensation insurance costs reflected within cost of
services in the accompanying statements of operations were $268,000 and $268,000
(unaudited), respectively. This relationship was terminated effective December
31, 1995.
In connection with various administrative and management services provided
to the related party, the Company charged a fee to the related party for such
services. For the years ended August 31, 1996, and the four months ended
December 31, 1995, the Company charged the related party $225,000 and $225,000
(unaudited), respectively. These amounts are included within other income in the
accompanying statements of operations. As discussed above, the relationship was
terminated December 31, 1995; therefore, no fees were charged subsequent to this
date.
10. FINANCIAL INSTRUMENTS:
The Company's financial instruments consist of cash and cash equivalents,
capital lease obligations and debt. The Company believes that the carrying value
of these instruments on the accompanying balance sheets approximates their fair
values.
11. COMMITMENTS AND CONTINGENCIES:
Litigation
The Company is involved in disputes or legal actions arising in the
ordinary course of business. Management does not believe the outcome of such
legal actions will have a material adverse effect on the Company's financial
position or results of operations.
Insurance
The Company carries a broad range of insurance coverage, including business
auto liability, general liability, workers' compensation and an umbrella policy.
The Company has not incurred significant claims or losses on any of these
insurance policies.
Beginning on May 1, 1998, the Company self-insured for medical claims up to
$50,000 per year per individual covered, with a $642,000 aggregate maximum
exposure per year. Claims in excess of these amounts are covered by a stop-loss
policy. At December 31, 1998, and March 31, 1999, the Company has
F-36
<PAGE> 162
CHRISTIANSON ENTERPRISES, INC.
AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
recorded reserves within accounts payable and accrued liabilities for its
portion of self-insurance claims based on estimated claims.
12. MAJOR CUSTOMERS AND RISK CONCENTRATION:
The Company had sales of approximately 24.1 percent, 22.8 percent, 23.1
percent, 23.5 percent (unaudited), 23.4 percent and 18.4 percent of total sales
to one major customer during the years ended August 31, 1996, December 31, 1997
and 1998, the four months ended December 31, 1995 and 1996 and the three months
ended March 31, 1999, respectively.
In general, the Company performs its services under contract terms that
entitle it to progress payments and is, by law, granted a lien interest on the
work until paid. The Company is exposed to potential credit risk related to
changes in business and economic factors within the region. However, management
believes that its contract acceptance, billing and collection policies are
adequate to minimize the potential credit risk.
The Company's customers are primarily in the construction industry.
Accordingly, the Company is exposed to risks of fluctuations in construction in
the areas in which it operates.
13. SUBSEQUENT EVENT:
On April 1, 1999, AMPAM acquired through merger all the stock of the
Company in exchange for cash, notes and common and preferred stock of AMPAM,
after which the Company is a wholly owned subsidiary of AMPAM. In connection
with the merger, the Company made cash distributions which represent the
Company's estimated S Corporation accumulated adjustment account.
As discussed in Note 2, in connection with the merger, the Company
converted from an S Corporation to a C Corporation. Upon conversion to C
Corporation status, the Company recorded deferred taxes for which it will be
responsible. If the S Corporation status had been terminated as of December 31,
1998 or March 31, 1999, the Company would have recorded an additional deferred
tax asset of approximately $471,000 and $296,000, respectively, due primarily to
reserves and accrued expenses and an additional deferred tax liability of
approximately $379,000 and $121,000, respectively, due primarily to differences
between book and tax depreciation and revenue recognition.
Concurrently with the merger, the Company entered into agreements with the
stockholders to lease land and buildings used in the Company's operations for a
negotiated amount and term.
F-37
<PAGE> 163
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To RCR Plumbing, Inc.:
We have audited the accompanying balance sheets of RCR Plumbing, Inc. (dba
RCR Companies, Inc.) as of December 31, 1997 and 1998, and the related
statements of operations, cash flows and stockholders' equity for each of the
three years in the period ended December 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RCR Plumbing, Inc., as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
March 19, 1999
F-38
<PAGE> 164
RCR PLUMBING, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------- MARCH 31,
1997 1998 1999
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ -- $ 1,378 $ 1,420
Accounts receivable --
Contract, net.......................................... 10,350 10,360 12,813
Other.................................................. 59 132 9
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 1,557 1,536 2,090
Inventories............................................... 1,706 1,308 1,374
Prepaid expenses and other current assets................. 95 128 22
------- ------- -------
Total current assets.............................. 13,767 14,842 17,728
PROPERTY AND EQUIPMENT, net................................. 4,848 5,484 4,175
------- ------- -------
Total assets...................................... $18,615 $20,326 $21,903
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft............................................ $ 772 $ 130 $ --
Lines of credit........................................... 1,910 -- --
Current maturities of long-term debt...................... 144 129 171
Current maturities of capital lease obligations........... 465 495 475
Accounts payable and accrued expenses..................... 3,739 4,804 7,379
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 2,000 2,612 2,537
------- ------- -------
Total current liabilities......................... 9,030 8,170 10,562
LONG-TERM LIABILITIES:
Long-term debt, net of current maturities................. 1,543 1,415 --
Capital lease obligations................................. 229 521 576
------- ------- -------
Total liabilities................................. 10,802 10,106 11,138
------- ------- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value, 75,000 shares authorized,
12,163 shares issued and outstanding................... 194 194 194
Additional paid-in capital................................ 37 37 37
Retained earnings......................................... 7,986 10,393 10,938
Treasury stock, 14,601, shares, at cost................... (404) (404) (404)
------- ------- -------
Total stockholders' equity........................ 7,813 10,220 10,765
------- ------- -------
Total liabilities and stockholders' equity........ $18,615 $20,326 $21,903
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-39
<PAGE> 165
RCR PLUMBING, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31,
--------------------------- -------------------------
1996 1997 1998 1998 1999
------- ------- ------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES................................. $40,430 $49,738 $63,293 $13,200 $19,441
COST OF REVENUES (including
depreciation).......................... 35,102 42,377 51,604 10,744 15,361
------- ------- ------- ------- -------
Gross profit........................ 5,328 7,361 11,689 2,456 4,080
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................... 3,979 5,712 8,370 1,724 2,452
------- ------- ------- ------- -------
Income from operations.............. 1,349 1,649 3,319 732 1,628
------- ------- ------- ------- -------
OTHER INCOME (EXPENSE):
Interest income........................ 34 25 1 1 6
Interest expense....................... (118) (251) (271) (90) (36)
Other.................................. 96 98 (11) 1 8
Gain on Sale of Buildings.............. -- -- -- -- 605
------- ------- ------- ------- -------
Other income (expense), net......... 12 (128) (281) (88) 583
------- ------- ------- ------- -------
INCOME BEFORE PROVISION FOR INCOME
TAXES.................................. 1,361 1,521 3,038 644 2,211
PROVISION FOR INCOME TAXES............... 19 5 24 8 26
------- ------- ------- ------- -------
NET INCOME............................... $ 1,342 $ 1,516 $ 3,014 $ 636 $ 2,185
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE> 166
RCR PLUMBING, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
--------------------------- ---------------------
1996 1997 1998 1998 1999
------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 1,342 $ 1,516 $ 3,014 $ 636 $ 2,185
Adjustments to reconcile net income to net cash provided
by (used in) operating activities --
Depreciation and amortization........................... 345 561 879 185 231
Loss (gain) on sale of property and equipment........... (14) (12) 19 -- (605)
Changes in operating assets and liabilities:
(Increase) decrease in --
Accounts receivable................................. (1,221) (4,838) (83) 379 (2,330)
Costs and estimated earnings in excess of billings
on uncompleted contracts.......................... (263) (228) 21 (237) (554)
Inventories......................................... 419 (85) 398 (238) (66)
Prepaid expenses and other current assets........... 34 117 (33) 96 106
Increase (decrease) in --
Accounts payable and accrued expenses............... 396 423 1,065 1,330 2,575
Billings in excess of costs and estimated earnings
on uncompleted contracts.......................... 314 1,032 612 (312) (75)
------- ------- ------- ------- -------
Net cash provided by (used in) operating
activities...................................... 1,352 (1,514) 5,892 1,839 1,467
------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment.............. 67 512 103 -- 42
Additions of property and equipment....................... (2,053) (1,112) (607) (269) (299)
------- ------- ------- ------- -------
Net cash used in investing activities............. (1,986) (600) (504) (269) (257)
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft............................................ -- 772 (642) (772) (130)
Borrowings on line of credit.............................. -- 1,910 -- -- --
Payments on line of credit................................ -- -- (1,910) (350) --
Borrowings on long-term debt and capital lease
obligations............................................. 1,153 184 -- -- --
Payments on long-term debt and capital lease
obligations............................................. (322) (966) (851) (170) (210)
Distributions to stockholders............................. (25) (948) (607) (197) (828)
------- ------- ------- ------- -------
Net cash provided by (used in) financing
activities...................................... 806 952 (4,010) (1,489) (1,168)
------- ------- ------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 172 (1,162) 1,378 81 1,252
CASH AND CASH EQUIVALENTS, beginning of period.............. 990 1,162 -- -- 1,378
------- ------- ------- ------- -------
CASH AND CASH EQUIVALENTS, end of period.................... $ 1,162 $ -- $ 1,378 $ 81 $ 1,420
======= ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for --
Interest................................................ $ 177 $ 362 $ 397 $ 120 $ 75
Capital lease additions................................. 415 902 1,030 284 204
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
In connection with the completion of the AMPAM Agreement, the Company transferred certain assets of the
Company to the stockholders with a fair market value of approximately $2,144. In return the stockholders assumed
liabilities related to those assets of approximately $1,332. The difference between the fair market value of the
assets transferred and the liabilities assumed was approximately $812 and was accounted for as a distribution to
stockholders equity.
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE> 167
RCR PLUMBING, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN RETAINED TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
------ ------ ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995......... 12,163 $194 $-- $ 6,101 $(404) $ 5,891
Distributions to stockholders.... -- -- -- (25) -- (25)
Net income....................... -- -- -- 1,342 -- 1,342
Stockholder contribution of
assets........................ -- -- 37 -- -- 37
------ ---- --- ------- ----- -------
BALANCE, December 31, 1996......... 12,163 194 37 7,418 (404) 7,245
Distributions to stockholders.... -- -- -- (948) -- (948)
Net income....................... -- -- -- 1,516 -- 1,516
------ ---- --- ------- ----- -------
BALANCE, December 31, 1997......... 12,163 194 37 7,986 (404) 7,813
Distributions to stockholders.... -- -- -- (607) -- (607)
Net income....................... -- -- -- 3,014 -- 3,014
------ ---- --- ------- ----- -------
BALANCE, December 31, 1998......... 12,163 194 37 10,393 (404) 10,220
Distributions to stockholders
(Unaudited)................... -- -- -- (1,640) -- (1,640)
Net income (Unaudited)........... -- -- -- 2,185 -- 2,185
------ ---- --- ------- ----- -------
BALANCE, March 31, 1999
(Unaudited)...................... 12,163 $194 $37 $10,938 $(404) $10,765
====== ==== === ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE> 168
RCR PLUMBING, INC.
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION:
RCR Plumbing, Inc., a California corporation (the Company), focuses on
providing installation of plumbing and heating, ventilation, and air
conditioning (HVAC) primarily for developers and builders of single-family and
multi-family developments, apartment buildings and condominiums. The Company
performs the majority of its contract work under fixed price arrangements with
contract terms generally ranging from six to 12 months. The Company performs the
majority of its work in California and Nevada.
The Company and its stockholders entered into a definitive agreement with
American Plumbing & Mechanical, Inc. (AMPAM), pursuant to which all outstanding
shares of the Company's common stock were exchanged for cash, notes and shares
of AMPAM common stock concurrently with the consummation of the related
financing.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Interim Financial Information
The interim financial statements as of March 31, 1999, and for the three
months ended March 31, 1998 and 1999, are unaudited and have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of the Company's management, the unaudited interim financial
statements contain all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Accounts Receivable and Provision for Doubtful Accounts
The Company provides an allowance for doubtful accounts based upon an
estimate of uncollectable balances.
Inventories
Inventories consist of parts and supplies held for use in the ordinary
course of business and are stated at the lower of cost or market using the
first-in, first-out (FIFO) method.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the life
of the lease or the estimated useful life of the asset.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statements of operations.
F-43
<PAGE> 169
RCR PLUMBING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
The Company recognizes revenue when services are performed except when work
is being performed under a construction contract. Revenues from construction
contracts are recognized on the percentage-of-completion method measured by the
percentage of cost incurred to date to total estimated costs for each contract.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor and depreciation
costs. Provisions for the total estimated losses on uncompleted contracts are
made in the period in which such losses are determined. Changes in job
performance, job conditions, estimated profitability and final contract
settlements may result in revisions to costs and income and their effects are
recognized in the period in which the revisions are determined. An amount equal
to contract costs attributable to claims is included in revenues when
realization is probable and the amount can be reliably estimated.
A portion of the Company's receivables are comprised of retainages. These
balances billed but not paid by customers pursuant to retainage provisions in
construction contracts will be due upon completion of the contracts and
acceptance by the customer. Based on the Company's experience with similar
contracts in recent years, the retention balance at each balance sheet date will
be collected within the subsequent fiscal year.
The current asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The current liability, "Billings in excess of costs and estimated
earnings on uncompleted contracts," represents billings in excess of revenues
recognized.
Warranty Costs
The Company generally warrants labor and materials for twelve months after
installation of a new plumbing or HVAC contract. A reserve for warranty costs is
recorded based upon the historical level of warranty claims and management's
estimate of future costs.
Income Taxes
The Company has elected S Corporation status as defined by the Internal
Revenue Code, whereby the Company is not subject to taxation for federal
purposes. Under S Corporation status, the stockholders report their shares of
the Company's taxable earnings or losses in their personal tax returns. Certain
states do not recognize the S Corporation status for purposes of state taxation.
The provision for income taxes in the accompanying statements of operations
represents the state tax provision related to such states. The Company
terminated its S Corporation status concurrently with the effective date of the
merger discussed in Note 13.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities,
disclosures of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Realization of Long-Lived Assets
The Company has adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
Accordingly, in the event that facts and circumstances indicate that property
and equipment or other assets may be impaired, an evaluation of
F-44
<PAGE> 170
RCR PLUMBING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
recoverability would be performed. If an evaluation is required, the estimated
future undiscounted cash flows associated with the asset are compared to the
asset's carrying amount to determine if an impairment of such property is
necessary. The effect of any impairment would be to expense the difference
between the fair value of such property and its carrying value. Adoption of this
standard did not have a material effect on the financial position or results of
operations of the Company.
(3) DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Contract receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
----------------- MARCH 31,
1997 1998 1999
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Billed................................................. $10,055 $ 9,529 $12,280
Retainage.............................................. 379 473 412
Other.................................................. 66 476 248
Allowance for uncollectible accounts................... (150) (118) (127)
------- ------- -------
Balance at end of period..................... $10,350 $10,360 $12,813
======= ======= =======
</TABLE>
Plumbing and HVAC installation contracts in progress are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------- MARCH 31,
1997 1998 1999
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Costs incurred on contracts in progress.............. $ 13,351 $ 22,929 $27,008
Estimated earnings, net of losses.................... 4,763 9,008 10,265
-------- -------- -------
18,114 31,937 37,273
Less -- billings to date............................. (18,557) (33,013) 37,720
-------- -------- -------
$ (443) $ (1,076) $ (447)
======== ======== =======
Costs and estimated earnings in excess of billings on
uncompleted contracts.............................. $ 1,557 $ 1,536 $ 2,090
Billings in excess of costs and estimated earnings on
uncompleted contracts.............................. (2,000) (2,612) (2,537)
-------- -------- -------
$ (443) $ (1,076) $ (447)
======== ======== =======
</TABLE>
Accounts payable and accrued expenses consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------- MARCH 31,
1997 1998 1999
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Accounts payable, trade.................................. $2,726 $3,420 $ 4,656
Accrued compensation and benefits........................ 524 800 2,094
Other accrued expenses................................... 489 584 629
------ ------ -------
Balance at end of period................................. $3,739 $4,804 $ 7,379
====== ====== =======
</TABLE>
F-45
<PAGE> 171
RCR PLUMBING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(4) PROPERTY AND EQUIPMENT:
Property and equipment, including capital lease assets, consist of the
following (in thousands):
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31
USEFUL LIVES ----------------- MARCH 31,
IN YEARS 1997 1998 1999
------------ ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Land....................................... $ 446 $ 423 $ --
Transportation equipment................... 2 - 6 2,195 3,055 3,185
Machinery and equipment.................... 3 - 7 585 678 724
Computer and telephone equipment........... 3 - 7 802 946 683
Building and leasehold improvements........ 5 -39 2,338 2,411 1,253
Furniture and fixtures..................... 7 207 221 628
------- ------- -------
6,573 7,734 6,473
Less -- accumulated depreciation and
amortization............................. (1,725) (2,250) (2,298)
------- ------- -------
Property and equipment, net................ $ 4,848 $ 5,484 $ 4,175
======= ======= =======
</TABLE>
(5) LINES OF CREDIT AND LONG-TERM DEBT:
During 1997, the Company negotiated two lines of credit, with an aggregate
credit limit of $4.5 million. The lines of credit expired May 1, 1999, and are
to be used for working capital and equipment purchases, and bear interest
ranging from the Bank's Reference Rate (8.5% at December 31, 1998) to the Bank's
Reference Rate plus .5%. The lines of credit are collateralized by machinery and
equipment, inventory and receivables. Borrowings on the lines of credit at
December 31, 1997 totaled $1.9 million. At December 31, 1998, and March 31,
1999, the Company had no borrowings against this line of credit. The line of
credit was terminated on April 5, 1999.
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------- MARCH 31,
1997 1998 1999
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Notes payable to a bank, due in monthly installments of
$2,218 including interest at 9.5% through October 2002,
collateralized by real estate with a carrying value of
$241,000 and $235,000 at December 31, 1997 and 1998,
respectively and $0 at March 31, 1999................... $ 225 $ 221 $ --
Notes payable to a bank, due in monthly installments
ranging from $359 to $5,365 at interest rates ranging
from 8.25% to 11%, maturity dates ranging from February
1999 to December 2003. Notes are collateralized by
vehicles and real estate, with a carrying value of
$1,335,000 and $1,313,000 at December 31, 1997 and 1998,
respectively and $243,000 at March 31, 1999............. $ 727 $ 679 $ 171
</TABLE>
F-46
<PAGE> 172
RCR PLUMBING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31
--------------- MARCH 31,
1997 1998 1999
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Notes payable to a bank, due in monthly installments from
$7,896 to $8,917 at interest rates ranging from 9% to
9.75%, maturity date of October 2000. Notes are
collateralized by real estate, with a carrying value of
$1,215,000 and $1,171,000 at December 31, 1997 and 1998,
respectively and $0 at March 31, 1999................... 735 644 --
------ ------ ---------
Totals.......................................... 1,687 1,544 171
Less -- current maturities................................ (144) (129) (171)
------ ------ ---------
Total long-term debt............................ $1,543 $1,415 $ --
====== ====== =========
</TABLE>
The maturities of long-term debt as of December 31, 1998, are as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C> <C>
1999............................................................. $ 129
2000............................................................. 730
2001............................................................. 13
2002............................................................. 216
2003............................................................. 456
------
$1,544
======
</TABLE>
(6) LEASES:
The Company leases various automobiles and equipment under capital lease
and noncancelable operating arrangements. Future minimum lease payments under
capital lease arrangements at December 31, 1998, and March 31, 1999, are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING YEAR ENDING
DECEMBER 31, MARCH 31,
------------ -----------
(UNAUDITED)
<S> <C> <C>
1999....................................... $ 609 $ 453
2000....................................... 394 476
2001....................................... 210 276
2002....................................... 25 39
2003....................................... 27 30
------ ------
1,265 1,274
Amounts representing interest................ (249) (223)
------ ------
1,016 1,051
Less -- current maturities................... (495) (475)
------ ------
Noncurrent................................... $ 521 $ 576
====== ======
</TABLE>
F-47
<PAGE> 173
RCR PLUMBING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under these noncancelable operating leases at
December 31, 1998, are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C> <C>
1999.............................................................. $305
2000.............................................................. 297
2001.............................................................. 125
----
$727
====
</TABLE>
Lease expense for the years ended December 31, 1996, 1997 and 1998 and the
three months ended March 31, 1999 totaled approximately $230,000, $243,000,
$312,000 and $78,000 (unaudited), respectively.
(7) RELATED-PARTY TRANSACTIONS:
Two of the Company's stockholders owned a partnership which leased vehicles
to the Company at rates that in management's opinion, approximated market.
During 1996, these stockholders contributed all such leased vehicles to the
Company, at their historical cost, less accumulated depreciation. Upon the
contribution of these assets, the net book value approximated zero.
A Company stockholder and employee owned a partnership, which leased steel
storage containers to the Company at rates that in management's opinion,
approximated market. During 1996, this stockholder and employee contributed all
such leased assets to the Company. These assets were contributed at the
approximate historical cost, less accumulated depreciation, of approximately
$37,000.
A Company stockholder and employee owned a partnership, which leased
certain equipment to the Company at rates that in management's opinion,
approximate market. The Company incurred lease expense under this arrangement of
approximately $87,000, $52,000, $77,000 and $70,000 (unaudited) for the years
ended December 31, 1996, 1997 and 1998 and the three months ended March 31,
1999, respectively.
The Company funds three life insurance policies for certain officers of the
Company. Two of the policies name the Company as the beneficiary, while the
other names one of the Company's stockholders as the beneficiary. Total payments
for these policies approximated $41,000, $29,000, $12,000 and $0 (unaudited) for
the years ended December 31, 1996, 1997 and 1998 and the three months ended
March 31, 1999, respectively.
The Company leases its two primary facilities from one of its stockholders
at rates that in management's opinion, approximate market. Lease expense related
to these buildings totaled approximately $220,000, $220,000, $220,000 and
$55,000 (unaudited) for the years ended December 31, 1996, 1997 and 1998 and the
three months ended March 31, 1999, respectively.
(8) EMPLOYEE BENEFIT PLAN:
The Company has a defined contribution profit-sharing plan. The Plan
provides for the Company to match 25% to 100%, depending on length of service,
of the first 6% contributed by each employee. Total contributions by the Company
under the Plan were approximately $150,000, $172,000, $222,000 and $50,000
(unaudited) for the years ending December 31, 1996, 1997 and 1998 and the three
months ended March 31, 1999, respectively. The Company may also make
discretionary contributions. The Company made no discretionary contributions for
the years ended December 31, 1996, 1997 and 1998 and for the three months ended
March 31, 1999.
(9) FINANCIAL INSTRUMENTS:
The Company's financial instruments consist of cash and cash equivalents,
lines of credit and debt. The Company believes that the carrying value of these
instruments on the accompanying balance sheets approximate their fair value.
F-48
<PAGE> 174
RCR PLUMBING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(10) COMMITMENTS AND CONTINGENCIES:
Litigation
The Company is involved in disputes or legal actions arising in the
ordinary course of business. Management does not believe the outcome of such
legal actions will have a material adverse effect on the Company's financial
position or results of operations.
Insurance
The Company carries a broad range of insurance coverage, including business
auto liability, general liability and an umbrella policy. The Company has not
incurred significant claims or losses on any of these insurance policies.
(11) CONCENTRATION OF CREDIT RISK:
In general, the Company performs its services under contract terms that
entitle it to progress payments and is, by law, granted a lien interest in the
work until paid. The Company is exposed to potential credit risk related to
changes in business and economic factors within the region. However, management
believes that its contract acceptance, billing and collection policies are
adequate to minimize the potential credit risk.
The Company's customers are primarily in the construction industry.
Accordingly, the Company is exposed to risks of fluctuations in construction in
the areas which it operates.
(12) SALE OF COMMON STOCK:
During 1998, one of the Company's stockholders sold all his shares to
another stockholder. Subsequent to this transaction, the Company was owned by
the two remaining stockholders.
(13) EVENT SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
On April 1, 1999, AMPAM acquired through merger all the stock of the
Company in exchange for cash, notes and stock of AMPAM, after which the Company
is a wholly owned subsidiary of AMPAM.
In connection with the completion of the AMPAM Agreement, the Company
transferred certain assets of the Company to the stockholders with a fair market
value of approximately $2,144,000. In return the stockholders assumed
liabilities related to those assets of approximately $1,332,000. In accordance
with Accounting Principles Board No. 29, the Company recognized a gain on the
transfer of the property of approximately $605,000. The difference between the
fair market value of the assets transferred and the liabilities assumed was
approximately $812,000 and was accounted for as a distribution to stockholders
equity. Additionally, the Company made cash distributions which represent the
Company's estimated S corporation accumulated adjustment account.
As discussed in Note 2, in connection with the merger, the Company
converted from an S Corporation to a C Corporation. Upon conversion to C
Corporation status, the Company recorded deferred taxes for which it will be
responsible. If the S Corporation had been terminated as of December 31, 1998 or
March 31, 1999, the Company would have recorded a net current deferred tax
liability of approximately $1,850,356 and $719,318, respectively, and a net
non-current deferred tax liability of approximately $156,908 and $168,038,
respectively. Deferred tax assets are a result of bad debt allowances, and
warranty and other liability reserves. Deferred tax liabilities are a result of
differences between book and tax depreciation, and differences between the
percentage of completion and completed contract method of accounting for its
contracts.
Concurrently with the merger, the Company entered into agreements with the
stockholders to lease office space used in the Company's operations for a
negotiated amount and term.
F-49
<PAGE> 175
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Teepe's River City Mechanical, Inc.:
We have audited the accompanying balance sheets of Teepe's River City
Mechanical, Inc. as of December 31, 1997, 1998 and March 31, 1999, and the
related statements of operations, cash flows and stockholders' equity for each
of the three years in the period ended December 31, 1998 and for the three
months ended March 31, 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Teepe's River City
Mechanical, Inc. as of December 31, 1997, 1998 and March 31, 1999, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, and for the three months ended March 31, 1999,
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
St. Louis, Missouri
May 21, 1999
F-50
<PAGE> 176
TEEPE'S RIVER CITY MECHANICAL, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------- MARCH 31,
1997 1998 1999
------- ------- ---------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 802 $ 1,177 $ 749
Accounts receivable --
Contract, net.......................................... 6,729 8,709 8,247
Other.................................................. 77 44 36
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 336 1,263 1,533
Inventories............................................... 128 201 210
Prepaid expenses and other current assets................. 169 178 178
Deferred income taxes..................................... 398 388 380
------- ------- -------
Total current assets.............................. 8,639 11,960 11,333
PROPERTY AND EQUIPMENT, net................................. 3,710 3,394 3,384
RELATED PARTY RECEIVABLES................................... 214 219 220
OTHER ASSETS................................................ 202 200 196
------- ------- -------
Total assets...................................... $12,765 $15,773 $15,133
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt...................... $ 338 $ 308 $ 258
Note payable.............................................. 520 498 676
Accounts payable and accrued expenses..................... 3,520 6,268 5,524
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 2,226 1,463 1,291
Retainage payable......................................... 1,036 1,221 1,332
------- ------- -------
Total current liabilities......................... 7,640 9,758 9,081
LONG-TERM DEBT, net of current maturities................... 1,318 601 596
OTHER LONG-TERM OBLIGATIONS................................. 391 1,084 1,064
------- ------- -------
Total liabilities................................. 9,349 11,443 10,741
------- ------- -------
STOCKHOLDERS' EQUITY:
Common stock, no par value, $15 stated value, 500 shares
authorized, 90 shares issued and outstanding........... 1 1 1
Retained earnings......................................... 3,415 4,329 4,391
------- ------- -------
Total stockholders' equity........................ 3,416 4,330 4,392
------- ------- -------
Total liabilities and stockholders' equity........ $12,765 $15,773 $15,133
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-51
<PAGE> 177
TEEPE'S RIVER CITY MECHANICAL, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
--------------------------- ---------------------
1996 1997 1998 1998 1999
------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES................................... $35,400 $42,687 $50,627 $11,449 $10,546
COST OF REVENUES (including depreciation).. 30,410 37,170 44,048 10,066 9,287
------- ------- ------- ------- -------
Gross profit.......................... 4,990 5,517 6,579 1,383 1,259
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES................................. 3,414 4,158 4,779 1,205 1,126
------- ------- ------- ------- -------
Income from operations................ 1,576 1,359 1,800 178 133
------- ------- ------- ------- -------
OTHER INCOME (EXPENSE):
Interest income.......................... 54 71 82 17 12
Interest expense......................... (76) (145) (125) (33) (61)
Other.................................... 13 14 (177) -- 5
------- ------- ------- ------- -------
Other income (expense), net........... (9) (60) (220) (16) (44)
------- ------- ------- ------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES... 1,567 1,299 1,580 162 89
PROVISION FOR INCOME TAXES................. 658 522 666 55 27
------- ------- ------- ------- -------
NET INCOME................................. $ 909 $ 777 $ 914 $ 107 $ 62
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-52
<PAGE> 178
TEEPE'S RIVER CITY MECHANICAL, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
-------------------------- --------------------
1996 1997 1998 1998 1999
------ ------- ------- ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................... $ 909 $ 777 $ 914 $ 107 $ 62
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities --
Depreciation and amortization.............. 272 388 303 76 88
(Gain) loss on sale of property and
equipment................................ 1 2 114 -- 5
Deferred income taxes...................... 52 72 (33) 47 --
Other, net................................. 2 (9) 2 9 4
Changes in operating assets and
liabilities --
(Increase) decrease in --
Accounts receivable................... (783) (1,681) (1,952) (1,537) 470
Costs and estimated earnings in excess
of billings on uncompleted
contracts........................... (983) 720 (927) (564) (270)
Inventories........................... 28 (62) (73) (23) (9)
Prepaid expenses and other current
assets.............................. 9 (39) (9) 15 --
Increase (decrease) in --
Accounts payable and accrued
expenses............................ 1,511 (803) 2,933 2,447 (633)
Billings in excess of costs and
estimated earnings on uncompleted
contracts........................... (468) 1,137 (763) 59 (172)
------ ------- ------- ------- ------
Net cash provided by operating
activities....................... 550 502 509 636 (455)
------ ------- ------- ------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and
equipment.................................. 15 141 349 -- 7
Additions of property and equipment........... (677) (1,488) (450) (79) (90)
Other investing activities.................... -- -- 736 -- (13)
------ ------- ------- ------- ------
Net cash (used in) provided by
investing activities................ (662) (1,347) 635 (79) (96)
------ ------- ------- ------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) proceeds from note payable..... -- 520 (22) (220) 178
Borrowings of long-term debt.................. 226 1,280 326 2 35
Payments of long-term debt.................... (210) (846) (1,073) (127) (90)
------ ------- ------- ------- ------
Net cash provided by (used in)
financing activities................ 16 954 (769) (345) 123
------ ------- ------- ------- ------
Net (decrease) increase in cash and
cash equivalents.................... (96) 109 375 212 (428)
CASH AND CASH EQUIVALENTS, beginning of
period........................................ 789 693 802 802 1,177
------ ------- ------- ------- ------
CASH AND CASH EQUIVALENTS, end of period........ $ 693 $ 802 $ 1,177 $ 1,014 $ 749
====== ======= ======= ======= ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for --
Interest................................... $ 76 $ 145 $ 120 $ 33 $ 55
Income taxes............................... $ 624 $ 607 $ 299 $ -- $ 145
Capital lease additions....................... $ -- $ 378 $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-53
<PAGE> 179
TEEPE'S RIVER CITY MECHANICAL, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995............................. 90 $1 $1,729 $1,730
Net income........................................... -- -- 909 909
-- -- ------ ------
BALANCE, December 31, 1996............................. 90 1 2,638 2,639
Net income........................................... -- -- 777 777
-- -- ------ ------
BALANCE, December 31, 1997............................. 90 1 3,415 3,416
Net income........................................... -- -- 914 914
-- -- ------ ------
BALANCE, December 31, 1998............................. 90 1 4,329 4,330
Net income........................................... -- -- 62 62
-- -- ------ ------
BALANCE, March 31, 1999................................ 90 $1 $4,391 $4,392
== == ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-54
<PAGE> 180
TEEPE'S RIVER CITY MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Teepe's River City Mechanical, Inc., an Ohio corporation (the Company),
provides plumbing and mechanical services for commercial and industrial
properties. The Company performs the majority of its contract work under fixed
price contracts with contract terms generally ranging from six to twelve months.
The Company performs the majority of its work in Ohio, Kentucky and Indiana.
The Company and its stockholders intend to enter into a definitive
agreement with American Plumbing & Mechanical, Inc. (AMPAM), pursuant to which
all outstanding shares of the Company's common stock will be exchanged for cash,
notes and shares of AMPAM common stock concurrently with the consummation of the
related financing.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Interim Financial Information
The interim financial statements for the three months ended March 31, 1998,
are unaudited and have been pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of the Company's management,
the unaudited interim financial statements contain all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation.
The results of operations for the interim periods are not necessarily indicative
of the results for the entire fiscal year.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts based upon an
estimate of uncollectable balances.
Inventories
Inventories consist of parts and supplies held for use in the ordinary
course of business and are stated at the lower of cost or market using the
first-in, first-out (FIFO) method.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the life
of the lease or the estimated useful life of the asset.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statements of operations.
F-55
<PAGE> 181
TEEPE'S RIVER CITY MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
Revenues from construction contracts are recognized on the
percentage-of-completion method measured by the percentage of cost incurred to
date to total estimated costs for each contract. Contract costs include all
direct material and labor costs and those indirect costs related to contract
performance, such as indirect labor and depreciation costs. Provisions for the
total estimated losses on uncompleted contracts are made in the period in which
such losses are determined. Changes in job performance, job conditions,
estimated profitability and final contract settlements may result in revisions
to costs and income and their effects are recognized in the period in which the
revisions are determined. An amount equal to contract costs attributable to
claims is included in revenues when realization is probable and the amount can
be reliably estimated. Revenue from noncontract work is recognized when the
services are performed.
The balances billed but not paid by customers pursuant to retainage
provisions in construction contracts will be due upon completion of the
contracts and acceptance by the customer.
The current asset, "costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The current liability, "billings in excess of costs and estimated
earnings on uncompleted contracts," represents billings in excess of revenues
recognized.
Warranty Costs
For certain contracts, the Company warrants labor for one year after
installation of plumbing or mechanical systems. A reserve for warranty costs is
recorded based upon the historical level of warranty claims and management's
estimate of future costs.
Income Taxes
The Company, which is a C Corporation, follows the liability method of
accounting for income taxes in accordance with Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." Under this method,
deferred assets and liabilities are recorded for future tax consequences of
temporary differences between the financial reporting and tax basis of assets
and liabilities, and are measured using the enacted tax rates and laws that will
be in effect when the underlying assets or liabilities are recovered or settled.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities,
disclosures of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Realization of Long-Lived Assets
The Company has adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
Accordingly, in the event that facts and circumstances indicate that property
and equipment or other assets may be impaired, an evaluation of recoverability
would be performed. If an evaluation is required, the estimated future
undiscounted cash flows associated with the asset are compared to the asset's
carrying amount to determine if an impairment of such property is necessary. The
effect of any impairment would be to expense the difference between the fair
value of such property and its carrying value. Adoption of this standard did not
have a material effect on the financial position or results of operations of the
Company.
F-56
<PAGE> 182
TEEPE'S RIVER CITY MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Contract receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1997 1998 1999
------ ------ ---------
<S> <C> <C> <C>
Trade................................................... $4,855 $6,087 $5,828
Unbilled retainage...................................... 1,849 2,186 2,052
Billed retainage........................................ 225 636 567
Allowance for uncollectible accounts.................... (200) (200) (200)
------ ------ ------
Balance at end of year............................. $6,729 $8,709 $8,247
====== ====== ======
</TABLE>
Installation contracts in progress are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1997 1998 1999
------- ------- ---------
<S> <C> <C> <C>
Costs incurred on contracts in progress............... $45,748 $60,913 $58,710
Estimated earnings, net of losses..................... 4,995 8,213 7,867
------- ------- -------
50,743 69,126 66,577
Less -- Billings to date.............................. 52,633 69,326 66,335
------- ------- -------
$(1,890) $ (200) $ 242
======= ======= =======
Costs and estimated earnings in excess of billings on
uncompleted contracts............................... $ 336 $ 1,263 $ 1,533
Billings in excess of costs and estimated earnings on
uncompleted contracts............................... (2,226) (1,463) (1,291)
------- ------- -------
$(1,890) $ (200) $ 242
======= ======= =======
</TABLE>
Accounts payable and accrued expenses consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1997 1998 1999
------ ------ ---------
<S> <C> <C> <C>
Accounts payable, trade................................. $2,737 $5,226 $5,040
Accrued compensation and benefits....................... 357 664 311
Other accrued expenses.................................. 426 378 173
------ ------ ------
$3,520 $6,268 $5,524
====== ====== ======
</TABLE>
F-57
<PAGE> 183
TEEPE'S RIVER CITY MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT:
Property and equipment, including capital lease assets, consists of the
following (in thousands):
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIVES ----------------- MARCH 31,
IN YEARS 1997 1998 1999
------------ ------- ------- ---------
<S> <C> <C> <C> <C>
Land, Building and leasehold improvements... 15-40 $ 1,613 $ 1,078 $ 1,006
Machinery and equipment..................... 6-10 1,338 1,671 1,741
Transportation equipment.................... 5-10 1,140 1,387 1,402
Furniture and fixtures...................... 5-12 720 779 801
Property held under capital lease........... 12 378 378 378
Tools....................................... 5-7 56 55 56
------- ------- -------
5,245 5,348 5,384
Less -- Accumulated depreciation and
amortization (1,535) (1,954) (2,000)
------- ------- -------
$ 3,710 $ 3,394 $ 3,384
======= ======= =======
</TABLE>
5. LONG-TERM DEBT:
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1997 1998 1999
------ ----- ---------
<S> <C> <C> <C>
Mortgage note payable in monthly installments through
November 2003. The interest rate (8.5% at December 31,
1997) is subject to annual adjustment based upon
current market interest rates. Land and building are
pledged as collateral. The shareholders of the Company
are guarantors........................................ $ 363 $ -- $ --
Mortgage note payable requires monthly installments of
$3 through October 2012. The interest rate (8.3% at
December 31, 1997) is subject to triennial adjustment
based upon current market interest rates. Land and
building are pledged as collateral. The shareholders
of the Company are guarantors......................... 301 -- --
Various installment notes payable with interest rates
ranging from 6.7% to 9.0%, payable in monthly
installments of $21 including interest, with various
maturities through August 2004, collateralized by
equipment............................................. 631 592 553
Capital lease obligation, payable in monthly
installments of $5, maturing September 2004, bearing
interest at 4.2%. The lease is collateralized by
equipment............................................. 361 317 301
------ ----- -----
Totals........................................ 1,656 909 854
Less -- Current portion................................. (338) (308) (258)
------ ----- -----
Long-term..................................... $1,318 $ 601 $ 596
====== ===== =====
</TABLE>
F-58
<PAGE> 184
TEEPE'S RIVER CITY MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
Year ending December 31:
1999...................................................... $258
2000...................................................... 279
2001...................................................... 133
2002...................................................... 79
2003...................................................... 59
Thereafter................................................ 46
----
$854
====
</TABLE>
6. NOTE PAYABLE:
The Company has a note payable to a bank that provided for borrowings of up
to $1,500,000 at December 31, 1997, 1998 and March 31, 1999. The note had
outstanding balances of $520,000, $498,000 and $676,000 at December 31, 1997,
1998 and March 31, 1999, respectively. At December 31, 1997, the note bore
interest at 8.5%, payable monthly with a maturity date of July 1998. At December
31, 1998, and March 31, 1999, the note bore interest at 7.75%, payable monthly
with a maturity date of July 1999. The note is secured by the Company's assets
and is subject to certain restrictive covenants.
7. LEASES:
The Company leases vehicles and office equipment under operating leases.
Lease expense related to these lease agreements totaled $30,000, $98,000,
$40,000 and $7,833 for the years ended December 31, 1996, 1997 and 1998, and the
three months ended March 31, 1999, respectively. The Company also leases a crane
under a capital lease from a third party. The capital lease requires payments of
$63,000 per year through September 2004. Future minimum lease payments under
noncancelable operating leases at December 31, 1998, are as follows (in
thousands):
<TABLE>
<S> <C>
Year ending December 31:
1999...................................................... $ 88
2000...................................................... 82
2001...................................................... 64
2002...................................................... 37
----
$271
====
</TABLE>
8. INCOME TAXES:
Federal and state income tax expenses are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31 THREE MONTHS
-------------------- ENDED MARCH 31,
1996 1997 1998 1999
---- ---- ---- ---------------
<S> <C> <C> <C> <C>
Federal:
Current..................................... $485 $362 $653 $13
Deferred.................................... 42 60 (45) --
State:
Current..................................... 121 88 46 14
Deferred.................................... 10 12 12 --
---- ---- ---- ---
$658 $522 $666 $27
==== ==== ==== ===
</TABLE>
F-59
<PAGE> 185
TEEPE'S RIVER CITY MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate rate of 34% to income before
provision for income taxes as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31 THREE MONTHS
-------------------- ENDED MARCH 31,
1996 1997 1998 1999
---- ---- ---- ---------------
<S> <C> <C> <C> <C>
Provision at the statutory rate............... $533 $442 $537 $ 30
Increase resulting from:
State income tax, net of benefit for federal
deduction................................ 79 57 58 14
Benefit of lower marginal tax rates......... (15) (13) (13) (13)
Other....................................... 61 36 84 (4)
---- ---- ---- ----
$658 $522 $666 $ 27
==== ==== ==== ====
</TABLE>
Deferred income tax provisions result from temporary differences in the
recognition of income and expenses for financial reporting purposes and for tax
purposes. The tax effects of these temporary differences, representing deferred
tax assets and liabilities, result principally from the following (in
thousands):
<TABLE>
<CAPTION>
AS OF
DECEMBER 31 THREE MONTHS
-------------- ENDED MARCH 31,
1997 1998 1999
----- ----- ---------------
<S> <C> <C> <C>
Deferred income tax assets:
Allowance for doubtful accounts................... $ 82 $ 82 $ 82
Accrued expenses.................................. 316 306 298
----- ----- ----
Total deferred income tax asset........... 398 388 380
----- ----- ----
Deferred income tax liabilities:
Property and equipment............................ (388) (335) (333)
Other............................................. (3) (13) (7)
----- ----- ----
Total deferred income tax liability
(included in other long-term
obligations)............................ (391) (348) (340)
----- ----- ----
Net deferred income tax asset............. $ 7 $ 40 $ 40
===== ===== ====
</TABLE>
The net deferred tax assets and liabilities are comprised of the following
(in thousands):
<TABLE>
<CAPTION>
AS OF
DECEMBER 31 THREE MONTHS
-------------- ENDED MARCH 31,
1997 1998 1999
----- ----- ---------------
<S> <C> <C> <C>
Deferred tax assets:
Current........................................... $ 398 $ 388 $ 380
Long-term......................................... -- -- --
----- ----- -----
Total..................................... 398 388 380
----- ----- -----
Deferred tax liabilities:
Current........................................... -- -- --
Long-term......................................... (391) (348) (340)
----- ----- -----
Net deferred income tax asset............. $ 7 $ 40 $ 40
===== ===== =====
</TABLE>
F-60
<PAGE> 186
TEEPE'S RIVER CITY MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. RELATED-PARTY TRANSACTIONS:
In July 1998, the Company sold certain property to an entity controlled by
the Company's majority stockholder. Concurrent with the sale, the Company
entered into a lease with the entity for the same property. The lease calls for
monthly lease payments of approximately $12,000. The sale leaseback was recorded
under the deposit method using Statement of Financial Accounting Standards
(SFAS) No. 98, "Accounting for Leases" and, as such, the liability of $736,000
and $724,000 is recorded at December 31, 1998, and March 31, 1999, respectively,
as a deposit and all payments will be charged against the deposit liability,
that is included in other long-term obligations on the balance sheet.
In 1997, the Company entered into an operating lease for its Columbus, Ohio
building with a related entity. The building lease expires in August 2003 with
an option to renew for two five year terms. The lease calls for monthly lease
payments of approximately $5,000. Total rent paid under this was $18,000,
$55,000 and $15,000 in 1997, 1998 and for the three months ended March 31, 1999,
respectively.
As of December 31, 1997 and 1998, and March 31, 1999, the Company has loans
to a shareholder and to an officer. Both receivables are classified as related
party receivables for balance sheet presentation. The loan to the shareholder
has an outstanding balance of $114,000, $122,940 and $121,752 at December 31,
1997, 1998, and March 31, 1999, respectively. The loan bears interest at the
applicable federal rate (5.9% at December 31, 1997, 1998 and 5.9% at March 31,
1999). Total interest income related to this loan was $7,000 for December 31,
1997 and 1998, and $1,771 for the three months ended March 31, 1999. The loan to
the officer of the Company had an outstanding balance of $100,000, $98,000 and
$98,000 at December 31, 1997, 1998, and March 31, 1999, respectively. The loan
bears interest at the prime rate, 8.5% at December 31, 1997 and 1998, and 7.75%
at March 31, 1999, respectively, and matures in August 1999.
10. EMPLOYEE BENEFIT PLAN:
The Company has a defined contribution profit-sharing plan for all
employees with immediate vesting. The plan provides for the Company to match the
first $500 contributed by each employee, which vests over a period of seven
years. Total contributions by the Company under the plan were approximately
$50,000, $57,000, $71,000 and $54,000 for the years ended December 31, 1996,
1997, 1998 and the three months ended March 31, 1999, respectively.
The Company's field personnel elected to have the Company contribute a
portion of their wages earned on prevailing wage contracts to a multiemployer
plan. The expense related to this plan was $333,000, $570,000, $501,700 and
$103,941 for the years ended December 31, 1996, 1997, 1998 and the three months
ended March 31, 1999, respectively.
11. FINANCIAL INSTRUMENTS:
The Company's financial instruments consist of cash and cash equivalents, a
notes payable and long-term debt. The Company believes that the carrying value
of these instruments on the accompanying balance sheets approximates their fair
value.
12. COMMITMENTS AND CONTINGENCIES:
Guarantees
The Company is the guarantor on several loans entered into by a company
affiliated through common ownership. The loans had outstanding balances
$1,937,000, $3,037,000 and $3,020,000 at December 31, 1997, 1998, and March
31,1999, respectively.
F-61
<PAGE> 187
TEEPE'S RIVER CITY MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Litigation
The Company is involved in disputes or legal actions arising in the
ordinary course of business. Management does not believe the outcome of such
legal actions will have a material adverse effect on the Company's financial
position or results of operations.
Insurance
The Company carries a broad range of insurance coverage, including business
auto liability, general liability and an umbrella policy. The Company has not
incurred significant claims or losses on any of these insurance policies. The
Company participates in a state-wide workers' compensation program. In June
1998, the Company received a one-time refund of $422,000 as a result of positive
claims experience and strong earnings of the workers' compensation fund. The
refund is reflected as a reduction in cost of services in 1998.
13. MAJOR CUSTOMERS AND RISK CONCENTRATION:
The Company had sales greater than 10% of the total revenues for one,
three, two and one major customers during the years ended December 31, 1996,
1997, 1998, and for the three months ended March 31, 1999, respectively. These
customers represented approximately 10.4%, 30.5%, 23.4% and 10.0% of total
revenues during the years ended December 31, 1996, 1997, 1998, and for the three
months ended March 31, 1999, respectively.
In general, the Company performs its services under contract terms that
entitle it to progress payments and is, by law, granted a lien interest in the
work until paid. The Company is exposed to potential credit risk related to
changes in business and economic factors within Ohio, Kentucky and Indiana.
However, management believes that its contract acceptance, billing and
collection policies are adequate to minimize the potential credit risk.
The Company's customers are primarily in the construction industry.
Accordingly, the Company is exposed to risks of fluctuations in construction in
the areas which it operates.
14. SUBSEQUENT EVENT:
On April 1, 1999, AMPAM acquired through merger all the stock of the
Company in exchange for cash, notes and stock of AMPAM, after which the Company
is a wholly owned subsidiary of AMPAM.
Concurrently with the merger, the Company entered into agreements with the
stockholder to lease land and buildings used in the Company's operations for a
negotiated amount and term.
F-62
<PAGE> 188
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Keith Riggs Plumbing, Inc.:
We have audited the accompanying balance sheets of Keith Riggs Plumbing,
Inc., (an Arizona corporation), as of December 31, 1997 and 1998, and the
related statements of operations, cash flows and stockholders' equity for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Keith Riggs Plumbing, Inc.,
as of December 31, 1997 and 1998, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Phoenix, Arizona
March 17, 1999
F-63
<PAGE> 189
KEITH RIGGS PLUMBING, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------- MARCH 31,
1997 1998 1999
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 64 $ 194 $ 171
Accounts receivable --
Contract, net.......................................... 4,927 4,207 4,776
Other.................................................. 7 4 227
Inventories............................................... 314 516 696
Prepaid expenses and other current assets................. 29 21 --
------ ------ ------
Total current assets.............................. 5,341 4,942 5,870
PROPERTY AND EQUIPMENT, net................................. 1,432 1,227 1,161
OTHER ASSETS................................................ 4 -- --
------ ------ ------
Total assets...................................... $6,777 $6,169 $7,031
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft............................................ $ 224 $ -- $ --
Line of credit............................................ 450 -- --
Current maturities of long-term debt...................... 224 214 200
Current maturities of notes payable -- related parties.... 32 16 12
Accounts payable and accrued expenses..................... 3,035 2,482 2,606
------ ------ ------
Total current liabilities......................... 3,965 2,712 2,818
LONG-TERM LIABILITIES:
Long-term debt, net of current maturities................. 562 437 382
Notes payable -- related parties, net of current
maturities............................................. 89 84 74
------ ------ ------
Total liabilities................................. 4,616 3,233 3,274
------ ------ ------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 1,000,000 shares authorized;
10,250 shares issued and 8,200 shares outstanding...... 10 10 10
Additional paid-in capital................................ 249 249 249
Retained earnings......................................... 2,089 2,864 3,685
Treasury stock, at cost, 2,050 shares..................... (187) (187) (187)
------ ------ ------
Total stockholders' equity........................ 2,161 2,936 3,757
------ ------ ------
Total liabilities and stockholders' equity........ $6,777 $6,169 $7,031
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-64
<PAGE> 190
KEITH RIGGS PLUMBING, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------------- --------------------
1997 1998 1998 1999
------- ------- ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES.......................................... $29,680 $34,464 $7,279 $8,917
COST OF REVENUES (including depreciation)......... 25,865 29,965 6,190 7,469
------- ------- ------ ------
Gross profit................................. 3,815 4,499 1,089 1,448
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES...... 2,583 2,943 655 706
------- ------- ------ ------
Income from operations....................... 1,232 1,556 434 742
------- ------- ------ ------
OTHER INCOME (EXPENSE):
Interest income................................. 8 17 2 11
Interest expense................................ (74) (90) (26) (9)
Other........................................... 165 97 (14) 228
------- ------- ------ ------
Other income (expense)....................... 99 24 (38) 230
------- ------- ------ ------
NET INCOME........................................ $ 1,331 $ 1,580 $ 396 $ 972
======= ======= ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-65
<PAGE> 191
KEITH RIGGS PLUMBING, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
----------------- -------------------
1997 1998 1998 1999
------- ------- ----------- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................... $ 1,331 $ 1,580 $396 $ 972
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization.................... 420 438 105 96
(Gain) loss on sale of property and equipment.... 9 2 15 (28)
Changes in operating assets and liabilities:
(Increase) decrease in --
Accounts receivable, contract, net.......... (818) 720 351 (569)
Accounts receivable, other.................. 4 3 (14) (223)
Inventories................................. 49 (202) -- (180)
Prepaid expenses and other current assets... 19 8 -- 21
Other noncurrent assets..................... -- 4 (2) --
Increase (decrease) in --
Accounts payable and accrued expenses....... 244 (553) (666) 124
------- ------- ---- -----
Net cash provided by operating
activities............................. 1,258 2,000 185 213
------- ------- ---- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment........ 35 22 -- 64
Additions of property and equipment................. (327) (148) (41) (66)
------- ------- ---- -----
Net cash used in investing activities..... (292) (126) (41) (2)
------- ------- ---- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in borrowings under line of
credit........................................... 450 (450) (450) --
Proceeds from long-term debt........................ 248 -- -- --
Payments of long-term debt.......................... (341) (246) (62) (69)
Distributions to stockholders....................... (974) (805) (202) (151)
Payments to related parties......................... (20) (19) (8) (14)
Increase in treasury stock.......................... (55) -- -- --
Decrease in bank overdraft.......................... (540) (224) 602 --
------- ------- ---- -----
Net cash used in financing activities..... (1,232) (1,744) (120) (234)
------- ------- ---- -----
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS......................................... (266) 130
CASH AND CASH EQUIVALENTS, beginning of period........ 330 64 64 194
------- ------- ---- -----
CASH AND CASH EQUIVALENTS, end of period.............. $ 64 $ 194 $ 88 $ 171
======= ======= ==== =====
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for -- interest........................... $ 74 $ 90 $ 26 $ 15
======= ======= ==== =====
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Additions of property and equipment via debt
financing........................................ $ 183 $ 110 $ 16 $ --
======= ======= ==== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-66
<PAGE> 192
KEITH RIGGS PLUMBING, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK
--------------- ADDITIONAL TOTAL
SHARES PAID-IN RETAINED TREASURY STOCKHOLDERS'
ISSUED AMOUNT CAPITAL EARNINGS STOCK EQUITY
------ ------ ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996......... 10,250 $10 $249 $1,732 $(132) $1,859
Distributions to stockholders.... -- -- -- (974) -- (974)
Net income....................... -- -- -- 1,331 -- 1,331
Other (Note 7)................... -- -- -- -- (55) (55)
------ --- ---- ------ ----- ------
BALANCE, December 31, 1997......... 10,250 10 249 2,089 (187) 2,161
Distributions to stockholders.... -- -- -- (805) -- (805)
Net income....................... -- -- -- 1,580 -- 1,580
------ --- ---- ------ ----- ------
BALANCE, December 31, 1998......... 10,250 $10 $249 $2,864 $(187) $2,936
Distributions to stockholders
(Unaudited)................... -- -- -- (151) -- (151)
Net income (Unaudited)........... -- -- -- 972 -- 972
------ --- ---- ------ ----- ------
BALANCE, March 31, 1999
(Unaudited)...................... 10,250 $10 $249 $3,685 $(187) $3,757
====== === ==== ====== ===== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-67
<PAGE> 193
KEITH RIGGS PLUMBING, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Keith Riggs Plumbing, Inc., an Arizona corporation (the Company), provides
plumbing services primarily for residential contractors. The Company performs
the majority of its contract work under fixed price contracts in the state of
Arizona.
The Company and its stockholders intend to enter into a definitive
agreement with American Plumbing & Mechanical, Inc. (AMPAM), pursuant to which
all outstanding shares of the Company's common stock will be exchanged for cash
and shares of AMPAM common stock concurrently with the consummation of the
related financing.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Interim Financial Information
The interim financial statements as of March 31, 1999, and for the three
months ended March 31, 1998 and 1999, are unaudited and have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of the Company's management, the unaudited interim financial
statements contain all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.
Receivable and Provision for Doubtful Accounts
The Company provides an allowance for doubtful accounts based upon an
estimate of uncollectable balances.
Inventories
Inventories consist of parts and supplies held for use in the ordinary
course of business and are stated at the lower of cost or market using the
first-in, first-out (FIFO) method.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the life
of the lease or the estimated useful life of the asset.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statements of operations.
Revenue Recognition
The Company recognizes revenue when services are performed except when work
is being performed under a construction contract. Revenue from construction
contracts is generally recognized on the
F-68
<PAGE> 194
KEITH RIGGS PLUMBING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
percentage-of-completion method measured by the percentage of cost incurred to
date to total estimated costs for each contract. Contract costs include all
direct material and labor costs and those indirect costs related to contract
performance, such as indirect labor and depreciation costs.
Warranty Costs
The Company warrants labor for two years after installation of new
plumbing. The Company generally warrants labor for 30 days after repair of
existing plumbing. A reserve for warranty costs is recorded based upon the
historical level of warranty claims and management's estimate of future costs.
Income Taxes
The Company has elected Subchapter S status under the Internal Revenue
Code. Therefore, the tax effects of the Company's operations will be reflected
on the tax returns of the individual stockholders. The Company will terminate
its S Corporation status concurrently with the effective date of the merger
discussed in Note 13.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities,
disclosures of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Realization of Long-Lived Assets
The Company has adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
Accordingly, in the event that facts and circumstances indicate that property
and equipment or other assets may be impaired, an evaluation of recoverability
would be performed. If an evaluation is required, the estimated future
undiscounted cash flows associated with the asset are compared to the asset's
carrying amount to determine if an impairment of such property is necessary. The
effect of any impairment would be to expense the difference between the fair
value of such property and its carrying value.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Contract receivables at December 31, 1997 and 1998, and March 31, 1999,
consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Billed................................................... $4,912 $4,016 $4,598
Unbilled................................................. 117 293 280
Allowance for doubtful accounts.......................... (102) (102) (102)
------ ------ ------
Balance at end of year......................... $4,927 $4,207 $4,776
====== ====== ======
</TABLE>
F-69
<PAGE> 195
KEITH RIGGS PLUMBING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Accounts payable and accrued expenses at December 31, 1997 and 1998, and
March 31, 1999, consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Accounts payable, trade.................................. $2,354 $1,783 $1,689
Accrued compensation and benefits........................ 352 445 518
Other accrued expenses................................... 329 254 399
------ ------ ------
Balance at end of year......................... $3,035 $2,482 $2,606
====== ====== ======
</TABLE>
4. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1997 and 1998, and March 31, 1999,
consist of the following (in thousands):
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
IN YEARS 1997 1998 1999
------------ ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Land............................................... -- $ 20 $ -- $ --
Transportation equipment........................... 5-7 2,551 2,735 2,633
Machinery and equipment............................ 5-10 244 249 311
Building and leasehold improvements................ 7-40 284 284 284
Furniture and fixtures............................. 3-10 207 221 221
------- ------- -------
3,306 3,489 3,449
Less -- accumulated depreciation and
amortization..................................... (1,874) (2,262) (2,288)
------- ------- -------
Property and equipment, net.............. $ 1,432 $ 1,227 $ 1,161
======= ======= =======
</TABLE>
5. LOAN AGREEMENT:
At December 31, 1998, and March 31, 1999, the Company had a Loan Agreement
(the Agreement) with a bank that provides for a revolving line of credit of
$550,000 and a term loan of $450,000. The proceeds of the revolving line of
credit are used to finance temporary increases in inventory and accounts
receivable and provide funds to take advantage of trade discounts. Proceeds of
the term loan are used to provide working capital.
The revolving line of credit requires payment of interest monthly at .5%
over the prime rate, which was 8.25% at December 31, 1998, and 7.75% at March
31, 1999, and matures on May 28, 1999. Borrowings on the line of credit at
December 31, 1997, totaled $450,000. There were no borrowings at December 31,
1998, and March 31, 1999. The line of credit was terminated subsequent to March
31, 1999.
The term loan is payable in monthly installments of $7,500 plus interest at
9% and matures in June 2002. At December 31, 1997 and 1998, and March 31, 1999,
$395,625, $298,125 and $283,125 (unaudited). respectively, was outstanding on
the term loan. Subsequent to March 31, 1999, and in connection with the merger
(see Note 13), the Company paid in full the amounts outstanding under the term
loan.
The Agreement is collateralized by receivables, inventory and equipment. In
addition, the shareholders of the Company are guarantors of the term loan.
Under the terms of the Agreement, the Company is required to maintain
certain financial covenants on a monthly basis, the most restrictive of which
are the following: maintenance of a debt to tangible net worth ratio of not more
than 3.5 to 1.0; a debt service coverage ratio greater than 1.5 to 1.0; and a
current ratio of not less than 1.1 to 1.0. The Agreement also places
restrictions on the Company's ability to create
F-70
<PAGE> 196
KEITH RIGGS PLUMBING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
liens or encumbrances to be placed on the collateral, to transfer or sell the
collateral, or to change ownership of the Company.
6. LONG-TERM DEBT:
Long-term debt at December 31, 1997 and 1998, and March 31, 1999, consists
of the following (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
----- ----- -----------
(UNAUDITED)
<S> <C> <C> <C>
Term loan (Note 5)........................................ $ 396 $ 298 $ 283
Notes payable to a bank, payable in monthly installments
of principal and interest at 9%; maturing through July
2003; secured by vehicles............................... 195 205 179
Note payable to a bank, payable in monthly installments of
principal and interest at 4.6%, maturing September 2001;
secured by equipment.................................... 39 29 16
Notes payable to various credit corporations, payable in
monthly installments of principal and interest at rates
between 6.45% and 10.9%; maturing through October 2001;
secured by vehicles and equipment....................... 156 119 104
----- ----- -----
786 651 582
Less -- current maturities.............................. (224) (214) (200)
----- ----- -----
Total long-term debt, net of current
maturities.................................... $ 562 $ 437 $ 382
===== ===== =====
</TABLE>
The maturities of long-term debt as of December 31, 1998, are as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1999...................................................... $214
2000...................................................... 185
2001...................................................... 151
2002...................................................... 59
2003...................................................... 8
Thereafter................................................ 34
----
$651
====
</TABLE>
7. STOCKHOLDERS' EQUITY:
Common Stock Split
On February 1, 1998, the Company declared a 1.025 for 1.0 stock split of
the Company's common stock to stockholders of record on December 31, 1997. All
share amounts have been restated to reflect the split.
Buy-Sell Agreement
The Keith Riggs Plumbing, Inc. Stockholders' Buy-Sell Agreement (the
"Buy-Sell Agreement") restricts the sale, assignment, transfer, pledge or other
disposition of the Company's shares without the prior written consent of the
other stockholders. Additionally, under certain circumstances shares of stock
shall be repurchased by the Company. The redemption price is to be based on an
annual certificate of value or, in the absence of the former, on an appraisal
performed at the time of the transaction, and is to be paid according to the
terms stipulated in the Buy-Sell Agreement.
F-71
<PAGE> 197
KEITH RIGGS PLUMBING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Buy-Sell Agreement also provides for the issuance of 100 shares of the
Company's common stock to any lineal descendant of the founders based upon
attaining 10 years of continuous service and shall receive 100 shares for each
additional year of service thereafter until the 20th year of service, when an
additional 1,000 shares shall be issued for a maximum of 2,000 shares. The years
of service are measured at December 31st and the shares are issued on February
1st of the subsequent year. Such shares may be issued through the issuance of
new shares or existing shares. On February 1, 1998 and 1999, 100 shares of the
Company's common stock were issued in connection with the terms of this
Agreement. The Company's stockholders elected to issue the shares from their
existing holdings.
Treasury Stock
Treasury stock consists of 2,050 shares redeemed from one stockholder in
1994 for an 11-year note payable collateralized by a life insurance policy. The
Company recorded the value of the treasury shares at the present value of the
note discounted at 8%. In 1997, upon the death of the stockholder and receipt of
the insurance proceeds, the Company repaid this debt in its entirety. The
$55,062 loss associated with this early extinguishment of debt with a related
party was recorded as an additional cost of treasury stock.
8. RELATED-PARTY TRANSACTIONS:
At December 31, 1998, the Company had a note payable due to one stockholder
amounting to $10,600. This note is noninterest bearing and is due on demand. At
December 31, 1998, and March 31, 1999, the Company had a note payable to RGS
Land LLC (RGS), a company wholly owned by the Company's stockholders, amounting
to $90,008 and $74,008 (unaudited), respectively. This note is payable in
monthly installments of $1,333 plus interest at prime plus 2% and matures in
July 2004. The proceeds received from the RGS note were used to construct the
Glendale, Arizona facility. Subsequent to March 31, 1999, these notes were paid
in full.
The Company leases its main premises in Mesa, Arizona and in Glendale,
Arizona, from the principal stockholders. The Company's lease obligation is on a
month to month basis with no fixed term. Rent expense for these locations
totaled $61,330, $63,878 and $11,118 (unaudited) for the years ended December
31, 1997 and 1998, and the three months ended March 31, 1999, respectively.
Management of the Company believes that the approximate market rental value for
these properties is $180,000 per year.
9. EMPLOYEE BENEFIT PLAN:
Effective January 1, 1997, the Company established the Keith Riggs
Plumbing, Inc. 401(k) Plan. The Plan covers full time employees and provides for
employer contributions on a discretionary basis. The Company's expense for the
years ended December 31, 1997 and 1998, and the three months ended March 31,
1999, totaled $25,448, $32,383 and $0 (unaudited), respectively.
10. FINANCIAL INSTRUMENTS:
The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, other current assets, the line of credit, accounts payable
and accrued expenses, notes payable and debt. The Company believes that the
carrying value of these instruments on the accompanying balance sheets
approximates their fair value.
F-72
<PAGE> 198
KEITH RIGGS PLUMBING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES:
Litigation
The Company is involved in disputes or legal actions arising in the
ordinary course of business. Management does not believe the outcome of such
legal actions will have a material adverse effect on the Company's financial
position or results of operations.
Insurance
The Company carries a broad range of insurance coverage, including business
auto liability, general liability, property and workers' compensation. The
Company has not incurred significant claims or losses on any of these insurance
policies. The workers' compensation policy provides for an annual refundable
deposit in addition to the premium payments. As of March 31, 1999, $200,000
(unaudited) has been accrued for a 1996 and 1997 compensation refund.
Operating Leases
In addition to the related-party leases described in Note 8, the Company
leases certain equipment from unaffiliated third parties under noncancellable
operating leases. Rent expense related to these lease agreements totaled
$24,371, $31,818 and $20,863 (unaudited) for the years ended December 31, 1997
and 1998, and the three months ended March 31, 1999, respectively. Future
minimum lease payments under these noncancellable leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1999................................................... $ 83,451
2000................................................... 83,451
2001................................................... 30,548
--------
$197,450
========
</TABLE>
12. MAJOR CUSTOMERS AND RISK CONCENTRATION:
The Company had revenues greater than 10% of total revenues to the
following major customers for the periods ended December 31, 1997 and 1998, and
March 31, 1999:
<TABLE>
<CAPTION>
1997 1998 1999
--------------------------- --------------------------- ---------------------------
REVENUES PERCENT OF REVENUES PERCENT OF REVENUES PERCENT OF
(IN THOUSANDS) REVENUES (IN THOUSANDS) REVENUES (IN THOUSANDS) REVENUES
-------------- ---------- -------------- ---------- -------------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Customer A............. $3,773 12.7% $6,143 17.8% $1,384 15.5%
Customer B............. 5,370 18.1 5,771 16.7 1,153 12.9
Customer C............. 4,388 14.8 5,741 16.7 1,082 12.1
Customer D............. 3,580 12.1 3,574 10.3 -- --
</TABLE>
Financial instruments which potentially expose the Company to
concentrations of credit risk, as defined by SFAS No. 105, consist primarily of
contract accounts receivable. At December 31, 1998, and March 31, 1999,
approximately 39% and 47% (unaudited) of contract accounts receivable are due
from three customers.
In general, the Company performs its services under contract terms that
entitle it to progress payments and is, by law, granted a lien interest in the
work until paid. The Company is exposed to potential credit risk related to
changes in business and economic factors within the state of Arizona.
F-73
<PAGE> 199
KEITH RIGGS PLUMBING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
However, management believes that its contract acceptance, billing and
collection policies are adequate to minimize the potential credit risk.
The Company's customers are primarily in the construction industry.
Accordingly, the Company is exposed to risks of fluctuations in construction in
the areas which it operates.
The Company relies on several key vendors to supply its primary material
needs. However, the Company believes that other suppliers could provide for the
Company's needs on comparable terms. Abrupt changes in the supply flow could,
however cause a delay and a possible inability to meet its commitments on
schedule or a possible loss of sales which would offset operating results
adversely.
13. EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
On April 1, 1999, AMPAM acquired through merger all the stock of the
Company in exchange for cash and stock of AMPAM, after which the Company is a
wholly owned subsidiary of AMPAM.
In connection with the merger, the Company sold or distributed certain
non-operating assets and attendant liabilities, if any, to the stockholders.
Additionally, the Company made cash distributions prior to the merger which
represent the Company's estimated S corporation accumulated adjustment account.
As discussed in Note 2, in connection with the merger, the Company
converted from an S corporation to a C corporation. Upon conversion to C
corporation status, the Company recorded deferred taxes for which it will be
responsible. If the S corporation had been terminated as of December 31, 1998,
and March 31, 1999, the Company would have recorded a deferred tax asset of
approximately $140,000 and $192,000, respectively, due to various book reserves
and accruals and a deferred tax liability of approximately $246,000 and
$265,000, respectively, due to differences between book and tax depreciation and
due to an accrual for unbilled revenue.
Concurrently with the merger, the Company entered into agreements with the
stockholders to lease office space used in the Company's operations for a
negotiated amount and term.
F-74
<PAGE> 200
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
J.A. Croson Company and Franklin Fire Sprinkler Company:
We have audited the accompanying combined balance sheets of J.A. Croson
Company and Franklin Fire Sprinkler Company (combined, the Company) as of
September 30, 1997 and 1998, and March 31, 1999, and the related combined
statements of operations, cash flows and stockholders' equity for each of the
three years in the period ended September 30, 1998, and for the six months ended
March 31, 1999. These combined financial statements are the responsibility of
the Companies' management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of J.A. Croson
Company and Franklin Fire Sprinkler Company as of September 30, 1997 and 1998,
and March 31, 1999, and the combined results of their operations and their cash
flows for each of the three years in the period ended September 30, 1998, and
for the six months ended March 31, 1999, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
St. Louis, Missouri,
May 14, 1999
F-75
<PAGE> 201
J.A. CROSON COMPANY AND FRANKLIN FIRE SPRINKLER COMPANY
COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------- MARCH 31,
1997 1998 1999
------ ------- ---------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 479 $ 692 $ 379
Accounts receivable --
Contract, net.......................................... 3,148 4,179 4,970
Contract -- related party.............................. 1,761 1,152 1,332
Other.................................................. 90 22 47
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 2,318 2,327 2,951
Inventories............................................... 292 215 247
Prepaid expenses and other current assets................. 15 -- 14
------ ------- -------
Total current assets.............................. 8,103 8,587 9,940
PROPERTY AND EQUIPMENT, net................................. 1,629 1,569 1,567
OTHER ASSETS................................................ 2 -- --
------ ------- -------
Total assets...................................... $9,734 $10,156 $11,507
====== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 20 $ 13 $ --
Current portion of other long-term obligations............ 201 181 186
Notes payable short-term.................................. -- -- 800
Accounts payable and accrued expenses..................... 3,375 2,782 2,940
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 1,217 1,452 1,081
------ ------- -------
Total current liabilities......................... 4,813 4,428 5,007
LONG-TERM DEBT, net of current maturities................... 93 61 64
OTHER LONG-TERM OBLIGATIONS, net of current portion......... 636 570 493
------ ------- -------
Total liabilities................................. 5,542 5,059 5,564
------ ------- -------
STOCKHOLDERS' EQUITY:
Croson common stock, $20 stated value; 750 shares
authorized, issued and outstanding..................... 15 15 15
Franklin common stock, $5 stated value; 750 shares
authorized, 100 issued and outstanding................. 1 1 1
Retained earnings......................................... 4,176 5,081 5,927
------ ------- -------
Total stockholders' equity........................ 4,192 5,097 5,943
------ ------- -------
Total liabilities and stockholders' equity........ $9,734 $10,156 $11,507
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-76
<PAGE> 202
J.A. CROSON COMPANY AND FRANKLIN FIRE SPRINKLER COMPANY
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
--------------------------- ---------------------
1996 1997 1998 1998 1999
------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES................................... $26,185 $27,029 $25,234 $12,330 $17,194
COST OF REVENUES (including depreciation).. 22,305 22,970 20,438 10,500 14,407
------- ------- ------- ------- -------
Gross profit.......................... 3,880 4,059 4,796 1,830 2,787
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES................................. 2,263 2,217 2,032 894 1,232
------- ------- ------- ------- -------
Income from operations................ 1,617 1,842 2,764 936 1,555
------- ------- ------- ------- -------
OTHER INCOME (EXPENSE):
Interest income.......................... 66 49 42 21 20
Interest expense......................... (55) (55) (51) (28) (23)
Other.................................... 15 3 (7) (12) (1)
------- ------- ------- ------- -------
Other income (expense), net........... 26 (3) (16) (19) (4)
------- ------- ------- ------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES... 1,643 1,839 2,748 917 1,551
PROVISION FOR INCOME TAXES................. 23 32 33 19 12
------- ------- ------- ------- -------
NET INCOME................................. $ 1,620 $ 1,807 $ 2,715 $ 898 $ 1,539
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-77
<PAGE> 203
J.A. CROSON COMPANY AND FRANKLIN FIRE SPRINKLER COMPANY
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30 MARCH 31
--------------------------- --------------------
1996 1997 1998 1998 1999
------- ------- ------- ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................... $ 1,620 $ 1,807 $ 2,715 $ 898 $1,539
Adjustments to reconcile net income to net cash
provided by (used in) operating activities --
Depreciation and amortization.................... 310 348 359 144 181
Gain on sale of property and equipment........... (10) (5) (4) (4) --
Changes in operating assets and liabilities --
(Increase) decrease in --
Accounts receivable......................... (509) 8 (354) 655 (996)
Costs and estimated earnings in excess of
billings on uncompleted contracts......... 685 (1,165) (9) 86 (624)
Inventories................................. (37) (69) 77 59 (32)
Prepaid expenses and other current assets... -- (15) 15 (43) (14)
Increase (decrease) in --
Accounts payable and accrued expenses....... 93 101 (593) (580) 158
Billings in excess of costs and estimated
earnings on uncompleted contracts......... (22) (194) 235 309 (371)
Other....................................... 240 -- -- --
------- ------- ------- ------- ------
Net cash provided by operating
activities.............................. 2,370 816 2,441 1,524 (159)
------- ------- ------- ------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment....... 11 13 18 18 --
Acquisitions of property and equipment............. (336) (289) (112) (112) (107)
Other investing activities......................... 13 -- -- -- 800
------- ------- ------- ------- ------
Net cash used in investing activities....... (312) (276) (94) (94) 693
------- ------- ------- ------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt......................... -- (125) (45) (18) (13)
Payments of other long-term obligations............ (142) (162) (279) (131) (141)
Distributions to stockholders...................... (1,323) (1,303) (1,810) (1,166) (693)
------- ------- ------- ------- ------
Net cash used in financing activities....... (1,465) (1,590) (2,134) (1,315) (847)
------- ------- ------- ------- ------
Net increase (decrease) in cash and cash
equivalents............................... 593 (1,050) 213 115 (313)
CASH AND CASH EQUIVALENTS, beginning of period....... 936 1,529 479 479 692
------- ------- ------- ------- ------
CASH AND CASH EQUIVALENTS, end of period............. $ 1,529 $ 479 $ 692 $ 594 $ 379
======= ======= ======= ======= ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for --
Interest......................................... $ 55 $ 55 $ 51 $ 28 $ 21
Income taxes..................................... $ 23 $ 23 $ 25 $ 10 $ 9
Capital lease additions............................ $ 169 $ 187 $ 172 $ 39 $ 52
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-78
<PAGE> 204
J.A. CROSON COMPANY AND FRANKLIN FIRE SPRINKLER COMPANY
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SHARES OF
COMMON COMMON RETAINED
STOCK STOCK EARNINGS TOTAL
--------- ------ -------- -------
<S> <C> <C> <C> <C>
BALANCE, September 30, 1995............................ 1,500 $16 $ 3,375 $ 3,391
Distributions to stockholders........................ -- -- (1,323) (1,323)
Net income........................................... -- -- 1,620 1,620
----- --- ------- -------
BALANCE, September 30, 1996............................ 1,500 16 3,672 3,688
Distributions to stockholders........................ -- -- (1,303) (1,303)
Net income........................................... -- -- 1,807 1,807
----- --- ------- -------
BALANCE AT SEPTEMBER 30, 1997.......................... 1,500 16 4,176 4,192
Distributions to stockholders........................ -- -- (1,810) (1,810)
Net income........................................... -- -- 2,715 2,715
----- --- ------- -------
BALANCE AT SEPTEMBER 30, 1998.......................... 1,500 16 5,081 5,097
Distributions to stockholders........................ -- -- (693) (693)
Net income........................................... -- -- 1,539 1,539
----- --- ------- -------
BALANCE AT MARCH 31, 1999.............................. 1,500 $16 $ 5,927 $ 5,943
===== === ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-79
<PAGE> 205
J.A. CROSON COMPANY AND FRANKLIN FIRE SPRINKLER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
J.A. Croson Company (Croson), an Ohio corporation, provides plumbing and
mechanical contracting services for commercial and industrial entities primarily
in Ohio. Franklin Fire Sprinkler Company (Franklin) provides fire protection
contracting services for commercial and industrial entities throughout Ohio. The
lengths of construction contracts are typically less than one year. Croson and
Franklin are collectively referred to herein as the Company.
The Company and its stockholders intend to enter into a definitive
agreement with American Plumbing & Mechanical, Inc. (AMPAM), pursuant to which
all outstanding shares of the Company's common stock will be exchanged for cash
and shares of AMPAM common stock concurrently with the consummation of the
related financing.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Combination
The accompanying financial statements include the accounts of Croson and
Franklin which are affiliated through common ownership. Intercompany
transactions and balances have been eliminated in combination.
Interim Financial Information
The interim financial statements for the six months ended March 31, 1998,
are unaudited and have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of the Company's
management, the unaudited interim financial statements contain all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Accounts Receivable and Provision for Doubtful Accounts
The Company provides an allowance for doubtful accounts based upon an
estimate of uncollectable balances.
Inventories
Inventories consist of parts and supplies held for use in the ordinary
course of business and are stated at the lower of cost or market using the
first-in, first-out (FIFO) method.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the life
of the lease or the estimated useful life of the asset.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and
F-80
<PAGE> 206
J.A. CROSON COMPANY AND FRANKLIN FIRE SPRINKLER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
depreciated. Upon retirement or disposition of property and equipment, the cost
and related accumulated depreciation are removed from the accounts and any
resulting gain or loss is recognized in the statement of operations.
Revenue Recognition
The Company recognizes revenue when services are performed except when work
is being performed under a construction contract. Revenues from construction
contracts are recognized on the percentage-of-completion method measured by the
percentage of cost incurred to date to total estimated costs for each contract.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor and depreciation
costs. Provisions for the total estimated losses on uncompleted contracts are
made in the period in which such losses are determined. Changes in job
performance, job conditions, estimated profitability and final contract
settlements may result in revisions to costs and income and their effects are
recognized in the period in which the revisions are determined. An amount equal
to contract costs attributable to claims is included in revenues when
realization is probable and the amount can be reliably estimated.
The balances billed but not paid by customers pursuant to retainage
provisions in construction contracts will be due upon completion of the
contracts and acceptance by the customer. Based on the Company's experience with
similar contracts in recent years, the retention balance at each balance sheet
date will be collected within the subsequent fiscal year.
The current asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The current liability, "Billings in excess of costs and estimated
earnings on uncompleted contracts," represents billings in excess of revenues
recognized.
Income Taxes
The Company has elected S Corporation status as defined by the Internal
Revenue Code, whereby the Company itself is not subject to taxation for federal
purposes. Under S Corporation status, the stockholders report their share of the
Company's taxable earnings in their personal tax returns. Consequently, the
accompanying financial statements of the Company do not include a provision for
current or deferred income taxes. Certain municipalities do not recognize the S
Corporation status for purposes of local taxation. The provision for income
taxes in the accompanying statement of operations represents the local tax
provision related to such municipalities. The Company will terminate its S
Corporation status concurrently with the effective date of the merger (see Note
12).
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities,
disclosures of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Realization of Long-Lived Assets
The Company has adopted the provision of Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of." Accordingly, in the event that
facts and circumstances indicate that property and equipment or other assets may
be impaired, an evaluation of recoverability would be performed. If an
evaluation is
F-81
<PAGE> 207
J.A. CROSON COMPANY AND FRANKLIN FIRE SPRINKLER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
required, the estimated future undiscounted cash flows associated with the asset
are compared to the asset's carrying amount to determine if an impairment of
such property is necessary. The effect of any impairment would be to expense the
difference between the fair value of such property and its carrying value.
Adoption of this standard did not have a material effect on the financial
position or results of operations of the Company.
Reclassifications
Certain reclassifications have been made to the prior year financial
statements to conform with the current year presentation.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Contract receivables consists of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30
--------------- MARCH 31,
1997 1998 1999
------ ------ ---------
<S> <C> <C> <C>
Trade..................................................... $2,408 $3,289 $3,693
Billed retentions....................................... 190 133 314
Unbilled retentions..................................... 684 891 1,097
------ ------ ------
3,282 4,313 5,104
Less -- Allowance for doubtful accounts................. (134) (134) (134)
------ ------ ------
Balance at end of year............................... $3,148 $4,179 $4,970
====== ====== ======
</TABLE>
Plumbing installation contracts in progress are as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30
----------------- MARCH 31,
1997 1998 1999
------- ------- ---------
<S> <C> <C> <C>
Costs incurred on contracts in progress................. $33,510 $31,261 $41,005
Estimated earnings, net of losses....................... 3,338 3,666 5,461
------- ------- -------
36,848 34,927 46,466
Less -- Billings to date................................ 35,747 34,052 44,596
------- ------- -------
$ 1,101 $ 875 $ 1,870
======= ======= =======
Costs and estimated earnings in excess of billings on
uncompleted contracts................................. $ 2,318 $ 2,327 $ 2,951
Billings in excess of costs and estimated earnings on
uncompleted contracts................................. (1,217) (1,452) (1,081)
------- ------- -------
$ 1,101 $ 875 $ 1,870
======= ======= =======
</TABLE>
Accounts payable and accrued expenses consist of the following (in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30
--------------- MARCH 31,
1997 1998 1999
------ ------ ---------
<S> <C> <C> <C>
Accounts payable, trade................................... $1,800 $1,935 $2,176
Accrued compensation and benefits......................... 1,236 830 637
Payables to related parties............................... 339 17 1
Other..................................................... -- -- 126
------ ------ ------
Balance at end of year.......................... $3,375 $2,782 $2,940
====== ====== ======
</TABLE>
F-82
<PAGE> 208
J.A. CROSON COMPANY AND FRANKLIN FIRE SPRINKLER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT:
Property and equipment, including capital lease assets, consists of the
following (in thousands):
<TABLE>
<CAPTION>
ESTIMATED
USEFUL SEPTEMBER 30
LIVES IN ----------------- MARCH 31,
YEARS 1997 1998 1999
--------- ------- ------- ---------
<S> <C> <C> <C> <C>
Transportation equipment...................... 5 $ 1,082 $ 1,142 $ 1,193
Machinery and equipment....................... 5 700 868 916
Building and leasehold improvements........... 10-30 1,255 1,143 1,143
Furniture and fixtures........................ 5 243 296 377
------- ------- -------
3,280 3,449 3,629
Less -- Accumulated depreciation and
amortization................................ (1,651) (1,880) (2,062)
------- ------- -------
Property and equipment, net......... $ 1,629 $ 1,569 $ 1,567
======= ======= =======
</TABLE>
5. LINE OF CREDIT AND LONG-TERM DEBT:
The Company has a $1,000,000 line of credit with a bank, bearing interest
at the prime rate (7.75% at March 31, 1999) less .5%. Interest on the
outstanding balance is due monthly. The Company had a $-0-, $-0- and $800,000
outstanding balance on its line of credit as of September 30, 1997 and 1998, and
March 31, 1999, respectively. The line of credit is secured by substantially all
of the Company's inventory, accounts receivable, property and equipment.
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30
------------ MARCH 31,
1997 1998 1999
---- ---- ---------
<S> <C> <C> <C>
Note payable, unsecured, 3-year, $60,000 noninterest
bearing agreement with principal payments due quarterly
in installments of $5,000................................ $ 45 $ -- $--
Note payable, 7-year, $185,000 noninterest bearing term
note (discounted at the Company's incremental borrowing
rate of 8.25% at the date of the note) with principal
payments due in four installments, $85,000 in 1997,
$12,500 in 1999, $12,500 in 2001 and $75,000 in 2003. The
note is secured by certain property...................... 68 74 64
---- ---- ---
Total debt....................................... 113 74 64
Current portion............................................ (20) (13) --
---- ---- ---
Long-term portion................................ $ 93 $ 61 $64
==== ==== ===
</TABLE>
The maturities of long-term debt as of September 30, 1998, are as follows
(in thousands):
<TABLE>
<S> <C>
1999........................................................ $ 13
2000........................................................ --
2001........................................................ 12
2002........................................................ --
2003........................................................ 75
----
$100
====
</TABLE>
F-83
<PAGE> 209
J.A. CROSON COMPANY AND FRANKLIN FIRE SPRINKLER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. LEASES:
Upon the sale of property to its majority stockholder on March 1, 1995, the
Company agreed to lease back the property through February 28, 2005. The sale
leaseback was recorded as a financing transaction and the obligation is recorded
at the present value of future minimum payments of $99,600 per year, discounted
at an interest rate of 9%.
The Company has also entered into various leases for certain equipment for
lease terms through January 2002. Obligations under these capital leases have
been recorded in the accompanying financial statements at the present value of
future minimum lease payments, discounted at the applicable interest rate. The
capitalized cost of $582,831, $755,226 and $806,976, less accumulated
depreciation of $243,717, $373,012 and $443,541, is included in property and
equipment in the accompanying financial statements as of September 30, 1997 and
1998, and March 31, 1999, respectively. Depreciation expense for this equipment
for the years ended September 30, 1996, 1997 and 1998, was $63,608, $91,836 and
$129,295, respectively. Depreciation expense for this equipment for the six
month period ended March 31, 1999, was $70,529.
Future minimum lease payments under the capital leases and the net present
value of the future minimum lease payments as of September 30, 1998, and March
31, 1999, are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1999
----- -----
<S> <C> <C>
1998........................................................ $ 236 $ 174
2000........................................................ 196 175
2001........................................................ 128 123
2002........................................................ 102 100
2003........................................................ 100 100
Thereafter.................................................. 141 141
----- -----
Total future minimum lease payments............... 903 813
Amount representing interest................................ (152) (134)
----- -----
Present value of future minimum lease payments.... 751 679
Less -- Current portion..................................... (181) (186)
----- -----
Noncurrent........................................ $ 570 $ 493
===== =====
</TABLE>
7. RELATED-PARTY TRANSACTIONS:
Croson is a partner in a joint venture with Lincoln T. Mandeville Plumbing
(Mandeville). The joint venture subcontracts all work to Croson and Mandeville
in amounts such that the joint venture reports minimal net income (loss). The
Company periodically receives and advances funds from and to the joint venture.
At September 30, 1997 and 1998, and March 31, 1999, the Company owed the joint
venture $339,386, $17,000 and $1,600, respectively, which is included in
"accounts payables and accrued expenses" in the accompanying balance sheet. The
joint venture owed the Company $1,760,765, $1,152,000 and $1,027,530 at
September 30, 1997 and 1998, and March 31, 1999, for the Company's billings on
contracts performed by the joint venture. The joint venture has receivables from
customers, principally governmental organizations, totaling $909,571, $588,840
and $745,543 as of September 30, 1997 and 1998, and March 31, 1999,
respectively. The Company recorded revenues for work performed for the joint
venture of $1,401,723, $2,172,264 and $3,635,953 for the years ended September
30, 1996, 1997 and 1998, respectively. The Company recorded revenues for work
performed for the joint venture of $1,229,234 for the six month period ended
March 31, 1999. The Company recorded costs of revenues for work performed for
the joint venture totaling $901,021, $1,908,858 and $3,023,871 for the years
ended September 30, 1996,
F-84
<PAGE> 210
J.A. CROSON COMPANY AND FRANKLIN FIRE SPRINKLER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
1997 and 1998, respectively. The Company recorded costs of revenues for work
performed for the joint venture totaling $1,027,870 for the six month period
ended March 31, 1999.
At March 31, 1999, the Company has a receivable balance of $303,973 from
David A. Croson related to an advance for a personal investment, which is
included in contract and other-related party on the accompanying combined
balance sheet. The noninterest bearing receivable is due upon demand.
On March 1, 1995, the Company sold certain property to its majority
stockholder approximately equal to the net book value of the property. The
Company then entered into a lease with the stockholder for the same property
(see Note 6). In 1996, 1997 and 1998, the Company made obligation payments to
its majority stockholder in the amount of $99,600. At September 30, 1997 and
1998, and March 31, 1999, the Company owed the majority stockholder $537,743,
$484,155 and $455,611, respectively, which is included in other long-term
obligations on the accompanying combined balance sheets.
8. EMPLOYEE BENEFIT PLAN:
The Company has a 401(k) and profit-sharing plan which covers full-time
employees who have met age and service requirements. The plan specifies
contributions at the discretion of the Company's management. Expense under the
plan amounted to approximately $208,000, $180,500 and $90,000 for the years
ended September 30, 1996, 1997 and 1998. Expense under the plan amounted to
approximately $26,590 for the six month period ended March 31, 1999. Amounts due
to this plan were approximately $177,000, $1,000 and $1,000 at September 30,
1997 and 1998, and March 31, 1999, respectively.
9. FINANCIAL INSTRUMENTS:
The Company's financial instruments consist of cash and cash equivalents
and debt. The Company's management believes that the carrying value of these
instruments on the accompanying combined balance sheets approximates their fair
value.
10. COMMITMENTS AND CONTINGENCIES:
Litigation
The Company is involved in disputes or legal actions arising in the
ordinary course of business. Management does not believe the outcome of such
legal actions will have a material adverse effect on the Company's financial
position or results of operations.
Insurance
The Company carries a broad range of insurance coverage, including business
auto liability, general liability and an umbrella policy. The Company has not
incurred significant claims or losses on any of these insurance policies.
11. MAJOR CUSTOMERS AND RISK CONCENTRATION:
The Company had revenues of approximately 26.8%, 32.2% and 31.2% of total
revenues to one major customer during the years ended September 30, 1996, 1997
and 1998, respectively. The Company had revenues of approximately 35.8% of total
revenues to one major customer during the six month period ended March 31, 1999.
In general, the Company performs its services under contract terms that
entitle it to progress payments and is, by law, granted a lien interest in the
work until paid. The Company is exposed to potential credit risk related to
changes in business and economic factors within the region. However,
F-85
<PAGE> 211
J.A. CROSON COMPANY AND FRANKLIN FIRE SPRINKLER COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
management believes that its contract acceptance, billing and collection
policies are adequate to minimize the potential credit risk.
12. SUBSEQUENT EVENT:
On April 1, 1999, AMPAM acquired through merger all the stock of the
Company in exchange for cash and stock of AMPAM, after which the Company is a
wholly owned subsidiary of AMPAM.
In connection with the merger, the Company sold or distributed certain
nonoperating assets and attendant liabilities, if any, to the stockholders.
Additionally, the Company made cash distributions which represent the Company's
estimated S Corporation accumulated adjustment account.
As discussed in Note 2, in connection with the merger, the Company
converted from an S Corporation to a C Corporation. Upon conversion to C
Corporation status, the Company recorded deferred taxes for which it will be
responsible. If the S Corporation had been terminated as of September 30, 1998,
the Company would have recorded a deferred tax asset of approximately $99,000
due to differences between book and tax depreciation. If the S Corporation had
been terminated as of March 31, 1999, the Company would have recorded a deferred
tax liability of approximately $133,000 due to differences between book and tax
depreciation.
Concurrently with the merger, the Company entered into agreements with the
stockholders to lease office space used in the Company's operations for a
negotiated amount and term.
F-86
<PAGE> 212
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
J. A. Croson Company of Florida:
We have audited the accompanying balance sheets of J. A. Croson Company of
Florida as of December 31, 1997 and 1998, and March 31, 1999, and the related
statements of operations, cash flows and stockholders' equity for each of the
three years in the period ended December 31, 1998, and for the three months
ended March 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of J. A. Croson Company of
Florida, as of December 31, 1997 and 1998, and March 31, 1999, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1998, and for the three months ended March 31, 1999, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
May 26, 1999
F-87
<PAGE> 213
J. A. CROSON COMPANY OF FLORIDA
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31
1997 1998 1999
------ ------ --------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 19 $ 71 $ 57
Accounts receivable, net.................................. 3,401 4,688 4,994
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 657 1,233 1,140
Inventories............................................... 73 40 2
Prepaid expenses and other current assets................. 399 371 539
------ ------ ------
Total current assets.............................. 4,549 6,403 6,732
PROPERTY AND EQUIPMENT, net................................. 1,293 1,247 996
OTHER LONG-TERM ASSETS...................................... -- 378 --
------ ------ ------
Total assets...................................... $5,842 $8,028 $7,728
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 82 $ -- $ --
Line of credit............................................ 739 337 840
Bank overdraft............................................ 89 -- --
Accounts payable and accrued expenses..................... 994 1,692 1,100
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 1,640 1,724 593
------ ------ ------
Total current liabilities......................... 3,544 3,753 2,533
LONG-TERM DEBT, net of current maturities................... 23 -- --
NOTE PAYABLE TO STOCKHOLDER................................. 434 -- --
------ ------ ------
Total liabilities................................. 4,001 3,753 2,533
------ ------ ------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1 par value, 7,500 shares authorized, 980
shares issued and outstanding.......................... 1 1 1
Additional paid-in capital................................ 650 650 650
Retained earnings......................................... 1,190 3,624 4,544
------ ------ ------
Total stockholders' equity........................ 1,841 4,275 5,195
------ ------ ------
Total liabilities and stockholders' equity........ $5,842 $8,028 $7,728
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-88
<PAGE> 214
J. A. CROSON COMPANY OF FLORIDA
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
--------------------------- --------------------
1996 1997 1998 1998 1999
------- ------- ------- ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES.................................... $11,722 $18,095 $28,142 $6,148 $8,274
COST OF REVENUES (including depreciation)... 9,300 13,916 20,483 4,658 5,482
------- ------- ------- ------ ------
Gross profit........................... 2,422 4,179 7,659 1,490 2,792
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.................................. 1,050 2,213 2,960 718 869
------- ------- ------- ------ ------
Income from operations................. 1,372 1,966 4,699 772 1,923
------- ------- ------- ------ ------
OTHER INCOME (EXPENSE):
Interest income........................... 10 -- -- -- --
Interest expense.......................... (97) (87) (108) (24) (7)
Other..................................... -- (44) -- -- --
------- ------- ------- ------ ------
Other income (expense), net............ (87) (131) (108) (24) (7)
------- ------- ------- ------ ------
NET INCOME.................................. $ 1,285 $ 1,835 $ 4,591 $ 748 $1,916
======= ======= ======= ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-89
<PAGE> 215
J. A. CROSON COMPANY OF FLORIDA
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
--------------------------- ---------------------
1996 1997 1998 1998 1999
------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................... $ 1,285 $ 1,835 $ 4,591 $ 748 $ 1,916
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation.............................. 73 173 182 23 45
Loss on sale of property and equipment.... -- 44 40
Changes in operating assets and
liabilities:
(Increase) decrease in:
Accounts receivable.................. 416 (1,623) (1,287) (641) (306)
Costs and estimated earnings in
excess of billings on uncompleted
contracts.......................... 135 (448) (576) (675) 93
Inventories.......................... 2 (58) 33 71 38
Prepaid expenses and other assets.... (200) (183) (350) (327) 210
Increase (decrease) in:
Bank overdraft....................... -- 89 (89) 682 --
Accounts payable and accrued
expenses........................... 122 309 698 (67) (378)
Billings in excess of costs and
estimated earnings on uncompleted
contracts.......................... 105 951 84 367 (1,131)
------- ------- ------- ----- -------
Net cash provided by operating
activities...................... 1,938 1,089 3,326 181 487
------- ------- ------- ----- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment.......... (165) (992) (352) (108) (8)
Proceeds from the sale of property and
equipment................................. -- -- 176 -- --
------- ------- ------- ----- -------
Net cash used in investing
activities...................... (165) (992) (176) (108) (8)
------- ------- ------- ----- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt................. 250 -- -- -- --
Payments of long-term debt................... (302) (96) (105) (7) --
Net borrowings (payments) on line of
credit.................................... (146) 739 (402) (70) 503
Borrowings from (payments to) stockholder.... (273) -- (434)
Proceeds from issuance of common stock....... 197 325 --
Distribution to stockholders................. (1,065) (1,521) (2,157) -- (996)
------- ------- ------- ----- -------
Net cash used in financing
activities...................... (1,339) (553) (3,098) (77) (493)
------- ------- ------- ----- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.................................. 434 (456) 52 (4) (14)
CASH AND CASH EQUIVALENTS, beginning of
period....................................... 41 475 19 19 71
------- ------- ------- ----- -------
CASH AND CASH EQUIVALENTS, end of period....... $ 475 $ 19 $ 71 $ 15 $ 57
======= ======= ======= ===== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for:
Interest.................................. $ 116 $ 44 $ 108 $ 24 $ 7
======= ======= ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-90
<PAGE> 216
J. A. CROSON COMPANY OF FLORIDA
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995................... 714 $1 $128 $ 656 $ 785
Issuance of Common Stock................... 119 -- 197 -- 197
Distributions to stockholders.............. -- -- -- (1,065) (1,065)
Net income................................. -- -- -- 1,285 1,285
--- -- ---- ------- -------
BALANCE, December 31, 1996................... 833 1 325 876 1,202
Issuance of Common Stock................... 147 -- 325 -- 325
Distributions to stockholders.............. -- -- -- (1,521) (1,521)
Net income................................. -- -- -- 1,835 1,835
--- -- ---- ------- -------
BALANCE, December 31, 1997................... 980 1 650 1,190 1,841
Distributions to stockholders.............. -- -- -- (2,157) (2,157)
Net income................................. -- -- -- 4,591 4,591
--- -- ---- ------- -------
BALANCE, December 31, 1998................... 980 1 650 3,624 4,275
Distributions to stockholders.............. -- -- -- (996) (996)
Net income................................. -- -- -- 1,916 1,916
--- -- ---- ------- -------
BALANCE, March 31, 1999...................... 980 $1 $650 $ 4,544 $ 5,195
=== == ==== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-91
<PAGE> 217
J. A. CROSON COMPANY OF FLORIDA
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
J. A. Croson Company of Florida (the Company), a Florida corporation,
focuses on providing plumbing contractor services primarily for multi-family
housing developers. The Company performs the majority of its contract work under
fixed-price contracts, with contract terms generally less than one year. The
Company performs the majority of its work in Central Florida.
The Company and its stockholders intend to enter into a definitive
agreement with American Plumbing & Mechanical, Inc. (AMPAM), pursuant to which
all outstanding shares of the Company's common stock will be exchanged for cash
and shares of AMPAM common stock concurrently with the consummation of the
related financing.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The interim financial statements for the three months ended March 31, 1998,
are unaudited and have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of the Company's
management, the unaudited interim financial statements contain all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Provision for Doubtful Accounts
The Company provides an allowance for doubtful accounts based upon an
estimate of uncollectable balances.
Inventories
Inventory purchases have historically been charged to jobs when purchased.
Inventories consist of parts and supplies held for use in the ordinary course of
business and are stated at the lower of cost or market using the first-in,
first-out (FIFO) method.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets,
net of any salvage values.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statements of operations.
F-92
<PAGE> 218
J. A. CROSON COMPANY OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
The Company recognizes revenue when services are performed except when work
is being performed under a construction contract. Revenues from construction
contracts are recognized on the percentage-of-completion method measured by the
percentage of cost incurred to date to total estimated costs for each contract.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor and depreciation
costs. Provisions for the total estimated losses on uncompleted contracts are
made in the period in which such losses are determined. Changes in job
performance, job conditions, estimated profitability and final contract
settlements may result in revisions to costs and income and their effects are
recognized in the period in which the revisions are determined. An amount equal
to contract costs attributable to claims is included in revenues when
realization is probable and the amount can be reliably estimated.
The balances billed but not paid by customers pursuant to retainage
provisions in construction contracts will be due upon completion of the
contracts and acceptance by the customer. Based on the Company's experience with
similar contracts in recent years, the retention balance at each balance sheet
date will be collected within the subsequent fiscal year.
The current asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The current liability, "Billings in excess of costs and estimated
earnings on uncompleted contracts," represents billings in excess of revenues
recognized.
Warranty Costs
For most contracts, the Company warrants labor and materials for one year
after completion of the job.
Income Taxes
The Company has elected S corporation status, as defined by the Internal
Revenue Code, whereby the Company itself is not subject to taxation for federal
purposes. Under S corporation status, the stockholders report their shares of
the Company's taxable earnings or losses in their personal tax returns.
Consequently, the accompanying financial statements of the Company do not
include a provision for current or deferred federal taxes. The Company
terminated its S corporation status concurrently with the effective date (April
1, 1999) of the merger discussed in Note 13.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities,
disclosures of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Realization of Long-Lived Assets
The Company has adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
Accordingly, in the event that facts and circumstances indicate that property
and equipment or other assets may be impaired, an evaluation of recoverability
would be performed. If an evaluation is required, the estimated future
undiscounted cash flows associated with the asset are compared to the asset's
carrying amount to determine if an impairment of such property is necessary. The
effect of any impairment would be to expense the difference between
F-93
<PAGE> 219
J. A. CROSON COMPANY OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
the fair value of such property and its carrying value. Adoption of this
standard did not have a material effect on the financial position or results of
operations of the Company.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS
Accounts receivables consist of the following at December 31, 1997 and 1998
and March 31, 1999 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 31,
1997 1998 1999
------ ------ ---------
<S> <C> <C> <C>
Billed.................................................. $2,445 $3,422 $3,528
Retainage............................................... 956 1,266 1,507
Allowance for doubtful accounts......................... 0 0 (41)
------ ------ ------
Balance at end of period...................... $3,401 $4,688 $4,994
====== ====== ======
</TABLE>
Plumbing installation contracts in progress are as follows at December 31,
1997 and 1998 and March 31, 1999 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1997 1998 1999
------- ------- ---------
<S> <C> <C> <C>
Costs incurred on contracts in progress............... $ 6,620 $12,031 $11,968
Estimated earnings, net of losses..................... 1,965 3,934 4,234
------- ------- -------
8,585 15,965 16,202
Less: Billings to date................................ 9,568 16,456 15,655
------- ------- -------
$ (983) $ (491) $ 547
======= ======= =======
Costs and estimated earnings in excess of billings on
uncompleted contracts............................... $ 657 $ 1,233 $ 1,140
Billings in excess of costs and estimated earnings on
uncompleted contracts............................... (1,640) (1,724) (593)
------- ------- -------
$ (983) $ (491) $ 547
======= ======= =======
</TABLE>
Accounts payable and accrued expenses consist of the following at December
31, 1997 and 1998 and March 31, 1999 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- MARCH 31,
1997 1998 1999
---- ------ ---------
<S> <C> <C> <C>
Accounts payable, trade.................................. $596 $ 975 $ 848
Accrued compensation and benefits........................ 227 356 187
Other accrued expenses................................... 171 361 65
---- ------ ------
Balance at end of period....................... $994 $1,692 $1,100
==== ====== ======
</TABLE>
F-94
<PAGE> 220
J. A. CROSON COMPANY OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1997 and
1998 and March 31, 1999 (in thousands):
<TABLE>
<CAPTION>
ESTIMATED
USEFUL DECEMBER 31,
LIVES --------------- MARCH 31,
IN YEARS 1997 1998 1999
--------- ------ ------ ---------
<S> <C> <C> <C> <C>
Transportation equipment........................ 5 $ 913 $1,063 $1,066
Machinery and equipment......................... 7 125 150 154
Office and storage trailers..................... 5 96 103 103
Building and improvements....................... 39 390 231 --
Furniture and fixtures.......................... 5 103 175 175
------ ------ ------
1,627 1,722 1,498
Less: accumulated depreciation.................. (334) (475) (502)
------ ------ ------
Property and equipment, net..................... $1,293 $1,247 $ 996
====== ====== ======
</TABLE>
5. LINE OF CREDIT AND LONG-TERM DEBT
Line of Credit
The Company has a $1,500,000 line of credit agreement with a bank to be
drawn upon as needed, with variable interest payable monthly at the bank's prime
rate, as defined, plus 1.25% (9.0% at March 31, 1999). The line is secured by
accounts receivable, inventory, and a personal guarantee by a principal
shareholder of the Company. At December 31, 1997 and 1998 and March 31, 1999,
$739,000, $337,000 and $840,000 was outstanding under the line of credit, which
is due June 1999.
Long-Term Debt
Long-term debt at December 31, 1997 and 1998 and March 31, 1999, consists
of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 31,
1997 1998 1999
----- ----- ---------
<S> <C> <C> <C>
Notes payable to a financial institution, due monthly,
payable in 19 payments of $3,943 including interest at a
rate of 8.66% paid off in 1998............................ $ 26 $ -- $ --
Notes payable to a financial institution, due monthly,
payable in 31 payments of $5,337 including interest at a
rate of 9.55%, paid off in 1998........................... 79 -- --
---- ---- ----
Total debt........................................ 105 -- --
Less: Current maturities of long-term debt................ (82) -- --
---- ---- ----
Total long-term debt.............................. $ 23 $ -- --
==== ==== ====
</TABLE>
6. LEASES
The Company leases certain property and office space from its stockholders
under noncancellable operating leases, expiring in September 2002 and December
2004. Rent expense under these related-party leases were approximately $32,000
for the years ended December 31, 1996 and 1997, $24,000 for the year ended
December 31, 1998 and $13,000 for the three months ended March 31, 1999.
F-95
<PAGE> 221
J. A. CROSON COMPANY OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In May 1998, the Company entered into a noncancellable operating lease with
a third party for property to be utilized as a prefabrication work location,
expiring in May 2001. Rent expense under this lease was approximately $22,000
for the year ended December 31, 1998 and $7,000 for the three months ended March
31, 1999.
In 1997, the Company entered into a lease for a warehouse and office
facility with a third party under a noncancellable operating lease, expiring in
March 2002. Rent expense under this lease was approximately $33,000 and $57,000
for the years ended December 31, 1997, and 1998, respectively and $14,000 for
the these months ended March 31, 1999.
Future minimum lease payments under these noncancelable operating leases
are as follows (in thousands):
<TABLE>
<S> <C>
Year ending December 31:
1999...................................................... $109
2000...................................................... 111
2001...................................................... 91
2002...................................................... 31
----
$342
====
</TABLE>
7. STOCKHOLDERS' EQUITY
The Company is authorized to issue 7,500 shares of common stock. Of this
authorized amount, the Company has issued and outstanding 980 shares at December
31, 1997 and 1998 and March 31, 1999.
The Company has also entered into a Stock Redemption Agreement with a
principal shareholder, agreeing to repurchase all of his stock over a period of
years, with the first redemption date being no earlier than January 1, 1998. The
redemption date shall be determined by the mutual agreement of the stockholder
and the Company before December 31 of the preceding year. The agreement requires
the Company to purchase annually from the stockholder the number of shares equal
to 10% (on a fully diluted basis immediately following the redemption) of the
total number of issued and outstanding shares as of the redemption date. The
purchase price of these shares shall be payable in cash and shall be equal to
10% of the book value of the Company on the redemption date. As of May 26, 1999,
no repurchase has occurred.
8. RELATED-PARTY TRANSACTIONS
The Company leases CERTAIN property and office space from a stockholder
under a noncancelable operating lease (see Note 6). The rent approximates the
fair market value of the property.
The Company had a Subordinated Note Agreement with a stockholder, with a
balance of $434,000 at December 31, 1997. This note was repaid during 1998.
At December 31, 1997 and 1998 and March 31, 1999, the Company had $80,000,
$179,000 and $4,000, respectively, of advances to employees included in current
assets. The 1998 amount includes a balance of $125,000 due from a principal
shareholder of the Company.
During the years ended December 31, 1996 and 1997, the Company purchased
plumbing supplies of $81,000 and $48,000, respectively, from a company
affiliated through common ownership. No such purchases have been made since
January 1, 1998. No amounts were owed to the Company at December 31, 1997 and
1998, or March 31, 1999.
F-96
<PAGE> 222
J. A. CROSON COMPANY OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution profit-sharing plan. The plan
provides for the Company to match 50% of the first $1,200 contributed by each
employee. Total contributions by the Company under the plan were approximately
$11,000, $23,000, and $26,000 for the years ending December 31, 1996, 1997 and
1998, respectively and $14,000 for the three months ended March 31, 1999.
10. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents, a
line of credit, notes payable and debt. The Company believes that the carrying
value of these instruments on the accompanying balance sheets approximates their
fair value.
11. COMMITMENTS AND CONTINGENCIES
Litigation
The Company is involved in disputes or legal actions arising in the
ordinary course of business. Management does not believe the outcome of SUCH
legal actions will have a material adverse effect on the Company's financial
position or results of operations.
Insurance
The Company carries a broad range of insurance coverage, including workers'
compensation, general liability, and an umbrella policy. The Company has not
incurred significant claims or losses on any of these insurance policies.
12. MAJOR CUSTOMERS AND RISK CONCENTRATION
The Company had revenues of approximately 29%, 27% and 24% of total
revenues to three major customers during the years ended December 31, 1996,
1997, and 1998, respectively and 42% during the three months ended March 31,
1999.
In general, the Company performs its services under contract terms that
entitle it to progress payments and is, by law, granted a lien interest in the
work until paid. The Company is exposed to potential credit risk related to
changes in business and economic factors within the region. However, management
believes that its contract acceptance, billing and collection policies are
adequate to minimize the potential credit risk.
The Company's customers are primarily in the construction industry.
Accordingly, the Company is exposed to risks of fluctuations in construction in
the areas which it operates.
13. SUBSEQUENT EVENTS
On April 1, 1999, AMPAM acquired through merger all the stock of the
Company in exchange for cash and stock of AMPAM, after which the Company is a
wholly owned subsidiary of AMPAM.
In connection with the merger, the Company sold or distributed certain
non-operating assets and attendant liabilities, if any, to the stockholders.
Additionally, the Company made cash distributions which represent the Company's
estimated S corporation accumulated adjustments account.
As discussed in Note 2, in connection with the merger, the Company
converted from an S corporation to a C corporation. Upon conversion to C
corporation status, the Company recorded deferred taxes for which it will be
responsible. If the S corporation had been terminated as of December 31, 1998,
the Company would have recorded a deferred tax asset of approximately $30,000
due to differences between
F-97
<PAGE> 223
J. A. CROSON COMPANY OF FLORIDA
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
book and tax depreciation. If the S corporation had been terminated as of March
31, 1999, the Company would have recorded a deferred tax asset of approximately
$15,600 due to bad debt allowance and a deferred tax liability of approximately
$7,500 due to the difference between book and tax depreciation.
Concurrently with the merger, the Company entered into agreements with the
stockholders to lease land and buildings used in the Company's operations for a
negotiated amount and term.
F-98
<PAGE> 224
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Power Plumbing, Inc.:
We have audited the accompanying consolidated balance sheets of Power
Plumbing, Inc., and subsidiaries as of December 31, 1997 and 1998, and March 31,
1999, and the related consolidated statements of operations, cash flows and
stockholders' equity for the years ended December 31, 1997 and 1998, and for the
three months ended March 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Power Plumbing, Inc., and
subsidiaries as of December 31, 1997 and 1998, and March 31, 1999, and the
results of their operations and their cash flows for the years ended December
31, 1997 and 1998, and for the three months ended March 31, 1999, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
May 21, 1999
F-99
<PAGE> 225
POWER PLUMBING, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
---------------- MARCH 31,
1997 1998 1999
------ ------ ---------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 696 $1,807 $3,083
Accounts receivable --
Contract, net.......................................... 2,918 3,961 3,748
Other.................................................. 219 266 264
Notes receivable -- stockholders.......................... -- -- 396
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 181 79 239
Prepaid expenses and other current assets................. 3 17 19
------ ------ ------
Total current assets.............................. 4,017 6,130 7,749
PROPERTY AND EQUIPMENT, net................................. 441 414 79
OTHER ASSETS................................................ 129 74 --
------ ------ ------
Total assets...................................... $4,587 $6,618 $7,828
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 5 $ 6 $ --
Accounts payable and accrued expenses..................... 910 963 1,829
Billings in excess of cost and estimated earnings on
uncompleted contracts.................................. 692 2,123 1,799
Deferred tax liability, current........................... 613 215 167
------ ------ ------
Total current liabilities......................... 2,220 3,307 3,795
LONG-TERM DEBT, net of current maturities................... 71 65 --
OTHER LONG-TERM LIABILITIES................................. 20 2 --
DEFERRED INCOME TAXES....................................... 7 4 6
------ ------ ------
Total liabilities................................. 2,318 3,378 3,801
------ ------ ------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 1,200 shares authorized, 1,125
shares issued and outstanding.......................... 1 1 1
Retained earnings......................................... 2,268 3,239 4,026
------ ------ ------
Total stockholders' equity........................ 2,269 3,240 4,027
------ ------ ------
Total liabilities and stockholders' equity........ $4,587 $6,618 $7,828
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-100
<PAGE> 226
POWER PLUMBING, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31 MARCH 31
-------------------- --------------------
1997 1998 1998 1999
------- ------- ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES........................................... $17,010 $17,109 $3,501 $5,620
COST OF REVENUES (Including depreciation).......... 14,680 14,371 3,174 4,022
------- ------- ------ ------
Gross profit.................................. 2,330 2,738 327 1,598
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES....... 1,128 1,268 217 346
------- ------- ------ ------
Income from operations........................ 1,202 1,470 110 1,252
------- ------- ------ ------
OTHER INCOME (EXPENSE):
Interest income.................................. 20 33 5 22
Interest expense................................. -- (3) (3) (3)
Other............................................ 84 83 13 4
------- ------- ------ ------
Other income (expense), net................... 104 113 15 23
------- ------- ------ ------
INCOME BEFORE PROVISION FOR INCOME TAXES........... 1,306 1,583 125 1,275
PROVISION FOR INCOME TAXES......................... 498 612 50 488
------- ------- ------ ------
NET INCOME......................................... $ 808 $ 971 $ 75 $ 787
======= ======= ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-101
<PAGE> 227
POWER PLUMBING, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31 MARCH 31
--------------- --------------------
1997 1998 1998 1999
----- ------- ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $ 808 $ 971 $ 75 $ 787
Adjustments to reconcile net income to net cash
provided by (used in) operating activities --
Depreciation...................................... 35 37 6 7
Loss (gain) on sale of property and equipment..... 2 (3) -- --
Deferred income taxes............................. 266 (401) (247) (46)
Changes in operating assets and liabilities --
(Increase) decrease in --
Accounts receivable.......................... (734) (1,090) (342) 215
Costs and estimated earnings in excess of
billings on uncompleted contracts.......... (46) 102 68 (160)
Prepaid expenses and other current assets.... 8 (14) (22) (2)
Other noncurrent assets...................... -- 55 -- --
Increase (decrease) in --
Accounts payable and accrued expenses........ (159) 53 126 878
Billings in excess of costs and estimated
earnings on uncompleted contracts.......... (266) 1,431 183 (324)
Other liabilities............................ (18) (18) (5) (2)
----- ------- ----- ------
Net cash provided by (used in) operating
activities.............................. (104) 1,123 (158) 1,353
----- ------- ----- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment......... 7 3 -- 12
Additions of property and equipment.................. (24) (10) -- (36)
Investment transactions, net......................... 11 -- 54 (53)
----- ------- ----- ------
Net cash used in investing activities...... (6) (7) 54 (77)
----- ------- ----- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt........................... (89) (5) (1) --
----- ------- ----- ------
Net cash used in financing activities...... (89) (5) (1) --
----- ------- ----- ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS... (199) 1,111 (105) 1,276
CASH AND CASH EQUIVALENTS, beginning of period......... 895 696 696 1,807
----- ------- ----- ------
CASH AND CASH EQUIVALENTS, end of period............... $ 696 $ 1,807 $ 591 $3,083
===== ======= ===== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for --
Interest.......................................... $ -- $ 3 $ 3 $ 3
Income taxes...................................... 294 666 175 310
Non-cash transactions --
Note receivable received for sale of
partnership..................................... -- -- -- 396
Net book value of partnership sold................ -- -- -- (344)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-102
<PAGE> 228
POWER PLUMBING, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1996............................. 1,125 $1 $1,460 $1,461
Net income........................................... -- -- 808 808
----- -- ------ ------
BALANCE, December 31, 1997............................. 1,125 1 2,268 2,269
Net income........................................... -- -- 971 971
----- -- ------ ------
BALANCE, December 31, 1998............................. 1,125 1 3,239 3,240
----- -- ------ ------
Net income........................................... -- -- 787 787
----- -- ------ ------
BALANCE, March 31, 1999................................ 1,125 $1 $4,026 $4,027
===== == ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-103
<PAGE> 229
POWER PLUMBING, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Power Plumbing, Inc., a Delaware corporation, and its subsidiaries (the
Company) focus on providing plumbing construction services primarily for
multifamily residential buildings. The Company performs the majority of its
contract work under fixed-price contracts, with contract terms generally ranging
from six to 18 months. The Company performs the majority of its work in Texas.
On April 1, 1999, American Plumbing & Mechanical, Inc. (AMPAM) acquired
through merger all the stock of the Company in exchange for cash and stock of
AMPAM, after which the Company is a wholly owned subsidiary of AMPAM. In
connection with the merger, the Company sold or distributed certain nonoperating
assets and attendant liabilities, if any, to the stockholders.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The financial statements through December 31, 1998 include the accounts and
results of operations of the Company, its wholly owned subsidiary, Power
Plumbing Personnel, Inc., and an affiliated company, Bingle Partners, Ltd. (see
Note 8), which is under common control and management. Effective January 1,
1999, the Company sold its interest in Bingle Partners, Ltd. to the stockholders
of the Company; therefore the financial statements for periods presented
subsequent to December 31, 1998 include only the accounts and results of
operations of the Company and its wholly owned subsidiary, Power Plumbing
Personnel, Inc. All significant intercompany transactions and balances have been
eliminated in consolidation.
Interim Financial Information
The interim financial statements for the three months ended March 31, 1998,
are unaudited and have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of the Company's
management, the unaudited interim financial statements contain all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation. The results of operations for the interim period are not
necessarily indicative of the results for the entire fiscal year.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts based upon an
estimate of uncollectable balances.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the life
lease or the estimated useful life of the asset (see Note 4).
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated over the
remaining useful life. Upon retirement or disposition of property and equipment,
the
F-104
<PAGE> 230
POWER PLUMBING, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
cost and related accumulated depreciation are removed from the accounts and any
resulting gain or loss is recognized in accompanying consolidated statements of
operations.
Revenue Recognition
The Company recognizes revenue when services are performed except when work
is being performed under a construction contract. Revenues from construction
contracts are recognized on the percentage-of-completion method measured by the
percentage of cost incurred to date to total estimated costs for each contract.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor and depreciation
costs. Provisions for the total estimated losses on uncompleted contracts are
made in the period in which such losses are determined. Changes in job
performance, job conditions, estimated profitability and final contract
settlements may result in revisions to costs and income and their effects are
recognized in the period in which the revisions are determined.
The balances billed but not paid by customers pursuant to retainage
provisions in construction contracts will be due upon completion of the
contracts and acceptance by the customer. Based on the Company's experience with
similar contracts in recent years, the Company anticipates that the retention
balance at each balance sheet date will be collected within the subsequent
fiscal year.
The current asset "Costs and estimated earnings in excess of billing on
uncompleted contracts" represents revenues recognized in excess of amounts
billed. The current liability "Billings in excess of costs and estimated
earnings on uncompleted contracts" represents billings in excess of revenues
recognized.
Warranty Costs
The Company warrants labor and materials for the first year after
completion of plumbing construction. A reserve for warranty costs is recorded
based upon the historical level of warranty claims and management's estimate of
future costs.
Income Taxes
The Company, which is a C Corporation, follows the liability method of
accounting for income taxes in accordance with Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." Under this method,
deferred assets and liabilities are recorded for future tax consequences of
temporary differences between the financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rules and laws that will
be in effect when the underlying assets or liabilities are recovered or settled.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities,
disclosures of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Realization of Long-Lived Assets
The Company has adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
Accordingly, in the event that facts and circumstances indicate that property
and equipment or other assets may be impaired, an evaluation of recoverability
would be performed. If an evaluation is required, the estimated future
undiscounted cash
F-105
<PAGE> 231
POWER PLUMBING, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
flows associated with the asset are compared to the asset's carrying amount to
determine if an impairment of such property is necessary. The effect of any
impairment would be to expense the difference between the fair value of such
property and its carrying value. The adoption of this standard did not have a
material effect on the financial position or results of operations of the
Company.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Contract receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------- MARCH 31,
1997 1998 1999
------ ------ ---------
<S> <C> <C> <C>
Billed.................................................... $1,418 $2,031 $1,971
Retainage................................................. 1,525 1,967 1,880
Allowance for uncollectible accounts...................... (25) (37) (103)
------ ------ ------
Balance at end of year.......................... $2,918 $3,961 $3,748
====== ====== ======
</TABLE>
Plumbing installation contracts in progress are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------- MARCH 31,
1997 1998 1999
-------- -------- ---------
<S> <C> <C> <C>
Costs incurred on contracts in progress.............. $ 10,472 $ 9,110 $ 11,347
Estimated earnings, net of losses.................... 1,766 1,974 3,050
-------- -------- --------
12,238 11,084 14,397
Less -- Billings to date............................. (12,749) (13,128) (15,957)
-------- -------- --------
$ (511) $ (2,044) $ (1,560)
======== ======== ========
Costs and estimated earnings in excess of billings on
uncompleted contracts.............................. $ 181 $ 79 $ 239
Billings in excess of costs and estimated earnings on
uncompleted contracts.............................. (692) (2,123) (1,799)
-------- -------- --------
$ (511) $ (2,044) $ (1,560)
======== ======== ========
</TABLE>
Accounts payable and accrued expenses consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
----------- MARCH 31,
1997 1998 1999
---- ---- ---------
<S> <C> <C> <C>
Accounts payable, trade..................................... $669 $553 $1,089
Accrued compensation and benefits........................... 33 40 82
Retainage payable........................................... 49 58 76
Other accrued expenses...................................... 134 115 151
Income taxes payable........................................ 25 197 431
---- ---- ------
Balance at end of year............................ $910 $963 $1,829
==== ==== ======
</TABLE>
F-106
<PAGE> 232
POWER PLUMBING, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31
USEFUL LIVES ------------ MARCH 31,
IN YEARS 1997 1998 1999
------------ ---- ----- ---------
<S> <C> <C> <C> <C>
Transportation.................................. 5 $ 94 $ 76 $ 78
Machinery and equipment......................... 7 78 76 82
Land and building............................... 30 363 377 --
Furniture and fixtures.......................... 5-7 3 1 5
---- ----- ----
538 530 165
Less -- Accumulated depreciation................ (97) (116) (86)
---- ----- ----
Property and equipment, net........... $441 $ 414 $ 79
==== ===== ====
</TABLE>
5. LINE OF CREDIT AND LONG-TERM DEBT:
The Company has a $150,000 revolving line of credit with a bank which is
due on demand or, if no demand, expires May 1, 1999, and bears interest at 0.5
percent above the bank's base lending rate. At December 31, 1997 and 1998 and
March 31, 1999, no balance was outstanding under this line of credit. This line
of credit is collateralized by the Company's accounts receivable and equipment
as well as insurance on its president and a personal unlimited guarantee from
the president. The line of credit was cancelled subsequent to March 31, 1999.
Long-term debt at December 31, 1998, consisted of a note payable with a
balance of approximately $71,000 to a bank for the purchase of property by
Bingle Partners, Ltd. The note was included in the Company's sale of its
interest in Bingle Partners, Ltd. interest; therefore, the Company has no
long-term debt at March 31, 1999.
6. LEASES:
During 1998, the Company leased two vehicles for stockholders, which expire
in April 2001 and September 2001. Expense for the vehicle leases was $4,980,
$11,113 and $12,490 for the years ended December 31, 1997 and 1998 and the three
months ended March 31, 1999, respectively.
The Company has an agreement with Bingle Partners, Ltd., that as of January
1, 1999 was owned by stockholders of the Company, to lease office space at a
rate that, in management's opinion, approximated market. The lease expires
August 31, 2003. Expense for the lease was $7,950 for the three months ended
March 31, 1999. Future minimum lease payments under these noncancelable
operating leases are as follows (in thousands):
<TABLE>
<S> <C>
Year ending December 31 --
1999...................................................... $ 46
2000...................................................... 46
2001...................................................... 39
2002...................................................... 32
2003...................................................... 21
----
$184
====
</TABLE>
F-107
<PAGE> 233
POWER PLUMBING, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES:
Federal and state income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------ MARCH 31,
1997 1998 1999
---- ----- ---------
<S> <C> <C> <C>
Federal --
Current................................................... $242 $ 887 $470
Deferred.................................................. 197 (348) (40)
State --
Current................................................... 26 126 63
Deferred.................................................. 33 (53) (5)
---- ----- ----
$498 $ 612 $488
==== ===== ====
</TABLE>
Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate rate of 35 percent to income
before provision for income taxes as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
----------- MARCH 31,
1997 1998 1999
---- ---- ---------
<S> <C> <C> <C>
Provision at the statutory rate............................. $457 $554 $446
Increase resulting from --
State income tax, net of benefit for federal deduction.... 38 47 38
Permanent differences, primarily meals and
entertainment.......................................... 3 11 4
---- ---- ----
$498 $612 $488
==== ==== ====
</TABLE>
Deferred income tax provisions result from temporary differences in the
recognition of income and expenses for financial reporting purposes and tax
purposes. The tax effects of these temporary differences, representing deferred
tax assets and liabilities result principally from the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------- MARCH 31,
1997 1998 1999
----- ----- ---------
<S> <C> <C> <C>
Deferred income tax assets --
Investment in partnership................................ $ 15 $ 15 $ 15
Minimum tax credit....................................... 49 -- --
----- ----- -----
Total deferred income tax asset.................. 64 15 15
----- ----- -----
Deferred income tax liabilities --
Property and equipment................................... (7) (11) (12)
Deferred contract revenue................................ (656) (252) (237)
Allowance for doubtful accounts.......................... (8) 15 41
Accrued expenses......................................... (13) 17 23
Other.................................................... -- (3) (3)
----- ----- -----
Total deferred income tax liability.............. (684) (234) (188)
----- ----- -----
Net deferred income tax liability................ $(620) $(219) $(173)
===== ===== =====
</TABLE>
F-108
<PAGE> 234
POWER PLUMBING, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The net deferred tax assets and liabilities are comprised of the following
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------- MARCH 31,
1997 1998 1999
----- ----- ---------
<S> <C> <C> <C>
Deferred tax assets --
Current................................................ $ 64 $ 15 $ 15
Long-term.............................................. -- -- --
----- ----- -----
Total.......................................... 64 15 15
----- ----- -----
Deferred tax liabilities --
Current................................................ (677) (230) (182)
Long-term.............................................. (7) (4) (6)
----- ----- -----
Total.......................................... (684) (234) (188)
----- ----- -----
Net deferred income tax liability.............. $(620) $(219) $(173)
===== ===== =====
</TABLE>
8. RELATED-PARTY TRANSACTIONS:
In December 1996, the Company purchased a 97 percent limited partnership
interest in Bingle Partners, Ltd., from a former stockholder for $300,000. A
stockholder owns a majority interest in the company that is the 3 percent
general partner in Bingle Partners, Ltd. On January 1, 1999, the Company sold
its interest in Bingle Partners, Ltd., to the stockholders of the Company in
exchange for promissory notes from each stockholder. The notes receivable had a
balance of approximately $396,000 at March 31, 1999. Subsequent to March 31,
1999, the Company collected the full amount of the receivable. The Company
leases office space from Bingle Partners, Ltd. (see Note 6).
In June 1998, the Company entered into a financing arrangement with ICM,
Inc., whereby the Company began purchasing materials for and selling them to
ICM, Inc., at a nominal markup. One of the Company's stockholders (the ICM
Stockholder) has a majority ownership in ICM Notes, Ltd., a company that also
provides financing to ICM, Inc. ICM Notes, Ltd., and ICM, Inc., do not have
common ownership. The ICM Stockholder has an informal agreement with the other
stockholders of the Company which provides that any losses incurred as a result
of the financing arrangement between the Company and ICM, Inc., will be funded
by the ICM Stockholder. As a result of this arrangement, approximately $200,000
of accounts receivable was included as other accounts receivable in the
accompanying balance sheets at December 31, 1998 and March 31, 1999. At the end
of 1998, ICM, Inc., ceased operations, and, subsequent to March 31, 1999, the
Company collected such receivable from the ICM Stockholder.
In June 1998, the Company guaranteed certain long-term obligations of four
employees. The long-term obligations consist of four notes payable to Northwest
Bank, N.A., for the purchase of vehicles. The notes are secured by the vehicles.
9. EMPLOYEE BENEFIT PLAN:
The Company has a defined contribution profit-sharing plan. The plan
provides for discretionary contributions by the Company as determined by the
stockholders. Total contributions by the Company under the plan were
approximately $14,216 and $14,690 for the years ended December 31, 1997 and
1998, respectively. No contributions were made by the Company under the plan for
the three months ended March 31, 1999. Such contributions are included in
accounts payable and accrued expenses in the accompanying consolidated balance
sheets at December 31, 1997 and 1998.
F-109
<PAGE> 235
POWER PLUMBING, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. FINANCIAL INSTRUMENTS:
The Company's financial instruments consist of cash and cash equivalents, a
line of credit and debt. The Company believes that the carrying values of these
instruments on the accompanying consolidated balance sheets approximate their
fair value.
11. COMMITMENTS AND CONTINGENCIES:
Litigation
The Company is involved in disputes or legal actions arising in the
ordinary course of business. Management does not believe the outcome of such
legal actions will have a material adverse effect on the Company's financial
position or results of operations.
Insurance
The Company carries a broad range of insurance coverage, including business
auto liability, general liability and an umbrella policy. The Company has not
incurred significant claims or losses on any of these insurance policies.
12. MAJOR CUSTOMERS AND RISK CONCENTRATION:
During the years ended December 31, 1997 and 1998 and the three months
ended March 31, 1999, three customers accounted for more than 10 percent of
total revenues. Sales to these companies were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 THREE MONTHS
-------------------------------- ENDED MARCH 31,
1997 1998 1999
-------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Customer A....................... $2,552 15.0% $2,204 12.9% $804 14.3%
Customer B....................... 2,548 15.0 1,982 11.6 716 12.7
Customer C....................... 1,983 11.7 1,761 10.3 625 11.1
</TABLE>
During the year ended December 31, 1997, three vendors accounted for more
than 10 percent of the Company's total materials purchases, and for the year
ended December 31, 1998 and the three months ended March 31, 1999, two vendors
accounted for more than 10 percent. Materials purchases from these vendors were
as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 THREE MONTHS
-------------------------------- ENDED MARCH 31,
1997 1998 1999
-------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Vendor A....................... $3,092 36.6% $3,180 39.3% $1,272 58.2%
Vendor B....................... 1,532 18.1 2,222 27.5 717 32.8
Vendor C....................... 1,411 16.7 -- -- -- --
</TABLE>
Management believes that the materials are readily available in the
marketplace at prices which approximate those paid to the above vendors.
In general, the Company performs its services under contract terms that
entitle it to progress payments and is, by law, granted a lien interest in the
work until paid. The Company is exposed to potential credit risk related to
changes in business and economic factors in Texas. However, management believes
that its contract acceptance, billing and collection policies are adequate to
minimize the potential credit risk.
The Company's customers are primarily in the construction industry.
Accordingly, the Company is exposed to risks of fluctuations in construction in
the areas which it operates.
F-110
<PAGE> 236
POWER PLUMBING, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. SUBSEQUENT EVENT
On April 1, 1999, AMPAM acquired through merger all the stock of the
Company in exchange for cash and stock of AMPAM, after which the Company is a
wholly owned subsidiary of AMPAM.
In connection with the merger, the Company sold or distributed certain
nonoperating assets and attendant liabilities, if any, to the stockholders.
Concurrently with the merger, the Company entered into agreements with the
stockholders to lease office space used in the Company's operations for a
negotiated amount and term.
F-111
<PAGE> 237
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Nelson Mechanical Contractors, Inc.:
We have audited the accompanying balance sheets of Nelson Mechanical
Contractors, Inc. as of April 30, 1998, and March 31, 1999, and the related
statements of operations, cash flows, and stockholders' equity for the years
ended April 30, 1997 and 1998, and for the eleven months ended March 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nelson Mechanical
Contractors, Inc. as of April 30, 1998, and March 31, 1999, and the results of
its operations and its cash flows for the years ended April 30, 1997 and 1998,
and for the eleven months ended March 31, 1999, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
June 1, 1999
F-112
<PAGE> 238
NELSON MECHANICAL CONTRACTORS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
ASSETS
<TABLE>
<CAPTION>
APRIL 30, MARCH 31,
1998 1999
---------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 683 $ 601
Accounts receivable:
Contract............................................... 1,477 2,034
Other.................................................. 238 123
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 1,445 1,055
Inventories............................................... 581 400
Prepaid expenses and other current assets................. 155 613
Current portion of notes receivable....................... 25 --
Loans to stockholders..................................... 170 --
------ ------
Total current assets.............................. 4,774 4,826
LONG-TERM NOTES RECEIVABLE.................................. 85 --
PROPERTY AND EQUIPMENT, net................................. 1,630 1,018
OTHER ASSETS................................................ 530 --
------ ------
Total assets...................................... $7,019 $5,844
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable, accrued expenses, and other............. $1,349 $ 308
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 127 205
Loans from stockholders................................... 99 4,788
Income taxes payable...................................... -- --
------ ------
Total liabilities................................. 1,575 5,301
------ ------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $10 par value; 200 shares authorized, 50
shares issued and outstanding.......................... 1 1
Additional paid-in capital................................ 1,088 1,088
Retained earnings (deficit)............................... 4,355 (546)
------ ------
Total stockholders' equity........................ 5,444 543
------ ------
Total liabilities and stockholders' equity........ $7,019 $5,844
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-113
<PAGE> 239
NELSON MECHANICAL CONTRACTORS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30 ELEVEN MONTHS ENDED
------------------- MARCH 31,
1997 1998 1999
-------- -------- -------------------
<S> <C> <C> <C>
REVENUES............................................... $12,507 $14,240 $14,039
COST OF REVENUES (including depreciation).............. 9,110 9,641 9,349
------- ------- -------
Gross profit...................................... 3,397 4,599 4,690
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES.......... 2,408 2,458 1,914
------- ------- -------
Income from operations............................ 989 2,141 2,776
------- ------- -------
OTHER INCOME (EXPENSE):
Interest income...................................... 54 48 51
Interest expense..................................... (11) (20) (134)
Other................................................ 45 50 416
------- ------- -------
Other income (expense), net....................... 88 78 333
------- ------- -------
NET INCOME............................................. $ 1,077 $ 2,219 $ 3,109
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-114
<PAGE> 240
NELSON MECHANICAL CONTRACTORS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30 ELEVEN MONTHS ENDED
------------------- MARCH 31,
1997 1998 1999
------- ------- -------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $ 1,077 $ 2,219 $ 3,109
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization....................... 396 382 336
Gain on sale of property and equipment.............. (23) (5) (414)
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable............................ (26) 44 (425)
Costs and estimated earnings in excess of
billings on uncompleted contracts............ 14 (1,144) 390
Inventories.................................... (66) (66) 180
Prepaid expenses and other current assets...... (8) 3 81
Increase (decrease) in:
Accounts payable, accrued expenses, and
other........................................ (14) 179 (1,042)
Billings in excess of costs and estimated
earnings on uncompleted contracts............ 50 (32) 78
Other, net....................................... -- (57) --
------- ------- -------
Net cash provided by operating activities...... 1,400 1,523 2,293
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment.......... 48 24 1,052
Additions of property and equipment................... (427) (725) (361)
Collections on notes receivable....................... 4 7 85
Additions to notes receivable......................... -- (30) --
Collections on loans to stockholders.................. 159 212 262
Additions to loans to stockholders.................... (227) (172) (92)
------- ------- -------
Net cash provided by (used in) investing
activities................................... (443) (684) 946
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of short-term debt......................... 300 250 500
Payments of short-term debt........................... (300) (250) (500)
Proceeds from loans from stockholders................. 420 587 7,162
Payments on loans from stockholders................... (594) (505) (2,473)
Distributions to stockholders......................... (859) (1,046) (8,010)
------- ------- -------
Net cash used in financing activities.......... (1,033) (964) (3,321)
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.... (76) (125) (82)
CASH AND CASH EQUIVALENTS, beginning of period.......... 884 808 683
------- ------- -------
CASH AND CASH EQUIVALENTS, end of period................ $ 808 $ 683 $ 601
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest............................................ $ 11 $ 20 $ 134
======= ======= =======
Income taxes........................................ $ -- $ -- $ --
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-115
<PAGE> 241
NELSON MECHANICAL CONTRACTORS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, April 30, 1996...................... 50 $ 1 $1,088 $ 2,964 $ 4,053
Distributions to stockholders.............. -- -- -- (859) (859)
Net income................................. -- -- -- 1,077 1,077
--- ---- ------ ------- -------
BALANCE, April 30, 1997...................... 50 1 1,088 3,182 4,271
Distributions to stockholders.............. -- -- -- (1,046) (1,046)
Net income................................. -- -- -- 2,219 2,219
--- ---- ------ ------- -------
BALANCE, April 30, 1998...................... 50 1 1,088 4,355 5,444
Distributions to stockholders.............. -- -- -- (8,010) (8,010)
Net income................................. -- -- -- 3,109 3,109
--- ---- ------ ------- -------
BALANCE, March 31, 1999...................... 50 $ 1 $1,088 $ (546) $ 543
=== ==== ====== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-116
<PAGE> 242
NELSON MECHANICAL CONTRACTORS, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
Nelson Mechanical Contractors, Inc., (the "Company"), a Florida
corporation, focuses on providing plumbing and utility services primarily for
general contractors, developers, local governmental agencies, and private
institutions. The Company performs the majority of its contract work under
fixed-price contracts, with contract terms generally ranging from two months to
two years. The Company performs the majority of its work in the southeast United
States.
The Company and its stockholders intend to enter into a definitive
agreement with American Plumbing & Mechanical, Inc. (AMPAM), pursuant to which
all outstanding shares of the Company's common stock will be exchanged for cash,
notes and shares of AMPAM common stock concurrently with the consummation of the
related financing.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company recognizes revenue when services are performed except when work
is being performed under a construction contract. Revenues from construction
contracts are recognized using the percentage-of-completion method, measured by
the percentage of cost incurred to date to total estimated costs for each
contract. Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor and
depreciation costs. Provisions for the total estimated losses on uncompleted
contracts are made in the period in which such losses are determined. Changes in
job performance, job conditions, estimated profitability, and final contract
settlements may result in revisions to costs and income, and their effects are
recognized in the period in which the revisions are determined. An amount equal
to contract costs attributable to claims is included in revenues when
realization is probable and the amount can be reliably estimated.
The balances billed but not paid by customers pursuant to retainage
provisions in construction contracts will be due upon completion of the
contracts and acceptance by the customer. Based on the Company's experience with
similar contracts in recent years, the retention balance at each balance sheet
date will be collected within the subsequent fiscal year. Customer retainage is
included in accounts receivable from construction contracts in the accompanying
balance sheets.
The current asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The current liability, "Billings in excess of costs and estimated
earnings on uncompleted contracts," represents billings in excess of revenues
recognized.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. As noted in
Note 5, cash and cash equivalents include $222,000 and $233,000 of restricted
cash at April 30, 1998, and March 31, 1999, respectively.
Accounts Receivable and Provision for Doubtful Accounts
The Company provides an allowance for doubtful accounts based on its
historical collection experience with its plumbing and utility services
customers. Management believes that an allowance for doubtful accounts is not
necessary, based on the status of contracts and their review of accounts.
F-117
<PAGE> 243
NELSON MECHANICAL CONTRACTORS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Inventories
Inventories consist of parts and supplies held for use in the ordinary
course of business and are stated at the lower of cost or market using the
first-in, first-out (FIFO) method.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the life
of the lease or the estimated useful life of the asset.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statements of operations.
Warranty Costs
For most contracts, the Company warrants labor and materials for one year
after completion of the job. A reserve for warranty costs is recorded based on
the historical level of warranty claims and management's estimate of future
costs.
Income Taxes
The Company has elected S corporation status, as defined by the Internal
Revenue Code, whereby the Company itself is not subject to taxation for federal
purposes. Under S corporation status, the stockholders report their shares of
the Company's taxable earnings or losses in their personal tax returns. The
Company will continue to be liable for income tax currently due to states that
do not recognize S corporation status. At April 30, 1998, and March 31, 1999,
there were no material income taxes due to such states.
An S corporation is permitted under the Revenue Act of 1987 to retain its
fiscal year, rather than adopting the calendar year, for tax purposes. However,
an annual payment approximating the income tax that would be paid on
short-period income if there had been a switch to a calendar year must be paid.
This tax deposit is reported as "other assets" in the accompanying financial
statements, is adjusted annually and amounts to $530,024 at April 30, 1998, and
March 31, 1999. The tax deposit is realized when the entity switches to a
calendar year, liquidates, terminates its S status or is considered not to have
any deferred taxable income. The Company terminated its S corporation status on
April 1, 1999, which is the effective date of the merger discussed in Note 11.
At April 30, 1998, and March 31, 1999, the Company had available for state
income tax purposes net operating loss carryforwards of approximately $550,000
which expire through 2011.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities,
disclosures of contingent liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-118
<PAGE> 244
NELSON MECHANICAL CONTRACTORS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Realization of Long-Lived Assets
The Company has adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." Accordingly, in the event that
facts and circumstances indicate that property and equipment or other assets may
be impaired, an evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted cash flows associated
with the asset are compared to the asset's carrying amount to determine whether
an impairment of such property is necessary. The effect of any impairment would
be to expense the difference between the fair value of such property and its
carrying value. Adoption of this standard did not have a material effect on the
financial position or results of operations of the Company.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS
Contract receivables consist of the following at April 30, 1998, and March
31, 1999 (in thousands):
<TABLE>
<CAPTION>
1998 1999
------ ------
<S> <C> <C>
Billed...................................................... $1,083 $1,385
Retainage................................................... 394 649
------ ------
Balance at end of period.................................... $1,477 $2,034
====== ======
</TABLE>
Plumbing installation contracts in progress are as follows at April 30,
1998, and March 31, 1999 (in thousands):
<TABLE>
<CAPTION>
1998 1999
------ -------
<S> <C> <C>
Costs incurred on contracts in progress..................... $3,445 $ 5,711
Estimated earnings, net of losses........................... 5,279 8,051
------ -------
8,724 13,762
Less billings to date....................................... 7,406 12,912
------ -------
$1,318 $ 850
====== =======
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... $$1,445 $ 1,055
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... (127) (205)
------ -------
$1,318 $ 850
====== =======
</TABLE>
Accounts payable and accrued expenses consist of the following at April 30,
1998, and March 31, 1999 (in thousands):
<TABLE>
<CAPTION>
1998 1999
------ ------
<S> <C> <C>
Accounts payable, trade..................................... $ 726 $ 216
Accrued compensation and benefits........................... 154 --
Insurance payable........................................... 442 42
Other accrued expenses...................................... 27 50
------ ------
Balance at end of period.................................... $1,349 $ 308
====== ======
</TABLE>
F-119
<PAGE> 245
NELSON MECHANICAL CONTRACTORS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at April 30, 1998, and
March 31, 1999 (in thousands):
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
IN YEARS 1998 1999
------------ ------- -------
<S> <C> <C> <C>
Land.................................................. $ 323 $ --
Transportation equipment.............................. 5.0 1,529 1,332
Machinery and equipment............................... 5.0 2,974 2,715
Computer and telephone equipment...................... 5.0 97 110
Building and leasehold improvements................... 31.5 114 --
Furniture and fixtures................................ 7.0 21 39
------- -------
5,058 4,196
Less accumulated depreciation and amortization........ (3,428) (3,178)
------- -------
Property and equipment, net........................... $ 1,630 $ 1,018
======= =======
</TABLE>
5. REVOLVING LINE OF CREDIT, LETTER OF CREDIT, AND DEBT
The Company has a $500,000 revolving line of credit with a financial
institution, secured by all owned equipment. The line of credit matures on
January 8, 2000, with the outstanding balance being due at this time. The line
of credit bears interest at the prime rate, which was 7.75% at March 31, 1999,
and is paid quarterly on the outstanding balance during the period. At April 30,
1998, and March 31, 1999, the Company did not have an outstanding balance on the
line of credit. The line of credit was terminated subsequent to March 31, 1999.
The Company has a $250,000 letter of credit with a financial institution,
secured by assignment of a certificate of deposit in the amount of $222,000 and
$233,000 at April 30, 1998, and March 31, 1999, respectively. The letter of
credit was reduced to $150,000 subsequent to March 31, 1999.
The Company occasionally borrows from its stockholders, as discussed in
Note 7. These notes are payable on demand and bear interest at 7%. At April 30,
1998, and March 31, 1999, the outstanding balance on loans from its stockholders
was $99,000 and $4,788,000, respectively.
The Company does not have any long-term debt instruments.
6. LEASES
The Company leases office space from a stockholder on a month-to-month
basis (Note 7). Rent expense for each of the years ended April 30, 1997 and
1998, and the eleven months ended March 31, 1999, was $45,000, $45,000 and
$41,000, respectively.
On occasion, the Company leases apartment space for extended jobs outside
of the southeast United States and certain office equipment under operating
leases from third parties. Rent expense under operating leases for the years
ended April 30, 1997 and 1998, and the eleven months ended March 31, 1999, was
$33,000, $42,000 and $51,000, respectively.
F-120
<PAGE> 246
NELSON MECHANICAL CONTRACTORS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under the noncancelable operating lease are
as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
APRIL 30,
-----------
<S> <C>
1999........................................................ $ 7
2000........................................................ 54
2001........................................................ 46
2002........................................................ 48
2003........................................................ 49
Thereafter.................................................. 47
----
$251
====
</TABLE>
7. RELATED-PARTY TRANSACTIONS
The Company occasionally loans money to its stockholders, which is payable
on demand. The loans bear interest at the applicable federal rate (5.51% at
April 30, 1998). There were no such loans at March 31, 1999.
The Company occasionally borrows money from its stockholders, which is
payable on demand. The loans bear interest at 7%.
The Company rents certain real property from its majority stockholder on a
month-to-month basis (see Note 6). Management believes the rent paid
approximates the fair market value of the property.
The Company loaned $90,000 to a stockholder under an installment agreement
on April 1, 1996. The note bears interest at 7% and is payable in monthly
installations of $809, including interest through April 2011. Current maturities
of the loan at April 30, 1998, was $4,000. The loan was paid in full on
September 30, 1998.
8. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
notes receivable and notes payable. The Company believes that the carrying value
of these instruments on the accompanying balance sheets approximates their fair
value.
9. COMMITMENTS AND CONTINGENCIES
Litigation
The Company is involved in disputes or legal actions arising in the
ordinary course of business. Management does not believe that the outcome of
such legal actions will have a material adverse effect on the Company's
financial position or results of operations.
Insurance
The Company carries a broad range of insurance coverage, including business
auto liability, general liability, and an umbrella policy. The Company has not
incurred significant claims or losses on any of these insurance policies.
10. MAJOR CUSTOMERS AND RISK CONCENTRATION
The Company had sales of approximately 17.8 percent and 11.5 percent of
total sales to one major customer during the year ended April 30, 1997. The
Company had sales of approximately 23.0 percent and
F-121
<PAGE> 247
NELSON MECHANICAL CONTRACTORS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
33.3 percent of total sales to another major customer during the year ended
April 30, 1998, and the eleven months ended March 31, 1999, respectively.
In general, the Company performs its services under contract terms that
entitle it to progress payments, and the Company is, by law, granted a lien
interest in the work until paid. The Company is exposed to potential credit risk
related to changes in business and economic factors within the market. However,
management believes that its contract acceptance, billing, and collection
policies are adequate to minimize the potential credit risk.
The Company's customers are primarily in the construction industry.
Accordingly, the Company is exposed to risks of fluctuations in construction in
the areas which it operates.
11. SUBSEQUENT EVENTS
On April 1, 1999, AMPAM acquired through merger all the stock of the
Company in exchange for cash, notes and stock of AMPAM, after which the Company
is a wholly owned subsidiary of AMPAM.
In connection with the merger, the Company sold or distributed certain
non-operating assets and attendant liabilities, if any, to the stockholders.
Additionally, the Company made cash distributions which represent the Company's
estimated S Corporation accumulated adjustment account.
As discussed in Note 2, in connection with the merger, the Company
converted from an S corporation to a C corporation. Upon conversion to C
corporation status, the Company recorded deferred taxes for which it will be
responsible. If the S corporation had been terminated as of April 30, 1998, the
Company would have recorded a deferred tax asset of approximately $4,500 due to
bad debt allowance and a deferred tax liability of approximately $47,000 due to
differences between book and tax depreciation.
Concurrently with the merger, the Company entered into agreements with the
stockholder(s) to lease land and buildings used in the Company's operations for
a negotiated amount and term.
F-122
<PAGE> 248
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Sherwood Mechanical, Inc.:
We have audited the accompanying balance sheets of Sherwood Mechanical,
Inc. (a California corporation), as of September 30, 1997 and 1998, and the
related statements of operations, cash flows and stockholder's equity for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sherwood Mechanical, Inc. as
of September 30, 1997 and 1998 and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
March 10, 1999
F-123
<PAGE> 249
SHERWOOD MECHANICAL, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------- MARCH 31,
1997 1998 1999
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 49 $ 98 $ 11
Contracts receivable, net................................. 1,954 3,024 2,467
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 471 903 825
Inventories............................................... 143 272 274
Prepaid expenses and other current assets................. 8 21 --
Due from stockholder...................................... 63 83 455
Land held for sale........................................ -- 554 --
------ ------ ------
Total current assets.............................. 2,688 4,955 4,032
LAND UNDER DEVELOPMENT...................................... 528 -- --
PROPERTY AND EQUIPMENT, net................................. 364 387 439
DEFERRED INCOME TAXES....................................... 216 30 --
OTHER ASSETS................................................ 10 7 13
------ ------ ------
Total assets...................................... $3,806 $5,379 $4,484
====== ====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Lines of credit........................................... $ 645 $ 972 $ 750
Current maturities of long-term debt...................... 293 258 64
Accounts payable and accrued expenses..................... 763 2,137 1,595
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 389 78 229
Income taxes payable...................................... 19 156 78
Deferred income taxes..................................... 505 369 160
------ ------ ------
Total current liabilities......................... 2,614 3,970 2,876
LONG-TERM DEBT, net of current maturities................... 107 52 98
DEFERRED INCOME TAXES....................................... -- -- 157
------ ------ ------
Total liabilities................................. 2,721 4,022 3,131
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, no par value 1,000 shares authorized, issued
and outstanding........................................ 26 26 26
Capital contribution...................................... -- 258 258
Retained earnings......................................... 1,059 1,073 1,069
------ ------ ------
Total stockholder's equity........................ 1,085 1,357 1,353
------ ------ ------
Total liabilities and stockholder's equity........ $3,806 $5,379 $4,484
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-124
<PAGE> 250
SHERWOOD MECHANICAL, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, MARCH 31,
----------------- --------------------
1997 1998 1998 1999
------- ------- ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES............................................. $11,482 $13,556 $6,607 $7,690
COST OF REVENUES (including depreciation)............ 9,867 11,066 5,372 6,446
------- ------- ------ ------
Gross profit.................................... 1,615 2,490 1,235 1,244
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES......... 1,505 2,189 850 1,198
------- ------- ------ ------
Income from operations.......................... 110 301 385 46
------- ------- ------ ------
OTHER INCOME (EXPENSE):
Interest expense................................... (53) (83) (40) (51)
Other.............................................. 18 3 -- 1
------- ------- ------ ------
Other income (expense), net..................... (35) (80) (40) (50)
------- ------- ------ ------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES...... 75 221 345 (4)
PROVISION FOR INCOME TAXES........................... 40 207 148 --
------- ------- ------ ------
NET INCOME (LOSS).................................... $ 35 $ 14 $ 197 $ (4)
======= ======= ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-125
<PAGE> 251
SHERWOOD MECHANICAL, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, MARCH 31,
--------------- -------------
1997 1998 1998 1999
----- ------- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................ $ 35 $ 14 $ 197 (4)
Adjustments to reconcile net income to net cash provided
by (used in) operating activities --
Depreciation.......................................... 80 107 47 65
Deferred income taxes................................. 22 50 (4) (22)
Changes in operating assets and liabilities:
(Increase) decrease in --
Contracts receivable............................. 349 (1,070) (594) 557
Costs and estimated earnings in excess of
billings on uncompleted contracts.............. (25) (432) (297) 78
Inventories...................................... (36) (129) (23) (2)
Prepaid expenses and other assets................ 6 (10) (51) 15
Increase (decrease) in --
Accounts payable and accrued expenses............ (250) 1,632 886 (542)
Billings in excess of costs and estimated
earnings on uncompleted contracts.............. 178 (311) (61) 151
Income taxes payable............................. 19 137 (22) (78)
----- ------- ----- -----
Net cash provided by (used in) operating
activities..................................... 378 (12) 78 218
----- ------- ----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Development of land, capitalized costs................... (108) (26) (19) 554
Additions of property and equipment...................... (146) (120) (74) (117)
----- ------- ----- -----
Net cash provided by (used in) investing
activities..................................... (254) (146) (93) 437
----- ------- ----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in bank overdraft............................... -- -- 153 --
Advances to shareholder.................................. (63) (29) -- (372)
Payments of borrowings from stockholder.................. (20) 9 -- --
Payments of long-term debt............................... (63) (100) (34) (148)
Proceeds on borrowings of long-term debt................. 19 -- -- --
Borrowings on lines of credit, net....................... (47) 327 (153) (222)
----- ------- ----- -----
Net cash provided by (used in) financing
activities..................................... (174) 207 (34) (742)
----- ------- ----- -----
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....... (50) 49 (49) (87)
CASH AND CASH EQUIVALENTS, beginning of period............. 99 49 49 98
----- ------- ----- -----
CASH AND CASH EQUIVALENTS, end of period................... $ 49 $ 98 $ -- 11
===== ======= ===== =====
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for --
Interest.............................................. $ 55 $ 82 $ 12 46
===== ======= ===== =====
Income taxes.......................................... $ -- $ 1 $ -- 100
===== ======= ===== =====
Non cash investing and financing activities --
Property and equipment acquired by incurring notes
payable............................................. $ 121 $ 10 $ -- --
===== ======= ===== =====
Liabilities assumed by the sole shareholder of the
Company............................................. $ -- $ 258 $ -- --
===== ======= ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-126
<PAGE> 252
SHERWOOD MECHANICAL, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK
--------------- CAPITAL RETAINED STOCKHOLDER'S
SHARES AMOUNT CONTRIBUTIONS EARNINGS EQUITY
------ ------ ------------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, September 30, 1996................ 1,000 $26 $ -- $1,024 $1,050
Net income............................... -- -- -- 35 35
----- --- ---- ------ ------
BALANCE, September 30, 1997................ 1,000 26 -- 1,059 1,085
Capital contribution..................... -- -- 258 -- 258
Net income............................... -- -- -- 14 14
----- --- ---- ------ ------
BALANCE, September 30, 1998................ 1,000 26 258 1,073 1,357
Net loss (Unaudited)..................... -- -- -- (4) (4)
----- --- ---- ------ ------
BALANCE, March 31, 1999 (Unaudited)........ 1,000 $26 $258 $1,069 $1,353
===== === ==== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-127
<PAGE> 253
SHERWOOD MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION:
Sherwood Mechanical, Inc., a California corporation (the Company), focuses
on installation of plumbing, mechanical, and site utilities for commercial and
industrial construction projects. The Company performs the majority of its
contract work under fixed price contracts with contract terms generally ranging
from 12 to 24 months. The Company performs the majority of its work in
California, Arizona and Nevada.
The Company and its stockholder intend to enter into a definitive agreement
with American Plumbing & Mechanical, Inc. (AMPAM), pursuant to which all
outstanding shares of the Company's common stock will be exchanged for cash,
notes and shares of AMPAM common stock concurrently with the consummation of the
related financing.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Interim Financial Information
The interim financial statements as of March 31, 1999 and for the six
months ended March 31, 1998 and 1999, are unaudited and have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of the Company's management, the unaudited interim financial
statements contain all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts based upon an
estimate of uncollectable balances.
Inventories
Inventories consist of parts and supplies held for use in the ordinary
course of business and are stated at the lower of cost or market using the
first-in, first-out (FIFO) method.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the life
of the lease or the estimated useful life of the asset.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statements of operations.
F-128
<PAGE> 254
SHERWOOD MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
The Company recognizes revenues when services are performed, except when
work is being performed under a construction contract. Revenues from
construction contracts are recognized on the percentage-of-completion method
measured by the percentage of cost incurred to date to total estimated costs for
each contract. Contract costs include all direct material and labor costs and
those indirect costs related to contract performance, such as indirect labor and
depreciation costs. Provisions for the total estimated losses on uncompleted
contracts are made in the period in which such losses are determined. Changes in
job performance, job conditions, estimated profitability and final contract
settlements may result in revisions to costs and income and their effects are
recognized in the period in which the revisions are determined. An amount equal
to contract costs attributable to claims is included in revenues when
realization is probable and the amount can be reliably estimated.
The balances billed but not paid by customers pursuant to retainage
provisions in construction contracts will be due upon completion of the
contracts and acceptance by the customer. Based on the Company's experience with
similar contracts in recent years, the retention balance at each balance sheet
date will be collected within the subsequent fiscal year.
The current asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The current liability, "Billings in excess of costs and estimated
earnings on uncompleted contracts," represents billings in excess of revenues
recognized under the percentage of completion.
Warranty Costs
The Company warrants labor for generally one year after construction is
complete. A reserve for warranty costs is recorded based upon the historical
level of warranty claims and management's estimate of future costs, which are
not expected to be material.
Income Taxes
The Company, which is a C Corporation, follows the liability method of
accounting for income taxes in accordance with Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes. Under this method,
deferred assets and liabilities are recorded for future tax consequences of
temporary differences between the financial reporting and tax bases of assets
and liabilities, and are measured using the enacted tax rates and laws that will
be in effect when the underlying assets or liabilities are recovered or settled.
Historically, the Company used the completed-contract method of reporting for
income tax purposes, under which all contract revenues and expenses are
recognized in the accounting period in which the contract is completed. The
Company changed to the percentage of completion method for income tax purposes
for the year beginning October 1, 1997.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities,
disclosures of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Realization of Long-Lived Assets
The Company has adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
Accordingly, in the event that facts and
F-129
<PAGE> 255
SHERWOOD MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
circumstances indicate that property and equipment or other assets may be
impaired, an evaluation of recoverability would be performed. If an evaluation
is required, the estimated future undiscounted cash flows associated with the
asset are compared to the asset's carrying amount to determine if an impairment
of such property is necessary. The effect of any impairment would be to expense
the difference between the fair value of such property and its carrying value.
Adoption of this standard did not have a material effect on the financial
position or results of operations of the Company.
(3) DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Contract receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------
1997 1998
------ ------
<S> <C> <C>
Billed...................................................... $1,470 $2,487
Claims...................................................... 118 118
Retainage................................................... 391 444
Allowance for doubtful accounts............................. (25) (25)
------ ------
Balance at end of period.......................... $1,954 $3,024
====== ======
</TABLE>
Contracts in progress are as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1997 1998
------- -------
<S> <C> <C>
Costs incurred on contracts in progress..................... $11,403 $ 8,500
Estimated earnings, net of losses........................... 2,251 2,152
------- -------
13,654 10,652
Less -- billings to date.................................... 13,572 9,827
------- -------
$ 82 $ 825
======= =======
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... $ 471 $ 903
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... (389) (78)
------- -------
$ 82 $ 825
======= =======
</TABLE>
Accounts payable and accrued expenses consist of the following (in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------
1997 1998
---- ------
<S> <C> <C>
Accounts payable, trade..................................... $498 $1,832
Accrued compensation and benefits........................... 195 236
Other accrued expenses...................................... 70 69
---- ------
Balance at end of period............................... $763 $2,137
==== ======
</TABLE>
F-130
<PAGE> 256
SHERWOOD MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(4) PROPERTY AND EQUIPMENT:
Property and equipment consist of the following (in thousands, except year
information):
<TABLE>
<CAPTION>
ESTIMATED SEPTEMBER 30,
USEFUL LIVES ---------------
IN YEARS 1997 1998
------------ ------ ------
<S> <C> <C> <C>
Transportation equipment................................ 3-5 $ 498 $ 515
Machinery and equipment................................. 3-7 396 379
Leasehold improvements.................................. 7-10 211 233
Office furniture and equipment.......................... 5-7 123 180
------ ------
1,228 1,307
Less -- accumulated depreciation........................ 864 920
------ ------
Property and equipment, net................... $ 364 $ 387
====== ======
</TABLE>
(5) LAND HELD FOR SALE AND LAND UNDER DEVELOPMENT:
The Company purchased land in April 1992 with plans to subdivide and resell
it at a future date. Included in the net book value is capitalized interest of
approximately $5,000 and $8,000 at September 30, 1997 and 1998, respectively.
The land is carried at the lower of cost or net realizable value.
In March 1999, the sole stockholder of the Company acquired the land for
carrying value and assumed the related outstanding debt.
(6) LINES OF CREDIT AND LONG-TERM DEBT:
The Company has two lines of credit with a bank with $750,000 and $250,000
of available credit. The lines of credit expire May 1999 and bear interest at
9.5% to 9.25%. The lines of credit are collateralized by the Company's assets
and are personally guaranteed by the sole stockholder. Aggregate borrowings
outstanding at September 30, 1997 and 1998 were approximately $645,000 and
$972,000, respectively.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------
1997 1998
----- -----
(IN THOUSANDS)
<S> <C> <C>
Note payable, due in monthly installments of $944 including
interest at 7.75% to 13.4% through March 2000,
collateralized by equipment and vehicle with a net book
value of $22,608 and $15,215 at September 30, 1997 and
1998, respectively........................................ $ 21 $ 11
Notes payable, due in monthly installments of $385 including
interest at 4.9% through June 1999. Notes are
collateralized by vehicles with a net book value of
$21,710 and $11,977 at September 30, 1997 and 1998,
respectively.............................................. 15 3
Notes payable, due in monthly installments of $2,774 at
interest rates ranging from 8.5% to 9.25%, maturity dates
ranging from December 1999 to March 2001. Notes are
collateralized by vehicles with a net book value of
$97,433 and $76,347 at September 30, 1997 and 1998,
respectively.............................................. 84 58
Note payable, due in monthly installments of $1,268,
including interest at 9.2%, through October 1998,
collateralized by equipment with a net book value of
$23,882 and $15,922 at September 30, 1997 and 1998,
respectively.............................................. 16 1
</TABLE>
F-131
<PAGE> 257
SHERWOOD MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------
1997 1998
----- -----
(IN THOUSANDS)
<S> <C> <C>
Note payable, due in monthly installments of $1,561
including interest at 6.9%, through August 2000,
collateralized by equipment with a net book value of
$48,953 and $38,825 at September 30, 1997 and 1998,
respectively.............................................. 49 34
Note payable, due in monthly installments of $331, including
interest at 9.77%, through February 2001, collateralized
by equipment with a net book value of $9,345 at September
30, 1998.................................................. -- 8
Note payable, balance due in July 1999. Collateralized by
land with a book value of $528,000 and $554,000 at
September 30, 1997 and 1998, respectively. (Also see Note
5.)....................................................... 215 195
----- -----
Total debt.................................................. 400 310
Less -- current maturities.................................. (293) (258)
----- -----
Total long-term debt........................................ $ 107 $ 52
===== =====
</TABLE>
The maturities of long-term debt are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30,
- -------------
<S> <C> <C>
1999........................................................... $258
2000........................................................... 47
2001........................................................... 5
----
$310
====
</TABLE>
(7) LEASES:
The Company leases a building under an operating lease agreement with the
sole stockholder. The rent paid under this related party lease was approximately
$78,000 and $97,000 for the year ended September 30, 1997 and 1998,
respectively. The lease expires in May 2003.
Future minimum lease payments under noncancelable operating leases are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30,
- -------------
<S> <C> <C>
1999................................................................ $126
2000................................................................ 129
2001................................................................ 133
2002................................................................ 137
2003................................................................ 129
----
$654
====
</TABLE>
F-132
<PAGE> 258
SHERWOOD MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(8) INCOME TAXES:
Federal and state income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------
1997 1998
----- -----
<S> <C> <C>
Federal --
Current................................................... $ 13 $106
Deferred.................................................. 18 43
State --
Current................................................... 6 51
Deferred.................................................. 3 7
---- ----
$ 40 $207
==== ====
</TABLE>
At September 30, 1997 and 1998, actual income tax expense differs from
income tax expense computed by applying the U.S. federal statutory corporate
rate of 35% and 34%, respectively, to income before provision for income taxes
as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------
1997 1998
----- -----
<S> <C> <C>
Provision at the statutory rate............................. $ 26 $ 75
Increase resulting from --
Permanent differences, primarily meals and
entertainment......................................... 9 7
Benefit of lower marginal tax rates.................... (1) --
State income tax, net of benefit for federal
deduction............................................. 6 40
Non deductible expense................................. -- 85
---- ----
$ 40 $207
==== ====
</TABLE>
The Company had federal and state alternative minimum tax credits of
$48,000 available to offset future regular tax at September 30, 1997, and no
credits available at September 30, 1998.
Deferred income taxes result from temporary differences in the recognition
of income and expenses for financial reporting purposes and for tax purposes.
The tax effects of these temporary differences, representing deferred tax assets
and liabilities, result principally from the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------
1997 1998
----- -----
<S> <C> <C>
Deferred income tax assets --
Allowance for bad debts................................... $ 10 $ 10
Reserves and accrued expenses............................. 27 30
Property and equipment.................................... 49 30
Alternative minimum tax credit............................ 48 --
Net operating loss........................................ 119 --
----- -----
Total deferred income tax asset................... 253 70
----- -----
Deferred income tax liabilities --
Deferred contract revenue................................. (522) (409)
Accrued expenses.......................................... (20) --
----- -----
Total deferred income tax liability............... (542) (409)
----- -----
Net deferred income tax liability................. $(289) $(339)
===== =====
</TABLE>
F-133
<PAGE> 259
SHERWOOD MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The net deferred tax assets and liabilities are comprised of the following
(in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------
1997 1998
----- -----
<S> <C> <C>
Deferred tax assets --
Current................................................... $ 37 $ 40
Long-term................................................. 216 30
----- -----
Total............................................. 253 70
----- -----
Deferred tax liabilities --
Current................................................... (542) (409)
Long-term................................................. -- --
----- -----
Total............................................. (542) (409)
----- -----
Net deferred income tax liability................. $(289) $(339)
===== =====
</TABLE>
(9) RELATED-PARTY TRANSACTIONS:
The Company entered into a construction contract with a partnership in
which the partners are executive officers and a stockholder of the Company. The
total contract receivable balance as of September 30, 1997 and 1998 was
approximately $302,000 and $88,000, respectively. The Company recorded
construction revenue and gross margin for this contract of approximately
$457,000 and $23,000 for 1997, and approximately $475,000 and $(112,000) for
1998, respectively.
(10) EMPLOYEE BENEFIT PLAN:
The Company has a defined contribution profit-sharing plan. The plan
provides for the Company to match an unspecified percent contributed by each
employee at the discretion of the Board of Director. Total cash contributions by
the Company under the plan were approximately $68,000 and $100,000 for the year
ended September 30, 1997 and 1998, respectively. Vesting is 100% at date of
contribution for employee contributions and employer contributions generally
vest over a period of one to six years.
(11) FINANCIAL INSTRUMENTS:
The Company's financial instruments consist of cash and cash equivalents,
contracts receivable, accounts payable, lines of credit, notes payable and
long-term debt. The Company believes that the carrying value of these
instruments on the accompanying balance sheets approximates their fair value.
(12) COMMITMENTS AND CONTINGENCIES:
Litigation
The Company was named as a defendant in an action filed by the trustee of a
union apprenticeship committee in December 1997, alleging the Company violated
the State's prevailing wage law and is seeking damages totaling approximately
$269,000. Related to the same matter, the Division of Labor Standards
Enforcement has sued an unaffiliated third party (Ray Wilson Company) seeking
the wages stated above of $269,000 plus penalties of $293,000. Ray Wilson
Company is seeking indemnification from the Company. The two cases overlap and
the collective potential loss totals $562,000. Subsequent to year end, the sole
stockholder of the Company personally guaranteed any liability to the Company
related to this matter. In March of 1999, the Department of Labor Standards
Enforcement offered a settlement of approximately $400,000. In April 1999, the
sole stockholder of the Company offered a settlement of approximately $270,000.
F-134
<PAGE> 260
SHERWOOD MECHANICAL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company is involved in disputes or legal actions arising in the
ordinary course of business. Management does not believe the outcome of such
legal actions will have a material adverse effect on the Company's financial
position or results of operations.
Insurance
The Company carries a broad range of insurance coverage, including business
auto liability, general liability and an umbrella policy. The Company has not
incurred significant claims or losses on any of these insurance policies.
(13) MAJOR CUSTOMERS AND RISK CONCENTRATION:
The Company had revenue greater than 10 percent of total revenues from
three major customers during the year ended September 30, 1997 and one major
customer during the year ended September 30, 1998, as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998
-------------------- --------------------
PERCENTAGE PERCENTAGE
OF OF
REVENUE REVENUE REVENUE REVENUE
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Customer A..................................... $1,870 16.3% $4,134 30.5%
Customer B..................................... 1,857 16.2 -- --
Customer C..................................... 1,546 13.5 -- --
</TABLE>
For the year ended September 30, 1997, contracts receivable from the three
customers were approximately $133,000, $131,000 and $77,000 for customers A, B
and C, respectively. Contracts receivable at September 30, 1998, from Customer A
was approximately $1,020,000.
In general, the Company performs its services under contract terms that
entitle it to progress payments and is granted a lien interest in the work until
paid. The Company is exposed to potential credit risk related to changes in
business and economic factors within the market. However, management believes
that its contract acceptance, billing and collection policies are adequate to
minimize the potential credit risk.
The Company's customers are primarily in the construction industry.
Accordingly, the Company is exposed to risks of fluctuations in construction in
the areas which it operates.
(14) EVENT SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(UNAUDITED):
On April 1, 1999, AMPAM acquired through merger all the stock of the
Company in exchange for cash, notes and stock of AMPAM, after which the Company
is a wholly owned subsidiary of AMPAM.
In connection with the merger, the Company distributed certain assets to
the shareholder, consisting of land, buildings and automobiles, at carrying
value.
Concurrently with the merger, the Company entered into agreements with the
stockholder to lease land and buildings used in the Company's operations for a
negotiated amount and term.
F-135
<PAGE> 261
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Miller Mechanical Contractors, Inc.:
We have audited the accompanying balance sheets of Miller Mechanical
Contractors, Inc., as of September 30, 1997 and 1998, and as of March 31, 1999,
and the related statements of operations, cash flows and stockholders' equity
for the years ended September 30, 1997 and 1998, and for the six months ended
March 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Miller Mechanical
Contractors, Inc., as of September 30, 1997 and 1998, and as of March 31, 1999,
and the results of its operations and its cash flows for the years ended
September 30, 1997 and 1998, and for the six months ended March 31, 1999, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
May 26, 1999
F-136
<PAGE> 262
MILLER MECHANICAL CONTRACTORS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------- MARCH 31,
1997 1998 1999
------ ------ ---------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $1,040 $1,872 $1,985
Accounts receivable --
Contract............................................... 1,255 1,650 1,284
Other.................................................. 123 86 127
Due from affiliate........................................ 195 8 --
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 55 74 72
Inventories............................................... 481 344 532
Prepaid expenses and other current assets................. 21 11 22
Deferred income taxes..................................... 85 -- --
------ ------ ------
Total current assets.............................. 3,255 4,045 4,022
PROPERTY AND EQUIPMENT, net................................. 297 326 225
OTHER ASSETS................................................ 49 21 --
------ ------ ------
Total assets...................................... $3,601 $4,392 $4,247
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 61 $ 65 $ 26
Note payable -- officer................................... 41 -- --
Accounts payable and accrued expenses..................... 1,222 1,024 772
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 1,072 1,044 866
Income taxes payable...................................... -- 332 120
------ ------ ------
Total current liabilities......................... 2,396 2,465 1,784
LONG-TERM DEBT, net of current maturities................... 61 48 37
DEFERRED INCOME TAXES....................................... -- 10 12
------ ------ ------
Total liabilities................................. 2,457 2,523 1,833
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 100,000 shares authorized,
73,781 shares issued and outstanding................... 74 74 74
Retained earnings......................................... 1,070 1,795 2,340
------ ------ ------
Total stockholders' equity........................ 1,144 1,869 2,414
------ ------ ------
Total liabilities and stockholders' equity........ $3,601 $4,392 $4,247
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-137
<PAGE> 263
MILLER MECHANICAL CONTRACTORS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30 MARCH 31
---------------- --------------------
1997 1998 1998 1999
------ ------- ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES.................................................. $8,042 $11,346 $5,369 $5,158
COST OF REVENUES (Including depreciation)................. 5,806 7,675 3,713 3,346
------ ------- ------ ------
Gross profit......................................... 2,236 3,671 1,656 1,812
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.............. 2,023 2,531 1,224 892
------ ------- ------ ------
Income from operations............................... 213 1,140 432 920
------ ------- ------ ------
OTHER INCOME (EXPENSE):
Interest income......................................... 20 47 22 40
Interest expense........................................ (49) (12) (9) (2)
Other................................................... 9 13 12 25
------ ------- ------ ------
Other income, net.................................... (20) 48 25 63
------ ------- ------ ------
INCOME BEFORE PROVISION FOR INCOME TAXES.................. 193 1,188 457 983
PROVISION FOR INCOME TAXES................................ 56 463 183 438
------ ------- ------ ------
NET INCOME................................................ $ 137 $ 725 $ 274 $ 545
====== ======= ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-138
<PAGE> 264
MILLER MECHANICAL CONTRACTORS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30 MARCH 31
--------------- ---------------------
1997 1998 1998 1999
------ ------ ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $ 137 $ 725 $ 274 $ 545
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation...................................... 108 116 18 81
Loss (gain) on sale of property and equipment..... 2 (12) (11) (25)
Deferred income taxes............................. 8 95 -- 2
Changes in operating assets and liabilities
(Increase) decrease in --
Accounts receivable.......................... (495) (172) 8 333
Costs and estimated earnings in excess of
billings on uncompleted contracts.......... 37 (18) (81) 2
Inventories.................................. 137 137 (22) (188)
Prepaid expenses and other assets............ (6) 10 (32) (11)
Increase (decrease) in --
Accounts payable and accrued expenses........ 127 (197) 170 (253)
Billings in excess of costs and estimated
earnings on uncompleted contracts.......... 642 (28) (245) (178)
Income taxes payable......................... -- 332 232 (212)
Other current liabilities.................... (53) -- -- --
------ ------ ------ ------
Net cash provided by operating
activities.............................. 644 988 311 96
------ ------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment......... 7 14 15 71
Additions to property and equipment.................. (87) (147) (35) (26)
(Increase) decrease in cash value of life
insurance......................................... (10) 28 -- 21
------ ------ ------ ------
Net cash provided by (used in) investing
activities.............................. (90) (105) (20) 66
------ ------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long-term debt......................... -- 68 26 --
Payments of long-term debt........................... (489) (119) (94) (49)
------ ------ ------ ------
Net cash used in financing activities...... (489) (51) (68) (49)
------ ------ ------ ------
NET INCREASE IN CASH AND CASH EQUIVALENTS.............. 65 832 223 113
CASH AND CASH EQUIVALENTS, beginning of period......... 975 1,040 1,040 1,872
------ ------ ------ ------
CASH AND CASH EQUIVALENTS, end of period............... $1,040 $1,872 $1,263 $1,985
====== ====== ====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for --
Interest.......................................... $ 49 $ 12 $ 11 $ 4
Income taxes...................................... 60 28 13 234
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-139
<PAGE> 265
MILLER MECHANICAL CONTRACTORS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
BALANCE, September 30, 1996........................... 73,781 $74 $ 933 $1,007
Net income.......................................... -- -- 137 137
------ --- ------ ------
BALANCE, September 30, 1997........................... 73,781 74 1,070 1,144
Net income.......................................... -- -- 725 725
------ --- ------ ------
BALANCE, September 30, 1998........................... 73,781 74 1,795 1,869
Net income.......................................... -- -- 545 545
------ --- ------ ------
BALANCE, March 31, 1999............................... 73,781 $74 $2,340 $2,414
====== === ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-140
<PAGE> 266
MILLER MECHANICAL CONTRACTORS, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Miller Mechanical Contractors, Inc. (the Company), a Georgia corporation,
is a plumbing subcontractor primarily for extended-stay motels and large upscale
apartment complexes. The Company performs the majority of its contract work
under fixed-price contracts, with contract terms generally ranging from six to
18 months. The Company performs the majority of its work in Georgia, Florida,
North Carolina, South Carolina and Tennessee.
The Company and its stockholders intend to enter into a definitive
agreement with American Plumbing & Mechanical, Inc. (AMPAM), pursuant to which
all outstanding shares of the Company's common stock will be exchanged for cash,
notes and shares of AMPAM common stock concurrently with the consummation the
related financing.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Interim Financial Information
The interim financial statements for the six months ended March 31, 1998,
are unaudited and have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of the Company's
management, the unaudited interim financial statements contain all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Accounts Receivable and Provisions for Doubtful Accounts
The Company provides an allowance for doubtful accounts based upon an
estimate of uncollectable balances. Management believes that an allowance for
doubtful accounts is not necessary, based on the status of contracts and review
of accounts.
Inventories
Inventories consist of parts and supplies held for use in the ordinary
course of business and are stated at the lower of cost or market using the
weighted-average method.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the life
of the lease or the estimated useful life of the assets (see Note 4).
Expenditures for repairs and maintenance are charged to expense when incurred.
Expenditures for major renewals and betterments, which extend the useful lives
of existing equipment, are capitalized and depreciated. Upon retirement or
disposition of property and equipment, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
recognized in the statement of operations.
F-141
<PAGE> 267
MILLER MECHANICAL CONTRACTORS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
The Company recognizes revenue when services are performed, except when
work is being performed under a construction contract. Revenues from
construction contracts are recognized using the percentage-of-completion method
measured by the percentage of cost incurred to date to total estimated costs for
each contract. Contract costs include all direct material and labor costs and
those indirect costs related to contract performance, such as indirect labor and
depreciation costs. Provisions for the total estimated losses on uncompleted
contracts are made in the period in which such losses are determined. Changes in
job performance, job conditions, estimated profitability and final contract
settlements may result in revisions to costs and income, and their effects are
recognized in the period in which the revisions are determined. An amount equal
to contract costs attributable to claims is included in revenues when
realization is probable and the amount can be reliably estimated.
The balances billed but not paid by customers pursuant to retainage
provisions in construction contracts will be due upon completion of the
contracts and acceptance by the customer. Based on the Company's experience with
similar contracts in recent years, the retention balance at each balance sheet
date will be collected within the subsequent fiscal year.
The current asset "Costs and estimated earnings in excess of billings on
uncompleted contracts" represents revenues recognized in excess of amounts
billed. The current liability "Billings in excess of costs and estimated
earnings on uncompleted contracts" represents billings in excess of revenues
recognized.
Income Taxes
The Company, which is a C Corporation, follows the liability method of
accounting for income taxes in accordance with Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." Under this method,
deferred assets and liabilities are recorded for future tax consequences of
temporary differences between the financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rates and laws that will
be in effect when the underlying assets and liabilities are recovered or
settled.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities,
disclosures of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from the estimates.
Realization of Long-Lived Assets
The Company has adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
Accordingly, in the event that facts and circumstances indicate that property
and equipment or other assets may be impaired, an evaluation of recoverability
would be performed. If an evaluation is required, the estimated future
undiscounted cash flows associated with the asset are compared to the asset's
carrying amount to determine whether an impairment of such property is
necessary. The effect of any impairment would be to expense the difference
between the fair value of such property and its carrying value. Adoption of this
standard did not have a material effect on the financial position or results of
operations of the Company.
F-142
<PAGE> 268
MILLER MECHANICAL CONTRACTORS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Contract receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30
---------------- MARCH 31
1997 1998 1999
------ ------ ----------
<S> <C> <C> <C>
Completed contracts.................................... $ 544 $ 30 $ 24
Contracts in progress.................................. 560 1,260 985
Retainage.............................................. 151 360 275
------ ------ ------
Balance at end of period............................. $1,255 $1,650 $1,284
====== ====== ======
</TABLE>
Plumbing installation contracts in progress are as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30
------------------ MARCH 31
1997 1998 1999
------- ------- ----------
<S> <C> <C> <C>
Cost incurred on contracts in progress............... $ 2,735 $ 8,352 $5,097
Estimated earnings, net of losses.................... 1,115 4,096 2,615
------- ------- ------
3,850 12,448 7,712
Less -- Billing to date.............................. 4,867 13,418 8,506
------- ------- ------
$(1,017) $ (970) $ (794)
======= ======= ======
Cost and estimated earnings in excess of billings on
uncompleted contracts.............................. $ 55 $ 74 $ 72
Billing in excess of costs and estimated earnings on
uncompleted contracts.............................. (1,072) (1,044) (866)
------- ------- ------
$(1,017) $ (970) $ (794)
======= ======= ======
</TABLE>
Accounts payable and accrued expenses consist of the following (in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30
---------------- MARCH 31
1997 1998 1999
------ ------ --------
<S> <C> <C> <C>
Accounts payable, trade................................. $ 570 $ 374 $475
Accrued compensation and benefits....................... 391 587 229
Other accrued expenses.................................. 261 63 68
------ ------ ----
Balance at end of period.............................. $1,222 $1,024 $772
====== ====== ====
</TABLE>
4. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
ESTIMATED SEPTEMBER 30
USEFUL LIVES ------------- MARCH 31
IN YEARS 1997 1998 1999
------------ ----- ----- --------
<S> <C> <C> <C> <C>
Vehicles......................................... 5 $434 $472 $400
Machinery and equipment.......................... 5-7 139 218 282
Property under capital lease..................... 5 26 -- --
Leasehold improvements........................... 31.5-39 128 130 35
---- ---- ----
727 820 717
Less -- Accumulated depreciation and
amortization................................... 430 494 492
---- ---- ----
Property and equipment, net............ $297 $326 $225
==== ==== ====
</TABLE>
F-143
<PAGE> 269
MILLER MECHANICAL CONTRACTORS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. LINE OF CREDIT AND LONG-TERM DEBT:
The Company has available a $300,000 line of credit with a bank.
Outstanding borrowings under the line of credit bear interest at the banks prime
rate plus 1 percent. The line of credit is secured by substantially all of the
assets of the Company and is personally guaranteed by the stockholders. At
September 30, 1997 and 1998, and March 31, 1999, no amount was outstanding on
the line of credit. The line of credit included an annual renewal option and was
not renewed during the six months ended March 31, 1999.
The Company has various notes payable with several financial institutions.
These notes have monthly payments ranging from $291 to $872, including interest,
and total $112,570 in the aggregate at September 30, 1998. Interest rates on the
notes vary from 1.9 percent to 10.4 percent and are due from February 1999
through June 2001. All of the notes payable are secured by the respective
vehicles and equipment.
The maturities of long-term debt as of September 30, 1998, are as follows
(in thousands):
<TABLE>
<S> <C>
Year ending September 30 --
1999...................................................... $ 65
2000...................................................... 33
2001...................................................... 15
----
$113
====
</TABLE>
6. LEASES:
The Company leases all of its operating facilities from the majority
stockholder under a lease agreement that expires on September 30, 2005. Monthly
lease payments aggregate $7,500 for the land and buildings through September 30,
2005. Under the agreement, the Company is responsible for all property taxes,
maintenance and insurance on the property. Future minimum lease payments under
the agreement are $90,000 per year through September 30, 2005. Rent expense was
$90,000 for the years ended September 30, 1997 and 1998 and $45,000 for the six
months ended March 31, 1999.
7. INCOME TAXES:
Federal and state income tax provisions are as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
SEPTEMBER 30 ENDED
------------ MARCH 31
1997 1998 1999
---- ----- ----------
<S> <C> <C> <C>
Federal --
Current.................................... $38 $310 $376
Deferred................................... 7 81 2
State --
Current.................................... 10 58 59
Deferred................................... 1 14 1
--- ---- ----
$56 $463 $438
=== ==== ====
</TABLE>
F-144
<PAGE> 270
MILLER MECHANICAL CONTRACTORS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Actual income tax expense differs from income tax expense computed by
applying the U.S. federal statutory corporate rate of 35 percent to income
before provision for income taxes as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
SEPTEMBER 30 ENDED
------------- MARCH 31
1997 1998 1999
----- ----- ----------
<S> <C> <C> <C>
Provisions at the statutory rate............ $ 68 $415 $344
Increase (decrease) resulting from --
State income tax, net of benefit for
federal deduction...................... 7 47 39
Benefit of lower marginal rates........... (16) (4) --
Resolution of prior year uncertainties...... -- -- 53
Other, net................................ (3) 5 2
---- ---- ----
$ 56 $463 $438
==== ==== ====
</TABLE>
Deferred income tax provisions result from temporary differences in the
recognition of income and expenses for financial reporting purposes and for tax
purposes. The tax effects of these temporary differences, representing deferred
tax assets and liabilities, result principally from the following (in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30
------------ MARCH 31
1997 1998 1999
---- ----- --------
<S> <C> <C> <C>
Deferred income tax assets --
Net operating loss carryforward........................... $74 -- --
Accrued related-party interest............................ 11 -- --
--- ---- ----
Total deferred income tax asset................... 85 -- --
--- ---- ----
Deferred income tax liabilities --
Property and equipment.................................... -- $(10) $(12)
--- ---- ----
Total deferred income tax liability............... -- $(10) $(12)
--- ---- ----
Net deferred income tax assets (liabilities)...... $85 $(10) $(12)
=== ==== ====
</TABLE>
8. RELATED-PARTY TRANSACTIONS:
The Company has purchased certain materials and supplies from an affiliate.
The Company also bills certain salaries, insurance and office supplies to the
affiliate. The Company and the affiliate have a common stockholder. For the
years ended September 30, 1997 and 1998 and the six months ended March 31, 1999,
the Company purchased approximately $1,940,000, $3,048,000 and $1,044,000,
respectively, of material and supplies from the affiliate. At September 30, 1997
and 1998 and March 31, 1999, the Company had receivables of $195,334, $8,241 and
$63, respectively due from the affiliate.
The Company leases all of its operating facilities from the majority
stockholder (see Note 6).
9. EMPLOYEE BENEFIT PLAN:
The Company has a defined contribution profit-sharing plan qualifying under
Section 401(a) of the Internal Revenue Code. The plan covers all eligible
employees. The Company can elect to contribute specified amounts to the plan, as
determined by the board of directors. Participants' vested interests in the
Company's contributions are based on years of service, as defined, with the
Company. The Company contributed $240,000, $130,000 and $65,000 to the plan for
the years ended September 30, 1997 and 1998,
F-145
<PAGE> 271
MILLER MECHANICAL CONTRACTORS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
and for the six months ended March 31, 1999, respectively, which is included in
accounts payable and accrued expenses in the accompanying balance sheets.
10. FINANCIAL INSTRUMENTS:
The Company's financial instruments consist of cash and cash equivalents, a
line of credit and debt. The Company believes that the carrying value of these
instruments on the accompanying balance sheet approximates their values.
11. COMMITMENTS AND CONTINGENCIES:
Litigation
The Company is involved in disputes or legal actions arising in the
ordinary course of business. Management does not believe the outcome of such
legal actions will have a material adverse effect on the Company's financial
position or results of operations.
Insurance
The Company carries a broad range of insurance coverage, including business
auto liability, general liability and an umbrella policy. The Company has not
incurred significant claims or losses on any of these insurance policies.
12. MAJOR CUSTOMERS AND RISK CONCENTRATION:
The Company had sales of approximately 54 percent of total sales to one
major customer during the year ended September 30, 1997. The Company had sales
of approximately 63 percent and 13 percent, respectively to two major customers
during the year ended September 30, 1998 and sales of approximately 56 percent
and 11 percent to two major customers during the six months ended March 31,
1999.
In general, the Company performs its services under contract terms that
entitle it to progress payments and is, by law, granted a lien interest in the
work until paid. The Company is exposed to potential credit risk related to
changes in business and economic factors within the southeastern United States.
However, management believes that its contract acceptance, billing and
collection policies are adequate to minimize the potential credit risk.
The Company's customers are primarily in the construction industry.
Accordingly, the Company is exposed to risks of fluctuations in construction in
the areas which it operates.
13. SUBSEQUENT EVENT:
On April 1, 1999, AMPAM acquired through merger all the stock of the
Company in exchange for cash, notes and stock of AMPAM, after which the Company
is a wholly owned subsidiary of AMPAM.
In connection with the merger, the Company sold or distributed certain
nonoperating assets and attendant liabilities, if any, to the stockholders.
F-146
<PAGE> 272
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[American Plumbing & Mechanical, Inc. Logo]
AMERICAN PLUMBING & MECHANICAL, INC.
OFFER TO EXCHANGE 11 5/8% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B FOR ALL
EXISTING 11 5/8% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A
--------------------
PROSPECTUS
--------------------
, 1999
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and, if given or made, the information or representations must not
be relied upon as having been authorized by American Plumbing & Mechanical, Inc.
This prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the securities to which it relates or any
offer to sell or the solicitation of an offer to buy securities of that type in
any circumstances in which an offer or solicitation is unlawful. Neither the
delivery of this prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of American Plumbing & Mechanical, Inc. since the date hereof or that
the information contained in this prospectus is correct as of any time
subsequent to its date.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 273
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of section 145 of the General Corporation Law of the State
of Delaware empowers a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
made to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) of Section 145
in the defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith; that indemnification provided for by Section 145
shall not be deemed exclusive of any other rights to which the indemnified party
may be entitled; that indemnification provided for by Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of such person's heirs, executors and administrators; and empowers the
corporation to purchase and maintain insurance on behalf of a director or
officer of the corporation against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
provided that such provision shall not eliminate or limit the liability of a
director (1) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (2) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (3) under Section
174 of the Delaware General Corporation Law, or (4) for any transaction from
which the director derived an improper personal benefit.
II-1
<PAGE> 274
Section 7(d) of the Company's Amended and Restated Certificate of
Incorporation states that:
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
DGCL is amended to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended. Any repeal or modification of this Section 7(d) by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
In addition, Article IX of the Company's Bylaws further provides that the
Company shall indemnify its officers, directors and employees to the fullest
extent permitted by law.
The Company has or will be entering into indemnification agreements with
each of its executive officers and directors.
These limitations on liability would apply to violations of the federal
securities laws. However, the registrant has been advised that in the opinion of
the SEC, indemnification for liabilities under the Securities Act of 1933 is
against public policy and therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S> <C>
*3.1 -- Amended and Restated Certificate of Incorporation
*3.2 -- Amended and Restated Bylaws
*3.3 -- Certificate of Designations of 10% Cumulative Redeemable
Convertible Preferred Stock, Series A
*4.1 -- Indenture, dated May 19, 1999, by and among American
Plumbing & Mechanical, Inc. and the subsidiaries named
therein and State Street Bank and Trust Company covering up
to $125,000,000 11 5/8% Senior Subordinated Notes due 2008
*4.2 -- Registration Rights Agreement dated May 19, 1999 by and
among American Plumbing & Mechanical, Inc., Fleet
Securities, Inc., Merrill Lynch & Co., Banc One Capital
Markets, Inc. and Credit Lyonnais Securities (USA), Inc.
*4.3 -- Form of American Plumbing & Mechanical, Inc. 11 5/8% Senior
Subordinated Note due 2008 (Included in Exhibit A to Exhibit
4.1)
*5.1 -- Opinion of Andrews & Kurth L.L.P.
+10.1 -- Form of Officer and Director Indemnification Agreement
*10.2 -- American Plumbing & Mechanical, Inc. 1999 Stock Plan
+10.3 -- $95 Million Senior Secured Credit Agreement dated March 31,
1999 among American Plumbing & Mechanical, Inc., First
National Bank of Chicago and the other lenders party
thereto.
*10.4 -- Transfer Restriction and Expense Reimbursement Agreement
*10.5 -- Acquisition Agreement dated February 11, 1999 by and between
American Plumbing & Mechanical, Inc., Christianson
Enterprises, Inc, Christianson Service Company, G.G.R.
Leasing Corporation and their stockholders
*10.6 -- Acquisition Agreement dated February 11, 1999 by and between
American Plumbing & Mechanical, Inc., J.A. Croson Company
and Franklin Fire Sprinkler Company and their stockholders
</TABLE>
II-2
<PAGE> 275
<TABLE>
<C> <S> <C>
*10.7 -- Acquisition Agreement dated February 11, 1999 by and between American Plumbing &
Mechanical, Inc., J.A. Croson Company of Florida and its stockholders
*10.8 -- Acquisition Agreement dated February 11, 1999 by and between American Plumbing &
Mechanical, Inc., Nelson Mechanical Contractors, Inc. and its stockholders
*10.9 -- Acquisition Agreement dated February 11, 1999 by and between American Plumbing &
Mechanical, Inc., Miller Mechanical Contractors, Inc. and its stockholders
*10.10 -- Acquisition Agreement dated February 11, 1999 by and between American Plumbing &
Mechanical, Inc., R.C.R. Plumbing, Inc. and its stockholders
*10.11 -- Acquisition Agreement dated February 11, 1999 by and between American Plumbing &
Mechanical, Inc., Teepe's River City Mechanical, Inc. and its stockholders
*10.12 -- Acquisition Agreement dated February 11, 1999 by and between American Plumbing &
Mechanical, Inc., Keith Riggs Plumbing, Inc. and its stockholders
*10.13 -- Acquisition Agreement dated February 11, 1999 by and between American Plumbing &
Mechanical, Inc., Power Plumbing, Inc. and its stockholders
*10.14 -- Acquisition Agreement dated February 11, 1999 by and between American Plumbing &
Mechanical, Inc., Sherwood Mechanical, Inc. and its stockholder
*12 -- Ratio of Earnings to Fixed Charges
*23.1 -- Consent of Andrews & Kurth L.L.P. (Included in Exhibit 5.1)
*23.2 -- Consent of Arthur Andersen, LLP
+25.1 -- Statement of Eligibility of State Street Bank and Trust Company, Trustee on Form T-1
*99.1 -- Form of Letter of Transmittal
*99.2 -- Form of Notice of Guaranteed Delivery
*99.3 -- Form of Letter to Clients
*99.4 -- Form of Letter to Nominees
*99.5 -- Form of Instruction to Registered Holder from Beneficial Owner
</TABLE>
- ---------------
* Filed herewith
+ To be filed by amendment
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 276
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(a) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
and
(d) To supply all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class main or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
II-4
<PAGE> 277
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on June 15, 1999.
AMERICAN PLUMBING & MECHANICAL, INC.
By: /s/ ROBERT A. CHRISTIANSON
-------------------------------------
Robert A. Christianson
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and
directors of American Plumbing & Mechanical, Inc., hereby constitutes and
appoints Robert Christianson and David Baggett (with full power to each of them
to act alone) his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and on his or her behalf and in his name, place and stead,
in any and all capacities, to sign, execute and file this Registration Statement
under the Securities Act of 1933, as amended, and any or all amendments
(including, without limitation, post-effective amendments), with all exhibits
and any and all documents required to be filed with respect thereto, with the
Securities and Exchange Commission or any regulatory authority, granting unto
such attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises in order to effectuate the same, as fully to all
intents and purposes as he himself might or could do, if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done.
Pursuant to the requirements of the Securities Act of 1933, this amendment
has been signed by the following persons in the capacities indicated on June 15,
1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ C. BYRON SNYDER Chairman of the Board of Directors
- -----------------------------------------------------
C. Byron Snyder
/s/ ROBERT A. CHRISTIANSON President, Chief Executive Officer and
- ----------------------------------------------------- Director (Principal Executive Officer)
Robert A. Christianson
/s/ DAVID C. BAGGETT Senior Vice President, Chief Financial
- ----------------------------------------------------- Officer, Secretary and Director (Principal
David C. Baggett Financial Officer and Principal Accounting
Officer)
/s/ ROBERT C. RICHEY Senior Vice President, Chief Operating Officer
- ----------------------------------------------------- and Director
Robert C. Richey
</TABLE>
II-5
<PAGE> 278
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ DAVID A. CROSON Director
- -----------------------------------------------------
David A. Croson
/s/ JAMES A. CROSON Director
- -----------------------------------------------------
James A. Croson
/s/ JOSEPH E. MILLER Director
- -----------------------------------------------------
Joseph E. Miller
/s/ ALBERT W. NIEMI, JR. Director
- -----------------------------------------------------
Albert W. Niemi, Jr.
/s/ SUSAN O. RHENEY Director
- -----------------------------------------------------
Susan O. Rheney
/s/ ROBERT W. SHERWOOD Director
- -----------------------------------------------------
Robert W. Sherwood
/s/ SAM B. SHERWOOD Director
- -----------------------------------------------------
Sam B. Sherwood
/s/ SCOTT W. TEEPE, SR. Director
- -----------------------------------------------------
Scott W. Teepe, Sr.
</TABLE>
II-6
<PAGE> 279
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrants
set forth below have duly caused this Registration Statement to be signed on
their behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on June 15, 1999.
CHRISTIANSON ENTERPRISES, INC.
CHRISTIANSON SERVICE COMPANY
G.G.R. LEASING CORPORATION
R.C.R. PLUMBING, INC.
J.A. CROSON COMPANY
FRANKLIN FIRE SPRINKLER COMPANY
J.A. CROSON COMPANY OF FLORIDA
TEEPE'S RIVER CITY MECHANICAL, INC.
KEITH RIGGS PLUMBING, INC.
POWER PLUMBING, INC.
NELSON MECHANICAL CONTRACTORS, INC.
SHERWOOD MECHANICAL, INC.
MILLER MECHANICAL CONTRACTORS, INC.
By: /s/ DAVID C. BAGGETT
----------------------------------------
David C. Baggett
Vice President, Secretary and Treasurer
of
each of the above listed companies
II-7
<PAGE> 280
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Robert Christianson and David Baggett
(with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, with full power of substitution, for him and on his
behalf and in his name, place and stead, in any and all capacities, to sign,
execute and file this Registration Statement under the Securities Act of 1933,
as amended, and any or all amendments (including, without limitation,
post-effective amendments), with all exhibits and any and all documents required
to be filed with respect thereto, with the Securities and Exchange Commission or
any regulatory authority, granting unto such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in order to
effectuate the same, as fully to all intents and purposes as he himself might or
could do, if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on June 15, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
CHRISTIANSON ENTERPRISES, INC.
CHRISTIANSON SERVICE COMPANY
G.G.R. LEASING CORPORATION
/s/ ROBERT A. CHRISTIANSON President and Director (Principal Executive
- ----------------------------------------------------- Officer)
Robert A. Christianson
/s/ DAVID C. BAGGETT Treasurer and Director (Principal Financial
- ----------------------------------------------------- and Accounting Officer)
David C. Baggett
/s/ BRIAN T. CHRISTIANSON Director
- -----------------------------------------------------
Brian T. Christianson
R.C.R. PLUMBING, INC.
/s/ ROBERT C. RICHEY Chief Executive Officer and Director
- ----------------------------------------------------- (Principal Executive Officer)
Robert C. Richey
/s/ DAVID C. BAGGETT Treasurer and Director (Principal Financial
- ----------------------------------------------------- and Accounting Officer)
David C. Baggett
/s/ ROBERT A. CHRISTIANSON Director
- -----------------------------------------------------
Robert A. Christianson
J.A. CROSON COMPANY
/s/ DAVID A. CROSON President and Director (Principal Executive
- ----------------------------------------------------- Officer)
David A. Croson
/s/ DAVID C. BAGGETT Treasurer and Director (Principal Financial
- ----------------------------------------------------- and Accounting Officer)
David C. Baggett
/s/ ROBERT A. CHRISTIANSON Director
- -----------------------------------------------------
Robert A. Christianson
</TABLE>
II-8
<PAGE> 281
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
FRANKLIN FIRE SPRINKLER COMPANY
/s/ JOHN L. BOYLE President and Director (Principal Executive
- ----------------------------------------------------- Officer)
John L. Boyle
/s/ DAVID C. BAGGETT Treasurer and Director (Principal Financial
- ----------------------------------------------------- and Accounting Officer)
David C. Baggett
/s/ ROBERT A. CHRISTIANSON Director
- -----------------------------------------------------
Robert A. Christianson
J.A. CROSON COMPANY OF FLORIDA
/s/ JAMES A. CROSON Chief Executive Officer and Director
- ----------------------------------------------------- (Principal Executive Officer)
James A. Croson
/s/ DAVID C. BAGGETT Treasurer and Director (Principal Financial
- ----------------------------------------------------- and Accounting Officer)
David C. Baggett
/s/ ROBERT A. CHRISTIANSON Director
- -----------------------------------------------------
Robert A. Christianson
TEEPE'S RIVER CITY MECHANICAL, INC.
/s/ SCOTT TEEPE President and Director (Principal Executive
- ----------------------------------------------------- Officer)
Scott Teepe
/s/ DAVID C. BAGGETT Treasurer and Director (Principal Financial
- ----------------------------------------------------- and Accounting Officer)
David C. Baggett
/s/ ROBERT A. CHRISTIANSON Director
- -----------------------------------------------------
Robert A. Christianson
KEITH RIGGS PLUMBING, INC.
/s/ GERALD RIGGS President and Director (Principal Executive
- ----------------------------------------------------- Officer)
Gerald Riggs
/s/ DAVID C. BAGGETT Treasurer and Director (Principal Financial
- ----------------------------------------------------- and Accounting Officer)
David C. Baggett
/s/ ROBERT A. CHRISTIANSON Director
- -----------------------------------------------------
Robert A. Christianson
POWER PLUMBING, INC.
/s/ JAMES N. POWER President and Director (Principal Executive
- ----------------------------------------------------- Officer)
James N. Power
/s/ DAVID C. BAGGETT Treasurer and Director (Principal Financial
- ----------------------------------------------------- and Accounting Officer)
David C. Baggett
/s/ ROBERT A. CHRISTIANSON Director
- -----------------------------------------------------
Robert A. Christianson
</TABLE>
II-9
<PAGE> 282
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
NELSON MECHANICAL CONTRACTORS, INC.
/s/ GILBERT NELSON President and Director (Principal Executive
- ----------------------------------------------------- Officer)
Gilbert Nelson
/s/ DAVID C. BAGGETT Treasurer and Director (Principal Financial
- ----------------------------------------------------- and Accounting Officer)
David C. Baggett
/s/ ROBERT A. CHRISTIANSON Director
- -----------------------------------------------------
Robert A. Christianson
SHERWOOD MECHANICAL, INC.
/s/ ROBERT SHERWOOD President and Director (Principal Executive
- ----------------------------------------------------- Officer)
Robert Sherwood
/s/ DAVID C. BAGGETT Treasurer and Director (Principal Financial
- ----------------------------------------------------- and Accounting Officer)
David C. Baggett
/s/ ROBERT A. CHRISTIANSON Director
- -----------------------------------------------------
Robert A. Christianson
MILLER MECHANICAL CONTRACTORS, INC.
/s/ JOSEPH E. MILLER President and Director (Principal Executive
- ----------------------------------------------------- Officer)
Joseph E. Miller
/s/ DAVID C. BAGGETT Treasurer and Director (Principal Financial
- ----------------------------------------------------- and Accounting Officer)
David C. Baggett
/s/ ROBERT A. CHRISTIANSON Director
- -----------------------------------------------------
Robert A. Christianson
</TABLE>
II-10
<PAGE> 283
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S> <C>
*3.1 -- Amended and Restated Certificate of Incorporation
*3.2 -- Amended and Restated Bylaws
*3.3 -- Certificate of Designations of 10% Cumulative Redeemable
Convertible Preferred Stock, Series A
*4.1 -- Indenture, dated May 19, 1999, by and among American
Plumbing & Mechanical, Inc. and the subsidiaries named
therein and State Street Bank and Trust Company covering up
to $125,000,000 11 5/8% Senior Subordinated Notes due 2008
*4.2 -- Registration Rights Agreement dated May 19, 1999 by and
among American Plumbing & Mechanical, Inc., Fleet
Securities, Inc., Merrill Lynch & Co., Banc One Capital
Markets, Inc. and Credit Lyonnais Securities (USA), Inc.
*4.3 -- Form of American Plumbing & Mechanical, Inc. 11 5/8% Senior
Subordinated Note due 2008 (Included in Exhibit A to Exhibit
4.1)
*5.1 -- Opinion of Andrews & Kurth L.L.P.
+10.1 -- Form of Officer and Director Indemnification Agreement
*10.2 -- American Plumbing & Mechanical, Inc. 1999 Stock Plan
+10.3 -- $95 Million Senior Secured Credit Agreement dated March 31,
1999 among American Plumbing & Mechanical, Inc., First
National Bank of Chicago and the other lenders party
thereto.
*10.4 -- Transfer Restriction and Expense Reimbursement Agreement
*10.5 -- Acquisition Agreement dated February 11, 1999 by and between
American Plumbing & Mechanical, Inc., Christianson
Enterprises, Inc, Christianson Service Company, G.G.R.
Leasing Corporation and their stockholders
*10.6 -- Acquisition Agreement dated February 11, 1999 by and between
American Plumbing & Mechanical, Inc., J.A. Crosan Company
and Franklin Fire Sprinkler Company and their stockholders
*10.7 -- Acquisition Agreement dated February 11, 1999 by and between
American Plumbing & Mechanical, Inc., J.A. Croson Company of
Florida and its stockholders
*10.8 -- Acquisition Agreement dated February 11, 1999 by and between
American Plumbing & Mechanical, Inc., Nelson Mechanical
Contractors, Inc. and its stockholders
*10.9 -- Acquisition Agreement dated February 11, 1999 by and between
American Plumbing & Mechanical, Inc., Miller Mechanical
Contractors, Inc. and its stockholders
*10.10 -- Acquisition Agreement dated February 11, 1999 by and between
American Plumbing & Mechanical, Inc., R.C.R. Plumbing, Inc.
and its stockholders
*10.11 -- Acquisition Agreement dated February 11, 1999 by and between
American Plumbing & Mechanical, Inc., Teepe's River City
Mechanical, Inc. and its stockholders
*10.12 -- Acquisition Agreement dated February 11, 1999 by and between
American Plumbing & Mechanical, Inc., Keith Riggs Plumbing,
Inc. and its stockholders
*10.13 -- Acquisition Agreement dated February 11, 1999 by and between
American Plumbing & Mechanical, Inc., Power Plumbing, Inc.
and its stockholders
*10.14 -- Acquisition Agreement dated February 11, 1999 by and between
American Plumbing & Mechanical, Inc., Sherwood Mechanical,
Inc. and its stockholder
*12 -- Ratio of Earnings to Fixed Charges
</TABLE>
<PAGE> 284
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S> <C>
*23.1 -- Consent of Andrews & Kurth L.L.P. (Included in Exhibit 5.1)
*23.2 -- Consent of Arthur Andersen, LLP
+25.1 -- Statement of Eligibility of State Street Bank and Trust
Company, Trustee on Form T-1
*99.1 -- Form of Letter of Transmittal
*99.2 -- Form of Notice of Guaranteed Delivery
*99.3 -- Form of Letter to Clients
*99.4 -- Form of Letter to Nominees
*99.5 -- Form of Instruction to Registered Holder from Beneficial
Owner
</TABLE>
- ---------------
* Filed herewith
+ To be filed by amendment
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
AMERICAN PLUMBING & MECHANICAL, INC.
American Plumbing & Mechanical, Inc. (the "Corporation"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware ("DGCL"), hereby certifies as follows
pursuant to Sections 242 and 245 of the DGCL:
1. The original Certificate of Incorporation of the Corporation was filed in
the Office of the Secretary of State of the State of Delaware (the "Secretary
of State") on June 18, 1998, and the original name of the Corporation was
American Plumbing & Mechanical Systems, Inc. A Certificate of Amendment was
filed with the Secretary of State on June 25, 1998 changing the name of the
Corporation to American Plumbing & Mechanical, Inc.
2. The Board of Directors and the stockholders of the Corporation, in
accordance with Sections 242 and 245 of the DGCL, adopted and approved this
Amended and Restated Certificate of Incorporation (including the amendments to
the Corporation's Certificate of Incorporation effected hereby).
3. Effective immediately upon the filing of this Amended and Restated
Certificate of Incorporation in the office of the Secretary of State, each
outstanding share of previously existing Common Stock, par value $0.01 per
share of the Corporation, shall be and hereby is converted into and
reclassified as 1,683.0537 shares of Common Stock, par value $0.01 per share.
Certificates representing reclassified shares are hereby canceled and upon
presentation of the canceled certificates to the Corporation, the holders
thereof shall be entitled to receive certificate(s) representing the new shares
into which such canceled shares have been converted.
4. The Certificate of Incorporation of the Corporation is hereby amended and
restated to read in its entirety as follows:
1. The name of the Corporation is American Plumbing & Mechanical, Inc.
2. The address of its registered office in the State of Delaware is
1209 Orange Street, Wilmington County of New Castle, Delaware 19801. The name
of its registered agent at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the DGCL.
4. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 115,000,000 consisting of
10,000,000 shares of preferred stock, par value $0.01 per share (hereinafter
called "Preferred Stock"), 100,000,000 shares of common stock, par value
<PAGE> 2
$0.01 per share (hereinafter called "Common Stock"), and 5,000,000 shares of
restricted common stock, par value $0.01 per share (hereinafter called
"Restricted Common Stock").
(a) The Preferred Stock may be issued from time to time in
one or more series and in such amounts as may be determined by the
Board of Directors. The voting powers, designations, preferences and
relative, participating, optional or other special rights, if any, and
the qualifications, limitations, or restrictions thereof, if any, of
the Preferred Stock of each series shall be such as are fixed by the
Board of Directors, authority so to do being hereby expressly granted,
and as are stated and expressed in a resolution or resolutions adopted
by the Board of Directors providing for the issue of such series of
Preferred Stock (herein called the "Directors' Resolution"). The
Directors' Resolution as to any series shall (1) designate the series,
(2) fix the dividend rate, if any, of such series, establish whether
dividends shall be cumulative or non-cumulative, fix the payment dates
for dividends on shares of such series and the date or dates, or the
method of determining the date or dates, if any, from which dividends
on shares of such series shall be cumulative, (3) fix the amount or
amounts payable on shares of such series upon voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation, and (4) state the price or prices or rate or rates, and
adjustments, if any, at which, the time or times and the terms and
conditions upon which, the shares of such series may be redeemed at
the option of the Corporation or at the option of the holder or
holders of shares of such series or upon the occurrence of a specified
event, and state whether such shares may be redeemed for cash,
property or rights, including securities of the Corporation or another
entity; and such Directors' Resolutions may (i) limit the number of
shares of such series that may be issued, (ii) provide for a sinking
fund for the purchase or redemption of shares of such series and
specify the terms and conditions governing the operations of any such
fund, (iii) grant voting rights to the holders of shares of such
series, (iv) impose conditions or restrictions upon the creation of
indebtedness of the Corporation or upon the issuance of additional
Preferred Stock or other capital stock ranking on a parity therewith,
or prior thereto, with respect to dividends or distributions of assets
upon liquidation, (v) impose conditions or restrictions upon the
payment of dividends upon, or the making of other distributions to, or
the acquisition of, shares ranking junior to the Preferred Stock or to
any series thereof with respect to dividends or distributions of
assets upon liquidation, (vi) state the time or times, the price or
prices or the rate or rates of exchange and other terms, conditions
and adjustments upon which shares of any such series may be made
convertible into, or exchangeable for, at the option of the holder or
the Corporation or upon the occurrence of a specified event, shares of
any other series of Preferred Stock or any other class or classes of
stock or other securities of the Corporation, and (vii) grant such
other special rights and impose such qualifications, limitations or
restrictions thereon as shall be fixed by the Board of Directors, to
the extent not inconsistent with this Section 4 and to the full extent
now or hereafter permitted by the laws of the State of Delaware.
Except as by law expressly provided, or except as may be
provided in any Directors' Resolution, the Preferred Stock shall have
no right or power to vote on any question or in any proceeding or to
be represented at, or to receive notice of, any meeting of
stockholders of the Corporation.
-2-
<PAGE> 3
Preferred Stock that is redeemed, purchased or retired by the
Corporation shall assume the status of authorized but unissued
Preferred Stock and may thereafter, subject to the provisions of any
Directors' Resolution providing for the issue of any particular series
of Preferred Stock, be reissued in the same manner as authorized but
unissued Preferred Stock.
(b) Subject to the preferred rights of the holders of shares
of any series of Preferred Stock as provided by the Board of Directors
with respect to any such series of Preferred Stock, the holders of the
Common Stock shall be entitled to receive, as and when declared by the
Board of Directors out of the funds of the Corporation legally
available therefor, such dividends (payable in cash, stock or
otherwise) as the Board of Directors may from time to time determine,
payable to stockholders of record on such dates, not exceeding 60 days
preceding the dividend payment dates, as shall be fixed for such
purpose by the Board of Directors in advance of payment of each
particular dividend.
In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, after the
distribution or payment to the holders of shares of any series of
Preferred Stock as provided by the Board of Directors with respect to
any such series of Preferred Stock, the remaining assets of the
Corporation available for distribution to stockholders shall be
distributed among and paid to the holders of Common Stock.
Except as otherwise required by law, each holder of shares of
Common Stock shall be entitled to one vote for each share of Common
Stock standing in such holder's name on the books of the Corporation
on all matters submitted to a vote of the stockholders of the
Corporation (other than the election of one director by the holders of
the Restricted Common Stock as provided for herein).
(c) The holders of the Restricted Common Stock shall not be
entitled to receive dividends (payable in cash, stock or otherwise).
In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntarily or involuntarily, after the
distribution or payment to the holders of shares of any series of
Preferred Stock as provided by the Board of Directors with respect to
any such series of Preferred Stock, the remaining assets of the
Corporation available for distribution to stockholders, if any, shall
be distributed among and paid to the holders of Common Stock ratably
in proportion to the number of shares of Common Stock held by them
respectively. The holders of Restricted Common Stock shall have no
distribution rights in the event of a liquidation, dissolution or
winding up of the Corporation.
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<PAGE> 4
Holders of Restricted Common Stock voting as a class shall be
entitled to elect one member of the Board of Directors, but shall not
otherwise be entitled to vote in the election of directors of the
Corporation. For purposes of electing one member of the Board of
Directors, each holder of shares of Restricted Common Stock shall be
entitled to one vote for each share of Restricted Common Stock.
Subject to the foregoing, and except as otherwise required by law,
each holder of shares of Restricted Common Stock shall be entitled to
one-fourth of one vote for each share of Restricted Common Stock
standing in such holder's name on the books of the Corporation on all
other matters submitted to a vote of the stockholders of the
Corporation.
(d) If the Restricted Common Stock has not been converted
into Common Stock pursuant to paragraph (e) below on or prior to the
third anniversary of April 1, 1999, the Corporation may, at its sole
option, at any time and from time to time upon prior written notice
(the "Redemption Notice," such Redemption Notice stating the date on
which the redemption shall occur (the "Redemption Date")), redeem all
of the shares of Restricted Common Stock then outstanding. Upon any
such redemption, the Corporation shall pay, out of funds legally
available therefor, a price per share of Restricted Common Stock of
$.01 (the "Redemption Price"). The Corporation shall be obligated on
the Redemption Date to pay to the holder of each share of Restricted
Common Stock (upon surrender by such holder at the Corporation's
principal office of the certificate representing such share) the total
Redemption Price for the number of shares of Restricted Common Stock
being redeemed.
The Corporation shall mail the Redemption Notice to each
record holder thereof not more than 90 days nor less than 30 days
prior to the Redemption Date. The Redemption Notice shall include (i)
the Redemption Date for such redemption, and (ii) the place where
share certificates are to be surrendered for payment of the Redemption
Price. Any shares of Restricted Common Stock which are redeemed or
otherwise acquired by the Corporation shall be canceled and retired to
authorized but unissued shares and shall not be reissued, sold or
transferred.
On or prior to April 1, 2002, upon approval of a majority of
the Corporation's Board of Directors, the Corporation's right to
redeem the Restricted Common Stock shall be suspended for a period not
to exceed one year. On or prior to April 1, 2003, upon approval of a
majority of the Corporation's Board of Directors, the Corporation's
right to redeem the Restricted Common Stock may be suspended for a
period not to exceed one year. The Corporation's Board of Directors
shall not have the ability to suspend the right of the Corporation to
redeem the Restricted Common Stock beyond April 1, 2004. The
conversion right set forth below in paragraph (e) shall remain in full
force and effect during such extension periods and thereafter but
shall be extinguished on the Redemption Date.
(e) Each share of Restricted Common Stock will automatically
convert into one share of Common Stock (as adjusted proportionately to
give effect to any stock dividends, combinations, splits or other
similar events with respect to the Common Stock) in the event the
Corporation consummates any of the following events: (i) an initial
public offering of the
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<PAGE> 5
Corporation's Common Stock, (ii) any sale of all or substantially all
of the Corporation's assets in one transaction or series of related
transactions, (iii) any merger or consolidation which involves the
Corporation in which the Corporation is not the surviving entity, or
(iv) any transaction after which the shares of the Corporation's
Common Stock, if any, which are then held by persons other than the
holders of the Corporation's Common Stock as of the April 1, 1999
constitute (after giving effect to the exercise of any outstanding
options or warrants which are convertible into the Corporation's
Common Stock or the conversion of any of the Corporation's securities
(equity, debt or otherwise) which are by their terms convertible into
the Corporation's Common Stock) 50% or more of the Corporation's
Common Stock outstanding as of the date of the consummation of such
transaction.
(f) The Corporation shall be entitled to treat the person in
whose name any share of its stock is registered as the owner thereof
for all purposes and shall not be bound to recognize any equitable or
other claim to, or interest in, such share on the part of any other
person, whether or not the Corporation shall have notice thereof,
except as expressly provided by applicable laws.
5. The Board of Directors is hereby authorized to create and issue,
whether or not in connection with the issuance and sale of any of its stock or
other securities, rights (the "Rights") entitling the holders thereof to
purchase from the Corporation shares of capital stock or other securities. The
times at which and the terms upon which the Rights are to be issued will be
determined by the Board of Directors and set forth in the contracts or
instruments that evidence the Rights. The authority of the Board of Directors
with respect to the Rights shall include, but not be limited to, determination
of the following:
(a) The initial purchase price per share of the capital stock
or other securities of the Corporation to be purchased upon exercise
of the Rights;
(b) Provisions relating to the times at which and the
circumstances under which the Rights may be exercised or sold or
otherwise transferred, either together with or separately from, any
other securities of the Corporation;
(c) Provisions that adjust the number or exercise price of
the Rights or amount or nature of the securities or other property
receivable upon exercise of the Rights in the event of a combination,
split or recapitalization of any capital stock of the Corporation, a
change in ownership of the Corporation's securities or a
reorganization, merger, consolidation, sale of assets or other
occurrence relating to the Corporation or any capital stock of the
Corporation, and provisions restricting the ability of the Corporation
to enter into any such transaction absent an assumption by the other
party or parties thereto of the obligations of the Corporation under
such Rights;
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<PAGE> 6
(d) Provisions that deny the holder of a specified percentage
of the outstanding securities of the Corporation the right to exercise
the Rights and/or cause the Rights held by such holder to become void;
(e) Provisions that permit the Corporation to redeem the
Rights; and
(f) The appointment of a Rights Agent with respect to the
Rights;
and such other provisions relating to the Rights as may be determined
by the Board of Directors.
6. No holder of stock of the Corporation shall be entitled as of right
to purchase or subscribe for any part of any unissued stock of the Corporation
or any additional stock to be issued whether or not by reason of any increase
of the authorized capital stock of the Corporation, or any bonds, certificates
of indebtedness, debentures or other securities convertible into stock or such
additional authorized issuance of new stock, but rather such stock, bonds,
certificates of indebtedness, debentures and other securities may be issued and
disposed of pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations, and upon such terms as may be deemed
advisable by the Board of Directors in the exercise of their discretion.
7. The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for
creating, defining, limiting and regulating the powers of the Corporation, the
directors and the stockholders.
(a) Subject to any limitation contained in the bylaws, the
Board of Directors may make bylaws, and from time to time may alter,
amend or repeal any bylaws, but any bylaws made by the Board of
Directors may be altered, amended or repealed by the stockholders at
any meeting of stockholders by the affirmative vote of at least 66
2/3% of the aggregate number of votes entitled to be cast thereon,
provided notice that an amendment is to be considered and acted upon
is inserted in the notice or waiver of notice of such meeting.
(b) Any vote or votes authorizing liquidation of the
Corporation or proceedings for its dissolution may provide, subject to
(i) any agreements among and between stockholders, (ii) the rights of
creditors and (iii) rights expressly provided for particular classes
or series of stocks, for the distribution pro rata among the
stockholders of the Corporation of the assets of the Corporation,
wholly or in part in kind, whether such assets be in cash or other
property, and may authorize the Board of Directors of the Corporation
to determine the value of the different assets of the Corporation for
the purpose of such liquidation and may divide such assets or any part
thereof among the stockholders of the Corporation in such manner that
every stockholder will receive a proportionate amount in value
(determined as aforesaid) of cash or property of the Corporation upon
such liquidation or dissolution even though each stockholder may not
receive a strictly proportionate part of each such asset.
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<PAGE> 7
(c) The Corporation shall, to the maximum extent permitted
from time to time under the DGCL, indemnify and upon request shall
advance expenses to any person who is or was a party or is threatened
to be made a party to any threatened, pending or completed action,
suit, proceeding or claim, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was or has agreed
to be a director or officer of the Corporation, or while a director or
officer is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, against expenses
(including attorneys' fees and expenses), judgments, fines, penalties
and amounts paid in settlement or incurred in connection with the
investigation, preparation to defend or defense of such action, suit,
proceeding, claim or counterclaim initiated by or on behalf of such
person. Such indemnification shall not be exclusive of other
indemnification rights arising under any bylaw, agreement, vote of
directors or stockholders or otherwise and shall inure to the benefit
of the heirs and legal representatives of such person. Any repeal or
modification of this Section 7(c) shall be prospective only, and shall
not adversely affect any right or protection of a director or officer
of the Corporation existing at the time of such repeal or
modification.
(d) A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the DGCL, or (iv) for any transaction from which
the director derived an improper personal benefit. If the DGCL is
amended to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest
extent permitted by the DGCL, as so amended. Any repeal or
modification of this Section 7(d) by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect
any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
8. Subject to the rights of the holders of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation to elect additional directors under specific circumstances:
(a) after an initial public offering of the Corporation's
Common Stock, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called
annual or special meeting of stockholders of the Corporation and may
not be effected by any consent in writing of such stockholders;
(b) special meetings of the stockholders of the Corporation
may be called only by the Chairman of the Board of Directors and shall
be called within ten (10) days after receipt of the written request of
the Board of Directors, pursuant to a resolution approved by a
majority of the whole Board of Directors; and
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<PAGE> 8
(c) the business permitted to be conducted at any special
meeting of the stockholders is limited to the business brought before
the meeting by the Chairman or by the Secretary at the request of a
majority of the Board of Directors.
9. The number of directors which shall constitute the whole board
shall be such as from time to time shall be fixed by, or in the manner provided
in, the bylaws, but in no case shall the number be less than three nor more
than 15.
The directors shall be classified with respect to the time for which
they shall severally hold office by dividing them into three classes which
classes shall consist of an equal, or as near to equal as possible, number of
directors. As to the initial election, the director or directors of the first
class shall be elected for a term expiring at the next annual meeting of
stockholders to be held following the end of the 2000 fiscal year; the director
or directors of the second class for a term expiring at the annual meeting to
be held following the end of the 2001 fiscal year; and the director or
directors of the third class for a term expiring at the annual meeting to be
held following the end of the 2002 fiscal year. At each annual meeting,
commencing with the annual meeting in 2001, the successor or successors to the
class of directors whose term shall expire in that year shall be elected to
hold office for a term of three years, so that the term of office of one class
of directors shall expire in each year. Any increase or decrease in the number
of directors constituting the Board shall be apportioned among the classes so
as to maintain the number of directors in each class as near as possible to
one-third the whole number of directors as so adjusted. Any director elected or
appointed to fill a vacancy shall hold office for the remaining term of the
class to which such directorship is assigned. No decrease in the number of
directors constituting the Corporation's Board of Directors shall shorten the
term of any incumbent director. Any vacancy in the Board of Directors, whether
arising through death, resignation or removal of a director, or through an
increase in the number of directors of any class, shall be filled by the
majority vote of the remaining directors, although less than a quorum, or by a
sole remaining director, provided that any vacancy in the Board of Directors
arising through death, resignation or removal of the director elected by the
Restricted Common Stock shall be filled only by a special meeting of the
holders of the Restricted Common Stock called for the purpose of electing a
director to fill such vacancy. The bylaws may contain any provision regarding
classification of the Corporation's directors not inconsistent with the terms
hereof. The right to cumulate votes in the election of directors is expressly
prohibited.
A director of the Corporation may be removed only for cause and only
upon the affirmative vote of the holders of 66 2/3 percent of the outstanding
capital stock of the Corporation entitled to vote at an election of such
director, subject to further restrictions on removal, not inconsistent with
this Section 9, as may be contained in the bylaws. Notwithstanding the
foregoing, the holders of Restricted Common Stock voting as a class shall be
entitled to elect one member of the Board of Directors, and only the holders of
the Restricted Common Stock shall be entitled to remove such member from the
Board of Directors.
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<PAGE> 9
Notwithstanding the foregoing, whenever the holders of any one or more
series of Preferred Stock issued by the Corporation shall have the right,
voting separately by series, to elect directors at an annual or special meeting
of stockholders, the election, term of office, filling of vacancies and other
features of such directorships shall be governed by the terms of the Directors'
Resolutions applicable thereto, and such directors so elected shall not be
subject to the provisions of this Section 9 unless expressly provided by such
terms.
10. Election of directors need not be by written ballot unless the
bylaws of the Corporation shall so provide. Meetings of stockholders may be
held within or without the State of Delaware, as the bylaws may provide. The
books of the Corporation may be kept (subject to any provisions contained in
the statutes of the State of Delaware) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of
Directors or the bylaws of the Corporation.
11. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation in the manner set forth below, and all rights and conferred upon
the directors or stockholders of the Corporation herein or in any amendment
hereof are granted subject to this reservation.
The affirmative vote of at least 75% of the aggregate number of votes
entitled to be cast thereon and the affirmative vote of the holders of at least
75% of the then outstanding shares of each class of stock of the Corporation
voting separately as a class, shall be required to adopt any amendment to
Sections 5, 7, 8, 9 and 11 of this Amended and Restated Certificate of
Incorporation of the Corporation, provided that holders of shares of any series
of Preferred Stock shall not be entitled to vote with respect to any such
amendment unless (i) specifically required by the Directors' Resolution
providing for the issue of such series of Preferred Stock or (ii) otherwise
required by the DGCL.
The affirmative vote of at least a majority of the aggregate number of
votes entitled to be cast thereon and the affirmative vote of the holders of at
least a majority of the then outstanding shares of each class of stock of the
Corporation voting separately as a class, shall be required to adopt any
amendment to any other Section of this Amended and Restated Certificate of
Incorporation of the Corporation, provided that holders of shares of any series
of Preferred Stock shall not be entitled to vote with respect to any such
amendment unless (i) specifically required by the Directors' Resolution
providing for the issue of such series of Preferred Stock or (ii) otherwise
required by the DGCL.
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been executed for and on behalf of the Corporation by its
officers thereunto duly authorized as of ______ day of March, 1999.
/s/ C. Byron Snyder
------------------------------------------
C. Byron Snyder, President
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<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
AMERICAN PLUMBING & MECHANICAL, INC.
<PAGE> 2
ARTICLE I
OFFICES
Section 1. The registered office of American Plumbing & Mechanical,
Inc. (the "Corporation") shall be in the City of Wilmington, County of New
Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other places
both within and without the state of Delaware as the Board of Directors may from
time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
Directors shall be held at such place as may be fixed from time to time by the
Board of Directors and stated in the notice of the meeting. Meetings of
stockholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held on such date
and at such time as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting. At the annual meeting, the
stockholders shall elect by a plurality vote the Directors pursuant to Article
III of these Bylaws, and transact such other business as may properly be brought
before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to a vote at
such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be (i) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (iii) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed to and received at the
principal executive offices of the Corporation not less than 120 days nor more
than 150 days prior to the anniversary of the date of the proxy statement for
the previous year's annual meeting; provided, however, that if no annual meeting
was held in the previous year or the date of the annual meeting of stockholders
has been changed by more than 30 calendar days from the date contemplated at the
<PAGE> 3
time of the previous year's proxy statement, the notice must be received by the
Corporation at least 60 days prior to the date the Corporation intends to
distribute its proxy statement with respect to such meeting.
A stockholder's notice to the Secretary shall set forth, as to each
matter a stockholder proposes to bring before the annual meeting, (i) the nature
of the proposed business with reasonable particularity, including the exact text
of any proposal to be presented for adoption and any supporting statement, which
proposal and supporting statement shall not in the aggregate exceed 500 words,
and his reasons for conducting such business at the annual meeting, (ii) any
material interest of such stockholder in such business, (iii) the name,
principal occupation and record address of such stockholder, (iv) the class and
number of shares of the Corporation which are held of record or beneficially
owned by such stockholder, (v) the dates upon which such stockholder acquired
such shares of stock and documentary support for any claims of beneficial
ownership and (vi) such other matters as may be required by the Certificate of
Incorporation as amended or restated from time to time (the "Certificate of
Incorporation").
Notwithstanding any other provision in these Bylaws, no business shall
be conducted at an annual meeting except in accordance with the procedures set
forth in this Section 3. The presiding officer of an annual meeting shall, if
the facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with this Section 3, and if
the presiding officer should so determine, the presiding officer shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
At any special meeting of stockholders, only such business shall be
conducted as shall have been specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors. In
accordance with Section 5 of this Article II, nothing in this Section 3 shall
entitle any stockholder to propose business for consideration at any special
meeting of stockholders.
Notwithstanding any other provision of these Bylaws, the Corporation
shall be under no obligation to include any stockholder proposal in its proxy
statement or otherwise present any such proposal to stockholders at a meeting of
stockholders if the Board of Directors reasonably believes that the proponents
thereof have not complied with Sections 13 and 14 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder; and the Corporation shall not be required to include in
its proxy statement to stockholders any stockholder proposal not required to be
included in its proxy statement to stockholders in accordance with the Exchange
Act and such rules or regulations; provided, however, nothing in this Section 3
shall be deemed to affect the rights of stockholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list
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<PAGE> 4
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten (10)
days prior to the meeting, either at a place within the city where the meeting
is to be held, which place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders for any purpose may be
called only by the Chairman of the Board of Directors and shall be called within
10 days after receipt of the written request of the Board of Directors, pursuant
to a resolution approved by a majority of the entire Board of Directors. The
business permitted to be conducted at any special meeting of the stockholders is
limited to the business brought before the meeting by the Chairman or by the
Secretary at the request of a majority of the entire Board of Directors.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting, and the purpose or purposes for which the meeting is
called, shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. The holders of a majority of the stock issued, outstanding
and entitled to vote, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the Certificate of
Incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented.
Section 8. When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting, except as otherwise required by this
Section 8, if the time and place thereof are announced at the meeting at which
the adjournment is taken. At such adjourned meeting the Corporation may transact
any business which might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 9. If a quorum exists, action on a matter (other than the
election of directors) shall be approved if the votes cast in favor of the
matter exceed the votes cast opposing the matter. In determining the number of
votes cast, shares abstaining from voting or not voted on a matter will not be
treated as votes cast. The provisions of this paragraph will govern with respect
to all votes of stockholders except as otherwise provided for in these Bylaws or
in the Certificate of Incorporation or by a specific statutory provision
superseding the provisions contained in these Bylaws or the Certificate of
Incorporation.
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<PAGE> 5
Section 10. Each stockholder shall at every meeting of the
stockholders, subject to any restriction or qualification set forth in the
Certificate of Incorporation, be entitled to one vote in person or by proxy for
each share of the capital stock having voting power held by such stockholder,
but no proxy shall be voted after three years from its date, unless the proxy
provides for a longer period.
Section 11. After an initial public offering of the Corporation's
Common Stock, any action required or permitted to be taken by the stockholders
of the Corporation must be affected at a duly called annual or special meeting
of stockholders of the Corporation and may not be effected by any consent in
writing of such stockholders.
Section 12. At each meeting of stockholders, the Chairman or
Vice-Chairman of the Board of Directors shall preside, and the secretary shall
keep records, and in the absence of either such officer, his duty shall be
performed by a person appointed at the meeting.
ARTICLE III
DIRECTORS
Number, Nomination, Removal
Section 1. The number of Directors shall be fixed from time to time by
the Board of Directors, but shall not be less than 3 nor more than 15 persons.
The Directors shall be elected at the annual meeting of the stockholders in
accordance with the provisions of Section 2 of this Article and Section 9 of the
Certificate of Incorporation, and each Director elected shall hold office until
his successor is elected and qualified. Directors need not be stockholders.
Section 2. Subject to the rights of holders of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation, nominations for the election of Directors may be made by the Board
of Directors or a committee appointed by the Board of Directors or by any
stockholder entitled to vote in the election of Directors generally. Any
stockholder entitled to vote in the election of Directors generally may nominate
one or more persons for election as Directors at a meeting only if written
notice of such stockholder's intent to make such nomination or nominations has
been given, either by personal delivery or by United States mail, postage
prepaid, to the Secretary of the Corporation not less than 120 days nor more
than 150 days prior to the anniversary of the date of the proxy materials for
the previous year's annual meeting; provided, however, that if no annual meeting
was held in the previous year or the date of the annual meeting of stockholders
has been changed by more than 30 calendar days from the date contemplated at the
time of the previous year's proxy statement, the notice must be received by the
Corporation at least 60 days prior to the date the Corporation intends to
distribute its proxy statement with respect to such meeting.
Each such notice given by a stockholder shall set forth the following
information, in addition to any other information or matters required by the
Certificate of Incorporation:
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(a) as to each person whom the stockholder proposes to nominate
for election or re-election as a director, (i) the exact name of such
person, (ii) such person's age, principal occupation, business address
and telephone number and residence address and telephone number, (iii)
the number of shares (if any) of each class of stock of the Corporation
owned directly or indirectly by such person and (iv) such other
information regarding each nominee proposed by such stockholder as
would be required to be disclosed in solicitations of proxies for
election of directors pursuant to Regulation 14A under the Exchange Act
or any successor regulation thereto (including such person's notarized
written acceptance of such nomination, consent to being named in the
proxy statement as a nominee and statement of intention to serve as a
director if elected) had the nominee been nominated, or intended to be
nominated, by the Board of Directors; and
(b) as to the stockholder giving the notice, (i) his name and
record address, (ii) a representation that the stockholder is a holder
of record of stock of the Corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice, (iii) the class and
number of shares of the Corporation which are held of record or
beneficially owned by him and the dates upon which he acquired such
shares of stock and documentary support for any claims of beneficial
ownership, and (iv) a description of all arrangements or understandings
between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder.
If the presiding officer of the meeting for the election of Directors
determines that a nomination of any candidate for election as a Director at such
meeting was not made in accordance with the applicable provisions of these
Bylaws, such nomination shall be void.
Section 3. Subject to the rights of the holders of any class or series
of stock having a preference over the Common Stock as to dividends or upon
liquidation to elect additional Directors under specified circumstances, newly
created directorships resulting from any increase in the number of Directors and
any vacancy on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled solely by the
affirmative vote of a majority of the remaining Directors then in office, even
though less than a quorum of the Board of Directors. or by a sole remaining
Director, provided that any vacancy in the Board of Directors arising through
death, resignation or removal of the director elected by the Restricted Common
Stock shall be filled only by a special meeting of the holders of the Restricted
Common Stock called for the purpose of electing a director to fill such vacancy.
Any Director elected or chosen as provided herein shall hold office until the
sooner of the following events: (i) the expiration of the term of the
directorship to which he is appointed, (ii) such time as his successor is
elected and qualified or (iii) his resignation or removal. No decrease in the
number of Directors constituting the Board of Directors shall shorten the term
of an incumbent Director.
Section 4. Subject to the rights of the holders of any class or series
of stock having preference over the Common Stock as to dividends or upon
liquidation to elect additional Directors under
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specified circumstances, any Director may be removed from office only for cause
by the stockholders in the manner provided in this Section 4. At any annual
meeting of the stockholders of the Corporation or at any special meeting of the
stockholders of the Corporation, the notice of which shall state that the
removal of a Director or Directors is among the purposes of the meeting, a
Director may be removed for cause by the affirmative vote of the holders of at
least 662/3 percent of the capital stock of the Corporation entitled to vote at
an election of such Director.
Section 5. The business of the Corporation shall be managed by its
Board of Directors, which may exercise all such powers of the Corporation and do
all such lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these Bylaws directed or required to be exercised or done by
the stockholders.
Advisory Member of the Board of Directors
Section 6. The holders of a majority of the outstanding shares of the
Company's Restricted Common Stock may appoint one individual to serve as an
advisory member of the Board of Directors (the "Advisory Member"). Such Advisory
Member will be entitled to attend all meetings of the Board of Directors and
meetings of committees thereof and to speak at such meetings. Such Advisory
Member shall also be entitled to receive copies of any and all materials
delivered to the Board of Directors; provided, however, such Advisory Member
will not be entitled to a vote at any meeting of the Board of Directors or
committee thereof and shall not have any duties or responsibilities of a
Director. Other than reimbursement for expenses, if any, related to attendance
at each meeting of the Board of Directors, the Advisory Member will not be paid
for attendance at such meetings.
Meetings of the Board of Directors
Section 7. The Board of Directors of the Corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 8. Meetings of the Board of Directors may be held at such time
and place as shall be specified in a notice given in the manner hereinafter
provided, or as shall be specified in a written waiver signed by all of the
Directors.
Section 9. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board of Directors.
Section 10. Special meetings of the Board of Directors may be called by
the Chairman of the Board on 24 hours' notice to each Director, either
personally or by telecopy or telegram; special meetings shall be called by the
president, chief executive officer or secretary in like manner and on like
notice on the written request of three Directors.
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Section 11. Except as provided in these Bylaws to the contrary, at all
meetings of the board a majority of the total number of Directors shall
constitute a quorum for the transaction of business and the vote of a majority
of the Directors entitled to vote and present at a meeting at which a quorum is
present shall be the act of the Board of Directors, unless the Certificate of
Incorporation shall require a vote of a greater number. If a quorum shall not be
present at any meeting of the Board of Directors, the Directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 12. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors, or of any committee thereof, may be taken
without a meeting, if all members of the Board of Directors or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or committee.
Section 13. At all meetings of the Board of Directors, business shall
be transacted in such order as from time to time the Board of Directors may
determine.
At all meetings of the Board of Directors, the Chairman or
Vice-Chairman of the Board of Directors shall preside, and in the absence of
either such Director a person shall be chosen by the board from among the
Directors present to act as chairman of the meeting.
The secretary of the Corporation shall act as secretary of the meeting
of the Board of Directors, but in the absence of the secretary, the presiding
officer may appoint any person to act as secretary of the meeting.
Executive Committee; Committees of Directors
Section 14.
The Board of Directors may, by resolution adopted by a majority of the
whole Board of Directors, designate one (1) or more committees, each committee
to consist of one (1) or more Directors. The Board of Directors may designate
one (1) or more directors as alternate members of any committee, who may replace
any absent or disqualified member at any meeting of the committee. In the
absence or disqualification of a member, and the alternate or alternates, if
any, designated for such member, of any committee, the member or members thereof
present at the meetings and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another Director to act at the
meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution
establishing such committee, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority
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in reference to the following matters: (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
Delaware General Corporation Law to be submitted to stockholders for approval or
(ii) adopting, amending or repealing any bylaw of the Corporation. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
Section 15. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors.
Compensation of Directors
Section 16. The Directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary or
retainer as Director. No such payment shall preclude any Director from serving
the Corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Whenever notice is required to be given to any Director or
stockholder pursuant to a statutory provision or the Certificate of
Incorporation or these Bylaws, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
Director or stockholder, at his address as it appears in the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to Directors may also be given personally or by telegram or telecopy.
Section 2. Whenever notice is required to be given pursuant to a
statutory provision or the Certificate of Incorporation or Bylaws, a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the Corporation shall be chosen by the Board
of Directors and shall be the Chairman of the Board of Directors, a chief
executive officer, a president, a secretary and a treasurer. The Board of
Directors may also appoint one or more chief operating officers, one or more
vice presidents and one or more assistant secretaries and assistant treasurers.
Any number of offices
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may be held by the same person, unless the Certificate of Incorporation or these
Bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a Chairman of the Board of
Directors, a chief executive officer, a president, a secretary and a treasurer
and may choose one or more one or more chief operating officers, one or more
vice presidents and such other officers as the Board of Directors shall
determine in its sole discretion.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors.
Section 4. The salaries of all officers and agents of the Corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the Corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
The Chairman of the Board of Directors
Section 6. The Chairman of the Board of Directors of the Corporation
shall preside at all meetings of stockholders and the Board of Directors. He
shall perform such duties and have such powers as usually appertain to the
office or as the Board of Directors may from time to time prescribe.
The Chief Executive Officer
Section 7. The Chief Executive Officer shall be a senior officer of the
Corporation and shall perform such duties and have such powers as usually
appertain to the office or as the Board of Directors may from time to time
prescribe. He shall have the authority to execute all documents and instruments
necessary to carry out the management of the business of the Corporation. He
shall report to the Board of Directors.
The President
Section 8. The president of the Corporation shall have general and
active management of the business of the Corporation and shall see that all
orders and resolutions of the Board of Directors are carried into effect. He
shall have the authority to execute all documents and instruments necessary to
carry out the management of the business of the Corporation. He shall execute
bonds, mortgages and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution
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thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of this Corporation. He shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe. He shall report to the Board of Directors.
The Chief Operating Officer
Section 9. The chief operating officer of the Corporation shall be
responsible for the day-to-day operations of the Corporation and shall have the
authority to execute all documents and instruments necessary to carry out such
operations. The chief operating officer shall perform such other duties and have
such other powers as the Board of Directors may from time to time prescribe. The
chief operating officer shall report to the chief executive officer of the
Corporation.
The Chief Financial Officer
Section 10. The chief financial officer of the Corporation shall be
responsible for the finances of the Corporation and shall have the authority to
execute all documents and instruments necessary with respect to financial
matters, including, without limitation, loan agreements, indentures, promissory
notes, mortgage instruments, security agreements and financing statements. The
chief financial officer shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe. The chief
financial officer shall report to the chief executive officer of the
Corporation.
The Vice Presidents
Section 11. In the absence of the president or in the event of his
inability or refusal to act, the vice president (or in the event there is more
than one, the vice presidents in the order determined by the Board of Directors,
or, if there be no such determination, then in the order of their election),
shall perform the duties of the president, and when so acting, shall have all
the powers of and be subject to all the restrictions imposed upon the president.
The vice presidents shall perform such other duties and have such other powers
as the Board of Directors may from time to time prescribe.
The Secretary and the Assistant Secretary
Section 12. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the Corporation, if any such seal be adopted by
resolution of the Board of Directors, and he, or an assistant secretary, shall
have authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by his signature or by the signature of such
assistant secretary. The Board of Directors may give
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general authority to any other officer to affix the seal of the Corporation and
to attest the affirming thereof by his signature.
Section 13. The assistant secretary (or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors, or, if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
The Treasurer and Assistant Treasurer
Section 14. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the president and the Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of all his transactions as treasurer
and of the financial condition of the Corporation.
Section 15. The assistant treasurer (or, if there shall be more than
one, the assistant treasurers in the order determined by the Board of Directors,
or, if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the Corporation shall be entitled
to a certificate, signed by, or in the name of the Corporation by, the Chairman
of the Board, the president or a vice president and the secretary or an
assistant secretary of the Corporation, certifying the number of shares owned by
him in the Corporation. Any signature on the certificate may be a facsimile. If
the Corporation shall be authorized to issue more than one class of stock or
more than one series of any class of stock, the designations, preferences. and
relative participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in Section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
who so requests the designations, preferences and relative, participating,
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optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
Section 2. Where a certificate is countersigned (1) by a transfer agent
other than the Corporation or its employee or, (2) by a registrar other than the
Corporation or its employee, any signature on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
Lost Certificates
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Transfers of Stock
Section 4. Upon surrender to the Corporation or the transfer agent of
the Corporation of a certificate for shares duly endorsed or accompanied by a
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Fixing Record Date
Section 5. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting prior to an initial public offering of the Corporation's
Common Stock, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
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Registered Stock Holders
Section 6. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
Dividends
Section 1. Dividends upon the capital stock of the Corporation, subject
to the provisions of the Certificate of Incorporation, if any, may be declared
by the Board of Directors at any regular or special meetings, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the Directors shall think conducive to the interest of the
Corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
Checks
Section 3. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
Fiscal Year
Section 4. The fiscal year of the Corporation shall begin on the first
day of January of each year and end on the last day of December of each year,
unless otherwise determined by the Board of Directors.
Seal
Section 5. The corporate seal, if any such seal be adopted by
resolution of the Board of Directors, will be in such form as the Board of
Directors may prescribe. The seal may be used by
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causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise placed thereon.
Interested Directors and Officers
Section 6.
(a) No contract or transaction between the Corporation and one or more
of its Directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of its Directors or officers are Directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the Director or officer is present at or participates in the meeting of the
board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purposes, if;
(1) the material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested Directors, even though the disinterested
Directors be less than a quorum; or
(2) the material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
(3) the contract or transaction is fair as to the Corporation as
of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders.
(b) Common or interested Directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
ARTICLE VIII
AMENDMENTS
These Bylaws may be altered, amended or repealed, or new Bylaws may be
adopted by the affirmative vote of a majority of the entire Board of Directors
at any meeting and without the consent or vote of the stockholders. These Bylaws
may be altered, amended or repealed, or new Bylaws may be adopted by the
stockholders at any annual meeting of the stockholders or at any special meeting
of the stockholders, if notice of such alteration, amendment, repeal or adoption
of new Bylaws is contained in the notice of such meeting, by the affirmative
vote of at least 75% of the aggregate number of votes entitled to be cast
thereon and the affirmative vote of the holders of at least 75%
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of the then outstanding shares of each class of stock of the Corporation voting
separately as a class, provided that holders of shares of any series of
Preferred Stock shall not be entitled to vote with respect to any such amendment
unless (i) specifically required by the Directors' Resolution providing for the
issue of such series of Preferred Stock, (ii) provided in the Certificate of
Designation for the applicable series of Preferred Stock or (iii) otherwise
required by the DGCL.
ARTICLE IX
INDEMNIFICATION AND INSURANCE
Section 1. The Corporation shall, to the full extent permitted by
Section 145 of Title 8 of the General Corporation Law of the State of Delaware,
as amended from time to time, indemnify all officers and directors of the
Corporation whom it may indemnify pursuant thereto. The provisions of this
Article IX shall apply to acts or omissions occurring before or after the
adoption hereof. The right of indemnification herein provided for shall not be
exclusive of any other right to which any Director or officer may now or
hereafter be entitled under any statute, bylaw, agreement, vote of stockholders
or disinterested Directors or otherwise, shall continue as to a person who has
ceased to be such Director or officer entitled to indemnification pursuant to
this Article IX and shall inure to the benefit of the heirs, executors and
administrators of such Director or officer.
Section 2. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
Director, Advisory Member, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article IX or
of Section 145 of the General Corporation Law of the State of Delaware.
Section 3. The indemnification provided by this Article IX shall be
subject to all valid and applicable laws, and, in the event this Article IX or
any of the provisions hereof or the indemnification contemplated hereby are
found to be inconsistent with or contrary to any such valid laws, the latter
shall be deemed to control, and this Article IX shall be regarded as modified
accordingly and, as so modified, shall continue in full force and effect.
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EXHIBIT 3.3
CERTIFICATE OF DESIGNATIONS OF 10%
CUMULATIVE REDEEMABLE CONVERTIBLE PREFERRED STOCK, SERIES A
(PAR VALUE $0.01 PER SHARE)
OF
AMERICAN PLUMBING & MECHANICAL, INC.
---------------------------------------------
PURSUANT TO SECTION 151(g) OF THE
GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
--------------------------------------------
The undersigned does hereby certify that the following
resolutions were duly adopted by the Board of Directors of American Plumbing &
Mechanical, Inc., a Delaware corporation (the "Corporation"), in accordance
with the provisions of Section 151 of the Delaware General Corporation Law, at
a meeting duly convened and held on March , 1999, at which a quorum was present
and acting throughout:
WHEREAS, the Amended and Restated Certificate of
Incorporation of the Corporation (the "Charter"), authorizes a total
of 115,000,000 shares of capital stock, consisting of (i) 100,000,000
shares of common stock, par value $0.01 per share (the "Common
Stock"), issuable from time to time; (ii) 5,000,000 shares of
restricted common stock, par value $0.01 per share, issuable from time
to time and (iii) 10,000,000 shares of preferred stock, par value
$0.01 per share (the "Preferred Stock"), issuable from time to time in
one or more series; and
WHEREAS, the Corporation has entered into acquisition
agreements (the "Acquisition Agreements"), dated February 11, 1999,
with each of the following entities: Christianson Enterprises, Inc.,
GGR Leasing Corporation and Christianson Services, Inc., R.C.R.
Plumbing, Inc., Teepe's River City Mechanical, Inc., Keith Riggs
Plumbing, Inc., J.A. Croson Company and Franklin Fire Sprinkler
Company, J. A. Croson Company of Florida, Power Plumbing Inc., Nelson
Mechanical Contractors, Inc., Sherwood Mechanical, Inc. and Miller
Mechanical Contractors, Inc., and the shareholders of each of those
entities;
RESOLVED, that pursuant to the authority conferred on the
Board of Directors by the Charter, the Series A Preferred, be, and it
hereby is, established, created and approved, and that the designation
and number of shares thereof and the voting and other powers,
preferences and relative, participating, optional and other rights of
the shares of such series,
<PAGE> 2
and the qualifications, limitations and restrictions thereof, be, and
they hereby are, as set forth on Exhibit A attached hereto and
incorporated herein by reference for all purposes; and
FURTHER RESOLVED, that the proper officers be, and each
hereby is, authorized, empowered and directed, by and on behalf of the
Corporation and in its name, to prepare, execute and deliver, and file
with the Secretary of State of the State of Delaware, a certificate of
designations of the terms, limitations, rights and preferences of the
Series A Preferred Stock (the "Certificate of Designations"), with the
designations, voting and other powers, preferences, relative,
participating, optional and other rights, and the qualifications,
limitations and restrictions, set forth on Exhibit A.
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IN WITNESS WHEREOF, the Corporation has caused this
certificate to be signed this 31 day of March, 1999.
American Plumbing & Mechanical, Inc.
By: /s/ C. BYRON SNYDER
----------------------------------------
C. Byron Snyder
Director and Secretary
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EXHIBIT A
Section 1. Number of Shares and Designation. This series of preferred
stock shall be designated as "10% Cumulative Redeemable Convertible Preferred
Stock, Series A" and the number of shares which shall constitute such series
shall not be more than 1,048,820 shares, par value $.01 per share. For the
purpose of this Certificate of Designations, the 10% Cumulative Redeemable
Convertible Preferred Stock, Series A, shall be referred to as the "Series A
Preferred."
Section 2. Dividends.
(a) General Obligation. When, as and if declared by the Board of
Directors and to the extent permitted under the Delaware law, the Corporation
shall pay preferential dividends in cash to the holders of the Series A
Preferred as provided in this Section 2. Dividends on each share of the Series A
Preferred shall accrue on a daily basis at the rate of 10% per annum of the sum
of the Liquidation Value (as defined in Section 3(f) hereof) thereof plus all
accumulated and unpaid dividends thereon from and including the date of issuance
of such share to and including the first to occur of (i) the date on which the
Liquidation Value of such share (plus all accrued and unpaid dividends thereon)
is due and payable to the holder thereof in connection with the liquidation of
the Corporation or the redemption of such share by the Corporation, (ii) the
date on which such share is converted into shares of Common Stock as provided
hereunder or (iii) the fortieth (40th) day immediately following the IPO
Prospectus Delivery Termination Date (as defined in Section 6(a) hereof.)
Dividends shall accrue whether or not they have been declared and whether or not
there are profits, surplus or other funds of the Corporation legally available
for the payment of dividends.
(b) Dividend Payment Dates. All dividends which have accrued on the
Series A Preferred shall be payable on June 30 and December 31 of each year,
beginning June 30,1999 (the "Dividend Payment Dates"). All dividends which have
accrued on each share of Series A Preferred outstanding during the six-month
period (or other period in the case of an initial Dividend Payment Date) ending
upon such Dividend Payment Date shall be accumulated and shall remain
accumulated dividends with respect to such shares until paid to the holder
thereof. If a Dividend Payment Date falls on any date other than a business day,
the dividend payment due on such Dividend Payment Date shall be paid on the
business day immediately following such Dividend Payment Date, with the same
effect as if paid on the Dividend Payment Date without any additional accrual of
dividends payable in respect of such delay. Dividends payable on each Dividend
Payment Date shall be paid to record holders of the shares of Series A Preferred
as they appear on the books of the Corporation at the close of business on a
date (the "Dividend Record Date") fixed by the Board of Directors not more than
60 nor less than 30 days immediately preceding the applicable Dividend Payment
Date.
(c) Distribution of Partial Dividend Payments. Except as otherwise
provided herein, if at any time the Corporation pays less than the total amount
of dividends then accrued with respect to the Series A Preferred, such payment
shall be distributed pro rata among the holders thereof based upon the aggregate
accrued but unpaid dividends on the shares of Series A Preferred held by each
such holder.
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(d) Participation in Dividends with Common Stock. The Series A Preferred
shall be entitled to receive dividends, in addition to the dividends otherwise
payable pursuant to paragraph (a) above, on the same basis and in the same
amount as any dividend declared and paid on the Common Stock, on a per share
basis, (i) when, as and if declared by the Board of Directors, (ii) to the
extent permitted by Delaware law and (iii) if, after taking into account all
dividends declared and paid on the Common Stock from and after the first date of
issuance of the Series A Preferred, the Corporation has paid to the holders of
Common Stock cumulative dividends equal to the amount determined by applying,
for each share of Common Stock outstanding at the time such determination is
made, the rate of 10% per annum of the Common Stock Base Amount (as defined
below) for the period commencing from (x) with respect to each share of Common
Stock outstanding on the date of the first issuance of shares of Series A
Preferred, the date of the first issuance of shares of Series A Preferred and
(y) with respect to each share of Common Stock issued thereafter, the date of
such issuance. The "Common Stock Base Amount", as of any particular date, shall
be equal to $13.00 per share (as adjusted proportionately for any stock
dividends, combinations, splits or other similar events with respect to such
shares).
(e) The holders of shares of Series A Preferred shall not be entitled to
receive any dividends or other distributions except as provided herein.
Section 3. Liquidation.
(a) Upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary (a "Liquidation"), each holder of Series A
Preferred shall be entitled to receive, out of the assets of the Corporation
available for distribution to stockholders, after any distribution of payment is
made upon any securities of the Corporation senior in ranking to the Series A
Preferred (the "Senior Securities"), and before any distribution or payment is
made upon any securities of the Corporation junior in ranking to the Series A
Preferred (the "Junior Securities"), an amount in cash equal to the aggregate
Liquidation Value of all shares of Series A Preferred held by such holder (plus
all accrued and unpaid dividends thereon through the effective date of the
Liquidation). If, upon any Liquidation and after payment or distribution is made
upon any Senior Securities, the Corporation's assets to be distributed among the
holders of the Series A Preferred are insufficient to permit payment to such
holders of the Series A Preferred of the aggregate amount which they are
entitled to be paid under this Section 3(a), then the entire assets available to
be distributed to the holders of the Series A Preferred shall be distributed pro
rata among such holders based upon the aggregate Liquidation Value (plus all
accrued and unpaid dividends thereon through the effective date of the
Liquidation) of the Series A Preferred held by each such holder.
(b) After the payment or distribution to the holders of Series A
Preferred in full of the preferential amount provided in Section 3(a), the
holders of Common Stock shall be entitled to receive ratably an amount per share
equal to the Common Stock Base Amount plus an amount equal to the cumulative
dividend amount with respect to such share computed in accordance with clause
(iii) of Section 2(d) hereof. If, upon any Liquidation and after payment or
distribution in full of the preferential amount specified in Section 3(a), the
Corporation's assets to be distributed among the holders of the Common Stock are
insufficient to permit payment to such holders of the Common
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Stock of the aggregate amount to which they are entitled to be paid under this
Section 3(b), then the entire remaining assets available to be distributed
shall be distributed pro rata among the holders of Common Stock.
(c) After the payment or distribution to the holders of the Series A
Preferred and the holders of the Common Stock as provided in Section 3(a) and
Section 3(b), the holders of Series A Preferred and the holders of the Common
Stock shall be entitled to receive ratably, on a per share basis, all remaining
assets of the Corporation to be paid or distributed.
(d) Prior to a Liquidation, the Series A Preferred shall be convertible
into Common Stock only in accordance with the provisions of Section 6 below.
(e) Neither the consolidation or merger of the Corporation into or with
any other entity or entities (whether or not the Corporation is the surviving
entity), or the sale, conveyance, exchange or transfer (for cash, securities or
other consideration) by the Corporation of all or any part of its assets, or the
reduction of the capital stock of the Corporation nor any other form of
recapitalization or reorganization affecting the Corporation shall be deemed to
be a Liquidation within the meaning of this Section 3.
(f) The "Liquidation Value" of any share of Series A Preferred, as of any
particular date, shall be equal to $13.00 (as adjusted proportionately for any
stock dividends, combinations, splits or other similar events with respect to
such shares).
Section 4. Redemptions.
(a) Redemption at the Option of the Holders.
(i) Effective upon the occurrence of the third anniversary of the
issuance of the shares of Series A Preferred, each holder of such shares shall
have the right (a "Put Right"), but not the obligation, to require the
Corporation to purchase the shares of Series A Preferred then owned by such
holder. The purchase price for such redemption, which shall be paid out of funds
legally available therefor, shall be the Liquidation Value of such shares plus
all accrued and unpaid dividends thereon to the date of redemption (the
"Redemption Date").
(ii) The holders may exercise their Put Right by giving written
notice (a "Put Notice") to the Corporation. Upon receipt of a Put Notice, the
Corporation shall promptly mail a Redemption Notice (as defined below) to the
holders exercising their Put Right which includes the information set forth in
Section 4(c) hereof. The Redemption Date with respect to the shares of Series A
Preferred to be redeemed upon exercise of a Put Right shall in no event be later
than 90 days after the date the Corporation first receives the Put Notice.
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(b) Redemption at the Option of the Corporation.
(i) The Corporation may, in its sole discretion, at any time and
from time to time upon prior written notice redeem all or any portion of shares
of Series A Preferred then outstanding. The purchase price for each share of
Series A Preferred to be redeemed pursuant to this Section 4(b), which shall be
paid out of funds legally available therefor, shall be the greater of (i) the
Liquidation Value of a share of Series A Preferred and (ii) the Fair Market
Value (as defined below) of a share of Series A Preferred as of the Redemption
Record Date (as defined below) plus, in the case of each of clauses (i) and
(ii), all accrued and unpaid dividends thereon to the Redemption Date. The
Corporation shall mail a Redemption Notice which includes the information set
forth in Section 4(c) hereof for each redemption to each holder of record
thereof as of a date (the "Redemption Record Date") not more than 90 days nor
less than 30 days prior to the Redemption Date.
(ii) For the purpose of any computation under clause (i) above,
the "Fair Market Value" of a share of Series A Preferred on any date shall be
deemed to be, if the Common Stock is then listed or admitted for trading on the
New York Stock Exchange ("NYSE"), the National Association of Securities Dealers
Automated Quotation National Market ("NASDAQ"), or any over-the -counter market,
the average of the daily Closing Prices for the Common Stock for the thirty (30)
consecutive business days commencing forty-five (45) business days before such
date or, if the Common Stock is not then listed or admitted for trading on the
NYSE, NASDAQ or any over-the-counter market, the fair market value thereof as
determined in good faith by the Corporation's Board of Directors. Where used
herein, the "Closing Price" for each day shall be the reported last sale price
regular way or in the case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in either case
as reported on the New York Stock Exchange Composite Transactions reporting
system or, if not so quoted, on the NYSE or, if at any time the Common Stock is
not listed or admitted to trading on the NYSE, on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
or if the Common Stock is not listed or admitted to trading on any national
securities exchange, on the NASDAQ, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or quoted on NASDAQ, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any NYSE member firm selected from time to time by the Board of
Directors for such purposes.
(iii) In the event the Corporation elects to redeem less than the
total number of shares of Series A Preferred outstanding as of the Redemption
Record Date, the number of shares of Series A Preferred to be redeemed from each
holder thereof in redemptions pursuant to this Section 4(b) shall be the number
of shares determined by multiplying (A) the total number of shares to be
redeemed by the Corporation times (B) a fraction, the numerator of which shall
be the total amount of Liquidation Value (plus aggregate accrued and unpaid
dividends) represented by the shares held by such holder as of the Redemption
Record Date, and the denominator of which shall be the total amount of
Liquidation Value (plus aggregate accrued and unpaid dividends) represented by
the all of the shares outstanding as of the Redemption Record Date.
(c) Redemption Notice. The "Redemption Notice" sent to holders of shares
of Series A Preferred pursuant to Section 4(a)(ii) or Section 4(b)(i) hereof
shall set forth (A) the Redemption
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<PAGE> 8
Date for such redemption, (B) the total number of shares of Series A Preferred
to be redeemed and (C) if fewer than all of the shares held by such holder are
to be redeemed, the number of shares to be redeemed from such holder, (D) the
purchase price for shares to be redeemed and (E) the place and time of day
where share certificates are to be surrendered for payment of the redemption
price. Upon mailing any Redemption Notice which relates to redemption at the
option of the Corporation pursuant to Section 4(b) hereof, the Corporation
shall become obligated to redeem the total number of shares specified in such
notice on the Redemption Date specified therein.
(d) Closing on the Redemption Date. Any closing of the sale of shares of
Series A Preferred redeemed pursuant this Section 4 shall take place on the
Redemption Date specified in the Redemption Notice at the time and place
specified therein, unless mutually agreed to in writing by the Corporation and
the redeeming holder. At such closing the Corporation shall make payment for the
shares of Series A Preferred to be repurchased by wire transfer of immediately
available funds to a bank account designated by such holder for such purpose and
such holder shall deliver to the Corporation certificates, duly endorsed for
transfer, representing the shares of Series A Preferred to be redeemed. In the
case where fewer than the total number of shares represented by any certificate
are redeemed, upon surrender at the closing of the certificate representing the
redeemed shares, a new certificate representing the number of unredeemed shares
of Series A Preferred shall be issued to the holder thereof without cost to the
holder on the Redemption Date.
(e) No Dividends after Redemption Date. No shares of Series A Preferred
to be redeemed shall be entitled to any dividends accruing after the Redemption
Date with respect to such shares. On such date, all rights attributable to such
shares shall cease and such shares shall no longer be deemed to be issued and
outstanding.
Section 5. Voting Rights. (a) Except as set forth below or as otherwise
provided by Delaware law, holders of shares of Series A Preferred shall not be
entitled to vote as a separate class, but shall vote together with the holders
of shares of all other classes of capital stock of the Corporation having
general voting powers as one class, on all matters submitted to a vote of the
Corporation's stockholders. Each holder of shares of Series A Preferred shall
be entitled to the number of votes equal to the number of full shares of Common
Stock into which all shares of Series A Preferred Stock held by such holder
would be converted pursuant to the provisions of Section 6(a)(i) hereof (as
adjusted proportionately for any stock dividends, combinations, splits or other
similar events with respect to such shares), at the record date for the
determination of the stockholders entitled to vote on such matters or, if no
such record date is established, at the date such vote is taken or any written
consent of stockholders is first executed (assuming, for purposes of
determining the number of votes if such shares of Series A Preferred were
converted pursuant to Section 6, a price to the public of a share of Common
Stock in an IPO (as defined in Section 6(a) hereof) of $13.00 per share). In
all cases where the holders of shares of Series A Preferred have the right to
vote separately as a class as provided elsewhere herein or otherwise by
Delaware law, such holders shall be entitled to one vote for each such share
held by them respectively.
(b) Without the affirmative vote of the holders of not less than a
majority of the shares of Series A Preferred, voting together as a single
class, the Corporation shall not:
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(i) authorize the issuance of any new class or series of stock or
reclassify any existing stock into stock having rights and preferences on parity
with or prior and superior to the Series A Preferred as to dividends or amounts
payable upon liquidation or dissolution;
(ii) increase or decrease the total number of authorized shares of
Series A Preferred;
(iii) purchase, redeem or otherwise acquire for value (or pay into
or set aside as a sinking fund for such purpose) any of the Common Stock;
provided, that this provision shall not apply to the repurchase of shares of
Common Stock under the terms of the Acquisition Agreements; or
(iv) make any amendment to the Certificate of Incorporation of the
Corporation that would adversely change the rights, preferences, privileges or
restrictions of or on the holders of the Series A Preferred set forth in this
Certificate of Designations.
(c) At any time and for so long as either (i) the Corporation has failed
to punctually pay when due any redemption payment pursuant to Section 4 hereof
or (ii) dividends payable on the Series A Preferred pursuant to Section 2 hereof
have been in arrears and unpaid for a period of forty days following the
applicable Dividend Payment Date, the Corporation shall not, without the
affirmative vote of the holders of not less than a majority of the shares of
Series A Preferred, voting together as a single class:
(i) incur any additional indebtedness for borrowed money other
than borrowings under any credit facility to which the Corporation is a party at
such time and as in effect when any redemption payment becomes due and is unpaid
or at the time any Dividend Payment becomes due and is unpaid;
(ii) effect (or make any agreement or become obligated to effect)
any (a) sale, lease, assignment, transfer or other conveyance of the assets of
the Corporation or its Subsidiaries which individually or in the aggregate would
constitute a Significant Subsidiary, (b) consolidation or merger involving the
Corporation or any of its Subsidiaries, or (c) dissolution, liquidation or
winding-up of the Corporation or any of its Subsidiaries; provided however that
in no event shall the Corporation effect any sale, lease, assignment, transfer
or other conveyance of the assets of the Corporation or its Subsidiaries to
Affiliates of the Corporation;
(iii) make (or permit any Subsidiary to make) any loan or advance
to, or own any stock or other securities of, any Subsidiary or other
corporation, partnership, or other entity unless it is wholly owned by the
Corporation and except for any such loans and advances which do not in the
aggregate exceed $250,000;
(iv) make any loan or advance to any person, including, without
limitation, any employee or director of the Corporation or any Subsidiary,
except advances and similar expenditures in the ordinary course of business; or
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(v) acquire, by purchase, exchange, merger or otherwise, all of
substantially all of the properties or assets of any other corporation or
entity.
(d) Definitions. For purposes of this Section 5, the following terms
shall have the means ascribed to them herein:
"Affiliates" means with respect to any person or entity, any other
person or entity that directly or indirectly, controls, is controlled by, or is
under common control with such person or entity.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, incorporated or unincorporated association,
joint-stock company, trust, unincorporated organization or government or other
agency or political subdivision thereof or other entity of any kind.
"Significant Subsidiary" means any Subsidiary of the Corporation that
would be a "Significant Subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation
is in effect on the date hereof.
"Subsidiary" of any Person means (i) any corporation of which at least a
majority of the aggregate voting power of all classes of the Voting Stock is
owned by such Person directly or through one or more other Subsidiaries of such
Person and (ii) any entity other than a corporation in which such Person,
directly or indirectly, owns at least a majority of the Voting Stock of such
entity entitling the holder thereof to vote or otherwise participate in the
selection of the governing body, partners, managers or others that control the
management and policies of such entity. Unless otherwise specified, "Subsidiary"
means a Subsidiary of the Corporation.
"Voting Stock" with respect to any Person, means securities of any class
of capital stock of such Person entitling the holders thereof (whether at all
times or only so long as no senior class of stock or other relevant equity
interest has voting power by reason of any contingency) to vote in the election
of members of the board of directors or other governing body, partners, managers
or others that control the management and policies of such Person.
Section 6. Conversion.
(a) Conversion at Election of Corporation
(i) Upon and at any time and from time to time after the
consummation of a firm commitment underwritten initial public offering of the
Common Stock managed by one or more nationally recognized national investment
banking firms which is registered under the Securities Act of 1933 (an "IPO"),
the Corporation may convert all or any portion of the issued and outstanding
shares of Series A Preferred at a conversion ratio of one share of Common Stock
for each share of Series A Preferred to be converted (the "Equivalent Basis
Conversion Ratio"), provided, however, that if the Equivalent Basis Conversion
Ratio results in a lesser number of shares of Common Stock upon conversion of a
share of Series A Preferred than the Floating Conversion Ratio (as defined in
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Section 6(c) hereof), then the conversion of the Series A Preferred pursuant to
this Section 6(a) shall be made utilizing the Floating Conversion Ratio.
(ii) In the event that the Corporation elects to convert shares of
Series A Preferred, the Corporation shall mail a Conversion Notice (as defined
below) which includes the information set forth in paragraph 6(b) hereof for
each conversion to each holder of record thereof as of a date (the "Conversion
Record Date") not more than 90 days nor less than 30 days prior to the date of
conversion specified in the Conversion Notice (the "Corporation-Elected
Conversion Date"). In the event the Corporation elects to convert less than the
total number of shares of Series A Preferred outstanding as of the Conversion
Record Date, the number of shares of Series A Preferred of each holder to be
converted pursuant to this Section 6(a) shall be the number of shares of Series
A Preferred determined by multiplying the total number of shares of Series A
Preferred to be converted by the Corporation times a fraction, the numerator of
which shall be the total amount of Liquidation Value (plus aggregate accrued and
unpaid dividends) represented by the shares held by such holder as of the
Conversion Record Date, and the denominator of which shall be the total amount
of Liquidation Value (plus aggregate accrued and unpaid dividends), determined
as of the applicable Conversion Date, represented by all of the shares
outstanding as of the Conversion Record Date.
(iii) The "Conversion Notice" sent to holders of shares of Series
A Preferred pursuant to Section 6(a)(ii) hereof shall set forth (A) the
Corporation-Elected Conversion Date for such conversion, (B) the total number of
shares of Series A Preferred to be converted, (C) the number of shares of Series
A Preferred held by such holder, (D) the conversion ratio applicable to such
conversion and (E) the time of day and place where Series A Preferred share
certificates are to be surrendered on the Corporation-Elected Conversion Date in
exchange for certificates representing shares of Common Stock. Upon mailing any
Conversion Notice which relates to conversion at the option of the Corporation,
the Corporation shall become obligated to convert the total number of shares of
Series A Preferred specified in such notice into shares of Common Stock on the
Corporation-Elected Conversion Date specified therein.
(iv) The holders of Series A Preferred shall surrender
certificates representing the number of shares of Series A Preferred specified
in the Conversion Notice at the time and place specified therein on the
Corporation-Elected Conversion Date, duly endorsed for transfer.
(b) Conversion at Election of Holder.
(i) At any time and from time to time prior to the filing by the
Corporation of a registration statement with the Securities and Exchange
Commission (the "SEC") relating to a proposed IPO (the "IPO Registration
Statement"), a holder of Series A Preferred may convert all or any portion of
the issued and outstanding shares of Series A Preferred owned by such holder at
the Equivalent Basis Conversion Ratio. In the event that the Corporation
determines to file an IPO Registration Statement, the Corporation shall give
written notice to each holder of Series A Preferred not less than 30 days prior
to filing the IPO Registration Statement with the SEC.
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(ii) Each conversion of shares of Series A Preferred pursuant to
Section 6(b) shall be deemed to have been effected as of the close of business
on the date on which the certificate or certificates representing the shares of
such Series A Preferred to be converted, together with properly executed
conversion instructions or powers, have been surrendered for conversion at the
principal office of the Corporation (the "Holder-Elected Conversion Date").
(iii) Notwithstanding anything to the contrary in this Section
6(b), from and after the receipt by a holder of Series A Preferred of a
Redemption Notice from the Corporation pursuant to Section 4(b) through 5:00
p.m. New York time on the business day immediately preceding the Redemption Date
related thereto, a holder of Series A Preferred may convert all or a portion of
the issued and outstanding shares of Series A Preferred owned by such holder at
the Equivalent Basis Conversion Ratio.
(c) Conversion Following IPO.
(i) Not later than the 25th day following the date of the final
prospectus filed with the SEC in connection with the IPO (the "IPO Prospectus
Delivery Termination Date"), the Corporation shall give written notice to each
holder of Series A Preferred stating that (i) the IPO has been completed and
(ii) the Series A Preferred then outstanding will convert, without any further
action on the part of the Corporation or the holder of Series A Preferred, into
shares of Common Stock at the Floating Conversion Ratio (as defined below)
unless, on the fortieth (40th) day immediately following the IPO Prospectus
Delivery Termination Date, unless on or prior to such fortieth (40th) day such
holder gives written notice (a "Non-Conversion Notice") to the Corporation that
such holder desires that such holder's shares of Series A Preferred not be
converted into shares of Common Stock pursuant to Section 6(c)(ii).
(ii) In the event that the Corporation does not receive a
Non-Conversion Notice from a holder of Series A Preferred on or prior to the
fortieth (40th) day immediately following the IPO Prospectus Delivery
Termination Date, then the shares of Series A Preferred owned by such holder
will convert, without any further action on the part of the Corporation or such
holder, into shares of Common Stock at the Floating Conversion Ratio.
(iii) The Floating Conversion Ratio shall mean, with respect to
each share of Series A Preferred, a number of shares of Common Stock determined
by multiplying one by a fraction, the numerator of which is the Liquidation
Value (without the inclusion of any accrued but unpaid dividends), determined as
of the applicable Conversion Date (as defined below), and the denominator of
which is the price to the public of a share of the Common Stock in the IPO.
(iv) Nothing in this Section 6(c) shall prevent a holder of Series
A Preferred from giving a Put Notice pursuant to Section 4(a) hereof prior to
the effectiveness of the conversion of Series A Preferred into Common Stock
pursuant to Section 6(c)(ii), and, in the event that a holder of Series A
Preferred gives a Put Notice prior to the effectiveness of such conversion, the
Corporation will be obligated to redeem the Series A Preferred subject to such
Put Notice in accordance with the provisions of Section 4(a).
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(d) Closing on the Conversion Date.
(i) As promptly as possible after a Corporation-Elected Conversion
Date or a Holder-Elected Conversion Date or the date of a conversion effected in
accordance with Section 6(c) hereof (each, a "Conversion Date"), but in any
event within five business days thereafter, the Corporation shall deliver or
cause to be delivered to or for the account of the holders of the converted
shares of Series A Preferred: (A) payment in cash, out of funds legally
available therefor, in an amount equal to all accrued dividends (whether or not
declared or currently payable) with respect to each share converted which have
not been paid prior to the applicable Conversion Date; (B) in lieu of any
fractional shares to which the holder would otherwise be entitled, payment in
cash, out of funds legally available therefor, in an amount equal to such
fraction of a share multiplied by the price to the public of a share of the
Common Stock in the IPO; (C) a certificate or certificates representing the
number of shares of Common Stock issuable by reason of such conversion in such
name or names and such denomination or denominations as the converting holder
has specified; and (D) a certificate representing any shares of Series A
Preferred which were represented by the certificate or certificates delivered to
the Corporation in connection with such conversion but which were not converted.
(ii) If the Corporation is not permitted under applicable law to
make the cash payment under subparagraph (ii) above, the Corporation shall make
such payments to the converting holder as soon thereafter as funds of the
Corporation are legally available for such payment. At the request of any such
converting holder in such case, the Corporation shall provide such holder with
written evidence of its obligation to such holder.
(iii) The issuance or delivery of certificates for shares of
Common Stock upon conversion of Series A Preferred shall be made without charge
to the holders of such Series A Preferred for any issuance tax in respect
thereof or other cost incurred by the Corporation in connection with such
conversion and the related issuance of shares of Common Stock; provided,
however, that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificate in a name other than that of the holder of shares of Series A
Preferred converted.
(e) No Dividends After Conversion Date. No shares of Series A Preferred
to be converted shall be entitled to any dividends accruing after the applicable
Conversion Date with respect to such shares. On such date, all rights
attributable to such shares shall cease, such shares shall no longer be deemed
to be issued and outstanding and the persons or persons in whose name or names
any certificate or certificates for shares of Common Stock are to be issued upon
such conversion will be deemed to have become the holder or holders of record of
the shares of Common Stock represented thereby. In the event certificates
representing the shares of Series A Preferred to be converted are not delivered
on the applicable Conversion Date, such certificates will thereafter represent
only the right to receive shares of Common Stock upon their surrender.
(f) Subdivision or Combination of Common Stock. If the Corporation at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Equivalent Basis Conversion Ratio and the Floating
Conversion Ratio (each, a "Conversion Ratio") in effect
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immediately prior to such subdivision shall be proportionately increased, and if
the Corporation at any time combines (by reverse stock split or otherwise) one
or more classes of its outstanding shares of Common Stock into a smaller number
of shares, each Conversion Ratio in effect immediately prior to such combination
shall be proportionately decreased; provided, however, the issuance by the
Corporation of additional shares of Common Stock in an IPO or otherwise
(including without limitation (i) upon the exercise of any options to purchase
Common Stock which may have been granted from time to time by the Corporation or
(ii) as dividends on any series of Preferred Stock) for cash, property or
services shall not result in any adjustment of either Conversion Ratio. Promptly
following any such adjustment of either Conversion Ratio, the Corporation shall
give written notice thereof to all holders of Series A Preferred, setting forth
in reasonable detail and certifying the calculation and the effective date of
such adjustment.
(g) Sale of Assets, Merger, Consolidation or Change of Control. In the
event of (i) any sale of all or substantially all of the Corporation's assets in
one transaction or series of transactions, (ii) any merger or consolidation
which involves the Corporation in which the Corporation is not the surviving
entity or (iii) any transaction after which the combined voting power of the
Corporation then held by persons other than the holders of voting stock as of
the date of the closing of Acquisition Agreements constitute 50% or more of the
combined voting power of the Corporation outstanding as of the date of the
consummation of such transaction (a "Reorganization Transaction"), prior to the
consummation of such Reorganization Transaction, the Corporation shall make
appropriate provisions to insure that each of the holders of Series A Preferred
shall thereafter have the right to acquire and receive, such shares of stock,
securities or assets as such holder would have received in connection with such
Reorganization Transaction if such holder had converted its Series A Preferred
immediately prior thereto.
(h) Reservation of Common Stock. So long as any shares of the Series A
Preferred remain outstanding, the Corporation will at all times reserve from its
authorized Common Stock a sufficient number of shares to provide for the
conversion rights herein set forth and will take such corporate action, in the
event of an adjustment in either Conversion Ratio, as may be necessary in order
that it may validly and legally issue fully paid and nonassessable shares of
Common Stock upon conversion of the Series A Preferred.
Section 7. Lost Share Certificates. In the event a holder of shares of
Series A Preferred is unable to deliver physical certificates representing such
shares for redemption or conversion, such holder, in lieu of delivering such
certificates, must notify the Corporation, and any transfer agent that the
Corporation may request, that such certificates have been lost, stolen, or
destroyed and execute an agreement reasonably satisfactory to the Corporation in
its sole discretion to indemnify the Corporation from any loss incurred by it in
connection therewith. In such event, such notice and agreement must be received
by the Corporation not less than ten days in advance of the applicable
Redemption Date or Conversion Date, as the case may be.
Section 8. Registration Books; Record Holders. The Corporation will keep,
or cause to be kept, at its principal office (or at the office of its agent for
such purpose) proper books in which the names and addresses of the holders of
shares of Series A Preferred issued by the Corporation shall
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<PAGE> 15
be registered and in which transfers of such shares may be registered. The
Corporation may treat the registered holder of any shares of Series A Preferred
as the absolute owner thereof for the purpose of receiving all dividends and
redemption payments thereon and for all other purposes, and the Corporation
shall not be affected by any notice or knowledge to the contrary.
Section 9. No Consent for Certain Actions. Except as provided in Section
5 hereof, no consent, approval or vote of the holders of Series A Preferred
shall be required for (i) the creation of any indebtedness of any kind of the
Corporation, (ii) the creation of any class of Junior Securities or Senior
Securities, (iii) the authorization of additional shares of any Junior Security
or Senior Securities, (iv) the issuance of shares of Junior Securities or Senior
Securities or (v) the repurchase or redemption of shares of Common Stock
pursuant to the provisions of the Acquisition Agreements.
Section 10. No Preemptive Rights. The holders of Series A Preferred
shall not have preemptive rights to acquire additional, unissued or treasury
shares of capital stock of the Corporation.
Section 11. Amendment and Waiver. The Corporation may not amend this
Certificate of Designations or waive compliance with any of the provisions
hereof without, in either instance, the affirmative vote (at a meeting) or the
written consent (with or without a meeting) of the holders of a majority of the
shares of Series A Preferred then outstanding.
Section 12. Severability of Provisions. Whenever possible, each provision
hereof shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such change as
shall be necessary to render the provision in question effective and valid under
applicable law.
Section 13. Notices. Except as otherwise expressly provided hereunder,
all notices referred to herein shall be in writing and shall be delivered by
first class mail or by reputable overnight courier service, charges prepaid, and
shall be deemed to have been given when so mailed or sent (i) to the Corporation
(attention: Secretary) at its principal executive offices and (ii) to any
stockholder, at such holder's address as it appears in the stock records of the
Corporation or to such other address as the Corporation or holder, as the case
may be, shall have designated by notice similarly given.
* * * *
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<PAGE> 16
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be signed and attested this _____ day of March, 1999.
AMERICAN PLUMBING & MECHANICAL, INC.
By:
---------------------------------------
David Baggett
Chief Financial Officer
Attest:
By:
-----------------------------
C. Byron Snyder
Secretary
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<PAGE> 1
EXHIBIT 4.1
================================================================================
AMERICAN PLUMBING & MECHANICAL, INC.
AS THE COMPANY
AND
THE SUBSIDIARIES NAMED HEREIN
AS GUARANTORS
TO
STATE STREET BANK AND TRUST COMPANY
AS TRUSTEE
INDENTURE
DATED AS OF MAY 19, 1999
UP TO $250,000,000
11 5/8% SENIOR SUBORDINATED NOTES DUE 2008
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
(NOTE - this table is not part of the Indenture)
<TABLE>
<CAPTION>
TIA Indenture
Section Section
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<S> <C>
310(a)(1)..................................................................................... 6.9
310(a)(2)..................................................................................... 6.9
310(a)(3)..................................................................................... N.A.
310(a)(4)..................................................................................... N.A.
310(a)(5)..................................................................................... N.A.
310(b)........................................................................................ 6.8; 6.10
310(c)........................................................................................ N.A.
311(a)........................................................................................ 6.13
311(b)........................................................................................ 6.13
311(c)........................................................................................ N.A.
312(a)........................................................................................ 7.1; 7.2
312(b)........................................................................................ 7.2
312(c)........................................................................................ 7.2
313(a)........................................................................................ 7.3
313(b)........................................................................................ 7.3
313(c)........................................................................................ 1.6
313(d)........................................................................................ 7.3
314(a)........................................................................................ 7.4
314(b)........................................................................................ N.A.
314(c)(1)..................................................................................... 1.2
314(c)(2)..................................................................................... 1.2
314(c)(3)..................................................................................... N.A.
314(d)........................................................................................ N.A.
314(e)........................................................................................ 1.2
314(f)........................................................................................ N.A.
315(a)........................................................................................ 6.1
315(b)........................................................................................ 6.2
315(c)........................................................................................ 6.1
315(d)........................................................................................ 6.1
315(e)........................................................................................ 5.14
316(a)(1)(A).................................................................................. 5.12
316(a)(1)(B).................................................................................. 5.13
316(a)(2)..................................................................................... N.A.
316(a)(last sentence)......................................................................... 1.1
316(b)........................................................................................ 5.7; 5.8
316(c)........................................................................................ 1.4
317(a)(1)..................................................................................... 5.3
317(a)(2)..................................................................................... 5.4
317(b)........................................................................................ 10.3
317(a)........................................................................................ 1.7
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
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ARTICLE I
Definitions and Other Provisions of General Application
SECTION 1.1. Definitions...............................................................................1
SECTION 1.2. Compliance Certificates and Opinions.....................................................24
SECTION 1.3. Form of Documents Delivered to Trustee...................................................25
SECTION 1.4. Acts of Holders; Record Dates............................................................25
SECTION 1.5. Notices to Trustee, the Company or a Guarantor...........................................27
SECTION 1.6. Notice to Holders; Waiver................................................................28
SECTION 1.7. Conflict with Trust Indenture Act........................................................28
SECTION 1.8. Effect of Headings and Table of Contents.................................................28
SECTION 1.9. Successors and Assigns...................................................................28
SECTION 1.10. Separability Clause......................................................................28
SECTION 1.11. Benefits of Indenture....................................................................29
SECTION 1.12. Governing Law............................................................................29
SECTION 1.13. Legal Holidays...........................................................................29
ARTICLE II
Security Forms
SECTION 2.1. Forms Generally..........................................................................29
ARTICLE III
The Securities
SECTION 3.1. Title and Terms..........................................................................29
SECTION 3.2. Denominations............................................................................30
SECTION 3.3. Execution, Authentication, Delivery and Dating...........................................31
SECTION 3.4. Temporary Securities.....................................................................32
SECTION 3.5. Registration; Registration of Transfer and Exchange......................................32
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities.........................................33
SECTION 3.7. Payment of Interest; Rights Preserved....................................................34
SECTION 3.8. Persons Deemed Owners....................................................................35
SECTION 3.9. Cancellation.............................................................................35
SECTION 3.10. Computation of Interest..................................................................36
SECTION 3.11. CUSIP and CINS Numbers...................................................................36
SECTION 3.12. Deposits of Monies.......................................................................36
SECTION 3.13. Book-Entry Provisions for Global Securities..............................................36
SECTION 3.14. Special Transfer Provisions..............................................................37
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ARTICLE IV
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture..................................................38
SECTION 4.2. Application of Trust Money...............................................................40
ARTICLE V
Remedies
SECTION 5.1. Events of Default........................................................................40
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment.......................................42
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee..........................43
SECTION 5.4. Trustee May File Proofs of Claim.........................................................44
SECTION 5.5. Trustee May Enforce Claims Without Possession of Securities..............................44
SECTION 5.6. Application of Money Collected...........................................................44
SECTION 5.7. Limitation on Suits......................................................................45
SECTION 5.8. Unconditional Right of Holders To Receive Principal, Premium and
Interest..............................................................................46
SECTION 5.9. Restoration of Rights and Remedies.......................................................46
SECTION 5.10. Rights and Remedies Cumulative...........................................................46
SECTION 5.11. Delay or Omission Not Waiver.............................................................46
SECTION 5.12. Control by Holders.......................................................................46
SECTION 5.13. Waiver of Past Defaults..................................................................47
SECTION 5.14. Undertaking for Costs....................................................................47
SECTION 5.15. Waiver of Stay or Extension Laws.........................................................47
ARTICLE VI
The Trustee
SECTION 6.1. Certain Duties and Responsibilities......................................................48
SECTION 6.2. Notice of Defaults.......................................................................48
SECTION 6.3. Certain Rights of Trustee................................................................49
SECTION 6.4. Not Responsible for Recitals or Issuance of Securities...................................50
SECTION 6.5. May Hold Securities......................................................................50
SECTION 6.6. Money Held in Trust......................................................................50
SECTION 6.7. Compensation and Reimbursement...........................................................50
SECTION 6.8. Conflicting Interests....................................................................51
SECTION 6.9. Corporate Trustee Required; Eligibility..................................................51
SECTION 6.10. Resignation and Removal; Appointment of Successor........................................52
</TABLE>
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SECTION 6.11. Acceptance of Appointment by Successor...................................................53
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business..............................53
SECTION 6.13. Preferential Collection of Claims Against the Company or a Guarantor.....................54
SECTION 6.14. Appointment of Authenticating Agent......................................................54
ARTICLE VII
Holders' Lists and Reports by Trustee and Company
SECTION 7.1. Company To Furnish Trustee Names and Addresses of Holders................................55
SECTION 7.2. Preservation of Information; Communications to Holders...................................55
SECTION 7.3. Reports by Trustee.......................................................................56
SECTION 7.4. Reports by Company.......................................................................56
ARTICLE VIII
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 8.1. Company May Merge, Consolidate, Etc., Only on Certain Terms..............................56
SECTION 8.2. Successor Substituted....................................................................58
ARTICLE IX
Amendments; Waivers; Supplemental Indentures
SECTION 9.1. Amendments, Waivers and Supplemental Indentures Without Consent of
Holders...............................................................................58
SECTION 9.2. Modifications, Amendments and Supplemental Indentures
with Consent of Holders...............................................................59
SECTION 9.3. Execution of Supplemental Indentures.....................................................60
SECTION 9.4. Effect of Supplemental Indentures........................................................60
SECTION 9.5. Conformity with Trust Indenture Act......................................................60
SECTION 9.6. Reference in Securities to Supplemental Indentures.......................................61
SECTION 9.7. Waiver of Certain Covenants..............................................................61
SECTION 9.8. No Liability for Certain Persons.........................................................61
ARTICLE X
Covenants
SECTION 10.1. Payment of Principal, Premium and Interest...............................................61
SECTION 10.2. Maintenance of Office or Agency..........................................................62
SECTION 10.3. Money for Security Payments To Be Held in Trust..........................................62
SECTION 10.4. Existence; Activities....................................................................63
SECTION 10.5. Maintenance of Properties................................................................63
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SECTION 10.6. Payment of Taxes and Other Claims........................................................64
SECTION 10.7. Maintenance of Insurance.................................................................64
SECTION 10.8. Limitation on Indebtedness...............................................................64
SECTION 10.9. Limitation on Restricted Payments........................................................64
SECTION 10.10. Limitation on Issuances and Sales of Restricted Subsidiary Stock.........................67
SECTION 10.11. Limitation on Transactions with Affiliates...............................................68
SECTION 10.12. Limitation on Liens......................................................................69
SECTION 10.13. Change of Control........................................................................69
SECTION 10.14. Disposition of Proceeds of Asset Sales...................................................70
SECTION 10.15. Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries...............................................................72
SECTION 10.16. Limitation on Issuance of Subordinated Indebtedness......................................73
SECTION 10.17. Additional Subsidiary Guarantees.........................................................73
SECTION 10.18. Limitations on Designation of Unrestricted Subsidiaries..................................73
SECTION 10.19. Provision of Financial Information.......................................................74
SECTION 10.20. Statement by Officers as to Default; Compliance Certificates.............................75
ARTICLE XI
Redemption of Securities
SECTION 11.1. Right of Redemption......................................................................75
SECTION 11.2. Applicability of Article.................................................................75
SECTION 11.3. Election to Redeem; Notice to Trustee....................................................75
SECTION 11.4. Selection by Trustee of Securities To Be Redeemed........................................76
SECTION 11.5. Notice of Redemption.....................................................................76
SECTION 11.6. Deposit of Redemption Price..............................................................77
SECTION 11.7. Securities Payable on Redemption Date....................................................77
SECTION 11.8. Securities Redeemed in Part..............................................................77
ARTICLE XII
Defeasance and Covenant Defeasance
SECTION 12.1. Company's Option To Effect Defeasance or Covenant Defeasance.............................78
SECTION 12.2. Defeasance and Discharge.................................................................78
SECTION 12.3. Covenant Defeasance......................................................................78
SECTION 12.4. Conditions to Defeasance or Covenant Defeasance..........................................79
SECTION 12.5. Deposited Money and U.S. Government Obligations To Be Held in Trust;
Miscellaneous Provisions..............................................................81
SECTION 12.6. Reinstatement............................................................................81
</TABLE>
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ARTICLE XIII
Guaranty
SECTION 13.1. Guaranty.................................................................................82
SECTION 13.2. Limitation on Liability..................................................................84
SECTION 13.3. Execution and Delivery of Guarantees; Supplemental Indentures............................84
SECTION 13.4. Guarantors May Consolidate, Etc., on Certain Terms.......................................84
SECTION 13.5. Release of Guarantors....................................................................85
SECTION 13.6. Successors and Assigns...................................................................85
SECTION 13.7. No Waiver, etc...........................................................................85
SECTION 13.8. Modification, etc........................................................................85
SECTION 13.9. Subordination of Guarantees..............................................................86
ARTICLE XIV
Subordination
SECTION 14.1. Securities Subordinate to Senior Indebtedness and Senior
to Subordinated Indebtedness..........................................................86
SECTION 14.2. Payment Over of Proceeds upon Dissolution, Etc...........................................86
SECTION 14.3. No Payment When Designated Senior Indebtedness in Default................................87
SECTION 14.4. Subrogation to Rights of Holders of Senior Indebtedness..................................88
SECTION 14.5. Provisions Solely To Define Relative Rights..............................................88
SECTION 14.6. Trustee To Effectuate Subordination......................................................88
SECTION 14.7. No Waiver of Subordination Provisions....................................................88
SECTION 14.8. Notice to Trustee........................................................................89
SECTION 14.9. Reliance on Judicial Order or Certificate of Liquidating Agent...........................89
SECTION 14.10. Trustee Not Fiduciary for Holders of Senior Indebtedness.................................90
SECTION 14.11. Rights of Trustee as Holder of Senior Indebtedness; Preservation of
Trustee's Rights......................................................................90
SECTION 14.12. Article Applicable to Paying Agents......................................................90
Schedule A List of Guarantors
Exhibit A-1 Form of Security
Exhibit A-2 Form of Series B Security
Exhibit B Global Securities Legend
Exhibit C Form of Supplemental Indenture
</TABLE>
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<PAGE> 8
INDENTURE, dated as of May 19, 1999, among AMERICAN PLUMBING &
MECHANICAL, INC., a corporation duly organized and existing under the laws of
the State of Delaware (herein called the "Company"), the Subsidiaries of the
Company named in Schedule A as of the date of issuance (herein called the
"Initial Guarantors") and STATE STREET BANK AND TRUST COMPANY, as trustee
(herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 11 5/8%
Senior Subordinated Notes due 2008, Series A, and 11 5/8% Senior Subordinated
Notes due 2008, Series B (together, the "Securities"), of substantially the
tenor and amount hereinafter set forth, and to provide therefor the Company has
duly authorized the execution and delivery of this Indenture.
Each Guarantor desires to make the Guaranty provided herein and has
duly authorized the execution and delivery of this Indenture.
All things necessary to make the Securities, when executed by the
Company, authenticated and delivered hereunder and duly issued by the Company,
and the Guarantees, when executed and delivered hereunder by each Guarantor,
the valid obligations of the Company and each Guarantor, and to make this
Indenture a valid agreement of the Company and each Guarantor, in accordance
with their and its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders (as defined herein) thereof, it is mutually
covenanted and agreed, for the equal and proportionate benefit of all Holders
of the Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with GAAP (whether or not
such is indicated herein);
<PAGE> 9
(4) unless the context otherwise requires, any reference to
an "Article" or a "Section" refers to an Article or Section, as the
case may be, of this Indenture;
(5) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision; and
(6) each reference herein to a rule or form of the Commission
shall mean such rule or form and any rule or form successor thereto,
in each case as amended from time to time.
Whenever this Indenture requires that a particular ratio or amount be
calculated with respect to a specified period after giving effect to certain
transactions or events on a pro forma basis, such calculation shall be made as
if the transactions or events occurred on the first day of such period, unless
otherwise specified.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Asset Acquisition from such Person or (b) existing at the
time such Person becomes or is merged into a Subsidiary of any other Person.
"Acquisition Agreements" means, collectively, the acquisition
agreements dated February 11, 1999 between the Company and each of the
stockholders of the founding companies pursuant to which the Company acquired
the founding companies.
"Act," when used with respect to any Holder, has the meaning specified
in Section 1.4.
"Affiliate" means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of Voting Stock, by agreement or
otherwise; provided, however, that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control.
"Agent Members" has the meaning specified in Section 3.13.
"Alternative Offer" has the meaning specified in Section 10.13.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary, or shall be merged with or into the Company or
any Restricted Subsidiary, or (b) the acquisition by the Company or any
Restricted Subsidiary of the assets of any Person which constitute all or
substantially all of the assets of such Person, any division or line of
business of such Person or, other than in the ordinary course of business, any
other properties or assets of such Person.
-2-
<PAGE> 10
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition by the Company or any Restricted Subsidiary to any Person
other than the Company or a Restricted Subsidiary, of (a) any Capital Stock of
any Restricted Subsidiary; (b) all or substantially all of the properties and
assets of any division or line of business of the Company or any Restricted
Subsidiary; or (c) any other properties or assets of the Company or any
Restricted Subsidiary outside of the ordinary course of business, other than
(i) sales of obsolete, damaged or used equipment or other equipment or
inventory sales in the ordinary course of business, (ii) sales of assets in one
or a series of related transactions for an aggregate consideration of less than
$2.0 million and (iii) sales of accounts receivable for financing purposes. For
the purposes of Section 10.14, the term "Asset Sale" shall not include (i) any
sale, issuance, conveyance, transfer, lease or other disposition of properties
or assets that is governed by the provisions of Article VIII or (ii) a
Restricted Payment that is permitted under Section 10.9 or (iii) the trade or
exchange by the Company or any Restricted Subsidiary of any property or assets
owned or held by the Company or such Restricted Subsidiary for any property or
assets owned or held by another Person, provided that the Fair Market Value of
the properties traded or exchanged by the Company or such Restricted Subsidiary
(including any cash or Cash Equivalents to be delivered by the Company or such
Restricted Subsidiary) is reasonably equivalent to the Fair Market Value of the
properties (together with any cash or Cash Equivalents) to be received by the
Company or such Restricted Subsidiary, and provided further that any such cash
or Cash Equivalents shall be deemed to constitute Net Cash Proceeds of an Asset
Sale for purposes of Section 10.14.
"Asset Sale Deficiency" has the meaning specified in Section 10.14.
"Asset Sale Offer" has the meaning specified in Section 10.14.
"Asset Sale Offer Amount" has the meaning specified in Section 10.14.
"Asset Sale Purchase Date" means the Purchase Date relating to an
Asset Sale Offer.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value of the obligation of the
lessee for net rental payments during the remaining term of the lease included
in such sale and leaseback transaction including any period for which such
lease has been extended or may, at the option of the lessor, be extended. Such
present value shall be calculated using a discount rate equal to the rate of
interest implicit in such transaction, determined in accordance with GAAP.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 hereof to act on behalf of the Trustee to authenticate
Securities.
"Average Life to Stated Maturity" means, with respect to any
Indebtedness, as at any date of determination, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years (and any
portion thereof) from such date of such determination to the date or dates of
each successive scheduled principal payment (including, without limitation, any
sinking fund or mandatory redemption payment requirements) of such
Indebtedness, and (b) the amount of each such principal payment by (ii) the sum
of all such principal payments.
-3-
<PAGE> 11
"Board of Directors" means the board of directors of a company or its
equivalent, including managers of a limited liability company, general partners
of a partnership or trustees of a business trust, or any duly authorized
committee thereof.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of a company to have been duly adopted by
the Board of Directors of such company and to be in full force and effect on
the date of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the Borough of
Manhattan, The City of New York are authorized or obligated by law or executive
order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock or equity participations, and any rights (other
than debt securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock and, including, without
limitation, with respect to partnerships, limited liability companies or
business trusts, ownership interests (whether general or limited) and any other
interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of assets of, such partnerships,
limited liability companies or business trusts.
"Capitalized Lease Obligation" means any obligation to pay rent or
other amounts under a lease of (or other agreement conveying the right to use)
any property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligation under GAAP, and, for
the purpose of this Indenture, the amount of such obligation at any date shall
be the capitalized amount thereof at such date, determined in accordance with
GAAP.
"Cash Equivalents" means, at any time, (a) any evidence of
Indebtedness, maturing not more than two years after such time, issued or
guaranteed by the United States Government or any agency thereof (provided that
the full faith and credit of the United States of America is pledged in support
thereof), (b) commercial paper, maturing not more than 270 days from the date
of issue, rated at least A-2 by Standard & Poor's Ratings Group or P-2 by
Moody's Investors Service, Inc., (c) any certificate of deposit (or time
deposits represented by such certificates of deposit) or bankers acceptance,
maturing not more than one year after such time, or overnight Federal Funds
transactions that are issued or sold by a banking institution that is a member
of the Federal Reserve System and has a combined capital and surplus and
undivided profits of not less than $500 million, (d) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clause (a) above entered into with any bank meeting the
specifications of clause (c) above, and (e) investments in funds investing
primarily in investments of the types described in clauses (a) through (d)
above.
"Change of Control" means the occurrence of any of the following
events: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be
deemed to have "beneficial ownership" of all securities that such Person has
the right to
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<PAGE> 12
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 50% of the total Voting
Stock of the Company; (b) the Company consolidates with, or merges with or
into, another Person or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the Company
is converted into or exchanged for cash, securities or other property, other
than any such transaction where (i) the outstanding Voting Stock of the Company
is converted into or exchanged for Voting Stock (other than Redeemable Capital
Stock) of the surviving or transferee corporation and (ii) immediately after
such transaction no "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act) is the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be
deemed to have "beneficial ownership" of any securities that such Person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than 50% of the
total Voting Stock of the surviving or transferee corporation; (c) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the stockholders of the Company was approved by a vote of 66 2/3%
of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office; or (d) the Company is
liquidated or dissolved or adopts a plan of liquidation.
"Change of Control Date" has the meaning specified in Section 10.13.
"Change of Control Offer" has the meaning specified in Section 10.13.
"Change of Control Purchase Date" has the meaning specified in Section
10.13.
"Change of Control Purchase Price" has the meaning specified in
Section 10.13.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations thereunder.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Stock" means the common stock of the Company, par value $0.01
per share.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Chief
Executive Officer, its Chief Financial
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<PAGE> 13
Officer, its President or a Vice President, and by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the
Trustee or Paying Agent, as applicable.
"Consolidated Cash Flow Available for Fixed Charges" as of any date of
determination means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus, to the extent
deducted from Consolidated Net Income during such period, the sum of, without
duplication, the amounts for such period, taken as a single accounting period,
of (a) Consolidated Non-cash Charges, (b) Consolidated Interest Expense, and
(c) Consolidated Income Tax Expense (other than income tax expense (either
positive or negative) attributable to extraordinary gains or losses) less all
cash payments during such period relating to non-cash charges that were added
back in determining Consolidated Cash Flow Available for Fixed Charges in any
prior period.
"Consolidated Fixed Charge Coverage Ratio" as of any date of
determination means, with respect to any Person, the ratio of the aggregate
amount of Consolidated Cash Flow Available for Fixed Charges of such Person for
the four full fiscal quarters, treated as one period, for which financial
information in respect thereof is available immediately preceding the date of
the transaction (the "Transaction Date") giving rise to the need to calculate
the Consolidated Fixed Charge Coverage Ratio (such four full fiscal quarter
period being referred to herein as the "Four Quarter Period") to the aggregate
amount of Consolidated Fixed Charges of such Person for the Four Quarter
Period. For purposes of making the computation referred to above, Consolidated
Cash Flow Available for Fixed Charges and Consolidated Fixed Charges shall be
calculated giving pro forma effect (in a manner consistent with Rule 11-02 of
Regulation S-X) to the following events (without duplication): (i) any Asset
Sale or Asset Acquisition occurring since the first day of the Four Quarter
Period (including to the date of calculation) as if such acquisition or
disposition occurred at the beginning of the Four Quarter Period (including
giving effect to (A) the amount of any reduction in expenses related to any
compensation, remuneration or other benefit paid or provided to any employee,
consultant, Affiliate or equity owner of the entity involved in any such Asset
Sale or Asset Acquisition to the extent such costs are eliminated or reduced
(or public announcement has been made of the intent to eliminate or reduce such
costs) prior to the date of such calculation and not replaced and (B) the
amount of any reduction in general, administrative or overhead costs of the
entity involved in any such Asset Sale or Asset Acquisition), (ii) the
incurrence of Indebtedness giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio and (if applicable) the application of
the net proceeds therefrom, including to refinance other Indebtedness, as if
such Indebtedness were incurred at the beginning of the Four Quarter Period,
(iii) the incurrence, repayment or retirement of any other Indebtedness by the
Company and its Restricted Subsidiaries since the first day of the Four Quarter
Period and prior to the date of making this calculation as if such Indebtedness
or obligations were incurred, repaid or retired at the beginning of the Four
Quarter Period (except that in making such computation, the amount of
Indebtedness under any revolving Credit Facility shall be computed based upon
the average daily balance of such Indebtedness during the Four Quarter Period)
and (iv) elimination of Consolidated Cash Flow Available for Fixed Charges and
Consolidated Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, but, with respect to Consolidated Fixed
Charges, only to the extent that the obligations giving rise to such
Consolidated Fixed Charges will not be obligations of the referent Person or
any of its Restricted Subsidiaries following the Transaction Date. In
calculating Consolidated Fixed Charges for purposes of determining the
denominator (but not the numerator) of the Consolidated Fixed Charge Coverage
Ratio, (i) interest on
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<PAGE> 14
outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall
be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; and (ii) if
interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a Eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the Transaction Date will be deemed to have been in
effect during the Four Quarter Period. If such Person or any of its Restricted
Subsidiaries directly or indirectly guarantees Indebtedness of a third Person,
the above provisions shall give effect to the incurrence of such guaranteed
Indebtedness as if such Person or such Subsidiary had directly incurred or
otherwise assumed such guaranteed Indebtedness.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum of, without duplication, the amounts for such period of (i)
Consolidated Interest Expense and (ii) the product of (x) the aggregate amount
of dividends and other distributions paid, accrued or scheduled to be paid
during such period in respect of Redeemable Capital Stock or Preferred Stock of
such Person and its Restricted Subsidiaries on a consolidated basis (other than
dividends or distributions paid solely in shares of Capital Stock (other than
Redeemable Capital Stock)) times (y) a fraction, the numerator of which is one
and the denominator of which is one minus the then current effective
consolidated federal, state and local tax rate of such Person, expressed as a
decimal.
"Consolidated Income Tax Expense" means, with respect to any Person
for any period, the provision for federal, state, local and foreign income
taxes of such Person and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, the sum of (i) the interest expense of such
Person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation, (a)
an amortization of debt discount, capitalized debt issuance costs and original
issue discount, (b) the net cost under Interest Rate Protection Obligations
(including any amortization of discounts), (c) the interest portion of any
deferred payment obligation, (d) all commissions, discounts and other fees and
charges owed with respect to letters of credit, bankers' acceptance financing
or similar facilities, (e) all accrued interest and (f) imputed interest with
respect to Attributable Debt; and (ii) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any
period, the consolidated net income (or loss) of such Person and its Restricted
Subsidiaries for such period as determined in accordance with GAAP, adjusted,
to the extent included in calculating such net income, by excluding, without
duplication, (i) all items classified as extraordinary gains or losses (net of
fees and expenses relating to the transaction giving rise thereto) on an
after-tax basis, (ii) net income (or loss) of any Person combined with such
Person or one of its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (iii) gains or
losses in respect of any Asset Sales by such Person or one of its Restricted
Subsidiaries (net of fees and expenses relating to the transaction giving rise
thereto), on an after-tax basis, (iv) the net income of any Restricted
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<PAGE> 15
subsidiary of such Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is not at
the time permitted, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (v) any gain or loss realized as a result of the cumulative
effect of a change in accounting principles, (vi) the net income of any Person,
other than a Restricted Subsidiary of the referent Person, except to the extent
of cash dividends or distributions paid to the referent Person or to a
Restricted Subsidiary of the referent Person by such Person, (vii) any
restoration to income of any contingency reserve in excess of $100,000 in the
aggregate for any one fiscal quarter, except to the extent that provision for
such reserve was made out of Consolidated Net Income accrued at any time
following the Issue Date and reflected on the financial statements of such
Person, (viii) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets and (ix) one-time non-cash charges reducing net income
resulting from stock issued to management of the Company in connection with the
Company's organization.
"Consolidated Non-cash Charges" means, with respect to any Person for
any period, the aggregate depreciation, amortization (including amortization of
goodwill and other intangibles) and other non-cash charges of such Person and
its Restricted Subsidiaries to the extent reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP excluding non-cash charges (other
than any non-cash charge reflected on the financial statements of such Person
on the Issue Date) which require an accrual of or a reserve for cash charges
for any future period.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be administered, which
address as of the date of this Indenture is located at Goodwin Square, 23rd
Floor, 225 Asylum Street, Hartford, CT 06103, Attention:
Corporate Trust, Administration.
"Covenant Defeasance" has the meaning specified in Section 12.3.
"Credit Facility" means the Credit Agreement dated as of March 31,
1999 among the Company, First National Bank of Chicago, as Agent, LC Issuer and
Lender, Credit Lyonnais, New York Branch, as Documentation Agent, and the
Lenders named therein, including any notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case
as amended (including any amendment and restatement thereof), modified,
extended, renewed, refunded, substituted or replaced or refinanced from time to
time, including any agreement extending the maturity of, refinancing, replacing
or otherwise restructuring (including increasing the amount of available
borrowings thereunder or adding Subsidiaries of the Company as additional
borrowers or Guarantors thereunder) all or any portion of the Indebtedness
under such agreement or any successor or replacement agreement and whether by
the same or any other agents, creditor, lender or group of creditors or
lenders.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
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<PAGE> 16
"Defaulted Interest" has the meaning specified in Section 3.7.
"Defeasance" has the meaning specified in Section 12.2.
"Depository" means The Depository Trust Company, or its successor.
"Designated Guarantor Senior Indebtedness" means, with respect to a
Guarantor, amounts owing by such Guarantor under the Credit Facility and
guarantees by such Guarantor of Designated Senior Indebtedness.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness
under the Credit Facility and (ii) any other Senior Indebtedness which (a) at
the time of the determination is equal to or greater than $25,000,000 in
aggregate principal amount and (b) is specifically designated by the Company in
the instrument evidencing such Senior Indebtedness as "Designated Senior
Indebtedness."
"Designation" has the meaning specified in Section 10.18.
"Designation Amount" has the meaning specified in Section 10.18.
"Disinterested Member of the Board of Directors of the Company" means,
with respect to any transaction or series of related transactions, a member of
the Board of Directors of the Company other than a member who has any material
direct or indirect financial interest in or with respect to such transaction or
series of related transactions or is an Affiliate, or an officer, director or
an employee of any Person (other than the Company) who has any direct or
indirect financial interest in or with respect to such transaction or series of
related transactions (in each case other than an interest arising solely from
the beneficial ownership of Capital Stock of the Company).
"Distribution Compliance Period" has the meaning set forth in Section
3.14.
"Event of Default" has the meaning specified in Section 5.1.
"Excess Proceeds" has the meaning specified in Section 10.14.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Securities" means the 11 5/8% Senior Subordinated Notes due
2008, Series B, of the Company, to be offered in exchange for the Initial
Securities in accordance with the Registration Rights Agreement or, with
respect to Initial Securities issued under this Indenture subsequent to the
Issue Date pursuant to Section 3.1, a registration rights agreement
substantially identical to the Registration Rights Agreement.
"Expiration Date" shall have the meaning set forth in the definition
of "Offer to Purchase."
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's length free market transaction between a willing seller
and a willing buyer, neither of which is under pressure or compulsion to
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<PAGE> 17
complete the transaction. Fair Market Value shall be determined by the
Disinterested Members of the Board of Directors of the Company in good faith.
"Federal Bankruptcy Code" means Title 11, U.S. Code.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States of America, which are in effect from time to
time.
"Global Securities" means a permanent global security in registered
form representing the aggregate principal amount of Securities sold in reliance
on Rule 144A under the Securities Act.
"guarantee" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts available to be drawn down under letters of credit of
another Person. When used as a verb, "guarantee" shall have a corresponding
meaning. The term "guarantor" shall mean any Person providing a guarantee of
any obligation.
"Guarantor Senior Indebtedness" of a Guarantor means the principal of,
premium, if any, and interest on any Indebtedness of such Guarantor, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to such
Guarantor's guarantee. Without limiting the generality of the foregoing, (x)
"Guarantor Senior Indebtedness" shall include all monetary obligations of every
nature under the Credit Facility including the principal of, premium, if any,
and interest on all obligations of every nature of such Guarantor from time to
time owed to the lenders under the Credit Facility, including, without
limitation, principal of and interest on, reimbursement obligations under
letters of credit and all fees, indemnities and expenses payable under, the
Credit Facility, and (y) in the case of amounts owing under the Credit Facility
and Guarantees of Designated Senior Indebtedness, "Guarantor Senior
Indebtedness" shall include interest accruing thereon subsequent to the
occurrence of any Event of Default specified in clause (7) or (8) of Section
5.1 relating to such Guarantor, whether or not the claim for such interest is
allowed under any applicable Bankruptcy Code. Notwithstanding the foregoing,
"Guarantor Senior Indebtedness" shall not include (a) Indebtedness evidenced by
the Securities or the guarantees, (b) Indebtedness that is expressly
subordinate or Junior in right of payment to any other Indebtedness of such
Guarantor, (c) Indebtedness which, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is by its terms
without recourse to such Guarantor, (d) Indebtedness which is represented by
Redeemable Capital Stock, (e) to the extent it constitutes Indebtedness, any
liability for federal, state, local or other taxes owed or owing by such
Guarantor, (f) Indebtedness of such Guarantor to the Company or a Subsidiary of
the Company or any other Affiliate of the Company or any of such Affiliate's
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<PAGE> 18
subsidiaries, (g) that portion of any Indebtedness which is incurred by such
Guarantor in violation of this Indenture and (h) trade payables.
"Guarantor Subordinated Indebtedness" means, with respect to a
Guarantor, indebtedness and other obligations of such Guarantor which are
expressly subordinated in right of payment to such Guarantor's Guaranty.
"Guarantors" shall mean each Initial Guarantor and each future
Subsidiary designated a Guarantor in accordance with Section 10.17 herein.
"Guaranty" means each guaranty of the Securities contained in Article
XIII given by each Guarantor.
"Guaranty Obligations" means, with respect to each Guarantor, the
obligations of such Guarantor under Article XIII.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" means, with respect to any Person, without duplication,
(a) all liabilities of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities incurred in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of
such Person in connection with any letters of credit, bankers' acceptance or
other similar credit transaction, if, and to the extent, any of the foregoing
would appear as a liability on a balance sheet of such Person prepared in
accordance with GAAP, (b) all obligations of such Person evidenced by bonds,
notes, debentures or other similar instruments, if, and to the extent, any of
the foregoing would appear as a liability on a balance sheet of such Person
prepared in accordance with GAAP, (c) all indebtedness of such Person created
or arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), but excluding consignments and trade
accounts payable arising in the ordinary course of business that are not
overdue by 90 days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted, (d) all Capitalized
Lease Obligations of such Person, (e) all Indebtedness referred to in the
preceding clauses of other Persons and all dividends of other Persons, the
payment of which is secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien upon
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligation being deemed to be
the lesser of the Fair Market Value of such property or asset or the amount of
the obligation so secured), (f) all guarantees of Indebtedness referred to in
this definition by such Person, (g) all Redeemable Capital Stock of such Person
valued at the greater of its voluntary or involuntary maximum fixed repurchase
price plus accrued dividends, (h) all Interest Rate Protection Obligations of
such Person and (i) all Attributable Debt in respect of sale and leaseback
transactions of such Person; provided, however, that Indebtedness shall not
include (i) Indebtedness arising from agreements of the Company or any
Restricted Subsidiary providing for indemnification, adjustment or holdback of
purchase
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<PAGE> 19
price or similar obligations, in each case, incurred or assumed in connection
with the acquisition or disposition of any business, assets or a Subsidiary,
other than guarantees of Indebtedness incurred by any Person acquiring all or
any portion of such business, assets or Subsidiary for the purpose of financing
such acquisition, or (ii) obligations under performance bonds, performance
guarantees, surety bonds, appeal bonds or similar obligations incurred in the
ordinary course of business and consistent with past practices. For purposes
hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Redeemable Capital Stock as if such Redeemable Capital
Stock were purchased on any date on which Indebtedness shall be required to be
determined pursuant to this Indenture, and if such price is based upon, or
measured by, the fair market value of such Redeemable Capital Stock, such fair
market value shall be approved in good faith by the board of directors of the
issuer of such Redeemable Capital Stock; provided, however, that if such
Redeemable Capital Stock is not at the date of determination permitted or
required to be repurchased, the "maximum fixed repurchase price" shall be the
book value of such Redeemable Capital Stock. In the case of Indebtedness issued
with original issue discount, the amount of such Indebtedness shall be the
accreted value thereof as of such date.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Initial Guarantors" has the meaning set forth in the introduction to
this Indenture.
"Initial Purchasers" means Fleet Securities, Inc., Merrill Lynch, Banc
One Capital Markets Inc. and Credit Lyonnais Securities (USA) Inc.
"Initial Securities" means, collectively, (i) the 11 5/8% Senior
Subordinated Notes due 2008, Series A, of the Company issued on the Issue Date
and (ii) one or more series of 11 5/8% Senior Subordinated Notes due 2008 that
are issued under this Indenture subsequent to the Issue Date pursuant to
Section 3.1, in each case for so long as such securities constitute Restricted
Securities.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Protection Agreement" means, with respect to any
Person, any arrangement with any other Person whereby, directly or indirectly,
such Person is entitled to receive from time to time periodic payments
calculated by applying either a floating or a fixed rate of interest on a
stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements or arrangements designed to
protect against or manage such Person's exposure to fluctuations in interest
rates.
"Interest Rate Protection Obligations" means the net obligations of
any Person pursuant to any Interest Rate Protection Agreements.
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<PAGE> 20
"Investment" means, with respect to any Person, any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any other Person, provided, however, that the term "Investment"
shall not include (a) extensions of trade credit on commercially reasonable
terms in accordance with normal trade practices and (b) Interest Rate
Protection Obligations entered into in the ordinary course of business.
"Issue Date" means the original date of issuance of the Initial
Securities.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim or other
encumbrance upon or with respect to any property of any kind. A Person shall be
deemed to own subject to a Lien any property which such Person has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement.
"Maturity Date" means October 15, 2008.
"Merrill Lynch" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds thereof received by the Company or any Restricted Subsidiary in the
form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
(except to the extent that such obligations are financed or sold with recourse
to the Company or any Restricted Subsidiary) net of (i) brokerage commissions
and other fees and expenses (including, without limitation, fees and expenses
of legal counsel and investment bankers, recording fees, transfer fees and
appraisers' fees) related to such Asset Sale, (ii) provisions for all taxes
payable as a result of such Asset Sale, (iii) amounts required to be paid to
any Person (other than the Company or any Restricted Subsidiary) owning a
beneficial interest in the assets subject to the Asset Sale, (iv) payments made
to permanently retire Indebtedness where payment of such Indebtedness is
secured by the assets or properties the subject of such Asset Sale, and (v)
appropriate amounts to be provided by the Company or any Restricted Subsidiary,
as the case may be, as a reserve required in accordance with GAAP against any
liabilities associated with such Asset Sale and retained by the Company or any
Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale; provided, however,
that any amounts remaining after adjustments, revaluations or liquidations of
such reserves shall constitute Net Cash Proceeds.
"Non payment Default" has the meaning specified in Section 14.3.
"Notice of Default" means a written notice of the kind specified in
Section 5.2.
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<PAGE> 21
"Offer" means a Change of Control Offer or an Asset Sale Offer.
"Offer to Purchase" means an Offer, sent by or on behalf of the
Company by first-class mail, postage prepaid, to each Holder of Securities at
its address appearing in the register for the Securities on the date of the
Offer, offering to purchase up to the principal amount of Securities specified
in such Offer at the purchase price specified in such Offer (as determined
pursuant to this Indenture). Unless otherwise provided in Section 10.13 or
10.14 or otherwise required by applicable law, the Offer shall specify an
expiration date (the "Expiration Date") of the Offer to Purchase, which shall
be not less than 20 Business Days nor more than 60 days after the date of such
Offer (or such later date as may be necessary for the Company to comply with
the Exchange Act), and a settlement date (the "Purchase Date") for purchase of
Securities to occur no later than five Business Days after the Expiration Date.
The Company shall notify the Trustee at least 15 Business Days (or such shorter
period as is acceptable to the Trustee) prior to the mailing of the Offer of
the Company's obligation to make an Offer to Purchase, and the Offer shall be
mailed by the Company or, at the Company's request, by the Trustee in the name
and at the expense of the Company. The Offer shall contain all the information
required by applicable law to be included therein. The Offer shall contain all
instructions and materials necessary to enable such Holders to tender
Securities pursuant to the Offer to Purchase. The Offer shall also state:
(1) the Section of this Indenture pursuant to which the Offer
to Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the purchase price to be paid by the Company for each
$1,000 aggregate principal amount of Securities accepted for payment
(as specified pursuant to this Indenture) (the "Purchase Price") and
the amount of accrued and unpaid interest to be paid;
(4) that the Holder may tender all or any portion of the
Securities registered in the name of such Holder and that any portion
of a Security tendered must be tendered in an integral multiple of
$1,000 principal amount;
(5) the place or places where Securities are to be
surrendered for tender pursuant to the Offer to Purchase;
(6) that interest on any Security not tendered or tendered
but not purchased by the Company pursuant to the Offer to Purchase
will continue to accrue;
(7) that on the Purchase Date the Purchase Price will become
due and payable upon each Security being accepted for payment pursuant
to the Offer to Purchase and that interest thereon shall cease to
accrue on and after the Purchase Date;
(8) that each Holder electing to tender all or any portion of
a Security pursuant to the Offer to Purchase will be required to
surrender such Security at the place or places specified in the Offer
prior to the close of business on the Expiration Date (such Security
being, if the Company or the Trustee so requires, duly endorsed by, or
accompanied by a written
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instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by the Holder thereof or his attorney duly
authorized in writing);
(9) that Holders will be entitled to withdraw all or any
portion of Securities tendered if the Company (or its Paying Agent)
receives, not later than the close of business on the fifth Business
Day next preceding the Expiration Date, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
the Security the Holder tendered, the certificate number of the
Security the Holder tendered and a statement that such Holder is
withdrawing all or a portion of his tender;
(10) that (a) if Securities purchasable at an aggregate
Purchase Price less than or equal to the Purchase Amount are duly
tendered and not withdrawn pursuant to the Offer to Purchase, the
Company shall purchase all such Securities and (b) if Securities
purchasable at an aggregate Purchase Price in excess of the Purchase
Amount are tendered and not withdrawn pursuant to the Offer to
Purchase, the Company shall purchase Securities on a pro rata basis
based on the Purchase Price therefor (subject in each case to
applicable rules of the Depository and any securities exchange upon
which the Securities may then be listed), with such adjustments as may
be deemed appropriate so that only Securities in denominations of
$1,000 principal face amount or integral multiples thereof shall be
purchased; and
(11) that in the case of a Holder whose Security is purchased
only in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder, in an aggregate principal
amount equal to and in exchange for the unpurchased portion of the
Security so tendered.
An Offer to Purchase shall be governed by and effected in accordance with the
provisions of this Indenture pertaining to the type of Offer to which it
relates.
"Offered Price" has the meaning specified in Section 10.14.
"Offering Memorandum" means the Offering Memorandum dated May 12, 1999
pursuant to which the Securities were offered, and any supplement thereto.
"Officer's Certificate" means a certificate signed by the Chairman of
the Board, the Chief Executive Officer, the President or a Vice President, the
Chief Financial Officer, the Treasurer, an Assistant Treasurer, the Secretary
or an Assistant Secretary, of the Company, and delivered to the Trustee. One of
the officers signing an Officer's Certificate given pursuant to Section 10.20
shall be the principal executive, financial or accounting officer of the
Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
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(i) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities; provided that,
if such Securities are to be redeemed, notice of such redemption has
been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;
(iii) Securities which have been paid pursuant to Section 3.6
or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by
a bona fide purchaser in whose hands such Securities are valid
obligations of the Company; and
(iv) Securities as to which Defeasance has been effected
pursuant to Section 12.2;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the Company or of such other
obligor shall be disregarded and deemed not to be Outstanding (it being
understood that Securities to be acquired by the Company pursuant to an Offer
or other offer to purchase shall not be deemed to be owned by the Company until
legal title to such Securities passes to the Company), except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent, waiver or other
action, only Securities which a Responsible Officer of the Trustee actually
knows to be so owned shall be so disregarded. Securities so owned which have
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
"Pari Passu Indebtedness" means any Indebtedness of the Company that
is pari passu in right of payment to the Securities.
"Pari Passu Indebtedness Amount" has the meaning specified in Section
10.14.
"Pari Passu Offer" has the meaning specified in Section 10.14.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Payment Blockage Period" has the meaning specified in Section 14.3.
"Permitted Indebtedness" means, without duplication:
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(a) Indebtedness of the Company and the Guarantors evidenced
by the Securities issued on the date of this Indenture, the Exchange
Securities and the Guarantees;
(b) Indebtedness of the Company and any Guarantor under the
Credit Facility in an aggregate principal amount at any one time
outstanding not to exceed $125 million, less any amounts permanently
repaid in accordance with Section 10.14;
(c) Indebtedness of the Company or any Guarantor outstanding
on the Issue Date;
(d) Indebtedness of the Company or any Restricted Subsidiary
incurred in respect of bankers' acceptances and letters of credit in
the ordinary course of business, including Indebtedness evidenced by
letters of credit issued in the ordinary course of business to support
the insurance or self-insurance obligations of the Company or any of
its Restricted Subsidiaries (including to secure workers' compensation
and other similar insurance coverages), in an aggregate amount not to
exceed $5.0 million at any time, but excluding letters of credit
issued in respect of or to secure money borrowed;
(e) (i) Interest Rate Protection Obligations of the Company
or a Guarantor covering Indebtedness of the Company or a Guarantor and
(ii) Interest Rate Protection Obligations of any Restricted Subsidiary
covering Permitted Indebtedness or Acquired Indebtedness of such
Restricted Subsidiary; provided, however, that, in the case of either
clause (i) or (ii), (x) any Indebtedness to which any such Interest
Rate Protection Obligations correspond bears interest at fluctuating
interest rates and is otherwise permitted to be incurred under Section
10.8 and (y) the notional principal amount of any such Interest Rate
Protection Obligations that exceeds 105% of the principal amount of
the Indebtedness to which such Interest Rate Protection Obligations
relate shall not constitute Permitted Indebtedness;
(f) Indebtedness of a Restricted Subsidiary owed to and held
by the Company or another Restricted Subsidiary, except that (i) any
transfer of such Indebtedness by the Company or a Restricted
Subsidiary (other than to the Company or another Restricted
Subsidiary), (ii) the sale, transfer or other disposition by the
Company or any Restricted Subsidiary of Capital Stock of a Restricted
Subsidiary which is owed Indebtedness of another Restricted Subsidiary
such that it shall no longer be a Restricted Subsidiary, and (iii) the
Designation of a Restricted Subsidiary which is owed Indebtedness of
another Restricted Subsidiary as an Unrestricted Subsidiary shall, in
each case, be an incurrence of Indebtedness by such Restricted
Subsidiary subject to the other provisions of this Indenture;
(g) Indebtedness of the Company owed to and held by a
Restricted Subsidiary which is unsecured and expressly subordinated in
right of payment to the payment and performance of the obligations of
the Company under this Indenture and the Securities, except that (i)
any transfer of such Indebtedness by a Restricted Subsidiary (other
than to another Restricted Subsidiary), (ii) the sale, transfer or
other disposition by the Company or any Restricted Subsidiary of
Capital Stock of a Restricted Subsidiary which is owed Indebtedness of
the Company such that it shall no longer be a Restricted Subsidiary
and (iii) the Designation
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of a Restricted Subsidiary which is owed Indebtedness of the Company
shall, in each case, be an incurrence of Indebtedness by the Company,
subject to the other provisions of this Indenture;
(h) Indebtedness of the Company or any Guarantor represented
by Capitalized Lease Obligations, mortgage financings or purchase
money obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of
the Company or such Guarantor, in an aggregate principal amount not to
exceed $15 million at any time outstanding;
(i) Subordinated Indebtedness of the Company, in an aggregate
principal amount not to exceed $10 million at any time outstanding,
that is convertible into Common Stock and issued in connection with an
Asset Acquisition of a business engaged in the plumbing and mechanical
contracting and maintenance services businesses and any other
businesses reasonably related thereto;
(j) Indebtedness of the Company, in addition to that
described in clauses (a) through (i) of this definition, in an
aggregate principal amount not to exceed $15 million at any time
outstanding;
(k) (i) Indebtedness of the Company the proceeds of which are
used solely to refinance (whether by amendment, renewal, extension or
refunding) Indebtedness of the Company or any of the Guarantors
incurred pursuant to the Consolidated Fixed Charge Coverage Ratio test
of the proviso of Section 10.8 or clause (a) or (c) of this definition
and (ii) Indebtedness of any Guarantor the proceeds of which are used
solely to refinance (whether by amendment, renewal, extension or
refunding) Indebtedness of such Guarantor incurred pursuant to the
Consolidated Fixed Charge Coverage Ratio test of the proviso of
Section 10.8 or clause (c) or (k) of this definition; provided,
however, that (x) the principal amount of Indebtedness incurred
pursuant to this clause (k) (or if such Indebtedness provides for an
amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration of maturity thereof, the original
issue price of such Indebtedness) shall not exceed the sum of the
principal amount of Indebtedness so refinanced, plus the amount of any
premiums and fees required to be paid in connection with such
refinancing pursuant to the terms of such Indebtedness, and (y) any
Indebtedness incurred pursuant to this clause (k) (A) has an Average
Life to Stated Maturity greater than the remaining Average Life to
Stated Maturity of the Securities and (B) is subordinated to the
Securities or the Guarantees, as the case may be, at least to the same
extent that the Indebtedness being refinanced is subordinated to the
Securities or the Guarantees, as the case may be;
(l) Indebtedness of any Restricted Subsidiary that
constitutes Acquired Indebtedness not incurred in contemplation of the
acquisition of such Restricted Subsidiary; provided, however, that
such Indebtedness is repaid within 90 days following the consummation
of the Asset Acquisition in which the Company acquired such Restricted
Subsidiary; and
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(m) Guarantees by the Company or guarantees by a Guarantor of
Indebtedness that was permitted to be incurred under this Indenture.
For purposes of determining compliance with Section 10.8, (A) in the
event that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness described in the clauses of the preceding paragraph or is
entitled to be incurred pursuant to Section 10.8, the Company, in its sole
discretion, shall classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one such clause, and (B)
the amount of Indebtedness issued at a price that is either less than or
greater than the principal amount thereof shall be equal to the amount of the
liability in respect thereof determined in conformity with GAAP.
"Permitted Investments" means any of the following: (i) Investments in
the Company or in a Restricted Subsidiary; (ii) Investments in another Person,
if as a result of such Investment (A) such other Person becomes a Restricted
Subsidiary or (B) such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to the Company or a
Restricted Subsidiary; (iii) Investments representing Capital Stock or
obligations issued to the Company or any of its Restricted Subsidiaries in
settlement of debts created in the ordinary course of business or claims
against any other Person by reason of a composition or readjustment of debt or
a reorganization of any debtor of the Company or such Restricted Subsidiary or
in satisfaction of judgments; (iv) Investments in Interest Rate Protection
Agreements on commercially reasonable terms entered into by the Company or any
of its Restricted Subsidiaries in the ordinary course of business in connection
with the operations of the business of the Company or its Restricted
Subsidiaries to hedge against fluctuations in interest rates on its outstanding
Indebtedness; (v) Investments in the Securities; (vi) Investments in Cash
Equivalents; (vii) Investments acquired by the Company or any Restricted
Subsidiary in connection with an Asset Sale permitted under Section 10.14 to
the extent such Investments are non-cash proceeds as permitted under Section
10.14; (viii) any Investment to the extent that the consideration therefor is
Capital Stock (other than Redeemable Capital Stock) of the Company; (ix) any
loans or other advances made pursuant to any employee benefit plans (including
plans for the benefit of directors) or employment agreements or other
compensation arrangements (including for the purchase of Capital Stock by such
employees), in each case as approved by the Board of Directors of the Company
in its good faith judgment, not to exceed $1,000,000 at any one time
outstanding; and (x) other Investments not to exceed $2,000,000 at any time
outstanding.
"Permitted Junior Securities" means Capital Stock of the Company or
debt securities that are subordinated to all Senior Indebtedness (and any debt
securities issued in exchange for Senior Indebtedness) to at least the same
extent as the Securities are subordinated to Senior Indebtedness.
"Permitted Liens" means the following types of Liens:
(a) any Lien existing as of the date of this Indenture;
(b) any Lien securing Acquired Indebtedness created prior to
(and not created in connection with, or in contemplation of) the
incurrence of such Indebtedness by the Company or any Restricted
Subsidiary, if such Lien does not attach to any property or assets of
the
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Company or any Restricted Subsidiary other than the property or assets
subject to the Lien prior to such incurrence;
(c) Liens in favor of the Company or a Guarantor;
(d) Liens on and pledges of the Capital Stock of any
Unrestricted Subsidiary securing any Indebtedness of such Unrestricted
Subsidiary;
(e) Liens for taxes, assessments or governmental charges or
claims, to the extent any such changes or claims constitute
Indebtedness, either (i) not delinquent or (ii) contested in good
faith by appropriate proceedings and as to which the Company or its
Restricted Subsidiaries shall have set aside on its books such
reserves as may be required pursuant to GAAP;
(f) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance or other kinds of social security, old age pension or public
liability obligations;
(g) Liens to secure Indebtedness (including Capitalized Lease
Obligations) permitted by clause (h) under the definition of
"Permitted Indebtedness" covering only the assets acquired with such
indebtedness;
(h) Liens securing Interest Rate Protection Obligations
permitted to be entered into pursuant to Section 10.8;
(i) judgment and attachment Liens not giving rise to an Event
of Default or Liens created by or existing from any litigation or
legal proceeding that are currently being contested in good faith by
appropriate proceedings and for which adequate reserves have been
made;
(j) Liens in favor of collecting or payor banks having a
right of setoff, revocation, refund or chargeback with respect to
money or instruments of the Company or any Subsidiary on deposit with
or in possession of such bank; and
(k) Liens not otherwise permitted by clauses (a) through (j)
that are incurred in the ordinary course of business of the Company or
any Restricted Subsidiary with respect to Indebtedness that does not
exceed $5 million at any one time outstanding.
"Person" means any individual, corporation, partnership (general or
limited), limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Preferred Stock," as applied to any Person, means Capital Stock of
any class or series (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class or series of such Person.
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"Private Exchange Securities" has the meaning set forth in the
Registration Rights Agreement.
"Private Placement Legend" shall mean the legend initially set forth
on the Securities in the form set forth on Exhibit A-1.
"Public Equity Offering" means any public sale of Common Stock of the
Company pursuant to a registration statement filed with the Commission in
accordance with the Securities Act (other than any public offerings with
respect to the Company's Common Stock registered on Form S-8 or Form S-4).
"Purchase Amount" means, with respect to an Offer to Purchase, the
maximum aggregate amount payable by the Company for Securities under the terms
of such Offer to Purchase, if such Offer to Purchase were accepted in respect
of all Securities.
"Purchase Date" shall have the meaning set forth in the definition of
"Offer to Purchase."
"Qualified Institutional Buyer" or "QIB" has the meaning specified in
Rule 144A under the Securities Act.
"Record Expiration Date" has the meaning specified in Section 1.4.
"Redeemable Capital Stock" means any class or series of Capital Stock
that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise, is or upon the
happening of an event or passage of time would be required to be redeemed prior
to the 91st day after the Maturity Date or is redeemable at the option of the
holder thereof at any time prior to the 91st day after the Maturity Date, or is
convertible into or exchangeable for debt securities at any time prior to the
91st day after the Maturity Date; provided that (i) Capital Stock will not
constitute Redeemable Capital Stock solely because the holders thereof have the
right to require the Company to repurchase or redeem such Capital Stock upon
the occurrence of a Change of Control or an Asset Sale and (ii) the Common
Stock of the Company will not constitute Redeemable Capital Stock solely
because of the redemption trigger features contained in the Acquisition
Agreements.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registrable Securities" has the meaning set forth in the Registration
Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement relating to the Securities dated as of May 19, 1999 by and among the
Company, the Guarantors and the Initial Purchasers, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof.
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"Regular Record Date" for the interest payable on any Interest Payment
Date means the April 1 or October 1 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Replacement Assets" has the meaning specified in Section 10.14.
"Required Filing Dates" has the meaning specified in Section 10.19.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Office, including, any vice president,
any assistant vice president, any assistant secretary, any assistant treasurer,
or any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Payments" has the meaning specified in Section 10.9.
"Restricted Security" means a Security that constitutes a "restricted
security" within the meaning of Rule 144(a)(3) under the Securities Act;
provided, however, that the Trustee shall be entitled to request and
conclusively rely on an opinion of counsel with respect to whether any Security
constitutes a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company that is
not an Unrestricted Subsidiary.
"Revocation" has the meaning set forth in Section 10.18.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Ratings Group, and its successors.
"Securities" means, collectively, the Initial Securities, the Private
Exchange Securities, if any, and the Unrestricted Securities, treated as a
single class of securities, as amended or supplemented from time to time in
accordance with the terms hereof, that are issued pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Seller Preferred Stock" means the 10% Cumulative Redeemable
Convertible Preferred Stock, Series A of the Company.
"Senior Indebtedness" means the principal of, premium, if any, and
interest on any Indebtedness of the Company, whether outstanding on the Issue
Date or thereafter created, incurred or
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assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Securities. Without limiting the generality of the foregoing,
(x) "Senior Indebtedness" shall include all monetary obligations of every
nature under the Credit Facility including the principal of, premium, if any,
and interest on all obligations of every nature of the Company from time to
time owed to the lenders under the Credit Facility, including, without
limitation, principal of and interest on, reimbursement obligations under
letters of credit and all fees, indemnities and expenses payable under, the
Credit Facility and (y) in the case of Designated Senior Indebtedness, "Senior
Indebtedness" shall include interest accruing thereon subsequent to the
occurrence of any Event of Default specified in clause (7) or (8) of Section
5.1 relating to the Company, whether or not the claim for such interest is
allowed under any applicable Bankruptcy Code. Notwithstanding the foregoing,
"Senior Indebtedness" shall not include (a) Indebtedness evidenced by the
Securities, (b) Indebtedness that is expressly subordinate or junior in right
of payment to any other Indebtedness of the Company, (c) Indebtedness which,
when incurred and without respect to any election under Section 1111(b) of
Title 11, United States Code, is by its terms without recourse to the Company,
(d) Indebtedness which is represented by Redeemable Capital Stock, (e) to the
extent it constitutes Indebtedness, any liability for federal, state, local or
other taxes owed or owing by the Company, (f) Indebtedness of the Company to a
Subsidiary of the Company or any other Affiliate of the Company or any of such
Affiliate's Subsidiaries, (g) that portion of any Indebtedness which is
incurred by the Company in violation of this Indenture and (h) trade payables.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Securities Act, as such regulation is in
effect on the date of this Indenture.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.7.
"Stated Maturity" means, when used with respect to any note or any
installment of interest thereon, the date specified in such note as the fixed
date on which the principal of such note or such installment of interest is due
and payable, and when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"Subordinated Indebtedness" means, with respect to the Company,
Indebtedness of the Company which is expressly subordinated in right of payment
to the Securities.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof and (ii) any other Person (other than a
corporation), including, without limitation, a partnership, limited liability
company, business trust or joint venture, in which such Person, one or more
Subsidiaries thereof or such Person and one or more Subsidiaries thereof,
directly or indirectly, at the date of determination thereof, have at least
majority ownership interest entitled to vote in the election of directors,
managers or trustees thereof (or other Person performing similar functions).
For purposes of this definition, any directors' qualifying shares
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or investments by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary.
"Surviving Entity" has the meaning specified in Section 8.1.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Unrestricted Securities" means one or more Securities that do not and
are not required to bear the Private Placement Legend, including, without
limitation, the Exchange Notes.
"Unrestricted Subsidiary" means (i) each Subsidiary of the Company
designated as such pursuant to and in compliance with Section 10.18 and (ii)
each Subsidiary of any such Subsidiary described in clause (i) of this
definition.
"U.S. Government Obligation" has the meaning specified in Section 12.4.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person.
SECTION 1.2. Compliance Certificates and Opinions.
Upon any application or request by the Company or a Guarantor to the
Trustee to take any action under any provision of this Indenture, the Company
or the Guarantor shall furnish to the Trustee such certificates and opinions as
may be required under the Trust Indenture Act. Each such certificate or opinion
shall be given in the form of an Officer's Certificate, if to be given by an
officer of the Company or a Guarantor, or an Opinion of Counsel, if to be given
by counsel, and shall comply with the requirements of the Trust Indenture Act
and any other requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
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(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.3. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company or a Guarantor
may be based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or opinion of counsel may
be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Company or a
Guarantor stating that the information with respect to such factual matters is
in the possession of the Company or such Guarantor, unless such counsel knows,
or in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company or a
Guarantor, as applicable. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders signing such instrument or instruments. Proof of execution
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this In-
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denture and (subject to Section 6.1) conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of
the same Security and the Holder of every Security issued upon the registration
of transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee, the Company or a
Guarantor in reliance thereon, whether or not notation of such action is made
upon such Security.
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given or taken by Holders
of Securities, provided that the Company may not set a record date for, and the
provisions of this paragraph shall not apply with respect to, the giving or
making of any notice, declaration, request or direction referred to in the next
paragraph. If any record date is set pursuant to this paragraph, the Holders of
Outstanding Securities on such record date, and no other Holders, shall be
entitled to take the relevant action, whether or not such Holders remain
Holders after such record date; provided that no such action shall be effective
hereunder unless taken on or prior to the applicable Record Expiration Date by
Holders of the requisite principal amount of Outstanding Securities on such
record date. Nothing in this paragraph shall prevent the Company from setting a
new record date for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be cancelled and of no effect),
nor shall anything in this paragraph be construed to render ineffective any
action taken pursuant to or in accordance with any other provision of this
Indenture by Holders of the requisite principal amount of Outstanding Notes on
the date such action is taken. Promptly after any record date is set pursuant
to this paragraph, the Company, at its own expense, shall cause notice of such
record date, the proposed action by Holders and the applicable Record
Expiration Date to be given to the Trustee in writing and to each Holder of
Securities in the manner set forth in Section 1.6.
The Trustee may but need not set any day as a record date for the
purpose of determining the Holders of Outstanding Securities entitled to join
in the giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 5.2, (iii) any request to institute
proceedings referred to in Section 5.7(ii) or (iv) any direction referred to in
Section 5.12. If any record date is set pursuant to this paragraph, the Holders
of Outstanding Securities on such record date, and no other
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Holders, shall be entitled to join in such notice, declaration, request or
direction, whether or not such Holders remain Holders after such record date;
provided that no such action shall be effective hereunder unless taken on or
prior to the applicable Record Expiration Date by Holders of the requisite
principal amount of Outstanding Securities on such record date. Nothing in this
paragraph shall be construed to prevent the Trustee from setting a new record
date for any action (whereupon the record date previously set shall
automatically and without any action by any Person be cancelled and of no
effect), nor shall anything in this paragraph be construed to render
ineffective any action taken pursuant to or in accordance with any other
provision of this Indenture by Holders of the requisite principal amount of
Outstanding Securities on the date such action is taken. Promptly after any
record date is set pursuant to this paragraph, the Trustee, at the Company's
expense, shall cause notice of such record date, the matter(s) to be submitted
for potential action by Holders and the applicable Record Expiration Date to be
given to the Company in writing and to each Holder of Securities in the manner
set forth in Section 1.6.
With respect to any record date set pursuant to this Section, the
party hereto that sets such record date may designate any day as the "Record
Expiration Date" and from time to time may change the Record Expiration Date to
any earlier or later day, provided that no such change shall be effective
unless notice of the proposed new Record Expiration Date is given to the other
party hereto in writing, and to each Holder of Securities in the manner set
forth in Section 1.6, on or before the existing Record Expiration Date. If a
Record Expiration Date is not designated with respect to any record date set
pursuant to this Section, the party hereto that set such record date shall be
deemed to have initially designated the 180th day after such record date as the
Record Expiration Date with respect thereto, subject to its right to change the
Record Expiration Date as provided in this paragraph. Notwithstanding the
foregoing, no Record Expiration Date shall be later than the 180th day after
the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.
SECTION 1.5. Notices to Trustee, the Company or a Guarantor.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(i) the Trustee by any Holder or by the Company or a
Guarantor shall be sufficient for every purpose hereunder if made,
given, furnished or filed in writing or mailed, first class postage
prepaid, or sent by overnight courier, or sent by telecopier, to or
with the Trustee at its Corporate Trust Office, Attention: Corporate
Trust Administration, or
(ii) the Company or a Guarantor by the Trustee or by any
Holder shall be sufficient for every purpose hereunder (unless
otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to the Company or such Guarantor
addressed to it at
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the address of the Company's principal office specified in the first
paragraph of this instrument, or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 1.6. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail or receive such notice, nor any
defect in any such notice, to any particular Holder shall affect the
sufficiency or validity of such notice. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 1.7. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under the Trust Indenture
Act to be part of and govern this Indenture, such provision of the Trust
Indenture Act shall control. If any provision of this Indenture modifies or
excludes any provision of the Trust Indenture Act that may be so modified or
excluded, such provision shall be deemed to be so modified or excluded, as the
case may be.
SECTION 1.8. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.9. Successors and Assigns.
Without limiting Articles VIII and XIII hereof, all covenants and
agreements in this Indenture by each of the Company or the Guarantors shall
bind their respective successors and assigns, whether so expressed or not.
SECTION 1.10. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
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SECTION 1.11. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders of Securities, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law.
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York, without regard to the
conflicts of laws principles thereof.
SECTION 1.13. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Purchase
Date or Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect (including with respect to the accrual of interest) as if made on
the Interest Payment Date, Redemption Date or Purchase Date, or at the Stated
Maturity.
ARTICLE II
SECURITY FORMS
SECTION 2.1. Forms Generally.
The Securities and the Trustee's certificates of authentication shall
be in substantially the forms set forth or referenced in Exhibit A-1 and
Exhibit A-2 annexed hereto, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or the Depository or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution thereof.
ARTICLE III
THE SECURITIES
SECTION 3.1. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $250,000,000
principal amount, except for Securities authenticated and
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delivered upon registration or transfer of, or in exchange for, or in lieu of,
other Securities pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.8 or in
connection with an Offer pursuant to Section 10.13 or 10.14.
The Initial Securities shall be known and designated as the "11 5/8%
Senior Subordinated Notes due 2008, Series A" of the Company and the Exchange
Securities shall be known and designated as the "11 5/8% Senior Subordinated
Notes due 2008, Series B" of the Company. The Stated Maturity for payment of
principal of the Securities shall be October 15, 2008. Interest on the
Securities shall accrue at the rate of 11 5/8% per annum (subject, in the case
of the Initial Securities, to increase in the circumstances contemplated in the
Registration Rights Agreement) and shall be payable semi-annually on each April
15 and October 15, commencing October 15, 1999, to the Holders of record of
Securities at the close of business on the April 1 and October 1, respectively,
immediately preceding such Interest Payment Date. Interest on the Securities
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the Issue Date of such Securities. Interest will
be computed on the basis of a 360-day year comprised of twelve 30-day months.
The Initial Securities and the Exchange Securities shall be considered
collectively as a single class for all purposes of this Indenture. Holders of
the Initial Securities and the Exchange Securities will vote and consent
together on all matters to which such Holders are entitled to vote or consent
as one class, and none of the Holders of the Initial Securities or the Exchange
Securities shall have the right to vote or consent as a separate class on any
matter to which such Holders are entitled to vote or consent.
The principal of (and premium, if any) and interest on the Securities
shall be payable at the office or agency of the Trustee in the Borough of
Manhattan, The City of New York or such other office maintained by the Trustee
for such purpose and at any other office or agency maintained by the Company
for such purpose; provided, however, that, at the option of the Company,
payment of interest on Securities that are not held in global form may be made
by check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register subject to the right of any Holder of
Securities in the principal amount of $500,000 or more to request payment by
wire transfer.
The Company may be required to make a Change of Control Offer as
provided in Section 10.13, or an Asset Sale Offer as provided in Section 10.14.
The Securities shall be redeemable as provided in Article XI and the
Securities.
The Securities shall be subject to Defeasance and/or Covenant
Defeasance as provided in Article XII.
The other terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this Indenture.
SECTION 3.2. Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 principal amount and any integral
multiple thereof.
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SECTION 3.3. Execution, Authentication, Delivery and Dating.
The Initial Securities and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A-1 hereto. The Exchange
Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A-2 hereto.
The terms and provisions contained in the Securities annexed hereto as
Exhibits A-1 and A-2 shall constitute, and are hereby expressly, made, a part
of this Indenture and, to the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such
terms and provisions and to be bound thereby.
Initial Securities shall be issued initially in the form of one or
more Global Securities, substantially in the form set forth in Exhibit A-1,
deposited with the Trustee, as custodian for the Depository, duly executed by
the Company and authenticated by the Trustee as hereinafter provided and shall
bear the legend set forth in Exhibit B. The aggregate principal amount of the
Global Securities may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the
Depository, as hereinafter provided.
All Securities shall remain in the form of a Global Security, except
as provided herein.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Chief Executive Officer, its President or one of its
Vice Presidents or its Chief Financial Officer and attested by its Chief
Executive Officer, any of its Senior Vice Presidents, its Secretary or one of
its Assistant Secretaries. The signature of any of these officers on the
Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
The Trustee shall authenticate (i) Initial Securities for original
issue in the aggregate principal amount not to exceed $250,000,000 in one or
more series, (ii) Private Exchange Securities from time to time only in
exchange for a like principal amount of Initial Securities and (iii)
Unrestricted Securities from time to time only (x) in exchange for a like
principal amount of Initial Securities or (y) in an aggregate principal amount
of not more than $250,000,000 over the sum of the aggregate principal amount of
(A) Initial Securities then outstanding, (B) Private Exchange Securities then
outstanding and (C) Unrestricted Securities issued in accordance with (iii)(x)
above. Each Company Order shall specify the amount of Securities to be
authenticated and the date on which the Securities are to be authenticated,
whether the Securities are to be Initial Securities, Private Exchange
Securities or
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Unrestricted Securities and such other information as the Trustee may reasonably
request. In addition, with respect to authentication pursuant to clause (ii) or
(iii) of the first sentence of this paragraph, the first such written order
from the Company shall be accompanied by an Opinion of Counsel of the Company
in a form reasonably satisfactory to the Trustee stating that the issuance of
the Private Exchange Securities or the Unrestricted Securities, as the case may
be, does not give rise to an Event of Default, complies with this Indenture and
has been duly authorized by the Company.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder.
SECTION 3.4. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at any office
or agency of the Company designated pursuant to Section 10.2, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities
of authorized denominations and of a like tenor. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 3.5. Registration; Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 10.2 being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as the Company may prescribe, the Company shall provide
for the registration of Securities and of transfers of Securities. The Trustee
is hereby appointed the initial "Security Registrar" for the purpose of
registering Securities and transfers of Securities as herein provided.
Subject to Sections 3.13 and 3.14 of this Indenture, upon surrender
for registration of transfer of any Security at an office or agency of the
Company designated pursuant to Section 10.2 for such
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purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denomination and of a like aggregate principal
amount and tenor.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount and tenor, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 3.4, 9.6 or 11.8 or in accordance with any Change
of Control Offer pursuant to Section 10.13 or any Asset Sale Offer pursuant to
Section 10.14, and in any such case not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Securities selected for redemption under Section 11.4 and ending at the close
of business on the day of such mailing, (ii) to register the transfer of or
exchange any Security so selected for redemption in whole or in part, except
the unredeemed portion of any Security being redeemed in part or (iii) to
register the transfer of any Securities other than Securities having a
principal amount of $1,000 or integral multiples thereof.
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security and (ii) such Security or indemnity as may be required by them to save
each of them and any agent of each of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute, and upon its request the
Trustee shall authenticate and deliver, in lieu of any such
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destroyed, lost or stolen Security, a new Security of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion
may, instead of, issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7. Payment of Interest; Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more predecessor securities) is registered
at the close of business on the Regular Record Date for such interest payment.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective predecessor securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest
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which shall be not more than 15 days and not less than 10 days prior
to the date of the proposed payment and not less than 15 days after
the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date
and, in the name and at the expense of the Company, shall cause notice
of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be given to each Holder in the manner
specified in Section 1.6, not less than 10 days prior to such Special
Record Date. Notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the
Securities (or their respective predecessor securities) are registered
at the close of business on such Special Record Date and shall no
longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon
such notice as may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by
the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 3.8. Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of (and premium, if
any) and (subject to Section 3.7) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 3.9. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or tendered and accepted pursuant to any Change of Control
Offer pursuant to Section 10.13 or any Asset Sale Offer pursuant to Section
10.14 shall, if surrendered to any Person other than the Trustee, be delivered
to the Trustee and shall be promptly cancelled by it. The Company may at any
time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired in
any manner whatsoever, and all Securities so delivered shall be promptly
cancelled by the Trustee. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Securities held by the
Trustee shall be disposed of in the customary manner by the Trustee unless
otherwise directed by a Company Order.
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SECTION 3.10. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
SECTION 3.11. CUSIP and CINS Numbers.
The Company in issuing the Securities may use "CUSIP" and "CINS"
numbers (if then generally in use), and, if so, the Trustee shall use the CUSIP
or CINS numbers in notices of redemption or repurchase as a convenience to
Holders; provided that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption or repurchase and that reliance may be
placed only on the other identification numbers printed on the Securities, and
any such redemption or repurchase shall not be affected by any defect in or
omission of such numbers.
In the event that the Company shall issue and the Trustee shall
authenticate any Securities issued under this Indenture subsequent to the Issue
Date pursuant to clauses (i) and (iii) of the first sentence of the eighth
paragraph of Section 3.3, the Company shall use its best efforts to obtain the
same "CUSIP" number for such Securities as is printed on the Securities
outstanding at such time; provided, however, that if any series of Securities
issued under this Indenture subsequent to the Issue Date is determined,
pursuant to an Opinion of Counsel of the Company in a form reasonably
satisfactory to the Trustee, to be a different class of security than the
Securities outstanding at such time for federal income tax purposes, the
Company may obtain a "CUSIP" number for such Securities that is different than
the "CUSIP" number printed on the Securities then outstanding. Notwithstanding
the foregoing, all Securities issued under this Indenture shall vote and
consent together on all matters as one class and no series of Securities will
have the right to vote or consent as a separate class on any matter.
SECTION 3.12. Deposits of Monies.
Except to the extent payment of interest is made by the Company's
check or wire transfer pursuant to Section 3.1, prior to 11:00 a.m. New York
City time on each Interest Payment Date, Redemption Date, Stated Maturity, and
Purchase Date, the Company shall deposit with the Paying Agent in immediately
available funds money sufficient to make cash payments, if any, due on such
Interest Payment Date, Redemption Date, Stated Maturity and Purchase Date, as
the case may be, in a timely manner which permits the Paying Agent to remit
payment to the Holders on such Interest Payment Date, Redemption Date, Stated
Maturity, and Purchase Date, as the case may be.
SECTION 3.13. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be delivered to
the Trustee as custodian for such Depository and (iii) bear legends as set
forth in Exhibit B hereto.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the
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Trustee as its custodian, or under any Global Security, and the Depository may
be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of the Global Securities for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depository or impair, as between the Depository and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
Holder of any Security.
(b) Transfer of Global Securities shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may not be
transferred or exchanged for physical securities, except that physical
securities shall be transferred to all beneficial owners in exchange for their
beneficial interests in Global Securities if (i) the Depository notifies the
Company that it is unwilling or unable to continue as Depository for any Global
Security, or that it will cease to be a "Clearing Agency" under the Exchange
Act, and in either case a successor Depository is not appointed by the Company
within 90 days of such notice or (ii) an Event of Default has occurred and is
continuing and the Security Registrar has received a written request from the
Depository to issue physical securities.
(c) The Holder of any Global Security may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
SECTION 3.14. Special Transfer Provisions.
(a) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of an Initial Security and
the transfer of the beneficial interest in an Initial Security to a QIB: the
Security Registrar shall register the transfer of any Initial Security, whether
or not such Security bears the Private Placement Legend, and the transfer of
the beneficial interest in an Initial Security may be made if (x) the requested
transfer is after the second anniversary of the Issue Date; provided, however,
that neither the Company nor any Affiliate of the Company has held any
beneficial interest in such Security, or portion thereof, at any time on or
prior to the second anniversary of the Issue Date and such transfer can
otherwise be lawfully made under the Securities Act without registering such
Initial Security thereunder, (y) in the case of the registration of a transfer
by the Security Registrar, such transfer is being made by a proposed transferor
who has checked the box provided for on the form of Security stating, or has
otherwise advised the Company and the Security Registrar in writing, that the
sale has been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form of
Security stating, or has otherwise advised the Company and the Security
Registrar in writing, that it is purchasing the Security for its own account or
an account with respect to which it exercises sole investment discretion and
that it and any such account is a QIB within the meaning of Rule 144A, and is
aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as it
has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A or (z) in the case of the transfer of the beneficial
interest in an Initial Security (other than a transfer by an Agent Member, to
which
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clause (ii) below shall apply), the transfer is made in accordance with Rule
144A under the Securities Act.
(b) Private Legend. Upon the registration of transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Security Registrar shall deliver Securities that do not bear the Private
Placement Legend. Upon the registration of transfer, exchange or replacement of
Securities bearing the Private Placement Legend, the Security Registrar shall
deliver only Securities that bear the Private Placement Legend unless (i) the
circumstances contemplated by clause (x) of Section 3.14(a) exists, (ii) there
is delivered to the Security Registrar an opinion of counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act or (iii) such
Security has been sold pursuant to an effective registration statement under
the Securities Act.
(c) Other Transfers. If a Holder proposes to transfer a Security
constituting a Restricted Security pursuant to any exemption from the
registration requirements of the Securities Act other than as provided for by
Section 3.14(a) and (b), the Security Registrar shall only register such
transfer or exchange if such transferor delivers an opinion of counsel
satisfactory to the Company and the Security Registrar that such transfer is in
compliance with the Securities Act and the terms of this Indenture.
(d) General. By its acceptance of any Security bearing the Private
Placement Legend and by its ownership of a beneficial interest therein, each
Holder of such a Security and each owner of a beneficial interest therein
acknowledges the restrictions on transfer of such Security and of beneficial
interests therein set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Security and beneficial interests
therein only as provided in this Indenture.
The Security Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 3.13 or this Section
3.14. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon
the giving of reasonable prior written notice to the Security Registrar.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, on demand of and at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
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(A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or
repaid as provided in Section 3.6 and (ii) Securities for
whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as
provided in Section 10.3) have been delivered to the Trustee
for cancellation; or
(B) all such Securities not theretofore delivered to
the Trustee for cancellation (other than Securities which
have been destroyed, lost or stolen and which have been
replaced or repaid as provided in Section 3.6),
(i) have become due and payable, or
(ii) will become due and payable at their
Stated Maturity within one year, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to the
Trustee for the serving of notice of redemption by
the Trustee in the name, and at the expense, of the
Company,
and the Company or any Guarantor, in the case of (i), (ii) or
(iii) above, has irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust an amount
sufficient to pay and discharge the entire Indebtedness on
such Securities not theretofore delivered to the Trustee for
cancellation, for principal of, premium, if any, and interest
on the Securities to the date of deposit (in the case of
Securities which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be,
together with irrevocable instructions from the Company
directing the Trustee to apply such funds to the payment
thereof at Stated Maturity or redemption, as the case may be;
(2) the Company or the Guarantors have paid or caused to be
paid all other sums payable hereunder by the Company or the
Guarantors; and
(3) the Company has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, which, taken together, state
that all conditions precedent herein relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture pursuant to
this Article IV, the obligations of the Company to the Trustee under Section
6.7, the obligations of the Company to any Authenticating Agent under Section
6.14 and, if money shall have been deposited with the Trustee pursuant to
subclause (B) of clause (1) of this Section, the obligations of the Trustee
under Section 4.2 and the last paragraph of Section 10.3 shall survive.
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SECTION 4.2. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of the principal of or premium, if
any, when due and payable, on any of the Securities (at Stated
Maturity, upon optional redemption, required purchase or otherwise);
or
(2) default in the payment of an installment of interest on
any of the Securities, when due and payable, for 30 days; or
(3) default in the performance, or breach, of any covenant or
agreement of the Company under this Indenture (other than a default in
the performance or breach of a covenant or agreement which is
specifically dealt with in clauses (1), (2) or (4)) and such default
or breach shall continue for a period of 30 days after written notice
has been given, by certified mail, (x) to the Company by the Trustee
or (y) to the Company and the Trustee by the holders of at least 25%
in aggregate principal amount of the Outstanding Securities; or
(4) (a) there shall be a default in the performance or breach
of the provisions of Section 8.1 with respect to the Company; (b) the
Company shall have failed to make or consummate an Asset Sale Offer in
accordance with the provisions of Section 10.14; or (c) the Company
shall have failed to make or consummate a Change of Control Offer in
accordance with the provisions of Section 10.13; or
(5) default or defaults under one or more agreements,
instruments, mortgages, bonds, debentures or other evidences of
Indebtedness under which the Company or any Restricted Subsidiary then
has outstanding Indebtedness in excess of $10,000,000, individually or
in the aggregate, and (a) such default or defaults include a failure
to make a payment of
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principal, (b) such Indebtedness is already due and payable in full or
(c) such default or defaults have resulted in the acceleration of the
maturity of such Indebtedness; provided, however, if any such default
is cured or waived or any such acceleration rescinded, or such
Indebtedness is repaid, within a period of 10 days from the
continuation of such default beyond the applicable grace period or the
occurrence of such acceleration, as the case may be, such Event of
Default and any consequential acceleration of the Securities shall be
automatically rescinded, so long as such rescission does not conflict
with any judgment or decree; or
(6) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $10,000,000, either individually or in
the aggregate (net of applicable insurance coverage which is
acknowledged in writing by the insurer or which has been determined to
be applicable by a final nonappealable determination by a court of
competent jurisdiction), shall be entered against the Company or any
Restricted Subsidiary or any of their respective properties and shall
not be discharged and there shall have been a period of 60 days after
the date on which any period for appeal has expired and during which a
stay of enforcement of such judgment, order or decree, shall not be in
effect; or
(7) the entry of a decree or order by a court having
jurisdiction in the premises (A) for relief in respect of the Company
or any Significant Subsidiary or one or more Restricted Subsidiaries
that, taken together, would constitute a Significant Subsidiary, in an
involuntary case or proceeding under the Federal Bankruptcy Code or
any other federal, state or foreign bankruptcy, insolvency,
reorganization or similar law or (B) adjudging the Company or any
Significant Subsidiary or one or more Restricted Subsidiaries that,
taken together, would constitute a Significant Subsidiary, bankrupt or
insolvent, or approving a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
or any Significant Subsidiary or one or more Restricted Subsidiaries
that, taken together, would constitute a Significant Subsidiary, under
the Federal Bankruptcy Code or any other similar federal, state or
foreign law, or appointing a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or other similar official) of the
Company or any Significant Subsidiary or one or more Restricted
Subsidiaries that, taken together, would constitute a Significant
Subsidiary or of any substantial part of any of their properties, or
ordering the winding up or liquidation of any of their affairs, and
the continuance of any such decree or order unstayed and in effect for
a period of 60 consecutive days; or
(8) the institution by the Company or any Significant
Subsidiary or one or more Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary of a voluntary
case or proceeding under the Federal Bankruptcy Code or any other
similar federal, state or foreign law or any other case or proceedings
to be adjudicated a bankrupt or insolvent, or the consent by the
Company or any Significant Subsidiary or one or more Restricted
Subsidiaries that, taken together, would constitute a Significant
Subsidiary to the entry of a decree or order for relief in respect of
the Company or such Significant Subsidiary or group of Restricted
Subsidiaries in any involuntary case or proceeding under the Federal
Bankruptcy Code or any other similar federal, state or foreign law or
to the institution of bankruptcy or insolvency proceedings against the
Company or such Significant Subsidiary or
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group of Restricted Subsidiaries, or the filing by the Company or any
Significant Subsidiary or one or more Restricted Subsidiaries that,
taken together, would constitute a Significant Subsidiary of a
petition or answer or consent seeking reorganization or relief under
the Federal Bankruptcy Code or any other similar federal, state or
foreign law, or the consent by it to the filing of any such petition
or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or other
similar official) of any of the Company or any Significant Subsidiary
or one or more Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due or the taking of corporate
action by the Company or any Significant Subsidiary or one or more
Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary in furtherance of any such action; or
(9) any of the Guarantees of any Significant Subsidiary or
one or more Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary ceases to be in full force and
effect or any of such Guarantees is declared to be null and void and
unenforceable or any of such Guarantees is found to be invalid or any
of such Guarantors denies its liability under its Guaranty (other than
by reason of release of such Guarantor in accordance with the terms of
this Indenture).
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than those covered by clause (7) or (8)
of Section 5.1 with respect to the Company) shall occur and be continuing, the
Trustee, by notice to the Company, or the Holders of at least 25% in aggregate
principal amount of the Securities then Outstanding, by notice to the Trustee
and the Company, may declare the principal of, premium, if any, and accrued and
unpaid interest, if any, on all of the Outstanding Securities due and payable
immediately, upon which declaration, all amounts payable in respect of the
Securities shall be due and payable. If an Event of Default specified in clause
(7) or (8) of Section 5.1 occurs and is continuing, then the principal of,
premium, if any, and accrued and unpaid interest, if any, on all the
Outstanding Securities shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder of Securities.
After a declaration of acceleration under this Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of a majority in aggregate principal amount of the
Outstanding Securities, by written notice to the Company and the Trustee, may
rescind such declaration if:
(1) the Company or any Guarantor has paid or deposited with
the Trustee a sum sufficient to pay
(A) all sums paid or advanced by the Trustee under
this Indenture and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel,
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(B) all overdue interest on all Securities,
(C) the principal of and premium, if any, on any
Securities which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate
borne by the Securities, and
(D) to the extent that payment of such interest is
lawful, interest upon overdue interest and overdue principal
at the rate set forth in the Securities which has become due
otherwise than by such declaration of acceleration;
(2) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction; and
(3) all Events of Default, other than the nonpayment of
principal of, premium, if any, and interest on the Securities that
have become due solely by such declaration of acceleration, have been
cured or waived.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company and each Guarantor covenants that if
(i) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(ii) default is made in the payment of the principal of (or
premium, if any, on) any Security on the due date for payment thereof,
including, with respect to any Security required to have been
purchased pursuant to a Change of Control Offer or an Asset Sale Offer
made by the Company, at the Purchase Date thereof,
the Company or such Guarantor will, upon demand of the Trustee, pay to it, for
the benefit of the Holders of such Securities, the whole amount then due and
payable on such Securities for principal (and premium, if any) and interest,
and, to the extent that payment of such interest shall be legally enforceable,
interest on any overdue principal (and premium, if any) and on any overdue
interest, at the rate provided by the Securities, and, in addition thereto,
such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
In addition to the rights and powers set forth in Section 317(a) of
the Trust Indenture Act, the Trustee shall be entitled to file such other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee and of the Holders of the Securities allowed in any
judicial proceeding relative to the Company, any Guarantor or any other obligor
upon the Securities, its creditors, or its property, and to collect and receive
any moneys or other property payable or deliverable on any such claims, and to
distribute the same after the deduction of its charges and expenses; and any
receiver, assignee or trustee in bankruptcy or reorganization is hereby
authorized by each of
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the Holders to make such payments to the Trustee, and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders,
to pay to the Trustee any amount due it for compensation and expenses,
including counsel fees incurred by it up to the date of such distribution.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.4. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company, a
Guarantor (or any other obligor upon the Securities), its property or its
creditors, the Trustee shall be entitled and empowered, by intervention in such
proceeding or otherwise, to take any and all actions authorized under the Trust
Indenture Act in order to have claims of the Holders and the Trustee allowed in
any such proceeding. In particular, the Trustee shall be authorized to collect
and receive any moneys or other property payable or deliverable on any such
claims and to distribute the same; and any custodian, receiver, assignee,
trustee, liquidator, sequestrator or other similar official in any such
judicial proceeding is hereby authorized by each Holder to make such payments
to the Trustee and, in the event that the Trustee shall consent to the making
of such payments directly to the Holders, to pay to the Trustee any amount due
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 6.7.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Securities or the rights of any Holder thereof or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding; provided,
however, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and be a member of a creditors,
or other similar committee.
SECTION 5.5. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
distributions and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 5.6. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on ac-
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count of principal (or premium, if any) or interest, upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 6.7;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal (and premium, if any) and interest, respectively;
THIRD: To the payment of any and all other amounts due under
this Indenture, the Securities or the Guarantees; and
FOURTH: To the Company (or such other Person as a court of
competent jurisdiction may direct).
SECTION 5.7. Limitation on Suits.
Subject to Section 5.8, no Holder of any Security shall have and right
to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(i) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(iv) the Trustee for 45 days after its receipt of such
notice, request and offer of indemnity has failed to institute any
such proceeding; and
(v) no direction inconsistent with such written request has
been given to the Trustee during such 45-day period by the Holders of
a majority in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
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SECTION 5.8. Unconditional Right of Holders To Receive Principal, Premium
and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 3.7) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date or in the case of a Change of Control Offer or an Asset Sale Offer made by
the Company and required to be accepted as to such Security, on the relevant
Purchase Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
SECTION 5.9. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, each Guarantor, the Trustee and
the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted,
subject to the determination in such proceeding.
SECTION 5.10. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in Section 3.6, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 5.12. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
(i) such direction shall not be in conflict with any rule of
law or with this Indenture, and
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(ii) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
SECTION 5.13. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default
(i) in the payment of the principal of (or premium, if any)
or interest on any Security (including any Security which is required
to have been purchased pursuant to a Change of Control Offer or an
Asset Sale Offer which has been made by the Company), or
(ii) in respect of a covenant or provision hereof which under
Article IX cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit
to file an undertaking to pay the costs of such suit, and may assess costs
against any such party litigant, in the manner and to the extent provided in
the Trust Indenture Act; provided, that neither this Section nor the Trust
Indenture Act shall be deemed to authorize any court to require such an
undertaking or to make such an assessment in any suit instituted by the Company
or a Guarantor, in any suit instituted by the Trustee, in any suit instituted
by any Holder or group of Holders, holding in the aggregate more than 10% in
principal amount of the Outstanding Securities, or in any suit instituted by
any Holder for the enforcement of the payment of the principal of (or premium,
if any) or interest on any Security on or after the Stated Maturity expressed
in such Security (or, in the case of redemption, on or after the Redemption
Date or, in the case of a Change of Control Offer or an Asset Sale Offer, made
by the Company and required to be accepted as to such Security, on the
applicable Purchase Date, as the case may be).
SECTION 5.15. Waiver of Stay or Extension Laws.
The Company and each Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any usury, stay or
extension law wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Indenture; and the Company
and each Guarantor (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law and covenants that it will not
hinder, delay or impede the execution of any
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power herein granted to the Trustee, but will suffer and permit the execution
of every such power as though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(i) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture; but in the case of any such certificates or
opinions which by the provisions hereof are specifically required to
be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the
requirements of this Indenture but need not verify the contents
thereof.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent misconduct, except that no
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers under
this Indenture, unless the Trustee has received security and indemnity
satisfactory to it against any loss, liability or expense. The Trustee shall
not be liable for any error of judgment unless it is proved that the Trustee
was negligent in the performance of its duties hereunder.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.1.
SECTION 6.2. Notice of Defaults.
Within 30 days after the occurrence of any Default, the Trustee shall
transmit by mail to all Holders, as their names and addresses appear in the
Security Register, notice of such Default
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hereunder known to the Trustee, unless such Default shall have been cured or
waived; provided, however, that, except in the case of a Default in the payment
of the principal of, premium, if any, or interest on any Security, the Trustee
shall be protected in withholding such notice if and so long as a trust
committee of Responsible Officers of the Trustee in good faith determines that
the withholding of such notice is in the interest of the Holders.
SECTION 6.3. Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may conclusively rely as to the truth of the
statements and correctness of the opinions expressed therein and shall
be fully protected in acting or refraining from acting upon any
resolution, Officer's Certificate, certificate of auditors or any
other certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to
be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors of the Company may be
sufficiently evidenced by a Board Resolution of the Company;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officer's
Certificate;
(d) the Trustee may consult with counsel of its selection and
the advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled (subject to
reasonable confidentiality arrangements as may be proposed by the
Company or any Guarantor) to make
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reasonable examination (upon prior notice and during regular business
hours) of the books, records and premises of the Company or a
Guarantor, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys or custodians or nominees and the Trustee
shall not be responsible for the supervision of, or any misconduct or
negligence on the part of any agent or attorney appointed with due
care by it hereunder;
(h) the Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Indenture; and
(i) in the event that the Trustee is also acting as
Authenticating Agent, Paying Agent or Security Registrar hereunder,
the rights and protections afforded to the Trustee pursuant to this
Article VI shall also be afforded to such Authenticating Agent, Paying
Agent and Security Registrar.
SECTION 6.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities. The
Trustee shall not be accountable for the use or application by the Company of
Securities or the proceeds thereof.
SECTION 6.5. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company or any Guarantor, in its individual
or any other capacity, may become the owner or pledgee of Securities and,
subject to Sections 6.8 and 6.13, may otherwise deal with the Company or a
Guarantor with the same rights it would have if it were not Trustee,
Authenticating Agent, Paying Agent, Security Registrar or such other agent.
SECTION 6.6. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 6.7. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time
agree in writing for all services rendered by
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it hereunder (which compensation shall not be limited by any provision
of law in regard to the compensation of a trustee of an express
trust);
(2) except as otherwise expressly provided herein, to
promptly reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee
in accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee, its directors, officers, agents
and employees for, and to hold them harmless against, any and all
loss, damage, claim, liability or expense incurred without negligence
or bad faith on its part, including taxes (other than taxes based
upon, measured by or determined by the revenue or income of the
Trustee), arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
The Trustee shall have a lien prior to the Securities as to all
property and funds held by it hereunder for any amount owing to it pursuant to
this Section 6.7, except with respect to funds held in trust for the benefit of
the Holders of particular Securities.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 5.1(7) or Section 5.1(8), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive any termination of this
Indenture.
SECTION 6.8. Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 6.9. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has, or is a wholly-owned subsidiary of a bank holding company that has, a
combined capital and surplus of at least $100,000,000. If such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of a Federal or State supervising or examining authority, then for the purposes
of this Section and to the extent permitted by the Trust Indenture Act, the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
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SECTION 6.10. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.9.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. if an instrument of acceptance by a successor Trustee
in accordance with the applicable requirements of Section 6.9 shall not have
been delivered to the Company and the resigning Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 6.8 after
written request therefor by the Company or by any Holder who has been
a bona fide Holder of a Security for at least six months, or
(ii) the Trustee shall cease to be eligible under Section 6.9
and shall fail to resign after written request therefor by the
Company, any Guarantor or by any such Holder, or
(iii) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company or any Guarantor, in each case by a
Board Resolution, may remove the Trustee, or (ii) subject to Section 5.14, any
Holder who has been a bona fide Holder of a Note for at least six months may,
on behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in
accordance with the applicable requirements of Section 6.11, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in accordance with the applicable requirements
of Section 6.11, any Holder who has been a bona fide Holder of a Note
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for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to all Holders in
the manner provided in Section 1.6. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
(g) The resignation or removal of the Trustee pursuant to this Section
6.10 shall not affect the obligation of the Company to indemnify the Trustee
pursuant to Section 6.7(3) in connection with the exercise or performance by
the Trustee prior to its resignation or removal of any of its powers or duties
hereunder.
(h) No Trustee under this Indenture shall be liable for any action or
omission of any successor Trustee.
SECTION 6.11. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee; but, on request of the Company or
the successor Trustee, such retiring Trustee shall, upon payment of its
charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
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SECTION 6.13. Preferential Collection of Claims Against the Company or a
Guarantor.
If and when the Trustee shall be or become a creditor of the Company
or a Guarantor (or any other obligor upon the Securities), the Trustee shall be
subject to the provisions of the Trust Indenture Act regarding the collection
of claims against the Company or such Guarantor (or any such other obligor).
SECTION 6.14. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents which shall
be authorized to act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer or partial
redemption or partial purchase or pursuant to Section 3.6, and Securities so
authenticated shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Wherever reference is made in this Indenture to the authentication
and delivery of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be a corporation organized and doing business under the laws of the
United States of America, any State thereof or the District of Columbia,
authorized under such laws to act as Authenticating Agent, having a combined
capital and surplus of not less than $100,000,000 and subject to supervision or
examination by Federal or State authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Authenticating Agent
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time an Authenticating Agent
shall cease to be eligible in accordance with the provisions of this Section,
such Authenticating Agent shall resign immediately in the manner and with the
effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate agency or corporate trust business of an Authenticating Agent,
shall continue to be an Authenticating Agent, provided such corporation shall
be otherwise eligible under this Section, without the execution or filing of
any paper or any further act on the part of the Trustee or the Authenticating
Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 1.6, to all Holders as their
names and addresses appear in the Security Register. Any successor
Authenticating Agent upon acceptance
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of its appointment hereunder shall become vested with all the rights, powers
and duties of its predecessor hereunder, with like effect as if originally
named as an Authenticating Agent. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities described in the within-mentioned
Indenture.
Dated:
State Street Bank and Trust Company,
As Trustee
By:
-------------------------------------
As Authenticating Agent
By:
-------------------------------------
Authorized Signatory
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1. Company To Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee at
such times as the Trustee may reasonably request in writing, within 30 days
after the receipt by the Company of any such request, a list of similar form
and content as of a date not more than 15 days prior to the time such list is
furnished; excluding from any such list names and addresses received by the
Trustee in its capacity as Security Registrar.
SECTION 7.2. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar, if so acting.
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(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company, any Guarantor
nor the Trustee nor any agent of either of them shall be held accountable by
reason of any disclosure of information as to the names and addresses of Holders
made pursuant to the Trust Indenture Act.
SECTION 7.3. Reports by Trustee.
(a) Within 60 days after May 15 of each year commencing May 15, 2000,
the Trustee shall transmit to Holders such reports concerning the Trustee and
its actions under this Indenture to the extent required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Company. The Company
will promptly notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 7.4. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to the Trust Indenture Act; provided
that any such information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed
with the Trustee within 15 days after the same is so required to be filed with
the Commission.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Company May Merge, Consolidate, Etc., Only on Certain Terms.
(A) The Company will not, in any transaction or series of transactions,
merge or consolidate with or into, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets to,
any Person or Persons, and (B) the Company will not permit any of its Restricted
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in a
sale, assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company or the Company and
its Restricted Subsidiaries, on a consolidated basis, to any other Person or
Persons, unless, in each of cases (A) and (B), at the time and after giving
effect thereto:
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(1) either:
(x) if the transaction or transactions is a merger or
consolidation, the Company or such Restricted Subsidiary, as
the case may be, shall be the surviving Person of such merger
or consolidation, or
(y) the Person formed by such consolidation or into
which the Company or such Restricted Subsidiary, as the case
may be, is merged or to which the properties and assets of the
Company or such Restricted Subsidiary, as the case may be, are
disposed of (any such surviving Person or transferee Person
being the "Surviving Entity") shall be a corporation organized
and existing under the laws of the United States of America,
any state thereof or the District of Columbia and shall
expressly assume by a supplemental indenture executed and
delivered to the Trustee, in form satisfactory to the Trustee,
all the obligations of the Company under the Securities, this
Indenture and the Registration Rights Agreement and in each
case, this Indenture, the Securities and the Registration
Rights Agreement shall remain in full force and effect;
(2) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (including, without
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of
transactions), no Default or Event of Default shall have occurred and
be continuing; and
(3) except in the case of any merger of the Company with any
Restricted Subsidiary of the Company or any merger of Guarantors, in
each case with no other Person, the Company or the Surviving Entity, as
the case may be, after giving effect to such transaction or series of
transactions on a pro forma basis on the assumption that the
transaction or transactions had occurred on the first day of the period
of four fiscal quarters ending immediately prior to the consummation of
such transaction or transactions, with the appropriate adjustments with
respect to such transaction or transactions being included in such pro
forma calculation, could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under Section 10.8 (assuming a market rate
of interest with respect to such additional Indebtedness).
In connection with any consolidation, merger, transfer, lease,
assignment or other disposition contemplated by the foregoing provisions of this
Section 8.1, the Company shall deliver, or cause to be delivered, to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officer's Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, transfer, lease, assignment, or other disposition and the
supplemental indenture in respect thereof (required under clause (1)(y) of this
Section 8.1) comply with the requirements of this Indenture. Each such Officer's
Certificate shall set forth the manner of determination of the ability to incur
Indebtedness in accordance with clause (3) of this Section 8.1.
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SECTION 8.2. Successor Substituted.
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition subject to and in accordance with Section 8.1,
the successor Person formed by such consolidation or into which the Company or
Restricted Subsidiary, as the case may be, is merged or the successor Person to
which such sale, assignment, conveyance, transfer, lease or disposition is made
shall succeed to, and be substituted for, and may exercise every right and power
of the Company under the Securities, this Indenture and/or the Registration
Rights Agreement, as applicable, with the same effect as if such successor had
been named as the Company in the Securities, this Indenture and/or in the
Registration Rights Agreement, as the case may be, and, except in the case of a
lease, the Company or such Restricted Subsidiary, as the case may be, shall be
automatically and unconditionally released and discharged from its obligations
thereunder.
For all purposes of this Indenture and the Securities (including the
provisions of this Article VIII and Sections 10.8, 10.9 and 10.12), Subsidiaries
of any Surviving Entity shall, upon consummation of such transaction or series
of related transactions, become Restricted Subsidiaries unless and until
designated Unrestricted Subsidiaries pursuant to and in accordance with Section
10.18 and all Indebtedness, and all Liens on property or assets, of the Company
and the Restricted Subsidiaries in existence immediately prior to such
transaction or series of related transactions will be deemed to have been
incurred upon consummation of such transaction or series of related
transactions.
ARTICLE IX
AMENDMENTS; WAIVERS; SUPPLEMENTAL INDENTURES
SECTION 9.1. Amendments, Waivers and Supplemental Indentures Without
Consent of Holders.
Without the consent of any Holders, the Company and each Guarantor,
when authorized by Board Resolutions, and the Trustee, at any time and from time
to time, may together amend, waive or supplement this Indenture, for any of the
following purposes:
(i) to evidence the succession of another Person to the
Company or a Guarantor and the assumption by any such successor of the
covenants of the Company or such Guarantor herein and in the Securities
and to evidence the assumption of obligations under this Indenture and
a Guaranty pursuant to Section 10.17; or
(ii) to add to the covenants of the Company or a Guarantor for
the benefit of the Holders, or to surrender any right or power herein
conferred upon the Company or a Guarantor; or
(iii) to secure the Securities pursuant to the requirements of
Section 10.12 or otherwise; or
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(iv) to comply with any requirements of the Commission in
order to effect or maintain the qualification of this Indenture under
the Trust Indenture Act; or
(v) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture which shall not be
inconsistent with the provisions of this Indenture,
provided that (a) such amendment, waiver or supplement does not adversely affect
the rights of any Holder of Securities and (b) the Company shall have delivered
to the Trustee an Opinion of Counsel stating that such action pursuant to
clauses (i), (ii), (iii), (iv) or (v) above is permitted by this Indenture. The
Trustee shall not be obligated to enter into any such amendment or supplemental
indenture that adversely affects its own rights, duties or immunities under this
Indenture or otherwise.
SECTION 9.2. Modifications, Amendments and Supplemental Indentures
with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company and the Guarantors, when authorized
by Board Resolutions, and the Trustee may together modify, amend or supplement
this Indenture for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Indenture or of modifying in
any manner the rights of the Holders under this Indenture; provided, however,
that no such modification, amendment or supplemental indenture shall, without
the consent of the Holder of each Outstanding Security affected thereby,
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal
amount of (or the premium, if any, on), or interest on, any Securities
or alter the redemption provisions of the Securities,
(ii) change the currency in which any Securities or any
premium or the interest thereon is payable,
(iii) reduce the above-stated percentage in principal amount
of outstanding Securities that must consent to an amendment or
modification of this Indenture or the Securities,
(iv) reduce the specified percentage in aggregate principal
amount of outstanding Securities necessary to waive compliance with
provisions of this Indenture or to waive defaults under this Indenture,
(v) impair the right to institute suit for the enforcement of
any payment on or with respect to the Securities or any Guaranty,
(vi) amend, change or modify the obligation of the Company to
make and consummate a Change of Control Offer after the occurrence of a
Change of Control or make and
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consummate an Asset Sale Offer with respect to any Asset Sale that has
been consummated or modify any of the provisions or definitions with
respect thereto,
(vii) modify or change any provision of this Indenture
relating to the Guarantees in a manner adverse to the Holders of the
Securities, or
(viii) modify or change any provision of this Indenture
affecting the Subordination or ranking of the Securities or any
Guaranty in a manner which adversely affects the holders of Securities.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed amendment or supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
The Trustee shall join with the Company and each Guarantor in the
execution of such amended or supplemental indenture unless such amended or
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion but shall not be obligated to enter into such amendment or
supplemental indenture.
SECTION 9.3. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise;
provided that the Trustee shall enter into and execute all other supplemental
indentures which satisfy all applicable conditions under this Article IX.
SECTION 9.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.5. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
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SECTION 9.6. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture, provided that any failure by the
Trustee to make such notation shall not affect the validity of the matter
provided for in such supplemental indenture or any Security or Guaranty
hereunder. If the Company shall so determine, new Securities so modified as to
conform, in the opinion of the Trustee, the Guarantors and the Company, to any
such supplemental indenture may be prepared and executed by the Company or
Guarantor and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION 9.7. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Section 8.1, any covenant or condition
provided pursuant to Section 9.1(ii) or any covenant or condition set forth in
Sections 10.4 to 10.12 and 10.15 to 10.18, inclusive, if before the time for
such compliance the Holders of at least a majority in principal amount of the
Outstanding Securities shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such covenant or condition shall remain in full force and
effect.
SECTION 9.8. No Liability for Certain Persons.
No director, officer, employee, or stockholder of the Company, nor any
director, officer or employees of any Guarantor, as such, shall have any
liability for any obligations of the Company or any Guarantor under the
Securities, the Guarantees or this Indenture based on, in respect of, or by
reason of such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability. The foregoing waiver and
release is an integral part of the consideration for the issuance of the
Securities and the Guarantees.
ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium and Interest.
The Company shall duly and punctually pay the principal of (and
premium, if any) and interest on the Securities in accordance with the terms of
the Securities, this Indenture and the Registration Rights Agreement.
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SECTION 10.2. Maintenance of Office or Agency.
The Company shall maintain an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company or any Guarantor in respect of the Securities, the Guarantees and
this Indenture may be served. The Company shall give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands. In the event any such notice or demands are so made or served on the
Trustee, the Trustee shall promptly forward copies thereof to the Company.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations.
Further, if at any time there shall be no such office or agency in the City of
New York where the Securities may be presented or surrendered for payment, the
Company shall forthwith designate and maintain such an office or agency in the
City of New York in order that the Securities shall at all times be payable in
the City of New York. The Company shall give prompt written notice to the
Trustee of any such designation or rescission and of any change in the location
of any such other office or agency.
SECTION 10.3. Money for Security Payments To Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (and premium, if any) or interest
on any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and premium, if
any) or interest so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and will promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, the Company
will, prior to 11:00 a.m. New York City time on each due date of the principal
of (and premium, if any) or interest on any Securities, deposit with a Paying
Agent a sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held as provided by the Trust Indenture Act, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of its action or failure so to act.
The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will: (i) comply with the provisions of the Trust Indenture
Act applicable to it as Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
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The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by such Paying Agent; and, upon
such payment by any Paying Agent (other than the Company) to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in The City of New York, notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
SECTION 10.4. Existence; Activities.
Subject to Article VIII, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and material franchises; provided, however, that
the Company shall not be required to preserve any such right or franchise if the
Board of Directors of the Company in good faith shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and that the loss thereof is not disadvantageous in any material
respect to the Holders.
SECTION 10.5. Maintenance of Properties.
The Company shall cause all material properties used in the conduct of
its business or the business of any Restricted Subsidiary to be maintained and
kept in good condition, repair and working order (regular wear and tear
excepted), all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
prevent the Company from disposing of any asset (subject to compliance with
Section 10.14) or from discontinuing the operation or maintenance of any of such
material properties if such discontinuance is, as determined by the Company in
good faith, desirable in the conduct of its business or the business of any
Restricted Subsidiary and not disadvantageous in any material respect to the
Holders.
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SECTION 10.6. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any of its Restricted
Subsidiaries or upon the income, profits or property of the Company or any of
its Restricted Subsidiaries, and (2) all lawful material claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon
property of the Company or any of its Restricted Subsidiaries; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 10.7. Maintenance of Insurance.
The Company shall, and shall cause its Restricted Subsidiaries to, keep
at all times all of their material properties which are of an insurable nature
insured against loss or damage with insurers believed by the Company to be
responsible to the extent that property of similar character is usually so
insured by corporations similarly situated and owning like properties in
accordance with good business practice. The Company shall, and shall cause its
Restricted Subsidiaries to, use the proceeds from any such insurance policy to
repair, replace or otherwise restore all material properties to which such
proceeds relate, provided, however, that the Company shall not be required to
repair, replace or otherwise restore any such material property if the Company
in good faith determines that such inaction is desirable in the conduct of the
business of the Company or any Restricted Subsidiary and not disadvantageous in
any material respect to the Holders.
SECTION 10.8. Limitation on Indebtedness.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or in any manner become directly or indirectly liable, contingently or otherwise
(in each case, to "incur"), for the payment of any Indebtedness (including any
Acquired Indebtedness) other than Permitted Indebtedness; provided, however,
that the Company and any Guarantor will be permitted to incur Indebtedness
(including Acquired Indebtedness) if (A) the Consolidated Fixed Charge Coverage
Ratio of the Company is at least 2.0 to 1 and (B) no Default or Event of Default
would occur or be continuing.
SECTION 10.9. Limitation on Restricted Payments.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other distribution
or payment on or in respect of Capital Stock of the Company or any of
its Restricted Subsidiaries or make any payment to the direct or
indirect holders (in their capacities as such) of Capital Stock of the
Company or any of its Restricted Subsidiaries (other than dividends or
distributions payable solely in Capital Stock of the Company (other
than Redeemable Capital Stock) or in options, warrants or other rights
to purchase Capital Stock of the Company (other than Redeemable
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Capital Stock)) (other than the declaration or payment of dividends or
other distributions to the extent declared or paid to the Company or
any Guarantor);
(b) purchase, redeem, or otherwise acquire or retire for value
any Capital Stock of the Company or any of its Restricted Subsidiaries
or any options, warrants, or other rights to purchase any such Capital
Stock (other than any securities owned by the Company or a Restricted
Subsidiary);
(c) make any principal payment on, or purchase, defease,
repurchase, redeem or otherwise acquire or retire for value, prior to
any scheduled maturity, scheduled repayment, scheduled sinking fund
payment or other Stated Maturity, any Subordinated Indebtedness (other
than any such Subordinated Indebtedness owed by the Company or a
Restricted Subsidiary); or
(d) make any Investment (other than any Permitted Investment)
in any Person
(such payments or Investments described in the preceding clauses (a), (b), (c)
and (d) are collectively referred to as "Restricted Payments"), unless, after
giving effect to the proposed Restricted Payment (the amount of any such
Restricted Payment, if other than cash, shall be the Fair Market Value of the
asset(s) proposed to be transferred by the Company or such Restricted
Subsidiary, as the case may be, pursuant to such Restricted Payment), (A) no
Default or Event of Default shall have occurred and be continuing, (B) after
giving pro forma effect to such Restricted Payment, the Company would be able to
incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 10.8 and (C) the aggregate amount of all Restricted Payments
declared or made from and after the Issue Date would not exceed the sum of:
(1) 50% of the aggregate Consolidated Net Income of the
Company accrued on a cumulative basis during the period beginning on
April 1, 1999 and ending on the last day of the fiscal quarter of the
Company ending immediately prior to the date of such proposed
Restricted Payment for which consolidated financial statements are
available (or, if such aggregate cumulative Consolidated Net Income of
the Company for such period shall be a loss, minus 100% of such loss);
(2) the aggregate net cash proceeds received by the Company as
capital contributions to the Company after the Issue Date and which
constitute shareholders' equity of the Company in accordance with GAAP;
(3) the aggregate net cash proceeds received by the Company
from the issuance or sale of Capital Stock (excluding Redeemable
Capital Stock) of the Company to any Person (other than to a Subsidiary
of the Company) after the Issue Date;
(4) the aggregate net cash proceeds received by the Company
from any Person (other than a Subsidiary of the Company) upon the
exercise of any options, warrants or rights to purchase shares of
Capital Stock (other than Redeemable Capital Stock) of the Company
after the Issue Date;
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(5) the aggregate net cash proceeds received after the Issue
Date by the Company from any Person (other than a Subsidiary of the
Company) from the issuance and sale of debt securities that have been
converted into or exchanged for Capital Stock of the Company (other
than Redeemable Capital Stock) to the extent such debt securities were
originally sold for cash, plus the aggregate amount of cash received by
the Company (other than from a Subsidiary of the Company) at the time
of such conversion or exchange;
(6) to the extent not otherwise included in the Company's
Consolidated Net Income, in the case of the disposition or repayment of
any Investment constituting a Restricted Payment after the Issue Date,
an amount equal to the lesser of the return of capital with respect to
such Investment and the initial amount of such Investment, in either
case, less the cost of the disposition of such Investment;
(7) so long as the Designation (as defined in Section 10.18)
thereof was treated as a Restricted Payment made after the Issue Date,
with respect to any Unrestricted Subsidiary that has been redesignated
as a Restricted Subsidiary after the Issue Date in accordance with
Section 10.18 below, the Fair Market Value of the Company's interest in
such Subsidiary at the time of such redesignation, provided, however,
that such amount shall not in any case exceed the Designation Amount
(as defined in Section 10.18) with respect to such Restricted
Subsidiary upon its Designation; and
(8) $4,000,000.
For purposes of the preceding clause (C)(4), the value of the aggregate
net proceeds received by the Company upon the issuance of Capital Stock upon the
exercise of options, warrants or rights will be the net cash proceeds received
upon the issuance of such options, warrants or rights plus the incremental
amount received by the Company upon the exercise thereof.
None of the foregoing provisions will prohibit, so long as, in the case
of clause (v) and (vi) below, there is no Default or Event of Default
continuing: (i) the payment of any dividend or distribution within 60 days after
the date of its declaration, if at the date of declaration such payment would be
permitted by the first paragraph of this covenant; (ii) the redemption,
repurchase or other acquisition or retirement of any shares of any class of
Capital Stock of the Company in exchange for, or out of the net cash proceeds of
a substantially concurrent issue and sale of, other shares of Capital Stock of
the Company (other than Redeemable Capital Stock) to any Person (other than to a
Subsidiary of the Company); provided, however, that such net cash proceeds are
excluded from clause (C) of the first paragraph of this Section 10.9; (iii) any
redemption, repurchase or other acquisition or retirement of Subordinated
Indebtedness of the Company in exchange for, or out of the net cash proceeds of
a substantially concurrent issue and sale of, (1) Capital Stock (other than
Redeemable Capital Stock) of the Company to any Person (other than to a
Subsidiary of the Company); provided, however, that any such net cash proceeds
are excluded from clause (C) of the first paragraph of this Section 10.9; or (2)
other Subordinated Indebtedness of the Company which (w) has no scheduled
principal payment prior to the 91st day after the Maturity Date, (x) has an
Average Life to Stated Maturity greater than the remaining Average Life to
Stated Maturity of the Securities and (y) is subordinated to the Securities to
at least the same extent as the Subordinated Indebtedness so purchased,
exchanged, redeemed,
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acquired or retired; (iv) payments to purchase Capital Stock of the Company from
management or employees of the Company or any of its Subsidiaries, or their
authorized representatives, upon the death, disability or termination of
employment of such employees, in aggregate amounts under this clause (iv) not to
exceed $1.0 million in any fiscal year of the Company; (v) the payment of
regularly scheduled semi-annual dividends in respect of the Seller Preferred
Stock in an aggregate amount not to exceed $1.4 million in any one year; (vi)
the payment of the aggregate liquidation preference of the Seller Preferred
Stock at final maturity in an aggregate amount not to exceed $14.0 million;
(vii) the application of the net proceeds of the issuance and sale of the
Securities issued on the Issue Date as described in the Offering Memorandum;
(viii) cash payments in lieu of fractional shares issuable as dividends on
preferred securities of the Company or any of its Restricted Subsidiaries, in
aggregate amounts under this clause (viii) not to exceed $20,000 in any fiscal
year of the Company; (ix) repurchases of Capital Stock deemed to occur upon
exercise of stock options if such Capital Stock represents a portion of the
exercise price of such options; (x) the payment of the redemption price of
rights issued pursuant to any shareholders' rights plan not in excess of $0.05
per right and not in excess of $1.0 million in the aggregate; (xi) the payment
of "Additional Consideration" (as defined in the Acquisition Agreements) in the
manner and in such amounts as provided in the Acquisition Agreements as in
effect on the Issue Date and described in the Offering Memorandum, in an
aggregate amount not to exceed $16.2 million; provided, however, that the
Company's Consolidated Fixed Charge Coverage Ratio at such time is at least 3.25
to 1; and (xii) the payment of amounts constituting post-closing adjustments to
the former stockholders of the founding companies in respect of (A) working
capital adjustments for which the Company received assets of comparable value
and (B) unpaid cash consideration reflected in the pro forma financial
statements of the Company on the Issue Date, in each case, in accordance with
the Acquisition Agreements as in effect on the Issue Date. Any payments made
pursuant to clauses (i), (iv), (vi), (x) and (xi) of this paragraph shall be
taken into account in calculating the amount of Restricted Payments made from
and after the Issue Date.
In computing Consolidated Net Income of the Company under clause (C)(1)
of the first paragraph of this Section 10.9, (1) the Company shall use audited
financial statements for the portions of the relevant period for which audited
financial statements are available on the date of determination and unaudited
financial statements and other current financial data based on the books and
records of the Company for the remaining portion of such period and (2) the
Company shall be permitted to rely in good faith on the financial statements and
other financial data derived from the books and records of the Company that are
available on the date of determination. If the Company makes a Restricted
Payment which, at the time of the making of such Restricted Payment would in the
good faith determination of the Company be permitted under the requirements of
this Indenture, such Restricted Payment shall be deemed to have been made in
compliance with this Indenture notwithstanding any subsequent adjustments made
in good faith to the Company's financial statements affecting Consolidated Net
Income of the Company for any period.
SECTION 10.10. Limitation on Issuances and Sales of Restricted Subsidiary
Stock.
The Company (i) will not permit any Restricted Subsidiary to issue any
Capital Stock (other than to the Company or a Restricted Subsidiary) and (ii)
will not permit any Person (other than the Company and/or one or more Restricted
Subsidiaries) to own any Capital Stock of any Restricted
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Subsidiary; provided, however, that this Section 10.10 shall not prohibit (1)
the issuance and sale of all, but not less than all, of the issued and
outstanding Capital Stock of any Restricted Subsidiary owned by the Company or
any of its Restricted Subsidiaries in compliance with the other provisions of
this Indenture, or (2) the ownership by directors of directors' qualifying
shares or the ownership by foreign nationals of Capital Stock of any Restricted
Subsidiary, to the extent mandated by applicable law.
SECTION 10.11. Limitation on Transactions with Affiliates.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into any transaction or series of
related transactions (including, without limitation, the sale, transfer,
disposition, purchase, exchange or lease of assets, property or services) with,
or for the benefit of, any of its Affiliates, except (a) on terms that are no
less favorable to the Company or such Restricted Subsidiary, as the case may be,
than those which could have been obtained at the time in a comparable
transaction or series of related transactions from Persons who are not
Affiliates of the Company, (b) with respect to a transaction or series of
related transactions involving aggregate payments or value equal to or greater
than $5.0 million, the Company shall have delivered an Officer's Certificate to
the Trustee certifying that such transaction or transactions comply with the
preceding clause (a) and have been approved by the Disinterested Members of the
Board of Directors of the Company; provided, however, that the Company may, if
there are no Disinterested Members of the Board of Directors or at its option,
obtain and deliver to the Trustee the written opinion referred to in clause (c)
below in lieu of such Officers' Certificate, and (c) with respect to a
transaction or series of related transactions involving aggregate payments or
value equal to or greater than $10 million, the Company shall have delivered to
the Trustee the Officers' Certificate referred to in clause (b) which includes a
certification that such transaction or transactions have been approved by a
majority of the Disinterested Members of the Board of Directors of the Company
or, in the event there are no such Disinterested Members of the Board of
Directors, that the Company has obtained a written opinion from an independent
nationally recognized investment banking firm, accounting firm or appraisal
firm, in each case specializing or having a specialty in the type and subject
matter of the transaction or series of transactions at issue, which opinion
shall be to the effect set forth in clause (a) above or shall state that such
transaction or series of related transactions is fair from a financial point of
view to the Company or such Restricted Subsidiary.
Notwithstanding the foregoing, the restrictions set forth in this
Section 10.11 shall not apply to (i) transactions between or among the Company
and its Restricted Subsidiaries, (ii) customary directors' fees, indemnification
and similar arrangements, consulting fees, employee salaries, bonuses or
employment agreements, compensation or employee benefit arrangements and
incentive arrangements with any officer, director or employee of the Company or
any Restricted Subsidiary entered into in the ordinary course of business, (iii)
any dividends made in compliance with Section 10.9, (iv) loans and advances to
officers, directors and employees of the Company or any Restricted Subsidiary
made in the ordinary course of business in an aggregate amount not to exceed
$1,000,000 outstanding at any one time, (v) transactions pursuant to agreements
in effect on the Issue Date, (vi) written agreements assumed in connection with
Asset Acquisitions with Persons who were not Affiliates prior to such
transactions; provided, however, that any such agreements were not entered into
in connection with or in contemplation of such Asset Acquisition, (vii) leases
of property or equipment
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entered into in the ordinary course of business on terms that are substantially
similar to those which could have been obtained at the time in a comparable
transaction with non-Affiliates or (viii) any sale or other issuance for cash of
Capital Stock (other than Redeemable Capital Stock) of the Company.
SECTION 10.12. Limitation on Liens.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Liens of any kind securing Indebtedness upon any of its property or
assets, or any proceeds therefrom, unless the Securities are equally and ratably
secured (except that Liens securing Subordinated Indebtedness shall be expressly
subordinate to Liens securing the Securities to the same extent such
Subordinated Indebtedness is subordinate to the Securities), except for (a)
Liens securing Senior Indebtedness and Guarantor Senior Indebtedness; (b) Liens
securing the Securities; (c) Liens securing Indebtedness which is incurred to
refinance Indebtedness which has been secured by a Lien (other than a Lien in
favor of the Company or a Restricted Subsidiary) permitted under this Indenture
and which has been incurred in accordance with the provisions of this Indenture;
provided, however, that such Liens do not extend to or cover any property or
assets of the Company or any its Restricted Subsidiaries not securing the
Indebtedness so refinanced; and (d) Permitted Liens.
SECTION 10.13. Change of Control.
On or before the 30th day after the date of the occurrence of a Change
of Control (the "Change of Control Date"), the Company shall make an Offer to
Purchase (a "Change of Control Offer") and shall purchase, on a Business Day
(the "Change of Control Purchase Date") not more than 60 nor less than 30 days
following the mailing of such Offer to Purchase, all of the then Outstanding
Securities tendered at a purchase price in cash (the "Change of Control Purchase
Price") equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, thereon to the Change of Control Purchase Date. The Company
shall be required to purchase all Securities tendered into the Change of Control
Offer and not withdrawn. The Change of Control Offer will be required to remain
open for at least 20 Business Days.
On the Change of Control Purchase Date, the Company shall (i) accept
for payment Securities or portions thereof (not less than $1,000 principal
amount and integral multiples thereof) tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent money, in immediately
available funds, sufficient to pay the purchase price of all Securities or
portions thereof so tendered and accepted and (iii) deliver to the Trustee the
Securities so accepted together with an Officer's Certificate setting forth the
Securities or portions thereof tendered to and accepted for payment by the
Company. The Paying Agent shall promptly mail or deliver to the Holders of
Securities so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and make available for delivery to such
Holders a new Security of like tenor equal in principal amount to any
unpurchased portion of the Security surrendered. Any Securities not so accepted
shall be promptly mailed or delivered by the Company to the Holder thereof. The
Company shall publicly announce the results of the Change of Control Offer not
later than the third Business Day following the Change of Control Purchase Date.
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The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer at
the same purchase price, at the same time and otherwise in compliance with the
requirements applicable to a Change of Control Offer made by the Company and
purchases all Securities validly tendered and not withdrawn under such Change of
Control Offer.
In addition, the Company shall not be required to make a Change of
Control Offer, as provided herein, if, in connection with or in contemplation of
any Change of Control, it has made an Offer to Purchase (an "Alternative Offer")
any and all Securities validly tendered at a cash price equal to or higher than
the Change of Control Purchase Price and has purchased all Securities properly
tendered in accordance with the terms of such Alternative Offer. The Company
shall comply with Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder, to the extent such laws or regulations are
applicable, in the event that a Change of Control occurs and the Company is
required to purchase Securities as described above, and any violation of the
provisions of this Indenture relating to such Offer to Purchase occurring as a
result of such compliance shall not be deemed a Default or an Event of Default.
SECTION 10.14. Disposition of Proceeds of Asset Sales.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any Asset Sale unless (a) the Company or such Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the Fair Market Value of the shares or assets sold or
otherwise disposed of and (b) at least 75% of the consideration in such Asset
Sale, plus all other Asset Sales since the Issue Date on a cumulative basis,
consists of cash or Cash Equivalents; provided, however, that the amount of any
Indebtedness (as shown on the most recent balance sheet of the Company or such
Restricted Subsidiary) of the Company or such Restricted Subsidiary that is
assumed by the transferee of such assets as a result of which the Company and
its Restricted Subsidiaries are no longer liable thereon, and any securities,
notes or other obligations received by the Company or such Restricted Subsidiary
from such transferee that are converted within 60 days into cash or Cash
Equivalents (to the extent of the cash or Cash Equivalents received) shall be
deemed to be cash for the purposes of this provision. To the extent that the Net
Cash Proceeds, or portion thereof, of any Asset Sale are not applied to repay,
and permanently reduce the commitments under Senior Indebtedness or Guarantor
Senior Indebtedness in accordance with the terms thereof, the Company or such
Restricted Subsidiary, as the case may be, may apply the Net Cash Proceeds, or
portion thereof, from such Asset Sale, within 360 days of such Asset Sale, to an
investment in properties and assets that replace the properties and assets that
were the subject of such Asset Sale or in properties and assets that (as
determined in good faith by the Board of Directors of the Company or the
Restricted Subsidiary, as the case may be) are used or useful in the business of
the Company and its Restricted Subsidiaries conducted at such time or in
businesses reasonably related thereto or in Capital Stock of a Person, the
principal portion of whose assets consist of such property or assets
("Replacement Assets"). Any Net Cash Proceeds from any Asset Sale that are
neither used to repay, and permanently reduce the commitments under, Senior
Indebtedness or Guarantor Senior Indebtedness in accordance with the terms
thereof nor invested in Replacement Assets within such 360-day period will
constitute "Excess Proceeds" subject to disposition as provided below; provided,
however, that any Net Cash Proceeds from any Asset Sale which are used to repay
Senior Indebtedness or Guarantor Senior
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Indebtedness but are subsequently invested in Replacement Assets within such
360-day period will not constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds equals or exceeds $10
million, the Company shall make an Offer to Purchase, from all Holders of the
Securities and any then outstanding Pari Passu Indebtedness required to be
repurchased or repaid on a permanent basis in connection with an Asset Sale, an
aggregate principal amount of Securities and any then outstanding Pari Passu
Indebtedness equal to such Excess Proceeds as follows:
(i) (A) The Company shall make an Offer to Purchase (an "Asset
Sale Offer") from all Holders of the Securities the maximum principal
amount (expressed as a multiple of $1,000) of Securities that may be
purchased out of an amount (the "Asset Sale Offer Amount") equal to
the product of such Excess Proceeds, multiplied by a fraction, the
numerator of which is the outstanding principal amount of the
Securities and the denominator of which is the sum of the outstanding
principal amount of the Securities and such Pari Passu Indebtedness,
if any (subject to proration in the event such amount is less than the
aggregate Offered Price (as defined below) of all Securities
tendered), and (B) to the extent required by such Pari Passu
Indebtedness and provided there is a permanent reduction in the
principal amount of such Pari Passu Indebtedness, the Company shall
make an Offer to Purchase Pari Passu Indebtedness (a "Pari Passu
Offer") in an amount (the "Pari Passu Indebtedness Amount") equal to
the excess of the Excess Proceeds over the Asset Sale Offer Amount;
(ii) The offer price for the Securities shall be payable in
cash in an amount equal to 100% of the principal amount of the
Securities tendered pursuant to an Asset Sale Offer, plus accrued and
unpaid interest, if any, to the date such Asset Sale Offer is
consummated (the "Offered Price"), in accordance with the procedures
set forth in this Indenture. To the extent that the aggregate Offered
Price of the Securities tendered pursuant to an Asset Sale Offer is
less than the Asset Sale Offer Amount relating thereto or the
aggregate amount of the Pari Passu Indebtedness that is purchased or
repaid pursuant to the Pari Passu Offer is less than the Pari Passu
Indebtedness Amount (such shortfall constituting an "Asset Sale
Deficiency"), the Company may use such Asset Sale Deficiency for
general corporate purposes, subject to the limitations in Section
10.9; and
(iii) If the aggregate Offered Price of Securities validly
tendered and not withdrawn by Holders thereof exceeds the Asset Sale
Offer Amount, Securities to be purchased will be selected on a pro
rata basis. Upon completion of such Asset Sale Offer and Pari Passu
Offer, the amount of Excess Proceeds shall be reset to zero.
On the Asset Sale Offer Purchase Date, the Company shall (i) accept for
payment (subject to proration as described in the Offer to Purchase) Securities
or portions thereof validly tendered pursuant to the Asset Sale Offer,
respectively, (ii) deposit with the Paying Agent money, in immediately available
funds, sufficient to pay the purchase price of all such Securities or portions
thereof so tendered and accepted and (iii) deliver to the Trustee the Securities
so accepted together with an Officer's Certificate setting forth the Securities
or portions thereof tendered to and accepted for payment by the Company. The
Paying Agent shall promptly mail or deliver to the Holders of Securities so
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accepted payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and make available for delivery to such Holders a new
Security of like tenor equal in principal amount to any unpurchased portion of
the Security surrendered. Any Securities not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company shall
publicly announce the results of the Asset Sale Offer and Pari Passu Offer not
later than the third Business Day following the Asset Sale Offer Purchase Date.
Whenever the aggregate amount of Excess Proceeds received by the
Company and its Restricted Subsidiaries exceeds $10 million, such Excess
Proceeds shall, prior to the purchase of Notes, be set aside by the Company or
such Restricted Subsidiary, as the case may be, in a separate account pending
(i) deposit with the Paying Agent of the amount required to purchase the
Securities tendered in an Asset Sale Offer or (ii) delivery by the Company of
the Offered Price to the Holders of the Securities validly tendered and not
withdrawn pursuant to an Asset Sale Offer. Such Excess Proceeds may be invested
in Cash Equivalents, as directed by the Company, having a maturity date which is
not later than the earliest possible date for purchase of Securities pursuant to
the Asset Sale Offer. The Company will be entitled to any interest or dividends
accrued, earned or paid on such Cash Equivalents.
The Company shall comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder, to the extent such laws and
regulations are applicable, in the event that an Asset Sale occurs and the
Company is required to purchase Securities as described above, and any violation
of the provisions of this Indenture relating to such Offer to Purchase occurring
as a result of such compliance shall not be deemed a Default or an Event of
Default.
SECTION 10.15. Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise,
or make any other distributions on or in respect of its Capital Stock to the
Company or any other Restricted Subsidiary, (b) pay any Indebtedness owed to the
Company or any other Restricted Subsidiary, (c) make loans or advances to the
Company or any other Restricted Subsidiary, (d) transfer any of its properties
or assets to the Company or any other Restricted Subsidiary or (e) guarantee any
Indebtedness of the Company or any other Restricted Subsidiary, except for such
encumbrances or restrictions existing under or by reason of (i) applicable law
or any applicable rule, regulation or order, (ii) customary non-assignment
provisions of any contract or any lease governing a leasehold interest of the
Company or any Restricted Subsidiary, (iii) customary restrictions on transfers
of property subject to a Lien permitted under this Indenture (including purchase
money Liens permitted under this Indenture), (iv) any agreement or other
instrument of a Person acquired by the Company or any Restricted Subsidiary in
existence at the time of such acquisition (but not created in contemplation
thereof), which encumbrance or restriction is not applicable to any Person, or
the properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, (v) an agreement entered into for the sale
or disposition of Capital Stock or assets of a Restricted Subsidiary or an
agreement entered into for the sale of specified assets (in either case, so long
as such
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encumbrance or restriction, by its terms, terminates on the earlier of the
termination of such agreement or the consummation of such agreement and so long
as such restriction applies only to the Capital Stock or assets to be sold),
(vi) any agreement in effect on the Issue Date (including, without limitation,
the Credit Facility), (vii) this Indenture and the Guarantees, and (viii) any
agreement that amends, extends, refinances, renews or replaces any agreement
described in the foregoing clauses; provided, however, that the terms and
conditions of any such agreement are not materially less favorable to the
Holders of the Securities with respect to such encumbrances or restrictions than
those under or pursuant to the agreement amended, extended, refinanced, renewed
or replaced.
SECTION 10.16. Limitation on Issuance of Subordinated Indebtedness.
The Company will not, and will not permit any Guarantor to, directly or
indirectly, incur any Indebtedness (including Acquired Indebtedness) that is
expressly subordinate or junior in right of payment to any Indebtedness of the
Company or such Guarantor and senior in right of payment to the Securities or
the Guaranty of such Guarantor, as the case may be.
SECTION 10.17. Additional Subsidiary Guarantees.
If the Company or any of its Restricted Subsidiaries acquires, creates
or designates another Restricted Subsidiary organized under the laws of the
United States or any possession or territory thereof, any State of the United
States or the District of Columbia, then such newly acquired, created or
designated Restricted Subsidiary shall, within 30 days after the date of its
acquisition, creation or designation, whichever is later, execute and deliver to
the Trustee a supplemental indenture in substantially the form set forth in
Exhibit C, pursuant to which such Subsidiary shall become a Guarantor of the
Securities in the manner set forth in Article XIII; provided, however, that such
Restricted Subsidiary shall not be obligated to become a Guarantor in the manner
set forth above if such Restricted Subsidiary is not, either individually or
when considered in the aggregate with all other Restricted Subsidiaries that are
not Guarantors, a Significant Subsidiary. Thereafter, such Restricted Subsidiary
shall be a Guarantor for all purposes of this Indenture. In addition to the
foregoing, the Company shall cause any Restricted Subsidiary that is not a
Guarantor to become a Guarantor in the manner provided above within 30 days of
such time as it becomes, either individually or when considered in the aggregate
with all other Restricted Subsidiaries that are not Guarantors, a Significant
Subsidiary. The Company at its option may also cause any other Restricted
Subsidiary to become a Guarantor in the manner provided in this Section.
SECTION 10.18. Limitations on Designation of Unrestricted Subsidiaries.
(a) The Company may designate after the Issue Date any Restricted
Subsidiary as an "Unrestricted Subsidiary" under this Indenture (a
"Designation") only if:
(i) no Default shall have occurred and be continuing at the
time of or after giving effect to such Designation;
(ii) the Company would be permitted to make an Investment
(other than a Permitted Investment covered by clause (x) of the
definition thereof) at the time of such Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
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Section 10.9 in an amount (the "Designation Amount") equal to the Fair
Market Value of the Company's interest in such Subsidiary on such date;
and
(iii) the Company would be permitted under this Indenture to
incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 10.8 at the time of such Designation
(assuming the effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to Section
10.9 for all purposes of this Indenture in the Designation Amount.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, at any time (x) provide credit support for or subject any of its
property or assets (other than the Capital Stock of any Unrestricted Subsidiary)
to the satisfaction of, any Indebtedness of any Unrestricted Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness), (y) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary or (z) be directly or indirectly liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final Stated Maturity upon the occurrence of
a default with respect to any Indebtedness of any Unrestricted Subsidiary
(including any right to take enforcement action against such Unrestricted
Subsidiary). The Designation of any Subsidiary as an Unrestricted Subsidiary
shall automatically be deemed to include the Designation of all Subsidiaries of
such Subsidiary as Unrestricted Subsidiaries.
(b) The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") if:
(i) no Default shall have occurred and be continuing at the
time of and after giving effect to such Revocation, and
(ii) all Liens and Indebtedness of such Unrestricted
Subsidiary outstanding immediately following such Revocation would, if
incurred at such time, have been permitted to be incurred under this
Indenture.
(c) All Designations and Revocations must be evidenced by Board
Resolutions of the Company delivered to the Trustee certifying compliance with
the foregoing provisions.
SECTION 10.19. Provision of Financial Information.
For so long as the Securities are outstanding, whether or not the
Company is subject to Section 13(a) or 15(d) of the Exchange Act, or any
successor provision thereto, the Company shall file with the Commission (if
permitted by Commission practice and applicable law and regulations) the annual
reports, quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to such Section 13(a) or 15(d) or
any successor provision thereto if the Company were so subject, such documents
to be filed with the Commission on or prior to the respective dates (the
"Required Filing Dates") by which the Company would have been required so to
file such documents if the Company were so subject. The Company shall also in
any
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event within 15 days after each Required Filing Date (whether or not permitted
or required to be filed with the Commission) file with the Trustee, copies of
the annual reports, quarterly reports and other documents which the Company
would be required to file with the Commission if the Securities were then
registered under the Exchange Act and to make such information available to
Holders of Securities upon request. In addition, if the Company is not subject
to the reporting requirements of the Exchange Act, for so long as any Securities
remain outstanding, the Company will furnish to the Holders of Securities and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 10.20. Statement by Officers as to Default; Compliance
Certificates.
(a) The Company shall deliver to the Trustee, prior to January 1 in
each year commencing January 1, 2000, an Officer's Certificate, stating whether
or not to the best knowledge of the signers thereof the Company is in default in
the performance and observance of any of the terms, provisions and conditions of
this Indenture (without regard to any period of grace or requirement of notice
provided hereunder), and if the Company shall be in default, specifying all such
defaults and the nature and status thereof of which he may have knowledge.
(b) The Company shall deliver to the Trustee, as soon as possible and
in any event within five business days after the Company becomes aware of the
occurrence of a Default or an Event of Default, an Officer's Certificate setting
forth the details of such Default or Event of Default, and the action which the
Company proposes to take with respect thereto.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1. Right of Redemption.
The Securities may be redeemed at the election of the Company, in the
amounts, at the times, at the Redemption Prices (together with any applicable
accrued and unpaid interest to the Redemption Date), and subject to the
conditions specified in the form of Security and hereinafter set forth.
SECTION 11.2. Applicability of Article.
Redemption of Securities at the election of the Company, as permitted
by this Indenture and the provisions of the Securities, shall be made in
accordance with such provisions and this Article.
SECTION 11.3. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 11.1 shall be evidenced by a Board Resolution. In the event of any
redemption at the election of the Company pursuant to Section 11.1, the Company
shall notify the Trustee, in case of a redemption of less than all the
Securities, at least 60 days, and in the case of a redemption of all the
Securities, at least 40 days, prior
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to the Redemption Date fixed by the Company (in each case, unless a shorter
notice shall be satisfactory to the Trustee) of such Redemption Date and of the
principal amount of Securities to be redeemed.
SECTION 11.4. Selection by Trustee of Securities To Be Redeemed.
In the event that less than all of the Securities are to be redeemed at
any time, selection of such Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Securities are listed or, if the Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by such method as the Trustee shall deem fair and appropriate (subject to the
rules of the Depository); provided, however, that Securities shall only be
redeemable in amounts of $1,000 or an integral multiple of $1,000.
The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture and of the Securities, unless the
context otherwise requires, all provisions relating to the redemption of
Securities shall relate, in the case of any Securities redeemed or to be
redeemed only in part, to the portion of the principal amount of such Securities
which has been or is to be redeemed.
SECTION 11.5. Notice of Redemption.
Notice of redemption shall be given by first class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall identify the Securities to be redeemed
(including, if used, CUSIP or CINS numbers) and shall state:
(i) the Redemption Date,
(ii) the Redemption Price,
(iii) if less than all the Outstanding Securities are to be
redeemed, the identification (and, in the case of partial redemption,
the principal amounts) of the particular Securities to be redeemed,
(iv) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed and that
interest thereon will cease to accrue on and after such Redemption
Date,
(v) the place or places where such Securities are to be
surrendered for payment of the Redemption Price, and
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(vi) if the redemption is being made pursuant to the provisions
of the Securities regarding a Public Equity Offering, a brief
description of the transaction or transactions giving rise to such
redemption, the nature and amount of Capital Stock sold by the Company
thereto in such transaction or transactions, the aggregate purchase
price thereof and the net cash proceeds therefrom available for such
redemption, the date or dates on which such transaction or
transactions were completed and the percentage of the aggregate
principal amount of Outstanding Securities being redeemed.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
SECTION 11.6. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 10.3) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) any applicable accrued interest on, all
the Securities which are to be redeemed on that date.
SECTION 11.7. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and any applicable
accrued interest) such Securities shall not bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with any applicable
accrued and unpaid interest to the Redemption Date; provided, however, that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
predecessor Notes, registered as such at the close of business on the relevant
record dates according to their terms and the provisions of Section 3.7.
If any Security called for redemption in accordance with the election
of the Company made pursuant to Section 11.1 shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate provided by the Security.
SECTION 11.8. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at an office or agency of the Company designated for that purpose pursuant to
Section 10.2 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly authorized
in writing), and the Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination
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as requested by such Holder, in aggregate principal amount at Stated Maturity
equal to and in exchange for the unredeemed portion of the principal amount at
Stated Maturity of the Security so surrendered.
ARTICLE XII
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 12.1. Company's Option To Effect Defeasance or Covenant
Defeasance.
The Company may elect, at its option at any time, to have Section 12.2
or Section 12.3 applied to the Outstanding Securities (as a whole and not in
part) upon compliance with the conditions set forth below in this Article. Any
such election shall be evidenced by a Board Resolution.
SECTION 12.2. Defeasance and Discharge.
Upon the Company's exercise of its option to have this Section applied
to the Outstanding Securities (as a whole and not in part), the Company shall be
deemed to have been discharged from its obligations with respect to such
Securities as provided in this Section on and after the date the conditions set
forth in Section 12.4 are satisfied (hereinafter called "Defeasance"). For this
purpose, such Defeasance means that the Company shall be deemed to have paid and
discharged the entire Indebtedness represented by such Securities and to have
satisfied all its other obligations under such Securities and this Indenture
insofar as such Securities are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), subject to
the following which shall survive until otherwise terminated or discharged
hereunder: (1) the rights of Holders of Outstanding Securities to receive,
solely from the trust fund described in Section 12.4 and as more fully set forth
in such Section, payments in respect of the principal of, premium, if any, and
interest on such Securities when payments are due, (2) the Company's obligations
with respect to such Securities under Sections 3.4, 3.5, 3.6, 10.2 and 10.3, (3)
the rights, powers, trusts, duties and immunities of the Trustee hereunder and
(4) this Article. Subject to compliance with this Article, the Company may
exercise its option to have this Section applied to the Outstanding Securities
(as a whole and not in part) notwithstanding the prior exercise of its option to
have Section 12.3 applied to such Securities.
SECTION 12.3. Covenant Defeasance.
Upon the Company's exercise of its option to have this Section applied
to the Outstanding Securities (as a whole and not in part), (i) the Company and
the Guarantors shall be released from their obligations under Section 8.1(A)(3),
Sections 10.5 through 10.19, inclusive, and any covenant provided pursuant to
Section 9.1(ii), (ii) the occurrence of any event specified in Sections 5.1(3)
and 5.1(4) (with respect to Section 8.1(A)(3) and any of Sections 10.5 through
10.19, inclusive, and any such covenants provided pursuant to Section 9.1(ii)),
shall be deemed not to be or result in an Event of Default, in each case with
respect to such Securities as provided in this Section on and after the date the
conditions set forth in Section 12.4 are satisfied (hereinafter called "Covenant
Defeasance").
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For this purpose, such Covenant Defeasance means that, with respect to such
Securities, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such specified
Section (to the extent so specified in the case of Sections 5.1(3) or 5.1(4)),
whether directly or indirectly, by reason of any reference elsewhere herein to
any such Section or by reason of any reference in any such Section to any other
provision herein or in any other document, but the remainder of this Indenture
and such Securities shall be unaffected thereby.
SECTION 12.4. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of Section
12.2 or Section 12.3 to the Outstanding Securities:
(1) The Company or any Guarantor shall irrevocably have
deposited or caused to be deposited with the Trustee (or another
trustee which satisfies the requirements contemplated by Section 6.9
and agrees to comply with the provisions of this Article applicable to
it) as trust funds in trust for the purpose of making the following
payments, specifically pledged as security for, and dedicated solely
to, the benefits of the Holders of such Securities, (A) money in an
amount, or (B) U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance with
their terms will provide, not later than one day before the due date of
any payment, money in an amount, or (C) a combination thereof, in each
case sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or any such other qualifying trustee) to pay
and discharge, the principal of, premium, if any, and any installment
of interest on such Securities on the respective Stated Maturities
thereof, in accordance with the terms of this Indenture and such
Securities. As used herein, "U.S. Government Obligation" means (x) any
security which is (i) a direct obligation of the United States of
America for the payment of which the full faith and credit of the
United States of America is pledged or (ii) an obligation of a Person
controlled or supervised by and acting as an agency or instrumentality
of the United States of America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States
of America, which, in either case (i) or (ii), is not callable or
redeemable at the option of the issuer thereof, and (y) any depositary
receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act) as custodian with respect to any U.S. Government
Obligation which is specified in clause (x) above and held by such bank
for the account of the holder of such depositary receipt, or with
respect to any specific payment of principal of or interest on any U.S.
Government Obligation which is so specified and held, provided (except
as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depositary
receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of principal or
interest evidenced by such depositary receipt.
(2) In the event of an election to have Section 12.2 apply to
the Outstanding Securities, the Company shall have delivered to the
Trustee an Opinion of Counsel stating that (A) the Company has received
from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change
in the
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applicable Federal income tax law, in either case to the effect that,
and based thereon such opinion shall confirm that, the Holders of such
Securities will not recognize gain or loss for Federal income tax
purposes as a result of the deposit, Defeasance and discharge to be
effected with respect to such Securities and will be subject to Federal
income tax on the same amount, in the same manner and at the same times
as would be the case if such deposit, Defeasance and discharge were not
to occur.
(3) In the event of an election to have Section 12.3 apply to
the Outstanding Securities, the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that the Holders of such
Securities will not recognize gain or loss for Federal income tax
purposes as a result of the deposit and Covenant Defeasance to be
effected with respect to such Securities and will be subject to Federal
income tax on the same amount, in the same manner and at the same times
as would be the case if such deposit and Covenant Defeasance were not
to occur.
(4) No Default or Event of Default with respect to the
Outstanding Securities shall have occurred and be continuing at the
time of such deposit (excluding a Default or Event of Default due to a
breach of Section 10.8 which arises solely due to the borrowing of
funds entirely and immediately applied to such deposit).
(5) Such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest with respect to any Securities
of the Company or any Guarantor.
(6) Such Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it
is bound.
(7) The Company shall have delivered to the Trustee an Opinion
of Counsel (which opinion may be subject to customary assumptions and
exceptions) to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally.
(8) The Company shall have delivered to the Trustee an
Officer's Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of the Securities
over the other creditors of the Company or any Guarantor with the
intent of defeating, hindering, delaying or defrauding creditors of the
Company or any Guarantor or others.
(9) No event or condition shall exist that would prevent the
Company from making payments of the principal of, premium, if any, and
interest on the Securities on the date of such deposit or at any time
ending on the 91st day after the date of such deposit.
(10) The Company shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent under this Indenture to either Defeasance or
Covenant Defeasance, as the case may be, have been complied with.
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SECTION 12.5. Deposited Money and U.S. Government Obligations To Be Held
in Trust; Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 10.3, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee or other qualifying trustee (solely for purposes of this
Section and Section 12.6, the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 12.4 in respect of the
Outstanding Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any such Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Securities, of all sums due and to become due thereon in respect of
principal and any premium and interest, but money so held in trust need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 12.4 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 12.4
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect the Defeasance or Covenant Defeasance, as the case may be,
with respect to the Outstanding Securities.
SECTION 12.6. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to any Securities by reason of any
order or judgment of any court or governmental authority enjoining, restraining,
or otherwise prohibiting such application, then the obligations under this
Indenture, such Securities and the Guarantees from which the Company and the
Guarantors have been discharged or released pursuant to Section 12.2 or 12.3
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article with respect to such Securities, until such time as the Trustee or
Paying Agent is permitted to apply all money held in trust pursuant to Section
12.5 with respect to such Securities in accordance with this Article; provided,
however, that if the Company makes any payment of principal of or any premium or
interest on any such Security following such reinstatement of its obligations,
the Company shall be subrogated to the rights (if any) of the Holders of such
Securities to receive such payment from the money so held in trust.
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ARTICLE XIII
GUARANTY
SECTION 13.1. Guaranty.
Each Guarantor hereby unconditionally and irrevocably guarantees on a
senior subordinated basis, jointly and severally, to each Holder and to the
Trustee and its successors and assigns (a) the full and prompt payment (within
applicable grace periods) of principal of and interest on the Securities when
due, whether at maturity, by acceleration, by redemption or otherwise, and all
other monetary obligations of the Company under this Indenture and the
Securities and (b) the full and prompt performance within applicable grace
periods of all other obligations of the Company under this Indenture and the
Securities (all the foregoing being hereinafter collectively called the
"Guaranty Obligations"). Each Guarantor further agrees that the Guaranty
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from such Guarantor, and that such Guarantor will remain bound
under this Article XIII notwithstanding any extension or renewal of any Guaranty
Obligation.
To the extent that any Guarantor shall be required to pay any amounts
on account of the Securities pursuant to a Guaranty in excess of an amount
calculated as the product of (i) the aggregate amount payable by the Guarantors
on account of the Securities pursuant to the Guarantees times (ii) the
proportion (expressed as a fraction) that such Guarantor's net assets
(determined in accordance with GAAP) at the date enforcement of the Guarantees
is sought bears to the aggregate net assets (determined in accordance with GAAP)
of all Guarantors at such date, then such Guarantor shall be reimbursed by the
other Guarantors for the amount of such excess, pro rata, based upon the
respective net assets (determined in accordance with GAAP) of such other
Guarantors at the date enforcement of the Guarantees is sought. This paragraph
is intended only to define the relative rights of Guarantors as among
themselves, and nothing set forth in this paragraph is intended to or shall
impair the joint and several obligations of the Guarantors under their
respective Guarantees.
The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not impair the
rights of the Holders under any Guaranty.
Each Guarantor waives presentation to, demand of payment from and
protest to the Company of any of the Guaranty Obligations and also waives notice
of protest for nonpayment. Each Guarantor waives notice of any default under the
Securities or the Guaranty Obligations. The obligations of each Guarantor
hereunder shall not be affected by (a) the failure of any Holder or the Trustee
to assert any claim or demand or to enforce any right or remedy against the
Company or any other Person under this Indenture, the Securities or any other
agreement or otherwise; (b) any extension or renewal of any thereof; (c) any
rescission, waiver, amendment or modification of any of the terms or provisions
of this Indenture, the Securities or any other agreement; (d) the release of any
Security held by any Holder or the Trustee for the Guaranty Obligations or any
of them; (e) the failure of any Holder or Trustee to exercise any right or
remedy against any other guarantor of the Guaranty Obligations; or (f) any
change in the ownership of any Guarantor (subject to Section 13.5(b)).
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Each Guarantor further agrees that its Guaranty herein constitutes a
guaranty of payment, performance and compliance when due (and not a guaranty of
collection) and waives any right to require that any resort be had by any Holder
or the Trustee to any Security held for payment of the Guaranty Obligations.
To the fullest extent permitted by law, the obligations of each
Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to any
defense of setoff, counterclaim, recoupment or termination whatsoever or by
reason of the invalidity, illegality or unenforceability of the Guaranty
Obligations or otherwise. Without limiting the generality of the foregoing, to
the fullest extent permitted by law, the obligations of each Guarantor herein
shall not be discharged or impaired or otherwise affected by the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any remedy
under this Indenture, the Securities or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the Guaranty Obligations, or by any other act
or thing or omission or delay to do any other act or thing which may or might in
any manner or to any extent vary the risk of such Guarantor or would otherwise
operate as a discharge of each Guarantor as a matter of law or equity.
Each Guarantor further agrees that its Guaranty herein shall continue
to be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal of or interest on any Guaranty Obligation is
rescinded or must otherwise be restored by any Holder or the Trustee upon the
bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against each
Guarantor by virtue hereof, upon the failure of the Company to pay the principal
of or interest on any Guaranty Obligation when and as the same shall become due,
whether at maturity, by acceleration, by redemption or otherwise (within
applicable grace periods), or to perform or comply with any other Guaranty
Obligation (within applicable grace periods), each Guarantor hereby promises to
and shall, upon receipt of written demand by the Trustee, forthwith pay, or
cause to be paid, in cash, to the Holders or the Trustee an amount equal to the
sum of (i) the unpaid principal amount of such Guaranty Obligations (ii) accrued
and unpaid interest on such Guaranty Obligations (but only to the extent not
prohibited by law) and (iii) all other monetary Guaranty Obligations of the
Company to the Holders and the Trustee.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any Guaranty Obligations
guarantied hereby until payment in full of all Guaranty Obligations. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the Guaranty
Obligations guarantied hereby may be accelerated as provided in Article V for
the purposes of its Guaranty herein, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the Guaranty
Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such Guaranty Obligations as provided in Article V, such
Guaranty Obligations (whether or not due and payable) shall forthwith become due
and payable by each Guarantor for the purposes of this Section.
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Each Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees and expenses) incurred by the Trustee or
any Holder in enforcing any rights under this Section.
SECTION 13.2. Limitation on Liability.
Any term or provision of this Indenture to the contrary
notwithstanding, the obligations of each Guarantor hereunder are limited to the
maximum amount which, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guaranty or pursuant to its
contribution obligations under this Indenture, will result in the obligations of
such Guarantor under this Indenture or its Guaranty not being voidable as a
fraudulent conveyance or fraudulent transfer under federal or state law.
SECTION 13.3. Execution and Delivery of Guarantees; Supplemental
Indentures.
The Guaranty of each Guarantor shall be conclusively evidenced by the
execution and delivery by such Guarantor of this Indenture. The execution and
delivery of any Restricted Subsidiary of the Company that is required to become
a Guarantor pursuant to Section 10.17 shall be conclusively evidenced by its
execution and delivery of the supplemental indenture referred to therein.
Each Guarantor hereby agrees that its Guaranty shall remain in full
force and effect notwithstanding any failure to endorse on each Security a
notation of such Guaranty.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantees on behalf of
the Guarantors.
SECTION 13.4. Guarantors May Consolidate, Etc., on Certain Terms.
(a) Except as may be provided in Articles VIII and X, nothing contained
in this Indenture or in any of the Securities shall prevent any consolidation or
merger of a Guarantor with or into the Company or another Guarantor or shall
prevent any sale or conveyance of the assets of a Guarantor as an entirety or
substantially as an entirety or the Capital Stock of a Guarantor to the Company
or another Guarantor.
(b) No Guarantor shall consolidate with or merge with or into (whether
or not such Guarantor is the surviving Person), another Person (other than the
Company or another Guarantor), whether or not affiliated with such Guarantor,
unless, (i) subject to Section 13.5, the Person formed by or surviving any such
consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor pursuant to a supplemental indenture,
substantially in the form of Exhibit C hereto, under the Securities and this
Indenture; and (ii) immediately after giving effect to such transaction, no
Default or Event of Default exists. In the case of any such consolidation or
merger and upon the assumption by the successor Person by supplemental indenture
of the applicable Guaranty, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor.
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SECTION 13.5. Release of Guarantors.
(a) Concurrently with any consolidation or merger of a Guarantor or any
sale or conveyance of all or substantially all of the assets of a Guarantor, in
each case as permitted by the other provisions of this Indenture (including,
without limitation, Sections 10.9, 10.11 and 10.14) and as a result of which
such Guarantor ceases to be a Restricted Subsidiary of the Company, upon
delivery by the Company to the Trustee of an Officer's Certificate to the effect
that such consolidation, merger, sale or conveyance was made in accordance with
this Indenture and an Opinion of Counsel to the effect that such transaction is
permitted by this Indenture (which opinion may be subject to customary
assumptions and limitations), the Trustee shall execute any documents reasonably
required in order to evidence the release of such Guarantor from its obligations
under its Guaranty under this Article XIII. Any Guarantor not released from its
obligations under its Guaranty under this Article XIII shall remain liable for
the full amount of principal of and premium, if any, and interest on the
Securities and for the other obligations of a Guarantor under its Guaranty under
this Article XIII.
(b) In the event that the Company designates a Guarantor to be an
Unrestricted Subsidiary in accordance with the terms of this Indenture
(including Section 10.18), then such Guarantor shall be released and relieved of
any obligations under its Guaranty.
SECTION 13.6. Successors and Assigns.
This Article XIII shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
conferred upon that party in this Indenture and in the Securities shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of this Indenture.
SECTION 13.7. No Waiver, etc.
Neither a failure nor a delay on the part of either the Trustee or the
Holders in exercising any right, power or privilege under this Article XIII
shall operate as a waiver thereof, nor shall a single or partial exercise
thereof preclude any other or further exercise of any right, power or privilege.
The rights, remedies and benefits of the Trustee and the Holders herein
expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which either may have under this Article XIII at law, in
equity, by statute or otherwise.
SECTION 13.8. Modification, etc.
No modification, amendment or waiver of any provision of this Article,
nor the consent to any departure by a Guarantor therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Trustee, and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No notice to or demand on a Guarantor in any
case shall entitle such Guarantor or any other guarantor to any other or further
notice or demand in the same, similar or other circumstances.
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SECTION 13.9. Subordination of Guarantees.
The obligations of each Guarantor pursuant to its Guaranty and this
Article XIII shall be (a) junior and subordinated in right of payment to the
prior payment in full in cash of all Guarantor Senior Indebtedness of such
Guarantor and (b) senior in right of payment to all existing and future
Guarantor Subordinated Indebtedness of such Guarantor, in each case on the same
basis as the Securities and the obligations of the Company hereunder are junior
and subordinated to all Senior Indebtedness and senior in right of payment to
all Subordinated Indebtedness. For the purposes of this Section 13.9, Article
XIV shall apply to the obligations of each Guarantor under its Guaranty, this
Article XIII and the other provisions of this Indenture as if references therein
to the Company, the Securities, Senior Indebtedness, Subordinated Indebtedness
and Designated Senior Indebtedness were references to such Guarantor, such
Guarantor's Guaranty, Guarantor Senior Indebtedness, Guarantor Subordinated
Indebtedness and Designated Guarantor Senior Indebtedness, respectively.
ARTICLE XIV
SUBORDINATION
SECTION 14.1. Securities Subordinate to Senior Indebtedness and Senior
to Subordinated Indebtedness.
The Company covenants and agrees, and each Holder of a Security, by his
acceptance thereof, likewise covenants and agrees that, to the extent and in the
manner hereinafter set forth in this Article XIV, the Indebtedness evidenced by
the Securities is hereby expressly made subordinate in right of payment to the
prior payment in full in cash of all Senior Indebtedness (including Indebtedness
under the Credit Facility) and senior in right of payment to all existing and
future Subordinated Indebtedness of the Company.
SECTION 14.2. Payment Over of Proceeds upon Dissolution, Etc.
In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relating to the Company or its assets, or
(b) any liquidation, dissolution or other winding-up of the Company, whether
voluntary or involuntary, or (c) any assignment for the benefit of creditors or
other marshaling of assets or liabilities of the Company, all Senior
Indebtedness (including, in the case of Designated Senior Indebtedness, any
interest accruing subsequent to the filing of a petition for bankruptcy
(regardless of whether such interest is an allowed claim in the bankruptcy
proceeding)) must be paid in full in cash before any direct or indirect payment
(other than payments from a trust previously created pursuant to Article XII) by
or on behalf of the Company of any kind or character (excluding Permitted Junior
Securities) may be made on account of the principal of, premium, if any, or
interest on, or the purchase, redemption or other acquisition of, the
Securities.
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SECTION 14.3. No Payment When Designated Senior Indebtedness in Default.
During the continuance of any default in the payment of principal, or
premium, if any, or interest on any Senior Indebtedness, when the same becomes
due, and after receipt by the Trustee and the Company from representatives of
holders of such Senior Indebtedness of written notice of such default, no direct
or indirect payment (other than payments from trusts previously created pursuant
to Article XII) by or on behalf of the Company of any kind or character
(excluding Permitted Junior Securities) may be made on account of the principal
of, premium, if any, or interest on, or the purchase, redemption or other
acquisition of, the Securities unless and until such default has been cured or
waived or has ceased to exist or such Senior Indebtedness shall have been paid
in full in cash or indefeasibly discharged, after which the Company shall resume
making any and all required payments in respect of the Securities, including any
missed payments.
In addition, during the continuance of any other default with respect
to any Designated Senior Indebtedness that permits, or would permit with the
passage of time or the giving of notice or both, the maturity thereof to be
accelerated (a "Non-payment Default") and upon the earlier to occur of (a)
receipt by the Trustee and the Company from the representatives of holders of
such Designated Senior Indebtedness of a written notice of such Non-payment
Default or (b) if such Non-payment Default results from the acceleration of the
maturity of the Securities, the date of such acceleration, no direct or indirect
payment (other than payments from trusts previously created pursuant to Article
XII) of any kind or character (excluding Permitted Junior Securities) may be
made by the Company on account of the principal of, premium, if any, or interest
on, or the purchase, redemption, or other acquisition of, the Securities for the
period specified below (the "Payment Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice
of a Non-payment Default by the Trustee and the Company from the representatives
of holders of Designated Senior Indebtedness or the date of the acceleration
referred to in clause (b) of the preceding paragraph, as the case may be, and
shall end on the earliest to occur of the following events: (i) 179 days have
elapsed since the receipt of such notice or the date of the acceleration
referred to in clause (b) of the preceding paragraph (provided the maturity of
such Designated Senior Indebtedness shall not theretofore have been
accelerated), (ii) such default is cured or waived or ceases to exist or such
Designated Senior Indebtedness is paid in full in cash or indefeasibly
discharged, or (iii) such Payment Blockage Period shall have been terminated by
written notice to the Company or the Trustee from the representatives of holders
of Designated Senior Indebtedness initiating such Payment Blockage Period, after
which the Company shall promptly resume making any and all required payments in
respect of the Securities, including any missed payments. Only one Payment
Blockage Period with respect to the Securities may be commenced within any 360
consecutive day period. No Non-payment Default with respect to Designated Senior
Indebtedness that existed or was continuing on the date of the commencement of
any Payment Blockage Period with respect to the Designated Senior Indebtedness
initiating such Payment Blockage Period will be, or can be, made the basis for
the commencement of a second Payment Blockage Period, whether or not within a
period of 360 consecutive days, unless such default has been cured or waived for
a period of not less than 90 consecutive days. In no event will a Payment
Blockage Period extend beyond 179 days from the date of the receipt by the
Trustee of the notice or the date of the acceleration initiating such Payment
Blockage Period, and there must
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be a 181 consecutive day period in any 360 day period during which no Payment
Blockage Period is in effect.
SECTION 14.4. Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full in cash of all Senior Indebtedness, the
Holders of the Securities shall be subrogated to the extent of the payments or
distributions made to the holders of such Senior Indebtedness pursuant to the
provisions of this Article XIV to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of,
premium, if any, and interest on the Securities shall be paid in full. For
purposes of such subrogation, no payments or distributions to the holders of the
Senior Indebtedness of any cash, property or securities to which the Holders of
the Securities or the Trustee would be entitled except for the provisions of
this Article XIV, and no payments over pursuant to the provisions of this
Article XIV to the holders of Senior Indebtedness by Holders of the Securities
or the Trustee, shall, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Securities, be deemed to be a payment
or distribution by the Company to or on account of the Senior Indebtedness.
SECTION 14.5. Provisions Solely To Define Relative Rights.
The provisions of this Article XIV are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article XIV or elsewhere in this Indenture or in the
Securities is intended to or shall (a) impair, as among the Company, its
creditors other than holders of Senior Indebtedness and the Holders of the
Securities, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders of the Securities the principal of, premium, if any and
interest on the Securities as and when the same shall become due and payable in
accordance with their terms; (b) affect the relative rights against the Company
of the Holders of the Securities and creditors of the Company other than the
holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any
Securities from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article XIV of the holders of Senior Indebtedness to receive cash, property and
securities otherwise payable or deliverable to the Trustee or such Holder.
SECTION 14.6. Trustee To Effectuate Subordination.
Each Holder of a Security by its acceptance thereof authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article XIV and
appoints the Trustee its attorney-in-fact for any and all such purposes.
SECTION 14.7. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
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non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
XIV or the obligations hereunder of the Holders of the Securities to the holders
of Senior Indebtedness, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Indebtedness, or otherwise amend or supplement in any manner
Senior Indebtedness or any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.
SECTION 14.8. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Securities. Notwithstanding the provisions of this
Article XIV or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Indebtedness or from any trustee therefor; and,
prior to the receipt of any such written notice, the Trustee, subject to the
provisions of Section 6.1, shall be entitled in all respects to assume that no
such facts exist; provided, however, that if the Trustee shall not have received
at its Corporate Trust Office the notice provided for in this Section at least
three Business Days prior to the date upon which by the terms hereof any money
may become payable for any purpose (including, without limitation, the payment
in cash of the principal of, premium, if any or interest on any Security), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to the
purpose for which such money was received and shall not be affected by any
notice to the contrary which may be received by it within three Business Days
prior to such date.
SECTION 14.9. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Company referred to
in this Article XIV, the Trustee, subject to the provisions of Section 6.1, and
the Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Securities, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and
-89-
<PAGE> 97
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article XIV.
SECTION 14.10. Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of Securities
or to the Company or to any other Person cash, property or securities to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
XIV or otherwise, except in the case of gross negligence or wilful misconduct on
the part of the Trustee.
SECTION 14.11. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XIV with respect to any Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder.
Nothing in this Article XIV shall apply to claims of, or payments to,
the Trustee or its agent or counsel under or pursuant to Section 6.7.
SECTION 14.12. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article XIV shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article XIV in addition to or in place of the Trustee; provided,
however, that Section 14.11 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
==============================
This Indenture may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
-90-
<PAGE> 98
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
AMERICAN PLUMBING & MECHANICAL, INC.
By: /s/ DAVID BAGGETT
--------------------------------------
Name: David Baggett
Title: Senior Vice President, Chief
Financial Officer and Secretary
STATE STREET BANK AND TRUST COMPANY
By: /s/ MICHAEL HOPKINS
--------------------------------------
Name: Michael Hopkins
Title: Vice President
CHRISTIANSON ENTERPRISES, INC.
G.G.R. LEASING CORPORATION
CHRISTIANSON SERVICE COMPANY
R.C.R. PLUMBING, INC.
FRANKLIN FIRE SPRINKLER COMPANY
J.A. CROSON COMPANY
TEEPE'S RIVER CITY MECHANICAL, INC.
KEITH RIGGS PLUMBING, INC.
J.A. CROSON COMPANY OF FLORIDA
POWER PLUMBING, INC.
NELSON MECHANICAL CONTRACTORS, INC.
SHERWOOD MECHANICAL, INC.
MILLER MECHANICAL CONTRACTORS, INC.
By: /s/ DAVID BAGGETT
--------------------------------------
Name: David Baggett
Title: Vice President, Secretary and
Treasurer
-91-
<PAGE> 99
Schedule A
LIST OF GUARANTORS
Christianson Enterprises, Inc.
G.G.R. Leasing Corporation
Christianson Service Company
R.C.R. Plumbing, Inc.
Franklin Fire Sprinkler Company
J.A. Croson Company
Teepe's River City Mechanical, Inc.
Keith Riggs Plumbing, Inc.
J.A. Croson Company of Florida
Power Plumbing, Inc.
Nelson Mechanical Contractors, Inc.
Sherwood Mechanical, Inc.
Miller Mechanical Contractors, Inc.
<PAGE> 100
EXHIBIT A-1
FORM OF SECURITY
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL
NOT, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH
THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF THIS SECURITY), OFFER, SELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) THAT PURCHASES THIS SECURITY FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 (IF AVAILABLE), OR (E) PURSUANT
TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT; PROVIDED THAT THE COMPANY, THE TRUSTEE, AND THE SECURITY
REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I)
PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN
EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE
FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRUSTEE.
A-1-1
<PAGE> 101
American Plumbing & Mechanical, Inc.
11 5/8% Senior Subordinated Note due 2008, Series A
No. 1
$125,000,000
CUSIP NO. 0290SOAA9
American Plumbing & Mechanical, Inc., a corporation duly organized and
existing under the laws of the State of Delaware (herein called the "Company,"
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to Cede & Co. or
registered assigns, the principal sum of One Hundred Twenty-Five Million Dollars
($125,000,000) on October 15, 2008 and to pay interest thereon from October 15,
1999 or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, semiannually in arrears on April 15 and October 15,
in each year, commencing October 15, 1999 at the rate of 11 5/8% per annum,
until the principal hereof is paid or duly provided for, provided that any
principal and premium, and any such installment of interest, which is overdue
shall bear interest at the rate of 11 5/8% per annum (to the extent that the
payment of such interest shall be legally enforceable), from the dates such
amounts are due until they are paid or duly provided for. The interest so
payable and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
Security (or one or more predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be the April
1 and October 1 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in said
Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose, in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts; provided,
however, that, at the option of the Company, payment of interest may be made by
check mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register (subject to the right of certain holders to
request payment by wire transfer as provided in the Indenture).
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
A-1-2
<PAGE> 102
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed and attested.
Attest: American Plumbing & Mechanical, Inc.
By:
- ------------------------------- -----------------------------------
Name: Name
Title: Title:
A-1-3
<PAGE> 103
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
STATE STREET BANK AND TRUST COMPANY
as Trustee
Dated: By:
-------------------------------------
Authorized Signatory
A-1-4
<PAGE> 104
FORM OF REVERSE OF SECURITY
This Security is one of a duly authorized issue of Securities of the
Company designated as 11 5/8% Senior Subordinated Notes due 2008, Series A
(herein called the "Initial Securities"), limited in aggregate principal amount
at Stated Maturity to $250,000,000 issued and to be issued under an Indenture,
dated as of May 19, 1999 (herein called the "Indenture," which term shall have
the meaning assigned to it in such instrument), among the Company, the
Guarantors named therein and State Street Bank and Trust Company, as Trustee
(herein called the "Trustee," which term includes any successor trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. The
Securities include the Initial Securities and the Exchange Securities referred
to below, which may be issued in exchange for the Initial Securities pursuant to
the Registration Rights Agreement. The Initial Securities and the Exchange
securities are treated as a single class of securities under the Indenture.
The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. Sections 7aaa - 77bbbb) (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Securities are
subject to all such terms, and Holders of Securities are referred to the
Indenture and the TIA for a statement of such terms. The Securities are
unsecured senior subordinated obligations of the Company limited to
$250,000,000.
This Security is redeemable at the option of the Company, in whole or
in part, at any time on or after April 15, 2004, at the Redemption Prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest, if any, thereon to the Redemption Date, if redeemed during the
12-month period beginning April 15 of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2004.................................................... 106.000%
2005.................................................... 104.000%
2006.................................................... 102.000%
2007 and thereafter..................................... 100.000%
</TABLE>
In addition, at any time, or from time to time, on or prior to April
15, 2002, the Company may, at its option, use the net cash proceeds of one or
more Public Equity Offerings to redeem up to an aggregate of 35% of the
principal amount of the Securities originally issued, at a Redemption Price
equal to 111.625% of the principal amount thereof plus accrued and unpaid
interest, if any, thereon to the Redemption Date; provided, however, at least
65% of the originally issued principal amount of Securities remains outstanding
immediately after the occurrence of such redemption. In order to effect the
foregoing redemption with the proceeds of any Public Equity Offering, the
Company must consummate such redemption not later than 60 days after the closing
of any such Public Equity Offering.
A-1-5
<PAGE> 105
The Securities are not subject to any sinking fund.
The Indenture provides that the Company is obligated (a) upon the
occurrence of a Change in Control to make an offer to purchase all outstanding
Securities at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, thereon to the date of purchase and
(b) to make an offer to purchase Securities with a portion of the net cash
proceeds of certain sales or other dispositions of assets (not applied as
specified in the Indenture within the periods set forth therein) at a purchase
price equal to 100% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase.
In the event of redemption or purchase of this Security in part only
pursuant to a Change of Control Offer or an Asset Sale Offer, a new Security or
Securities for the unredeemed or unpurchased portion hereof will be issued in
the name of the Holder hereof upon the cancellation hereof.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security or of certain restrictive covenants and
Events of Default with respect to this Security, in each case upon compliance
with certain conditions set forth in the Indenture.
If an Event of Default shall occur and be continuing, there may be
declared due and payable the principal of, premium, if any, and accrued and
unpaid interest, if any, on all of the outstanding Securities, in the manner and
with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25% in principal amount of the
Securities at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity and the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding a direction inconsistent with such request, and shall have
failed to institute any such proceeding for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to certain
suits described in the Indenture, including any suit instituted by the Holder of
this Security for the enforcement of
A-1-6
<PAGE> 106
any payment of principal hereof or any premium or interest hereon on or after
the respective due dates expressed herein (or, in the case of redemption, on or
after the Redemption Date or, in the case of any purchase of this Security
required to be made pursuant to a Change of Control Offer or an Asset Sale
Offer, on or after the relevant Purchase Date).
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
This Security is issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of like tenor
of a different authorized denomination, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
Pursuant to the Registration Rights Agreement by and among the Company
and the Initial Purchasers, the Company will be obligated to consummate an
exchange offer pursuant to which the Holder of this Security shall have the
right to exchange this Security for 11 5/8% Senior Subordinated Notes due 2008,
Series B, of the Company (herein called the "Exchange Securities"), which have
been registered under the Securities Act, in like principal amount and having
identical terms as the Initial Securities (other than as set forth in this
paragraph). The Holders of Initial Securities shall be entitled to receive
certain additional interest payments in the event such exchange offer is not
consummated and upon certain other conditions, all pursuant to and in accordance
with the terms of the Registration Rights Agreement.
Interest on this Security shall be computed on the basis of a 360-day
year of twelve 30-day months.
A-1-7
<PAGE> 107
The obligations of the Company under the Indenture and this Security
are expressly subordinated to all Senior Indebtedness and senior in right of
payment to all Subordinated Indebtedness, in each case to the extent set forth
in Article XIV of the Indenture, and reference is hereby made to such Indenture
for the precise terms of such subordination.
As provided in the Indenture and subject to certain limitations therein
set forth, the obligations of the Company under the Indenture and this Security
are Guaranteed pursuant to Guarantees as provided in the Indenture. Each Holder,
by holding this Security, agrees to all of the terms and provisions of said
Guarantees. The Indenture provides that each Guarantor shall be released from
its Guaranty upon compliance with certain conditions.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Indenture and this Security shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflicts of laws principles thereof.
A-1-8
<PAGE> 108
ASSIGNMENT FORM
If you, the Holder, want to assign this Security, fill in the form below and
have your signature guaranteed:
I (or we) assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- --------------------------------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for such agent.
In connection with any transfer of this Security occurring prior to the
date which is the earlier of (i) the date of the declaration by the Commission
of the effectiveness of a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), covering resales of this Security
(which effectiveness shall not have been suspended or terminated at the date of
the transfer) and (ii) the date two years (or such shorter period of time as
permitted by Rule 144(k) under the Securities Act or any successor provision
thereunder) after the later of the original issuance date appearing on the face
of this Security (or any predecessor thereto) or the last date on which the
Company or any affiliate of the Company was the owner of this Security (or any
predecessor thereto), the undersigned confirms that it has not utilized any
general solicitation or general advertising in connection with the transfer and
that:
Please Check
[ ] this Security is being transferred in compliance with the exemption
from registration under the Securities Act provided by Rule 144A
thereunder.
If the foregoing box is not checked, the Trustee or Security Registrar shall not
be obliged to register this Security in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 3.14 of the Indenture shall have
been satisfied.
A-1-9
<PAGE> 109
Date: Your Signature:
--------------- ------------------------------------------
(Sign exactly as your name appears on the
other side of this Security)
By:
----------------------------------------------
NOTICE: To be executed by an executive officer
Signature Guarantee:
---------------------------------------
TO BE COMPLETED BY PURCHASER IF THE BOX ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A (including the information
specified in Rule 144A(d)(4)) or has determined not to request such information
and that it is aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
Date:
--------------- ------------------------------------------
NOTICE: To be executed by an executive
officer
A-1-10
<PAGE> 110
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its entirety by
the Company pursuant to Section 10.13 or 10.14 of the Indenture, check the
applicable box:
Section 10.13 __
Section 10.14 __
If you want to elect to have only a part of the principal amount of
this Security purchased by the Company pursuant to Section 10.13 or 10.14 of the
Indenture, state the portion of such amount: $___________
Date: Your Signature:
--------------- ------------------------------------------
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee:
----------------------------------------------------------
(Signature must be guaranteed by a financial institution
that is a member of the Securities Transfer Agent
Medallion Program ("STAMP"), the Stock Exchange Medallion
Program ("SEMP"), the New York Stock Exchange, Inc.
Medallion Signature Program ("MSP") or such other
signature guarantee program as may be determined by the
Security Registrar in addition to, or in substitution for,
STAMP, SEMP or MSP, all in accordance with the Securities
Exchange Act of 1934, as amended.)
A-1-11
<PAGE> 111
EXHIBIT A-2
American Plumbing & Mechanical, Inc.
11 5/8% Senior Subordinated Note due 2008, Series B
No. [ ]
$125,000,000
CUSIP NO.__________
American Plumbing & Mechanical, Inc., a corporation duly organized and
existing under the laws of the State of Delaware (herein called the "Company,"
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to Cede & Co. or
registered assigns, the principal sum of One Hundred Twenty-Five Million Dollars
($125,000,000) on October 15, 2008 and to pay interest thereon from October 15,
1999 or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, semiannually in arrears on April 15 and October 15 in
each year, commencing October 15, 1999 at the rate of 11 5/8% per annum, until
the principal hereof is paid or duly provided for, provided that any principal
and premium, and any such installment of interest, which is overdue shall bear
interest at the rate of 11 5/8% per annum (to the extent that the payment of
such interest shall be legally enforceable), from the dates such amounts are due
until they are paid or duly provided for. The interest so payable and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in
such Indenture, be paid to the Person in whose name this Security (or one or
more predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest, which shall be the April 1 and October 1
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly provided
for will forthwith cease to be payable to the Holder on such Regular Record Date
and may either be paid to the Person in whose name this Security (or one or more
predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose, in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts; provided,
however, that, at the option of the Company, payment of interest may be made by
check mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register (subject to the right of certain holders to
request payment by wire transfer as provided in the Indenture).
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
A-2-1
<PAGE> 112
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed and attested.
Attest: American Plumbing & Mechanical, Inc.
By:
- ------------------------------- -----------------------------------
Name: Name
Title: Title:
A-2-2
<PAGE> 113
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
STATE STREET BANK AND TRUST COMPANY,
as Trustee
Dated: By:
----------------------------------------
Authorized Signatory
A-2-3
<PAGE> 114
FORM OF REVERSE OF SECURITIES
This Security is one of a duly authorized issue of Securities of the
Company designated as 11 5/8% Senior Subordinated Notes due 2008, Series B
(herein called the "Exchange Securities"), limited in aggregate principal amount
at Stated Maturity to $250,000,000 issued and to be issued under an Indenture,
dated as of May 19, 1999 (herein called the "Indenture," which term shall have
the meaning assigned to it in such instrument), among the Company, the
Guarantors named therein and State Street Bank and Trust Company, as Trustee
(herein called the "Trustee," which term includes any successor trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered. The
Securities include the Initial Securities and the Exchange Securities, issued in
exchange for the Initial Securities pursuant to the Registration Rights
Agreement. The Initial Securities and the Exchange Securities are treated as a
single class of securities under the Indenture.
The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. Sections 7aaa - 77bbbb) (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Securities are
subject to all such terms, and Holders of Securities are referred to the
Indenture and the TIA for a statement of such terms. The Securities are
unsecured senior subordinated obligations of the Company limited to
$250,000,000.
This Security is redeemable at the option of the Company, in whole or
in part, at any time on or after April 15, 2004, at the Redemption Prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest, if any, thereon to the Redemption Date, if redeemed during the
12-month period beginning April 15 of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2004.................................................. 106.000%
2005.................................................. 104.000%
2006.................................................. 102.000%
2007 and thereafter................................... 100.000%
</TABLE>
In addition, at any time, or from time to time, on or prior to April
15, 2002, the Company may, at its option, use the net cash proceeds of one or
more Public Equity Offerings to redeem up to an aggregate of 35% of the
principal amount of the Securities originally issued, at a Redemption Price
equal to 111.625% of the principal amount thereof plus accrued and unpaid
interest, if any, thereon to the Redemption Date; provided, however, at least
65% of the originally issued principal amount of Securities remains outstanding
immediately after the occurrence of such redemption. In order to effect the
foregoing redemption with the proceeds of any Public Equity Offering, the
Company shall consummate such redemption not later than 60 days after the
closing of any such Public Equity Offering.
A-2-4
<PAGE> 115
The Securities are not subject to any sinking fund.
The Indenture provides that the Company is obligated (a) upon the
occurrence of a Change in Control to make an offer to purchase all outstanding
Securities at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, thereon to the date of purchase and
(b) to make an offer to purchase Securities with a portion of the net cash
proceeds of certain sales or other dispositions of assets (not applied as
specified in the Indenture within the periods set forth therein) at a purchase
price equal to 100% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase.
In the event of redemption or purchase of this Security in part only
pursuant to a Change of Control Offer or an Asset Sale Offer, a new Security or
Securities for the unredeemed or unpurchased portion hereof will be issued in
the name of the Holder hereof upon the cancellation hereof.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security or of certain restrictive covenants and
Events of Default with respect to this Security, in each case upon compliance
with certain conditions set forth in the Indenture.
If an Event of Default shall occur and be continuing, there may be
declared due and payable the principal of, premium, if any, and accrued and
unpaid interest, if any, on all of the outstanding Securities, in the manner and
with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25% in principal amount of the
Securities at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity and the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding a direction inconsistent with such request, and shall have
failed to institute any such proceeding for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to certain
suits described in the Indenture, including any suit instituted by the Holder of
this Security for the enforcement of
A-2-5
<PAGE> 116
any payment of principal hereof or any premium or interest hereon on or after
the respective due dates expressed herein (or, in the case of redemption, on or
after the Redemption Date or, in the case of any purchase of this Security
required to be made pursuant to a Change of Control Offer or an Asset Sale
Offer, on or after the relevant Purchase Date).
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
The obligations of the Company under the Indenture and this Security
are expressly subordinated to all Senior Indebtedness, in each case to the
extent set forth in Article XIV of the Indenture, and reference is hereby made
to such Indenture for the precise terms of such subordination.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
This Security is issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Securities are
exchangeable for a like aggregate principal amount of Securities of like tenor
of a different authorized denomination, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
Interest on this Security shall be computed on the basis of a 360-day
year of twelve 30-day months.
As provided in the Indenture and subject to certain limitations therein
set forth, the obligations of the Company under the Indenture and this Security
are Guaranteed pursuant to Guarantees as provided in the Indenture. Each Holder,
by holding this Security, agrees to all of the terms and provisions of said
Guarantees. The Indenture provides that each Guarantor shall be released from
its Guaranty upon compliance with certain conditions.
A-2-6
<PAGE> 117
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Indenture and this Security shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflicts of laws principles thereof.
A-2-7
<PAGE> 118
ASSIGNMENT FORM
If you, the Holder, want to assign this Security, fill in the form below and
have your signature guaranteed:
If you, the Holder, want to assign this Security, fill in the form below and
have your signature guaranteed:
I (or we) assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and irrevocably appoint
- --------------------------------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for such agent.
Date: Your Signature:
--------------- ------------------------------------------
(Sign exactly as your name appears on the
other side of this Security)
By:
----------------------------------------------
NOTICE: To be executed by an executive officer
Signature Guarantee:
---------------------------------------
A-2-8
<PAGE> 119
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its entirety by
the Company pursuant to Section 10.13 or 10.14 of the Indenture, check the
applicable box:
Section 10.13 __
Section 10.14 __
If you want to elect to have only a part of the principal amount of
this Security purchased by the Company pursuant to Section 10.13 or 10.14 of the
Indenture, state the portion of such amount: $_______________
Date: Your Signature:
--------------- ------------------------------------------
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee:
----------------------------------------------------------
(Signature must be guaranteed by a financial institution
that is a member of the Securities Transfer Agent
Medallion Program ("STAMP"), the Stock Exchange Medallion
Program ("SEMP"), the New York Stock Exchange, Inc.
Medallion Signature Program ("MSP") or such other
signature guarantee program as may be determined by the
Security Registrar in addition to, or in substitution for,
STAMP, SEMP or MSP, all in accordance with the Securities
Exchange Act of 1934, as amended.)
A-2-9
<PAGE> 120
EXHIBIT B
FORM OF LEGEND FOR BOOK-ENTRY SECURITIES
Any Global Security authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("D.T.C."), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF D.T.C. (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF D.T.C.), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
B-1
<PAGE> 121
EXHIBIT C
FORM OF SUPPLEMENTAL INDENTURE RELATING
TO ADDITIONAL GUARANTORS
SUPPLEMENTAL INDENTURE
This SUPPLEMENTAL INDENTURE, dated as of __________ ___, ____, is among
American Plumbing & Mechanical, Inc., a Delaware corporation (the "Company"),
each of the parties identified under the caption "Guarantors" on the signature
page hereto (the "Guarantors") and State Street Bank and Trust Company, as
Trustee.
RECITALS
WHEREAS, the Company, the subsidiaries of the Company named therein and
the Trustee entered into an Indenture, dated as of May 19, 1999 (as amended or
supplemented, the "Indenture"), pursuant to which the Company has originally
issued $125,000,000 in principal amount of 11 5/8% Senior Subordinated Notes due
2008 (the "Securities"); and
WHEREAS, Section 9.1(i) of the Indenture provides that the Company and
the Trustee may amend or supplement the Indenture in order to execute and
deliver a guarantee (a "Guarantee") to comply with Section 10.17 thereof without
the consent of the Holders of the Securities; and
WHEREAS, all acts and things prescribed by the Indenture, by law and by
the certificate of incorporation and the bylaws (or comparable constituent
documents) of the Company, of the Guarantors and of the Trustee necessary to
make this Supplemental Indenture a valid instrument legally binding on the
Company, the Guarantors and the Trustee, in accordance with its terms, have been
duly done and performed;
NOW, THEREFORE, to comply with the provisions of the Indenture and in
consideration of the above premises, the Company, the Guarantors and the Trustee
covenant and agree for the equal and proportionate benefit of the respective
Holders of the Securities as follows:
ARTICLE 1
Section 1.01. This Supplemental Indenture is supplemental to the
Indenture and does and shall be deemed to form a part of, and shall be construed
in connection with and as part of, the Indenture for any and all purposes.
Section 1.02. This Supplemental Indenture shall become effective
immediately upon its execution and delivery by each of the Company, the
Guarantors and the Trustee.
C-1
<PAGE> 122
ARTICLE 2
From this date, in accordance with Section 10.17 and by executing this
Supplemental Indenture, the Guarantors whose signatures appear below are
Guarantors for all purposes under the Indenture and are subject to the
provisions of the Indenture to the extent provided for in Article XIII
thereunder.
ARTICLE 3
Section 3.01. Except as specifically modified herein, the Indenture and
the Securities are in all respects ratified and confirmed (mutatis mutandis) and
shall remain in full force and effect in accordance with their terms with all
capitalized terms used herein without definition having the same respective
meanings ascribed to them as in the Indenture.
Section 3.02. Except as otherwise expressly provided herein, no duties,
responsibilities or liabilities are assumed, or shall be construed to be
assumed, by the Trustee by reason of this Supplemental Indenture. This
Supplemental Indenture is executed and accepted by the Trustee subject to all
the terms and conditions set forth in the Indenture with the same force and
effect as if those terms and conditions were repeated at length herein and made
applicable to the Trustee with respect hereto.
Section 3.03. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED
TO CONSTRUE AND ENFORCE THIS SUPPLEMENTAL INDENTURE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
Section 3.04. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of such
executed copies together shall represent the same agreement.
[NEXT PAGE IS SIGNATURE PAGE]
C-2
<PAGE> 123
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the date first written above.
AMERICAN PLUMBING & MECHANICAL, INC.
By
--------------------------------------
Name:
Title:
GUARANTORS
[ ]
By
--------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By
--------------------------------------
Name:
Title:
C-3
<PAGE> 1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into this 19th day of May 1999, among American Plumbing & Mechanical
Inc., a Delaware corporation (the "Company"), the Guarantors named on Schedule A
hereto (the "Guarantors") and Fleet Securities, Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Banc One Capital Markets, Inc. and Credit Lyonnais
Securities (USA) Inc. (collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated May
12, 1999, among the Company, the Guarantors and the Initial Purchasers (the
"Purchase Agreement"), which provides for the sale by the Company and the
Guarantors to the Initial Purchasers of an aggregate of $125 million principal
amount of the Company's 11 5/8% Senior Subordinated Notes due 2008, Series A
(the "Notes"), together with the related guarantees of such Notes by the
Guarantors (the Guarantees, and together with the Notes, the "Securities"). In
order to induce the Initial Purchasers to enter into the Purchase Agreement, the
Company and the Guarantors have agreed to provide to the Initial Purchasers and
their direct and indirect transferees the registration rights set forth in this
Agreement. The execution of this Agreement is a condition to the closing under
the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from time
to time.
"1934 Act" shall mean the Securities Exchange Act of l934, as amended
from time to time.
"Closing Date" shall mean the Closing Time as defined in the Purchase
Agreement.
"Company" shall have the meaning set forth in the preamble and shall
also include the Company's successors.
"Depositary" shall mean The Depository Trust Company, or any other
depositary appointed by the Company, provided, however, that such depositary
must have an address in the Borough of Manhattan, in the City of New York.
"Exchange Offer" shall mean the offer by the Company and the Guarantors
to exchange Exchange Securities for Registrable Securities pursuant to Section
2.1 hereof.
"Exchange Offer Registration" shall mean a registration under the 1933
Act effected pursuant to Section 2.1 hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form), and all amendments and supplements to such registration statement,
including the Prospectus contained therein, all exhibits thereto and all
documents incorporated by reference therein.
"Exchange Period" shall have the meaning set forth in Section 2.1
hereof.
<PAGE> 2
"Exchange Securities" shall mean the 11 5/8% Senior Subordinated Notes
due 2009, Series B and related guarantees issued by the Company and the
Guarantors under the Indenture containing terms identical to the Securities in
all material respects (except for references to certain interest rate
provisions, restrictions on transfers and restrictive legends), to be offered to
Holders of Securities in exchange for Registrable Securities pursuant to the
Exchange Offer.
"Guarantors" has the meaning set forth in the preamble, and shall
include any additional guarantors of the Notes added pursuant to the Indenture.
"Holder" shall mean an Initial Purchaser, for so long as it owns any
Registrable Securities, and each of its successors, assigns and direct and
indirect transferees who become registered owners of Registrable Securities
under the Indenture and each Participating Broker-Dealer that holds Exchange
Securities for so long as such Participating Broker-Dealer is required to
deliver a prospectus meeting the requirements of the 1933 Act in connection with
any resale of such Exchange Securities.
"Indenture" shall mean the Indenture relating to the Securities, dated
as of May 19, 1999, among the Company, the Guarantors and State Street Bank and
Trust Company, as trustee, as the same may be amended, supplemented, waived or
otherwise modified from time to time in accordance with the terms thereof.
"Initial Purchaser" or "Initial Purchasers" shall have the meaning set
forth in the preamble.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of Outstanding (as defined in the Indenture)
Registrable Securities; provided, however, that whenever the consent or approval
of Holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company and other obligors on the
Securities or any Affiliate (as defined in the Indenture) of the Company shall
be disregarded in determining whether such consent or approval was given by the
Holders of such required percentage amount.
"Notes" shall have the meaning set forth in the preamble.
"Participating Broker-Dealer" shall mean any of Fleet Securities, Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc One Capital Markets,
Inc. and Credit Lyonnais Securities (USA) Inc. and any other broker-dealer which
makes a market in the Securities and exchanges Registrable Securities in the
Exchange Offer for Exchange Securities.
"Person" shall mean an individual, partnership (general or limited),
corporation, limited liability company, trust or unincorporated organization, or
a government or agency or political subdivision thereof.
"Private Exchange" shall have the meaning set forth in Section 2.1
hereof.
"Private Exchange Securities" shall have the meaning set forth in
Section 2.1 hereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including any such
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by a Shelf Registration Statement, and by
all other amendments and supplements to a prospectus, including post-effective
amendments, and in each case including all information incorporated by reference
therein.
"Purchase Agreement" shall have the meaning set forth in the preamble.
-2-
<PAGE> 3
"Registrable Securities" shall mean the Securities and, if issued, the
Private Exchange Securities; provided, however, that the Securities and, if
issued, the Private Exchange Securities, shall cease to be Registrable
Securities when (i) a Registration Statement with respect to such Securities
shall have been declared effective under the 1933 Act and such Securities shall
have been disposed of pursuant to such Registration Statement, (ii) such
Securities have been sold to the public pursuant to Rule l44 under the 1933 Act
or have become eligible for resale without restriction pursuant to Rule 144(k)
under the 1933 Act (in each case, or any similar provision then in force, but
not Rule 144A), (iii) such Securities shall have ceased to be outstanding or
(iv) such Securities have been exchanged for freely tradeable Exchange
Securities in the Exchange Offer (except in the case of Securities purchased
from the Company and continued to be held by the Initial Purchasers).
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. (the "NASD") registration and filing fees, including,
if applicable, the fees and expenses of any "qualified independent underwriter"
(and its counsel) that is required to be retained by any holder of Registrable
Securities in accordance with the rules and regulations of the NASD, (ii) all
fees and expenses incurred in connection with compliance with state securities
or blue sky laws and compliance with the rules of the NASD (including reasonable
fees and disbursements of counsel for any underwriters or Holders in connection
with blue sky qualification of any of the Exchange Securities or Registrable
Securities and any filings with the NASD), (iii) all expenses of any Persons in
preparing or assisting in preparing, word processing, printing and distributing
any Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements and other
documents relating to the performance of and compliance with this Agreement,
(iv) all fees and expenses incurred in connection with the listing, if any, of
any of the Registrable Securities on any securities exchange or exchanges, (v)
all rating agency fees, (vi) the fees and disbursements of counsel for the
Company and of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, (vii) the fees and expenses of the Trustee,
and any escrow agent or custodian, (viii) the reasonable fees and expenses of
the Initial Purchasers in connection with the Exchange Offer, including the
reasonable fees and expenses of counsel to the Initial Purchasers in connection
therewith, (ix) the reasonable fees and disbursements of one counsel
representing the Majority Holders and (x) any reasonable fees and disbursements
of the underwriters customarily required to be paid by issuers or sellers of
securities and the fees and expenses of any special experts retained by the
Company in connection with any Registration Statement, but excluding
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of Registrable Securities by a Holder.
"Registration Statement" shall mean any registration statement of the
Company which covers any of the Exchange Securities or Registrable Securities
pursuant to the provisions of this Agreement, and all amendments and supplements
to any such Registration Statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission or any
successor agency or government body performing the functions currently performed
by the United States Securities and Exchange Commission.
"Securities" shall have the meaning set forth in the preamble.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2.2 hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2.2 of this
Agreement which covers all of the Registrable Securities or all of the Private
Exchange Securities on an appropriate form under Rule 415 under the 1933 Act, or
any similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
-3-
<PAGE> 4
"Suspension Period" shall have the meaning set forth in Section 2.2(b).
"Trustee" shall mean the trustee with respect to the Securities under
the Indenture.
2. Registration Under the 1933 Act.
2.1 Exchange Offer. The Company and the Guarantors shall, for the
benefit of the Holders, at the Company's cost, (A) prepare and, as soon as
practicable but not later than 60 days following the Closing Date, file with the
SEC an Exchange Offer Registration Statement on an appropriate form under the
1933 Act with respect to a proposed Exchange Offer and the issuance and delivery
to the Holders, in exchange for the Registrable Securities (other than Private
Exchange Securities), of a like principal amount of Exchange Securities, (B) use
their reasonable best efforts to cause the Exchange Offer Registration Statement
to be declared effective under the 1933 Act within 150 days of the Closing Date,
(C) use their reasonable best efforts to keep the Exchange Offer Registration
Statement effective until the closing of the Exchange Offer and (D) use their
reasonable best efforts to cause the Exchange Offer to be consummated not later
than 180 days following the Closing Date. The Exchange Securities will be issued
under the Indenture. Upon the effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall promptly commence the Exchange
Offer, it being the objective of such Exchange Offer to enable each Holder
eligible and electing to exchange Registrable Securities for Exchange Securities
(assuming that such Holder (a) is not an affiliate of the Company within the
meaning of Rule 405 under the 1933 Act, (b) is not a broker-dealer tendering
Registrable Securities acquired directly from the Company for its own account,
(c) acquired the Registrable Securities in the ordinary course of such Holder's
business and (d) has no arrangements or understandings with any Person to
participate in the Exchange Offer for the purpose of distributing the Exchange
Securities) to transfer such Exchange Securities from and after their receipt
without any limitations or restrictions under the 1933 Act or under state
securities or blue sky laws.
In connection with the Exchange Offer, the Company shall:
(a) mail as promptly as practicable to each Holder a copy of
the Prospectus forming part of the Exchange Offer Registration
Statement, together with an appropriate letter of transmittal and
related documents;
(b) keep the Exchange Offer open for acceptance for a period
of not less than 30 calendar days after the date notice thereof is
mailed to the Holders (or longer if required by applicable law) (such
period referred to herein as the "Exchange Period");
(c) utilize the services of the Depositary for the Exchange
Offer;
(d) permit Holders to withdraw tendered Registrable Securities
at any time prior to 5:00 p.m. (Eastern Time) on the last business day
of the Exchange Period, by sending to the institution specified in the
notice a telegram, telex, facsimile transmission or letter setting
forth the name of such Holder, the principal amount of Registrable
Securities delivered for exchange, and a statement that such Holder is
withdrawing such Holder's election to have such Securities exchanged;
(e) notify each Holder that any Registrable Security not
tendered will remain outstanding and continue to accrue interest, but
will not retain any rights under this Agreement (except in the case of
the Initial Purchasers and Participating Broker-Dealers as provided
herein); and
-4-
<PAGE> 5
(f) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
If, prior to consummation of the Exchange Offer, the Initial Purchasers
hold any Securities acquired by them and having the status of an unsold
allotment in the initial distribution, the Company and the Guarantors upon the
request of any Initial Purchaser shall, simultaneously with the delivery of the
Exchange Securities in the Exchange Offer, issue and deliver to such Initial
Purchaser in exchange (the "Private Exchange") for the Securities held by such
Initial Purchaser, a like principal amount of debt securities of the Company and
related guarantees by the Guarantors that are identical (except that such
securities shall bear appropriate transfer restrictions) to the Exchange
Securities (the "Private Exchange Securities").
The Exchange Securities and the Private Exchange Securities shall be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture and which, in either case, has been qualified under
the Trust Indenture Act of 1939, as amended (the "TIA"), or is exempt from such
qualification and shall provide that the Exchange Securities shall not be
subject to the transfer restrictions applicable to the Registrable Securities
set forth in the Indenture but that the Private Exchange Securities shall be
subject to such transfer restrictions. The Indenture or such indenture shall
provide that the Exchange Securities, the Private Exchange Securities and the
Securities shall vote and consent together on all matters as one class and that
none of the Exchange Securities, the Private Exchange Securities or the
Securities will have the right to vote or consent as a separate class on any
matter. The Private Exchange Securities shall be of the same series as and the
Company shall use all commercially reasonable efforts to have the Private
Exchange Securities bear the same CUSIP number as the Exchange Securities. The
Company shall not have any liability under this Agreement solely as a result of
such Private Exchange Securities not bearing the same CUSIP number as the
Exchange Securities.
As soon as practicable after the close of the Exchange Offer and/or the
Private Exchange, as the case may be, the Company and the Guarantors shall:
(i) accept for exchange all Registrable Securities duly
tendered and not validly withdrawn pursuant to the Exchange Offer in
accordance with the terms of the Exchange Offer Registration Statement
and the letter of transmittal which shall be an exhibit thereto;
(ii) accept for exchange all Securities properly tendered
pursuant to the Private Exchange;
(iii) deliver to the Trustee for cancellation all Registrable
Securities so accepted for exchange; and
(iv) cause the Trustee promptly to authenticate and deliver
Exchange Securities or Private Exchange Securities, as the case may be,
to each Holder of Registrable Securities so accepted for exchange in a
principal amount equal to the principal amount of the Registrable
Securities of such Holder so accepted for exchange.
Interest on each Exchange Security and Private Exchange Security will
accrue from the last date on which interest was paid on the Registrable
Securities surrendered in exchange therefor or, if no interest has been paid on
the Registrable Securities, from the date of original issuance. The Exchange
Offer and the Private Exchange shall not be subject to any conditions, other
than (i) that the Exchange Offer or the Private Exchange, or the making of any
exchange by a Holder, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) the due tendering of Registrable
Securities in accordance with the Exchange Offer and the Private Exchange, (iii)
that each Holder of Registrable Securities exchanged in the Exchange Offer shall
have represented that all Exchange Securities to be received by it shall be
acquired in the ordinary course of its business and that at the time of the
consummation of the Exchange Offer it shall have no arrangement or understanding
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<PAGE> 6
with any person to participate in the distribution (within the meaning of the
1933 Act) of the Exchange Securities and shall have made such other
representations as may be reasonably necessary under applicable SEC rules,
regulations or interpretations to render the use of Form S-4 or other
appropriate form under the 1933 Act available and (iv) that no action or
proceeding shall have been instituted or threatened in any court or by or before
any governmental agency with respect to the Exchange Offer or the Private
Exchange which, in the Company's judgment, would reasonably be expected to
impair the ability of the Company to proceed with the Exchange Offer or the
Private Exchange. The Company shall inform the Initial Purchasers of the names
and addresses of the Holders to whom the Exchange Offer is made, and the Initial
Purchasers shall have the right to contact such Holders and otherwise facilitate
the tender of Registrable Securities in the Exchange Offer.
2.2 Shelf Registration. (i) If, because of any changes in law, SEC
rules or regulations or applicable interpretations thereof by the staff of the
SEC, the Company is not permitted to effect the Exchange Offer as contemplated
by Section 2.1 hereof, (ii) if for any other reason the Exchange Offer
Registration Statement is not declared effective within 150 days following the
original issue of the Registrable Securities or the Exchange Offer is not
consummated within 180 days after the original issue of the Registrable
Securities, (iii) upon the request of any of the Initial Purchasers or (iv) if a
Holder is not permitted to participate in the Exchange Offer or does not receive
fully tradeable Exchange Securities pursuant to the Exchange Offer, then in case
of each of clauses (i) through (iv) the Company and the Guarantors shall, at the
Company's cost:
(a) As promptly as practicable, file with the SEC, and
thereafter shall use their reasonable best efforts to cause to be
declared effective as promptly as practicable but no later than 150
days after the date the obligation to file the Shelf Registration
Statement arises, a Shelf Registration Statement relating to the offer
and sale of the Registrable Securities by the Holders from time to time
in accordance with the methods of distribution elected by the Majority
Holders participating in the Shelf Registration and set forth in such
Shelf Registration Statement.
(b) Use their reasonable best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
Prospectus forming part thereof to be usable by Holders for a period of
two years from the date the Shelf Registration Statement is declared
effective by the SEC, or for such shorter period that will terminate
when all Registrable Securities covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement
or cease to be outstanding or otherwise cease to be Registrable
Securities (the "Effectiveness Period"); provided, however, that the
Effectiveness Period in respect of the Shelf Registration Statement
shall be extended to the extent required to permit dealers to comply
with the applicable prospectus delivery requirements of Rule 174 under
the 1933 Act and as otherwise provided herein; and provided, further,
that the Company and the Guarantors shall not be obligated to keep the
Shelf Registration Statement effective or to permit the use of any
Prospectus forming a part of the Shelf Registration Statement if (A)
the Company determines, in its reasonable judgment, upon advice of
counsel, that the continued effectiveness and use of the Shelf
Registration Statement would (x) require the disclosure of material
information which the Company has a bona fide business reason for
preserving as confidential, or (y) interfere with any financing,
acquisition, corporate reorganization or other material transaction
involving the Company or any of its subsidiaries, and provided,
further, that the failure to keep the Shelf Registration Statement
effective and usable for offers and sales of Registrable Securities for
such reasons shall last no longer than an aggregate of 30 days in any
consecutive twelve-month period (whereafter a Registration Default, as
defined in Section 2.5, shall occur), and (B) the Company promptly
thereafter complies with the requirements of Section 3(k) hereof, if
applicable (any such period during which the Company is excused from
keeping the Shelf Registration Statement effective and usable for
offers and sales of Registrable Securities is referred to herein as a
"Suspension Period", and a Suspension Period shall commence on and
include the date that the Company gives notice to the Holders that the
Shelf Registration Statement is no longer effective or the prospectus
included therein is no longer usable for offers and sales of
Registrable Securities as a result of the foregoing provisions and
shall end on the earlier to occur of the date
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<PAGE> 7
on which each seller of Registrable Securities covered by the Shelf
Registration Statement either receives the copies of the supplemented
or amended prospectus contemplated by Section 3(k) hereof or is advised
in writing by the Company that use of the prospectus may be resumed);
and
(c) use their reasonable best efforts to ensure that (i) any
Shelf Registration Statement and any amendment thereto and any
Prospectus forming part thereof and any supplement thereto complies in
all material respects with the 1933 Act and the rules and regulations
thereunder, (ii) any Shelf Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading and (iii) subject to Section 2(b) above, any Prospectus
forming part of any Shelf Registration Statement, and any supplement to
such Prospectus (as amended or supplemented from time to time), does
not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements, in light of
the circumstances under which they were made, not misleading.
The Company shall not permit any securities other than Registrable
Securities to be included in the Shelf Registration Statement. The Company and
the Guarantors further agree, if necessary, to supplement or amend the Shelf
Registration Statement, as required by Section 3(b) below, and to furnish to the
Holders of Registrable Securities copies of any such supplement or amendment
promptly after its being used or filed with the SEC.
2.3 Expenses. The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2.1 or 2.2. Each Holder
shall pay all underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement.
2.4 Effectiveness. (a) The Company and the Guarantors will be deemed
not to have used their reasonable best efforts to cause the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
to become, or to remain, effective during the requisite period if they
voluntarily take any action that would, or omits to take any action which
omission would, result in any such Registration Statement not being declared
effective or in the Holders of Registrable Securities covered thereby not being
able to exchange or offer and sell such Registrable Securities during that
period as and to the extent contemplated hereby, unless such action is required
by applicable law.
(b) An Exchange Offer Registration Statement pursuant to Section 2.1
hereof or a Shelf Registration Statement pursuant to Section 2.2 hereof will not
be deemed to have become effective unless it has been declared effective by the
SEC; provided, however, that if, after it has been declared effective, the
offering of Registrable Securities pursuant to an Exchange Offer Registration
Statement or a Shelf Registration Statement is interfered with by any stop
order, injunction or other order or requirement of the SEC or any other
governmental agency or court, such Registration Statement will be deemed not to
have become effective during the period of such interference, until the offering
of Registrable Securities pursuant to such Registration Statement may legally
resume.
2.5 Additional Interest. The Indenture executed in connection with the
Securities will provide that in the event that either (a) the Exchange Offer
Registration Statement is not filed with the Commission on or prior to the 60th
calendar day following the date of original issue of the Securities, (b) the
Exchange Offer Registration Statement has not been declared effective on or
prior to the 150th calendar day following the date of original issue of the
Securities , (c) the Exchange Offer is not consummated on or prior to the 180th
calendar day following the date of original issue of the Securities or a Shelf
Registration Statement is not declared effective prior to the 150th day
following the date the obligation to file such Shelf Registration Statement
arises or (d) after the Shelf Registration Statement has been filed and declared
effective, the Shelf Registration Statement is
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<PAGE> 8
unusable by the Holders for any reason during the Effectiveness Period, and the
aggregate number of days in any consecutive twelve-month period for which the
Shelf Registration Statement shall not be usable exceeds 30 days in the
aggregate (each such event referred to in clauses (a) through (d) above, a
"Registration Default"), the interest rate borne by the Registrable Securities
shall be increased ("Additional Interest") by 0.25% per annum upon the
occurrence of each Registration Default, which rate will increase by 0.25% per
annum each 90-day period that such Additional Interest continues to accrue under
any such circumstance, provided that the maximum aggregate increase in the
interest rate will in no event exceed 0.50% per annum. Additional Interest shall
be computed based on the actual number of days elapsed in each period in which a
Registration Default occurs. Following the cure of all Registration Defaults the
accrual of Additional Interest will cease and the interest rate will revert to
the original rate.
The Company shall notify the Trustee within three business days after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). Additional Interest shall be
paid by depositing with the Trustee, in trust, for the benefit of the Holders of
Registrable Securities, on or before the applicable semiannual interest payment
date, immediately available funds in sums sufficient to pay the Additional
Interest then due. The Additional Interest due shall be payable on each interest
payment date to the record Holder of Securities entitled to receive the interest
payment to be paid on such date as set forth in the Indenture. Each obligation
to pay Additional Interest shall be deemed to accrue from and including the day
following the applicable Event Date.
3. Registration Procedures. In connection with the obligations of the
Company with respect to Registration Statements pursuant to Sections 2.1 and 2.2
hereof, the Company (and, as necessary, the Guarantors) shall:
(a) prepare and file with the SEC a Registration Statement,
within the relevant time period specified in Section 2, on the
appropriate form under the 1933 Act, which form (i) shall be selected
by the Company, (ii) shall, in the case of a Shelf Registration, be
available for the sale of the Registrable Securities by the selling
Holders thereof, (iii) shall comply as to form in all material respects
with the requirements of the applicable form and include or incorporate
by reference all financial statements required by the SEC to be filed
therewith or incorporated by reference therein, and (iv) shall comply
in all respects with the requirements of Regulation S-T under the 1933
Act, and use its reasonable best efforts to cause such Registration
Statement to become effective and remain effective in accordance with
Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary under applicable law to keep such Registration Statement
effective for the applicable period; and cause each Prospectus to be
supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provision
then in force) under the 1933 Act and comply with the provisions of the
1933 Act, the 1934 Act and the rules and regulations thereunder
applicable to them with respect to the disposition of all securities
covered by each Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
selling Holders thereof (including sales by any Participating
Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify each
Holder of Registrable Securities, at least five business days prior to
filing, that a Shelf Registration Statement with respect to the
Registrable Securities is being filed and advising such Holders that
the distribution of Registrable Securities will be made in accordance
with the method selected by the Majority Holders participating in the
Shelf Registration; (ii) furnish to each Holder of Registrable
Securities and to each underwriter of an underwritten offering of
Registrable Securities, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other
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<PAGE> 9
documents as such Holder or underwriter may reasonably request,
including financial statements and schedules, in order to facilitate
the public sale or other disposition of the Registrable Securities; and
(iii) hereby consent to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Holders of Registrable
Securities in connection with the offering and sale of the Registrable
Securities covered by the Prospectus or any amendment or supplement
thereto;
(d) use its reasonable best efforts to register or qualify the
Registrable Securities under all applicable state securities or "blue
sky" laws of such jurisdictions as any Holder of Registrable Securities
covered by a Registration Statement and each underwriter of an
underwritten offering of Registrable Securities shall reasonably
request by the time the applicable Registration Statement is declared
effective by the SEC, and do any and all other acts and things which
may be reasonably necessary or advisable to enable each such Holder and
underwriter to consummate the disposition in each such jurisdiction of
such Registrable Securities owned by such Holder; provided, however,
that the Company shall not be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3(d),
or (ii) take any action which would subject it to general service of
process or taxation in any such jurisdiction where it is not then so
subject;
(e) notify promptly each Holder of Registrable Securities
included in a Shelf Registration or any Participating Broker-Dealer who
has notified the Company that it is utilizing the Exchange Offer
Registration Statement as provided in paragraph (f) below and, if
requested by such Holder or Participating Broker-Dealer, confirm such
advice in writing promptly (i) when a Registration Statement has become
effective and when any post-effective amendments and supplements
thereto become effective, (ii) of any request by the SEC or any state
securities authority for post-effective amendments and supplements to a
Registration Statement and Prospectus or for additional information
after the Registration Statement has become effective, (iii) of the
issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) of the happening
of any event or the discovery of any facts during the period a Shelf
Registration Statement is effective which makes any statement made in
such Registration Statement or the related Prospectus untrue in any
material respect or which requires the making of any changes in such
Registration Statement or Prospectus in order to make the statements
therein not misleading or to include omitted material information, (v)
of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities or the
Exchange Securities, as the case may be, for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose and
(vi) of any determination by the Company that a post-effective
amendment to such Registration Statement would be appropriate;
(f) (A) in the case of the Exchange Offer Registration
Statement (i) include in the Exchange Offer Registration Statement a
section entitled "Plan of Distribution", and which shall contain a
summary statement of the positions taken or policies made by the staff
of the SEC with respect to the potential "underwriter" status of any
broker-dealer that holds Registrable Securities acquired for its own
account as a result of market-making activities or other trading
activities and that will be the beneficial owner (as defined in Rule
13d-3 under the Exchange Act) of Exchange Securities to be received by
such broker-dealer in the Exchange Offer, whether such positions or
policies have been publicly disseminated by the staff of the SEC or
such positions or policies represent the prevailing views of the staff
of the SEC, including a statement that any such broker-dealer who
receives Exchange Securities for Registrable Securities pursuant to the
Exchange Offer may be deemed a statutory underwriter and must deliver a
prospectus meeting the requirements of the 1933 Act in connection with
any resale of such Exchange Securities, (ii) furnish to each
Participating Broker-Dealer who has delivered to the Company the notice
referred to in Section 3(e), without charge, as many copies of each
Prospectus included in the Exchange Offer Registration Statement,
including any preliminary prospectus, and any amendment or supplement
thereto, as such Participating Broker-Dealer may reasonably request,
(iii) hereby consent to the use of the Prospectus forming part of the
Exchange Offer Registration Statement or any
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<PAGE> 10
amendment or supplement thereto, by any Person subject to the
prospectus delivery requirements of the SEC, including all
Participating Broker-Dealers, in connection with the sale or transfer
of the Exchange Securities covered by the Prospectus or any amendment
or supplement thereto (except during any Suspension Period), and (iv)
include in the transmittal letter or similar documentation to be
executed by an exchange offeree in order to participate in the Exchange
Offer (x) the following provision:
"If the exchange offeree is a broker-dealer holding
Registrable Securities acquired for its own account as a
result of market-making activities or other trading
activities, it will deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of
Exchange Securities received in respect of such Registrable
Securities pursuant to the Exchange Offer;" and
(y) a statement to the effect that by a broker-dealer making the
acknowledgment described in clause (x) and by delivering a Prospectus
in connection with the exchange of Registrable Securities, the
broker-dealer will not be deemed to admit that it is an underwriter
within the meaning of the 1933 Act; and
(B) in the case of any Exchange Offer Registration Statement,
the Company agrees to deliver to the Initial Purchasers on behalf of
the Participating Broker-Dealers upon the effectiveness of the Exchange
Offer Registration Statement (i) an opinion of counsel or opinions of
counsel substantially in the form attached hereto as Exhibit A, (ii)
officers' certificates substantially in the form customarily delivered
in a public offering of debt securities and (iii) a comfort letter or
comfort letters in customary form to the extent permitted by Statement
on Auditing Standards No. 72 of the American Institute of Certified
Public Accountants (or if such a comfort letter is not permitted, an
agreed upon procedures letter in customary form) from the Company's
independent certified public accountants (and, if necessary, any other
independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements are, or are required to be, included in the Registration
Statement) at least as broad in scope and coverage as the comfort
letter or comfort letters delivered to the Initial Purchasers in
connection with the initial sale of the Securities to the Initial
Purchasers;
(g) (i) in the case of an Exchange Offer, furnish counsel for
the Initial Purchasers and (ii) in the case of a Shelf Registration,
furnish counsel for the Holders of Registrable Securities copies of any
comment letters received from the SEC or any other request by the SEC
or any state securities authority for amendments or supplements to a
Registration Statement and Prospectus or for additional information;
(h) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at
the earliest possible moment;
(i) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, and each underwriter, if any, without
charge, at least one conformed copy of each Registration Statement and
any post-effective amendment thereto, including financial statements
and schedules (without documents incorporated therein by reference and
all exhibits thereto, unless requested);
(j) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends; and
enable such Registrable Securities to be in such denominations
(consistent with the provisions of the Indenture) and registered in
such names as
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<PAGE> 11
the selling Holders or the underwriters, if any, may reasonably request
at least three business days prior to the closing of any sale of
Registrable Securities;
(k) in the case of a Shelf Registration, upon the occurrence
of any event or the discovery of any facts, each as contemplated by
Sections 3(e)(iv) and 3(e)(v) hereof, as promptly as practicable after
the occurrence of such an event, subject to Section 2.2(b), use its
reasonable best efforts to prepare a supplement or post-effective
amendment to the Registration Statement or the related Prospectus or
any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers of
the Registrable Securities or Participating Broker-Dealers, such
Prospectus will not contain at the time of such delivery any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading or will remain so qualified. At
such time as such public disclosure is otherwise made or the Company
determines that such disclosure is not necessary, in each case to
correct any misstatement of a material fact or to include any omitted
material fact, the Company agrees promptly to notify each Holder of
such determination and to furnish each Holder such number of copies of
the Prospectus as amended or supplemented, as such Holder may
reasonably request;
(l) in the case of a Shelf Registration, a reasonable time
prior to the filing of any Registration Statement, any Prospectus, any
amendment to a Registration Statement or amendment or supplement to a
Prospectus or any document which is to be incorporated by reference
into a Registration Statement or a Prospectus after initial filing of a
Registration Statement, provide copies of such document to the Initial
Purchasers on behalf of such Holders; and make representatives of the
Company as shall be reasonably requested by the holders of a majority
of the Registrable Securities being sold, or the Initial Purchasers on
behalf of such Holders, available for discussion of such document;
(m) obtain a CUSIP number for all Exchange Securities, Private
Exchange Securities or Registrable Securities, as the case may be, not
later than the effective date of a Registration Statement, and provide
the Trustee with printed certificates for the Exchange Securities,
Private Exchange Securities or the Registrable Securities, as the case
may be, in a form eligible for deposit with the Depositary;
(n) (i) cause the Indenture to be qualified under the TIA in
connection with the registration of the Exchange Securities or
Registrable Securities, as the case may be, (ii) cooperate with the
Trustee and the Holders to effect such changes to the Indenture as may
be required for the Indenture to be so qualified in accordance with the
terms of the TIA and (iii) execute, and use its reasonable best efforts
to cause the Trustee to execute, all documents as may be required to
effect such changes, and all other forms and documents required to be
filed with the SEC to enable the Indenture to be so qualified in a
timely manner;
(o) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and
appropriate actions reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities:
(i) make such representations and warranties to the
Holders of such Registrable Securities and the underwriters,
if any, in form, substance and scope as are customarily made
by issuers to underwriters in similar underwritten offerings
as may be reasonably requested by them;
(ii) if requested by the managing underwriters, obtain
opinions of counsel to the Company and updates thereof (which
counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any,
and the holders of a majority in principal amount of the
Registrable Securities being sold) addressed to each selling
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<PAGE> 12
Holder and the underwriters, if any, covering the matters
customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably
requested by such Holders and underwriters;
(iii) if requested by the managing underwriters, obtain
"cold comfort" letters and updates thereof from the Company's
independent certified public accountants (and, if necessary,
any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the
Company for which financial statements are, or are required to
be, included in the Registration Statement) addressed to the
underwriters, if any, and use reasonable efforts to have such
letter addressed to the selling Holders of Registrable
Securities (to the extent consistent with Statement on
Auditing Standards No. 72 of the American Institute of
Certified Public Accounts), such letters to be in customary
form and covering matters of the type customarily covered in
"cold comfort" letters to underwriters in connection with
similar underwritten offerings;
(iv) enter into a securities sales agreement with the
Holders and an agent of the Holders providing for, among other
things, the appointment of such agent for the selling Holders
for the purpose of soliciting purchases of Registrable
Securities, which agreement shall be in form, substance and
scope customary for similar offerings;
(v) if an underwriting agreement is entered into,
cause the same to set forth indemnification provisions and
procedures substantially equivalent to the indemnification
provisions and procedures set forth in Section 4 hereof with
respect to the underwriters and all other parties to be
indemnified pursuant to said Section or, at the request of any
underwriters, in the form customarily provided to such
underwriters in similar types of transactions; and
(vi) deliver such documents and certificates as may be
reasonably requested and as are customarily delivered in
similar offerings to the Holders of a majority in principal
amount of the Registrable Securities being sold and the
managing underwriters, if any.
The above shall be done at each closing of any sale of Registrable
Securities, whether under any underwriting or similar agreement or
otherwise;
(p) in the case of a Shelf Registration or if a Prospectus is
required to be delivered by any Participating Broker-Dealer in the case
of an Exchange Offer, make available at reasonable times for inspection
by representatives appointed by the Majority Holders, any underwriters
participating in any disposition pursuant to a Shelf Registration
Statement, any Participating Broker-Dealer and any counsel or
accountant retained by any of the foregoing, all financial and other
records, pertinent corporate documents and properties of the Company
reasonably requested by any such persons, and cause the respective
officers, directors, employees, and any other agents of the Company to
supply all information reasonably requested by any such representative,
underwriter, special counsel or accountant in connection with a
Registration Statement, and make such representatives of the Company
available for discussion of such documents as shall be reasonably
requested by the Initial Purchasers;
(q) (i) in the case of an Exchange Offer Registration
Statement, a reasonable time prior to the filing of any Exchange Offer
Registration Statement, any Prospectus forming a part thereof, any
amendment to an Exchange Offer Registration Statement or amendment or
supplement to such Prospectus, provide copies of such document to the
Initial Purchasers and to counsel to the Majority Holders and make such
changes in any such document prior to the filing thereof as the Initial
Purchasers may reasonably request and, except as otherwise required by
applicable law, not file any such document in a form to which the
Initial Purchasers on behalf of the Holders of Registrable Securities
and
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<PAGE> 13
counsel to the Majority Holders shall not have previously been advised
and furnished a copy of or to which the Initial Purchasers on behalf of
the Holders of Registrable Securities or counsel to the Majority
Holders shall reasonably object, and make the representatives of the
Company available for discussion of such documents as shall be
reasonably requested by the Initial Purchasers; and
(ii) in the case of a Shelf Registration, a reasonable time
prior to filing any Shelf Registration Statement, any Prospectus
forming a part thereof, any amendment to such Shelf Registration
Statement or amendment or supplement to such Prospectus, provide copies
of such document to the Holders of Registrable Securities, to the
Initial Purchasers, to counsel for the Holders and to the underwriter
or underwriters of an underwritten offering of Registrable Securities,
if any, make such changes in any such document prior to the filing
thereof as the Initial Purchasers, the counsel to the Holders or the
underwriter or underwriters reasonably request and not file any such
document in a form to which the Majority Holders, the Initial
Purchasers on behalf of the Holders of Registrable Securities, counsel
for the Holders of Registrable Securities or any underwriter shall not
have previously been advised and furnished a copy of or to which the
Majority Holders, the Initial Purchasers of behalf of the Holders of
Registrable Securities, counsel to the Holders of Registrable
Securities or any underwriter shall reasonably object, and make the
representatives of the Company available for discussion of such
document as shall be reasonably requested by the Holders of Registrable
Securities, the Initial Purchasers on behalf of such Holders, counsel
for the Holders of Registrable Securities or any underwriter;
(r) otherwise comply with all applicable rules and regulations
of the SEC and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering at least 12
months which shall satisfy the provisions of Section 11(a) of the 1933
Act and Rule 158 thereunder;
(s) cooperate and assist in any filings required to be made
with the NASD and, in the case of a Shelf Registration, in the
performance of any due diligence investigation by any underwriter and
its counsel (including any "qualified independent underwriter" that is
required to be retained in accordance with the rules and regulations of
the NASD); and
(t) upon consummation of an Exchange Offer or a Private
Exchange, obtain a customary opinion of counsel to the Company and the
Guarantors addressed to the Trustee for the benefit of all Holders of
Registrable Securities participating in the Exchange Offer or Private
Exchange, and which includes an opinion that (i) the Company and the
Guarantors have duly authorized, executed and delivered the Exchange
Securities and/or Private Exchange Securities, as applicable, and the
related indenture, and (ii) each of the Exchange Securities and related
indenture constitute a legal, valid and binding obligation of the
Company and the Guarantors, enforceable against the Company and the
Guarantors in accordance with its respective terms (with customary
exceptions).
In the case of a Shelf Registration Statement, the Company may (as a
condition to such Holder's participation in the Shelf Registration) require each
Holder of Registrable Securities to furnish to the Company such information
regarding the Holder and the proposed distribution by such Holder of such
Registrable Securities as the Company may from time to time reasonably request
in writing.
In the case of a Shelf Registration Statement, each Holder agrees that,
upon receipt of any notice from the Company of (a) the happening of any event or
the discovery of any facts, each of the kind described in Section 3(e)(iv)
hereof or (b) the Company's election to begin a Suspension Period pursuant to
Section 2.2(b), such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(k) hereof or written notice from the Company of termination of such
Suspension Period, and, if so directed by the Company, such Holder will deliver
to the Company (at the Company's expense) all copies in such Holder's
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<PAGE> 14
possession, other than permanent file copies then in such Holder's possession,
of the Prospectus covering such Registrable Securities current at the time of
receipt of such notice.
If any of the Registrable Securities covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the underwriter or
underwriters and manager or managers that will manage such offering will be
selected by the Majority Holders of such Registrable Securities included in such
offering and shall be acceptable to the Company. No Holder of Registrable
Securities may participate in any underwritten registration hereunder unless
such Holder (a) agrees to sell such Holder's Registrable Securities on the basis
provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
4. Indemnification; Contribution.
(a) The Company and the Guarantors jointly and severally agree to
indemnify and hold harmless the Initial Purchasers, each Holder, each
Participating Broker-Dealer, each Person who participates as an underwriter (any
such Person being an "Underwriter") and each Person, if any, who controls any
Holder or Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment or supplement thereto)
pursuant to which Exchange Securities or Registrable Securities were
registered under the 1933 Act, including all documents incorporated
therein by reference, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or arising out of any untrue
statement or alleged untrue statement of a material fact contained in
any Prospectus (or any amendment or supplement thereto) or the omission
or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 4(d) below) any such settlement is effected
with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by any
indemnified party), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Holder or Underwriter expressly for use in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto).
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<PAGE> 15
(b) Each Holder severally, but not jointly, agrees to indemnify and
hold harmless the Company, the Guarantors, the Initial Purchasers, each
Underwriter and the other selling Holders, and each of their respective
directors and officers, and each Person, if any, who controls the Company, any
Guarantor, any Initial Purchaser, any Underwriter or any other selling Holder
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act,
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in Section 4(a) hereof, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in the Shelf Registration Statement (or any amendment thereto) or any
Prospectus included therein (or any amendment or supplement thereto) in reliance
upon and in conformity with written information with respect to such Holder
furnished to the Company by such Holder expressly for use in the Shelf
Registration Statement (or any amendment thereto) or such Prospectus (or any
amendment or supplement thereto); provided, however, that no such Holder shall
be liable for any claims hereunder in excess of the amount of net proceeds
received by such Holder from the sale of Registrable Securities pursuant to such
Registration Statement.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action or proceeding commenced
against it in respect of which indemnity may be sought hereunder, but failure so
to notify an indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. An indemnifying
party may participate at its own expense in the defense of such action;
provided, however, that counsel to the indemnifying party shall not (except with
the consent of the indemnified party) also be counsel to the indemnified party.
In no event shall the indemnifying party or parties be liable for the fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 4 (whether or
not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 4(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement; provided,
however, that an indemnifying party shall not be liable for any such settlement
effected without its consent if such indemnifying party, prior to the date of
such settlement, (1) reimburses such indemnified party in accordance with such
request for the amount of such fees and expenses of counsel as the indemnifying
party believes in good faith to be reasonable, and (2) provides written notice
to the indemnified party that the indemnifying party disputes in good faith the
reasonableness of the unpaid balance of such fees and expenses.
(e) If the indemnification provided for in this Section 4 is for any
reason unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, liabilities, claims, damages or expenses referred to
therein, then each indemnifying party shall contribute to the aggregate amount
of such losses, liabilities, claims, damages and expenses incurred by such
indemnified party, as incurred, in such proportion as is appropriate to reflect
the relative fault of the Company and the Guarantors on the one hand and the
Holders and the
-15-
<PAGE> 16
Initial Purchasers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative fault of the Company and the Guarantors on the one hand
and the Holders and the Initial Purchasers on the other hand shall be determined
by reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company, the Guarantors, the Holders
or the Initial Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Guarantors, the Holders and the Initial Purchasers
agree that it would not be just and equitable if contribution pursuant to this
Section 4 were determined by pro rata allocation (even if the Initial Purchasers
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this Section 4. The aggregate amount of losses, liabilities, claims,
damages and expenses incurred by an indemnified party and referred to above in
this Section 4 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any
such untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 4, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities sold by it were offered exceeds the amount
of any damages which such Initial Purchaser has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission.
No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 4, each Person, if any, who controls an
Initial Purchaser or Holder within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
Initial Purchaser or Holder, and each director of the Company or any Guarantor,
and each Person, if any, who controls the Company or any Guarantor within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have
the same rights to contribution as the Company and the Guarantors. The Initial
Purchasers' respective obligations to contribute pursuant to this Section 4 are
several in proportion to the principal amount of Securities set forth opposite
their respective names in Schedule A to the Purchase Agreement and not joint.
5. Miscellaneous.
5.1 Rule 144 and Rule 144A. For so long as the Company is subject to
the reporting requirements of Section 13 or 15 of the 1934 Act, the Company
covenants that it will file the reports required to be filed by it under the
1933 Act and Section 13(a) or 15(d) of the 1934 Act and the rules and
regulations adopted by the SEC thereunder. If the Company ceases to be so
required to file such reports, the Company covenants that it will upon the
request of any Holder of Registrable Securities (a) make publicly available such
information as is necessary to permit sales pursuant to Rule 144 under the 1933
Act, (b) deliver such information to a prospective purchaser as is necessary to
permit sales pursuant to Rule 144A under the 1933 Act and it will take such
further action as any Holder of Registrable Securities may reasonably request,
and (c) take such further action that is reasonable in the circumstances, in
each case, to the extent required from time to time to enable such Holder to
sell its Registrable Securities without registration under the 1933 Act within
the limitation of the exemptions provided by (i) Rule 144 under the 1933 Act, as
such Rule may be amended from time to time, (ii) Rule 144A under the 1933 Act,
as such Rule may be amended from time to time, or (iii) any similar rules or
regulations
-16-
<PAGE> 17
hereafter adopted by the SEC. Upon the request of any Holder of Registrable
Securities, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
5.2 No Inconsistent Agreements. The Company has not entered into and
the Company will not after the date of this Agreement enter into any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not and will not for the term of
this Agreement in any way conflict with the rights granted to the holders of the
Company's other issued and outstanding securities under any such agreements.
5.3 Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Company has obtained the written consent of the Majority
Holders affected by such amendment, modification, supplement, waiver or
departure.
5.4 Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (a) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 5.4, which address initially is the address set forth in the Purchase
Agreement with respect to the Initial Purchasers; and (b) if to the Company or
any Guarantor, initially at the Company's address set forth in the Purchase
Agreement, and thereafter at such other address of which notice is given in
accordance with the provisions of this Section 5.4.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; two business days
after being deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; when receipt is acknowledged, if telecopied; and on the next
business day if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the Trustee under the
Indenture, at the address specified in such Indenture.
5.5 Successor and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders; provided that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Securities
in violation of the terms of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement and,
if applicable, the Purchase Agreement, and such person shall be entitled to
receive the benefits hereof.
5.6 Third Party Beneficiaries. The Initial Purchasers (even if the
Initial Purchasers are not Holders of Registrable Securities) shall be third
party beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Holders, on the other hand, and shall have
the right to enforce such agreements directly to the extent they deem such
enforcement necessary or advisable to protect their rights or the rights of
Holders hereunder. Each Holder of Registrable Securities shall be a third party
beneficiary to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent it deems
such enforcement necessary or advisable to protect its rights hereunder.
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<PAGE> 18
5.7 Specific Enforcement. Without limiting the remedies available to
the Initial Purchasers and the Holders, the Company and the Guarantors
acknowledge that any failure by the Company and the Guarantors to comply with
their obligations under Sections 2.1 through 2.4 hereof may result in material
irreparable injury to the Initial Purchasers or the Holders for which there is
no adequate remedy at law, that it would not be possible to measure damages for
such injuries precisely and that, in the event of any such failure, the Initial
Purchasers or any Holder may obtain such relief as may be required to
specifically enforce the obligations of the Company and the Guarantors under
Sections 2.1 through 2.4 hereof.
5.8 Restriction on Resales. Until the expiration of two years after the
original issuance of the Securities, the Company and the Guarantors will not
resell any Securities which are "restricted securities" (as such term is defined
under Rule 144(a)(3) under the 1933 Act) that have been reacquired by any of
them and shall immediately upon any purchase of any such Securities submit such
Securities to the Trustee for cancellation.
5.9 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
5.10 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
5.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS THEREOF. SPECIFIED TIMES OF DAY REFER TO NEW YORK
CITY TIME.
5.12 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
-18-
<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
AMERICAN PLUMBING &
MECHANICAL, INC.
By: /s/ DAVID BAGGETT
--------------------------------------
David C. Baggett
Chief Financial Officer
CHRISTIANSON ENTERPRISES, INC.
CHRISTIANSON SERVICE COMPANY
G.G.R. LEASING COMPANY
R.C.R. PLUMBING INC.
FRANKLIN FIRE SPINKLER COMPANY
J.A. CROSON COMPANY
TEEPE'S RIVER CITY MECHANICAL, INC.
KEITH RIGGS PLUMBING, INC.
J.A. CROSON COMPANY OF FLORIDA
POWER PLUMBING INC.
NELSON MECHANICAL CONTRACTORS, INC.
SHERWOOD MECHANICAL, INC.
MILLER MECHANICAL CONTRACTORS, INC.
By: /s/ DAVID BAGGETT
--------------------------------------
David C. Baggett
Vice President, Secretary and
Treasurer of each of the above Guarantors.
-19-
<PAGE> 20
Confirmed and accepted as of the first date first above written:
FLEET SECURITIES, INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BANC ONE CAPITAL MARKETS, INC.
CREDIT LYONNAIS SECURITIES (USA) INC.
BY: FLEET SECURITIES, INC.
By: /s/ Mike Browne
-------------------------------------
Name: Mike Browne
Title: Managing Director
BY: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Lex Maultsby
-------------------------------------
Name: Lex Maultsby
Title: Vice President
-20-
<PAGE> 21
SCHEDULE A
LIST OF GUARANTORS
Christianson Enterprises, Inc.
G.G.R. Leasing Corporation
Christianson Service Company
R.C.R. Plumbing, Inc.
Franklin Fire Sprinkler Company
J.A. Croson Company
Teepe's River City Mechanical, Inc.
Keith Riggs Plumbing, Inc.
J.A. Croson Company of Florida
Power Plumbing, Inc.
Nelson Mechanical Contractors, Inc.
Sherwood Mechanical, Inc.
Miller Mechanical Contractors, Inc.
<PAGE> 22
Exhibit A
FORM OF OPINION OF COUNSEL
Fleet Securities, Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Banc One Capital Markets, Inc.
Credit Lyonnais Securities (USA) Inc.
c/o Fleet Securities, Inc. and Merrill Lynch, Pierce, Fenner &
1185 Avenue of the Americas Smith Incorporated
16th Floor North Tower
New York, NY 10036 World Financial Center
New York, NY 10036
Ladies and Gentlemen:
We have acted as counsel for American Plumbing & Mechanical, Inc., a
Delaware corporation (the "Company") and the Guarantors described below in
connection with the sale by the Company to the Initial Purchasers (as defined
below) of $150,000,000 aggregate principal amount of 11 5/8% Senior Subordinated
Notes due 2009 (the "Notes") of the Company together with the related guarantees
of the obligation of the Company under such Notes, pursuant to the Purchase
Agreement dated May 12, 1999 (the "Purchase Agreement") among the Company, the
Guarantors named therein (the "Guarantors") and Fleet Securities, Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Banc One Capital Markets, Inc. and
Credit Lyonnais Securities (USA) Inc. (collectively, the "Initial Purchasers")
and the filing by the Company and the Guarantors of an Exchange Offer
Registration Statement (the "Registration Statement") in connection with an
Exchange Offer to be effected pursuant to the Registration Rights Agreement (the
"Registration Rights Agreement"), dated May 19, 1999 among the Company, the
Guarantors and the Initial Purchasers. This opinion is furnished to you pursuant
to Section 3(f)(B) of the Registration Rights Agreement. Unless otherwise
defined herein, capitalized terms used in this opinion that are defined in the
Registration Rights Agreement are used herein as so defined.
We have examined such documents, records and matters of law as we have
deemed necessary for purposes of this opinion. In rendering this opinion, as to
all matters of fact relevant to this opinion, we have assumed the completeness
and accuracy of, and are relying solely upon, the representations and warranties
of the Company and the Guarantors set forth in the Purchase Agreement and the
statements set forth in certificates of public officials and officers of the
Company and the Guarantors, without making any independent investigation or
inquiry with respect to the completeness or accuracy of such representations,
warranties or statements, other than a review of the certificate of
incorporation, by-laws and relevant minute books of the Company and the
Guarantors.
Based on and subject to the foregoing, we are of the opinion that:
1. The Exchange Offer Registration Statement and the Prospectus (other
than the financial statements, notes or schedules thereto and other financial
data and supplemental schedules included or incorporated by reference therein or
omitted therefrom and the Form T-1, as to which such counsel need express no
opinion), comply as to form in all material respects with the requirements of
the 1933 Act and the applicable rules and regulations promulgated under the 1933
Act.
<PAGE> 23
2. We have participated in the preparation of the Registration
Statement and the Prospectus and in the course thereof have had discussions with
representatives of the Underwriters, officers and other representatives of the
Company and the Company's independent public accountants, during which the
contents of the Registration Statement and the Prospectus were discussed. We
have not, however, independently verified and are not passing upon, and do not
assume any responsibility for, the accuracy, completeness or fairness of the
statements contained in the Registration Statement and the Prospectus. Based on
our participation as described above, nothing has come to our attention that
would lead us to believe that the Registration Statement (except for financial
statements and schedules and other financial data included therein as to which
we make no statement) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus or any
amendment or supplement thereto (except for financial statements and schedules
and other financial data included therein, as to which such counsel need make no
statement), at the time the Prospectus was issued, at the time any such amended
or supplemented Prospectus was issued or at the Closing Time, included or
includes an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
This opinion is being furnished to you solely for your benefit in
connection with the transactions contemplated by the Registration Rights
Agreement, and may not be used for any other purpose or relied upon by any
person other than you. Except with our prior written consent, the opinions
herein expressed are not to be used, circulated, quoted or otherwise referred to
in connection with any transactions other than those contemplated by the
Registration Rights Agreement by or to any other person.
Very truly yours,
-2-
<PAGE> 1
EXHIBIT 5.1
, 1999
-----------
Board of Directors
American Plumbing and Mechanical, Inc.
1502 Augusta, Suite 425
Houston, Texas 77057
Ladies and Gentlemen:
We have acted as counsel to American Plumbing & Mechanical,
Inc., a Delaware corporation (the "Company"), and are delivering this opinion
in connection with the Company's Registration Statement on Form S-4 (the
"Registration Statement") relating to the registration under the Securities Act
of 1933, as amended (the "Securities Act"), of the offer by the Company to
exchange up to $125,000,000 aggregate principal amount of its 115/8% Senior
Subordinated Notes Due 2008, Series B (the "Exchange Notes") for its existing
115/8% Senior Subordinated Notes Due 2008, Series A (the "Existing Notes"). The
Exchange Notes are proposed to be issued in accordance with the provisions of
the indenture (the "Indenture"), dated as of May 19, 1999, between the Company,
the guarantors named therein (the "Guarantors") and State Street Bank and Trust
Company, as Trustee.
In arriving at the opinions expressed below, we have examined
the Registration Statement, the Prospectus contained therein, the Indenture
which is filed as an exhibit to the Registration Statement, and the originals
or copies certified or otherwise identified to our satisfaction of such other
instruments and other certificates of public officials and officers and
representatives of the Company. In all such examinations and for purposes of
our opinions set forth below, we have, with your approval and without
independent investigation, assumed the genuineness of all signatures, the legal
capacity of all natural persons, the authenticity and completeness of all
documents submitted to us as originals, the conformity to the authentic
original documents of all documents submitted to us as copies and that all
documents in respect of which forms were filed with the Securities and Exchange
Commission as exhibits to the Registration Statement will conform in all
material respects to the forms thereof that we have examined. In addition, as
the basis for the opinion hereinafter expressed, we have examined such
statutes, regulations, corporate records and documents, certificates of
corporate and public officials and other instruments as we have deemed
necessary or advisable for the purposes of this opinion.
Based on the foregoing, and having due regard for such legal
considerations as we deem relevant, and subject to the qualifications and
limitations set forth below, we are of the opinion that the Exchange Notes and
the guarantee of each of the Guarantors (the "Guarantees"), (a) when
<PAGE> 2
Board of Directors
American Plumbing and Mechanical, Inc.
, 1999
- -------------
Page 2
the Notes have been exchanged in the manner described in the Registration
Statement, (b) when the Exchange Notes have been duly executed, authenticated,
issued and delivered in accordance with the terms of the Indenture, (c) when
the Indenture has been duly qualified under the Trust Indenture Act of 1939, as
amended, and (d) when applicable provisions of "blue sky" laws have been
complied with, will constitute valid and binding obligations of the Company and
the Guarantors, as applicable, enforceable against the Company and the
Guarantors, as applicable, in accordance with their terms, under the laws of
the State of New York which are expressed to govern the same, except as the
enforcement thereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium (including, without limitation, all laws relating to
fraudulent transfers), (b) other similar laws relating to or affecting
enforcement of creditors' rights generally, (c) general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or
at law) and (d) limitations on the waiver of rights under usury laws, and will
be entitled to the benefits of the Indenture.
This opinion is limited in all respects to the laws of the
State of Texas, the State of New York and the Delaware General Corporation Law.
We express no opinion as to, and for the purposes of the opinions set forth
herein, we have conducted no investigation of, and do not purport to be experts
on, any other laws. With respect to each Guarantor which was not organized
under the laws of the State of Texas or the State of Delaware, we have assumed
that the laws of the jurisdiction, organization or formation of such Guarantor
with respect to matters of authorization, execution and delivery do not differ
in any material respect from the laws of the State of Texas in those regards
and have undertaken no investigation of the laws of any jurisdiction or their
effect, if any, on any legal conclusion herein expressed other than, the laws
of the State of Texas, the State of New York and the Delaware General
Corporation Law. We hereby consent to the use of this opinion as an exhibit to
the Registration Statement.
Very truly yours,
<PAGE> 1
EXHIBIT 10.2
AMERICAN PLUMBING & MECHANICAL, INC.
1999 STOCK OPTION PLAN
SECTION 1. Purpose of the Plan.
The American Plumbing & Mechanical, Inc. 1999 Stock Option Plan (the
"Plan") is intended to promote the interests of American Plumbing & Mechanical,
Inc., a Delaware corporation (the "Company"), by encouraging officers,
employees, directors and consultants of the Company, its subsidiaries and
affiliated entities to acquire or increase their equity interest in the Company
and to provide a means whereby they may develop a sense of proprietorship and
personal involvement in the development and financial success of the Company,
and to encourage them to remain with and devote their best efforts to the
business of the Company thereby advancing the interests of the Company and its
stockholders. The Plan is also contemplated to enhance the ability of the
Company, its subsidiaries and affiliated entities to attract and retain the
services of individuals who are essential for the growth and profitability of
the Company.
SECTION 2. Definitions.
As used in the Plan, the following terms shall have the meanings set
forth below:
"Affiliate" shall mean (i) any entity that, directly or through one or
more intermediaries, is controlled by the Company and (ii) any entity in which
the Company has a significant equity interest, as determined by the Committee.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations thereunder.
"Committee" shall mean the committee appointed by the Board.
"Consultant" shall mean any individual, other than a Director or an
Employee, who renders consulting services to the Company or an Affiliate for a
fee.
"Director" shall mean a director of the Company who is not also an
Employee.
"Employee" shall mean any employee of the Company or an Affiliate.
<PAGE> 2
"Fair Market Value" shall mean the fair market value of a Share as of
the applicable date as determined in good faith by the Committee; provided,
however, if the Shares are then publicly traded, Fair Market Value shall mean
the closing sales price of a Share on the applicable date (or if there is no
trading in the Shares on such date, on the next preceding date on which there
was trading) as reported in The Wall Street Journal (or other reporting service
approved by the Committee).
"Option" shall mean an option to purchase Shares granted under the
Plan.
"Participant" shall mean any Director, Employee or Consultant granted
an Option under the Plan.
"Person" shall mean individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or
political subdivision thereof or other entity.
"Shares" or "Common Shares" or "Common Stock" shall mean the common
stock of the Company, $0.01 par value, and such other securities or property as
may become the subject of Options under the Plan.
SECTION 3. Administration.
The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum, and the acts of the members of the
Committee who are present at any meeting thereof at which a quorum is present,
or acts unanimously approved by the members of the Committee in writing, shall
be the acts of the Committee. Subject to the following, the Committee, in its
sole discretion, may delegate any or all of its powers and duties under the
Plan to the Chief Executive Officer of the Company, including the power to
grant Options under the Plan, other than to himself, subject to such
limitations on such delegated powers and duties as the Committee may impose.
Upon any such delegation all references in the Plan to the "Committee", other
than in Section 7, shall be deemed to include the Chief Executive Officer;
provided, however, that such delegation shall not limit the Chief Executive
Officer's right to receive Options under the Plan. Subject to the terms of the
Plan and applicable law, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, the Committee shall have
full power and authority to: (i) designate Participants; (ii) determine the
number of Shares to be covered by Options; (iii) determine the terms and
conditions of any Option; (iv) interpret and administer the Plan and any
instrument or agreement relating to an Option made under the Plan; (v)
establish, amend, suspend, or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
and (vi) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan or any Option shall be within the sole discretion of the Committee,
may be made at any time and shall be final, conclusive, and binding upon all
Persons.
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SECTION 4. Shares Available for Options.
(a) Shares Available. Subject to adjustment as provided in Section
4(c), the maximum number of Shares with respect to which Options may be granted
under the Plan shall be 3,700,000 shares or 15% of the aggregate number of
Shares outstanding determined immediately prior to the grant of such Option. If
any Option is forfeited, terminates or is canceled without the delivery of
Shares, then the Shares covered by such Option, to the extent of such
forfeiture, termination or cancellation, shall again be Shares with respect to
which Options may be granted.
(b) Sources of Shares Deliverable Under Options. Any Shares delivered
pursuant to an Option may consist, in whole or in part, of authorized and
unissued Shares or of treasury Shares.
(c) Adjustments. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the Shares
such that an adjustment is determined by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Committee shall, in such
manner as it may deem equitable, adjust any or all of (i) the number and type
of Shares (or other securities or property) with respect to which Options may
be granted, (ii) the number and type of Shares (or other securities or
property) subject to outstanding Options, and (iii) the grant or exercise price
with respect to any Option or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding Option; provided, that the number of
Shares subject to any Option shall always be a whole number.
SECTION 5. Eligibility.
Any Director, Employee or Consultant shall be eligible to be
designated a Participant by the Committee.
SECTION 6. Options.
(a) Options. Subject to the provisions of the Plan, the Committee
shall have the authority to determine the Participants to whom Options shall be
granted from time to time, the number of Shares to be covered by each Option,
the exercise price therefor and the terms, conditions and limitations
applicable to the exercise of the Option, including the following terms and
conditions and such additional terms and conditions as the Committee shall
determine are not inconsistent with the provisions of the Plan.
(i) Exercise Price. The exercise price per Share purchasable under
an Option shall be determined by the Committee.
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<PAGE> 4
(ii) Time and Method of Exercise. The Committee shall determine
the time or times at which an Option may be exercised in whole or in
part, and the method or methods by which, and the form or forms in
which payment of the exercise price with respect thereto may be made
or deemed to have been made, which may include, without limitation,
(i) cash or check acceptable to the Company in an amount equal to the
relevant exercise price, (ii) Shares already-owned by the Participant
having a Fair Market Value on the exercise date equal to the relevant
exercise price, (iii) a "cashless-broker" exercise (through procedures
approved by the Company) pursuant to which Shares delivered in payment
of the exercise price are valued at the Fair Market Value, (iv) a
personal note with such terms and security as the Committee deems
appropriate or other securities or other property having an aggregate
value, as determined in good faith by the Committee, on the exercise
date equal to the relevant exercise price or (v) any combination
thereof.
(iii) Limits on Transfer of Options.
(A) Except as provided in (C) below, each Option, and each
right under any Option, shall be exercisable only by the
Participant during the Participant's lifetime, or by the person to
whom the Participant's rights shall pass by will or the laws of
descent and distribution.
(B) Except as provided in (C) below, no Option and no right
under any such Option may be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by a
Participant otherwise than by will or by the laws of descent and
distribution and any such purported assignment, alienation,
pledge, attachment, sale, transfer or encumbrance shall be void
and unenforceable against the Company or any Affiliate.
(C) Notwithstanding anything in the Plan to the contrary, to
the extent specifically provided by the Committee with respect to
a grant, an Option may be transferred to immediate family members
or related family trusts, limited partnerships or similar entities
or on such terms and conditions as the Committee may establish.
(iv) Term of Options, etc. The term of each Option shall be for
such period as may be determined by the Committee; provided, that in
no event shall the term of any Option exceed a period of 10 years from
the date of its grant. The Committee shall have the discretion at any
time while an Option remains outstanding to accelerate the vesting of,
reduce the exercise price of, and/or to extend the period of time for
which the Option is to remain exercisable following the Participant's
termination, but in no event may an extension be beyond the expiration
of the Option's term.
(v) Share Certificates. All certificates for Shares or other
securities of the Company or any Affiliate delivered under the Plan
pursuant to any Option or the exercise
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<PAGE> 5
thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the
rules, regulations, and other requirements of federal or state
securities laws, any stock exchange upon which such Shares or other
securities are then listed, and any applicable federal or state laws,
and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(vi) Delivery of Shares or other Securities and Payment by
Participant of Consideration. No Shares or other securities shall be
delivered pursuant to any Option until payment in full of any amount
required to be paid pursuant to the Plan or the applicable Option
agreement (including, without limitation, any exercise price and
applicable tax withholding) is received by the Company. Such tax
withholding payments may be made by such method or methods and in such
form or forms as the Committee shall determine, including, without
limitation, cash, Shares, other securities, or property, withholding
of Shares, cashless exercise with simultaneous sale, or any
combination thereof.
(vii) Stockholders' Agreement. The Committee may condition the
grant and/or exercise of any Option upon the Participant's already
being, or becoming subject to, a stockholders' agreement covering,
inter alia, the transferability of the Shares, rights of the Company
to repurchase such Shares and such other matters as the Committee
deems appropriate.
(viii) Securities Laws Compliance. Unless the Stock has been
registered under the Securities Act of 1933 (and, in the case of any
Participant who may be deemed an affiliate of the Company for
securities law purposes, such Stock has been registered under such Act
for resale by such Participant), or the Company has determined that an
exemption from registration is available, the Company may require
prior to and as a condition of the exercise of any Option that (i) the
Participant desiring to exercise such Option give the Company written
notice of a desire to exercise such Option and that notice of exercise
may not be given by the Participant until 45 days thereafter (which
time period may be waived by the Committee in its sole discretion) in
order to allow the Company the opportunity to provide to such
Participant any disclosure materials, or to make such filings, as may
be required under federal and state securities laws and (ii) the
Participant desiring to exercise such Option furnish the Company with
a written representation in a form prescribed by the Board to the
effect that such person is acquiring said Stock solely with a view to
investment for his or her own account and not with a view to the
resale or distribution of all or any part thereof, and that such
person will not dispose of any of such Stock otherwise than in
accordance with the provisions of Rule 144 under the Act unless and
until either the shares of Common Stock are registered under the Act
or the Company is satisfied that an exemption from such registration
is available.
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<PAGE> 6
SECTION 7. Amendment and Termination.
Except to the extent prohibited by applicable law or the rules of the
principal securities market on which the shares are traded and unless otherwise
expressly provided in an Option agreement or in the Plan:
(i) Amendments to the Plan. The Board or the Committee may amend,
alter, suspend, discontinue, or terminate the Plan without the consent
of any stockholder, Participant, other holder or beneficiary of an
Option, or other Person.
(ii) Amendments to Options. The Committee may waive any conditions
or rights under, amend any terms of, or alter any Option theretofore
granted, provided no change, other than pursuant to Section 7(iii), in
any Option shall materially reduce the benefit to Participant without
the consent of such Participant.
(iii) Adjustment of Options Upon the Occurrence of Certain Unusual
or Nonrecurring Events. The Committee is hereby authorized to make
adjustments in the terms and conditions of, and the criteria included
in, Options in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section 4(c)
of the Plan) affecting the Company, any Affiliate, or the financial
statements of the Company or any Affiliate, or of changes in
applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan.
SECTION 8. Change in Control.
Notwithstanding any other provision of this Plan or an Option
agreement to the contrary, in the event of a Change in Control of the Company
all outstanding Options automatically shall become fully vested immediately
prior to such Change in Control (or such earlier time as set by the Committee).
For purposes of this Plan, a "Change in Control" shall be deemed to occur if:
(i) any person, entity or group (as such terms are used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Act")), other than persons and entities which owned any
capital stock of the Company on the closing date of the transactions
contemplated in the acquisition agreements between the Company and
certain other entities dated February 11, 1999, the Company or a
subsidiary (the "AmPaM Companies") or an employee benefit plan of the
AmPaM Companies, acquires, directly or indirectly, the beneficial
ownership (as defined in Section 13(d) of the Act) of any voting
security of the Company and immediately after such acquisition such
person, entity or group is, directly or indirectly, the beneficial
owner of voting securities representing 20% or more of the total
voting power of all of the then
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outstanding voting securities of the Company entitled to vote
generally in the election of directors;
(ii) upon the first purchase of the Company's common stock
pursuant to a tender or exchange offer (other than a tender or
exchange offer made by the Company);
(iii) the stockholders of the Company shall approve a merger,
consolidation, recapitalization or reorganization of the Company, or a
reverse stock split of outstanding voting securities, or consummation
of any such transaction if stockholder approval is not obtained, other
than any such transaction which would result in at least 75% of the
total voting power represented by the voting securities of the
surviving entity outstanding immediately after such transaction being
beneficially owned by the holders of all of the outstanding voting
securities of the Company immediately prior to the transactions with
the voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction;
(iv) the stockholders of the Company shall approve a plan of
complete liquidation or dissolution of the Company or an agreement for
the sale or disposition by the Company of all or substantially all of
the Company's assets; or
(v) if, at any time during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board
cease for any reason to constitute at least a majority thereof, unless
the election or nomination for the election by the Company's
stockholders of each new director was approved a vote of at least
two-thirds of the directors then still in office who were directors at
the beginning of the period.
In the event of a Change in Control, the Committee, in its discretion,
may (i) provide for the purchase of the Option for an amount of cash or other
property that could have been received upon the exercise of the Option, (ii)
adjust the terms of the Option in a manner determined by the Committee to
reflect the Change in Control, (iii) cause the Option to be assumed, or new
rights substituted therefor, by another entity, or (iv) make such other
provision as the Committee may consider equitable and in the best interests of
the Company, including, without limitation, providing for the termination of
the Option to the extent not exercised.
SECTION 9. General Provisions.
(a) No Rights to Options. No Employee, Consultant or Director shall
have any claim to be granted any Option, and there is no obligation for
uniformity of treatment of Participants. The terms and conditions of Options
need not be the same with respect to each recipient.
(b) No Right to Employment. The grant of an Option shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate. Further, the Company or an Affiliate may at any time
dismiss a Participant from employment, free from any
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<PAGE> 8
liability or any claim under the Plan, unless otherwise expressly provided in
the Plan or in any Option Agreement.
(c) Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Texas and applicable federal law.
(d) Severability. If any provision of the Plan or any Option is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Option, or would disqualify the Plan or any
Option under any law deemed applicable by the Committee, such provision shall
be construed or deemed amended to conform to the applicable laws, or if it
cannot be construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan or the Option, such
provision shall be stricken as to such jurisdiction, Person or Option and the
remainder of the Plan and any such Option shall remain in full force and
effect.
(e) Other Laws. The Committee may refuse to issue or transfer any
Shares or other consideration under an Option if, acting in its sole
discretion, it determines that the issuance of transfer or such Shares or such
other consideration might violate any applicable law or regulation.
(f) No Trust or Fund Created. Neither the Plan nor the Option shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant
or any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Option, such right
shall be no greater than the right of any general unsecured creditor of the
Company or any Affiliate.
(g) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Option, and the Committee shall determine
whether cash, other securities, or other property shall be paid or transferred
in lieu of any fractional Shares or whether such fractional Shares or any
rights thereto shall be canceled, terminated, or otherwise eliminated.
(h) Headings. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
SECTION 10. Effective Date of the Plan.
The Plan shall be effective as of the date of its approval by the
Board.
SECTION 11. Term of the Plan.
No Option shall be granted under the Plan after the 10th anniversary
of the date the Plan is adopted by the Board. However, unless otherwise
expressly provided in the Plan or in an applicable Option agreement, any Option
granted prior to such termination, and the authority of the Board or
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<PAGE> 9
the Committee to amend, alter, adjust, suspend, discontinue, or terminate any
such Option or to waive any conditions or rights under such Option, shall
extend beyond such termination date.
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EXHIBIT 10.4
TRANSFER RESTRICTION AND EXPENSE REIMBURSEMENT AGREEMENT
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, American Plumbing & Mechanical, Inc., a Delaware
corporation (the "Company") and the undersigned, being stockholders of the
Company (the "Undersigned") hereby agree as follows:
1. TRANSFER RESTRICTIONS
1.1 TRANSFER RESTRICTIONS. For a period of two years from the date of
issuance or, in the event that the Company completes a firm commitment
underwritten initial public offering of shares of stock of the Company managed
by one or more nationally recognized national investment banking firms (an
"IPO"), for a period through the second anniversary of the date of the closing
of such IPO (the "Restricted Period"), the Undersigned shall not (i) sell,
assign, exchange, transfer, pledge, or otherwise dispose of any shares of
restricted common stock or common stock of the Company (the "Stock") currently
owned or held by the Undersigned or any securities convertible into,
exchangeable or exercisable for any shares of Stock, (ii) grant any option to
purchase, or otherwise enter into any contract to sell, assign, transfer,
pledge or otherwise dispose of, any shares of Stock currently owned or held by
the Undersigned, or (iii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of any currently owned or held Stock, whether
any such swap or transaction is to be settled by delivery of shares of Stock or
other securities, by the delivery or payment of cash or otherwise, except, in
the case of clauses (i), (ii) or (iii) above, (A) as otherwise agreed by the
Company, (B) for the sale of shares of Stock, and entering into agreements
relating to the sale of shares of Stock, pursuant to Section 3 hereof, (C) for
transfers to (I) immediate family members of the Undersigned or to equity
owners or members of the Undersigned who agree with the Company in writing to
be bound by the restrictions set forth in this Section 1.1, (II) trusts,
limited partnerships or other estate planning entities for the benefit of the
Undersigned or family members of the Undersigned which have agreed with the
Company in writing, through action taken by the trustees, partners or other
persons having authority to bind the trust, limited partnership or other estate
planning entity, to be bound by the restrictions set forth in this Section 1.1,
(III) any charitable organization that qualifies for receipt of charitable
contributions under Section 170(c) of the Code which agrees with the Company in
writing to be bound by the restrictions set forth in this Section 1.1, (D) the
sale by the Undersigned in an IPO of shares of Stock, provided that if the
Company is advised in writing in good faith by any managing underwriter of an
underwritten offering of the securities being offered pursuant to any
registration statement under Section 3.1 that the number of shares to be sold
by persons other than the Company is greater than the number of such shares
which can be offered without adversely affecting the success of the offering,
the Company may reduce pro rata (among the Undersigned and all other selling
security holders in the offering) the number of shares offered for the accounts
of such persons (based upon the number of shares held by such person) to a
number deemed satisfactory by such managing underwriter. During the Restricted
Period, the certificates evidencing the Stock owned or held by the Undersigned
will bear a legend substantially in the form set forth below:
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<PAGE> 2
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF WITHOUT THE WRITTEN
CONSENT OF THE COMPANY, AND THE COMPANY SHALL NOT BE REQUIRED TO GIVE EFFECT TO
ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, PLEDGE OR OTHER DISPOSITION
PRIOR TO EXPIRATION OF TWO YEARS. SUCH RESTRICTIONS ON TRANSFER ARE SET FORTH
IN A TRANSFER RESTRICTION AGREEMENT, A COPY OF WHICH IS MAINTAINED AT THE
PRINCIPAL OFFICES OF THE COMPANY. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE COMPANY AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY
STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
2. FEDERAL SECURITIES ACT REPRESENTATIONS
2.1 COMPLIANCE WITH LAW. The Undersigned acknowledges that the shares
of Stock have not been and will not be registered under the Securities Act of
1933, as amended (the "1933 Act") (except as provided in Section 3 hereof) and
therefore may not be sold, assigned, exchanged, transferred, pledged or
otherwise disposed of without compliance with the 1933 Act which, among other
matters, would require registration under the 1933 Act unless exemption from
the registration requirements is available for such transaction. The Stock was
being acquired solely for the Undersigned's own account, for investment
purposes only, and with no present intention of selling, assigning, exchanging,
transferring, pledging, or otherwise disposing of it. The Undersigned
covenants, warrants and represents that neither the shares of Stock issued to
the Undersigned was offered, sold, assigned, exchanged, pledged, transferred or
otherwise disposed of except after full compliance with all of the applicable
provisions of the 1933 Act and the rules and regulations of the SEC. All
certificates representing the Stock shall bear the following legend in addition
to the legend required under Section 1 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
3. REGISTRATION RIGHTS
3.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the date
hereof, whenever the Company proposes to register any Stock for its own or
other's account under the 1933 Act for a public offering, other than (i) any
shelf or other registration of shares to be used as consideration for
acquisitions of additional businesses by the Company and (ii) registrations
relating to employee benefit plans, the Company shall give the Undersigned
prompt written notice of its intent to do so. Upon the written request of the
Undersigned given within 15 calendar days after receipt of such notice,
notwithstanding the provisions of Section 1 (except as specified below with
respect to an IPO), the Company shall cause to be included in such registration
all of the Stock held or owned by
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the Undersigned (including any stock issued as or issuable upon the conversion
or exchange of any convertible security, warrant, right or other security which
is issued by the Company as a stock split, dividend or other distribution with
respect to, or in exchange for, or in replacement of such Stock) which the
Undersigned requests, other than shares of Stock which may then be immediately
sold under Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act, and other than shares of Stock that have been theretofore
sold by the Undersigned in accordance with the 1933 Act. In addition, if the
Company is advised in writing in good faith by any managing underwriter of an
underwritten offering of the securities being offered pursuant to any
registration statement under this Section 3.1 that the number of shares to be
sold by persons other than the Company is greater than the number of such
shares which can be offered without adversely affecting the success of the
offering, the Company may reduce pro rata (among the Undersigned and all other
selling security holders in the offering) the number of shares offered for the
accounts of such persons (based upon the number of shares held by such person)
to a number deemed satisfactory by such managing underwriter. If the
Undersigned disapproves of the terms of the underwriting, the Undersigned may
elect to withdraw therefrom by written notice to the Company and the managing
underwriter. The Undersigned's shares of Stock so withdrawn shall also be
withdrawn from registration.
3.2 REGISTRATION PROCEDURES. Whenever the Company is required to
register shares of Stock pursuant to Section 3.1, the Company will, as
expeditiously as possible:
(i) Prepare and file with the Securities and Exchange Commission
(the "SEC") a registration statement with respect to such shares and
use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or
prospectus or any amendments or supplements or term sheets thereto,
the Company will furnish a representative of the Undersigned with
copies of all such documents proposed to be filed) as promptly as
practical;
(ii) Notify the Undersigned of any stop order issued or threatened
by the SEC and take all reasonable actions required to prevent the
entry of such stop order or to remove it if entered;
(iii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 120 days, cause the
prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the 1933
Act; and comply with the provisions of the 1933 Act applicable to it
with respect to the disposition of all securities covered by such
registration statement during the applicable period in accordance with
the intended methods of disposition by the sellers thereof set forth
in such registration statement or supplement to the prospectus;
(iv) Furnish to the Undersigned upon request such number of copies
of such registration statement, each amendment and supplement thereto
and the prospectus included
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in such registration statement (including each preliminary prospectus
and any term sheet associated therewith), and such other documents as
the Undersigned may reasonably request in order to facilitate the
disposition of the relevant shares;
(v) Make "generally available to its security holders" (within the
meaning of Rule 158) an earnings statement satisfying the provisions
of Section 11(a) of the 1933 Act and Rule 158 thereunder no later than
90 days after the end of the 12-month period beginning with the first
day of the Company's first fiscal quarter commencing after the
effective date of the registration statement;
(vi) Make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at
the earliest possible moment;
(vii) If requested by the managing underwriter or underwriters, if
any, or any participating stockholder, promptly incorporate in a
prospectus supplement or post-effective amendment such information as
the managing underwriter or underwriters or any participating
stockholder, as the case may be, reasonably requests to be included
therein, including, without limitation, information with respect to
the number of shares of Stock being sold by participating stockholders
to any underwriter or underwriters, the purchase price being paid
therefor by such underwriter or underwriters and with respect to any
other terms of an underwritten offering of the shares of Stock to be
sold in such offering, and promptly make all required filings of such
prospectus by supplement or post-effective amendment;
(viii) Make available for inspection by participating
stockholders, any underwriter participating in any disposition
pursuant to such registration statement, and the counsel retained by
the participating stockholders, counsel for the underwriters and any
accountant or other agent retained by participating stockholders or
any such underwriter (collectively, the "Inspectors"), all financial
and other records, pertinent corporate documents and properties of the
Company (the "Records"), as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information
reasonably requested by any such Inspectors in connection with such
registration statement; provided, that records which the Company
determines, in good faith, to be confidential and which the Company
notifies the Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in the registration
statement or (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction after
delivery of sufficient notice to the Company to enable the Company to
contest such subpoena or order;
(ix) Take all other steps reasonably necessary to effect the
registration of the shares of Stock contemplated hereby;
-4-
<PAGE> 5
(x) Use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested
by the Undersigned, and to keep such registration or qualification
effective during the period such registration statement is required to
be kept effective, provided that the Company shall not be required to
become subject to taxation, to qualify generally to do business or to
file a general consent to service of process in any such states or
jurisdictions;
(xi) Cause all such shares of Stock to be listed or included not
later than the date of the first sale of shares of Stock under such
registration statement on any securities exchanges or trading systems
on which similar securities issued by the Company are then listed or
included; and
(xii) Notify the Undersigned at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within
the period that the Company is required to keep the registration
statement effective of the happening of any event as a result of which
the prospectus included in such registration statement (as then in
effect), together with any associated term sheet, contains an untrue
statement of a material fact or omits to state any fact required to be
stated therein or necessary to make the statements therein (in the
case of the prospectus or any preliminary prospectus, in light of the
circumstances under which they were made) not misleading, and, at the
request of the Undersigned, the Company promptly will prepare a
supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of the covered shares, such prospectus
will not contain an untrue statement of material fact or omit to state
any fact required to be stated therein or necessary to make the
statements therein (in the case of the prospectus or any preliminary
prospectus, in light of the circumstances under which they were made)
not misleading.
All expenses incurred in connection with the registration under this
Article 3 and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printer and
accounting fees, but excluding underwriting commissions and discounts), shall
be borne by the Company.
3.3 INDEMNIFICATION.
(a) In connection with any registration under Section 3.1,
the Company shall indemnify, to the extent permitted by law, the Undersigned
(an "Indemnified Party") against all losses, claims, damages, liabilities and
expenses arising out of or resulting from any untrue or alleged untrue
statement of material fact contained or incorporated by reference in any
registration statement, prospectus or preliminary prospectus or associated term
sheet or any omission or alleged omission to state or incorporated by reference
therein a material fact required to be stated or incorporated by reference
therein or necessary to make the statements therein not misleading except
insofar as the same are caused by or contained in or omitted from any
information furnished in writing to the Company by such Indemnified Party
expressly for use therein or by any Indemnified Parties' failure
-5-
<PAGE> 6
to deliver a copy of the registration statement or prospectus or any amendment
or supplements thereto after the Company has furnished such Indemnified Party
with a sufficient number of copies of the same.
(b) In connection with any registration under Section 3.1,
the Undersigned shall furnish to the Company in writing such information
concerning the Undersigned and his or her proposed offering of shares as is
reasonably requested by the Company for use in any such registration statement
or prospectus and will indemnify, to the extent permitted by law, the Company,
its directors and officers and each person who controls the Company (within the
meaning of the 1933 Act) against any losses, claims, damages, liabilities and
expenses resulting from any untrue or alleged untrue statement of a material
fact or any omission or alleged omission to state therein a material fact
required to be stated in the registration statement or prospectus or any
amendment thereof or supplement thereto or necessary to make the statements
therein not misleading, but only to the extent that such untrue or alleged
untrue statement or omission or alleged omission is contained in or omitted
from information so furnished in writing to the Company by the Undersigned
expressly for use in the registration statement. Notwithstanding the foregoing,
the liability of the Undersigned under this Section 3.3 shall be limited to an
amount equal to the net proceeds actually received by the Undersigned from the
sale of the relevant shares covered by the registration statement.
(c) Any person entitled to indemnification hereunder will (i)
give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) unless in such indemnified parties'
reasonable judgment, a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. Any failure to give prompt notice shall
deprive a party of its right to indemnification hereunder only to the extent
that such failure shall have adversely affected the indemnifying party. If the
defense of any claim is assumed, the indemnifying party will not be subject to
any liability for any settlement made without its consent (but such consent
shall not be unreasonably withheld). An indemnifying party that is not entitled
or elects not, to assume the defense of a claim, will not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party, a conflict of interest may exist between
such indemnified party and any other of such indemnified parties with respect
to such claim.
3.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Section 3.1 covering an underwritten registered offering, (i) the
Undersigned shall execute and deliver to the Company a written power of
attorney instrument that (A) appoints an officer of the Company as the
Undersigned's attorney-in-fact for purposes of executing and delivering an
underwriting agreement among the Company, the underwriters named therein and
the Undersigned specifying the terms and conditions applicable to the sale of
Stock of the Undersigned in such offering and (B) otherwise is in such form and
containing such provisions as are customary in the securities business for such
an arrangement in connection with an underwritten registered offering
-6-
<PAGE> 7
in which one or more stockholders of the issuer are participants, including a
provision that authorizes the attorney-in-fact appointed by the Undersigned to
execute and deliver such an underwriting agreement in the event that the net
price per share to be received by the Undersigned from the sale of the shares
of Stock to be sold in such offering is not less than a price specified in such
instrument and (iii) the Company and the Undersigned agree to enter into a
written agreement with the managing underwriters in such form and containing
such provisions as are customary in the securities business for such an
arrangement between such managing underwriters and companies of the Company's
size and investment stature, including indemnification; provided, however, that
(A) the Undersigned shall be exempt and excluded from any indemnification of
the managing underwriters other than with respect to information provided by
the Undersigned with respect to the Undersigned to the Company or the managing
underwriters specifically for inclusion in any such registration statement and
(B) the Undersigned shall not be obligated to enter into such an underwriting
agreement in the event that the net price per share to be received by the
Undersigned from the sale of shares of Stock to be sold in such offering is
less than the floor price specified in the power of attorney instrument
executed and delivered to the Company pursuant to clause (i) above.
3.5 TRANSFER OF RIGHTS. The right to cause the Company to register
shares of Stock under this Agreement may be assigned to a transferee or
assignee of the Undersigned to the extent that such transferee or assignee is a
member of the immediate family of the Undersigned, a trust, limited partnership
or other estate planning entity for the benefit of any such persons or a
charitable organization that qualifies for receipt of charitable contributions
under Section 170(c) of the Code.
3.6 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC that may permit the sale of stock
to the public without registration, following an IPO the Company agrees to use
its reasonable efforts, from and after the completion of an IPO, to:
(i) make and keep public information regarding the Company
available as those terms are understood and defined in Rule 144 under
the 1933 Act beginning 90 days following the effective date of a
registration statement relating to an IPO;
(ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act
at any time after it has become subject to such reporting
requirements; and
(iii) so long as the Undersigned owns any restricted Stock,
furnish to the Undersigned forthwith upon written request a written
statement by the Company as to its compliance with the current public
information requirements of Rule 144 (at any time from and after 90
days following the effective date of a registration statement relating
to an IPO), and of the 1933 Act and the 1934 Act (any time after it
has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other
reports and documents so filed as the Undersigned may reasonably
request in availing itself of any rule or regulation of the SEC
allowing the Undersigned to sell any such shares without registration.
-7-
<PAGE> 8
4. GENERAL
4.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of the Company, and the heirs and legal representatives of the
Undersigned.
4.2 NOTICES. All notices or communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the
same in person to an officer or agent of such party.
(a) If to the Company addressed to it at:
American Plumbing & Mechanical, Inc.
1502 Augusta, Suite 425
Houston, Texas 77057
Attention: Chief Financial Officer
(b) If to the Undersigned, addressed to it at:
Sterling City Capital, LLC
1502 Augusta, Suite 425
Houston, Texas 77057
or to such other address or counsel as any party hereto shall specify pursuant
to this section from time to time.
4.3 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Texas, excluding any conflicts of law, rule or
principle that might refer same to the laws of another jurisdiction.
4.4 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.
-8-
<PAGE> 9
5. EXPENSE REIMBURSEMENT.
As contemplated by Section 19.6 of the Acquisition Agreements dated
February 11, 1999 by and among the Company, the Founding Companies and the
Stockholders of the Founding Companies identified therein, (collectively, the
"Acquisition Agreements"), the Company hereby agrees to pay the reasonable
fees, expenses and disbursements of the Company and its agents,
representatives, accountants and counsel incurred in connection with the
subject matter of the Acquisition Agreements and any amendments thereto,
including all costs and expenses incurred in the performance and compliance
with all conditions to be performed by the Company under the Acquisition
Agreements, including the fees and expenses of Arthur Andersen LLP, Andrews &
Kurth L.L.P., and any other person or entity retained by the Company, and the
costs of preparing the Private Placement Memorandum incurred in connection with
the subject matter of the Acquisition Agreements and any amendments thereto. In
addition, the Company hereby agrees to pay the reasonable fees and expenses of
Bracewell & Patterson LLP incurred on behalf of the Founding Companies and the
Stockholders in connection with the subject matter of the Acquisition
Agreements. The Company hereby agrees to reimburse Sterling City Capital, LLC
(or any person or entity which is an Affiliate thereof) for any of the
foregoing fees, expenses and disbursements paid by Sterling City Capital, LLC
(or any person or entity which is an Affiliate thereof) and shall repay
Sterling City Capital, LLC (or any person or entity which is an Affiliate
thereof) for any loans or advances made by Sterling City Capital, LLC (or any
person or entity which is an Affiliate thereof) for the purpose of providing
the Company funds to pay any such fees, expenses and disbursements, provided
that such reimbursement and loan repayment obligation shall be limited to the
foregoing fees, expenses, and disbursements which are out-of-pocket expenses of
the Company, Sterling City Capital, LLC or any person or entity which is an
Affiliate thereof. Sterling City Capital, LLC shall be reimbursed by the
Company in the form of AmPaM Notes as described in the Acquisition Agreements.
The Company retains the right, within a reasonable period following the Closing
Date, to conduct an audit of the expenses for which Sterling City Capital, LLC
is reimbursed. If and to the extent such audit reflects that an adjustment
should be made to the principal amount of the AmPaM Note issued to Sterling
City LLC, the Company and Sterling City Capital, LLC shall use their best
efforts to negotiate the amount of any such adjustment.
-9-
<PAGE> 10
The parties hereto have entered into and executed this Agreement as of
April 1, 1999.
AMERICAN PLUMBING & MECHANICAL, INC. STERLING CITY CAPITAL, LLC
By: /s/ David Baggett By: /s/ C. Byron Snyder
--------------------------------- --------------------------------
David Baggett C. Byron Snyder
Chief Financial Officer President
CONSOLIDATION FINANCIAL
CONSULTANTS, LLC
By: /s/ T.A. Reppert and T.A. Reppert, personally
-------------------------------------------------
Todd Reppert
President
POLLOCK FAMILY PARTNERSHIP, LTD.
By: /s/ Jon Pollock
---------------------------------
Jon Pollock - General Partner
/s/ Doug Toole
---------------------------------
Doug Toole
/s/ C. Mark Cummings
---------------------------------
C. Mark Cummings
/s/ Susan Cannon
---------------------------------
Susan Cannon
/s/ D. Merril Cummings
---------------------------------
D. Merril Cummings
/s/ Jim P. Wise
---------------------------------
Jim Wise
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<PAGE> 11
/s/ Mel Payne
---------------------------------
Mel Payne
/s/ John Wombwell
---------------------------------
John Wombwell
/s/ Tom Popp
---------------------------------
Tom Popp
/s/ Larry O'Connell
---------------------------------
Larry O'Connell
/s/ Jim Thurman
---------------------------------
Jim Thurman
/s/ Ben Mueller
---------------------------------
Ben Mueller
/s/ Jerry M. Mills
---------------------------------
Jerry Mills
/s/ Gary O'Sullivan
---------------------------------
Gary O'Sullivan
/s/ Charles P. Bagby
---------------------------------
Charles Bagby
/s/ Tom Daniel
---------------------------------
Tom Daniel
/s/ Richard Muth
---------------------------------
Richard Muth
-11-
<PAGE> 12
/s/ Paul Muth
---------------------------------
Paul Muth
/s/ Jeremy O. Brown
---------------------------------
Jeremy Brown
/s/ Gregg Snyder
---------------------------------
Gregg Snyder
/s/ Worth Snyder
---------------------------------
Worth Snyder
/s/ Natalie Snyder
---------------------------------
Natalie Snyder
/s/ Meredith Snyder
---------------------------------
Meredith Snyder
/s/ Lane Dilg
---------------------------------
Lane Dilg
/s/ Mary Dilg
---------------------------------
Mary Dilg
/s/ Robert Christianson
---------------------------------
Robert Christianson
/s/ David Baggett
---------------------------------
David Baggett
/s/ Robert Richey
---------------------------------
Robert Richey
-12-
<PAGE> 13
/s/ Guy Hoffman
---------------------------------
Guy Hoffman
/s/ Paul Leleux
---------------------------------
Paul Leleux
/s/ Steve Smith
---------------------------------
Steve Smith
/s/ Aimee B. Shaw
---------------------------------
Aimee Shaw
/s/ Michael James
---------------------------------
Michael James
/s/ Bob Weik
---------------------------------
Bob Weik
ERICA JANE HOFFMAN 1999 TRUST
By: /s/ Molly Vining By: /s/ Peter Bauer
---------------------------------- --------------------------------
Molly Vining, Trustee Peter Bauer, Trustee
CLAIRE ELAINE HOFFMAN 1999 TRUST
By: /s/ Molly Vining By: /s/ Peter Bauer
---------------------------------- --------------------------------
Molly Vining, Trustee Peter Bauer, Trustee
-13-
<PAGE> 1
EXHIBIT 10.5
Execution Copy
- --------------------------------------------------------------------------------
ACQUISITION AGREEMENT
dated as of the 11th day of February, 1999
by and among
AMERICAN PLUMBING & MECHANICAL, INC.
CHRISTIANSON ENTERPRISES, INC.
CHRISTIANSON SERVICES, INC. AND
GGR LEASING CORPORATION
and
all of the STOCKHOLDERS of
CHRISTIANSON ENTERPRISES, INC.
CHRISTIANSON SERVICES, INC. AND
GGR LEASING CORPORATION
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS ....................................................................................1
1. ACQUISITION OF STOCK................................................................5
1.1 Acquisition................................................................5
1.2 Consideration..............................................................5
1.3 Certain Information With Respect to the Capital Stock of the Company
and AmPaM..................................................................5
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY......................................5
2.1 Board of Directors.........................................................5
2.2 Officers...................................................................6
3. DELIVERY OF CONSIDERATION...........................................................6
3.1 Stockholders' Consideration................................................6
3.2 Stockholders' Deliveries...................................................6
4. CLOSING.............................................................................6
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................6
5.1 Due Organization...........................................................7
5.2 Authorization..............................................................7
5.3 Capital Stock of the Company...............................................7
5.4 Transactions in Capital Stock..............................................8
5.5 No Bonus Shares............................................................8
5.6 Subsidiaries; Ownership in Other Entities..................................8
5.7 Predecessor Status; etc....................................................8
5.8 Spin-off by the Company....................................................8
5.9 Financial Statements.......................................................9
5.10 Liabilities and Obligations................................................9
5.11 Accounts and Notes Receivable.............................................10
5.12 Licenses; Intellectual Property...........................................11
5.13 Environmental Matters.....................................................11
5.14 Personal Property.........................................................13
5.15 Significant Customers; Material Contracts and Commitments.................13
5.16 Real Property.............................................................14
5.17 Insurance.................................................................15
5.18 Compensation; Employment Agreements; Labor Matters........................15
5.19 Employee Plans............................................................16
5.20 Compliance with ERISA.....................................................16
5.21 Conformity with Law; Litigation...........................................17
</TABLE>
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<TABLE>
<S> <C>
5.22 Taxes.....................................................................18
5.23 No Violations; No Consent Required, Etc...................................18
5.24 Government Contracts......................................................19
5.25 Absence of Changes........................................................19
5.26 Deposit Accounts; Powers of Attorney......................................21
5.27 Validity of Obligations...................................................21
5.28 Relations with Governments................................................21
5.29 Disclosure................................................................21
5.30 No Warranties or Insurance................................................22
5.31 Interest in Customers and Suppliers and Related Party Transactions........22
5.32 Private Placement Memorandum..............................................22
5.33 Authority; Ownership......................................................22
5.34 Preemptive Rights.........................................................23
5.35 No Commitment to Dispose of AmPaM Stock or AmPaM
Series A Preferred Stock..................................................23
5.36 Disclosure................................................................23
6. REPRESENTATIONS OF AMPAM...........................................................24
6.1 Due Organization..........................................................24
6.2 Authorization.............................................................24
6.3 Capital Stock of AmPaM....................................................24
6.4 Transactions in Capital Stock.............................................25
6.5 Subsidiaries..............................................................25
6.6 Financial Statements......................................................25
6.7 Liabilities and Obligations...............................................25
6.8 Conformity with Law; Litigation...........................................26
6.9 No Violations.............................................................26
6.10 Validity of Obligations...................................................27
6.11 AmPaM Stock and AmPaM Series A Preferred Stock............................27
6.12 AmPaM Notes...............................................................28
6.13 No Side Agreements........................................................28
6.14 Business; Real Property; Material Agreements..............................29
6.15 Relations with Governments................................................29
6.16 Disclosure................................................................29
6.17 Other Agreements..........................................................29
7. COVENANTS PRIOR TO CLOSING.........................................................29
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate............29
7.2 Conduct of Business Pending Closing.......................................30
7.3 Prohibited Activities.....................................................31
7.4 No Shop...................................................................32
7.5 Agreements................................................................32
7.6 Notification of Certain Matters...........................................33
7.7 Amendment of Schedules....................................................33
7.8 Further Assurances........................................................33
</TABLE>
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<TABLE>
<S> <C>
7.9 Authorized Capital........................................................34
7.10 Compliance with the Hart-Scott Act........................................34
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
AND COMPANY........................................................................34
8.1 Representations and Warranties; Performance of Obligations................34
8.2 Satisfaction..............................................................34
8.3 No Litigation.............................................................35
8.4 Opinion of Counsel........................................................35
8.5 Consents and Approvals....................................................35
8.6 Good Standing Certificates................................................35
8.7 No Material Adverse Change................................................35
8.8 Secretary's Certificate...................................................35
8.9 Tax Matters...............................................................35
8.10 Other Founding Companies..................................................36
8.11 Company Release of Stockholders...........................................36
8.12 Sterling City Capital Transfer Restrictions...............................36
8.13 Election of Chief Executive Officer.......................................36
8.14 Funding Availability......................................................36
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AMPAM.......................................36
9.1 Representations and Warranties; Performance and Obligations...............36
9.2 No Litigation.............................................................37
9.3 Secretary's Certificate...................................................37
9.4 No Material Adverse Effect................................................37
9.5 Stockholders' Release.....................................................37
9.6 Satisfaction..............................................................37
9.7 Termination of Related Party Agreements...................................38
9.8 Opinion of Counsel........................................................38
9.9 Consents and Approvals....................................................38
9.10 Good Standing Certificates................................................38
9.11 Funding Availability......................................................38
9.12 FIRPTA Certificate........................................................38
9.13 Resignations of Directors and Officers....................................39
10. COVENANTS OF AMPAM AND THE STOCKHOLDERS AFTER CLOSING..............................39
10.1 Release From Guarantees; Repayment of Certain Obligations.................39
10.2 Preservation of Tax and Accounting Treatment..............................39
10.3 Preparation and Filing of Tax Returns; Payment of Taxes...................39
10.4 Directors.................................................................40
10.5 Legal Opinions............................................................40
11. INDEMNIFICATION....................................................................40
11.1 General Indemnification by the Stockholders...............................41
11.2 Indemnification by AmPaM..................................................42
</TABLE>
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<TABLE>
<S> <C>
11.3 Third Person Claims.......................................................42
11.4 Exclusive Remedy..........................................................44
11.5 Limitations on Indemnification............................................44
12. TERMINATION OF AGREEMENT...........................................................45
12.1 Termination...............................................................45
12.2 Procedure and Effect of Termination.......................................46
13. NONCOMPETITION.....................................................................47
13.1 Prohibited Activities.....................................................47
13.2 Damages...................................................................48
13.3 Reasonable Restraint......................................................48
13.4 Severability; Reformation.................................................48
13.5 Independent Covenant......................................................48
13.6 Materiality...............................................................49
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..........................................49
14.1 Stockholders..............................................................49
14.2 AmPaM.....................................................................49
14.3 Damages...................................................................50
14.4 Survival..................................................................50
14.5 Return of Information.....................................................50
15. TRANSFER RESTRICTIONS..............................................................50
15.1 Transfer Restrictions Relating to AmPaM Stock.............................50
15.2 Transfer Restrictions Relating to Additional Consideration................52
16. FEDERAL SECURITIES ACT REPRESENTATIONS.............................................52
16.1 Compliance with Law.......................................................52
16.2 Economic Risk; Sophistication.............................................53
16.3 Reliance by AmPaM.........................................................53
17. REGISTRATION RIGHTS................................................................54
17.1 Piggyback Registration Rights.............................................54
17.2 Registration Procedures...................................................55
17.3 Indemnification...........................................................57
17.4 Underwriting Agreement....................................................58
17.5 Transfer of Rights........................................................59
17.6 Rule 144 Reporting........................................................59
17.7 Converted Shares of AmPaM Series A Preferred Stock........................59
</TABLE>
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<TABLE>
<S> <C>
18. REDEMPTION OF AMPAM STOCK AND AMPAM SERIES A
PREFERRED STOCK....................................................................59
18.1 Redemption Trigger........................................................59
18.2 Minimum Redemption; Limitations...........................................60
18.3 Notice; Exercise..........................................................60
18.4 Additional Redemptions....................................................60
18.5 Termination of Redemption Obligation......................................60
19. GENERAL............................................................................61
19.1 Cooperation...............................................................61
19.2 Successors and Assigns....................................................61
19.3 Entire Agreement..........................................................61
19.4 Counterparts..............................................................61
19.5 Brokers and Agent.........................................................61
19.6 Expenses..................................................................62
19.7 Notices...................................................................62
19.8 Governing Law.............................................................64
19.9 Survival of Representations and Warranties................................64
19.10 Exercise of Rights and Remedies...........................................64
19.11 Time......................................................................64
19.12 Reformation and Severability..............................................64
19.13 Remedies Cumulative.......................................................64
19.14 Captions..................................................................64
19.15 Amendments and Waivers....................................................64
19.16 Mediation and Arbitration.................................................65
19.17 Information Provided for Private Placement Memorandum.....................65
19.18 Effective Date of Agreement...............................................65
</TABLE>
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ANNEXES
Annex I - Consideration to Be Paid to Stockholders
Annex II - Amended and Restated Certificate of Incorporation and
By-Laws of AmPaM
Annex III - Form of Opinion of Counsel to AmPaM
Annex IV - Form of Tax Opinion
Annex V-1 - Form of Opinion of Counsel to Company and Stockholders
Annex V-2 - Form of Opinion of Counsel to Company and Stockholders
Annex VI-1 - Form of Employment Agreement
Annex VI-2 - Form of Employment Agreement
Annex VI-3 - Form of Employment Agreement
Annex VI-4 - Form of Employment Agreement
Annex VI-5 - Form of Employment Agreement
Annex VI-6 - Form of Employment Agreement
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SCHEDULES
<TABLE>
<S> <C>
2.1 Board of Directors
2.2 Officers
5.1 Due Organization
5.2 Authorization
5.3 Capital Stock of the Company
5.4 Transactions in Capital Stock; Organization Accounting
5.5 No Bonus Shares
5.6 Subsidiaries; Ownership in Other Entities
5.7 Predecessor Status; etc
5.8 Spin-off by the Company
5.9 Financial Statements
5.10 Liabilities and Obligations
5.11 Accounts and Notes Receivable
5.12 Licenses; Intellectual Property (Schedules 5.12(a)(1), 5.12(a)(2),
5.12(b)(1) and 5.12(b)(2))
5.13 Environmental Matters
5.14 Personal Property
5.15 Significant Customers; Material Contracts and Commitments
(Schedules 5.15(a), 5.15(b) and 5.15 (c))
5.16 Real Property
5.17 Insurance
5.18 Compensation; Employment Agreements; Labor Matters
5.19 Employee Plans
5.20 Compliance with ERISA
5.21 Conformity with Law; Litigation
5.22 Taxes (Schedules 5.22(a) and 5.22(b))
5.23 No Violations, No Consents Required, Etc.
(Schedules 5.23(a), 5.23(b), 5.23(c) and 5.23(e))
5.24 Government Contracts
5.25 Absence of Changes
5.26 Deposit Accounts; Powers of Attorney
5.30 No Warranties or Insurance
5.31 Interest in Customers and Suppliers and Related Party Transactions
5.33 Authority; Ownership (Schedules 5.33(a) and 5.33(b))
6.9 No Violations
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate
7.2 Conduct of Business Pending Closing
7.3 Prohibited Activities
7.5 Agreements
8.11 Employment Agreements
9.7 Termination of Related Party Agreements
10.1 Release From Guarantees; Repayment of Certain Obligations
16.2 Non-accredited Investors
18.5 Brokers and Agents
</TABLE>
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<PAGE> 9
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made as of the 11th day
of February, 1999 by and among AMERICAN PLUMBING & MECHANICAL, INC., a Delaware
corporation ("AmPaM"), CHRISTIANSON ENTERPRISES, INC., a Texas corporation,
("CEI"), CHRISTIANSON SERVICES, INC., a Texas corporation ("CSI") and GGR
LEASING CORPORATION, a Texas corporation ("GGR"), and the stockholders listed on
the signature pages of this Agreement (the "Stockholders"), which are all the
stockholders of CEI, CSI and GGR (collectively, the "Company").
RECITALS
WHEREAS, the Company is engaged in the plumbing and mechanical services
business;
WHEREAS, as of the date hereof, the Stockholders own, and as of the
Closing Date the Stockholders will own, all of the issued and outstanding
capital stock of the Company (the "Company Stock");
WHEREAS, AmPaM is entering into other separate agreements
simultaneously with this Agreement that are substantially the same as this
Agreement (the "Other Agreements"), each of which is entitled "Acquisition
Agreement," with each of the Other Founding Companies (as defined herein) and
their respective stockholders in order for AmPaM to acquire additional companies
engaged in the plumbing and mechanical services business;
WHEREAS, this Agreement and the Other Agreements constitute the "AmPaM
Plan of Organization;"
WHEREAS, the Stockholders and the boards of directors and the
stockholders of AmPaM, and each of the Other Founding Companies that are parties
to the Other Agreements, have approved and adopted the AmPaM Plan of
Organization as an integrated plan pursuant to which the Stockholders and the
stockholders of each of the other Founding Companies will contribute the capital
stock of each of the Founding Companies to AmPaM, and the Stockholders and the
stockholders of each of the other Founding Companies will acquire the stock of
AmPaM (but not cash or other property) as a tax-free transfer of property under
Section 351 of the Code;
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Stockholders have approved this
Agreement as part of the AmPaM Plan of Organization in order to transfer all of
the issued and outstanding capital stock of the Company to AmPaM; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
<PAGE> 10
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule attached hereto and not otherwise defined shall
have the following meanings for all purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"Acquired Party" means the Company, any subsidiary of the Company and
any member of a Relevant Group.
"Affiliates" means with respect to any person or entity, any other
person or entity that directly or indirectly, controls, is controlled by, or is
under common control with such person or entity.
"AmPaM" has the meaning set forth in the first paragraph of this
Agreement.
"AmPaM Charter Documents" has the meaning set forth in Section 6.1.
"AmPaM Plan of Organization" has the meaning set forth in the recitals
of this Agreement.
"AmPaM Series A Preferred Stock" means the 10% cumulative redeemable
convertible preferred stock, Series A, of AmPaM
"AmPaM Stock" means the common stock, par value $.01 per share, of
AmPaM.
"AmPaM Notes" means those notes issued by AmPaM to the Stockholders as
a portion of the consideration to be received hereunder and in substantially the
form to Annex I as Appendix A.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" has the meaning set forth in the recitals of this
Agreement.
"Delaware GCL" means the General Corporation Law of the State of
Delaware.
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<PAGE> 11
"Environmental Laws" has the meaning set forth in Section 5.13(b).
"Expiration Date" has the meaning set forth in Section 5(A) and Section
6, as applicable.
"Founding Companies" means the following companies:
Christianson Enterprises, Inc., a Texas corporation;
Christianson Services, Inc., a Texas corporation;
GGR Leasing Corporation, a Texas corporation;
J.A. Croson Company of Florida, a Florida corporation;
J.A. Croson Company, an Ohio corporation;
Franklin Fire Sprinkler Company, an Ohio corporation;
Keith Riggs Plumbing, Inc., an Arizona corporation;
Miller Mechanical Contractors, Inc., a Georgia corporation;
Nelson Mechanical Contractors, Inc., a Florida corporation;
Power Plumbing Inc., a Delaware corporation;
R.C.R. Plumbing, Inc., a California corporation;
Sherwood Mechanical, Inc., a California corporation; and
Teepe's River City Mechanical, Inc., an Ohio corporation.
"GAAP" means generally accepted accounting principles as consistently
applied in the United States.
"Hart-Scott Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Hazardous Substance" has the meaning set forth in Section 5.13(c).
"IPO" means a firm commitment underwritten initial public offering of
AmPaM Stock managed by one or more nationally recognized national investment
banking firms.
"known" or "knowledge," when used in reference to a statement regarding
the existence or absence of facts in this Agreement, is intended by the parties
to mean that the only information to be attributed to such person is information
actually known to (a) the person in the case of an individual, (b) in the case
of a corporation or other entity other than the Company, an officer or director
of such corporation or entity or (c) in the case of the Company and its
Subsidiaries, an officer of the Company listed on Schedule 2.2 hereto, except
for David Baggett.
"Material Adverse Change" means a material adverse change in the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
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<PAGE> 12
"Material Adverse Effect" means a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Documents" has the meaning set forth in Section 5.23.
"Ordinary Course of Business" means the ordinary course of business
consistent with past customs and practice (including with respect to quantity
and frequency).
"Other Agreements" has the meaning set forth in the recitals of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Plans" has the meaning set forth in Section 5.19.
"Private Placement Memorandum" means the Private Placement Memorandum,
dated as of February 11, 1999, provided to each Stockholder prior to the
execution and delivery of this Agreement which sets forth certain information
relating to the transactions contemplated by this Agreement and the Other
Agreements.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Relevant Group" means the Company and any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a member.
"Restricted Common Stock" has the meaning set forth in Section 1.3(ii).
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"State of Incorporation" means the State of Texas for each of CEI, CSI
and GGR.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Subsidiaries" means with respect to a person or entity, any
corporation or other entity in which such person or entity owns a 5% or greater
ownership interest.
4
<PAGE> 13
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, employment, excise, property, deed, stamp, alternative
or add-on minimum, or other taxes, assessments, duties, fees, levies or other
governmental charges, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
1. ACQUISITION OF STOCK
1.1 ACQUISITION. Upon the terms and subject to the conditions contained
in this Agreement and in reliance upon the representations, warranties,
covenants and agreements contained in this Agreement, on the Closing Date, the
Stockholders shall convey and transfer to AmPaM all of the issued and
outstanding shares of Company Stock as set forth in Annex I hereto.
1.2 CONSIDERATION. The consideration for the Company Stock shall be as
set forth on Annex I to this Agreement.
1.3 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY AND AMPAM. The respective designations and numbers of outstanding shares
and voting rights of each class of outstanding capital stock of the Company and
AmPaM as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
outstanding Company Stock is as set forth on Schedule 5.3 hereto; and
(ii) immediately prior to the Closing Date, the authorized
capital stock of AmPaM will consist of (A) 100,000,000 shares of AmPaM
Stock, of which the number of issued and outstanding shares will be set
forth in the Private Placement Memorandum, (B) 10,000,000 shares of
redeemable preferred stock, of which the number of issued and
outstanding shares will be set forth in the Private Placement
Memorandum, and (C) 5,000,000 shares of Restricted Voting Common Stock,
$.01 per value (the "Restricted Common Stock"), all of which will be
issued and outstanding except as otherwise set forth in the Private
Placement Memorandum.
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY
2.1 BOARD OF DIRECTORS. The Company and the Stockholders shall take
action, including solicitation of resignation of directors, necessary so that
the Board of Directors of the Company as of the Closing Date shall consist only
of the persons identified on Schedule 2.1 hereto.
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<PAGE> 14
2.2 OFFICERS. The Company and the Stockholders shall take action,
including solicitation of resignation of officers, necessary so that the
officers of the Company as of the Closing Date shall consist only of the persons
identified on Schedule 2.2 hereto.
3. DELIVERY OF CONSIDERATION
3.1 STOCKHOLDERS' CONSIDERATION. On the Closing Date, the Stockholders
shall, upon surrender of certificates evidencing the Company Stock, receive from
AmPaM the respective number of shares of AmPaM Stock, the respective number of
shares of AmPaM Series A Preferred Stock, the amount of cash and the principal
amount of AmPaM Notes described on Annex I hereto specified with respect to each
such Stockholder as payable on the Closing Date. All payments of cash shall be
made by certified check or wire transfer of immediately available funds.
Consideration consisting of AmPaM Notes shall be substantially in the form of
Appendix A to Annex I and the consideration consisting of AmPaM Series A
Preferred Stock will have the rights and obligations set forth in a Certificate
of Designations substantially in the form of Appendix B to Annex I.
3.2 STOCKHOLDERS' DELIVERIES. The Stockholders shall deliver at the
Closing the certificates representing Company Stock, duly endorsed in blank by
the Stockholders, or accompanied by blank stock powers, and with all necessary
transfer tax and other revenue stamps, acquired at the Stockholders' expense,
affixed and canceled. The Stockholders agree promptly to cure any deficiencies
with respect to the endorsement of the stock certificates or other documents of
conveyance with respect to such Company Stock or with respect to the stock
powers accompanying any Company Stock.
4. CLOSING
The consummation of the transactions contemplated by Section 3 (the
"Closing") shall take place on March 31, 1999 or such date not later than May
31, 1999 as AmPaM shall determine by giving written notice of such other date as
provided in Section 18.7 (the "Closing Date") at the offices of Andrews & Kurth
L.L.P., 4200 Chase Tower, 600 Travis, Houston, Texas 77002; provided however,
that if the Closing does not occur on or before May 31, 1999, AmPaM shall pay
$50,000 to the Company as reimbursement for certain costs and expenses related
to the negotiation and execution of this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the disclosure schedules attached hereto and
except as otherwise qualified below, the Company represents and warrants that
all of the following representations and warranties in this Section 5(A) are
true at the date of this Agreement and, subject to Section 7.7 hereto, shall be
true at the time of the Closing, and that such representations and warranties
shall survive the Closing Date for a period of eighteen months (the last day of
such period being the
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<PAGE> 15
"Expiration Date"), except that the representations and warranties set forth in
Sections 5.3, 5.22 and 5.32 hereof shall survive until such time as the
applicable statute of limitations period has run, which shall be deemed to be
the Expiration Date for the representations and warranties set forth in Sections
5.3, 5.22 and 5.32. For purposes of this Section 5, the term "Company" shall
mean and refer to the Company and all of its Subsidiaries, if any, and any
reference to a Material Adverse Effect on the Company or Material Adverse Change
with respect to the Company shall mean the Company and its Subsidiaries, taken
as a whole. Except as expressly set forth in this Agreement, the Company
expressly disclaims any representation or warranty (express, implied or
otherwise) relating to the Company and any Subsidiary thereof including, without
limitation, any warranty of merchantability or fitness for a particular purpose.
5.1 DUE ORGANIZATION. The Company is a corporation duly incorporated
and organized, validly existing and in good standing under the laws of the State
of Incorporation, and has the requisite power and authority to carry on its
business as it is now being conducted. The Company is duly qualified or
authorized to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or authorization necessary except where the failure to be so
qualified or authorized to do business would not have a Material Adverse Effect
on the Company. Schedule 5.1 sets forth a list of all states in which the
Company is authorized or qualified to do business, which list indicates which of
such entities is authorized or qualified to do business in such states. True,
complete and correct copies of the Certificate or Articles of Incorporation and
By-laws, each as amended, of the Company (the "Charter Documents") are all
attached to Schedule 5.1. The Company has delivered to AmPaM complete and
correct copies of (i) the stock records of the Company and (ii) all minutes of
meetings, written consents and other evidence, if any, of deliberations of or
actions taken by the Company's Board of Directors, any committees of the Board
of Directors and stockholders during the last five years.
5.2 AUTHORIZATION. (i) The officers or other representatives of the
Company executing this Agreement have the authority to enter into and bind the
Company to the terms of this Agreement and (ii) the Company has the full legal
right, power and authority to enter into this Agreement and consummate the
transactions contemplated hereby. Copies of the most recent resolutions adopted
by the Board of Directors of the Company and the most recent resolutions adopted
by the Stockholders, which approve this Agreement and the transactions
contemplated hereby in all respects, certified by the Secretary or an Assistant
Secretary of the Company as being in full force and effect on the date hereof,
are attached hereto as Schedule 5.2.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company and each of its Subsidiaries is as set forth on Schedule 5.3(a). All of
the issued and outstanding shares of the capital stock of the Company are owned
by the Stockholders in the amounts set forth in Schedule 5.3(a). Except as set
forth on Schedule 5.3(a), all of the issued and outstanding capital stock of
each Subsidiary is owned by the Company. All of the issued and outstanding
shares of the capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable, are owned of record by the
Stockholders and further, such shares were offered, issued,
7
<PAGE> 16
sold and delivered by the Company in compliance with all applicable state and
Federal laws concerning the issuance of securities. Further, none of such shares
were issued in violation of any preemptive rights of any past or present
stockholder.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule
5.4(a), the Company has not acquired or redeemed any shares of capital stock of
the Company since January 1, 1996. Except as set forth on Schedule 5.4(b), (i)
no option, warrant, call, conversion right or commitment of any kind exists
which obligates the Company to issue any of its authorized but unissued capital
stock; (ii) the Company has no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any distribution in respect thereof; and
(iii) neither the voting stock structure of the Company nor the relative
ownership of shares among any of its Stockholders has been altered or changed in
contemplation of the AmPaM Plan of Organization. There are no voting trusts,
proxies or other agreements or understandings to which the Company is a party or
is bound with respect to the voting of any shares of capital stock of the
Company.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses in
contemplation of the AmPaM Plan of Organization.
5.6 SUBSIDIARIES; OWNERSHIP IN OTHER ENTITIES. Except as set forth on
Schedule 5.6(a), the Company has no Subsidiaries. Except as set forth in
Schedule 5.6(b), the Company does not presently own, of record or beneficially,
or control, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any corporation, association
or business entity nor is the Company, directly or indirectly, a participant in
any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7(a) is a list of
all predecessor companies of the Company, including the names of any entities
acquired by the Company (by stock purchase, merger or otherwise) or owned by the
Company or from whom the Company previously acquired material assets, in any
case, from the earliest date upon which any Stockholder acquired his or her
stock in any Company. Except as disclosed on Schedule 5.7(b), the Company has
not been, within such period of time, a subsidiary or division of another
corporation or a part of an acquisition which was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
Company or any other person or entity that is an Affiliate of the Company since
January 1, 1996.
8
<PAGE> 17
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 is a
copy of:
(i) the combined balance sheets of the Company as of December
31, 1996 and 1997 and the related statements of combined operations,
stockholders' equity and cash flows for the three-year period ended
December 31, 1997, together with the related notes and schedules (such
balance sheets, the related statements of operations, stockholders'
equity and cash flows and the related notes and schedules are referred
to herein as the "Year-end Financial Statements");
(ii) the combined balance sheet of the Company as of June 30,
1998 and the related statements of operations, stockholders' equity and
cash flows for the six-month periods ended June 30, 1997 and 1998,
together with the related notes and schedules (such balance sheets, the
related statements of operations, stockholders' equity and cash flows
and the related notes and schedules are referred to herein as the
"Six-Month Interim Financial Statements");
(iii) the combined balance sheet of the Company as of
September 30, 1998 (the "Balance Sheet Date") and the related
statements of operations, stockholders' equity and cash flows for the
nine-month periods ended September 30, 1997 and 1998 (such balance
sheets, the related statements of operations, stockholders' equity and
cash flows are referred to herein as the "Nine-Month Interim Financial
Statements"); and
(iv) the combined income statement of the Company for the
12-month period ended June 30, 1998, together with the related notes
and schedules thereto (the "Valuation Income Statement").
The Year-end Financial Statements, the Six-Month Interim Financial Statements,
the Nine-Month Interim Financial Statements and the Valuation Income Statement
are collectively called the "Financial Statements". The Financial Statements,
including those included in the Private Placement Memorandum, have been prepared
in accordance with GAAP applied on a consistent basis and fairly present the
combined financial position of the Company as of the dates thereof and the
results of its operations and changes in financial position for the periods then
ended, subject, in the case of the Six-Month Interim Financial Statements and
the Nine-Month Interim Financial Statements, to normal year-end audit
adjustments and any other adjustments described therein and the absence of
certain footnote disclosures.
5.10 LIABILITIES AND OBLIGATIONS. Schedule 5.10(a) sets forth an
accurate list as of the Balance Sheet Date of (i) all material liabilities of
the Company which are not reflected on the combined balance sheet of the Company
at the Balance Sheet Date or otherwise reflected in the Company Financial
Statements at the Balance Sheet Date which by their nature would be required in
accordance with GAAP to be reflected in the balance sheet, and (ii) all loan
agreements, indemnity or guaranty agreements, bonds, mortgages, pledges or other
security agreements to which the Company is a party or by which its properties
may be bound other than bid bonds and performance
9
<PAGE> 18
bonds made in the Ordinary Course of Business. Except as set forth on Schedule
5.10(b), since the Balance Sheet Date, the Company has not incurred any material
liabilities or obligations of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise, other than
liabilities incurred in the Ordinary Course of Business. The Company has also
delivered to AmPaM, on Schedule 5.10(c), a list of contingent liabilities
related to pending litigation or litigation that has been threatened in writing,
or other material liabilities which are not fixed or otherwise accrued or
reserved. For each such contingent liability of the Company or liability of the
Company for which the amount is not fixed or is contested, the Company has
provided to AmPaM the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation in the
possession of the Company or its directors, officers
or stockholders relating thereto;
(b) amounts claimed and any other action or relief
sought; and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(ii) the name of each court or agency before which such claim,
suit or proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted;
and
(iv) a good faith estimate of the maximum amount, if any,
which the Company expects, based on information available, is likely to
become payable with respect to each such liability and the amount, if
any, accrued or reserved for each such potential liability on the
Financial Statements.
AmPaM acknowledges that all estimates referred to above and set forth on
Schedule 5.10(c) are only good faith estimates, and that the Company and the
Stockholders expressly do not represent or warrant that the actual amounts of
such liabilities will be equal to, or more or less than, the amounts of such
estimates.
5.11 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.11(a) sets forth an
accurate list, in all material respects, of the accounts and notes receivable of
the Company, as of the Balance Sheet Date, including any such amounts which are
not reflected in the balance sheet as of the Balance Sheet Date, and including
all receivables from and advances to employees and the Stockholders, which are
identified as such. Schedule 5.11(a) also sets forth a materially accurate aging
of all accounts and notes receivable as of the Balance Sheet Date showing
amounts due in 30-day aging categories. Except to the extent reflected on
Schedule 5.11(b), such accounts, notes and other receivables are collectible in
the amounts shown on Schedule 5.11(a), net of reserves reflected in the balance
sheet as of the Balance Sheet Date.
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<PAGE> 19
5.12 LICENSES; INTELLECTUAL PROPERTY. (a) The Company or its employees
hold all licenses, franchises, permits and other governmental authorizations
("Licenses") necessary to conduct the business of the Company, the absence of
which would cause a Material Adverse Effect on the Company, and the Company has
delivered to AmPaM a list that is accurate, in all material respects, and
summary description (which is set forth on Schedule 5.12(a)(1)) of all such
Licenses. At or prior to the Closing, all such Licenses owned or held by any
employee of the Company will be assigned or licensed to the Company for no
additional consideration. The Licenses listed on Schedule 5.12(a)(1) are valid,
and the Company has not received any notice that any person intends to cancel,
terminate or not renew any such License. The Company has conducted and is
conducting its business in compliance in all material respects with the
requirements, standards, criteria and conditions set forth in the Licenses
listed on Schedule 5.12(a)(1) and is not in violation of any of the foregoing in
any material respect. Except as specifically provided in Schedule 5.12(a)(2),
the consummation by the Company of the transactions contemplated by this
Agreement will not result in a default under or a breach or violation of, or
adversely affect the rights and benefits afforded to the Company by, any such
Licenses.
(b) The Company owns or possesses adequate licenses or other rights to
use (without making any payment or granting rights to any person in exchange)
all patents, patent applications, trademarks, copyrights, service marks and
trade names (collectively, the "Intellectual Property") necessary to conduct its
business as currently conducted. A description of any Intellectual Property
licensed by the Company, including the material terms of any such license, is
described on Schedule 5.12(b)(1). Neither the validity of the Intellectual
Property nor the title thereto or use thereof by the Company is being questioned
in any pending litigation, and the conduct of the Company's business, as
currently conducted, does not conflict with licenses, copyrights, uncopyrighted
works, trade marks, service marks, trade names, trade name rights, patents,
patent rights, unpatented inventions or trade secrets of others. Neither the
validity of the Intellectual Property nor the title thereto or use thereof by
the Company is being questioned in any pending or, to the knowledge of the
Company, threatened infringement claims or litigation, and the conduct of the
Company's business, as now conducted, does not conflict with licenses,
copyrights, uncopyrighted works, trade marks, service marks, trade names, trade
name rights, patents, patent rights, unpatented inventions or trade secrets of
others. Except as specifically provided in Schedule 5.12(b)(2), the consummation
by the Company of the transactions contemplated by this Agreement will not
adversely affect the rights and benefits afforded to the Company by any such
Intellectual Property.
5.13 ENVIRONMENTAL MATTERS. (a) Except as set forth in Schedule 5.13
attached hereto, (i) the Company has conducted its businesses in compliance in
all material respects with all applicable Environmental Laws, including, without
limitation, having all environmental permits, licenses and other approvals and
authorizations necessary for the operation of its business as presently
conducted, except where the failure to have such permit, license, approval or
authorization would not have a Material Adverse Effect on the Company, (ii) none
of the properties owned by the Company contain any Hazardous Substance as a
result of any activity of the Company in amounts exceeding the levels permitted
by applicable Environmental Laws, except where amounts in excess
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<PAGE> 20
of such levels would not have a Material Adverse Effect on the Company, (iii)
the Company has not received any notices, demand letters or requests for
information from any Federal, state, local or foreign governmental entity or
third party indicating that the Company may be in violation of, or liable under,
any Environmental Law in connection with the ownership or operation of its
business, (iv) there are no civil, criminal or administrative actions, suits,
demands, claims, hearings, investigations or proceedings pending or, to the
knowledge of the Company, threatened, against the Company relating to any
violation, or alleged violation, of any Environmental Law, except where such
violation would not have a Material Adverse Effect on the Company, (v) no
reports have been filed, or are required to be filed, by the Company concerning
the release of any Hazardous Substance or the threatened or actual violation of
any Environmental Law, (vi) no Hazardous Substance has been disposed of,
released or transported in violation of any applicable Environmental Law from
any properties owned by the Company as a result of any activity of the Company
during the time such properties were owned, leased or operated by the Company,
(vii) there have been no environmental investigations, studies, audits, tests,
reviews or other analyses regarding compliance or non-compliance with any
applicable Environmental Law conducted by or which are in the possession of the
Company relating to the activities of the Company which are not listed on
Schedule 5.13 attached hereto prior to the date hereof, (viii) to the knowledge
of the Company, (A) there are no underground storage tanks on, in or under any
properties owned by the Company and (B) no underground storage tanks have been
closed or removed from any of such properties during the time such properties
were owned, leased or operated by the Company which are not listed on Schedule
5.13, (ix) to the knowledge of the Company, (A) there is no asbestos or
asbestos-containing material present in any material quantity in any of the
properties owned by the Company, and (B) no asbestos has been removed from any
of such properties during the time such properties were owned, leased or
operated by the Company, and (x) neither the Company nor any of its properties
are subject to any material liabilities or expenditures (fixed or contingent)
relating to any suit, settlement, court order, administrative order, regulatory
requirement, judgment or claim asserted or arising under any Environmental Law.
(b) As used herein, "Environmental Law" means, as of the Closing Date,
any Federal, state, local or foreign law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, order, judgment,
decree, injunction or agreement with any governmental entity to which the
Company is a party or subject relating to (x) the protection, preservation or
restoration of the environment (including, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource) or to human health or
safety or (y) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of Hazardous Substances, in each case as amended and as in effect on
the Closing Date. The term Environmental Law includes, without limitation, (i)
the Federal Comprehensive Environmental Response Compensation and Liability Act
of 1980, the Superfund Amendments and Reauthorization Act, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976 (including
the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste
Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Federal
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Occupational Safety and Health Act of 1970, each as amended and as in effect on
the Closing Date, and (ii) any common law or equitable doctrine (including,
without limitation, injunctive relief and tort doctrines such as negligence,
nuisance, trespass and strict liability) that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of, effects of or exposure to any Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance presently
listed, defined, designated or classified as hazardous, toxic, radioactive, or
dangerous, or otherwise regulated, under any Environmental Law. Hazardous
Substance includes any substance to which exposure is regulated by any
government authority or any Environmental Law including, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance or petroleum or any
derivative or by-product thereof, radon, radioactive material, asbestos or
asbestos-containing material, urea formaldehyde foam insulation, lead or
polychlorinated biphenyls.
5.14 PERSONAL PROPERTY. The Company has delivered to AmPaM an accurate
list (which is set forth on Schedule 5.14(a)) of (x) all personal property
material to the operations of the Company as of the Balance Sheet Date included
in "plant, property and equipment" on the balance sheet of the Company as of
such date, (y) all other items of personal property owned by the Company with an
individual value in excess of $15,000 (i) as of the Balance Sheet Date and (ii)
acquired since the Balance Sheet Date and (z) all material leases and agreements
in respect of personal property, including, in the case of each of (x), (y) and
(z), (1) true, complete and correct copies of all such leases and (2) an
indication as to which assets are currently owned, or were formerly owned, by
Stockholders, relatives of Stockholders, or Affiliates of the Company. Except as
set forth on Schedule 5.14(b), (i) all personal property material to, and used
by, the Company in its business is either owned by the Company or leased by the
Company pursuant to a lease included on Schedule 5.14(a), (ii) all of the
personal property listed on Schedule 5.14(a) or replacement property thereof is
in working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14(a) are in full force and effect
and constitute valid and binding agreements of the Company, in each case in
accordance with their respective terms.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
(a) The Company has delivered to AmPaM a materially accurate list
(which is set forth on Schedule 5.15(a)(1)) of all customers (persons or
entities) representing 5% or more of the Company's annual revenues for any
period covered by any of the Financial Statements. Except to the extent set
forth on Schedule 5.15(a)(2), none of such customers has canceled or, to the
knowledge of the Company, are currently threatening to cancel a currently
effective contract with the Company.
(b) The Company has listed on Schedule 5.15(b) all material contracts,
commitments and similar agreements to which the Company is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with customers listed on Schedule 5.15(a), joint venture or
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partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land), other than agreements listed on
Schedules 5.10(a), Schedule 5.14(a) or Schedule 5.16(a), (a) in existence as of
the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and in
each case has delivered or made available to AmPaM true, complete and correct
copies of such agreements. For purposes of the preceding sentence, a contract,
commitment or similar agreement is "material" if it (i) has a term of more than
one year (other than contracts, commitments or agreements that are cancelable
without liability or penalty within 30 days of notice from the Company of
cancellation or that can be terminated by the Company without material penalty
upon notice of 30 days or less) or (ii) requires the payment by or to the
Company of more than $100,000 during any 12-month period. Except for
expenditures in the ordinary course of business, the Company has also indicated
on Schedule 5.15(b) a summary description of all plans or projects involving the
opening of new operations, expansion of existing operations, or the acquisition
of any personal property, business or assets requiring, in any event, the
payment of more than $50,000 by the Company during any 12-month period.
(c) Except as set forth on Schedule 5.15(c), the Company is not
required to provide any bonding or other financial security arrangements in any
material amount in connection with any contract listed on Schedule 5.15(b).
5.16 REAL PROPERTY. Schedule 5.16(a) includes a list of all real
property owned or leased by the Company at the date hereof and all other real
property, if any, used by the Company in the conduct of its business. The
Company has good and insurable title to any real property owned by it that is
shown on Schedule 5.16(a), other than property intended to be sold or
distributed prior to the Closing Date as provided in Section 7.1(c) of this
Agreement, and all real property so owned is subject to no mortgage, pledge,
lien, conditional sales agreement, encumbrance, lease, possessory rights of
third parties or charge, except for:
(i) liens reflected on Schedule 5.10(a) or Schedule 5.16(b) as
securing specified liabilities (with respect to which no material
default by the Company exists);
(ii) liens for current taxes not yet payable and assessments
not in default;
(iii) easements for utilities serving the property; and
(iv) easements, covenants and restrictions and other
exceptions to title which do not adversely affect the current use of
the property.
Copies of all leases and agreements in respect of such real property
leased by the Company, which are true, complete and correct in all material
respects, are attached to Schedule 5.16(a), and an indication as to which such
properties, if any, are currently owned, or were formerly owned, by Stockholders
or Affiliates of the Company or Stockholders is included in Schedule 5.16(a).
Except as set forth on Schedule 5.16(b), all of such leases included on Schedule
5.16(a) are, as to the
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Company, in full force and effect and constitute valid and binding agreements of
the Company in accordance with their respective terms.
5.17 INSURANCE. The Company has delivered to AmPaM (i) an accurate list
as of the Balance Sheet Date of all insurance policies carried by the Company
and (ii) an accurate list of all insurance loss runs or workers compensation
claims received for the past three policy years (which lists are set forth on
Schedule 5.17). The Company has also delivered or made available to AmPaM true,
complete and correct copies of all insurance policies currently in effect that
are referred in Schedule 5.17. Such insurance policies evidence all of the
insurance the Company is required to carry pursuant to all of its contracts and
other agreements and pursuant to all applicable laws. All of such insurance
policies are currently in full force and effect except as stated in Schedule
5.17. Since January 1, 1996, no insurance carried by the Company has been
canceled by the insurer and the Company has not been denied coverage under any
such policy.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; LABOR MATTERS.
(a) The Company has delivered to AmPaM an accurate list (which is set
forth on Schedule 5.18(a)(1)) showing all officers, directors and key employees
of the Company, listing all employment agreements with such officers, directors
and key employees and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of each of
such persons as of (i) the Balance Sheet Date and (ii) the date hereof. The
Company has provided to AmPaM true, complete and correct copies of any
employment agreements for persons listed on Schedule 5.18(a)(1). Since the
Balance Sheet Date, except as disclosed on Schedule 5.18(a)(2), there have been
no increases in the compensation payable or any bonuses to any officer,
director, key employee or other employee, except ordinary salary increases
implemented on a basis consistent with past practices and except for bonuses
paid on a basis consistent with past practices.
(b) Except as set forth on Schedule 5.18(b), (i) the Company is not
bound by or subject to (and none of its assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) to the knowledge of the
Company, no campaign to establish such arrangement is in progress and (iii)
there is no pending or, to the Company's knowledge, threatened labor dispute
involving the Company and any group of its employees nor has the Company
experienced any labor interruptions over the past three years. The Company
believes its relationship with employees to be generally good.
(c) Except as set forth in Schedule 5.18(c) attached hereto, (i) there
are no claims, actions or proceedings pending or, to the knowledge of the
Company, threatened between the Company and any of its employees, (ii) the
Company has complied in all material respects with all laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, and (iii) the Company has not received written
notice from any person asserting that the Company is liable in
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<PAGE> 24
any material amount for any arrears of wages or any taxes or penalties for
failure to comply with any of the foregoing.
5.19 EMPLOYEE PLANS. The Company has delivered to AmPaM accurate
schedule (Schedule 5.19(a)) showing all employee benefit plans of the Company,
including all employment agreements and other agreements or arrangements
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date and as of the date of
this Agreement. Except for the employee benefit plans, if any, described on
Schedule 5.19(a), the Company does not sponsor, maintain or contribute to any
plan program, fund or arrangement that constitutes an "employee pension benefit
plan", and neither the Company nor any Subsidiary has any obligation to
contribute to or accrue or pay any benefits under any deferred compensation or
retirement funding arrangement on behalf of any employee or employees (such as,
for example, and without limitation, any individual retirement account or
annuity, any "excess benefit plan" (within the meaning of Section 3(36) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) or any
non-qualified deferred compensation arrangement). For the purposes of this
Agreement, the term "employee pension benefit plan" shall have the same meaning
as is given that term in Section 3(2) of ERISA. The Company has not sponsored,
maintained or contributed to any employee pension benefit plan other than the
plans set forth on Schedule 5.19(a), and, except as described on Schedule
5.19(b), the Company is not or could not be required to contribute to any
retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions or employment of any of the
Company's employees.
Except as set forth on Schedule 5.19(c), the Company is not now, or
will not as a result of its past activities become, liable to the Pension
Benefit Guaranty Corporation or to any multiemployer employee pension benefit
plan under the provisions of Title IV of ERISA.
All employee benefit plans listed on Schedule 5.19(a) and the
administration thereof are in compliance in all material respects with their
terms and all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable federal, state and local
statutes, ordinances and regulations.
All accrued contribution obligations of the Company as of the Balance
Sheet Date with respect to any plan listed on Schedule 5.19(a) have either been
fulfilled in their entirety or are fully reflected on the balance sheet of the
Company as of the Balance Sheet Date.
5.20 COMPLIANCE WITH ERISA. All plans listed on Schedule 5.19(a) that
are intended to qualify under Section 401 (a) of the Code (the "Qualified
Plans") are, and have been so qualified and have been determined by the Internal
Revenue Service to be so qualified, and copies of such determination letters are
attached to Schedule 5.19(a). Except as disclosed on Schedule 5.20, all reports
and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, actuarial reports, audits or tax returns)
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since January 1, 1992 have been timely filed or distributed, and copies thereof
have been made available to AmPaM. No such plan listed on Schedule 5.19(a) nor
the Company has engaged in any transaction prohibited under the provisions of
Section 4975 of the Code or Section 406 of ERISA. No such Plan listed on
Schedule 5.19(a) has incurred an accumulated funding deficiency, as defined in
Section 412(a) of the Code and Section 302(l) of ERISA; and the Company has not
incurred any liability for excise tax or penalty due to the Internal Revenue
Service nor any liability to the Pension Benefit Guaranty Corporation. The
Company further represents that except as set forth on Schedule 5.20 hereto:
(i) there have been no terminations, partial terminations or
discontinuations of contributions to any Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval
by the Internal Revenue Service;
(ii) no plan listed on Schedule 5.19(a) subject to the
provisions of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase
is defined in Section 4043 of ERISA) with respect to any such plan
listed in Schedule 5.19(a);
(iv) the Company (including any Subsidiaries) has not incurred
liability under Section 4062 of ERISA; and
(v) no circumstances exist pursuant to which the Company could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to any multiemployer plan or the PBGC under
Title IV of ERISA or to the Internal Revenue Service for any excise tax
or penalty, or being subject to any statutory lien to secure payment of
any such liability) with respect to any plan now or heretofore
maintained or contributed to by any entity other than the Company that
is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 5.21 or Schedule 5.13, the Company has not violated within the five
years prior to the date of this Agreement and is not currently in violation of
any law or regulation or any order of any court or Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it other than violations that would not
have a Material Adverse Effect on the Company; and except to the extent set
forth on Schedule 5.10(c) or Schedule 5.13, there are no claims, actions, suits
or proceedings, pending or, to the knowledge of the Company, threatened in
writing against the Company, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over the Company and no written
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received by the Company, and to the knowledge of the Company there is
no valid basis for any such claim, action, suit or proceeding that could
reasonably be expected to have a Material Adverse Effect on the Company.
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5.22 TAXES. (a) The Company has timely filed all requisite Federal,
state and other Tax Returns or extension requests for all fiscal periods ended
on or before the Balance Sheet Date; and except as set forth on Schedule
5.22(a), there are no examinations in progress or claims pending against the
Company for federal, state and other Taxes (including penalties and interest)
for any period or periods prior to and including the Balance Sheet Date and no
notice of any claim for Taxes, whether pending or threatened, has been received.
All Tax, including interest and penalties (whether or not shown on any Tax
Return), due by the Company has been paid. The amounts shown as accruals for
Taxes on the Financial Statements are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before the date of the respective Financial Statements. Copies of
(i) any tax examinations, (ii) extensions of statutory limitations and (iii) the
federal and local income Tax Returns and franchise Tax Returns of Company for
their last three (3) fiscal years, or such shorter period of time as any of them
shall have existed, are attached hereto as Schedule 5.22(a) or have otherwise
been delivered to AmPaM. The Company has a taxable year ended December 31.
Except as set forth on Schedule 5.22(a), the Company uses the accrual method of
accounting for income tax purposes, and the Company's methods of accounting have
not changed in any material respect in the past five years (except as required
to conform to changes in GAAP). The Company is not an investment company as
defined in Section 351(e)(1) of the Code. The Company is not and has not during
the last five years been a party to any tax sharing agreement or agreement of
similar effect. Except as set forth on Schedule 5.22(a), the Company is not and
has not during the last five years been a member of any consolidated group for
federal tax purposes. The Company has not received, been denied, or applied for
any private letter ruling from the IRS during the last ten years.
(b) The Stockholders have made a valid election under the provisions of
Subchapter S of the Code and, except as set forth on Schedule 5.22(b), the
Company has not, within the past five years, been subject to Federal income
Taxes under the provisions of Subchapter C of the Code.
5.23 NO VIOLATIONS; NO CONSENT REQUIRED, ETC.
(a) The Company is not in violation of any Charter Document. Except as
set forth on Schedule 5.23(a), the Company is not in default under any lease,
instrument, agreement, license, or permit set forth on Schedule 5.12(a),
Schedule 5.14(a), Schedule 5.15(b) or Schedule 5.16(a) (collectively, the
"Material Documents").
(b) Except as set forth on Schedule 5.23(b)(1), the execution and
delivery of this Agreement by each of the Company and the Stockholders do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company under any of the
terms, conditions or provisions of (i) the Charter Documents of the Company,
(ii) any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental authority
applicable to the Company or any of its
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properties or assets, or (iii) any Material Document to which the Company is now
a party or by which the Company or any of its properties or assets may be bound
or affected. The consummation by the Company and the Stockholders of the
transactions contemplated hereby will not result in any material violation,
conflict, breach, right of termination or acceleration or creation of liens
under any of the terms, conditions or provisions of the items described in
clauses (i) through (iii) of the preceding sentence, subject, in the case of the
terms, conditions or provisions of the items described in clause (iii) above, to
obtaining (prior to the Effective Time) such consents as may be required from
commercial lenders, lessors or other third parties as listed on Schedule
5.23(b)(2).
(c) Except as set forth on Schedule 5.23(c) and except for the
Hart-Scott Act, none of the Material Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to the consummation by the Company and the Stockholders of any of the
transactions contemplated hereby in order to remain in full force and effect,
and consummation by the Company and the Stockholders of the transactions
contemplated hereby will not give rise to any right to termination, cancellation
or acceleration or loss of any material right or benefit under any Material
Document.
(d) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act or with any state securities authorities in connection with the offer
and sale of AmPaM Stock, AmPaM Series A Preferred Stock or AmPaM Notes pursuant
to this Agreement and (ii) any filing required to be made under the Hart-Scott
Act in connection with the transactions contemplated by this Agreement, no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby.
(e) Except as set forth on Schedule 5.23(e), none of the Material
Documents prohibits the disclosure or publication by the Company or AmPaM of the
name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company from freely providing services or
selling products to any other customer or potential customer of the Company,
AmPaM or any Other Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24, the
Company is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.25 ABSENCE OF CHANGES. (a) Since the Balance Sheet Date, except as
set forth on Schedule 5.25 or as otherwise contemplated hereby, there has not
been:
(i) any Material Adverse Change in the Company;
(ii) any damage, destruction or casualty loss (whether or not
covered by insurance), alone or in the aggregate, which has caused a
Material Adverse Effect on the Company;
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(iii) any change in the authorized capital of the Company or
its outstanding securities or any change in its ownership interests or
any grant of any options, warrants, calls, conversion rights or
commitments;
(iv) any declaration or payment of any dividend or
distribution in respect of the capital stock or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock
of the Company except for distributions that would have been permitted
after the date hereof under Section 7.3(iii) hereof,
(v) any increase in the compensation, bonus, sales commissions
or fee arrangement payable or to become payable by the Company to any
of its officers, directors, Stockholders, employees, consultants or
agents, except for ordinary and customary bonuses and salary increases
for employees in accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed,
or any event or condition of any character, which has caused a Material
Adverse Effect on the Company;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the Company to any
person, including, without limitation, the Stockholders and their
affiliates, except inventory sold or transferred in the Ordinary Course
of Business;
(viii) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to the Company, including
without limitation any indebtedness or obligation of any Stockholders
or any Affiliate thereof;
(ix) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
material assets, property or rights of the Company or requiring consent
of any party to the transfer and assignment of any such assets,
property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the Ordinary Course of Business;
(xi) any waiver of any material rights or claims of the
Company;
(xii) any amendment or termination of any Material Document to
which the Company is a party except for the termination of a Material
Document in accordance with its terms without any action on the part of
the Company;
(xiii) any transaction by the Company outside the Ordinary
Course of Business;
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(xiv) any cancellation or termination of a material contract
with a customer or client listed on Schedule 5.15(a) prior to the
scheduled termination date thereof; or
(xv) any other distribution of property or assets by the
Company other than in the Ordinary Course of Business, other than (a)
distributions of nonoperating assets specifically identified on
Schedule 5.25, (b) distributions of real estate required by Section
7.1(c) of this Agreement and (c) distributions of cash or promissory
notes permitted by Annex I hereto.
(b) Except as set forth on Schedule 5.25, the Company has not,
between the Balance Sheet Date and the date hereof, taken any of the actions set
forth in Section 7.3.
5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The Company has delivered to
AmPaM an accurate schedule (which is set forth on Schedule 5.26) as of the date
of the Agreement of:
(i) the name of each financial institution in which the
Company has an account or safe deposit box;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or
have access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company and
a description of the terms of such power.
5.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the Company and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
Company and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
5.28 RELATIONS WITH GOVERNMENTS. The Company has not, and to the
knowledge of the Company none of the Stockholders or any Affiliate of any of
them has, given or offered anything of value to any governmental official,
political party or candidate for government office or otherwise taken any action
which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any law of similar effect.
5.29 DISCLOSURE. This Agreement, including the Annexes and Schedules
hereto, and the completed questionnaire related to the Hart-Scott Act furnished
to AmPaM by the Company, do not contain an untrue statement of a material fact
concerning the Company or omit to state a material fact concerning the Company
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing
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does not apply to statements contained in or omitted from any of such documents
made or omitted in reliance upon information furnished in writing by AmPaM.
5.30 NO WARRANTIES OR INSURANCE. Except for warranty liability under
applicable law and except for warranty liability under the warranties issued by
the Company of the types described on Schedule 5.30, the Company has no
liability to any person under any warranty and the Company does not offer or
sell insurance or consumer protection plans or other arrangements that could
result in the Company being required to make any payment to or perform any
service for any person.
5.31 INTEREST IN CUSTOMERS AND SUPPLIERS AND RELATED PARTY
TRANSACTIONS. Except as described on Schedule 5.31 or in Section 8.11, no
Stockholder, officer, director or Affiliate of the Company (i) owns, directly or
indirectly, any financial interest in, or is a director, officer, employee or
affiliate of, any corporation, firm, association or business organization that
is a client, supplier, customer, lessor, lessee or competitor of the Company, or
(ii) is or will be a party to an agreement or relationship with the Company
other than through a customary "at will" employment relationship.
5.32 PRIVATE PLACEMENT MEMORANDUM. None of the information supplied or
to be supplied by the Company in writing specifically for inclusion in the
Private Placement Memorandum contained or, as of the Closing Date, will contain
any untrue statement of a material fact concerning the Company or omitted or
will omit to state any material fact required to be stated therein or necessary
in order to make the statements contained in such information supplied or to be
supplied by the Company concerning the Company, in light of the circumstances
under which they are made, not misleading.
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.
Each Stockholder severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.7 hereof, shall be true at the time of
Closing, and that the representations and warranties set forth in this Section
5(B) shall survive the Closing Date.
5.33 AUTHORITY; OWNERSHIP. Such Stockholder has the full legal right,
power and authority to enter into this Agreement, and this Agreement is a legal,
valid and binding obligation of such Stockholder, enforceable against the
Stockholder in accordance with its terms. Except as set forth on Schedule
5.33(a), the execution and delivery of this Agreement by such Stockholder does
not violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of such Stockholder
under any of the terms, conditions or provisions of (i) the Charter Documents of
the Company, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to such Stockholder or any of such Stockholder's properties
or assets, or (iii) any lease,
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instrument, agreement, license or permit to which such Stockholder is now a
party or by which such Stockholder or any of such Stockholder's properties or
assets may be bound or affected. Except for (i) any filings to be made with the
SEC pursuant to the 1933 Act and any state securities authorities in connection
with the offer and sale of AmPaM Stock, AmPaM Series A Preferred Stock and AmPaM
Notes pursuant to this Agreement, (ii) any filing required to be made under the
Hart-Scott Act in connection with the transactions contemplated by this
Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by such
Stockholder or the consummation by such Stockholder of the transactions
contemplated hereby. Except as set forth on Schedule 5.33(b), such Stockholder
owns beneficially and of record all of the shares of the Company Stock
identified on Annex I hereto as being owned by such Stockholder, and, such
Company Stock is owned free and clear of all liens, security interests, pledges,
charges, voting trusts, voting agreements, restrictions, encumbrances and claims
of every kind.
5.34 PREEMPTIVE RIGHTS. Such Stockholder does not have, or hereby
waives, any preemptive or other right to acquire shares of Company Stock, AmPaM
Stock or AmPaM Series A Preferred Stock that such Stockholder has or may have
had. Nothing herein, however, shall limit or restrict the rights of any
Stockholder to acquire AmPaM Stock or AmPaM Series A Preferred Stock pursuant to
(i) this Agreement, (ii) any option granted or to be granted by AmPaM to such
Stockholder, (iii) a purchase through a broker in a regular stock market
transaction or (iv) a purchase from a stockholder of a Founding Company (subject
to compliance with any contractual restrictions or securities law restrictions
applicable thereto specified in Section 15 hereof).
5.35 NO COMMITMENT TO DISPOSE OF AMPAM STOCK OR AMPAM SERIES A
PREFERRED STOCK. No Stockholder is under any binding commitment or contract to
sell, exchange or otherwise dispose of shares of AmPaM Stock or AmPaM Series A
Preferred Stock received pursuant to this Agreement.
5.36 DISCLOSURE. The completed Director and Officer Questionnaires with
respect to such Stockholder (if any), the completed investor questionnaire
furnished to AmPaM by such Stockholder in connection with the proposed
acquisition by such Stockholder of AmPaM Stock, AmPaM Series A Preferred Stock
or AmPaM Notes and any other information provided to AmPaM in writing by such
Stockholder relating specifically to such Stockholder for inclusion in the
Private Placement Memorandum do not contain an untrue statement of a material
fact concerning such Stockholder or omit to state a material fact concerning
such Stockholder necessary to make the statements herein and therein, in light
of the circumstances under which they were made, not misleading.
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6. REPRESENTATIONS OF AMPAM
Except as otherwise qualified below, AmPaM represents and warrants that
all of the following representations and warranties in this Section 6 are true
at the date of this Agreement and, subject to Section 7.7 hereof, shall be true
at the time of Closing, and that such representations and warranties shall
survive the Closing Date for a period of eighteen months (the last day of such
period being the "Expiration Date" for purposes of the representations and
warranties set forth in this Section 6), except that the representations and
warranties set forth in Section 6.3, 6.11 and 6.15 shall survive until such time
as the applicable statute of limitations period has run, which shall be deemed
to be the Expiration Date for the representations and warranties set forth in
Sections 6.3, 6.11 and 6.15.
AmPaM acknowledges that in purchasing the shares of Company Stock, it
is relying upon its own independent investigation as well as the representations
and warranties of the Company and the Stockholders as set forth in this
Agreement.
6.1 DUE ORGANIZATION. AmPaM is a corporation duly incorporated and
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite power and authority to carry on its business as
it is now being conducted and as contemplated by the Private Placement
Memorandum. AmPaM is duly qualified or authorized to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or authorization
necessary, except where the failure to be so qualified or authorized to do
business would not have a Material Adverse Effect. True, complete and correct
copies of the Certificate of Incorporation and By-laws, each as proposed to be
amended and as such documents shall be in effect as of the Closing Date, of
AmPaM (the "AmPaM Charter Documents") are attached hereto as Annex II.
6.2 AUTHORIZATION. (i) The officers of AmPaM executing this Agreement
have the authority to enter into and bind AmPaM to the terms of this Agreement
and (ii) AmPaM has the full legal right, power and authority to enter into this
Agreement and consummate the transactions contemplated hereby. All corporate
acts and other proceedings required to have been taken by AmPaM to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly and properly taken.
6.3 CAPITAL STOCK OF AMPAM. The authorized capital stock of AmPaM is as
set forth in Section 1.3(ii). Immediately prior to the Closing Date, all of the
issued and outstanding shares of the capital stock of AmPaM will be as set forth
in the Private Placement Memorandum, free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind other than any restrictions described in the Private
Placement Memorandum. All of the issued and outstanding shares of the capital
stock of AmPaM have been duly authorized and validly issued, are fully paid and
nonassessable and such shares were offered, issued, sold and delivered by AmPaM
in compliance with all applicable state and Federal laws concerning the issuance
of securities. Further, none of such shares were issued in violation of the
preemptive rights
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of any past or present stockholder of AmPaM. Upon the Closing Date, the
authorized, issued and outstanding shares of capital stock of AmPaM will be as
set forth in the Private Placement Memorandum under the caption
"Capitalization." Upon the Closing Date, the aggregate number of shares of AmPaM
Stock issued and outstanding on the Closing Date that are owned by Sterling City
Capital, LLC, any Affiliates of Sterling City Capital, LLC and the officers and
directors of AmPaM will not be greater than the number of shares of AmPaM Stock
reflected in the Private Placement Memorandum as the aggregate number of shares
of AmPaM Stock to be issued and outstanding and owned by Sterling City Capital,
LLC, any Affiliates of Sterling City Capital, LLC and the officers and directors
of AmPaM.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth in this
Agreement, the Other Agreements and except as set forth in the Private Placement
Memorandum, (i) no option, warrant, call, conversion right or commitment of any
kind exists as of the date of this Agreement which obligates AmPaM to issue any
of its authorized but unissued capital stock; and (ii) AmPaM has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. The material terms of any options, warrants or
other rights to acquire shares of the stock of AmPaM referred to in the
preceding sentence will be as described in the Private Placement Memorandum.
6.5 SUBSIDIARIES. As of the date of this Agreement, AmPaM has no
subsidiaries. As of the date of this Agreement, AmPaM does not own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity, and AmPaM is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. The historical financial statements of AmPaM
included in the Private Placement Memorandum (the "AmPaM Financial Statements")
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (except as noted thereon), and the balance
sheet included therein presents fairly the financial position of AmPaM as of its
date. Management of AmPaM believes that the assumptions underlying the pro forma
adjustments utilized in the preparation of such pro forma financial statements
are reasonable, and such pro forma adjustments have been properly applied to the
historical financial amounts in the compilation of the pro forma financial
statements. Based on the representations in Section 5.9 of this Agreement and in
Section 5.9 of each of the Other Agreements, the pro forma financial information
of AmPaM fairly presents the pro forma financial position, results of operations
and other information purported to be shown therein at the respective dates and
for the respective periods specified.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth in the Private
Placement Memorandum, as of the date of this Agreement, AmPaM has no material
liabilities or obligations of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise, other than
liabilities incurred in the ordinary course of business and consistent with past
practices, liabilities or obligations set forth in or contemplated by this
Agreement and the Other
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Agreements and except for fees incurred in connection with the transactions
contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth in
the Private Placement Memorandum, AmPaM is not in violation of any law or
regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and its stockholders and, there are no claims,
actions, suits or proceedings, pending or, to the knowledge of AmPaM, threatened
against or affecting, AmPaM, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over it and no notice of any
claim, action, suit or proceeding, whether pending or threatened, has been
received. AmPaM has conducted and is conducting its businesses in compliance in
all material respects with the requirements, standards, criteria and conditions
set forth in applicable Federal, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations and is not in
violation, in any material respect, of any of the foregoing.
6.9 NO VIOLATIONS. (a) AmPaM is not in violation of any AmPaM Charter
Document. AmPaM is not in default under any lease, instrument, agreement,
license, or permit to which AmPaM is a party or by which AmPaM or any of its
properties are bound (collectively, the "AmPaM Documents").
(b) The execution and delivery of this Agreement by AmPaM do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of AmPaM under any of the
terms, conditions or provisions of (i) the AmPaM Charter Documents, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to
AmPaM or any of its properties or assets, or (iii) any AmPaM Document; provided
that the representations and warranties specified in clause (ii) of this
sentence (A) are based on information in the investor questionnaires and related
purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements and
(B) are subject to the accuracy and completeness of the information contained in
such investor questionnaires and related purchaser representative questionnaires
and the truthfulness of such representations and warranties. The consummation by
AmPaM of the transactions contemplated hereby will not result in any material
violation, conflict, breach, right of termination or acceleration or creation of
liens under any of the terms, conditions or provisions of the items described in
clauses (i) through (iii) of the preceding sentence, subject, in the case of the
terms, conditions or provisions of the items described in clause (iii) above, to
obtaining (prior to the Closing Date) (x) such approvals, consents or orders
from the SEC, state blue sky authorities and
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authorities administering the Hart-Scott Act and (y) such other consents as may
be required from commercial lenders, lessors or other third parties which are
listed on Schedule 6.9.
(c) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act and filings with various state securities authorities in connection
with the transactions contemplated by this Agreement, and (ii) any filings
required to be made under the Hart-Scott Act in connection with the transactions
contemplated by this Agreement, none of the AmPaM Documents requires notice to,
or the consent or approval of, any governmental agency or other third party with
respect to the consummation by AmPaM of any of the transactions contemplated
hereby in order to remain in full force and effect, and consummation by AmPaM of
the transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any material right or
benefit under the AmPaM Documents; provided that the representations and
warranties specified in clauses (i) and (ii) of this sentence (A) are based on
information in the investor questionnaires and related purchaser representative
questionnaires executed and delivered by the Stockholders of the Company and the
stockholders of the Other Founding Companies, the representations and warranties
of the Stockholders set forth in Section 16 hereof and the representations and
warranties of the stockholders of the Other Founding Companies set forth in
Section 16 of the Other Agreements and (B) are subject to the accuracy and
completeness of the information contained in such investor questionnaires and
related purchaser representative questionnaires and the truthfulness of such
representations and warranties.
(d) Except for (i) any filings with the SEC pursuant to the 1933 Act
and filings with various state securities authorities in connection with the
transactions contemplated by this Agreement and (ii) any filings required under
the Hart-Scott Act in connection with the transactions contemplated by this
Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by AmPaM
or the consummation by AmPaM of the transactions contemplated hereby; provided
that the representations and warranties specified in clauses (i) and (ii) of
this sentence (A) are based on information in the investor questionnaires and
related purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements and
(B) are subject to the accuracy and completeness of the information contained in
such investor questionnaires and related purchaser representative questionnaires
and the truthfulness of such representations and warranties.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by AmPaM and the performance of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of AmPaM and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of AmPaM, enforceable
against AmPaM in accordance with its terms.
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6.11 AmPaM STOCK AND AmPam SERIES A PREFERRED STOCK. At the time of
issuance thereof and delivery to the Stockholders, (a) the AmPaM Stock and AmPaM
Series A Preferred Stock to be delivered to the Stockholders pursuant to this
Agreement will constitute valid, duly authorized and legally issued shares of
AmPaM, fully paid and nonassessable, and (b) with the exception of restrictions
upon resale set forth in Sections 15 and 16 hereof, the AmPaM Stock will be
identical in all substantive respects (which do not include the form of
certificate upon which it is printed or the presence or absence of a CUSIP
number on any such certificate) to the AmPaM Stock issued and outstanding as of
the date hereof, other than the Restricted Common Stock. The AmPaM Stock and
AmPaM Series A Preferred Stock issued and delivered to the Stockholders shall at
the time of such issuance and delivery be free and clear of any liens, claims or
encumbrances of any kind or character. The offer and sale of the shares of AmPaM
Stock and AmPaM Series A Preferred Stock to be issued to the Stockholders
pursuant to this Agreement are not required to be registered under the 1933 Act;
provided that the representations and warranties specified in this sentence (A)
are based on information in the investor questionnaires and related purchaser
representative questionnaires executed and delivered by the Stockholders of the
Company and the stockholders of the Other Founding Companies, the
representations and warranties of the Stockholders set forth in Section 16
hereof and the representations and warranties of the stockholders of the Other
Founding Companies set forth in Section 16 of the Other Agreements and (B) are
subject to the accuracy and completeness of the information contained in such
investor questionnaires and related purchaser representative questionnaires and
the truthfulness of such representations and warranties.
6.12 AmPaM NOTES. The AmPaM Notes have been duly authorized and, at the
Closing Date, will have been duly executed by AmPaM and, when authenticated,
issued and delivered, will constitute valid and binding obligations of AmPaM,
enforceable against AmPaM in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers) reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
6.13 NO SIDE AGREEMENTS. AmPaM has not entered into any agreement with
any of the Founding Companies or any of the Stockholders of the Founding
Companies other than this Agreement, the Other Agreements, the agreements
referred to in this Agreement and in the Other Agreements and the Private
Placement Memorandum. AmPaM has not entered into any agreements providing for
rights to register shares of AmPaM Stock, AmPaM Series A Preferred Stock or
AmPaM Notes under the 1933 Act except as provided in Section 17 of this
Agreement, in Section 17 of the Other Agreements and in an agreement with
Sterling City Capital, LLC, its Affiliates and officers and directors of AmPaM
having terms substantially similar to those set forth in Section 17 hereof.
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6.14 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. AmPaM was formed in
June 1998 and has conducted no material business since the date of its inception
except for activities related to the transaction contemplated by this Agreement,
the Other Agreements and the Private Placement Memorandum. Except as described
in the Private Placement Memorandum, as of the date of this Agreement, AmPaM
does not own any real property or any material personal property and is not a
party to any other material agreement other than this Agreement, the Other
Agreements and the agreements contemplated hereby and thereby.
6.15 RELATIONS WITH GOVERNMENTS. Neither AmPaM nor any of its
directors, officers or Affiliates has given or offered anything of value to any
government official, political party or candidate for government office, nor has
AmPaM, any of its directors, officers or Affiliates of any of them otherwise
taken any action, which would cause AmPaM to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any law of similar effect.
6.16 DISCLOSURE. The Private Placement Memorandum delivered to the
Company and the Stockholders does not as of the date hereof contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing does not apply to
statements contained in or omitted from any of such documents made or omitted in
reliance upon, and in conformity with, information furnished to AmPaM by the
Company or the Stockholders in writing specifically for inclusion in the Private
Placement Memorandum.
6.17 OTHER AGREEMENTS. The Other Agreements have been duly authorized,
executed and delivered by AmPaM and constitute the legal, valid and binding
obligation of AmPaM enforceable against AmPaM in accordance with their
respective terms. The terms and conditions of the Other Agreements (excluding
the terms relating to the consideration payable by AmPaM thereunder) are
identical in all material respects to the terms and conditions in this
Agreement.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE; TRANSFER OF REAL ESTATE.
(a) Between the date of this Agreement and the Closing Date, the
Company will afford to the officers and authorized representatives of AmPaM
reasonable access during normal business hours to all of the Company's sites,
properties, books and records and will furnish AmPaM with such additional
financial and operating data and other information as to the business and
properties of the Company as AmPaM may from time to time reasonably request. The
Company will cooperate with AmPaM, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. AmPaM,
the Stockholders and the Company will treat all information obtained in
connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to the Company as confidential
in accordance with the provisions of Section 14 hereof.
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(b) Between the date of this Agreement and the Closing Date, AmPaM will
afford to the officers and authorized representatives of the Company access to
all of AmPaM's sites, properties, books and records and will furnish the Company
with such additional financial and operating data and other information as to
the business and properties of AmPaM and the Other Founding Companies as the
Company may from time to time reasonably request. AmPaM will cooperate with the
Company, its representatives, auditors and counsel in the preparation of any
documents or other material which may be required in connection with any
documents or materials required by this Agreement. The Company will cause all
information obtained pursuant to this Section 7.1(b) or obtained in connection
with the negotiation and performance of this Agreement to be treated as
confidential in accordance with the provisions of Section 14 hereof.
(c) Except as set forth on Schedule 7.1, any real property owned by the
Company will be sold or distributed by the Company on terms mutually acceptable
to AmPaM and the Company and leased back by the Company on terms no less
favorable to the Company than those available from an unaffiliated party and
otherwise reasonably acceptable to AmPaM at or prior to the Closing Date.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Closing Date, the Company will, except as set forth on
Schedule 7.2:
(i) carry on its businesses in the Ordinary Course of Business
and not introduce any material new method of management, operation or
accounting;
(ii) use all commercially reasonable efforts to maintain its
properties and facilities, including those held under leases, in as
good working order and condition as at present, ordinary wear and tear,
depreciation and insured losses excepted;
(iii) perform in all material respects all of its obligations
under all Material Documents relating to or affecting its respective
assets, properties or rights;
(iv) use its commercially reasonable efforts to keep in full
force and effect present insurance policies or other comparable
insurance coverage;
(v) use its commercially reasonable efforts to maintain and
preserve its business organization intact, retain its respective
present key employees and maintain its relationships with suppliers,
customers and others having business relations with the Company;
(vi) use its commercially reasonable efforts to maintain
compliance with all material permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory
agencies and similar governmental authorities;
(vii) maintain present debt and lease instruments in
accordance with their terms and not enter into new or amended debt or
lease instruments without the knowledge and
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consent of AmPaM (which consent shall not be unreasonably withheld),
provided that debt and/or lease instruments may be replaced without the
consent of AmPaM if such replacement instruments are on terms at least
as favorable to the Company as the instruments being replaced;
(viii) maintain or reduce present salaries and commission
levels for all officers, directors, employees and agents except for
ordinary and customary bonus and salary increases for employees in
accordance with past practices; and
(ix) use commercially reasonable efforts to cause the actual
amount of its Current Assets (as defined in Annex I hereto) to be not
less than 150% of the actual amount of its Current Liabilities (as
defined in Annex I hereto).
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between
the date hereof and the Closing Date, the Company will not, without prior
written consent of AmPaM:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of any kind
other than in connection with the exercise of options or warrants
listed in Schedule 5.4;
(iii) except as permitted pursuant to the terms and conditions
for distributions described in Annex I, declare or pay any dividend, or
make any distribution in respect of its stock whether now or hereafter
outstanding, or purchase, redeem or otherwise acquire or retire for
value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree
to incur any liability or make any capital expenditures, except if it
is in the Ordinary Course of Business or involves an amount not in
excess of three percent (3%) of the Company's gross revenues for fiscal
1997;
(v) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired, except (1) with respect to purchase money
liens incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of three percent (3%) of the Company's
gross revenues for fiscal 1997 necessary or desirable for the conduct
of the businesses of the Company, (2) (A) liens for taxes either not
yet due or being contested in good faith and by appropriate proceedings
(and for which contested taxes adequate reserves have been established
and are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the Ordinary
Course of Business (the liens set forth in clause (2) being referred to
herein as "Statutory Liens"), or (3) liens set forth on Schedule 5.10
and/or Schedule 5.15 hereto;
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(vi) sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the Ordinary Course of Business and
other than distributions of real estate and other assets as permitted
in this Agreement (including Annex I hereto);
(vii) negotiate for the acquisition of any business or the
start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate
with or into any other corporation;
(ix) waive any material rights or claims of the Company,
provided that the Company may negotiate and adjust bills and accounts
in the course of good faith disputes with customers in a manner
consistent with past practice;
(x) amend or terminate any Material Document except for the
termination of a Material Document in accordance with its terms without
any action on the part of the Company; or
(xi) enter into any other material transaction outside the
Ordinary Course of Business or any transaction prohibited hereunder.
7.4 NO SHOP. None of the Stockholders, the Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than AmPaM
or its authorized agents relating to, any acquisition or purchase of
all or a material amount of the assets of, or any equity interest in,
the Company or a merger, consolidation or business combination of the
Company.
7.5 AGREEMENTS. Except as disclosed on Schedule 7.5(a), the
Stockholders and the Company shall terminate (i) any stockholders agreements,
voting agreements, voting trusts, agreements providing for the grant by the
Company of any options, warrants and employment agreements between the Company
and any employee listed on Schedule 8.11 hereto and (ii) except as otherwise
provided in this Agreement, any existing agreement between the Company and any
Stockholder, on or prior to the Closing Date provided that nothing herein shall
prohibit or prevent the Company from paying (either prior to or on the Closing
Date) notes or other obligations from the Company to the Stockholders described
in Schedule 7.5(b) in accordance with the terms thereof.
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7.6 NOTIFICATION OF CERTAIN MATTERS. Each Stockholder and the Company
shall give prompt notice to AmPaM upon obtaining knowledge of (i) the occurrence
or non-occurrence of any event the occurrence or nonoccurrence of which would be
likely to cause any representation or warranty of the Company or such
Stockholder contained herein to be untrue or inaccurate in any material respect
at or prior to the Closing and (ii) any material failure of such Stockholder or
the Company to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such person hereunder. AmPaM shall give prompt
notice to the Company of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of AmPaM contained herein to be untrue or inaccurate
in any material respect at or prior to the Closing, (ii) any material failure of
AmPaM to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; (iii) any termination of any Other
Agreement for any reason; and (iv) the issuance by the SEC or any state
securities regulatory authority of any issuance of or threatened issuance of any
order challenging the availability of an exemption from registration or
suspending the qualification of any securities described in the Private
Placement Memorandum for sale in any jurisdiction. However, subject to the
provisions of Section 7.7, such notification shall not relieve either the
Company or such Stockholder of their respective obligations under this
Agreement. The delivery of any notice pursuant to this Section 7.6 shall not be
deemed to (i) modify the representations or warranties hereunder of the party
delivering such notice, which modification may only be made pursuant to Section
7.7, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
7.7 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until 24 hours prior to the
Closing Date to notify AmPaM with respect to any matter (i) hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules or (ii) which may
have been omitted from the Schedules previously provided by such party.
Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule
prepared by the Company may be made unless AmPaM consents to such amendment or
supplement; and provided further, that no amendment or supplement to a Schedule
prepared by AmPaM may be made unless the Stockholders consent to such amendment
or supplement. For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Sections 8.1 and
9.1 have been fulfilled, the Schedules hereto, as amended or supplemented with
the consent of AmPaM or the Stockholders, as the case may be, as provided above,
shall be deemed to be the Schedules to this Agreement.
7.8 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
appropriate to carry out the transactions contemplated hereby and to cause the
conditions to the Closing Date to be satisfied as promptly as practicable.
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7.9 AUTHORIZED CAPITAL. Prior to the Closing Date, AmPaM shall maintain
its authorized capital stock as set forth in the Private Placement Memorandum.
7.10 COMPLIANCE WITH THE HART-SCOTT ACT. All parties to this Agreement
hereby recognize that one or more filings under the Hart-Scott Act may be
required in connection with the transactions contemplated herein. If it is
determined by the parties to this Agreement that filings under the Hart-Scott
Act are required, then: (i) each of the parties hereto agrees to cooperate and
use its best efforts to comply with the Hart-Scott Act and (ii) such compliance
by the Stockholders and the parties agree to cooperate and use their best
efforts to cause all filings required under the Hart- Scott Act to be made. If
filings under the Hart-Scott Act are required, the costs and expenses thereof
(including filing fees) shall be borne by AmPaM.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of the Stockholders and the Company with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions. As of
the Closing Date, if any such applicable conditions have not been satisfied, any
one or more of the Stockholders who would be entitled to receive a majority of
the Aggregate Consideration (as defined herein) received by all Stockholders
specified in Section I of Annex I to this Agreement if the transactions
contemplated hereby were consummated shall have the right to waive any condition
not so satisfied. Any act or action of the Stockholders in consummating the
Closing or delivering the certificates representing Company Stock as of the
Closing Date shall constitute a waiver of any conditions not so satisfied.
However, no such waiver shall be deemed to affect the survival of the
representations and warranties of AmPaM contained in Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of AmPaM contained in Section 6 shall be true and
correct as of the Closing Date as though such representations and warranties had
been made as of that time; all of the terms, covenants and conditions of this
Agreement to be complied with and performed by AmPaM on or before the Closing
Date shall have been duly complied with and performed in all material respects;
and certificates to the foregoing effect dated the Closing Date and signed by
the President or any Vice President of AmPaM shall have been delivered to the
Stockholders.
8.2 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of the Company or the Stockholders and that are
required to carry out this Agreement or incidental hereto shall be reasonably
satisfactory to the Company, the Stockholders and their counsel.
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8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the purchase and sale of the Company Stock.
8.4 OPINION OF COUNSEL. The Company shall have received opinions from
counsel for AmPaM, dated the Closing Date, addressed to the Company and the
Stockholders in the form annexed hereto as Annex III.
8.5 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule 6.9
shall have been obtained; and no action or proceeding shall have been instituted
or threatened to restrain or prohibit the purchase and sale of the Company Stock
and no governmental agency or body shall have taken any other action or made any
request of Company as a result of which Company deems it inadvisable to proceed
with the transactions hereunder.
8.6 GOOD STANDING CERTIFICATES. AmPaM shall have delivered to the
Company a certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Delaware Secretary of State and in each state
in which AmPaM is authorized to do business, showing that AmPaM is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for AmPaM for all periods prior to the Closing have
been filed and paid.
8.7 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred which would constitute a Material Adverse Change with respect to AmPaM
from the date of the Private Placement Memorandum.
8.8 SECRETARY'S CERTIFICATE. The Company shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of AmPaM, certifying the truth and correctness of attached copies of AmPaM's
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and, if required,
the stockholders of AmPaM approving AmPaM's entering into this Agreement and the
Other Agreements and the consummation of the transactions contemplated hereby
and thereby.
8.9 TAX MATTERS. The Stockholders shall have received an opinion of
Andrews & Kurth L.L.P., in substantially the form of Annex IV hereto, that the
AmPaM Plan of Organization will qualify as a tax-free transfer of property under
Section 351 of the Code and that the Stockholders will not recognize gain to the
extent the Stockholders exchange Company Stock for AmPaM Stock or AmPaM Series A
Preferred Stock (but not cash or other property) pursuant to this Agreement in
connection with the AmPaM Plan of Organization.
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8.10 OTHER FOUNDING COMPANIES. The transactions contemplated by the
Other Agreements are consummated simultaneously with the consummation of the
transactions contemplated by this Agreement.
8.11 COMPANY RELEASE OF STOCKHOLDERS. The Company shall have delivered
to the Stockholders an instrument dated the Closing Date, in form reasonably
satisfactory to AmPaM and the Stockholders, which shall be effective only upon
the occurrence of the Closing Date, releasing the Stockholders from (i) any and
all claims of the Company against the Stockholders, known and unknown, and (ii)
obligations of the Stockholders to the Company, except for (x) items
specifically identified on Schedule 5.10(a) and Schedule 5.15(b) as being claims
of or obligations to the Company and (y) continuing obligations to the Company
relating to their employment by the Company pursuant to any employment agreement
entered into pursuant to Section 8.11 hereof.
8.12 STERLING CITY CAPITAL TRANSFER RESTRICTIONS. Sterling City
Capital, LLC and each of its Affiliates which owns AmPaM Stock shall have
entered into an agreement with AmPaM containing substantially the same terms and
conditions as are contained in Section 15 and Section 17.
8.13 ELECTION OF CHIEF EXECUTIVE OFFICER. AmPaM shall have taken all
corporate action necessary to elect Robert A. Christianson as Chief Executive
Officer of AmPaM effective immediately following the Closing Date.
8.14 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto as
payable to the Stockholders upon the Closing and (ii) the aggregate cash amounts
specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AMPAM
The obligations of AmPaM with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. As of the Closing Date, if any
such conditions have not been satisfied, AmPaM shall have the right to terminate
this Agreement, or waive any such condition, but no such waiver shall be deemed
to affect the survival of the representations and warranties contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE AND OBLIGATIONS. All
the representations and warranties of the Stockholders and the Company contained
in this Agreement shall be true and correct as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date; all of the terms, covenants and conditions of this Agreement to be
complied with or performed by the Stockholders and the Company on or before
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the Closing Date shall have been duly performed or complied with in all material
respects; and the Stockholders shall have delivered to AmPaM certificates dated
the Closing Date and signed by them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the purchase and sale of the Company Stock.
9.3 SECRETARY'S CERTIFICATE. AmPaM shall have received a certificate,
dated the Closing Date and signed by the secretary of the Company, certifying
the truth and correctness of attached copies of the Company's Articles or
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and the
Stockholders approving the execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby.
9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Company
to conduct its business.
9.5 STOCKHOLDERS' RELEASE. The Stockholders shall have delivered to
AmPaM an instrument dated the Closing Date which shall be effective only upon
the occurrence of the Closing releasing the Company and AmPaM from (i) any and
all claims of the Stockholders against the Company and AmPaM and (ii)
obligations of the Company and AmPaM to the Stockholders, except for (A) items
specifically identified on Schedule 5.31 as being claims of or obligations to
the Stockholders, (B) continuing obligations to Stockholders relating to their
employment by the Company pursuant to employment agreements entered into as
specified in Section 8.11 hereof, (C) obligations arising under this Agreement
or the transactions contemplated hereby and (D) claims of Stockholders against
the Company for unreimbursed business expenses incurred by the Stockholders on
behalf of the Company (other than expenses related to the transactions
contemplated by this Agreement) prior to the Closing Date or unreimbursed
medical expenses of the Stockholders incurred prior to the Closing Date which
are covered by the Company's existing health insurance coverage. In the event
that the Closing Date does not occur, then the release instrument referenced
herein shall be void and of no further force or effect.
9.6 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of AmPaM and that are required to carry out the
transactions contemplated by this Agreement or incidental hereto shall have been
reasonably approved by counsel to AmPaM.
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9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the Company and the Stockholders
(and between the Company and entities controlled by the Stockholders) specified
on Schedule 5.31 shall have been terminated effective prior to or as of the
Closing Date without any payment being made by the Company other than payments
made for services rendered, materials provided or other benefits provided to the
Company prior to the Closing Date pursuant to the terms of such agreements as in
effect as of the date of this Agreement.
9.8 OPINION OF COUNSEL. AmPaM shall have received opinions from counsel
to the Company and the Stockholders, dated the Closing Date, substantially in
the form annexed hereto as Annex V-1 and Annex V-2.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule
5.23(b)(2) shall have been obtained; and no action or proceeding shall have been
instituted or threatened to restrain or prohibit the purchase and sale of the
Company Stock and no governmental agency or body shall have taken any other
action or made any request of AmPaM as a result of which AmPaM deems it
inadvisable to proceed with the transactions hereunder.
9.10 GOOD STANDING CERTIFICATES. The Company shall have delivered to
AmPaM a certificate, dated as of a date no earlier than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by AmPaM, in each state in
which the Company is authorized to do business, showing the Company is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the Company for all periods prior to the
Closing have been filed and paid.
9.11 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto as
payable to the Stockholders upon the Closing and (ii) the aggregate cash amounts
specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9.12 FIRPTA CERTIFICATE. Each Stockholder shall have delivered to AmPaM
a certificate to the effect that he is not a foreign person pursuant to Section
1.1445-2(b) of the Treasury regulations.
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9.13 RESIGNATIONS OF DIRECTORS AND OFFICERS. Any directors of the
Company, other than those identified on Schedule 2.1, shall have resigned as
directors of the Company. Any officers of the Company, other than those
identified on Schedule 2.2, shall have resigned as officers of the Company.
10. COVENANTS OF AMPAM AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. AmPaM
shall use reasonable efforts to have the Stockholders released from any and all
guarantees of the Company's indebtedness, including bond obligations, identified
on Schedule 10.1. Prior to obtaining the release of such guarantees, AmPaM shall
provide its guarantee of such indebtedness to the lenders thereof. In the event
that AmPaM cannot obtain such releases from the lenders of any such guaranteed
indebtedness identified on Schedule 10.1 on or prior to 90 days subsequent to
the Closing Date, AmPaM shall promptly pay off or otherwise refinance or retire
such indebtedness such that the Stockholders' personal liability shall be
released. AmPaM will indemnify the Stockholders against any loss or damage
suffered as a result of the personal guarantees.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement, after the Closing Date, AmPaM shall not and
shall not permit any of its Subsidiaries to undertake any act that would
jeopardize the tax-free status of the exchange of Company Stock for AmPaM Stock
and AmPaM Series A Preferred Stock (but not cash or other property), including
without limitation:
(a) the retirement or reacquisition, directly or indirectly,
of all or part of the AmPaM Stock or AmPaM Series A Preferred Stock issued in
connection with the transactions contemplated hereby; or
(b) the entering into of financial arrangements for the
benefit of the Stockholders other than as described in the Private Placement
Memorandum or as described in this Agreement.
10.3 PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES.
(a) The Company, if possible, or otherwise the Stockholders
shall file or cause to be filed all income Tax Returns (federal, state, local or
otherwise) of any Acquired Party for all taxable periods that end on or before
the Closing Date, and shall permit AmPaM to review all such Tax Returns prior to
such filings. Unless the Company is a C corporation, the Stockholders shall pay
or cause to be paid all income Tax liabilities (in excess of all amounts already
paid with respect thereto or properly accrued or reserved with respect thereto
on the Financial Statements) with respect to the Company's operations for all
periods through and including the Closing Date.
(b) AmPaM shall file or cause to be filed all separate Returns
of, or that include, any Acquired Party for all taxable periods ending after the
Closing Date.
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(c) Unless required by applicable law, regulations or
government proceedings, AmPaM shall not take any action, including any amendment
of a Tax Return of any Acquired Party, if such action would result in additional
Tax liabilities payable by any of the Stockholders for periods ending on or
prior to the Closing Date.
(d) Each party hereto shall, and shall cause its subsidiaries
and Affiliates to, provide to each of the other parties hereto such cooperation
and information as any of them reasonably may request in filing any Return,
amended Return or claim for refund, determining a liability for Taxes or a right
to refund of Taxes or in conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of all
relevant portions of relevant Returns, together with relevant accompanying
schedules and relevant work papers, relevant documents relating to rulings or
other determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which such party may possess. Each party
shall make its employees reasonably available on a mutually convenient basis at
its cost to provide explanation of any documents or information so provided.
Subject to the preceding sentence, each party required to file Returns pursuant
to this Agreement shall bear all costs of filing such Returns.
(e) Each of the Company, AmPaM and each Stockholder shall
comply with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as a tax-free
contribution under Section 351(a) of the Code subject to gain, if any,
recognized on the receipt of cash or other property under Section 351(b) of the
Code.
10.4 DIRECTORS. The persons named in the Private Placement Memorandum
shall be appointed as directors and elected as officers of AmPaM, as and to the
extent set forth in the Private Placement Memorandum, promptly following the
Closing Date; provided, however, that the parties hereto acknowledge that if the
Company consummates an IPO, the persons who will serve as directors and
executive officers of AmPaM will be adjusted as appropriate for a publicly
traded entity, with any such changes being subject to the approval of the
majority of the Board of Directors of AmPaM.
10.5 LEGAL OPINIONS. If required by the lenders pursuant to the terms
of any agreements related to financing of the cash amounts referred to in
Section 9.11 hereof, the Company shall cause its counsel to deliver to such
lenders, at the Closing, an opinion of counsel in substantially the form
attached hereto as Annex V.
11. INDEMNIFICATION
The Stockholders and AmPaM each make the following covenants that are
applicable to them, respectively:
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11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS.
(a) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement until the applicable Expiration Date (as defined in
the introductory paragraph to Section 5(A)), provided that for purposes of
clause (iii) below, the applicable Expiration Date shall be the date on which
the applicable statute of limitations expires), from and against all claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by AmPaM as a result of
or arising from (i) any breach of the representations and warranties of the
Company set forth herein or on the schedules attached hereto or certificates
delivered pursuant to this Agreement, (ii) any breach of any covenant or
agreement on the part of the Company under this Agreement, or (iii) any
liability under the 1933 Act or any Federal or state securities law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating solely to the
Company which was based upon information provided to AmPaM or its counsel in
writing by the Company specifically for inclusion in the Private Placement
Memorandum and is contained in the Private Placement Memorandum, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
Company required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that no Stockholder shall be liable
for any indemnification obligation pursuant to this Section 11.1 in excess of
such Stockholder's pro rata share thereof determined by reference to the
aggregate value of the Base Cash Amount (as defined in Annex I of this
Agreement), the principal amount of AmPaM Notes, the shares of AmPaM Series A
Preferred Stock (valued at a stated value of $13.00 per share) and the shares of
AmPaM Stock (valued at a price of $13.00 per share) received by such Stockholder
pursuant to Section I.A. of Annex I hereto (without giving effect to the
adjustments provided in Sections I.B. and I.C. thereof) (giving effect to the
value of such AmPaM Stock and such AmPaM Series A Preferred Stock and without
giving effect to such adjustments, collectively, the "Aggregate Consideration")
such Stockholder would receive pursuant to Section I of Annex I of this
Agreement if the transactions contemplated hereby were consummated in relation
to the total Aggregate Consideration all Stockholders would receive pursuant to
Section I of Annex I of this Agreement if the transactions contemplated hereby
were consummated.
(b) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by AmPaM as a result of or arising from (i)
any breach of the representations and warranties of such Stockholder set forth
in Section 5(B) hereof, (ii) any breach of any covenant or agreement on the part
of such Stockholder under this Agreement, or (iii) any liability under the 1933
Act or any Federal or state securities law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating solely to such Stockholder which was based
upon information provided to AmPaM or
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its counsel in writing by such Stockholder specifically for inclusion in the
Private Placement Memorandum and is contained in the Private Placement
Memorandum, or any amendment thereof or supplement thereto, or arising out of or
based upon any omission or alleged omission to state therein a material fact
relating solely to such Stockholder required to be stated therein or necessary
to make the statements therein in light of the circumstances in which such
statements were made not misleading.
(c) AmPaM acknowledges and agrees that other than the representations
and warranties of the Company or the Stockholders specifically contained in this
Agreement, there are no representations or warranties of the Company or the
Stockholders, either express or implied, with respect to the transactions
contemplated by this Agreement, the Company or its assets, liabilities and
business.
11.2 INDEMNIFICATION BY AMPAM. AmPaM covenants and agrees that it will
indemnify, defend, protect and hold harmless the Company and the Stockholders at
all times from and after the date of this Agreement until the applicable
Expiration Date (as defined in the introductory paragraph of Section 6, provided
that for purposes of clause (iii) below, the applicable Expiration Date shall be
the date on which the applicable statute of limitations expires), from and
against all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
Company or the Stockholders as a result of or arising from (i) any breach by
AmPaM of its representations and warranties set forth herein or on the schedules
attached hereto or certificates delivered pursuant to this Agreement, (ii) any
breach of any agreement on the part of AmPaM under this Agreement; or (iii) any
liability under the 1933 Act or any Federal or state securities law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Private Placement Memorandum, or any amendment thereof or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except to the extent such is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission, made
therein in reliance upon, and in conformity with, the representations and
warranties of the Company or the Stockholders specifically contained in this
Agreement or other information furnished to AmPaM by the Company or the
Stockholders in writing specifically for inclusion therein.
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel reasonably
satisfactory to the
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Indemnified Party, any such matter so long as the Indemnifying Party pursues the
same in good faith and diligently, provided that the Indemnifying Party shall
not settle any criminal proceeding without the written consent of the
Indemnified Party. If the Indemnifying Party undertakes to defend or settle, it
shall promptly notify the Indemnified Party of its intention to do so, and the
Indemnified Party shall cooperate with the Indemnifying Party and its counsel in
the defense thereof and in any settlement thereof. Such cooperation shall
include, but shall not be limited to, furnishing the Indemnifying Party with any
books, records or information reasonably requested by the Indemnifying Party
that are in the Indemnified Party's possession or control. All Indemnified
Parties shall use the same counsel, which shall be the counsel selected by
Indemnifying Party, provided that if counsel to the Indemnifying Party shall
have a conflict of interest or a conflict of interest is reasonably likely to
arise that prevents counsel for the Indemnifying Party from representing such
Indemnified Party, Indemnified Party shall have the right to participate in such
matter through counsel of its own choosing and Indemnifying Party will reimburse
the Indemnified Party for the reasonable expenses of its counsel. After the
Indemnifying Party has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except (i) as set forth in the preceding sentence and (ii) to the
extent such participation is requested by the Indemnifying Party, in which event
the Indemnified Party shall be reimbursed by the Indemnifying Party for
reasonable additional legal expenses and out-of-pocket expenses. If the
Indemnifying Party desires to accept a final and complete settlement of any such
Third Person claim and the Indemnified Party refuses to consent to such
settlement, then the Indemnifying Party's liability under this Section with
respect to such Third Person claim shall be limited to the amount so offered in
settlement by said Third Person. Upon agreement as to such settlement between
said Third Person and the Indemnifying Party, the Indemnifying Party shall, in
exchange for a complete release from the Indemnified Party, promptly pay to the
Indemnified Party the amount agreed to in such settlement. If the Indemnifying
Party does not undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
defense, the Indemnified Party may undertake such defense through counsel of its
choice, at the cost and expense of the Indemnifying Party, and the Indemnified
Party may settle such matter, and the Indemnifying Party shall pay the
Indemnified Party for the settlement amount and any other liabilities or
expenses incurred by the Indemnified Party in connection therewith, provided,
however, that under no circumstances shall the Indemnified Party settle any
Third Person claim without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed. All settlements hereunder
shall effect a complete release of the Indemnified Party, unless the Indemnified
Party otherwise agrees in writing. With respect to any account, note or other
receivable as to which the Stockholders have paid in full any indemnification
obligation pursuant to this Section 11 as a result of a breach of the
representation and warranty made pursuant to Section 5.11 or as to which a claim
in respect thereof has been asserted pursuant to this Section 11 that has been
applied against the Indemnification Threshold with respect to the Stockholders
as a result of a breach of the representation and warranty made pursuant to
Section 5.11, AmPaM shall cause the Company to assign such account, note or
other receivable to
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the Stockholders. The parties hereto will make appropriate adjustments for
insurance proceeds in determining the amount of any indemnification obligation
under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section
11 shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party to this Agreement with respect to any
provision of this Agreement, provided that, nothing herein shall be construed to
limit the right of a party, in a proper case, to seek injunctive relief for a
breach of this Agreement. AmPaM hereby waives, to the fullest extent permitted
under applicable law, any and all other rights, claims and causes of action,
known or unknown, it or any indemnified person may have against the Company or
any Stockholder relating to this Agreement or the transactions pursuant to this
Agreement arising under or based upon any Federal, state, local or foreign
statute, law, rule, regulation or otherwise. Any indemnity payment under this
Section 11 shall be treated as an adjustment to the exchange consideration for
Tax purposes unless a final determination (which shall include the execution of
a Form 870-AD or successor form) with respect to the Indemnified Party or any of
its Affiliate causes any such payment not to be treated as an adjustment to the
exchange consideration for U.S. Federal income Tax purposes.
11.5 LIMITATIONS ON INDEMNIFICATION. (a) AmPaM shall not assert any
claim for indemnification under this Section 11 against the Stockholders until
such time as, and solely to the extent that, the aggregate of all claims which
AmPaM may have against the Stockholders shall exceed the greater of (a) 3.0% of
the sum of (i) the cash paid to the Stockholders pursuant to Section 1.2 plus
(ii) the value of the AmPaM Stock delivered to the Stockholders pursuant to
Section 1.2 (calculated as provided in this Section 11.5) plus (iii) the
principal amount of the AmPaM Notes delivered to the Stockholders pursuant to
Section 1.2 (iv) plus the value of the AmPaM Series A Preferred Stock delivered
to the Stockholders pursuant to Section 1.2 (calculated as provided in this
Section 11.5), or (b) $50,000 (the "Indemnification Threshold"). Stockholders
shall not assert any claim for indemnification hereunder against AmPaM until
such time as, and solely to the extent that, the aggregate of all claims which
Stockholders may have against AmPaM shall exceed $50,000; provided, however,
that this sentence shall not be applicable with respect of any failure by AmPaM
to (i) deliver the consideration specified in Annex I hereto on the Closing Date
upon the satisfaction, or waiver by AmPaM, of all conditions to the occurrence
of the Closing Date specified in Section 9 or (ii) comply with its obligations
pursuant to Section 10.1. After the $50,000 threshold for AmPaM (subject to the
proviso in the preceding sentence) or the Indemnification Threshold for a
Stockholder has been met, all claims must be made in $10,000 increments, which
claims may be cumulated in order to meet such $10,000 thresholds. For purposes
of this paragraph, the AmPaM Stock delivered to the Stockholders shall be valued
at $13.00 per share and the AmPaM Series A Preferred Stock delivered to the
Stockholders shall have a stated value of $13.00 per share.
(b) No person shall be entitled to indemnification under this Section
11 if and to the extent that such person's claim for indemnification is directly
or indirectly related to a breach by such person of any representation,
warranty, covenant or other agreement set forth in this Agreement.
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No claim for indemnification against the Stockholders shall limit, diminish or
change any obligation of AmPaM pursuant to Section 10.1 hereof.
(c) Notwithstanding any other term of this Agreement, no Stockholder
shall be liable under this Section 11 for an amount which exceeds eighty-five
percent (85%) of the amount of proceeds received by such Stockholder (valued as
of the Closing Date) in connection with the purchase and sale of the Company
Stock. For purposes of this paragraph, the AmPaM Stock shall be valued at $13.00
per share and the AmPaM Series A Preferred Stock delivered to the Stockholders
shall have a stated value of $13.00 per share.
(d) A Stockholder may pay any indemnification obligation under Section
11 by means of the payment of cash or a combination of the payment of cash, the
forgiveness of amounts owed pursuant to the AmPaM Notes and the delivery to
AmPaM of shares of AmPaM Stock or shares of AmPaM Series A Preferred Stock;
provided that the percentage of the indemnification obligation satisfied by
means of the delivery of shares of AmPaM Stock or shares of AmPaM Series A
Preferred Stock does not exceed the percentage of AmPaM Stock or shares of AmPaM
Series A Preferred Stock comprising the total consideration paid to such
Stockholder by AmPaM to such Stockholder pursuant to Annex I. For the purpose of
crediting Stockholders for payments made to AmPaM by means of delivery of shares
of AmPaM Stock or shares of AmPaM Series A Preferred Stock, the AmPaM Stock
shall be valued at $13.00 per share and the AmPaM Series A Preferred Stock
delivered to the Stockholders shall have a stated value of $13.00 per share.
(e) In determining the amount of any loss, liability or expense for
which any party is entitled to indemnification under this Agreement, the gross
amount thereof will be reduced by any correlative insurance proceeds or other
third party indemnity or reimbursement proceeds realized or to be realized by
such party (or, in the case of AmPaM, by AmPaM, the Company or any subsidiary of
AmPaM or the Company) and such correlative insurance proceeds or other third
party indemnity or reimbursement proceeds shall be net of any insurance premium
or other incremental cost or expense owed or payable to any third party which
becomes due as a result of such claim. AmPaM shall use commercially reasonable
efforts to pursue any available insurance coverage or other rights of indemnity
or reimbursement from third parties with respect to any such loss, liability or
expense.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) by mutual consent of AmPaM and the Stockholders;
(ii) by the Stockholders, if the transactions contemplated by
this Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by the Company
or the Stockholders prior to or on the Closing Date;
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(iii) by AmPaM, if the transactions contemplated by this
Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by AmPaM prior
to or on the Closing Date;
(iv) by the Stockholders, if a material breach or default
shall be made by AmPaM in the observance or in the due and timely
performance of any of the covenants or agreements contained herein
relating to AmPaM, and the curing of such default shall not have been
made (or in the reasonable judgment of such Stockholders cannot be
made) on or before the Closing Date;
(v) by AmPaM, if a material breach or default shall be made by
the Company or the Stockholders in the observance or in the due and
timely performance of any of the covenants or agreements contained
herein relating to the Company or the Stockholders, and the curing of
such default shall not have been made (or in the reasonable judgment of
AmPaM cannot be made) on or before the Closing Date;
(vi) by the Stockholders, if the conditions set forth in
Section 8 hereof have not been satisfied or waived as of the Closing
Date; or
(vii) by AmPaM, if the conditions set forth in Section 9
hereof have not been satisfied or waived as of the Closing Date.
12.2 PROCEDURE AND EFFECT OF TERMINATION. A determination to terminate
this Agreement by AmPaM pursuant to Section 12.1 shall be valid and effective
only if a written notice of termination, accompanied by a certified copy of
resolutions of the board of directors of AmPaM that evidence the authorization
of the officer of AmPaM to deliver a written notice of termination of this
Agreement pursuant to Section 12.1, is given to the Stockholders in the manner
specified for notices in this Agreement. A determination to terminate this
Agreement by the Stockholders pursuant to Section 12.1 shall be valid and
effective only if a written notice of termination, signed by Stockholders who
would be entitled to receive a majority of the shares of AmPaM Stock and AmPaM
Series A Preferred Stock specified in Section I of Annex I to this Agreement if
the transactions contemplated hereby were consummated, is given to AmPaM in the
manner specified for notices in this Agreement. Upon the giving of notice of
termination of this Agreement pursuant to Section 12.1 as specified in the
preceding sentence, this Agreement shall terminate, and the transactions
contemplated hereby shall be abandoned, without further action by any of the
parties hereto. Immediately upon any such termination, AmPaM shall deliver
written notice of such termination to the Other Founding Companies. If this
Agreement is terminated as provided in this Section 12, no party hereto shall
have any liability or further obligation hereunder to any other party, except as
provided in Section 14 and Section 18.6, provided, that, the termination of this
Agreement will in no way limit any obligation or liability of any party based on
or arising from a breach or default by such party with respect to any of its
representations, warranties, covenants or agreements
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contained in this Agreement including, but not limited to, legal and audit costs
and out of pocket expenses that occurred prior to such termination.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The Stockholders will not, without the
prior written consent of AmPaM, for a period of two (2) years following the
Closing Date for any reason whatsoever, directly or indirectly, for themselves
or on behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, whether paid or unpaid, in any plumbing, piping,
mechanical, heating, ventilation or air conditioning contracting,
installation or services business or operation, whether for
residential, commercial, industrial or governmental customers, or any
ancillary contracting, installation or services business directly
related thereto (such business and operations referred to herein as the
"Plumbing and Mechanical Business"), within 100 miles of where the
Company or any of its subsidiaries conducted business within two (2)
years prior to the Closing Date (the "Territory");
(ii) call upon any person who is, at the Closing Date, within
the Territory, an employee of AmPaM or any subsidiary thereof for the
purpose or with the intent of enticing such employee away from or out
of the employ of AmPaM or any subsidiary thereof;
(iii) call upon any person or entity which is, at the Closing
Date, or which has been within three (3) years prior to the Closing
Date, a customer of AmPaM or any subsidiary thereof, of the Company or
of any of the Other Founding Companies for the purpose of soliciting
customers, orders or contracts for any Plumbing and Mechanical Business
in direct competition with AmPaM within the Territory;
(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor in the Plumbing
and Mechanical Business, which candidate, to the actual knowledge of
such Stockholder after due inquiry, was called upon by AmPaM or any
subsidiary thereof or for which, to the actual knowledge of such
Stockholder after due inquiry, AmPaM or any subsidiary thereof made an
acquisition analysis, for the purpose of acquiring such entity; or
(v) disclose to any person, firm, partnership, corporation or
business the names or identities of any person, firm, partnership,
corporation or business which has been a customer of the Company or any
of its subsidiaries within the two (2) years prior to the Closing Date
for any reason or purpose whatsoever except to the extent that the
Company has in the past disclosed such information to the public for
valid business reasons; or
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(vi) testify as an expert witness in matters related to the
Plumbing and Mechanical Business for an adverse party to AmPaM, the
Company or any Other Founding Companies in litigation.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Stockholder from acquiring as a passive investment (i) not more
than one percent (1%) of the capital stock of a competing business whose stock
is traded on a national securities exchange, the NASDAQ Stock Market or
over-the-counter, or (ii) not more than five percent (5%) of the capital stock
of a competing business whose stock is not publicly traded if the Board of
Directors of AmPaM consents to such acquisition. In addition, the provisions of
clause (i) above shall not apply to George Christianson with respect to the
heating, ventilation and air conditioning installation and service business.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to
AmPaM as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to AmPaM for which it
would have no other adequate remedy, each Stockholder agrees that the foregoing
covenant may be enforced by AmPaM in the event of breach by such Stockholder, by
injunctions and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
Stockholders in light of the activities and business of AmPaM and the
subsidiaries thereof on the date of the execution of this Agreement and the
current plans of AmPaM as described in the Private Placement Memorandum.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against AmPaM or any subsidiary thereof, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by AmPaM of such
covenants. It is specifically agreed that the period of two (2) years stated at
the beginning of this Section 13, during which the agreements and covenants of
each Stockholder made in this Section 13 shall be effective, shall be computed
by excluding from such computation any time during which such Stockholder is
found to be in violation of any provision of this Section 13 as determined by
any of (i) a written agreement to such effect executed and delivered by AmPaM
and such Stockholder, (ii) a determination by an arbitration panel pursuant to
an arbitration conducted pursuant to Section 18.16 hereof or (iii) a
non-appealable judgment of a court of competent jurisdiction. The covenants
contained in Section 13 shall not be affected by any breach of any other
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provision hereof by any party hereto. The covenants contained in Section 13
shall have no effect if the transactions contemplated by this Agreement are not
consummated.
13.6 MATERIALITY. The Company and the Stockholders hereby agree that
the covenants contained in this Section 13 are a material and substantial part
of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company, the Other Founding Companies,
and/or AmPaM, such as operational policies, customer lists, and pricing and cost
policies that are valuable, special and unique assets of the Company's, the
Other Founding Companies' and/or AmPaM's respective businesses. The Stockholders
agree that they will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of AmPaM, (b) following the
Closing, such information may be disclosed by the Stockholders as is required in
the course of performing their duties for AmPaM or the Company and (c) to its
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.1; provided, however
that (i) the foregoing disclosure prohibition shall not apply in the event that
(i) such information becomes known to the public generally through no fault of
the Stockholders, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), the Stockholders shall, if
possible, give prior written notice thereof to AmPaM and provide AmPaM with the
opportunity to contest such disclosure, or (iii) the disclosing party reasonably
believes that such disclosure is required in connection with the defense of a
lawsuit against the disclosing party. In the event of a breach or threatened
breach by any of the Stockholders of the provisions of this Section, AmPaM shall
be entitled to an injunction restraining such Stockholders from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting AmPaM from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages. In the event the
transactions contemplated by this Agreement are not consummated, Stockholders
shall have none of the above-mentioned restrictions on their ability to
disseminate confidential information with respect to the Company.
14.2 AMPAM. AmPaM recognizes and acknowledges that it had in the past
and currently has access to certain confidential information of the Company,
such as operational policies, customer lists, and pricing and cost policies that
are valuable, special and unique assets of the Company's business. AmPaM agrees
that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
the Company, (b) to its counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
14.2, (c) to the Other Founding Companies and their representatives pursuant to
Section 7.1(b) of the Other Agreements and (d) to potential purchasers of
securities of AmPaM to the extent necessary or
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advisable in connection with the applicable securities laws; provided, however
that the foregoing disclosure prohibition shall not apply in the event that (A)
such information becomes known to the public generally through no fault of
AmPaM, (B) disclosure is required by law or the order of any governmental
authority under color of law, provided, that prior to disclosing any information
pursuant to this clause (B), AmPaM shall, if possible, give prior written notice
thereof to the Company and the Stockholders and provide the Company and the
Stockholders with the opportunity to contest such disclosure, or (C) the
disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party. In the
event of a breach or threatened breach by AmPaM of the provisions of this
Section 14.2, the Company and the Stockholders shall be entitled to an
injunction restraining AmPaM from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting the
Company and the Stockholders from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages. In the event the
transactions contemplated by this Agreement are not consummated for any reason,
AmPaM shall nevertheless remain subject to this Section 14.2, except that it
shall not be permitted to make any disclosures otherwise than pursuant to clause
(A), (B) or (C) above.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Sections 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14
shall survive the termination of this Agreement for a period of five years from
the Closing Date.
14.5 RETURN OF INFORMATION. If the transactions contemplated by this
Agreement are not consummated, AmPaM will return or destroy all confidential
information regarding the Company.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS RELATING TO AMPAM STOCK. For a period of two
years from the Closing Date or, in the event that the Company completes an IPO,
for a period through the second anniversary of the date of the closing of such
IPO (the "Restricted Period"), no Stockholder shall (i) sell, assign, exchange,
transfer, pledge, or otherwise dispose of any shares of AmPaM Stock (including
shares received in a conversion of the AmPaM Series A Preferred Stock), AmPaM
Series A Preferred Stock or AmPaM Notes received by the Stockholders pursuant to
this Agreement or any securities convertible into, exchangeable or exercisable
for any shares of AmPaM Stock, AmPaM Notes or AmPaM Series A Preferred Stock
received by such Stockholder pursuant to this Agreement, (ii) grant any option
to purchase, or otherwise enter into any contract to sell, assign, transfer,
pledge or otherwise dispose of, any shares of AmPaM Stock, AmPaM Notes or AmPaM
Series A Preferred Stock received by such Stockholder pursuant to this
Agreement, or (iii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or
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indirectly, the economic consequence of ownership of the AmPaM Stock, AmPaM
Notes or AmPaM Series A Preferred Stock, whether any such swap or transaction is
to be settled by delivery of shares of AmPaM Stock, AmPaM Notes or AmPaM Series
A Preferred Stock or other securities, by the delivery or payment of cash or
otherwise, except, in the case of clauses (i), (ii) or (iii) above, (A) as
otherwise agreed by AmPaM, (B) for the sale of shares of AmPaM Stock, and
entering into agreements relating to the sale of shares of AmPaM Stock, pursuant
to Section 17 hereof, (C) for transfers to (I) immediate family members of such
Stockholder who agree with AmPaM in writing to be bound by the restrictions set
forth in this Section 15.1, (II) trusts, limited partnerships or other estate
planning entities for the benefit of such Stockholder or family members of such
Stockholder which have agreed with AmPaM in writing, through action taken by the
trustees, partners or other persons having authority to bind the trust, limited
partnership or other estate planning entity, to be bound by the restrictions set
forth in this Section 15.1, (III) any charitable organization that qualifies for
receipt of charitable contributions under Section 170(c) of the Code which
agrees with AmPaM in writing to be bound by the restrictions set forth in this
Section 15.1, (D) for transfers of AmPaM Stock, AmPaM Notes or AmPaM Series A
Preferred Stock to AmPaM pursuant to Section 11.5(d), (E) for transfers to
another Stockholder, to another person or entity who receives shares of AmPaM
Stock or AmPaM Notes pursuant to the Other Agreements or to Sterling City
Capital LLC or any of its Affiliates provided that (1) such transaction is
exempt from the registration requirements of the 1933 Act as evidenced by the
delivery to AmPaM of an opinion of counsel in form and substance reasonably
satisfactory to AmPaM and (2) any such transferee agrees in writing to be bound
by the restrictions set forth in this Section 15.1, (F) transfers of shares of
AmPaM Stock, shares of AmPaM Notes or AmPaM Series A Preferred Stock, or grants
of options to purchase shares of AmPaM Stock, by such Stockholder to employees
of the Company of up to an aggregate of 15% of the shares of AmPaM Stock or
AmPaM Series A Preferred Stock received by such Stockholder pursuant to this
Agreement provided that (1) any such transaction is exempt from the registration
requirements of the 1933 Act as evidenced by the delivery to AmPaM of an opinion
of counsel in form and substance reasonably satisfactory to AmPaM and (2) any
such employee agrees with AmPaM in writing to be bound by the restrictions set
forth in this Section 15.1, (G) the sale by such Stockholder in an IPO of shares
of AmPaM Stock representing not more than 10% of the Aggregate Consideration in
cash; provided, however, that in no circumstance will a Stockholder be entitled
to sell shares of AmPaM Stock in an IPO to the extent that the sale of such
shares by such Stockholder would result in such Stockholder receiving in excess
of 45% of the Aggregate Consideration in cash; and, provided further, if AmPaM
is advised in writing in good faith by any managing underwriter of an
underwritten offering of the securities being offered pursuant to any
registration statement under Section 17.1 that the number of shares to be sold
by persons other than AmPaM is greater than the number of such shares which can
be offered without adversely affecting the success of the offering, AmPaM may
reduce pro rata (among the Stockholders and all other selling security holders
in the offering) the number of shares offered for the accounts of such persons
(based upon the number of shares held by such person) to a number deemed
satisfactory by such managing underwriter or (H) pledges of AmPaM Stock, AmPaM
Series A Preferred Stock or AmPaM Notes to secure a bonafide financing
arrangement with an unaffiliated financial institution; provided that the party
to whom such securities are pledged agrees to be bound by the transfer
restrictions set forth in this Agreement. During the Restricted Period, the
certificates evidencing the AmPaM Stock, AmPaM
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Notes or the AmPaM Series A Preferred Stock delivered to the Stockholders
pursuant to Section 3 of this Agreement will bear a legend substantially in the
form set forth below:
THE [SHARES/NOTES] REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE
TERMS OF THE ACQUISITION AGREEMENT PURSUANT TO WHICH SUCH SHARES WERE ISSUED,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, PLEDGE OR OTHER DISPOSITION PRIOR TO EXPIRATION
OF THE RESTRICTED PERIOD REFERRED TO IN THE ACQUISITION AGREEMENT EXCEPT IN
ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT. SUCH RESTRICTIONS ON TRANSFER ARE
SET FORTH IN AN ACQUISITION AGREEMENT, A COPY OF WHICH IS MAINTAINED AT THE
PRINCIPAL OFFICES OF THE ISSUER. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 TRANSFER RESTRICTIONS RELATING TO ADDITIONAL CONSIDERATION. No
Stockholder shall (i) sell, assign, exchange, transfer, pledge, or otherwise
dispose of any right to receive any consideration pursuant to Section II of
Annex I to this Agreement (the "Additional Consideration Right") or any
securities convertible into, exchangeable or exercisable for any Additional
Consideration Right, (ii) grant any option to purchase, or otherwise enter into
any contract to sell, assign, transfer, pledge or otherwise dispose of, any
Additional Consideration Right, or (iii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of any Additional
Consideration Right, whether any such swap or transaction is to be settled by
delivery of shares of AmPaM Stock or other securities, by the delivery or
payment of cash or otherwise.
16. FEDERAL SECURITIES ACT REPRESENTATIONS
16.1 COMPLIANCE WITH LAW. Each Stockholder acknowledges that the shares
of AmPaM Stock, the shares of AmPaM Series A Preferred Stock, the Additional
Consideration Right and any AmPaM Notes to be delivered to such Stockholder
pursuant to this Agreement have not been and will not be registered under the
1933 Act (except as provided in Section 17 hereof) and therefore may not be
sold, assigned, exchanged, transferred, pledged or otherwise disposed of without
compliance with the 1933 Act which, among other matters, would require
registration under the 1933 Act unless exemption from the registration
requirements is available for such transaction. The AmPaM Stock, the AmPaM
Series A Preferred Stock, the Additional Consideration Right and any AmPaM Notes
to be acquired by each Stockholder pursuant to this Agreement is being acquired
solely for such Stockholder's own account, for investment purposes only, and
with no present intention of selling, assigning, exchanging, transferring,
pledging, or otherwise disposing of it. Each Stockholder covenants, warrants and
represents that neither the shares of AmPaM Stock, the AmPaM Series A Preferred
Stock, the Additional Consideration Right nor any AmPaM Notes issued to such
Stockholder will be offered, sold, assigned, exchanged, pledged, transferred or
otherwise
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disposed of except after full compliance with all of the applicable provisions
of the 1933 Act and the rules and regulations of the SEC. All certificates
representing the AmPaM Stock or the AmPaM Series A Preferred Stock, shall bear
the following legend in addition to the legend required under Section 15 of this
Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each Stockholder is able to bear
the economic risk of an investment in the AmPaM Stock, the AmPaM Series A
Preferred Stock and AmPaM Notes to be acquired pursuant to this Agreement and
can afford to sustain a total loss of such investment. Each Stockholder has
substantial knowledge and experience in making investment decisions of this type
(or is relying on qualified purchaser representatives with such knowledge and
experience in making this decision), and is capable, either individually or with
such purchaser representatives, of evaluating the merits and risks of this
investment. Each Stockholder has had an adequate opportunity to ask questions
and receive answers from the officers of AmPaM concerning any and all matters
relating to the transactions described herein including, without limitation, the
background and experience of the current and proposed officers and directors of
AmPaM, the plans for the operations of the business of AmPaM, the business,
operations and financial condition of the Founding Companies other than the
Company, and any plans for additional acquisitions. Each Stockholder has asked
any and all questions of the nature described in the preceding sentence and all
questions have been answered to such Stockholder's satisfaction. Except as set
forth on Schedule 16.2, each Stockholder is an "accredited investor" as defined
in Rule 501(a) of the 1933 Act. Neither the foregoing nor any investigation made
by the Stockholders referred to above shall in any way affect the
representations, warranties, covenants and agreements of AmPaM made herein
except to the extent that AmPaM is relying upon the representations of the
Stockholders in Section 16.1 and in this Section 16.2 for purposes of AmPaM's
representations and warranties in Sections 6.9, 6.11, 6.15 and 6.17 hereof as
specified therein.
16.3 RELIANCE BY AMPAM. Each Stockholder acknowledges that AmPaM in
relying upon the representations and covenants of such Stockholder set forth in
Section 16.1 and Section 16.2 for purposes of compliance by AmPaM with Federal
and state securities laws related to the issuance of AmPaM Stock and the AmPaM
Series A Preferred Stock pursuant to this Agreement and the Other Agreements.
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17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. Whenever AmPaM proposes to register
any AmPaM Stock for its own or other's account under the 1933 Act for a public
offering, other than (i) any shelf or other registration of shares to be used as
consideration for acquisitions of additional businesses by AmPaM and (ii)
registrations relating to employee benefit plans, AmPaM shall give each of the
Stockholders prompt written notice of its intent to do so. Upon the written
request of any of the Stockholders given within 15 calendar days after receipt
of such notice, notwithstanding the provisions of Section 15 (except as
specified below with respect to an IPO), AmPaM shall cause to be included in
such registration all of the AmPaM Stock issued to such Stockholders pursuant to
this Agreement (including any stock issued as or issuable upon the conversion or
exchange of the AmPaM Series A Preferred Stock and any convertible security,
warrant, right or other security which is issued by AmPaM as a stock split,
dividend or other distribution with respect to, or in exchange for, or in
replacement of such AmPaM Stock or AmPaM Series A Preferred Stock) which any
such Stockholder requests, other than shares of AmPaM Stock which may then be
immediately sold under Rule 144(k) (or any similar or successor provision)
promulgated under the 1933 Act, and other than shares of AmPaM Stock that have
been theretofore sold by the Stockholder in accordance with the 1933 Act,
provided that AmPaM shall have the right to reduce pro rata the number of shares
of each selling Stockholder included in such registration to the extent that
inclusion of such shares would, in the written opinion of tax counsel to AmPaM
or its independent auditors, jeopardize the status of the transactions
contemplated hereby and by the Private Placement Memorandum as a tax-free
organization under Section 351 of the Code; provided, however, that with respect
to a proposal by AmPaM to register AmPaM Stock under the 1933 Act in connection
with an IPO, no Stockholder shall be permitted pursuant to this Section 17.1 to
have included in such registration more shares of AmPaM Stock than permitted to
be sold by such Stockholder pursuant to Section 15.1. In addition, if AmPaM is
advised in writing in good faith by any managing underwriter of an underwritten
offering of the securities being offered pursuant to any registration statement
under this Section 17.1 that the number of shares to be sold by persons other
than AmPaM is greater than the number of such shares which can be offered
without adversely affecting the success of the offering, AmPaM may reduce pro
rata (among the Stockholders and all other selling security holders in the
offering) the number of shares offered for the accounts of such persons (based
upon the number of shares held by such person) to a number deemed satisfactory
by such managing underwriter. If any Stockholder disapproves of the terms of the
underwriting, that Stockholder may elect to withdraw therefrom by written notice
to AmPaM and the managing underwriter. That Stockholder's shares of AmPaM Stock
so withdrawn shall also be withdrawn from registration; provided, however, that,
if by the withdrawal of such shares a greater number of shares of AmPaM Stock
held by other Stockholders may be included in such registration, then AmPaM
shall offer to all other Stockholders of AmPaM the right to include additional
shares in the same proportion used in effecting the above limitations. AmPaM
shall not, for a period of two years following the Closing Date, grant to any
other person any rights to cause AmPaM to register any securities in priority
over, or in precedent to, the rights granted to the Stockholders hereunder and
to the stockholders of the Other Founding Companies pursuant to Section 17 of
the Other Agreements.
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17.2 REGISTRATION PROCEDURES. Whenever AmPaM is required to register
shares of AmPaM Stock pursuant to Section 17.1, AmPaM will, as expeditiously as
possible:
(i) Prepare and file with the SEC a registration statement
with respect to such shares and use its best efforts to cause such
registration statement to become effective (provided that before filing
a registration statement or prospectus or any amendments or supplements
or term sheets thereto, AmPaM will furnish a representative of the
Stockholders with copies of all such documents proposed to be filed) as
promptly as practical;
(ii) Notify the Stockholders of any stop order issued or
threatened by the SEC and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered;
(iii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 120 days, cause the
prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the 1933
Act; and comply with the provisions of the 1933 Act applicable to it
with respect to the disposition of all securities covered by such
registration statement during the applicable period in accordance with
the intended methods of disposition by the sellers thereof set forth in
such registration statement or supplement to the prospectus;
(iv) Furnish to each Stockholder who so requests such number
of copies of such registration statement, each amendment and supplement
thereto and the prospectus included in such registration statement
(including each preliminary prospectus and any term sheet associated
therewith), and such other documents as such Stockholder may reasonably
request in order to facilitate the disposition of the relevant shares;
(v) Make "generally available to its security holders" (within
the meaning of Rule 158) an earnings statement satisfying the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder no
later than 90 days after the end of the 12-month period beginning with
the first day of AmPaM's first fiscal quarter commencing after the
effective date of the registration statement;
(vi) Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement at
the earliest possible moment;
(vii) If requested by the managing underwriter or
underwriters, if any, or any participating Stockholder, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters or any
participating Stockholder, as the case may be, reasonably requests to
be included therein, including, without limitation, information with
respect to the number of shares of AmPaM
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Stock being sold by participating Stockholders to any underwriter or
underwriters, the purchase price being paid therefor by such
underwriter or underwriters and with respect to any other terms of an
underwritten offering of the shares of AmPaM Stock to be sold in such
offering, and promptly make all required filings of such prospectus by
supplement or post-effective amendment;
(viii) Make available for inspection by participating
Stockholders, any underwriter participating in any disposition pursuant
to such registration statement, and the counsel retained by the
participating Stockholders, counsel for the underwriters and any
accountant or other agent retained by participating Stockholders or any
such underwriter (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of AmPaM
(the "Records"), as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause AmPaM's
officers, directors and employees to supply all information reasonably
requested by any such Inspectors in connection with such registration
statement; provided, that records which AmPaM determines, in good
faith, to be confidential and which AmPaM notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or (ii) the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction after delivery of
sufficient notice to AmPaM to enable AmPaM to contest such subpoena or
order;
(ix) Take all other steps reasonably necessary to effect the
registration of the shares of AmPaM Stock contemplated hereby;
(x) Use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested by
the Stockholders, and to keep such registration or qualification
effective during the period such registration statement is required to
be kept effective, provided that AmPaM shall not be required to become
subject to taxation, to qualify generally to do business or to file a
general consent to service of process in any such states or
jurisdictions;
(xi) Cause all such shares of AmPaM Stock to be listed or
included not later than the date of the first sale of shares of AmPaM
Stock under such registration statement on any securities exchanges or
trading systems on which similar securities issued by AmPaM are then
listed or included; and
(xii) Notify each Stockholder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within
the period that AmPaM is required to keep the registration statement
effective of the happening of any event as a result of which the
prospectus included in such registration statement (as then in effect),
together with any associated term sheet, contains an untrue statement
of a material fact or omits to state any
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fact required to be stated therein or necessary to make the statements
therein (in the case of the prospectus or any preliminary prospectus,
in light of the circumstances under which they were made) not
misleading, and, at the request of such Stockholder, AmPaM promptly
will prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of the covered shares, such
prospectus will not contain an untrue statement of material fact or
omit to state any fact required to be stated therein or necessary to
make the statements therein (in the case of the prospectus or any
preliminary prospectus, in light of the circumstances under which they
were made) not misleading.
All expenses incurred in connection with the registration under this
Article 17 and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printer and
accounting fees, but excluding underwriting commissions and discounts), shall be
borne by AmPaM.
17.3 INDEMNIFICATION.
(a) In connection with any registration under Section 17.1,
AmPaM shall indemnify, to the extent permitted by law, each selling Stockholder
(an "Indemnified Party") against all losses, claims, damages, liabilities and
expenses arising out of or resulting from any untrue or alleged untrue statement
of material fact contained or incorporated by reference in any registration
statement, prospectus or preliminary prospectus or associated term sheet or any
omission or alleged omission to state or incorporated by reference therein a
material fact required to be stated or incorporated by reference therein or
necessary to make the statements therein not misleading except insofar as the
same are caused by or contained in or omitted from any information furnished in
writing to AmPaM by such Indemnified Party expressly for use therein or by any
Indemnified Parties' failure to deliver a copy of the registration statement or
prospectus or any amendment or supplements thereto after AmPaM has furnished
such Indemnified Party with a sufficient number of copies of the same.
(b) In connection with any registration under Section 17.1,
each selling Stockholder shall furnish to AmPaM in writing such information
concerning the Stockholder and his or her proposed offering of shares as is
reasonably requested by AmPaM for use in any such registration statement or
prospectus and will indemnify, to the extent permitted by law, AmPaM, its
directors and officers and each person who controls AmPaM (within the meaning of
the 1933 Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of a material fact or any
omission or alleged omission to state therein a material fact required to be
stated in the registration statement or prospectus or any amendment thereof or
supplement thereto or necessary to make the statements therein not misleading,
but only to the extent that such untrue or alleged untrue statement or omission
or alleged omission is contained in or omitted from information so furnished in
writing to AmPaM by such Stockholder expressly for use in the registration
statement. Notwithstanding the foregoing, the liability of a Stockholder under
this Section 17.3 shall be limited to an amount equal to the net proceeds
actually received by such Stockholder from the sale of the relevant shares
covered by the registration statement.
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(c) Any person entitled to indemnification hereunder will (i)
give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) unless in such indemnified parties' reasonable
judgment, a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. Any failure to give prompt notice shall deprive a party of
its right to indemnification hereunder only to the extent that such failure
shall have adversely affected the indemnifying party. If the defense of any
claim is assumed, the indemnifying party will not be subject to any liability
for any settlement made without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party that is not entitled or elects
not, to assume the defense of a claim, will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party, a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
17.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 17.1 covering an underwritten registered offering, (i) each
participating Stockholder shall execute and deliver to AmPaM a written power of
attorney instrument that (A) appoints an officer of AmPaM as such Stockholder's
attorney-in-fact for purposes of executing and delivering an underwriting
agreement among AmPaM, the underwriters named therein and such Stockholder
specifying the terms and conditions applicable to the sale of AmPaM Stock of
such Stockholder in such offering and (B) otherwise is in such form and
containing such provisions as are customary in the securities business for such
an arrangement in connection with an underwritten registered offering in which
one or more stockholders of the issuer are participants, including a provision
that authorizes the attorney-in-fact appointed by such Stockholder to execute
and deliver such an underwriting agreement in the event that the net price per
share to be received by such Stockholder from the sale of the shares of AmPaM
Stock to be sold in such offering is not less than a price specified in such
instrument and (iii) AmPaM and each participating Stockholder agree to enter
into a written agreement with the managing underwriters in such form and
containing such provisions as are customary in the securities business for such
an arrangement between such managing underwriters and companies of AmPaM's size
and investment stature, including indemnification; provided, however, that (A)
such Stockholder shall be exempt and excluded from any indemnification of the
managing underwriters other than with respect to information provided by such
Stockholder with respect to such Stockholder to AmPaM or the managing
underwriters specifically for inclusion in any such registration statement and
(B) such Stockholder shall not be obligated to enter into such an underwriting
agreement in the event that the net price per share to be received by such
Stockholder from the sale of shares of AmPaM Stock to be sold in such offering
is less than the floor price specified in the power of attorney instrument
executed and delivered to AmPaM pursuant to clause (i) above.
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17.5 TRANSFER OF RIGHTS. The right to cause AmPaM to register shares of
AmPaM Stock under this Agreement may be assigned to a transferee or assignee of
any Stockholder to the extent that such transferee or assignee is a member of
the immediate family of a Stockholder, a trust, limited partnership or other
estate planning entity for the benefit of any such persons or a charitable
organization that qualifies for receipt of charitable contributions under
Section 170(c) of the Code.
17.6 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC that may permit the sale of AmPaM
stock to the public without registration, following an IPO AmPaM agrees to use
its reasonable efforts, from and after the completion of an IPO, to:
(i) make and keep public information regarding AmPaM available
as those terms are understood and defined in Rule 144 under the 1933
Act beginning 90 days following the effective date of a registration
statement relating to an IPO;
(ii) file with the SEC in a timely manner all reports and
other documents required of AmPaM under the 1933 Act and the 1934 Act
at any time after it has become subject to such reporting requirements;
and
(iii) so long as a Stockholder owns any restricted AmPaM
Stock, furnish to each Stockholder forthwith upon written request a
written statement by AmPaM as to its compliance with the current public
information requirements of Rule 144 (at any time from and after 90
days following the effective date of a registration statement relating
to an IPO), and of the 1933 Act and the 1934 Act (any time after it has
become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of AmPaM, and such other reports and
documents so filed as a Stockholder may reasonably request in availing
itself of any rule or regulation of the SEC allowing a Stockholder to
sell any such shares without registration.
17.7 CONVERTED SHARES OF AMPAM SERIES A PREFERRED STOCK. The provisions
of this Section 17 shall apply to any and all shares of AmPaM Stock issued in
connection with the conversion of AmPaM Series A Preferred Stock into AmPaM
Stock.
18. REDEMPTION OF AMPAM STOCK
18.1 REDEMPTION TRIGGER. In the event that, within three years of the
Closing Date, (i) AmPaM has not consummated an IPO and (ii) any Stockholder has
not received cash (including proceeds from the public or private sale of AmPaM
Stock received as consideration hereunder and the receipt of principal payments,
if any, made with respect to AmPaM Notes held by such Stockholder) equal to or
exceeding 50% of the Aggregate Consideration on or prior to the third
anniversary of the Closing Date, such Stockholder shall have the right (the "Put
Right"), but not the obligation, commencing on the third anniversary of the
Closing Date to require AmPaM to purchase a number of shares of AmPaM Stock then
owned by such Stockholder, subject to the limitations set
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forth in Section 18.2 below. The purchase price for such redemption shall be
$13.00 per share, such price to be subject to appropriate adjustment to reflect
any reclassification, stock dividend, subdivision, split-up or combination of
shares of AmPaM Stock after the date hereof.
18.2 MINIMUM REDEMPTION; LIMITATIONS. If the events specified in
Section 18.1(i) and 18.1(ii), with Section 18.1(ii) being determined on an
individual Stockholder basis, have not occurred within the time specified, AmPaM
shall be obligated to purchase from each eligible Stockholder no less than 10%
of the AmPaM Stock held by such Stockholder annually; provided, however, that
the Stockholders shall not be entitled to exercise their Put Rights if and to
the extent the Company has not achieved the Target Net Income (as defined in
Annex I hereto) for the year preceding the year in which a Stockholder seeks to
exercise his Put Right. The redemptions will be funded by internal cash flows or
alternative financing arrangements but AmPaM's obligation to make any redemption
pursuant to this Section 18 will be subject to the covenants and restrictions
contained in AmPaM's then existing private or public debt or equity instruments.
18.3 NOTICE; EXERCISE. The Stockholders may exercise their Put Right by
giving written notice (the "Put Notice") to AmPaM within thirty (30) days of the
third anniversary of the execution hereof. If any Stockholder does not provide
AmPaM with a Put Notice within such thirty-day period, the Put Right applicable
to such Stockholder shall expire. The date for closing the sale of any shares of
AmPaM Stock pursuant to a proper exercise of a Put Right shall in no event be
earlier than 90 days after the date AmPaM receives the Put Notice. Any such
closing shall be at such time of day and place as shall be mutually agreed
between such holder and AmPaM. At such closing AmPaM shall make payment for the
AmPaM Stock to be repurchased by wire transfer of immediately available funds to
a bank account designated by such Stockholder for such purpose and such
Stockholder shall deliver to AmPaM certificates, duly endorsed for transfer,
representing the shares of AmPaM Stock to be purchased and sold pursuant to the
exercise of such Put Right.
18.4 ADDITIONAL REDEMPTIONS. In the event AmPaM has not consummated an
IPO and notwithstanding the foregoing, to the extent the Stockholders who have
received greater than 50% of their Aggregate Consideration in cash wish to
tender AmPaM Stock to AmPaM for purchase, AmPaM will use its commercially
reasonable efforts to continue to repurchase up to 10% of the AmPaM Stock held
by such Stockholder annually.
18.5 TERMINATION OF REDEMPTION OBLIGATION. Put Rights with respect to
any individual Stockholder will terminate upon receipt by such Stockholder of
50% of his Aggregate Consideration in cash; such termination will not, however,
limit such Stockholders ability to participate in the additional redemptions
provided in Section 18.4. Notwithstanding the foregoing, all of AmPaM's
redemption obligations contained in this Section 18 shall terminate on the
earlier to occur of (i) an IPO, (ii) any sale of all or substantially all of
AmPaM's assets in one transaction or series of transactions, (iii) any merger or
consolidation which involves AmPaM and in which AmPaM is not the surviving
entity or (iv) any transaction after which the shares of AmPaM Common Stock, if
any, which are then held by persons other than the holders of AmPaM Common Stock
as of the Closing
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Date constitute 50% or more of AmPaM Common Stock outstanding as of the date of
the consummation of such transaction.
19. GENERAL
19.1 COOPERATION. The Company, Stockholders and AmPaM shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The Company will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the Company cooperate with
AmPaM on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law and except as
provided in Section 17.5) and shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of AmPaM and the Company, and the
heirs, successors and legal representatives of the Stockholders.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company and AmPaM and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the Stockholders, the Company and AmPaM, acting
through their respective officers or trustees, duly authorized by their
respective Boards of Directors. Any disclosure made on any Schedule delivered
pursuant hereto shall be deemed to have been disclosed for purposes of any other
Schedule required hereby, provided that the Company shall make a good faith
effort to cross reference disclosure, as necessary or advisable, between related
Schedules.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument. A telecopied
facsimile of an executed counterpart of this Agreement shall be sufficient to
evidence the binding agreement of each party to the terms hereof. However, each
party agrees to return to the other parties an original, duly executed
counterpart of this Agreement promptly after delivery of a telecopied facsimile
thereof.
19.5 BROKERS AND AGENT. Except as disclosed on Schedule 18.5, each
party hereto represents and warrants that it employed no broker or agent in
connection with this transaction and agrees to indemnify the other parties
hereto against all loss, cost, damages or expense arising out of claims for fees
or commission of brokers employed or alleged to have been employed by such
indemnifying party.
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19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, AmPaM will pay the reasonable fees, expenses and
disbursements of AmPaM and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto, including all costs and expenses incurred in the performance
and compliance with all conditions to be performed by AmPaM under this
Agreement, including the fees and expenses of Arthur Andersen LLP, Andrews &
Kurth L.L.P., and any other person or entity retained by AmPaM, and the costs of
preparing the Private Placement Memorandum incurred in connection with the
subject matter of this Agreement and any amendments thereto. In addition,
whether or not the transactions contemplated herein shall be consummated, AmPaM
will pay the reasonable fees and expenses of Bracewell & Patterson LLP incurred
on behalf of the Company and the Stockholders in connection with the subject
matter of this Agreement. Whether or not the transactions herein contemplated
shall be consummated, the Company will pay all of its costs and expenses
incurred on behalf of the Company and the Stockholders in connection with the
subject matter of this Agreement except that (i) the Company shall not be
required to pay any of the costs, fees and expenses specified above as to which
AmPaM is responsible for the payment thereof and (ii) neither the Company nor
the Stockholders shall be responsible for the payment of the costs, fees and
expenses incurred by or on behalf of AmPaM. Whether or not the transactions
herein contemplated shall be consummated, AmPaM shall reimburse Sterling City
Capital, LLC (or any person or entity which is an Affiliate thereof) for any of
the foregoing fees, expenses and disbursements paid by Sterling City Capital,
LLC (or any person or entity which is an Affiliate thereof) and shall repay
Sterling City Capital, LLC (or any person or entity which is an Affiliate
thereof) for any loans or advances made by Sterling City Capital, LLC (or any
person or entity which is an Affiliate thereof) for the purpose of providing
AmPaM funds to pay any such fees, expenses and disbursements, provided that such
reimbursement and loan repayment obligation shall be limited to the foregoing
fees, expenses, and disbursements which are out-of-pocket expenses of AmPaM,
Sterling City Capital, LLC or any person or entity which is an Affiliate
thereof. Sterling City Capital, LLC shall be reimbursed by AmPaM in the form of
AmPaM Notes. AmPaM retains the right, within a reasonable period following the
Closing Date, to conduct an audit of the expenses for which Sterling City
Capital, LLC is reimbursed. Each Stockholder shall pay all sales, use, transfer,
real property transfer, recording, gains, stock transfer and other similar taxes
and fees ("Transfer Taxes") imposed in connection with the purchase and sale of
the Company Stock, other than Transfer Taxes, if any, imposed by the State of
Delaware. Each Stockholder shall file all necessary documentation and Returns
with respect to such Transfer Taxes. In addition, each Stockholder acknowledges
that he, and not the Company or AmPaM, will pay all Taxes due by him upon
receipt of the consideration payable pursuant to Section 1 hereof. The
Stockholders acknowledge that the risks of the transactions contemplated hereby
include Tax risks, with respect to which the Stockholders are relying
substantially on the opinion contemplated by Section 8.12 hereof and
representations by AmPaM in this Agreement.
19.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person or via a nationally recognized courier service to an officer or agent
of such party.
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(a) If to AmPaM addressed to it at:
American Plumbing & Mechanical, Inc.
515 Post Oak Blvd., Suite 450
Houston, Texas 77027
Attention: Chief Executive Officer
with copies to:
Thomas P. Mason
Andrews & Kurth L.L.P.
4200 Chase Tower
Houston, Texas 77002
(b) If to the Stockholders, addressed to them at their addresses
set forth on the signature pages hereto, with copies to:
J. Rowland Cook
Jenkens & Gilchrist, a Professional Corporation
2200 One American Center
600 Congress
Austin, Texas 78701
and: Ronald G. Skloss
Brobeck, Phleger & Harrison LLP
301 Congress Avenue, Suite 1200
Austin, Texas 78701
(c) If to the Company, addressed to it at:
Christianson Enterprises, Inc.
1950 Louis Henna Blvd.
Round Rock, Texas 78664
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
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19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Texas, excluding any conflicts of law, rule or
principle that might refer same to the laws of another jurisdiction.
19.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties until the respective Expiration
Dates referred to herein with respect thereto or, if no Expiration Date is
applicable with respect thereto, until the expiration of all applicable statute
of limitations periods.
19.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.11 TIME. Time is of the essence with respect to this Agreement.
19.12 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.
19.13 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
19.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of AmPaM, the Company and Stockholders who would receive a
majority of the Aggregate Consideration specified in Section I of Annex I to
this Agreement if the transactions contemplated hereby were consummated. Any
amendment or waiver effected in accordance with this Section 19.15 shall be
binding upon each of the parties hereto, any other person receiving AmPaM Stock
or AmPaM Series A Preferred Stock in connection with the purchase and sale of
the Company Stock and each
64
<PAGE> 73
future holder of such AmPaM Stock or AmPaM Series A Preferred Stock. Any consent
of the Stockholders who would receive a majority of the Aggregate Consideration
pursuant to Section I of Annex I of this Agreement if the transactions
contemplated hereby were consummated shall be deemed to be the consent of the
Stockholders for purposes of provisions of this Agreement as to which a consent
of the Stockholders may be requested or required.
19.16 MEDIATION AND ARBITRATION. If a dispute arises out of or relates
to this Agreement, or the breach thereof, and if said dispute cannot be settled
through direct discussions, the parties agree to first endeavor to settle the
dispute in an amicable manner by mediation administered by the American
Arbitration Association under its then prevailing Commercial Mediation Rules,
before resorting to arbitration. Thereafter, any unresolved controversy or claim
arising out of or relating to this Agreement, or the breach thereof, shall be
settled by arbitration administered by the American Arbitration Association in
accordance with its then prevailing Commercial Arbitration Rules. The
enforcement, interpretation and procedural and substantive effect of the
obligation to arbitrate created by this Section 19.16 shall be governed by the
Federal Arbitration Act as amended from time to time, 9 U.S.C. Sections 1 et
seq. The parties hereby disclaim any intention to have the substantive or
procedural law of any state or other jurisdiction, other than the law of the
United States as embodied in the Federal Arbitration Act, applied to such
obligation. Any such mediation or arbitration proceeding will be conducted in
Houston, Texas.
19.17 INFORMATION PROVIDED FOR PRIVATE PLACEMENT MEMORANDUM. For
purposes of this Agreement, the information provided by the Company in writing
specifically for inclusion in the Private Placement Memorandum shall include
solely (i) the Financial Statements (in the form that they appear in the Private
Placement Memorandum), (ii) any financial statements provided to AmPaM pursuant
to Section 7.9, (iii) the description of the Company contained in the Private
Placement Memorandum under the caption "The Company", (iv) the description of
the Company's results of operations and its liquidity and capital resources, if
any, contained in the Private Placement Memorandum under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and (v) the description, if any, of matters related to the Company
contained in the Private Placement Memorandum under the caption "Certain
Transactions involving Certain Officers, Directors and Stockholders". For
purposes of this Agreement, the information provided by a Stockholder in writing
specifically for inclusion in the Private Placement Memorandum shall include
only (i) the description, if any, of matters related to such Stockholder
contained in the Private Placement Memorandum under the caption "Certain
Transactions - Transactions involving Certain Officers, Directors and
Stockholders" and (ii) the biographical description of such Stockholder, if any,
contained in the Private Placement Memorandum under the caption "Management."
19.18 EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective upon (i) the execution and delivery of this Agreement by all of the
parties hereto and (ii) the delivery to AmPaM of each Employment Agreement
attached hereto as Annex VI-1, Annex VI-2, Annex VI-3, Annex VI-4, Annex VI-5
and Annex VI-6 executed by each of the Company, the employees named therein and
AmPaM.
65
<PAGE> 74
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AMERICAN PLUMBING & MECHANICAL, INC.
By:: /s/ DAVID BAGGETT
--------------------------------
Name: David Baggett
-------------------------------
Title: Chief Financial Officer
------------------------------
CHRISTIANSON ENTERPRISES, INC.
By:: /s/ ROBERT CHRISTIANSON
--------------------------------
Robert Christianson
President
CHRISTIANSON SERVICES, INC.
By:: /s/ ROBERT CHRISTIANSON
--------------------------------
Robert Christianson
President
GGR LEASING CORPORATION
By:: /s/ GLEN CHRISTIANSON
--------------------------------
Glen Christianson
President
[Remainder of page intentionally left blank]
66
<PAGE> 75
STOCKHOLDERS OF CHRISTIANSON SPOUSES (WITHOUT PERSONAL LIABILITY
ENTERPRISES, INC.: AND SOLELY TO ACKNOWLEDGE THE SALE OF THE
COMPANY STOCK BY THE STOCKHOLDER):
/s/ ROBERT CHRISTIANSON /s/ BEVERLY CHRISTIANSON
- -------------------------------- --------------------------------
Robert A. Christianson Beverly A. Christianson
5803 Long Court
Austin, Texas 78730
Darrell and Pamela Christianson
600 Woodway Drive
Georgetown, Texas 78628
By: /s/ DARRELL CHRISTIANSON
--------------------------------
Darrell Christianson
By: /s/ PAMELA CHRISTIANSON
--------------------------------
Pamela Christianson
/s/ LANE CHRISTIANSON /s/ KELLY CHRISTIANSON
- -------------------------------- --------------------------------
Lane B. Christianson Kelly Christianson
2104 Smoke Tree
Round Rock, Texas 78664
/s/ GEORGE CHRISTIANSON /s/ DEBORAH CHRISTIANSON
- -------------------------------- --------------------------------
George Christianson Deborah Christianson
1443 County Road #3
Georgetown, Texas 78726
/s/ BRIAN CHRISTIANSON /s/ JULIE CHRISTIANSON
- -------------------------------- --------------------------------
Brian Trent Christianson Julie Christianson
122 Cascade Caverns Road
Boerne, Texas 78006
67
<PAGE> 76
/s/ TREY CHRISTIANSON
- --------------------------------
Trey Christianson
16650 Huebner Road #1218
San Antonio, Texas 78248
/s/ GLEN T. CHRISTIANSON /s/ JUDY CHRISTIANSON
- -------------------------------- --------------------------------
Glen T. Christianson Judy K. Christianson
P.O. Box 280
Weir, Texas 78674
/s/ GLEN T. CHRISTIANSON /s/ ANGELA CHRISTIANSON
- -------------------------------- --------------------------------
Greg T. Christianson Angela Christianson
P.O. Box 28
Weir, Texas 78674
/s/ RANDY DALE CHRISTIANSON /s/ MELISSA JILL CHRISTIANSON
- -------------------------------- --------------------------------
Randy Dale Christianson Melissa Jill Christianson
213 Wind Ridge Cove
Georgetown, Texas 78628
The Callan E. Christianson QSST Trust
1950 Louis Henna Blvd.
Round Rock, Texas 78664
By: /s/ GEORGE CHRISTIANSON
--------------------------------
George Christianson, as Trustee
The Cody Christianson QSST Trust
1950 Louis Henna Blvd.
Round Rock, Texas 78664
By: /s/ GEORGE CHRISTIANSON
--------------------------------
George Christianson, as Trustee
68
<PAGE> 77
STOCKHOLDERS OF CHRISTIANSON SPOUSES (WITHOUT PERSONAL LIABILITY AND
SERVICES, INC. SOLELY TO ACKNOWLEDGE THE SALE OF THE
COMPANY STOCK BY THE STOCKHOLDER):
/s/ ROBERT A. CHRISTIANSON /s/ BEVERLY A. CHRISTIANSON
- -------------------------------- --------------------------------
Robert A. Christianson Beverly A. Christianson
5803 Long Court
Austin, Texas 78730
/s/ DARRELL CHRISTIANSON /s/ PAMELA CHRISTIANSON
- -------------------------------- --------------------------------
Darrell Christianson Pamela Christianson
600 Woodway Drive
Georgetown, Texas 78628
/s/ LANE B. CHRISTIANSON /s/ KELLY CHRISTIANSON
- -------------------------------- --------------------------------
Lane B. Christianson Kelly Christianson
2104 Smoke Tree
Round Rock, Texas 78664
/s/ GEORGE CHRISTIANSON /s/ DEBORAH CHRISTIANSON
- -------------------------------- --------------------------------
George Christianson Deborah Christianson
1443 County Road #3
Georgetown, Texas 78726
/s/ BRIAN TRENT CHRISTIANSON /s/ JULIE CHRISTIANSON
- -------------------------------- --------------------------------
Brian Trent Christianson Julie Christianson
122 Cascade Caverns Road
Boerne, Texas 78006
/s/ TREY CHRISTIANSON
- --------------------------------
Trey Christianson
16650 Huebner Road #1218
San Antonio, Texas 78248
69
<PAGE> 78
/s/ GLEN T. CHRISTIANSON /s/ JUDY K. CHRISTIANSON
- -------------------------------- --------------------------------
Glen T. Christianson Judy K. Christianson
P.O. Box 280
Weir, Texas 78674
/s/ GREG T. CHRISTIANSON /s/ ANGELA CHRISTIANSON
- -------------------------------- --------------------------------
Greg T. Christianson Angela Christianson
P.O. Box 28
Weir, Texas 78674
/s/ RANDY DALE CHRISTIANSON /s/ MELISSA JILL CHRISTIANSON
- -------------------------------- --------------------------------
Randy Dale Christianson Melissa Jill Christianson
213 Wind Ridge Cove
Georgetown, Texas 78628
The Callan E. Christianson QSST Trust
1950 Louis Henna Blvd.
Round Rock, Texas 78664
By: /s/ GEORGE CHRISTIANSON
--------------------------------
George Christianson, as Trustee
The Cody Christianson QSST Trust
1950 Louis Henna Blvd.
Round Rock, Texas 78664
By: /s/ GEORGE CHRISTIANSON
--------------------------------
George Christianson, as Trustee
70
<PAGE> 79
STOCKHOLDERS OF GGR LEASING SPOUSES (WITHOUT PERSONAL LIABILITY AND
CORPORATION SOLELY TO ACKNOWLEDGE THE SALE OF THE
COMPANY STOCK BY THE STOCKHOLDER):
/s/ ROBERT A. CHRISTIANSON /s/ BEVERLY A. CHRISTIANSON
- -------------------------------- --------------------------------
Robert A. Christianson Beverly A. Christianson
5803 Long Court
Austin, Texas 78730
/s/ GLEN T. CHRISTIANSON /s/ JUDY K. CHRISTIANSON
- -------------------------------- --------------------------------
Glen T. Christianson Judy K. Christianson
P.O. Box 280
Weir, Texas 78674
/s/ GEORGE CHRISTIANSON /s/ DEBORAH CHRISTIANSON
- -------------------------------- --------------------------------
George Christianson Deborah Christianson
1443 County Road #3
Georgetown, Texas 78726
71
<PAGE> 1
EXHIBIT 10.6
Execution Copy
- --------------------------------------------------------------------------------
ACQUISITION AGREEMENT
dated as of the 11th day of February, 1999
by and among
AMERICAN PLUMBING & MECHANICAL, INC.
J.A. CROSON COMPANY
AND
FRANKLIN FIRE SPRINKLER COMPANY
and
all of the STOCKHOLDERS of J.A. CROSON COMPANY
and
FRANKLIN FIRE SPRINKLER COMPANY
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS ......................................................................................................... 1
1. ACQUISITION OF STOCK..................................................................................... 5
1.1 Acquisition..................................................................................... 5
1.2 Consideration................................................................................... 5
1.3 Certain Information With Respect to the Capital Stock of the Company
and AmPaM....................................................................................... 5
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY........................................................... 5
2.1 Board of Directors.............................................................................. 5
2.2 Officers........................................................................................ 5
3. DELIVERY OF CONSIDERATION................................................................................ 6
3.1 Stockholders' Consideration..................................................................... 6
3.2 Stockholders' Deliveries........................................................................ 6
4. CLOSING.................................................................................................. 6
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................ 6
5.1 Due Organization................................................................................ 7
5.2 Authorization................................................................................... 7
5.3 Capital Stock of the Company.................................................................... 7
5.4 Transactions in Capital Stock................................................................... 8
5.5 No Bonus Shares................................................................................. 8
5.6 Subsidiaries; Ownership in Other Entities....................................................... 8
5.7 Predecessor Status; etc......................................................................... 8
5.8 Spin-off by the Company......................................................................... 8
5.9 Financial Statements............................................................................ 8
5.10 Liabilities and Obligations..................................................................... 9
5.11 Accounts and Notes Receivable...................................................................10
5.12 Licenses; Intellectual Property.................................................................10
5.13 Environmental Matters...........................................................................11
5.14 Personal Property...............................................................................13
5.15 Significant Customers; Material Contracts and Commitments.......................................13
5.16 Real Property...................................................................................14
5.17 Insurance.......................................................................................14
5.18 Compensation; Employment Agreements; Labor Matters..............................................15
5.19 Employee Plans..................................................................................15
5.20 Compliance with ERISA...........................................................................16
5.21 Conformity with Law; Litigation.................................................................17
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
5.22 Taxes..........................................................................................17
5.23 No Violations; No Consent Required, Etc........................................................18
5.24 Government Contracts...........................................................................19
5.25 Absence of Changes.............................................................................19
5.26 Deposit Accounts; Powers of Attorney...........................................................21
5.27 Validity of Obligations........................................................................21
5.28 Relations with Governments.....................................................................21
5.29 Disclosure.....................................................................................21
5.30 No Warranties or Insurance.....................................................................21
5.31 Interest in Customers and Suppliers and Related Party Transactions.............................22
5.32 Private Placement Memorandum...................................................................22
5.33 Authority; Ownership...........................................................................22
5.34 Preemptive Rights..............................................................................23
5.35 No Commitment to Dispose of AmPaM Stock........................................................23
5.36 Disclosure.....................................................................................23
6. REPRESENTATIONS OF AMPAM................................................................................23
6.1 Due Organization...............................................................................24
6.2 Authorization..................................................................................24
6.3 Capital Stock of AmPaM.........................................................................24
6.4 Transactions in Capital Stock..................................................................24
6.5 Subsidiaries...................................................................................25
6.6 Financial Statements...........................................................................25
6.7 Liabilities and Obligations....................................................................25
6.8 Conformity with Law; Litigation................................................................25
6.9 No Violations..................................................................................26
6.10 Validity of Obligations........................................................................27
6.11 AmPaM Stock....................................................................................27
6.12 AmPaM Notes....................................................................................28
6.13 No Side Agreements.............................................................................28
6.14 Business; Real Property; Material Agreements...................................................28
6.15 Relations with Governments.....................................................................28
6.16 Disclosure.....................................................................................28
6.17 Other Agreements...............................................................................29
7. COVENANTS PRIOR TO CLOSING..............................................................................29
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate.................................29
7.2 Conduct of Business Pending Closing............................................................30
7.3 Prohibited Activities..........................................................................31
7.4 No Shop........................................................................................32
7.5 Agreements.....................................................................................32
7.6 Notification of Certain Matters................................................................32
7.7 Amendment of Schedules.........................................................................33
7.8 Further Assurances.............................................................................33
7.9 Authorized Capital.............................................................................33
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
7.10 Compliance with the Hart-Scott Act.............................................................33
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
AND COMPANY.............................................................................................34
8.1 Representations and Warranties; Performance of Obligations.....................................34
8.2 Satisfaction...................................................................................34
8.3 No Litigation..................................................................................34
8.4 Opinion of Counsel.............................................................................34
8.5 Consents and Approvals.........................................................................34
8.6 Good Standing Certificates.....................................................................35
8.7 No Material Adverse Change.....................................................................35
8.8 Secretary's Certificate........................................................................35
8.9 Tax Matters....................................................................................35
8.10 Other Founding Companies.......................................................................35
8.11 Company Release of Stockholders................................................................35
8.12 Sterling City Capital Transfer Restrictions....................................................35
8.13 Election of Chief Executive Officer............................................................36
8.14 Funding Availability...........................................................................36
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AMPAM............................................................36
9.1 Representations and Warranties; Performance and Obligations....................................36
9.2 No Litigation..................................................................................36
9.3 Secretary's Certificate........................................................................36
9.4 No Material Adverse Effect.....................................................................37
9.5 Stockholders' Release..........................................................................37
9.6 Satisfaction...................................................................................37
9.7 Termination of Related Party Agreements........................................................37
9.8 Opinion of Counsel.............................................................................37
9.9 Consents and Approvals.........................................................................37
9.10 Good Standing Certificates.....................................................................38
9.11 Funding Availability...........................................................................38
9.12 FIRPTA Certificate.............................................................................38
9.13 Resignations of Directors and Officers.........................................................38
10. COVENANTS OF AMPAM AND THE STOCKHOLDERS AFTER CLOSING...................................................38
10.1 Release From Guarantees; Repayment of Certain Obligations......................................38
10.2 Preservation of Tax and Accounting Treatment...................................................39
10.3 Preparation and Filing of Tax Returns; Payment of Taxes........................................39
10.4 Directors......................................................................................40
10.5 Legal Opinions.................................................................................40
11. INDEMNIFICATION.........................................................................................40
11.1 General Indemnification by the Stockholders....................................................40
11.2 Indemnification by AmPaM.......................................................................42
11.3 Third Person Claims............................................................................42
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
11.4 Exclusive Remedy...............................................................................43
11.5 Limitations on Indemnification.................................................................44
12. TERMINATION OF AGREEMENT................................................................................45
12.1 Termination....................................................................................45
12.2 Procedure and Effect of Termination............................................................46
13. NONCOMPETITION..........................................................................................46
13.1 Prohibited Activities..........................................................................46
13.2 Damages........................................................................................47
13.3 Reasonable Restraint...........................................................................48
13.4 Severability; Reformation......................................................................48
13.5 Independent Covenant...........................................................................48
13.6 Materiality....................................................................................48
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................48
14.1 Stockholders...................................................................................48
14.2 AmPaM..........................................................................................49
14.3 Damages........................................................................................50
14.4 Survival.......................................................................................50
14.5 Return of Information..........................................................................50
15. TRANSFER RESTRICTIONS...................................................................................50
15.1 Transfer Restrictions Relating to AmPaM Stock and AmPaM Notes..................................50
15.2 Transfer Restrictions Relating to Additional Consideration.....................................51
16. FEDERAL SECURITIES ACT REPRESENTATIONS..................................................................52
16.1 Compliance with Law............................................................................52
16.2 Economic Risk; Sophistication..................................................................52
16.3 Reliance by AmPaM..............................................................................53
17. REGISTRATION RIGHTS.....................................................................................53
17.1 Piggyback Registration Rights..................................................................53
17.2 Registration Procedures........................................................................54
17.3 Indemnification................................................................................56
17.4 Underwriting Agreement.........................................................................57
17.5 Transfer of Rights.............................................................................58
17.6 Rule 144 Reporting.............................................................................58
18. REDEMPTION OF AMPAM STOCK...............................................................................58
18.1 Redemption Trigger.............................................................................58
18.2 Minimum Redemption; Limitations................................................................59
18.3 Notice; Exercise...............................................................................59
18.4 Additional Redemptions.........................................................................59
18.5 Termination of Redemption Obligation...........................................................59
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C>
19. GENERAL.................................................................................................60
19.1 Cooperation....................................................................................60
19.2 Successors and Assigns.........................................................................60
19.3 Entire Agreement...............................................................................60
19.4 Counterparts...................................................................................60
19.5 Brokers and Agent..............................................................................61
19.6 Expenses.......................................................................................61
19.7 Notices........................................................................................62
19.8 Governing Law..................................................................................63
19.9 Survival of Representations and Warranties.....................................................63
19.10 Exercise of Rights and Remedies................................................................63
19.11 Time...........................................................................................63
19.12 Reformation and Severability...................................................................63
19.13 Remedies Cumulative............................................................................63
19.14 Captions.......................................................................................63
19.15 Amendments and Waivers.........................................................................63
19.16 Mediation and Arbitration......................................................................64
19.17 Information Provided for Private Placement Memorandum..........................................64
19.18 Effective Date of Agreement....................................................................64
</TABLE>
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<PAGE> 7
ANNEXES
Annex I - Consideration to Be Paid to Stockholders
Annex II - Amended and Restated Certificate of Incorporation and
By-Laws of AmPaM
Annex III - Form of Opinion of Counsel to AmPaM
Annex IV - Form of Tax Opinion
Annex V - Form of Opinion of Counsel to Company and Stockholders
Annex VI-I - Form of Employment Agreement
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<PAGE> 8
SCHEDULES
2.1 Board of Directors
2.2 Officers
5.1 Due Organization
5.2 Authorization
5.3 Capital Stock of the Company
5.4 Transactions in Capital Stock; Organization Accounting
5.5 No Bonus Shares
5.6 Subsidiaries; Ownership in Other Entities
5.7 Predecessor Status; etc
5.8 Spin-off by the Company
5.9 Financial Statements
5.10 Liabilities and Obligations
5.11 Accounts and Notes Receivable
5.12 Licenses; Intellectual Property (Schedules 5.12(a)(1), 5.12(a)(2),
5.12(b)(1) and 5.12(b)(2))
5.13 Environmental Matters
5.14 Personal Property
5.15 Significant Customers; Material Contracts and Commitments
(Schedules 5.15(a), 5.15(b) and 5.15 (c))
5.16 Real Property
5.17 Insurance
5.18 Compensation; Employment Agreements; Labor Matters
5.19 Employee Plans
5.20 Compliance with ERISA
5.21 Conformity with Law; Litigation
5.22 Taxes (Schedules 5.22(a) and 5.22(b))
5.23 No Violations, No Consents Required, Etc.
(Schedules 5.23(a), 5.23(b), 5.23(c) and 5.23(e))
5.24 Government Contracts
5.25 Absence of Changes
5.26 Deposit Accounts; Powers of Attorney
5.30 No Warranties or Insurance
5.31 Interest in Customers and Suppliers and Related Party Transactions
5.33 Authority; Ownership (Schedules 5.33(a) and 5.33(b))
6.9 No Violations
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate
7.2 Conduct of Business Pending Closing
7.3 Prohibited Activities
7.5 Agreements
8.11 Employment Agreements
9.7 Termination of Related Party Agreements
10.1 Release From Guarantees; Repayment of Certain Obligations
16.2 Non-accredited Investors
18.5 Brokers and Agents
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<PAGE> 9
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made as of the 11th day
of February, 1999 by and among AMERICAN PLUMBING & MECHANICAL, INC., a Delaware
corporation ("AmPaM"), J.A. CROSON COMPANY, an Ohio corporation ("J.A. Croson")
and FRANKLIN FIRE SPRINKLER COMPANY, an Ohio corporation ("Franklin Fire"), and
the stockholders listed on the signature pages of this Agreement (the
"Stockholders"), which are all the stockholders of J.A. CROSON and FRANKLIN FIRE
(collectively, the "Company")..
RECITALS
WHEREAS, the Company is engaged in the plumbing and mechanical services
business;
WHEREAS, as of the date hereof, the Stockholders own, and as of the
Closing Date the Stockholders will own, all of the issued and outstanding
capital stock of each of J.A. Croson and Franklin Fire (the "Company Stock");
WHEREAS, AmPaM is entering into other separate agreements
simultaneously with this Agreement that are substantially the same as this
Agreement (the "Other Agreements"), each of which is entitled "Acquisition
Agreement," with each of the Other Founding Companies (as defined herein) and
their respective stockholders in order for AmPaM to acquire additional companies
engaged in the plumbing and mechanical services business;
WHEREAS, this Agreement and the Other Agreements constitute the "AmPaM
Plan of Organization;"
WHEREAS, the Stockholders and the boards of directors and the
stockholders of AmPaM, and each of the Other Founding Companies that are parties
to the Other Agreements, have approved and adopted the AmPaM Plan of
Organization as an integrated plan pursuant to which the Stockholders and the
stockholders of each of the other Founding Companies will contribute the capital
stock of each of the Founding Companies to AmPaM, and the Stockholders and the
stockholders of each of the other Founding Companies will acquire the stock of
AmPaM (but not cash or other property) as a tax-free transfer of property under
Section 351 of the Code;
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Stockholders have approved this
Agreement as part of the AmPaM Plan of Organization in order to transfer all of
the issued and outstanding capital stock of the Company to AmPaM; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
<PAGE> 10
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule attached hereto and not otherwise defined shall
have the following meanings for all purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"Acquired Party" means the Company, any subsidiary of the Company and
any member of a Relevant Group.
"Affiliates" means with respect to any person or entity, any other
person or entity that directly or indirectly, controls, is controlled by, or is
under common control with such person or entity.
"AmPaM" has the meaning set forth in the first paragraph of this
Agreement.
"AmPaM Charter Documents" has the meaning set forth in Section 6.1.
"AmPaM Plan of Organization" has the meaning set forth in the recitals
of this Agreement.
"AmPaM Stock" means the common stock, par value $.01 per share, of
AmPaM.
"AmPaM Notes" means those notes issued by AmPaM to the Stockholders as
a portion of the consideration to be received hereunder and in substantially the
form to Annex I as Appendix A.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" has the meaning set forth in the recitals of this
Agreement.
"Delaware GCL" means the General Corporation Law of the State of
Delaware.
"Environmental Laws" has the meaning set forth in Section 5.13(b).
"Expiration Date" has the meaning set forth in Section 5(A) and Section
6, as applicable.
2
<PAGE> 11
"Founding Companies" means the following companies:
Christianson Enterprises, Inc., a Texas corporation;
Christianson Services, Inc., a Texas corporation;
GGR Leasing Corporation, a Texas corporation;
J.A. Croson Company of Florida, a Florida corporation;
J.A. Croson Company, an Ohio corporation;
Franklin Fire Sprinkler Company, an Ohio corporation;
Keith Riggs Plumbing, Inc., an Arizona corporation;
Miller Mechanical Contractors, Inc., a Georgia corporation;
Nelson Mechanical Contractors, Inc., a Florida corporation;
Power Plumbing Inc., a Delaware corporation;
R.C.R. Plumbing, Inc., a California corporation;
Sherwood Mechanical, Inc., a California corporation; and
Teepe's River City Mechanical, Inc., an Ohio corporation.
"GAAP" means generally accepted accounting principles as consistently
applied in the United States.
"Hart-Scott Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Hazardous Substance" has the meaning set forth in Section 5.13(c).
"IPO" means a firm commitment underwritten initial public offering of
AmPaM Stock managed by one or more nationally recognized national investment
banking firms.
"known" or "knowledge," when used in reference to a statement regarding
the existence or absence of facts in this Agreement, is intended by the parties
to mean that the only information to be attributed to such person is information
actually known to (a) the person in the case of an individual, (b) in the case
of a corporation or other entity other than the Company, an officer or director
of such corporation or entity or (c) in the case of the Company and its
Subsidiaries, an officer of the Company listed on Schedule 2.2 hereto, except
for David Baggett.
"Material Adverse Change" means a material adverse change in the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Documents" has the meaning set forth in Section 5.23.
3
<PAGE> 12
"Ordinary Course of Business" means the ordinary course of business
consistent with past customs and practice (including with respect to quantity
and frequency).
"Other Agreements" has the meaning set forth in the recitals of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Plans" has the meaning set forth in Section 5.19.
"Private Placement Memorandum" means the Private Placement Memorandum,
dated as of February 11, 1999, provided to each Stockholder prior to the
execution and delivery of this Agreement which sets forth certain information
relating to the transactions contemplated by this Agreement and the Other
Agreements.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Relevant Group" means the Company and any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a member.
"Restricted Common Stock" has the meaning set forth in Section 1.3(ii).
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"State of Incorporation" means the State of Ohio for each of J.A.
Croson and Franklin Fire.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Subsidiaries" means with respect to a person or entity, any
corporation or other entity in which such person or entity owns a 5% or greater
ownership interest.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, employment, excise, property, deed, stamp, alternative
or add-on minimum, or other taxes, assessments, duties, fees, levies or other
governmental charges, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
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1. ACQUISITION OF STOCK
1.1 ACQUISITION. Upon the terms and subject to the conditions contained
in this Agreement and in reliance upon the representations, warranties,
covenants and agreements contained in this Agreement, on the Closing Date, the
Stockholders shall convey and transfer to AmPaM all of the issued and
outstanding shares of Company Stock as set forth in Annex I hereto.
1.2 CONSIDERATION. The consideration for the Company Stock shall be as
set forth on Annex I to this Agreement.
1.3 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY AND AMPAM. The respective designations and numbers of outstanding shares
and voting rights of each class of outstanding capital stock of the Company and
AmPaM as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
outstanding Company Stock is as set forth on Schedule 5.3 hereto; and
(ii) immediately prior to the Closing Date, the authorized
capital stock of AmPaM will consist of (A) 100,000,000 shares of AmPaM
Stock, of which the number of issued and outstanding shares will be set
forth in the Private Placement Memorandum, (B) 10,000,000 shares of
redeemable preferred stock, of which the number of issued and
outstanding shares will be set forth in the Private Placement
Memorandum, and (C) 5,000,000 shares of Restricted Voting Common Stock,
$.01 per value (the "Restricted Common Stock"), all of which will be
issued and outstanding except as otherwise set forth in the Private
Placement Memorandum.
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY
2.1 BOARD OF DIRECTORS. The Company and the Stockholders shall take
action, including solicitation of resignation of directors, necessary so that
the Board of Directors of the Company as of the Closing Date shall consist only
of the persons identified on Schedule 2.1 hereto.
2.2 OFFICERS. The Company and the Stockholders shall take action,
including solicitation of resignation of officers, necessary so that the
officers of the Company as of the Closing Date shall consist only of the persons
identified on Schedule 2.2 hereto.
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3. DELIVERY OF CONSIDERATION
3.1 STOCKHOLDERS' CONSIDERATION. On the Closing Date, the Stockholders
shall, upon surrender of certificates evidencing the Company Stock, receive from
AmPaM the respective number of shares of AmPaM Stock, the amount of cash and the
principal amount of AmPaM Notes described on Annex I hereto specified with
respect to each such Stockholder as payable on the Closing Date. All payments of
cash shall be made by certified check or wire transfer of immediately available
funds. Consideration consisting of AmPaM Notes shall be substantially in the
form of Appendix A to Annex I.
3.2 STOCKHOLDERS' DELIVERIES. The Stockholders shall deliver at the
Closing the certificates representing Company Stock, duly endorsed in blank by
the Stockholders, or accompanied by blank stock powers, and with all necessary
transfer tax and other revenue stamps, acquired at the Stockholders' expense,
affixed and canceled. The Stockholders agree promptly to cure any deficiencies
with respect to the endorsement of the stock certificates or other documents of
conveyance with respect to such Company Stock or with respect to the stock
powers accompanying any Company Stock.
4. CLOSING
The consummation of the transactions contemplated by Section 3 (the
"Closing") shall take place on March 31, 1999 or such date not later than May
31, 1999 as AmPaM shall determine by giving written notice of such other date as
provided in Section 18.7 (the "Closing Date") at the offices of Andrews & Kurth
L.L.P., 4200 Chase Tower, 600 Travis, Houston, Texas 77002.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the disclosure schedules attached hereto and
except as otherwise qualified below, the Company represents and warrants that
all of the following representations and warranties in this Section 5(A) are
true at the date of this Agreement and, subject to Section 7.7 hereto, shall be
true at the time of the Closing, and that such representations and warranties
shall survive the Closing Date for a period of eighteen months (the last day of
such period being the "Expiration Date"), except that the representations and
warranties set forth in Sections 5.3, 5.22 and 5.32 hereof shall survive until
such time as the applicable statute of limitations period has run, which shall
be deemed to be the Expiration Date for the representations and warranties set
forth in Sections 5.3, 5.22 and 5.32. For purposes of this Section 5, the term
"Company" shall mean and refer to the Company and all of its Subsidiaries, if
any, and any reference to a Material Adverse Effect on the Company or Material
Adverse Change with respect to the Company shall mean the Company and its
Subsidiaries, taken as a whole. Except as expressly set forth in this Agreement,
the Company expressly disclaims any representation or warranty (express, implied
or otherwise) relating to the
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<PAGE> 15
Company and any Subsidiary thereof including, without limitation, any warranty
of merchantability or fitness for a particular purpose.
5.1 DUE ORGANIZATION. The Company is a corporation duly incorporated
and organized, validly existing and in good standing under the laws of the State
of Incorporation, and has the requisite power and authority to carry on its
business as it is now being conducted. The Company is duly qualified or
authorized to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or authorization necessary except where the failure to be so
qualified or authorized to do business would not have a Material Adverse Effect
on the Company. Schedule 5.1 sets forth a list of all states in which the
Company is authorized or qualified to do business, which list indicates which of
such entities is authorized or qualified to do business in such states. True,
complete and correct copies of the Certificate or Articles of Incorporation and
By-laws, each as amended, of the Company (the "Charter Documents") are all
attached to Schedule 5.1. The Company has delivered to AmPaM complete and
correct copies of (i) the stock records of the Company and (ii) all minutes of
meetings, written consents and other evidence, if any, of deliberations of or
actions taken by the Company's Board of Directors, any committees of the Board
of Directors and stockholders during the last five years.
5.2 AUTHORIZATION. (i) The officers or other representatives of the
Company executing this Agreement have the authority to enter into and bind the
Company to the terms of this Agreement and (ii) the Company has the full legal
right, power and authority to enter into this Agreement and consummate the
transactions contemplated hereby. Copies of the most recent resolutions adopted
by the Board of Directors of the Company and the most recent resolutions adopted
by the Stockholders, which approve this Agreement and the transactions
contemplated hereby in all respects, certified by the Secretary or an Assistant
Secretary of the Company as being in full force and effect on the date hereof,
are attached hereto as Schedule 5.2.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company and each of its Subsidiaries is as set forth on Schedule 5.3(a). All of
the issued and outstanding shares of the capital stock of the Company are owned
by the Stockholders in the amounts set forth in Schedule 5.3(a). Except as set
forth on Schedule 5.3(a), all of the issued and outstanding capital stock of
each Subsidiary is owned by the Company. All of the issued and outstanding
shares of the capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable, are owned of record by the
Stockholders and further, such shares were offered, issued, sold and delivered
by the Company in compliance with all applicable state and Federal laws
concerning the issuance of securities. Further, none of such shares were issued
in violation of any preemptive rights of any past or present stockholder.
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<PAGE> 16
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule
5.4(a), the Company has not acquired or redeemed any shares of capital stock of
the Company since January 1, 1996. Except as set forth on Schedule 5.4(b), (i)
no option, warrant, call, conversion right or commitment of any kind exists
which obligates the Company to issue any of its authorized but unissued capital
stock; (ii) the Company has no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any distribution in respect thereof; and
(iii) neither the voting stock structure of the Company nor the relative
ownership of shares among any of its Stockholders has been altered or changed in
contemplation of the AmPaM Plan of Organization. There are no voting trusts,
proxies or other agreements or understandings to which the Company is a party or
is bound with respect to the voting of any shares of capital stock of the
Company.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses in
contemplation of the AmPaM Plan of Organization.
5.6 SUBSIDIARIES; OWNERSHIP IN OTHER ENTITIES. Except as set forth on
Schedule 5.6(a), the Company has no Subsidiaries. Except as set forth in
Schedule 5.6(b), the Company does not presently own, of record or beneficially,
or control, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any corporation, association
or business entity nor is the Company, directly or indirectly, a participant in
any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7(a) is a list of
all predecessor companies of the Company, including the names of any entities
acquired by the Company (by stock purchase, merger or otherwise) or owned by the
Company or from whom the Company previously acquired material assets, in any
case, from the earliest date upon which any Stockholder acquired his or her
stock in any Company. Except as disclosed on Schedule 5.7(b), the Company has
not been, within such period of time, a subsidiary or division of another
corporation or a part of an acquisition which was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
Company or any other person or entity that is an Affiliate of the Company since
January 1, 1996.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 is a copy of:
(i) the combined balance sheets of the Company as of September
30, 1996 and 1997 and the related statements of combined operations,
stockholders' equity and cash flows for the three-year period ended
September 30, 1997, together with the related notes and schedules (such
balance sheets, the related statements of operations, stockholders'
equity and cash flows and the related notes and schedules are referred
to herein as the "Year-end Financial Statements");
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(ii) the combined balance sheet of the Company as of June 30,
1998 and the related statements of combined operations, stockholders'
equity and cash flows for the nine-month periods ended June 30, 1997
and 1998, together with the related notes and schedules (such balance
sheets, the related statements of operations, stockholders' equity and
cash flows and the related notes and schedules are referred to herein
as the "Nine-Month Interim Financial Statements");
(iii) the combined balance sheet of the Company as of
September 30, 1998 (the "Balance Sheet Date") and the related
statements of operations, stockholders' equity and cash flows for the
twelve-month periods ended September 30, 1998 (such balance sheets, the
related statements of operations, stockholders' equity and cash flows
are referred to herein as the "Twelve-Month Interim Financial
Statements"); and
(iv) the combined income statement of the Company for the
12-month period ended June 30, 1998 (the "Valuation Income Statement").
The Year-end Financial Statements, the Nine-Month Interim Financial Statements,
the Twelve-Month Interim Financial Statements and the Valuation Income Statement
are collectively called the "Financial Statements". The Financial Statements,
including those included in the Private Placement Memorandum, have been prepared
in accordance with GAAP applied on a consistent basis and fairly present the
combined financial position of the Company as of the dates thereof and the
results of its operations and changes in financial position for the periods then
ended, subject, in the case of the Nine-Month Interim Financial Statements and
the Twelve-Month Interim Financial Statements, to normal year-end audit
adjustments and any other adjustments described therein and the absence of
certain footnote disclosures.
5.10 LIABILITIES AND OBLIGATIONS. Schedule 5.10(a) sets forth an
accurate list as of the Balance Sheet Date of (i) all material liabilities of
the Company which are not reflected on the combined balance sheet of the Company
at the Balance Sheet Date or otherwise reflected in the Company Financial
Statements at the Balance Sheet Date which by their nature would be required in
accordance with GAAP to be reflected in the balance sheet, and (ii) all loan
agreements, indemnity or guaranty agreements, bonds, mortgages, pledges or other
security agreements to which the Company is a party or by which its properties
may be bound other than bid bonds and performance bonds made in the Ordinary
Course of Business. Except as set forth on Schedule 5.10(b), since the Balance
Sheet Date, the Company has not incurred any material liabilities or obligations
of any kind, character or description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, other than liabilities incurred in the
Ordinary Course of Business. The Company has also delivered to AmPaM, on
Schedule 5.10(c), a list of contingent liabilities related to pending litigation
or litigation that has been threatened in writing, or other material liabilities
which are not fixed or otherwise accrued or reserved. For each such contingent
liability of the Company or liability of the Company for which the amount is not
fixed or is contested, the Company has provided to AmPaM the following
information:
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(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation in the
possession of the Company or its directors,
officers or stockholders relating thereto;
(b) amounts claimed and any other action or
relief sought; and
(c) name of claimant and all other parties to
the claim, suit or proceeding;
(ii) the name of each court or agency before which such claim,
suit or proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted;
and
(iv) a good faith estimate of the maximum amount, if any,
which the Company expects, based on information available, is likely to
become payable with respect to each such liability and the amount, if
any, accrued or reserved for each such potential liability on the
Financial Statements.
AmPaM acknowledges that all estimates referred to above and set forth on
Schedule 5.10(c) are only good faith estimates, and that the Company and the
Stockholders expressly do not represent or warrant that the actual amounts of
such liabilities will be equal to, or more or less than, the amounts of such
estimates.
5.11 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.11(a) sets forth an
accurate list, in all material respects, of the accounts and notes receivable of
the Company, as of the Balance Sheet Date, including any such amounts which are
not reflected in the balance sheet as of the Balance Sheet Date, and including
all receivables from and advances to employees and the Stockholders, which are
identified as such. Schedule 5.11(a) also sets forth a materially accurate aging
of all accounts and notes receivable as of the Balance Sheet Date showing
amounts due in 30-day aging categories. Except to the extent reflected on
Schedule 5.11(b), such accounts, notes and other receivables are collectible in
the amounts shown on Schedule 5.11(a), net of reserves reflected in the balance
sheet as of the Balance Sheet Date.
5.12 LICENSES; INTELLECTUAL PROPERTY. (a) The Company or its employees
hold all licenses, franchises, permits and other governmental authorizations
("Licenses") necessary to conduct the business of the Company, the absence of
which would cause a Material Adverse Effect on the Company, and the Company has
delivered to AmPaM a list that is accurate, in all material respects, and
summary description (which is set forth on Schedule 5.12(a)(1)) of all such
Licenses. At or prior to the Closing, all such Licenses owned or held by any
employee of the Company will be assigned or licensed to the Company for no
additional consideration. The Licenses listed on Schedule 5.12(a)(1) are valid,
and the Company has not received any notice that any person intends to cancel,
terminate or not renew any such License. The Company has conducted and is
conducting its business in compliance in all material respects with the
requirements, standards, criteria and
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conditions set forth in the Licenses listed on Schedule 5.12(a)(1) and is not in
violation of any of the foregoing in any material respect. Except as
specifically provided in Schedule 5.12(a)(2), the consummation by the Company of
the transactions contemplated by this Agreement will not result in a default
under or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such Licenses.
(b) The Company owns or possesses adequate licenses or other rights to
use (without making any payment or granting rights to any person in exchange)
all patents, patent applications, trademarks, copyrights, service marks and
trade names (collectively, the "Intellectual Property") necessary to conduct its
business as currently conducted. A description of any Intellectual Property
licensed by the Company, including the material terms of any such license, is
described on Schedule 5.12(b)(1). Neither the validity of the Intellectual
Property nor the title thereto or use thereof by the Company is being questioned
in any pending litigation, and the conduct of the Company's business, as
currently conducted, does not conflict with licenses, copyrights, uncopyrighted
works, trade marks, service marks, trade names, trade name rights, patents,
patent rights, unpatented inventions or trade secrets of others. Neither the
validity of the Intellectual Property nor the title thereto or use thereof by
the Company is being questioned in any pending or, to the knowledge of the
Company, threatened infringement claims or litigation, and the conduct of the
Company's business, as now conducted, does not conflict with licenses,
copyrights, uncopyrighted works, trade marks, service marks, trade names, trade
name rights, patents, patent rights, unpatented inventions or trade secrets of
others. Except as specifically provided in Schedule 5.12(b)(2), the consummation
by the Company of the transactions contemplated by this Agreement will not
adversely affect the rights and benefits afforded to the Company by any such
Intellectual Property.
5.13 ENVIRONMENTAL MATTERS. (a) Except as set forth in Schedule 5.13
attached hereto, (i) the Company has conducted its businesses in compliance in
all material respects with all applicable Environmental Laws, including, without
limitation, having all environmental permits, licenses and other approvals and
authorizations necessary for the operation of its business as presently
conducted, except where the failure to have such permit, license, approval or
authorization would not have a Material Adverse Effect on the Company, (ii) none
of the properties owned by the Company contain any Hazardous Substance as a
result of any activity of the Company in amounts exceeding the levels permitted
by applicable Environmental Laws, except where amounts in excess of such levels
would not have a Material Adverse Effect on the Company, (iii) the Company has
not received any notices, demand letters or requests for information from any
Federal, state, local or foreign governmental entity or third party indicating
that the Company may be in violation of, or liable under, any Environmental Law
in connection with the ownership or operation of its business, (iv) there are no
civil, criminal or administrative actions, suits, demands, claims, hearings,
investigations or proceedings pending or, to the knowledge of the Company,
threatened, against the Company relating to any violation, or alleged violation,
of any Environmental Law, except where such violation would not have a Material
Adverse Effect on the Company, (v) no reports have been filed, or are required
to be filed, by the Company concerning the release of any Hazardous Substance or
the threatened or actual violation of any Environmental Law, (vi) no Hazardous
Substance has
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been disposed of, released or transported in violation of any applicable
Environmental Law from any properties owned by the Company as a result of any
activity of the Company during the time such properties were owned, leased or
operated by the Company, (vii) there have been no environmental investigations,
studies, audits, tests, reviews or other analyses regarding compliance or
non-compliance with any applicable Environmental Law conducted by or which are
in the possession of the Company relating to the activities of the Company which
are not listed on Schedule 5.13 attached hereto prior to the date hereof, (viii)
to the knowledge of the Company, (A) there are no underground storage tanks on,
in or under any properties owned by the Company and (B) no underground storage
tanks have been closed or removed from any of such properties during the time
such properties were owned, leased or operated by the Company which are not
listed on Schedule 5.13, (ix) to the knowledge of the Company, (A) there is no
asbestos or asbestos-containing material present in any material quantity in any
of the properties owned by the Company, and (B) no asbestos has been removed
from any of such properties during the time such properties were owned, leased
or operated by the Company, and (x) neither the Company nor any of its
properties are subject to any material liabilities or expenditures (fixed or
contingent) relating to any suit, settlement, court order, administrative order,
regulatory requirement, judgment or claim asserted or arising under any
Environmental Law.
(b) As used herein, "Environmental Law" means, as of the Closing Date,
any Federal, state, local or foreign law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, order, judgment,
decree, injunction or agreement with any governmental entity to which the
Company is a party or subject relating to (x) the protection, preservation or
restoration of the environment (including, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource) or to human health or
safety or (y) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of Hazardous Substances, in each case as amended and as in effect on
the Closing Date. The term Environmental Law includes, without limitation, (i)
the Federal Comprehensive Environmental Response Compensation and Liability Act
of 1980, the Superfund Amendments and Reauthorization Act, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976 (including
the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste
Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Federal Occupational Safety and Health Act of
1970, each as amended and as in effect on the Closing Date, and (ii) any common
law or equitable doctrine (including, without limitation, injunctive relief and
tort doctrines such as negligence, nuisance, trespass and strict liability) that
may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of, effects of or exposure to any
Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance presently
listed, defined, designated or classified as hazardous, toxic, radioactive, or
dangerous, or otherwise regulated, under any Environmental Law. Hazardous
Substance includes any substance to which exposure is regulated by any
government authority or any Environmental Law including, without
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<PAGE> 21
limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material, asbestos or
asbestos-containing material, urea formaldehyde foam insulation, lead or
polychlorinated biphenyls.
5.14 PERSONAL PROPERTY. The Company has delivered to AmPaM an accurate
list (which is set forth on Schedule 5.14(a)) of (x) all personal property
material to the operations of the Company as of the Balance Sheet Date included
in "plant, property and equipment" on the balance sheet of the Company as of
such date, (y) all other items of personal property owned by the Company with an
individual value in excess of $15,000 (i) as of the Balance Sheet Date and (ii)
acquired since the Balance Sheet Date and (z) all material leases and agreements
in respect of personal property, including, in the case of each of (x), (y) and
(z), (1) true, complete and correct copies of all such leases and (2) an
indication as to which assets are currently owned, or were formerly owned, by
Stockholders, relatives of Stockholders, or Affiliates of the Company. Except as
set forth on Schedule 5.14(b), (i) all personal property material to, and used
by, the Company in its business is either owned by the Company or leased by the
Company pursuant to a lease included on Schedule 5.14(a), (ii) all of the
personal property listed on Schedule 5.14(a) or replacement property thereof is
in working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14(a) are in full force and effect
and constitute valid and binding agreements of the Company, in each case in
accordance with their respective terms.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
(a) The Company has delivered to AmPaM a materially accurate list
(which is set forth on Schedule 5.15(a)(1)) of all customers (persons or
entities) representing 5% or more of the Company's annual revenues for any
period covered by any of the Financial Statements. Except to the extent set
forth on Schedule 5.15(a)(2), none of such customers has canceled or, to the
knowledge of the Company, are currently threatening to cancel a currently
effective contract with the Company.
(b) The Company has listed on Schedule 5.15(b) all material contracts,
commitments and similar agreements to which the Company is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with customers listed on Schedule 5.15(a), joint venture or partnership
agreements, contracts with any labor organizations, strategic alliances and
options to purchase land), other than agreements listed on Schedules 5.10(a),
Schedule 5.14(a) or Schedule 5.16(a), (a) in existence as of the Balance Sheet
Date and (b) entered into since the Balance Sheet Date, and in each case has
delivered or made available to AmPaM true, complete and correct copies of such
agreements. For purposes of the preceding sentence, a contract, commitment or
similar agreement is "material" if it (i) has a term of more than one year
(other than contracts, commitments or agreements that are cancelable without
liability or penalty within 30 days of notice from the Company of cancellation
or that can be terminated by the Company without material penalty upon notice of
30 days or less) or (ii) requires the payment by or to the Company of more than
$100,000 during any 12-month period. Except for expenditures in the ordinary
course of
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business, the Company has also indicated on Schedule 5.15(b) a summary
description of all plans or projects involving the opening of new operations,
expansion of existing operations, or the acquisition of any personal property,
business or assets requiring, in any event, the payment of more than $50,000 by
the Company during any 12-month period.
(c) Except as set forth on Schedule 5.15(c), the Company is not
required to provide any bonding or other financial security arrangements in any
material amount in connection with any contract listed on Schedule 5.15(b).
5.16 REAL PROPERTY. Schedule 5.16(a) includes a list of all real
property owned or leased by the Company at the date hereof and all other real
property, if any, used by the Company in the conduct of its business. The
Company has good and insurable title to any real property owned by it that is
shown on Schedule 5.16(a), other than property intended to be sold or
distributed prior to the Closing Date as provided in Section 7.1(c) of this
Agreement, and all real property so owned is subject to no mortgage, pledge,
lien, conditional sales agreement, encumbrance, lease, possessory rights of
third parties or charge, except for:
(i) liens reflected on Schedule 5.10(a) or Schedule 5.16(b) as
securing specified liabilities (with respect to which no material
default by the Company exists);
(ii) liens for current taxes not yet payable and assessments
not in default;
(iii) easements for utilities serving the property; and
(iv) easements, covenants and restrictions and other
exceptions to title which do not adversely affect the current use of
the property.
Copies of all leases and agreements in respect of such real property
leased by the Company, which are true, complete and correct in all material
respects, are attached to Schedule 5.16(a), and an indication as to which such
properties, if any, are currently owned, or were formerly owned, by Stockholders
or Affiliates of the Company or Stockholders is included in Schedule 5.16(a).
Except as set forth on Schedule 5.16(b), all of such leases included on Schedule
5.16(a) are, as to the Company, in full force and effect and constitute valid
and binding agreements of the Company in accordance with their respective terms.
5.17 INSURANCE. The Company has delivered to AmPaM (i) an accurate list
as of the Balance Sheet Date of all insurance policies carried by the Company
and (ii) an accurate list of all insurance loss runs or workers compensation
claims received for the past three policy years (which lists are set forth on
Schedule 5.17). The Company has also delivered or made available to AmPaM true,
complete and correct copies of all insurance policies currently in effect that
are referred in Schedule 5.17. Such insurance policies evidence all of the
insurance the Company is required to carry pursuant to all of its contracts and
other agreements and pursuant to all applicable laws. All of such insurance
policies are currently in full force and effect, except as stated in Schedule
5.17.
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Since January 1, 1996, no insurance carried by the Company has been canceled by
the insurer and the Company has not been denied coverage under any such policy.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; LABOR MATTERS.
(a) The Company has delivered to AmPaM an accurate list (which is set
forth on Schedule 5.18(a)(1)) showing all officers, directors and key employees
of the Company, listing all employment agreements with such officers, directors
and key employees and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of each of
such persons as of (i) the Balance Sheet Date and (ii) the date hereof. The
Company has provided to AmPaM true, complete and correct copies of any
employment agreements for persons listed on Schedule 5.18(a)(1). Since the
Balance Sheet Date, except as disclosed on Schedule 5.18(a)(2), there have been
no increases in the compensation payable or any bonuses to any officer,
director, key employee or other employee, except ordinary salary increases
implemented on a basis consistent with past practices and except for bonuses
paid on a basis consistent with past practices.
(b) Except as set forth on Schedule 5.18(b), (i) the Company is not
bound by or subject to (and none of its assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) to the knowledge of the
Company, no campaign to establish such arrangement is in progress and (iii)
there is no pending or, to the Company's knowledge, threatened labor dispute
involving the Company and any group of its employees nor has the Company
experienced any labor interruptions over the past three years. The Company
believes its relationship with employees to be generally good.
(c) Except as set forth in Schedule 5.18(c) attached hereto, (i) there
are no claims, actions or proceedings pending or, to the knowledge of the
Company, threatened between the Company and any of its employees, (ii) the
Company has complied in all material respects with all laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, and (iii) the Company has not received written
notice from any person asserting that the Company is liable in any material
amount for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing.
5.19 EMPLOYEE PLANS. The Company has delivered to AmPaM accurate
schedule (Schedule 5.19(a)) showing all employee benefit plans of the Company,
including all employment agreements and other agreements or arrangements
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date and as of the date of
this Agreement. Except for the employee benefit plans, if any, described on
Schedule 5.19(a), the Company does not sponsor, maintain or contribute to any
plan program, fund or arrangement that constitutes an "employee pension benefit
plan", and neither the Company nor any Subsidiary has any obligation to
contribute to or accrue or
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pay any benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan" (within the meaning of Section 3(36) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or any non-qualified deferred
compensation arrangement). For the purposes of this Agreement, the term
"employee pension benefit plan" shall have the same meaning as is given that
term in Section 3(2) of ERISA. The Company has not sponsored, maintained or
contributed to any employee pension benefit plan other than the plans set forth
on Schedule 5.19(a), and, except as described on Schedule 5.19(b), the Company
is not or could not be required to contribute to any retirement plan pursuant to
the provisions of any collective bargaining agreement establishing the terms and
conditions or employment of any of the Company's employees.
Except as set forth on Schedule 5.19(c), the Company is not now, or
will not as a result of its past activities become, liable to the Pension
Benefit Guaranty Corporation or to any multiemployer employee pension benefit
plan under the provisions of Title IV of ERISA.
All employee benefit plans listed on Schedule 5.19(a) and the
administration thereof are in compliance in all material respects with their
terms and all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable federal, state and local
statutes, ordinances and regulations.
All accrued contribution obligations of the Company as of the Balance
Sheet Date with respect to any plan listed on Schedule 5.19(a) have either been
fulfilled in their entirety or are fully reflected on the balance sheet of the
Company as of the Balance Sheet Date.
5.20 COMPLIANCE WITH ERISA. All plans listed on Schedule 5.19(a) that
are intended to qualify under Section 401 (a) of the Code (the "Qualified
Plans") are, and have been so qualified and have been determined by the Internal
Revenue Service to be so qualified, and copies of such determination letters are
attached to Schedule 5.19(a). Except as disclosed on Schedule 5.20, all reports
and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, actuarial reports, audits or tax returns) since January 1, 1992 have been
timely filed or distributed, and copies thereof have been made available to
AmPaM. No such plan listed on Schedule 5.19(a) nor the Company has engaged in
any transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No such Plan listed on Schedule 5.19(a) has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(l) of ERISA; and the Company has not incurred any liability for
excise tax or penalty due to the Internal Revenue Service nor any liability to
the Pension Benefit Guaranty Corporation. The Company further represents that
except as set forth on Schedule 5.20 hereto:
(i) there have been no terminations, partial terminations or
discontinuations of contributions to any Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval
by the Internal Revenue Service;
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(ii) no plan listed on Schedule 5.19(a) subject to the
provisions of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase
is defined in Section 4043 of ERISA) with respect to any such plan
listed in Schedule 5.19(a);
(iv) the Company (including any Subsidiaries) has not incurred
liability under Section 4062 of ERISA; and
(v) no circumstances exist pursuant to which the Company could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to any multiemployer plan or the PBGC under
Title IV of ERISA or to the Internal Revenue Service for any excise tax
or penalty, or being subject to any statutory lien to secure payment of
any such liability) with respect to any plan now or heretofore
maintained or contributed to by any entity other than the Company that
is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 5.21 or Schedule 5.13, the Company has not violated within the five
years prior to the date of this Agreement and is not currently in violation of
any law or regulation or any order of any court or Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it other than violations that would not
have a Material Adverse Effect on the Company; and except to the extent set
forth on Schedule 5.10(c) or Schedule 5.13, there are no claims, actions, suits
or proceedings, pending or, to the knowledge of the Company, threatened in
writing against the Company, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over the Company and no written
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received by the Company, and to the knowledge of the Company there is
no valid basis for any such claim, action, suit or proceeding that could
reasonably be expected to have a Material Adverse Effect on the Company.
5.22 TAXES. The Company has timely filed all requisite Federal, state
and other Tax Returns or extension requests for all fiscal periods ended on or
before the Balance Sheet Date; and except as set forth on Schedule 5.22(a),
there are no examinations in progress or claims pending against the Company for
federal, state and other Taxes (including penalties and interest) for any period
or periods prior to and including the Balance Sheet Date and no notice of any
claim for Taxes, whether pending or threatened, has been received. All Tax,
including interest and penalties (whether or not shown on any Tax Return), due
by the Company has been paid. The amounts shown as accruals for Taxes on the
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before the date of the respective Financial Statements. Copies of (i) any tax
examinations, (ii) extensions of statutory limitations and (iii) the federal and
local income Tax Returns and franchise Tax Returns of Company for their last
three (3) fiscal years, or such shorter period of time as any of them shall
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have existed, are attached hereto as Schedule 5.22(a) or have otherwise been
delivered to AmPaM. The Company has a taxable year ended September 30. Except as
set forth on Schedule 5.22(a), the Company uses the accrual method of accounting
for income tax purposes, and the Company's methods of accounting have not
changed in any material respect in the past five years (except as required to
conform to changes in GAAP). The Company is not an investment company as defined
in Section 351(e)(1) of the Code. The Company is not and has not during the last
five years been a party to any tax sharing agreement or agreement of similar
effect. Except as set forth on Schedule 5.22(a), the Company is not and has not
during the last five years been a member of any consolidated group for federal
tax purposes. The Company has not received, been denied, or applied for any
private letter ruling from the IRS during the last ten years.
5.23 NO VIOLATIONS; NO CONSENT REQUIRED, ETC.
(a) The Company is not in violation of any Charter Document. Except as
set forth on Schedule 5.23(a), the Company is not in default under any lease,
instrument, agreement, license, or permit set forth on Schedule 5.12(a),
Schedule 5.14(a), Schedule 5.15(b) or Schedule 5.16(a) (collectively, the
"Material Documents").
(b) Except as set forth on Schedule 5.23(b)(1), the execution and
delivery of this Agreement by each of the Company and the Stockholders do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company under any of the
terms, conditions or provisions of (i) the Charter Documents of the Company,
(ii) any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental authority
applicable to the Company or any of its properties or assets, or (iii) any
Material Document to which the Company is now a party or by which the Company or
any of its properties or assets may be bound or affected. The consummation by
the Company and the Stockholders of the transactions contemplated hereby will
not result in any material violation, conflict, breach, right of termination or
acceleration or creation of liens under any of the terms, conditions or
provisions of the items described in clauses (i) through (iii) of the preceding
sentence, subject, in the case of the terms, conditions or provisions of the
items described in clause (iii) above, to obtaining (prior to the Effective
Time) such consents as may be required from commercial lenders, lessors or other
third parties as listed on Schedule 5.23(b)(2).
(c) Except as set forth on Schedule 5.23(c) and except for the
Hart-Scott Act, none of the Material Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to the consummation by the Company and the Stockholders of any of the
transactions contemplated hereby in order to remain in full force and effect,
and consummation by the Company and the Stockholders of the transactions
contemplated hereby will not give rise to any right to termination, cancellation
or acceleration or loss of any material right or benefit under any Material
Document.
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(d) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act or with any state securities authorities in connection with the offer
and sale of AmPaM Stock and AmPaM Notes pursuant to this Agreement and (ii) any
filing required to be made under the Hart-Scott Act in connection with the
transactions contemplated by this Agreement, no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby.
(e) Except as set forth on Schedule 5.23(e), none of the Material
Documents prohibits the disclosure or publication by the Company or AmPaM of the
name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company from freely providing services or
selling products to any other customer or potential customer of the Company,
AmPaM or any Other Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24, the
Company is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.25 ABSENCE OF CHANGES. (a) Since the Balance Sheet Date, except as
set forth on Schedule 5.25 or as otherwise contemplated hereby, there has not
been:
(i) any Material Adverse Change in the Company;
(ii) any damage, destruction or casualty loss (whether or not
covered by insurance), alone or in the aggregate, which has caused a
Material Adverse Effect on the Company;
(iii) any change in the authorized capital of the Company or
its outstanding securities or any change in its ownership interests or
any grant of any options, warrants, calls, conversion rights or
commitments;
(iv) any declaration or payment of any dividend or
distribution in respect of the capital stock or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock
of the Company except for distributions that would have been permitted
after the date hereof under Section 7.3(iii) hereof,
(v) any increase in the compensation, bonus, sales commissions
or fee arrangement payable or to become payable by the Company to any
of its officers, directors, Stockholders, employees, consultants or
agents, except for ordinary and customary bonuses, except for salary
increases for employees in accordance with past practice and except for
the establishment of the J. A. Croson Company Deferred Stock
Compensation Plan (the "Croson Plan") or the Franklin Fire Sprinkler
Company Deferred Compensation Plan (the "Franklin Plan") and the
arrangements to contribute shares of AmPaM Stock thereto as described
in Annex I hereto;
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(vi) any work interruptions, labor grievances or claims filed,
or any event or condition of any character, which has caused a Material
Adverse Effect on the Company;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the Company to any
person, including, without limitation, the Stockholders and their
affiliates, except inventory sold or transferred in the Ordinary Course
of Business;
(viii) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to the Company, including
without limitation any indebtedness or obligation of any Stockholders
or any Affiliate thereof;
(ix) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
material assets, property or rights of the Company or requiring consent
of any party to the transfer and assignment of any such assets,
property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the Ordinary Course of Business;
(xi) any waiver of any material rights or claims of the
Company;
(xii) any amendment or termination of any Material Document to
which the Company is a party except for the termination of a Material
Document in accordance with its terms without any action on the part of
the Company;
(xiii) any transaction by the Company outside the Ordinary
Course of Business;
(xiv) any cancellation or termination of a material contract
with a customer or client listed on Schedule 5.15(a) prior to the
scheduled termination date thereof; or
(xv) any other distribution of property or assets by the
Company other than in the Ordinary Course of Business, other than (a)
distributions of nonoperating assets specifically identified on
Schedule 5.25, (b) distributions of real estate required by Section
7.1(c) of this Agreement and (c) distributions of cash or promissory
notes permitted by Annex I hereto.
(b) Except as set forth on Schedule 5.25, the Company has not,
between the Balance Sheet Date and the date hereof, taken any of the actions set
forth in Section 7.3.
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5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The Company has delivered to
AmPaM an accurate schedule (which is set forth on Schedule 5.26) as of the date
of the Agreement of:
(i) the name of each financial institution in which the
Company has an account or safe deposit box;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or
have access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company and
a description of the terms of such power.
5.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the Company and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
Company and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
5.28 RELATIONS WITH GOVERNMENTS. The Company has not, and to the
knowledge of the Company none of the Stockholders or any Affiliate of any of
them has, given or offered anything of value to any governmental official,
political party or candidate for government office or otherwise taken any action
which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any law of similar effect.
5.29 DISCLOSURE. This Agreement, including the Annexes and Schedules
hereto, and the completed questionnaire related to the Hart-Scott Act furnished
to AmPaM by the Company, do not contain an untrue statement of a material fact
concerning the Company or omit to state a material fact concerning the Company
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing does not apply to statements contained in or omitted from any
of such documents made or omitted in reliance upon information furnished in
writing by AmPaM.
5.30 NO WARRANTIES OR INSURANCE. Except for warranty liability under
applicable law and except for warranty liability under the warranties issued by
the Company of the types described on Schedule 5.30, the Company has no
liability to any person under any warranty and the Company does not offer or
sell insurance or consumer protection plans or other arrangements that could
result in the Company being required to make any payment to or perform any
service for any person.
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5.31 INTEREST IN CUSTOMERS AND SUPPLIERS AND RELATED PARTY
TRANSACTIONS. Except as described on Schedule 5.31 or in Section 8.11, no
Stockholder, officer, director or Affiliate of the Company (i) owns, directly or
indirectly, any financial interest in, or is a director, officer, employee or
affiliate of, any corporation, firm, association or business organization that
is a client, supplier, customer, lessor, lessee or competitor of the Company, or
(ii) is or will be a party to an agreement or relationship with the Company
other than through a customary "at will" employment relationship.
5.32 PRIVATE PLACEMENT MEMORANDUM. None of the information supplied or
to be supplied by the Company in writing specifically for inclusion in the
Private Placement Memorandum contained or, as of the Closing Date, will contain
any untrue statement of a material fact concerning the Company or omitted or
will omit to state any material fact required to be stated therein or necessary
in order to make the statements contained in such information supplied or to be
supplied by the Company concerning the Company, in light of the circumstances
under which they are made, not misleading.
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.
Each Stockholder severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.7 hereof, shall be true at the time of
Closing, and that the representations and warranties set forth in this Section
5(B) shall survive the Closing Date.
5.33 AUTHORITY; OWNERSHIP. Such Stockholder has the full legal right,
power and authority to enter into this Agreement, and this Agreement is a legal,
valid and binding obligation of such Stockholder, enforceable against the
Stockholder in accordance with its terms. Except as set forth on Schedule
5.33(a), the execution and delivery of this Agreement by such Stockholder does
not violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of such Stockholder
under any of the terms, conditions or provisions of (i) the Charter Documents of
the Company, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to such Stockholder or any of such Stockholder's properties
or assets, or (iii) any lease, instrument, agreement, license or permit to which
such Stockholder is now a party or by which such Stockholder or any of such
Stockholder's properties or assets may be bound or affected. Except for (i) any
filings to be made with the SEC pursuant to the 1933 Act and any state
securities authorities in connection with the offer and sale of AmPaM Stock and
AmPaM Notes pursuant to this Agreement, (ii) any filing required to be made
under the Hart-Scott Act in connection with the transactions contemplated by
this Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by such
Stockholder or the consummation by such Stockholder of the transactions
contemplated hereby. Except as set forth on
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Schedule 5.33(b), such Stockholder owns beneficially and of record all of the
shares of the Company Stock identified on Annex I hereto as being owned by such
Stockholder, and, such Company Stock is owned free and clear of all liens,
security interests, pledges, charges, voting trusts, voting agreements,
restrictions, encumbrances and claims of every kind.
5.34 PREEMPTIVE RIGHTS. Such Stockholder does not have, or hereby
waives, any preemptive or other right to acquire shares of Company Stock or
AmPaM Stock that such Stockholder has or may have had. Nothing herein, however,
shall limit or restrict the rights of any Stockholder to acquire AmPaM Stock
pursuant to (i) this Agreement, (ii) any option granted or to be granted by
AmPaM to such Stockholder, (iii) a purchase through a broker in a regular stock
market transaction or (iv) a purchase from a stockholder of a Founding Company
(subject to compliance with any contractual restrictions or securities law
restrictions applicable thereto specified in Section 15 hereof).
5.35 NO COMMITMENT TO DISPOSE OF AMPAM STOCK. No Stockholder is under
any binding commitment or contract to sell, exchange or otherwise dispose of
shares of AmPaM Stock or AmPaM Notes received pursuant to this Agreement.
5.36 DISCLOSURE. The completed Director and Officer Questionnaires with
respect to such Stockholder (if any), the completed investor questionnaire
furnished to AmPaM by such Stockholder in connection with the proposed
acquisition by such Stockholder of AmPaM Stock and AmPaM Notes and any other
information provided to AmPaM in writing by such Stockholder relating
specifically to such Stockholder for inclusion in the Private Placement
Memorandum do not contain an untrue statement of a material fact concerning such
Stockholder or omit to state a material fact concerning such Stockholder
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading.
6. REPRESENTATIONS OF AMPAM
Except as otherwise qualified below, AmPaM represents and warrants that
all of the following representations and warranties in this Section 6 are true
at the date of this Agreement and, subject to Section 7.7 hereof, shall be true
at the time of Closing, and that such representations and warranties shall
survive the Closing Date for a period of eighteen months (the last day of such
period being the "Expiration Date" for purposes of the representations and
warranties set forth in this Section 6), except that the representations and
warranties set forth in Section 6.3, 6.11 and 6.15 shall survive until such time
as the applicable statute of limitations period has run, which shall be deemed
to be the Expiration Date for the representations and warranties set forth in
Sections 6.3, 6.11 and 6.15.
AmPaM acknowledges that in purchasing the shares of Company Stock, it
is relying upon its own independent investigation as well as the representations
and warranties of the Company and the Stockholders as set forth in this
Agreement.
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6.1 DUE ORGANIZATION. AmPaM is a corporation duly incorporated and
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite power and authority to carry on its business as
it is now being conducted and as contemplated by the Private Placement
Memorandum. AmPaM is duly qualified or authorized to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or authorization
necessary, except where the failure to be so qualified or authorized to do
business would not have a Material Adverse Effect. True, complete and correct
copies of the Certificate of Incorporation and By-laws, each as proposed to be
amended and as such documents shall be in effect as of the Closing Date, of
AmPaM (the "AmPaM Charter Documents") are attached hereto as Annex II.
6.2 AUTHORIZATION. (i) The officers of AmPaM executing this Agreement
have the authority to enter into and bind AmPaM to the terms of this Agreement
and (ii) AmPaM has the full legal right, power and authority to enter into this
Agreement and consummate the transactions contemplated hereby. All corporate
acts and other proceedings required to have been taken by AmPaM to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly and properly taken.
6.3 CAPITAL STOCK OF AMPAM. The authorized capital stock of AmPaM is as
set forth in Section 1.3(ii). Immediately prior to the Closing Date, all of the
issued and outstanding shares of the capital stock of AmPaM will be as set forth
in the Private Placement Memorandum, free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind other than any restrictions described in the Private
Placement Memorandum. All of the issued and outstanding shares of the capital
stock of AmPaM have been duly authorized and validly issued, are fully paid and
nonassessable and such shares were offered, issued, sold and delivered by AmPaM
in compliance with all applicable state and Federal laws concerning the issuance
of securities. Further, none of such shares were issued in violation of the
preemptive rights of any past or present stockholder of AmPaM. Upon the Closing
Date, the authorized, issued and outstanding shares of capital stock of AmPaM
will be as set forth in the Private Placement Memorandum under the caption
"Capitalization." Upon the Closing Date, the aggregate number of shares of AmPaM
Stock issued and outstanding on the Closing Date that are owned by Sterling City
Capital, LLC, any Affiliates of Sterling City Capital, LLC and the officers and
directors of AmPaM will not be greater than the number of shares of AmPaM Stock
reflected in the Private Placement Memorandum as the aggregate number of shares
of AmPaM Stock to be issued and outstanding and owned by Sterling City Capital,
LLC, any Affiliates of Sterling City Capital, LLC and the officers and directors
of AmPaM.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements,
except for the arrangements to contribute AmPaM Stock to the Croson Plan, the
Franklin Plan as described in Annex I hereto, and except as set forth in the
Private Placement Memorandum, (i) no option, warrant, call, conversion right or
commitment of any kind exists as of the date of this Agreement which obligates
AmPaM to issue any of its authorized but unissued capital stock; and (ii) AmPaM
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity
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securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. The material terms of any options, warrants or
other rights to acquire shares of the stock of AmPaM referred to in the
preceding sentence will be as described in the Private Placement Memorandum.
6.5 SUBSIDIARIES. As of the date of this Agreement, AmPaM has no
subsidiaries. As of the date of this Agreement, AmPaM does not own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity, and AmPaM is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. The historical financial statements of AmPaM
included in the Private Placement Memorandum (the "AmPaM Financial Statements")
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (except as noted thereon), and the balance
sheet included therein presents fairly the financial position of AmPaM as of its
date. Management of AmPaM believes that the assumptions underlying the pro forma
adjustments utilized in the preparation of such pro forma financial statements
are reasonable, and such pro forma adjustments have been properly applied to the
historical financial amounts in the compilation of the pro forma financial
statements. Based on the representations in Section 5.9 of this Agreement and in
Section 5.9 of each of the Other Agreements, the pro forma financial information
of AmPaM fairly presents the pro forma financial position, results of operations
and other information purported to be shown therein at the respective dates and
for the respective periods specified.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth in the Private
Placement Memorandum, as of the date of this Agreement, AmPaM has no material
liabilities or obligations of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise, other than
liabilities incurred in the ordinary course of business and consistent with past
practices, liabilities or obligations set forth in or contemplated by this
Agreement and the Other Agreements and except for fees incurred in connection
with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth in
the Private Placement Memorandum, AmPaM is not in violation of any law or
regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and its stockholders and, there are no claims,
actions, suits or proceedings, pending or, to the knowledge of AmPaM, threatened
against or affecting, AmPaM, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over it and no notice of any
claim, action, suit or proceeding, whether pending or threatened, has been
received. AmPaM has conducted and is conducting its businesses in compliance in
all material respects with the requirements, standards, criteria and conditions
set forth in applicable Federal, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations and is not in
violation, in any material respect, of any of the foregoing.
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6.9 NO VIOLATIONS. (a) AmPaM is not in violation of any AmPaM Charter
Document. AmPaM is not in default under any lease, instrument, agreement,
license, or permit to which AmPaM is a party or by which AmPaM or any of its
properties are bound (collectively, the "AmPaM Documents").
(b) The execution and delivery of this Agreement by AmPaM do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of AmPaM under any of the
terms, conditions or provisions of (i) the AmPaM Charter Documents, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to
AmPaM or any of its properties or assets, or (iii) any AmPaM Document; provided
that the representations and warranties specified in clause (ii) of this
sentence (A) are based on information in the investor questionnaires and related
purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements and
(B) are subject to the accuracy and completeness of the information contained in
such investor questionnaires and related purchaser representative questionnaires
and the truthfulness of such representations and warranties. The consummation by
AmPaM of the transactions contemplated hereby will not result in any material
violation, conflict, breach, right of termination or acceleration or creation of
liens under any of the terms, conditions or provisions of the items described in
clauses (i) through (iii) of the preceding sentence, subject, in the case of the
terms, conditions or provisions of the items described in clause (iii) above, to
obtaining (prior to the Closing Date) (x) such approvals, consents or orders
from the SEC, state blue sky authorities and authorities administering the
Hart-Scott Act and (y) such other consents as may be required from commercial
lenders, lessors or other third parties which are listed on Schedule 6.9.
(c) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act and filings with various state securities authorities in connection
with the transactions contemplated by this Agreement, and (ii) any filings
required to be made under the Hart-Scott Act in connection with the transactions
contemplated by this Agreement, none of the AmPaM Documents requires notice to,
or the consent or approval of, any governmental agency or other third party with
respect to the consummation by AmPaM of any of the transactions contemplated
hereby in order to remain in full force and effect, and consummation by AmPaM of
the transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any material right or
benefit under the AmPaM Documents; provided that the representations and
warranties specified in clauses (i) and (ii) of this sentence (A) are based on
information in the investor questionnaires and related purchaser representative
questionnaires executed and delivered by the Stockholders of the Company and the
stockholders of the Other Founding Companies, the representations and warranties
of the Stockholders set forth in Section 16 hereof and the representations and
warranties of the
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stockholders of the Other Founding Companies set forth in Section 16 of the
Other Agreements and (B) are subject to the accuracy and completeness of the
information contained in such investor questionnaires and related purchaser
representative questionnaires and the truthfulness of such representations and
warranties.
(d) Except for (i) any filings with the SEC pursuant to the 1933 Act
and filings with various state securities authorities in connection with the
transactions contemplated by this Agreement and (ii) any filings required under
the Hart-Scott Act in connection with the transactions contemplated by this
Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by AmPaM
or the consummation by AmPaM of the transactions contemplated hereby; provided
that the representations and warranties specified in clauses (i) and (ii) of
this sentence (A) are based on information in the investor questionnaires and
related purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements and
(B) are subject to the accuracy and completeness of the information contained in
such investor questionnaires and related purchaser representative questionnaires
and the truthfulness of such representations and warranties.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by AmPaM and the performance of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of AmPaM and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of AmPaM, enforceable
against AmPaM in accordance with its terms.
6.11 AMPAM STOCK. At the time of issuance thereof and delivery to the
Stockholders, the AmPaM Stock to be delivered to the Stockholders pursuant to
this Agreement will constitute valid, duly authorized and legally issued shares
of AmPaM, fully paid and nonassessable, and with the exception of restrictions
upon resale set forth in Sections 15 and 16 hereof, will be identical in all
substantive respects (which do not include the form of certificate upon which it
is printed or the presence or absence of a CUSIP number on any such certificate)
to the AmPaM Stock issued and outstanding as of the date hereof, other than the
Restricted Common Stock. The AmPaM Stock issued and delivered to the
Stockholders shall at the time of such issuance and delivery be free and clear
of any liens, claims or encumbrances of any kind or character. The offer and
sale of the shares of AmPaM Stock to be issued to the Stockholders pursuant to
this Agreement are not required to be registered under the 1933 Act; provided
that the representations and warranties specified in this sentence (A) are based
on information in the investor questionnaires and related purchaser
representative questionnaires executed and delivered by the Stockholders of the
Company and the stockholders of the Other Founding Companies, the
representations and warranties of the Stockholders set forth in Section 16
hereof and the representations and warranties of the stockholders of the Other
Founding Companies set forth in Section 16 of the Other Agreements and (B) are
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subject to the accuracy and completeness of the information contained in such
investor questionnaires and related purchaser representative questionnaires and
the truthfulness of such representations and warranties.
6.12 AMPAM NOTES. The AmPaM Notes have been duly authorized and, at the
Closing Date, will have been duly executed by AmPaM and, when authenticated,
issued and delivered, will constitute valid and binding obligations of AmPaM,
enforceable against AmPaM in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers) reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
6.13 NO SIDE AGREEMENTS. AmPaM has not entered into any agreement with
any of the Founding Companies or any of the Stockholders of the Founding
Companies other than this Agreement, the Other Agreements, the agreements
referred to in this Agreement and in the Other Agreements and the Private
Placement Memorandum. AmPaM has not entered into any agreements providing for
rights to register shares of AmPaM Stock under the 1933 Act except as provided
in Section 17 of this Agreement, in Section 17 of the Other Agreements and in an
agreement with Sterling City Capital, LLC, its Affiliates and officers and
directors of AmPaM having terms substantially similar to those set forth in
Section 17 hereof.
6.14 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. AmPaM was formed in
June 1998 and has conducted no material business since the date of its inception
except for activities related to the transaction contemplated by this Agreement,
the Other Agreements and the Private Placement Memorandum. Except as described
in the Private Placement Memorandum, as of the date of this Agreement, AmPaM
does not own any real property or any material personal property and is not a
party to any other material agreement other than this Agreement, the Other
Agreements and the agreements contemplated hereby and thereby.
6.15 RELATIONS WITH GOVERNMENTS. Neither AmPaM nor any of its
directors, officers or Affiliates has given or offered anything of value to any
government official, political party or candidate for government office, nor has
AmPaM, any of its directors, officers or Affiliates of any of them otherwise
taken any action, which would cause AmPaM to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any law of similar effect.
6.16 DISCLOSURE. The Private Placement Memorandum delivered to the
Company and the Stockholders does not as of the date hereof contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing does not apply to
statements contained in or omitted from any of such documents made or omitted in
reliance upon, and in conformity with, information furnished to AmPaM by the
Company or the Stockholders in writing specifically for inclusion in the Private
Placement Memorandum.
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6.17 OTHER AGREEMENTS. The Other Agreements have been duly authorized,
executed and delivered by AmPaM and constitute the legal, valid and binding
obligation of AmPaM enforceable against AmPaM in accordance with their
respective terms. The terms and conditions of the Other Agreements (excluding
the terms relating to the consideration payable by AmPaM thereunder) are
identical in all material respects to the terms and conditions in this
Agreement.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE; TRANSFER OF REAL ESTATE.
(a) Between the date of this Agreement and the Closing Date, the
Company will afford to the officers and authorized representatives of AmPaM
reasonable access during normal business hours to all of the Company's sites,
properties, books and records and will furnish AmPaM with such additional
financial and operating data and other information as to the business and
properties of the Company as AmPaM may from time to time reasonably request. The
Company will cooperate with AmPaM, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. AmPaM,
the Stockholders and the Company will treat all information obtained in
connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to the Company as confidential
in accordance with the provisions of Section 14 hereof.
(b) Between the date of this Agreement and the Closing Date, AmPaM will
afford to the officers and authorized representatives of the Company access to
all of AmPaM's sites, properties, books and records and will furnish the Company
with such additional financial and operating data and other information as to
the business and properties of AmPaM and the Other Founding Companies as the
Company may from time to time reasonably request. AmPaM will cooperate with the
Company, its representatives, auditors and counsel in the preparation of any
documents or other material which may be required in connection with any
documents or materials required by this Agreement. The Company will cause all
information obtained pursuant to this Section 7.1(b) or obtained in connection
with the negotiation and performance of this Agreement to be treated as
confidential in accordance with the provisions of Section 14 hereof.
(c) Except as set forth on Schedule 7.1, any real property owned by the
Company will be sold or distributed by the Company on terms mutually acceptable
to AmPaM and the Company and leased back by the Company on terms no less
favorable to the Company than those available from an unaffiliated party and
otherwise reasonably acceptable to AmPaM at or prior to the Closing Date.
(d) David A. Croson shall cause the guaranty by the Company of the loan
referred to in Schedule 10.1 to be released by Bank One within 60 days following
the Closing Date.
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7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Closing Date, the Company will, except as set forth on
Schedule 7.2:
(i) carry on its businesses in the Ordinary Course of Business
and not introduce any material new method of management, operation or
accounting;
(ii) use all commercially reasonable efforts to maintain its
properties and facilities, including those held under leases, in as
good working order and condition as at present, ordinary wear and tear,
depreciation and insured losses excepted;
(iii) perform in all material respects all of its obligations
under all Material Documents relating to or affecting its respective
assets, properties or rights;
(iv) use its commercially reasonable efforts to keep in full
force and effect present insurance policies or other comparable
insurance coverage;
(v) use its commercially reasonable efforts to maintain and
preserve its business organization intact, retain its respective
present key employees and maintain its relationships with suppliers,
customers and others having business relations with the Company;
(vi) use its commercially reasonable efforts to maintain
compliance with all material permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory
agencies and similar governmental authorities;
(vii) maintain present debt and lease instruments in
accordance with their terms and not enter into new or amended debt or
lease instruments without the knowledge and consent of AmPaM (which
consent shall not be unreasonably withheld), provided that debt and/or
lease instruments may be replaced without the consent of AmPaM if such
replacement instruments are on terms at least as favorable to the
Company as the instruments being replaced;
(viii) maintain or reduce present salaries and commission
levels for all officers, directors, employees and agents except for
ordinary and customary bonus and salary increases for employees in
accordance with past practices; and
(ix) use commercially reasonable efforts to cause the actual
amount of its Current Assets (as defined in Annex I hereto) to be not
less than 150% of the actual amount of its Current Liabilities (as
defined in Annex I hereto).
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7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between
the date hereof and the Closing Date, the Company will not, without prior
written consent of AmPaM:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of any kind
other than in connection with the exercise of options or warrants
listed in Schedule 5.4;
(iii) except as permitted pursuant to the terms and conditions
for distributions described in Annex I, declare or pay any dividend, or
make any distribution in respect of its stock whether now or hereafter
outstanding, or purchase, redeem or otherwise acquire or retire for
value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree
to incur any liability or make any capital expenditures, except if it
is in the Ordinary Course of Business or involves an amount not in
excess of three percent (3%) of the Company's gross revenues for fiscal
1997;
(v) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired, except (1) with respect to purchase money
liens incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of three percent (3%) of the Company's
gross revenues for fiscal 1997 necessary or desirable for the conduct
of the businesses of the Company, (2) (A) liens for taxes either not
yet due or being contested in good faith and by appropriate proceedings
(and for which contested taxes adequate reserves have been established
and are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the Ordinary
Course of Business (the liens set forth in clause (2) being referred to
herein as "Statutory Liens"), or (3) liens set forth on Schedule 5.10
and/or Schedule 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the Ordinary Course of Business and
other than distributions of real estate and other assets as permitted
in this Agreement (including Annex I hereto);
(vii) negotiate for the acquisition of any business or the
start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate
with or into any other corporation;
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(ix) waive any material rights or claims of the Company,
provided that the Company may negotiate and adjust bills and accounts
in the course of good faith disputes with customers in a manner
consistent with past practice;
(x) amend or terminate any Material Document except for the
termination of a Material Document in accordance with its terms without
any action on the part of the Company; or
(xi) enter into any other material transaction outside the
Ordinary Course of Business or any transaction prohibited hereunder.
7.4 NO SHOP. None of the Stockholders, the Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than AmPaM
or its authorized agents relating to, any acquisition or purchase of
all or a material amount of the assets of, or any equity interest in,
the Company or a merger, consolidation or business combination of the
Company.
7.5 AGREEMENTS. Except as disclosed on Schedule 7.5(a), the
Stockholders and the Company shall terminate (i) any stockholders agreements,
voting agreements, voting trusts, agreements providing for the grant by the
Company of any options, warrants and employment agreements between the Company
and any employee listed on Schedule 8.11 hereto and (ii) except as otherwise
provided in this Agreement, any existing agreement between the Company and any
Stockholder, on or prior to the Closing Date provided that nothing herein shall
prohibit or prevent the Company from paying (either prior to or on the Closing
Date) notes or other obligations from the Company to the Stockholders described
in Schedule 7.5(b) in accordance with the terms thereof.
7.6 NOTIFICATION OF CERTAIN MATTERS. Each Stockholder and the Company
shall give prompt notice to AmPaM upon obtaining knowledge of (i) the occurrence
or non-occurrence of any event the occurrence or nonoccurrence of which would be
likely to cause any representation or warranty of the Company or such
Stockholder contained herein to be untrue or inaccurate in any material respect
at or prior to the Closing and (ii) any material failure of such Stockholder or
the Company to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such person hereunder. AmPaM shall give prompt
notice to the Company of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of AmPaM contained herein to be untrue or inaccurate
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in any material respect at or prior to the Closing, (ii) any material failure of
AmPaM to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; (iii) any termination of any Other
Agreement for any reason; and (iv) the issuance by the SEC or any state
securities regulatory authority of any issuance of or threatened issuance of any
order challenging the availability of an exemption from registration or
suspending the qualification of any securities described in the Private
Placement Memorandum for sale in any jurisdiction. However, subject to the
provisions of Section 7.7, such notification shall not relieve either the
Company or such Stockholder of their respective obligations under this
Agreement. The delivery of any notice pursuant to this Section 7.6 shall not be
deemed to (i) modify the representations or warranties hereunder of the party
delivering such notice, which modification may only be made pursuant to Section
7.7, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
7.7 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until 24 hours prior to the
Closing Date to notify AmPaM with respect to any matter (i) hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules or (ii) which may
have been omitted from the Schedules previously provided by such party.
Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule
prepared by the Company may be made unless AmPaM consents to such amendment or
supplement; and provided further, that no amendment or supplement to a Schedule
prepared by AmPaM may be made unless the Stockholders consent to such amendment
or supplement. For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Sections 8.1 and
9.1 have been fulfilled, the Schedules hereto, as amended or supplemented with
the consent of AmPaM or the Stockholders, as the case may be, as provided above,
shall be deemed to be the Schedules to this Agreement.
7.8 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
appropriate to carry out the transactions contemplated hereby and to cause the
conditions to the Closing Date to be satisfied as promptly as practicable.
7.9 AUTHORIZED CAPITAL. Prior to the Closing Date, AmPaM shall maintain
its authorized capital stock as set forth in the Private Placement Memorandum.
7.10 COMPLIANCE WITH THE HART-SCOTT ACT. All parties to this Agreement
hereby recognize that one or more filings under the Hart-Scott Act may be
required in connection with the transactions contemplated herein. If it is
determined by the parties to this Agreement that filings under the Hart-Scott
Act are required, then: (i) each of the parties hereto agrees to cooperate and
use its best efforts to comply with the Hart-Scott Act and (ii) such compliance
by the Stockholders and the parties agree to cooperate and use their best
efforts to cause all filings required under the Hart-Scott Act to be made. If
filings under the Hart-Scott Act are required, the costs and expenses thereof
(including filing fees) shall be borne by AmPaM.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND
COMPANY
The obligations of the Stockholders and the Company with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions. As of
the Closing Date, if any such applicable conditions have not been satisfied, any
one or more of the Stockholders who would be entitled to receive a majority of
the Aggregate Consideration (as defined herein) received by all Stockholders if
the transactions contemplated hereby were consummated shall have the right to
waive any condition not so satisfied. Any act or action of the Stockholders in
consummating the Closing or delivering the certificates representing Company
Stock as of the Closing Date shall constitute a waiver of any conditions not so
satisfied. However, no such waiver shall be deemed to affect the survival of the
representations and warranties of AmPaM contained in Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of AmPaM contained in Section 6 shall be true and
correct as of the Closing Date as though such representations and warranties had
been made as of that time; all of the terms, covenants and conditions of this
Agreement to be complied with and performed by AmPaM on or before the Closing
Date shall have been duly complied with and performed in all material respects;
and certificates to the foregoing effect dated the Closing Date and signed by
the President or any Vice President of AmPaM shall have been delivered to the
Stockholders.
8.2 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of the Company or the Stockholders and that are
required to carry out this Agreement or incidental hereto shall be reasonably
satisfactory to the Company, the Stockholders and their counsel.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the purchase and sale of the Company Stock.
8.4 OPINION OF COUNSEL. The Company shall have received opinions from
counsel for AmPaM, dated the Closing Date, addressed to the Company and the
Stockholders in the form annexed hereto as Annex III.
8.5 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule 6.9
shall have been obtained; and no action or proceeding shall have been instituted
or threatened to restrain or prohibit the purchase and sale of the Company Stock
and no governmental agency or body shall have taken any other action or made any
request of Company as a result of which Company deems it inadvisable to proceed
with the transactions hereunder.
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8.6 GOOD STANDING CERTIFICATES. AmPaM shall have delivered to the
Company a certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Delaware Secretary of State and in each state
in which AmPaM is authorized to do business, showing that AmPaM is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for AmPaM for all periods prior to the Closing have
been filed and paid.
8.7 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred which would constitute a Material Adverse Change with respect to AmPaM
from the date of the Private Placement Memorandum.
8.8 SECRETARY'S CERTIFICATE. The Company shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of AmPaM, certifying the truth and correctness of attached copies of AmPaM's
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and, if required,
the stockholders of AmPaM approving AmPaM's entering into this Agreement and the
Other Agreements and the consummation of the transactions contemplated hereby
and thereby.
8.9 TAX MATTERS. The Stockholders shall have received an opinion of
Andrews & Kurth L.L.P., in substantially the form of Annex IV hereto, that the
AmPaM Plan of Organization will qualify as a tax-free transfer of property under
Section 351 of the Code and that the Stockholders will not recognize gain to the
extent the Stockholders exchange Company Stock for AmPaM Stock (but not cash or
other property) pursuant to this Agreement in connection with the AmPaM Plan of
Organization.
8.10 OTHER FOUNDING COMPANIES. The transactions contemplated by the
Other Agreements are consummated simultaneously with the consummation of the
transactions contemplated by this Agreement.
8.11 COMPANY RELEASE OF STOCKHOLDERS. The Company shall have delivered
to the Stockholders an instrument dated the Closing Date, in form reasonably
satisfactory to AmPaM and the Stockholders, which shall be effective only upon
the occurrence of the Closing Date, releasing the Stockholders from (i) any and
all claims of the Company against the Stockholders, known and unknown, and (ii)
obligations of the Stockholders to the Company, except for (x) items
specifically identified on Schedule 5.10(a) and Schedule 5.15(b) as being claims
of or obligations to the Company and (y) continuing obligations to the Company
relating to their employment by the Company pursuant to any employment agreement
entered into pursuant to Section 8.11 hereof.
8.12 STERLING CITY CAPITAL TRANSFER RESTRICTIONS. Sterling City
Capital, LLC and each of its Affiliates which owns AmPaM Stock shall have
entered into an agreement with AmPaM containing substantially the same terms and
conditions as are contained in Section 15 and Section 17.
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8.13 ELECTION OF CHIEF EXECUTIVE OFFICER. AmPaM shall have taken all
corporate action necessary to elect Robert A. Christianson as Chief Executive
Officer of AmPaM effective immediately following the Closing Date.
8.14 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto as
payable to the Stockholders upon the Closing and (ii) the aggregate cash amounts
specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AMPAM
The obligations of AmPaM with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. As of the Closing Date, if any
such conditions have not been satisfied, AmPaM shall have the right to terminate
this Agreement, or waive any such condition, but no such waiver shall be deemed
to affect the survival of the representations and warranties contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE AND OBLIGATIONS. All
the representations and warranties of the Stockholders and the Company contained
in this Agreement shall be true and correct as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date; all of the terms, covenants and conditions of this Agreement to be
complied with or performed by the Stockholders and the Company on or before the
Closing Date shall have been duly performed or complied with in all material
respects; and the Stockholders shall have delivered to AmPaM certificates dated
the Closing Date and signed by them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the purchase and sale of the Company Stock.
9.3 SECRETARY'S CERTIFICATE. AmPaM shall have received a certificate,
dated the Closing Date and signed by the secretary of the Company, certifying
the truth and correctness of attached copies of the Company's Articles or
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and the
Stockholders approving the execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby.
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9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Company
to conduct its business.
9.5 STOCKHOLDERS' RELEASE. The Stockholders shall have delivered to
AmPaM an instrument dated the Closing Date which shall be effective only upon
the occurrence of the Closing releasing the Company and AmPaM from (i) any and
all claims of the Stockholders against the Company and AmPaM and (ii)
obligations of the Company and AmPaM to the Stockholders, except for (A) items
specifically identified on Schedule 5.31 as being claims of or obligations to
the Stockholders, (B) continuing obligations to Stockholders relating to their
employment by the Company pursuant to employment agreements entered into as
specified in Section 8.11 hereof, (C) obligations arising under this Agreement
or the transactions contemplated hereby and (D) claims of Stockholders against
the Company for unreimbursed business expenses incurred by the Stockholders on
behalf of the Company (other than expenses related to the transactions
contemplated by this Agreement) prior to the Closing Date or unreimbursed
medical expenses of the Stockholders incurred prior to the Closing Date which
are covered by the Company's existing health insurance coverage. In the event
that the Closing Date does not occur, then the release instrument referenced
herein shall be void and of no further force or effect.
9.6 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of AmPaM and that are required to carry out the
transactions contemplated by this Agreement or incidental hereto shall have been
reasonably approved by counsel to AmPaM.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the Company and the Stockholders
(and between the Company and entities controlled by the Stockholders) specified
on Schedule 5.31 shall have been terminated effective prior to or as of the
Closing Date without any payment being made by the Company other than payments
made for services rendered, materials provided or other benefits provided to the
Company prior to the Closing Date pursuant to the terms of such agreements as in
effect as of the date of this Agreement.
9.8 OPINION OF COUNSEL. AmPaM shall have received opinions from counsel
to the Company and the Stockholders, dated the Closing Date, substantially in
the form annexed hereto as Annex V.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule
5.23(b)(2) shall have been obtained; and no action or proceeding shall have been
instituted or threatened to restrain or prohibit the purchase and sale of the
Company Stock and no
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governmental agency or body shall have taken any other action or made any
request of AmPaM as a result of which AmPaM deems it inadvisable to proceed with
the transactions hereunder.
9.10 GOOD STANDING CERTIFICATES. The Company shall have delivered to
AmPaM a certificate, dated as of a date no earlier than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by AmPaM, in each state in
which the Company is authorized to do business, showing the Company is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the Company for all periods prior to the
Closing have been filed and paid.
9.11 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto as
payable to the Stockholders upon the Closing and (ii) the aggregate cash amounts
specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9.12 FIRPTA CERTIFICATE. Each Stockholder shall have delivered to AmPaM
a certificate to the effect that he is not a foreign person pursuant to Section
1.1445-2(b) of the Treasury regulations.
9.13 RESIGNATIONS OF DIRECTORS AND OFFICERS. Any directors of the
Company, other than those identified on Schedule 2.1, shall have resigned as
directors of the Company. Any officers of the Company, other than those
identified on Schedule 2.2, shall have resigned as officers of the Company.
10. COVENANTS OF AMPAM AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. AmPaM
shall use reasonable efforts to have the Stockholders released from any and all
guarantees of the Company's indebtedness, including bond obligations, identified
on Schedule 10.1. Prior to obtaining the release of such guarantees, AmPaM shall
provide its guarantee of such indebtedness to the lenders thereof. In the event
that AmPaM cannot obtain such releases from the lenders of any such guaranteed
indebtedness identified on Schedule 10.1 on or prior to 90 days subsequent to
the Closing Date, AmPaM shall promptly pay off or otherwise refinance or retire
such indebtedness such that the Stockholders' personal liability shall be
released. AmPaM will indemnify the Stockholders against any loss or damage
suffered as a result of the personal guarantees.
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10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement, after the Closing Date, AmPaM shall not and
shall not permit any of its Subsidiaries to undertake any act that would
jeopardize the tax-free status of the exchange of Company Stock for AmPaM Stock
(but not cash or other property), including without limitation:
(a) the retirement or reacquisition, directly or indirectly,
of all or part of the AmPaM Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the
benefit of the Stockholders other than as described in the Private Placement
Memorandum or as described in this Agreement.
10.3 PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES.
(a) The Company, if possible, or otherwise the Stockholders
shall file or cause to be filed all income Tax Returns (federal, state, local or
otherwise) of any Acquired Party for all taxable periods that end on or before
the Closing Date, and shall permit AmPaM to review all such Tax Returns prior to
such filings. Unless the Company is a C corporation, the Stockholders shall pay
or cause to be paid all income Tax liabilities (in excess of all amounts already
paid with respect thereto or properly accrued or reserved with respect thereto
on the Financial Statements) with respect to the Company's operations for all
periods through and including the Closing Date.
(b) AmPaM shall file or cause to be filed all separate Returns
of, or that include, any Acquired Party for all taxable periods ending after the
Closing Date.
(c) Unless required by applicable law, regulations or
government proceedings, AmPaM shall not take any action, including any amendment
of a Tax Return of any Acquired Party, if such action would result in additional
Tax liabilities payable by any of the Stockholders for periods ending on or
prior to the Closing Date.
(d) Each party hereto shall, and shall cause its subsidiaries
and Affiliates to, provide to each of the other parties hereto such cooperation
and information as any of them reasonably may request in filing any Return,
amended Return or claim for refund, determining a liability for Taxes or a right
to refund of Taxes or in conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of all
relevant portions of relevant Returns, together with relevant accompanying
schedules and relevant work papers, relevant documents relating to rulings or
other determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which such party may possess. Each party
shall make its employees reasonably available on a mutually convenient basis at
its cost to provide explanation of any documents or information so provided.
Subject to the preceding sentence, each party required to file Returns pursuant
to this Agreement shall bear all costs of filing such Returns.
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(e) Each of the Company, AmPaM and each Stockholder shall
comply with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as a tax-free
contribution under Section 351(a) of the Code subject to gain, if any,
recognized on the receipt of cash or other property under Section 351(b) of the
Code.
10.4 DIRECTORS. The persons named in the Private Placement Memorandum
shall be appointed as directors and elected as officers of AmPaM, as and to the
extent set forth in the Private Placement Memorandum, promptly following the
Closing Date; provided, however, that the parties hereto acknowledge that if the
Company consummates an IPO, the persons who will serve as directors and
executive officers of AmPaM will be adjusted as appropriate for a publicly
traded entity, with any such changes being subject to the approval of the
majority of the Board of Directors of AmPaM.
10.5 LEGAL OPINIONS. If required by the lenders pursuant to the terms
of any agreements related to financing of the cash amounts referred to in
Section 9.11 hereof, the Company shall cause its counsel to deliver to such
lenders, at the Closing, an opinion of counsel in substantially the form
attached hereto as Annex V.
11. INDEMNIFICATION
The Stockholders and AmPaM each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS.
(a) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement until the applicable Expiration Date (as defined in
the introductory paragraph to Section 5(A)), provided that for purposes of
clause (iii) below, the applicable Expiration Date shall be the date on which
the applicable statute of limitations expires), from and against all claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by AmPaM as a result of
or arising from (i) any breach of the representations and warranties of the
Company set forth herein or on the schedules attached hereto or certificates
delivered pursuant to this Agreement, (ii) any breach of any covenant or
agreement on the part of the Company under this Agreement, or (iii) any
liability under the 1933 Act or any Federal or state securities law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating solely to the
Company which was based upon information provided to AmPaM or its counsel in
writing by the Company specifically for inclusion in the Private Placement
Memorandum and is contained in the Private Placement Memorandum, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
Company required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that no Stockholder shall be liable
for any
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indemnification obligation pursuant to this Section 11.1 in excess of such
Stockholder's pro rata share thereof determined by reference to the aggregate
value of the Base Cash Amount (as defined in Annex I of this Agreement), the
principal amount of AmPaM Notes and the shares of AmPaM Stock (valued at a price
of $13.00 per share) received by such Stockholder pursuant to Section I.A. of
Annex I hereto (without giving effect to the adjustments provided in Sections
I.B. and I.C. thereof) (giving effect to the value of such AmPaM Stock and
without giving effect to such adjustments, collectively, the "Aggregate
Consideration") such Stockholder would receive pursuant to Section I of Annex I
of this Agreement if the transactions contemplated hereby were consummated in
relation to the total Aggregate Consideration all Stockholders would receive
pursuant to Section I of Annex I of this Agreement if the transactions
contemplated hereby were consummated.
(b) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by AmPaM as a result of or arising from (i)
any breach of the representations and warranties of such Stockholder set forth
in Section 5(B) hereof, (ii) any breach of any covenant or agreement on the part
of such Stockholder under this Agreement, or (iii) any liability under the 1933
Act or any Federal or state securities law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating solely to such Stockholder which was based
upon information provided to AmPaM or its counsel in writing by such Stockholder
specifically for inclusion in the Private Placement Memorandum and is contained
in the Private Placement Memorandum, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating solely to such Stockholder required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which such statements were made not misleading.
(c) David A. Croson covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by AmPaM as a result of or arising from the
guarantee by the Company of the loan referred to in Schedule 10.1.
(d) AmPaM acknowledges and agrees that other than the representations
and warranties of the Company or the Stockholders specifically contained in this
Agreement, there are no representations or warranties of the Company or the
Stockholders, either express or implied, with respect to the transactions
contemplated by this Agreement, the Company or its assets, liabilities and
business.
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11.2 INDEMNIFICATION BY AMPAM. AmPaM covenants and agrees that it will
indemnify, defend, protect and hold harmless the Company and the Stockholders at
all times from and after the date of this Agreement until the applicable
Expiration Date (as defined in the introductory paragraph of Section 6, provided
that for purposes of clause (iii) below, the applicable Expiration Date shall be
the date on which the applicable statute of limitations expires), from and
against all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
Company or the Stockholders as a result of or arising from (i) any breach by
AmPaM of its representations and warranties set forth herein or on the schedules
attached hereto or certificates delivered pursuant to this Agreement, (ii) any
breach of any agreement on the part of AmPaM under this Agreement; or (iii) any
liability under the 1933 Act or any Federal or state securities law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Private Placement Memorandum, or any amendment thereof or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except to the extent such is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission, made
therein in reliance upon, and in conformity with, the representations and
warranties of the Company or the Stockholders specifically contained in this
Agreement or other information furnished to AmPaM by the Company or the
Stockholders in writing specifically for inclusion therein.
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel reasonably
satisfactory to the Indemnified Party, any such matter so long as the
Indemnifying Party pursues the same in good faith and diligently, provided that
the Indemnifying Party shall not settle any criminal proceeding without the
written consent of the Indemnified Party. If the Indemnifying Party undertakes
to defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by Indemnifying Party, provided that if counsel to
the Indemnifying Party shall have a conflict of interest or a conflict of
interest is reasonably likely to arise that prevents counsel for the
Indemnifying Party from representing such Indemnified Party, Indemnified Party
shall have the right to participate in such matter through counsel of its own
choosing and Indemnifying Party will reimburse the Indemnified Party for the
reasonable expenses
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of its counsel. After the Indemnifying Party has notified the Indemnified Party
of its intention to undertake to defend or settle any such asserted liability,
and for so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except (i) as set forth in the preceding sentence
and (ii) to the extent such participation is requested by the Indemnifying
Party, in which event the Indemnified Party shall be reimbursed by the
Indemnifying Party for reasonable additional legal expenses and out-of-pocket
expenses. If the Indemnifying Party desires to accept a final and complete
settlement of any such Third Person claim and the Indemnified Party refuses to
consent to such settlement, then the Indemnifying Party's liability under this
Section with respect to such Third Person claim shall be limited to the amount
so offered in settlement by said Third Person. Upon agreement as to such
settlement between said Third Person and the Indemnifying Party, the
Indemnifying Party shall, in exchange for a complete release from the
Indemnified Party, promptly pay to the Indemnified Party the amount agreed to in
such settlement. If the Indemnifying Party does not undertake to defend such
matter to which the Indemnified Party is entitled to indemnification hereunder,
or fails diligently to pursue such defense, the Indemnified Party may undertake
such defense through counsel of its choice, at the cost and expense of the
Indemnifying Party, and the Indemnified Party may settle such matter, and the
Indemnifying Party shall pay the Indemnified Party for the settlement amount and
any other liabilities or expenses incurred by the Indemnified Party in
connection therewith, provided, however, that under no circumstances shall the
Indemnified Party settle any Third Person claim without the written consent of
the Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. All settlements hereunder shall effect a complete release of the
Indemnified Party, unless the Indemnified Party otherwise agrees in writing.
With respect to any account, note or other receivable as to which the
Stockholders have paid in full any indemnification obligation pursuant to this
Section 11 as a result of a breach of the representation and warranty made
pursuant to Section 5.11 or as to which a claim in respect thereof has been
asserted pursuant to this Section 11 that has been applied against the
Indemnification Threshold with respect to the Stockholders as a result of a
breach of the representation and warranty made pursuant to Section 5.11, AmPaM
shall cause the Company to assign such account, note or other receivable to the
Stockholders. The parties hereto will make appropriate adjustments for insurance
proceeds in determining the amount of any indemnification obligation under this
Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section
11 shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party to this Agreement with respect to any
provision of this Agreement, provided that, nothing herein shall be construed to
limit the right of a party, in a proper case, to seek injunctive relief for a
breach of this Agreement. AmPaM hereby waives, to the fullest extent permitted
under applicable law, any and all other rights, claims and causes of action,
known or unknown, it or any indemnified person may have against the Company or
any Stockholder relating to this Agreement or the transactions pursuant to this
Agreement arising under or based upon any Federal, state, local or foreign
statute, law, rule, regulation or otherwise. Any indemnity payment under this
Section 11 shall be treated as an adjustment to the exchange consideration for
Tax purposes unless a final determination (which shall
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include the execution of a Form 870-AD or successor form) with respect to the
Indemnified Party or any of its Affiliate causes any such payment not to be
treated as an adjustment to the exchange consideration for U.S. Federal income
Tax purposes.
11.5 LIMITATIONS ON INDEMNIFICATION. (a) AmPaM shall not assert any
claim for indemnification under this Section 11 against the Stockholders until
such time as, and solely to the extent that, the aggregate of all claims which
AmPaM may have against the Stockholders shall exceed the greater of (a) 3.0% of
the sum of (i) the cash paid to the Stockholders pursuant to Section 1.2 plus
(ii) the value of the AmPaM Stock delivered to the Stockholders pursuant to
Section 1.2 (calculated as provided in this Section 11.5) plus (iii) the
principal amount of the AmPaM Notes delivered to the Stockholders pursuant to
Section 1.2, or (b) $50,000 (the "Indemnification Threshold"). Stockholders
shall not assert any claim for indemnification hereunder against AmPaM until
such time as, and solely to the extent that, the aggregate of all claims which
Stockholders may have against AmPaM shall exceed $50,000; provided, however,
that this sentence shall not be applicable with respect of any failure by AmPaM
to (i) deliver the consideration specified in Annex I hereto on the Closing Date
upon the satisfaction, or waiver by AmPaM, of all conditions to the occurrence
of the Closing Date specified in Section 9 or (ii) comply with its obligations
pursuant to Section 10.1. After the $50,000 threshold for AmPaM (subject to the
proviso in the preceding sentence) or the Indemnification Threshold for a
Stockholder has been met, all claims must be made in $10,000 increments, which
claims may be cumulated in order to meet such $10,000 thresholds. For purposes
of this paragraph, the AmPaM Stock delivered to the Stockholders shall be valued
at $13.00 per share.
(b) No person shall be entitled to indemnification under this Section
11 if and to the extent that such person's claim for indemnification is directly
or indirectly related to a breach by such person of any representation,
warranty, covenant or other agreement set forth in this Agreement. No claim for
indemnification against the Stockholders shall limit, diminish or change any
obligation of AmPaM pursuant to Section 10.1 hereof.
(c) Notwithstanding any other term of this Agreement, no Stockholder
shall be liable under this Section 11 for an amount which exceeds eighty-five
percent (85%) of the amount of proceeds received by such Stockholder (valued as
of the Closing Date) in connection with the purchase and sale of the Company
Stock. For purposes of this paragraph, the AmPaM Stock shall be valued at $13.00
per share.
(d) A Stockholder may pay any indemnification obligation under Section
11 by means of the payment of cash or a combination of the payment of cash, the
forgiveness of amounts owed pursuant to the AmPaM Notes and the delivery to
AmPaM of shares of AmPaM Stock; provided that the percentage of the
indemnification obligation satisfied by means of the delivery of shares of AmPaM
Stock does not exceed the percentage of AmPaM Stock comprising the total
consideration paid to such Stockholder by AmPaM to such Stockholder pursuant to
Annex I. For the purpose of crediting Stockholders for payments made to AmPaM by
means of delivery of shares of AmPaM Stock, the AmPaM Stock shall be valued at
$13.00 per share.
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(e) In determining the amount of any loss, liability or expense for
which any party is entitled to indemnification under this Agreement, the gross
amount thereof will be reduced by any correlative insurance proceeds or other
third party indemnity or reimbursement proceeds realized or to be realized by
such party (or, in the case of AmPaM, by AmPaM, the Company or any subsidiary of
AmPaM or the Company) and such correlative insurance proceeds or other third
party indemnity or reimbursement proceeds shall be net of any insurance premium
or other incremental cost or expense owed or payable to any third party which
becomes due as a result of such claim. AmPaM shall use commercially reasonable
efforts to pursue any available insurance coverage or other rights of indemnity
or reimbursement from third parties with respect to any such loss, liability or
expense.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) by mutual consent of AmPaM and the Stockholders;
(ii) by the Stockholders, if the transactions contemplated by
this Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by the Company
or the Stockholders prior to or on the Closing Date;
(iii) by AmPaM, if the transactions contemplated by this
Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by AmPaM prior
to or on the Closing Date;
(iv) by the Stockholders, if a material breach or default
shall be made by AmPaM in the observance or in the due and timely
performance of any of the covenants or agreements contained herein
relating to AmPaM, and the curing of such default shall not have been
made (or in the reasonable judgment of such Stockholders cannot be
made) on or before the Closing Date;
(v) by AmPaM, if a material breach or default shall be made by
the Company or the Stockholders in the observance or in the due and
timely performance of any of the covenants or agreements contained
herein relating to the Company or the Stockholders, and the curing of
such default shall not have been made (or in the reasonable judgment of
AmPaM cannot be made) on or before the Closing Date;
(vi) by the Stockholders, if the conditions set forth in
Section 8 hereof have not been satisfied or waived as of the Closing
Date; or
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(vii) by AmPaM, if the conditions set forth in Section 9
hereof have not been satisfied or waived as of the Closing Date.
12.2 PROCEDURE AND EFFECT OF TERMINATION. A determination to terminate
this Agreement by AmPaM pursuant to Section 12.1 shall be valid and effective
only if a written notice of termination, accompanied by a certified copy of
resolutions of the board of directors of AmPaM that evidence the authorization
of the officer of AmPaM to deliver a written notice of termination of this
Agreement pursuant to Section 12.1, is given to the Stockholders in the manner
specified for notices in this Agreement. A determination to terminate this
Agreement by the Stockholders pursuant to Section 12.1 shall be valid and
effective only if a written notice of termination, signed by Stockholders who
would be entitled to receive a majority of the shares of AmPaM Stock specified
in Section I of Annex I to this Agreement if the transactions contemplated
hereby were consummated, is given to AmPaM in the manner specified for notices
in this Agreement. Upon the giving of notice of termination of this Agreement
pursuant to Section 12.1 as specified in the preceding sentence, this Agreement
shall terminate, and the transactions contemplated hereby shall be abandoned,
without further action by any of the parties hereto. Immediately upon any such
termination, AmPaM shall deliver written notice of such termination to the Other
Founding Companies. If this Agreement is terminated as provided in this Section
12, no party hereto shall have any liability or further obligation hereunder to
any other party, except as provided in Section 14 and Section 18.6, provided,
that, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses that occurred prior to such termination.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The Stockholders will not, without the
prior written consent of AmPaM, for a period of two (2) years following the
Closing Date, for any reason whatsoever, directly or indirectly, for themselves
or on behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, whether paid or unpaid, in any plumbing, piping,
mechanical, heating, ventilation or air conditioning contracting,
installation or services business or operation, whether for
residential, commercial, industrial or governmental customers, or any
ancillary contracting, installation or services business directly
related thereto (such business and operations referred to herein as the
"Plumbing and Mechanical Business"), within 100 miles of where the
Company or any of its subsidiaries conducted business within two (2)
years prior to the Closing Date (the "Territory");
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(ii) call upon any person who is, at the Closing Date, within
the Territory, an employee of AmPaM or any subsidiary thereof for the
purpose or with the intent of enticing such employee away from or out
of the employ of AmPaM or any subsidiary thereof;
(iii) call upon any person or entity which is, at the Closing
Date, or which has been within three (3) years prior to the Closing
Date, a customer of AmPaM or any subsidiary thereof, of the Company or
of any of the Other Founding Companies for the purpose of soliciting
customers, orders or contracts for any Plumbing and Mechanical Business
in direct competition with AmPaM within the Territory;
(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor in the Plumbing
and Mechanical Business, which candidate, to the actual knowledge of
such Stockholder after due inquiry, was called upon by AmPaM or any
subsidiary thereof or for which, to the actual knowledge of such
Stockholder after due inquiry, AmPaM or any subsidiary thereof made an
acquisition analysis, for the purpose of acquiring such entity; or
(v) disclose to any person, firm, partnership, corporation or
business the names or identities of any person, firm, partnership,
corporation or business which has been a customer of the Company or any
of its subsidiaries within the two (2) years prior to the Closing Date
for any reason or purpose whatsoever except to the extent that the
Company has in the past disclosed such information to the public for
valid business reasons; or
(vi) testify as an expert witness in matters related to the
Plumbing and Mechanical Business for an adverse party to AmPaM, the
Company or any Other Founding Companies in litigation.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Stockholder from acquiring as a passive investment (i) not more
than one percent (1%) of the capital stock of a competing business whose stock
is traded on a national securities exchange, the NASDAQ Stock Market or
over-the-counter, or (ii) not more than five percent (5%) of the capital stock
of a competing business whose stock is not publicly traded if the Board of
Directors of AmPaM consents to such acquisition.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to
AmPaM as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to AmPaM for which it
would have no other adequate remedy, each Stockholder agrees that the foregoing
covenant may be enforced by AmPaM in the event of breach by such Stockholder, by
injunctions and restraining orders.
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13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
Stockholders in light of the activities and business of AmPaM and the
subsidiaries thereof on the date of the execution of this Agreement and the
current plans of AmPaM as described in the Private Placement Memorandum.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against AmPaM or any subsidiary thereof, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by AmPaM of such
covenants. It is specifically agreed that the period of two (2) years stated at
the beginning of this Section 13, during which the agreements and covenants of
each Stockholder made in this Section 13 shall be effective, shall be computed
by excluding from such computation any time during which such Stockholder is
found to be in violation of any provision of this Section 13 as determined by
any of (i) a written agreement to such effect executed and delivered by AmPaM
and such Stockholder, (ii) a determination by an arbitration panel pursuant to
an arbitration conducted pursuant to Section 18.16 hereof or (iii) a
non-appealable judgment of a court of competent jurisdiction. The covenants
contained in Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto. The covenants contained in Section 13
shall have no effect if the transactions contemplated by this Agreement are not
consummated.
13.6 MATERIALITY. The Company and the Stockholders hereby agree that
the covenants contained in this Section 13 are a material and substantial part
of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company, the Other Founding Companies,
and/or AmPaM, such as operational policies, customer lists, and pricing and cost
policies that are valuable, special and unique assets of the Company's, the
Other Founding Companies' and/or AmPaM's respective businesses. The Stockholders
agree that they will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of AmPaM, (b) following the
Closing, such information may be disclosed by the Stockholders as is required in
the course of performing their duties for AmPaM or the Company and (c) to its
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.1; provided, however
that (i) the foregoing
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disclosure prohibition shall not apply in the event that (i) such information
becomes known to the public generally through no fault of the Stockholders, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, that prior to disclosing any information pursuant to
this clause (ii), the Stockholders shall, if possible, give prior written notice
thereof to AmPaM and provide AmPaM with the opportunity to contest such
disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any of the
Stockholders of the provisions of this Section, AmPaM shall be entitled to an
injunction restraining such Stockholders from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
AmPaM from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages. In the event the transactions
contemplated by this Agreement are not consummated, Stockholders shall have none
of the above-mentioned restrictions on their ability to disseminate confidential
information with respect to the Company.
14.2 AMPAM. AmPaM recognizes and acknowledges that it had in the past
and currently has access to certain confidential information of the Company,
such as operational policies, customer lists, and pricing and cost policies that
are valuable, special and unique assets of the Company's business. AmPaM agrees
that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
the Company, (b) to its counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
14.2, (c) to the Other Founding Companies and their representatives pursuant to
Section 7.1(b) of the Other Agreements and (d) to potential purchasers of
securities of AmPaM to the extent necessary or advisable in connection with the
applicable securities laws; provided, however that the foregoing disclosure
prohibition shall not apply in the event that (A) such information becomes known
to the public generally through no fault of AmPaM, (B) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (B), AmPaM
shall, if possible, give prior written notice thereof to the Company and the
Stockholders and provide the Company and the Stockholders with the opportunity
to contest such disclosure, or (C) the disclosing party reasonably believes that
such disclosure is required in connection with the defense of a lawsuit against
the disclosing party. In the event of a breach or threatened breach by AmPaM of
the provisions of this Section 14.2, the Company and the Stockholders shall be
entitled to an injunction restraining AmPaM from disclosing, in whole or in
part, such confidential information. Nothing herein shall be construed as
prohibiting the Company and the Stockholders from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by this Agreement are not consummated
for any reason, AmPaM shall nevertheless remain subject to this Section 14.2,
except that it shall not be permitted to make any disclosures otherwise than
pursuant to clause (A), (B) or (C) above.
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14.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Sections 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14
shall survive the termination of this Agreement for a period of five years from
the Closing Date.
14.5 RETURN OF INFORMATION. If the transactions contemplated by this
Agreement are not consummated, AmPaM will return or destroy all confidential
information regarding the Company.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS RELATING TO AMPAM STOCK AND AMPAM NOTES. For
a period of two years from the Closing Date or, in the event that the Company
completes an IPO, for a period through the second anniversary of the date of the
closing of such IPO (the "Restricted Period"), no Stockholder shall (i) sell,
assign, exchange, transfer, pledge, or otherwise dispose of any shares of AmPaM
Stock or AmPaM Notes received by the Stockholders pursuant to this Agreement or
any securities convertible into, exchangeable or exercisable for any shares of
AmPaM Stock or AmPaM Notes received by such Stockholder pursuant to this
Agreement, (ii) grant any option to purchase, or otherwise enter into any
contract to sell, assign, transfer, pledge or otherwise dispose of, any shares
of AmPaM Stock or AmPaM Notes received by such Stockholder pursuant to this
Agreement, or (iii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the AmPaM Stock or AmPaM Notes, whether any
such swap or transaction is to be settled by delivery of shares of AmPaM Stock
or AmPaM Notes or other securities, by the delivery or payment of cash or
otherwise, except, in the case of clauses (i), (ii) or (iii) above, (A) as
otherwise agreed by AmPaM, (B) for the sale of shares of AmPaM Stock, and
entering into agreements relating to the sale of shares of AmPaM Stock, pursuant
to Section 17 hereof, (C) for transfers to (I) immediate family members of such
Stockholder who agree with AmPaM in writing to be bound by the restrictions set
forth in this Section 15.1, (II) trusts, limited partnerships or other estate
planning entities for the benefit of such Stockholder or family members of such
Stockholder which have agreed with AmPaM in writing, through action taken by the
trustees, partners or other persons having authority to bind the trust, limited
partnership or other estate planning entity, to be bound by the restrictions set
forth in this Section 15.1, (III) any charitable organization that qualifies for
receipt of charitable contributions under Section 170(c) of the Code which
agrees with AmPaM in writing to be bound by the restrictions set forth in this
Section 15.1, (D) for transfers of AmPaM Stock or AmPaM Notes to AmPaM pursuant
to Section 11.5(d), (E) for transfers to another Stockholder, to another person
or entity who receives shares of AmPaM Stock or AmPaM Notes or AmPaM Series A
Preferred Stock pursuant to the Other Agreements or to Sterling City Capital LLC
or any of its Affiliates provided that (1) such transaction is exempt from the
registration requirements of the 1933 Act as evidenced by the delivery to AmPaM
of an opinion of counsel in form and substance reasonably satisfactory to AmPaM
and
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(2) any such transferee agrees in writing to be bound by the restrictions set
forth in this Section 15.1, (F) transfers of shares of AmPaM Notes, shares of
AmPaM Stock, or grants of options to purchase shares of AmPaM Stock, by such
Stockholder to employees of the Company of up to an aggregate of 15% of the
shares of AmPaM Stock received by such Stockholder pursuant to this Agreement
provided that (1) any such transaction is exempt from the registration
requirements of the 1933 Act as evidenced by the delivery to AmPaM of an opinion
of counsel in form and substance reasonably satisfactory to AmPaM and (2) any
such employee agrees with AmPaM in writing to be bound by the restrictions set
forth in this Section 15.1 or (G) the sale by such Stockholder in an IPO of
shares of AmPaM Stock representing not more than 10% of the Aggregate
Consideration in cash; provided, however, that in no circumstance will a
Stockholder be entitled to sell shares of AmPaM Stock in an IPO to the extent
that the sale of such shares by such Stockholder would result in such
Stockholder receiving in excess of 45% of the Aggregate Consideration in cash;
and, provided further, if AmPaM is advised in writing in good faith by any
managing underwriter of an underwritten offering of the securities being offered
pursuant to any registration statement under Section 17.1 that the number of
shares to be sold by persons other than AmPaM is greater than the number of such
shares which can be offered without adversely affecting the success of the
offering, AmPaM may reduce pro rata (among the Stockholders and all other
selling security holders in the offering) the number of shares offered for the
accounts of such persons (based upon the number of shares held by such person)
to a number deemed satisfactory by such managing underwriter. During the
Restricted Period, the certificates evidencing the AmPaM Stock or AmPaM Notes
delivered to the Stockholders pursuant to Section 3 of this Agreement will bear
a legend substantially in the form set forth below:
THE [SHARES/NOTES] REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE
TERMS OF THE ACQUISITION AGREEMENT PURSUANT TO WHICH SUCH SHARES WERE ISSUED,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, PLEDGE OR OTHER DISPOSITION PRIOR TO EXPIRATION
OF THE RESTRICTED PERIOD REFERRED TO IN THE ACQUISITION AGREEMENT EXCEPT IN
ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT. SUCH RESTRICTIONS ON TRANSFER ARE
SET FORTH IN AN ACQUISITION AGREEMENT, A COPY OF WHICH IS MAINTAINED AT THE
PRINCIPAL OFFICES OF THE ISSUER. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 TRANSFER RESTRICTIONS RELATING TO ADDITIONAL CONSIDERATION. No
Stockholder shall (i) sell, assign, exchange, transfer, pledge, or otherwise
dispose of any right to receive any consideration pursuant to Section II of
Annex I to this Agreement (the "Additional Consideration Right") or any
securities convertible into, exchangeable or exercisable for any Additional
Consideration Right, (ii) grant any option to purchase, or otherwise enter into
any contract to sell, assign, transfer, pledge or otherwise dispose of, any
Additional Consideration Right, or (iii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly
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or indirectly, the economic consequence of ownership of any Additional
Consideration Right, whether any such swap or transaction is to be settled by
delivery of shares of AmPaM Stock or other securities, by the delivery or
payment of cash or otherwise.
16. FEDERAL SECURITIES ACT REPRESENTATIONS
16.1 COMPLIANCE WITH LAW. Each Stockholder acknowledges that the shares
of AmPaM Stock, the Additional Consideration Right and any AmPaM Notes to be
delivered to such Stockholder pursuant to this Agreement have not been and will
not be registered under the 1933 Act (except as provided in Section 17 hereof)
and therefore may not be sold, assigned, exchanged, transferred, pledged or
otherwise disposed of without compliance with the 1933 Act which, among other
matters, would require registration under the 1933 Act unless exemption from the
registration requirements is available for such transaction. The AmPaM Stock,
the Additional Consideration Right and any AmPaM Notes to be acquired by each
Stockholder pursuant to this Agreement is being acquired solely for such
Stockholder's own account, for investment purposes only, and with no present
intention of selling, assigning, exchanging, transferring, pledging, or
otherwise disposing of it. Each Stockholder covenants, warrants and represents
that neither the shares of AmPaM Stock, the Additional Consideration Right nor
any AmPaM Notes issued to such Stockholder will be offered, sold, assigned,
exchanged, pledged, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the 1933 Act and the rules
and regulations of the SEC. All certificates representing the AmPaM Stock shall
bear the following legend in addition to the legend required under Section 15 of
this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each Stockholder is able to bear
the economic risk of an investment in the AmPaM Stock and AmPaM Notes to be
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment. Each Stockholder has substantial knowledge and experience in
making investment decisions of this type (or is relying on qualified purchaser
representatives with such knowledge and experience in making this decision), and
is capable, either individually or with such purchaser representatives, of
evaluating the merits and risks of this investment. Each Stockholder has had an
adequate opportunity to ask questions and receive answers from the officers of
AmPaM concerning any and all matters relating to the transactions described
herein including, without limitation, the background and experience of the
current and proposed officers and directors of AmPaM, the plans for the
operations of the business of AmPaM, the business, operations and financial
condition of the Founding Companies other than the Company, and any plans for
additional acquisitions. Each Stockholder has asked any and all questions of the
nature described in the preceding sentence and all questions have been answered
to such Stockholder's satisfaction. Except as set forth on Schedule 16.2, each
Stockholder is an "accredited investor" as defined in Rule 501(a) of the 1933
Act. Neither the foregoing nor any investigation made by the Stockholders
referred to above shall in any way affect the representations, warranties,
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covenants and agreements of AmPaM made herein except to the extent that AmPaM is
relying upon the representations of the Stockholders in Section 16.1 and in this
Section 16.2 for purposes of AmPaM's representations and warranties in Sections
6.9, 6.11, 6.15 and 6.17 hereof as specified therein.
16.3 RELIANCE BY AMPAM. Each Stockholder acknowledges that AmPaM in
relying upon the representations and covenants of such Stockholder set forth in
Section 16.1 and Section 16.2 for purposes of compliance by AmPaM with Federal
and state securities laws related to the issuance of AmPaM Stock pursuant to
this Agreement and the Other Agreements.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. Whenever AmPaM proposes to register
any AmPaM Stock for its own or other's account under the 1933 Act for a public
offering, other than (i) any shelf or other registration of shares to be used as
consideration for acquisitions of additional businesses by AmPaM and (ii)
registrations relating to employee benefit plans, AmPaM shall give each of the
Stockholders prompt written notice of its intent to do so. Upon the written
request of any of the Stockholders given within 15 calendar days after receipt
of such notice, notwithstanding the provisions of Section 15 (except as
specified below with respect to an IPO), AmPaM shall cause to be included in
such registration all of the AmPaM Stock issued to such Stockholders pursuant to
this Agreement (including any stock issued as or issuable upon the conversion or
exchange of any convertible security, warrant, right or other security which is
issued by AmPaM as a stock split, dividend or other distribution with respect
to, or in exchange for, or in replacement of such AmPaM Stock) which any such
Stockholder requests, other than shares of AmPaM Stock which may then be
immediately sold under Rule 144(k) (or any similar or successor provision)
promulgated under the 1933 Act, and other than shares of AmPaM Stock that have
been theretofore sold by the Stockholder in accordance with the 1933 Act,
provided that AmPaM shall have the right to reduce pro rata the number of shares
of each selling Stockholder included in such registration to the extent that
inclusion of such shares would, in the written opinion of tax counsel to AmPaM
or its independent auditors, jeopardize the status of the transactions
contemplated hereby and by the Private Placement Memorandum as a tax-free
organization under Section 351 of the Code; provided, however, that with respect
to a proposal by AmPaM to register AmPaM Stock under the 1933 Act in connection
with an IPO, no Stockholder shall be permitted pursuant to this Section 17.1 to
have included in such registration more shares of AmPaM Stock than permitted to
be sold by such Stockholder pursuant to Section 15.1. In addition, if AmPaM is
advised in writing in good faith by any managing underwriter of an underwritten
offering of the securities being offered pursuant to any registration statement
under this Section 17.1 that the number of shares to be sold by persons other
than AmPaM is greater than the number of such shares which can be offered
without adversely affecting the success of the offering, AmPaM may reduce pro
rata (among the Stockholders and all other selling security holders in the
offering) the number of shares offered for the accounts of such persons (based
upon the number of shares held by such person) to a number deemed satisfactory
by such managing underwriter. If any Stockholder disapproves of the terms of the
underwriting, that Stockholder may elect to withdraw therefrom by written notice
to AmPaM and the managing underwriter. That
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Stockholder's shares of AmPaM Stock so withdrawn shall also be withdrawn from
registration; provided, however, that, if by the withdrawal of such shares a
greater number of shares of AmPaM Stock held by other Stockholders may be
included in such registration, then AmPaM shall offer to all other Stockholders
of AmPaM the right to include additional shares in the same proportion used in
effecting the above limitations. AmPaM shall not, for a period of two years
following the Closing Date, grant to any other person any rights to cause AmPaM
to register any securities in priority over, or in precedent to, the rights
granted to the Stockholders hereunder and to the stockholders of the Other
Founding Companies pursuant to Section 17 of the Other Agreements.
17.2 REGISTRATION PROCEDURES. Whenever AmPaM is required to register
shares of AmPaM Stock pursuant to Section 17.1, AmPaM will, as expeditiously as
possible:
(i) Prepare and file with the SEC a registration statement
with respect to such shares and use its best efforts to cause such
registration statement to become effective (provided that before filing
a registration statement or prospectus or any amendments or supplements
or term sheets thereto, AmPaM will furnish a representative of the
Stockholders with copies of all such documents proposed to be filed) as
promptly as practical;
(ii) Notify the Stockholders of any stop order issued or
threatened by the SEC and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered;
(iii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 120 days, cause the
prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the 1933
Act; and comply with the provisions of the 1933 Act applicable to it
with respect to the disposition of all securities covered by such
registration statement during the applicable period in accordance with
the intended methods of disposition by the sellers thereof set forth in
such registration statement or supplement to the prospectus;
(iv) Furnish to each Stockholder who so requests such number
of copies of such registration statement, each amendment and supplement
thereto and the prospectus included in such registration statement
(including each preliminary prospectus and any term sheet associated
therewith), and such other documents as such Stockholder may reasonably
request in order to facilitate the disposition of the relevant shares;
(v) Make "generally available to its security holders" (within
the meaning of Rule 158) an earnings statement satisfying the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder no
later than 90 days after the end of the 12-month period beginning with
the first day of AmPaM's first fiscal quarter commencing after the
effective date of the registration statement;
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(vi) Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement at
the earliest possible moment;
(vii) If requested by the managing underwriter or
underwriters, if any, or any participating Stockholder, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters or any
participating Stockholder, as the case may be, reasonably requests to
be included therein, including, without limitation, information with
respect to the number of shares of AmPaM Stock being sold by
participating Stockholders to any underwriter or underwriters, the
purchase price being paid therefor by such underwriter or underwriters
and with respect to any other terms of an underwritten offering of the
shares of AmPaM Stock to be sold in such offering, and promptly make
all required filings of such prospectus by supplement or post-effective
amendment;
(viii) Make available for inspection by participating
Stockholders, any underwriter participating in any disposition pursuant
to such registration statement, and the counsel retained by the
participating Stockholders, counsel for the underwriters and any
accountant or other agent retained by participating Stockholders or any
such underwriter (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of AmPaM
(the "Records"), as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause AmPaM's
officers, directors and employees to supply all information reasonably
requested by any such Inspectors in connection with such registration
statement; provided, that records which AmPaM determines, in good
faith, to be confidential and which AmPaM notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or (ii) the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction after delivery of
sufficient notice to AmPaM to enable AmPaM to contest such subpoena or
order;
(ix) Take all other steps reasonably necessary to effect the
registration of the shares of AmPaM Stock contemplated hereby;
(x) Use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested by
the Stockholders, and to keep such registration or qualification
effective during the period such registration statement is required to
be kept effective, provided that AmPaM shall not be required to become
subject to taxation, to qualify generally to do business or to file a
general consent to service of process in any such states or
jurisdictions;
(xi) Cause all such shares of AmPaM Stock to be listed or
included not later than the date of the first sale of shares of AmPaM
Stock under such registration statement on any
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securities exchanges or trading systems on which similar securities
issued by AmPaM are then listed or included; and
(xii) Notify each Stockholder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within
the period that AmPaM is required to keep the registration statement
effective of the happening of any event as a result of which the
prospectus included in such registration statement (as then in effect),
together with any associated term sheet, contains an untrue statement
of a material fact or omits to state any fact required to be stated
therein or necessary to make the statements therein (in the case of the
prospectus or any preliminary prospectus, in light of the circumstances
under which they were made) not misleading, and, at the request of such
Stockholder, AmPaM promptly will prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of
the covered shares, such prospectus will not contain an untrue
statement of material fact or omit to state any fact required to be
stated therein or necessary to make the statements therein (in the case
of the prospectus or any preliminary prospectus, in light of the
circumstances under which they were made) not misleading.
All expenses incurred in connection with the registration under this
Article 17 and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printer and
accounting fees, but excluding underwriting commissions and discounts), shall be
borne by AmPaM.
17.3 INDEMNIFICATION.
(a) In connection with any registration under Section 17.1,
AmPaM shall indemnify, to the extent permitted by law, each selling Stockholder
(an "Indemnified Party") against all losses, claims, damages, liabilities and
expenses arising out of or resulting from any untrue or alleged untrue statement
of material fact contained or incorporated by reference in any registration
statement, prospectus or preliminary prospectus or associated term sheet or any
omission or alleged omission to state or incorporated by reference therein a
material fact required to be stated or incorporated by reference therein or
necessary to make the statements therein not misleading except insofar as the
same are caused by or contained in or omitted from any information furnished in
writing to AmPaM by such Indemnified Party expressly for use therein or by any
Indemnified Parties' failure to deliver a copy of the registration statement or
prospectus or any amendment or supplements thereto after AmPaM has furnished
such Indemnified Party with a sufficient number of copies of the same.
(b) In connection with any registration under Section 17.1,
each selling Stockholder shall furnish to AmPaM in writing such information
concerning the Stockholder and his or her proposed offering of shares as is
reasonably requested by AmPaM for use in any such registration statement or
prospectus and will indemnify, to the extent permitted by law, AmPaM, its
directors and officers and each person who controls AmPaM (within the meaning of
the 1933 Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged
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untrue statement of a material fact or any omission or alleged omission to state
therein a material fact required to be stated in the registration statement or
prospectus or any amendment thereof or supplement thereto or necessary to make
the statements therein not misleading, but only to the extent that such untrue
or alleged untrue statement or omission or alleged omission is contained in or
omitted from information so furnished in writing to AmPaM by such Stockholder
expressly for use in the registration statement. Notwithstanding the foregoing,
the liability of a Stockholder under this Section 17.3 shall be limited to an
amount equal to the net proceeds actually received by such Stockholder from the
sale of the relevant shares covered by the registration statement.
(c) Any person entitled to indemnification hereunder will (i)
give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) unless in such indemnified parties' reasonable
judgment, a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. Any failure to give prompt notice shall deprive a party of
its right to indemnification hereunder only to the extent that such failure
shall have adversely affected the indemnifying party. If the defense of any
claim is assumed, the indemnifying party will not be subject to any liability
for any settlement made without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party that is not entitled or elects
not, to assume the defense of a claim, will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party, a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
17.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 17.1 covering an underwritten registered offering, (i) each
participating Stockholder shall execute and deliver to AmPaM a written power of
attorney instrument that (A) appoints an officer of AmPaM as such Stockholder's
attorney-in-fact for purposes of executing and delivering an underwriting
agreement among AmPaM, the underwriters named therein and such Stockholder
specifying the terms and conditions applicable to the sale of AmPaM Stock of
such Stockholder in such offering and (B) otherwise is in such form and
containing such provisions as are customary in the securities business for such
an arrangement in connection with an underwritten registered offering in which
one or more stockholders of the issuer are participants, including a provision
that authorizes the attorney-in-fact appointed by such Stockholder to execute
and deliver such an underwriting agreement in the event that the net price per
share to be received by such Stockholder from the sale of the shares of AmPaM
Stock to be sold in such offering is not less than a price specified in such
instrument and (iii) AmPaM and each participating Stockholder agree to enter
into a written agreement with the managing underwriters in such form and
containing such provisions as are customary in the securities business for such
an arrangement between such managing underwriters and companies of AmPaM's size
and investment stature, including indemnification; provided, however, that (A)
such Stockholder shall be exempt and excluded from any indemnification of the
managing underwriters other than with respect to information provided by such
Stockholder with respect to such Stockholder to AmPaM or the managing
underwriters
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specifically for inclusion in any such registration statement and (B) such
Stockholder shall not be obligated to enter into such an underwriting agreement
in the event that the net price per share to be received by such Stockholder
from the sale of shares of AmPaM Stock to be sold in such offering is less than
the floor price specified in the power of attorney instrument executed and
delivered to AmPaM pursuant to clause (i) above.
17.5 TRANSFER OF RIGHTS. The right to cause AmPaM to register shares of
AmPaM Stock under this Agreement may be assigned to a transferee or assignee of
any Stockholder to the extent that such transferee or assignee is a member of
the immediate family of a Stockholder, a trust, limited partnership or other
estate planning entity for the benefit of any such persons or a charitable
organization that qualifies for receipt of charitable contributions under
Section 170(c) of the Code.
17.6 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC that may permit the sale of AmPaM
stock to the public without registration, following an IPO AmPaM agrees to use
its reasonable efforts, from and after the completion of an IPO, to:
(i) make and keep public information regarding AmPaM available
as those terms are understood and defined in Rule 144 under the 1933
Act beginning 90 days following the effective date of a registration
statement relating to an IPO;
(ii) file with the SEC in a timely manner all reports and
other documents required of AmPaM under the 1933 Act and the 1934 Act
at any time after it has become subject to such reporting requirements;
and
(iii) so long as a Stockholder owns any restricted AmPaM
Stock, furnish to each Stockholder forthwith upon written request a
written statement by AmPaM as to its compliance with the current public
information requirements of Rule 144 (at any time from and after 90
days following the effective date of a registration statement relating
to an IPO), and of the 1933 Act and the 1934 Act (any time after it has
become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of AmPaM, and such other reports and
documents so filed as a Stockholder may reasonably request in availing
itself of any rule or regulation of the SEC allowing a Stockholder to
sell any such shares without registration.
18. REDEMPTION OF AMPAM STOCK
18.1 REDEMPTION TRIGGER. In the event that, within three years of the
Closing Date, (i) AmPaM has not consummated an IPO and (ii) any Stockholder has
not received cash (including proceeds from the public or private sale of AmPaM
Stock received as consideration hereunder and the receipt of principal payments,
if any, made with respect to AmPaM Notes held by such Stockholder) equal to or
exceeding 50% of the Aggregate Consideration on or prior to the third
anniversary of the Closing Date, such Stockholder shall have the right (the "Put
Right"), but not the
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obligation, commencing on the third anniversary of the Closing Date to require
AmPaM to purchase a number of shares of AmPaM Stock then owned by such
Stockholder, subject to the limitations set forth in Section 18.2 below. The
purchase price for such redemption shall be $13.00 per share, such price to be
subject to appropriate adjustment to reflect any reclassification, stock
dividend, subdivision, split-up or combination of shares of AmPaM Stock after
the date hereof.
18.2 MINIMUM REDEMPTION; LIMITATIONS. If the events specified in
Section 18.1(i) and 18.1(ii), with Section 18.1(ii) being determined on an
individual Stockholder basis, have not occurred within the time specified, AmPaM
shall be obligated to purchase from each eligible Stockholder no less than 10%
of the AmPaM Stock held by such Stockholder annually; provided, however, that
the Stockholders shall not be entitled to exercise their Put Rights if and to
the extent the Company has not achieved the Target Net Income (as defined in
Annex I hereto) for the year preceding the year in which a Stockholder seeks to
exercise his Put Right. The redemptions will be funded by internal cash flows or
alternative financing arrangements but AmPaM's obligation to make any redemption
pursuant to this Section 18 will be subject to the covenants and restrictions
contained in AmPaM's then existing private or public debt or equity instruments.
18.3 NOTICE; EXERCISE. The Stockholders may exercise their Put Right by
giving written notice (the "Put Notice") to AmPaM within thirty (30) days of the
third anniversary of the execution hereof. If any Stockholder does not provide
AmPaM with a Put Notice within such thirty-day period, the Put Right applicable
to such Stockholder shall expire. The date for closing the sale of any shares of
AmPaM Stock pursuant to a proper exercise of a Put Right shall in no event be
earlier than 90 days after the date AmPaM receives the Put Notice. Any such
closing shall be at such time of day and place as shall be mutually agreed
between such holder and AmPaM. At such closing AmPaM shall make payment for the
AmPaM Stock to be repurchased by wire transfer of immediately available funds to
a bank account designated by such Stockholder for such purpose and such
Stockholder shall deliver to AmPaM certificates, duly endorsed for transfer,
representing the shares of AmPaM Stock to be purchased and sold pursuant to the
exercise of such Put Right.
18.4 ADDITIONAL REDEMPTIONS. In the event AmPaM has not consummated an
IPO and notwithstanding the foregoing, to the extent the Stockholders who have
received greater than 50% of their Aggregate Consideration in cash wish to
tender AmPaM Stock to AmPaM for purchase, AmPaM will use its commercially
reasonable efforts to continue to repurchase up to 10% of the AmPaM Stock held
by such Stockholder annually.
18.5 TERMINATION OF REDEMPTION OBLIGATION. Put Rights with respect to
any individual Stockholder will terminate upon receipt by such Stockholder of
50% of his Aggregate Consideration in cash; such termination will not, however,
limit such Stockholders ability to participate in the additional redemptions
provided in Section 18.4. Notwithstanding the foregoing, all of AmPaM's
redemption obligations contained in this Section 18 shall terminate on the
earlier to occur of (i) an IPO, (ii) any sale of all or substantially all of
AmPaM's assets in one transaction or series of transactions, (iii) any merger or
consolidation which involves AmPaM and in which AmPaM is not the surviving
entity or (iv) any transaction after which the shares of AmPaM Common Stock, if
any,
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which are then held by persons other than the holders of AmPaM Common Stock as
of the Closing Date constitute 50% or more of AmPaM Common Stock outstanding as
of the date of the consummation of such transaction.
19. GENERAL
19.1 COOPERATION. The Company, Stockholders and AmPaM shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The Company will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the Company cooperate with
AmPaM on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law and except as
provided in Section 17.5) and shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of AmPaM and the Company, and the
heirs, successors and legal representatives of the Stockholders.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company and AmPaM and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the Stockholders, the Company and AmPaM, acting
through their respective officers or trustees, duly authorized by their
respective Boards of Directors. Any disclosure made on any Schedule delivered
pursuant hereto shall be deemed to have been disclosed for purposes of any other
Schedule required hereby, provided that the Company shall make a good faith
effort to cross reference disclosure, as necessary or advisable, between related
Schedules.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument. A telecopied
facsimile of an executed counterpart of this Agreement shall be sufficient to
evidence the binding agreement of each party to the terms hereof. However, each
party agrees to return to the other parties an original, duly executed
counterpart of this Agreement promptly after delivery of a telecopied facsimile
thereof.
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19.5 BROKERS AND AGENT. Except as disclosed on Schedule 18.5, each
party hereto represents and warrants that it employed no broker or agent in
connection with this transaction and agrees to indemnify the other parties
hereto against all loss, cost, damages or expense arising out of claims for fees
or commission of brokers employed or alleged to have been employed by such
indemnifying party.
19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, AmPaM will pay the reasonable fees, expenses and
disbursements of AmPaM and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto, including all costs and expenses incurred in the performance
and compliance with all conditions to be performed by AmPaM under this
Agreement, including the fees and expenses of Arthur Andersen LLP, Andrews &
Kurth L.L.P., and any other person or entity retained by AmPaM, and the costs of
preparing the Private Placement Memorandum incurred in connection with the
subject matter of this Agreement and any amendments thereto. In addition,
whether or not the transactions contemplated herein shall be consummated, AmPaM
will pay the reasonable fees and expenses of Bracewell & Patterson LLP incurred
on behalf of the Company and the Stockholders in connection with the subject
matter of this Agreement. Whether or not the transactions herein contemplated
shall be consummated, the Company will pay all of its costs and expenses
incurred on behalf of the Company and the Stockholders in connection with the
subject matter of this Agreement except that (i) the Company shall not be
required to pay any of the costs, fees and expenses specified above as to which
AmPaM is responsible for the payment thereof and (ii) neither the Company nor
the Stockholders shall be responsible for the payment of the costs, fees and
expenses incurred by or on behalf of AmPaM. Whether or not the transactions
herein contemplated shall be consummated, AmPaM shall reimburse Sterling City
Capital, LLC (or any person or entity which is an Affiliate thereof) for any of
the foregoing fees, expenses and disbursements paid by Sterling City Capital,
LLC (or any person or entity which is an Affiliate thereof) and shall repay
Sterling City Capital, LLC (or any person or entity which is an Affiliate
thereof) for any loans or advances made by Sterling City Capital, LLC (or any
person or entity which is an Affiliate thereof) for the purpose of providing
AmPaM funds to pay any such fees, expenses and disbursements, provided that such
reimbursement and loan repayment obligation shall be limited to the foregoing
fees, expenses, and disbursements which are out-of-pocket expenses of AmPaM,
Sterling City Capital, LLC or any person or entity which is an Affiliate
thereof. Sterling City Capital, LLC shall be reimbursed by AmPaM in the form of
AmPaM Notes. AmPaM retains the right, within a reasonable period following the
Closing Date, to conduct an audit of the expenses for which Sterling City
Capital, LLC is reimbursed. Each Stockholder shall pay all sales, use, transfer,
real property transfer, recording, gains, stock transfer and other similar taxes
and fees ("Transfer Taxes") imposed in connection with the purchase and sale of
the Company Stock, other than Transfer Taxes, if any, imposed by the State of
Delaware. Each Stockholder shall file all necessary documentation and Returns
with respect to such Transfer Taxes. In addition, each Stockholder acknowledges
that he, and not the Company or AmPaM, will pay all Taxes due by him upon
receipt of the consideration payable pursuant to Section 1 hereof. The
Stockholders acknowledge that the risks of the transactions contemplated hereby
include Tax risks, with respect to which the
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Stockholders are relying substantially on the opinion contemplated by Section
8.12 hereof and representations by AmPaM in this Agreement.
19.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person or via a nationally recognized courier service to an officer or agent
of such party.
(a) If to AmPaM addressed to it at:
American Plumbing & Mechanical, Inc.
515 Post Oak Blvd., Suite 450
Houston, Texas 77027
Attention: Chief Executive Officer
with copies to:
Thomas P. Mason
Andrews & Kurth L.L.P.
4200 Chase Tower
Houston, Texas 77002
(b) If to the Stockholders, addressed to them at their addresses
set forth on the signature pages hereto, with copies to:
Richard V. Patchen
Carlile Patchen & Murphy LLP
366 East Broad Street
Columbus, Ohio 43215
(c) If to the Company, addressed to it at:
David A. Croson
J.A. Croson Company
2130 Franklin Road
Columbus, Ohio 43209
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
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19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Texas, excluding any conflicts of law, rule or
principle that might refer same to the laws of another jurisdiction.
19.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties until the respective Expiration
Dates referred to herein with respect thereto or, if no Expiration Date is
applicable with respect thereto, until the expiration of all applicable statute
of limitations periods.
19.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.11 TIME. Time is of the essence with respect to this Agreement.
19.12 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.
19.13 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
19.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of AmPaM, the Company and Stockholders who would receive a
majority of the Aggregate Consideration specified in Section I of Annex I to
this Agreement if the transactions contemplated hereby were consummated. Any
amendment or waiver effected in accordance with this Section 19.15 shall be
binding upon each of the parties hereto, any other person receiving AmPaM Stock
in connection with the purchase and sale of the Company Stock and each future
holder of such AmPaM Stock. Any consent of the Stockholders who would receive a
majority of the Aggregate Consideration pursuant
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to Section I of Annex I of this Agreement if the transactions contemplated
hereby were consummated shall be deemed to be the consent of the Stockholders
for purposes of provisions of this Agreement as to which a consent of the
Stockholders may be requested or required.
19.16 MEDIATION AND ARBITRATION. If a dispute arises out of or relates
to this Agreement, or the breach thereof, and if said dispute cannot be settled
through direct discussions, the parties agree to first endeavor to settle the
dispute in an amicable manner by mediation administered by the American
Arbitration Association under its then prevailing Commercial Mediation Rules,
before resorting to arbitration. Thereafter, any unresolved controversy or claim
arising out of or relating to this Agreement, or the breach thereof, shall be
settled by arbitration administered by the American Arbitration Association in
accordance with its then prevailing Commercial Arbitration Rules. The
enforcement, interpretation and procedural and substantive effect of the
obligation to arbitrate created by this Section 19.16 shall be governed by the
Federal Arbitration Act as amended from time to time, 9 U.S.C. Sections 1 et
seq. The parties hereby disclaim any intention to have the substantive or
procedural law of any state or other jurisdiction, other than the law of the
United States as embodied in the Federal Arbitration Act, applied to such
obligation. Any such mediation or arbitration proceeding will be conducted in
Houston, Texas.
19.17 INFORMATION PROVIDED FOR PRIVATE PLACEMENT MEMORANDUM. For
purposes of this Agreement, the information provided by the Company in writing
specifically for inclusion in the Private Placement Memorandum shall include
solely (i) the Financial Statements (in the form that they appear in the Private
Placement Memorandum), (ii) any financial statements provided to AmPaM pursuant
to Section 7.9, (iii) the description of the Company contained in the Private
Placement Memorandum under the caption "The Company", (iv) the description of
the Company's results of operations and its liquidity and capital resources, if
any, contained in the Private Placement Memorandum under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and (v) the description, if any, of matters related to the Company
contained in the Private Placement Memorandum under the caption "Certain
Transactions Transactions involving Certain Officers, Directors and
Stockholders". For purposes of this Agreement, the information provided by a
Stockholder in writing specifically for inclusion in the Private Placement
Memorandum shall include only (i) the description, if any, of matters related to
such Stockholder contained in the Private Placement Memorandum under the caption
"Certain Transactions - Transactions involving Certain Officers, Directors and
Stockholders" and (ii) the biographical description of such Stockholder, if any,
contained in the Private Placement Memorandum under the caption "Management."
19.18 EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective upon (i) the execution and delivery of this Agreement by all of the
parties hereto and (ii) the delivery to AmPaM of each Employment Agreement
attached hereto as Annex VI-1 executed by each of the Company, the employees
named therein and AmPaM.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AMERICAN PLUMBING & MECHANICAL, INC.
By: /s/ DAVID BAGGETT
---------------------------------
Name: David Baggett
-------------------------------
Title: Chief Financial Officer
------------------------------
J.A. CROSON COMPANY
By: /s/ DAVID A. CROSON
---------------------------------
David A. Croson
President
FRANKLIN FIRE SPRINKLER COMPANY
By: /s/ JOHN L. BOYLE
---------------------------------
John L. Boyle
President
[Remainder of page intentionally left blank]
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STOCKHOLDERS OF J.A. CROSON COMPANY: SPOUSES (WITHOUT PERSONAL LIABILITY
AND SOLELY TO ACKNOWLEDGE THE SALE
OF THE COMPANY STOCK BY THE
STOCKHOLDER):
/s/ KATHERINE RUTH ELIZABETH CROSON
- ------------------------------------
Katherine Ruth Elizabeth Croson
5705 Lithopolis Road
Lancaster, Ohio 43130
/s/ KATHERINE R. CROSON
- ------------------------------------
Katherine R. Croson
Custodian for Charles D. Croson, Minor
5705 Lithopolis Road
Lancaster, Ohio 43130
/s/ DAVID A. CROSON /s/ KATHERINE R. CROSON
- ------------------------------------ -----------------------------------
David A. Croson Katherine R. Croson
5705 Lithopolis Road
Lancaster, Ohio 43130
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STOCKHOLDERS OF FRANKLIN FIRE SPOUSES (WITHOUT PERSONAL LIABILITY
AND SPRINKLER COMPANY: SOLELY TO
ACKNOWLEDGE THE SALE OF THE COMPANY
STOCK BY THE STOCKHOLDER):
/s/ MIKEAL W. KING /s/ PATSY J. KING
- ------------------------------------ -----------------------------------
Mikeal W. King Patsy J. King
5193 Norton Road
Grove City, Ohio 43123
/s/ RUSSELL W. CLARK /s/ M. DIANE CLARK
- ------------------------------------ -----------------------------------
Russell W. Clark M. Diane Clark
2000 Riverhill Road
Cols, Ohio 43221
/s/ NORBERT HOFFMANN /s/ MONA HOFFMANN
- ------------------------------------ -----------------------------------
Norbert Hoffmann Mona Hoffmann
24340 Woodsedge Dr.
Bonita Springs, Florida 34134-2916
/s/ KATHERINE R. CROSON /s/ DAVID A. CROSON
- ------------------------------------ -----------------------------------
Katherine R. Croson David A. Croson
5705 Lithopolis Road
Lancaster, Ohio 43130
/s/ DAVID A. CROSON /s/ KATHERINE R. CROSON
- ------------------------------------ -----------------------------------
David A. Croson Katherine R. Croson
5705 Lithopolis Road
Lancaster, Ohio 43130
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EXHIBIT 10.7
Execution Copy
- --------------------------------------------------------------------------------
ACQUISITION AGREEMENT
dated as of the 11th day of February, 1999
by and among
AMERICAN PLUMBING & MECHANICAL, INC.
J.A. CROSON COMPANY OF FLORIDA
and
all of the STOCKHOLDERS of
J.A. CROSON COMPANY OF FLORIDA
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
RECITALS .........................................................................................................1
1. ACQUISITION OF STOCK.....................................................................................5
1.1 Acquisition.....................................................................................5
1.2 Consideration...................................................................................5
1.3 Certain Information With Respect to the Capital Stock of the Company
and AmPaM.......................................................................................5
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY...........................................................5
2.1 Board of Directors..............................................................................5
2.2 Officers........................................................................................5
3. DELIVERY OF CONSIDERATION................................................................................6
3.1 Stockholders' Consideration.....................................................................6
3.2 Stockholders' Deliveries........................................................................6
4. CLOSING..................................................................................................6
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................6
5.1 Due Organization................................................................................7
5.2 Authorization...................................................................................7
5.3 Capital Stock of the Company....................................................................7
5.4 Transactions in Capital Stock...................................................................8
5.5 No Bonus Shares.................................................................................8
5.6 Subsidiaries; Ownership in Other Entities.......................................................8
5.7 Predecessor Status; etc.........................................................................8
5.8 Spin-off by the Company.........................................................................8
5.9 Financial Statements............................................................................8
5.10 Liabilities and Obligations.....................................................................9
5.11 Accounts and Notes Receivable..................................................................10
5.12 Licenses; Intellectual Property................................................................10
5.13 Environmental Matters..........................................................................11
5.14 Personal Property..............................................................................13
5.15 Significant Customers; Material Contracts and Commitments......................................13
5.16 Real Property..................................................................................14
5.17 Insurance......................................................................................14
5.18 Compensation; Employment Agreements; Labor Matters.............................................15
5.19 Employee Plans.................................................................................15
5.20 Compliance with ERISA..........................................................................16
5.21 Conformity with Law; Litigation................................................................17
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
5.22 Taxes..........................................................................................17
5.23 No Violations; No Consent Required, Etc........................................................18
5.24 Government Contracts...........................................................................19
5.25 Absence of Changes.............................................................................19
5.26 Deposit Accounts; Powers of Attorney...........................................................21
5.27 Validity of Obligations........................................................................21
5.28 Relations with Governments.....................................................................21
5.29 Disclosure.....................................................................................21
5.30 No Warranties or Insurance.....................................................................21
5.31 Interest in Customers and Suppliers and Related Party Transactions.............................22
5.32 Private Placement Memorandum...................................................................22
5.33 Authority; Ownership...........................................................................22
5.34 Preemptive Rights..............................................................................23
5.35 No Commitment to Dispose of AmPaM Stock........................................................23
5.36 Disclosure.....................................................................................23
6. REPRESENTATIONS OF AMPAM................................................................................23
6.1 Due Organization...............................................................................24
6.2 Authorization..................................................................................24
6.3 Capital Stock of AmPaM.........................................................................24
6.4 Transactions in Capital Stock..................................................................24
6.5 Subsidiaries...................................................................................25
6.6 Financial Statements...........................................................................25
6.7 Liabilities and Obligations....................................................................25
6.8 Conformity with Law; Litigation................................................................25
6.9 No Violations..................................................................................26
6.10 Validity of Obligations........................................................................27
6.11 AmPaM Stock....................................................................................27
6.12 AmPaM Notes....................................................................................28
6.13 No Side Agreements.............................................................................28
6.14 Business; Real Property; Material Agreements...................................................28
6.15 Relations with Governments.....................................................................28
6.16 Disclosure.....................................................................................28
6.17 Other Agreements...............................................................................29
7. COVENANTS PRIOR TO CLOSING..............................................................................29
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate.................................29
7.2 Conduct of Business Pending Closing............................................................30
7.3 Prohibited Activities..........................................................................31
7.4 No Shop........................................................................................32
7.5 Agreements.....................................................................................32
7.6 Notification of Certain Matters................................................................32
7.7 Amendment of Schedules.........................................................................33
7.8 Further Assurances.............................................................................33
7.9 Authorized Capital.............................................................................33
</TABLE>
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<TABLE>
<S> <C> <C> <C>
7.10 Compliance with the Hart-Scott Act.............................................................33
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
AND COMPANY.............................................................................................34
8.1 Representations and Warranties; Performance of Obligations.....................................34
8.2 Satisfaction...................................................................................34
8.3 No Litigation..................................................................................34
8.4 Opinion of Counsel.............................................................................34
8.5 Consents and Approvals.........................................................................34
8.6 Good Standing Certificates.....................................................................35
8.7 No Material Adverse Change.....................................................................35
8.8 Secretary's Certificate........................................................................35
8.9 Tax Matters....................................................................................35
8.10 Other Founding Companies.......................................................................35
8.11 Company Release of Stockholders................................................................35
8.12 Sterling City Capital Transfer Restrictions....................................................35
8.13 Election of Chief Executive Officer............................................................36
8.14 Funding Availability...........................................................................36
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AMPAM............................................................36
9.1 Representations and Warranties; Performance and Obligations....................................36
9.2 No Litigation..................................................................................36
9.3 Secretary's Certificate........................................................................36
9.4 No Material Adverse Effect.....................................................................37
9.5 Stockholders' Release..........................................................................37
9.6 Satisfaction...................................................................................37
9.7 Termination of Related Party Agreements........................................................37
9.8 Opinion of Counsel.............................................................................37
9.9 Consents and Approvals.........................................................................37
9.10 Good Standing Certificates.....................................................................38
9.11 Funding Availability...........................................................................38
9.12 FIRPTA Certificate.............................................................................38
9.13 Resignations of Directors and Officers.........................................................38
10. COVENANTS OF AMPAM AND THE STOCKHOLDERS AFTER CLOSING...................................................38
10.1 Release From Guarantees; Repayment of Certain Obligations......................................38
10.2 Preservation of Tax and Accounting Treatment...................................................39
10.3 Preparation and Filing of Tax Returns; Payment of Taxes........................................39
10.4 Directors......................................................................................40
10.5 Legal Opinions.................................................................................40
11. INDEMNIFICATION.........................................................................................40
11.1 General Indemnification by the Stockholders....................................................40
11.2 Indemnification by AmPaM.......................................................................41
11.3 Third Person Claims............................................................................42
</TABLE>
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11.4 Exclusive Remedy...............................................................................43
11.5 Limitations on Indemnification.................................................................44
12. TERMINATION OF AGREEMENT................................................................................45
12.1 Termination....................................................................................45
12.2 Procedure and Effect of Termination............................................................45
13. NONCOMPETITION..........................................................................................46
13.1 Prohibited Activities..........................................................................46
13.2 Damages........................................................................................47
13.3 Reasonable Restraint...........................................................................47
13.4 Severability; Reformation......................................................................47
13.5 Independent Covenant...........................................................................48
13.6 Materiality....................................................................................48
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................48
14.1 Stockholders...................................................................................48
14.2 AmPaM..........................................................................................48
14.3 Damages........................................................................................49
14.4 Survival.......................................................................................49
14.5 Return of Information..........................................................................50
15. TRANSFER RESTRICTIONS...................................................................................50
15.1 Transfer Restrictions Relating to AmPaM Stock and AmPaM Notes..................................50
15.2 Transfer Restrictions Relating to Additional Consideration.....................................51
16. FEDERAL SECURITIES ACT REPRESENTATIONS..................................................................52
16.1 Compliance with Law............................................................................52
16.2 Economic Risk; Sophistication..................................................................52
16.3 Reliance by AmPaM..............................................................................53
17. REGISTRATION RIGHTS.....................................................................................53
17.1 Piggyback Registration Rights..................................................................53
17.2 Registration Procedures........................................................................54
17.3 Indemnification................................................................................56
17.4 Underwriting Agreement.........................................................................57
17.5 Transfer of Rights.............................................................................58
17.6 Rule 144 Reporting.............................................................................58
18. REDEMPTION OF AMPAM STOCK...............................................................................58
18.1 Redemption Trigger.............................................................................58
18.2 Minimum Redemption; Limitations................................................................59
18.3 Notice; Exercise...............................................................................59
18.4 Additional Redemptions.........................................................................59
18.5 Termination of Redemption Obligation...........................................................59
</TABLE>
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19. GENERAL.................................................................................................60
19.1 Cooperation....................................................................................60
19.2 Successors and Assigns.........................................................................60
19.3 Entire Agreement...............................................................................60
19.4 Counterparts...................................................................................60
19.5 Brokers and Agent..............................................................................61
19.6 Expenses.......................................................................................61
19.7 Notices........................................................................................62
19.8 Governing Law..................................................................................63
19.9 Survival of Representations and Warranties.....................................................63
19.10 Exercise of Rights and Remedies................................................................63
19.11 Time...........................................................................................63
19.12 Reformation and Severability...................................................................63
19.13 Remedies Cumulative............................................................................63
19.14 Captions.......................................................................................63
19.15 Amendments and Waivers.........................................................................63
19.16 Mediation and Arbitration......................................................................64
19.17 Information Provided for Private Placement Memorandum..........................................64
19.18 Effective Date of Agreement....................................................................64
</TABLE>
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ANNEXES
Annex I - Consideration to Be Paid to Stockholders
Annex II - Amended and Restated Certificate of Incorporation and
By-Laws of AmPaM
Annex III - Form of Opinion of Counsel to AmPaM
Annex IV - Form of Tax Opinion
Annex V - Form of Opinion of Counsel to Company and Stockholders
Annex VI-1 - Form of Employment Agreement
Annex VI-2 - Form of Employment Agreement
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SCHEDULES
2.1 Board of Directors
2.2 Officers
5.1 Due Organization
5.2 Authorization
5.3 Capital Stock of the Company
5.4 Transactions in Capital Stock; Organization Accounting
5.5 No Bonus Shares
5.6 Subsidiaries; Ownership in Other Entities
5.7 Predecessor Status; etc
5.8 Spin-off by the Company
5.9 Financial Statements
5.10 Liabilities and Obligations
5.11 Accounts and Notes Receivable
5.12 Licenses; Intellectual Property (Schedules 5.12(a)(1), 5.12(a)(2),
5.12(b)(1) and 5.12(b)(2))
5.13 Environmental Matters
5.14 Personal Property
5.15 Significant Customers; Material Contracts and Commitments
(Schedules 5.15(a), 5.15(b) and 5.15 (c))
5.16 Real Property
5.17 Insurance
5.18 Compensation; Employment Agreements; Labor Matters
5.19 Employee Plans
5.20 Compliance with ERISA
5.21 Conformity with Law; Litigation
5.22 Taxes (Schedules 5.22(a) and 5.22(b))
5.23 No Violations, No Consents Required, Etc.
(Schedules 5.23(a), 5.23(b), 5.23(c) and 5.23(e))
5.24 Government Contracts
5.25 Absence of Changes
5.26 Deposit Accounts; Powers of Attorney
5.30 No Warranties or Insurance
5.31 Interest in Customers and Suppliers and Related Party Transactions
5.33 Authority; Ownership (Schedules 5.33(a) and 5.33(b))
6.9 No Violations
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate
7.2 Conduct of Business Pending Closing
7.3 Prohibited Activities
7.5 Agreements
8.11 Employment Agreements
9.7 Termination of Related Party Agreements
10.1 Release From Guarantees; Repayment of Certain Obligations
16.2 Non-accredited Investors
18.5 Brokers and Agents
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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made as of the 11th day
of February, 1999 by and among AMERICAN PLUMBING & MECHANICAL, INC., a Delaware
corporation ("AmPaM"), J.A. CROSON COMPANY OF FLORIDA, a Florida corporation
(the "Company"), and the stockholders listed on the signature pages of this
Agreement (the "Stockholders"), which are all the stockholders of the Company.
RECITALS
WHEREAS, the Company is engaged in the plumbing and mechanical services
business;
WHEREAS, as of the date hereof, the Stockholders own, and as of the
Closing Date the Stockholders will own, all of the issued and outstanding
capital stock of the Company (the "Company Stock");
WHEREAS, AmPaM is entering into other separate agreements
simultaneously with this Agreement that are substantially the same as this
Agreement (the "Other Agreements"), each of which is entitled "Acquisition
Agreement," with each of the Other Founding Companies (as defined herein) and
their respective stockholders in order for AmPaM to acquire additional companies
engaged in the plumbing and mechanical services business;
WHEREAS, this Agreement and the Other Agreements constitute the "AmPaM
Plan of Organization;"
WHEREAS, the Stockholders and the boards of directors and the
stockholders of AmPaM, and each of the Other Founding Companies that are parties
to the Other Agreements, have approved and adopted the AmPaM Plan of
Organization as an integrated plan pursuant to which the Stockholders and the
stockholders of each of the other Founding Companies will contribute the capital
stock of each of the Founding Companies to AmPaM, and the Stockholders and the
stockholders of each of the other Founding Companies will acquire the stock of
AmPaM (but not cash or other property) as a tax-free transfer of property under
Section 351 of the Code;
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Stockholders have approved this
Agreement as part of the AmPaM Plan of Organization in order to transfer all of
the issued and outstanding capital stock of the Company to AmPaM; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
<PAGE> 10
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule attached hereto and not otherwise defined shall
have the following meanings for all purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"Acquired Party" means the Company, any subsidiary of the Company and
any member of a Relevant Group.
"Affiliates" means with respect to any person or entity, any other
person or entity that directly or indirectly, controls, is controlled by, or is
under common control with such person or entity.
"AmPaM" has the meaning set forth in the first paragraph of this
Agreement.
"AmPaM Charter Documents" has the meaning set forth in Section 6.1.
"AmPaM Plan of Organization" has the meaning set forth in the recitals
of this Agreement.
"AmPaM Stock" means the common stock, par value $.01 per share, of
AmPaM.
"AmPaM Notes" means those notes issued by AmPaM to the Stockholders as
a portion of the consideration to be received hereunder and in substantially the
form to Annex I as Appendix A.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" has the meaning set forth in the recitals of this
Agreement.
"Delaware GCL" means the General Corporation Law of the State of
Delaware.
"Environmental Laws" has the meaning set forth in Section 5.13(b).
"Expiration Date" has the meaning set forth in Section 5(A) and Section
6, as applicable.
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<PAGE> 11
"Founding Companies" means the following companies:
Christianson Enterprises, Inc., a Texas corporation;
Christianson Services, Inc., a Texas corporation;
GGR Leasing Corporation, a Texas corporation;
J.A. Croson Company of Florida, a Florida corporation;
J.A. Croson Company, an Ohio corporation;
Franklin Fire Sprinkler Company, an Ohio corporation;
Keith Riggs Plumbing, Inc., an Arizona corporation;
Miller Mechanical Contractors, Inc., a Georgia corporation;
Nelson Mechanical Contractors, Inc., a Florida corporation;
Power Plumbing Inc., a Delaware corporation;
R.C.R. Plumbing, Inc., a California corporation;
Sherwood Mechanical, Inc., a California corporation; and
Teepe's River City Mechanical, Inc., an Ohio corporation.
"GAAP" means generally accepted accounting principles as consistently
applied in the United States.
"Hart-Scott Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Hazardous Substance" has the meaning set forth in Section 5.13(c).
"IPO" means a firm commitment underwritten initial public offering of
AmPaM Stock managed by one or more nationally recognized national investment
banking firms.
"known" or "knowledge," when used in reference to a statement regarding
the existence or absence of facts in this Agreement, is intended by the parties
to mean that the only information to be attributed to such person is information
actually known to (a) the person in the case of an individual, (b) in the case
of a corporation or other entity other than the Company, an officer or director
of such corporation or entity or (c) in the case of the Company and its
Subsidiaries, an officer of the Company listed on Schedule 2.2 hereto, except
for David Baggett.
"Material Adverse Change" means a material adverse change in the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Documents" has the meaning set forth in Section 5.23.
3
<PAGE> 12
"Ordinary Course of Business" means the ordinary course of business
consistent with past customs and practice (including with respect to quantity
and frequency).
"Other Agreements" has the meaning set forth in the recitals of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Plans" has the meaning set forth in Section 5.19.
"Private Placement Memorandum" means the Private Placement Memorandum,
dated as of February 11, 1999, provided to each Stockholder prior to the
execution and delivery of this Agreement which sets forth certain information
relating to the transactions contemplated by this Agreement and the Other
Agreements.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Relevant Group" means the Company and any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a member.
"Restricted Common Stock" has the meaning set forth in Section 1.3(ii).
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"State of Incorporation" means the State of Florida.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Subsidiaries" means with respect to a person or entity, any
corporation or other entity in which such person or entity owns a 5% or greater
ownership interest.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, employment, excise, property, deed, stamp, alternative
or add-on minimum, or other taxes, assessments, duties, fees, levies or other
governmental charges, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
4
<PAGE> 13
1. ACQUISITION OF STOCK
1.1 ACQUISITION. Upon the terms and subject to the conditions contained
in this Agreement and in reliance upon the representations, warranties,
covenants and agreements contained in this Agreement, on the Closing Date, the
Stockholders shall convey and transfer to AmPaM all of the issued and
outstanding shares of Company Stock as set forth in Annex I hereto.
1.2 CONSIDERATION. The consideration for the Company Stock shall be as
set forth on Annex I to this Agreement.
1.3 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY AND AMPAM. The respective designations and numbers of outstanding shares
and voting rights of each class of outstanding capital stock of the Company and
AmPaM as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
outstanding Company Stock is as set forth on Schedule 5.3 hereto; and
(ii) immediately prior to the Closing Date, the authorized
capital stock of AmPaM will consist of (A) 100,000,000 shares of AmPaM
Stock, of which the number of issued and outstanding shares will be set
forth in the Private Placement Memorandum, (B) 10,000,000 shares of
redeemable preferred stock, of which the number of issued and
outstanding shares will be set forth in the Private Placement
Memorandum, and (C) 5,000,000 shares of Restricted Voting Common Stock,
$.01 per value (the "Restricted Common Stock"), all of which will be
issued and outstanding except as otherwise set forth in the Private
Placement Memorandum.
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY
2.1 BOARD OF DIRECTORS. The Company and the Stockholders shall take
action, including solicitation of resignation of directors, necessary so that
the Board of Directors of the Company as of the Closing Date shall consist only
of the persons identified on Schedule 2.1 hereto.
2.2 OFFICERS. The Company and the Stockholders shall take action,
including solicitation of resignation of officers, necessary so that the
officers of the Company as of the Closing Date shall consist only of the persons
identified on Schedule 2.2 hereto.
5
<PAGE> 14
3. DELIVERY OF CONSIDERATION
3.1 STOCKHOLDERS' CONSIDERATION. On the Closing Date, the Stockholders
shall, upon surrender of certificates evidencing the Company Stock, receive from
AmPaM the respective number of shares of AmPaM Stock, the amount of cash and the
principal amount of AmPaM Notes described on Annex I hereto specified with
respect to each such Stockholder as payable on the Closing Date. All payments of
cash shall be made by certified check or wire transfer of immediately available
funds. Consideration consisting of AmPaM Notes shall be substantially in the
form of Appendix A to Annex I.
3.2 STOCKHOLDERS' DELIVERIES. The Stockholders shall deliver at the
Closing the certificates representing Company Stock, duly endorsed in blank by
the Stockholders, or accompanied by blank stock powers, and with all necessary
transfer tax and other revenue stamps, acquired at the Stockholders' expense,
affixed and canceled. The Stockholders agree promptly to cure any deficiencies
with respect to the endorsement of the stock certificates or other documents of
conveyance with respect to such Company Stock or with respect to the stock
powers accompanying any Company Stock.
4. CLOSING
The consummation of the transactions contemplated by Section 3 (the
"Closing") shall take place on March 31, 1999 or such date not later than May
31, 1999 as AmPaM shall determine by giving written notice of such other date as
provided in Section 18.7 (the "Closing Date") at the offices of Andrews & Kurth
L.L.P., 4200 Chase Tower, 600 Travis, Houston, Texas 77002.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the disclosure schedules attached hereto and
except as otherwise qualified below, the Company represents and warrants that
all of the following representations and warranties in this Section 5(A) are
true at the date of this Agreement and, subject to Section 7.7 hereto, shall be
true at the time of the Closing, and that such representations and warranties
shall survive the Closing Date for a period of eighteen months (the last day of
such period being the "Expiration Date"), except that the representations and
warranties set forth in Sections 5.3, 5.22 and 5.32 hereof shall survive until
such time as the applicable statute of limitations period has run, which shall
be deemed to be the Expiration Date for the representations and warranties set
forth in Sections 5.3, 5.22 and 5.32. For purposes of this Section 5, the term
"Company" shall mean and refer to the Company and all of its Subsidiaries, if
any, and any reference to a Material Adverse Effect on the Company or Material
Adverse Change with respect to the Company shall mean the Company and its
Subsidiaries, taken as a whole. Except as expressly set forth in this Agreement,
the Company expressly disclaims any representation or warranty (express, implied
or otherwise) relating to the
6
<PAGE> 15
Company and any Subsidiary thereof including, without limitation, any warranty
of merchantability or fitness for a particular purpose.
5.1 DUE ORGANIZATION. The Company is a corporation duly incorporated
and organized, validly existing and in good standing under the laws of the State
of Incorporation, and has the requisite power and authority to carry on its
business as it is now being conducted. The Company is duly qualified or
authorized to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or authorization necessary except where the failure to be so
qualified or authorized to do business would not have a Material Adverse Effect
on the Company. Schedule 5.1 sets forth a list of all states in which the
Company is authorized or qualified to do business, which list indicates which of
such entities is authorized or qualified to do business in such states. True,
complete and correct copies of the Certificate or Articles of Incorporation and
By-laws, each as amended, of the Company (the "Charter Documents") are all
attached to Schedule 5.1. The Company has delivered to AmPaM complete and
correct copies of (i) the stock records of the Company and (ii) all minutes of
meetings, written consents and other evidence, if any, of deliberations of or
actions taken by the Company's Board of Directors, any committees of the Board
of Directors and stockholders during the last five years.
5.2 AUTHORIZATION. (i) The officers or other representatives of the
Company executing this Agreement have the authority to enter into and bind the
Company to the terms of this Agreement and (ii) the Company has the full legal
right, power and authority to enter into this Agreement and consummate the
transactions contemplated hereby. Copies of the most recent resolutions adopted
by the Board of Directors of the Company and the most recent resolutions adopted
by the Stockholders, which approve this Agreement and the transactions
contemplated hereby in all respects, certified by the Secretary or an Assistant
Secretary of the Company as being in full force and effect on the date hereof,
are attached hereto as Schedule 5.2.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company and each of its Subsidiaries is as set forth on Schedule 5.3(a). All of
the issued and outstanding shares of the capital stock of the Company and the
Subsidiaries are owned by the Stockholders in the amounts set forth in Schedule
5.3(a). Except as set forth on Schedule 5.3(a), all of the issued and
outstanding capital stock of each Subsidiary is owned by the Company. All of the
issued and outstanding shares of the capital stock of the Company have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record by the Stockholders and further, such shares were offered, issued, sold
and delivered by the Company in compliance with all applicable state and Federal
laws concerning the issuance of securities. Further, none of such shares were
issued in violation of any preemptive rights of any past or present stockholder.
7
<PAGE> 16
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule
5.4(a), the Company has not acquired or redeemed any shares of capital stock of
the Company since January 1, 1996. Except as set forth on Schedule 5.4(b), (i)
no option, warrant, call, conversion right or commitment of any kind exists
which obligates the Company to issue any of its authorized but unissued capital
stock; (ii) the Company has no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any distribution in respect thereof; and
(iii) neither the voting stock structure of the Company nor the relative
ownership of shares among any of its Stockholders has been altered or changed in
contemplation of the AmPaM Plan of Organization. There are no voting trusts,
proxies or other agreements or understandings to which the Company is a party or
is bound with respect to the voting of any shares of capital stock of the
Company.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses in
contemplation of the AmPaM Plan of Organization.
5.6 SUBSIDIARIES; OWNERSHIP IN OTHER ENTITIES. Except as set forth on
Schedule 5.6(a), the Company has no Subsidiaries. Except as set forth in
Schedule 5.6(b), the Company does not presently own, of record or beneficially,
or control, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any corporation, association
or business entity nor is the Company, directly or indirectly, a participant in
any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7(a) is a list of
all predecessor companies of the Company, including the names of any entities
acquired by the Company (by stock purchase, merger or otherwise) or owned by the
Company or from whom the Company previously acquired material assets, in any
case, from the earliest date upon which any Stockholder acquired his or her
stock in any Company. Except as disclosed on Schedule 5.7(b), the Company has
not been, within such period of time, a subsidiary or division of another
corporation or a part of an acquisition which was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
Company or any other person or entity that is an Affiliate of the Company since
January 1, 1996.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 is a copy of:
(i) the balance sheets of the Company as of December 31, 1996
and 1997 and the related statements of operations, stockholders' equity
and cash flows for the three-year period ended December 31, 1997,
together with the related notes and schedules (such balance sheets, the
related statements of operations, stockholders' equity and cash flows
and the related notes and schedules are referred to herein as the
"Year-end Financial Statements");
8
<PAGE> 17
(ii) the balance sheet of the Company as of June 30, 1998 and
the related statements of operations, stockholders' equity and cash
flows for the six-month periods ended June 30, 1997 and 1998, together
with the related notes and schedules (such balance sheets, the related
statements of operations, stockholders' equity and cash flows and the
related notes and schedules are referred to herein as the "Six-Month
Interim Financial Statements");
(iii) the balance sheet of the Company as of September 30,
1998 (the "Balance Sheet Date") and the related statements of
operations, stockholders' equity and cash flows for the nine-month
periods ended September 30, 1997 and 1998 (such balance sheets, the
related statements of operations, stockholders' equity and cash flows
are referred to herein as the "Nine-Month Interim Financial
Statements"); and
(iv) the income statement of the Company for the 12-month
period ended June 30, 1998 (the "Valuation Income Statement").
The Year-end Financial Statements, the Six-Month Interim Financial Statements,
the Nine-Month Interim Financial Statements and the Valuation Income Statement
are collectively called the "Financial Statements". The Financial Statements,
including those included in the Private Placement Memorandum, have been prepared
in accordance with GAAP applied on a consistent basis and fairly present the
financial position of the Company as of the dates thereof and the results of its
operations and changes in financial position for the periods then ended,
subject, in the case of the Six-Month Interim Financial Statements and the
Nine-Month Interim Financial Statements, to normal year-end audit adjustments
and any other adjustments described therein and the absence of certain footnote
disclosures.
5.10 LIABILITIES AND OBLIGATIONS. Schedule 5.10(a) sets forth an
accurate list as of the Balance Sheet Date of (i) all material liabilities of
the Company which are not reflected on the balance sheet of the Company at the
Balance Sheet Date or otherwise reflected in the Company Financial Statements at
the Balance Sheet Date which by their nature would be required in accordance
with GAAP to be reflected in the balance sheet, and (ii) all loan agreements,
indemnity or guaranty agreements, bonds, mortgages, pledges or other security
agreements to which the Company is a party or by which its properties may be
bound other than bid bonds and performance bonds made in the Ordinary Course of
Business. Except as set forth on Schedule 5.10(b), since the Balance Sheet Date,
the Company has not incurred any material liabilities or obligations of any
kind, character or description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the Ordinary Course
of Business. The Company has also delivered to AmPaM, on Schedule 5.10(c), a
list of contingent liabilities related to pending litigation or litigation that
has been threatened in writing, or other material liabilities which are not
fixed or otherwise accrued or reserved. For each such contingent liability of
the Company or liability of the Company for which the amount is not fixed or is
contested, the Company has provided to AmPaM the following information:
9
<PAGE> 18
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation in the possession
of the Company or its directors, officers or
stockholders relating thereto;
(b) amounts claimed and any other action or relief sought;
and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(ii) the name of each court or agency before which such claim,
suit or proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted;
and
(iv) a good faith estimate of the maximum amount, if any,
which the Company expects, based on information available, is likely to
become payable with respect to each such liability and the amount, if
any, accrued or reserved for each such potential liability on the
Financial Statements.
AmPaM acknowledges that all estimates referred to above and set forth on
Schedule 5.10(c) are only good faith estimates, and that the Company and the
Stockholders expressly do not represent or warrant that the actual amounts of
such liabilities will be equal to, or more or less than, the amounts of such
estimates.
5.11 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.11(a) sets forth an
accurate list, in all material respects, of the accounts and notes receivable of
the Company, as of the Balance Sheet Date, including any such amounts which are
not reflected in the balance sheet as of the Balance Sheet Date, and including
all receivables from and advances to employees and the Stockholders, which are
identified as such. Schedule 5.11(a) also sets forth a materially accurate aging
of all accounts and notes receivable as of the Balance Sheet Date showing
amounts due in 30-day aging categories. Except to the extent reflected on
Schedule 5.11(b), such accounts, notes and other receivables are collectible in
the amounts shown on Schedule 5.11(a), net of reserves reflected in the balance
sheet as of the Balance Sheet Date.
5.12 LICENSES; INTELLECTUAL PROPERTY. (a) The Company or its employees
hold all licenses, franchises, permits and other governmental authorizations
("Licenses") necessary to conduct the business of the Company, the absence of
which would cause a Material Adverse Effect on the Company, and the Company has
delivered to AmPaM a list that is accurate, in all material respects, and
summary description (which is set forth on Schedule 5.12(a)(1)) of all such
Licenses. At or prior to the Closing, all such Licenses owned or held by any
employee of the Company will be assigned or licensed to the Company for no
additional consideration. The Licenses listed on Schedule 5.12(a)(1) are valid,
and the Company has not received any notice that any person intends to cancel,
terminate or not renew any such License. The Company has conducted and is
conducting its business in compliance in all material respects with the
requirements, standards, criteria and
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conditions set forth in the Licenses listed on Schedule 5.12(a)(1) and is not in
violation of any of the foregoing in any material respect. Except as
specifically provided in Schedule 5.12(a)(2), the consummation by the Company of
the transactions contemplated by this Agreement will not result in a default
under or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such Licenses.
(b) The Company owns or possesses adequate licenses or other rights to
use (without making any payment or granting rights to any person in exchange)
all patents, patent applications, trademarks, copyrights, service marks and
trade names (collectively, the "Intellectual Property") necessary to conduct its
business as currently conducted. A description of any Intellectual Property
licensed by the Company, including the material terms of any such license, is
described on Schedule 5.12(b)(1). Neither the validity of the Intellectual
Property nor the title thereto or use thereof by the Company is being questioned
in any pending litigation, and the conduct of the Company's business, as
currently conducted, does not conflict with licenses, copyrights, uncopyrighted
works, trade marks, service marks, trade names, trade name rights, patents,
patent rights, unpatented inventions or trade secrets of others. Neither the
validity of the Intellectual Property nor the title thereto or use thereof by
the Company is being questioned in any pending or, to the knowledge of the
Company, threatened infringement claims or litigation, and the conduct of the
Company's business, as now conducted, does not conflict with licenses,
copyrights, uncopyrighted works, trade marks, service marks, trade names, trade
name rights, patents, patent rights, unpatented inventions or trade secrets of
others. Except as specifically provided in Schedule 5.12(b)(2), the consummation
by the Company of the transactions contemplated by this Agreement will not
adversely affect the rights and benefits afforded to the Company by any such
Intellectual Property.
5.13 ENVIRONMENTAL MATTERS. (a) Except as set forth in Schedule 5.13
attached hereto, (i) the Company has conducted its businesses in compliance in
all material respects with all applicable Environmental Laws, including, without
limitation, having all environmental permits, licenses and other approvals and
authorizations necessary for the operation of its business as presently
conducted, except where the failure to have such permit, license, approval or
authorization would not have a Material Adverse Effect on the Company, (ii) none
of the properties owned by the Company contain any Hazardous Substance as a
result of any activity of the Company in amounts exceeding the levels permitted
by applicable Environmental Laws, except where amounts in excess of such levels
would not have a Material Adverse Effect on the Company, (iii) the Company has
not received any notices, demand letters or requests for information from any
Federal, state, local or foreign governmental entity or third party indicating
that the Company may be in violation of, or liable under, any Environmental Law
in connection with the ownership or operation of its business, (iv) there are no
civil, criminal or administrative actions, suits, demands, claims, hearings,
investigations or proceedings pending or, to the knowledge of the Company,
threatened, against the Company relating to any violation, or alleged violation,
of any Environmental Law, except where such violation would not have a Material
Adverse Effect on the Company, (v) no reports have been filed, or are required
to be filed, by the Company concerning the release of any Hazardous Substance or
the threatened or actual violation of any Environmental Law, (vi) no Hazardous
Substance has
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<PAGE> 20
been disposed of, released or transported in violation of any applicable
Environmental Law from any properties owned by the Company as a result of any
activity of the Company during the time such properties were owned, leased or
operated by the Company, (vii) there have been no environmental investigations,
studies, audits, tests, reviews or other analyses regarding compliance or
non-compliance with any applicable Environmental Law conducted by or which are
in the possession of the Company relating to the activities of the Company which
are not listed on Schedule 5.13 attached hereto prior to the date hereof, (viii)
to the knowledge of the Company, (A) there are no underground storage tanks on,
in or under any properties owned by the Company and (B) no underground storage
tanks have been closed or removed from any of such properties during the time
such properties were owned, leased or operated by the Company which are not
listed on Schedule 5.13, (ix) to the knowledge of the Company, (A) there is no
asbestos or asbestos-containing material present in any material quantity in any
of the properties owned by the Company, and (B) no asbestos has been removed
from any of such properties during the time such properties were owned, leased
or operated by the Company, and (x) neither the Company nor any of its
properties are subject to any material liabilities or expenditures (fixed or
contingent) relating to any suit, settlement, court order, administrative order,
regulatory requirement, judgment or claim asserted or arising under any
Environmental Law.
(b) As used herein, "Environmental Law" means, as of the Closing Date,
any Federal, state, local or foreign law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, order, judgment,
decree, injunction or agreement with any governmental entity to which the
Company is a party or subject relating to (x) the protection, preservation or
restoration of the environment (including, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource) or to human health or
safety or (y) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of Hazardous Substances, in each case as amended and as in effect on
the Closing Date. The term Environmental Law includes, without limitation, (i)
the Federal Comprehensive Environmental Response Compensation and Liability Act
of 1980, the Superfund Amendments and Reauthorization Act, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976 (including
the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste
Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Federal Occupational Safety and Health Act of
1970, each as amended and as in effect on the Closing Date, and (ii) any common
law or equitable doctrine (including, without limitation, injunctive relief and
tort doctrines such as negligence, nuisance, trespass and strict liability) that
may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of, effects of or exposure to any
Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance presently
listed, defined, designated or classified as hazardous, toxic, radioactive, or
dangerous, or otherwise regulated, under any Environmental Law. Hazardous
Substance includes any substance to which exposure is regulated by any
government authority or any Environmental Law including, without
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<PAGE> 21
limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material, asbestos or
asbestos-containing material, urea formaldehyde foam insulation, lead or
polychlorinated biphenyls.
5.14 PERSONAL PROPERTY. The Company has delivered to AmPaM an accurate
list (which is set forth on Schedule 5.14(a)) of (x) all personal property
material to the operations of the Company as of the Balance Sheet Date included
in "plant, property and equipment" on the balance sheet of the Company as of
such date, (y) all other items of personal property owned by the Company with an
individual value in excess of $15,000 (i) as of the Balance Sheet Date and (ii)
acquired since the Balance Sheet Date and (z) all material leases and agreements
in respect of personal property, including, in the case of each of (x), (y) and
(z), (1) true, complete and correct copies of all such leases and (2) an
indication as to which assets are currently owned, or were formerly owned, by
Stockholders, relatives of Stockholders, or Affiliates of the Company. Except as
set forth on Schedule 5.14(b), (i) all personal property material to, and used
by, the Company in its business is either owned by the Company or leased by the
Company pursuant to a lease included on Schedule 5.14(a), (ii) all of the
personal property listed on Schedule 5.14(a) or replacement property thereof is
in working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14(a) are in full force and effect
and constitute valid and binding agreements of the Company, in each case in
accordance with their respective terms.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
(a) The Company has delivered to AmPaM a materially accurate list
(which is set forth on Schedule 5.15(a)(1)) of all customers (persons or
entities) representing 5% or more of the Company's annual revenues for any
period covered by any of the Financial Statements. Except to the extent set
forth on Schedule 5.15(a)(2), none of such customers has canceled or, to the
knowledge of the Company, are currently threatening to cancel a currently
effective contract with the Company.
(b) The Company has listed on Schedule 5.15(b) all material contracts,
commitments and similar agreements to which the Company is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with customers listed on Schedule 5.15(a), joint venture or partnership
agreements, contracts with any labor organizations, strategic alliances and
options to purchase land), other than agreements listed on Schedules 5.10(a),
Schedule 5.14(a) or Schedule 5.16(a), (a) in existence as of the Balance Sheet
Date and (b) entered into since the Balance Sheet Date, and in each case has
delivered or made available to AmPaM true, complete and correct copies of such
agreements. For purposes of the preceding sentence, a contract, commitment or
similar agreement is "material" if it (i) has a term of more than one year
(other than contracts, commitments or agreements that are cancelable without
liability or penalty within 30 days of notice from the Company of cancellation
or that can be terminated by the Company without material penalty upon notice of
30 days or less) or (ii) requires the payment by or to the Company of more than
$100,000 during any 12-month period. Except for expenditures in the ordinary
course of
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<PAGE> 22
business, the Company has also indicated on Schedule 5.15(b) a summary
description of all plans or projects involving the opening of new operations,
expansion of existing operations, or the acquisition of any personal property,
business or assets requiring, in any event, the payment of more than $50,000 by
the Company during any 12-month period.
(c) Except as set forth on Schedule 5.15(c), the Company is not
required to provide any bonding or other financial security arrangements in any
material amount in connection with any contract listed on Schedule 5.15(b).
5.16 REAL PROPERTY. Schedule 5.16(a) includes a list of all real
property owned or leased by the Company at the date hereof and all other real
property, if any, used by the Company in the conduct of its business. The
Company has good and insurable title to any real property owned by it that is
shown on Schedule 5.16(a), other than property intended to be sold or
distributed prior to the Closing Date as provided in Section 7.1(c) of this
Agreement, and all real property so owned is subject to no mortgage, pledge,
lien, conditional sales agreement, encumbrance, lease, possessory rights of
third parties or charge, except for:
(i) liens reflected on Schedule 5.10(a) or Schedule 5.16(b) as
securing specified liabilities (with respect to which no material
default by the Company exists);
(ii) liens for current taxes not yet payable and assessments
not in default;
(iii) easements for utilities serving the property; and
(iv) easements, covenants and restrictions and other
exceptions to title which do not adversely affect the current use of
the property.
Copies of all leases and agreements in respect of such real property
leased by the Company, which are true, complete and correct in all material
respects, are attached to Schedule 5.16(a), and an indication as to which such
properties, if any, are currently owned, or were formerly owned, by Stockholders
or Affiliates of the Company or Stockholders is included in Schedule 5.16(a).
Except as set forth on Schedule 5.16(b), all of such leases included on Schedule
5.16(a) are, as to the Company, in full force and effect and constitute valid
and binding agreements of the Company in accordance with their respective terms.
5.17 INSURANCE. The Company has delivered to AmPaM (i) an accurate list
as of the Balance Sheet Date of all insurance policies carried by the Company
and (ii) an accurate list of all insurance loss runs or workers compensation
claims received for the past three policy years (which lists are set forth on
Schedule 5.17). The Company has also delivered or made available to AmPaM true,
complete and correct copies of all insurance policies currently in effect that
are referred in Schedule 5.17. Such insurance policies evidence all of the
insurance the Company is required to carry pursuant to all of its contracts and
other agreements and pursuant to all applicable laws. All of such insurance
policies are currently in full force and effect except as stated in Schedule
5.17.
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Since January 1, 1996, no insurance carried by the Company has been canceled by
the insurer and the Company has not been denied coverage under any such policy.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; LABOR MATTERS.
(a) The Company has delivered to AmPaM an accurate list (which is set
forth on Schedule 5.18(a)(1)) showing all officers, directors and key employees
of the Company, listing all employment agreements with such officers, directors
and key employees and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of each of
such persons as of (i) the Balance Sheet Date and (ii) the date hereof. The
Company has provided to AmPaM true, complete and correct copies of any
employment agreements for persons listed on Schedule 5.18(a)(1). Since the
Balance Sheet Date, except as disclosed on Schedule 5.18(a)(2), there have been
no increases in the compensation payable or any bonuses to any officer,
director, key employee or other employee, except ordinary salary increases
implemented on a basis consistent with past practices and except for bonuses
paid on a basis consistent with past practices.
(b) Except as set forth on Schedule 5.18(b), (i) the Company is not
bound by or subject to (and none of its assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) to the knowledge of the
Company, no campaign to establish such arrangement is in progress and (iii)
there is no pending or, to the Company's knowledge, threatened labor dispute
involving the Company and any group of its employees nor has the Company
experienced any labor interruptions over the past three years. The Company
believes its relationship with employees to be generally good.
(c) Except as set forth in Schedule 5.18(c) attached hereto, (i) there
are no claims, actions or proceedings pending or, to the knowledge of the
Company, threatened between the Company and any of its employees, (ii) the
Company has complied in all material respects with all laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, and (iii) the Company has not received written
notice from any person asserting that the Company is liable in any material
amount for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing.
5.19 EMPLOYEE PLANS. The Company has delivered to AmPaM accurate
schedule (Schedule 5.19(a)) showing all employee benefit plans of the Company,
including all employment agreements and other agreements or arrangements
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date and as of the date of
this Agreement. Except for the employee benefit plans, if any, described on
Schedule 5.19(a), the Company does not sponsor, maintain or contribute to any
plan program, fund or arrangement that constitutes an "employee pension benefit
plan", and neither the Company nor any Subsidiary has any obligation to
contribute to or accrue or
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pay any benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan" (within the meaning of Section 3(36) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or any non-qualified deferred
compensation arrangement). For the purposes of this Agreement, the term
"employee pension benefit plan" shall have the same meaning as is given that
term in Section 3(2) of ERISA. The Company has not sponsored, maintained or
contributed to any employee pension benefit plan other than the plans set forth
on Schedule 5.19(a), and, except as described on Schedule 5.19(b), the Company
is not or could not be required to contribute to any retirement plan pursuant to
the provisions of any collective bargaining agreement establishing the terms and
conditions or employment of any of the Company's employees.
Except as set forth on Schedule 5.19(c), the Company is not now, or
will not as a result of its past activities become, liable to the Pension
Benefit Guaranty Corporation or to any multiemployer employee pension benefit
plan under the provisions of Title IV of ERISA.
All employee benefit plans listed on Schedule 5.19(a) and the
administration thereof are in compliance in all material respects with their
terms and all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable federal, state and local
statutes, ordinances and regulations.
All accrued contribution obligations of the Company as of the Balance
Sheet Date with respect to any plan listed on Schedule 5.19(a) have either been
fulfilled in their entirety or are fully reflected on the balance sheet of the
Company as of the Balance Sheet Date.
5.20 COMPLIANCE WITH ERISA. All plans listed on Schedule 5.19(a) that
are intended to qualify under Section 401 (a) of the Code (the "Qualified
Plans") are, and have been so qualified and have been determined by the Internal
Revenue Service to be so qualified, and copies of such determination letters are
attached to Schedule 5.19(a). Except as disclosed on Schedule 5.20, all reports
and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, actuarial reports, audits or tax returns) since January 1, 1992 have been
timely filed or distributed, and copies thereof have been made available to
AmPaM. No such plan listed on Schedule 5.19(a) nor the Company has engaged in
any transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No such Plan listed on Schedule 5.19(a) has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(l) of ERISA; and the Company has not incurred any liability for
excise tax or penalty due to the Internal Revenue Service nor any liability to
the Pension Benefit Guaranty Corporation. The Company further represents that
except as set forth on Schedule 5.20 hereto:
(i) there have been no terminations, partial terminations or
discontinuations of contributions to any Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval
by the Internal Revenue Service;
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(ii) no plan listed on Schedule 5.19(a) subject to the
provisions of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase
is defined in Section 4043 of ERISA) with respect to any such plan
listed in Schedule 5.19(a);
(iv) the Company (including any Subsidiaries) has not incurred
liability under Section 4062 of ERISA; and
(v) no circumstances exist pursuant to which the Company could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to any multiemployer plan or the PBGC under
Title IV of ERISA or to the Internal Revenue Service for any excise tax
or penalty, or being subject to any statutory lien to secure payment of
any such liability) with respect to any plan now or heretofore
maintained or contributed to by any entity other than the Company that
is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 5.21 or Schedule 5.13, the Company has not violated within the five
years prior to the date of this Agreement and is not currently in violation of
any law or regulation or any order of any court or Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it other than violations that would not
have a Material Adverse Effect on the Company; and except to the extent set
forth on Schedule 5.10(c) or Schedule 5.13, there are no claims, actions, suits
or proceedings, pending or, to the knowledge of the Company, threatened in
writing against the Company, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over the Company and no written
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received by the Company, and to the knowledge of the Company there is
no valid basis for any such claim, action, suit or proceeding that could
reasonably be expected to have a Material Adverse Effect on the Company.
5.22 TAXES. (a) The Company has timely filed all requisite Federal,
state and other Tax Returns or extension requests for all fiscal periods ended
on or before the Balance Sheet Date; and except as set forth on Schedule
5.22(a), there are no examinations in progress or claims pending against the
Company for federal, state and other Taxes (including penalties and interest)
for any period or periods prior to and including the Balance Sheet Date and no
notice of any claim for Taxes, whether pending or threatened, has been received.
All Tax, including interest and penalties (whether or not shown on any Tax
Return), due by the Company has been paid. The amounts shown as accruals for
Taxes on the Financial Statements are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before the date of the respective Financial Statements. Copies of
(i) any tax examinations, (ii) extensions of statutory limitations and (iii) the
federal and local income Tax Returns and franchise Tax Returns of Company for
their last three (3) fiscal years, or such shorter period of time as any of them
shall
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have existed, are attached hereto as Schedule 5.22(a) or have otherwise been
delivered to AmPaM. The Company has a taxable year ended December 31. Except as
set forth on Schedule 5.22(a), the Company uses the accrual method of accounting
for income tax purposes, and the Company's methods of accounting have not
changed in any material respect in the past five years (except as required to
conform to changes in GAAP). The Company is not an investment company as defined
in Section 351(e)(1) of the Code. The Company is not and has not during the last
five years been a party to any tax sharing agreement or agreement of similar
effect. Except as set forth on Schedule 5.22(a), the Company is not and has not
during the last five years been a member of any consolidated group for federal
tax purposes. The Company has not received, been denied, or applied for any
private letter ruling from the IRS during the last ten years.
(b) The Stockholders have made a valid election under the provisions of
Subchapter S of the Code and, except as set forth on Schedule 5.22(b), the
Company has not, within the past five years, been subject to Federal income
Taxes under the provisions of Subchapter C of the Code.
5.23 NO VIOLATIONS; NO CONSENT REQUIRED, ETC.
(a) The Company is not in violation of any Charter Document. Except as
set forth on Schedule 5.23(a), the Company is not in default under any lease,
instrument, agreement, license, or permit set forth on Schedule 5.12(a),
Schedule 5.14(a), Schedule 5.15(b) or Schedule 5.16(a) (collectively, the
"Material Documents").
(b) Except as set forth on Schedule 5.23(b)(1), the execution and
delivery of this Agreement by each of the Company and the Stockholders do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company under any of the
terms, conditions or provisions of (i) the Charter Documents of the Company,
(ii) any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental authority
applicable to the Company or any of its properties or assets, or (iii) any
Material Document to which the Company is now a party or by which the Company or
any of its properties or assets may be bound or affected. The consummation by
the Company and the Stockholders of the transactions contemplated hereby will
not result in any material violation, conflict, breach, right of termination or
acceleration or creation of liens under any of the terms, conditions or
provisions of the items described in clauses (i) through (iii) of the preceding
sentence, subject, in the case of the terms, conditions or provisions of the
items described in clause (iii) above, to obtaining (prior to the Effective
Time) such consents as may be required from commercial lenders, lessors or other
third parties as listed on Schedule 5.23(b)(2).
(c) Except as set forth on Schedule 5.23(c) and except for the
Hart-Scott Act, none of the Material Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to the consummation by the Company and the Stockholders of any of
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<PAGE> 27
the transactions contemplated hereby in order to remain in full force and
effect, and consummation by the Company and the Stockholders of the transactions
contemplated hereby will not give rise to any right to termination, cancellation
or acceleration or loss of any material right or benefit under any Material
Document.
(d) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act or with any state securities authorities in connection with the offer
and sale of AmPaM Stock and AmPaM Notes pursuant to this Agreement and (ii) any
filing required to be made under the Hart-Scott Act in connection with the
transactions contemplated by this Agreement, no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby.
(e) Except as set forth on Schedule 5.23(e), none of the Material
Documents prohibits the disclosure or publication by the Company or AmPaM of the
name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company from freely providing services or
selling products to any other customer or potential customer of the Company,
AmPaM or any Other Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24, the
Company is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.25 ABSENCE OF CHANGES. (a) Since the Balance Sheet Date, except as
set forth on Schedule 5.25 or as otherwise contemplated hereby, there has not
been:
(i) any Material Adverse Change in the Company;
(ii) any damage, destruction or casualty loss (whether or not
covered by insurance), alone or in the aggregate, which has caused a
Material Adverse Effect on the Company;
(iii) any change in the authorized capital of the Company or
its outstanding securities or any change in its ownership interests or
any grant of any options, warrants, calls, conversion rights or
commitments;
(iv) any declaration or payment of any dividend or
distribution in respect of the capital stock or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock
of the Company except for distributions that would have been permitted
after the date hereof under Section 7.3(iii) hereof,
(v) any increase in the compensation, bonus, sales commissions
or fee arrangement payable or to become payable by the Company to any
of its officers, directors,
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Stockholders, employees, consultants or agents, except for ordinary and
customary bonuses and salary increases for employees in accordance with
past practice;
(vi) any work interruptions, labor grievances or claims filed,
or any event or condition of any character, which has caused a Material
Adverse Effect on the Company;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the Company to any
person, including, without limitation, the Stockholders and their
affiliates, except inventory sold or transferred in the Ordinary Course
of Business;
(viii) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to the Company, including
without limitation any indebtedness or obligation of any Stockholders
or any Affiliate thereof;
(ix) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
material assets, property or rights of the Company or requiring consent
of any party to the transfer and assignment of any such assets,
property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the Ordinary Course of Business;
(xi) any waiver of any material rights or claims of the
Company;
(xii) any amendment or termination of any Material Document to
which the Company is a party except for the termination of a Material
Document in accordance with its terms without any action on the part of
the Company;
(xiii) any transaction by the Company outside the Ordinary
Course of Business;
(xiv) any cancellation or termination of a material contract
with a customer or client listed on Schedule 5.15(a) prior to the
scheduled termination date thereof; or
(xv) any other distribution of property or assets by the
Company other than in the Ordinary Course of Business, other than (a)
distributions of nonoperating assets specifically identified on
Schedule 5.25, (b) distributions of real estate required by Section
7.1(c) of this Agreement and (c) distributions of cash or promissory
notes permitted by Annex I hereto.
(b) Except as set forth on Schedule 5.25, the Company has not,
between the Balance Sheet Date and the date hereof, taken any of the actions set
forth in Section 7.3.
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5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The Company has delivered to
AmPaM an accurate schedule (which is set forth on Schedule 5.26) as of the date
of the Agreement of:
(i) the name of each financial institution in which the
Company has an account or safe deposit box;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or
have access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company and
a description of the terms of such power.
5.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the Company and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
Company and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
5.28 RELATIONS WITH GOVERNMENTS. The Company has not, and to the
knowledge of the Company none of the Stockholders or any Affiliate of any of
them has, given or offered anything of value to any governmental official,
political party or candidate for government office or otherwise taken any action
which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any law of similar effect.
5.29 DISCLOSURE. This Agreement, including the Annexes and Schedules
hereto, and the completed questionnaire related to the Hart-Scott Act furnished
to AmPaM by the Company, do not contain an untrue statement of a material fact
concerning the Company or omit to state a material fact concerning the Company
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing does not apply to statements contained in or omitted from any
of such documents made or omitted in reliance upon information furnished in
writing by AmPaM.
5.30 NO WARRANTIES OR INSURANCE. Except for warranty liability under
applicable law and except for warranty liability under the warranties issued by
the Company of the types described on Schedule 5.30, the Company has no
liability to any person under any warranty and the Company does not offer or
sell insurance or consumer protection plans or other arrangements that could
result in the Company being required to make any payment to or perform any
service for any person.
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5.31 INTEREST IN CUSTOMERS AND SUPPLIERS AND RELATED PARTY
TRANSACTIONS. Except as described on Schedule 5.31 or in Section 8.11, no
Stockholder, officer, director or Affiliate of the Company (i) owns, directly or
indirectly, any financial interest in, or is a director, officer, employee or
affiliate of, any corporation, firm, association or business organization that
is a client, supplier, customer, lessor, lessee or competitor of the Company, or
(ii) is or will be a party to an agreement or relationship with the Company
other than through a customary "at will" employment relationship.
5.32 PRIVATE PLACEMENT MEMORANDUM. None of the information supplied or
to be supplied by the Company in writing specifically for inclusion in the
Private Placement Memorandum contained or, as of the Closing Date, will contain
any untrue statement of a material fact concerning the Company or omitted or
will omit to state any material fact required to be stated therein or necessary
in order to make the statements contained in such information supplied or to be
supplied by the Company concerning the Company, in light of the circumstances
under which they are made, not misleading.
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.
Each Stockholder severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.7 hereof, shall be true at the time of
Closing, and that the representations and warranties set forth in this Section
5(B) shall survive the Closing Date.
5.33 AUTHORITY; OWNERSHIP. Such Stockholder has the full legal right,
power and authority to enter into this Agreement, and this Agreement is a legal,
valid and binding obligation of such Stockholder, enforceable against the
Stockholder in accordance with its terms. Except as set forth on Schedule
5.33(a), the execution and delivery of this Agreement by such Stockholder does
not violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of such Stockholder
under any of the terms, conditions or provisions of (i) the Charter Documents of
the Company, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to such Stockholder or any of such Stockholder's properties
or assets, or (iii) any lease, instrument, agreement, license or permit to which
such Stockholder is now a party or by which such Stockholder or any of such
Stockholder's properties or assets may be bound or affected. Except for (i) any
filings to be made with the SEC pursuant to the 1933 Act and any state
securities authorities in connection with the offer and sale of AmPaM Stock and
AmPaM Notes pursuant to this Agreement, (ii) any filing required to be made
under the Hart-Scott Act in connection with the transactions contemplated by
this Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by such
Stockholder or the consummation by such Stockholder of the transactions
contemplated hereby. Except as set forth on
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Schedule 5.33(b), such Stockholder owns beneficially and of record all of the
shares of the Company Stock identified on Annex I hereto as being owned by such
Stockholder, and, such Company Stock is owned free and clear of all liens,
security interests, pledges, charges, voting trusts, voting agreements,
restrictions, encumbrances and claims of every kind.
5.34 PREEMPTIVE RIGHTS. Such Stockholder does not have, or hereby
waives, any preemptive or other right to acquire shares of Company Stock or
AmPaM Stock that such Stockholder has or may have had. Nothing herein, however,
shall limit or restrict the rights of any Stockholder to acquire AmPaM Stock
pursuant to (i) this Agreement, (ii) any option granted or to be granted by
AmPaM to such Stockholder, (iii) a purchase through a broker in a regular stock
market transaction or (iv) a purchase from a stockholder of a Founding Company
(subject to compliance with any contractual restrictions or securities law
restrictions applicable thereto specified in Section 15 hereof).
5.35 NO COMMITMENT TO DISPOSE OF AMPAM STOCK. No Stockholder is under
any binding commitment or contract to sell, exchange or otherwise dispose of
shares of AmPaM Stock or AmPaM Notes received pursuant to this Agreement.
5.36 DISCLOSURE. The completed Director and Officer Questionnaires with
respect to such Stockholder (if any), the completed investor questionnaire
furnished to AmPaM by such Stockholder in connection with the proposed
acquisition by such Stockholder of AmPaM Stock and AmPaM Notes and any other
information provided to AmPaM in writing by such Stockholder relating
specifically to such Stockholder for inclusion in the Private Placement
Memorandum do not contain an untrue statement of a material fact concerning such
Stockholder or omit to state a material fact concerning such Stockholder
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading.
6. REPRESENTATIONS OF AMPAM
Except as otherwise qualified below, AmPaM represents and warrants that
all of the following representations and warranties in this Section 6 are true
at the date of this Agreement and, subject to Section 7.7 hereof, shall be true
at the time of Closing, and that such representations and warranties shall
survive the Closing Date for a period of eighteen months (the last day of such
period being the "Expiration Date" for purposes of the representations and
warranties set forth in this Section 6), except that the representations and
warranties set forth in Section 6.3, 6.11 and 6.15 shall survive until such time
as the applicable statute of limitations period has run, which shall be deemed
to be the Expiration Date for the representations and warranties set forth in
Sections 6.3, 6.11 and 6.15.
AmPaM acknowledges that in purchasing the shares of Company Stock, it
is relying upon its own independent investigation as well as the representations
and warranties of the Company and the Stockholders as set forth in this
Agreement.
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6.1 DUE ORGANIZATION. AmPaM is a corporation duly incorporated and
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite power and authority to carry on its business as
it is now being conducted and as contemplated by the Private Placement
Memorandum. AmPaM is duly qualified or authorized to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or authorization
necessary, except where the failure to be so qualified or authorized to do
business would not have a Material Adverse Effect. True, complete and correct
copies of the Certificate of Incorporation and By-laws, each as proposed to be
amended and as such documents shall be in effect as of the Closing Date, of
AmPaM (the "AmPaM Charter Documents") are attached hereto as Annex II.
6.2 AUTHORIZATION. (i) The officers of AmPaM executing this Agreement
have the authority to enter into and bind AmPaM to the terms of this Agreement
and (ii) AmPaM has the full legal right, power and authority to enter into this
Agreement and consummate the transactions contemplated hereby. All corporate
acts and other proceedings required to have been taken by AmPaM to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly and properly taken.
6.3 CAPITAL STOCK OF AMPAM. The authorized capital stock of AmPaM is as
set forth in Section 1.3(ii). Immediately prior to the Closing Date, all of the
issued and outstanding shares of the capital stock of AmPaM will be as set forth
in the Private Placement Memorandum, free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind other than any restrictions described in the Private
Placement Memorandum. All of the issued and outstanding shares of the capital
stock of AmPaM have been duly authorized and validly issued, are fully paid and
nonassessable and such shares were offered, issued, sold and delivered by AmPaM
in compliance with all applicable state and Federal laws concerning the issuance
of securities. Further, none of such shares were issued in violation of the
preemptive rights of any past or present stockholder of AmPaM. Upon the Closing
Date, the authorized, issued and outstanding shares of capital stock of AmPaM
will be as set forth in the Private Placement Memorandum under the caption
"Capitalization." Upon the Closing Date, the aggregate number of shares of AmPaM
Stock issued and outstanding on the Closing Date that are owned by Sterling City
Capital, LLC, any Affiliates of Sterling City Capital, LLC and the officers and
directors of AmPaM will not be greater than the number of shares of AmPaM Stock
reflected in the Private Placement Memorandum as the aggregate number of shares
of AmPaM Stock to be issued and outstanding and owned by Sterling City Capital,
LLC, any Affiliates of Sterling City Capital, LLC and the officers and directors
of AmPaM.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth in the Private Placement Memorandum, (i) no option, warrant,
call, conversion right or commitment of any kind exists as of the date of this
Agreement which obligates AmPaM to issue any of its authorized but unissued
capital stock; and (ii) AmPaM has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof. The material terms of any
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options, warrants or other rights to acquire shares of the stock of AmPaM
referred to in the preceding sentence will be as described in the Private
Placement Memorandum.
6.5 SUBSIDIARIES. As of the date of this Agreement, AmPaM has no
subsidiaries. As of the date of this Agreement, AmPaM does not own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity, and AmPaM is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. The historical financial statements of AmPaM
included in the Private Placement Memorandum (the "AmPaM Financial Statements")
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (except as noted thereon), and the balance
sheet included therein presents fairly the financial position of AmPaM as of its
date. Management of AmPaM believes that the assumptions underlying the pro forma
adjustments utilized in the preparation of such pro forma financial statements
are reasonable, and such pro forma adjustments have been properly applied to the
historical financial amounts in the compilation of the pro forma financial
statements. Based on the representations in Section 5.9 of this Agreement and in
Section 5.9 of each of the Other Agreements, the pro forma financial information
of AmPaM fairly presents the pro forma financial position, results of operations
and other information purported to be shown therein at the respective dates and
for the respective periods specified.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth in the Private
Placement Memorandum, as of the date of this Agreement, AmPaM has no material
liabilities or obligations of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise, other than
liabilities incurred in the ordinary course of business and consistent with past
practices, liabilities or obligations set forth in or contemplated by this
Agreement and the Other Agreements and except for fees incurred in connection
with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth in
the Private Placement Memorandum, AmPaM is not in violation of any law or
regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and its stockholders and, there are no claims,
actions, suits or proceedings, pending or, to the knowledge of AmPaM, threatened
against or affecting, AmPaM, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over it and no notice of any
claim, action, suit or proceeding, whether pending or threatened, has been
received. AmPaM has conducted and is conducting its businesses in compliance in
all material respects with the requirements, standards, criteria and conditions
set forth in applicable Federal, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations and is not in
violation, in any material respect, of any of the foregoing.
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6.9 NO VIOLATIONS. (a) AmPaM is not in violation of any AmPaM Charter
Document. AmPaM is not in default under any lease, instrument, agreement,
license, or permit to which AmPaM is a party or by which AmPaM or any of its
properties are bound (collectively, the "AmPaM Documents").
(b) The execution and delivery of this Agreement by AmPaM do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of AmPaM under any of the
terms, conditions or provisions of (i) the AmPaM Charter Documents, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to
AmPaM or any of its properties or assets, or (iii) any AmPaM Document; provided
that the representations and warranties specified in clause (ii) of this
sentence (A) are based on information in the investor questionnaires and related
purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements and
(B) are subject to the accuracy and completeness of the information contained in
such investor questionnaires and related purchaser representative questionnaires
and the truthfulness of such representations and warranties. The consummation by
AmPaM of the transactions contemplated hereby will not result in any material
violation, conflict, breach, right of termination or acceleration or creation of
liens under any of the terms, conditions or provisions of the items described in
clauses (i) through (iii) of the preceding sentence, subject, in the case of the
terms, conditions or provisions of the items described in clause (iii) above, to
obtaining (prior to the Closing Date) (x) such approvals, consents or orders
from the SEC, state blue sky authorities and authorities administering the
Hart-Scott Act and (y) such other consents as may be required from commercial
lenders, lessors or other third parties which are listed on Schedule 6.9.
(c) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act and filings with various state securities authorities in connection
with the transactions contemplated by this Agreement, and (ii) any filings
required to be made under the Hart-Scott Act in connection with the transactions
contemplated by this Agreement, none of the AmPaM Documents requires notice to,
or the consent or approval of, any governmental agency or other third party with
respect to the consummation by AmPaM of any of the transactions contemplated
hereby in order to remain in full force and effect, and consummation by AmPaM of
the transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any material right or
benefit under the AmPaM Documents; provided that the representations and
warranties specified in clauses (i) and (ii) of this sentence (A) are based on
information in the investor questionnaires and related purchaser representative
questionnaires executed and delivered by the Stockholders of the Company and the
stockholders of the Other Founding Companies, the representations and warranties
of the Stockholders set forth in Section 16 hereof and the representations and
warranties of the
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stockholders of the Other Founding Companies set forth in Section 16 of the
Other Agreements and (B) are subject to the accuracy and completeness of the
information contained in such investor questionnaires and related purchaser
representative questionnaires and the truthfulness of such representations and
warranties.
(d) Except for (i) any filings with the SEC pursuant to the 1933 Act
and filings with various state securities authorities in connection with the
transactions contemplated by this Agreement and (ii) any filings required under
the Hart-Scott Act in connection with the transactions contemplated by this
Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by AmPaM
or the consummation by AmPaM of the transactions contemplated hereby; provided
that the representations and warranties specified in clauses (i) and (ii) of
this sentence (A) are based on information in the investor questionnaires and
related purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements and
(B) are subject to the accuracy and completeness of the information contained in
such investor questionnaires and related purchaser representative questionnaires
and the truthfulness of such representations and warranties.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by AmPaM and the performance of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of AmPaM and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of AmPaM, enforceable
against AmPaM in accordance with its terms.
6.11 AmPaM STOCK. At the time of issuance thereof and delivery to the
Stockholders, the AmPaM Stock to be delivered to the Stockholders pursuant to
this Agreement will constitute valid, duly authorized and legally issued shares
of AmPaM, fully paid and nonassessable, and with the exception of restrictions
upon resale set forth in Sections 15 and 16 hereof, will be identical in all
substantive respects (which do not include the form of certificate upon which it
is printed or the presence or absence of a CUSIP number on any such certificate)
to the AmPaM Stock issued and outstanding as of the date hereof, other than the
Restricted Common Stock. The AmPaM Stock issued and delivered to the
Stockholders shall at the time of such issuance and delivery be free and clear
of any liens, claims or encumbrances of any kind or character. The offer and
sale of the shares of AmPaM Stock to be issued to the Stockholders pursuant to
this Agreement are not required to be registered under the 1933 Act; provided
that the representations and warranties specified in this sentence (A) are based
on information in the investor questionnaires and related purchaser
representative questionnaires executed and delivered by the Stockholders of the
Company and the stockholders of the Other Founding Companies, the
representations and warranties of the Stockholders set forth in Section 16
hereof and the representations and warranties of the stockholders of the Other
Founding Companies set forth in Section 16 of the Other Agreements and (B) are
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subject to the accuracy and completeness of the information contained in such
investor questionnaires and related purchaser representative questionnaires and
the truthfulness of such representations and warranties.
6.12 AmPaM NOTES. The AmPaM Notes have been duly authorized and, at the
Closing Date, will have been duly executed by AmPaM and, when authenticated,
issued and delivered, will constitute valid and binding obligations of AmPaM,
enforceable against AmPaM in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers) reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
6.13 NO SIDE AGREEMENTS. AmPaM has not entered into any agreement with
any of the Founding Companies or any of the Stockholders of the Founding
Companies other than this Agreement, the Other Agreements, the agreements
referred to in this Agreement and in the Other Agreements and the Private
Placement Memorandum. AmPaM has not entered into any agreements providing for
rights to register shares of AmPaM Stock under the 1933 Act except as provided
in Section 17 of this Agreement, in Section 17 of the Other Agreements and in an
agreement with Sterling City Capital, LLC, its Affiliates and officers and
directors of AmPaM having terms substantially similar to those set forth in
Section 17 hereof.
6.14 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. AmPaM was formed in
June 1998 and has conducted no material business since the date of its inception
except for activities related to the transaction contemplated by this Agreement,
the Other Agreements and the Private Placement Memorandum. Except as described
in the Private Placement Memorandum, as of the date of this Agreement, AmPaM
does not own any real property or any material personal property and is not a
party to any other material agreement other than this Agreement, the Other
Agreements and the agreements contemplated hereby and thereby.
6.15 RELATIONS WITH GOVERNMENTS. Neither AmPaM nor any of its
directors, officers or Affiliates has given or offered anything of value to any
government official, political party or candidate for government office, nor has
AmPaM, any of its directors, officers or Affiliates of any of them otherwise
taken any action, which would cause AmPaM to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any law of similar effect.
6.16 DISCLOSURE. The Private Placement Memorandum delivered to the
Company and the Stockholders does not as of the date hereof contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing does not apply to
statements contained in or omitted from any of such documents made or omitted in
reliance upon, and in conformity with, information furnished to AmPaM by the
Company or the Stockholders in writing specifically for inclusion in the Private
Placement Memorandum.
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6.17 OTHER AGREEMENTS. The Other Agreements have been duly authorized,
executed and delivered by AmPaM and constitute the legal, valid and binding
obligation of AmPaM enforceable against AmPaM in accordance with their
respective terms. The terms and conditions of the Other Agreements (excluding
the terms relating to the consideration payable by AmPaM thereunder) are
identical in all material respects to the terms and conditions in this
Agreement.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE; TRANSFER OF REAL ESTATE.
(a) Between the date of this Agreement and the Closing Date, the
Company will afford to the officers and authorized representatives of AmPaM
reasonable access during normal business hours to all of the Company's sites,
properties, books and records and will furnish AmPaM with such additional
financial and operating data and other information as to the business and
properties of the Company as AmPaM may from time to time reasonably request. The
Company will cooperate with AmPaM, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. AmPaM,
the Stockholders and the Company will treat all information obtained in
connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to the Company as confidential
in accordance with the provisions of Section 14 hereof.
(b) Between the date of this Agreement and the Closing Date, AmPaM will
afford to the officers and authorized representatives of the Company access to
all of AmPaM's sites, properties, books and records and will furnish the Company
with such additional financial and operating data and other information as to
the business and properties of AmPaM and the Other Founding Companies as the
Company may from time to time reasonably request. AmPaM will cooperate with the
Company, its representatives, auditors and counsel in the preparation of any
documents or other material which may be required in connection with any
documents or materials required by this Agreement. The Company will cause all
information obtained pursuant to this Section 7.1(b) or obtained in connection
with the negotiation and performance of this Agreement to be treated as
confidential in accordance with the provisions of Section 14 hereof.
(c) Except as set forth on Schedule 7.1, any real property owned by the
Company will be sold or distributed by the Company on terms mutually acceptable
to AmPaM and the Company and leased back by the Company on terms no less
favorable to the Company than those available from an unaffiliated party and
otherwise reasonably acceptable to AmPaM at or prior to the Closing Date.
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7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Closing Date, the Company will, except as set forth on
Schedule 7.2:
(i) carry on its businesses in the Ordinary Course of Business
and not introduce any material new method of management, operation or
accounting;
(ii) use all commercially reasonable efforts to maintain its
properties and facilities, including those held under leases, in as
good working order and condition as at present, ordinary wear and tear,
depreciation and insured losses excepted;
(iii) perform in all material respects all of its obligations
under all Material Documents relating to or affecting its respective
assets, properties or rights;
(iv) use its commercially reasonable efforts to keep in full
force and effect present insurance policies or other comparable
insurance coverage;
(v) use its commercially reasonable efforts to maintain and
preserve its business organization intact, retain its respective
present key employees and maintain its relationships with suppliers,
customers and others having business relations with the Company;
(vi) use its commercially reasonable efforts to maintain
compliance with all material permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory
agencies and similar governmental authorities;
(vii) maintain present debt and lease instruments in
accordance with their terms and not enter into new or amended debt or
lease instruments without the knowledge and consent of AmPaM (which
consent shall not be unreasonably withheld), provided that debt and/or
lease instruments may be replaced without the consent of AmPaM if such
replacement instruments are on terms at least as favorable to the
Company as the instruments being replaced;
(viii) maintain or reduce present salaries and commission
levels for all officers, directors, employees and agents except for
ordinary and customary bonus and salary increases for employees in
accordance with past practices; and
(ix) use commercially reasonable efforts to cause the actual
amount of its Current Assets (as defined in Annex I hereto) to be not
less than 150% of the actual amount of its Current Liabilities (as
defined in Annex I hereto).
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7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between
the date hereof and the Closing Date, the Company will not, without prior
written consent of AmPaM:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of any kind
other than in connection with the exercise of options or warrants
listed in Schedule 5.4;
(iii) except as permitted pursuant to the terms and conditions
for distributions described in Annex I, declare or pay any dividend, or
make any distribution in respect of its stock whether now or hereafter
outstanding, or purchase, redeem or otherwise acquire or retire for
value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree
to incur any liability or make any capital expenditures, except if it
is in the Ordinary Course of Business or involves an amount not in
excess of three percent (3%) of the Company's gross revenues for fiscal
1997;
(v) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired, except (1) with respect to purchase money
liens incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of three percent (3%) of the Company's
gross revenues for fiscal 1997 necessary or desirable for the conduct
of the businesses of the Company, (2) (A) liens for taxes either not
yet due or being contested in good faith and by appropriate proceedings
(and for which contested taxes adequate reserves have been established
and are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the Ordinary
Course of Business (the liens set forth in clause (2) being referred to
herein as "Statutory Liens"), or (3) liens set forth on Schedule 5.10
and/or Schedule 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the Ordinary Course of Business and
other than distributions of real estate and other assets as permitted
in this Agreement (including Annex I hereto);
(vii) negotiate for the acquisition of any business or the
start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate
with or into any other corporation;
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(ix) waive any material rights or claims of the Company,
provided that the Company may negotiate and adjust bills and accounts
in the course of good faith disputes with customers in a manner
consistent with past practice;
(x) amend or terminate any Material Document except for the
termination of a Material Document in accordance with its terms without
any action on the part of the Company; or
(xi) enter into any other material transaction outside the
Ordinary Course of Business or any transaction prohibited hereunder.
7.4 NO SHOP. None of the Stockholders, the Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than AmPaM
or its authorized agents relating to, any acquisition or purchase of
all or a material amount of the assets of, or any equity interest in,
the Company or a merger, consolidation or business combination of the
Company.
7.5 AGREEMENTS. Except as disclosed on Schedule 7.5(a), the
Stockholders and the Company shall terminate (i) any stockholders agreements,
voting agreements, voting trusts, agreements providing for the grant by the
Company of any options, warrants and employment agreements between the Company
and any employee listed on Schedule 8.11 hereto and (ii) except as otherwise
provided in this Agreement, any existing agreement between the Company and any
Stockholder, on or prior to the Closing Date provided that nothing herein shall
prohibit or prevent the Company from paying (either prior to or on the Closing
Date) notes or other obligations from the Company to the Stockholders described
in Schedule 7.5(b) in accordance with the terms thereof.
7.6 NOTIFICATION OF CERTAIN MATTERS. Each Stockholder and the Company
shall give prompt notice to AmPaM upon obtaining knowledge of (i) the occurrence
or non-occurrence of any event the occurrence or nonoccurrence of which would be
likely to cause any representation or warranty of the Company or such
Stockholder contained herein to be untrue or inaccurate in any material respect
at or prior to the Closing and (ii) any material failure of such Stockholder or
the Company to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such person hereunder. AmPaM shall give prompt
notice to the Company of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of AmPaM contained herein to be untrue or inaccurate
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in any material respect at or prior to the Closing, (ii) any material failure of
AmPaM to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; (iii) any termination of any Other
Agreement for any reason; and (iv) the issuance by the SEC or any state
securities regulatory authority of any issuance of or threatened issuance of any
order challenging the availability of an exemption from registration or
suspending the qualification of any securities described in the Private
Placement Memorandum for sale in any jurisdiction. However, subject to the
provisions of Section 7.7, such notification shall not relieve either the
Company or such Stockholder of their respective obligations under this
Agreement. The delivery of any notice pursuant to this Section 7.6 shall not be
deemed to (i) modify the representations or warranties hereunder of the party
delivering such notice, which modification may only be made pursuant to Section
7.7, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
7.7 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until 24 hours prior to the
Closing Date to notify AmPaM with respect to any matter (i) hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules or (ii) which may
have been omitted from the Schedules previously provided by such party.
Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule
prepared by the Company may be made unless AmPaM consents to such amendment or
supplement; and provided further, that no amendment or supplement to a Schedule
prepared by AmPaM may be made unless the Stockholders consent to such amendment
or supplement. For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Sections 8.1 and
9.1 have been fulfilled, the Schedules hereto, as amended or supplemented with
the consent of AmPaM or the Stockholders, as the case may be, as provided above,
shall be deemed to be the Schedules to this Agreement.
7.8 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
appropriate to carry out the transactions contemplated hereby and to cause the
conditions to the Closing Date to be satisfied as promptly as practicable.
7.9 AUTHORIZED CAPITAL. Prior to the Closing Date, AmPaM shall maintain
its authorized capital stock as set forth in the Private Placement Memorandum.
7.10 COMPLIANCE WITH THE HART-SCOTT ACT. All parties to this Agreement
hereby recognize that one or more filings under the Hart-Scott Act may be
required in connection with the transactions contemplated herein. If it is
determined by the parties to this Agreement that filings under the Hart-Scott
Act are required, then: (i) each of the parties hereto agrees to cooperate and
use its best efforts to comply with the Hart-Scott Act and (ii) such compliance
by the Stockholders and the parties agree to cooperate and use their best
efforts to cause all filings required under the Hart- Scott Act to be made. If
filings under the Hart-Scott Act are required, the costs and expenses thereof
(including filing fees) shall be borne by AmPaM.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of the Stockholders and the Company with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions. As of
the Closing Date, if any such applicable conditions have not been satisfied, any
one or more of the Stockholders who would be entitled to receive a majority of
the Aggregate Consideration (as defined herein) received by all the Stockholders
if the transactions contemplated hereby were consummated shall have the right to
waive any condition not so satisfied. Any act or action of the Stockholders in
consummating the Closing or delivering the certificates representing Company
Stock as of the Closing Date shall constitute a waiver of any conditions not so
satisfied. However, no such waiver shall be deemed to affect the survival of the
representations and warranties of AmPaM contained in Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of AmPaM contained in Section 6 shall be true and
correct as of the Closing Date as though such representations and warranties had
been made as of that time; all of the terms, covenants and conditions of this
Agreement to be complied with and performed by AmPaM on or before the Closing
Date shall have been duly complied with and performed in all material respects;
and certificates to the foregoing effect dated the Closing Date and signed by
the President or any Vice President of AmPaM shall have been delivered to the
Stockholders.
8.2 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of the Company or the Stockholders and that are
required to carry out this Agreement or incidental hereto shall be reasonably
satisfactory to the Company, the Stockholders and their counsel.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the purchase and sale of the Company Stock.
8.4 OPINION OF COUNSEL. The Company shall have received opinions from
counsel for AmPaM, dated the Closing Date, addressed to the Company and the
Stockholders in the form annexed hereto as Annex III.
8.5 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule 6.9
shall have been obtained; and no action or proceeding shall have been instituted
or threatened to restrain or prohibit the purchase and sale of the Company Stock
and no governmental agency or body shall have taken any other action or made any
request of Company as a result of which Company deems it inadvisable to proceed
with the transactions hereunder.
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8.6 GOOD STANDING CERTIFICATES. AmPaM shall have delivered to the
Company a certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Delaware Secretary of State and in each state
in which AmPaM is authorized to do business, showing that AmPaM is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for AmPaM for all periods prior to the Closing have
been filed and paid.
8.7 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred which would constitute a Material Adverse Change with respect to AmPaM
from the date of the Private Placement Memorandum.
8.8 SECRETARY'S CERTIFICATE. The Company shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of AmPaM, certifying the truth and correctness of attached copies of AmPaM's
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and, if required,
the stockholders of AmPaM approving AmPaM's entering into this Agreement and the
Other Agreements and the consummation of the transactions contemplated hereby
and thereby.
8.9 TAX MATTERS. The Stockholders shall have received an opinion of
Andrews & Kurth L.L.P., in substantially the form of Annex IV hereto, that the
AmPaM Plan of Organization will qualify as a tax-free transfer of property under
Section 351 of the Code and that the Stockholders will not recognize gain to the
extent the Stockholders exchange Company Stock for AmPaM Stock (but not cash or
other property) pursuant to this Agreement in connection with the AmPaM Plan of
Organization.
8.10 OTHER FOUNDING COMPANIES. The transactions contemplated by the
Other Agreements are consummated simultaneously with the consummation of the
transactions contemplated by this Agreement.
8.11 COMPANY RELEASE OF STOCKHOLDERS. The Company shall have delivered
to the Stockholders an instrument dated the Closing Date, in form reasonably
satisfactory to AmPaM and the Stockholders, which shall be effective only upon
the occurrence of the Closing Date, releasing the Stockholders from (i) any and
all claims of the Company against the Stockholders, known and unknown, and (ii)
obligations of the Stockholders to the Company, except for (x) items
specifically identified on Schedule 5.10(a) and Schedule 5.15(b) as being claims
of or obligations to the Company and (y) continuing obligations to the Company
relating to their employment by the Company pursuant to any employment agreement
entered into pursuant to Section 8.11 hereof.
8.12 STERLING CITY CAPITAL TRANSFER RESTRICTIONS. Sterling City
Capital, LLC and each of its Affiliates which owns AmPaM Stock shall have
entered into an agreement with AmPaM containing substantially the same terms and
conditions as are contained in Section 15 and Section 17.
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8.13 ELECTION OF CHIEF EXECUTIVE OFFICER. AmPaM shall have taken all
corporate action necessary to elect Robert A. Christianson as Chief Executive
Officer of AmPaM effective immediately following the Closing Date.
8.14 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto as
payable to the Stockholders upon the Closing and (ii) the aggregate cash amounts
specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AMPAM
The obligations of AmPaM with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. As of the Closing Date, if any
such conditions have not been satisfied, AmPaM shall have the right to terminate
this Agreement, or waive any such condition, but no such waiver shall be deemed
to affect the survival of the representations and warranties contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE AND OBLIGATIONS. All
the representations and warranties of the Stockholders and the Company contained
in this Agreement shall be true and correct as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date; all of the terms, covenants and conditions of this Agreement to be
complied with or performed by the Stockholders and the Company on or before the
Closing Date shall have been duly performed or complied with in all material
respects; and the Stockholders shall have delivered to AmPaM certificates dated
the Closing Date and signed by them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the purchase and sale of the Company Stock.
9.3 SECRETARY'S CERTIFICATE. AmPaM shall have received a certificate,
dated the Closing Date and signed by the secretary of the Company, certifying
the truth and correctness of attached copies of the Company's Articles or
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and the
Stockholders approving the execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby.
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9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Company
to conduct its business.
9.5 STOCKHOLDERS' RELEASE. The Stockholders shall have delivered to
AmPaM an instrument dated the Closing Date which shall be effective only upon
the occurrence of the Closing releasing the Company and AmPaM from (i) any and
all claims of the Stockholders against the Company and AmPaM and (ii)
obligations of the Company and AmPaM to the Stockholders, except for (A) items
specifically identified on Schedule 5.31 as being claims of or obligations to
the Stockholders, (B) continuing obligations to Stockholders relating to their
employment by the Company pursuant to employment agreements entered into as
specified in Section 8.11 hereof, (C) obligations arising under this Agreement
or the transactions contemplated hereby and (D) claims of Stockholders against
the Company for unreimbursed business expenses incurred by the Stockholders on
behalf of the Company (other than expenses related to the transactions
contemplated by this Agreement) prior to the Closing Date or unreimbursed
medical expenses of the Stockholders incurred prior to the Closing Date which
are covered by the Company's existing health insurance coverage. In the event
that the Closing Date does not occur, then the release instrument referenced
herein shall be void and of no further force or effect.
9.6 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of AmPaM and that are required to carry out the
transactions contemplated by this Agreement or incidental hereto shall have been
reasonably approved by counsel to AmPaM.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the Company and the Stockholders
(and between the Company and entities controlled by the Stockholders) specified
on Schedule 5.31 shall have been terminated effective prior to or as of the
Closing Date without any payment being made by the Company other than payments
made for services rendered, materials provided or other benefits provided to the
Company prior to the Closing Date pursuant to the terms of such agreements as in
effect as of the date of this Agreement.
9.8 OPINION OF COUNSEL. AmPaM shall have received opinions from counsel
to the Company and the Stockholders, dated the Closing Date, substantially in
the form annexed hereto as Annex V.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule
5.23(b)(2) shall have been obtained; and no action or proceeding shall have been
instituted or threatened to restrain or prohibit the purchase and sale of the
Company Stock and no
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governmental agency or body shall have taken any other action or made any
request of AmPaM as a result of which AmPaM deems it inadvisable to proceed with
the transactions hereunder.
9.10 GOOD STANDING CERTIFICATES. The Company shall have delivered to
AmPaM a certificate, dated as of a date no earlier than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by AmPaM, in each state in
which the Company is authorized to do business, showing the Company is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the Company for all periods prior to the
Closing have been filed and paid.
9.11 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto as
payable to the Stockholders upon the Closing and (ii) the aggregate cash amounts
specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9.12 FIRPTA CERTIFICATE. Each Stockholder shall have delivered to AmPaM
a certificate to the effect that he is not a foreign person pursuant to Section
1.1445-2(b) of the Treasury regulations.
9.13 RESIGNATIONS OF DIRECTORS AND OFFICERS. Any directors of the
Company, other than those identified on Schedule 2.1, shall have resigned as
directors of the Company. Any officers of the Company, other than those
identified on Schedule 2.2, shall have resigned as officers of the Company.
10. COVENANTS OF AMPAM AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. AmPaM
shall use reasonable efforts to have the Stockholders released from any and all
guarantees of the Company's indebtedness, including bond obligations, identified
on Schedule 10.1. Prior to obtaining the release of such guarantees, AmPaM shall
provide its guarantee of such indebtedness to the lenders thereof. In the event
that AmPaM cannot obtain such releases from the lenders of any such guaranteed
indebtedness identified on Schedule 10.1 on or prior to 90 days subsequent to
the Closing Date, AmPaM shall promptly pay off or otherwise refinance or retire
such indebtedness such that the Stockholders' personal liability shall be
released. AmPaM will indemnify the Stockholders against any loss or damage
suffered as a result of the personal guarantees.
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10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement, after the Closing Date, AmPaM shall not and
shall not permit any of its Subsidiaries to undertake any act that would
jeopardize the tax-free status of the exchange of Company Stock for AmPaM Stock
(but not cash or other property), including without limitation:
(a) the retirement or reacquisition, directly or indirectly,
of all or part of the AmPaM Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the
benefit of the Stockholders other than as described in the Private Placement
Memorandum or as described in this Agreement.
10.3 PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES.
(a) The Company, if possible, or otherwise the Stockholders
shall file or cause to be filed all income Tax Returns (federal, state, local or
otherwise) of any Acquired Party for all taxable periods that end on or before
the Closing Date, and shall permit AmPaM to review all such Tax Returns prior to
such filings. Unless the Company is a C corporation, the Stockholders shall pay
or cause to be paid all income Tax liabilities (in excess of all amounts already
paid with respect thereto or properly accrued or reserved with respect thereto
on the Financial Statements) with respect to the Company's operations for all
periods through and including the Closing Date.
(b) AmPaM shall file or cause to be filed all separate Returns
of, or that include, any Acquired Party for all taxable periods ending after the
Closing Date.
(c) Unless required by applicable law, regulations or
government proceedings, AmPaM shall not take any action, including any amendment
of a Tax Return of any Acquired Party, if such action would result in additional
Tax liabilities payable by any of the Stockholders for periods ending on or
prior to the Closing Date.
(d) Each party hereto shall, and shall cause its subsidiaries
and Affiliates to, provide to each of the other parties hereto such cooperation
and information as any of them reasonably may request in filing any Return,
amended Return or claim for refund, determining a liability for Taxes or a right
to refund of Taxes or in conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of all
relevant portions of relevant Returns, together with relevant accompanying
schedules and relevant work papers, relevant documents relating to rulings or
other determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which such party may possess. Each party
shall make its employees reasonably available on a mutually convenient basis at
its cost to provide explanation of any documents or information so provided.
Subject to the preceding sentence, each party required to file Returns pursuant
to this Agreement shall bear all costs of filing such Returns.
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(e) Each of the Company, AmPaM and each Stockholder shall
comply with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as a tax-free
contribution under Section 351(a) of the Code subject to gain, if any,
recognized on the receipt of cash or other property under Section 351(b) of the
Code.
10.4 DIRECTORS. The persons named in the Private Placement Memorandum
shall be appointed as directors and elected as officers of AmPaM, as and to the
extent set forth in the Private Placement Memorandum, promptly following the
Closing Date; provided, however, that the parties hereto acknowledge that if the
Company consummates an IPO, the persons who will serve as directors and
executive officers of AmPaM will be adjusted as appropriate for a publicly
traded entity, with any such changes being subject to the approval of the
majority of the Board of Directors of AmPaM.
10.5 LEGAL OPINIONS. If required by the lenders pursuant to the terms
of any agreements related to financing of the cash amounts referred to in
Section 9.11 hereof, the Company shall cause its counsel to deliver to such
lenders, at the Closing, an opinion of counsel in substantially the form
attached hereto as Annex V.
11. INDEMNIFICATION
The Stockholders and AmPaM each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS.
(a) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement until the applicable Expiration Date (as defined in
the introductory paragraph to Section 5(A)), provided that for purposes of
clause (iii) below, the applicable Expiration Date shall be the date on which
the applicable statute of limitations expires), from and against all claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by AmPaM as a result of
or arising from (i) any breach of the representations and warranties of the
Company set forth herein or on the schedules attached hereto or certificates
delivered pursuant to this Agreement, (ii) any breach of any covenant or
agreement on the part of the Company under this Agreement, or (iii) any
liability under the 1933 Act or any Federal or state securities law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating solely to the
Company which was based upon information provided to AmPaM or its counsel in
writing by the Company specifically for inclusion in the Private Placement
Memorandum and is contained in the Private Placement Memorandum, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
Company required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that no Stockholder shall be liable
for any
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indemnification obligation pursuant to this Section 11.1 in excess of such
Stockholder's pro rata share thereof determined by reference to the aggregate
value of the Base Cash Amount (as defined in Annex I of this Agreement), the
principal amount of AmPaM Notes and the shares of AmPaM Stock (valued at a price
of $13.00 per share) received by such Stockholder pursuant to Section I.A. of
Annex I hereto (without giving effect to the adjustments provided in Sections
I.B. and I.C. thereof) (giving effect to the value of such AmPaM Stock and
without giving effect to such adjustments, collectively, the "Aggregate
Consideration") such Stockholder would receive pursuant to Section I of Annex I
of this Agreement if the transactions contemplated hereby were consummated in
relation to the total Aggregate Consideration all Stockholders would receive
pursuant to Section I of Annex I of this Agreement if the transactions
contemplated hereby were consummated.
(b) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by AmPaM as a result of or arising from (i)
any breach of the representations and warranties of such Stockholder set forth
in Section 5(B) hereof, (ii) any breach of any covenant or agreement on the part
of such Stockholder under this Agreement, or (iii) any liability under the 1933
Act or any Federal or state securities law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating solely to such Stockholder which was based
upon information provided to AmPaM or its counsel in writing by such Stockholder
specifically for inclusion in the Private Placement Memorandum and is contained
in the Private Placement Memorandum, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating solely to such Stockholder required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which such statements were made not misleading.
(c) AmPaM acknowledges and agrees that other than the representations
and warranties of the Company or the Stockholders specifically contained in this
Agreement, there are no representations or warranties of the Company or the
Stockholders, either express or implied, with respect to the transactions
contemplated by this Agreement, the Company or its assets, liabilities and
business.
11.2 INDEMNIFICATION BY AMPAM. AmPaM covenants and agrees that it will
indemnify, defend, protect and hold harmless the Company and the Stockholders at
all times from and after the date of this Agreement until the applicable
Expiration Date (as defined in the introductory paragraph of Section 6, provided
that for purposes of clause (iii) below, the applicable Expiration Date shall be
the date on which the applicable statute of limitations expires), from and
against all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
Company or the Stockholders as a result of or arising from (i) any breach by
AmPaM of its representations and warranties set forth herein or on the schedules
attached
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hereto or certificates delivered pursuant to this Agreement, (ii) any breach of
any agreement on the part of AmPaM under this Agreement; or (iii) any liability
under the 1933 Act or any Federal or state securities law or regulation, at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Private Placement
Memorandum, or any amendment thereof or supplement thereto, or arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except to the extent such is based upon an untrue statement or
alleged untrue statement, or omission or alleged omission, made therein in
reliance upon, and in conformity with, the representations and warranties of the
Company or the Stockholders specifically contained in this Agreement or other
information furnished to AmPaM by the Company or the Stockholders in writing
specifically for inclusion therein.
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel reasonably
satisfactory to the Indemnified Party, any such matter so long as the
Indemnifying Party pursues the same in good faith and diligently, provided that
the Indemnifying Party shall not settle any criminal proceeding without the
written consent of the Indemnified Party. If the Indemnifying Party undertakes
to defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by Indemnifying Party, provided that if counsel to
the Indemnifying Party shall have a conflict of interest or a conflict of
interest is reasonably likely to arise that prevents counsel for the
Indemnifying Party from representing such Indemnified Party, Indemnified Party
shall have the right to participate in such matter through counsel of its own
choosing and Indemnifying Party will reimburse the Indemnified Party for the
reasonable expenses of its counsel. After the Indemnifying Party has notified
the Indemnified Party of its intention to undertake to defend or settle any such
asserted liability, and for so long as the Indemnifying Party diligently pursues
such defense, the Indemnifying Party shall not be liable for any additional
legal expenses incurred by the Indemnified Party in connection with any defense
or settlement of such asserted liability, except (i) as set forth in the
preceding sentence and (ii) to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the
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Indemnifying Party's liability under this Section with respect to such Third
Person claim shall be limited to the amount so offered in settlement by said
Third Person. Upon agreement as to such settlement between said Third Person and
the Indemnifying Party, the Indemnifying Party shall, in exchange for a complete
release from the Indemnified Party, promptly pay to the Indemnified Party the
amount agreed to in such settlement. If the Indemnifying Party does not
undertake to defend such matter to which the Indemnified Party is entitled to
indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense through counsel of its choice, at
the cost and expense of the Indemnifying Party, and the Indemnified Party may
settle such matter, and the Indemnifying Party shall pay the Indemnified Party
for the settlement amount and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith, provided, however, that under no
circumstances shall the Indemnified Party settle any Third Person claim without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. With respect to any account, note or other
receivable as to which the Stockholders have paid in full any indemnification
obligation pursuant to this Section 11 as a result of a breach of the
representation and warranty made pursuant to Section 5.11 or as to which a claim
in respect thereof has been asserted pursuant to this Section 11 that has been
applied against the Indemnification Threshold with respect to the Stockholders
as a result of a breach of the representation and warranty made pursuant to
Section 5.11, AmPaM shall cause the Company to assign such account, note or
other receivable to the Stockholders. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section
11 shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party to this Agreement with respect to any
provision of this Agreement, provided that, nothing herein shall be construed to
limit the right of a party, in a proper case, to seek injunctive relief for a
breach of this Agreement. AmPaM hereby waives, to the fullest extent permitted
under applicable law, any and all other rights, claims and causes of action,
known or unknown, it or any indemnified person may have against the Company or
any Stockholder relating to this Agreement or the transactions pursuant to this
Agreement arising under or based upon any Federal, state, local or foreign
statute, law, rule, regulation or otherwise. Any indemnity payment under this
Section 11 shall be treated as an adjustment to the exchange consideration for
Tax purposes unless a final determination (which shall include the execution of
a Form 870-AD or successor form) with respect to the Indemnified Party or any of
its Affiliate causes any such payment not to be treated as an adjustment to the
exchange consideration for U.S. Federal income Tax purposes.
11.5 LIMITATIONS ON INDEMNIFICATION. (a) AmPaM shall not assert any
claim for indemnification under this Section 11 against the Stockholders until
such time as, and solely to the extent that, the aggregate of all claims which
AmPaM may have against the Stockholders shall exceed the greater of (a) 3.0% of
the sum of (i) the cash paid to the Stockholders pursuant to Section 1.2 plus
(ii) the value of the AmPaM Stock delivered to the Stockholders pursuant to
Section 1.2
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(calculated as provided in this Section 11.5) plus (iii) the principal amount of
the AmPaM Notes delivered to the Stockholders pursuant to Section 1.2, or (b)
$50,000 (the "Indemnification Threshold"). Stockholders shall not assert any
claim for indemnification hereunder against AmPaM until such time as, and solely
to the extent that, the aggregate of all claims which Stockholders may have
against AmPaM shall exceed $50,000; provided, however, that this sentence shall
not be applicable with respect of any failure by AmPaM to (i) deliver the
consideration specified in Annex I hereto on the Closing Date upon the
satisfaction, or waiver by AmPaM, of all conditions to the occurrence of the
Closing Date specified in Section 9 or (ii) comply with its obligations pursuant
to Section 10.1. After the $50,000 threshold for AmPaM (subject to the proviso
in the preceding sentence) or the Indemnification Threshold for a Stockholder
has been met, all claims must be made in $10,000 increments, which claims may be
cumulated in order to meet such $10,000 thresholds. For purposes of this
paragraph, the AmPaM Stock delivered to the Stockholders shall be valued at
$13.00 per share.
(b) No person shall be entitled to indemnification under this Section
11 if and to the extent that such person's claim for indemnification is directly
or indirectly related to a breach by such person of any representation,
warranty, covenant or other agreement set forth in this Agreement. No claim for
indemnification against the Stockholders shall limit, diminish or change any
obligation of AmPaM pursuant to Section 10.1 hereof.
(c) Notwithstanding any other term of this Agreement, no Stockholder
shall be liable under this Section 11 for an amount which exceeds eighty-five
percent (85%) of the amount of proceeds received by such Stockholder (valued as
of the Closing Date) in connection with the purchase and sale of the Company
Stock. For purposes of this paragraph, the AmPaM Stock shall be valued at $13.00
per share.
(d) A Stockholder may pay any indemnification obligation under Section
11 by means of the payment of cash or a combination of the payment of cash, the
forgiveness of amounts owed pursuant to the AmPaM Notes and the delivery to
AmPaM of shares of AmPaM Stock; provided that the percentage of the
indemnification obligation satisfied by means of the delivery of shares of AmPaM
Stock does not exceed the percentage of AmPaM Stock comprising the total
consideration paid to such Stockholder by AmPaM to such Stockholder pursuant to
Annex I. For the purpose of crediting Stockholders for payments made to AmPaM by
means of delivery of shares of AmPaM Stock, the AmPaM Stock shall be valued at
$13.00 per share.
(e) In determining the amount of any loss, liability or expense for
which any party is entitled to indemnification under this Agreement, the gross
amount thereof will be reduced by any correlative insurance proceeds or other
third party indemnity or reimbursement proceeds realized or to be realized by
such party (or, in the case of AmPaM, by AmPaM, the Company or any subsidiary of
AmPaM or the Company) and such correlative insurance proceeds or other third
party indemnity or reimbursement proceeds shall be net of any insurance premium
or other incremental cost or expense owed or payable to any third party which
becomes due as a result of such claim. AmPaM
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shall use commercially reasonable efforts to pursue any available insurance
coverage or other rights of indemnity or reimbursement from third parties with
respect to any such loss, liability or expense.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) by mutual consent of AmPaM and the Stockholders;
(ii) by the Stockholders, if the transactions contemplated by
this Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by the Company
or the Stockholders prior to or on the Closing Date;
(iii) by AmPaM, if the transactions contemplated by this
Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by AmPaM prior
to or on the Closing Date;
(iv) by the Stockholders, if a material breach or default
shall be made by AmPaM in the observance or in the due and timely
performance of any of the covenants or agreements contained herein
relating to AmPaM, and the curing of such default shall not have been
made (or in the reasonable judgment of such Stockholders cannot be
made) on or before the Closing Date;
(v) by AmPaM, if a material breach or default shall be made by
the Company or the Stockholders in the observance or in the due and
timely performance of any of the covenants or agreements contained
herein relating to the Company or the Stockholders, and the curing of
such default shall not have been made (or in the reasonable judgment of
AmPaM cannot be made) on or before the Closing Date;
(vi) by the Stockholders, if the conditions set forth in
Section 8 hereof have not been satisfied or waived as of the Closing
Date; or
(vii) by AmPaM, if the conditions set forth in Section 9
hereof have not been satisfied or waived as of the Closing Date.
12.2 PROCEDURE AND EFFECT OF TERMINATION. A determination to terminate
this Agreement by AmPaM pursuant to Section 12.1 shall be valid and effective
only if a written notice of termination, accompanied by a certified copy of
resolutions of the board of directors of AmPaM that evidence the authorization
of the officer of AmPaM to deliver a written notice of termination of this
Agreement pursuant to Section 12.1, is given to the Stockholders in the manner
specified for notices
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in this Agreement. A determination to terminate this Agreement by the
Stockholders pursuant to Section 12.1 shall be valid and effective only if a
written notice of termination, signed by Stockholders who would be entitled to
receive a majority of the shares of AmPaM Stock specified in Section I of Annex
I to this Agreement if the transactions contemplated hereby were consummated, is
given to AmPaM in the manner specified for notices in this Agreement. Upon the
giving of notice of termination of this Agreement pursuant to Section 12.1 as
specified in the preceding sentence, this Agreement shall terminate, and the
transactions contemplated hereby shall be abandoned, without further action by
any of the parties hereto. Immediately upon any such termination, AmPaM shall
deliver written notice of such termination to the Other Founding Companies. If
this Agreement is terminated as provided in this Section 12, no party hereto
shall have any liability or further obligation hereunder to any other party,
except as provided in Section 14 and Section 18.6, provided, that, the
termination of this Agreement will in no way limit any obligation or liability
of any party based on or arising from a breach or default by such party with
respect to any of its representations, warranties, covenants or agreements
contained in this Agreement including, but not limited to, legal and audit costs
and out of pocket expenses that occurred prior to such termination.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The Stockholders will not, without the
prior written consent of AmPaM, for a period of two (2) years following the
Closing Date, for any reason whatsoever, directly or indirectly, for themselves
or on behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, whether paid or unpaid, in any plumbing, piping,
mechanical, heating, ventilation or air conditioning contracting,
installation or services business or operation, whether for
residential, commercial, industrial or governmental customers, or any
ancillary contracting, installation or services business directly
related thereto (such business and operations referred to herein as the
"Plumbing and Mechanical Business"), within 100 miles of where the
Company or any of its subsidiaries conducted business within two (2)
years prior to the Closing Date (the "Territory");
(ii) call upon any person who is, at the Closing Date, within
the Territory, an employee of AmPaM or any subsidiary thereof for the
purpose or with the intent of enticing such employee away from or out
of the employ of AmPaM or any subsidiary thereof;
(iii) call upon any person or entity which is, at the Closing
Date, or which has been within three (3) years prior to the Closing
Date, a customer of AmPaM or any subsidiary thereof, of the Company or
of any of the Other Founding Companies for the purpose of soliciting
customers, orders or contracts for any Plumbing and Mechanical Business
in direct competition with AmPaM within the Territory;
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(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor in the Plumbing
and Mechanical Business, which candidate, to the actual knowledge of
such Stockholder after due inquiry, was called upon by AmPaM or any
subsidiary thereof or for which, to the actual knowledge of such
Stockholder after due inquiry, AmPaM or any subsidiary thereof made an
acquisition analysis, for the purpose of acquiring such entity; or
(v) disclose to any person, firm, partnership, corporation or
business the names or identities of any person, firm, partnership,
corporation or business which has been a customer of the Company or any
of its subsidiaries within the two (2) years prior to the Closing Date
for any reason or purpose whatsoever except to the extent that the
Company has in the past disclosed such information to the public for
valid business reasons; or
(vi) testify as an expert witness in matters related to the
Plumbing and Mechanical Business for an adverse party to AmPaM, the
Company or any Other Founding Companies in litigation.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Stockholder from acquiring as a passive investment (i) not more
than one percent (1%) of the capital stock of a competing business whose stock
is traded on a national securities exchange, the NASDAQ Stock Market or
over-the-counter, or (ii) not more than five percent (5%) of the capital stock
of a competing business whose stock is not publicly traded if the Board of
Directors of AmPaM consents to such acquisition.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to
AmPaM as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to AmPaM for which it
would have no other adequate remedy, each Stockholder agrees that the foregoing
covenant may be enforced by AmPaM in the event of breach by such Stockholder, by
injunctions and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
Stockholders in light of the activities and business of AmPaM and the
subsidiaries thereof on the date of the execution of this Agreement and the
current plans of AmPaM as described in the Private Placement Memorandum.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
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13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against AmPaM or any subsidiary thereof, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by AmPaM of such
covenants. It is specifically agreed that the period of two (2) years stated at
the beginning of this Section 13, during which the agreements and covenants of
each Stockholder made in this Section 13 shall be effective, shall be computed
by excluding from such computation any time during which such Stockholder is
found to be in violation of any provision of this Section 13 as determined by
any of (i) a written agreement to such effect executed and delivered by AmPaM
and such Stockholder, (ii) a determination by an arbitration panel pursuant to
an arbitration conducted pursuant to Section 18.16 hereof or (iii) a
non-appealable judgment of a court of competent jurisdiction. The covenants
contained in Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto. The covenants contained in Section 13
shall have no effect if the transactions contemplated by this Agreement are not
consummated.
13.6 MATERIALITY. The Company and the Stockholders hereby agree that
the covenants contained in this Section 13 are a material and substantial part
of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company, the Other Founding Companies,
and/or AmPaM, such as operational policies, customer lists, and pricing and cost
policies that are valuable, special and unique assets of the Company's, the
Other Founding Companies' and/or AmPaM's respective businesses. The Stockholders
agree that they will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of AmPaM, (b) following the
Closing, such information may be disclosed by the Stockholders as is required in
the course of performing their duties for AmPaM or the Company and (c) to its
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.1; provided, however
that (i) the foregoing disclosure prohibition shall not apply in the event that
(i) such information becomes known to the public generally through no fault of
the Stockholders, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), the Stockholders shall, if
possible, give prior written notice thereof to AmPaM and provide AmPaM with the
opportunity to contest such disclosure, or (iii) the disclosing party reasonably
believes that such disclosure is required in connection with the defense of a
lawsuit against the disclosing party. In the event of a breach or threatened
breach by any of the Stockholders of the provisions of this Section, AmPaM shall
be entitled to an injunction restraining such Stockholders from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting AmPaM from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages. In the event the
transactions contemplated
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by this Agreement are not consummated, Stockholders shall have none of the
above-mentioned restrictions on their ability to disseminate confidential
information with respect to the Company.
14.2 AmPaM. AmPaM recognizes and acknowledges that it had in the past
and currently has access to certain confidential information of the Company,
such as operational policies, customer lists, and pricing and cost policies that
are valuable, special and unique assets of the Company's business. AmPaM agrees
that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
the Company, (b) to its counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
14.2, (c) to the Other Founding Companies and their representatives pursuant to
Section 7.1(b) of the Other Agreements and (d) to potential purchasers of
securities of AmPaM to the extent necessary or advisable in connection with the
applicable securities laws; provided, however that the foregoing disclosure
prohibition shall not apply in the event that (A) such information becomes known
to the public generally through no fault of AmPaM, (B) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (B), AmPaM
shall, if possible, give prior written notice thereof to the Company and the
Stockholders and provide the Company and the Stockholders with the opportunity
to contest such disclosure, or (C) the disclosing party reasonably believes that
such disclosure is required in connection with the defense of a lawsuit against
the disclosing party. In the event of a breach or threatened breach by AmPaM of
the provisions of this Section 14.2, the Company and the Stockholders shall be
entitled to an injunction restraining AmPaM from disclosing, in whole or in
part, such confidential information. Nothing herein shall be construed as
prohibiting the Company and the Stockholders from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by this Agreement are not consummated
for any reason, AmPaM shall nevertheless remain subject to this Section 14.2,
except that it shall not be permitted to make any disclosures otherwise than
pursuant to clause (A), (B) or (C) above.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Sections 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14
shall survive the termination of this Agreement for a period of five years from
the Closing Date.
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14.5 RETURN OF INFORMATION. If the transactions contemplated by this
Agreement are not consummated, AmPaM will return or destroy all confidential
information regarding the Company.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS RELATING TO AMPAM STOCK AND AMPAM NOTES. For
a period of two years from the Closing Date or, in the event that the Company
completes an IPO, for a period through the second anniversary of the date of the
closing of such IPO (the "Restricted Period"), no Stockholder shall (i) sell,
assign, exchange, transfer, pledge, or otherwise dispose of any shares of AmPaM
Stock or AmPaM Notes received by the Stockholders pursuant to this Agreement or
any securities convertible into, exchangeable or exercisable for any shares of
AmPaM Stock or AmPaM Notes received by such Stockholder pursuant to this
Agreement, (ii) grant any option to purchase, or otherwise enter into any
contract to sell, assign, transfer, pledge or otherwise dispose of, any shares
of AmPaM Stock or AmPaM Notes received by such Stockholder pursuant to this
Agreement, or (iii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the AmPaM Stock or AmPaM Notes, whether any
such swap or transaction is to be settled by delivery of shares of AmPaM Stock
or AmPaM Notes or other securities, by the delivery or payment of cash or
otherwise, except, in the case of clauses (i), (ii) or (iii) above, (A) as
otherwise agreed by AmPaM, (B) for the sale of shares of AmPaM Stock, and
entering into agreements relating to the sale of shares of AmPaM Stock, pursuant
to Section 17 hereof, (C) for transfers to (I) immediate family members of such
Stockholder who agree with AmPaM in writing to be bound by the restrictions set
forth in this Section 15.1, (II) trusts, limited partnerships or other estate
planning entities for the benefit of such Stockholder or family members of such
Stockholder which have agreed with AmPaM in writing, through action taken by the
trustees, partners or other persons having authority to bind the trust, limited
partnership or other estate planning entity, to be bound by the restrictions set
forth in this Section 15.1, (III) any charitable organization that qualifies for
receipt of charitable contributions under Section 170(c) of the Code which
agrees with AmPaM in writing to be bound by the restrictions set forth in this
Section 15.1, (D) for transfers of AmPaM Stock or AmPaM Notes to AmPaM pursuant
to Section 11.5(d), (E) for transfers to another Stockholder, to another person
or entity who receives shares of AmPaM Stock or AmPaM Notes or AmPaM Series A
Preferred Stock pursuant to the Other Agreements or to Sterling City Capital LLC
or any of its Affiliates provided that (1) such transaction is exempt from the
registration requirements of the 1933 Act as evidenced by the delivery to AmPaM
of an opinion of counsel in form and substance reasonably satisfactory to AmPaM
and (2) any such transferee agrees in writing to be bound by the restrictions
set forth in this Section 15.1, (F) transfers of shares of AmPaM Notes, shares
of AmPaM Stock, or grants of options to purchase shares of AmPaM Stock, by such
Stockholder to employees of the Company of up to an aggregate of 15% of the
shares of AmPaM Stock received by such Stockholder pursuant to this Agreement
provided that (1) any such transaction is exempt from the registration
requirements of the 1933 Act as evidenced by the delivery to AmPaM of an opinion
of counsel in form and substance reasonably satisfactory to AmPaM and (2) any
such employee agrees with AmPaM in writing to be bound by the restrictions set
forth in this Section 15.1 or (G) the sale by such Stockholder in an IPO of
shares of AmPaM Stock representing not more than 10% of the
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Aggregate Consideration in cash; provided, however, that in no circumstance will
a Stockholder be entitled to sell shares of AmPaM Stock in an IPO to the extent
that the sale of such shares by such Stockholder would result in such
Stockholder receiving in excess of 45% of the Aggregate Consideration in cash;
and, provided further, if AmPaM is advised in writing in good faith by any
managing underwriter of an underwritten offering of the securities being offered
pursuant to any registration statement under Section 17.1 that the number of
shares to be sold by persons other than AmPaM is greater than the number of such
shares which can be offered without adversely affecting the success of the
offering, AmPaM may reduce pro rata (among the Stockholders and all other
selling security holders in the offering) the number of shares offered for the
accounts of such persons (based upon the number of shares held by such person)
to a number deemed satisfactory by such managing underwriter. During the
Restricted Period, the certificates evidencing the AmPaM Stock or AmPaM Notes
delivered to the Stockholders pursuant to Section 3 of this Agreement will bear
a legend substantially in the form set forth below:
THE [SHARES/NOTES] REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE
TERMS OF THE ACQUISITION AGREEMENT PURSUANT TO WHICH SUCH SHARES WERE ISSUED,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, PLEDGE OR OTHER DISPOSITION PRIOR TO EXPIRATION
OF THE RESTRICTED PERIOD REFERRED TO IN THE ACQUISITION AGREEMENT EXCEPT IN
ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT. SUCH RESTRICTIONS ON TRANSFER ARE
SET FORTH IN AN ACQUISITION AGREEMENT, A COPY OF WHICH IS MAINTAINED AT THE
PRINCIPAL OFFICES OF THE ISSUER. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 TRANSFER RESTRICTIONS RELATING TO ADDITIONAL CONSIDERATION. No
Stockholder shall (i) sell, assign, exchange, transfer, pledge, or otherwise
dispose of any right to receive any consideration pursuant to Section II of
Annex I to this Agreement (the "Additional Consideration Right") or any
securities convertible into, exchangeable or exercisable for any Additional
Consideration Right, (ii) grant any option to purchase, or otherwise enter into
any contract to sell, assign, transfer, pledge or otherwise dispose of, any
Additional Consideration Right, or (iii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of any Additional
Consideration Right, whether any such swap or transaction is to be settled by
delivery of shares of AmPaM Stock or other securities, by the delivery or
payment of cash or otherwise.
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16. FEDERAL SECURITIES ACT REPRESENTATIONS
16.1 COMPLIANCE WITH LAW. Each Stockholder acknowledges that the shares
of AmPaM Stock, the Additional Consideration Right and any AmPaM Notes to be
delivered to such Stockholder pursuant to this Agreement have not been and will
not be registered under the 1933 Act (except as provided in Section 17 hereof)
and therefore may not be sold, assigned, exchanged, transferred, pledged or
otherwise disposed of without compliance with the 1933 Act which, among other
matters, would require registration under the 1933 Act unless exemption from the
registration requirements is available for such transaction. The AmPaM Stock,
the Additional Consideration Right and any AmPaM Notes to be acquired by each
Stockholder pursuant to this Agreement is being acquired solely for such
Stockholder's own account, for investment purposes only, and with no present
intention of selling, assigning, exchanging, transferring, pledging, or
otherwise disposing of it. Each Stockholder covenants, warrants and represents
that neither the shares of AmPaM Stock, the Additional Consideration Right nor
any AmPaM Notes issued to such Stockholder will be offered, sold, assigned,
exchanged, pledged, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the 1933 Act and the rules
and regulations of the SEC. All certificates representing the AmPaM Stock shall
bear the following legend in addition to the legend required under Section 15 of
this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each Stockholder is able to bear
the economic risk of an investment in the AmPaM Stock and AmPaM Notes to be
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment. Each Stockholder has substantial knowledge and experience in
making investment decisions of this type (or is relying on qualified purchaser
representatives with such knowledge and experience in making this decision), and
is capable, either individually or with such purchaser representatives, of
evaluating the merits and risks of this investment. Each Stockholder has had an
adequate opportunity to ask questions and receive answers from the officers of
AmPaM concerning any and all matters relating to the transactions described
herein including, without limitation, the background and experience of the
current and proposed officers and directors of AmPaM, the plans for the
operations of the business of AmPaM, the business, operations and financial
condition of the Founding Companies other than the Company, and any plans for
additional acquisitions. Each Stockholder has asked any and all questions of the
nature described in the preceding sentence and all questions have been answered
to such Stockholder's satisfaction. Except as set forth on Schedule 16.2, each
Stockholder is an "accredited investor" as defined in Rule 501(a) of the 1933
Act. Neither the foregoing nor any investigation made by the Stockholders
referred to above shall in any way affect the representations, warranties,
covenants and agreements of AmPaM made herein except to the extent that AmPaM is
relying upon the representations of the Stockholders in Section 16.1 and in this
Section 16.2 for purposes of
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AmPaM's representations and warranties in Sections 6.9, 6.11, 6.15 and 6.17
hereof as specified therein.
16.3 RELIANCE BY AmPaM. Each Stockholder acknowledges that AmPaM in
relying upon the representations and covenants of such Stockholder set forth in
Section 16.1 and Section 16.2 for purposes of compliance by AmPaM with Federal
and state securities laws related to the issuance of AmPaM Stock pursuant to
this Agreement and the Other Agreements.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. Whenever AmPaM proposes to register
any AmPaM Stock for its own or other's account under the 1933 Act for a public
offering, other than (i) any shelf or other registration of shares to be used as
consideration for acquisitions of additional businesses by AmPaM and (ii)
registrations relating to employee benefit plans, AmPaM shall give each of the
Stockholders prompt written notice of its intent to do so. Upon the written
request of any of the Stockholders given within 15 calendar days after receipt
of such notice, notwithstanding the provisions of Section 15 (except as
specified below with respect to an IPO), AmPaM shall cause to be included in
such registration all of the AmPaM Stock issued to such Stockholders pursuant to
this Agreement (including any stock issued as or issuable upon the conversion or
exchange of any convertible security, warrant, right or other security which is
issued by AmPaM as a stock split, dividend or other distribution with respect
to, or in exchange for, or in replacement of such AmPaM Stock) which any such
Stockholder requests, other than shares of AmPaM Stock which may then be
immediately sold under Rule 144(k) (or any similar or successor provision)
promulgated under the 1933 Act, and other than shares of AmPaM Stock that have
been theretofore sold by the Stockholder in accordance with the 1933 Act,
provided that AmPaM shall have the right to reduce pro rata the number of shares
of each selling Stockholder included in such registration to the extent that
inclusion of such shares would, in the written opinion of tax counsel to AmPaM
or its independent auditors, jeopardize the status of the transactions
contemplated hereby and by the Private Placement Memorandum as a tax-free
organization under Section 351 of the Code; provided, however, that with respect
to a proposal by AmPaM to register AmPaM Stock under the 1933 Act in connection
with an IPO, no Stockholder shall be permitted pursuant to this Section 17.1 to
have included in such registration more shares of AmPaM Stock than permitted to
be sold by such Stockholder pursuant to Section 15.1. In addition, if AmPaM is
advised in writing in good faith by any managing underwriter of an underwritten
offering of the securities being offered pursuant to any registration statement
under this Section 17.1 that the number of shares to be sold by persons other
than AmPaM is greater than the number of such shares which can be offered
without adversely affecting the success of the offering, AmPaM may reduce pro
rata (among the Stockholders and all other selling security holders in the
offering) the number of shares offered for the accounts of such persons (based
upon the number of shares held by such person) to a number deemed satisfactory
by such managing underwriter. If any Stockholder disapproves of the terms of the
underwriting, that Stockholder may elect to withdraw therefrom by written notice
to AmPaM and the managing underwriter. That Stockholder's shares of AmPaM Stock
so withdrawn shall also be withdrawn from registration; provided, however, that,
if by the withdrawal of such shares a greater number of shares of AmPaM
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Stock held by other Stockholders may be included in such registration, then
AmPaM shall offer to all other Stockholders of AmPaM the right to include
additional shares in the same proportion used in effecting the above
limitations. AmPaM shall not, for a period of two years following the Closing
Date, grant to any other person any rights to cause AmPaM to register any
securities in priority over, or in precedent to, the rights granted to the
Stockholders hereunder and to the stockholders of the Other Founding Companies
pursuant to Section 17 of the Other Agreements.
17.2 REGISTRATION PROCEDURES. Whenever AmPaM is required to register
shares of AmPaM Stock pursuant to Section 17.1, AmPaM will, as expeditiously as
possible:
(i) Prepare and file with the SEC a registration statement
with respect to such shares and use its best efforts to cause such
registration statement to become effective (provided that before filing
a registration statement or prospectus or any amendments or supplements
or term sheets thereto, AmPaM will furnish a representative of the
Stockholders with copies of all such documents proposed to be filed) as
promptly as practical;
(ii) Notify the Stockholders of any stop order issued or
threatened by the SEC and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered;
(iii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 120 days, cause the
prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the 1933
Act; and comply with the provisions of the 1933 Act applicable to it
with respect to the disposition of all securities covered by such
registration statement during the applicable period in accordance with
the intended methods of disposition by the sellers thereof set forth in
such registration statement or supplement to the prospectus;
(iv) Furnish to each Stockholder who so requests such number
of copies of such registration statement, each amendment and supplement
thereto and the prospectus included in such registration statement
(including each preliminary prospectus and any term sheet associated
therewith), and such other documents as such Stockholder may reasonably
request in order to facilitate the disposition of the relevant shares;
(v) Make "generally available to its security holders" (within
the meaning of Rule 158) an earnings statement satisfying the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder no
later than 90 days after the end of the 12-month period beginning with
the first day of AmPaM's first fiscal quarter commencing after the
effective date of the registration statement;
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(vi) Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement at
the earliest possible moment;
(vii) If requested by the managing underwriter or
underwriters, if any, or any participating Stockholder, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters or any
participating Stockholder, as the case may be, reasonably requests to
be included therein, including, without limitation, information with
respect to the number of shares of AmPaM Stock being sold by
participating Stockholders to any underwriter or underwriters, the
purchase price being paid therefor by such underwriter or underwriters
and with respect to any other terms of an underwritten offering of the
shares of AmPaM Stock to be sold in such offering, and promptly make
all required filings of such prospectus by supplement or post-effective
amendment;
(viii) Make available for inspection by participating
Stockholders, any underwriter participating in any disposition pursuant
to such registration statement, and the counsel retained by the
participating Stockholders, counsel for the underwriters and any
accountant or other agent retained by participating Stockholders or any
such underwriter (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of AmPaM
(the "Records"), as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause AmPaM's
officers, directors and employees to supply all information reasonably
requested by any such Inspectors in connection with such registration
statement; provided, that records which AmPaM determines, in good
faith, to be confidential and which AmPaM notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or (ii) the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction after delivery of
sufficient notice to AmPaM to enable AmPaM to contest such subpoena or
order;
(ix) Take all other steps reasonably necessary to effect the
registration of the shares of AmPaM Stock contemplated hereby;
(x) Use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested by
the Stockholders, and to keep such registration or qualification
effective during the period such registration statement is required to
be kept effective, provided that AmPaM shall not be required to become
subject to taxation, to qualify generally to do business or to file a
general consent to service of process in any such states or
jurisdictions;
(xi) Cause all such shares of AmPaM Stock to be listed or
included not later than the date of the first sale of shares of AmPaM
Stock under such registration statement on any
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securities exchanges or trading systems on which similar securities
issued by AmPaM are then listed or included; and
(xii) Notify each Stockholder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within
the period that AmPaM is required to keep the registration statement
effective of the happening of any event as a result of which the
prospectus included in such registration statement (as then in effect),
together with any associated term sheet, contains an untrue statement
of a material fact or omits to state any fact required to be stated
therein or necessary to make the statements therein (in the case of the
prospectus or any preliminary prospectus, in light of the circumstances
under which they were made) not misleading, and, at the request of such
Stockholder, AmPaM promptly will prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of
the covered shares, such prospectus will not contain an untrue
statement of material fact or omit to state any fact required to be
stated therein or necessary to make the statements therein (in the case
of the prospectus or any preliminary prospectus, in light of the
circumstances under which they were made) not misleading.
All expenses incurred in connection with the registration under this
Article 17 and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printer and
accounting fees, but excluding underwriting commissions and discounts), shall be
borne by AmPaM.
17.3 INDEMNIFICATION.
(a) In connection with any registration under Section 17.1,
AmPaM shall indemnify, to the extent permitted by law, each selling Stockholder
(an "Indemnified Party") against all losses, claims, damages, liabilities and
expenses arising out of or resulting from any untrue or alleged untrue statement
of material fact contained or incorporated by reference in any registration
statement, prospectus or preliminary prospectus or associated term sheet or any
omission or alleged omission to state or incorporated by reference therein a
material fact required to be stated or incorporated by reference therein or
necessary to make the statements therein not misleading except insofar as the
same are caused by or contained in or omitted from any information furnished in
writing to AmPaM by such Indemnified Party expressly for use therein or by any
Indemnified Parties' failure to deliver a copy of the registration statement or
prospectus or any amendment or supplements thereto after AmPaM has furnished
such Indemnified Party with a sufficient number of copies of the same.
(b) In connection with any registration under Section 17.1,
each selling Stockholder shall furnish to AmPaM in writing such information
concerning the Stockholder and his or her proposed offering of shares as is
reasonably requested by AmPaM for use in any such registration statement or
prospectus and will indemnify, to the extent permitted by law, AmPaM, its
directors and officers and each person who controls AmPaM (within the meaning of
the 1933 Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged
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untrue statement of a material fact or any omission or alleged omission to state
therein a material fact required to be stated in the registration statement or
prospectus or any amendment thereof or supplement thereto or necessary to make
the statements therein not misleading, but only to the extent that such untrue
or alleged untrue statement or omission or alleged omission is contained in or
omitted from information so furnished in writing to AmPaM by such Stockholder
expressly for use in the registration statement. Notwithstanding the foregoing,
the liability of a Stockholder under this Section 17.3 shall be limited to an
amount equal to the net proceeds actually received by such Stockholder from the
sale of the relevant shares covered by the registration statement.
(c) Any person entitled to indemnification hereunder will (i)
give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) unless in such indemnified parties' reasonable
judgment, a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. Any failure to give prompt notice shall deprive a party of
its right to indemnification hereunder only to the extent that such failure
shall have adversely affected the indemnifying party. If the defense of any
claim is assumed, the indemnifying party will not be subject to any liability
for any settlement made without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party that is not entitled or elects
not, to assume the defense of a claim, will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party, a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
17.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 17.1 covering an underwritten registered offering, (i) each
participating Stockholder shall execute and deliver to AmPaM a written power of
attorney instrument that (A) appoints an officer of AmPaM as such Stockholder's
attorney-in-fact for purposes of executing and delivering an underwriting
agreement among AmPaM, the underwriters named therein and such Stockholder
specifying the terms and conditions applicable to the sale of AmPaM Stock of
such Stockholder in such offering and (B) otherwise is in such form and
containing such provisions as are customary in the securities business for such
an arrangement in connection with an underwritten registered offering in which
one or more stockholders of the issuer are participants, including a provision
that authorizes the attorney-in-fact appointed by such Stockholder to execute
and deliver such an underwriting agreement in the event that the net price per
share to be received by such Stockholder from the sale of the shares of AmPaM
Stock to be sold in such offering is not less than a price specified in such
instrument and (iii) AmPaM and each participating Stockholder agree to enter
into a written agreement with the managing underwriters in such form and
containing such provisions as are customary in the securities business for such
an arrangement between such managing underwriters and companies of AmPaM's size
and investment stature, including indemnification; provided, however, that (A)
such Stockholder shall be exempt and excluded from any indemnification of the
managing underwriters other than with respect to information provided by such
Stockholder with respect to such Stockholder to AmPaM or the managing
underwriters
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specifically for inclusion in any such registration statement and (B) such
Stockholder shall not be obligated to enter into such an underwriting agreement
in the event that the net price per share to be received by such Stockholder
from the sale of shares of AmPaM Stock to be sold in such offering is less than
the floor price specified in the power of attorney instrument executed and
delivered to AmPaM pursuant to clause (i) above.
17.5 TRANSFER OF RIGHTS. The right to cause AmPaM to register shares of
AmPaM Stock under this Agreement may be assigned to a transferee or assignee of
any Stockholder to the extent that such transferee or assignee is a member of
the immediate family of a Stockholder, a trust, limited partnership or other
estate planning entity for the benefit of any such persons or a charitable
organization that qualifies for receipt of charitable contributions under
Section 170(c) of the Code.
17.6 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC that may permit the sale of AmPaM
stock to the public without registration, following an IPO AmPaM agrees to use
its reasonable efforts, from and after the completion of an IPO, to:
(i) make and keep public information regarding AmPaM available
as those terms are understood and defined in Rule 144 under the 1933
Act beginning 90 days following the effective date of a registration
statement relating to an IPO;
(ii) file with the SEC in a timely manner all reports and
other documents required of AmPaM under the 1933 Act and the 1934 Act
at any time after it has become subject to such reporting requirements;
and
(iii) so long as a Stockholder owns any restricted AmPaM
Stock, furnish to each Stockholder forthwith upon written request a
written statement by AmPaM as to its compliance with the current public
information requirements of Rule 144 (at any time from and after 90
days following the effective date of a registration statement relating
to an IPO), and of the 1933 Act and the 1934 Act (any time after it has
become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of AmPaM, and such other reports and
documents so filed as a Stockholder may reasonably request in availing
itself of any rule or regulation of the SEC allowing a Stockholder to
sell any such shares without registration.
18. REDEMPTION OF AMPAM STOCK
18.1 REDEMPTION TRIGGER. In the event that, within three years of the
Closing Date, (i) AmPaM has not consummated an IPO and (ii) any Stockholder has
not received cash (including proceeds from the public or private sale of AmPaM
Stock received as consideration hereunder and the receipt of principal payments,
if any, made with respect to AmPaM Notes held by such Stockholder) equal to or
exceeding 50% of the Aggregate Consideration on or prior to the third
anniversary of the Closing Date, such Stockholder shall have the right (the "Put
Right"), but not the
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obligation, commencing on the third anniversary of the Closing Date to require
AmPaM to purchase a number of shares of AmPaM Stock then owned by such
Stockholder, subject to the limitations set forth in Section 18.2 below. The
purchase price for such redemption shall be $13.00 per share, such price to be
subject to appropriate adjustment to reflect any reclassification, stock
dividend, subdivision, split-up or combination of shares of AmPaM Stock after
the date hereof.
18.2 MINIMUM REDEMPTION; LIMITATIONS. If the events specified in
Section 18.1(i) and 18.1(ii), with Section 18.1(ii) being determined on an
individual Stockholder basis, have not occurred within the time specified, AmPaM
shall be obligated to purchase from each eligible Stockholder no less than 10%
of the AmPaM Stock held by such Stockholder annually; provided, however, that
the Stockholders shall not be entitled to exercise their Put Rights if and to
the extent the Company has not achieved the Target Net Income (as defined in
Annex I hereto) for the year preceding the year in which a Stockholder seeks to
exercise his Put Right. The redemptions will be funded by internal cash flows or
alternative financing arrangements but AmPaM's obligation to make any redemption
pursuant to this Section 18 will be subject to the covenants and restrictions
contained in AmPaM's then existing private or public debt or equity instruments.
18.3 NOTICE; EXERCISE. The Stockholders may exercise their Put Right by
giving written notice (the "Put Notice") to AmPaM within thirty (30) days of the
third anniversary of the execution hereof. If any Stockholder does not provide
AmPaM with a Put Notice within such thirty-day period, the Put Right applicable
to such Stockholder shall expire. The date for closing the sale of any shares of
AmPaM Stock pursuant to a proper exercise of a Put Right shall in no event be
earlier than 90 days after the date AmPaM receives the Put Notice. Any such
closing shall be at such time of day and place as shall be mutually agreed
between such holder and AmPaM. At such closing AmPaM shall make payment for the
AmPaM Stock to be repurchased by wire transfer of immediately available funds to
a bank account designated by such Stockholder for such purpose and such
Stockholder shall deliver to AmPaM certificates, duly endorsed for transfer,
representing the shares of AmPaM Stock to be purchased and sold pursuant to the
exercise of such Put Right.
18.4 ADDITIONAL REDEMPTIONS. In the event AmPaM has not consummated an
IPO and notwithstanding the foregoing, to the extent the Stockholders who have
received greater than 50% of their Aggregate Consideration in cash wish to
tender AmPaM Stock to AmPaM for purchase, AmPaM will use its commercially
reasonable efforts to continue to repurchase up to 10% of the AmPaM Stock held
by such Stockholder annually.
18.5 TERMINATION OF REDEMPTION OBLIGATION. Put Rights with respect to
any individual Stockholder will terminate upon receipt by such Stockholder of
50% of his Aggregate Consideration in cash; such termination will not, however,
limit such Stockholders ability to participate in the additional redemptions
provided in Section 18.4. Notwithstanding the foregoing, all of AmPaM's
redemption obligations contained in this Section 18 shall terminate on the
earlier to occur of (i) an IPO, (ii) any sale of all or substantially all of
AmPaM's assets in one transaction or series of transactions, (iii) any merger or
consolidation which involves AmPaM and in which AmPaM is not the surviving
entity or (iv) any transaction after which the shares of AmPaM Common Stock, if
any,
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which are then held by persons other than the holders of AmPaM Common Stock as
of the Closing Date constitute 50% or more of AmPaM Common Stock outstanding as
of the date of the consummation of such transaction.
19. GENERAL
19.1 COOPERATION. The Company, Stockholders and AmPaM shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The Company will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the Company cooperate with
AmPaM on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law and except as
provided in Section 17.5) and shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of AmPaM and the Company, and the
heirs, successors and legal representatives of the Stockholders.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company and AmPaM and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the Stockholders, the Company and AmPaM, acting
through their respective officers or trustees, duly authorized by their
respective Boards of Directors. Any disclosure made on any Schedule delivered
pursuant hereto shall be deemed to have been disclosed for purposes of any other
Schedule required hereby, provided that the Company shall make a good faith
effort to cross reference disclosure, as necessary or advisable, between related
Schedules.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument. A telecopied
facsimile of an executed counterpart of this Agreement shall be sufficient to
evidence the binding agreement of each party to the terms hereof. However, each
party agrees to return to the other parties an original, duly executed
counterpart of this Agreement promptly after delivery of a telecopied facsimile
thereof.
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19.5 BROKERS AND AGENT. Except as disclosed on Schedule 18.5, each
party hereto represents and warrants that it employed no broker or agent in
connection with this transaction and agrees to indemnify the other parties
hereto against all loss, cost, damages or expense arising out of claims for fees
or commission of brokers employed or alleged to have been employed by such
indemnifying party.
19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, AmPaM will pay the reasonable fees, expenses and
disbursements of AmPaM and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto, including all costs and expenses incurred in the performance
and compliance with all conditions to be performed by AmPaM under this
Agreement, including the fees and expenses of Arthur Andersen LLP, Andrews &
Kurth L.L.P., and any other person or entity retained by AmPaM, and the costs of
preparing the Private Placement Memorandum incurred in connection with the
subject matter of this Agreement and any amendments thereto. In addition,
whether or not the transactions contemplated herein shall be consummated, AmPaM
will pay the reasonable fees and expenses of Bracewell & Patterson LLP incurred
on behalf of the Company and the Stockholders in connection with the subject
matter of this Agreement. Whether or not the transactions herein contemplated
shall be consummated, the Company will pay all of its costs and expenses
incurred on behalf of the Company and the Stockholders in connection with the
subject matter of this Agreement except that (i) the Company shall not be
required to pay any of the costs, fees and expenses specified above as to which
AmPaM is responsible for the payment thereof and (ii) neither the Company nor
the Stockholders shall be responsible for the payment of the costs, fees and
expenses incurred by or on behalf of AmPaM. Whether or not the transactions
herein contemplated shall be consummated, AmPaM shall reimburse Sterling City
Capital, LLC (or any person or entity which is an Affiliate thereof) for any of
the foregoing fees, expenses and disbursements paid by Sterling City Capital,
LLC (or any person or entity which is an Affiliate thereof) and shall repay
Sterling City Capital, LLC (or any person or entity which is an Affiliate
thereof) for any loans or advances made by Sterling City Capital, LLC (or any
person or entity which is an Affiliate thereof) for the purpose of providing
AmPaM funds to pay any such fees, expenses and disbursements, provided that such
reimbursement and loan repayment obligation shall be limited to the foregoing
fees, expenses, and disbursements which are out-of-pocket expenses of AmPaM,
Sterling City Capital, LLC or any person or entity which is an Affiliate
thereof. Sterling City Capital, LLC shall be reimbursed by AmPaM in the form of
AmPaM Notes. AmPaM retains the right, within a reasonable period following the
Closing Date, to conduct an audit of the expenses for which Sterling City
Capital, LLC is reimbursed. Each Stockholder shall pay all sales, use, transfer,
real property transfer, recording, gains, stock transfer and other similar taxes
and fees ("Transfer Taxes") imposed in connection with the purchase and sale of
the Company Stock, other than Transfer Taxes, if any, imposed by the State of
Delaware. Each Stockholder shall file all necessary documentation and Returns
with respect to such Transfer Taxes. In addition, each Stockholder acknowledges
that he, and not the Company or AmPaM, will pay all Taxes due by him upon
receipt of the consideration payable pursuant to Section 1 hereof. The
Stockholders acknowledge that the risks of the transactions contemplated hereby
include Tax risks, with respect to which the Stockholders are relying
substantially on the opinion contemplated by Section 8.12 hereof and
representations by AmPaM in this Agreement.
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19.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person or via a nationally recognized courier service to an officer or agent
of such party.
(a) If to AmPaM addressed to it at:
American Plumbing & Mechanical, Inc.
515 Post Oak Blvd., Suite 450
Houston, Texas 77027
Attention: Chief Executive Officer
with copies to:
Thomas P. Mason
Andrews & Kurth L.L.P.
4200 Chase Tower
Houston, Texas 77002
(b) If to the Stockholders, addressed to them at their addresses set
forth on the signature pages hereto, with copies to:
Bill Cauthen
Cauthen & Feldman
215 N. Joanna Ave.
Tampa, Florida 32778-3200
(c) If to the Company, addressed to it at:
James A. Croson
J.A. Croson Company of Florida
7420 East Colonial
Orlando, Florida 32807
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
62
<PAGE> 71
19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Texas, excluding any conflicts of law, rule or
principle that might refer same to the laws of another jurisdiction.
19.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties until the respective Expiration
Dates referred to herein with respect thereto or, if no Expiration Date is
applicable with respect thereto, until the expiration of all applicable statute
of limitations periods.
19.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.11 TIME. Time is of the essence with respect to this Agreement.
19.12 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.
19.13 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
19.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of AmPaM, the Company and Stockholders who would receive a
majority of the Aggregate Consideration specified in Section I of Annex I to
this Agreement if the transactions contemplated hereby were consummated. Any
amendment or waiver effected in accordance with this Section 19.15 shall be
binding upon each of the parties hereto, any other person receiving AmPaM Stock
in connection with the purchase and sale of the Company Stock and each future
holder of such AmPaM Stock. Any
63
<PAGE> 72
consent of the Stockholders who would receive a majority of the Aggregate
Consideration pursuant to Section I of Annex I of this Agreement if the
transactions contemplated hereby were consummated shall be deemed to be the
consent of the Stockholders for purposes of provisions of this Agreement as to
which a consent of the Stockholders may be requested or required.
19.16 MEDIATION AND ARBITRATION. If a dispute arises out of or relates
to this Agreement, or the breach thereof, and if said dispute cannot be settled
through direct discussions, the parties agree to first endeavor to settle the
dispute in an amicable manner by mediation administered by the American
Arbitration Association under its then prevailing Commercial Mediation Rules,
before resorting to arbitration. Thereafter, any unresolved controversy or claim
arising out of or relating to this Agreement, or the breach thereof, shall be
settled by arbitration administered by the American Arbitration Association in
accordance with its then prevailing Commercial Arbitration Rules. The
enforcement, interpretation and procedural and substantive effect of the
obligation to arbitrate created by this Section 19.16 shall be governed by the
Federal Arbitration Act as amended from time to time, 9 U.S.C. Section 1 et seq.
The parties hereby disclaim any intention to have the substantive or procedural
law of any state or other jurisdiction, other than the law of the United States
as embodied in the Federal Arbitration Act, applied to such obligation. Any such
mediation or arbitration proceeding will be conducted in Houston, Texas.
19.17 INFORMATION PROVIDED FOR PRIVATE PLACEMENT MEMORANDUM. For
purposes of this Agreement, the information provided by the Company in writing
specifically for inclusion in the Private Placement Memorandum shall include
solely (i) the Financial Statements (in the form that they appear in the Private
Placement Memorandum), (ii) any financial statements provided to AmPaM pursuant
to Section 7.9, (iii) the description of the Company contained in the Private
Placement Memorandum under the caption "The Company", (iv) the description of
the Company's results of operations and its liquidity and capital resources, if
any, contained in the Private Placement Memorandum under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and (v) the description, if any, of matters related to the Company
contained in the Private Placement Memorandum under the caption "Certain
Transactions Transactions involving Certain Officers, Directors and
Stockholders". For purposes of this Agreement, the information provided by a
Stockholder in writing specifically for inclusion in the Private Placement
Memorandum shall include only (i) the description, if any, of matters related to
such Stockholder contained in the Private Placement Memorandum under the caption
"Certain Transactions - Transactions involving Certain Officers, Directors and
Stockholders" and (ii) the biographical description of such Stockholder, if any,
contained in the Private Placement Memorandum under the caption "Management."
19.18 EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective upon (i) the execution and delivery of this Agreement by all of the
parties hereto and (ii) the delivery to AmPaM of each Employment Agreement
attached hereto as Annex VI-1 and Annex VI-2 executed by each of the Company,
the employees named therein and AmPaM.
64
<PAGE> 73
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AMERICAN PLUMBING & MECHANICAL, INC.
By: /s/ DAVID BAGGETT
-------------------------------------
Name: David Baggett
-----------------------------------
Title: Chief Financial Officer
----------------------------------
J.A. CROSON COMPANY OF FLORIDA
By: /s/ JAMES A. CROSON
-------------------------------------
James A. Croson
Chief Executive Office
[Remainder of page intentionally left blank]
65
<PAGE> 74
STOCKHOLDERS: SPOUSES (WITHOUT PERSONAL LIABILITY AND
SOLELY TO ACKNOWLEDGE THE SALE OF THE
COMPANY STOCK BY THE STOCKHOLDER):
/s/ JAMES A. CROSON /s/ JOANN CROSON
- ---------------------------------- ---------------------------------------
James A. Croson Joann Croson
3111 Lakeshore Drive
Mt. Dora, Florida 32757
/s/ MARK F. LATOURELLE
- ----------------------------------
Mark F. Latourelle
5341 Cypress Reserve Place
Winter Park, Florida 32792
/s/ JAMES M. CROSON /s/ SHERIE A. LINDAMOOD
- ---------------------------------- ---------------------------------------
James M. Croson Sherie A. Lindamood
431 Selge Terrace
Rochester, New York 14613
/s/ DAVID A. CROSON /s/ KATHERINE CROSON
- ---------------------------------- ---------------------------------------
David A. Croson Katherine Croson
5705 Lithopolis Road
Lancheseter, Ohio 43130
/s/ JULIANA M. CROSON
- ----------------------------------
Juliana M. Croson
1515 Carroll Eastern Avenue
Rochester, New York 14613
/s/ JOSEPH W. CROSON /s/ JEANNETTE CROSON
- ---------------------------------- ---------------------------------------
Joseph W. Croson Jeannette Croson
902 Grove Street
Eustis, Florida 32726
66
<PAGE> 75
/s/ THOMAS A. CROSON /s/ KATHRYN L. CROSON
- ---------------------------------- ---------------------------------------
Thomas A. Croson Kathryn L. Croson
4659 Johnstown Road
Gahanna, Ohio 43230
/s/ LAURA A. LARMAY /s/ GUY C. LARMAY
- ---------------------------------- ---------------------------------------
Laura A. Larmay Guy C. Larmay
815 Norman Drive
Mt. Dora, Florida 32757
/s/ PAUL S. CROSON /s/ MELISSA A. CROSON
- ---------------------------------- ---------------------------------------
Paul S. Croson Melissa A. Croson
700 Jefferis Court
Eustis, Florida 32726
/s/ JAMES M. CROSON
- ----------------------------------
James M. Croson
Custodian for Phoenix Amber Gayles
/s/ JAMES M. CROSON
- ----------------------------------
James M. Croson
Custodian for Ferron Rhae Gayles
/s/ JAMES M. CROSON
- ----------------------------------
James M. Croson
Custodian for Felecia Lynn Croson
/s/ JAMES M. CROSON
- ----------------------------------
James M. Croson
Custodian for Brandon Paul Croson
/s/ JAMES M. CROSON
- ----------------------------------
James M. Croson
Custodian for Jonathan Stephen Croson
67
<PAGE> 76
/s/ JAMES M. CROSON
- ----------------------------------
James M. Croson
Custodian for Ryan James Carl Croson
/s/ JAMES M. CROSON
- ----------------------------------
James M. Croson
Custodian for Kara Danielle Croson
/s/ JAMES M. CROSON
- ----------------------------------
James M. Croson
Custodian for Thomas Andrew Croson, Jr.
68
<PAGE> 1
EXHIBIT 10.8
Execution Copy
- --------------------------------------------------------------------------------
ACQUISITION AGREEMENT
dated as of the 11th day of February, 1999
by and among
AMERICAN PLUMBING & MECHANICAL, INC.
NELSON MECHANICAL CONTRACTORS, INC.
and
all of the STOCKHOLDERS of
NELSON MECHANICAL CONTRACTORS, INC.
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS .........................................................................................................1
1. ACQUISITION OF STOCK.....................................................................................5
1.1 Acquisition.....................................................................................5
1.2 Consideration...................................................................................5
1.3 Certain Information With Respect to the Capital Stock of the Company
and AmPaM.......................................................................................5
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY...........................................................5
2.1 Board of Directors..............................................................................5
2.2 Officers........................................................................................5
3. DELIVERY OF CONSIDERATION................................................................................6
3.1 Stockholders' Consideration.....................................................................6
3.2 Stockholders' Deliveries........................................................................6
4. CLOSING..................................................................................................6
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................6
5.1 Due Organization................................................................................7
5.2 Authorization...................................................................................7
5.3 Capital Stock of the Company....................................................................7
5.4 Transactions in Capital Stock...................................................................8
5.5 No Bonus Shares.................................................................................8
5.6 Subsidiaries; Ownership in Other Entities.......................................................8
5.7 Predecessor Status; etc.........................................................................8
5.8 Spin-off by the Company.........................................................................8
5.9 Financial Statements............................................................................8
5.10 Liabilities and Obligations.....................................................................9
5.11 Accounts and Notes Receivable..................................................................10
5.12 Licenses; Intellectual Property................................................................10
5.13 Environmental Matters..........................................................................11
5.14 Personal Property..............................................................................13
5.15 Significant Customers; Material Contracts and Commitments......................................13
5.16 Real Property..................................................................................14
5.17 Insurance......................................................................................14
5.18 Compensation; Employment Agreements; Labor Matters.............................................15
5.19 Employee Plans.................................................................................15
5.20 Compliance with ERISA..........................................................................16
5.21 Conformity with Law; Litigation................................................................17
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
5.22 Taxes..........................................................................................17
5.23 No Violations; No Consent Required, Etc........................................................18
5.24 Government Contracts...........................................................................19
5.25 Absence of Changes.............................................................................19
5.26 Deposit Accounts; Powers of Attorney...........................................................21
5.27 Validity of Obligations........................................................................21
5.28 Relations with Governments.....................................................................21
5.29 Disclosure.....................................................................................21
5.30 No Warranties or Insurance.....................................................................21
5.31 Interest in Customers and Suppliers and Related Party Transactions.............................22
5.32 Private Placement Memorandum...................................................................22
5.33 Authority; Ownership...........................................................................22
5.34 Preemptive Rights..............................................................................23
5.35 No Commitment to Dispose of AmPaM Stock........................................................23
5.36 Disclosure.....................................................................................23
6. REPRESENTATIONS OF AMPAM................................................................................23
6.1 Due Organization...............................................................................24
6.2 Authorization..................................................................................24
6.3 Capital Stock of AmPaM.........................................................................24
6.4 Transactions in Capital Stock..................................................................24
6.5 Subsidiaries...................................................................................25
6.6 Financial Statements...........................................................................25
6.7 Liabilities and Obligations....................................................................25
6.8 Conformity with Law; Litigation................................................................25
6.9 No Violations..................................................................................26
6.10 Validity of Obligations........................................................................27
6.11 AmPaM Stock....................................................................................27
6.12 AmPaM Notes....................................................................................28
6.13 No Side Agreements.............................................................................28
6.14 Business; Real Property; Material Agreements...................................................28
6.15 Relations with Governments.....................................................................28
6.16 Disclosure.....................................................................................28
6.17 Other Agreements...............................................................................29
7. COVENANTS PRIOR TO CLOSING..............................................................................29
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate.................................29
7.2 Conduct of Business Pending Closing............................................................30
7.3 Prohibited Activities..........................................................................31
7.4 No Shop........................................................................................32
7.5 Agreements.....................................................................................32
7.6 Notification of Certain Matters................................................................32
7.7 Amendment of Schedules.........................................................................33
7.8 Further Assurances.............................................................................33
7.9 Authorized Capital.............................................................................33
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
7.10 Compliance with the Hart-Scott Act.............................................................33
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
AND COMPANY.............................................................................................34
8.1 Representations and Warranties; Performance of Obligations.....................................34
8.2 Satisfaction...................................................................................34
8.3 No Litigation..................................................................................34
8.4 Opinion of Counsel.............................................................................34
8.5 Consents and Approvals.........................................................................34
8.6 Good Standing Certificates.....................................................................35
8.7 No Material Adverse Change.....................................................................35
8.8 Secretary's Certificate........................................................................35
8.9 Tax Matters....................................................................................35
8.10 Other Founding Companies.......................................................................35
8.11 Company Release of Stockholders................................................................35
8.12 Sterling City Capital Transfer Restrictions....................................................35
8.13 Election of Chief Executive Officer............................................................36
8.14 Funding Availability...........................................................................36
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AMPAM............................................................36
9.1 Representations and Warranties; Performance and Obligations....................................36
9.2 No Litigation..................................................................................36
9.3 Secretary's Certificate........................................................................36
9.4 No Material Adverse Effect.....................................................................37
9.5 Stockholders' Release..........................................................................37
9.6 Satisfaction...................................................................................37
9.7 Termination of Related Party Agreements........................................................37
9.8 Opinion of Counsel.............................................................................37
9.9 Consents and Approvals.........................................................................37
9.10 Good Standing Certificates.....................................................................38
9.11 Funding Availability...........................................................................38
9.12 FIRPTA Certificate.............................................................................38
9.13 Resignations of Directors and Officers.........................................................38
10. COVENANTS OF AMPAM AND THE STOCKHOLDERS AFTER CLOSING...................................................38
10.1 Release From Guarantees; Repayment of Certain Obligations......................................38
10.2 Preservation of Tax and Accounting Treatment...................................................39
10.3 Preparation and Filing of Tax Returns; Payment of Taxes........................................39
10.4 Directors......................................................................................40
10.5 Legal Opinions.................................................................................40
11. INDEMNIFICATION.........................................................................................40
11.1 General Indemnification by the Stockholders....................................................40
11.2 Indemnification by AmPaM.......................................................................41
11.3 Third Person Claims............................................................................42
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
11.4 Exclusive Remedy...............................................................................43
11.5 Limitations on Indemnification.................................................................43
12. TERMINATION OF AGREEMENT................................................................................45
12.1 Termination....................................................................................45
12.2 Procedure and Effect of Termination............................................................45
13. NONCOMPETITION..........................................................................................46
13.1 Prohibited Activities..........................................................................46
13.2 Damages........................................................................................47
13.3 Reasonable Restraint...........................................................................47
13.4 Severability; Reformation......................................................................47
13.5 Independent Covenant...........................................................................48
13.6 Materiality....................................................................................48
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................48
14.1 Stockholders...................................................................................48
14.2 AmPaM..........................................................................................49
14.3 Damages........................................................................................49
14.4 Survival.......................................................................................49
14.5 Return of Information..........................................................................50
15. TRANSFER RESTRICTIONS...................................................................................50
15.1 Transfer Restrictions Relating to AmPaM Stock and AmPaM Notes..................................50
15.2 Transfer Restrictions Relating to Additional Consideration.....................................51
16. FEDERAL SECURITIES ACT REPRESENTATIONS..................................................................52
16.1 Compliance with Law............................................................................52
16.2 Economic Risk; Sophistication..................................................................52
16.3 Reliance by AmPaM..............................................................................53
17. REGISTRATION RIGHTS.....................................................................................53
17.1 Piggyback Registration Rights..................................................................53
17.2 Registration Procedures........................................................................54
17.3 Indemnification................................................................................56
17.4 Underwriting Agreement.........................................................................57
17.5 Transfer of Rights.............................................................................58
17.6 Rule 144 Reporting.............................................................................58
18. REDEMPTION OF AMPAM STOCK...............................................................................58
18.1 Redemption Trigger.............................................................................58
18.2 Minimum Redemption; Limitations................................................................59
18.3 Notice; Exercise...............................................................................59
18.4 Additional Redemptions.........................................................................59
18.5 Termination of Redemption Obligation...........................................................59
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C>
19. GENERAL.................................................................................................60
19.1 Cooperation....................................................................................60
19.2 Successors and Assigns.........................................................................60
19.3 Entire Agreement...............................................................................60
19.4 Counterparts...................................................................................60
19.5 Brokers and Agent..............................................................................61
19.6 Expenses.......................................................................................61
19.7 Notices........................................................................................62
19.8 Governing Law..................................................................................63
19.9 Survival of Representations and Warranties.....................................................63
19.10 Exercise of Rights and Remedies................................................................63
19.11 Time...........................................................................................63
19.12 Reformation and Severability...................................................................63
19.13 Remedies Cumulative............................................................................63
19.14 Captions.......................................................................................63
19.15 Amendments and Waivers.........................................................................63
19.16 Mediation and Arbitration......................................................................64
19.17 Information Provided for Private Placement Memorandum..........................................64
19.18 Effective Date of Agreement....................................................................64
</TABLE>
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<PAGE> 7
ANNEXES
Annex I - Consideration to Be Paid to Stockholders
Annex II - Amended and Restated Certificate of Incorporation and
By-Laws of AmPaM
Annex III - Form of Opinion of Counsel to AmPaM
Annex IV - Form of Tax Opinion
Annex V - Form of Opinion of Counsel to Company and Stockholders
Annex VI-1 - Form of Employment Agreement
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<PAGE> 8
SCHEDULES
<TABLE>
<S> <C>
2.1 Board of Directors
2.2 Officers
5.1 Due Organization
5.2 Authorization
5.3 Capital Stock of the Company
5.4 Transactions in Capital Stock; Organization Accounting
5.5 No Bonus Shares
5.6 Subsidiaries; Ownership in Other Entities
5.7 Predecessor Status; etc
5.8 Spin-off by the Company
5.9 Financial Statements
5.10 Liabilities and Obligations
5.11 Accounts and Notes Receivable
5.12 Licenses; Intellectual Property (Schedules 5.12(a)(1), 5.12(a)(2), 5.12(b)(1) and 5.12(b)(2))
5.13 Environmental Matters
5.14 Personal Property
5.15 Significant Customers; Material Contracts and Commitments
(Schedules 5.15(a), 5.15(b) and 5.15 (c))
5.16 Real Property
5.17 Insurance
5.18 Compensation; Employment Agreements; Labor Matters
5.19 Employee Plans
5.20 Compliance with ERISA
5.21 Conformity with Law; Litigation
5.22 Taxes (Schedules 5.22(a) and 5.22(b))
5.23 No Violations, No Consents Required, Etc.
(Schedules 5.23(a), 5.23(b), 5.23(c) and 5.23(e))
5.24 Government Contracts
5.25 Absence of Changes
5.26 Deposit Accounts; Powers of Attorney
5.30 No Warranties or Insurance
5.31 Interest in Customers and Suppliers and Related Party Transactions
5.33 Authority; Ownership (Schedules 5.33(a) and 5.33(b))
6.9 No Violations
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate
7.2 Conduct of Business Pending Closing
7.3 Prohibited Activities
7.5 Agreements
8.11 Employment Agreements
9.7 Termination of Related Party Agreements
10.1 Release From Guarantees; Repayment of Certain Obligations
16.2 Non-accredited Investors
18.5 Brokers and Agents
</TABLE>
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<PAGE> 9
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made as of the 11th
day of February, 1999 by and among AMERICAN PLUMBING & MECHANICAL, INC., a
Delaware corporation ("AmPaM"), NELSON MECHANICAL CONTRACTORS, INC., a Florida
corporation (the "Company"), and the stockholders listed on the signature pages
of this Agreement (the "Stockholders"), which are all the stockholders of the
Company.
RECITALS
WHEREAS, the Company is engaged in the plumbing and mechanical
services business;
WHEREAS, as of the date hereof, the Stockholders own, and as of the
Closing Date the Stockholders will own, all of the issued and outstanding
capital stock of the Company (the "Company Stock");
WHEREAS, AmPaM is entering into other separate agreements
simultaneously with this Agreement that are substantially the same as this
Agreement (the "Other Agreements"), each of which is entitled "Acquisition
Agreement," with each of the Other Founding Companies (as defined herein) and
their respective stockholders in order for AmPaM to acquire additional
companies engaged in the plumbing and mechanical services business;
WHEREAS, this Agreement and the Other Agreements constitute the "AmPaM
Plan of Organization;"
WHEREAS, the Stockholders and the boards of directors and the
stockholders of AmPaM, and each of the Other Founding Companies that are
parties to the Other Agreements, have approved and adopted the AmPaM Plan of
Organization as an integrated plan pursuant to which the Stockholders and the
stockholders of each of the other Founding Companies will contribute the
capital stock of each of the Founding Companies to AmPaM, and the Stockholders
and the stockholders of each of the other Founding Companies will acquire the
stock of AmPaM (but not cash or other property) as a tax-free transfer of
property under Section 351 of the Code;
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Stockholders have approved this
Agreement as part of the AmPaM Plan of Organization in order to transfer all of
the issued and outstanding capital stock of the Company to AmPaM; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
<PAGE> 10
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule attached hereto and not otherwise defined shall
have the following meanings for all purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"Acquired Party" means the Company, any subsidiary of the Company and
any member of a Relevant Group.
"Affiliates" means with respect to any person or entity, any other
person or entity that directly or indirectly, controls, is controlled by, or is
under common control with such person or entity.
"AmPaM" has the meaning set forth in the first paragraph of this
Agreement.
"AmPaM Charter Documents" has the meaning set forth in Section 6.1.
"AmPaM Plan of Organization" has the meaning set forth in the recitals
of this Agreement.
"AmPaM Stock" means the common stock, par value $.01 per share, of
AmPaM.
"AmPaM Notes" means those notes issued by AmPaM to the Stockholders as
a portion of the consideration to be received hereunder and in substantially
the form to Annex I as Appendix A.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" has the meaning set forth in the recitals of this
Agreement.
"Delaware GCL" means the General Corporation Law of the State of
Delaware.
"Environmental Laws" has the meaning set forth in Section 5.13(b).
"Expiration Date" has the meaning set forth in Section 5(A) and
Section 6, as applicable.
2
<PAGE> 11
"Founding Companies" means the following companies:
Christianson Enterprises, Inc., a Texas corporation;
Christianson Services, Inc., a Texas corporation;
GGR Leasing Corporation, a Texas corporation;
J.A. Croson Company of Florida, a Florida corporation;
J.A. Croson Company, an Ohio corporation;
Franklin Fire Sprinkler Company, an Ohio corporation;
Keith Riggs Plumbing, Inc., an Arizona corporation;
Miller Mechanical Contractors, Inc., a Georgia corporation;
Nelson Mechanical Contractors, Inc., a Florida corporation;
Power Plumbing Inc., a Delaware corporation;
R.C.R. Plumbing, Inc., a California corporation;
Sherwood Mechanical Inc., a California corporation; and
Teepe's River City Mechanical, Inc., an Ohio corporation.
"GAAP" means generally accepted accounting principles as consistently
applied in the United States.
"Hart-Scott Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Hazardous Substance" has the meaning set forth in Section 5.13(c).
"IPO" means a firm commitment underwritten initial public offering of
AmPaM Stock managed by one or more nationally recognized national investment
banking firms.
"known" or "knowledge," when used in reference to a statement
regarding the existence or absence of facts in this Agreement, is intended by
the parties to mean that the only information to be attributed to such person
is information actually known to (a) the person in the case of an individual,
(b) in the case of a corporation or other entity other than the Company, an
officer or director of such corporation or entity or (c) in the case of the
Company and its Subsidiaries, an officer of the Company listed on Schedule 2.2
hereto, except for David Baggett.
"Material Adverse Change" means a material adverse change in the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Documents" has the meaning set forth in Section 5.23.
3
<PAGE> 12
"Ordinary Course of Business" means the ordinary course of business
consistent with past customs and practice (including with respect to quantity
and frequency).
"Other Agreements" has the meaning set forth in the recitals of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Plans" has the meaning set forth in Section 5.19.
"Private Placement Memorandum" means the Private Placement Memorandum,
dated as of February 11, 1999, provided to each Stockholder prior to the
execution and delivery of this Agreement which sets forth certain information
relating to the transactions contemplated by this Agreement and the Other
Agreements.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Relevant Group" means the Company and any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a member.
"Restricted Common Stock" has the meaning set forth in Section
1.3(ii).
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"State of Incorporation" means the State of Florida.
"Stockholders" has the meaning set forth in the first paragraph of
this Agreement.
"Subsidiaries" means with respect to a person or entity, any
corporation or other entity in which such person or entity owns a 5% or greater
ownership interest.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, withholding, employment, excise, property, deed, stamp,
alternative or add-on minimum, or other taxes, assessments, duties, fees,
levies or other governmental charges, whether disputed or not, together with
any interest, penalties, additions to tax or additional amounts with respect
thereto.
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1. ACQUISITION OF STOCK
1.1 ACQUISITION. Upon the terms and subject to the conditions
contained in this Agreement and in reliance upon the representations,
warranties, covenants and agreements contained in this Agreement, on the
Closing Date, the Stockholders shall convey and transfer to AmPaM all of the
issued and outstanding shares of Company Stock as set forth in Annex I hereto.
1.2 CONSIDERATION. The consideration for the Company Stock shall be as
set forth on Annex I to this Agreement.
1.3 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY AND AMPAM. The respective designations and numbers of outstanding
shares and voting rights of each class of outstanding capital stock of the
Company and AmPaM as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
outstanding Company Stock is as set forth on Schedule 5.3 hereto; and
(ii) immediately prior to the Closing Date, the authorized
capital stock of AmPaM will consist of (A) 100,000,000 shares of AmPaM
Stock, of which the number of issued and outstanding shares will be
set forth in the Private Placement Memorandum, (B) 10,000,000 shares
of redeemable preferred stock, of which the number of issued and
outstanding shares will be set forth in the Private Placement
Memorandum, and (C) 5,000,000 shares of Restricted Voting Common
Stock, $.01 per value (the "Restricted Common Stock"), all of which
will be issued and outstanding except as otherwise set forth in the
Private Placement Memorandum.
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY
2.1 BOARD OF DIRECTORS. The Company and the Stockholders shall take
action, including solicitation of resignation of directors, necessary so that
the Board of Directors of the Company as of the Closing Date shall consist only
of the persons identified on Schedule 2.1 hereto.
2.2 OFFICERS. The Company and the Stockholders shall take action,
including solicitation of resignation of officers, necessary so that the
officers of the Company as of the Closing Date shall consist only of the
persons identified on Schedule 2.2 hereto.
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3. DELIVERY OF CONSIDERATION
3.1 STOCKHOLDERS' CONSIDERATION. On the Closing Date, the Stockholders
shall, upon surrender of certificates evidencing the Company Stock, receive
from AmPaM the respective number of shares of AmPaM Stock, the amount of cash
and the principal amount of AmPaM Notes described on Annex I hereto specified
with respect to each such Stockholder as payable on the Closing Date. All
payments of cash shall be made by certified check or wire transfer of
immediately available funds. Consideration consisting of AmPaM Notes shall be
substantially in the form of Appendix A to Annex I.
3.2 STOCKHOLDERS' DELIVERIES. The Stockholders shall deliver at the
Closing the certificates representing Company Stock, duly endorsed in blank by
the Stockholders, or accompanied by blank stock powers, and with all necessary
transfer tax and other revenue stamps, acquired at the Stockholders' expense,
affixed and canceled. The Stockholders agree promptly to cure any deficiencies
with respect to the endorsement of the stock certificates or other documents of
conveyance with respect to such Company Stock or with respect to the stock
powers accompanying any Company Stock.
4. CLOSING
The consummation of the transactions contemplated by Section 3 (the
"Closing") shall take place on March 31, 1999 or such date not later than May
31, 1999 as AmPaM shall determine by giving written notice of such other date
as provided in Section 18.7 (the "Closing Date") at the offices of Andrews &
Kurth L.L.P., 4200 Chase Tower, 600 Travis, Houston, Texas 77002.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the disclosure schedules attached hereto and
except as otherwise qualified below, the Company represents and warrants that
all of the following representations and warranties in this Section 5(A) are
true at the date of this Agreement and, subject to Section 7.7 hereto, shall be
true at the time of the Closing, and that such representations and warranties
shall survive the Closing Date for a period of eighteen months (the last day of
such period being the "Expiration Date"), except that the representations and
warranties set forth in Sections 5.3, 5.22 and 5.32 hereof shall survive until
such time as the applicable statute of limitations period has run, which shall
be deemed to be the Expiration Date for the representations and warranties set
forth in Sections 5.3, 5.22 and 5.32. For purposes of this Section 5, the term
"Company" shall mean and refer to the Company and all of its Subsidiaries, if
any, and any reference to a Material Adverse Effect on the Company or Material
Adverse Change with respect to the Company shall mean the Company and its
Subsidiaries, taken as a whole. Except as expressly set forth in this
Agreement, the Company expressly disclaims any representation or warranty
(express, implied or otherwise) relating to the
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<PAGE> 15
Company and any Subsidiary thereof including, without limitation, any warranty
of merchantability or fitness for a particular purpose.
5.1 DUE ORGANIZATION. The Company is a corporation duly incorporated
and organized, validly existing and in good standing under the laws of the
State of Incorporation, and has the requisite power and authority to carry on
its business as it is now being conducted. The Company is duly qualified or
authorized to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or authorization necessary except where the failure to be so
qualified or authorized to do business would not have a Material Adverse Effect
on the Company. Schedule 5.1 sets forth a list of all states in which the
Company is authorized or qualified to do business, which list indicates which
of such entities is authorized or qualified to do business in such states.
True, complete and correct copies of the Certificate or Articles of
Incorporation and By-laws, each as amended, of the Company (the "Charter
Documents") are all attached to Schedule 5.1. The Company has delivered to
AmPaM complete and correct copies of (i) the stock records of the Company and
(ii) all minutes of meetings, written consents and other evidence, if any, of
deliberations of or actions taken by the Company's Board of Directors, any
committees of the Board of Directors and stockholders during the last five
years.
5.2 AUTHORIZATION. (i) The officers or other representatives of the
Company executing this Agreement have the authority to enter into and bind the
Company to the terms of this Agreement and (ii) the Company has the full legal
right, power and authority to enter into this Agreement and consummate the
transactions contemplated hereby. Copies of the most recent resolutions adopted
by the Board of Directors of the Company and the most recent resolutions
adopted by the Stockholders, which approve this Agreement and the transactions
contemplated hereby in all respects, certified by the Secretary or an Assistant
Secretary of the Company as being in full force and effect on the date hereof,
are attached hereto as Schedule 5.2.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company and each of its Subsidiaries is as set forth on Schedule 5.3(a). All of
the issued and outstanding shares of the capital stock of the Company are owned
by the Stockholders in the amounts set forth in Schedule 5.3(a). Except as set
forth on Schedule 5.3(a), all of the issued and outstanding capital stock of
each Subsidiary is owned by the Company. All of the issued and outstanding
shares of the capital stock of the Company have been duly authorized and
validly issued, are fully paid and nonassessable, are owned of record by the
Stockholders and further, such shares were offered, issued, sold and delivered
by the Company in compliance with all applicable state and Federal laws
concerning the issuance of securities. Further, none of such shares were issued
in violation of any preemptive rights of any past or present stockholder.
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<PAGE> 16
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule
5.4(a), the Company has not acquired or redeemed any shares of capital stock of
the Company since January 1, 1996. Except as set forth on Schedule 5.4(b), (i)
no option, warrant, call, conversion right or commitment of any kind exists
which obligates the Company to issue any of its authorized but unissued capital
stock; (ii) the Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof; and (iii) neither the voting stock structure of the Company nor the
relative ownership of shares among any of its Stockholders has been altered or
changed in contemplation of the AmPaM Plan of Organization. There are no voting
trusts, proxies or other agreements or understandings to which the Company is a
party or is bound with respect to the voting of any shares of capital stock of
the Company.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses in
contemplation of the AmPaM Plan of Organization.
5.6 SUBSIDIARIES; OWNERSHIP IN OTHER ENTITIES. Except as set forth on
Schedule 5.6(a), the Company has no Subsidiaries. Except as set forth in
Schedule 5.6(b), the Company does not presently own, of record or beneficially,
or control, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any corporation, association
or business entity nor is the Company, directly or indirectly, a participant in
any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7(a) is a list of
all predecessor companies of the Company, including the names of any entities
acquired by the Company (by stock purchase, merger or otherwise) or owned by
the Company or from whom the Company previously acquired material assets, in
any case, from the earliest date upon which any Stockholder acquired his or her
stock in any Company. Except as disclosed on Schedule 5.7(b), the Company has
not been, within such period of time, a subsidiary or division of another
corporation or a part of an acquisition which was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8,
there has not been any sale, spin-off or split-up of material assets of either
the Company or any other person or entity that is an Affiliate of the Company
since January 1, 1996.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 is a copy
of:
(i) the balance sheets of the Company as of April 30, 1997
and 1998 and the related statements of operations, stockholders'
equity and cash flows for the two-year period ended April 30, 1998,
together with the related notes and schedules (such balance sheets,
the related statements of operations, stockholders' equity and cash
flows and the related notes and schedules are referred to herein as
the "Year-end Financial Statements");
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(ii) the balance sheet of the Company as of September 30,
1998 (the "Balance Sheet Date") and the related statements of
operations, stockholders' equity and cash flows for the nine-month
periods ended September 30, 1997 and 1998 (such balance sheets, the
related statements of operations, stockholders' equity and cash flows
are referred to herein as the "Nine-Month Interim Financial
Statements"); and
(iii) the income statement of the Company for the 12-month
period ended June 30, 1998 (the "Valuation Income Statement").
The Year-end Financial Statements, the Nine-Month Interim Financial Statements
and the Valuation Income Statement are collectively called the "Financial
Statements". The Financial Statements, including those included in the Private
Placement Memorandum, have been prepared in accordance with GAAP applied on a
consistent basis and fairly present the financial position of the Company as of
the dates thereof and the results of its operations and changes in financial
position for the periods then ended, subject, in the case of the Nine-Month
Interim Financial Statements, to normal year-end audit adjustments and any
other adjustments described therein and the absence of certain footnote
disclosures.
5.10 LIABILITIES AND OBLIGATIONS. Schedule 5.10(a) sets forth an
accurate list as of the Balance Sheet Date of (i) all material liabilities of
the Company which are not reflected on the balance sheet of the Company at the
Balance Sheet Date or otherwise reflected in the Company Financial Statements
at the Balance Sheet Date which by their nature would be required in accordance
with GAAP to be reflected in the balance sheet, and (ii) all loan agreements,
indemnity or guaranty agreements, bonds, mortgages, pledges or other security
agreements to which the Company is a party or by which its properties may be
bound other than bid bonds and performance bonds made in the Ordinary Course of
Business. Except as set forth on Schedule 5.10(b), since the Balance Sheet
Date, the Company has not incurred any material liabilities or obligations of
any kind, character or description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, other than liabilities incurred in the
Ordinary Course of Business. The Company has also delivered to AmPaM, on
Schedule 5.10(c), a list of contingent liabilities related to pending
litigation or litigation that has been threatened in writing, or other material
liabilities which are not fixed or otherwise accrued or reserved. For each such
contingent liability of the Company or liability of the Company for which the
amount is not fixed or is contested, the Company has provided to AmPaM the
following information:
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(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation in the
possession of the Company or its directors, officers
or stockholders relating thereto;
(b) amounts claimed and any other action or relief
sought; and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(ii) the name of each court or agency before which such
claim, suit or proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted;
and
(iv) a good faith estimate of the maximum amount, if any,
which the Company expects, based on information available, is likely
to become payable with respect to each such liability and the amount,
if any, accrued or reserved for each such potential liability on the
Financial Statements.
AmPaM acknowledges that all estimates referred to above and set forth on
Schedule 5.10(c) are only good faith estimates, and that the Company and the
Stockholders expressly do not represent or warrant that the actual amounts of
such liabilities will be equal to, or more or less than, the amounts of such
estimates.
5.11 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.11(a) sets forth an
accurate list, in all material respects, of the accounts and notes receivable
of the Company, as of the Balance Sheet Date, including any such amounts which
are not reflected in the balance sheet as of the Balance Sheet Date, and
including all receivables from and advances to employees and the Stockholders,
which are identified as such. Schedule 5.11(a) also sets forth a materially
accurate aging of all accounts and notes receivable as of the Balance Sheet
Date showing amounts due in 30-day aging categories. Except to the extent
reflected on Schedule 5.11(b), such accounts, notes and other receivables are
collectible in the amounts shown on Schedule 5.11(a), net of reserves reflected
in the balance sheet as of the Balance Sheet Date.
5.12 LICENSES; INTELLECTUAL PROPERTY. (a) The Company or its employees
hold all licenses, franchises, permits and other governmental authorizations
("Licenses") necessary to conduct the business of the Company, the absence of
which would cause a Material Adverse Effect on the Company, and the Company has
delivered to AmPaM a list that is accurate, in all material respects, and
summary description (which is set forth on Schedule 5.12(a)(1)) of all such
Licenses. At or prior to the Closing, all such Licenses owned or held by any
employee of the Company will be assigned or licensed to the Company for no
additional consideration. The Licenses listed on Schedule 5.12(a)(1) are valid,
and the Company has not received any notice that any person intends to cancel,
terminate or not renew any such License. The Company has conducted and is
conducting its business in compliance in all material respects with the
requirements, standards, criteria and
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conditions set forth in the Licenses listed on Schedule 5.12(a)(1) and is not
in violation of any of the foregoing in any material respect. Except as
specifically provided in Schedule 5.12(a)(2), the consummation by the Company
of the transactions contemplated by this Agreement will not result in a default
under or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such Licenses.
(b) The Company owns or possesses adequate licenses or other rights to
use (without making any payment or granting rights to any person in exchange)
all patents, patent applications, trademarks, copyrights, service marks and
trade names (collectively, the "Intellectual Property") necessary to conduct
its business as currently conducted. A description of any Intellectual Property
licensed by the Company, including the material terms of any such license, is
described on Schedule 5.12(b)(1). Neither the validity of the Intellectual
Property nor the title thereto or use thereof by the Company is being
questioned in any pending litigation, and the conduct of the Company's
business, as currently conducted, does not conflict with licenses, copyrights,
uncopyrighted works, trade marks, service marks, trade names, trade name
rights, patents, patent rights, unpatented inventions or trade secrets of
others. Neither the validity of the Intellectual Property nor the title thereto
or use thereof by the Company is being questioned in any pending or, to the
knowledge of the Company, threatened infringement claims or litigation, and the
conduct of the Company's business, as now conducted, does not conflict with
licenses, copyrights, uncopyrighted works, trade marks, service marks, trade
names, trade name rights, patents, patent rights, unpatented inventions or
trade secrets of others. Except as specifically provided in Schedule
5.12(b)(2), the consummation by the Company of the transactions contemplated by
this Agreement will not adversely affect the rights and benefits afforded to
the Company by any such Intellectual Property.
5.13 ENVIRONMENTAL MATTERS. (a) Except as set forth in Schedule 5.13
attached hereto, (i) the Company has conducted its businesses in compliance in
all material respects with all applicable Environmental Laws, including,
without limitation, having all environmental permits, licenses and other
approvals and authorizations necessary for the operation of its business as
presently conducted, except where the failure to have such permit, license,
approval or authorization would not have a Material Adverse Effect on the
Company, (ii) none of the properties owned by the Company contain any Hazardous
Substance as a result of any activity of the Company in amounts exceeding the
levels permitted by applicable Environmental Laws, except where amounts in
excess of such levels would not have a Material Adverse Effect on the Company,
(iii) the Company has not received any notices, demand letters or requests for
information from any Federal, state, local or foreign governmental entity or
third party indicating that the Company may be in violation of, or liable
under, any Environmental Law in connection with the ownership or operation of
its business, (iv) there are no civil, criminal or administrative actions,
suits, demands, claims, hearings, investigations or proceedings pending or, to
the knowledge of the Company, threatened, against the Company relating to any
violation, or alleged violation, of any Environmental Law, except where such
violation would not have a Material Adverse Effect on the Company, (v) no
reports have been filed, or are required to be filed, by the Company concerning
the release of any Hazardous Substance or the threatened or actual violation of
any Environmental Law, (vi) no Hazardous Substance has
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<PAGE> 20
been disposed of, released or transported in violation of any applicable
Environmental Law from any properties owned by the Company as a result of any
activity of the Company during the time such properties were owned, leased or
operated by the Company, (vii) there have been no environmental investigations,
studies, audits, tests, reviews or other analyses regarding compliance or
non-compliance with any applicable Environmental Law conducted by or which are
in the possession of the Company relating to the activities of the Company
which are not listed on Schedule 5.13 attached hereto prior to the date hereof,
(viii) to the knowledge of the Company, (A) there are no underground storage
tanks on, in or under any properties owned by the Company and (B) no
underground storage tanks have been closed or removed from any of such
properties during the time such properties were owned, leased or operated by
the Company which are not listed on Schedule 5.13, (ix) to the knowledge of the
Company, (A) there is no asbestos or asbestos-containing material present in
any material quantity in any of the properties owned by the Company, and (B) no
asbestos has been removed from any of such properties during the time such
properties were owned, leased or operated by the Company, and (x) neither the
Company nor any of its properties are subject to any material liabilities or
expenditures (fixed or contingent) relating to any suit, settlement, court
order, administrative order, regulatory requirement, judgment or claim asserted
or arising under any Environmental Law.
(b) As used herein, "Environmental Law" means, as of the Closing Date,
any Federal, state, local or foreign law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, order, judgment,
decree, injunction or agreement with any governmental entity to which the
Company is a party or subject relating to (x) the protection, preservation or
restoration of the environment (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface land,
subsurface land, plant and animal life or any other natural resource) or to
human health or safety or (y) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Hazardous Substances, in each case as
amended and as in effect on the Closing Date. The term Environmental Law
includes, without limitation, (i) the Federal Comprehensive Environmental
Response Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic
Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act,
the Federal Occupational Safety and Health Act of 1970, each as amended and as
in effect on the Closing Date, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such as
negligence, nuisance, trespass and strict liability) that may impose liability
or obligations for injuries or damages due to, or threatened as a result of,
the presence of, effects of or exposure to any Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance
presently listed, defined, designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated, under any Environmental Law.
Hazardous Substance includes any substance to which exposure is regulated by
any government authority or any Environmental Law including, without
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<PAGE> 21
limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material, asbestos or
asbestos-containing material, urea formaldehyde foam insulation, lead or
polychlorinated biphenyls.
5.14 PERSONAL PROPERTY. The Company has delivered to AmPaM an accurate
list (which is set forth on Schedule 5.14(a)) of (x) all personal property
material to the operations of the Company as of the Balance Sheet Date included
in "plant, property and equipment" on the balance sheet of the Company as of
such date, (y) all other items of personal property owned by the Company with
an individual value in excess of $15,000 (i) as of the Balance Sheet Date and
(ii) acquired since the Balance Sheet Date and (z) all material leases and
agreements in respect of personal property, including, in the case of each of
(x), (y) and (z), (1) true, complete and correct copies of all such leases and
(2) an indication as to which assets are currently owned, or were formerly
owned, by Stockholders, relatives of Stockholders, or Affiliates of the
Company. Except as set forth on Schedule 5.14(b), (i) all personal property
material to, and used by, the Company in its business is either owned by the
Company or leased by the Company pursuant to a lease included on Schedule
5.14(a), (ii) all of the personal property listed on Schedule 5.14(a) or
replacement property thereof is in working order and condition, ordinary wear
and tear excepted and (iii) all leases and agreements included on Schedule
5.14(a) are in full force and effect and constitute valid and binding
agreements of the Company, in each case in accordance with their respective
terms.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
(a) The Company has delivered to AmPaM a materially accurate list
(which is set forth on Schedule 5.15(a)(1)) of all customers (persons or
entities) representing 5% or more of the Company's annual revenues for any
period covered by any of the Financial Statements. Except to the extent set
forth on Schedule 5.15(a)(2), none of such customers has canceled or, to the
knowledge of the Company, are currently threatening to cancel a currently
effective contract with the Company.
(b) The Company has listed on Schedule 5.15(b) all material contracts,
commitments and similar agreements to which the Company is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with customers listed on Schedule 5.15(a), joint venture or partnership
agreements, contracts with any labor organizations, strategic alliances and
options to purchase land), other than agreements listed on Schedules 5.10(a),
Schedule 5.14(a) or Schedule 5.16(a), (a) in existence as of the Balance Sheet
Date and (b) entered into since the Balance Sheet Date, and in each case has
delivered or made available to AmPaM true, complete and correct copies of such
agreements. For purposes of the preceding sentence, a contract, commitment or
similar agreement is "material" if it (i) has a term of more than one year
(other than contracts, commitments or agreements that are cancelable without
liability or penalty within 30 days of notice from the Company of cancellation
or that can be terminated by the Company without material penalty upon notice
of 30 days or less) or (ii) requires the payment by or to the Company of more
than $100,000 during any 12-month period. Except for expenditures in the
ordinary course of
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<PAGE> 22
business, the Company has also indicated on Schedule 5.15(b) a summary
description of all plans or projects involving the opening of new operations,
expansion of existing operations, or the acquisition of any personal property,
business or assets requiring, in any event, the payment of more than $50,000 by
the Company during any 12-month period.
(c) Except as set forth on Schedule 5.15(c), the Company is not
required to provide any bonding or other financial security arrangements in any
material amount in connection with any contract listed on Schedule 5.15(b).
5.16 REAL PROPERTY. Schedule 5.16(a) includes a list of all real
property owned or leased by the Company at the date hereof and all other real
property, if any, used by the Company in the conduct of its business. The
Company has good and insurable title to any real property owned by it that is
shown on Schedule 5.16(a), other than property intended to be sold or
distributed prior to the Closing Date as provided in Section 7.1(c) of this
Agreement, and all real property so owned is subject to no mortgage, pledge,
lien, conditional sales agreement, encumbrance, lease, possessory rights of
third parties or charge, except for:
(i) liens reflected on Schedule 5.10(a) or Schedule 5.16(b)
as securing specified liabilities (with respect to which no material
default by the Company exists);
(ii) liens for current taxes not yet payable and assessments
not in default;
(iii) easements for utilities serving the property; and
(iv) easements, covenants and restrictions and other
exceptions to title which do not adversely affect the current use of
the property.
Copies of all leases and agreements in respect of such real property
leased by the Company, which are true, complete and correct in all material
respects, are attached to Schedule 5.16(a), and an indication as to which such
properties, if any, are currently owned, or were formerly owned, by
Stockholders or Affiliates of the Company or Stockholders is included in
Schedule 5.16(a). Except as set forth on Schedule 5.16(b), all of such leases
included on Schedule 5.16(a) are, as to the Company, in full force and effect
and constitute valid and binding agreements of the Company in accordance with
their respective terms.
5.17 INSURANCE. The Company has delivered to AmPaM (i) an accurate
list as of the Balance Sheet Date of all insurance policies carried by the
Company and (ii) an accurate list of all insurance loss runs or workers
compensation claims received for the past three policy years (which lists are
set forth on Schedule 5.17). The Company has also delivered or made available
to AmPaM true, complete and correct copies of all insurance policies currently
in effect that are referred in Schedule 5.17. Such insurance policies evidence
all of the insurance the Company is required to carry pursuant to all of its
contracts and other agreements and pursuant to all applicable laws. All of such
insurance policies are currently in full force and effect except as stated in
Schedule 5.17.
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Since January 1, 1996, no insurance carried by the Company has been canceled by
the insurer and the Company has not been denied coverage under any such policy.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; LABOR MATTERS.
(a) The Company has delivered to AmPaM an accurate list (which is set
forth on Schedule 5.18(a)(1)) showing all officers, directors and key employees
of the Company, listing all employment agreements with such officers, directors
and key employees and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of each of
such persons as of (i) the Balance Sheet Date and (ii) the date hereof. The
Company has provided to AmPaM true, complete and correct copies of any
employment agreements for persons listed on Schedule 5.18(a)(1). Since the
Balance Sheet Date, except as disclosed on Schedule 5.18(a)(2), there have been
no increases in the compensation payable or any bonuses to any officer,
director, key employee or other employee, except ordinary salary increases
implemented on a basis consistent with past practices and except for bonuses
paid on a basis consistent with past practices.
(b) Except as set forth on Schedule 5.18(b), (i) the Company is not
bound by or subject to (and none of its assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) to the knowledge of the
Company, no campaign to establish such arrangement is in progress and (iii)
there is no pending or, to the Company's knowledge, threatened labor dispute
involving the Company and any group of its employees nor has the Company
experienced any labor interruptions over the past three years. The Company
believes its relationship with employees to be generally good.
(c) Except as set forth in Schedule 5.18(c) attached hereto, (i) there
are no claims, actions or proceedings pending or, to the knowledge of the
Company, threatened between the Company and any of its employees, (ii) the
Company has complied in all material respects with all laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, and (iii) the Company has not received written
notice from any person asserting that the Company is liable in any material
amount for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing.
5.19 EMPLOYEE PLANS. The Company has delivered to AmPaM accurate
schedule (Schedule 5.19(a)) showing all employee benefit plans of the Company,
including all employment agreements and other agreements or arrangements
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of
such plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date and as of the date of
this Agreement. Except for the employee benefit plans, if any, described on
Schedule 5.19(a), the Company does not sponsor, maintain or contribute to any
plan program, fund or arrangement that constitutes an "employee pension benefit
plan", and neither the Company nor any Subsidiary has any obligation to
contribute to or accrue or
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pay any benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan" (within the meaning of Section 3(36) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or any non-qualified
deferred compensation arrangement). For the purposes of this Agreement, the
term "employee pension benefit plan" shall have the same meaning as is given
that term in Section 3(2) of ERISA. The Company has not sponsored, maintained
or contributed to any employee pension benefit plan other than the plans set
forth on Schedule 5.19(a), and, except as described on Schedule 5.19(b), the
Company is not or could not be required to contribute to any retirement plan
pursuant to the provisions of any collective bargaining agreement establishing
the terms and conditions or employment of any of the Company's employees.
Except as set forth on Schedule 5.19(c), the Company is not now, or
will not as a result of its past activities become, liable to the Pension
Benefit Guaranty Corporation or to any multiemployer employee pension benefit
plan under the provisions of Title IV of ERISA.
All employee benefit plans listed on Schedule 5.19(a) and the
administration thereof are in compliance in all material respects with their
terms and all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable federal, state and local
statutes, ordinances and regulations.
All accrued contribution obligations of the Company as of the Balance
Sheet Date with respect to any plan listed on Schedule 5.19(a) have either been
fulfilled in their entirety or are fully reflected on the balance sheet of the
Company as of the Balance Sheet Date.
5.20 COMPLIANCE WITH ERISA. All plans listed on Schedule 5.19(a) that
are intended to qualify under Section 401 (a) of the Code (the "Qualified
Plans") are, and have been so qualified and have been determined by the
Internal Revenue Service to be so qualified, and copies of such determination
letters are attached to Schedule 5.19(a). Except as disclosed on Schedule 5.20,
all reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries (including, but not
limited to, actuarial reports, audits or tax returns) since January 1, 1992
have been timely filed or distributed, and copies thereof have been made
available to AmPaM. No such plan listed on Schedule 5.19(a) nor the Company has
engaged in any transaction prohibited under the provisions of Section 4975 of
the Code or Section 406 of ERISA. No such Plan listed on Schedule 5.19(a) has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(l) of ERISA; and the Company has not incurred any
liability for excise tax or penalty due to the Internal Revenue Service nor any
liability to the Pension Benefit Guaranty Corporation. The Company further
represents that except as set forth on Schedule 5.20 hereto:
(i) there have been no terminations, partial terminations or
discontinuations of contributions to any Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and
approval by the Internal Revenue Service;
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(ii) no plan listed on Schedule 5.19(a) subject to the
provisions of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase
is defined in Section 4043 of ERISA) with respect to any such plan
listed in Schedule 5.19(a);
(iv) the Company (including any Subsidiaries) has not
incurred liability under Section 4062 of ERISA; and
(v) no circumstances exist pursuant to which the Company
could have any direct or indirect liability whatsoever (including, but
not limited to, any liability to any multiemployer plan or the PBGC
under Title IV of ERISA or to the Internal Revenue Service for any
excise tax or penalty, or being subject to any statutory lien to
secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the
Company that is, or at any time was, a member of a "controlled group"
(as defined in Section 412(n)(6)(B) of the Code) that includes the
Company.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth
on Schedule 5.21 or Schedule 5.13, the Company has not violated within the five
years prior to the date of this Agreement and is not currently in violation of
any law or regulation or any order of any court or Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it other than violations that would
not have a Material Adverse Effect on the Company; and except to the extent set
forth on Schedule 5.10(c) or Schedule 5.13, there are no claims, actions, suits
or proceedings, pending or, to the knowledge of the Company, threatened in
writing against the Company, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over the Company and no written
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received by the Company, and to the knowledge of the Company there is
no valid basis for any such claim, action, suit or proceeding that could
reasonably be expected to have a Material Adverse Effect on the Company.
5.22 TAXES.
(a) The Company has timely filed all requisite Federal, state and
other Tax Returns or extension requests for all fiscal periods ended on or
before the Balance Sheet Date; and except as set forth on Schedule 5.22(a),
there are no examinations in progress or claims pending against the Company for
federal, state and other Taxes (including penalties and interest) for any
period or periods prior to and including the Balance Sheet Date and no notice
of any claim for Taxes, whether pending or threatened, has been received. All
Tax, including interest and penalties (whether or not shown on any Tax Return),
due by the Company has been paid. The amounts shown as accruals for Taxes on
the Financial Statements are sufficient for the payment of all Taxes of the
kinds indicated (including penalties and interest) for all fiscal periods ended
on or before the date of the respective Financial Statements. Copies of (i) any
tax examinations, (ii) extensions of statutory limitations and
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(iii) the federal and local income Tax Returns and franchise Tax Returns of
Company for their last three (3) fiscal years, or such shorter period of time
as any of them shall have existed, are attached hereto as Schedule 5.22(a) or
have otherwise been delivered to AmPaM. The Company has a taxable year ended
April 30. Except as set forth on Schedule 5.22(a), the Company uses the accrual
method of accounting for income tax purposes, and the Company's methods of
accounting have not changed in any material respect in the past five years
(except as required to conform to changes in GAAP). The Company is not an
investment company as defined in Section 351(e)(1) of the Code. The Company is
not and has not during the last five years been a party to any tax sharing
agreement or agreement of similar effect. Except as set forth on Schedule
5.22(a), the Company is not and has not during the last five years been a
member of any consolidated group for federal tax purposes. The Company has not
received, been denied, or applied for any private letter ruling from the IRS
during the last ten years.
(b) The Stockholders have made a valid election under the provisions
of Subchapter S of the Code and, except as set forth on Schedule 5.22(b), the
Company has not, within the past five years, been subject to Federal income
Taxes under the provisions of Subchapter C of the Code.
5.23 NO VIOLATIONS; NO CONSENT REQUIRED, ETC.
(a) The Company is not in violation of any Charter Document. Except as
set forth on Schedule 5.23(a), the Company is not in default under any lease,
instrument, agreement, license, or permit set forth on Schedule 5.12(a),
Schedule 5.14(a), Schedule 5.15(b) or Schedule 5.16(a) (collectively, the
"Material Documents").
(b) Except as set forth on Schedule 5.23(b)(1), the execution and
delivery of this Agreement by each of the Company and the Stockholders do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company under any of
the terms, conditions or provisions of (i) the Charter Documents of the
Company, (ii) any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any court or governmental
authority applicable to the Company or any of its properties or assets, or
(iii) any Material Document to which the Company is now a party or by which the
Company or any of its properties or assets may be bound or affected. The
consummation by the Company and the Stockholders of the transactions
contemplated hereby will not result in any material violation, conflict,
breach, right of termination or acceleration or creation of liens under any of
the terms, conditions or provisions of the items described in clauses (i)
through (iii) of the preceding sentence, subject, in the case of the terms,
conditions or provisions of the items described in clause (iii) above, to
obtaining (prior to the Effective Time) such consents as may be required from
commercial lenders, lessors or other third parties as listed on Schedule
5.23(b)(2).
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(c) Except as set forth on Schedule 5.23(c) and except for the
Hart-Scott Act, none of the Material Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to the consummation by the Company and the Stockholders of any of the
transactions contemplated hereby in order to remain in full force and effect,
and consummation by the Company and the Stockholders of the transactions
contemplated hereby will not give rise to any right to termination,
cancellation or acceleration or loss of any material right or benefit under any
Material Document.
(d) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act or with any state securities authorities in connection with the offer
and sale of AmPaM Stock and AmPaM Notes pursuant to this Agreement and (ii) any
filing required to be made under the Hart-Scott Act in connection with the
transactions contemplated by this Agreement, no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby.
(e) Except as set forth on Schedule 5.23(e), none of the Material
Documents prohibits the disclosure or publication by the Company or AmPaM of
the name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company from freely providing services or
selling products to any other customer or potential customer of the Company,
AmPaM or any Other Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24, the
Company is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.25 ABSENCE OF CHANGES. (a) Since the Balance Sheet Date, except as
set forth on Schedule 5.25 or as otherwise contemplated hereby, there has not
been:
(i) any Material Adverse Change in the Company;
(ii) any damage, destruction or casualty loss (whether or not
covered by insurance), alone or in the aggregate, which has caused a
Material Adverse Effect on the Company;
(iii) any change in the authorized capital of the Company or
its outstanding securities or any change in its ownership interests or
any grant of any options, warrants, calls, conversion rights or
commitments;
(iv) any declaration or payment of any dividend or
distribution in respect of the capital stock or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock
of the Company except for distributions that would have been permitted
after the date hereof under Section 7.3(iii) hereof,
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(v) any increase in the compensation, bonus, sales
commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, Stockholders, employees,
consultants or agents, except for ordinary and customary bonuses and
salary increases for employees in accordance with past practice;
(vi) any work interruptions, labor grievances or claims
filed, or any event or condition of any character, which has caused a
Material Adverse Effect on the Company;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the Company to
any person, including, without limitation, the Stockholders and their
affiliates, except inventory sold or transferred in the Ordinary
Course of Business;
(viii) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to the Company, including
without limitation any indebtedness or obligation of any Stockholders
or any Affiliate thereof;
(ix) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
material assets, property or rights of the Company or requiring
consent of any party to the transfer and assignment of any such
assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the Ordinary Course of Business;
(xi) any waiver of any material rights or claims of the
Company;
(xii) any amendment or termination of any Material Document
to which the Company is a party except for the termination of a
Material Document in accordance with its terms without any action on
the part of the Company;
(xiii) any transaction by the Company outside the Ordinary
Course of Business;
(xiv) any cancellation or termination of a material contract
with a customer or client listed on Schedule 5.15(a) prior to the
scheduled termination date thereof; or
(xv) any other distribution of property or assets by the
Company other than in the Ordinary Course of Business, other than (a)
distributions of nonoperating assets specifically identified on
Schedule 5.25, (b) distributions of real estate required by Section
7.1(c) of this Agreement and (c) distributions of cash or promissory
notes permitted by Annex I hereto.
(b) Except as set forth on Schedule 5.25, the Company has
not, between the Balance Sheet Date and the date hereof, taken any of the
actions set forth in Section 7.3.
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5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The Company has delivered
to AmPaM an accurate schedule (which is set forth on Schedule 5.26) as of the
date of the Agreement of:
(i) the name of each financial institution in which the
Company has an account or safe deposit box;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or
have access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company
and a description of the terms of such power.
5.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the Company and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
Company and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
5.28 RELATIONS WITH GOVERNMENTS. The Company has not, and to the
knowledge of the Company none of the Stockholders or any Affiliate of any of
them has, given or offered anything of value to any governmental official,
political party or candidate for government office or otherwise taken any
action which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any law of similar effect.
5.29 DISCLOSURE. This Agreement, including the Annexes and Schedules
hereto, and the completed questionnaire related to the Hart-Scott Act furnished
to AmPaM by the Company, do not contain an untrue statement of a material fact
concerning the Company or omit to state a material fact concerning the Company
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing does not apply to statements contained in or omitted from
any of such documents made or omitted in reliance upon information furnished in
writing by AmPaM.
5.30 NO WARRANTIES OR INSURANCE. Except for warranty liability under
applicable law and except for warranty liability under the warranties issued by
the Company of the types described on Schedule 5.30, the Company has no
liability to any person under any warranty and the Company does not offer or
sell insurance or consumer protection plans or other arrangements that could
result in the Company being required to make any payment to or perform any
service for any person.
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5.31 INTEREST IN CUSTOMERS AND SUPPLIERS AND RELATED PARTY
TRANSACTIONS. Except as described on Schedule 5.31 or in Section 8.11, no
Stockholder, officer, director or Affiliate of the Company (i) owns, directly
or indirectly, any financial interest in, or is a director, officer, employee
or affiliate of, any corporation, firm, association or business organization
that is a client, supplier, customer, lessor, lessee or competitor of the
Company, or (ii) is or will be a party to an agreement or relationship with the
Company other than through a customary "at will" employment relationship.
5.32 PRIVATE PLACEMENT MEMORANDUM. None of the information supplied or
to be supplied by the Company in writing specifically for inclusion in the
Private Placement Memorandum contained or, as of the Closing Date, will contain
any untrue statement of a material fact concerning the Company or omitted or
will omit to state any material fact required to be stated therein or necessary
in order to make the statements contained in such information supplied or to be
supplied by the Company concerning the Company, in light of the circumstances
under which they are made, not misleading.
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.
Each Stockholder severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.7 hereof, shall be true at the time of
Closing, and that the representations and warranties set forth in this Section
5(B) shall survive the Closing Date.
5.33 AUTHORITY; OWNERSHIP. Such Stockholder has the full legal right,
power and authority to enter into this Agreement, and this Agreement is a
legal, valid and binding obligation of such Stockholder, enforceable against
the Stockholder in accordance with its terms. Except as set forth on Schedule
5.33(a), the execution and delivery of this Agreement by such Stockholder does
not violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of such Stockholder
under any of the terms, conditions or provisions of (i) the Charter Documents
of the Company, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to such Stockholder or any of such Stockholder's
properties or assets, or (iii) any lease, instrument, agreement, license or
permit to which such Stockholder is now a party or by which such Stockholder or
any of such Stockholder's properties or assets may be bound or affected. Except
for (i) any filings to be made with the SEC pursuant to the 1933 Act and any
state securities authorities in connection with the offer and sale of AmPaM
Stock and AmPaM Notes pursuant to this Agreement, (ii) any filing required to
be made under the Hart-Scott Act in connection with the transactions
contemplated by this Agreement, no declaration, filing or registration with, or
notice to, or authorization, consent or approval of, any governmental or
regulatory body or authority is necessary for the execution and delivery of
this Agreement by such Stockholder or the consummation by such Stockholder of
the transactions contemplated hereby. Except as set forth on
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Schedule 5.33(b), such Stockholder owns beneficially and of record all of the
shares of the Company Stock identified on Annex I hereto as being owned by such
Stockholder, and, such Company Stock is owned free and clear of all liens,
security interests, pledges, charges, voting trusts, voting agreements,
restrictions, encumbrances and claims of every kind.
5.34 PREEMPTIVE RIGHTS. Such Stockholder does not have, or hereby
waives, any preemptive or other right to acquire shares of Company Stock or
AmPaM Stock that such Stockholder has or may have had. Nothing herein, however,
shall limit or restrict the rights of any Stockholder to acquire AmPaM Stock
pursuant to (i) this Agreement, (ii) any option granted or to be granted by
AmPaM to such Stockholder, (iii) a purchase through a broker in a regular stock
market transaction or (iv) a purchase from a stockholder of a Founding Company
(subject to compliance with any contractual restrictions or securities law
restrictions applicable thereto specified in Section 15 hereof).
5.35 NO COMMITMENT TO DISPOSE OF AMPAM STOCK. No Stockholder is under
any binding commitment or contract to sell, exchange or otherwise dispose of
shares of AmPaM Stock or AmPaM Notes received pursuant to this Agreement.
5.36 DISCLOSURE. The completed Director and Officer Questionnaires
with respect to such Stockholder (if any), the completed investor questionnaire
furnished to AmPaM by such Stockholder in connection with the proposed
acquisition by such Stockholder of AmPaM Stock and AmPaM Notes and any other
information provided to AmPaM in writing by such Stockholder relating
specifically to such Stockholder for inclusion in the Private Placement
Memorandum do not contain an untrue statement of a material fact concerning
such Stockholder or omit to state a material fact concerning such Stockholder
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading.
6. REPRESENTATIONS OF AMPAM
Except as otherwise qualified below, AmPaM represents and warrants
that all of the following representations and warranties in this Section 6 are
true at the date of this Agreement and, subject to Section 7.7 hereof, shall be
true at the time of Closing, and that such representations and warranties shall
survive the Closing Date for a period of eighteen months (the last day of such
period being the "Expiration Date" for purposes of the representations and
warranties set forth in this Section 6), except that the representations and
warranties set forth in Section 6.3, 6.11 and 6.15 shall survive until such
time as the applicable statute of limitations period has run, which shall be
deemed to be the Expiration Date for the representations and warranties set
forth in Sections 6.3, 6.11 and 6.15.
AmPaM acknowledges that in purchasing the shares of Company Stock, it
is relying upon its own independent investigation as well as the
representations and warranties of the Company and the Stockholders as set forth
in this Agreement.
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6.1 DUE ORGANIZATION. AmPaM is a corporation duly incorporated and
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite power and authority to carry on its business as
it is now being conducted and as contemplated by the Private Placement
Memorandum. AmPaM is duly qualified or authorized to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or
authorization necessary, except where the failure to be so qualified or
authorized to do business would not have a Material Adverse Effect. True,
complete and correct copies of the Certificate of Incorporation and By-laws,
each as proposed to be amended and as such documents shall be in effect as of
the Closing Date, of AmPaM (the "AmPaM Charter Documents") are attached hereto
as Annex II.
6.2 AUTHORIZATION. (i) The officers of AmPaM executing this Agreement
have the authority to enter into and bind AmPaM to the terms of this Agreement
and (ii) AmPaM has the full legal right, power and authority to enter into this
Agreement and consummate the transactions contemplated hereby. All corporate
acts and other proceedings required to have been taken by AmPaM to authorize
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby have been duly and properly taken.
6.3 CAPITAL STOCK OF AMPAM. The authorized capital stock of AmPaM is
as set forth in Section 1.3(ii). Immediately prior to the Closing Date, all of
the issued and outstanding shares of the capital stock of AmPaM will be as set
forth in the Private Placement Memorandum, free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind other than any restrictions described in the Private
Placement Memorandum. All of the issued and outstanding shares of the capital
stock of AmPaM have been duly authorized and validly issued, are fully paid and
nonassessable and such shares were offered, issued, sold and delivered by AmPaM
in compliance with all applicable state and Federal laws concerning the
issuance of securities. Further, none of such shares were issued in violation
of the preemptive rights of any past or present stockholder of AmPaM. Upon the
Closing Date, the authorized, issued and outstanding shares of capital stock of
AmPaM will be as set forth in the Private Placement Memorandum under the
caption "Capitalization." Upon the Closing Date, the aggregate number of shares
of AmPaM Stock issued and outstanding on the Closing Date that are owned by
Sterling City Capital, LLC, any Affiliates of Sterling City Capital, LLC and
the officers and directors of AmPaM will not be greater than the number of
shares of AmPaM Stock reflected in the Private Placement Memorandum as the
aggregate number of shares of AmPaM Stock to be issued and outstanding and
owned by Sterling City Capital, LLC, any Affiliates of Sterling City Capital,
LLC and the officers and directors of AmPaM.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth in the Private Placement Memorandum, (i) no option,
warrant, call, conversion right or commitment of any kind exists as of the date
of this Agreement which obligates AmPaM to issue any of its authorized but
unissued capital stock; and (ii) AmPaM has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. The material terms of any
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<PAGE> 33
options, warrants or other rights to acquire shares of the stock of AmPaM
referred to in the preceding sentence will be as described in the Private
Placement Memorandum.
6.5 SUBSIDIARIES. As of the date of this Agreement, AmPaM has no
subsidiaries. As of the date of this Agreement, AmPaM does not own, of record
or beneficially, or control, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity interest in any
corporation, association or business entity, and AmPaM is not, directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
6.6 FINANCIAL STATEMENTS. The historical financial statements of AmPaM
included in the Private Placement Memorandum (the "AmPaM Financial Statements")
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (except as noted thereon), and the balance
sheet included therein presents fairly the financial position of AmPaM as of
its date. Management of AmPaM believes that the assumptions underlying the pro
forma adjustments utilized in the preparation of such pro forma financial
statements are reasonable, and such pro forma adjustments have been properly
applied to the historical financial amounts in the compilation of the pro forma
financial statements. Based on the representations in Section 5.9 of this
Agreement and in Section 5.9 of each of the Other Agreements, the pro forma
financial information of AmPaM fairly presents the pro forma financial
position, results of operations and other information purported to be shown
therein at the respective dates and for the respective periods specified.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth in the Private
Placement Memorandum, as of the date of this Agreement, AmPaM has no material
liabilities or obligations of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise, other than
liabilities incurred in the ordinary course of business and consistent with
past practices, liabilities or obligations set forth in or contemplated by this
Agreement and the Other Agreements and except for fees incurred in connection
with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth in
the Private Placement Memorandum, AmPaM is not in violation of any law or
regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and its stockholders and, there are no claims,
actions, suits or proceedings, pending or, to the knowledge of AmPaM,
threatened against or affecting, AmPaM, at law or in equity, or before or by
any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it and no
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. AmPaM has conducted and is conducting its businesses in
compliance in all material respects with the requirements, standards, criteria
and conditions set forth in applicable Federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation, in any material respect, of any of the
foregoing.
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6.9 NO VIOLATIONS. (a) AmPaM is not in violation of any AmPaM Charter
Document. AmPaM is not in default under any lease, instrument, agreement,
license, or permit to which AmPaM is a party or by which AmPaM or any of its
properties are bound (collectively, the "AmPaM Documents").
(b) The execution and delivery of this Agreement by AmPaM do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of AmPaM under any of the
terms, conditions or provisions of (i) the AmPaM Charter Documents, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to
AmPaM or any of its properties or assets, or (iii) any AmPaM Document; provided
that the representations and warranties specified in clause (ii) of this
sentence (A) are based on information in the investor questionnaires and
related purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements
and (B) are subject to the accuracy and completeness of the information
contained in such investor questionnaires and related purchaser representative
questionnaires and the truthfulness of such representations and warranties. The
consummation by AmPaM of the transactions contemplated hereby will not result
in any material violation, conflict, breach, right of termination or
acceleration or creation of liens under any of the terms, conditions or
provisions of the items described in clauses (i) through (iii) of the preceding
sentence, subject, in the case of the terms, conditions or provisions of the
items described in clause (iii) above, to obtaining (prior to the Closing Date)
(x) such approvals, consents or orders from the SEC, state blue sky authorities
and authorities administering the Hart-Scott Act and (y) such other consents as
may be required from commercial lenders, lessors or other third parties which
are listed on Schedule 6.9.
(c) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act and filings with various state securities authorities in connection
with the transactions contemplated by this Agreement, and (ii) any filings
required to be made under the Hart-Scott Act in connection with the
transactions contemplated by this Agreement, none of the AmPaM Documents
requires notice to, or the consent or approval of, any governmental agency or
other third party with respect to the consummation by AmPaM of any of the
transactions contemplated hereby in order to remain in full force and effect,
and consummation by AmPaM of the transactions contemplated hereby will not give
rise to any right to termination, cancellation or acceleration or loss of any
material right or benefit under the AmPaM Documents; provided that the
representations and warranties specified in clauses (i) and (ii) of this
sentence (A) are based on information in the investor questionnaires and
related purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the
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stockholders of the Other Founding Companies set forth in Section 16 of the
Other Agreements and (B) are subject to the accuracy and completeness of the
information contained in such investor questionnaires and related purchaser
representative questionnaires and the truthfulness of such representations and
warranties.
(d) Except for (i) any filings with the SEC pursuant to the 1933 Act
and filings with various state securities authorities in connection with the
transactions contemplated by this Agreement and (ii) any filings required under
the Hart-Scott Act in connection with the transactions contemplated by this
Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by
AmPaM or the consummation by AmPaM of the transactions contemplated hereby;
provided that the representations and warranties specified in clauses (i) and
(ii) of this sentence (A) are based on information in the investor
questionnaires and related purchaser representative questionnaires executed and
delivered by the Stockholders of the Company and the stockholders of the Other
Founding Companies, the representations and warranties of the Stockholders set
forth in Section 16 hereof and the representations and warranties of the
stockholders of the Other Founding Companies set forth in Section 16 of the
Other Agreements and (B) are subject to the accuracy and completeness of the
information contained in such investor questionnaires and related purchaser
representative questionnaires and the truthfulness of such representations and
warranties.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by AmPaM and the performance of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of AmPaM and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of AmPaM, enforceable
against AmPaM in accordance with its terms.
6.11 AMPAM STOCK. At the time of issuance thereof and delivery to the
Stockholders, the AmPaM Stock to be delivered to the Stockholders pursuant to
this Agreement will constitute valid, duly authorized and legally issued shares
of AmPaM, fully paid and nonassessable, and with the exception of restrictions
upon resale set forth in Sections 15 and 16 hereof, will be identical in all
substantive respects (which do not include the form of certificate upon which
it is printed or the presence or absence of a CUSIP number on any such
certificate) to the AmPaM Stock issued and outstanding as of the date hereof,
other than the Restricted Common Stock. The AmPaM Stock issued and delivered to
the Stockholders shall at the time of such issuance and delivery be free and
clear of any liens, claims or encumbrances of any kind or character. The offer
and sale of the shares of AmPaM Stock to be issued to the Stockholders pursuant
to this Agreement are not required to be registered under the 1933 Act;
provided that the representations and warranties specified in this sentence (A)
are based on information in the investor questionnaires and related purchaser
representative questionnaires executed and delivered by the Stockholders of the
Company and the stockholders of the Other Founding Companies, the
representations and warranties of the Stockholders set forth in Section 16
hereof and the representations and warranties of the stockholders of the Other
Founding Companies set forth in Section 16 of the Other Agreements and (B) are
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subject to the accuracy and completeness of the information contained in such
investor questionnaires and related purchaser representative questionnaires and
the truthfulness of such representations and warranties.
6.12 AMPAM NOTES. The AmPaM Notes have been duly authorized and, at
the Closing Date, will have been duly executed by AmPaM and, when
authenticated, issued and delivered, will constitute valid and binding
obligations of AmPaM, enforceable against AmPaM in accordance with their terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers)
reorganization, moratorium or similar laws affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
6.13 NO SIDE AGREEMENTS. AmPaM has not entered into any agreement with
any of the Founding Companies or any of the Stockholders of the Founding
Companies other than this Agreement, the Other Agreements, the agreements
referred to in this Agreement and in the Other Agreements and the Private
Placement Memorandum. AmPaM has not entered into any agreements providing for
rights to register shares of AmPaM Stock under the 1933 Act except as provided
in Section 17 of this Agreement, in Section 17 of the Other Agreements and in
an agreement with Sterling City Capital, LLC, its Affiliates and officers and
directors of AmPaM having terms substantially similar to those set forth in
Section 17 hereof.
6.14 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. AmPaM was formed in
June 1998 and has conducted no material business since the date of its
inception except for activities related to the transaction contemplated by this
Agreement, the Other Agreements and the Private Placement Memorandum. Except as
described in the Private Placement Memorandum, as of the date of this
Agreement, AmPaM does not own any real property or any material personal
property and is not a party to any other material agreement other than this
Agreement, the Other Agreements and the agreements contemplated hereby and
thereby.
6.15 RELATIONS WITH GOVERNMENTS. Neither AmPaM nor any of its
directors, officers or Affiliates has given or offered anything of value to any
government official, political party or candidate for government office, nor
has AmPaM, any of its directors, officers or Affiliates of any of them
otherwise taken any action, which would cause AmPaM to be in violation of the
Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
6.16 DISCLOSURE. The Private Placement Memorandum delivered to the
Company and the Stockholders does not as of the date hereof contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing does not apply to
statements contained in or omitted from any of such documents made or omitted
in reliance upon, and in conformity with, information furnished to AmPaM by the
Company or the Stockholders in writing specifically for inclusion in the
Private Placement Memorandum.
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6.17 OTHER AGREEMENTS. The Other Agreements have been duly authorized,
executed and delivered by AmPaM and constitute the legal, valid and binding
obligation of AmPaM enforceable against AmPaM in accordance with their
respective terms. The terms and conditions of the Other Agreements (excluding
the terms relating to the consideration payable by AmPaM thereunder) are
identical in all material respects to the terms and conditions in this
Agreement.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE; TRANSFER OF REAL ESTATE.
(a) Between the date of this Agreement and the Closing Date, the
Company will afford to the officers and authorized representatives of AmPaM
reasonable access during normal business hours to all of the Company's sites,
properties, books and records and will furnish AmPaM with such additional
financial and operating data and other information as to the business and
properties of the Company as AmPaM may from time to time reasonably request.
The Company will cooperate with AmPaM, its representatives, auditors and
counsel in the preparation of any documents or other material which may be
required in connection with any documents or materials required by this
Agreement. AmPaM, the Stockholders and the Company will treat all information
obtained in connection with the negotiation and performance of this Agreement
or the due diligence investigations conducted with respect to the Company as
confidential in accordance with the provisions of Section 14 hereof.
(b) Between the date of this Agreement and the Closing Date, AmPaM
will afford to the officers and authorized representatives of the Company
access to all of AmPaM's sites, properties, books and records and will furnish
the Company with such additional financial and operating data and other
information as to the business and properties of AmPaM and the Other Founding
Companies as the Company may from time to time reasonably request. AmPaM will
cooperate with the Company, its representatives, auditors and counsel in the
preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. The
Company will cause all information obtained pursuant to this Section 7.1(b) or
obtained in connection with the negotiation and performance of this Agreement
to be treated as confidential in accordance with the provisions of Section 14
hereof.
(c) Except as set forth on Schedule 7.1, any real property owned by
the Company will be sold or distributed by the Company on terms mutually
acceptable to AmPaM and the Company and leased back by the Company on terms no
less favorable to the Company than those available from an unaffiliated party
and otherwise reasonably acceptable to AmPaM at or prior to the Closing Date.
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7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Closing Date, the Company will, except as set forth on
Schedule 7.2:
(i) carry on its businesses in the Ordinary Course of
Business and not introduce any material new method of management,
operation or accounting;
(ii) use all commercially reasonable efforts to maintain its
properties and facilities, including those held under leases, in as
good working order and condition as at present, ordinary wear and
tear, depreciation and insured losses excepted;
(iii) perform in all material respects all of its obligations
under all Material Documents relating to or affecting its respective
assets, properties or rights;
(iv) use its commercially reasonable efforts to keep in full
force and effect present insurance policies or other comparable
insurance coverage;
(v) use its commercially reasonable efforts to maintain and
preserve its business organization intact, retain its respective
present key employees and maintain its relationships with suppliers,
customers and others having business relations with the Company;
(vi) use its commercially reasonable efforts to maintain
compliance with all material permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory
agencies and similar governmental authorities;
(vii) maintain present debt and lease instruments in
accordance with their terms and not enter into new or amended debt or
lease instruments without the knowledge and consent of AmPaM (which
consent shall not be unreasonably withheld), provided that debt and/or
lease instruments may be replaced without the consent of AmPaM if such
replacement instruments are on terms at least as favorable to the
Company as the instruments being replaced;
(viii) maintain or reduce present salaries and commission
levels for all officers, directors, employees and agents except for
ordinary and customary bonus and salary increases for employees in
accordance with past practices; and
(ix) use commercially reasonable efforts to cause the actual
amount of its Current Assets (as defined in Annex I hereto) to be not
less than 150% of the actual amount of its Current Liabilities (as
defined in Annex I hereto).
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7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3,
between the date hereof and the Closing Date, the Company will not, without
prior written consent of AmPaM:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of any
kind other than in connection with the exercise of options or warrants
listed in Schedule 5.4;
(iii) except as permitted pursuant to the terms and
conditions for distributions described in Annex I, declare or pay any
dividend, or make any distribution in respect of its stock whether now
or hereafter outstanding, or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree
to incur any liability or make any capital expenditures, except if it
is in the Ordinary Course of Business or involves an amount not in
excess of three percent (3%) of the Company's gross revenues for
fiscal 1997;
(v) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired, except (1) with respect to purchase money
liens incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of three percent (3%) of the Company's
gross revenues for fiscal 1997 necessary or desirable for the conduct
of the businesses of the Company, (2) (A) liens for taxes either not
yet due or being contested in good faith and by appropriate
proceedings (and for which contested taxes adequate reserves have been
established and are being maintained) or (B) materialmen's,
mechanics', workers', repairmen's, employees' or other like liens
arising in the Ordinary Course of Business (the liens set forth in
clause (2) being referred to herein as "Statutory Liens"), or (3)
liens set forth on Schedule 5.10 and/or Schedule 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the Ordinary Course of Business
and other than distributions of real estate and other assets as
permitted in this Agreement (including Annex I hereto);
(vii) negotiate for the acquisition of any business or the
start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate
with or into any other corporation;
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(ix) waive any material rights or claims of the Company,
provided that the Company may negotiate and adjust bills and accounts
in the course of good faith disputes with customers in a manner
consistent with past practice;
(x) amend or terminate any Material Document except for the
termination of a Material Document in accordance with its terms
without any action on the part of the Company; or
(xi) enter into any other material transaction outside the
Ordinary Course of Business or any transaction prohibited hereunder.
7.4 NO SHOP. None of the Stockholders, the Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than AmPaM
or its authorized agents relating to, any acquisition or purchase of
all or a material amount of the assets of, or any equity interest in,
the Company or a merger, consolidation or business combination of the
Company.
7.5 AGREEMENTS. Except as disclosed on Schedule 7.5(a), the
Stockholders and the Company shall terminate (i) any stockholders agreements,
voting agreements, voting trusts, agreements providing for the grant by the
Company of any options, warrants and employment agreements between the Company
and any employee listed on Schedule 8.11 hereto and (ii) except as otherwise
provided in this Agreement, any existing agreement between the Company and any
Stockholder, on or prior to the Closing Date provided that nothing herein shall
prohibit or prevent the Company from paying (either prior to or on the Closing
Date) notes or other obligations from the Company to the Stockholders described
in Schedule 7.5(b) in accordance with the terms thereof.
7.6 NOTIFICATION OF CERTAIN MATTERS. Each Stockholder and the Company
shall give prompt notice to AmPaM upon obtaining knowledge of (i) the
occurrence or non-occurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty of the Company or
such Stockholder contained herein to be untrue or inaccurate in any material
respect at or prior to the Closing and (ii) any material failure of such
Stockholder or the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such person hereunder. AmPaM
shall give prompt notice to the Company of (i) the occurrence or non-occurrence
of any event the occurrence or non-occurrence of which would be likely to cause
any representation or warranty of AmPaM contained herein to be untrue or
inaccurate
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in any material respect at or prior to the Closing, (ii) any material failure
of AmPaM to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; (iii) any termination of any Other
Agreement for any reason; and (iv) the issuance by the SEC or any state
securities regulatory authority of any issuance of or threatened issuance of
any order challenging the availability of an exemption from registration or
suspending the qualification of any securities described in the Private
Placement Memorandum for sale in any jurisdiction. However, subject to the
provisions of Section 7.7, such notification shall not relieve either the
Company or such Stockholder of their respective obligations under this
Agreement. The delivery of any notice pursuant to this Section 7.6 shall not be
deemed to (i) modify the representations or warranties hereunder of the party
delivering such notice, which modification may only be made pursuant to Section
7.7, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit
or otherwise affect the remedies available hereunder to the party receiving
such notice.
7.7 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until 24 hours prior
to the Closing Date to notify AmPaM with respect to any matter (i) hereafter
arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules or (ii) which may have been omitted from the Schedules previously
provided by such party. Notwithstanding the foregoing sentence, no amendment or
supplement to a Schedule prepared by the Company may be made unless AmPaM
consents to such amendment or supplement; and provided further, that no
amendment or supplement to a Schedule prepared by AmPaM may be made unless the
Stockholders consent to such amendment or supplement. For all purposes of this
Agreement, including without limitation for purposes of determining whether the
conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules
hereto, as amended or supplemented with the consent of AmPaM or the
Stockholders, as the case may be, as provided above, shall be deemed to be the
Schedules to this Agreement.
7.8 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
appropriate to carry out the transactions contemplated hereby and to cause the
conditions to the Closing Date to be satisfied as promptly as practicable.
7.9 AUTHORIZED CAPITAL. Prior to the Closing Date, AmPaM shall
maintain its authorized capital stock as set forth in the Private Placement
Memorandum.
7.10 COMPLIANCE WITH THE HART-SCOTT ACT. All parties to this Agreement
hereby recognize that one or more filings under the Hart-Scott Act may be
required in connection with the transactions contemplated herein. If it is
determined by the parties to this Agreement that filings under the Hart-Scott
Act are required, then: (i) each of the parties hereto agrees to cooperate and
use its best efforts to comply with the Hart-Scott Act and (ii) such compliance
by the Stockholders and the parties agree to cooperate and use their best
efforts to cause all filings required under the Hart- Scott Act to be made. If
filings under the Hart-Scott Act are required, the costs and expenses thereof
(including filing fees) shall be borne by AmPaM.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND
COMPANY
The obligations of the Stockholders and the Company with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions. As
of the Closing Date, if any such applicable conditions have not been satisfied,
any one or more of the Stockholders who would be entitled to receive a majority
of the Aggregate Consideration (as defined herein) received by all the
Stockholders if the transactions contemplated hereby were consummated shall
have the right to waive any condition not so satisfied. Any act or action of
the Stockholders in consummating the Closing or delivering the certificates
representing Company Stock as of the Closing Date shall constitute a waiver of
any conditions not so satisfied. However, no such waiver shall be deemed to
affect the survival of the representations and warranties of AmPaM contained in
Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of AmPaM contained in Section 6 shall be true
and correct as of the Closing Date as though such representations and
warranties had been made as of that time; all of the terms, covenants and
conditions of this Agreement to be complied with and performed by AmPaM on or
before the Closing Date shall have been duly complied with and performed in all
material respects; and certificates to the foregoing effect dated the Closing
Date and signed by the President or any Vice President of AmPaM shall have been
delivered to the Stockholders.
8.2 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of the Company or the Stockholders and that are
required to carry out this Agreement or incidental hereto shall be reasonably
satisfactory to the Company, the Stockholders and their counsel.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the purchase and sale of the Company Stock.
8.4 OPINION OF COUNSEL. The Company shall have received opinions from
counsel for AmPaM, dated the Closing Date, addressed to the Company and the
Stockholders in the form annexed hereto as Annex III.
8.5 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule 6.9
shall have been obtained; and no action or proceeding shall have been
instituted or threatened to restrain or prohibit the purchase and sale of the
Company Stock and no governmental agency or body shall have taken any other
action or made any request of Company as a result of which Company deems it
inadvisable to proceed with the transactions hereunder.
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8.6 GOOD STANDING CERTIFICATES. AmPaM shall have delivered to the
Company a certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Delaware Secretary of State and in each state
in which AmPaM is authorized to do business, showing that AmPaM is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for AmPaM for all periods prior to the Closing
have been filed and paid.
8.7 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred which would constitute a Material Adverse Change with respect to AmPaM
from the date of the Private Placement Memorandum.
8.8 SECRETARY'S CERTIFICATE. The Company shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of AmPaM, certifying the truth and correctness of attached copies of AmPaM's
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and, if
required, the stockholders of AmPaM approving AmPaM's entering into this
Agreement and the Other Agreements and the consummation of the transactions
contemplated hereby and thereby.
8.9 TAX MATTERS. The Stockholders shall have received an opinion of
Andrews & Kurth L.L.P., in substantially the form of Annex IV hereto, that the
AmPaM Plan of Organization will qualify as a tax-free transfer of property
under Section 351 of the Code and that the Stockholders will not recognize gain
to the extent the Stockholders exchange Company Stock for AmPaM Stock (but not
cash or other property) pursuant to this Agreement in connection with the AmPaM
Plan of Organization.
8.10 OTHER FOUNDING COMPANIES. The transactions contemplated by the
Other Agreements are consummated simultaneously with the consummation of the
transactions contemplated by this Agreement.
8.11 COMPANY RELEASE OF STOCKHOLDERS. The Company shall have delivered
to the Stockholders an instrument dated the Closing Date, in form reasonably
satisfactory to AmPaM and the Stockholders, which shall be effective only upon
the occurrence of the Closing Date, releasing the Stockholders from (i) any and
all claims of the Company against the Stockholders, known and unknown, and (ii)
obligations of the Stockholders to the Company, except for (x) items
specifically identified on Schedule 5.10(a) and Schedule 5.15(b) as being
claims of or obligations to the Company and (y) continuing obligations to the
Company relating to their employment by the Company pursuant to any employment
agreement entered into pursuant to Section 8.11 hereof.
8.12 STERLING CITY CAPITAL TRANSFER RESTRICTIONS. Sterling City
Capital, LLC and each of its Affiliates which owns AmPaM Stock shall have
entered into an agreement with AmPaM containing substantially the same terms
and conditions as are contained in Section 15 and Section 17.
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8.13 ELECTION OF CHIEF EXECUTIVE OFFICER. AmPaM shall have taken all
corporate action necessary to elect Robert A. Christianson as Chief Executive
Officer of AmPaM effective immediately following the Closing Date.
8.14 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto
as payable to the Stockholders upon the Closing and (ii) the aggregate cash
amounts specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AMPAM
The obligations of AmPaM with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. As of the Closing Date, if any
such conditions have not been satisfied, AmPaM shall have the right to
terminate this Agreement, or waive any such condition, but no such waiver shall
be deemed to affect the survival of the representations and warranties
contained in Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE AND OBLIGATIONS. All
the representations and warranties of the Stockholders and the Company
contained in this Agreement shall be true and correct as of the Closing Date
with the same effect as though such representations and warranties had been
made on and as of such date; all of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Stockholders and the Company
on or before the Closing Date shall have been duly performed or complied with
in all material respects; and the Stockholders shall have delivered to AmPaM
certificates dated the Closing Date and signed by them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the purchase and sale of the Company Stock.
9.3 SECRETARY'S CERTIFICATE. AmPaM shall have received a certificate,
dated the Closing Date and signed by the secretary of the Company, certifying
the truth and correctness of attached copies of the Company's Articles or
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and the
Stockholders approving the execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby.
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9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Company
to conduct its business.
9.5 STOCKHOLDERS' RELEASE. The Stockholders shall have delivered to
AmPaM an instrument dated the Closing Date which shall be effective only upon
the occurrence of the Closing releasing the Company and AmPaM from (i) any and
all claims of the Stockholders against the Company and AmPaM and (ii)
obligations of the Company and AmPaM to the Stockholders, except for (A) items
specifically identified on Schedule 5.31 as being claims of or obligations to
the Stockholders, (B) continuing obligations to Stockholders relating to their
employment by the Company pursuant to employment agreements entered into as
specified in Section 8.11 hereof, (C) obligations arising under this Agreement
or the transactions contemplated hereby and (D) claims of Stockholders against
the Company for unreimbursed business expenses incurred by the Stockholders on
behalf of the Company (other than expenses related to the transactions
contemplated by this Agreement) prior to the Closing Date or unreimbursed
medical expenses of the Stockholders incurred prior to the Closing Date which
are covered by the Company's existing health insurance coverage. In the event
that the Closing Date does not occur, then the release instrument referenced
herein shall be void and of no further force or effect.
9.6 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of AmPaM and that are required to carry out the
transactions contemplated by this Agreement or incidental hereto shall have
been reasonably approved by counsel to AmPaM.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the Company and the Stockholders
(and between the Company and entities controlled by the Stockholders) specified
on Schedule 5.31 shall have been terminated effective prior to or as of the
Closing Date without any payment being made by the Company other than payments
made for services rendered, materials provided or other benefits provided to
the Company prior to the Closing Date pursuant to the terms of such agreements
as in effect as of the date of this Agreement.
9.8 OPINION OF COUNSEL. AmPaM shall have received opinions from
counsel to the Company and the Stockholders, dated the Closing Date,
substantially in the form annexed hereto as Annex V.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule
5.23(b)(2) shall have been obtained; and no action or proceeding shall have
been instituted or threatened to restrain or prohibit the purchase and sale of
the Company Stock and no
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governmental agency or body shall have taken any other action or made any
request of AmPaM as a result of which AmPaM deems it inadvisable to proceed
with the transactions hereunder.
9.10 GOOD STANDING CERTIFICATES. The Company shall have delivered to
AmPaM a certificate, dated as of a date no earlier than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by AmPaM, in each state in
which the Company is authorized to do business, showing the Company is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the Company for all periods prior to the
Closing have been filed and paid.
9.11 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto
as payable to the Stockholders upon the Closing and (ii) the aggregate cash
amounts specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9.12 FIRPTA CERTIFICATE. Each Stockholder shall have delivered to
AmPaM a certificate to the effect that he is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.13 RESIGNATIONS OF DIRECTORS AND OFFICERS. Any directors of the
Company, other than those identified on Schedule 2.1, shall have resigned as
directors of the Company. Any officers of the Company, other than those
identified on Schedule 2.2, shall have resigned as officers of the Company.
10. COVENANTS OF AMPAM AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. AmPaM
shall use reasonable efforts to have the Stockholders released from any and all
guarantees of the Company's indebtedness, including bond obligations,
identified on Schedule 10.1. Prior to obtaining the release of such guarantees,
AmPaM shall provide its guarantee of such indebtedness to the lenders thereof.
In the event that AmPaM cannot obtain such releases from the lenders of any
such guaranteed indebtedness identified on Schedule 10.1 on or prior to 90 days
subsequent to the Closing Date, AmPaM shall promptly pay off or otherwise
refinance or retire such indebtedness such that the Stockholders' personal
liability shall be released. AmPaM will indemnify the Stockholders against any
loss or damage suffered as a result of the personal guarantees.
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10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement, after the Closing Date, AmPaM shall not and
shall not permit any of its Subsidiaries to undertake any act that would
jeopardize the tax-free status of the exchange of Company Stock for AmPaM Stock
(but not cash or other property), including without limitation:
(a) the retirement or reacquisition, directly or indirectly,
of all or part of the AmPaM Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the
benefit of the Stockholders other than as described in the Private Placement
Memorandum or as described in this Agreement.
10.3 PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES.
(a) The Company, if possible, or otherwise the Stockholders
shall file or cause to be filed all income Tax Returns (federal, state, local
or otherwise) of any Acquired Party for all taxable periods that end on or
before the Closing Date, and shall permit AmPaM to review all such Tax Returns
prior to such filings. Unless the Company is a C corporation, the Stockholders
shall pay or cause to be paid all income Tax liabilities (in excess of all
amounts already paid with respect thereto or properly accrued or reserved with
respect thereto on the Financial Statements) with respect to the Company's
operations for all periods through and including the Closing Date.
(b) AmPaM shall file or cause to be filed all separate
Returns of, or that include, any Acquired Party for all taxable periods ending
after the Closing Date.
(c) Unless required by applicable law, regulations or
government proceedings, AmPaM shall not take any action, including any
amendment of a Tax Return of any Acquired Party, if such action would result in
additional Tax liabilities payable by any of the Stockholders for periods
ending on or prior to the Closing Date.
(d) Each party hereto shall, and shall cause its subsidiaries
and Affiliates to, provide to each of the other parties hereto such cooperation
and information as any of them reasonably may request in filing any Return,
amended Return or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding in
respect of Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file Returns pursuant to this Agreement shall bear all costs of filing such
Returns.
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(e) Each of the Company, AmPaM and each Stockholder shall
comply with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as a tax-free
contribution under Section 351(a) of the Code subject to gain, if any,
recognized on the receipt of cash or other property under Section 351(b) of the
Code.
10.4 DIRECTORS. The persons named in the Private Placement Memorandum
shall be appointed as directors and elected as officers of AmPaM, as and to the
extent set forth in the Private Placement Memorandum, promptly following the
Closing Date; provided, however, that the parties hereto acknowledge that if
the Company consummates an IPO, the persons who will serve as directors and
executive officers of AmPaM will be adjusted as appropriate for a publicly
traded entity, with any such changes being subject to the approval of the
majority of the Board of Directors of AmPaM.
10.5 LEGAL OPINIONS. If required by the lenders pursuant to the terms
of any agreements related to financing of the cash amounts referred to in
Section 9.11 hereof, the Company shall cause its counsel to deliver to such
lenders, at the Closing, an opinion of counsel in substantially the form
attached hereto as Annex V.
11. INDEMNIFICATION
The Stockholders and AmPaM each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS.
(a) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement until the applicable Expiration Date (as defined in
the introductory paragraph to Section 5(A)), provided that for purposes of
clause (iii) below, the applicable Expiration Date shall be the date on which
the applicable statute of limitations expires), from and against all claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by AmPaM as a result of
or arising from (i) any breach of the representations and warranties of the
Company set forth herein or on the schedules attached hereto or certificates
delivered pursuant to this Agreement, (ii) any breach of any covenant or
agreement on the part of the Company under this Agreement, or (iii) any
liability under the 1933 Act or any Federal or state securities law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating solely to the
Company which was based upon information provided to AmPaM or its counsel in
writing by the Company specifically for inclusion in the Private Placement
Memorandum and is contained in the Private Placement Memorandum, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
Company required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that no Stockholder shall be liable
for any
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indemnification obligation pursuant to this Section 11.1 in excess of such
Stockholder's pro rata share thereof determined by reference to the aggregate
value of the Base Cash Amount (as defined in Annex I of this Agreement), the
principal amount of AmPaM Notes and the shares of AmPaM Stock (valued at a
price of $13.00 per share) received by such Stockholder pursuant to Section
I.A. of Annex I hereto (without giving effect to the adjustments provided in
Sections I.B. and I.C. thereof) (giving effect to the value of such AmPaM Stock
and without giving effect to such adjustments, collectively, the "Aggregate
Consideration") such Stockholder would receive pursuant to Section I of Annex I
of this Agreement if the transactions contemplated hereby were consummated in
relation to the total Aggregate Consideration all Stockholders would receive
pursuant to Section I of Annex I of this Agreement if the transactions
contemplated hereby were consummated.
(b) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by AmPaM as a result of or arising from (i)
any breach of the representations and warranties of such Stockholder set forth
in Section 5(B) hereof, (ii) any breach of any covenant or agreement on the
part of such Stockholder under this Agreement, or (iii) any liability under the
1933 Act or any Federal or state securities law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating solely to such Stockholder which was
based upon information provided to AmPaM or its counsel in writing by such
Stockholder specifically for inclusion in the Private Placement Memorandum and
is contained in the Private Placement Memorandum, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact relating solely to such Stockholder
required to be stated therein or necessary to make the statements therein in
light of the circumstances in which such statements were made not misleading.
(c) AmPaM acknowledges and agrees that other than the representations
and warranties of the Company or the Stockholders specifically contained in
this Agreement, there are no representations or warranties of the Company or
the Stockholders, either express or implied, with respect to the transactions
contemplated by this Agreement, the Company or its assets, liabilities and
business.
11.2 INDEMNIFICATION BY AMPAM. AmPaM covenants and agrees that it will
indemnify, defend, protect and hold harmless the Company and the Stockholders
at all times from and after the date of this Agreement until the applicable
Expiration Date (as defined in the introductory paragraph of Section 6,
provided that for purposes of clause (iii) below, the applicable Expiration
Date shall be the date on which the applicable statute of limitations expires),
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by the Company or the Stockholders as a result of or arising from (i)
any breach by AmPaM of its representations and warranties set forth herein or
on the schedules attached
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hereto or certificates delivered pursuant to this Agreement, (ii) any breach of
any agreement on the part of AmPaM under this Agreement; or (iii) any liability
under the 1933 Act or any Federal or state securities law or regulation, at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Private Placement
Memorandum, or any amendment thereof or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except to the extent such is based upon an untrue statement or
alleged untrue statement, or omission or alleged omission, made therein in
reliance upon, and in conformity with, the representations and warranties of
the Company or the Stockholders specifically contained in this Agreement or
other information furnished to AmPaM by the Company or the Stockholders in
writing specifically for inclusion therein.
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim
by a person not a party to this Agreement ("Third Person"), or the commencement
of any action or proceeding by a Third Person, the Indemnified Party shall, as
a condition precedent to a claim with respect thereto being made against any
party obligated to provide indemnification pursuant to Section 11.1 or 11.2
hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or proceeding.
Such notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel reasonably
satisfactory to the Indemnified Party, any such matter so long as the
Indemnifying Party pursues the same in good faith and diligently, provided that
the Indemnifying Party shall not settle any criminal proceeding without the
written consent of the Indemnified Party. If the Indemnifying Party undertakes
to defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to,
furnishing the Indemnifying Party with any books, records or information
reasonably requested by the Indemnifying Party that are in the Indemnified
Party's possession or control. All Indemnified Parties shall use the same
counsel, which shall be the counsel selected by Indemnifying Party, provided
that if counsel to the Indemnifying Party shall have a conflict of interest or
a conflict of interest is reasonably likely to arise that prevents counsel for
the Indemnifying Party from representing such Indemnified Party, Indemnified
Party shall have the right to participate in such matter through counsel of its
own choosing and Indemnifying Party will reimburse the Indemnified Party for
the reasonable expenses of its counsel. After the Indemnifying Party has
notified the Indemnified Party of its intention to undertake to defend or
settle any such asserted liability, and for so long as the Indemnifying Party
diligently pursues such defense, the Indemnifying Party shall not be liable for
any additional legal expenses incurred by the Indemnified Party in connection
with any defense or settlement of such asserted liability, except (i) as set
forth in the preceding sentence and (ii) to the extent such participation is
requested by the Indemnifying Party, in which event the Indemnified Party shall
be reimbursed by the Indemnifying Party for reasonable additional legal
expenses and out-of-pocket expenses. If the Indemnifying Party desires to
accept a final and complete settlement of any such Third Person claim and the
Indemnified Party refuses to consent to such settlement, then the
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Indemnifying Party's liability under this Section with respect to such Third
Person claim shall be limited to the amount so offered in settlement by said
Third Person. Upon agreement as to such settlement between said Third Person
and the Indemnifying Party, the Indemnifying Party shall, in exchange for a
complete release from the Indemnified Party, promptly pay to the Indemnified
Party the amount agreed to in such settlement. If the Indemnifying Party does
not undertake to defend such matter to which the Indemnified Party is entitled
to indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense through counsel of its choice, at
the cost and expense of the Indemnifying Party, and the Indemnified Party may
settle such matter, and the Indemnifying Party shall pay the Indemnified Party
for the settlement amount and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith, provided, however, that under no
circumstances shall the Indemnified Party settle any Third Person claim without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. With respect to any account, note or other
receivable as to which the Stockholders have paid in full any indemnification
obligation pursuant to this Section 11 as a result of a breach of the
representation and warranty made pursuant to Section 5.11 or as to which a
claim in respect thereof has been asserted pursuant to this Section 11 that has
been applied against the Indemnification Threshold with respect to the
Stockholders as a result of a breach of the representation and warranty made
pursuant to Section 5.11, AmPaM shall cause the Company to assign such account,
note or other receivable to the Stockholders. The parties hereto will make
appropriate adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this
Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any
action seeking damages or any other form of monetary relief brought by any
party to this Agreement against another party to this Agreement with respect to
any provision of this Agreement, provided that, nothing herein shall be
construed to limit the right of a party, in a proper case, to seek injunctive
relief for a breach of this Agreement. AmPaM hereby waives, to the fullest
extent permitted under applicable law, any and all other rights, claims and
causes of action, known or unknown, it or any indemnified person may have
against the Company or any Stockholder relating to this Agreement or the
transactions pursuant to this Agreement arising under or based upon any
Federal, state, local or foreign statute, law, rule, regulation or otherwise.
Any indemnity payment under this Section 11 shall be treated as an adjustment
to the exchange consideration for Tax purposes unless a final determination
(which shall include the execution of a Form 870-AD or successor form) with
respect to the Indemnified Party or any of its Affiliate causes any such
payment not to be treated as an adjustment to the exchange consideration for
U.S. Federal income Tax purposes.
11.5 LIMITATIONS ON INDEMNIFICATION. (a) AmPaM shall not assert any
claim for indemnification under this Section 11 against the Stockholders until
such time as, and solely to the extent that, the aggregate of all claims which
AmPaM may have against the Stockholders shall exceed the greater of (a) 3.0% of
the sum of (i) the cash paid to the Stockholders pursuant to Section 1.2 plus
(ii) the value of the AmPaM Stock delivered to the Stockholders pursuant to
Section 1.2
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(calculated as provided in this Section 11.5) plus (iii) the principal amount
of the AmPaM Notes delivered to the Stockholders pursuant to Section 1.2, or
(b) $50,000 (the "Indemnification Threshold"). Stockholders shall not assert
any claim for indemnification hereunder against AmPaM until such time as, and
solely to the extent that, the aggregate of all claims which Stockholders may
have against AmPaM shall exceed $50,000; provided, however, that this sentence
shall not be applicable with respect of any failure by AmPaM to (i) deliver the
consideration specified in Annex I hereto on the Closing Date upon the
satisfaction, or waiver by AmPaM, of all conditions to the occurrence of the
Closing Date specified in Section 9 or (ii) comply with its obligations
pursuant to Section 10.1. After the $50,000 threshold for AmPaM (subject to the
proviso in the preceding sentence) or the Indemnification Threshold for a
Stockholder has been met, all claims must be made in $10,000 increments, which
claims may be cumulated in order to meet such $10,000 thresholds. For purposes
of this paragraph, the AmPaM Stock delivered to the Stockholders shall be
valued at $13.00 per share.
(b) No person shall be entitled to indemnification under this Section
11 if and to the extent that such person's claim for indemnification is
directly or indirectly related to a breach by such person of any
representation, warranty, covenant or other agreement set forth in this
Agreement. No claim for indemnification against the Stockholders shall limit,
diminish or change any obligation of AmPaM pursuant to Section 10.1 hereof.
(c) Notwithstanding any other term of this Agreement, no Stockholder
shall be liable under this Section 11 for an amount which exceeds eighty-five
percent (85%) of the amount of proceeds received by such Stockholder (valued as
of the Closing Date) in connection with the purchase and sale of the Company
Stock. For purposes of this paragraph, the AmPaM Stock shall be valued at
$13.00 per share.
(d) A Stockholder may pay any indemnification obligation under Section
11 by means of the payment of cash or a combination of the payment of cash, the
forgiveness of amounts owed pursuant to the AmPaM Notes and the delivery to
AmPaM of shares of AmPaM Stock; provided that the percentage of the
indemnification obligation satisfied by means of the delivery of shares of
AmPaM Stock does not exceed the percentage of AmPaM Stock comprising the total
consideration paid to such Stockholder by AmPaM to such Stockholder pursuant to
Annex I. For the purpose of crediting Stockholders for payments made to AmPaM
by means of delivery of shares of AmPaM Stock, the AmPaM Stock shall be valued
at $13.00 per share.
(e) In determining the amount of any loss, liability or expense for
which any party is entitled to indemnification under this Agreement, the gross
amount thereof will be reduced by any correlative insurance proceeds or other
third party indemnity or reimbursement proceeds realized or to be realized by
such party (or, in the case of AmPaM, by AmPaM, the Company or any subsidiary
of AmPaM or the Company) and such correlative insurance proceeds or other third
party indemnity or reimbursement proceeds shall be net of any insurance premium
or other incremental cost or expense owed or payable to any third party which
becomes due as a result of such claim. AmPaM
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shall use commercially reasonable efforts to pursue any available insurance
coverage or other rights of indemnity or reimbursement from third parties with
respect to any such loss, liability or expense.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing Date solely:
(i) by mutual consent of AmPaM and the Stockholders;
(ii) by the Stockholders, if the transactions contemplated by
this Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by the Company
or the Stockholders prior to or on the Closing Date;
(iii) by AmPaM, if the transactions contemplated by this
Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by AmPaM prior
to or on the Closing Date;
(iv) by the Stockholders, if a material breach or default
shall be made by AmPaM in the observance or in the due and timely
performance of any of the covenants or agreements contained herein
relating to AmPaM, and the curing of such default shall not have been
made (or in the reasonable judgment of such Stockholders cannot be
made) on or before the Closing Date;
(v) by AmPaM, if a material breach or default shall be made
by the Company or the Stockholders in the observance or in the due and
timely performance of any of the covenants or agreements contained
herein relating to the Company or the Stockholders, and the curing of
such default shall not have been made (or in the reasonable judgment
of AmPaM cannot be made) on or before the Closing Date;
(vi) by the Stockholders, if the conditions set forth in
Section 8 hereof have not been satisfied or waived as of the Closing
Date; or
(vii) by AmPaM, if the conditions set forth in Section 9
hereof have not been satisfied or waived as of the Closing Date.
12.2 PROCEDURE AND EFFECT OF TERMINATION. A determination to terminate
this Agreement by AmPaM pursuant to Section 12.1 shall be valid and effective
only if a written notice of termination, accompanied by a certified copy of
resolutions of the board of directors of AmPaM that evidence the authorization
of the officer of AmPaM to deliver a written notice of termination of this
Agreement pursuant to Section 12.1, is given to the Stockholders in the manner
specified for notices
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in this Agreement. A determination to terminate this Agreement by the
Stockholders pursuant to Section 12.1 shall be valid and effective only if a
written notice of termination, signed by Stockholders who would be entitled to
receive a majority of the shares of AmPaM Stock specified in Section I of Annex
I to this Agreement if the transactions contemplated hereby were consummated,
is given to AmPaM in the manner specified for notices in this Agreement. Upon
the giving of notice of termination of this Agreement pursuant to Section 12.1
as specified in the preceding sentence, this Agreement shall terminate, and the
transactions contemplated hereby shall be abandoned, without further action by
any of the parties hereto. Immediately upon any such termination, AmPaM shall
deliver written notice of such termination to the Other Founding Companies. If
this Agreement is terminated as provided in this Section 12, no party hereto
shall have any liability or further obligation hereunder to any other party,
except as provided in Section 14 and Section 18.6, provided, that, the
termination of this Agreement will in no way limit any obligation or liability
of any party based on or arising from a breach or default by such party with
respect to any of its representations, warranties, covenants or agreements
contained in this Agreement including, but not limited to, legal and audit
costs and out of pocket expenses that occurred prior to such termination.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The Stockholders will not, without the
prior written consent of AmPaM, for a period of two (2) years following the
Closing Date, for any reason whatsoever, directly or indirectly, for themselves
or on behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, whether paid or unpaid, in any plumbing, piping,
mechanical, heating, ventilation or air conditioning contracting,
installation or services business or operation, whether for
residential, commercial, industrial or governmental customers, or any
ancillary contracting, installation or services business directly
related thereto (such business and operations referred to herein as
the "Plumbing and Mechanical Business"), within 100 miles of where the
Company or any of its subsidiaries conducted business within two (2)
years prior to the Closing Date (the "Territory");
(ii) call upon any person who is, at the Closing Date, within
the Territory, an employee of AmPaM or any subsidiary thereof for the
purpose or with the intent of enticing such employee away from or out
of the employ of AmPaM or any subsidiary thereof;
(iii) call upon any person or entity which is, at the Closing
Date, or which has been within three (3) years prior to the Closing
Date, a customer of AmPaM or any subsidiary thereof, of the Company or
of any of the Other Founding Companies for the purpose of soliciting
customers, orders or contracts for any Plumbing and Mechanical
Business in direct competition with AmPaM within the Territory;
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(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor in the
Plumbing and Mechanical Business, which candidate, to the actual
knowledge of such Stockholder after due inquiry, was called upon by
AmPaM or any subsidiary thereof or for which, to the actual knowledge
of such Stockholder after due inquiry, AmPaM or any subsidiary thereof
made an acquisition analysis, for the purpose of acquiring such
entity; or
(v) disclose to any person, firm, partnership, corporation or
business the names or identities of any person, firm, partnership,
corporation or business which has been a customer of the Company or
any of its subsidiaries within the two (2) years prior to the Closing
Date for any reason or purpose whatsoever except to the extent that
the Company has in the past disclosed such information to the public
for valid business reasons; or
(vi) testify as an expert witness in matters related to the
Plumbing and Mechanical Business for an adverse party to AmPaM, the
Company or any Other Founding Companies in litigation.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Stockholder from acquiring as a passive investment (i) not more
than one percent (1%) of the capital stock of a competing business whose stock
is traded on a national securities exchange, the NASDAQ Stock Market or
over-the-counter, or (ii) not more than five percent (5%) of the capital stock
of a competing business whose stock is not publicly traded if the Board of
Directors of AmPaM consents to such acquisition.
13.2 DAMAGES. Because of the difficulty of measuring economic losses
to AmPaM as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to AmPaM for which it
would have no other adequate remedy, each Stockholder agrees that the foregoing
covenant may be enforced by AmPaM in the event of breach by such Stockholder,
by injunctions and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
Stockholders in light of the activities and business of AmPaM and the
subsidiaries thereof on the date of the execution of this Agreement and the
current plans of AmPaM as described in the Private Placement Memorandum.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent which
the court deems reasonable, and the Agreement shall thereby be reformed.
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13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against AmPaM or any subsidiary thereof, whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by AmPaM of
such covenants. It is specifically agreed that the period of two (2) years
stated at the beginning of this Section 13, during which the agreements and
covenants of each Stockholder made in this Section 13 shall be effective, shall
be computed by excluding from such computation any time during which such
Stockholder is found to be in violation of any provision of this Section 13 as
determined by any of (i) a written agreement to such effect executed and
delivered by AmPaM and such Stockholder, (ii) a determination by an arbitration
panel pursuant to an arbitration conducted pursuant to Section 18.16 hereof or
(iii) a non-appealable judgment of a court of competent jurisdiction. The
covenants contained in Section 13 shall not be affected by any breach of any
other provision hereof by any party hereto. The covenants contained in Section
13 shall have no effect if the transactions contemplated by this Agreement are
not consummated.
13.6 MATERIALITY. The Company and the Stockholders hereby agree that
the covenants contained in this Section 13 are a material and substantial part
of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that
they had in the past, currently have, and in the future may possibly have,
access to certain confidential information of the Company, the Other Founding
Companies, and/or AmPaM, such as operational policies, customer lists, and
pricing and cost policies that are valuable, special and unique assets of the
Company's, the Other Founding Companies' and/or AmPaM's respective businesses.
The Stockholders agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
AmPaM, (b) following the Closing, such information may be disclosed by the
Stockholders as is required in the course of performing their duties for AmPaM
or the Company and (c) to its counsel and other advisers, provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 14.1; provided, however that (i) the foregoing disclosure prohibition
shall not apply in the event that (i) such information becomes known to the
public generally through no fault of the Stockholders, (ii) disclosure is
required by law or the order of any governmental authority under color of law,
provided, that prior to disclosing any information pursuant to this clause
(ii), the Stockholders shall, if possible, give prior written notice thereof to
AmPaM and provide AmPaM with the opportunity to contest such disclosure, or
(iii) the disclosing party reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing party. In
the event of a breach or threatened breach by any of the Stockholders of the
provisions of this Section, AmPaM shall be entitled to an injunction
restraining such Stockholders from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
AmPaM from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages. In the event the transactions
contemplated
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by this Agreement are not consummated, Stockholders shall have none of the
above-mentioned restrictions on their ability to disseminate confidential
information with respect to the Company.
14.2 AmPaM. AmPaM recognizes and acknowledges that it had in the past
and currently has access to certain confidential information of the Company,
such as operational policies, customer lists, and pricing and cost policies
that are valuable, special and unique assets of the Company's business. AmPaM
agrees that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
the Company, (b) to its counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
14.2, (c) to the Other Founding Companies and their representatives pursuant to
Section 7.1(b) of the Other Agreements and (d) to potential purchasers of
securities of AmPaM to the extent necessary or advisable in connection with the
applicable securities laws; provided, however that the foregoing disclosure
prohibition shall not apply in the event that (A) such information becomes
known to the public generally through no fault of AmPaM, (B) disclosure is
required by law or the order of any governmental authority under color of law,
provided, that prior to disclosing any information pursuant to this clause (B),
AmPaM shall, if possible, give prior written notice thereof to the Company and
the Stockholders and provide the Company and the Stockholders with the
opportunity to contest such disclosure, or (C) the disclosing party reasonably
believes that such disclosure is required in connection with the defense of a
lawsuit against the disclosing party. In the event of a breach or threatened
breach by AmPaM of the provisions of this Section 14.2, the Company and the
Stockholders shall be entitled to an injunction restraining AmPaM from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting the Company and the Stockholders from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. In the event the transactions contemplated
by this Agreement are not consummated for any reason, AmPaM shall nevertheless
remain subject to this Section 14.2, except that it shall not be permitted to
make any disclosures otherwise than pursuant to clause (A), (B) or (C) above.
14.3 DAMAGES. Because of the difficulty of measuring economic losses
as a result of the breach of the foregoing covenants in Sections 14.1 and 14.2,
and because of the immediate and irreparable damage that would be caused for
which they would have no other adequate remedy, the parties hereto agree that,
in the event of a breach by any of them of the foregoing covenants, the
covenant may be enforced against the other parties by injunctions and
restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14
shall survive the termination of this Agreement for a period of five years from
the Closing Date.
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14.5 RETURN OF INFORMATION. If the transactions contemplated by this
Agreement are not consummated, AmPaM will return or destroy all confidential
information regarding the Company.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS RELATING TO AMPAM STOCK AND AMPAM NOTES.
For a period of two years from the Closing Date or, in the event that the
Company completes an IPO, for a period through the second anniversary of the
date of the closing of such IPO (the "Restricted Period"), no Stockholder shall
(i) sell, assign, exchange, transfer, pledge, or otherwise dispose of any
shares of AmPaM Stock or AmPaM Notes received by the Stockholders pursuant to
this Agreement or any securities convertible into, exchangeable or exercisable
for any shares of AmPaM Stock or AmPaM Notes received by such Stockholder
pursuant to this Agreement, (ii) grant any option to purchase, or otherwise
enter into any contract to sell, assign, transfer, pledge or otherwise dispose
of, any shares of AmPaM Stock or AmPaM Notes received by such Stockholder
pursuant to this Agreement, or (iii) enter into any swap or any other agreement
or any transaction that transfers, in whole or in part, directly or indirectly,
the economic consequence of ownership of the AmPaM Stock or AmPaM Notes,
whether any such swap or transaction is to be settled by delivery of shares of
AmPaM Stock or AmPam Notes or other securities, by the delivery or payment of
cash or otherwise, except, in the case of clauses (i), (ii) or (iii) above, (A)
as otherwise agreed by AmPaM, (B) for the sale of shares of AmPaM Stock, and
entering into agreements relating to the sale of shares of AmPaM Stock,
pursuant to Section 17 hereof, (C) for transfers to (I) immediate family
members of such Stockholder who agree with AmPaM in writing to be bound by the
restrictions set forth in this Section 15.1, (II) trusts, limited partnerships
or other estate planning entities for the benefit of such Stockholder or family
members of such Stockholder which have agreed with AmPaM in writing, through
action taken by the trustees, partners or other persons having authority to
bind the trust, limited partnership or other estate planning entity, to be
bound by the restrictions set forth in this Section 15.1, (III) any charitable
organization that qualifies for receipt of charitable contributions under
Section 170(c) of the Code which agrees with AmPaM in writing to be bound by
the restrictions set forth in this Section 15.1, (D) for transfers of AmPaM
Stock or AmPaM Notes to AmPaM pursuant to Section 11.5(d), (E) for transfers to
another Stockholder, to another person or entity who receives shares of AmPaM
Stock or AmPaM Notes or AmPaM Series A Preferred Stock pursuant to the Other
Agreements or to Sterling City Capital LLC or any of its Affiliates provided
that (1) such transaction is exempt from the registration requirements of the
1933 Act as evidenced by the delivery to AmPaM of an opinion of counsel in form
and substance reasonably satisfactory to AmPaM and (2) any such transferee
agrees in writing to be bound by the restrictions set forth in this Section
15.1, (F) transfers of shares of AmPaM Notes, shares of AmPaM Stock, or grants
of options to purchase shares of AmPaM Stock, by such Stockholder to employees
of the Company of up to an aggregate of 15% of the shares of AmPaM Stock
received by such Stockholder pursuant to this Agreement provided that (1) any
such transaction is exempt from the registration requirements of the 1933 Act
as evidenced by the delivery to AmPaM of an opinion of counsel in form and
substance reasonably satisfactory to AmPaM and (2) any such employee agrees
with AmPaM in writing to be bound by the restrictions set forth in this Section
15.1 or (G) the sale by such Stockholder in an IPO of shares of AmPaM Stock
representing not more than 10% of the Aggregate Consideration in cash;
provided,
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however, that in no circumstance will a Stockholder be entitled to sell shares
of AmPaM Stock in an IPO to the extent that the sale of such shares by such
Stockholder would result in such Stockholder receiving in excess of 45% of the
Aggregate Consideration in cash; and, provided further, if AmPaM is advised in
writing in good faith by any managing underwriter of an underwritten offering
of the securities being offered pursuant to any registration statement under
Section 17.1 that the number of shares to be sold by persons other than AmPaM
is greater than the number of such shares which can be offered without
adversely affecting the success of the offering, AmPaM may reduce pro rata
(among the Stockholders and all other selling security holders in the offering)
the number of shares offered for the accounts of such persons (based upon the
number of shares held by such person) to a number deemed satisfactory by such
managing underwriter. During the Restricted Period, the certificates evidencing
the AmPaM Stock or AmPaM Notes delivered to the Stockholders pursuant to
Section 3 of this Agreement will bear a legend substantially in the form set
forth below:
THE [SHARES/NOTES] REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE
TERMS OF THE ACQUISITION AGREEMENT PURSUANT TO WHICH SUCH SHARES WERE ISSUED,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, PLEDGE OR OTHER DISPOSITION PRIOR TO EXPIRATION
OF THE RESTRICTED PERIOD REFERRED TO IN THE ACQUISITION AGREEMENT EXCEPT IN
ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT. SUCH RESTRICTIONS ON TRANSFER ARE
SET FORTH IN AN ACQUISITION AGREEMENT, A COPY OF WHICH IS MAINTAINED AT THE
PRINCIPAL OFFICES OF THE ISSUER. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 TRANSFER RESTRICTIONS RELATING TO ADDITIONAL CONSIDERATION. No
Stockholder shall (i) sell, assign, exchange, transfer, pledge, or otherwise
dispose of any right to receive any consideration pursuant to Section II of
Annex I to this Agreement (the "Additional Consideration Right") or any
securities convertible into, exchangeable or exercisable for any Additional
Consideration Right, (ii) grant any option to purchase, or otherwise enter into
any contract to sell, assign, transfer, pledge or otherwise dispose of, any
Additional Consideration Right, or (iii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of any Additional
Consideration Right, whether any such swap or transaction is to be settled by
delivery of shares of AmPaM Stock or other securities, by the delivery or
payment of cash or otherwise.
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16. FEDERAL SECURITIES ACT REPRESENTATIONS
16.1 COMPLIANCE WITH LAW. Each Stockholder acknowledges that the
shares of AmPaM Stock, the Additional Consideration Right and any AmPaM Notes
to be delivered to such Stockholder pursuant to this Agreement have not been
and will not be registered under the 1933 Act (except as provided in Section 17
hereof) and therefore may not be sold, assigned, exchanged, transferred,
pledged or otherwise disposed of without compliance with the 1933 Act which,
among other matters, would require registration under the 1933 Act unless
exemption from the registration requirements is available for such transaction.
The AmPaM Stock, the Additional Consideration Right and any AmPaM Notes to be
acquired by each Stockholder pursuant to this Agreement is being acquired
solely for such Stockholder's own account, for investment purposes only, and
with no present intention of selling, assigning, exchanging, transferring,
pledging, or otherwise disposing of it. Each Stockholder covenants, warrants
and represents that neither the shares of AmPaM Stock, the Additional
Consideration Right nor any AmPaM Notes issued to such Stockholder will be
offered, sold, assigned, exchanged, pledged, transferred or otherwise disposed
of except after full compliance with all of the applicable provisions of the
1933 Act and the rules and regulations of the SEC. All certificates
representing the AmPaM Stock shall bear the following legend in addition to the
legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each Stockholder is able to bear
the economic risk of an investment in the AmPaM Stock and AmPaM Notes to be
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment. Each Stockholder has substantial knowledge and experience in
making investment decisions of this type (or is relying on qualified purchaser
representatives with such knowledge and experience in making this decision),
and is capable, either individually or with such purchaser representatives, of
evaluating the merits and risks of this investment. Each Stockholder has had an
adequate opportunity to ask questions and receive answers from the officers of
AmPaM concerning any and all matters relating to the transactions described
herein including, without limitation, the background and experience of the
current and proposed officers and directors of AmPaM, the plans for the
operations of the business of AmPaM, the business, operations and financial
condition of the Founding Companies other than the Company, and any plans for
additional acquisitions. Each Stockholder has asked any and all questions of
the nature described in the preceding sentence and all questions have been
answered to such Stockholder's satisfaction. Except as set forth on Schedule
16.2, each Stockholder is an "accredited investor" as defined in Rule 501(a) of
the 1933 Act. Neither the foregoing nor any investigation made by the
Stockholders referred to above shall in any way affect the representations,
warranties, covenants and agreements of AmPaM made herein except to the extent
that AmPaM is relying upon the representations of the Stockholders in Section
16.1 and in this Section 16.2 for purposes of
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AmPaM's representations and warranties in Sections 6.9, 6.11, 6.15 and 6.17
hereof as specified therein.
16.3 RELIANCE BY AmPaM. Each Stockholder acknowledges that AmPaM in
relying upon the representations and covenants of such Stockholder set forth in
Section 16.1 and Section 16.2 for purposes of compliance by AmPaM with Federal
and state securities laws related to the issuance of AmPaM Stock pursuant to
this Agreement and the Other Agreements.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. Whenever AmPaM proposes to
register any AmPaM Stock for its own or other's account under the 1933 Act for
a public offering, other than (i) any shelf or other registration of shares to
be used as consideration for acquisitions of additional businesses by AmPaM and
(ii) registrations relating to employee benefit plans, AmPaM shall give each of
the Stockholders prompt written notice of its intent to do so. Upon the written
request of any of the Stockholders given within 15 calendar days after receipt
of such notice, notwithstanding the provisions of Section 15 (except as
specified below with respect to an IPO), AmPaM shall cause to be included in
such registration all of the AmPaM Stock issued to such Stockholders pursuant
to this Agreement (including any stock issued as or issuable upon the
conversion or exchange of any convertible security, warrant, right or other
security which is issued by AmPaM as a stock split, dividend or other
distribution with respect to, or in exchange for, or in replacement of such
AmPaM Stock) which any such Stockholder requests, other than shares of AmPaM
Stock which may then be immediately sold under Rule 144(k) (or any similar or
successor provision) promulgated under the 1933 Act, and other than shares of
AmPaM Stock that have been theretofore sold by the Stockholder in accordance
with the 1933 Act, provided that AmPaM shall have the right to reduce pro rata
the number of shares of each selling Stockholder included in such registration
to the extent that inclusion of such shares would, in the written opinion of
tax counsel to AmPaM or its independent auditors, jeopardize the status of the
transactions contemplated hereby and by the Private Placement Memorandum as a
tax-free organization under Section 351 of the Code; provided, however, that
with respect to a proposal by AmPaM to register AmPaM Stock under the 1933 Act
in connection with an IPO, no Stockholder shall be permitted pursuant to this
Section 17.1 to have included in such registration more shares of AmPaM Stock
than permitted to be sold by such Stockholder pursuant to Section 15.1. In
addition, if AmPaM is advised in writing in good faith by any managing
underwriter of an underwritten offering of the securities being offered
pursuant to any registration statement under this Section 17.1 that the number
of shares to be sold by persons other than AmPaM is greater than the number of
such shares which can be offered without adversely affecting the success of the
offering, AmPaM may reduce pro rata (among the Stockholders and all other
selling security holders in the offering) the number of shares offered for the
accounts of such persons (based upon the number of shares held by such person)
to a number deemed satisfactory by such managing underwriter. If any
Stockholder disapproves of the terms of the underwriting, that Stockholder may
elect to withdraw therefrom by written notice to AmPaM and the managing
underwriter. That Stockholder's shares of AmPaM Stock so withdrawn shall also
be withdrawn from registration; provided, however, that, if by the withdrawal
of such shares a greater number of shares of AmPaM
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Stock held by other Stockholders may be included in such registration, then
AmPaM shall offer to all other Stockholders of AmPaM the right to include
additional shares in the same proportion used in effecting the above
limitations. AmPaM shall not, for a period of two years following the Closing
Date, grant to any other person any rights to cause AmPaM to register any
securities in priority over, or in precedent to, the rights granted to the
Stockholders hereunder and to the stockholders of the Other Founding Companies
pursuant to Section 17 of the Other Agreements.
17.2 REGISTRATION PROCEDURES. Whenever AmPaM is required to register
shares of AmPaM Stock pursuant to Section 17.1, AmPaM will, as expeditiously as
possible:
(i) Prepare and file with the SEC a registration statement
with respect to such shares and use its best efforts to cause such
registration statement to become effective (provided that before
filing a registration statement or prospectus or any amendments or
supplements or term sheets thereto, AmPaM will furnish a
representative of the Stockholders with copies of all such documents
proposed to be filed) as promptly as practical;
(ii) Notify the Stockholders of any stop order issued or
threatened by the SEC and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered;
(iii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 120 days, cause the
prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the 1933
Act; and comply with the provisions of the 1933 Act applicable to it
with respect to the disposition of all securities covered by such
registration statement during the applicable period in accordance with
the intended methods of disposition by the sellers thereof set forth
in such registration statement or supplement to the prospectus;
(iv) Furnish to each Stockholder who so requests such number
of copies of such registration statement, each amendment and
supplement thereto and the prospectus included in such registration
statement (including each preliminary prospectus and any term sheet
associated therewith), and such other documents as such Stockholder
may reasonably request in order to facilitate the disposition of the
relevant shares;
(v) Make "generally available to its security holders"
(within the meaning of Rule 158) an earnings statement satisfying the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder no
later than 90 days after the end of the 12-month period beginning with
the first day of AmPaM's first fiscal quarter commencing after the
effective date of the registration statement;
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(vi) Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement
at the earliest possible moment;
(vii) If requested by the managing underwriter or
underwriters, if any, or any participating Stockholder, promptly
incorporate in a prospectus supplement or post-effective amendment
such information as the managing underwriter or underwriters or any
participating Stockholder, as the case may be, reasonably requests to
be included therein, including, without limitation, information with
respect to the number of shares of AmPaM Stock being sold by
participating Stockholders to any underwriter or underwriters, the
purchase price being paid therefor by such underwriter or underwriters
and with respect to any other terms of an underwritten offering of the
shares of AmPaM Stock to be sold in such offering, and promptly make
all required filings of such prospectus by supplement or
post-effective amendment;
(viii) Make available for inspection by participating
Stockholders, any underwriter participating in any disposition
pursuant to such registration statement, and the counsel retained by
the participating Stockholders, counsel for the underwriters and any
accountant or other agent retained by participating Stockholders or
any such underwriter (collectively, the "Inspectors"), all financial
and other records, pertinent corporate documents and properties of
AmPaM (the "Records"), as shall be reasonably necessary to enable them
to exercise their due diligence responsibility, and cause AmPaM's
officers, directors and employees to supply all information reasonably
requested by any such Inspectors in connection with such registration
statement; provided, that records which AmPaM determines, in good
faith, to be confidential and which AmPaM notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or (ii) the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction after delivery of
sufficient notice to AmPaM to enable AmPaM to contest such subpoena or
order;
(ix) Take all other steps reasonably necessary to effect the
registration of the shares of AmPaM Stock contemplated hereby;
(x) Use its best efforts to register or qualify the
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as shall be
reasonably requested by the Stockholders, and to keep such
registration or qualification effective during the period such
registration statement is required to be kept effective, provided that
AmPaM shall not be required to become subject to taxation, to qualify
generally to do business or to file a general consent to service of
process in any such states or jurisdictions;
(xi) Cause all such shares of AmPaM Stock to be listed or
included not later than the date of the first sale of shares of AmPaM
Stock under such registration statement on any
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securities exchanges or trading systems on which similar securities
issued by AmPaM are then listed or included; and
(xii) Notify each Stockholder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within
the period that AmPaM is required to keep the registration statement
effective of the happening of any event as a result of which the
prospectus included in such registration statement (as then in
effect), together with any associated term sheet, contains an untrue
statement of a material fact or omits to state any fact required to be
stated therein or necessary to make the statements therein (in the
case of the prospectus or any preliminary prospectus, in light of the
circumstances under which they were made) not misleading, and, at the
request of such Stockholder, AmPaM promptly will prepare a supplement
or amendment to such prospectus so that, as thereafter delivered to
the purchasers of the covered shares, such prospectus will not contain
an untrue statement of material fact or omit to state any fact
required to be stated therein or necessary to make the statements
therein (in the case of the prospectus or any preliminary prospectus,
in light of the circumstances under which they were made) not
misleading.
All expenses incurred in connection with the registration under this
Article 17 and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printer and
accounting fees, but excluding underwriting commissions and discounts), shall
be borne by AmPaM.
17.3 INDEMNIFICATION.
(a) In connection with any registration under Section 17.1,
AmPaM shall indemnify, to the extent permitted by law, each selling Stockholder
(an "Indemnified Party") against all losses, claims, damages, liabilities and
expenses arising out of or resulting from any untrue or alleged untrue
statement of material fact contained or incorporated by reference in any
registration statement, prospectus or preliminary prospectus or associated term
sheet or any omission or alleged omission to state or incorporated by reference
therein a material fact required to be stated or incorporated by reference
therein or necessary to make the statements therein not misleading except
insofar as the same are caused by or contained in or omitted from any
information furnished in writing to AmPaM by such Indemnified Party expressly
for use therein or by any Indemnified Parties' failure to deliver a copy of the
registration statement or prospectus or any amendment or supplements thereto
after AmPaM has furnished such Indemnified Party with a sufficient number of
copies of the same.
(b) In connection with any registration under Section 17.1,
each selling Stockholder shall furnish to AmPaM in writing such information
concerning the Stockholder and his or her proposed offering of shares as is
reasonably requested by AmPaM for use in any such registration statement or
prospectus and will indemnify, to the extent permitted by law, AmPaM, its
directors and officers and each person who controls AmPaM (within the meaning
of the 1933 Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged
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untrue statement of a material fact or any omission or alleged omission to
state therein a material fact required to be stated in the registration
statement or prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein not misleading, but only to the extent
that such untrue or alleged untrue statement or omission or alleged omission is
contained in or omitted from information so furnished in writing to AmPaM by
such Stockholder expressly for use in the registration statement.
Notwithstanding the foregoing, the liability of a Stockholder under this
Section 17.3 shall be limited to an amount equal to the net proceeds actually
received by such Stockholder from the sale of the relevant shares covered by
the registration statement.
(c) Any person entitled to indemnification hereunder will (i)
give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) unless in such indemnified parties'
reasonable judgment, a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. Any failure to give prompt notice shall
deprive a party of its right to indemnification hereunder only to the extent
that such failure shall have adversely affected the indemnifying party. If the
defense of any claim is assumed, the indemnifying party will not be subject to
any liability for any settlement made without its consent (but such consent
shall not be unreasonably withheld). An indemnifying party that is not entitled
or elects not, to assume the defense of a claim, will not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party, a conflict of interest may exist between
such indemnified party and any other of such indemnified parties with respect
to such claim.
17.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 17.1 covering an underwritten registered offering, (i)
each participating Stockholder shall execute and deliver to AmPaM a written
power of attorney instrument that (A) appoints an officer of AmPaM as such
Stockholder's attorney-in-fact for purposes of executing and delivering an
underwriting agreement among AmPaM, the underwriters named therein and such
Stockholder specifying the terms and conditions applicable to the sale of AmPaM
Stock of such Stockholder in such offering and (B) otherwise is in such form
and containing such provisions as are customary in the securities business for
such an arrangement in connection with an underwritten registered offering in
which one or more stockholders of the issuer are participants, including a
provision that authorizes the attorney-in-fact appointed by such Stockholder to
execute and deliver such an underwriting agreement in the event that the net
price per share to be received by such Stockholder from the sale of the shares
of AmPaM Stock to be sold in such offering is not less than a price specified
in such instrument and (iii) AmPaM and each participating Stockholder agree to
enter into a written agreement with the managing underwriters in such form and
containing such provisions as are customary in the securities business for such
an arrangement between such managing underwriters and companies of AmPaM's size
and investment stature, including indemnification; provided, however, that (A)
such Stockholder shall be exempt and excluded from any indemnification of the
managing underwriters other than with respect to information provided by such
Stockholder with respect to such Stockholder to AmPaM or the managing
underwriters
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specifically for inclusion in any such registration statement and (B) such
Stockholder shall not be obligated to enter into such an underwriting agreement
in the event that the net price per share to be received by such Stockholder
from the sale of shares of AmPaM Stock to be sold in such offering is less than
the floor price specified in the power of attorney instrument executed and
delivered to AmPaM pursuant to clause (i) above.
17.5 TRANSFER OF RIGHTS. The right to cause AmPaM to register shares
of AmPaM Stock under this Agreement may be assigned to a transferee or assignee
of any Stockholder to the extent that such transferee or assignee is a member
of the immediate family of a Stockholder, a trust, limited partnership or other
estate planning entity for the benefit of any such persons or a charitable
organization that qualifies for receipt of charitable contributions under
Section 170(c) of the Code.
17.6 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC that may permit the sale of AmPaM
stock to the public without registration, following an IPO AmPaM agrees to use
its reasonable efforts, from and after the completion of an IPO, to:
(i) make and keep public information regarding AmPaM
available as those terms are understood and defined in Rule 144 under
the 1933 Act beginning 90 days following the effective date of a
registration statement relating to an IPO;
(ii) file with the SEC in a timely manner all reports and
other documents required of AmPaM under the 1933 Act and the 1934 Act
at any time after it has become subject to such reporting
requirements; and
(iii) so long as a Stockholder owns any restricted AmPaM
Stock, furnish to each Stockholder forthwith upon written request a
written statement by AmPaM as to its compliance with the current
public information requirements of Rule 144 (at any time from and
after 90 days following the effective date of a registration statement
relating to an IPO), and of the 1933 Act and the 1934 Act (any time
after it has become subject to such reporting requirements), a copy of
the most recent annual or quarterly report of AmPaM, and such other
reports and documents so filed as a Stockholder may reasonably request
in availing itself of any rule or regulation of the SEC allowing a
Stockholder to sell any such shares without registration.
18. REDEMPTION OF AMPAM STOCK
18.1 REDEMPTION TRIGGER. In the event that, within three years of the
Closing Date, (i) AmPaM has not consummated an IPO and (ii) any Stockholder has
not received cash (including proceeds from the public or private sale of AmPaM
Stock received as consideration hereunder and the receipt of principal
payments, if any, made with respect to AmPaM Notes held by such Stockholder)
equal to or exceeding 50% of the Aggregate Consideration on or prior to the
third anniversary of the Closing Date, such Stockholder shall have the right
(the "Put Right"), but not the
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obligation, commencing on the third anniversary date of the Closing Date to
require AmPaM to purchase a number of shares of AmPaM Stock then owned by such
Stockholder, subject to the limitations set forth in Section 18.2 below. The
purchase price for such redemption shall be $13.00 per share, such price to be
subject to appropriate adjustment to reflect any reclassification, stock
dividend, subdivision, split-up or combination of shares of AmPaM Stock after
the date hereof.
18.2 MINIMUM REDEMPTION; LIMITATIONS. If the events specified in
Section 18.1(i) and 18.1(ii), with Section 18.1(ii) being determined on an
individual Stockholder basis, have not occurred within the time specified,
AmPaM shall be obligated to purchase from each eligible Stockholder no less
than 10% of the AmPaM Stock held by such Stockholder annually; provided,
however, that the Stockholders shall not be entitled to exercise their Put
Rights if and to the extent the Company has not achieved the Target Net Income
(as defined in Annex I hereto) for the year preceding the year in which a
Stockholder seeks to exercise his Put Right. The redemptions will be funded by
internal cash flows or alternative financing arrangements but AmPaM's
obligation to make any redemption pursuant to this Section 18 will be subject
to the covenants and restrictions contained in AmPaM's then existing private or
public debt or equity instruments.
18.3 NOTICE; EXERCISE. The Stockholders may exercise their Put Right
by giving written notice (the "Put Notice") to AmPaM within thirty (30) days of
the third anniversary of the execution hereof. If any Stockholder does not
provide AmPaM with a Put Notice within such thirty-day period, the Put Right
applicable to such Stockholder shall expire. The date for closing the sale of
any shares of AmPaM Stock pursuant to a proper exercise of a Put Right shall in
no event be earlier than 90 days after the date AmPaM receives the Put Notice.
Any such closing shall be at such time of day and place as shall be mutually
agreed between such holder and AmPaM. At such closing AmPaM shall make payment
for the AmPaM Stock to be repurchased by wire transfer of immediately available
funds to a bank account designated by such Stockholder for such purpose and
such Stockholder shall deliver to AmPaM certificates, duly endorsed for
transfer, representing the shares of AmPaM Stock to be purchased and sold
pursuant to the exercise of such Put Right.
18.4 ADDITIONAL REDEMPTIONS. In the event AmPaM has not consummated an
IPO and notwithstanding the foregoing, to the extent the Stockholders who have
received greater than 50% of their Aggregate Consideration in cash wish to
tender AmPaM Stock to AmPaM for purchase, AmPaM will use its commercially
reasonable efforts to continue to repurchase up to 10% of the AmPaM Stock held
by such Stockholder annually.
18.5 TERMINATION OF REDEMPTION OBLIGATION. Put Rights with respect to
any individual Stockholder will terminate upon receipt by such Stockholder of
50% of his Aggregate Consideration in cash; such termination will not, however,
limit such Stockholders ability to participate in the additional redemptions
provided in Section 18.4. Notwithstanding the foregoing, all of AmPaM's
redemption obligations contained in this Section 18 shall terminate on the
earlier to occur of (i) an IPO, (ii) any sale of all or substantially all of
AmPaM's assets in one transaction or series of transactions, (iii) any merger
or consolidation which involves AmPaM and in which AmPaM is not the surviving
entity or (iv) any transaction after which the shares of AmPaM Common Stock, if
any,
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which are then held by persons other than the holders of AmPaM Common Stock as
of the Closing Date constitute 50% or more of AmPaM Common Stock outstanding as
of the date of the consummation of such transaction.
19. GENERAL
19.1 COOPERATION. The Company, Stockholders and AmPaM shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The Company will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the Company cooperate
with AmPaM on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law and except as
provided in Section 17.5) and shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of AmPaM and the Company, and the
heirs, successors and legal representatives of the Stockholders.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the
Stockholders, the Company and AmPaM and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the Stockholders, the Company and AmPaM,
acting through their respective officers or trustees, duly authorized by their
respective Boards of Directors. Any disclosure made on any Schedule delivered
pursuant hereto shall be deemed to have been disclosed for purposes of any
other Schedule required hereby, provided that the Company shall make a good
faith effort to cross reference disclosure, as necessary or advisable, between
related Schedules.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in
two (2) or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument. A
telecopied facsimile of an executed counterpart of this Agreement shall be
sufficient to evidence the binding agreement of each party to the terms hereof.
However, each party agrees to return to the other parties an original, duly
executed counterpart of this Agreement promptly after delivery of a telecopied
facsimile thereof.
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19.5 BROKERS AND AGENT. Except as disclosed on Schedule 18.5, each
party hereto represents and warrants that it employed no broker or agent in
connection with this transaction and agrees to indemnify the other parties
hereto against all loss, cost, damages or expense arising out of claims for
fees or commission of brokers employed or alleged to have been employed by such
indemnifying party.
19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, AmPaM will pay the reasonable fees, expenses and
disbursements of AmPaM and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto, including all costs and expenses incurred in the
performance and compliance with all conditions to be performed by AmPaM under
this Agreement, including the fees and expenses of Arthur Andersen LLP, Andrews
& Kurth L.L.P., and any other person or entity retained by AmPaM, and the costs
of preparing the Private Placement Memorandum incurred in connection with the
subject matter of this Agreement and any amendments thereto. In addition,
whether or not the transactions contemplated herein shall be consummated, AmPaM
will pay the reasonable fees and expenses of Bracewell & Patterson LLP incurred
on behalf of the Company and the Stockholders in connection with the subject
matter of this Agreement. Whether or not the transactions herein contemplated
shall be consummated, the Company will pay all of its costs and expenses
incurred on behalf of the Company and the Stockholders in connection with the
subject matter of this Agreement except that (i) the Company shall not be
required to pay any of the costs, fees and expenses specified above as to which
AmPaM is responsible for the payment thereof and (ii) neither the Company nor
the Stockholders shall be responsible for the payment of the costs, fees and
expenses incurred by or on behalf of AmPaM. Whether or not the transactions
herein contemplated shall be consummated, AmPaM shall reimburse Sterling City
Capital, LLC (or any person or entity which is an Affiliate thereof) for any of
the foregoing fees, expenses and disbursements paid by Sterling City Capital,
LLC (or any person or entity which is an Affiliate thereof) and shall repay
Sterling City Capital, LLC (or any person or entity which is an Affiliate
thereof) for any loans or advances made by Sterling City Capital, LLC (or any
person or entity which is an Affiliate thereof) for the purpose of providing
AmPaM funds to pay any such fees, expenses and disbursements, provided that
such reimbursement and loan repayment obligation shall be limited to the
foregoing fees, expenses, and disbursements which are out-of-pocket expenses of
AmPaM, Sterling City Capital, LLC or any person or entity which is an Affiliate
thereof. Sterling City Capital, LLC shall be reimbursed by AmPaM in the form of
AmPaM Notes. AmPaM retains the right, within a reasonable period following the
Closing Date, to conduct an audit of the expenses for which Sterling City
Capital, LLC is reimbursed. Each Stockholder shall pay all sales, use,
transfer, real property transfer, recording, gains, stock transfer and other
similar taxes and fees ("Transfer Taxes") imposed in connection with the
purchase and sale of the Company Stock, other than Transfer Taxes, if any,
imposed by the State of Delaware. Each Stockholder shall file all necessary
documentation and Returns with respect to such Transfer Taxes. In addition,
each Stockholder acknowledges that he, and not the Company or AmPaM, will pay
all Taxes due by him upon receipt of the consideration payable pursuant to
Section 1 hereof. The Stockholders acknowledge that the risks of the
transactions contemplated hereby include Tax risks, with respect to which the
Stockholders are relying substantially on the opinion contemplated by Section
8.12 hereof and representations by AmPaM in this Agreement.
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19.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the
same in person or via a nationally recognized courier service to an officer or
agent of such party.
(a) If to AmPaM addressed to it at:
American Plumbing & Mechanical, Inc.
515 Post Oak Blvd., Suite 450
Houston, Texas 77027
Attention: Chief Executive Officer
with copies to:
Thomas P. Mason
Andrews & Kurth L.L.P.
4200 Chase Tower
Houston, Texas 77002
(b) If to the Stockholders, addressed to them at their addresses set
forth on the signature pages hereto, with copies to:
Bob Hart
Clark, Partington & Hart
125 W. Romana St., Suite 800
Pensacola, Florida 32501
(c) If to the Company, addressed to it at:
Gilbert Nelson
Nelson Mechanical Contractors, Inc.
211 E. Brent
Pensacola, Florida 32503
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
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19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Texas, excluding any conflicts of law, rule or
principle that might refer same to the laws of another jurisdiction.
19.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated
hereby and any examination on behalf of the parties until the respective
Expiration Dates referred to herein with respect thereto or, if no Expiration
Date is applicable with respect thereto, until the expiration of all applicable
statute of limitations periods.
19.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or
of any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.11 TIME. Time is of the essence with respect to this Agreement.
19.12 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.
19.13 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
19.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived only
with the written consent of AmPaM, the Company and Stockholders who would
receive a majority of the Aggregate Consideration specified in Section I of
Annex I to this Agreement if the transactions contemplated hereby were
consummated. Any amendment or waiver effected in accordance with this Section
19.15 shall be binding upon each of the parties hereto, any other person
receiving AmPaM Stock in connection with the purchase and sale of the Company
Stock and each future holder of such AmPaM Stock. Any
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consent of the Stockholders who would receive a majority of the Aggregate
Consideration pursuant to Section I of Annex I of this Agreement if the
transactions contemplated hereby were consummated shall be deemed to be the
consent of the Stockholders for purposes of provisions of this Agreement as to
which a consent of the Stockholders may be requested or required.
19.16 MEDIATION AND ARBITRATION. If a dispute arises out of or relates
to this Agreement, or the breach thereof, and if said dispute cannot be settled
through direct discussions, the parties agree to first endeavor to settle the
dispute in an amicable manner by mediation administered by the American
Arbitration Association under its then prevailing Commercial Mediation Rules,
before resorting to arbitration. Thereafter, any unresolved controversy or
claim arising out of or relating to this Agreement, or the breach thereof,
shall be settled by arbitration administered by the American Arbitration
Association in accordance with its then prevailing Commercial Arbitration
Rules. The enforcement, interpretation and procedural and substantive effect of
the obligation to arbitrate created by this Section 19.16 shall be governed by
the Federal Arbitration Act as amended from time to time, 9 U.S.C. Section 1 et
seq. The parties hereby disclaim any intention to have the substantive or
procedural law of any state or other jurisdiction, other than the law of the
United States as embodied in the Federal Arbitration Act, applied to such
obligation. Any such mediation or arbitration proceeding will be conducted in
Houston, Texas.
19.17 INFORMATION PROVIDED FOR PRIVATE PLACEMENT MEMORANDUM. For
purposes of this Agreement, the information provided by the Company in writing
specifically for inclusion in the Private Placement Memorandum shall include
solely (i) the Financial Statements (in the form that they appear in the
Private Placement Memorandum), (ii) any financial statements provided to AmPaM
pursuant to Section 7.9, (iii) the description of the Company contained in the
Private Placement Memorandum under the caption "The Company", (iv) the
description of the Company's results of operations and its liquidity and
capital resources, if any, contained in the Private Placement Memorandum under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and (v) the description, if any, of matters related to
the Company contained in the Private Placement Memorandum under the caption
"Certain Transactions Transactions involving Certain Officers, Directors and
Stockholders". For purposes of this Agreement, the information provided by a
Stockholder in writing specifically for inclusion in the Private Placement
Memorandum shall include only (i) the description, if any, of matters related
to such Stockholder contained in the Private Placement Memorandum under the
caption "Certain Transactions - Transactions involving Certain Officers,
Directors and Stockholders" and (ii) the biographical description of such
Stockholder, if any, contained in the Private Placement Memorandum under the
caption "Management."
19.18 EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective upon (i) the execution and delivery of this Agreement by all of the
parties hereto and (ii) the delivery to AmPaM of each Employment Agreement
attached hereto as Annex VI-1 executed by each of the Company, the employees
named therein and AmPaM.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AMERICAN PLUMBING & MECHANICAL, INC.
By: /s/ DAVID BAGGETT
-------------------------------------
Name: David Baggett
-----------------------------------
Title: Chief Financial Officer
----------------------------------
NELSON MECHANICAL CONTRACTORS, INC.
By: /s/ GILBERT NELSON
-------------------------------------
Gilbert Nelson
President
[Remainder of page intentionally left blank]
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STOCKHOLDERS: SPOUSES (WITHOUT PERSONAL LIABILITY AND
SOLELY TO ACKNOWLEDGE THE SALE OF THE
COMPANY STOCK BY THE STOCKHOLDER):
/s/ GILBERT NELSON /s/ THERESA B. NELSON
- ----------------------------------- -----------------------------------------
Gilbert Nelson Theresa B. Nelson
6076 Forest Green Road
Pensacola, Florida 32505
/s/ JOHN GILBERT NELSON
- -----------------------------------
John Gilbert Nelson
208 Sixth Street
Atlanta, Georgia 30308
/s/ MICHAEL ALAN NELSON
- -----------------------------------
Michael Alan Nelson
204 Sixth Street
Atlanta, Georgia 30308
/s/ JAN ELIZABETH NELSON
- -----------------------------------
Jan Elizabeth Nelson
6076 Forest Green Road
Pensacola, Florida 32505
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EXHIBIT 10.9
Execution Copy
- --------------------------------------------------------------------------------
ACQUISITION AGREEMENT
dated as of the 11th day of February, 1999
by and among
AMERICAN PLUMBING & MECHANICAL, INC.
MILLER MECHANICAL CONTRACTORS, INC.
and
all of the STOCKHOLDERS of
MILLER MECHANICAL CONTRACTORS, INC.
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
<TABLE>
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Page
<S> <C> <C> <C>
RECITALS ...........................................................................................1
1. ACQUISITION OF STOCK.......................................................................5
1.1 Acquisition.......................................................................5
1.2 Consideration.....................................................................5
1.3 Certain Information With Respect to the Capital Stock of the Company
and AmPaM.........................................................................5
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY.............................................5
2.1 Board of Directors................................................................5
2.2 Officers..........................................................................5
3. DELIVERY OF CONSIDERATION..................................................................6
3.1 Stockholders' Consideration.......................................................6
3.2 Stockholders' Deliveries..........................................................6
4. CLOSING....................................................................................6
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............................................6
5.1 Due Organization..................................................................7
5.2 Authorization.....................................................................7
5.3 Capital Stock of the Company......................................................7
5.4 Transactions in Capital Stock.....................................................8
5.5 No Bonus Shares...................................................................8
5.6 Subsidiaries; Ownership in Other Entities.........................................8
5.7 Predecessor Status; etc...........................................................8
5.8 Spin-off by the Company...........................................................8
5.9 Financial Statements..............................................................8
5.10 Liabilities and Obligations.......................................................9
5.11 Accounts and Notes Receivable....................................................10
5.12 Licenses; Intellectual Property..................................................10
5.13 Environmental Matters............................................................11
5.14 Personal Property................................................................13
5.15 Significant Customers; Material Contracts and Commitments........................13
5.16 Real Property....................................................................14
5.17 Insurance........................................................................14
5.18 Compensation; Employment Agreements; Labor Matters...............................15
5.19 Employee Plans...................................................................15
5.20 Compliance with ERISA............................................................16
5.21 Conformity with Law; Litigation..................................................17
</TABLE>
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<TABLE>
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5.22 Taxes.........................................................................17
5.23 No Violations; No Consent Required, Etc.......................................18
5.24 Government Contracts..........................................................19
5.25 Absence of Changes............................................................19
5.26 Deposit Accounts; Powers of Attorney..........................................21
5.27 Validity of Obligations.......................................................21
5.28 Relations with Governments....................................................21
5.29 Disclosure....................................................................21
5.30 No Warranties or Insurance....................................................21
5.31 Interest in Customers and Suppliers and Related Party Transactions............22
5.32 Private Placement Memorandum..................................................22
5.33 Authority; Ownership..........................................................22
5.34 Preemptive Rights.............................................................23
5.35 No Commitment to Dispose of AmPaM Stock.......................................23
5.36 Disclosure....................................................................23
6. REPRESENTATIONS OF AmPaM...............................................................23
6.1 Due Organization..............................................................24
6.2 Authorization.................................................................24
6.3 Capital Stock of AmPaM........................................................24
6.4 Transactions in Capital Stock.................................................24
6.5 Subsidiaries..................................................................25
6.6 Financial Statements..........................................................25
6.7 Liabilities and Obligations...................................................25
6.8 Conformity with Law; Litigation...............................................25
6.9 No Violations.................................................................26
6.10 Validity of Obligations.......................................................27
6.11 AmPaM Stock...................................................................27
6.12 AmPaM Notes...................................................................28
6.13 No Side Agreements............................................................28
6.14 Business; Real Property; Material Agreements..................................28
6.15 Relations with Governments....................................................28
6.16 Disclosure....................................................................29
6.17 Other Agreements..............................................................29
7. COVENANTS PRIOR TO CLOSING.............................................................29
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate................29
7.2 Conduct of Business Pending Closing...........................................30
7.3 Prohibited Activities.........................................................31
7.4 No Shop.......................................................................32
7.5 Agreements....................................................................32
7.6 Notification of Certain Matters...............................................32
7.7 Amendment of Schedules........................................................33
7.8 Further Assurances............................................................33
7.9 Authorized Capital............................................................33
</TABLE>
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<TABLE>
<S> <C> <C> <C>
7.10 Compliance with the Hart-Scott Act...........................................................33
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
AND COMPANY...........................................................................................34
8.1 Representations and Warranties; Performance of Obligations...................................34
8.2 Satisfaction.................................................................................34
8.3 No Litigation................................................................................34
8.4 Opinion of Counsel...........................................................................34
8.5 Consents and Approvals.......................................................................34
8.6 Good Standing Certificates...................................................................35
8.7 No Material Adverse Change...................................................................35
8.8 Secretary's Certificate......................................................................35
8.9 Tax Matters..................................................................................35
8.10 Other Founding Companies.....................................................................35
8.11 Company Release of Stockholders..............................................................35
8.12 Sterling City Capital Transfer Restrictions..................................................36
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AmPaM..........................................................36
9.1 Representations and Warranties; Performance and Obligations..................................36
9.2 No Litigation................................................................................36
9.3 Secretary's Certificate......................................................................36
9.4 No Material Adverse Effect...................................................................37
9.5 Stockholders' Release........................................................................37
9.6 Satisfaction.................................................................................37
9.7 Termination of Related Party Agreements......................................................37
9.8 Opinion of Counsel...........................................................................37
9.9 Consents and Approvals.......................................................................37
9.10 Good Standing Certificates...................................................................38
9.11 Funding Availability.........................................................................38
9.12 FIRPTA Certificate...........................................................................38
9.13 Resignations of Directors and Officers.......................................................38
10. COVENANTS OF AMPAM AND THE STOCKHOLDERS AFTER CLOSING.................................................38
10.1 Release From Guarantees; Repayment of Certain Obligations....................................38
10.2 Preservation of Tax and Accounting Treatment.................................................39
10.3 Preparation and Filing of Tax Returns; Payment of Taxes......................................39
10.4 Directors....................................................................................40
10.5 Legal Opinions...............................................................................40
11. INDEMNIFICATION.......................................................................................40
11.1 General Indemnification by the Stockholders..................................................40
11.2 Indemnification by AmPaM.....................................................................41
11.3 Third Person Claims..........................................................................42
11.4 Exclusive Remedy.............................................................................43
11.5 Limitations on Indemnification...............................................................44
</TABLE>
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<TABLE>
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12. TERMINATION OF AGREEMENT..................................................................................45
12.1 Termination......................................................................................45
12.2 Procedure and Effect of Termination..............................................................45
13. NONCOMPETITION............................................................................................46
13.1 Prohibited Activities............................................................................46
13.2 Damages..........................................................................................47
13.3 Reasonable Restraint.............................................................................47
13.4 Severability; Reformation........................................................................47
13.5 Independent Covenant.............................................................................48
13.6 Materiality......................................................................................48
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.................................................................48
14.1 Stockholders.....................................................................................48
14.2 AmPaM............................................................................................49
14.3 Damages..........................................................................................49
14.4 Survival.........................................................................................49
14.5 Return of Information............................................................................50
15. TRANSFER RESTRICTIONS.....................................................................................50
15.1 Transfer Restrictions Relating to AmPaM Stock and AmPaM Notes....................................50
15.2 Transfer Restrictions Relating to Additional Consideration.......................................51
16. FEDERAL SECURITIES ACT REPRESENTATIONS....................................................................52
16.1 Compliance with Law..............................................................................52
16.2 Economic Risk; Sophistication....................................................................52
16.3 Reliance by AmPaM................................................................................53
17. REGISTRATION RIGHTS.......................................................................................53
17.1 Piggyback Registration Rights....................................................................53
17.2 Registration Procedures..........................................................................54
17.3 Indemnification..................................................................................56
17.4 Underwriting Agreement...........................................................................57
17.5 Transfer of Rights...............................................................................58
17.6 Rule 144 Reporting...............................................................................58
18. REDEMPTION OF AmPaM STOCK.................................................................................58
18.1 Redemption Trigger...............................................................................58
18.2 Minimum Redemption; Limitations..................................................................59
18.3 Notice; Exercise.................................................................................59
18.4 Additional Redemptions...........................................................................59
18.5 Termination of Redemption Obligation.............................................................59
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C> <C> <C>
19. GENERAL........................................................................................60
19.1 Cooperation...........................................................................60
19.2 Successors and Assigns................................................................60
19.3 Entire Agreement......................................................................60
19.4 Counterparts..........................................................................60
19.5 Brokers and Agent.....................................................................61
19.6 Expenses..............................................................................61
19.7 Notices...............................................................................62
19.8 Governing Law.........................................................................62
19.9 Survival of Representations and Warranties............................................62
19.10 Exercise of Rights and Remedies.......................................................63
19.11 Time..................................................................................63
19.12 Reformation and Severability..........................................................63
19.13 Remedies Cumulative...................................................................63
19.14 Captions..............................................................................63
19.15 Amendments and Waivers................................................................63
19.16 Mediation and Arbitration.............................................................63
19.17 Information Provided for Private Placement Memorandum.................................64
19.18 Effective Date of Agreement...........................................................64
</TABLE>
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<PAGE> 7
ANNEXES
Annex I - Consideration to Be Paid to Stockholders
Annex II - Amended and Restated Certificate of Incorporation and
By-Laws of AmPaM
Annex III - Form of Opinion of Counsel to AmPaM
Annex IV - Form of Tax Opinion
Annex V - Form of Opinion of Counsel to Company and Stockholders
Annex VI-1 - Form of Employment Agreement
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<PAGE> 8
SCHEDULES
2.1 Board of Directors
2.2 Officers
5.1 Due Organization
5.2 Authorization
5.3 Capital Stock of the Company
5.4 Transactions in Capital Stock; Organization Accounting
5.5 No Bonus Shares
5.6 Subsidiaries; Ownership in Other Entities
5.7 Predecessor Status; etc
5.8 Spin-off by the Company
5.9 Financial Statements
5.10 Liabilities and Obligations
5.11 Accounts and Notes Receivable
5.12 Licenses; Intellectual Property (Schedules 5.12(a)(1), 5.12(a)(2),
5.12(b)(1) and 5.12(b)(2))
5.13 Environmental Matters
5.14 Personal Property
5.15 Significant Customers; Material Contracts and Commitments (Schedules
5.15(a), 5.15(b) and 5.15 (c))
5.16 Real Property
5.17 Insurance
5.18 Compensation; Employment Agreements; Labor Matters
5.19 Employee Plans
5.20 Compliance with ERISA
5.21 Conformity with Law; Litigation
5.22 Taxes (Schedules 5.22(a) and 5.22(b))
5.23 No Violations, No Consents Required, Etc. (Schedules 5.23(a), 5.23(b),
5.23(c) and 5.23(e))
5.24 Government Contracts
5.25 Absence of Changes
5.26 Deposit Accounts; Powers of Attorney
5.30 No Warranties or Insurance
5.31 Interest in Customers and Suppliers and Related Party Transactions
5.33 Authority; Ownership (Schedules 5.33(a) and 5.33(b))
6.9 No Violations
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate
7.2 Conduct of Business Pending Closing
7.3 Prohibited Activities
7.5 Agreements
8.11 Employment Agreements
9.7 Termination of Related Party Agreements
10.1 Release From Guarantees; Repayment of Certain Obligations
16.2 Non-accredited Investors
18.5 Brokers and Agents
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<PAGE> 9
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made as of the 11th
day of February, 1999 by and among AMERICAN PLUMBING & MECHANICAL, INC., a
Delaware corporation ("AmPaM"), MILLER MECHANICAL CONTRACTORS, INC. a Georgia
corporation (the "Company"), and the stockholders listed on the signature pages
of this Agreement (the "Stockholders"), which are all the stockholders of the
Company.
RECITALS
WHEREAS, the Company is engaged in the plumbing and mechanical
services business;
WHEREAS, as of the date hereof, the Stockholders own, and as of the
Closing Date the Stockholders will own, all of the issued and outstanding
capital stock of the Company (the "Company Stock");
WHEREAS, AmPaM is entering into other separate agreements
simultaneously with this Agreement that are substantially the same as this
Agreement (the "Other Agreements"), each of which is entitled "Acquisition
Agreement," with each of the Other Founding Companies (as defined herein) and
their respective stockholders in order for AmPaM to acquire additional
companies engaged in the plumbing and mechanical services business;
WHEREAS, this Agreement and the Other Agreements constitute the "AmPaM
Plan of Organization;"
WHEREAS, the Stockholders and the boards of directors and the
stockholders of AmPaM, and each of the Other Founding Companies that are
parties to the Other Agreements, have approved and adopted the AmPaM Plan of
Organization as an integrated plan pursuant to which the Stockholders and the
stockholders of each of the other Founding Companies will contribute the
capital stock of each of the Founding Companies to AmPaM, and the Stockholders
and the stockholders of each of the other Founding Companies will acquire the
stock of AmPaM (but not cash or other property) as a tax-free transfer of
property under Section 351 of the Code;
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Stockholders have approved this
Agreement as part of the AmPaM Plan of Organization in order to transfer all of
the issued and outstanding capital stock of the Company to AmPaM; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
<PAGE> 10
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule attached hereto and not otherwise defined shall
have the following meanings for all purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"Acquired Party" means the Company, any subsidiary of the Company and
any member of a Relevant Group.
"Affiliates" means with respect to any person or entity, any other
person or entity that directly or indirectly, controls, is controlled by, or is
under common control with such person or entity.
"AmPaM" has the meaning set forth in the first paragraph of this
Agreement.
"AmPaM Charter Documents" has the meaning set forth in Section 6.1.
"AmPaM Plan of Organization" has the meaning set forth in the recitals
of this Agreement.
"AmPaM Stock" means the common stock, par value $.01 per share, of
AmPaM.
"AmPaM Notes" means those notes issued by AmPaM to the Stockholders as
a portion of the consideration to be received hereunder and in substantially
the form to Annex I as Appendix A.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" has the meaning set forth in the recitals of this
Agreement.
"Delaware GCL" means the General Corporation Law of the State of
Delaware.
"Environmental Laws" has the meaning set forth in Section 5.13(b).
"Expiration Date" has the meaning set forth in Section 5(A) and
Section 6, as applicable.
2
<PAGE> 11
"Founding Companies" means the following companies:
Christianson Enterprises, Inc., a Texas corporation;
Christianson Services, Inc., a Texas corporation;
GGR Leasing Corporation, a Texas corporation;
J.A. Croson Company of Florida, a Florida corporation;
J.A. Croson Company, an Ohio corporation;
Franklin Fire Sprinkler Company, an Ohio corporation;
Keith Riggs Plumbing, Inc., an Arizona corporation;
Miller Mechanical Contractors, Inc., a Georgia corporation;
Nelson Mechanical Contractors, Inc., a Florida corporation;
Power Plumbing Inc., a Delaware corporation;
R.C.R. Plumbing, Inc., a California corporation;
Sherwood Mechanical, Inc., a California corporation; and
Teepe's River City Mechanical, Inc., an Ohio corporation.
"GAAP" means generally accepted accounting principles as consistently
applied in the United States.
"Hart-Scott Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Hazardous Substance" has the meaning set forth in Section 5.13(c).
"IPO" means a firm commitment underwritten initial public offering of
AmPaM Stock managed by one or more nationally recognized national investment
banking firms.
"known" or "knowledge," when used in reference to a statement
regarding the existence or absence of facts in this Agreement, is intended by
the parties to mean that the only information to be attributed to such person
is information actually known to (a) the person in the case of an individual,
(b) in the case of a corporation or other entity other than the Company, an
officer or director of such corporation or entity or (c) in the case of the
Company and its Subsidiaries, an officer of the Company listed on Schedule 2.2
hereto, except for David Baggett.
"Material Adverse Change" means a material adverse change in the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Documents" has the meaning set forth in Section 5.23.
3
<PAGE> 12
"Ordinary Course of Business" means the ordinary course of business
consistent with past customs and practice (including with respect to quantity
and frequency).
"Other Agreements" has the meaning set forth in the recitals of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Plans" has the meaning set forth in Section 5.19.
"Private Placement Memorandum" means the Private Placement Memorandum,
dated as of February 11, 1999, provided to each Stockholder prior to the
execution and delivery of this Agreement which sets forth certain information
relating to the transactions contemplated by this Agreement and the Other
Agreements.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Relevant Group" means the Company and any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a member.
"Restricted Common Stock" has the meaning set forth in Section
1.3(ii).
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"State of Incorporation" means the State of Georgia.
"Stockholders" has the meaning set forth in the first paragraph of
this Agreement.
"Subsidiaries" means with respect to a person or entity, any
corporation or other entity in which such person or entity owns a 5% or greater
ownership interest.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, withholding, employment, excise, property, deed, stamp,
alternative or add-on minimum, or other taxes, assessments, duties, fees,
levies or other governmental charges, whether disputed or not, together with
any interest, penalties, additions to tax or additional amounts with respect
thereto.
4
<PAGE> 13
1. ACQUISITION OF STOCK
1.1 ACQUISITION. Upon the terms and subject to the conditions
contained in this Agreement and in reliance upon the representations,
warranties, covenants and agreements contained in this Agreement, on the
Closing Date, the Stockholders shall convey and transfer to AmPaM all of the
issued and outstanding shares of Company Stock as set forth in Annex I hereto.
1.2 CONSIDERATION. The consideration for the Company Stock shall be as
set forth on Annex I to this Agreement.
1.3 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY AND AMPAM. The respective designations and numbers of outstanding
shares and voting rights of each class of outstanding capital stock of the
Company and AmPaM as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
outstanding Company Stock is as set forth on Schedule 5.3 hereto; and
(ii) immediately prior to the Closing Date, the authorized capital
stock of AmPaM will consist of (A) 100,000,000 shares of AmPaM Stock,
of which the number of issued and outstanding shares will be set forth
in the Private Placement Memorandum, (B) 10,000,000 shares of
redeemable preferred stock, of which the number of issued and
outstanding shares will be set forth in the Private Placement
Memorandum, and (C) 5,000,000 shares of Restricted Voting Common
Stock, $.01 per value (the "Restricted Common Stock"), all of which
will be issued and outstanding except as otherwise set forth in the
Private Placement Memorandum.
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY
2.1 BOARD OF DIRECTORS. The Company and the Stockholders shall take
action, including solicitation of resignation of directors, necessary so that
the Board of Directors of the Company as of the Closing Date shall consist only
of the persons identified on Schedule 2.1 hereto.
2.2 OFFICERS. The Company and the Stockholders shall take action,
including solicitation of resignation of officers, necessary so that the
officers of the Company as of the Closing Date shall consist only of the
persons identified on Schedule 2.2 hereto.
5
<PAGE> 14
3. DELIVERY OF CONSIDERATION
3.1 STOCKHOLDERS' CONSIDERATION. On the Closing Date, the Stockholders
shall, upon surrender of certificates evidencing the Company Stock, receive
from AmPaM the respective number of shares of AmPaM Stock, the amount of cash
and the principal amount of AmPaM Notes described on Annex I hereto specified
with respect to each such Stockholder as payable on the Closing Date. All
payments of cash shall be made by certified check or wire transfer of
immediately available funds. Consideration in consisting of AmPaM Notes shall
be substantially in the form of Appendix A to Annex I.
3.2 STOCKHOLDERS' DELIVERIES. The Stockholders shall deliver at the
Closing the certificates representing Company Stock, duly endorsed in blank by
the Stockholders, or accompanied by blank stock powers, and with all necessary
transfer tax and other revenue stamps, acquired at the Stockholders' expense,
affixed and canceled. The Stockholders agree promptly to cure any deficiencies
with respect to the endorsement of the stock certificates or other documents of
conveyance with respect to such Company Stock or with respect to the stock
powers accompanying any Company Stock.
4. CLOSING
The consummation of the transactions contemplated by Section 3 (the
"Closing") shall take place on March 31, 1999 or such date not later than May
31, 1999 as AmPaM shall determine by giving written notice of such other date
as provided in Section 18.7 (the "Closing Date") at the offices of Andrews &
Kurth L.L.P., 4200 Chase Tower, 600 Travis, Houston, Texas 77002.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the disclosure schedules attached hereto and
except as otherwise qualified below, the Company represents and warrants that
all of the following representations and warranties in this Section 5(A) are
true at the date of this Agreement and, subject to Section 7.7 hereto, shall be
true at the time of the Closing, and that such representations and warranties
shall survive the Closing Date for a period of eighteen months (the last day of
such period being the "Expiration Date"), except that the representations and
warranties set forth in Sections 5.3, 5.22 and 5.32 hereof shall survive until
such time as the applicable statute of limitations period has run, which shall
be deemed to be the Expiration Date for the representations and warranties set
forth in Sections 5.3, 5.22 and 5.32. For purposes of this Section 5, the term
"Company" shall mean and refer to the Company and all of its Subsidiaries, if
any, and any reference to a Material Adverse Effect on the Company or Material
Adverse Change with respect to the Company shall mean the Company and its
Subsidiaries, taken as a whole. Except as expressly set forth in this
Agreement, the Company expressly disclaims any representation or warranty
(express, implied or otherwise) relating to the Company and any Subsidiary
thereof including, without limitation, any warranty of merchantability or
fitness for a particular purpose.
6
<PAGE> 15
5.1 DUE ORGANIZATION. The Company is a corporation duly incorporated
and organized, validly existing and in good standing under the laws of the
State of Incorporation, and has the requisite power and authority to carry on
its business as it is now being conducted. The Company is duly qualified or
authorized to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or authorization necessary except where the failure to be so
qualified or authorized to do business would not have a Material Adverse Effect
on the Company. Schedule 5.1 sets forth a list of all states in which the
Company is authorized or qualified to do business, which list indicates which
of such entities is authorized or qualified to do business in such states.
True, complete and correct copies of the Certificate or Articles of
Incorporation and By-laws, each as amended, of the Company (the "Charter
Documents") are all attached to Schedule 5.1. The Company has delivered to
AmPaM complete and correct copies of (i) the stock records of the Company and
(ii) all minutes of meetings, written consents and other evidence, if any, of
deliberations of or actions taken by the Company's Board of Directors, any
committees of the Board of Directors and stockholders during the last five
years.
5.2 AUTHORIZATION. (i) The officers or other representatives of the
Company executing this Agreement have the authority to enter into and bind the
Company to the terms of this Agreement and (ii) the Company has the full legal
right, power and authority to enter into this Agreement and consummate the
transactions contemplated hereby. Copies of the most recent resolutions adopted
by the Board of Directors of the Company and the most recent resolutions
adopted by the Stockholders, which approve this Agreement and the transactions
contemplated hereby in all respects, certified by the Secretary or an Assistant
Secretary of the Company as being in full force and effect on the date hereof,
are attached hereto as Schedule 5.2.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company and each of its Subsidiaries is as set forth on Schedule 5.3(a). All of
the issued and outstanding shares of the capital stock of the Company are owned
by the Stockholders in the amounts set forth in Schedule 5.3(a). Except as set
forth on Schedule 5.3(a), all of the issued and outstanding capital stock of
each Subsidiary is owned by the Company. All of the issued and outstanding
shares of the capital stock of the Company have been duly authorized and
validly issued, are fully paid and nonassessable, are owned of record by the
Stockholders and further, such shares were offered, issued, sold and delivered
by the Company in compliance with all applicable state and Federal laws
concerning the issuance of securities. Further, none of such shares were issued
in violation of any preemptive rights of any past or present stockholder.
7
<PAGE> 16
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule
5.4(a), the Company has not acquired or redeemed any shares of capital stock of
the Company since January 1, 1996. Except as set forth on Schedule 5.4(b), (i)
no option, warrant, call, conversion right or commitment of any kind exists
which obligates the Company to issue any of its authorized but unissued capital
stock; (ii) the Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof; and (iii) neither the voting stock structure of the Company nor the
relative ownership of shares among any of its Stockholders has been altered or
changed in contemplation of the AmPaM Plan of Organization. There are no voting
trusts, proxies or other agreements or understandings to which the Company is a
party or is bound with respect to the voting of any shares of capital stock of
the Company.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses in
contemplation of the AmPaM Plan of Organization.
5.6 SUBSIDIARIES; OWNERSHIP IN OTHER ENTITIES. Except as set forth on
Schedule 5.6(a), the Company has no Subsidiaries. Except as set forth in
Schedule 5.6(b), the Company does not presently own, of record or beneficially,
or control, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any corporation, association
or business entity nor is the Company, directly or indirectly, a participant in
any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7(a) is a list of
all predecessor companies of the Company, including the names of any entities
acquired by the Company (by stock purchase, merger or otherwise) or owned by
the Company or from whom the Company previously acquired material assets, in
any case, from the earliest date upon which any Stockholder acquired his or her
stock in any Company. Except as disclosed on Schedule 5.7(b), the Company has
not been, within such period of time, a subsidiary or division of another
corporation or a part of an acquisition which was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8,
there has not been any sale, spin-off or split-up of material assets of either
the Company or any other person or entity that is an Affiliate of the Company
since January 1, 1996.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 is a copy
of:
(i) the balance sheet of the Company as of September 30, 1997 and
the related statements of operations, stockholders' equity and cash
flows for the one-year period ended September 30, 1997, together with
the related notes and schedules (such balance sheets, the related
statements of operations, stockholders' equity and cash flows and the
related notes and schedules are referred to herein as the "Year-end
Financial Statements");
8
<PAGE> 17
(ii) the balance sheet of the Company as of June 30, 1998 and the
related statements of operations, stockholders' equity and cash flows
for the nine-month periods ended June 30, 1997 and 1998, together with
the related notes and schedules (such balance sheets, the related
statements of operations, stockholders' equity and cash flows and the
related notes and schedules are referred to herein as the "Nine-Month
Interim Financial Statements");
(iii) the balance sheet of the Company as of September 30, 1998
(the "Balance Sheet Date") and the related statements of operations,
stockholders' equity and cash flows for the twelve-month periods ended
September 30, 1997 and 1998 (such balance sheets, the related
statements of operations, stockholders' equity and cash flows are
referred to herein as the "Twelve-Month Interim Financial
Statements"); and
(iv) the income statement of the Company for the 12-month period
ended June 30, 1998 (the "Valuation Income Statement").
The Year-end Financial Statements, the Nine-Month Interim Financial Statements,
the Twelve-Month Interim Financial Statements and the Valuation Income
Statement are collectively called the "Financial Statements". The Financial
Statements, including those included in the Private Placement Memorandum, have
been prepared in accordance with GAAP applied on a consistent basis and fairly
present the financial position of the Company as of the dates thereof and the
results of its operations and changes in financial position for the periods
then ended, subject, in the case of the Nine-Month Interim Financial Statements
and the Twelve-Month Interim Financial Statements, to normal year-end audit
adjustments and any other adjustments described therein and the absence of
certain footnote disclosures.
5.10 LIABILITIES AND OBLIGATIONS. Schedule 5.10(a) sets forth an
accurate list as of the Balance Sheet Date of (i) all material liabilities of
the Company which are not reflected on the balance sheet of the Company at the
Balance Sheet Date or otherwise reflected in the Company Financial Statements
at the Balance Sheet Date which by their nature would be required in accordance
with GAAP to be reflected in the balance sheet, and (ii) all loan agreements,
indemnity or guaranty agreements, bonds, mortgages, pledges or other security
agreements to which the Company is a party or by which its properties may be
bound other than bid bonds and performance bonds made in the Ordinary Course of
Business. Except as set forth on Schedule 5.10(b), since the Balance Sheet
Date, the Company has not incurred any material liabilities or obligations of
any kind, character or description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, other than liabilities incurred in the
Ordinary Course of Business. The Company has also delivered to AmPaM, on
Schedule 5.10(c), a list of contingent liabilities related to pending
litigation or litigation that has been threatened in writing, or other material
liabilities which are not fixed or otherwise accrued or reserved. For each such
contingent liability of the Company or liability of the Company for which the
amount is not fixed or is contested, the Company has provided to AmPaM the
following information:
9
<PAGE> 18
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation in the possession of
the Company or its directors, officers or stockholders
relating thereto;
(b) amounts claimed and any other action or relief sought;
and
(c) name of claimant and all other parties to the claim, suit
or proceeding;
(ii) the name of each court or agency before which such claim,
suit or proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith estimate of the maximum amount, if any, which
the Company expects, based on information available, is likely to
become payable with respect to each such liability and the amount, if
any, accrued or reserved for each such potential liability on the
Financial Statements.
AmPaM acknowledges that all estimates referred to above and set forth on
Schedule 5.10(c) are only good faith estimates, and that the Company and the
Stockholders expressly do not represent or warrant that the actual amounts of
such liabilities will be equal to, or more or less than, the amounts of such
estimates.
5.11 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.11(a) sets forth an
accurate list, in all material respects, of the accounts and notes receivable
of the Company, as of the Balance Sheet Date, including any such amounts which
are not reflected in the balance sheet as of the Balance Sheet Date, and
including all receivables from and advances to employees and the Stockholders,
which are identified as such. Schedule 5.11(a) also sets forth a materially
accurate aging of all accounts and notes receivable as of the Balance Sheet
Date showing amounts due in 30-day aging categories. Except to the extent
reflected on Schedule 5.11(b), such accounts, notes and other receivables are
collectible in the amounts shown on Schedule 5.11(a), net of reserves reflected
in the balance sheet as of the Balance Sheet Date.
5.12 LICENSES; INTELLECTUAL PROPERTY. (a) The Company or its employees
hold all licenses, franchises, permits and other governmental authorizations
("Licenses") necessary to conduct the business of the Company, the absence of
which would cause a Material Adverse Effect on the Company, and the Company has
delivered to AmPaM a list that is accurate, in all material respects, and
summary description (which is set forth on Schedule 5.12(a)(1)) of all such
Licenses. At or prior to the Closing, all such Licenses owned or held by any
employee of the Company will be assigned or licensed to the Company for no
additional consideration. The Licenses listed on Schedule 5.12(a)(1) are valid,
and the Company has not received any notice that any person intends to cancel,
terminate or not renew any such License. The Company has conducted and is
conducting its business in compliance in all material respects with the
requirements, standards, criteria and
10
<PAGE> 19
conditions set forth in the Licenses listed on Schedule 5.12(a)(1) and is not
in violation of any of the foregoing in any material respect. Except as
specifically provided in Schedule 5.12(a)(2), the consummation by the Company
of the transactions contemplated by this Agreement will not result in a default
under or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such Licenses.
(b) The Company owns or possesses adequate licenses or other rights to
use (without making any payment or granting rights to any person in exchange)
all patents, patent applications, trademarks, copyrights, service marks and
trade names (collectively, the "Intellectual Property") necessary to conduct
its business as currently conducted. A description of any Intellectual Property
licensed by the Company, including the material terms of any such license, is
described on Schedule 5.12(b)(1). Neither the validity of the Intellectual
Property nor the title thereto or use thereof by the Company is being
questioned in any pending litigation, and the conduct of the Company's
business, as currently conducted, does not conflict with licenses, copyrights,
uncopyrighted works, trade marks, service marks, trade names, trade name
rights, patents, patent rights, unpatented inventions or trade secrets of
others. Neither the validity of the Intellectual Property nor the title thereto
or use thereof by the Company is being questioned in any pending or, to the
knowledge of the Company, threatened infringement claims or litigation, and the
conduct of the Company's business, as now conducted, does not conflict with
licenses, copyrights, uncopyrighted works, trade marks, service marks, trade
names, trade name rights, patents, patent rights, unpatented inventions or
trade secrets of others. Except as specifically provided in Schedule
5.12(b)(2), the consummation by the Company of the transactions contemplated by
this Agreement will not adversely affect the rights and benefits afforded to
the Company by any such Intellectual Property.
5.13 ENVIRONMENTAL MATTERS. (a) Except as set forth in Schedule 5.13
attached hereto, (i) the Company has conducted its businesses in compliance in
all material respects with all applicable Environmental Laws, including,
without limitation, having all environmental permits, licenses and other
approvals and authorizations necessary for the operation of its business as
presently conducted, except where the failure to have such permit, license,
approval or authorization would not have a Material Adverse Effect on the
Company, (ii) none of the properties owned by the Company contain any Hazardous
Substance as a result of any activity of the Company in amounts exceeding the
levels permitted by applicable Environmental Laws, except where amounts in
excess of such levels would not have a Material Adverse Effect on the Company,
(iii) the Company has not received any notices, demand letters or requests for
information from any Federal, state, local or foreign governmental entity or
third party indicating that the Company may be in violation of, or liable
under, any Environmental Law in connection with the ownership or operation of
its business, (iv) there are no civil, criminal or administrative actions,
suits, demands, claims, hearings, investigations or proceedings pending or, to
the knowledge of the Company, threatened, against the Company relating to any
violation, or alleged violation, of any Environmental Law, except where such
violation would not have a Material Adverse Effect on the Company, (v) no
reports have been filed, or are required to be filed, by the Company concerning
the release of any Hazardous Substance or the threatened or actual violation of
any Environmental Law, (vi) no Hazardous Substance has
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been disposed of, released or transported in violation of any applicable
Environmental Law from any properties owned by the Company as a result of any
activity of the Company during the time such properties were owned, leased or
operated by the Company, (vii) there have been no environmental investigations,
studies, audits, tests, reviews or other analyses regarding compliance or
non-compliance with any applicable Environmental Law conducted by or which are
in the possession of the Company relating to the activities of the Company
which are not listed on Schedule 5.13 attached hereto prior to the date hereof,
(viii) to the knowledge of the Company, (A) there are no underground storage
tanks on, in or under any properties owned by the Company and (B) no
underground storage tanks have been closed or removed from any of such
properties during the time such properties were owned, leased or operated by
the Company which are not listed on Schedule 5.13, (ix) to the knowledge of the
Company, (A) there is no asbestos or asbestos-containing material present in
any material quantity in any of the properties owned by the Company, and (B) no
asbestos has been removed from any of such properties during the time such
properties were owned, leased or operated by the Company, and (x) neither the
Company nor any of its properties are subject to any material liabilities or
expenditures (fixed or contingent) relating to any suit, settlement, court
order, administrative order, regulatory requirement, judgment or claim asserted
or arising under any Environmental Law.
(b) As used herein, "Environmental Law" means, as of the Closing Date,
any Federal, state, local or foreign law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, order, judgment,
decree, injunction or agreement with any governmental entity to which the
Company is a party or subject relating to (x) the protection, preservation or
restoration of the environment (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface land,
subsurface land, plant and animal life or any other natural resource) or to
human health or safety or (y) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Hazardous Substances, in each case as
amended and as in effect on the Closing Date. The term Environmental Law
includes, without limitation, (i) the Federal Comprehensive Environmental
Response Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic
Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act,
the Federal Occupational Safety and Health Act of 1970, each as amended and as
in effect on the Closing Date, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such as
negligence, nuisance, trespass and strict liability) that may impose liability
or obligations for injuries or damages due to, or threatened as a result of,
the presence of, effects of or exposure to any Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance
presently listed, defined, designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated, under any Environmental Law.
Hazardous Substance includes any substance to which exposure is regulated by
any government authority or any Environmental Law including, without
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limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material, asbestos or
asbestos-containing material, urea formaldehyde foam insulation, lead or
polychlorinated biphenyls.
5.14 PERSONAL PROPERTY. The Company has delivered to AmPaM an accurate
list (which is set forth on Schedule 5.14(a)) of (x) all personal property
material to the operations of the Company as of the Balance Sheet Date included
in "plant, property and equipment" on the balance sheet of the Company as of
such date, (y) all other items of personal property owned by the Company with
an individual value in excess of $15,000 (i) as of the Balance Sheet Date and
(ii) acquired since the Balance Sheet Date and (z) all material leases and
agreements in respect of personal property, including, in the case of each of
(x), (y) and (z), (1) true, complete and correct copies of all such leases and
(2) an indication as to which assets are currently owned, or were formerly
owned, by Stockholders, relatives of Stockholders, or Affiliates of the
Company. Except as set forth on Schedule 5.14(b), (i) all personal property
material to, and used by, the Company in its business is either owned by the
Company or leased by the Company pursuant to a lease included on Schedule
5.14(a), (ii) all of the personal property listed on Schedule 5.14(a) or
replacement property thereof is in working order and condition, ordinary wear
and tear excepted and (iii) all leases and agreements included on Schedule
5.14(a) are in full force and effect and constitute valid and binding
agreements of the Company, in each case in accordance with their respective
terms.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
(a) The Company has delivered to AmPaM a materially accurate list
(which is set forth on Schedule 5.15(a)(1)) of all customers (persons or
entities) representing 5% or more of the Company's annual revenues for any
period covered by any of the Financial Statements. Except to the extent set
forth on Schedule 5.15(a)(2), none of such customers has canceled or, to the
knowledge of the Company, are currently threatening to cancel a currently
effective contract with the Company.
(b) The Company has listed on Schedule 5.15(b) all material contracts,
commitments and similar agreements to which the Company is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with customers listed on Schedule 5.15(a), joint venture or partnership
agreements, contracts with any labor organizations, strategic alliances and
options to purchase land), other than agreements listed on Schedules 5.10(a),
Schedule 5.14(a) or Schedule 5.16(a), (a) in existence as of the Balance Sheet
Date and (b) entered into since the Balance Sheet Date, and in each case has
delivered or made available to AmPaM true, complete and correct copies of such
agreements. For purposes of the preceding sentence, a contract, commitment or
similar agreement is "material" if it (i) has a term of more than one year
(other than contracts, commitments or agreements that are cancelable without
liability or penalty within 30 days of notice from the Company of cancellation
or that can be terminated by the Company without material penalty upon notice
of 30 days or less) or (ii) requires the payment by or to the Company of more
than $100,000 during any 12-month period. Except for expenditures in the
ordinary course of
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business, the Company has also indicated on Schedule 5.15(b) a summary
description of all plans or projects involving the opening of new operations,
expansion of existing operations, or the acquisition of any personal property,
business or assets requiring, in any event, the payment of more than $50,000 by
the Company during any 12-month period.
(c) Except as set forth on Schedule 5.15(c), the Company is not
required to provide any bonding or other financial security arrangements in any
material amount in connection with any contract listed on Schedule 5.15(b).
5.16 REAL PROPERTY. Schedule 5.16(a) includes a list of all real
property owned or leased by the Company at the date hereof and all other real
property, if any, used by the Company in the conduct of its business. The
Company has good and insurable title to any real property owned by it that is
shown on Schedule 5.16(a), other than property intended to be sold or
distributed prior to the Closing Date as provided in Section 7.1(c) of this
Agreement, and all real property so owned is subject to no mortgage, pledge,
lien, conditional sales agreement, encumbrance, lease, possessory rights of
third parties or charge, except for:
(i) liens reflected on Schedule 5.10(a) or Schedule 5.16(b) as
securing specified liabilities (with respect to which no material
default by the Company exists);
(ii) liens for current taxes not yet payable and assessments not
in default;
(iii) easements for utilities serving the property; and
(iv) easements, covenants and restrictions and other exceptions to
title which do not adversely affect the current use of the property.
Copies of all leases and agreements in respect of such real property
leased by the Company, which are true, complete and correct in all material
respects, are attached to Schedule 5.16(a), and an indication as to which such
properties, if any, are currently owned, or were formerly owned, by
Stockholders or Affiliates of the Company or Stockholders is included in
Schedule 5.16(a). Except as set forth on Schedule 5.16(b), all of such leases
included on Schedule 5.16(a) are, as to the Company, in full force and effect
and constitute valid and binding agreements of the Company in accordance with
their respective terms.
5.17 INSURANCE. The Company has delivered to AmPaM (i) an accurate
list as of the Balance Sheet Date of all insurance policies carried by the
Company and (ii) an accurate list of all insurance loss runs or workers
compensation claims received for the past three policy years (which lists are
set forth on Schedule 5.17). The Company has also delivered or made available
to AmPaM true, complete and correct copies of all insurance policies currently
in effect that are referred in Schedule 5.17. Such insurance policies evidence
all of the insurance the Company is required to carry pursuant to all of its
contracts and other agreements and pursuant to all applicable laws. All of such
insurance policies are currently in full force and effect except as stated in
Schedule 5.17.
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Since January 1, 1996, no insurance carried by the Company has been canceled by
the insurer and the Company has not been denied coverage under any such policy.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; LABOR MATTERS.
(a) The Company has delivered to AmPaM an accurate list (which is set
forth on Schedule 5.18(a)(1)) showing all officers, directors and key employees
of the Company, listing all employment agreements with such officers, directors
and key employees and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of each of
such persons as of (i) the Balance Sheet Date and (ii) the date hereof. The
Company has provided to AmPaM true, complete and correct copies of any
employment agreements for persons listed on Schedule 5.18(a)(1). Since the
Balance Sheet Date, except as disclosed on Schedule 5.18(a)(2), there have been
no increases in the compensation payable or any bonuses to any officer,
director, key employee or other employee, except ordinary salary increases
implemented on a basis consistent with past practices and except for bonuses
paid on a basis consistent with past practices.
(b) Except as set forth on Schedule 5.18(b), (i) the Company is not
bound by or subject to (and none of its assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) to the knowledge of the
Company, no campaign to establish such arrangement is in progress and (iii)
there is no pending or, to the Company's knowledge, threatened labor dispute
involving the Company and any group of its employees nor has the Company
experienced any labor interruptions over the past three years. The Company
believes its relationship with employees to be generally good.
(c) Except as set forth in Schedule 5.18(c) attached hereto, (i) there
are no claims, actions or proceedings pending or, to the knowledge of the
Company, threatened between the Company and any of its employees, (ii) the
Company has complied in all material respects with all laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, and (iii) the Company has not received written
notice from any person asserting that the Company is liable in any material
amount for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing.
5.19 EMPLOYEE PLANS. The Company has delivered to AmPaM accurate
schedule (Schedule 5.19(a)) showing all employee benefit plans of the Company,
including all employment agreements and other agreements or arrangements
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of
such plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date and as of the date of
this Agreement. Except for the employee benefit plans, if any, described on
Schedule 5.19(a), the Company does not sponsor, maintain or contribute to any
plan program, fund or arrangement that constitutes an "employee pension benefit
plan", and neither the Company nor any Subsidiary has any obligation to
contribute to or accrue or
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pay any benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan" (within the meaning of Section 3(36) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or any non-qualified
deferred compensation arrangement). For the purposes of this Agreement, the
term "employee pension benefit plan" shall have the same meaning as is given
that term in Section 3(2) of ERISA. The Company has not sponsored, maintained
or contributed to any employee pension benefit plan other than the plans set
forth on Schedule 5.19(a), and, except as described on Schedule 5.19(b), the
Company is not or could not be required to contribute to any retirement plan
pursuant to the provisions of any collective bargaining agreement establishing
the terms and conditions or employment of any of the Company's employees.
Except as set forth on Schedule 5.19(c), the Company is not now, or
will not as a result of its past activities become, liable to the Pension
Benefit Guaranty Corporation or to any multiemployer employee pension benefit
plan under the provisions of Title IV of ERISA.
All employee benefit plans listed on Schedule 5.19(a) and the
administration thereof are in compliance in all material respects with their
terms and all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable federal, state and local
statutes, ordinances and regulations.
All accrued contribution obligations of the Company as of the Balance
Sheet Date with respect to any plan listed on Schedule 5.19(a) have either been
fulfilled in their entirety or are fully reflected on the balance sheet of the
Company as of the Balance Sheet Date.
5.20 COMPLIANCE WITH ERISA. All plans listed on Schedule 5.19(a) that
are intended to qualify under Section 401 (a) of the Code (the "Qualified
Plans") are, and have been so qualified and have been determined by the
Internal Revenue Service to be so qualified, and copies of such determination
letters are attached to Schedule 5.19(a). Except as disclosed on Schedule 5.20,
all reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries (including, but not
limited to, actuarial reports, audits or tax returns) since January 1, 1992
have been timely filed or distributed, and copies thereof have been made
available to AmPaM. No such plan listed on Schedule 5.19(a) nor the Company has
engaged in any transaction prohibited under the provisions of Section 4975 of
the Code or Section 406 of ERISA. No such Plan listed on Schedule 5.19(a) has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(l) of ERISA; and the Company has not incurred any
liability for excise tax or penalty due to the Internal Revenue Service nor any
liability to the Pension Benefit Guaranty Corporation. The Company further
represents that except as set forth on Schedule 5.20 hereto:
(i) there have been no terminations, partial terminations or
discontinuations of contributions to any Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and
approval by the Internal Revenue Service;
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(ii) no plan listed on Schedule 5.19(a) subject to the provisions
of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed
in Schedule 5.19(a);
(iv) the Company (including any Subsidiaries) has not incurred
liability under Section 4062 of ERISA; and
(v) no circumstances exist pursuant to which the Company could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to any multiemployer plan or the PBGC under
Title IV of ERISA or to the Internal Revenue Service for any excise
tax or penalty, or being subject to any statutory lien to secure
payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the
Company that is, or at any time was, a member of a "controlled group"
(as defined in Section 412(n)(6)(B) of the Code) that includes the
Company.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth
on Schedule 5.21 or Schedule 5.13, the Company has not violated within the five
years prior to the date of this Agreement and is not currently in violation of
any law or regulation or any order of any court or Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it other than violations that would
not have a Material Adverse Effect on the Company; and except to the extent set
forth on Schedule 5.10(c) or Schedule 5.13, there are no claims, actions, suits
or proceedings, pending or, to the knowledge of the Company, threatened in
writing against the Company, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over the Company and no written
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received by the Company, and to the knowledge of the Company there is
no valid basis for any such claim, action, suit or proceeding that could
reasonably be expected to have a Material Adverse Effect on the Company.
5.22 TAXES. The Company has timely filed all requisite Federal, state
and other Tax Returns or extension requests for all fiscal periods ended on or
before the Balance Sheet Date; and except as set forth on Schedule 5.22(a),
there are no examinations in progress or claims pending against the Company for
federal, state and other Taxes (including penalties and interest) for any
period or periods prior to and including the Balance Sheet Date and no notice
of any claim for Taxes, whether pending or threatened, has been received. All
Tax, including interest and penalties (whether or not shown on any Tax Return),
due by the Company has been paid. The amounts shown as accruals for Taxes on
the Financial Statements are sufficient for the payment of all Taxes of the
kinds indicated (including penalties and interest) for all fiscal periods ended
on or before the date of the respective Financial Statements. Copies of (i) any
tax examinations, (ii) extensions of statutory limitations and (iii) the
federal and local income Tax Returns and franchise Tax Returns of Company for
their last three (3) fiscal years, or such shorter period of time as any of
them shall
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have existed, are attached hereto as Schedule 5.22(a) or have otherwise been
delivered to AmPaM. The Company has a taxable year ended September 30.. Except
as set forth on Schedule 5.22(a), the Company uses the accrual method of
accounting for income tax purposes, and the Company's methods of accounting
have not changed in any material respect in the past five years (except as
required to conform to changes in GAAP). The Company is not an investment
company as defined in Section 351(e)(1) of the Code. The Company is not and has
not during the last five years been a party to any tax sharing agreement or
agreement of similar effect. Except as set forth on Schedule 5.22(a), the
Company is not and has not during the last five years been a member of any
consolidated group for federal tax purposes. The Company has not received, been
denied, or applied for any private letter ruling from the IRS during the last
ten years.
5.23 NO VIOLATIONS; NO CONSENT REQUIRED, ETC.
(a) The Company is not in violation of any Charter Document. Except as
set forth on Schedule 5.23(a), the Company is not in default under any lease,
instrument, agreement, license, or permit set forth on Schedule 5.12(a),
Schedule 5.14(a), Schedule 5.15(b) or Schedule 5.16(a) (collectively, the
"Material Documents").
(b) Except as set forth on Schedule 5.23(b)(1), the execution and
delivery of this Agreement by each of the Company and the Stockholders do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company under any of
the terms, conditions or provisions of (i) the Charter Documents of the
Company, (ii) any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any court or governmental
authority applicable to the Company or any of its properties or assets, or
(iii) any Material Document to which the Company is now a party or by which the
Company or any of its properties or assets may be bound or affected. The
consummation by the Company and the Stockholders of the transactions
contemplated hereby will not result in any material violation, conflict,
breach, right of termination or acceleration or creation of liens under any of
the terms, conditions or provisions of the items described in clauses (i)
through (iii) of the preceding sentence, subject, in the case of the terms,
conditions or provisions of the items described in clause (iii) above, to
obtaining (prior to the Effective Time) such consents as may be required from
commercial lenders, lessors or other third parties as listed on Schedule
5.23(b)(2).
(c) Except as set forth on Schedule 5.23(c) and except for the
Hart-Scott Act, none of the Material Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to the consummation by the Company and the Stockholders of any of the
transactions contemplated hereby in order to remain in full force and effect,
and consummation by the Company and the Stockholders of the transactions
contemplated hereby will not give rise to any right to termination,
cancellation or acceleration or loss of any material right or benefit under any
Material Document.
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(d) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act or with any state securities authorities in connection with the offer
and sale of AmPaM Stock and AmPaM Notes pursuant to this Agreement and (ii) any
filing required to be made under the Hart-Scott Act in connection with the
transactions contemplated by this Agreement, no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby.
(e) Except as set forth on Schedule 5.23(e), none of the Material
Documents prohibits the disclosure or publication by the Company or AmPaM of
the name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company from freely providing services or
selling products to any other customer or potential customer of the Company,
AmPaM or any Other Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24, the
Company is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.25 ABSENCE OF CHANGES. (a) Since the Balance Sheet Date, except as
set forth on Schedule 5.25 or as otherwise contemplated hereby, there has not
been:
(i) any Material Adverse Change in the Company;
(ii) any damage, destruction or casualty loss (whether or not
covered by insurance), alone or in the aggregate, which has caused a
Material Adverse Effect on the Company;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or
commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the
Company except for distributions that would have been permitted after
the date hereof under Section 7.3(iii) hereof,
(v) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by the Company to any of
its officers, directors, Stockholders, employees, consultants or
agents, except for ordinary and customary bonuses and salary increases
for employees in accordance with past practice and except for salary
increases for employees in accordance with past practice and except
for the establishment of a deferred stock compensation plan for the
benefit of certain Company employees and the arrangements to
contribute shares of AmPaM Stock thereto as described in Annex I
hereto;
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(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, which has caused a Material
Adverse Effect on the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person,
including, without limitation, the Stockholders and their affiliates,
except inventory sold or transferred in the Ordinary Course of
Business;
(viii) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to the Company, including without limitation
any indebtedness or obligation of any Stockholders or any Affiliate
thereof;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the material
assets, property or rights of the Company or requiring consent of any
party to the transfer and assignment of any such assets, property or
rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the Ordinary Course of Business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any Material Document to
which the Company is a party except for the termination of a Material
Document in accordance with its terms without any action on the part
of the Company;
(xiii) any transaction by the Company outside the Ordinary Course
of Business;
(xiv) any cancellation or termination of a material contract with
a customer or client listed on Schedule 5.15(a) prior to the scheduled
termination date thereof; or
(xv) any other distribution of property or assets by the Company
other than in the Ordinary Course of Business, other than (a)
distributions of nonoperating assets specifically identified on
Schedule 5.25, (b) distributions of real estate required by Section
7.1(c) of this Agreement and (c) distributions of cash or promissory
notes permitted by Annex I hereto.
(b) Except as set forth on Schedule 5.25, the Company has not, between
the Balance Sheet Date and the date hereof, taken any of the actions set forth
in Section 7.3.
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5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The Company has delivered
to AmPaM an accurate schedule (which is set forth on Schedule 5.26) as of the
date of the Agreement of:
(i) the name of each financial institution in which the Company
has an account or safe deposit box;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company
and a description of the terms of such power.
5.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the Company and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
Company and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
5.28 RELATIONS WITH GOVERNMENTS. The Company has not, and to the
knowledge of the Company none of the Stockholders or any Affiliate of any of
them has, given or offered anything of value to any governmental official,
political party or candidate for government office or otherwise taken any
action which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any law of similar effect.
5.29 DISCLOSURE. This Agreement, including the Annexes and Schedules
hereto, and the completed questionnaire related to the Hart-Scott Act furnished
to AmPaM by the Company, do not contain an untrue statement of a material fact
concerning the Company or omit to state a material fact concerning the Company
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing does not apply to statements contained in or omitted from
any of such documents made or omitted in reliance upon information furnished in
writing by AmPaM.
5.30 NO WARRANTIES OR INSURANCE. Except for warranty liability under
applicable law and except for warranty liability under the warranties issued by
the Company of the types described on Schedule 5.30, the Company has no
liability to any person under any warranty and the Company does not offer or
sell insurance or consumer protection plans or other arrangements that could
result in the Company being required to make any payment to or perform any
service for any person.
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5.31 INTEREST IN CUSTOMERS AND SUPPLIERS AND RELATED PARTY
TRANSACTIONS. Except as described on Schedule 5.31 or in Section 8.11, no
Stockholder, officer, director or Affiliate of the Company (i) owns, directly
or indirectly, any financial interest in, or is a director, officer, employee
or affiliate of, any corporation, firm, association or business organization
that is a client, supplier, customer, lessor, lessee or competitor of the
Company, or (ii) is or will be a party to an agreement or relationship with the
Company other than through a customary "at will" employment relationship.
5.32 PRIVATE PLACEMENT MEMORANDUM. None of the information supplied or
to be supplied by the Company in writing specifically for inclusion in the
Private Placement Memorandum contained or, as of the Closing Date, will contain
any untrue statement of a material fact concerning the Company or omitted or
will omit to state any material fact required to be stated therein or necessary
in order to make the statements contained in such information supplied or to be
supplied by the Company concerning the Company, in light of the circumstances
under which they are made, not misleading.
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.
Each Stockholder severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.7 hereof, shall be true at the time of
Closing, and that the representations and warranties set forth in this Section
5(B) shall survive the Closing Date.
5.33 AUTHORITY; OWNERSHIP. Such Stockholder has the full legal right,
power and authority to enter into this Agreement, and this Agreement is a
legal, valid and binding obligation of such Stockholder, enforceable against
the Stockholder in accordance with its terms. Except as set forth on Schedule
5.33(a), the execution and delivery of this Agreement by such Stockholder does
not violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of such Stockholder
under any of the terms, conditions or provisions of (i) the Charter Documents
of the Company, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to such Stockholder or any of such Stockholder's
properties or assets, or (iii) any lease, instrument, agreement, license or
permit to which such Stockholder is now a party or by which such Stockholder or
any of such Stockholder's properties or assets may be bound or affected. Except
for (i) any filings to be made with the SEC pursuant to the 1933 Act and any
state securities authorities in connection with the offer and sale of AmPaM
Stock and AmPaM Notes pursuant to this Agreement, (ii) any filing required to
be made under the Hart-Scott Act in connection with the transactions
contemplated by this Agreement, no declaration, filing or registration with, or
notice to, or authorization, consent or approval of, any governmental or
regulatory body or authority is necessary for the execution and delivery of
this Agreement by such Stockholder or the consummation by such Stockholder of
the transactions contemplated hereby. Except as set forth on
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Schedule 5.33(b), such Stockholder owns beneficially and of record all of the
shares of the Company Stock identified on Annex I hereto as being owned by such
Stockholder, and, such Company Stock is owned free and clear of all liens,
security interests, pledges, charges, voting trusts, voting agreements,
restrictions, encumbrances and claims of every kind.
5.34 PREEMPTIVE RIGHTS. Such Stockholder does not have, or hereby
waives, any preemptive or other right to acquire shares of Company Stock or
AmPaM Stock that such Stockholder has or may have had. Nothing herein, however,
shall limit or restrict the rights of any Stockholder to acquire AmPaM Stock
pursuant to (i) this Agreement, (ii) any option granted or to be granted by
AmPaM to such Stockholder, (iii) a purchase through a broker in a regular stock
market transaction or (iv) a purchase from a stockholder of a Founding Company
(subject to compliance with any contractual restrictions or securities law
restrictions applicable thereto specified in Section 15 hereof).
5.35 NO COMMITMENT TO DISPOSE OF AMPAM STOCK. No Stockholder is under
any binding commitment or contract to sell, exchange or otherwise dispose of
shares of AmPaM Stock or AmPaM Notes received pursuant to this Agreement.
5.36 DISCLOSURE. The completed Director and Officer Questionnaires
with respect to such Stockholder (if any), the completed investor questionnaire
furnished to AmPaM by such Stockholder in connection with the proposed
acquisition by such Stockholder of AmPaM Stock and AmPaM Notes and any other
information provided to AmPaM in writing by such Stockholder relating
specifically to such Stockholder for inclusion in the Private Placement
Memorandum do not contain an untrue statement of a material fact concerning
such Stockholder or omit to state a material fact concerning such Stockholder
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading.
6. REPRESENTATIONS OF AmPaM
Except as otherwise qualified below, AmPaM represents and warrants
that all of the following representations and warranties in this Section 6 are
true at the date of this Agreement and, subject to Section 7.7 hereof, shall be
true at the time of Closing, and that such representations and warranties shall
survive the Closing Date for a period of eighteen months (the last day of such
period being the "Expiration Date" for purposes of the representations and
warranties set forth in this Section 6), except that the representations and
warranties set forth in Section 6.3, 6.11 and 6.15 shall survive until such
time as the applicable statute of limitations period has run, which shall be
deemed to be the Expiration Date for the representations and warranties set
forth in Sections 6.3, 6.11 and 6.15.
AmPaM acknowledges that in purchasing the shares of Company Stock, it
is relying upon its own independent investigation as well as the
representations and warranties of the Company and the Stockholders as set forth
in this Agreement.
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6.1 DUE ORGANIZATION. AmPaM is a corporation duly incorporated and
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite power and authority to carry on its business as
it is now being conducted and as contemplated by the Private Placement
Memorandum. AmPaM is duly qualified or authorized to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or
authorization necessary, except where the failure to be so qualified or
authorized to do business would not have a Material Adverse Effect. True,
complete and correct copies of the Certificate of Incorporation and By-laws,
each as proposed to be amended and as such documents shall be in effect as of
the Closing Date, of AmPaM (the "AmPaM Charter Documents") are attached hereto
as Annex II.
6.2 AUTHORIZATION. (i) The officers of AmPaM executing this Agreement
have the authority to enter into and bind AmPaM to the terms of this Agreement
and (ii) AmPaM has the full legal right, power and authority to enter into this
Agreement and consummate the transactions contemplated hereby. All corporate
acts and other proceedings required to have been taken by AmPaM to authorize
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby have been duly and properly taken.
6.3 CAPITAL STOCK OF AmPaM. The authorized capital stock of AmPaM is
as set forth in Section 1.3(ii). Immediately prior to the Closing Date, all of
the issued and outstanding shares of the capital stock of AmPaM will be as set
forth in the Private Placement Memorandum, free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind other than any restrictions described in the Private
Placement Memorandum. All of the issued and outstanding shares of the capital
stock of AmPaM have been duly authorized and validly issued, are fully paid and
nonassessable and such shares were offered, issued, sold and delivered by AmPaM
in compliance with all applicable state and Federal laws concerning the
issuance of securities. Further, none of such shares were issued in violation
of the preemptive rights of any past or present stockholder of AmPaM. Upon the
Closing Date, the authorized, issued and outstanding shares of capital stock of
AmPaM will be as set forth in the Private Placement Memorandum under the
caption "Capitalization." Upon the Closing Date, the aggregate number of shares
of AmPaM Stock issued and outstanding on the Closing Date that are owned by
Sterling City Capital, LLC, any Affiliates of Sterling City Capital, LLC and
the officers and directors of AmPaM will not be greater than the number of
shares of AmPaM Stock reflected in the Private Placement Memorandum as the
aggregate number of shares of AmPaM Stock to be issued and outstanding and
owned by Sterling City Capital, LLC, any Affiliates of Sterling City Capital,
LLC and the officers and directors of AmPaM.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements,
except for the arrangements to contribute AmPaM Stock to a deferred stock
compensation plan for the benefit of certain employees as described in Annex I
hereto, and except as set forth in the Private Placement Memorandum, (i) no
option, warrant, call, conversion right or commitment of any kind exists as of
the date of this Agreement which obligates AmPaM to issue any of its authorized
but unissued capital stock; and (ii) AmPaM has no obligation (contingent or
otherwise) to purchase, redeem or
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otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof. The material
terms of any options, warrants or other rights to acquire shares of the stock
of AmPaM referred to in the preceding sentence will be as described in the
Private Placement Memorandum.
6.5 SUBSIDIARIES. As of the date of this Agreement, AmPaM has no
subsidiaries. As of the date of this Agreement, AmPaM does not own, of record
or beneficially, or control, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity interest in any
corporation, association or business entity, and AmPaM is not, directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
6.6 FINANCIAL STATEMENTS. The historical financial statements of AmPaM
included in the Private Placement Memorandum (the "AmPaM Financial Statements")
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (except as noted thereon), and the balance
sheet included therein presents fairly the financial position of AmPaM as of
its date. Management of AmPaM believes that the assumptions underlying the pro
forma adjustments utilized in the preparation of such pro forma financial
statements are reasonable, and such pro forma adjustments have been properly
applied to the historical financial amounts in the compilation of the pro forma
financial statements. Based on the representations in Section 5.9 of this
Agreement and in Section 5.9 of each of the Other Agreements, the pro forma
financial information of AmPaM fairly presents the pro forma financial
position, results of operations and other information purported to be shown
therein at the respective dates and for the respective periods specified.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth in the Private
Placement Memorandum, as of the date of this Agreement, AmPaM has no material
liabilities or obligations of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise, other than
liabilities incurred in the ordinary course of business and consistent with
past practices, liabilities or obligations set forth in or contemplated by this
Agreement and the Other Agreements and except for fees incurred in connection
with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth in
the Private Placement Memorandum, AmPaM is not in violation of any law or
regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and its stockholders and, there are no claims,
actions, suits or proceedings, pending or, to the knowledge of AmPaM,
threatened against or affecting, AmPaM, at law or in equity, or before or by
any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it and no
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. AmPaM has conducted and is conducting its businesses in
compliance in all material respects with the requirements, standards, criteria
and conditions set forth in applicable Federal, state
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and local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations and is not in violation, in any material respect, of any
of the foregoing.
6.9 NO VIOLATIONS. (a) AmPaM is not in violation of any AmPaM Charter
Document. AmPaM is not in default under any lease, instrument, agreement,
license, or permit to which AmPaM is a party or by which AmPaM or any of its
properties are bound (collectively, the "AmPaM Documents").
(b) The execution and delivery of this Agreement by AmPaM do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of AmPaM under any of the
terms, conditions or provisions of (i) the AmPaM Charter Documents, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to
AmPaM or any of its properties or assets, or (iii) any AmPaM Document; provided
that the representations and warranties specified in clause (ii) of this
sentence (A) are based on information in the investor questionnaires and
related purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements
and (B) are subject to the accuracy and completeness of the information
contained in such investor questionnaires and related purchaser representative
questionnaires and the truthfulness of such representations and warranties. The
consummation by AmPaM of the transactions contemplated hereby will not result
in any material violation, conflict, breach, right of termination or
acceleration or creation of liens under any of the terms, conditions or
provisions of the items described in clauses (i) through (iii) of the preceding
sentence, subject, in the case of the terms, conditions or provisions of the
items described in clause (iii) above, to obtaining (prior to the Closing Date)
(x) such approvals, consents or orders from the SEC, state blue sky authorities
and authorities administering the Hart-Scott Act and (y) such other consents as
may be required from commercial lenders, lessors or other third parties which
are listed on Schedule 6.9.
(c) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act and filings with various state securities authorities in connection
with the transactions contemplated by this Agreement, and (ii) any filings
required to be made under the Hart-Scott Act in connection with the
transactions contemplated by this Agreement, none of the AmPaM Documents
requires notice to, or the consent or approval of, any governmental agency or
other third party with respect to the consummation by AmPaM of any of the
transactions contemplated hereby in order to remain in full force and effect,
and consummation by AmPaM of the transactions contemplated hereby will not give
rise to any right to termination, cancellation or acceleration or loss of any
material right or benefit under the AmPaM Documents; provided that the
representations and warranties specified in clauses (i) and (ii) of this
sentence (A) are based on information in the investor questionnaires and
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related purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements
and (B) are subject to the accuracy and completeness of the information
contained in such investor questionnaires and related purchaser representative
questionnaires and the truthfulness of such representations and warranties.
(d) Except for (i) any filings with the SEC pursuant to the 1933 Act
and filings with various state securities authorities in connection with the
transactions contemplated by this Agreement and (ii) any filings required under
the Hart-Scott Act in connection with the transactions contemplated by this
Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by
AmPaM or the consummation by AmPaM of the transactions contemplated hereby;
provided that the representations and warranties specified in clauses (i) and
(ii) of this sentence (A) are based on information in the investor
questionnaires and related purchaser representative questionnaires executed and
delivered by the Stockholders of the Company and the stockholders of the Other
Founding Companies, the representations and warranties of the Stockholders set
forth in Section 16 hereof and the representations and warranties of the
stockholders of the Other Founding Companies set forth in Section 16 of the
Other Agreements and (B) are subject to the accuracy and completeness of the
information contained in such investor questionnaires and related purchaser
representative questionnaires and the truthfulness of such representations and
warranties.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by AmPaM and the performance of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of AmPaM and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of AmPaM, enforceable
against AmPaM in accordance with its terms.
6.11 AmPaM STOCK. At the time of issuance thereof and delivery to the
Stockholders, the AmPaM Stock to be delivered to the Stockholders pursuant to
this Agreement will constitute valid, duly authorized and legally issued shares
of AmPaM, fully paid and nonassessable, and with the exception of restrictions
upon resale set forth in Sections 15 and 16 hereof, will be identical in all
substantive respects (which do not include the form of certificate upon which
it is printed or the presence or absence of a CUSIP number on any such
certificate) to the AmPaM Stock issued and outstanding as of the date hereof,
other than the Restricted Common Stock. The AmPaM Stock issued and delivered to
the Stockholders shall at the time of such issuance and delivery be free and
clear of any liens, claims or encumbrances of any kind or character. The offer
and sale of the shares of AmPaM Stock to be issued to the Stockholders pursuant
to this Agreement are not required to be registered under the 1933 Act;
provided that the representations and warranties specified in this sentence (A)
are based on information in the investor questionnaires and related purchaser
representative questionnaires executed and delivered by the Stockholders of the
Company and the
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stockholders of the Other Founding Companies, the representations and
warranties of the Stockholders set forth in Section 16 hereof and the
representations and warranties of the stockholders of the Other Founding
Companies set forth in Section 16 of the Other Agreements and (B) are subject
to the accuracy and completeness of the information contained in such investor
questionnaires and related purchaser representative questionnaires and the
truthfulness of such representations and warranties.
6.12 AmPaM NOTES. The AmPaM Notes have been duly authorized and, at
the Closing Date, will have been duly executed by AmPaM and, when
authenticated, issued and delivered, will constitute valid and binding
obligations of AmPaM, enforceable against AmPaM in accordance with their terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers)
reorganization, moratorium or similar laws affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
6.13 NO SIDE AGREEMENTS. AmPaM has not entered into any agreement with
any of the Founding Companies or any of the Stockholders of the Founding
Companies other than this Agreement, the Other Agreements, the agreements
referred to in this Agreement and in the Other Agreements and the Private
Placement Memorandum. AmPaM has not entered into any agreements providing for
rights to register shares of AmPaM Stock under the 1933 Act except as provided
in Section 17 of this Agreement, in Section 17 of the Other Agreements and in
an agreement with Sterling City Capital, LLC, its Affiliates and officers and
directors of AmPaM having terms substantially similar to those set forth in
Section 17 hereof.
6.14 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. AmPaM was formed in
June 1998 and has conducted no material business since the date of its
inception except for activities related to the transaction contemplated by this
Agreement, the Other Agreements and the Private Placement Memorandum. Except as
described in the Private Placement Memorandum, as of the date of this
Agreement, AmPaM does not own any real property or any material personal
property and is not a party to any other material agreement other than this
Agreement, the Other Agreements and the agreements contemplated hereby and
thereby.
6.15 RELATIONS WITH GOVERNMENTS. Neither AmPaM nor any of its
directors, officers or Affiliates has given or offered anything of value to any
government official, political party or candidate for government office, nor
has AmPaM, any of its directors, officers or Affiliates of any of them
otherwise taken any action, which would cause AmPaM to be in violation of the
Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
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6.16 DISCLOSURE. The Private Placement Memorandum delivered to the
Company and the Stockholders does not as of the date hereof contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing does not apply to
statements contained in or omitted from any of such documents made or omitted
in reliance upon, and in conformity with, information furnished to AmPaM by the
Company or the Stockholders in writing specifically for inclusion in the
Private Placement Memorandum.
6.17 OTHER AGREEMENTS. The Other Agreements have been duly authorized,
executed and delivered by AmPaM and constitute the legal, valid and binding
obligation of AmPaM enforceable against AmPaM in accordance with their
respective terms. The terms and conditions of the Other Agreements (excluding
the terms relating to the consideration payable by AmPaM thereunder) are
identical in all material respects to the terms and conditions in this
Agreement.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE; TRANSFER OF REAL ESTATE.
(a) Between the date of this Agreement and the Closing Date, the
Company will afford to the officers and authorized representatives of AmPaM
reasonable access during normal business hours to all of the Company's sites,
properties, books and records and will furnish AmPaM with such additional
financial and operating data and other information as to the business and
properties of the Company as AmPaM may from time to time reasonably request.
The Company will cooperate with AmPaM, its representatives, auditors and
counsel in the preparation of any documents or other material which may be
required in connection with any documents or materials required by this
Agreement. AmPaM, the Stockholders and the Company will treat all information
obtained in connection with the negotiation and performance of this Agreement
or the due diligence investigations conducted with respect to the Company as
confidential in accordance with the provisions of Section 14 hereof.
(b) Between the date of this Agreement and the Closing Date, AmPaM
will afford to the officers and authorized representatives of the Company
access to all of AmPaM's sites, properties, books and records and will furnish
the Company with such additional financial and operating data and other
information as to the business and properties of AmPaM and the Other Founding
Companies as the Company may from time to time reasonably request. AmPaM will
cooperate with the Company, its representatives, auditors and counsel in the
preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. The
Company will cause all information obtained pursuant to this Section 7.1(b) or
obtained in connection with the negotiation and performance of this Agreement
to be treated as confidential in accordance with the provisions of Section 14
hereof.
(c) Except as set forth on Schedule 7.1, any real property owned by
the Company will be sold or distributed by the Company on terms mutually
acceptable to AmPaM and the Company
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and leased back by the Company on terms no less favorable to the Company than
those available from an unaffiliated party and otherwise reasonably acceptable
to AmPaM at or prior to the Closing Date.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Closing Date, the Company will, except as set forth on
Schedule 7.2:
(i) carry on its businesses in the Ordinary Course of Business and
not introduce any material new method of management, operation or
accounting;
(ii) use all commercially reasonable efforts to maintain its
properties and facilities, including those held under leases, in as
good working order and condition as at present, ordinary wear and
tear, depreciation and insured losses excepted;
(iii) perform in all material respects all of its obligations
under all Material Documents relating to or affecting its respective
assets, properties or rights;
(iv) use its commercially reasonable efforts to keep in full force
and effect present insurance policies or other comparable insurance
coverage;
(v) use its commercially reasonable efforts to maintain and
preserve its business organization intact, retain its respective
present key employees and maintain its relationships with suppliers,
customers and others having business relations with the Company;
(vi) use its commercially reasonable efforts to maintain
compliance with all material permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory
agencies and similar governmental authorities;
(vii) maintain present debt and lease instruments in accordance
with their terms and not enter into new or amended debt or lease
instruments without the knowledge and consent of AmPaM (which consent
shall not be unreasonably withheld), provided that debt and/or lease
instruments may be replaced without the consent of AmPaM if such
replacement instruments are on terms at least as favorable to the
Company as the instruments being replaced;
(viii) maintain or reduce present salaries and commission levels
for all officers, directors, employees and agents except for ordinary
and customary bonus and salary increases for employees in accordance
with past practices; and
(ix) use commercially reasonable efforts to cause the actual
amount of its Current Assets (as defined in Annex I hereto) to be not
less than 150% of the actual amount of its Current Liabilities (as
defined in Annex I hereto).
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7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3,
between the date hereof and the Closing Date, the Company will not, without
prior written consent of AmPaM:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other
than in connection with the exercise of options or warrants listed in
Schedule 5.4;
(iii) except as permitted pursuant to the terms and conditions for
distributions described in Annex I, declare or pay any dividend, or
make any distribution in respect of its stock whether now or hereafter
outstanding, or purchase, redeem or otherwise acquire or retire for
value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except if it is
in the Ordinary Course of Business or involves an amount not in excess
of three percent (3%) of the Company's gross revenues for fiscal 1997;
(v) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired, except (1) with respect to purchase money
liens incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of three percent (3%) of the Company's
gross revenues for fiscal 1997 necessary or desirable for the conduct
of the businesses of the Company, (2) (A) liens for taxes either not
yet due or being contested in good faith and by appropriate
proceedings (and for which contested taxes adequate reserves have been
established and are being maintained) or (B) materialmen's,
mechanics', workers', repairmen's, employees' or other like liens
arising in the Ordinary Course of Business (the liens set forth in
clause (2) being referred to herein as "Statutory Liens"), or (3)
liens set forth on Schedule 5.10 and/or Schedule 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the Ordinary Course of Business and
other than distributions of real estate and other assets as permitted
in this Agreement (including Annex I hereto);
(vii) negotiate for the acquisition of any business or the
start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate with
or into any other corporation;
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(ix) waive any material rights or claims of the Company, provided
that the Company may negotiate and adjust bills and accounts in the
course of good faith disputes with customers in a manner consistent
with past practice;
(x) amend or terminate any Material Document except for the
termination of a Material Document in accordance with its terms
without any action on the part of the Company; or
(xi) enter into any other material transaction outside the
Ordinary Course of Business or any transaction prohibited hereunder.
7.4 NO SHOP. None of the Stockholders, the Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than AmPaM or
its authorized agents relating to, any acquisition or purchase of all
or a material amount of the assets of, or any equity interest in, the
Company or a merger, consolidation or business combination of the
Company.
7.5 AGREEMENTS. Except as disclosed on Schedule 7.5(a), the
Stockholders and the Company shall terminate (i) any stockholders agreements,
voting agreements, voting trusts, agreements providing for the grant by the
Company of any options, warrants and employment agreements between the Company
and any employee listed on Schedule 8.11 hereto and (ii) except as otherwise
provided in this Agreement, any existing agreement between the Company and any
Stockholder, on or prior to the Closing Date provided that nothing herein shall
prohibit or prevent the Company from paying (either prior to or on the Closing
Date) notes or other obligations from the Company to the Stockholders described
in Schedule 7.5(b) in accordance with the terms thereof.
7.6 NOTIFICATION OF CERTAIN MATTERS. Each Stockholder and the Company
shall give prompt notice to AmPaM upon obtaining knowledge of (i) the
occurrence or non-occurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty of the Company or
such Stockholder contained herein to be untrue or inaccurate in any material
respect at or prior to the Closing and (ii) any material failure of such
Stockholder or the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such person hereunder. AmPaM
shall give prompt notice to the Company of (i) the occurrence or non-occurrence
of any event the occurrence or non-occurrence of which would be likely to cause
any representation or warranty of AmPaM contained herein to be untrue or
inaccurate
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in any material respect at or prior to the Closing, (ii) any material failure
of AmPaM to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; (iii) any termination of any Other
Agreement for any reason; and (iv) the issuance by the SEC or any state
securities regulatory authority of any issuance of or threatened issuance of
any order challenging the availability of an exemption from registration or
suspending the qualification of any securities described in the Private
Placement Memorandum for sale in any jurisdiction. However, subject to the
provisions of Section 7.7, such notification shall not relieve either the
Company or such Stockholder of their respective obligations under this
Agreement. The delivery of any notice pursuant to this Section 7.6 shall not be
deemed to (i) modify the representations or warranties hereunder of the party
delivering such notice, which modification may only be made pursuant to Section
7.7, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit
or otherwise affect the remedies available hereunder to the party receiving
such notice.
7.7 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until 24 hours prior
to the Closing Date to notify AmPaM with respect to any matter (i) hereafter
arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules or (ii) which may have been omitted from the Schedules previously
provided by such party. Notwithstanding the foregoing sentence, no amendment or
supplement to a Schedule prepared by the Company may be made unless AmPaM
consents to such amendment or supplement; and provided further, that no
amendment or supplement to a Schedule prepared by AmPaM may be made unless the
Stockholders consent to such amendment or supplement. For all purposes of this
Agreement, including without limitation for purposes of determining whether the
conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules
hereto, as amended or supplemented with the consent of AmPaM or the
Stockholders, as the case may be, as provided above, shall be deemed to be the
Schedules to this Agreement.
7.8 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
appropriate to carry out the transactions contemplated hereby and to cause the
conditions to the Closing Date to be satisfied as promptly as practicable.
7.9 AUTHORIZED CAPITAL. Prior to the Closing Date, AmPaM shall
maintain its authorized capital stock as set forth in the Private Placement
Memorandum.
7.10 COMPLIANCE WITH THE HART-SCOTT ACT. All parties to this Agreement
hereby recognize that one or more filings under the Hart-Scott Act may be
required in connection with the transactions contemplated herein. If it is
determined by the parties to this Agreement that filings under the Hart-Scott
Act are required, then: (i) each of the parties hereto agrees to cooperate and
use its best efforts to comply with the Hart-Scott Act and (ii) such compliance
by the Stockholders and the parties agree to cooperate and use their best
efforts to cause all filings required under the Hart- Scott Act to be made. If
filings under the Hart-Scott Act are required, the costs and expenses thereof
(including filing fees) shall be borne by AmPaM.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of the Stockholders and the Company with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions. As
of the Closing Date, if any such applicable conditions have not been satisfied,
any one or more of the Stockholders who would be entitled to receive a majority
of the Aggregate Consideration (as defined herein) received by all Stockholders
if the transactions contemplated hereby were consummated shall have the right
to waive any condition not so satisfied. Any act or action of the Stockholders
in consummating the Closing or delivering the certificates representing Company
Stock as of the Closing Date shall constitute a waiver of any conditions not so
satisfied. However, no such waiver shall be deemed to affect the survival of
the representations and warranties of AmPaM contained in Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of AmPaM contained in Section 6 shall be true
and correct as of the Closing Date as though such representations and
warranties had been made as of that time; all of the terms, covenants and
conditions of this Agreement to be complied with and performed by AmPaM on or
before the Closing Date shall have been duly complied with and performed in all
material respects; and certificates to the foregoing effect dated the Closing
Date and signed by the President or any Vice President of AmPaM shall have been
delivered to the Stockholders.
8.2 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of the Company or the Stockholders and that are
required to carry out this Agreement or incidental hereto shall be reasonably
satisfactory to the Company, the Stockholders and their counsel.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the purchase and sale of the Company Stock.
8.4 OPINION OF COUNSEL. The Company shall have received opinions from
counsel for AmPaM, dated the Closing Date, addressed to the Company and the
Stockholders in the form annexed hereto as Annex III.
8.5 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule 6.9
shall have been obtained; and no action or proceeding shall have been
instituted or threatened to restrain or prohibit the purchase and sale of the
Company Stock and no governmental agency or body shall have taken any other
action or made any request of Company as a result of which Company deems it
inadvisable to proceed with the transactions hereunder.
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8.6 GOOD STANDING CERTIFICATES. AmPaM shall have delivered to the
Company a certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Delaware Secretary of State and in each state
in which AmPaM is authorized to do business, showing that AmPaM is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for AmPaM for all periods prior to the Closing
have been filed and paid.
8.7 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred which would constitute a Material Adverse Change with respect to AmPaM
from the date of the Private Placement Memorandum.
8.8 SECRETARY'S CERTIFICATE. The Company shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of AmPaM, certifying the truth and correctness of attached copies of AmPaM's
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and, if
required, the stockholders of AmPaM approving AmPaM's entering into this
Agreement and the Other Agreements and the consummation of the transactions
contemplated hereby and thereby.
8.9 TAX MATTERS. The Stockholders shall have received an opinion of
Andrews & Kurth L.L.P., in substantially the form of Annex IV hereto, that the
AmPaM Plan of Organization will qualify as a tax-free transfer of property
under Section 351 of the Code and that the Stockholders will not recognize gain
to the extent the Stockholders exchange Company Stock for AmPaM Stock (but not
cash or other property) pursuant to this Agreement in connection with the AmPaM
Plan of Organization.
8.10 OTHER FOUNDING COMPANIES. The transactions contemplated by the
Other Agreements are consummated simultaneously with the consummation of the
transactions contemplated by this Agreement.
8.11 COMPANY RELEASE OF STOCKHOLDERS. The Company shall have delivered
to the Stockholders an instrument dated the Closing Date, in form reasonably
satisfactory to AmPaM and the Stockholders, which shall be effective only upon
the occurrence of the Closing Date, releasing the Stockholders from (i) any and
all claims of the Company against the Stockholders, known and unknown, and (ii)
obligations of the Stockholders to the Company, except for (x) items
specifically identified on Schedule 5.10(a) and Schedule 5.15(b) as being
claims of or obligations to the Company and (y) continuing obligations to the
Company relating to their employment by the Company pursuant to any employment
agreement entered into pursuant to Section 8.11 hereof.
8.12 STERLING CITY CAPITAL TRANSFER RESTRICTIONS. Sterling City
Capital, LLC and each of its Affiliates which owns AmPaM Stock shall have
entered into an agreement with AmPaM containing substantially the same terms
and conditions as are contained in Section 15 and Section 17.
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8.13 ELECTION OF CHIEF EXECUTIVE OFFICER. AmPaM shall have taken all
corporate action necessary to elect Robert A. Christianson as Chief Executive
Officer of AmPaM effective immediately following the Closing Date.
8.14 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto
as payable to the Stockholders upon the Closing and (ii) the aggregate cash
amounts specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AmPaM
The obligations of AmPaM with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. As of the Closing Date, if any
such conditions have not been satisfied, AmPaM shall have the right to
terminate this Agreement, or waive any such condition, but no such waiver shall
be deemed to affect the survival of the representations and warranties
contained in Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE AND OBLIGATIONS. All
the representations and warranties of the Stockholders and the Company
contained in this Agreement shall be true and correct as of the Closing Date
with the same effect as though such representations and warranties had been
made on and as of such date; all of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Stockholders and the Company
on or before the Closing Date shall have been duly performed or complied with
in all material respects; and the Stockholders shall have delivered to AmPaM
certificates dated the Closing Date and signed by them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the purchase and sale of the Company Stock.
9.3 SECRETARY'S CERTIFICATE. AmPaM shall have received a certificate,
dated the Closing Date and signed by the secretary of the Company, certifying
the truth and correctness of attached copies of the Company's Articles or
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and the
Stockholders approving the execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby.
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9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Company
to conduct its business.
9.5 STOCKHOLDERS' RELEASE. The Stockholders shall have delivered to
AmPaM an instrument dated the Closing Date which shall be effective only upon
the occurrence of the Closing releasing the Company and AmPaM from (i) any and
all claims of the Stockholders against the Company and AmPaM and (ii)
obligations of the Company and AmPaM to the Stockholders, except for (A) items
specifically identified on Schedule 5.31 as being claims of or obligations to
the Stockholders, (B) continuing obligations to Stockholders relating to their
employment by the Company pursuant to employment agreements entered into as
specified in Section 8.11 hereof, (C) obligations arising under this Agreement
or the transactions contemplated hereby and (D) claims of Stockholders against
the Company for unreimbursed business expenses incurred by the Stockholders on
behalf of the Company (other than expenses related to the transactions
contemplated by this Agreement) prior to the Closing Date or unreimbursed
medical expenses of the Stockholders incurred prior to the Closing Date which
are covered by the Company's existing health insurance coverage. In the event
that the Closing Date does not occur, then the release instrument referenced
herein shall be void and of no further force or effect.
9.6 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of AmPaM and that are required to carry out the
transactions contemplated by this Agreement or incidental hereto shall have
been reasonably approved by counsel to AmPaM.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the Company and the Stockholders
(and between the Company and entities controlled by the Stockholders) specified
on Schedule 5.31 shall have been terminated effective prior to or as of the
Closing Date without any payment being made by the Company other than payments
made for services rendered, materials provided or other benefits provided to
the Company prior to the Closing Date pursuant to the terms of such agreements
as in effect as of the date of this Agreement.
9.8 OPINION OF COUNSEL. AmPaM shall have received opinions from
counsel to the Company and the Stockholders, dated the Closing Date,
substantially in the form annexed hereto as Annex V.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule
5.23(b)(2) shall have been obtained; and no action or proceeding shall have
been instituted or threatened to restrain or prohibit the purchase and sale of
the Company Stock and no
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governmental agency or body shall have taken any other action or made any
request of AmPaM as a result of which AmPaM deems it inadvisable to proceed with
the transactions hereunder.
9.10 GOOD STANDING CERTIFICATES. The Company shall have delivered to
AmPaM a certificate, dated as of a date no earlier than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by AmPaM, in each state in
which the Company is authorized to do business, showing the Company is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the Company for all periods prior to the
Closing have been filed and paid.
9.11 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto
as payable to the Stockholders upon the Closing and (ii) the aggregate cash
amounts specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9.12 FIRPTA CERTIFICATE. Each Stockholder shall have delivered to
AmPaM a certificate to the effect that he is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.13 RESIGNATIONS OF DIRECTORS AND OFFICERS. Any directors of the
Company, other than those identified on Schedule 2.1, shall have resigned as
directors of the Company. Any officers of the Company, other than those
identified on Schedule 2.2, shall have resigned as officers of the Company.
10. COVENANTS OF AMPAM AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. AmPaM
shall use reasonable efforts to have the Stockholders released from any and all
guarantees of the Company's indebtedness, including bond obligations,
identified on Schedule 10.1. Prior to obtaining the release of such guarantees,
AmPaM shall provide its guarantee of such indebtedness to the lenders thereof.
In the event that AmPaM cannot obtain such releases from the lenders of any
such guaranteed indebtedness identified on Schedule 10.1 on or prior to 90 days
subsequent to the Closing Date, AmPaM shall promptly pay off or otherwise
refinance or retire such indebtedness such that the Stockholders' personal
liability shall be released. AmPaM will indemnify the Stockholders against any
loss or damage suffered as a result of the personal guarantees.
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10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement, after the Closing Date, AmPaM shall not and
shall not permit any of its Subsidiaries to undertake any act that would
jeopardize the tax-free status of the exchange of Company Stock for AmPaM Stock
(but not cash or other property), including without limitation:
(a) the retirement or reacquisition, directly or indirectly, of
all or part of the AmPaM Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit
of the Stockholders other than as described in the Private Placement Memorandum
or as described in this Agreement.
10.3 PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES.
(a) The Company, if possible, or otherwise the Stockholders shall
file or cause to be filed all income Tax Returns (federal, state, local or
otherwise) of any Acquired Party for all taxable periods that end on or before
the Closing Date, and shall permit AmPaM to review all such Tax Returns prior
to such filings. Unless the Company is a C corporation, the Stockholders shall
pay or cause to be paid all income Tax liabilities (in excess of all amounts
already paid with respect thereto or properly accrued or reserved with respect
thereto on the Financial Statements) with respect to the Company's operations
for all periods through and including the Closing Date.
(b) AmPaM shall file or cause to be filed all separate Returns
of, or that include, any Acquired Party for all taxable periods ending after
the Closing Date.
(c) Unless required by applicable law, regulations or government
proceedings, AmPaM shall not take any action, including any amendment of a Tax
Return of any Acquired Party, if such action would result in additional Tax
liabilities payable by any of the Stockholders for periods ending on or prior
to the Closing Date.
(d) Each party hereto shall, and shall cause its subsidiaries and
Affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Return, amended
Return or claim for refund, determining a liability for Taxes or a right to
refund of Taxes or in conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of all
relevant portions of relevant Returns, together with relevant accompanying
schedules and relevant work papers, relevant documents relating to rulings or
other determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which such party may possess. Each party
shall make its employees reasonably available on a mutually convenient basis at
its cost to provide explanation of any documents or information so provided.
Subject to the preceding sentence, each party required to file Returns pursuant
to this Agreement shall bear all costs of filing such Returns.
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(e) Each of the Company, AmPaM and each Stockholder shall comply
with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as a tax-free
contribution under Section 351(a) of the Code subject to gain, if any,
recognized on the receipt of cash or other property under Section 351(b) of the
Code.
10.4 DIRECTORS. The persons named in the Private Placement Memorandum
shall be appointed as directors and elected as officers of AmPaM, as and to the
extent set forth in the Private Placement Memorandum, promptly following the
Closing Date; provided, however, that the parties hereto acknowledge that if
the Company consummates an IPO, the persons who will serve as directors and
executive officers of AmPaM will be adjusted as appropriate for a publicly
traded entity, with any such changes being subject to the approval of the
majority of the Board of Directors of AmPaM.
10.5 LEGAL OPINIONS. If required by the lenders pursuant to the terms
of any agreements related to financing of the cash amounts referred to in
Section 9.11 hereof, the Company shall cause its counsel to deliver to such
lenders, at the Closing, an opinion of counsel in substantially the form
attached hereto as Annex V.
11. INDEMNIFICATION
The Stockholders and AmPaM each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS.
(a) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement until the applicable Expiration Date (as defined in
the introductory paragraph to Section 5(A)), provided that for purposes of
clause (iii) below, the applicable Expiration Date shall be the date on which
the applicable statute of limitations expires), from and against all claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by AmPaM as a result of
or arising from (i) any breach of the representations and warranties of the
Company set forth herein or on the schedules attached hereto or certificates
delivered pursuant to this Agreement, (ii) any breach of any covenant or
agreement on the part of the Company under this Agreement, or (iii) any
liability under the 1933 Act or any Federal or state securities law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating solely to the
Company which was based upon information provided to AmPaM or its counsel in
writing by the Company specifically for inclusion in the Private Placement
Memorandum and is contained in the Private Placement Memorandum, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
Company required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that no Stockholder shall be liable
for any
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indemnification obligation pursuant to this Section 11.1 in excess of such
Stockholder's pro rata share thereof determined by reference to the aggregate
value of the Base Cash Amount (as defined in Annex I of this Agreement), the
principal amount of AmPaM Notes and the shares of AmPaM Stock (valued at a
price of $13.00 per share) received by such Stockholder pursuant to Section
I.A. of Annex I hereto (without giving effect to the adjustments provided in
Sections I.B. and I.C. thereof) (giving effect to the value of such AmPaM Stock
and without giving effect to such adjustments, collectively, the "Aggregate
Consideration") such Stockholder would receive pursuant to Section I of Annex I
of this Agreement if the transactions contemplated hereby were consummated in
relation to the total Aggregate Consideration all Stockholders would receive
pursuant to Section I of Annex I of this Agreement if the transactions
contemplated hereby were consummated.
(b) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by AmPaM as a result of or arising from (i)
any breach of the representations and warranties of such Stockholder set forth
in Section 5(B) hereof, (ii) any breach of any covenant or agreement on the
part of such Stockholder under this Agreement, or (iii) any liability under the
1933 Act or any Federal or state securities law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating solely to such Stockholder which was
based upon information provided to AmPaM or its counsel in writing by such
Stockholder specifically for inclusion in the Private Placement Memorandum and
is contained in the Private Placement Memorandum, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact relating solely to such Stockholder
required to be stated therein or necessary to make the statements therein in
light of the circumstances in which such statements were made not misleading.
(c) AmPaM acknowledges and agrees that other than the representations
and warranties of the Company or the Stockholders specifically contained in
this Agreement, there are no representations or warranties of the Company or
the Stockholders, either express or implied, with respect to the transactions
contemplated by this Agreement, the Company or its assets, liabilities and
business.
11.2 INDEMNIFICATION BY AmPaM. AmPaM covenants and agrees that it will
indemnify, defend, protect and hold harmless the Company and the Stockholders
at all times from and after the date of this Agreement until the applicable
Expiration Date (as defined in the introductory paragraph of Section 6,
provided that for purposes of clause (iii) below, the applicable Expiration
Date shall be the date on which the applicable statute of limitations expires),
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by the Company or the Stockholders as a result of or arising from (i)
any breach by AmPaM of its representations and warranties set forth herein or
on the schedules attached
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hereto or certificates delivered pursuant to this Agreement, (ii) any breach of
any agreement on the part of AmPaM under this Agreement; or (iii) any liability
under the 1933 Act or any Federal or state securities law or regulation, at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Private Placement
Memorandum, or any amendment thereof or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except to the extent such is based upon an untrue statement or
alleged untrue statement, or omission or alleged omission, made therein in
reliance upon, and in conformity with, the representations and warranties of
the Company or the Stockholders specifically contained in this Agreement or
other information furnished to AmPaM by the Company or the Stockholders in
writing specifically for inclusion therein.
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim
by a person not a party to this Agreement ("Third Person"), or the commencement
of any action or proceeding by a Third Person, the Indemnified Party shall, as
a condition precedent to a claim with respect thereto being made against any
party obligated to provide indemnification pursuant to Section 11.1 or 11.2
hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or proceeding.
Such notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel reasonably
satisfactory to the Indemnified Party, any such matter so long as the
Indemnifying Party pursues the same in good faith and diligently, provided that
the Indemnifying Party shall not settle any criminal proceeding without the
written consent of the Indemnified Party. If the Indemnifying Party undertakes
to defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to,
furnishing the Indemnifying Party with any books, records or information
reasonably requested by the Indemnifying Party that are in the Indemnified
Party's possession or control. All Indemnified Parties shall use the same
counsel, which shall be the counsel selected by Indemnifying Party, provided
that if counsel to the Indemnifying Party shall have a conflict of interest or
a conflict of interest is reasonably likely to arise that prevents counsel for
the Indemnifying Party from representing such Indemnified Party, Indemnified
Party shall have the right to participate in such matter through counsel of its
own choosing and Indemnifying Party will reimburse the Indemnified Party for
the reasonable expenses of its counsel. After the Indemnifying Party has
notified the Indemnified Party of its intention to undertake to defend or
settle any such asserted liability, and for so long as the Indemnifying Party
diligently pursues such defense, the Indemnifying Party shall not be liable for
any additional legal expenses incurred by the Indemnified Party in connection
with any defense or settlement of such asserted liability, except (i) as set
forth in the preceding sentence and (ii) to the extent such participation is
requested by the Indemnifying Party, in which event the Indemnified Party shall
be reimbursed by the Indemnifying Party for reasonable additional legal
expenses and out-of-pocket expenses. If the Indemnifying Party desires to
accept a final and complete settlement of any such Third Person claim and the
Indemnified Party refuses to consent to such settlement, then the
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Indemnifying Party's liability under this Section with respect to such Third
Person claim shall be limited to the amount so offered in settlement by said
Third Person. Upon agreement as to such settlement between said Third Person
and the Indemnifying Party, the Indemnifying Party shall, in exchange for a
complete release from the Indemnified Party, promptly pay to the Indemnified
Party the amount agreed to in such settlement. If the Indemnifying Party does
not undertake to defend such matter to which the Indemnified Party is entitled
to indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense through counsel of its choice, at
the cost and expense of the Indemnifying Party, and the Indemnified Party may
settle such matter, and the Indemnifying Party shall pay the Indemnified Party
for the settlement amount and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith, provided, however, that under no
circumstances shall the Indemnified Party settle any Third Person claim without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. With respect to any account, note or other
receivable as to which the Stockholders have paid in full any indemnification
obligation pursuant to this Section 11 as a result of a breach of the
representation and warranty made pursuant to Section 5.11 or as to which a
claim in respect thereof has been asserted pursuant to this Section 11 that has
been applied against the Indemnification Threshold with respect to the
Stockholders as a result of a breach of the representation and warranty made
pursuant to Section 5.11, AmPaM shall cause the Company to assign such account,
note or other receivable to the Stockholders. The parties hereto will make
appropriate adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this
Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any
action seeking damages or any other form of monetary relief brought by any
party to this Agreement against another party to this Agreement with respect to
any provision of this Agreement, provided that, nothing herein shall be
construed to limit the right of a party, in a proper case, to seek injunctive
relief for a breach of this Agreement. AmPaM hereby waives, to the fullest
extent permitted under applicable law, any and all other rights, claims and
causes of action, known or unknown, it or any indemnified person may have
against the Company or any Stockholder relating to this Agreement or the
transactions pursuant to this Agreement arising under or based upon any
Federal, state, local or foreign statute, law, rule, regulation or otherwise.
Any indemnity payment under this Section 11 shall be treated as an adjustment
to the exchange consideration for Tax purposes unless a final determination
(which shall include the execution of a Form 870-AD or successor form) with
respect to the Indemnified Party or any of its Affiliate causes any such
payment not to be treated as an adjustment to the exchange consideration for
U.S. Federal income Tax purposes.
11.5 LIMITATIONS ON INDEMNIFICATION. (a) AmPaM shall not assert any
claim for indemnification under this Section 11 against the Stockholders until
such time as, and solely to the extent that, the aggregate of all claims which
AmPaM may have against the Stockholders shall exceed the greater of (a) 3.0% of
the sum of (i) the cash paid to the Stockholders pursuant to Section 1.2 plus
(ii) the value of the AmPaM Stock delivered to the Stockholders pursuant to
Section 1.2
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(calculated as provided in this Section 11.5) plus (iii) the principal amount
of the AmPaM Notes delivered to the Stockholders pursuant to Section 1.2, or
(b) $50,000 (the "Indemnification Threshold"). Stockholders shall not assert
any claim for indemnification hereunder against AmPaM until such time as, and
solely to the extent that, the aggregate of all claims which Stockholders may
have against AmPaM shall exceed $50,000; provided, however, that this sentence
shall not be applicable with respect of any failure by AmPaM to (i) deliver the
consideration specified in Annex I hereto on the Closing Date upon the
satisfaction, or waiver by AmPaM, of all conditions to the occurrence of the
Closing Date specified in Section 9 or (ii) comply with its obligations
pursuant to Section 10.1. After the $50,000 threshold for AmPaM (subject to the
proviso in the preceding sentence) or the Indemnification Threshold for a
Stockholder has been met, all claims must be made in $10,000 increments, which
claims may be cumulated in order to meet such $10,000 thresholds. For purposes
of this paragraph, the AmPaM Stock delivered to the Stockholders shall be
valued at $13.00 per share.
(b) No person shall be entitled to indemnification under this Section
11 if and to the extent that such person's claim for indemnification is
directly or indirectly related to a breach by such person of any
representation, warranty, covenant or other agreement set forth in this
Agreement. No claim for indemnification against the Stockholders shall limit,
diminish or change any obligation of AmPaM pursuant to Section 10.1 hereof.
(c) Notwithstanding any other term of this Agreement, no Stockholder
shall be liable under this Section 11 for an amount which exceeds eighty-five
percent (85%) of the amount of proceeds received by such Stockholder (valued as
of the Closing Date) in connection with the purchase and sale of the Company
Stock. For purposes of this paragraph, the AmPaM Stock shall be valued at
$13.00 per share.
(d) A Stockholder may pay any indemnification obligation under Section
11 by means of the payment of cash or a combination of the payment of cash, the
forgiveness of amounts owed pursuant to the AmPaM Notes and the delivery to
AmPaM of shares of AmPaM Stock; provided that the percentage of the
indemnification obligation satisfied by means of the delivery of shares of
AmPaM Stock does not exceed the percentage of AmPaM Stock comprising the total
consideration paid to such Stockholder by AmPaM to such Stockholder pursuant to
Annex I. For the purpose of crediting Stockholders for payments made to AmPaM
by means of delivery of shares of AmPaM Stock, the AmPaM Stock shall be valued
at $13.00 per share.
(e) In determining the amount of any loss, liability or expense for
which any party is entitled to indemnification under this Agreement, the gross
amount thereof will be reduced by any correlative insurance proceeds or other
third party indemnity or reimbursement proceeds realized or to be realized by
such party (or, in the case of AmPaM, by AmPaM, the Company or any subsidiary
of AmPaM or the Company) and such correlative insurance proceeds or other third
party indemnity or reimbursement proceeds shall be net of any insurance premium
or other incremental cost or expense owed or payable to any third party which
becomes due as a result of such claim. AmPaM shall use commercially reasonable
efforts to pursue any available insurance coverage or other rights of indemnity
or reimbursement from third parties with respect to any such loss, liability or
expense.
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12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing Date solely:
(i) by mutual consent of AmPaM and the Stockholders;
(ii) by the Stockholders, if the transactions contemplated by
this Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by the Company
or the Stockholders prior to or on the Closing Date;
(iii) by AmPaM, if the transactions contemplated by this
Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by AmPaM prior
to or on the Closing Date;
(iv) by the Stockholders, if a material breach or default shall
be made by AmPaM in the observance or in the due and timely
performance of any of the covenants or agreements contained herein
relating to AmPaM, and the curing of such default shall not have been
made (or in the reasonable judgment of such Stockholders cannot be
made) on or before the Closing Date;
(v) by AmPaM, if a material breach or default shall be made by
the Company or the Stockholders in the observance or in the due and
timely performance of any of the covenants or agreements contained
herein relating to the Company or the Stockholders, and the curing of
such default shall not have been made (or in the reasonable judgment
of AmPaM cannot be made) on or before the Closing Date;
(vi) by the Stockholders, if the conditions set forth in Section
8 hereof have not been satisfied or waived as of the Closing Date; or
(vii) by AmPaM, if the conditions set forth in Section 9 hereof
have not been satisfied or waived as of the Closing Date.
12.2 PROCEDURE AND EFFECT OF TERMINATION. A determination to terminate
this Agreement by AmPaM pursuant to Section 12.1 shall be valid and effective
only if a written notice of termination, accompanied by a certified copy of
resolutions of the board of directors of AmPaM that evidence the authorization
of the officer of AmPaM to deliver a written notice of termination of this
Agreement pursuant to Section 12.1, is given to the Stockholders in the manner
specified for notices
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in this Agreement. A determination to terminate this Agreement by the
Stockholders pursuant to Section 12.1 shall be valid and effective only if a
written notice of termination, signed by Stockholders who would be entitled to
receive a majority of the shares of AmPaM Stock specified in Section I of Annex
I to this Agreement if the transactions contemplated hereby were consummated,
is given to AmPaM in the manner specified for notices in this Agreement. Upon
the giving of notice of termination of this Agreement pursuant to Section 12.1
as specified in the preceding sentence, this Agreement shall terminate, and the
transactions contemplated hereby shall be abandoned, without further action by
any of the parties hereto. Immediately upon any such termination, AmPaM shall
deliver written notice of such termination to the Other Founding Companies. If
this Agreement is terminated as provided in this Section 12, no party hereto
shall have any liability or further obligation hereunder to any other party,
except as provided in Section 14 and Section 18.6, provided, that, the
termination of this Agreement will in no way limit any obligation or liability
of any party based on or arising from a breach or default by such party with
respect to any of its representations, warranties, covenants or agreements
contained in this Agreement including, but not limited to, legal and audit
costs and out of pocket expenses that occurred prior to such termination.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The Stockholders will not, without the
prior written consent of AmPaM, for a period of two (2) years following the
Closing Date, for any reason whatsoever, directly or indirectly, for themselves
or on behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, whether paid or unpaid, in any plumbing, piping,
mechanical, heating, ventilation or air conditioning contracting,
installation or services business or operation, whether for
residential, commercial, industrial or governmental customers, or any
ancillary contracting, installation or services business directly
related thereto (such business and operations referred to herein as
the "Plumbing and Mechanical Business"), within 100 miles of where the
Company or any of its subsidiaries conducted business within two (2)
years prior to the Closing Date (the "Territory");
(ii) call upon any person who is, at the Closing Date, within the
Territory, an employee of AmPaM or any subsidiary thereof for the
purpose or with the intent of enticing such employee away from or out
of the employ of AmPaM or any subsidiary thereof;
(iii) call upon any person or entity which is, at the Closing
Date, or which has been within three (3) years prior to the Closing
Date, a customer of AmPaM or any subsidiary thereof, of the Company or
of any of the Other Founding Companies for the purpose of soliciting
customers, orders or contracts for any Plumbing and Mechanical
Business in direct competition with AmPaM within the Territory;
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(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor in the
Plumbing and Mechanical Business, which candidate, to the actual
knowledge of such Stockholder after due inquiry, was called upon by
AmPaM or any subsidiary thereof or for which, to the actual knowledge
of such Stockholder after due inquiry, AmPaM or any subsidiary thereof
made an acquisition analysis, for the purpose of acquiring such
entity; or
(v) disclose to any person, firm, partnership, corporation or
business the names or identities of any person, firm, partnership,
corporation or business which has been a customer of the Company or
any of its subsidiaries within the two (2) years prior to the Closing
Date for any reason or purpose whatsoever except to the extent that
the Company has in the past disclosed such information to the public
for valid business reasons; or
(vi) testify as an expert witness in matters related to the
Plumbing and Mechanical Business for an adverse party to AmPaM, the
Company or any Other Founding Companies in litigation.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Stockholder from acquiring as a passive investment (i) not more
than one percent (1%) of the capital stock of a competing business whose stock
is traded on a national securities exchange, the NASDAQ Stock Market or
over-the-counter, or (ii) not more than five percent (5%) of the capital stock
of a competing business whose stock is not publicly traded if the Board of
Directors of AmPaM consents to such acquisition.
13.2 DAMAGES. Because of the difficulty of measuring economic losses
to AmPaM as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to AmPaM for which it
would have no other adequate remedy, each Stockholder agrees that the foregoing
covenant may be enforced by AmPaM in the event of breach by such Stockholder,
by injunctions and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
Stockholders in light of the activities and business of AmPaM and the
subsidiaries thereof on the date of the execution of this Agreement and the
current plans of AmPaM as described in the Private Placement Memorandum.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent which
the court deems reasonable, and the Agreement shall thereby be reformed.
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13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against AmPaM or any subsidiary thereof, whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by AmPaM of
such covenants. It is specifically agreed that the period of two (2) years
stated at the beginning of this Section 13, during which the agreements and
covenants of each Stockholder made in this Section 13 shall be effective, shall
be computed by excluding from such computation any time during which such
Stockholder is found to be in violation of any provision of this Section 13 as
determined by any of (i) a written agreement to such effect executed and
delivered by AmPaM and such Stockholder, (ii) a determination by an arbitration
panel pursuant to an arbitration conducted pursuant to Section 18.16 hereof or
(iii) a non-appealable judgment of a court of competent jurisdiction. The
covenants contained in Section 13 shall not be affected by any breach of any
other provision hereof by any party hereto. The covenants contained in Section
13 shall have no effect if the transactions contemplated by this Agreement are
not consummated.
13.6 MATERIALITY. The Company and the Stockholders hereby agree that
the covenants contained in this Section 13 are a material and substantial part
of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that
they had in the past, currently have, and in the future may possibly have,
access to certain confidential information of the Company, the Other Founding
Companies, and/or AmPaM, such as operational policies, customer lists, and
pricing and cost policies that are valuable, special and unique assets of the
Company's, the Other Founding Companies' and/or AmPaM's respective businesses.
The Stockholders agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
AmPaM, (b) following the Closing, such information may be disclosed by the
Stockholders as is required in the course of performing their duties for AmPaM
or the Company and (c) to its counsel and other advisers, provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 14.1; provided, however that (i) the foregoing disclosure prohibition
shall not apply in the event that (i) such information becomes known to the
public generally through no fault of the Stockholders, (ii) disclosure is
required by law or the order of any governmental authority under color of law,
provided, that prior to disclosing any information pursuant to this clause
(ii), the Stockholders shall, if possible, give prior written notice thereof to
AmPaM and provide AmPaM with the opportunity to contest such disclosure, or
(iii) the disclosing party reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing party. In
the event of a breach or threatened breach by any of the Stockholders of the
provisions of this Section, AmPaM shall be entitled to an injunction
restraining such Stockholders from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
AmPaM from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages. In the event the transactions
contemplated
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by this Agreement are not consummated, Stockholders shall have none of the
above-mentioned restrictions on their ability to disseminate confidential
information with respect to the Company.
14.2 AmPaM. AmPaM recognizes and acknowledges that it had in the past
and currently has access to certain confidential information of the Company,
such as operational policies, customer lists, and pricing and cost policies
that are valuable, special and unique assets of the Company's business. AmPaM
agrees that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
the Company, (b) to its counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
14.2, (c) to the Other Founding Companies and their representatives pursuant to
Section 7.1(b) of the Other Agreements and (d) to potential purchasers of
securities of AmPaM to the extent necessary or advisable in connection with the
applicable securities laws; provided, however that the foregoing disclosure
prohibition shall not apply in the event that (A) such information becomes
known to the public generally through no fault of AmPaM, (B) disclosure is
required by law or the order of any governmental authority under color of law,
provided, that prior to disclosing any information pursuant to this clause (B),
AmPaM shall, if possible, give prior written notice thereof to the Company and
the Stockholders and provide the Company and the Stockholders with the
opportunity to contest such disclosure, or (C) the disclosing party reasonably
believes that such disclosure is required in connection with the defense of a
lawsuit against the disclosing party. In the event of a breach or threatened
breach by AmPaM of the provisions of this Section 14.2, the Company and the
Stockholders shall be entitled to an injunction restraining AmPaM from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting the Company and the Stockholders from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. In the event the transactions contemplated
by this Agreement are not consummated for any reason, AmPaM shall nevertheless
remain subject to this Section 14.2, except that it shall not be permitted to
make any disclosures otherwise than pursuant to clause (A), (B) or (C) above.
14.3 DAMAGES. Because of the difficulty of measuring economic losses
as a result of the breach of the foregoing covenants in Sections 14.1 and 14.2,
and because of the immediate and irreparable damage that would be caused for
which they would have no other adequate remedy, the parties hereto agree that,
in the event of a breach by any of them of the foregoing covenants, the
covenant may be enforced against the other parties by injunctions and
restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14
shall survive the termination of this Agreement for a period of five years from
the Closing Date.
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14.5 RETURN OF INFORMATION. If the transactions contemplated by this
Agreement are not consummated, AmPaM will return or destroy all confidential
information regarding the Company.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS RELATING TO AmPaM STOCK AND AmPaM NOTES.
For a period of two years from the Closing Date or, in the event that the
Company completes an IPO, for a period through the second anniversary of the
date of the closing of such IPO (the "Restricted Period"), no Stockholder shall
(i) sell, assign, exchange, transfer, pledge, or otherwise dispose of any
shares of AmPaM Stock or AmPaM Notes received by the Stockholders pursuant to
this Agreement or any securities convertible into, exchangeable or exercisable
for any shares of AmPaM Stock or AmPaM Notes received by such Stockholder
pursuant to this Agreement, (ii) grant any option to purchase, or otherwise
enter into any contract to sell, assign, transfer, pledge or otherwise dispose
of, any shares of AmPaM Stock or AmPaM Notes received by such Stockholder
pursuant to this Agreement, or (iii) enter into any swap or any other agreement
or any transaction that transfers, in whole or in part, directly or indirectly,
the economic consequence of ownership of the AmPaM Stock or AmPaM Notes,
whether any such swap or transaction is to be settled by delivery of shares of
AmPaM Stock or AmPaM Notes or other securities, by the delivery or payment of
cash or otherwise, except, in the case of clauses (i), (ii) or (iii) above, (A)
as otherwise agreed by AmPaM, (B) for the sale of shares of AmPaM Stock, and
entering into agreements relating to the sale of shares of AmPaM Stock,
pursuant to Section 17 hereof, (C) for transfers to (I) immediate family
members of such Stockholder who agree with AmPaM in writing to be bound by the
restrictions set forth in this Section 15.1, (II) trusts, limited partnerships
or other estate planning entities for the benefit of such Stockholder or family
members of such Stockholder which have agreed with AmPaM in writing, through
action taken by the trustees, partners or other persons having authority to
bind the trust, limited partnership or other estate planning entity, to be
bound by the restrictions set forth in this Section 15.1, (III) any charitable
organization that qualifies for receipt of charitable contributions under
Section 170(c) of the Code which agrees with AmPaM in writing to be bound by
the restrictions set forth in this Section 15.1, (D) for transfers of AmPaM
Stock or AmPaM Notes to AmPaM pursuant to Section 11.5(d), (E) for transfers to
another Stockholder, to another person or entity who receives shares of AmPaM
Stock or AmPaM Notes or AmPaM Series A Preferred Stock pursuant to the Other
Agreements or to Sterling City Capital LLC or any of its Affiliates provided
that (1) such transaction is exempt from the registration requirements of the
1933 Act as evidenced by the delivery to AmPaM of an opinion of counsel in form
and substance reasonably satisfactory to AmPaM and (2) any such transferee
agrees in writing to be bound by the restrictions set forth in this Section
15.1, (F) transfers of shares of AmPaM Notes, shares of AmPaM Stock, or grants
of options to purchase shares of AmPaM Stock, by such Stockholder to employees
of the Company of up to an aggregate of 15% of the shares of AmPaM Stock
received by such Stockholder pursuant to this Agreement provided that (1) any
such transaction is exempt from the registration requirements of the 1933 Act
as evidenced by the delivery to AmPaM of an opinion of counsel in form and
substance reasonably satisfactory to AmPaM and (2) any such employee agrees
with AmPaM in writing to be bound by the restrictions set forth in this Section
15.1 or (G) the sale by such Stockholder in an IPO of shares of AmPaM Stock
representing not more than 10% of the Aggregate Consideration in cash;
provided,
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however, that in no circumstance will a Stockholder be entitled to sell shares
of AmPaM Stock in an IPO to the extent that the sale of such shares by such
Stockholder would result in such Stockholder receiving in excess of 45% of the
Aggregate Consideration in cash; and, provided further, if AmPaM is advised in
writing in good faith by any managing underwriter of an underwritten offering
of the securities being offered pursuant to any registration statement under
Section 17.1 that the number of shares to be sold by persons other than AmPaM
is greater than the number of such shares which can be offered without
adversely affecting the success of the offering, AmPaM may reduce pro rata
(among the Stockholders and all other selling security holders in the offering)
the number of shares offered for the accounts of such persons (based upon the
number of shares held by such person) to a number deemed satisfactory by such
managing underwriter. During the Restricted Period, the certificates evidencing
the AmPaM Stock or AmPaM Notes delivered to the Stockholders pursuant to
Section 3 of this Agreement will bear a legend substantially in the form set
forth below:
THE [SHARES/NOTES] REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE
TERMS OF THE ACQUISITION AGREEMENT PURSUANT TO WHICH SUCH SHARES WERE ISSUED,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, PLEDGE OR OTHER DISPOSITION PRIOR TO EXPIRATION
OF THE RESTRICTED PERIOD REFERRED TO IN THE ACQUISITION AGREEMENT EXCEPT IN
ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT. SUCH RESTRICTIONS ON TRANSFER ARE
SET FORTH IN AN ACQUISITION AGREEMENT, A COPY OF WHICH IS MAINTAINED AT THE
PRINCIPAL OFFICES OF THE ISSUER. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 TRANSFER RESTRICTIONS RELATING TO ADDITIONAL CONSIDERATION. No
Stockholder shall (i) sell, assign, exchange, transfer, pledge, or otherwise
dispose of any right to receive any consideration pursuant to Section II of
Annex I to this Agreement (the "Additional Consideration Right") or any
securities convertible into, exchangeable or exercisable for any Additional
Consideration Right, (ii) grant any option to purchase, or otherwise enter into
any contract to sell, assign, transfer, pledge or otherwise dispose of, any
Additional Consideration Right, or (iii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of any Additional
Consideration Right, whether any such swap or transaction is to be settled by
delivery of shares of AmPaM Stock or other securities, by the delivery or
payment of cash or otherwise.
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16. FEDERAL SECURITIES ACT REPRESENTATIONS
16.1 COMPLIANCE WITH LAW. Each Stockholder acknowledges that the
shares of AmPaM Stock, the Additional Consideration Right and any AmPaM Notes
to be delivered to such Stockholder pursuant to this Agreement have not been
and will not be registered under the 1933 Act (except as provided in Section 17
hereof) and therefore may not be sold, assigned, exchanged, transferred,
pledged or otherwise disposed of without compliance with the 1933 Act which,
among other matters, would require registration under the 1933 Act unless
exemption from the registration requirements is available for such transaction.
The AmPaM Stock, the Additional Consideration Right and any AmPaM Notes to be
acquired by each Stockholder pursuant to this Agreement is being acquired
solely for such Stockholder's own account, for investment purposes only, and
with no present intention of selling, assigning, exchanging, transferring,
pledging, or otherwise disposing of it. Each Stockholder covenants, warrants
and represents that neither the shares of AmPaM Stock, the Additional
Consideration Right nor any AmPaM Notes issued to such Stockholder will be
offered, sold, assigned, exchanged, pledged, transferred or otherwise disposed
of except after full compliance with all of the applicable provisions of the
1933 Act and the rules and regulations of the SEC. All certificates
representing the AmPaM Stock shall bear the following legend in addition to the
legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each Stockholder is able to bear
the economic risk of an investment in the AmPaM Stock and AmPaM Notes to be
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment. Each Stockholder has substantial knowledge and experience in
making investment decisions of this type (or is relying on qualified purchaser
representatives with such knowledge and experience in making this decision),
and is capable, either individually or with such purchaser representatives, of
evaluating the merits and risks of this investment. Each Stockholder has had an
adequate opportunity to ask questions and receive answers from the officers of
AmPaM concerning any and all matters relating to the transactions described
herein including, without limitation, the background and experience of the
current and proposed officers and directors of AmPaM, the plans for the
operations of the business of AmPaM, the business, operations and financial
condition of the Founding Companies other than the Company, and any plans for
additional acquisitions. Each Stockholder has asked any and all questions of
the nature described in the preceding sentence and all questions have been
answered to such Stockholder's satisfaction. Except as set forth on Schedule
16.2, each Stockholder is an "accredited investor" as defined in Rule 501(a) of
the 1933 Act. Neither the foregoing nor any investigation made by the
Stockholders referred to above shall in any way affect the representations,
warranties, covenants and agreements of AmPaM made herein except to the extent
that AmPaM is relying upon the representations of the Stockholders in Section
16.1 and in this Section 16.2 for purposes of AmPaM's representations and
warranties in Sections 6.9, 6.11, 6.15 and 6.17 hereof as specified therein.
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16.3 RELIANCE BY AmPaM. Each Stockholder acknowledges that AmPaM in
relying upon the representations and covenants of such Stockholder set forth in
Section 16.1 and Section 16.2 for purposes of compliance by AmPaM with Federal
and state securities laws related to the issuance of AmPaM Stock pursuant to
this Agreement and the Other Agreements.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. Whenever AmPaM proposes to
register any AmPaM Stock for its own or other's account under the 1933 Act for
a public offering, other than (i) any shelf or other registration of shares to
be used as consideration for acquisitions of additional businesses by AmPaM and
(ii) registrations relating to employee benefit plans, AmPaM shall give each of
the Stockholders prompt written notice of its intent to do so. Upon the written
request of any of the Stockholders given within 15 calendar days after receipt
of such notice, notwithstanding the provisions of Section 15 (except as
specified below with respect to an IPO), AmPaM shall cause to be included in
such registration all of the AmPaM Stock issued to such Stockholders pursuant
to this Agreement (including any stock issued as or issuable upon the
conversion or exchange of any convertible security, warrant, right or other
security which is issued by AmPaM as a stock split, dividend or other
distribution with respect to, or in exchange for, or in replacement of such
AmPaM Stock) which any such Stockholder requests, other than shares of AmPaM
Stock which may then be immediately sold under Rule 144(k) (or any similar or
successor provision) promulgated under the 1933 Act, and other than shares of
AmPaM Stock that have been theretofore sold by the Stockholder in accordance
with the 1933 Act, provided that AmPaM shall have the right to reduce pro rata
the number of shares of each selling Stockholder included in such registration
to the extent that inclusion of such shares would, in the written opinion of
tax counsel to AmPaM or its independent auditors, jeopardize the status of the
transactions contemplated hereby and by the Private Placement Memorandum as a
tax-free organization under Section 351 of the Code; provided, however, that
with respect to a proposal by AmPaM to register AmPaM Stock under the 1933 Act
in connection with an IPO, no Stockholder shall be permitted pursuant to this
Section 17.1 to have included in such registration more shares of AmPaM Stock
than permitted to be sold by such Stockholder pursuant to Section 15.1. In
addition, if AmPaM is advised in writing in good faith by any managing
underwriter of an underwritten offering of the securities being offered
pursuant to any registration statement under this Section 17.1 that the number
of shares to be sold by persons other than AmPaM is greater than the number of
such shares which can be offered without adversely affecting the success of the
offering, AmPaM may reduce pro rata (among the Stockholders and all other
selling security holders in the offering) the number of shares offered for the
accounts of such persons (based upon the number of shares held by such person)
to a number deemed satisfactory by such managing underwriter. If any
Stockholder disapproves of the terms of the underwriting, that Stockholder may
elect to withdraw therefrom by written notice to AmPaM and the managing
underwriter. That Stockholder's shares of AmPaM Stock so withdrawn shall also
be withdrawn from registration; provided, however, that, if by the withdrawal
of such shares a greater number of shares of AmPaM
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Stock held by other Stockholders may be included in such registration, then
AmPaM shall offer to all other Stockholders of AmPaM the right to include
additional shares in the same proportion used in effecting the above
limitations. AmPaM shall not, for a period of two years following the Closing
Date, grant to any other person any rights to cause AmPaM to register any
securities in priority over, or in precedent to, the rights granted to the
Stockholders hereunder and to the stockholders of the Other Founding Companies
pursuant to Section 17 of the Other Agreements.
17.2 REGISTRATION PROCEDURES. Whenever AmPaM is required to register
shares of AmPaM Stock pursuant to Section 17.1, AmPaM will, as expeditiously as
possible:
(i) Prepare and file with the SEC a registration statement with
respect to such shares and use its best efforts to cause such
registration statement to become effective (provided that before
filing a registration statement or prospectus or any amendments or
supplements or term sheets thereto, AmPaM will furnish a
representative of the Stockholders with copies of all such documents
proposed to be filed) as promptly as practical;
(ii) Notify the Stockholders of any stop order issued or
threatened by the SEC and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered;
(iii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 120 days, cause the
prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the 1933
Act; and comply with the provisions of the 1933 Act applicable to it
with respect to the disposition of all securities covered by such
registration statement during the applicable period in accordance with
the intended methods of disposition by the sellers thereof set forth
in such registration statement or supplement to the prospectus;
(iv) Furnish to each Stockholder who so requests such number of
copies of such registration statement, each amendment and supplement
thereto and the prospectus included in such registration statement
(including each preliminary prospectus and any term sheet associated
therewith), and such other documents as such Stockholder may
reasonably request in order to facilitate the disposition of the
relevant shares;
(v) Make "generally available to its security holders" (within
the meaning of Rule 158) an earnings statement satisfying the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder no
later than 90 days after the end of the 12-month period beginning with
the first day of AmPaM's first fiscal quarter commencing after the
effective date of the registration statement;
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(vi) Make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at
the earliest possible moment;
(vii) If requested by the managing underwriter or underwriters,
if any, or any participating Stockholder, promptly incorporate in a
prospectus supplement or post-effective amendment such information as
the managing underwriter or underwriters or any participating
Stockholder, as the case may be, reasonably requests to be included
therein, including, without limitation, information with respect to
the number of shares of AmPaM Stock being sold by participating
Stockholders to any underwriter or underwriters, the purchase price
being paid therefor by such underwriter or underwriters and with
respect to any other terms of an underwritten offering of the shares
of AmPaM Stock to be sold in such offering, and promptly make all
required filings of such prospectus by supplement or post-effective
amendment;
(viii) Make available for inspection by participating
Stockholders, any underwriter participating in any disposition
pursuant to such registration statement, and the counsel retained by
the participating Stockholders, counsel for the underwriters and any
accountant or other agent retained by participating Stockholders or
any such underwriter (collectively, the "Inspectors"), all financial
and other records, pertinent corporate documents and properties of
AmPaM (the "Records"), as shall be reasonably necessary to enable them
to exercise their due diligence responsibility, and cause AmPaM's
officers, directors and employees to supply all information reasonably
requested by any such Inspectors in connection with such registration
statement; provided, that records which AmPaM determines, in good
faith, to be confidential and which AmPaM notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or (ii) the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction after delivery of
sufficient notice to AmPaM to enable AmPaM to contest such subpoena or
order;
(ix) Take all other steps reasonably necessary to effect the
registration of the shares of AmPaM Stock contemplated hereby;
(x) Use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested
by the Stockholders, and to keep such registration or qualification
effective during the period such registration statement is required to
be kept effective, provided that AmPaM shall not be required to become
subject to taxation, to qualify generally to do business or to file a
general consent to service of process in any such states or
jurisdictions;
(xi) Cause all such shares of AmPaM Stock to be listed or
included not later than the date of the first sale of shares of AmPaM
Stock under such registration statement on any securities exchanges or
trading systems on which similar securities issued by AmPaM are then
listed or included; and
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(xii) Notify each Stockholder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within
the period that AmPaM is required to keep the registration statement
effective of the happening of any event as a result of which the
prospectus included in such registration statement (as then in
effect), together with any associated term sheet, contains an untrue
statement of a material fact or omits to state any fact required to be
stated therein or necessary to make the statements therein (in the
case of the prospectus or any preliminary prospectus, in light of the
circumstances under which they were made) not misleading, and, at the
request of such Stockholder, AmPaM promptly will prepare a supplement
or amendment to such prospectus so that, as thereafter delivered to
the purchasers of the covered shares, such prospectus will not contain
an untrue statement of material fact or omit to state any fact
required to be stated therein or necessary to make the statements
therein (in the case of the prospectus or any preliminary prospectus,
in light of the circumstances under which they were made) not
misleading.
All expenses incurred in connection with the registration under this
Article 17 and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printer and
accounting fees, but excluding underwriting commissions and discounts), shall
be borne by AmPaM.
17.3 INDEMNIFICATION.
(a) In connection with any registration under Section 17.1,
AmPaM shall indemnify, to the extent permitted by law, each selling Stockholder
(an "Indemnified Party") against all losses, claims, damages, liabilities and
expenses arising out of or resulting from any untrue or alleged untrue
statement of material fact contained or incorporated by reference in any
registration statement, prospectus or preliminary prospectus or associated term
sheet or any omission or alleged omission to state or incorporated by reference
therein a material fact required to be stated or incorporated by reference
therein or necessary to make the statements therein not misleading except
insofar as the same are caused by or contained in or omitted from any
information furnished in writing to AmPaM by such Indemnified Party expressly
for use therein or by any Indemnified Parties' failure to deliver a copy of the
registration statement or prospectus or any amendment or supplements thereto
after AmPaM has furnished such Indemnified Party with a sufficient number of
copies of the same.
(b) In connection with any registration under Section 17.1,
each selling Stockholder shall furnish to AmPaM in writing such information
concerning the Stockholder and his or her proposed offering of shares as is
reasonably requested by AmPaM for use in any such registration statement or
prospectus and will indemnify, to the extent permitted by law, AmPaM, its
directors and officers and each person who controls AmPaM (within the meaning
of the 1933 Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged
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untrue statement of a material fact or any omission or alleged omission to
state therein a material fact required to be stated in the registration
statement or prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein not misleading, but only to the extent
that such untrue or alleged untrue statement or omission or alleged omission is
contained in or omitted from information so furnished in writing to AmPaM by
such Stockholder expressly for use in the registration statement.
Notwithstanding the foregoing, the liability of a Stockholder under this
Section 17.3 shall be limited to an amount equal to the net proceeds actually
received by such Stockholder from the sale of the relevant shares covered by
the registration statement.
(c) Any person entitled to indemnification hereunder will (i)
give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) unless in such indemnified parties'
reasonable judgment, a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. Any failure to give prompt notice shall
deprive a party of its right to indemnification hereunder only to the extent
that such failure shall have adversely affected the indemnifying party. If the
defense of any claim is assumed, the indemnifying party will not be subject to
any liability for any settlement made without its consent (but such consent
shall not be unreasonably withheld). An indemnifying party that is not entitled
or elects not, to assume the defense of a claim, will not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party, a conflict of interest may exist between
such indemnified party and any other of such indemnified parties with respect
to such claim.
17.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 17.1 covering an underwritten registered offering, (i)
each participating Stockholder shall execute and deliver to AmPaM a written
power of attorney instrument that (A) appoints an officer of AmPaM as such
Stockholder's attorney-in-fact for purposes of executing and delivering an
underwriting agreement among AmPaM, the underwriters named therein and such
Stockholder specifying the terms and conditions applicable to the sale of AmPaM
Stock of such Stockholder in such offering and (B) otherwise is in such form
and containing such provisions as are customary in the securities business for
such an arrangement in connection with an underwritten registered offering in
which one or more stockholders of the issuer are participants, including a
provision that authorizes the attorney-in-fact appointed by such Stockholder to
execute and deliver such an underwriting agreement in the event that the net
price per share to be received by such Stockholder from the sale of the shares
of AmPaM Stock to be sold in such offering is not less than a price specified
in such instrument and (iii) AmPaM and each participating Stockholder agree to
enter into a written agreement with the managing underwriters in such form and
containing such provisions as are customary in the securities business for such
an arrangement between such managing underwriters and companies of AmPaM's size
and investment stature, including indemnification; provided, however, that (A)
such Stockholder shall be exempt and excluded from any indemnification of the
managing underwriters other than with respect to information provided by such
Stockholder with respect to such Stockholder to AmPaM or the managing
underwriters
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specifically for inclusion in any such registration statement and (B) such
Stockholder shall not be obligated to enter into such an underwriting agreement
in the event that the net price per share to be received by such Stockholder
from the sale of shares of AmPaM Stock to be sold in such offering is less than
the floor price specified in the power of attorney instrument executed and
delivered to AmPaM pursuant to clause (i) above.
17.5 TRANSFER OF RIGHTS. The right to cause AmPaM to register shares
of AmPaM Stock under this Agreement may be assigned to a transferee or assignee
of any Stockholder to the extent that such transferee or assignee is a member
of the immediate family of a Stockholder, a trust, limited partnership or other
estate planning entity for the benefit of any such persons or a charitable
organization that qualifies for receipt of charitable contributions under
Section 170(c) of the Code.
17.6 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC that may permit the sale of AmPaM
stock to the public without registration, following an IPO AmPaM agrees to use
its reasonable efforts, from and after the completion of an IPO, to:
(i) make and keep public information regarding AmPaM available as
those terms are understood and defined in Rule 144 under the 1933 Act
beginning 90 days following the effective date of a registration
statement relating to an IPO;
(ii) file with the SEC in a timely manner all reports and other
documents required of AmPaM under the 1933 Act and the 1934 Act at any
time after it has become subject to such reporting requirements; and
(iii) so long as a Stockholder owns any restricted AmPaM Stock,
furnish to each Stockholder forthwith upon written request a written
statement by AmPaM as to its compliance with the current public
information requirements of Rule 144 (at any time from and after 90
days following the effective date of a registration statement relating
to an IPO), and of the 1933 Act and the 1934 Act (any time after it
has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of AmPaM, and such other reports and
documents so filed as a Stockholder may reasonably request in availing
itself of any rule or regulation of the SEC allowing a Stockholder to
sell any such shares without registration.
18. REDEMPTION OF AmPaM STOCK
18.1 REDEMPTION TRIGGER. In the event that, within three years of the
Closing Date, (i) AmPaM has not consummated an IPO and (ii) any Stockholder has
not received cash (including proceeds from the public or private sale of AmPaM
Stock received as consideration hereunder and the receipt of principal
payments, if any, made with respect to AmPaM Notes held by such Stockholder)
equal to or exceeding 50% of the Aggregate Consideration on or prior to the
third anniversary of the Closing Date, such Stockholder shall have the right
(the "Put Right"), but not the
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obligation, commencing on the third anniversary of the Closing Date to require
AmPaM to purchase a number of shares of AmPaM Stock then owned by such
Stockholder, subject to the limitations set forth in Section 18.2 below. The
purchase price for such redemption shall be $13.00 per share, such price to be
subject to appropriate adjustment to reflect any reclassification, stock
dividend, subdivision, split-up or combination of shares of AmPaM Stock after
the date hereof.
18.2 MINIMUM REDEMPTION; LIMITATIONS. If the events specified in
Section 18.1(i) and 18.1(ii), with Section 18.1(ii) being determined on an
individual Stockholder basis, have not occurred within the time specified,
AmPaM shall be obligated to purchase from each eligible Stockholder no less
than 10% of the AmPaM Stock held by such Stockholder annually; provided,
however, that the Stockholders shall not be entitled to exercise their Put
Rights if and to the extent the Company has not achieved the Target Net Income
(as defined in Annex I hereto) for the year preceding the year in which a
Stockholder seeks to exercise his Put Right. The redemptions will be funded by
internal cash flows or alternative financing arrangements but AmPaM's
obligation to make any redemption pursuant to this Section 18 will be subject
to the covenants and restrictions contained in AmPaM's then existing private or
public debt or equity instruments.
18.3 NOTICE; EXERCISE. The Stockholders may exercise their Put Right
by giving written notice (the "Put Notice") to AmPaM within thirty (30) days of
the third anniversary of the execution hereof. If any Stockholder does not
provide AmPaM with a Put Notice within such thirty-day period, the Put Right
applicable to such Stockholder shall expire. The date for closing the sale of
any shares of AmPaM Stock pursuant to a proper exercise of a Put Right shall in
no event be earlier than 90 days after the date AmPaM receives the Put Notice.
Any such closing shall be at such time of day and place as shall be mutually
agreed between such holder and AmPaM. At such closing AmPaM shall make payment
for the AmPaM Stock to be repurchased by wire transfer of immediately available
funds to a bank account designated by such Stockholder for such purpose and
such Stockholder shall deliver to AmPaM certificates, duly endorsed for
transfer, representing the shares of AmPaM Stock to be purchased and sold
pursuant to the exercise of such Put Right.
18.4 ADDITIONAL REDEMPTIONS. In the event AmPaM has not consummated an
IPO and notwithstanding the foregoing, to the extent the Stockholders who have
received greater than 50% of their Aggregate Consideration in cash wish to
tender AmPaM Stock to AmPaM for purchase, AmPaM will use its commercially
reasonable efforts to continue to repurchase up to 10% of the AmPaM Stock held
by such Stockholder annually.
18.5 TERMINATION OF REDEMPTION OBLIGATION. Put Rights with respect to
any individual Stockholder will terminate upon receipt by such Stockholder of
50% of his Aggregate Consideration in cash; such termination will not, however,
limit such Stockholders ability to participate in the additional redemptions
provided in Section 18.4. Notwithstanding the foregoing, all of AmPaM's
redemption obligations contained in this Section 18 shall terminate on the
earlier to occur of (i) an IPO, (ii) any sale of all or substantially all of
AmPaM's assets in one transaction or series of transactions, (iii) any merger
or consolidation which involves AmPaM and in which AmPaM is not the surviving
entity or (iv) any transaction after which the shares of AmPaM Common Stock, if
any,
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which are then held by persons other than the holders of AmPaM Common Stock as
of the Closing Date constitute 50% or more of AmPaM Common Stock outstanding as
of the date of the consummation of such transaction.
19. GENERAL
19.1 COOPERATION. The Company, Stockholders and AmPaM shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The Company will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the Company cooperate
with AmPaM on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law and except as
provided in Section 17.5) and shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of AmPaM and the Company, and the
heirs, successors and legal representatives of the Stockholders.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the
Stockholders, the Company and AmPaM and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the Stockholders, the Company and AmPaM,
acting through their respective officers or trustees, duly authorized by their
respective Boards of Directors. Any disclosure made on any Schedule delivered
pursuant hereto shall be deemed to have been disclosed for purposes of any
other Schedule required hereby, provided that the Company shall make a good
faith effort to cross reference disclosure, as necessary or advisable, between
related Schedules.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in
two (2) or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument. A
telecopied facsimile of an executed counterpart of this Agreement shall be
sufficient to evidence the binding agreement of each party to the terms hereof.
However, each party agrees to return to the other parties an original, duly
executed counterpart of this Agreement promptly after delivery of a telecopied
facsimile thereof.
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19.5 BROKERS AND AGENT. Except as disclosed on Schedule 18.5, each
party hereto represents and warrants that it employed no broker or agent in
connection with this transaction and agrees to indemnify the other parties
hereto against all loss, cost, damages or expense arising out of claims for
fees or commission of brokers employed or alleged to have been employed by such
indemnifying party.
19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, AmPaM will pay the reasonable fees, expenses and
disbursements of AmPaM and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto, including all costs and expenses incurred in the
performance and compliance with all conditions to be performed by AmPaM under
this Agreement, including the fees and expenses of Arthur Andersen LLP, Andrews
& Kurth L.L.P., and any other person or entity retained by AmPaM, and the costs
of preparing the Private Placement Memorandum incurred in connection with the
subject matter of this Agreement and any amendments thereto. In addition,
whether or not the transactions contemplated herein shall be consummated, AmPaM
will pay the reasonable fees and expenses of Bracewell & Patterson LLP incurred
on behalf of the Company and the Stockholders in connection with the subject
matter of this Agreement. Whether or not the transactions herein contemplated
shall be consummated, the Company will pay all of its costs and expenses
incurred on behalf of the Company and the Stockholders in connection with the
subject matter of this Agreement except that (i) the Company shall not be
required to pay any of the costs, fees and expenses specified above as to which
AmPaM is responsible for the payment thereof and (ii) neither the Company nor
the Stockholders shall be responsible for the payment of the costs, fees and
expenses incurred by or on behalf of AmPaM. Whether or not the transactions
herein contemplated shall be consummated, AmPaM shall reimburse Sterling City
Capital, LLC (or any person or entity which is an Affiliate thereof) for any of
the foregoing fees, expenses and disbursements paid by Sterling City Capital,
LLC (or any person or entity which is an Affiliate thereof) and shall repay
Sterling City Capital, LLC (or any person or entity which is an Affiliate
thereof) for any loans or advances made by Sterling City Capital, LLC (or any
person or entity which is an Affiliate thereof) for the purpose of providing
AmPaM funds to pay any such fees, expenses and disbursements, provided that
such reimbursement and loan repayment obligation shall be limited to the
foregoing fees, expenses, and disbursements which are out-of-pocket expenses of
AmPaM, Sterling City Capital, LLC or any person or entity which is an Affiliate
thereof. Sterling City Capital, LLC shall be reimbursed by AmPaM in the form of
AmPaM Notes. AmPaM retains the right, within a reasonable period following the
Closing Date, to conduct an audit of the expenses for which Sterling City
Capital, LLC is reimbursed. Each Stockholder shall pay all sales, use,
transfer, real property transfer, recording, gains, stock transfer and other
similar taxes and fees ("Transfer Taxes") imposed in connection with the
purchase and sale of the Company Stock, other than Transfer Taxes, if any,
imposed by the State of Delaware. Each Stockholder shall file all necessary
documentation and Returns with respect to such Transfer Taxes. In addition,
each Stockholder acknowledges that he, and not the Company or AmPaM, will pay
all Taxes due by him upon receipt of the consideration payable pursuant to
Section 1 hereof. The Stockholders acknowledge that the risks of the
transactions contemplated hereby include Tax risks, with respect to which the
Stockholders are relying substantially on the opinion contemplated by Section
8.12 hereof and representations by AmPaM in this Agreement.
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19.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the
same in person or via a nationally recognized courier service to an officer or
agent of such party.
(a) If to AmPaM addressed to it at:
American Plumbing & Mechanical, Inc.
515 Post Oak Blvd., Suite 450
Houston, Texas 77027
Attention: Chief Executive Officer
with copies to:
Thomas P. Mason
Andrews & Kurth L.L.P.
4200 Chase Tower
Houston, Texas 77002
(b) If to the Stockholders, addressed to them at their addresses
set forth on the signature pages hereto.
(c) If to the Company, addressed to it at:
Bill Gehman
Miller Mechanical Contractors, Inc.
1976 Airport Industrial Park Dr.
Marietta, Georgia 30062
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Texas, excluding any conflicts of law, rule or
principle that might refer same to the laws of another jurisdiction.
19.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated
hereby and any examination on behalf of the parties until the respective
Expiration Dates referred to herein with respect thereto or, if no Expiration
Date is applicable with respect thereto, until the expiration of all applicable
statute of limitations periods.
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19.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or
of any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.11 TIME. Time is of the essence with respect to this Agreement.
19.12 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.
19.13 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
19.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived only
with the written consent of AmPaM, the Company and Stockholders who would
receive a majority of the Aggregate Consideration specified in Section I of
Annex I to this Agreement if the transactions contemplated hereby were
consummated. Any amendment or waiver effected in accordance with this Section
19.15 shall be binding upon each of the parties hereto, any other person
receiving AmPaM Stock in connection with the purchase and sale of the Company
Stock and each future holder of such AmPaM Stock. Any consent of the
Stockholders who would receive a majority of the shares of the Aggregate
Consideration pursuant to Section I of Annex I of this Agreement if the
transactions contemplated hereby were consummated shall be deemed to be the
consent of the Stockholders for purposes of provisions of this Agreement as to
which a consent of the Stockholders may be requested or required.
19.16 MEDIATION AND ARBITRATION. If a dispute arises out of or relates
to this Agreement, or the breach thereof, and if said dispute cannot be settled
through direct discussions, the parties agree to first endeavor to settle the
dispute in an amicable manner by mediation administered by the American
Arbitration Association under its then prevailing Commercial Mediation Rules,
before resorting to arbitration. Thereafter, any unresolved controversy or
claim arising out of or relating
63
<PAGE> 72
to this Agreement, or the breach thereof, shall be settled by arbitration
administered by the American Arbitration Association in accordance with its
then prevailing Commercial Arbitration Rules. The enforcement, interpretation
and procedural and substantive effect of the obligation to arbitrate created by
this Section 19.16 shall be governed by the Federal Arbitration Act as amended
from time to time, 9 U.S.C. Section 1 et seq. The parties hereby disclaim any
intention to have the substantive or procedural law of any state or other
jurisdiction, other than the law of the United States as embodied in the
Federal Arbitration Act, applied to such obligation. Any such mediation or
arbitration proceeding will be conducted in Houston, Texas.
19.17 INFORMATION PROVIDED FOR PRIVATE PLACEMENT MEMORANDUM. For
purposes of this Agreement, the information provided by the Company in writing
specifically for inclusion in the Private Placement Memorandum shall include
solely (i) the Financial Statements (in the form that they appear in the
Private Placement Memorandum), (ii) any financial statements provided to AmPaM
pursuant to Section 7.9, (iii) the description of the Company contained in the
Private Placement Memorandum under the caption "The Company", (iv) the
description of the Company's results of operations and its liquidity and
capital resources, if any, contained in the Private Placement Memorandum under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and (v) the description, if any, of matters related to
the Company contained in the Private Placement Memorandum under the caption
"Certain Transactions Transactions involving Certain Officers, Directors and
Stockholders". For purposes of this Agreement, the information provided by a
Stockholder in writing specifically for inclusion in the Private Placement
Memorandum shall include only (i) the description, if any, of matters related
to such Stockholder contained in the Private Placement Memorandum under the
caption "Certain Transactions - Transactions involving Certain Officers,
Directors and Stockholders" and (ii) the biographical description of such
Stockholder, if any, contained in the Private Placement Memorandum under the
caption "Management."
19.18 EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective upon (i) the execution and delivery of this Agreement by all of the
parties hereto and (ii) the delivery to AmPaM of each Employment Agreement
attached hereto as Annex VI executed by each of the Company, the employees
named therein and AmPaM.
64
<PAGE> 73
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AMERICAN PLUMBING & MECHANICAL, INC.
By: /s/ DAVID BAGGETT
-------------------------------------
Name: David Baggett
-----------------------------------
Title: Chief Financial Officer
----------------------------------
MILLER MECHANICAL CONTRACTORS, INC.
By: /s/ JOSEPH H. MILLER
-------------------------------------
Joseph H. Miller
President
[Remainder of page intentionally left blank]
65
<PAGE> 74
STOCKHOLDERS: SPOUSES (WITHOUT PERSONAL LIABILITY AND
SOLELY TO ACKNOWLEDGE THE SALE OF THE
COMPANY STOCK BY THE STOCKHOLDER):
/s/ JOSEPH H. MILLER /s/ LENA R. MILLER
- ------------------------------- ----------------------------------------
Joseph H. Miller Lena R. Miller
1244 Timberland Drive
Marietta, Georgia 30067
/s/ JOSEPH E. MILLER /s/ ALICE M. MILLER
- ------------------------------- ----------------------------------------
Joseph E. Miller Alice M. Miller
4450 Club Lake Circle
Marietta, Georgia 30067
66
<PAGE> 1
EXHIBIT 10.10
Execution Copy
- --------------------------------------------------------------------------------
ACQUISITION AGREEMENT
dated as of the 11th day of February, 1999
by and among
AMERICAN PLUMBING & MECHANICAL, INC.
R.C.R. PLUMBING, INC.
and
all of the STOCKHOLDERS of R.C.R. PLUMBING, INC.
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS .........................................................................................................1
1. ACQUISITION OF STOCK.....................................................................................5
1.1 Acquisition.....................................................................................5
1.2 Consideration...................................................................................5
1.3 Certain Information With Respect to the Capital Stock of the Company
and AmPaM.......................................................................................5
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY...........................................................5
2.1 Board of Directors..............................................................................5
2.2 Officers........................................................................................5
3. DELIVERY OF CONSIDERATION................................................................................6
3.1 Stockholders' Consideration.....................................................................6
3.2 Stockholders' Deliveries........................................................................6
4. CLOSING..................................................................................................6
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................6
5.1 Due Organization................................................................................7
5.2 Authorization...................................................................................7
5.3 Capital Stock of the Company....................................................................7
5.4 Transactions in Capital Stock...................................................................8
5.5 No Bonus Shares.................................................................................8
5.6 Subsidiaries; Ownership in Other Entities.......................................................8
5.7 Predecessor Status; etc.........................................................................8
5.8 Spin-off by the Company.........................................................................8
5.9 Financial Statements............................................................................8
5.10 Liabilities and Obligations.....................................................................9
5.11 Accounts and Notes Receivable..................................................................10
5.12 Licenses; Intellectual Property................................................................10
5.13 Environmental Matters..........................................................................11
5.14 Personal Property..............................................................................13
5.15 Significant Customers; Material Contracts and Commitments......................................13
5.16 Real Property..................................................................................14
5.17 Insurance......................................................................................14
5.18 Compensation; Employment Agreements; Labor Matters.............................................15
5.19 Employee Plans.................................................................................15
5.20 Compliance with ERISA..........................................................................16
5.21 Conformity with Law; Litigation................................................................17
</TABLE>
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<TABLE>
<S> <C>
5.22 Taxes..........................................................................................17
5.23 No Violations; No Consent Required, Etc........................................................18
5.24 Government Contracts...........................................................................19
5.25 Absence of Changes.............................................................................19
5.26 Deposit Accounts; Powers of Attorney...........................................................21
5.27 Validity of Obligations........................................................................21
5.28 Relations with Governments.....................................................................21
5.29 Disclosure.....................................................................................21
5.30 No Warranties or Insurance.....................................................................21
5.31 Interest in Customers and Suppliers and Related Party Transactions.............................22
5.32 Private Placement Memorandum...................................................................22
5.33 Authority; Ownership...........................................................................22
5.34 Preemptive Rights..............................................................................23
5.35 No Commitment to Dispose of AmPaM Stock........................................................23
5.36 Disclosure.....................................................................................23
6. REPRESENTATIONS OF AmPaM................................................................................23
6.1 Due Organization...............................................................................24
6.2 Authorization..................................................................................24
6.3 Capital Stock of AmPaM.........................................................................24
6.4 Transactions in Capital Stock..................................................................24
6.5 Subsidiaries...................................................................................25
6.6 Financial Statements...........................................................................25
6.7 Liabilities and Obligations....................................................................25
6.8 Conformity with Law; Litigation................................................................25
6.9 No Violations..................................................................................26
6.10 Validity of Obligations........................................................................27
6.11 AmPaM Stock....................................................................................27
6.12 AmPaM Notes....................................................................................28
6.13 No Side Agreements.............................................................................28
6.14 Business; Real Property; Material Agreements...................................................28
6.15 Relations with Governments.....................................................................28
6.16 Disclosure.....................................................................................28
6.17 Other Agreements...............................................................................29
7. COVENANTS PRIOR TO CLOSING..............................................................................29
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate.................................29
7.2 Conduct of Business Pending Closing............................................................30
7.3 Prohibited Activities..........................................................................31
7.4 No Shop........................................................................................32
7.5 Agreements.....................................................................................32
7.6 Notification of Certain Matters................................................................32
7.7 Amendment of Schedules.........................................................................33
7.8 Further Assurances.............................................................................33
7.9 Authorized Capital.............................................................................33
</TABLE>
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<TABLE>
<S> <C>
7.10 Compliance with the Hart-Scott Act.............................................................33
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
AND COMPANY.............................................................................................34
8.1 Representations and Warranties; Performance of Obligations.....................................34
8.2 Satisfaction...................................................................................34
8.3 No Litigation..................................................................................34
8.4 Opinion of Counsel.............................................................................34
8.5 Consents and Approvals.........................................................................34
8.6 Good Standing Certificates.....................................................................35
8.7 No Material Adverse Change.....................................................................35
8.8 Secretary's Certificate........................................................................35
8.9 Tax Matters....................................................................................35
8.10 Other Founding Companies.......................................................................35
8.11 Company Release of Stockholders................................................................35
8.12 Sterling City Capital Transfer Restrictions....................................................36
8.13 Election of Class Executive Officer............................................................36
8.14 Funding Availability...........................................................................36
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AmPaM............................................................36
9.1 Representations and Warranties; Performance and Obligations....................................36
9.2 No Litigation..................................................................................36
9.3 Secretary's Certificate........................................................................36
9.4 No Material Adverse Effect.....................................................................37
9.5 Stockholders' Release..........................................................................37
9.6 Satisfaction...................................................................................37
9.7 Termination of Related Party Agreements........................................................37
9.8 Opinion of Counsel.............................................................................37
9.9 Consents and Approvals.........................................................................38
9.10 Good Standing Certificates.....................................................................38
9.11 Funding Availability...........................................................................38
9.12 FIRPTA Certificate.............................................................................38
9.13 Resignations of Directors and Officers.........................................................38
10. COVENANTS OF AmPaM AND THE STOCKHOLDERS AFTER CLOSING...................................................38
10.1 Release From Guarantees; Repayment of Certain Obligations......................................38
10.2 Preservation of Tax and Accounting Treatment...................................................39
10.3 Preparation and Filing of Tax Returns; Payment of Taxes........................................39
10.4 Directors......................................................................................40
10.5 Legal Opinions.................................................................................40
11. INDEMNIFICATION.........................................................................................40
11.1 General Indemnification by the Stockholders....................................................40
11.2 Indemnification by AmPaM.......................................................................42
11.3 Third Person Claims............................................................................42
</TABLE>
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<TABLE>
<S> <C>
11.4 Exclusive Remedy...............................................................................43
11.5 Limitations on Indemnification.................................................................44
12. TERMINATION OF AGREEMENT................................................................................45
12.1 Termination....................................................................................45
12.2 Procedure and Effect of Termination............................................................46
13. NONCOMPETITION..........................................................................................46
13.1 Prohibited Activities..........................................................................46
13.2 Prohibited Activities (Baker)..................................................................47
13.3 Damages........................................................................................49
13.4 Reasonable Restraint...........................................................................49
13.5 Severability; Reformation......................................................................49
13.6 Independent Covenant...........................................................................49
13.7 Materiality....................................................................................50
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................50
14.1 Stockholders...................................................................................50
14.2 AmPaM..........................................................................................50
14.3 Damages........................................................................................51
14.4 Survival.......................................................................................51
14.5 Return of Information..........................................................................51
15. TRANSFER RESTRICTIONS...................................................................................51
15.1 Transfer Restrictions Relating to AmPaM Stock and AmPaM Notes..................................51
15.2 Transfer Restrictions Relating to Additional Consideration.....................................53
16. FEDERAL SECURITIES ACT REPRESENTATIONS..................................................................53
16.1 Compliance with Law............................................................................53
16.2 Economic Risk; Sophistication..................................................................54
16.3 Reliance by AmPaM..............................................................................54
17. REGISTRATION RIGHTS.....................................................................................54
17.1 Piggyback Registration Rights..................................................................54
17.2 Registration Procedures........................................................................55
17.3 Indemnification................................................................................58
17.4 Underwriting Agreement.........................................................................59
17.5 Transfer of Rights.............................................................................59
17.6 Rule 144 Reporting.............................................................................59
18. REDEMPTION OF AmPaM STOCK...............................................................................60
18.1 Redemption Trigger.............................................................................60
18.2 Minimum Redemption; Limitations................................................................60
18.3 Notice; Exercise...............................................................................61
18.4 Additional Redemptions.........................................................................61
</TABLE>
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<TABLE>
<S> <C>
18.5 Termination of Redemption Obligation...........................................................61
19. GENERAL.................................................................................................61
19.1 Cooperation....................................................................................61
19.2 Successors and Assigns.........................................................................62
19.3 Entire Agreement...............................................................................62
19.4 Counterparts...................................................................................62
19.5 Brokers and Agent..............................................................................62
19.6 Expenses.......................................................................................62
19.7 Notices........................................................................................63
19.8 Governing Law..................................................................................64
19.9 Survival of Representations and Warranties.....................................................64
19.10 Exercise of Rights and Remedies................................................................64
19.11 Time...........................................................................................64
19.12 Reformation and Severability...................................................................64
19.13 Remedies Cumulative............................................................................65
19.14 Captions.......................................................................................65
19.15 Amendments and Waivers.........................................................................65
19.16 Mediation and Arbitration......................................................................65
19.17 Information Provided for Private Placement Memorandum..........................................65
19.18 Effective Date of Agreement....................................................................66
</TABLE>
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<PAGE> 7
ANNEXES
Annex I - Consideration to Be Paid to Stockholders
Annex II - Amended and Restated Certificate of Incorporation and
By-Laws of AmPaM
Annex III - Form of Opinion of Counsel to AmPaM
Annex IV - Form of Tax Opinion
Annex V - Form of Opinion of Counsel to Company and Stockholders
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<PAGE> 8
SCHEDULES
<TABLE>
<S> <C>
2.1 Board of Directors
2.2 Officers
5.1 Due Organization
5.2 Authorization
5.3 Capital Stock of the Company
5.4 Transactions in Capital Stock; Organization Accounting
5.5 No Bonus Shares
5.6 Subsidiaries; Ownership in Other Entities
5.7 Predecessor Status; etc
5.8 Spin-off by the Company
5.9 Financial Statements
5.10 Liabilities and Obligations
5.11 Accounts and Notes Receivable
5.12 Licenses; Intellectual Property (Schedules 5.12(a)(1), 5.12(a)(2), 5.12(b)(1) and 5.12(b)(2))
5.13 Environmental Matters
5.14 Personal Property
5.15 Significant Customers; Material Contracts and Commitments
(Schedules 5.15(a), 5.15(b) and 5.15 (c))
5.16 Real Property
5.17 Insurance
5.18 Compensation; Employment Agreements; Labor Matters
5.19 Employee Plans
5.20 Compliance with ERISA
5.21 Conformity with Law; Litigation
5.22 Taxes (Schedules 5.22(a) and 5.22(b))
5.23 No Violations, No Consents Required, Etc.
(Schedules 5.23(a), 5.23(b), 5.23(c) and 5.23(e))
5.24 Government Contracts
5.25 Absence of Changes
5.26 Deposit Accounts; Powers of Attorney
5.30 No Warranties or Insurance
5.31 Interest in Customers and Suppliers and Related Party Transactions
5.33 Authority; Ownership (Schedules 5.33(a) and 5.33(b))
6.9 No Violations
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate
7.2 Conduct of Business Pending Closing
7.3 Prohibited Activities
7.5 Agreements
8.11 Employment Agreements
9.7 Termination of Related Party Agreements
10.1 Release From Guarantees; Repayment of Certain Obligations
16.2 Non-accredited Investors
18.5 Brokers and Agents
</TABLE>
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<PAGE> 9
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made as of the 11th
day of February, 1999 by and among AMERICAN PLUMBING & MECHANICAL, INC., a
Delaware corporation ("AmPaM"), R.C.R. PLUMBING, INC., a California corporation
(the "Company"), and the stockholders listed on the signature pages of this
Agreement (the "Stockholders"), which are all the stockholders of the Company.
RECITALS
WHEREAS, the Company is engaged in the plumbing and mechanical
services business;
WHEREAS, as of the date hereof, the Stockholders own, and as of the
Closing Date the Stockholders will own, all of the issued and outstanding
capital stock of the Company (the "Company Stock");
WHEREAS, AmPaM is entering into other separate agreements
simultaneously with this Agreement that are substantially the same as this
Agreement (the "Other Agreements"), each of which is entitled "Acquisition
Agreement," with each of the Other Founding Companies (as defined herein) and
their respective stockholders in order for AmPaM to acquire additional
companies engaged in the plumbing and mechanical services business;
WHEREAS, this Agreement and the Other Agreements constitute the "AmPaM
Plan of Organization;"
WHEREAS, the Stockholders and the boards of directors and the
stockholders of AmPaM, and each of the Other Founding Companies that are
parties to the Other Agreements, have approved and adopted the AmPaM Plan of
Organization as an integrated plan pursuant to which the Stockholders and the
stockholders of each of the other Founding Companies will contribute the
capital stock of each of the Founding Companies to AmPaM, and the Stockholders
and the stockholders of each of the other Founding Companies will acquire the
stock of AmPaM (but not cash or other property) as a tax-free transfer of
property under Section 351 of the Code;
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Stockholders have approved this
Agreement as part of the AmPaM Plan of Organization in order to transfer all of
the issued and outstanding capital stock of the Company to AmPaM; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
<PAGE> 10
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule attached hereto and not otherwise defined shall
have the following meanings for all purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"Acquired Party" means the Company, any subsidiary of the Company and
any member of a Relevant Group.
"Affiliates" means with respect to any person or entity, any other
person or entity that directly or indirectly, controls, is controlled by, or is
under common control with such person or entity.
"AmPaM" has the meaning set forth in the first paragraph of this
Agreement.
"AmPaM Charter Documents" has the meaning set forth in Section 6.1.
"AmPaM Plan of Organization" has the meaning set forth in the recitals
of this Agreement.
"AmPaM Stock" means the common stock, par value $.01 per share, of
AmPaM.
"AmPaM Notes" means those notes issued by AmPaM to the Stockholders as
a portion of the consideration to be received hereunder and in substantially
the form to Annex I as Appendix A.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" has the meaning set forth in the recitals of this
Agreement.
"Delaware GCL" means the General Corporation Law of the State of
Delaware.
"Environmental Laws" has the meaning set forth in Section 5.13(b).
"Expiration Date" has the meaning set forth in Section 5(A) and
Section 6, as applicable.
2
<PAGE> 11
"Founding Companies" means the following companies:
Christianson Enterprises, Inc., a Texas corporation;
Christianson Services, Inc., a Texas corporation;
GGR Leasing Corporation, a Texas corporation;
J.A. Croson Company of Florida, a Florida corporation;
J.A. Croson Company, an Ohio corporation;
Franklin Fire Sprinkler Company, an Ohio corporation;
Keith Riggs Plumbing, Inc., an Arizona corporation;
Miller Mechanical Contractors, Inc., a Georgia corporation;
Nelson Mechanical Contractors, Inc., a Florida corporation;
Power Plumbing Inc., a Delaware corporation;
R.C.R. Plumbing, Inc., a California corporation;
Sherwood Mechanical, Inc., a California corporation; and
Teepe's River City Mechanical, Inc., an Ohio corporation.
"GAAP" means generally accepted accounting principles as consistently
applied in the United States.
"Hart-Scott Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Hazardous Substance" has the meaning set forth in Section 5.13(c).
"IPO" means a firm commitment underwritten initial public offering of
AmPaM Stock managed by one or more nationally recognized national investment
banking firms.
"known" or "knowledge," when used in reference to a statement
regarding the existence or absence of facts in this Agreement, is intended by
the parties to mean that the only information to be attributed to such person
is information actually known to (a) the person in the case of an individual,
(b) in the case of a corporation or other entity other than the Company, an
officer or director of such corporation or entity or (c) in the case of the
Company and its Subsidiaries, an officer of the Company listed on Schedule 2.2
hereto, except for David Baggett.
"Material Adverse Change" means a material adverse change in the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Documents" has the meaning set forth in Section 5.23.
3
<PAGE> 12
"Ordinary Course of Business" means the ordinary course of business
consistent with past customs and practice (including with respect to quantity
and frequency).
"Other Agreements" has the meaning set forth in the recitals of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Plans" has the meaning set forth in Section 5.19.
"Private Placement Memorandum" means the Private Placement Memorandum,
dated as of February 11, 1999, provided to each Stockholder prior to the
execution and delivery of this Agreement which sets forth certain information
relating to the transactions contemplated by this Agreement and the Other
Agreements.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Relevant Group" means the Company and any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a member.
"Restricted Common Stock" has the meaning set forth in Section 1.3(ii).
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"State of Incorporation" means the State of California.
"Stockholders" has the meaning set forth in the first paragraph of
this Agreement.
"Subsidiaries" means with respect to a person or entity, any
corporation or other entity in which such person or entity owns a 5% or greater
ownership interest.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, withholding, employment, excise, property, deed, stamp,
alternative or add-on minimum, or other taxes, assessments, duties, fees,
levies or other governmental charges, whether disputed or not, together with
any interest, penalties, additions to tax or additional amounts with respect
thereto.
4
<PAGE> 13
1. ACQUISITION OF STOCK
1.1 ACQUISITION. Upon the terms and subject to the conditions
contained in this Agreement and in reliance upon the representations,
warranties, covenants and agreements contained in this Agreement, on the
Closing Date, the Stockholders shall convey and transfer to AmPaM all of the
issued and outstanding shares of Company Stock as set forth in Annex I hereto.
1.2 CONSIDERATION. The consideration for the Company Stock shall be as
set forth on Annex I to this Agreement.
1.3 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY AND AMPAM. The respective designations and numbers of outstanding
shares and voting rights of each class of outstanding capital stock of the
Company and AmPaM as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
outstanding Company Stock is as set forth on Schedule 5.3 hereto; and
(ii) immediately prior to the Closing Date, the authorized
capital stock of AmPaM will consist of (A) 100,000,000 shares of AmPaM
Stock, of which the number of issued and outstanding shares will be
set forth in the Private Placement Memorandum, (B) 10,000,000 shares
of redeemable preferred stock, of which the number of issued and
outstanding shares will be set forth in the Private Placement
Memorandum, and (C) 5,000,000 shares of Restricted Voting Common
Stock, $.01 per value (the "Restricted Common Stock"), all of which
will be issued and outstanding except as otherwise set forth in the
Private Placement Memorandum.
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY
2.1 BOARD OF DIRECTORS. The Company and the Stockholders shall take
action, including solicitation of resignation of directors, necessary so that
the Board of Directors of the Company as of the Closing Date shall consist only
of the persons identified on Schedule 2.1 hereto.
2.2 OFFICERS. The Company and the Stockholders shall take action,
including solicitation of resignation of officers, necessary so that the
officers of the Company as of the Closing Date shall consist only of the
persons identified on Schedule 2.2 hereto.
5
<PAGE> 14
3. DELIVERY OF CONSIDERATION
3.1 STOCKHOLDERS' CONSIDERATION. On the Closing Date, the Stockholders
shall, upon surrender of certificates evidencing the Company Stock, receive
from AmPaM the respective number of shares of AmPaM Stock, the amount of cash
and the principal amount of AmPaM Notes described on Annex I hereto specified
with respect to each such Stockholder as payable on the Closing Date. All
payments of cash shall be made by certified check or wire transfer of
immediately available funds. Consideration consisting of AmPaM Notes shall be
substantially in the form of Appendix A to Annex I.
3.2 STOCKHOLDERS' DELIVERIES. The Stockholders shall deliver at the
Closing the certificates representing Company Stock, duly endorsed in blank by
the Stockholders, or accompanied by blank stock powers, and with all necessary
transfer tax and other revenue stamps, acquired at the Stockholders' expense,
affixed and canceled. The Stockholders agree promptly to cure any deficiencies
with respect to the endorsement of the stock certificates or other documents of
conveyance with respect to such Company Stock or with respect to the stock
powers accompanying any Company Stock.
4. CLOSING
The consummation of the transactions contemplated by Section 3 (the
"Closing") shall take place on March 31, 1999 or such date not later than May
31, 1999 as AmPaM shall determine by giving written notice of such other date
as provided in Section 18.7 (the "Closing Date") at the offices of Andrews &
Kurth L.L.P., 4200 Chase Tower, 600 Travis, Houston, Texas 77002.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the disclosure schedules attached hereto and
except as otherwise qualified below, the Company represents and warrants that
all of the following representations and warranties in this Section 5(A) are
true at the date of this Agreement and, subject to Section 7.7 hereto, shall be
true at the time of the Closing, and that such representations and warranties
shall survive the Closing Date for a period of eighteen months (the last day of
such period being the "Expiration Date"), except that the representations and
warranties set forth in Sections 5.3, 5.22 and 5.32 hereof shall survive until
such time as the applicable statute of limitations period has run, which shall
be deemed to be the Expiration Date for the representations and warranties set
forth in Sections 5.3, 5.22 and 5.32. For purposes of this Section 5, the term
"Company" shall mean and refer to the Company and all of its Subsidiaries, if
any, and any reference to a Material Adverse Effect on the Company or Material
Adverse Change with respect to the Company shall mean the Company and its
Subsidiaries, taken as a whole. Except as expressly set forth in this
Agreement, the Company expressly disclaims any representation or warranty
(express, implied or otherwise) relating to the
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<PAGE> 15
Company and any Subsidiary thereof including, without limitation, any warranty
of merchantability or fitness for a particular purpose.
5.1 DUE ORGANIZATION. The Company is a corporation duly incorporated
and organized, validly existing and in good standing under the laws of the
State of Incorporation, and has the requisite power and authority to carry on
its business as it is now being conducted. The Company is duly qualified or
authorized to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or authorization necessary except where the failure to be so
qualified or authorized to do business would not have a Material Adverse Effect
on the Company. Schedule 5.1 sets forth a list of all states in which the
Company is authorized or qualified to do business, which list indicates which
of such entities is authorized or qualified to do business in such states.
True, complete and correct copies of the Certificate or Articles of
Incorporation and By-laws, each as amended, of the Company (the "Charter
Documents") are all attached to Schedule 5.1. The Company has delivered to
AmPaM complete and correct copies of (i) the stock records of the Company and
(ii) all minutes of meetings, written consents and other evidence, if any, of
deliberations of or actions taken by the Company's Board of Directors, any
committees of the Board of Directors and stockholders during the last five
years.
5.2 AUTHORIZATION. (i) The officers or other representatives of the
Company executing this Agreement have the authority to enter into and bind the
Company to the terms of this Agreement and (ii) the Company has the full legal
right, power and authority to enter into this Agreement and consummate the
transactions contemplated hereby. Copies of the most recent resolutions adopted
by the Board of Directors of the Company and the most recent resolutions
adopted by the Stockholders, which approve this Agreement and the transactions
contemplated hereby in all respects, certified by the Secretary or an Assistant
Secretary of the Company as being in full force and effect on the date hereof,
are attached hereto as Schedule 5.2.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company and each of its Subsidiaries is as set forth on Schedule 5.3(a). All of
the issued and outstanding shares of the capital stock of the Company are owned
by the Stockholders in the amounts set forth in Schedule 5.3(a). Except as set
forth on Schedule 5.3(a), all of the issued and outstanding capital stock of
each Subsidiary is owned by the Company. All of the issued and outstanding
shares of the capital stock of the Company have been duly authorized and
validly issued, are fully paid and nonassessable, are owned of record by the
Stockholders and further, such shares were offered, issued, sold and delivered
by the Company in compliance with all applicable state and Federal laws
concerning the issuance of securities. Further, none of such shares were issued
in violation of any preemptive rights of any past or present stockholder.
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<PAGE> 16
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule
5.4(a), the Company has not acquired or redeemed any shares of capital stock of
the Company since January 1, 1996. Except as set forth on Schedule 5.4(b), (i)
no option, warrant, call, conversion right or commitment of any kind exists
which obligates the Company to issue any of its authorized but unissued capital
stock; (ii) the Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof; and (iii) neither the voting stock structure of the Company nor the
relative ownership of shares among any of its Stockholders has been altered or
changed in contemplation of the AmPaM Plan of Organization. There are no voting
trusts, proxies or other agreements or understandings to which the Company is a
party or is bound with respect to the voting of any shares of capital stock of
the Company.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses in
contemplation of the AmPaM Plan of Organization.
5.6 SUBSIDIARIES; OWNERSHIP IN OTHER ENTITIES. Except as set forth on
Schedule 5.6(a), the Company has no Subsidiaries. Except as set forth in
Schedule 5.6(b), the Company does not presently own, of record or beneficially,
or control, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any corporation, association
or business entity nor is the Company, directly or indirectly, a participant in
any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7(a) is a list of
all predecessor companies of the Company, including the names of any entities
acquired by the Company (by stock purchase, merger or otherwise) or owned by
the Company or from whom the Company previously acquired material assets, in
any case, from the earliest date upon which any Stockholder acquired his or her
stock in any Company. Except as disclosed on Schedule 5.7(b), the Company has
not been, within such period of time, a subsidiary or division of another
corporation or a part of an acquisition which was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8,
there has not been any sale, spin-off or split-up of material assets of either
the Company or any other person or entity that is an Affiliate of the Company
since January 1, 1996.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 is a copy
of:
(i) the balance sheets of the Company as of December 31, 1996
and 1997 and the related statements of operations, stockholders'
equity and cash flows for the three-year period ended December 31,
1997, together with the related notes and schedules (such balance
sheets, the related statements of operations, stockholders' equity and
cash flows and the related notes and schedules are referred to herein
as the "Year-end Financial Statements");
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<PAGE> 17
(ii) the balance sheet of the Company as of June 30, 1998 and
the related statements of operations, stockholders' equity and cash
flows for the six-month periods ended June 30, 1997 and 1998, together
with the related notes and schedules (such balance sheets, the related
statements of operations, stockholders' equity and cash flows and the
related notes and schedules are referred to herein as the "Six-Month
Interim Financial Statements");
(iii) the balance sheet of the Company as of September 30,
1998 (the "Balance Sheet Date") and the related statements of
operations, stockholders' equity and cash flows for the nine-month
periods ended September 30, 1997 and 1998 (such balance sheets, the
related statements of operations, stockholders' equity and cash flows
are referred to herein as the "Nine-Month Interim Financial
Statements"); and
(iv) the income statement of the Company for the 12-month
period ended June 30, 1998 (the "Valuation Income Statement").
The Year-end Financial Statements, the Six-Month Interim Financial Statements,
the Nine-Month Interim Financial Statements and the Valuation Income Statement
are collectively called the "Financial Statements". The Financial Statements,
including those included in the Private Placement Memorandum, have been
prepared in accordance with GAAP applied on a consistent basis and fairly
present the financial position of the Company as of the dates thereof and the
results of its operations and changes in financial position for the periods
then ended, subject, in the case of the Six-Month Interim Financial Statements
and the Nine-Month Interim Financial Statements, to normal year-end audit
adjustments and any other adjustments described therein and the absence of
certain footnote disclosures.
5.10 LIABILITIES AND OBLIGATIONS. Schedule 5.10(a) sets forth an
accurate list as of the Balance Sheet Date of (i) all material liabilities of
the Company which are not reflected on the balance sheet of the Company at the
Balance Sheet Date or otherwise reflected in the Company Financial Statements
at the Balance Sheet Date which by their nature would be required in accordance
with GAAP to be reflected in the balance sheet, and (ii) all loan agreements,
indemnity or guaranty agreements, bonds, mortgages, pledges or other security
agreements to which the Company is a party or by which its properties may be
bound other than bid bonds and performance bonds made in the Ordinary Course of
Business. Except as set forth on Schedule 5.10(b), since the Balance Sheet
Date, the Company has not incurred any material liabilities or obligations of
any kind, character or description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, other than liabilities incurred in the
Ordinary Course of Business. The Company has also delivered to AmPaM, on
Schedule 5.10(c), a list of contingent liabilities related to pending
litigation or litigation that has been threatened in writing, or other material
liabilities which are not fixed or otherwise accrued or reserved. For each such
contingent liability of the Company or liability of the Company for which the
amount is not fixed or is contested, the Company has provided to AmPaM the
following information:
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<PAGE> 18
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation in the
possession of the Company or its directors, officers
or stockholders relating thereto;
(b) amounts claimed and any other action or relief
sought; and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(ii) the name of each court or agency before which such
claim, suit or proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted;
and
(iv) a good faith estimate of the maximum amount, if any,
which the Company expects, based on information available, is likely
to become payable with respect to each such liability and the amount,
if any, accrued or reserved for each such potential liability on the
Financial Statements.
AmPaM acknowledges that all estimates referred to above and set forth on
Schedule 5.10(c) are only good faith estimates, and that the Company and the
Stockholders expressly do not represent or warrant that the actual amounts of
such liabilities will be equal to, or more or less than, the amounts of such
estimates.
5.11 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.11(a) sets forth an
accurate list, in all material respects, of the accounts and notes receivable
of the Company, as of the Balance Sheet Date, including any such amounts which
are not reflected in the balance sheet as of the Balance Sheet Date, and
including all receivables from and advances to employees and the Stockholders,
which are identified as such. Schedule 5.11(a) also sets forth a materially
accurate aging of all accounts and notes receivable as of the Balance Sheet
Date showing amounts due in 30-day aging categories. Except to the extent
reflected on Schedule 5.11(b), such accounts, notes and other receivables are
collectible in the amounts shown on Schedule 5.11(a), net of reserves reflected
in the balance sheet as of the Balance Sheet Date.
5.12 LICENSES; INTELLECTUAL PROPERTY. (a) The Company or its employees
hold all licenses, franchises, permits and other governmental authorizations
("Licenses") necessary to conduct the business of the Company, the absence of
which would cause a Material Adverse Effect on the Company, and the Company has
delivered to AmPaM a list that is accurate, in all material respects, and
summary description (which is set forth on Schedule 5.12(a)(1)) of all such
Licenses. At or prior to the Closing, all such Licenses owned or held by any
employee of the Company will be assigned or licensed to the Company for no
additional consideration. The Licenses listed on Schedule 5.12(a)(1) are valid,
and the Company has not received any notice that any person intends to cancel,
terminate or not renew any such License. The Company has conducted and is
conducting its business in compliance in all material respects with the
requirements, standards, criteria and
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<PAGE> 19
conditions set forth in the Licenses listed on Schedule 5.12(a)(1) and is not
in violation of any of the foregoing in any material respect. Except as
specifically provided in Schedule 5.12(a)(2), the consummation by the Company
of the transactions contemplated by this Agreement will not result in a default
under or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such Licenses.
(b) The Company owns or possesses adequate licenses or other rights to
use (without making any payment or granting rights to any person in exchange)
all patents, patent applications, trademarks, copyrights, service marks and
trade names (collectively, the "Intellectual Property") necessary to conduct
its business as currently conducted. A description of any Intellectual Property
licensed by the Company, including the material terms of any such license, is
described on Schedule 5.12(b)(1). Neither the validity of the Intellectual
Property nor the title thereto or use thereof by the Company is being
questioned in any pending litigation, and the conduct of the Company's
business, as currently conducted, does not conflict with licenses, copyrights,
uncopyrighted works, trade marks, service marks, trade names, trade name
rights, patents, patent rights, unpatented inventions or trade secrets of
others. Neither the validity of the Intellectual Property nor the title thereto
or use thereof by the Company is being questioned in any pending or, to the
knowledge of the Company, threatened infringement claims or litigation, and the
conduct of the Company's business, as now conducted, does not conflict with
licenses, copyrights, uncopyrighted works, trade marks, service marks, trade
names, trade name rights, patents, patent rights, unpatented inventions or
trade secrets of others. Except as specifically provided in Schedule
5.12(b)(2), the consummation by the Company of the transactions contemplated by
this Agreement will not adversely affect the rights and benefits afforded to
the Company by any such Intellectual Property.
5.13 ENVIRONMENTAL MATTERS. (a) Except as set forth in Schedule 5.13
attached hereto, (i) the Company has conducted its businesses in compliance in
all material respects with all applicable Environmental Laws, including,
without limitation, having all environmental permits, licenses and other
approvals and authorizations necessary for the operation of its business as
presently conducted, except where the failure to have such permit, license,
approval or authorization would not have a Material Adverse Effect on the
Company, (ii) none of the properties owned by the Company contain any Hazardous
Substance as a result of any activity of the Company in amounts exceeding the
levels permitted by applicable Environmental Laws, except where amounts in
excess of such levels would not have a Material Adverse Effect on the Company,
(iii) the Company has not received any notices, demand letters or requests for
information from any Federal, state, local or foreign governmental entity or
third party indicating that the Company may be in violation of, or liable
under, any Environmental Law in connection with the ownership or operation of
its business, (iv) there are no civil, criminal or administrative actions,
suits, demands, claims, hearings, investigations or proceedings pending or, to
the knowledge of the Company, threatened, against the Company relating to any
violation, or alleged violation, of any Environmental Law, except where such
violation would not have a Material Adverse Effect on the Company, (v) no
reports have been filed, or are required to be filed, by the Company concerning
the release of any Hazardous Substance or the threatened or actual violation of
any Environmental Law, (vi) no Hazardous Substance has
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<PAGE> 20
been disposed of, released or transported in violation of any applicable
Environmental Law from any properties owned by the Company as a result of any
activity of the Company during the time such properties were owned, leased or
operated by the Company, (vii) there have been no environmental investigations,
studies, audits, tests, reviews or other analyses regarding compliance or
non-compliance with any applicable Environmental Law conducted by or which are
in the possession of the Company relating to the activities of the Company
which are not listed on Schedule 5.13 attached hereto prior to the date hereof,
(viii) to the knowledge of the Company, (A) there are no underground storage
tanks on, in or under any properties owned by the Company and (B) no
underground storage tanks have been closed or removed from any of such
properties during the time such properties were owned, leased or operated by
the Company which are not listed on Schedule 5.13, (ix) to the knowledge of the
Company, (A) there is no asbestos or asbestos-containing material present in
any material quantity in any of the properties owned by the Company, and (B) no
asbestos has been removed from any of such properties during the time such
properties were owned, leased or operated by the Company, and (x) neither the
Company nor any of its properties are subject to any material liabilities or
expenditures (fixed or contingent) relating to any suit, settlement, court
order, administrative order, regulatory requirement, judgment or claim asserted
or arising under any Environmental Law.
(b) As used herein, "Environmental Law" means, as of the Closing Date,
any Federal, state, local or foreign law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, order, judgment,
decree, injunction or agreement with any governmental entity to which the
Company is a party or subject relating to (x) the protection, preservation or
restoration of the environment (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface land,
subsurface land, plant and animal life or any other natural resource) or to
human health or safety or (y) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Hazardous Substances, in each case as
amended and as in effect on the Closing Date. The term Environmental Law
includes, without limitation, (i) the Federal Comprehensive Environmental
Response Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic
Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act,
the Federal Occupational Safety and Health Act of 1970, each as amended and as
in effect on the Closing Date, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such as
negligence, nuisance, trespass and strict liability) that may impose liability
or obligations for injuries or damages due to, or threatened as a result of,
the presence of, effects of or exposure to any Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance
presently listed, defined, designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated, under any Environmental Law.
Hazardous Substance includes any substance to which exposure is regulated by
any government authority or any Environmental Law including, without
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<PAGE> 21
limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material, asbestos or
asbestos-containing material, urea formaldehyde foam insulation, lead or
polychlorinated biphenyls.
5.14 PERSONAL PROPERTY. The Company has delivered to AmPaM an accurate
list (which is set forth on Schedule 5.14(a)) of (x) all personal property
material to the operations of the Company as of the Balance Sheet Date included
in "plant, property and equipment" on the balance sheet of the Company as of
such date, (y) all other items of personal property owned by the Company with
an individual value in excess of $15,000 (i) as of the Balance Sheet Date and
(ii) acquired since the Balance Sheet Date and (z) all material leases and
agreements in respect of personal property, including, in the case of each of
(x), (y) and (z), (1) true, complete and correct copies of all such leases and
(2) an indication as to which assets are currently owned, or were formerly
owned, by Stockholders, relatives of Stockholders, or Affiliates of the
Company. Except as set forth on Schedule 5.14(b), (i) all personal property
material to, and used by, the Company in its business is either owned by the
Company or leased by the Company pursuant to a lease included on Schedule
5.14(a), (ii) all of the personal property listed on Schedule 5.14(a) or
replacement property thereof is in working order and condition, ordinary wear
and tear excepted and (iii) all leases and agreements included on Schedule
5.14(a) are in full force and effect and constitute valid and binding
agreements of the Company, in each case in accordance with their respective
terms.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
(a) The Company has delivered to AmPaM a materially accurate list
(which is set forth on Schedule 5.15(a)(1)) of all customers (persons or
entities) representing 5% or more of the Company's annual revenues for any
period covered by any of the Financial Statements. Except to the extent set
forth on Schedule 5.15(a)(2), none of such customers has canceled or, to the
knowledge of the Company, are currently threatening to cancel a currently
effective contract with the Company.
(b) The Company has listed on Schedule 5.15(b) all material contracts,
commitments and similar agreements to which the Company is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with customers listed on Schedule 5.15(a), joint venture or partnership
agreements, contracts with any labor organizations, strategic alliances and
options to purchase land), other than agreements listed on Schedules 5.10(a),
Schedule 5.14(a) or Schedule 5.16(a), (a) in existence as of the Balance Sheet
Date and (b) entered into since the Balance Sheet Date, and in each case has
delivered or made available to AmPaM true, complete and correct copies of such
agreements. For purposes of the preceding sentence, a contract, commitment or
similar agreement is "material" if it (i) has a term of more than one year
(other than contracts, commitments or agreements that are cancelable without
liability or penalty within 30 days of notice from the Company of cancellation
or that can be terminated by the Company without material penalty upon notice
of 30 days or less) or (ii) requires the payment by or to the Company of more
than $100,000 during any 12-month period. Except for expenditures in the
ordinary course of
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<PAGE> 22
business, the Company has also indicated on Schedule 5.15(b) a summary
description of all plans or projects involving the opening of new operations,
expansion of existing operations, or the acquisition of any personal property,
business or assets requiring, in any event, the payment of more than $50,000 by
the Company during any 12-month period.
(c) Except as set forth on Schedule 5.15(c), the Company is not
required to provide any bonding or other financial security arrangements in any
material amount in connection with any contract listed on Schedule 5.15(b).
5.16 REAL PROPERTY. Schedule 5.16(a) includes a list of all real
property owned or leased by the Company at the date hereof and all other real
property, if any, used by the Company in the conduct of its business. The
Company has good and insurable title to any real property owned by it that is
shown on Schedule 5.16(a), other than property intended to be sold or
distributed prior to the Closing Date as provided in Section 7.1(c) of this
Agreement, and all real property so owned is subject to no mortgage, pledge,
lien, conditional sales agreement, encumbrance, lease, possessory rights of
third parties or charge, except for:
(i) liens reflected on Schedule 5.10(a) or Schedule 5.16(b)
as securing specified liabilities (with respect to which no material
default by the Company exists);
(ii) liens for current taxes not yet payable and assessments
not in default;
(iii) easements for utilities serving the property; and
(iv) easements, covenants and restrictions and other
exceptions to title which do not adversely affect the current use of
the property.
Copies of all leases and agreements in respect of such real property
leased by the Company, which are true, complete and correct in all material
respects, are attached to Schedule 5.16(a), and an indication as to which such
properties, if any, are currently owned, or were formerly owned, by
Stockholders or Affiliates of the Company or Stockholders is included in
Schedule 5.16(a). Except as set forth on Schedule 5.16(b), all of such leases
included on Schedule 5.16(a) are, as to the Company, in full force and effect
and constitute valid and binding agreements of the Company in accordance with
their respective terms.
5.17 INSURANCE. The Company has delivered to AmPaM (i) an accurate
list as of the Balance Sheet Date of all insurance policies carried by the
Company and (ii) an accurate list of all insurance loss runs or workers
compensation claims received for the past three policy years (which lists are
set forth on Schedule 5.17). The Company has also delivered or made available
to AmPaM true, complete and correct copies of all insurance policies currently
in effect that are referred in Schedule 5.17. Such insurance policies evidence
all of the insurance the Company is required to carry pursuant to all of its
contracts and other agreements and pursuant to all applicable laws. All of such
insurance policies are currently in full force and effect except as stated in
Schedule 5.17.
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Since January 1, 1996, no insurance carried by the Company has been canceled by
the insurer and the Company has not been denied coverage under any such policy.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; LABOR MATTERS.
(a) The Company has delivered to AmPaM an accurate list (which is set
forth on Schedule 5.18(a)(1)) showing all officers, directors and key employees
of the Company, listing all employment agreements with such officers, directors
and key employees and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of each of
such persons as of (i) the Balance Sheet Date and (ii) the date hereof. The
Company has provided to AmPaM true, complete and correct copies of any
employment agreements for persons listed on Schedule 5.18(a)(1). Since the
Balance Sheet Date, except as disclosed on Schedule 5.18(a)(2), there have been
no increases in the compensation payable or any bonuses to any officer,
director, key employee or other employee, except ordinary salary increases
implemented on a basis consistent with past practices and except for bonuses
paid on a basis consistent with past practices.
(b) Except as set forth on Schedule 5.18(b), (i) the Company is not
bound by or subject to (and none of its assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) to the knowledge of the
Company, no campaign to establish such arrangement is in progress and (iii)
there is no pending or, to the Company's knowledge, threatened labor dispute
involving the Company and any group of its employees nor has the Company
experienced any labor interruptions over the past three years. The Company
believes its relationship with employees to be generally good.
(c) Except as set forth in Schedule 5.18(c) attached hereto, (i) there
are no claims, actions or proceedings pending or, to the knowledge of the
Company, threatened between the Company and any of its employees, (ii) the
Company has complied in all material respects with all laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, and (iii) the Company has not received written
notice from any person asserting that the Company is liable in any material
amount for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing.
5.19 EMPLOYEE PLANS. The Company has delivered to AmPaM accurate
schedule (Schedule 5.19(a)) showing all employee benefit plans of the Company,
including all employment agreements and other agreements or arrangements
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of
such plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date and as of the date of
this Agreement. Except for the employee benefit plans, if any, described on
Schedule 5.19(a), the Company does not sponsor, maintain or contribute to any
plan program, fund or arrangement that constitutes an "employee pension benefit
plan", and neither the Company nor any Subsidiary has any obligation to
contribute to or accrue or
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pay any benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan" (within the meaning of Section 3(36) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or any non-qualified
deferred compensation arrangement). For the purposes of this Agreement, the
term "employee pension benefit plan" shall have the same meaning as is given
that term in Section 3(2) of ERISA. The Company has not sponsored, maintained
or contributed to any employee pension benefit plan other than the plans set
forth on Schedule 5.19(a), and, except as described on Schedule 5.19(b), the
Company is not or could not be required to contribute to any retirement plan
pursuant to the provisions of any collective bargaining agreement establishing
the terms and conditions or employment of any of the Company's employees.
Except as set forth on Schedule 5.19(c), the Company is not now, or
will not as a result of its past activities become, liable to the Pension
Benefit Guaranty Corporation or to any multiemployer employee pension benefit
plan under the provisions of Title IV of ERISA.
All employee benefit plans listed on Schedule 5.19(a) and the
administration thereof are in compliance in all material respects with their
terms and all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable federal, state and local
statutes, ordinances and regulations.
All accrued contribution obligations of the Company as of the Balance
Sheet Date with respect to any plan listed on Schedule 5.19(a) have either been
fulfilled in their entirety or are fully reflected on the balance sheet of the
Company as of the Balance Sheet Date.
5.20 COMPLIANCE WITH ERISA. All plans listed on Schedule 5.19(a) that
are intended to qualify under Section 401 (a) of the Code (the "Qualified
Plans") are, and have been so qualified and have been determined by the
Internal Revenue Service to be so qualified, and copies of such determination
letters are attached to Schedule 5.19(a). Except as disclosed on Schedule 5.20,
all reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries (including, but not
limited to, actuarial reports, audits or tax returns) since January 1, 1992
have been timely filed or distributed, and copies thereof have been made
available to AmPaM. No such plan listed on Schedule 5.19(a) nor the Company has
engaged in any transaction prohibited under the provisions of Section 4975 of
the Code or Section 406 of ERISA. No such Plan listed on Schedule 5.19(a) has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(l) of ERISA; and the Company has not incurred any
liability for excise tax or penalty due to the Internal Revenue Service nor any
liability to the Pension Benefit Guaranty Corporation. The Company further
represents that except as set forth on Schedule 5.20 hereto:
(i) there have been no terminations, partial terminations or
discontinuations of contributions to any Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and
approval by the Internal Revenue Service;
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(ii) no plan listed on Schedule 5.19(a) subject to the
provisions of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase
is defined in Section 4043 of ERISA) with respect to any such plan
listed in Schedule 5.19(a);
(iv) the Company (including any Subsidiaries) has not
incurred liability under Section 4062 of ERISA; and
(v) no circumstances exist pursuant to which the Company
could have any direct or indirect liability whatsoever (including, but
not limited to, any liability to any multiemployer plan or the PBGC
under Title IV of ERISA or to the Internal Revenue Service for any
excise tax or penalty, or being subject to any statutory lien to
secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the
Company that is, or at any time was, a member of a "controlled group"
(as defined in Section 412(n)(6)(B) of the Code) that includes the
Company.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth
on Schedule 5.21 or Schedule 5.13, the Company has not violated within the five
years prior to the date of this Agreement and is not currently in violation of
any law or regulation or any order of any court or Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it other than violations that would
not have a Material Adverse Effect on the Company; and except to the extent set
forth on Schedule 5.10(c) or Schedule 5.13, there are no claims, actions, suits
or proceedings, pending or, to the knowledge of the Company, threatened in
writing against the Company, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over the Company and no written
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received by the Company, and to the knowledge of the Company there is
no valid basis for any such claim, action, suit or proceeding that could
reasonably be expected to have a Material Adverse Effect on the Company.
5.22 TAXES. (a) The Company has timely filed all requisite Federal,
state and other Tax Returns or extension requests for all fiscal periods ended
on or before the Balance Sheet Date; and except as set forth on Schedule
5.22(a), there are no examinations in progress or claims pending against the
Company for federal, state and other Taxes (including penalties and interest)
for any period or periods prior to and including the Balance Sheet Date and no
notice of any claim for Taxes, whether pending or threatened, has been
received. All Tax, including interest and penalties (whether or not shown on
any Tax Return), due by the Company has been paid. The amounts shown as
accruals for Taxes on the Financial Statements are sufficient for the payment
of all Taxes of the kinds indicated (including penalties and interest) for all
fiscal periods ended on or before the date of the respective Financial
Statements. Copies of (i) any tax examinations, (ii) extensions of statutory
limitations and (iii) the federal and local income Tax Returns and franchise
Tax Returns of Company for their last three (3) fiscal years, or such shorter
period of time as any of them shall
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have existed, are attached hereto as Schedule 5.22(a) or have otherwise been
delivered to AmPaM. The Company has a taxable year ended December 31. Except as
set forth on Schedule 5.22(a), the Company uses the accrual method of
accounting for income tax purposes, and the Company's methods of accounting
have not changed in any material respect in the past five years (except as
required to conform to changes in GAAP). The Company is not an investment
company as defined in Section 351(e)(1) of the Code. The Company is not and has
not during the last five years been a party to any tax sharing agreement or
agreement of similar effect. Except as set forth on Schedule 5.22(a), the
Company is not and has not during the last five years been a member of any
consolidated group for federal tax purposes. The Company has not received, been
denied, or applied for any private letter ruling from the IRS during the last
ten years.
(b) The Stockholders have made a valid election under the provisions
of Subchapter S of the Code and, except as set forth on Schedule 5.22(b), the
Company has not, within the past five years, been subject to Federal income
Taxes under the provisions of Subchapter C of the Code.
5.23 NO VIOLATIONS; NO CONSENT REQUIRED, ETC.
(a) The Company is not in violation of any Charter Document. Except as
set forth on Schedule 5.23(a), the Company is not in default under any lease,
instrument, agreement, license, or permit set forth on Schedule 5.12(a),
Schedule 5.14(a), Schedule 5.15(b) or Schedule 5.16(a) (collectively, the
"Material Documents").
(b) Except as set forth on Schedule 5.23(b)(1), the execution and
delivery of this Agreement by each of the Company and the Stockholders do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company under any of
the terms, conditions or provisions of (i) the Charter Documents of the
Company, (ii) any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any court or governmental
authority applicable to the Company or any of its properties or assets, or
(iii) any Material Document to which the Company is now a party or by which the
Company or any of its properties or assets may be bound or affected. The
consummation by the Company and the Stockholders of the transactions
contemplated hereby will not result in any material violation, conflict,
breach, right of termination or acceleration or creation of liens under any of
the terms, conditions or provisions of the items described in clauses (i)
through (iii) of the preceding sentence, subject, in the case of the terms,
conditions or provisions of the items described in clause (iii) above, to
obtaining (prior to the Effective Time) such consents as may be required from
commercial lenders, lessors or other third parties as listed on Schedule
5.23(b)(2).
(c) Except as set forth on Schedule 5.23(c) and except for the
Hart-Scott Act, none of the Material Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to the consummation by the Company and the Stockholders of any of
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the transactions contemplated hereby in order to remain in full force and
effect, and consummation by the Company and the Stockholders of the
transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any material right or
benefit under any Material Document.
(d) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act or with any state securities authorities in connection with the offer
and sale of AmPaM Stock and AmPaM Notes pursuant to this Agreement and (ii) any
filing required to be made under the Hart-Scott Act in connection with the
transactions contemplated by this Agreement, no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby.
(e) Except as set forth on Schedule 5.23(e), none of the Material
Documents prohibits the disclosure or publication by the Company or AmPaM of
the name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company from freely providing services or
selling products to any other customer or potential customer of the Company,
AmPaM or any Other Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24, the
Company is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.25 ABSENCE OF CHANGES. (a) Since the Balance Sheet Date, except as
set forth on Schedule 5.25 or as otherwise contemplated hereby, there has not
been:
(i) any Material Adverse Change in the Company;
(ii) any damage, destruction or casualty loss (whether or not
covered by insurance), alone or in the aggregate, which has caused a
Material Adverse Effect on the Company;
(iii) any change in the authorized capital of the Company or
its outstanding securities or any change in its ownership interests or
any grant of any options, warrants, calls, conversion rights or
commitments;
(iv) any declaration or payment of any dividend or
distribution in respect of the capital stock or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock
of the Company except for distributions that would have been permitted
after the date hereof under Section 7.3(iii) hereof,
(v) any increase in the compensation, bonus, sales
commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors,
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Stockholders, employees, consultants or agents, except for ordinary
and customary bonuses and salary increases for employees in accordance
with past practice;
(vi) any work interruptions, labor grievances or claims
filed, or any event or condition of any character, which has caused a
Material Adverse Effect on the Company;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the Company to
any person, including, without limitation, the Stockholders and their
affiliates, except inventory sold or transferred in the Ordinary
Course of Business;
(viii) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to the Company, including
without limitation any indebtedness or obligation of any Stockholders
or any Affiliate thereof;
(ix) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
material assets, property or rights of the Company or requiring
consent of any party to the transfer and assignment of any such
assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the Ordinary Course of Business;
(xi) any waiver of any material rights or claims of the
Company;
(xii) any amendment or termination of any Material Document
to which the Company is a party except for the termination of a
Material Document in accordance with its terms without any action on
the part of the Company;
(xiii) any transaction by the Company outside the Ordinary
Course of Business;
(xiv) any cancellation or termination of a material contract
with a customer or client listed on Schedule 5.15(a) prior to the
scheduled termination date thereof; or
(xv) any other distribution of property or assets by the
Company other than in the Ordinary Course of Business, other than (a)
distributions of nonoperating assets specifically identified on
Schedule 5.25, (b) distributions of real estate required by Section
7.1(c) of this Agreement and (c) distributions of cash or promissory
notes permitted by Annex I hereto.
(b) Except as set forth on Schedule 5.25, the Company has
not, between the Balance Sheet Date and the date hereof, taken any of the
actions set forth in Section 7.3.
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5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The Company has delivered
to AmPaM an accurate schedule (which is set forth on Schedule 5.26) as of the
date of the Agreement of:
(i) the name of each financial institution in which the
Company has an account or safe deposit box;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or
have access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company
and a description of the terms of such power.
5.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the Company and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
Company and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
5.28 RELATIONS WITH GOVERNMENTS. The Company has not, and to the
knowledge of the Company none of the Stockholders or any Affiliate of any of
them has, given or offered anything of value to any governmental official,
political party or candidate for government office or otherwise taken any
action which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any law of similar effect.
5.29 DISCLOSURE. This Agreement, including the Annexes and Schedules
hereto, and the completed questionnaire related to the Hart-Scott Act furnished
to AmPaM by the Company, do not contain an untrue statement of a material fact
concerning the Company or omit to state a material fact concerning the Company
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing does not apply to statements contained in or omitted from
any of such documents made or omitted in reliance upon information furnished in
writing by AmPaM.
5.30 NO WARRANTIES OR INSURANCE. Except for warranty liability under
applicable law and except for warranty liability under the warranties issued by
the Company of the types described on Schedule 5.30, the Company has no
liability to any person under any warranty and the Company does not offer or
sell insurance or consumer protection plans or other arrangements that could
result in the Company being required to make any payment to or perform any
service for any person.
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5.31 INTEREST IN CUSTOMERS AND SUPPLIERS AND RELATED PARTY
TRANSACTIONS. Except as described on Schedule 5.31 or in Section 8.11, no
Stockholder, officer, director or Affiliate of the Company (i) owns, directly
or indirectly, any financial interest in, or is a director, officer, employee
or affiliate of, any corporation, firm, association or business organization
that is a client, supplier, customer, lessor, lessee or competitor of the
Company, or (ii) is or will be a party to an agreement or relationship with the
Company other than through a customary "at will" employment relationship.
5.32 PRIVATE PLACEMENT MEMORANDUM. None of the information supplied or
to be supplied by the Company in writing specifically for inclusion in the
Private Placement Memorandum contained or, as of the Closing Date, will contain
any untrue statement of a material fact concerning the Company or omitted or
will omit to state any material fact required to be stated therein or necessary
in order to make the statements contained in such information supplied or to be
supplied by the Company concerning the Company, in light of the circumstances
under which they are made, not misleading.
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.
Each Stockholder severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.7 hereof, shall be true at the time of
Closing, and that the representations and warranties set forth in this Section
5(B) shall survive the Closing Date.
5.33 AUTHORITY; OWNERSHIP. Such Stockholder has the full legal right,
power and authority to enter into this Agreement, and this Agreement is a
legal, valid and binding obligation of such Stockholder, enforceable against
the Stockholder in accordance with its terms. Except as set forth on Schedule
5.33(a), the execution and delivery of this Agreement by such Stockholder does
not violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of such Stockholder
under any of the terms, conditions or provisions of (i) the Charter Documents
of the Company, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to such Stockholder or any of such Stockholder's
properties or assets, or (iii) any lease, instrument, agreement, license or
permit to which such Stockholder is now a party or by which such Stockholder or
any of such Stockholder's properties or assets may be bound or affected. Except
for (i) any filings to be made with the SEC pursuant to the 1933 Act and any
state securities authorities in connection with the offer and sale of AmPaM
Stock and AmPaM Notes pursuant to this Agreement, (ii) any filing required to
be made under the Hart-Scott Act in connection with the transactions
contemplated by this Agreement, no declaration, filing or registration with, or
notice to, or authorization, consent or approval of, any governmental or
regulatory body or authority is necessary for the execution and delivery of
this Agreement by such Stockholder or the consummation by such Stockholder of
the transactions contemplated hereby. Except as set forth on
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<PAGE> 31
Schedule 5.33(b), such Stockholder owns beneficially and of record all of the
shares of the Company Stock identified on Annex I hereto as being owned by such
Stockholder, and, such Company Stock is owned free and clear of all liens,
security interests, pledges, charges, voting trusts, voting agreements,
restrictions, encumbrances and claims of every kind.
5.34 PREEMPTIVE RIGHTS. Such Stockholder does not have, or hereby
waives, any preemptive or other right to acquire shares of Company Stock or
AmPaM Stock that such Stockholder has or may have had. Nothing herein, however,
shall limit or restrict the rights of any Stockholder to acquire AmPaM Stock
pursuant to (i) this Agreement, (ii) any option granted or to be granted by
AmPaM to such Stockholder, (iii) a purchase through a broker in a regular stock
market transaction or (iv) a purchase from a stockholder of a Founding Company
(subject to compliance with any contractual restrictions or securities law
restrictions applicable thereto specified in Section 15 hereof).
5.35 NO COMMITMENT TO DISPOSE OF AMPAM STOCK. No Stockholder is under
any binding commitment or contract to sell, exchange or otherwise dispose of
shares of AmPaM Stock or AmPaM Notes received pursuant to this Agreement.
5.36 DISCLOSURE. The completed Director and Officer Questionnaires
with respect to such Stockholder (if any), the completed investor questionnaire
furnished to AmPaM by such Stockholder in connection with the proposed
acquisition by such Stockholder of AmPaM Stock and AmPaM Notes and any other
information provided to AmPaM in writing by such Stockholder relating
specifically to such Stockholder for inclusion in the Private Placement
Memorandum do not contain an untrue statement of a material fact concerning
such Stockholder or omit to state a material fact concerning such Stockholder
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading.
6. REPRESENTATIONS OF AmPaM
Except as otherwise qualified below, AmPaM represents and warrants
that all of the following representations and warranties in this Section 6 are
true at the date of this Agreement and, subject to Section 7.7 hereof, shall be
true at the time of Closing, and that such representations and warranties shall
survive the Closing Date for a period of eighteen months (the last day of such
period being the "Expiration Date" for purposes of the representations and
warranties set forth in this Section 6), except that the representations and
warranties set forth in Section 6.3, 6.11 and 6.15 shall survive until such
time as the applicable statute of limitations period has run, which shall be
deemed to be the Expiration Date for the representations and warranties set
forth in Sections 6.3, 6.11 and 6.15.
AmPaM acknowledges that in purchasing the shares of Company Stock, it
is relying upon its own independent investigation as well as the
representations and warranties of the Company and the Stockholders as set forth
in this Agreement.
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6.1 DUE ORGANIZATION. AmPaM is a corporation duly incorporated and
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite power and authority to carry on its business as
it is now being conducted and as contemplated by the Private Placement
Memorandum. AmPaM is duly qualified or authorized to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or
authorization necessary, except where the failure to be so qualified or
authorized to do business would not have a Material Adverse Effect. True,
complete and correct copies of the Certificate of Incorporation and By-laws,
each as proposed to be amended and as such documents shall be in effect as of
the Closing Date, of AmPaM (the "AmPaM Charter Documents") are attached hereto
as Annex II.
6.2 AUTHORIZATION. (i) The officers of AmPaM executing this Agreement
have the authority to enter into and bind AmPaM to the terms of this Agreement
and (ii) AmPaM has the full legal right, power and authority to enter into this
Agreement and consummate the transactions contemplated hereby. All corporate
acts and other proceedings required to have been taken by AmPaM to authorize
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby have been duly and properly taken.
6.3 CAPITAL STOCK OF AmPaM. The authorized capital stock of AmPaM is
as set forth in Section 1.3(ii). Immediately prior to the Closing Date, all of
the issued and outstanding shares of the capital stock of AmPaM will be as set
forth in the Private Placement Memorandum, free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind other than any restrictions described in the Private
Placement Memorandum. All of the issued and outstanding shares of the capital
stock of AmPaM have been duly authorized and validly issued, are fully paid and
nonassessable and such shares were offered, issued, sold and delivered by AmPaM
in compliance with all applicable state and Federal laws concerning the
issuance of securities. Further, none of such shares were issued in violation
of the preemptive rights of any past or present stockholder of AmPaM. Upon the
Closing Date, the authorized, issued and outstanding shares of capital stock of
AmPaM will be as set forth in the Private Placement Memorandum under the
caption "Capitalization." Upon the Closing Date, the aggregate number of shares
of AmPaM Stock issued and outstanding on the Closing Date that are owned by
Sterling City Capital, LLC, any Affiliates of Sterling City Capital, LLC and
the officers and directors of AmPaM will not be greater than the number of
shares of AmPaM Stock reflected in the Private Placement Memorandum as the
aggregate number of shares of AmPaM Stock to be issued and outstanding and
owned by Sterling City Capital, LLC, any Affiliates of Sterling City Capital,
LLC and the officers and directors of AmPaM.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth in the Private Placement Memorandum, (i) no option,
warrant, call, conversion right or commitment of any kind exists as of the date
of this Agreement which obligates AmPaM to issue any of its authorized but
unissued capital stock; and (ii) AmPaM has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. The material terms of any
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<PAGE> 33
options, warrants or other rights to acquire shares of the stock of AmPaM
referred to in the preceding sentence will be as described in the Private
Placement Memorandum.
6.5 SUBSIDIARIES. As of the date of this Agreement, AmPaM has no
subsidiaries. As of the date of this Agreement, AmPaM does not own, of record
or beneficially, or control, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity interest in any
corporation, association or business entity, and AmPaM is not, directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
6.6 FINANCIAL STATEMENTS. The historical financial statements of AmPaM
included in the Private Placement Memorandum (the "AmPaM Financial Statements")
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (except as noted thereon), and the balance
sheet included therein presents fairly the financial position of AmPaM as of
its date. Management of AmPaM believes that the assumptions underlying the pro
forma adjustments utilized in the preparation of such pro forma financial
statements are reasonable, and such pro forma adjustments have been properly
applied to the historical financial amounts in the compilation of the pro forma
financial statements. Based on the representations in Section 5.9 of this
Agreement and in Section 5.9 of each of the Other Agreements, the pro forma
financial information of AmPaM fairly presents the pro forma financial
position, results of operations and other information purported to be shown
therein at the respective dates and for the respective periods specified.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth in the Private
Placement Memorandum, as of the date of this Agreement, AmPaM has no material
liabilities or obligations of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise, other than
liabilities incurred in the ordinary course of business and consistent with
past practices, liabilities or obligations set forth in or contemplated by this
Agreement and the Other Agreements and except for fees incurred in connection
with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth in
the Private Placement Memorandum, AmPaM is not in violation of any law or
regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and its stockholders and, there are no claims,
actions, suits or proceedings, pending or, to the knowledge of AmPaM,
threatened against or affecting, AmPaM, at law or in equity, or before or by
any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it and no
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. AmPaM has conducted and is conducting its businesses in
compliance in all material respects with the requirements, standards, criteria
and conditions set forth in applicable Federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation, in any material respect, of any of the
foregoing.
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6.9 NO VIOLATIONS. (a) AmPaM is not in violation of any AmPaM Charter
Document. AmPaM is not in default under any lease, instrument, agreement,
license, or permit to which AmPaM is a party or by which AmPaM or any of its
properties are bound (collectively, the "AmPaM Documents").
(b) The execution and delivery of this Agreement by AmPaM do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of AmPaM under any of the
terms, conditions or provisions of (i) the AmPaM Charter Documents, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to
AmPaM or any of its properties or assets, or (iii) any AmPaM Document; provided
that the representations and warranties specified in clause (ii) of this
sentence (A) are based on information in the investor questionnaires and
related purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements
and (B) are subject to the accuracy and completeness of the information
contained in such investor questionnaires and related purchaser representative
questionnaires and the truthfulness of such representations and warranties. The
consummation by AmPaM of the transactions contemplated hereby will not result
in any material violation, conflict, breach, right of termination or
acceleration or creation of liens under any of the terms, conditions or
provisions of the items described in clauses (i) through (iii) of the preceding
sentence, subject, in the case of the terms, conditions or provisions of the
items described in clause (iii) above, to obtaining (prior to the Closing Date)
(x) such approvals, consents or orders from the SEC, state blue sky authorities
and authorities administering the Hart-Scott Act and (y) such other consents as
may be required from commercial lenders, lessors or other third parties which
are listed on Schedule 6.9.
(c) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act and filings with various state securities authorities in connection
with the transactions contemplated by this Agreement, and (ii) any filings
required to be made under the Hart-Scott Act in connection with the
transactions contemplated by this Agreement, none of the AmPaM Documents
requires notice to, or the consent or approval of, any governmental agency or
other third party with respect to the consummation by AmPaM of any of the
transactions contemplated hereby in order to remain in full force and effect,
and consummation by AmPaM of the transactions contemplated hereby will not give
rise to any right to termination, cancellation or acceleration or loss of any
material right or benefit under the AmPaM Documents; provided that the
representations and warranties specified in clauses (i) and (ii) of this
sentence (A) are based on information in the investor questionnaires and
related purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the
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<PAGE> 35
stockholders of the Other Founding Companies set forth in Section 16 of the
Other Agreements and (B) are subject to the accuracy and completeness of the
information contained in such investor questionnaires and related purchaser
representative questionnaires and the truthfulness of such representations and
warranties.
(d) Except for (i) any filings with the SEC pursuant to the 1933 Act
and filings with various state securities authorities in connection with the
transactions contemplated by this Agreement and (ii) any filings required under
the Hart-Scott Act in connection with the transactions contemplated by this
Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by
AmPaM or the consummation by AmPaM of the transactions contemplated hereby;
provided that the representations and warranties specified in clauses (i) and
(ii) of this sentence (A) are based on information in the investor
questionnaires and related purchaser representative questionnaires executed and
delivered by the Stockholders of the Company and the stockholders of the Other
Founding Companies, the representations and warranties of the Stockholders set
forth in Section 16 hereof and the representations and warranties of the
stockholders of the Other Founding Companies set forth in Section 16 of the
Other Agreements and (B) are subject to the accuracy and completeness of the
information contained in such investor questionnaires and related purchaser
representative questionnaires and the truthfulness of such representations and
warranties.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by AmPaM and the performance of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of AmPaM and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of AmPaM, enforceable
against AmPaM in accordance with its terms.
6.11 AmPaM STOCK. At the time of issuance thereof and delivery to the
Stockholders, the AmPaM Stock to be delivered to the Stockholders pursuant to
this Agreement will constitute valid, duly authorized and legally issued shares
of AmPaM, fully paid and nonassessable, and with the exception of restrictions
upon resale set forth in Sections 15 and 16 hereof, will be identical in all
substantive respects (which do not include the form of certificate upon which
it is printed or the presence or absence of a CUSIP number on any such
certificate) to the AmPaM Stock issued and outstanding as of the date hereof,
other than the Restricted Common Stock. The AmPaM Stock issued and delivered to
the Stockholders shall at the time of such issuance and delivery be free and
clear of any liens, claims or encumbrances of any kind or character. The offer
and sale of the shares of AmPaM Stock to be issued to the Stockholders pursuant
to this Agreement are not required to be registered under the 1933 Act;
provided that the representations and warranties specified in this sentence (A)
are based on information in the investor questionnaires and related purchaser
representative questionnaires executed and delivered by the Stockholders of the
Company and the stockholders of the Other Founding Companies, the
representations and warranties of the Stockholders set forth in Section 16
hereof and the representations and warranties of the stockholders of the Other
Founding Companies set forth in Section 16 of the Other Agreements and (B) are
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subject to the accuracy and completeness of the information contained in such
investor questionnaires and related purchaser representative questionnaires and
the truthfulness of such representations and warranties.
6.12 AmPaM NOTES. The AmPaM Notes have been duly authorized and, at
the Closing Date, will have been duly executed by AmPaM and, when
authenticated, issued and delivered, will constitute valid and binding
obligations of AmPaM, enforceable against AmPaM in accordance with their terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers)
reorganization, moratorium or similar laws affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
6.13 NO SIDE AGREEMENTS. AmPaM has not entered into any agreement with
any of the Founding Companies or any of the Stockholders of the Founding
Companies other than this Agreement, the Other Agreements, the agreements
referred to in this Agreement and in the Other Agreements and the Private
Placement Memorandum. AmPaM has not entered into any agreements providing for
rights to register shares of AmPaM Stock under the 1933 Act except as provided
in Section 17 of this Agreement, in Section 17 of the Other Agreements and in
an agreement with Sterling City Capital, LLC, its Affiliates and officers and
directors of AmPaM having terms substantially similar to those set forth in
Section 17 hereof.
6.14 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. AmPaM was formed in
June 1998 and has conducted no material business since the date of its
inception except for activities related to the transaction contemplated by this
Agreement, the Other Agreements and the Private Placement Memorandum. Except as
described in the Private Placement Memorandum, as of the date of this
Agreement, AmPaM does not own any real property or any material personal
property and is not a party to any other material agreement other than this
Agreement, the Other Agreements and the agreements contemplated hereby and
thereby.
6.15 RELATIONS WITH GOVERNMENTS. Neither AmPaM nor any of its
directors, officers or Affiliates has given or offered anything of value to any
government official, political party or candidate for government office, nor
has AmPaM, any of its directors, officers or Affiliates of any of them
otherwise taken any action, which would cause AmPaM to be in violation of the
Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
6.16 DISCLOSURE. The Private Placement Memorandum delivered to the
Company and the Stockholders does not as of the date hereof contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing does not apply to
statements contained in or omitted from any of such documents made or omitted
in reliance upon, and in conformity with, information furnished to AmPaM by the
Company or the Stockholders in writing specifically for inclusion in the
Private Placement Memorandum.
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6.17 OTHER AGREEMENTS. The Other Agreements have been duly authorized,
executed and delivered by AmPaM and constitute the legal, valid and binding
obligation of AmPaM enforceable against AmPaM in accordance with their
respective terms. The terms and conditions of the Other Agreements (excluding
the terms relating to the consideration payable by AmPaM thereunder) are
identical in all material respects to the terms and conditions in this
Agreement.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE; TRANSFER OF REAL ESTATE.
(a) Between the date of this Agreement and the Closing Date, the
Company will afford to the officers and authorized representatives of AmPaM
reasonable access during normal business hours to all of the Company's sites,
properties, books and records and will furnish AmPaM with such additional
financial and operating data and other information as to the business and
properties of the Company as AmPaM may from time to time reasonably request.
The Company will cooperate with AmPaM, its representatives, auditors and
counsel in the preparation of any documents or other material which may be
required in connection with any documents or materials required by this
Agreement. AmPaM, the Stockholders and the Company will treat all information
obtained in connection with the negotiation and performance of this Agreement
or the due diligence investigations conducted with respect to the Company as
confidential in accordance with the provisions of Section 14 hereof.
(b) Between the date of this Agreement and the Closing Date, AmPaM
will afford to the officers and authorized representatives of the Company
access to all of AmPaM's sites, properties, books and records and will furnish
the Company with such additional financial and operating data and other
information as to the business and properties of AmPaM and the Other Founding
Companies as the Company may from time to time reasonably request. AmPaM will
cooperate with the Company, its representatives, auditors and counsel in the
preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. The
Company will cause all information obtained pursuant to this Section 7.1(b) or
obtained in connection with the negotiation and performance of this Agreement
to be treated as confidential in accordance with the provisions of Section 14
hereof.
(c) Except as set forth on Schedule 7.1, any real property owned by
the Company will be sold or distributed by the Company on terms mutually
acceptable to AmPaM and the Company and leased back by the Company on terms no
less favorable to the Company than those available from an unaffiliated party
and otherwise reasonably acceptable to AmPaM at or prior to the Closing Date.
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7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Closing Date, the Company will, except as set forth on
Schedule 7.2:
(i) carry on its businesses in the Ordinary Course of
Business and not introduce any material new method of management,
operation or accounting;
(ii) use all commercially reasonable efforts to maintain its
properties and facilities, including those held under leases, in as
good working order and condition as at present, ordinary wear and
tear, depreciation and insured losses excepted;
(iii) perform in all material respects all of its obligations
under all Material Documents relating to or affecting its respective
assets, properties or rights;
(iv) use its commercially reasonable efforts to keep in full
force and effect present insurance policies or other comparable
insurance coverage;
(v) use its commercially reasonable efforts to maintain and
preserve its business organization intact, retain its respective
present key employees and maintain its relationships with suppliers,
customers and others having business relations with the Company;
(vi) use its commercially reasonable efforts to maintain
compliance with all material permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory
agencies and similar governmental authorities;
(vii) maintain present debt and lease instruments in
accordance with their terms and not enter into new or amended debt or
lease instruments without the knowledge and consent of AmPaM (which
consent shall not be unreasonably withheld), provided that debt and/or
lease instruments may be replaced without the consent of AmPaM if such
replacement instruments are on terms at least as favorable to the
Company as the instruments being replaced;
(viii) maintain or reduce present salaries and commission
levels for all officers, directors, employees and agents except for
ordinary and customary bonus and salary increases for employees in
accordance with past practices; and
(ix) use commercially reasonable efforts to cause the actual
amount of its Current Assets (as defined in Annex I hereto) to be not
less than 150% of the actual amount of its Current Liabilities (as
defined in Annex I hereto).
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7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3,
between the date hereof and the Closing Date, the Company will not, without
prior written consent of AmPaM:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of any
kind other than in connection with the exercise of options or warrants
listed in Schedule 5.4;
(iii) except as permitted pursuant to the terms and
conditions for distributions described in Annex I, declare or pay any
dividend, or make any distribution in respect of its stock whether now
or hereafter outstanding, or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree
to incur any liability or make any capital expenditures, except if it
is in the Ordinary Course of Business or involves an amount not in
excess of three percent (3%) of the Company's gross revenues for
fiscal 1997;
(v) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired, except (1) with respect to purchase money
liens incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of three percent (3%) of the Company's
gross revenues for fiscal 1997 necessary or desirable for the conduct
of the businesses of the Company, (2) (A) liens for taxes either not
yet due or being contested in good faith and by appropriate
proceedings (and for which contested taxes adequate reserves have been
established and are being maintained) or (B) materialmen's,
mechanics', workers', repairmen's, employees' or other like liens
arising in the Ordinary Course of Business (the liens set forth in
clause (2) being referred to herein as "Statutory Liens"), or (3)
liens set forth on Schedule 5.10 and/or Schedule 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the Ordinary Course of Business
and other than distributions of real estate and other assets as
permitted in this Agreement (including Annex I hereto);
(vii) negotiate for the acquisition of any business or the
start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate
with or into any other corporation;
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(ix) waive any material rights or claims of the Company,
provided that the Company may negotiate and adjust bills and accounts
in the course of good faith disputes with customers in a manner
consistent with past practice;
(x) amend or terminate any Material Document except for the
termination of a Material Document in accordance with its terms
without any action on the part of the Company; or
(xi) enter into any other material transaction outside the
Ordinary Course of Business or any transaction prohibited hereunder.
7.4 NO SHOP. None of the Stockholders, the Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than AmPaM
or its authorized agents relating to, any acquisition or purchase of
all or a material amount of the assets of, or any equity interest in,
the Company or a merger, consolidation or business combination of the
Company.
7.5 AGREEMENTS. Except as disclosed on Schedule 7.5(a), the
Stockholders and the Company shall terminate (i) any stockholders agreements,
voting agreements, voting trusts, agreements providing for the grant by the
Company of any options, warrants and employment agreements between the Company
and any employee listed on Schedule 8.11 hereto and (ii) except as otherwise
provided in this Agreement, any existing agreement between the Company and any
Stockholder, on or prior to the Closing Date provided that nothing herein shall
prohibit or prevent the Company from paying (either prior to or on the Closing
Date) notes or other obligations from the Company to the Stockholders described
in Schedule 7.5(b) in accordance with the terms thereof.
7.6 NOTIFICATION OF CERTAIN MATTERS. Each Stockholder and the Company
shall give prompt notice to AmPaM upon obtaining knowledge of (i) the
occurrence or non-occurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty of the Company or
such Stockholder contained herein to be untrue or inaccurate in any material
respect at or prior to the Closing and (ii) any material failure of such
Stockholder or the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such person hereunder. AmPaM
shall give prompt notice to the Company of (i) the occurrence or non-occurrence
of any event the occurrence or non-occurrence of which would be likely to cause
any representation or warranty of AmPaM contained herein to be untrue or
inaccurate
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in any material respect at or prior to the Closing, (ii) any material failure
of AmPaM to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; (iii) any termination of any Other
Agreement for any reason; and (iv) the issuance by the SEC or any state
securities regulatory authority of any issuance of or threatened issuance of
any order challenging the availability of an exemption from registration or
suspending the qualification of any securities described in the Private
Placement Memorandum for sale in any jurisdiction. However, subject to the
provisions of Section 7.7, such notification shall not relieve either the
Company or such Stockholder of their respective obligations under this
Agreement. The delivery of any notice pursuant to this Section 7.6 shall not be
deemed to (i) modify the representations or warranties hereunder of the party
delivering such notice, which modification may only be made pursuant to Section
7.7, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit
or otherwise affect the remedies available hereunder to the party receiving
such notice.
7.7 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until 24 hours prior
to the Closing Date to notify AmPaM with respect to any matter (i) hereafter
arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules or (ii) which may have been omitted from the Schedules previously
provided by such party. Notwithstanding the foregoing sentence, no amendment or
supplement to a Schedule prepared by the Company may be made unless AmPaM
consents to such amendment or supplement; and provided further, that no
amendment or supplement to a Schedule prepared by AmPaM may be made unless the
Stockholders consent to such amendment or supplement. For all purposes of this
Agreement, including without limitation for purposes of determining whether the
conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules
hereto, as amended or supplemented with the consent of AmPaM or the
Stockholders, as the case may be, as provided above, shall be deemed to be the
Schedules to this Agreement.
7.8 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
appropriate to carry out the transactions contemplated hereby and to cause the
conditions to the Closing Date to be satisfied as promptly as practicable.
7.9 AUTHORIZED CAPITAL. Prior to the Closing Date, AmPaM shall
maintain its authorized capital stock as set forth in the Private Placement
Memorandum.
7.10 COMPLIANCE WITH THE HART-SCOTT ACT. All parties to this Agreement
hereby recognize that one or more filings under the Hart-Scott Act may be
required in connection with the transactions contemplated herein. If it is
determined by the parties to this Agreement that filings under the Hart-Scott
Act are required, then: (i) each of the parties hereto agrees to cooperate and
use its best efforts to comply with the Hart-Scott Act and (ii) such compliance
by the Stockholders and the parties agree to cooperate and use their best
efforts to cause all filings required under the Hart- Scott Act to be made. If
filings under the Hart-Scott Act are required, the costs and expenses thereof
(including filing fees) shall be borne by AmPaM.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of the Stockholders and the Company with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions. As
of the Closing Date, if any such applicable conditions have not been satisfied,
any one or more of the Stockholders who would be entitled to receive a majority
of the Aggregate Consideration (as defined herein) received by all Stockholders
if the transactions contemplated hereby were consummated shall have the right
to waive any condition not so satisfied. Any act or action of the Stockholders
in consummating the Closing or delivering the certificates representing Company
Stock as of the Closing Date shall constitute a waiver of any conditions not so
satisfied. However, no such waiver shall be deemed to affect the survival of
the representations and warranties of AmPaM contained in Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of AmPaM contained in Section 6 shall be true
and correct as of the Closing Date as though such representations and
warranties had been made as of that time; all of the terms, covenants and
conditions of this Agreement to be complied with and performed by AmPaM on or
before the Closing Date shall have been duly complied with and performed in all
material respects; and certificates to the foregoing effect dated the Closing
Date and signed by the President or any Vice President of AmPaM shall have been
delivered to the Stockholders.
8.2 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of the Company or the Stockholders and that are
required to carry out this Agreement or incidental hereto shall be reasonably
satisfactory to the Company, the Stockholders and their counsel.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the purchase and sale of the Company Stock.
8.4 OPINION OF COUNSEL. The Company shall have received opinions from
counsel for AmPaM, dated the Closing Date, addressed to the Company and the
Stockholders in the form annexed hereto as Annex III.
8.5 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule 6.9
shall have been obtained; and no action or proceeding shall have been
instituted or threatened to restrain or prohibit the purchase and sale of the
Company Stock and no governmental agency or body shall have taken any other
action or made any request of Company as a result of which Company deems it
inadvisable to proceed with the transactions hereunder.
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8.6 GOOD STANDING CERTIFICATES. AmPaM shall have delivered to the
Company a certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Delaware Secretary of State and in each state
in which AmPaM is authorized to do business, showing that AmPaM is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for AmPaM for all periods prior to the Closing
have been filed and paid.
8.7 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred which would constitute a Material Adverse Change with respect to AmPaM
from the date of the Private Placement Memorandum.
8.8 SECRETARY'S CERTIFICATE. The Company shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of AmPaM, certifying the truth and correctness of attached copies of AmPaM's
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and, if
required, the stockholders of AmPaM approving AmPaM's entering into this
Agreement and the Other Agreements and the consummation of the transactions
contemplated hereby and thereby.
8.9 TAX MATTERS. The Stockholders shall have received an opinion of
Andrews & Kurth L.L.P., in substantially the form of Annex IV hereto, that the
AmPaM Plan of Organization will qualify as a tax-free transfer of property
under Section 351 of the Code and that the Stockholders will not recognize gain
to the extent the Stockholders exchange Company Stock for AmPaM Stock (but not
cash or other property) pursuant to this Agreement in connection with the AmPaM
Plan of Organization.
8.10 OTHER FOUNDING COMPANIES. The transactions contemplated by the
Other Agreements are consummated simultaneously with the consummation of the
transactions contemplated by this Agreement.
8.11 COMPANY RELEASE OF STOCKHOLDERS. The Company shall have delivered
to the Stockholders an instrument dated the Closing Date, in form reasonably
satisfactory to AmPaM and the Stockholders, which shall be effective only upon
the occurrence of the Closing Date, releasing each Stockholder who owns shares
of Company Stock as of the Consummation Date from (i) any and all claims of the
Company against the Stockholders, known and unknown, and (ii) obligations of
the Stockholders to the Company, except for (x) items specifically identified
on Schedule 5.10(a) and Schedule 5.15(b) as being claims of or obligations to
the Company and (y) continuing obligations to the Company relating to their
employment by the Company pursuant to any employment agreement entered into
pursuant to Section 8.11 hereof.
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8.12 STERLING CITY CAPITAL TRANSFER RESTRICTIONS. Sterling City
Capital, LLC and each of its Affiliates which owns AmPaM Stock shall have
entered into an agreement with AmPaM containing substantially the same terms
and conditions as are contained in Section 15 and Section 17.
8.13 ELECTION OF CHIEF EXECUTIVE OFFICER. AmPaM shall have taken all
corporate action necessary to elect Robert A. Christianson as Chief Executive
Officer of AmPaM effective immediately following the Closing Date.
8.14 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto
as payable to the Stockholders upon the Closing and (ii) the aggregate cash
amounts specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AmPaM
The obligations of AmPaM with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. As of the Closing Date, if any
such conditions have not been satisfied, AmPaM shall have the right to
terminate this Agreement, or waive any such condition, but no such waiver shall
be deemed to affect the survival of the representations and warranties
contained in Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE AND OBLIGATIONS. All
the representations and warranties of the Stockholders and the Company
contained in this Agreement shall be true and correct as of the Closing Date
with the same effect as though such representations and warranties had been
made on and as of such date; all of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Stockholders and the Company
on or before the Closing Date shall have been duly performed or complied with
in all material respects; and the Stockholders shall have delivered to AmPaM
certificates dated the Closing Date and signed by them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the purchase and sale of the Company Stock.
9.3 SECRETARY'S CERTIFICATE. AmPaM shall have received a certificate,
dated the Closing Date and signed by the secretary of the Company, certifying
the truth and correctness of attached copies of the Company's Articles or
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and the
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Stockholders approving the execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby.
9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Company
to conduct its business.
9.5 STOCKHOLDERS' RELEASE. The Stockholders shall have delivered to
AmPaM an instrument dated the Closing Date which shall be effective only upon
the occurrence of the Closing releasing the Company and AmPaM from (i) any and
all claims of the Stockholders against the Company and AmPaM and (ii)
obligations of the Company and AmPaM to the Stockholders, except for (A) items
specifically identified on Schedule 5.31 as being claims of or obligations to
the Stockholders, (B) continuing obligations to Stockholders relating to their
employment by the Company pursuant to employment agreements entered into as
specified in Section 8.11 hereof, (C) obligations arising under this Agreement
or the transactions contemplated hereby and (D) claims of Stockholders against
the Company for unreimbursed business expenses incurred by the Stockholders on
behalf of the Company (other than expenses related to the transactions
contemplated by this Agreement) prior to the Closing Date or unreimbursed
medical expenses of the Stockholders incurred prior to the Closing Date which
are covered by the Company's existing health insurance coverage. In the event
that the Closing Date does not occur, then the release instrument referenced
herein shall be void and of no further force or effect.
9.6 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of AmPaM and that are required to carry out the
transactions contemplated by this Agreement or incidental hereto shall have
been reasonably approved by counsel to AmPaM.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the Company and the Stockholders
(and between the Company and entities controlled by the Stockholders) specified
on Schedule 5.31 shall have been terminated effective prior to or as of the
Closing Date without any payment being made by the Company other than payments
made for services rendered, materials provided or other benefits provided to
the Company prior to the Closing Date pursuant to the terms of such agreements
as in effect as of the date of this Agreement.
9.8 OPINION OF COUNSEL. AmPaM shall have received opinions from
counsel to the Company and the Stockholders, dated the Closing Date,
substantially in the form annexed hereto as Annex V.
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9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule
5.23(b)(2) shall have been obtained; and no action or proceeding shall have
been instituted or threatened to restrain or prohibit the purchase and sale of
the Company Stock and no governmental agency or body shall have taken any other
action or made any request of AmPaM as a result of which AmPaM deems it
inadvisable to proceed with the transactions hereunder.
9.10 GOOD STANDING CERTIFICATES. The Company shall have delivered to
AmPaM a certificate, dated as of a date no earlier than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by AmPaM, in each state in
which the Company is authorized to do business, showing the Company is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the Company for all periods prior to the
Closing have been filed and paid.
9.11 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto
as payable to the Stockholders upon the Closing and (ii) the aggregate cash
amounts specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9.12 FIRPTA CERTIFICATE. Each Stockholder shall have delivered to
AmPaM a certificate to the effect that he is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.13 RESIGNATIONS OF DIRECTORS AND OFFICERS. Any directors of the
Company, other than those identified on Schedule 2.1, shall have resigned as
directors of the Company. Any officers of the Company, other than those
identified on Schedule 2.2, shall have resigned as officers of the Company.
10. COVENANTS OF AmPaM AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. AmPaM
shall use reasonable efforts to have the Stockholders released from any and all
guarantees of the Company's indebtedness, including bond obligations,
identified on Schedule 10.1. Prior to obtaining the release of such guarantees,
AmPaM shall provide its guarantee of such indebtedness to the lenders thereof.
In the event that AmPaM cannot obtain such releases from the lenders of any
such guaranteed indebtedness identified on Schedule 10.1 on or prior to 90 days
subsequent to the Closing Date, AmPaM shall promptly pay off or otherwise
refinance or retire such indebtedness such that the
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Stockholders' personal liability shall be released. AmPaM will indemnify the
Stockholders against any loss or damage suffered as a result of the personal
guarantees.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement, after the Closing Date, AmPaM shall not and
shall not permit any of its Subsidiaries to undertake any act that would
jeopardize the tax-free status of the exchange of Company Stock for AmPaM Stock
(but not cash or other property), including without limitation:
(a) the retirement or reacquisition, directly or indirectly,
of all or part of the AmPaM Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the
benefit of the Stockholders other than as described in the Private Placement
Memorandum or as described in this Agreement.
10.3 PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES.
(a) The Company, if possible, or otherwise the Stockholders
shall file or cause to be filed all income Tax Returns (federal, state, local
or otherwise) of any Acquired Party for all taxable periods that end on or
before the Closing Date, and shall permit AmPaM to review all such Tax Returns
prior to such filings. Unless the Company is a C corporation, the Stockholders
shall pay or cause to be paid all income Tax liabilities (in excess of all
amounts already paid with respect thereto or properly accrued or reserved with
respect thereto on the Financial Statements) with respect to the Company's
operations for all periods through and including the Closing Date.
(b) AmPaM shall file or cause to be filed all separate
Returns of, or that include, any Acquired Party for all taxable periods ending
after the Closing Date.
(c) Unless required by applicable law, regulations or
government proceedings, AmPaM shall not take any action, including any
amendment of a Tax Return of any Acquired Party, if such action would result in
additional Tax liabilities payable by any of the Stockholders for periods
ending on or prior to the Closing Date.
(d) Each party hereto shall, and shall cause its subsidiaries
and Affiliates to, provide to each of the other parties hereto such cooperation
and information as any of them reasonably may request in filing any Return,
amended Return or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding in
respect of Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding
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sentence, each party required to file Returns pursuant to this Agreement shall
bear all costs of filing such Returns.
(e) Each of the Company, AmPaM and each Stockholder shall
comply with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as a tax-free
contribution under Section 351(a) of the Code subject to gain, if any,
recognized on the receipt of cash or other property under Section 351(b) of the
Code.
10.4 DIRECTORS. The persons named in the Private Placement Memorandum
shall be appointed as directors and elected as officers of AmPaM, as and to the
extent set forth in the Private Placement Memorandum, promptly following the
Closing Date; provided, however, that the parties hereto acknowledge that if
the Company consummates an IPO, the persons who will serve as directors and
executive officers of AmPaM will be adjusted as appropriate for a publicly
traded entity, with any such changes being subject to the approval of the
majority of the Board of Directors of AmPaM.
10.5 LEGAL OPINIONS. If required by the lenders pursuant to the terms
of any agreements related to financing of the cash amounts referred to in
Section 9.11 hereof, the Company shall cause its counsel to deliver to such
lenders, at the Closing, an opinion of counsel in substantially the form
attached hereto as Annex V.
11. INDEMNIFICATION
The Stockholders and AmPaM each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS.
(a) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement until the applicable Expiration Date (as defined in
the introductory paragraph to Section 5(A)), provided that for purposes of
clause (iii) below, the applicable Expiration Date shall be the date on which
the applicable statute of limitations expires), from and against all claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by AmPaM as a result of
or arising from (i) any breach of the representations and warranties of the
Company set forth herein or on the schedules attached hereto or certificates
delivered pursuant to this Agreement, (ii) any breach of any covenant or
agreement on the part of the Company under this Agreement, or (iii) any
liability under the 1933 Act or any Federal or state securities law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating solely to the
Company which was based upon information provided to AmPaM or its counsel in
writing by the Company specifically for inclusion in the Private Placement
Memorandum and is contained in the Private Placement Memorandum, or any
amendment thereof
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or supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact relating to the Company required to
be stated therein or necessary to make the statements therein not misleading;
provided, however, that (i) no Stockholder shall be liable for any
indemnification obligation pursuant to this Section 11.1 in excess of such
Stockholder's pro rata share thereof determined by reference to the aggregate
value of the Base Cash Amount (as defined in Annex I of this Agreement), the
principal amount of AmPaM Notes and the shares of AmPaM Stock (valued at a
price of $13.00 per share) received by such Stockholder pursuant to Section
I.A. of Annex I hereto (without giving effect to the adjustments provided in
Sections I.B. and I.C. thereof) (giving effect to the value of such AmPaM Stock
and without giving effect to such adjustments, collectively, the "Aggregate
Consideration") such Stockholder would receive pursuant to Section I of Annex I
of this Agreement if the transactions contemplated hereby were consummated in
relation to the Aggregate Consideration all Stockholders would receive pursuant
to Section I of Annex I of this Agreement if the transactions contemplated
hereby were consummated and (ii) the indemnity obligations in this Section
11.1(a) shall not be applicable to any Stockholder who has sold all of his
shares of Company Stock to the other Stockholder prior to the Closing Date.
(b) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by AmPaM as a result of or arising from (i)
any breach of the representations and warranties of such Stockholder set forth
in Section 5(B) hereof, (ii) any breach of any covenant or agreement on the
part of such Stockholder under this Agreement, or (iii) any liability under the
1933 Act or any Federal or state securities law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating solely to such Stockholder which was
based upon information provided to AmPaM or its counsel in writing by such
Stockholder specifically for inclusion in the Private Placement Memorandum and
is contained in the Private Placement Memorandum, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact relating solely to such Stockholder
required to be stated therein or necessary to make the statements therein in
light of the circumstances in which such statements were made not misleading;
provided, however, that such indemnity shall not be applicable to any
Stockholder who has sold all of his shares of Company Stock to the other
Stockholder prior to the Closing Date.
(c) AmPaM acknowledges and agrees that other than the representations
and warranties of the Company or the Stockholders specifically contained in
this Agreement, there are no representations or warranties of the Company or
the Stockholders, either express or implied, with respect to the transactions
contemplated by this Agreement, the Company or its assets, liabilities and
business.
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11.2 INDEMNIFICATION BY AmPaM. AmPaM covenants and agrees that it will
indemnify, defend, protect and hold harmless the Company and the Stockholders
at all times from and after the date of this Agreement until the applicable
Expiration Date (as defined in the introductory paragraph of Section 6,
provided that for purposes of clause (iii) below, the applicable Expiration
Date shall be the date on which the applicable statute of limitations expires),
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by the Company or the Stockholders as a result of or arising from (i)
any breach by AmPaM of its representations and warranties set forth herein or
on the schedules attached hereto or certificates delivered pursuant to this
Agreement, (ii) any breach of any agreement on the part of AmPaM under this
Agreement; or (iii) any liability under the 1933 Act or any Federal or state
securities law or regulation, at common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Private Placement Memorandum, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except to the extent
such is based upon an untrue statement or alleged untrue statement, or omission
or alleged omission, made therein in reliance upon, and in conformity with, the
representations and warranties of the Company or the Stockholders specifically
contained in this Agreement or other information furnished to AmPaM by the
Company or the Stockholders in writing specifically for inclusion therein.
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim
by a person not a party to this Agreement ("Third Person"), or the commencement
of any action or proceeding by a Third Person, the Indemnified Party shall, as
a condition precedent to a claim with respect thereto being made against any
party obligated to provide indemnification pursuant to Section 11.1 or 11.2
hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or proceeding.
Such notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel reasonably
satisfactory to the Indemnified Party, any such matter so long as the
Indemnifying Party pursues the same in good faith and diligently, provided that
the Indemnifying Party shall not settle any criminal proceeding without the
written consent of the Indemnified Party. If the Indemnifying Party undertakes
to defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to,
furnishing the Indemnifying Party with any books, records or information
reasonably requested by the Indemnifying Party that are in the Indemnified
Party's possession or control. All Indemnified Parties shall use the same
counsel, which shall be the counsel selected by Indemnifying Party, provided
that if counsel to the Indemnifying Party shall have a conflict of interest or
a conflict of interest is reasonably likely to arise that prevents counsel for
the Indemnifying Party from representing such Indemnified Party, Indemnified
Party shall have the right to participate in such matter through counsel of its
own choosing and Indemnifying Party will reimburse the Indemnified Party for
the reasonable expenses
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of its counsel. After the Indemnifying Party has notified the Indemnified Party
of its intention to undertake to defend or settle any such asserted liability,
and for so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except (i) as set forth in the preceding sentence
and (ii) to the extent such participation is requested by the Indemnifying
Party, in which event the Indemnified Party shall be reimbursed by the
Indemnifying Party for reasonable additional legal expenses and out-of-pocket
expenses. If the Indemnifying Party desires to accept a final and complete
settlement of any such Third Person claim and the Indemnified Party refuses to
consent to such settlement, then the Indemnifying Party's liability under this
Section with respect to such Third Person claim shall be limited to the amount
so offered in settlement by said Third Person. Upon agreement as to such
settlement between said Third Person and the Indemnifying Party, the
Indemnifying Party shall, in exchange for a complete release from the
Indemnified Party, promptly pay to the Indemnified Party the amount agreed to
in such settlement. If the Indemnifying Party does not undertake to defend such
matter to which the Indemnified Party is entitled to indemnification hereunder,
or fails diligently to pursue such defense, the Indemnified Party may undertake
such defense through counsel of its choice, at the cost and expense of the
Indemnifying Party, and the Indemnified Party may settle such matter, and the
Indemnifying Party shall pay the Indemnified Party for the settlement amount
and any other liabilities or expenses incurred by the Indemnified Party in
connection therewith, provided, however, that under no circumstances shall the
Indemnified Party settle any Third Person claim without the written consent of
the Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. All settlements hereunder shall effect a complete release of the
Indemnified Party, unless the Indemnified Party otherwise agrees in writing.
With respect to any account, note or other receivable as to which the
Stockholders have paid in full any indemnification obligation pursuant to this
Section 11 as a result of a breach of the representation and warranty made
pursuant to Section 5.11 or as to which a claim in respect thereof has been
asserted pursuant to this Section 11 that has been applied against the
Indemnification Threshold with respect to the Stockholders as a result of a
breach of the representation and warranty made pursuant to Section 5.11, AmPaM
shall cause the Company to assign such account, note or other receivable to the
Stockholders. The parties hereto will make appropriate adjustments for
insurance proceeds in determining the amount of any indemnification obligation
under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this
Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any
action seeking damages or any other form of monetary relief brought by any
party to this Agreement against another party to this Agreement with respect to
any provision of this Agreement, provided that, nothing herein shall be
construed to limit the right of a party, in a proper case, to seek injunctive
relief for a breach of this Agreement. AmPaM hereby waives, to the fullest
extent permitted under applicable law, any and all other rights, claims and
causes of action, known or unknown, it or any indemnified person may have
against the Company or any Stockholder relating to this Agreement or the
transactions pursuant to this Agreement arising under or based upon any
Federal, state, local or foreign statute, law, rule, regulation or otherwise.
Any indemnity payment under this Section 11 shall be treated as an adjustment
to the exchange consideration for Tax purposes unless a final determination
(which shall
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include the execution of a Form 870-AD or successor form) with respect to the
Indemnified Party or any of its Affiliate causes any such payment not to be
treated as an adjustment to the exchange consideration for U.S. Federal income
Tax purposes.
11.5 LIMITATIONS ON INDEMNIFICATION. (a) AmPaM shall not assert any
claim for indemnification under this Section 11 against the Stockholders until
such time as, and solely to the extent that, the aggregate of all claims which
AmPaM may have against the Stockholders shall exceed the greater of (a) 3.0% of
the sum of (i) the cash paid to the Stockholders pursuant to Section 1.2 plus
(ii) the value of the AmPaM Stock delivered to the Stockholders pursuant to
Section 1.2 (calculated as provided in this Section 11.5) plus (iii) the
principal amount of the AmPaM Notes delivered to the Stockholders pursuant to
Section 1.2, or (b) $50,000 (the "Indemnification Threshold"). Stockholders
shall not assert any claim for indemnification hereunder against AmPaM until
such time as, and solely to the extent that, the aggregate of all claims which
Stockholders may have against AmPaM shall exceed $50,000; provided, however,
that this sentence shall not be applicable with respect of any failure by AmPaM
to (i) deliver the consideration specified in Annex I hereto on the Closing
Date upon the satisfaction, or waiver by AmPaM, of all conditions to the
occurrence of the Closing Date specified in Section 9 or (ii) comply with its
obligations pursuant to Section 10.1. After the $50,000 threshold for AmPaM
(subject to the proviso in the preceding sentence) or the Indemnification
Threshold for a Stockholder has been met, all claims must be made in $10,000
increments, which claims may be cumulated in order to meet such $10,000
thresholds. For purposes of this paragraph, the AmPaM Stock delivered to the
Stockholders shall be valued at $13.00 per share.
(b) No person shall be entitled to indemnification under this Section
11 if and to the extent that such person's claim for indemnification is
directly or indirectly related to a breach by such person of any
representation, warranty, covenant or other agreement set forth in this
Agreement. No claim for indemnification against the Stockholders shall limit,
diminish or change any obligation of AmPaM pursuant to Section 10.1 hereof.
(c) Notwithstanding any other term of this Agreement, no Stockholder
shall be liable under this Section 11 for an amount which exceeds eighty-five
percent (85%) of the amount of proceeds received by such Stockholder (valued as
of the Closing Date) in connection with the purchase and sale of the Company
Stock. For purposes of this paragraph, the AmPaM Stock shall be valued at
$13.00 per share.
(d) A Stockholder may pay any indemnification obligation under Section
11 by means of the payment of cash or a combination of the payment of cash, the
forgiveness of amounts owed pursuant to the AmPaM Notes and the delivery to
AmPaM of shares of AmPaM Stock; provided that the percentage of the
indemnification obligation satisfied by means of the delivery of shares of
AmPaM Stock does not exceed the percentage of AmPaM Stock comprising the total
consideration paid to such Stockholder by AmPaM to such Stockholder pursuant to
Annex I. For the purpose of crediting Stockholders for payments made to AmPaM
by means of delivery of shares of AmPaM Stock, the AmPaM Stock shall be valued
at $13.00 per share.
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(e) In determining the amount of any loss, liability or expense for
which any party is entitled to indemnification under this Agreement, the gross
amount thereof will be reduced by any correlative insurance proceeds or other
third party indemnity or reimbursement proceeds realized or to be realized by
such party (or, in the case of AmPaM, by AmPaM, the Company or any subsidiary
of AmPaM or the Company) and such correlative insurance proceeds or other third
party indemnity or reimbursement proceeds shall be net of any insurance premium
or other incremental cost or expense owed or payable to any third party which
becomes due as a result of such claim. AmPaM shall use commercially reasonable
efforts to pursue any available insurance coverage or other rights of indemnity
or reimbursement from third parties with respect to any such loss, liability or
expense.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing Date solely:
(i) by mutual consent of AmPaM and the Stockholders;
(ii) by the Stockholders, if the transactions contemplated by
this Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by the Company
or the Stockholders prior to or on the Closing Date;
(iii) by AmPaM, if the transactions contemplated by this
Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by AmPaM prior
to or on the Closing Date;
(iv) by the Stockholders, if a material breach or default
shall be made by AmPaM in the observance or in the due and timely
performance of any of the covenants or agreements contained herein
relating to AmPaM, and the curing of such default shall not have been
made (or in the reasonable judgment of such Stockholders cannot be
made) on or before the Closing Date;
(v) by AmPaM, if a material breach or default shall be made
by the Company or the Stockholders in the observance or in the due and
timely performance of any of the covenants or agreements contained
herein relating to the Company or the Stockholders, and the curing of
such default shall not have been made (or in the reasonable judgment
of AmPaM cannot be made) on or before the Closing Date;
(vi) by the Stockholders, if the conditions set forth in
Section 8 hereof have not been satisfied or waived as of the Closing
Date; or
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(vii) by AmPaM, if the conditions set forth in Section 9
hereof have not been satisfied or waived as of the Closing Date.
12.2 PROCEDURE AND EFFECT OF TERMINATION. A determination to terminate
this Agreement by AmPaM pursuant to Section 12.1 shall be valid and effective
only if a written notice of termination, accompanied by a certified copy of
resolutions of the board of directors of AmPaM that evidence the authorization
of the officer of AmPaM to deliver a written notice of termination of this
Agreement pursuant to Section 12.1, is given to the Stockholders in the manner
specified for notices in this Agreement. A determination to terminate this
Agreement by the Stockholders pursuant to Section 12.1 shall be valid and
effective only if a written notice of termination, signed by Stockholders who
would be entitled to receive a majority of the shares of AmPaM Stock specified
in Section I of Annex I to this Agreement if the transactions contemplated
hereby were consummated, is given to AmPaM in the manner specified for notices
in this Agreement. Upon the giving of notice of termination of this Agreement
pursuant to Section 12.1 as specified in the preceding sentence, this Agreement
shall terminate, and the transactions contemplated hereby shall be abandoned,
without further action by any of the parties hereto. Immediately upon any such
termination, AmPaM shall deliver written notice of such termination to the
Other Founding Companies. If this Agreement is terminated as provided in this
Section 12, no party hereto shall have any liability or further obligation
hereunder to any other party, except as provided in Section 14 and Section
18.6, provided, that, the termination of this Agreement will in no way limit
any obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement including, but not limited
to, legal and audit costs and out of pocket expenses that occurred prior to
such termination.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. Robert C. Richey will not, without the
prior written consent of AmPaM, for a period of two (2) years following the
Closing Date, for any reason whatsoever, directly or indirectly, for themselves
or on behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, whether paid or unpaid, in any plumbing, piping,
mechanical, heating, ventilation or air conditioning contracting,
installation or services business or operation, whether for
residential, commercial, industrial or governmental customers, or any
ancillary contracting, installation or services business directly
related thereto (such business and operations referred to herein as
the "Plumbing and Mechanical Business"), within 100 miles of where the
Company or any of its subsidiaries conducted business within two (2)
years prior to the Closing Date (the "Territory");
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(ii) call upon any person who is, at the Closing Date, within
the Territory, an employee of AmPaM or any subsidiary thereof for the
purpose or with the intent of enticing such employee away from or out
of the employ of AmPaM or any subsidiary thereof;
(iii) call upon any person or entity which is, at the Closing
Date, or which has been within three (3) years prior to the Closing
Date, a customer of AmPaM or any subsidiary thereof, of the Company or
of any of the Other Founding Companies for the purpose of soliciting
customers, orders or contracts for any Plumbing and Mechanical
Business in direct competition with AmPaM within the Territory;
(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor in the
Plumbing and Mechanical Business, which candidate, to the actual
knowledge of such Stockholder after due inquiry, was called upon by
AmPaM or any subsidiary thereof or for which, to the actual knowledge
of such Stockholder after due inquiry, AmPaM or any subsidiary thereof
made an acquisition analysis, for the purpose of acquiring such
entity; or
(v) disclose to any person, firm, partnership, corporation or
business the names or identities of any person, firm, partnership,
corporation or business which has been a customer of the Company or
any of its subsidiaries within the two (2) years prior to the Closing
Date for any reason or purpose whatsoever except to the extent that
the Company has in the past disclosed such information to the public
for valid business reasons; or
(vi) testify as an expert witness in matters related to the
Plumbing and Mechanical Business for an adverse party to AmPaM, the
Company or any Other Founding Companies in litigation.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Stockholder from acquiring as a passive investment (i) not more
than one percent (1%) of the capital stock of a competing business whose stock
is traded on a national securities exchange, the NASDAQ Stock Market or
over-the-counter, or (ii) not more than five percent (5%) of the capital stock
of a competing business whose stock is not publicly traded if the Board of
Directors of AmPaM consents to such acquisition.
13.2 PROHIBITED ACTIVITIES (BAKER). Thomas L. Baker ("Baker") will
not, without the prior written consent of AmPaM, for the period from the date
of this Agreement through the second anniversary thereof (the "Baker Restricted
Period"), for any reason whatsoever, directly or indirectly, for himself or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature, including any employee
thereof:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or
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adviser, or as a sales representative, whether paid or unpaid, in the
Plumbing and Mechanical Business in the state of Nevada;
(ii) bid on or enter into an agreement to perform any work
which would constitute Plumbing and Mechanical Business for which
actual work will commence before the expiration of the Baker
Restricted Period for any of the following builders:
(a) S&S Construction Co.
(b) Kaufman & Broad/Lewis
(c) Presley Homes
(d) Barratt American, Inc.
(e) Forecast Group
(f) Centex
(g) Ryland;
(iii) bid or enter into an agreement to perform any work
which would constitute Plumbing and Mechanical Business involving a
continuing phase of any phased project for which the Company has
contracted, regardless of the builder, unless Baker is advised in
writing by the builder of such project that such builder does not
intend to employ or contract with the Company for such continuing
phase or phases;
(iv) call upon any person who is, at the Closing Date, an
employee of the Company, for the purpose or with the intent of
enticing such employee away from or out of the employ of the Company;
(v) (a) employ more than a total of thirteen (13) R.C.R.
Employees (as defined below) at any time during the first twelve
months of the Baker Restricted Period and (b) employ more than a total
of twenty-nine (29) R.C.R. Employees at any time during the second
twelve months of the Baker Restricted Period. The term "R.C.R.
Employees" shall mean any person who is an active employee of the
Company as of February 28, 1999, but shall not include any person who
is laid off or whose employment is terminated, by the Company, or any
of Baker's children.
(vi) conduct a business having gross sales from the Plumbing
and Mechanical Business in excess of $3,000,000 for the year ending
December 31, 1999 and $5,000,000 for the year ending December 31,
2000; or
(vii) except as required by process of law, disclose, reveal
or furnish to any other person, entity or government agency, any
"Trade Secret" acquired during Baker's employment with the Company,
whether prepared by him or otherwise coming into his possession. The
term "Trade Secret" shall have the meaning provided in the Uniform
Trade Secrets Act, Section 3426.1(d) of the California Civil Code.
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The Company will not, without the prior written consent of
Baker, for the Baker Restricted Period, for any reason whatsoever, directly or
indirectly, for itself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature, bid
or enter into an agreement to perform any work which would constitute Plumbing
and Mechanical Business involving a continuing phase of any project for which
Baker has contracted, regardless of the builder, unless the Company is advised
in writing by the builder of such project that such builder does not intend to
employ or contract with Baker for such continuing phase or phases.
13.3 DAMAGES. Because of the difficulty of measuring economic losses
to AmPaM as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to AmPaM for which it
would have no other adequate remedy, each Stockholder agrees that the foregoing
covenant may be enforced by AmPaM in the event of breach by such Stockholder,
by injunctions and restraining orders.
13.4 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
Stockholders in light of the activities and business of AmPaM and the
subsidiaries thereof on the date of the execution of this Agreement and the
current plans of AmPaM as described in the Private Placement Memorandum.
13.5 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent which
the court deems reasonable, and the Agreement shall thereby be reformed.
13.6 INDEPENDENT COVENANT. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against AmPaM or any subsidiary thereof, whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by AmPaM of
such covenants. It is specifically agreed that the period of two (2) years
stated at the beginning of this Section 13, during which the agreements and
covenants of each Stockholder made in this Section 13 shall be effective, shall
be computed by excluding from such computation any time during which such
Stockholder is found to be in violation of any provision of this Section 13 as
determined by any of (i) a written agreement to such effect executed and
delivered by AmPaM and such Stockholder, (ii) a determination by an arbitration
panel pursuant to an arbitration conducted pursuant to Section 18.16 hereof or
(iii) a non-appealable judgment of a court of competent jurisdiction. The
covenants contained in Section 13 shall not be affected by any breach of any
other provision hereof by any party hereto. The covenants contained in Section
13 shall have no effect if the transactions contemplated by this Agreement are
not consummated.
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13.7 MATERIALITY. The Company and the Stockholders hereby agree that
the covenants contained in this Section 13 are a material and substantial part
of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. Robert C. Richey recognizes and acknowledges that
he had in the past, currently has, and in the future may possibly have, access
to certain confidential information of the Company, the Other Founding
Companies, and/or AmPaM, such as operational policies, customer lists, and
pricing and cost policies that are valuable, special and unique assets of the
Company's, the Other Founding Companies' and/or AmPaM's respective businesses.
Robert C. Richey agrees that he will not disclose such confidential information
to any person, firm, corporation, association or other entity for any purpose
or reason whatsoever, except (a) to authorized representatives of AmPaM, (b)
following the Closing, such information may be disclosed by Robert C. Richey as
is required in the course of performing his duties for AmPaM or the Company and
(c) to its counsel and other advisers, provided that such advisers (other than
counsel) agree to the confidentiality provisions of this Section 14.1;
provided, however that (i) the foregoing disclosure prohibition shall not apply
in the event that (i) such information becomes known to the public generally
through no fault of Robert C. Richey, (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), Robert C. Richey
shall, if possible, give prior written notice thereof to AmPaM and provide
AmPaM with the opportunity to contest such disclosure, or (iii) the disclosing
party reasonably believes that such disclosure is required in connection with
the defense of a lawsuit against the disclosing party. In the event of a breach
or threatened breach by Robert C. Richey of the provisions of this Section,
AmPaM shall be entitled to an injunction restraining Robert C. Richey from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting AmPaM from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by this Agreement are not
consummated, Robert C. Richey shall have none of the above-mentioned
restrictions on their ability to disseminate confidential information with
respect to the Company.
14.2 AmPaM. AmPaM recognizes and acknowledges that it had in the past
and currently has access to certain confidential information of the Company,
such as operational policies, customer lists, and pricing and cost policies
that are valuable, special and unique assets of the Company's business. AmPaM
agrees that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
the Company, (b) to its counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
14.2, (c) to the Other Founding Companies and their representatives pursuant to
Section 7.1(b) of the Other Agreements and (d) to potential purchasers of
securities of AmPaM to the extent necessary or advisable in connection with the
applicable securities laws; provided, however that the foregoing disclosure
prohibition shall not apply in the event that (A) such information becomes
known to the public generally through no fault of AmPaM, (B) disclosure is
required by law or the order of any
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governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (B), AmPaM shall, if possible, give
prior written notice thereof to the Company and the Stockholders and provide
the Company and the Stockholders with the opportunity to contest such
disclosure, or (C) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by AmPaM of the
provisions of this Section 14.2, the Company and the Stockholders shall be
entitled to an injunction restraining AmPaM from disclosing, in whole or in
part, such confidential information. Nothing herein shall be construed as
prohibiting the Company and the Stockholders from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by this Agreement are not
consummated for any reason, AmPaM shall nevertheless remain subject to this
Section 14.2, except that it shall not be permitted to make any disclosures
otherwise than pursuant to clause (A), (B) or (C) above.
14.3 DAMAGES. Because of the difficulty of measuring economic losses
as a result of the breach of the foregoing covenants in Sections 14.1 and 14.2,
and because of the immediate and irreparable damage that would be caused for
which they would have no other adequate remedy, the parties hereto agree that,
in the event of a breach by any of them of the foregoing covenants, the
covenant may be enforced against the other parties by injunctions and
restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14
shall survive the termination of this Agreement for a period of five years from
the Closing Date.
14.5 RETURN OF INFORMATION. If the transactions contemplated by this
Agreement are not consummated, AmPaM will return or destroy all confidential
information regarding the Company.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS RELATING TO AmPaM STOCK AND AmPaM NOTES.
For a period of two years from the Closing Date or, in the event that the
Company completes an IPO, for a period through the second anniversary of the
date of the closing of such IPO (the "Restricted Period"), no Stockholder shall
(i) sell, assign, exchange, transfer, pledge, or otherwise dispose of any
shares of AmPaM Stock or AmPaM Notes received by the Stockholders pursuant to
this Agreement or any securities convertible into, exchangeable or exercisable
for any shares of AmPaM Stock or AmPaM Notes received by such Stockholder
pursuant to this Agreement, (ii) grant any option to purchase, or otherwise
enter into any contract to sell, assign, transfer, pledge or otherwise dispose
of, any shares of AmPaM Stock or AmPaM Notes received by such Stockholder
pursuant to this Agreement, or (iii) enter into any swap or any other agreement
or any transaction that transfers, in whole or in part, directly or indirectly,
the economic consequence of ownership of the AmPaM Stock or AmPaM Notes,
whether any such swap or transaction is to be settled by delivery of shares of
AmPaM Stock or AmPaM Notes or other securities, by the delivery or payment of
cash or otherwise, except, in the case of clauses (i), (ii) or (iii) above, (A)
as otherwise agreed by AmPaM, (B) for the sale of shares of AmPaM Stock, and
entering into agreements relating to the sale of shares of AmPaM Stock,
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pursuant to Section 17 hereof, (C) for transfers to (I) immediate family
members of such Stockholder who agree with AmPaM in writing to be bound by the
restrictions set forth in this Section 15.1, (II) trusts, limited partnerships
or other estate planning entities for the benefit of such Stockholder or family
members of such Stockholder which have agreed with AmPaM in writing, through
action taken by the trustees, partners or other persons having authority to
bind the trust, limited partnership or other estate planning entity, to be
bound by the restrictions set forth in this Section 15.1, (III) any charitable
organization that qualifies for receipt of charitable contributions under
Section 170(c) of the Code which agrees with AmPaM in writing to be bound by
the restrictions set forth in this Section 15.1, (D) for transfers of AmPaM
Stock or AmPaM Notes to AmPaM pursuant to Section 11.5(d), (E) for transfers to
another Stockholder, to another person or entity who receives shares of AmPaM
Stock or AmPaM Notes or AmPaM Series A Preferred Stock pursuant to the Other
Agreements or to Sterling City Capital LLC or any of its Affiliates provided
that (1) such transaction is exempt from the registration requirements of the
1933 Act as evidenced by the delivery to AmPaM of an opinion of counsel in form
and substance reasonably satisfactory to AmPaM and (2) any such transferee
agrees in writing to be bound by the restrictions set forth in this Section
15.1, (F) transfers of shares of AmPaM Notes, shares of AmPaM Stock, or grants
of options to purchase shares of AmPaM Stock, by such Stockholder to employees
of the Company of up to an aggregate of 15% of the shares of AmPaM Stock
received by such Stockholder pursuant to this Agreement provided that (1) any
such transaction is exempt from the registration requirements of the 1933 Act
as evidenced by the delivery to AmPaM of an opinion of counsel in form and
substance reasonably satisfactory to AmPaM and (2) any such employee agrees
with AmPaM in writing to be bound by the restrictions set forth in this Section
15.1 or (G) the sale by such Stockholder in an IPO of shares of AmPaM Stock
representing not more than 10% of the Aggregate Consideration in cash;
provided, however, that in no circumstance will a Stockholder be entitled to
sell shares of AmPaM Stock in an IPO to the extent that the sale of such shares
by such Stockholder would result in such Stockholder receiving in excess of 45%
of the Aggregate Consideration in cash; and, provided further, if AmPaM is
advised in writing in good faith by any managing underwriter of an underwritten
offering of the securities being offered pursuant to any registration statement
under Section 17.1 that the number of shares to be sold by persons other than
AmPaM is greater than the number of such shares which can be offered without
adversely affecting the success of the offering, AmPaM may reduce pro rata
(among the Stockholders and all other selling security holders in the offering)
the number of shares offered for the accounts of such persons (based upon the
number of shares held by such person) to a number deemed satisfactory by such
managing underwriter. During the Restricted Period, the certificates evidencing
the AmPaM Stock or AmPaM Notes delivered to the Stockholders pursuant to
Section 3 of this Agreement will bear a legend substantially in the form set
forth below:
THE [SHARES/NOTES] REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE
TERMS OF THE ACQUISITION AGREEMENT PURSUANT TO WHICH SUCH SHARES WERE ISSUED,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, PLEDGE OR OTHER DISPOSITION PRIOR TO EXPIRATION
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OF THE RESTRICTED PERIOD REFERRED TO IN THE ACQUISITION AGREEMENT EXCEPT IN
ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT. SUCH RESTRICTIONS ON TRANSFER ARE
SET FORTH IN AN ACQUISITION AGREEMENT, A COPY OF WHICH IS MAINTAINED AT THE
PRINCIPAL OFFICES OF THE ISSUER. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 TRANSFER RESTRICTIONS RELATING TO ADDITIONAL CONSIDERATION. No
Stockholder shall (i) sell, assign, exchange, transfer, pledge, or otherwise
dispose of any right to receive any consideration pursuant to Section II of
Annex I to this Agreement (the "Additional Consideration Right") or any
securities convertible into, exchangeable or exercisable for any Additional
Consideration Right, (ii) grant any option to purchase, or otherwise enter into
any contract to sell, assign, transfer, pledge or otherwise dispose of, any
Additional Consideration Right, or (iii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of any Additional
Consideration Right, whether any such swap or transaction is to be settled by
delivery of shares of AmPaM Stock or other securities, by the delivery or
payment of cash or otherwise.
16. FEDERAL SECURITIES ACT REPRESENTATIONS
16.1 COMPLIANCE WITH LAW. Each Stockholder acknowledges that the
shares of AmPaM Stock, the Additional Consideration Right and any AmPaM Notes
to be delivered to such Stockholder pursuant to this Agreement have not been
and will not be registered under the 1933 Act (except as provided in Section 17
hereof) and therefore may not be sold, assigned, exchanged, transferred,
pledged or otherwise disposed of without compliance with the 1933 Act which,
among other matters, would require registration under the 1933 Act unless
exemption from the registration requirements is available for such transaction.
The AmPaM Stock, the Additional Consideration Right and any AmPaM Notes to be
acquired by each Stockholder pursuant to this Agreement is being acquired
solely for such Stockholder's own account, for investment purposes only, and
with no present intention of selling, assigning, exchanging, transferring,
pledging, or otherwise disposing of it. Each Stockholder covenants, warrants
and represents that neither the shares of AmPaM Stock, the Additional
Consideration Right nor any AmPaM Notes issued to such Stockholder will be
offered, sold, assigned, exchanged, pledged, transferred or otherwise disposed
of except after full compliance with all of the applicable provisions of the
1933 Act and the rules and regulations of the SEC. All certificates
representing the AmPaM Stock shall bear the following legend in addition to the
legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
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16.2 ECONOMIC RISK; SOPHISTICATION. Each Stockholder is able to bear
the economic risk of an investment in the AmPaM Stock and AmPaM Notes to be
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment. Each Stockholder has substantial knowledge and experience in
making investment decisions of this type (or is relying on qualified purchaser
representatives with such knowledge and experience in making this decision),
and is capable, either individually or with such purchaser representatives, of
evaluating the merits and risks of this investment. Each Stockholder has had an
adequate opportunity to ask questions and receive answers from the officers of
AmPaM concerning any and all matters relating to the transactions described
herein including, without limitation, the background and experience of the
current and proposed officers and directors of AmPaM, the plans for the
operations of the business of AmPaM, the business, operations and financial
condition of the Founding Companies other than the Company, and any plans for
additional acquisitions. Each Stockholder has asked any and all questions of
the nature described in the preceding sentence and all questions have been
answered to such Stockholder's satisfaction. Except as set forth on Schedule
16.2, each Stockholder is an "accredited investor" as defined in Rule 501(a) of
the 1933 Act. Neither the foregoing nor any investigation made by the
Stockholders referred to above shall in any way affect the representations,
warranties, covenants and agreements of AmPaM made herein except to the extent
that AmPaM is relying upon the representations of the Stockholders in Section
16.1 and in this Section 16.2 for purposes of AmPaM's representations and
warranties in Sections 6.9, 6.11, 6.15 and 6.17 hereof as specified therein.
16.3 RELIANCE BY AMPAM. Each Stockholder acknowledges that AmPaM in
relying upon the representations and covenants of such Stockholder set forth in
Section 16.1 and Section 16.2 for purposes of compliance by AmPaM with Federal
and state securities laws related to the issuance of AmPaM Stock pursuant to
this Agreement and the Other Agreements.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. Whenever AmPaM proposes to register
any AmPaM Stock for its own or other's account under the 1933 Act for a public
offering, other than (i) any shelf or other registration of shares to be used
as consideration for acquisitions of additional businesses by AmPaM and (ii)
registrations relating to employee benefit plans, AmPaM shall give each of the
Stockholders prompt written notice of its intent to do so. Upon the written
request of any of the Stockholders given within 15 calendar days after receipt
of such notice, notwithstanding the provisions of Section 15 (except as
specified below with respect to an IPO), AmPaM shall cause to be included in
such registration all of the AmPaM Stock issued to such Stockholders pursuant
to this Agreement (including any stock issued as or issuable upon the
conversion or exchange of any convertible security, warrant, right or other
security which is issued by AmPaM as a stock split, dividend or other
distribution with respect to, or in exchange for, or in replacement of such
AmPaM Stock) which any such Stockholder requests, other than shares of AmPaM
Stock which may then be immediately sold under Rule 144(k) (or any similar or
successor provision) promulgated under the 1933 Act, and other than shares of
AmPaM Stock that have been theretofore sold by the Stockholder in accordance
with the 1933 Act, provided that AmPaM shall have the right to reduce pro rata
the
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number of shares of each selling Stockholder included in such registration to
the extent that inclusion of such shares would, in the written opinion of tax
counsel to AmPaM or its independent auditors, jeopardize the status of the
transactions contemplated hereby and by the Private Placement Memorandum as a
tax-free organization under Section 351 of the Code; provided, however, that
with respect to a proposal by AmPaM to register AmPaM Stock under the 1933 Act
in connection with an IPO, no Stockholder shall be permitted pursuant to this
Section 17.1 to have included in such registration more shares of AmPaM Stock
than permitted to be sold by such Stockholder pursuant to Section 15.1. In
addition, if AmPaM is advised in writing in good faith by any managing
underwriter of an underwritten offering of the securities being offered
pursuant to any registration statement under this Section 17.1 that the number
of shares to be sold by persons other than AmPaM is greater than the number of
such shares which can be offered without adversely affecting the success of the
offering, AmPaM may reduce pro rata (among the Stockholders and all other
selling security holders in the offering) the number of shares offered for the
accounts of such persons (based upon the number of shares held by such person)
to a number deemed satisfactory by such managing underwriter. If any
Stockholder disapproves of the terms of the underwriting, that Stockholder may
elect to withdraw therefrom by written notice to AmPaM and the managing
underwriter. That Stockholder's shares of AmPaM Stock so withdrawn shall also
be withdrawn from registration; provided, however, that, if by the withdrawal
of such shares a greater number of shares of AmPaM Stock held by other
Stockholders may be included in such registration, then AmPaM shall offer to
all other Stockholders of AmPaM the right to include additional shares in the
same proportion used in effecting the above limitations. AmPaM shall not, for a
period of two years following the Closing Date, grant to any other person any
rights to cause AmPaM to register any securities in priority over, or in
precedent to, the rights granted to the Stockholders hereunder and to the
stockholders of the Other Founding Companies pursuant to Section 17 of the
Other Agreements.
17.2 REGISTRATION PROCEDURES. Whenever AmPaM is required to register
shares of AmPaM Stock pursuant to Section 17.1, AmPaM will, as expeditiously as
possible:
(i) Prepare and file with the SEC a registration statement
with respect to such shares and use its best efforts to cause such
registration statement to become effective (provided that before
filing a registration statement or prospectus or any amendments or
supplements or term sheets thereto, AmPaM will furnish a
representative of the Stockholders with copies of all such documents
proposed to be filed) as promptly as practical;
(ii) Notify the Stockholders of any stop order issued or
threatened by the SEC and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered;
(iii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 120 days, cause the
prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the 1933
Act; and comply with the
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provisions of the 1933 Act applicable to it with respect to the
disposition of all securities covered by such registration statement
during the applicable period in accordance with the intended methods
of disposition by the sellers thereof set forth in such registration
statement or supplement to the prospectus;
(iv) Furnish to each Stockholder who so requests such number
of copies of such registration statement, each amendment and
supplement thereto and the prospectus included in such registration
statement (including each preliminary prospectus and any term sheet
associated therewith), and such other documents as such Stockholder
may reasonably request in order to facilitate the disposition of the
relevant shares;
(v) Make "generally available to its security holders"
(within the meaning of Rule 158) an earnings statement satisfying the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder no
later than 90 days after the end of the 12-month period beginning with
the first day of AmPaM's first fiscal quarter commencing after the
effective date of the registration statement;
(vi) Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement
at the earliest possible moment;
(vii) If requested by the managing underwriter or
underwriters, if any, or any participating Stockholder, promptly
incorporate in a prospectus supplement or post-effective amendment
such information as the managing underwriter or underwriters or any
participating Stockholder, as the case may be, reasonably requests to
be included therein, including, without limitation, information with
respect to the number of shares of AmPaM Stock being sold by
participating Stockholders to any underwriter or underwriters, the
purchase price being paid therefor by such underwriter or underwriters
and with respect to any other terms of an underwritten offering of the
shares of AmPaM Stock to be sold in such offering, and promptly make
all required filings of such prospectus by supplement or
post-effective amendment;
(viii) Make available for inspection by participating
Stockholders, any underwriter participating in any disposition
pursuant to such registration statement, and the counsel retained by
the participating Stockholders, counsel for the underwriters and any
accountant or other agent retained by participating Stockholders or
any such underwriter (collectively, the "Inspectors"), all financial
and other records, pertinent corporate documents and properties of
AmPaM (the "Records"), as shall be reasonably necessary to enable them
to exercise their due diligence responsibility, and cause AmPaM's
officers, directors and employees to supply all information reasonably
requested by any such Inspectors in connection with such registration
statement; provided, that records which AmPaM determines, in good
faith, to be confidential and which AmPaM notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or
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(ii) the release of such Records is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction after delivery of
sufficient notice to AmPaM to enable AmPaM to contest such subpoena or
order;
(ix) Take all other steps reasonably necessary to effect the
registration of the shares of AmPaM Stock contemplated hereby;
(x) Use its best efforts to register or qualify the
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as shall be
reasonably requested by the Stockholders, and to keep such
registration or qualification effective during the period such
registration statement is required to be kept effective, provided that
AmPaM shall not be required to become subject to taxation, to qualify
generally to do business or to file a general consent to service of
process in any such states or jurisdictions;
(xi) Cause all such shares of AmPaM Stock to be listed or
included not later than the date of the first sale of shares of AmPaM
Stock under such registration statement on any securities exchanges or
trading systems on which similar securities issued by AmPaM are then
listed or included; and
(xii) Notify each Stockholder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within
the period that AmPaM is required to keep the registration statement
effective of the happening of any event as a result of which the
prospectus included in such registration statement (as then in
effect), together with any associated term sheet, contains an untrue
statement of a material fact or omits to state any fact required to be
stated therein or necessary to make the statements therein (in the
case of the prospectus or any preliminary prospectus, in light of the
circumstances under which they were made) not misleading, and, at the
request of such Stockholder, AmPaM promptly will prepare a supplement
or amendment to such prospectus so that, as thereafter delivered to
the purchasers of the covered shares, such prospectus will not contain
an untrue statement of material fact or omit to state any fact
required to be stated therein or necessary to make the statements
therein (in the case of the prospectus or any preliminary prospectus,
in light of the circumstances under which they were made) not
misleading.
All expenses incurred in connection with the registration under this
Article 17 and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printer and
accounting fees, but excluding underwriting commissions and discounts), shall
be borne by AmPaM.
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17.3 INDEMNIFICATION.
(a) In connection with any registration under Section 17.1,
AmPaM shall indemnify, to the extent permitted by law, each selling Stockholder
(an "Indemnified Party") against all losses, claims, damages, liabilities and
expenses arising out of or resulting from any untrue or alleged untrue
statement of material fact contained or incorporated by reference in any
registration statement, prospectus or preliminary prospectus or associated term
sheet or any omission or alleged omission to state or incorporated by reference
therein a material fact required to be stated or incorporated by reference
therein or necessary to make the statements therein not misleading except
insofar as the same are caused by or contained in or omitted from any
information furnished in writing to AmPaM by such Indemnified Party expressly
for use therein or by any Indemnified Parties' failure to deliver a copy of the
registration statement or prospectus or any amendment or supplements thereto
after AmPaM has furnished such Indemnified Party with a sufficient number of
copies of the same.
(b) In connection with any registration under Section 17.1,
each selling Stockholder shall furnish to AmPaM in writing such information
concerning the Stockholder and his or her proposed offering of shares as is
reasonably requested by AmPaM for use in any such registration statement or
prospectus and will indemnify, to the extent permitted by law, AmPaM, its
directors and officers and each person who controls AmPaM (within the meaning
of the 1933 Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of a material fact or any
omission or alleged omission to state therein a material fact required to be
stated in the registration statement or prospectus or any amendment thereof or
supplement thereto or necessary to make the statements therein not misleading,
but only to the extent that such untrue or alleged untrue statement or omission
or alleged omission is contained in or omitted from information so furnished in
writing to AmPaM by such Stockholder expressly for use in the registration
statement. Notwithstanding the foregoing, the liability of a Stockholder under
this Section 17.3 shall be limited to an amount equal to the net proceeds
actually received by such Stockholder from the sale of the relevant shares
covered by the registration statement.
(c) Any person entitled to indemnification hereunder will (i)
give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) unless in such indemnified parties'
reasonable judgment, a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. Any failure to give prompt notice shall
deprive a party of its right to indemnification hereunder only to the extent
that such failure shall have adversely affected the indemnifying party. If the
defense of any claim is assumed, the indemnifying party will not be subject to
any liability for any settlement made without its consent (but such consent
shall not be unreasonably withheld). An indemnifying party that is not entitled
or elects not, to assume the defense of a claim, will not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party, a
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conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
17.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 17.1 covering an underwritten registered offering, (i)
each participating Stockholder shall execute and deliver to AmPaM a written
power of attorney instrument that (A) appoints an officer of AmPaM as such
Stockholder's attorney-in-fact for purposes of executing and delivering an
underwriting agreement among AmPaM, the underwriters named therein and such
Stockholder specifying the terms and conditions applicable to the sale of AmPaM
Stock of such Stockholder in such offering and (B) otherwise is in such form
and containing such provisions as are customary in the securities business for
such an arrangement in connection with an underwritten registered offering in
which one or more stockholders of the issuer are participants, including a
provision that authorizes the attorney-in-fact appointed by such Stockholder to
execute and deliver such an underwriting agreement in the event that the net
price per share to be received by such Stockholder from the sale of the shares
of AmPaM Stock to be sold in such offering is not less than a price specified
in such instrument and (iii) AmPaM and each participating Stockholder agree to
enter into a written agreement with the managing underwriters in such form and
containing such provisions as are customary in the securities business for such
an arrangement between such managing underwriters and companies of AmPaM's size
and investment stature, including indemnification; provided, however, that (A)
such Stockholder shall be exempt and excluded from any indemnification of the
managing underwriters other than with respect to information provided by such
Stockholder with respect to such Stockholder to AmPaM or the managing
underwriters specifically for inclusion in any such registration statement and
(B) such Stockholder shall not be obligated to enter into such an underwriting
agreement in the event that the net price per share to be received by such
Stockholder from the sale of shares of AmPaM Stock to be sold in such offering
is less than the floor price specified in the power of attorney instrument
executed and delivered to AmPaM pursuant to clause (i) above.
17.5 TRANSFER OF RIGHTS. The right to cause AmPaM to register shares
of AmPaM Stock under this Agreement may be assigned to a transferee or assignee
of any Stockholder to the extent that such transferee or assignee is a member
of the immediate family of a Stockholder, a trust, limited partnership or other
estate planning entity for the benefit of any such persons or a charitable
organization that qualifies for receipt of charitable contributions under
Section 170(c) of the Code.
17.6 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC that may permit the sale of AmPaM
stock to the public without registration, following an IPO AmPaM agrees to use
its reasonable efforts, from and after the completion of an IPO, to:
(i) make and keep public information regarding AmPaM
available as those terms are understood and defined in Rule 144 under
the 1933 Act beginning 90 days following the effective date of a
registration statement relating to an IPO;
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(ii) file with the SEC in a timely manner all reports and
other documents required of AmPaM under the 1933 Act and the 1934 Act
at any time after it has become subject to such reporting
requirements; and
(iii) so long as a Stockholder owns any restricted AmPaM
Stock, furnish to each Stockholder forthwith upon written request a
written statement by AmPaM as to its compliance with the current
public information requirements of Rule 144 (at any time from and
after 90 days following the effective date of a registration statement
relating to an IPO), and of the 1933 Act and the 1934 Act (any time
after it has become subject to such reporting requirements), a copy of
the most recent annual or quarterly report of AmPaM, and such other
reports and documents so filed as a Stockholder may reasonably request
in availing itself of any rule or regulation of the SEC allowing a
Stockholder to sell any such shares without registration.
18. REDEMPTION OF AMPAM STOCK
18.1 REDEMPTION TRIGGER. In the event that, within three years of the
Closing Date, (i) AmPaM has not consummated an IPO and (ii) any Stockholder has
not received cash (including proceeds from the public or private sale of AmPaM
Stock received as consideration hereunder and the receipt of principal
payments, if any, made with respect to AmPaM Notes held by such Stockholder)
equal to or exceeding 50% of the Aggregate Consideration on or prior to the
third anniversary of the Closing Date, such Stockholder shall have the right
(the "Put Right"), but not the obligation, commencing on the third anniversary
date of the Closing Date to require AmPaM to purchase a number of shares of
AmPaM Stock then owned by such Stockholder, subject to the limitations set
forth in Section 18.2 below. The purchase price for such redemption shall be
$13.00 per share, such price to be subject to appropriate adjustment to reflect
any reclassification, stock dividend, subdivision, split-up or combination of
shares of AmPaM Stock after the date hereof.
18.2 MINIMUM REDEMPTION; LIMITATIONS. If the events specified in
Section 18.1(i) and 18.1(ii), with Section 18.1(ii) being determined on an
individual Stockholder basis, have not occurred within the time specified,
AmPaM shall be obligated to purchase from each eligible Stockholder no less
than 10% of the AmPaM Stock held by such Stockholder annually; provided,
however, that the Stockholders shall not be entitled to exercise their Put
Rights if and to the extent the Company has not achieved the Target Net Income
(as defined in Annex I hereto) for the year preceding the year in which a
Stockholder seeks to exercise his Put Right. The redemptions will be funded by
internal cash flows or alternative financing arrangements but AmPaM's
obligation to make any redemption pursuant to this Section 18 will be subject
to the covenants and restrictions contained in AmPaM's then existing private or
public debt or equity instruments.
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18.3 NOTICE; EXERCISE. The Stockholders may exercise their Put Right
by giving written notice (the "Put Notice") to AmPaM within thirty (30) days of
the third anniversary of the execution hereof. If any Stockholder does not
provide AmPaM with a Put Notice within such thirty-day period, the Put Right
applicable to such Stockholder shall expire. The date for closing the sale of
any shares of AmPaM Stock pursuant to a proper exercise of a Put Right shall in
no event be earlier than 90 days after the date AmPaM receives the Put Notice.
Any such closing shall be at such time of day and place as shall be mutually
agreed between such holder and AmPaM. At such closing AmPaM shall make payment
for the AmPaM Stock to be repurchased by wire transfer of immediately available
funds to a bank account designated by such Stockholder for such purpose and
such Stockholder shall deliver to AmPaM certificates, duly endorsed for
transfer, representing the shares of AmPaM Stock to be purchased and sold
pursuant to the exercise of such Put Right.
18.4 ADDITIONAL REDEMPTIONS. In the event AmPaM has not consummated an
IPO and notwithstanding the foregoing, to the extent the Stockholders who have
received greater than 50% of their Aggregate Consideration in cash wish to
tender AmPaM Stock to AmPaM for purchase, AmPaM will use its commercially
reasonable efforts to continue to repurchase up to 10% of the AmPaM Stock held
by such Stockholder annually.
18.5 TERMINATION OF REDEMPTION OBLIGATION. Put Rights with respect to
any individual Stockholder will terminate upon receipt by such Stockholder of
50% of his Aggregate Consideration in cash; such termination will not, however,
limit such Stockholders ability to participate in the additional redemptions
provided in Section 18.4. Notwithstanding the foregoing, all of AmPaM's
redemption obligations contained in this Section 18 shall terminate on the
earlier to occur of (i) an IPO, (ii) any sale of all or substantially all of
AmPaM's assets in one transaction or series of transactions, (iii) any merger
or consolidation which involves AmPaM and in which AmPaM is not the surviving
entity or (iv) any transaction after which the shares of AmPaM Common Stock, if
any, which are then held by persons other than the holders of AmPaM Common
Stock as of the Closing Date constitute 50% or more of AmPaM Common Stock
outstanding as of the date of the consummation of such transaction.
19. GENERAL
19.1 COOPERATION. The Company, Stockholders and AmPaM shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The Company will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the Company cooperate
with AmPaM on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
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19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law and except as
provided in Section 17.5) and shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of AmPaM and the Company, and the
heirs, successors and legal representatives of the Stockholders.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the
Stockholders, the Company and AmPaM and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the Stockholders, the Company and AmPaM,
acting through their respective officers or trustees, duly authorized by their
respective Boards of Directors. Any disclosure made on any Schedule delivered
pursuant hereto shall be deemed to have been disclosed for purposes of any
other Schedule required hereby, provided that the Company shall make a good
faith effort to cross reference disclosure, as necessary or advisable, between
related Schedules.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in
two (2) or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument. A
telecopied facsimile of an executed counterpart of this Agreement shall be
sufficient to evidence the binding agreement of each party to the terms hereof.
However, each party agrees to return to the other parties an original, duly
executed counterpart of this Agreement promptly after delivery of a telecopied
facsimile thereof.
19.5 BROKERS AND AGENT. Except as disclosed on Schedule 18.5, each
party hereto represents and warrants that it employed no broker or agent in
connection with this transaction and agrees to indemnify the other parties
hereto against all loss, cost, damages or expense arising out of claims for
fees or commission of brokers employed or alleged to have been employed by such
indemnifying party.
19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, AmPaM will pay the reasonable fees, expenses and
disbursements of AmPaM and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto, including all costs and expenses incurred in the
performance and compliance with all conditions to be performed by AmPaM under
this Agreement, including the fees and expenses of Arthur Andersen LLP, Andrews
& Kurth L.L.P., and any other person or entity retained by AmPaM, and the costs
of preparing the Private Placement Memorandum incurred in connection with the
subject matter of this Agreement and any amendments thereto. In addition,
whether or not the transactions contemplated herein shall be consummated, AmPaM
will pay the reasonable fees and expenses of Bracewell & Patterson LLP incurred
on behalf of the Company and the Stockholders in connection with the subject
matter of this Agreement. Whether or not the transactions herein contemplated
shall be consummated, the Company will pay all of its costs and expenses
incurred on behalf of the Company and the Stockholders in connection with the
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subject matter of this Agreement except that (i) the Company shall not be
required to pay any of the costs, fees and expenses specified above as to which
AmPaM is responsible for the payment thereof and (ii) neither the Company nor
the Stockholders shall be responsible for the payment of the costs, fees and
expenses incurred by or on behalf of AmPaM. Whether or not the transactions
herein contemplated shall be consummated, AmPaM shall reimburse Sterling City
Capital, LLC (or any person or entity which is an Affiliate thereof) for any of
the foregoing fees, expenses and disbursements paid by Sterling City Capital,
LLC (or any person or entity which is an Affiliate thereof) and shall repay
Sterling City Capital, LLC (or any person or entity which is an Affiliate
thereof) for any loans or advances made by Sterling City Capital, LLC (or any
person or entity which is an Affiliate thereof) for the purpose of providing
AmPaM funds to pay any such fees, expenses and disbursements, provided that
such reimbursement and loan repayment obligation shall be limited to the
foregoing fees, expenses, and disbursements which are out-of-pocket expenses of
AmPaM, Sterling City Capital, LLC or any person or entity which is an Affiliate
thereof. Sterling City Capital, LLC shall be reimbursed by AmPaM in the form of
AmPaM Notes. AmPaM retains the right, within a reasonable period following the
Closing Date, to conduct an audit of the expenses for which Sterling City
Capital, LLC is reimbursed. Each Stockholder shall pay all sales, use,
transfer, real property transfer, recording, gains, stock transfer and other
similar taxes and fees ("Transfer Taxes") imposed in connection with the
purchase and sale of the Company Stock, other than Transfer Taxes, if any,
imposed by the State of Delaware. Each Stockholder shall file all necessary
documentation and Returns with respect to such Transfer Taxes. In addition,
each Stockholder acknowledges that he, and not the Company or AmPaM, will pay
all Taxes due by him upon receipt of the consideration payable pursuant to
Section 1 hereof. The Stockholders acknowledge that the risks of the
transactions contemplated hereby include Tax risks, with respect to which the
Stockholders are relying substantially on the opinion contemplated by Section
8.12 hereof and representations by AmPaM in this Agreement.
19.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the
same in person or via a nationally recognized courier service to an officer or
agent of such party.
(a) If to AmPaM addressed to it at:
American Plumbing & Mechanical, Inc.
515 Post Oak Blvd., Suite 450
Houston, Texas 77027
Attention: Chief Executive Officer
with copies to:
Thomas P. Mason
Andrews & Kurth L.L.P.
4200 Chase Tower
Houston, Texas 77002
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(b) If to the Stockholders, addressed to them at their addresses set
forth on the signature pages hereto.
(c) If to the Company, addressed to it at:
Robert C. Richey
R.C.R. Plumbing, Inc.
12620 Magnolia Ave.
Riverside, California 92503
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Texas, excluding any conflicts of law, rule or
principle that might refer same to the laws of another jurisdiction.
19.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated
hereby and any examination on behalf of the parties until the respective
Expiration Dates referred to herein with respect thereto or, if no Expiration
Date is applicable with respect thereto, until the expiration of all applicable
statute of limitations periods.
19.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or
of any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.11 TIME. Time is of the essence with respect to this Agreement.
19.12 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.
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19.13 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
19.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived only
with the written consent of AmPaM, the Company and Stockholders who would
receive a majority of the Aggregate Consideration specified in Section I of
Annex I to this Agreement if the transactions contemplated hereby were
consummated. Any amendment or waiver effected in accordance with this Section
19.15 shall be binding upon each of the parties hereto, any other person
receiving AmPaM Stock in connection with the purchase and sale of the Company
Stock and each future holder of such AmPaM Stock. Any consent of the
Stockholders who would receive a majority of the Aggregate Consideration
pursuant to Section I of Annex I of this Agreement if the transactions
contemplated hereby were consummated shall be deemed to be the consent of the
Stockholders for purposes of provisions of this Agreement as to which a consent
of the Stockholders may be requested or required.
19.16 MEDIATION AND ARBITRATION. If a dispute arises out of or relates
to this Agreement, or the breach thereof, and if said dispute cannot be settled
through direct discussions, the parties agree to first endeavor to settle the
dispute in an amicable manner by mediation administered by the American
Arbitration Association under its then prevailing Commercial Mediation Rules,
before resorting to arbitration. Thereafter, any unresolved controversy or
claim arising out of or relating to this Agreement, or the breach thereof,
shall be settled by arbitration administered by the American Arbitration
Association in accordance with its then prevailing Commercial Arbitration
Rules. The enforcement, interpretation and procedural and substantive effect of
the obligation to arbitrate created by this Section 19.16 shall be governed by
the Federal Arbitration Act as amended from time to time, 9 U.S.C. Section 1 et
seq. The parties hereby disclaim any intention to have the substantive or
procedural law of any state or other jurisdiction, other than the law of the
United States as embodied in the Federal Arbitration Act, applied to such
obligation. Any such mediation or arbitration proceeding will be conducted in
Houston, Texas.
19.17 INFORMATION PROVIDED FOR PRIVATE PLACEMENT MEMORANDUM. For
purposes of this Agreement, the information provided by the Company in writing
specifically for inclusion in the Private Placement Memorandum shall include
solely (i) the Financial Statements (in the form that they appear in the
Private Placement Memorandum), (ii) any financial statements provided to AmPaM
pursuant to Section 7.9, (iii) the description of the Company contained in the
Private Placement Memorandum under the caption "The Company", (iv) the
description of the Company's results of operations and its liquidity and
capital resources, if any, contained in the Private Placement Memorandum under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and (v) the description, if any, of matters related to
the Company contained in the Private Placement Memorandum under the caption
"Certain Transactions Transactions involving Certain Officers, Directors and
Stockholders". For purposes of this
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Agreement, the information provided by a Stockholder in writing specifically
for inclusion in the Private Placement Memorandum shall include only (i) the
description, if any, of matters related to such Stockholder contained in the
Private Placement Memorandum under the caption "Certain Transactions -
Transactions involving Certain Officers, Directors and Stockholders" and (ii)
the biographical description of such Stockholder, if any, contained in the
Private Placement Memorandum under the caption "Management."
19.18 EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective upon (i) the execution and delivery of this Agreement by all of the
parties hereto and (ii) the delivery to AmPaM of each Employment Agreement
attached hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AMERICAN PLUMBING & MECHANICAL, INC.
By: /s/ DAVID BAGGETT
-------------------------------------
Name: David Baggett
-----------------------------------
Title: Chief Financial Officer
----------------------------------
R.C.R. PLUMBING, INC.
By: /s/ ROBERT C. RICHEY
-------------------------------------
Robert C. Richey
Chief Executive Officer
By: /s/ MICHAEL A. MAHONY
-------------------------------------
Michael A. Mahony
Chief Financial Officer
[Remainder of page intentionally left blank]
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STOCKHOLDERS: SPOUSES (WITHOUT PERSONAL LIABILITY AND
SOLELY TO ACKNOWLEDGE THE SALE OF THE
COMPANY STOCK BY THE STOCKHOLDER):
ROBERT C. RICHEY FAMILY TRUST, 1/20/97
By: /s/ ROBERT C. RICHEY
------------------------------------
Robert C. Richey, Trustee
1215 Seacrest Drive
Corona Del Mar, California 92625
BAKER FAMILY TRUST, 6/3/97
By: /s/ THOMAS L. BAKER
------------------------------------
Thomas L. Baker, Trustee
6863 Canyon Hill Drive
Riverside, California 92506
By: /s/ LINDA S. BAKER
------------------------------------
Linda S. Baker, Trustee
6863 Canyon Hill Drive
Riverside, California 92506
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EXHIBIT 10.11
Execution Copy
- --------------------------------------------------------------------------------
ACQUISITION AGREEMENT
dated as of the 11th day of February, 1999
by and among
AMERICAN PLUMBING & MECHANICAL, INC.
TEEPE'S RIVER CITY MECHANICAL, INC.
and
all of the STOCKHOLDERS of
TEEPE'S RIVER CITY MECHANICAL, INC.
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
<TABLE>
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RECITALS .....................................................................................1
1. ACQUISITION OF STOCK.................................................................5
1.1 Acquisition.................................................................5
1.2 Consideration...............................................................5
1.3 Certain Information With Respect to the Capital Stock of the Company
and AmPaM...................................................................5
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY.......................................5
2.1 Board of Directors..........................................................5
2.2 Officers....................................................................5
3. DELIVERY OF CONSIDERATION............................................................6
3.1 Stockholders' Consideration.................................................6
3.2 Stockholders' Deliveries....................................................6
4. CLOSING..............................................................................6
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................6
5.1 Due Organization............................................................7
5.2 Authorization...............................................................7
5.3 Capital Stock of the Company................................................7
5.4 Transactions in Capital Stock...............................................8
5.5 No Bonus Shares.............................................................8
5.6 Subsidiaries; Ownership in Other Entities...................................8
5.7 Predecessor Status; etc.....................................................8
5.8 Spin-off by the Company.....................................................8
5.9 Financial Statements........................................................8
5.10 Liabilities and Obligations.................................................9
5.11 Accounts and Notes Receivable..............................................10
5.12 Licenses; Intellectual Property............................................10
5.13 Environmental Matters......................................................11
5.14 Personal Property..........................................................13
5.15 Significant Customers; Material Contracts and Commitments..................13
5.16 Real Property..............................................................14
5.17 Insurance..................................................................14
5.18 Compensation; Employment Agreements; Labor Matters.........................15
5.19 Employee Plans.............................................................15
5.20 Compliance with ERISA......................................................16
5.21 Conformity with Law; Litigation............................................17
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5.22 Taxes......................................................................17
5.23 No Violations; No Consent Required, Etc....................................18
5.24 Government Contracts.......................................................19
5.25 Absence of Changes.........................................................19
5.26 Deposit Accounts; Powers of Attorney.......................................21
5.27 Validity of Obligations....................................................21
5.28 Relations with Governments.................................................21
5.29 Disclosure.................................................................21
5.30 No Warranties or Insurance.................................................21
5.31 Interest in Customers and Suppliers and Related Party Transactions.........22
5.32 Private Placement Memorandum...............................................22
5.33 Authority; Ownership.......................................................22
5.34 Preemptive Rights..........................................................23
5.35 No Commitment to Dispose of AmPaM Stock....................................23
5.36 Disclosure.................................................................23
6. REPRESENTATIONS OF AMPAM............................................................23
6.1 Due Organization...........................................................24
6.2 Authorization..............................................................24
6.3 Capital Stock of AmPaM.....................................................24
6.4 Transactions in Capital Stock..............................................24
6.5 Subsidiaries...............................................................25
6.6 Financial Statements.......................................................25
6.7 Liabilities and Obligations................................................25
6.8 Conformity with Law; Litigation............................................25
6.9 No Violations..............................................................26
6.10 Validity of Obligations....................................................27
6.11 AmPaM Stock................................................................27
6.12 AmPaM Notes................................................................28
6.13 No Side Agreements.........................................................28
6.14 Business; Real Property; Material Agreements...............................28
6.15 Relations with Governments.................................................28
6.16 Disclosure.................................................................29
6.17 Other Agreements...........................................................29
7. COVENANTS PRIOR TO CLOSING..........................................................29
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate.............29
7.2 Conduct of Business Pending Closing........................................30
7.3 Prohibited Activities......................................................31
7.4 No Shop....................................................................32
7.5 Agreements.................................................................32
7.6 Notification of Certain Matters............................................33
7.7 Amendment of Schedules.....................................................33
7.8 Further Assurances.........................................................33
7.9 Authorized Capital.........................................................34
7.10 Compliance with the Hart-Scott Act.........................................34
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
AND COMPANY.........................................................................34
8.1 Representations and Warranties; Performance of Obligations.................34
8.2 Satisfaction...............................................................34
8.3 No Litigation..............................................................34
8.4 Opinion of Counsel.........................................................35
8.5 Consents and Approvals.....................................................35
8.6 Good Standing Certificates.................................................35
8.7 No Material Adverse Change.................................................35
8.8 Secretary's Certificate....................................................35
8.9 Tax Matters................................................................35
8.10 Other Founding Companies...................................................35
8.11 Company Release of Stockholders............................................36
8.12 Sterling City Capital Transfer Restrictions................................36
8.13 Election of Chief Executive Officer........................................36
8.14 Funding Availability.......................................................36
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AMPAM........................................36
9.1 Representations and Warranties; Performance and Obligations................36
9.2 No Litigation..............................................................37
9.3 Secretary's Certificate....................................................37
9.4 No Material Adverse Effect.................................................37
9.5 Stockholders' Release......................................................37
9.6 Satisfaction...............................................................37
9.7 Termination of Related Party Agreements....................................37
9.8 Opinion of Counsel.........................................................38
9.9 Consents and Approvals.....................................................38
9.10 Good Standing Certificates.................................................38
9.11 Funding Availability.......................................................38
9.12 FIRPTA Certificate.........................................................38
9.13 Resignations of Directors and Officers.....................................38
10. COVENANTS OF AMPAM AND THE STOCKHOLDERS AFTER CLOSING...............................39
10.1 Release From Guarantees; Repayment of Certain Obligations..................39
10.2 Preservation of Tax and Accounting Treatment...............................39
10.3 Preparation and Filing of Tax Returns; Payment of Taxes....................39
10.4 Directors..................................................................40
10.5 Legal Opinions.............................................................40
11. INDEMNIFICATION.....................................................................40
11.1 General Indemnification by the Stockholders................................40
11.2 Indemnification by AmPaM...................................................42
11.3 Third Person Claims........................................................42
11.4 Exclusive Remedy...........................................................43
11.5 Limitations on Indemnification.............................................44
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12. TERMINATION OF AGREEMENT............................................................45
12.1 Termination................................................................45
12.2 Procedure and Effect of Termination........................................46
13. NONCOMPETITION......................................................................46
13.1 Prohibited Activities......................................................47
13.2 Damages....................................................................47
13.3 Reasonable Restraint.......................................................48
13.4 Severability; Reformation..................................................48
13.5 Independent Covenant.......................................................48
13.6 Materiality................................................................48
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...........................................48
14.1 Stockholders...............................................................48
14.2 AmPaM......................................................................49
14.3 Damages....................................................................50
14.4 Survival...................................................................50
14.5 Return of Information......................................................50
15. TRANSFER RESTRICTIONS...............................................................50
15.1 Transfer Restrictions Relating to AmPaM Stock and AmPaM Notes..............50
15.2 Transfer Restrictions Relating to Additional Consideration.................51
16. FEDERAL SECURITIES ACT REPRESENTATIONS..............................................52
16.1 Compliance with Law........................................................52
16.2 Economic Risk; Sophistication..............................................52
16.3 Reliance by AmPaM..........................................................53
17. REGISTRATION RIGHTS.................................................................53
17.1 Piggyback Registration Rights..............................................53
17.2 Registration Procedures....................................................54
17.3 Indemnification............................................................56
17.4 Underwriting Agreement.....................................................57
17.5 Transfer of Rights.........................................................58
17.6 Rule 144 Reporting.........................................................58
18. REDEMPTION OF AMPAM STOCK...........................................................58
18.1 Redemption Trigger.........................................................58
18.2 Minimum Redemption; Limitations............................................59
18.3 Notice; Exercise...........................................................59
18.4 Additional Redemptions.....................................................59
18.5 Termination of Redemption Obligation.......................................59
</TABLE>
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<TABLE>
<S> <C>
19. GENERAL.............................................................................60
19.1 Cooperation................................................................60
19.2 Successors and Assigns.....................................................60
19.3 Entire Agreement...........................................................60
19.4 Counterparts...............................................................60
19.5 Brokers and Agent..........................................................61
19.6 Expenses...................................................................61
19.7 Notices....................................................................62
19.8 Governing Law..............................................................63
19.9 Survival of Representations and Warranties.................................63
19.10 Exercise of Rights and Remedies............................................63
19.11 Time.......................................................................63
19.12 Reformation and Severability...............................................63
19.13 Remedies Cumulative........................................................63
19.14 Captions...................................................................63
19.15 Amendments and Waivers.....................................................64
19.16 Mediation and Arbitration..................................................64
19.17 Information Provided for Private Placement Memorandum......................64
19.18 Effective Date of Agreement................................................64
</TABLE>
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<PAGE> 7
ANNEXES
Annex I - Consideration to Be Paid to Stockholders
Annex II - Amended and Restated Certificate of Incorporation and
By-Laws of AmPaM
Annex III - Form of Opinion of Counsel to AmPaM
Annex IV - Form of Tax Opinion
Annex V - Form of Opinion of Counsel to Company and Stockholders
Annex VI-1 - Form of Employment Agreement
Annex VI-2 - Form of Employment Agreement
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<PAGE> 8
SCHEDULES
<TABLE>
<S> <C>
2.1 Board of Directors
2.2 Officers
5.1 Due Organization
5.2 Authorization
5.3 Capital Stock of the Company
5.4 Transactions in Capital Stock; Organization Accounting
5.5 No Bonus Shares
5.6 Subsidiaries; Ownership in Other Entities
5.7 Predecessor Status; etc
5.8 Spin-off by the Company
5.9 Financial Statements
5.10 Liabilities and Obligations
5.11 Accounts and Notes Receivable
5.12 Licenses; Intellectual Property (Schedules 5.12(a)(1), 5.12(a)(2),
5.12(b)(1) and 5.12(b)(2))
5.13 Environmental Matters
5.14 Personal Property
5.15 Significant Customers; Material Contracts and Commitments
(Schedules 5.15(a), 5.15(b) and 5.15 (c))
5.16 Real Property
5.17 Insurance
5.18 Compensation; Employment Agreements; Labor Matters
5.19 Employee Plans
5.20 Compliance with ERISA
5.21 Conformity with Law; Litigation
5.22 Taxes (Schedules 5.22(a) and 5.22(b))
5.23 No Violations, No Consents Required, Etc.
(Schedules 5.23(a), 5.23(b), 5.23(c) and 5.23(e))
5.24 Government Contracts
5.25 Absence of Changes
5.26 Deposit Accounts; Powers of Attorney
5.30 No Warranties or Insurance
5.31 Interest in Customers and Suppliers and Related Party Transactions
5.33 Authority; Ownership (Schedules 5.33(a) and 5.33(b))
6.9 No Violations
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate
7.2 Conduct of Business Pending Closing
7.3 Prohibited Activities
7.5 Agreements
8.11 Employment Agreements
9.7 Termination of Related Party Agreements
10.1 Release From Guarantees; Repayment of Certain Obligations
16.2 Non-accredited Investors
18.5 Brokers and Agents
</TABLE>
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<PAGE> 9
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made as of the 11th day
of February, 1999 by and among AMERICAN PLUMBING & MECHANICAL, INC., a Delaware
corporation ("AmPaM"), TEEPE'S RIVER CITY MECHANICAL, INC., an Ohio corporation
(the "Company"), and the stockholders listed on the signature pages of this
Agreement (the "Stockholders"), which are all the stockholders of the Company.
RECITALS
WHEREAS, the Company is engaged in the plumbing and mechanical services
business;
WHEREAS, as of the date hereof, the Stockholders own, and as of the
Closing Date the Stockholders will own, all of the issued and outstanding
capital stock of the Company (the "Company Stock");
WHEREAS, AmPaM is entering into other separate agreements
simultaneously with this Agreement that are substantially the same as this
Agreement (the "Other Agreements"), each of which is entitled "Acquisition
Agreement," with each of the Other Founding Companies (as defined herein) and
their respective stockholders in order for AmPaM to acquire additional companies
engaged in the plumbing and mechanical services business;
WHEREAS, this Agreement and the Other Agreements constitute the "AmPaM
Plan of Organization;"
WHEREAS, the Stockholders and the boards of directors and the
stockholders of AmPaM, and each of the Other Founding Companies that are parties
to the Other Agreements, have approved and adopted the AmPaM Plan of
Organization as an integrated plan pursuant to which the Stockholders and the
stockholders of each of the other Founding Companies will contribute the capital
stock of each of the Founding Companies to AmPaM, and the Stockholders and the
stockholders of each of the other Founding Companies will acquire the stock of
AmPaM (but not cash or other property) as a tax-free transfer of property under
Section 351 of the Code;
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Stockholders have approved this
Agreement as part of the AmPaM Plan of Organization in order to transfer all of
the issued and outstanding capital stock of the Company to AmPaM; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
<PAGE> 10
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule attached hereto and not otherwise defined shall
have the following meanings for all purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"Acquired Party" means the Company, any subsidiary of the Company and
any member of a Relevant Group.
"Affiliates" means with respect to any person or entity, any other
person or entity that directly or indirectly, controls, is controlled by, or is
under common control with such person or entity.
"AmPaM" has the meaning set forth in the first paragraph of this
Agreement.
"AmPaM Charter Documents" has the meaning set forth in Section 6.1.
"AmPaM Plan of Organization" has the meaning set forth in the recitals
of this Agreement.
"AmPaM Stock" means the common stock, par value $.01 per share, of
AmPaM.
"AmPaM Notes" means those notes issued by AmPaM to the Stockholders as
a portion of the consideration to be received hereunder and in substantially the
form to Annex I as Appendix A.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" has the meaning set forth in the recitals of this
Agreement.
"Delaware GCL" means the General Corporation Law of the State of
Delaware.
"Environmental Laws" has the meaning set forth in Section 5.13(b).
"Expiration Date" has the meaning set forth in Section 5(A) and Section
6, as applicable.
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<PAGE> 11
"Founding Companies" means the following companies:
Christianson Enterprises, Inc., a Texas corporation;
Christianson Services, Inc., a Texas corporation;
GGR Leasing Corporation, a Texas corporation;
J.A. Croson Company of Florida, a Florida corporation;
J.A. Croson Company, an Ohio corporation;
Franklin Fire Sprinkler Company, an Ohio corporation;
Keith Riggs Plumbing, Inc., an Arizona corporation;
Miller Mechanical Contractors, Inc., a Georgia corporation;
Nelson Mechanical Contractors, Inc., a Florida corporation;
Power Plumbing Inc., a Delaware corporation;
R.C.R. Plumbing, Inc., a California corporation;
Sherwood Mechanical, Inc., a California corporation; and
Teepe's River City Mechanical, Inc., an Ohio corporation.
"GAAP" means generally accepted accounting principles as consistently
applied in the United States.
"Hart-Scott Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Hazardous Substance" has the meaning set forth in Section 5.13(c).
"IPO" means a firm commitment underwritten initial public offering of
AmPaM Stock managed by one or more nationally recognized national investment
banking firms.
"known" or "knowledge," when used in reference to a statement regarding
the existence or absence of facts in this Agreement, is intended by the parties
to mean that the only information to be attributed to such person is information
actually known to (a) the person in the case of an individual, (b) in the case
of a corporation or other entity other than the Company, an officer or director
of such corporation or entity or (c) in the case of the Company and its
Subsidiaries, an officer of the Company listed on Schedule 2.2 hereto, except
for David Baggett.
"Material Adverse Change" means a material adverse change in the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Documents" has the meaning set forth in Section 5.23.
3
<PAGE> 12
"Ordinary Course of Business" means the ordinary course of business
consistent with past customs and practice (including with respect to quantity
and frequency).
"Other Agreements" has the meaning set forth in the recitals of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Plans" has the meaning set forth in Section 5.19.
"Private Placement Memorandum" means the Private Placement Memorandum,
dated as of February 11, 1999, provided to each Stockholder prior to the
execution and delivery of this Agreement which sets forth certain information
relating to the transactions contemplated by this Agreement and the Other
Agreements.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Relevant Group" means the Company and any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a member.
"Restricted Common Stock" has the meaning set forth in Section 1.3(ii).
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"State of Incorporation" means the State of Ohio.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Subsidiaries" means with respect to a person or entity, any
corporation or other entity in which such person or entity owns a 5% or greater
ownership interest.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, employment, excise, property, deed, stamp, alternative
or add-on minimum, or other taxes, assessments, duties, fees, levies or other
governmental charges, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
4
<PAGE> 13
1. ACQUISITION OF STOCK
1.1 ACQUISITION. Upon the terms and subject to the conditions contained
in this Agreement and in reliance upon the representations, warranties,
covenants and agreements contained in this Agreement, on the Closing Date, the
Stockholders shall convey and transfer to AmPaM all of the issued and
outstanding shares of Company Stock as set forth in Annex I hereto.
1.2 CONSIDERATION. The consideration for the Company Stock shall be as
set forth on Annex I to this Agreement.
1.3 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY AND AMPAM. The respective designations and numbers of outstanding shares
and voting rights of each class of outstanding capital stock of the Company and
AmPaM as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
outstanding Company Stock is as set forth on Schedule 5.3 hereto; and
(ii) immediately prior to the Closing Date, the authorized
capital stock of AmPaM will consist of (A) 100,000,000 shares of AmPaM
Stock, of which the number of issued and outstanding shares will be set
forth in the Private Placement Memorandum, (B) 10,000,000 shares of
redeemable preferred stock, of which the number of issued and
outstanding shares will be set forth in the Private Placement
Memorandum, and (C) 5,000,000 shares of Restricted Voting Common Stock,
$.01 per value (the "Restricted Common Stock"), all of which will be
issued and outstanding except as otherwise set forth in the Private
Placement Memorandum.
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY
2.1 BOARD OF DIRECTORS. The Company and the Stockholders shall take
action, including solicitation of resignation of directors, necessary so that
the Board of Directors of the Company as of the Closing Date shall consist only
of the persons identified on Schedule 2.1 hereto.
2.2 OFFICERS. The Company and the Stockholders shall take action,
including solicitation of resignation of officers, necessary so that the
officers of the Company as of the Closing Date shall consist only of the persons
identified on Schedule 2.2 hereto.
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<PAGE> 14
3. DELIVERY OF CONSIDERATION
3.1 STOCKHOLDERS' CONSIDERATION. On the Closing Date, the Stockholders
shall, upon surrender of certificates evidencing the Company Stock, receive from
AmPaM the respective number of shares of AmPaM Stock, the amount of cash and the
principal amount of AmPaM Notes described on Annex I hereto specified with
respect to each such Stockholder as payable on the Closing Date. All payments of
cash shall be made by certified check or wire transfer of immediately available
funds. Consideration consisting of AmPaM Notes shall be substantially in the
form of Appendix A to Annex I.
3.2 STOCKHOLDERS' DELIVERIES. The Stockholders shall deliver at the
Closing the certificates representing Company Stock, duly endorsed in blank by
the Stockholders, or accompanied by blank stock powers, and with all necessary
transfer tax and other revenue stamps, acquired at the Stockholders' expense,
affixed and canceled. The Stockholders agree promptly to cure any deficiencies
with respect to the endorsement of the stock certificates or other documents of
conveyance with respect to such Company Stock or with respect to the stock
powers accompanying any Company Stock.
4. CLOSING
The consummation of the transactions contemplated by Section 3 (the
"Closing") shall take place on March 31, 1999 or such date not later than May
31, 1999 as AmPaM shall determine by giving written notice of such other date as
provided in Section 18.7 (the "Closing Date") at the offices of Andrews & Kurth
L.L.P., 4200 Chase Tower, 600 Travis, Houston, Texas 77002.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the disclosure schedules attached hereto and
except as otherwise qualified below, the Company represents and warrants that
all of the following representations and warranties in this Section 5(A) are
true at the date of this Agreement and, subject to Section 7.7 hereto, shall be
true at the time of the Closing, and that such representations and warranties
shall survive the Closing Date for a period of eighteen months (the last day of
such period being the "Expiration Date"), except that the representations and
warranties set forth in Sections 5.3, 5.22 and 5.32 hereof shall survive until
such time as the applicable statute of limitations period has run, which shall
be deemed to be the Expiration Date for the representations and warranties set
forth in Sections 5.3, 5.22 and 5.32. For purposes of this Section 5, the term
"Company" shall mean and refer to the Company and all of its Subsidiaries, if
any, and any reference to a Material Adverse Effect on the Company or Material
Adverse Change with respect to the Company shall mean the Company and its
Subsidiaries, taken as a whole. Except as expressly set forth in this Agreement,
the Company expressly disclaims any representation or warranty (express, implied
or otherwise) relating to the
6
<PAGE> 15
Company and any Subsidiary thereof including, without limitation, any warranty
of merchantability or fitness for a particular purpose.
5.1 DUE ORGANIZATION. The Company is a corporation duly incorporated
and organized, validly existing and in good standing under the laws of the State
of Incorporation, and has the requisite power and authority to carry on its
business as it is now being conducted. The Company is duly qualified or
authorized to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or authorization necessary except where the failure to be so
qualified or authorized to do business would not have a Material Adverse Effect
on the Company. Schedule 5.1 sets forth a list of all states in which the
Company is authorized or qualified to do business, which list indicates which of
such entities is authorized or qualified to do business in such states. True,
complete and correct copies of the Certificate or Articles of Incorporation and
By-laws, each as amended, of the Company (the "Charter Documents") are all
attached to Schedule 5.1. The Company has delivered to AmPaM complete and
correct copies of (i) the stock records of the Company and (ii) all minutes of
meetings, written consents and other evidence, if any, of deliberations of or
actions taken by the Company's Board of Directors, any committees of the Board
of Directors and stockholders during the last five years.
5.2 AUTHORIZATION. (i) The officers or other representatives of the
Company executing this Agreement have the authority to enter into and bind the
Company to the terms of this Agreement and (ii) the Company has the full legal
right, power and authority to enter into this Agreement and consummate the
transactions contemplated hereby. Copies of the most recent resolutions adopted
by the Board of Directors of the Company and the most recent resolutions adopted
by the Stockholders, which approve this Agreement and the transactions
contemplated hereby in all respects, certified by the Secretary or an Assistant
Secretary of the Company as being in full force and effect on the date hereof,
are attached hereto as Schedule 5.2.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company and each of its Subsidiaries is as set forth on Schedule 5.3(a). All of
the issued and outstanding shares of the capital stock of the Company are owned
by the Stockholders in the amounts set forth in Schedule 5.3(a). Except as set
forth on Schedule 5.3(a), all of the issued and outstanding capital stock of
each Subsidiary is owned by the Company. All of the issued and outstanding
shares of the capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable, are owned of record by the
Stockholders and further, such shares were offered, issued, sold and delivered
by the Company in compliance with all applicable state and Federal laws
concerning the issuance of securities. Further, none of such shares were issued
in violation of any preemptive rights of any past or present stockholder.
7
<PAGE> 16
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule
5.4(a), the Company has not acquired or redeemed any shares of capital stock of
the Company since January 1, 1996. Except as set forth on Schedule 5.4(b), (i)
no option, warrant, call, conversion right or commitment of any kind exists
which obligates the Company to issue any of its authorized but unissued capital
stock; (ii) the Company has no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any distribution in respect thereof; and
(iii) neither the voting stock structure of the Company nor the relative
ownership of shares among any of its Stockholders has been altered or changed in
contemplation of the AmPaM Plan of Organization. There are no voting trusts,
proxies or other agreements or understandings to which the Company is a party or
is bound with respect to the voting of any shares of capital stock of the
Company.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses in
contemplation of the AmPaM Plan of Organization.
5.6 SUBSIDIARIES; OWNERSHIP IN OTHER ENTITIES. Except as set forth on
Schedule 5.6(a), the Company has no Subsidiaries. Except as set forth in
Schedule 5.6(b), the Company does not presently own, of record or beneficially,
or control, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any corporation, association
or business entity nor is the Company, directly or indirectly, a participant in
any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7(a) is a list of
all predecessor companies of the Company, including the names of any entities
acquired by the Company (by stock purchase, merger or otherwise) or owned by the
Company or from whom the Company previously acquired material assets, in any
case, from the earliest date upon which any Stockholder acquired his or her
stock in any Company. Except as disclosed on Schedule 5.7(b), the Company has
not been, within such period of time, a subsidiary or division of another
corporation or a part of an acquisition which was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
Company or any other person or entity that is an Affiliate of the Company since
January 1, 1996.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 is a
copy of:
(i) the balance sheets of the Company as of December 31, 1996
and 1997 and the related statements of operations, stockholders' equity
and cash flows for the three-year period ended December 31, 1997,
together with the related notes and schedules (such balance sheets, the
related statements of operations, stockholders' equity and cash flows
and the related notes and schedules are referred to herein as the
"Year-end Financial Statements");
8
<PAGE> 17
(ii) the balance sheet of the Company as of June 30, 1998 and
the related statements of operations, stockholders' equity and cash
flows for the six-month periods ended June 30, 1997 and 1998, together
with the related notes and schedules (such balance sheets, the related
statements of operations, stockholders' equity and cash flows and the
related notes and schedules are referred to herein as the "Six-Month
Interim Financial Statements");
(iii) the balance sheet of the Company as of September 30,
1998 (the "Balance Sheet Date") and the related statements of
operations, stockholders' equity and cash flows for the nine-month
periods ended September 30, 1997 and 1998 (such balance sheets, the
related statements of operations, stockholders' equity and cash flows
are referred to herein as the "Nine-Month Interim Financial
Statements"); and
(iv) the income statement of the Company for the 12-month
period ended June 30, 1998 (the "Valuation Income Statement").
The Year-end Financial Statements, the Six-Month Interim Financial Statements,
the Nine-Month Interim Financial Statements and the Valuation Income Statement
are collectively called the "Financial Statements". The Financial Statements,
including those included in the Private Placement Memorandum, have been prepared
in accordance with GAAP applied on a consistent basis and fairly present the
financial position of the Company as of the dates thereof and the results of its
operations and changes in financial position for the periods then ended,
subject, in the case of the Six-Month Interim Financial Statements and the
Nine-Month Interim Financial Statements, to normal year-end audit adjustments
and any other adjustments described therein and the absence of certain footnote
disclosures.
5.10 LIABILITIES AND OBLIGATIONS. Schedule 5.10(a) sets forth an
accurate list as of the Balance Sheet Date of (i) all material liabilities of
the Company which are not reflected on the balance sheet of the Company at the
Balance Sheet Date or otherwise reflected in the Company Financial Statements at
the Balance Sheet Date which by their nature would be required in accordance
with GAAP to be reflected in the balance sheet, and (ii) all loan agreements,
indemnity or guaranty agreements, bonds, mortgages, pledges or other security
agreements to which the Company is a party or by which its properties may be
bound other than bid bonds and performance bonds made in the Ordinary Course of
Business. Except as set forth on Schedule 5.10(b), since the Balance Sheet Date,
the Company has not incurred any material liabilities or obligations of any
kind, character or description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the Ordinary Course
of Business. The Company has also delivered to AmPaM, on Schedule 5.10(c), a
list of contingent liabilities related to pending litigation or litigation that
has been threatened in writing, or other material liabilities which are not
fixed or otherwise accrued or reserved. For each such contingent liability of
the Company or liability of the Company for which the amount is not fixed or is
contested, the Company has provided to AmPaM the following information:
9
<PAGE> 18
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation in the
possession of the Company or its directors, officers
or stockholders relating thereto;
(b) amounts claimed and any other action or relief
sought; and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(ii) the name of each court or agency before which such claim,
suit or proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted;
and
(iv) a good faith estimate of the maximum amount, if any,
which the Company expects, based on information available, is likely to
become payable with respect to each such liability and the amount, if
any, accrued or reserved for each such potential liability on the
Financial Statements.
AmPaM acknowledges that all estimates referred to above and set forth on
Schedule 5.10(c) are only good faith estimates, and that the Company and the
Stockholders expressly do not represent or warrant that the actual amounts of
such liabilities will be equal to, or more or less than, the amounts of such
estimates.
5.11 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.11(a) sets forth an
accurate list, in all material respects, of the accounts and notes receivable of
the Company, as of the Balance Sheet Date, including any such amounts which are
not reflected in the balance sheet as of the Balance Sheet Date, and including
all receivables from and advances to employees and the Stockholders, which are
identified as such. Schedule 5.11(a) also sets forth a materially accurate aging
of all accounts and notes receivable as of the Balance Sheet Date showing
amounts due in 30-day aging categories. Except to the extent reflected on
Schedule 5.11(b), such accounts, notes and other receivables are collectible in
the amounts shown on Schedule 5.11(a), net of reserves reflected in the balance
sheet as of the Balance Sheet Date.
5.12 LICENSES; INTELLECTUAL PROPERTY. (a) The Company or its employees
hold all licenses, franchises, permits and other governmental authorizations
("Licenses") necessary to conduct the business of the Company, the absence of
which would cause a Material Adverse Effect on the Company, and the Company has
delivered to AmPaM a list that is accurate, in all material respects, and
summary description (which is set forth on Schedule 5.12(a)(1)) of all such
Licenses. At or prior to the Closing, all such Licenses owned or held by any
employee of the Company will be assigned or licensed to the Company for no
additional consideration. The Licenses listed on Schedule 5.12(a)(1) are valid,
and the Company has not received any notice that any person intends to cancel,
terminate or not renew any such License. The Company has conducted and is
conducting its business in compliance in all material respects with the
requirements, standards, criteria and
10
<PAGE> 19
conditions set forth in the Licenses listed on Schedule 5.12(a)(1) and is not in
violation of any of the foregoing in any material respect. Except as
specifically provided in Schedule 5.12(a)(2), the consummation by the Company of
the transactions contemplated by this Agreement will not result in a default
under or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such Licenses.
(b) The Company owns or possesses adequate licenses or other rights to
use (without making any payment or granting rights to any person in exchange)
all patents, patent applications, trademarks, copyrights, service marks and
trade names (collectively, the "Intellectual Property") necessary to conduct its
business as currently conducted. A description of any Intellectual Property
licensed by the Company, including the material terms of any such license, is
described on Schedule 5.12(b)(1). Neither the validity of the Intellectual
Property nor the title thereto or use thereof by the Company is being questioned
in any pending litigation, and the conduct of the Company's business, as
currently conducted, does not conflict with licenses, copyrights, uncopyrighted
works, trade marks, service marks, trade names, trade name rights, patents,
patent rights, unpatented inventions or trade secrets of others. Neither the
validity of the Intellectual Property nor the title thereto or use thereof by
the Company is being questioned in any pending or, to the knowledge of the
Company, threatened infringement claims or litigation, and the conduct of the
Company's business, as now conducted, does not conflict with licenses,
copyrights, uncopyrighted works, trade marks, service marks, trade names, trade
name rights, patents, patent rights, unpatented inventions or trade secrets of
others. Except as specifically provided in Schedule 5.12(b)(2), the consummation
by the Company of the transactions contemplated by this Agreement will not
adversely affect the rights and benefits afforded to the Company by any such
Intellectual Property.
5.13 ENVIRONMENTAL MATTERS. (a) Except as set forth in Schedule 5.13
attached hereto, (i) the Company has conducted its businesses in compliance in
all material respects with all applicable Environmental Laws, including, without
limitation, having all environmental permits, licenses and other approvals and
authorizations necessary for the operation of its business as presently
conducted, except where the failure to have such permit, license, approval or
authorization would not have a Material Adverse Effect on the Company, (ii) none
of the properties owned by the Company contain any Hazardous Substance as a
result of any activity of the Company in amounts exceeding the levels permitted
by applicable Environmental Laws, except where amounts in excess of such levels
would not have a Material Adverse Effect on the Company, (iii) the Company has
not received any notices, demand letters or requests for information from any
Federal, state, local or foreign governmental entity or third party indicating
that the Company may be in violation of, or liable under, any Environmental Law
in connection with the ownership or operation of its business, (iv) there are no
civil, criminal or administrative actions, suits, demands, claims, hearings,
investigations or proceedings pending or, to the knowledge of the Company,
threatened, against the Company relating to any violation, or alleged violation,
of any Environmental Law, except where such violation would not have a Material
Adverse Effect on the Company, (v) no reports have been filed, or are required
to be filed, by the Company concerning the release of any Hazardous Substance or
the threatened or actual violation of any Environmental Law, (vi) no Hazardous
Substance has
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been disposed of, released or transported in violation of any applicable
Environmental Law from any properties owned by the Company as a result of any
activity of the Company during the time such properties were owned, leased or
operated by the Company, (vii) there have been no environmental investigations,
studies, audits, tests, reviews or other analyses regarding compliance or
non-compliance with any applicable Environmental Law conducted by or which are
in the possession of the Company relating to the activities of the Company which
are not listed on Schedule 5.13 attached hereto prior to the date hereof, (viii)
to the knowledge of the Company, (A) there are no underground storage tanks on,
in or under any properties owned by the Company and (B) no underground storage
tanks have been closed or removed from any of such properties during the time
such properties were owned, leased or operated by the Company which are not
listed on Schedule 5.13, (ix) to the knowledge of the Company, (A) there is no
asbestos or asbestos-containing material present in any material quantity in any
of the properties owned by the Company, and (B) no asbestos has been removed
from any of such properties during the time such properties were owned, leased
or operated by the Company, and (x) neither the Company nor any of its
properties are subject to any material liabilities or expenditures (fixed or
contingent) relating to any suit, settlement, court order, administrative order,
regulatory requirement, judgment or claim asserted or arising under any
Environmental Law.
(b) As used herein, "Environmental Law" means, as of the Closing Date,
any Federal, state, local or foreign law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, order, judgment,
decree, injunction or agreement with any governmental entity to which the
Company is a party or subject relating to (x) the protection, preservation or
restoration of the environment (including, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource) or to human health or
safety or (y) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of Hazardous Substances, in each case as amended and as in effect on
the Closing Date. The term Environmental Law includes, without limitation, (i)
the Federal Comprehensive Environmental Response Compensation and Liability Act
of 1980, the Superfund Amendments and Reauthorization Act, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976 (including
the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste
Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Federal Occupational Safety and Health Act of
1970, each as amended and as in effect on the Closing Date, and (ii) any common
law or equitable doctrine (including, without limitation, injunctive relief and
tort doctrines such as negligence, nuisance, trespass and strict liability) that
may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of, effects of or exposure to any
Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance presently
listed, defined, designated or classified as hazardous, toxic, radioactive, or
dangerous, or otherwise regulated, under any Environmental Law. Hazardous
Substance includes any substance to which exposure is regulated by any
government authority or any Environmental Law including, without
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limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material, asbestos or
asbestos-containing material, urea formaldehyde foam insulation, lead or
polychlorinated biphenyls.
5.14 PERSONAL PROPERTY. The Company has delivered to AmPaM an accurate
list (which is set forth on Schedule 5.14(a)) of (x) all personal property
material to the operations of the Company as of the Balance Sheet Date included
in "plant, property and equipment" on the balance sheet of the Company as of
such date, (y) all other items of personal property owned by the Company with an
individual value in excess of $15,000 (i) as of the Balance Sheet Date and (ii)
acquired since the Balance Sheet Date and (z) all material leases and agreements
in respect of personal property, including, in the case of each of (x), (y) and
(z), (1) true, complete and correct copies of all such leases and (2) an
indication as to which assets are currently owned, or were formerly owned, by
Stockholders, relatives of Stockholders, or Affiliates of the Company. Except as
set forth on Schedule 5.14(b), (i) all personal property material to, and used
by, the Company in its business is either owned by the Company or leased by the
Company pursuant to a lease included on Schedule 5.14(a), (ii) all of the
personal property listed on Schedule 5.14(a) or replacement property thereof is
in working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14(a) are in full force and effect
and constitute valid and binding agreements of the Company, in each case in
accordance with their respective terms.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
(a) The Company has delivered to AmPaM a materially accurate list
(which is set forth on Schedule 5.15(a)(1)) of all customers (persons or
entities) representing 5% or more of the Company's annual revenues for any
period covered by any of the Financial Statements. Except to the extent set
forth on Schedule 5.15(a)(2), none of such customers has canceled or, to the
knowledge of the Company, are currently threatening to cancel a currently
effective contract with the Company.
(b) The Company has listed on Schedule 5.15(b) all material contracts,
commitments and similar agreements to which the Company is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with customers listed on Schedule 5.15(a), joint venture or partnership
agreements, contracts with any labor organizations, strategic alliances and
options to purchase land), other than agreements listed on Schedules 5.10(a),
Schedule 5.14(a) or Schedule 5.16(a), (a) in existence as of the Balance Sheet
Date and (b) entered into since the Balance Sheet Date, and in each case has
delivered or made available to AmPaM true, complete and correct copies of such
agreements. For purposes of the preceding sentence, a contract, commitment or
similar agreement is "material" if it (i) has a term of more than one year
(other than contracts, commitments or agreements that are cancelable without
liability or penalty within 30 days of notice from the Company of cancellation
or that can be terminated by the Company without material penalty upon notice of
30 days or less) or (ii) requires the payment by or to the Company of more than
$100,000 during any 12-month period. Except for expenditures in the ordinary
course of
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business, the Company has also indicated on Schedule 5.15(b) a summary
description of all plans or projects involving the opening of new operations,
expansion of existing operations, or the acquisition of any personal property,
business or assets requiring, in any event, the payment of more than $50,000 by
the Company during any 12-month period.
(c) Except as set forth on Schedule 5.15(c), the Company is not
required to provide any bonding or other financial security arrangements in any
material amount in connection with any contract listed on Schedule 5.15(b).
5.16 REAL PROPERTY. Schedule 5.16(a) includes a list of all real
property owned or leased by the Company at the date hereof and all other real
property, if any, used by the Company in the conduct of its business. The
Company has good and insurable title to any real property owned by it that is
shown on Schedule 5.16(a), other than property intended to be sold or
distributed prior to the Closing Date as provided in Section 7.1(c) of this
Agreement, and all real property so owned is subject to no mortgage, pledge,
lien, conditional sales agreement, encumbrance, lease, possessory rights of
third parties or charge, except for:
(i) liens reflected on Schedule 5.10(a) or Schedule 5.16(b) as
securing specified liabilities (with respect to which no material
default by the Company exists);
(ii) liens for current taxes not yet payable and assessments
not in default;
(iii) easements for utilities serving the property; and
(iv) easements, covenants and restrictions and other
exceptions to title which do not adversely affect the current use of
the property.
Copies of all leases and agreements in respect of such real property
leased by the Company, which are true, complete and correct in all material
respects, are attached to Schedule 5.16(a), and an indication as to which such
properties, if any, are currently owned, or were formerly owned, by Stockholders
or Affiliates of the Company or Stockholders is included in Schedule 5.16(a).
Except as set forth on Schedule 5.16(b), all of such leases included on Schedule
5.16(a) are, as to the Company, in full force and effect and constitute valid
and binding agreements of the Company in accordance with their respective terms.
5.17 INSURANCE. The Company has delivered to AmPaM (i) an accurate list
as of the Balance Sheet Date of all insurance policies carried by the Company
and (ii) an accurate list of all insurance loss runs or workers compensation
claims received for the past three policy years (which lists are set forth on
Schedule 5.17). The Company has also delivered or made available to AmPaM true,
complete and correct copies of all insurance policies currently in effect that
are referred in Schedule 5.17. Such insurance policies evidence all of the
insurance the Company is required to carry pursuant to all of its contracts and
other agreements and pursuant to all applicable laws. All of such insurance
policies are currently in full force and effect except as stated in Schedule
5.17.
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Since January 1, 1996, no insurance carried by the Company has been canceled by
the insurer and the Company has not been denied coverage under any such policy.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; LABOR MATTERS.
(a) The Company has delivered to AmPaM an accurate list (which is set
forth on Schedule 5.18(a)(1)) showing all officers, directors and key employees
of the Company, listing all employment agreements with such officers, directors
and key employees and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of each of
such persons as of (i) the Balance Sheet Date and (ii) the date hereof. The
Company has provided to AmPaM true, complete and correct copies of any
employment agreements for persons listed on Schedule 5.18(a)(1). Since the
Balance Sheet Date, except as disclosed on Schedule 5.18(a)(2), there have been
no increases in the compensation payable or any bonuses to any officer,
director, key employee or other employee, except ordinary salary increases
implemented on a basis consistent with past practices and except for bonuses
paid on a basis consistent with past practices.
(b) Except as set forth on Schedule 5.18(b), (i) the Company is not
bound by or subject to (and none of its assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) to the knowledge of the
Company, no campaign to establish such arrangement is in progress and (iii)
there is no pending or, to the Company's knowledge, threatened labor dispute
involving the Company and any group of its employees nor has the Company
experienced any labor interruptions over the past three years. The Company
believes its relationship with employees to be generally good.
(c) Except as set forth in Schedule 5.18(c) attached hereto, (i) there
are no claims, actions or proceedings pending or, to the knowledge of the
Company, threatened between the Company and any of its employees, (ii) the
Company has complied in all material respects with all laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, and (iii) the Company has not received written
notice from any person asserting that the Company is liable in any material
amount for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing.
5.19 EMPLOYEE PLANS. The Company has delivered to AmPaM accurate
schedule (Schedule 5.19(a)) showing all employee benefit plans of the Company,
including all employment agreements and other agreements or arrangements
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date and as of the date of
this Agreement. Except for the employee benefit plans, if any, described on
Schedule 5.19(a), the Company does not sponsor, maintain or contribute to any
plan program, fund or arrangement that constitutes an "employee pension benefit
plan", and neither the Company nor any Subsidiary has any obligation to
contribute to or accrue or
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pay any benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan" (within the meaning of Section 3(36) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or any non-qualified deferred
compensation arrangement). For the purposes of this Agreement, the term
"employee pension benefit plan" shall have the same meaning as is given that
term in Section 3(2) of ERISA. The Company has not sponsored, maintained or
contributed to any employee pension benefit plan other than the plans set forth
on Schedule 5.19(a), and, except as described on Schedule 5.19(b), the Company
is not or could not be required to contribute to any retirement plan pursuant to
the provisions of any collective bargaining agreement establishing the terms and
conditions or employment of any of the Company's employees.
Except as set forth on Schedule 5.19(c), the Company is not now, or
will not as a result of its past activities become, liable to the Pension
Benefit Guaranty Corporation or to any multiemployer employee pension benefit
plan under the provisions of Title IV of ERISA.
All employee benefit plans listed on Schedule 5.19(a) and the
administration thereof are in compliance in all material respects with their
terms and all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable federal, state and local
statutes, ordinances and regulations.
All accrued contribution obligations of the Company as of the Balance
Sheet Date with respect to any plan listed on Schedule 5.19(a) have either been
fulfilled in their entirety or are fully reflected on the balance sheet of the
Company as of the Balance Sheet Date.
5.20 COMPLIANCE WITH ERISA. All plans listed on Schedule 5.19(a) that
are intended to qualify under Section 401 (a) of the Code (the "Qualified
Plans") are, and have been so qualified and have been determined by the Internal
Revenue Service to be so qualified, and copies of such determination letters are
attached to Schedule 5.19(a). Except as disclosed on Schedule 5.20, all reports
and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, actuarial reports, audits or tax returns) since January 1, 1992 have been
timely filed or distributed, and copies thereof have been made available to
AmPaM. No such plan listed on Schedule 5.19(a) nor the Company has engaged in
any transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No such Plan listed on Schedule 5.19(a) has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(l) of ERISA; and the Company has not incurred any liability for
excise tax or penalty due to the Internal Revenue Service nor any liability to
the Pension Benefit Guaranty Corporation. The Company further represents that
except as set forth on Schedule 5.20 hereto:
(i) there have been no terminations, partial terminations or
discontinuations of contributions to any Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval
by the Internal Revenue Service;
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(ii) no plan listed on Schedule 5.19(a) subject to the
provisions of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase
is defined in Section 4043 of ERISA) with respect to any such plan
listed in Schedule 5.19(a);
(iv) the Company (including any Subsidiaries) has not incurred
liability under Section 4062 of ERISA; and
(v) no circumstances exist pursuant to which the Company could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to any multiemployer plan or the PBGC under
Title IV of ERISA or to the Internal Revenue Service for any excise tax
or penalty, or being subject to any statutory lien to secure payment of
any such liability) with respect to any plan now or heretofore
maintained or contributed to by any entity other than the Company that
is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 5.21 or Schedule 5.13, the Company has not violated within the five
years prior to the date of this Agreement and is not currently in violation of
any law or regulation or any order of any court or Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it other than violations that would not
have a Material Adverse Effect on the Company; and except to the extent set
forth on Schedule 5.10(c) or Schedule 5.13, there are no claims, actions, suits
or proceedings, pending or, to the knowledge of the Company, threatened in
writing against the Company, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over the Company and no written
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received by the Company, and to the knowledge of the Company there is
no valid basis for any such claim, action, suit or proceeding that could
reasonably be expected to have a Material Adverse Effect on the Company.
5.22 TAXES. The Company has timely filed all requisite Federal, state
and other Tax Returns or extension requests for all fiscal periods ended on or
before the Balance Sheet Date; and except as set forth on Schedule 5.22(a),
there are no examinations in progress or claims pending against the Company for
federal, state and other Taxes (including penalties and interest) for any period
or periods prior to and including the Balance Sheet Date and no notice of any
claim for Taxes, whether pending or threatened, has been received. All Tax,
including interest and penalties (whether or not shown on any Tax Return), due
by the Company has been paid. The amounts shown as accruals for Taxes on the
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before the date of the respective Financial Statements. Copies of (i) any tax
examinations, (ii) extensions of statutory limitations and (iii) the federal and
local income Tax Returns and franchise Tax Returns of Company for their last
three (3) fiscal years, or such shorter period of time as any of them shall
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have existed, are attached hereto as Schedule 5.22(a) or have otherwise been
delivered to AmPaM. The Company has a taxable year ended December 31. Except as
set forth on Schedule 5.22(a), the Company uses the accrual method of accounting
for income tax purposes, and the Company's methods of accounting have not
changed in any material respect in the past five years (except as required to
conform to changes in GAAP). The Company is not an investment company as defined
in Section 351(e)(1) of the Code. The Company is not and has not during the last
five years been a party to any tax sharing agreement or agreement of similar
effect. Except as set forth on Schedule 5.22(a), the Company is not and has not
during the last five years been a member of any consolidated group for federal
tax purposes. The Company has not received, been denied, or applied for any
private letter ruling from the IRS during the last ten years.
5.23 NO VIOLATIONS; NO CONSENT REQUIRED, ETC.
(a) The Company is not in violation of any Charter Document. Except as
set forth on Schedule 5.23(a), the Company is not in default under any lease,
instrument, agreement, license, or permit set forth on Schedule 5.12(a),
Schedule 5.14(a), Schedule 5.15(b) or Schedule 5.16(a) (collectively, the
"Material Documents").
(b) Except as set forth on Schedule 5.23(b)(1), the execution and
delivery of this Agreement by each of the Company and the Stockholders do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company under any of the
terms, conditions or provisions of (i) the Charter Documents of the Company,
(ii) any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental authority
applicable to the Company or any of its properties or assets, or (iii) any
Material Document to which the Company is now a party or by which the Company or
any of its properties or assets may be bound or affected. The consummation by
the Company and the Stockholders of the transactions contemplated hereby will
not result in any material violation, conflict, breach, right of termination or
acceleration or creation of liens under any of the terms, conditions or
provisions of the items described in clauses (i) through (iii) of the preceding
sentence, subject, in the case of the terms, conditions or provisions of the
items described in clause (iii) above, to obtaining (prior to the Effective
Time) such consents as may be required from commercial lenders, lessors or other
third parties as listed on Schedule 5.23(b)(2).
(c) Except as set forth on Schedule 5.23(c) and except for the
Hart-Scott Act, none of the Material Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to the consummation by the Company and the Stockholders of any of the
transactions contemplated hereby in order to remain in full force and effect,
and consummation by the Company and the Stockholders of the transactions
contemplated hereby will not give rise to any right to termination, cancellation
or acceleration or loss of any material right or benefit under any Material
Document.
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(d) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act or with any state securities authorities in connection with the offer
and sale of AmPaM Stock and AmPaM Notes pursuant to this Agreement and (ii) any
filing required to be made under the Hart-Scott Act in connection with the
transactions contemplated by this Agreement, no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby.
(e) Except as set forth on Schedule 5.23(e), none of the Material
Documents prohibits the disclosure or publication by the Company or AmPaM of the
name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company from freely providing services or
selling products to any other customer or potential customer of the Company,
AmPaM or any Other Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24, the
Company is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.25 ABSENCE OF CHANGES. (a) Since the Balance Sheet Date, except as
set forth on Schedule 5.25 or as otherwise contemplated hereby, there has not
been:
(i) any Material Adverse Change in the Company;
(ii) any damage, destruction or casualty loss (whether or not
covered by insurance), alone or in the aggregate, which has caused a
Material Adverse Effect on the Company;
(iii) any change in the authorized capital of the Company or
its outstanding securities or any change in its ownership interests or
any grant of any options, warrants, calls, conversion rights or
commitments;
(iv) any declaration or payment of any dividend or
distribution in respect of the capital stock or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock
of the Company except for distributions that would have been permitted
after the date hereof under Section 7.3(iii) hereof,
(v) any increase in the compensation, bonus, sales commissions
or fee arrangement payable or to become payable by the Company to any
of its officers, directors, Stockholders, employees, consultants or
agents, except for ordinary and customary bonuses except for salary
increases for employees in accordance with past practice and except for
the establishment of a deferred stock compensation plan for the benefit
of certain Company employees and the arrangements to contribute shares
of AmPaM Stock thereto as described in Annex I hereto;
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(vi) any work interruptions, labor grievances or claims filed,
or any event or condition of any character, which has caused a Material
Adverse Effect on the Company;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the Company to any
person, including, without limitation, the Stockholders and their
affiliates, except inventory sold or transferred in the Ordinary Course
of Business;
(viii) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to the Company, including
without limitation any indebtedness or obligation of any Stockholders
or any Affiliate thereof;
(ix) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
material assets, property or rights of the Company or requiring consent
of any party to the transfer and assignment of any such assets,
property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the Ordinary Course of Business;
(xi) any waiver of any material rights or claims of the
Company;
(xii) any amendment or termination of any Material Document to
which the Company is a party except for the termination of a Material
Document in accordance with its terms without any action on the part of
the Company;
(xiii) any transaction by the Company outside the Ordinary
Course of Business;
(xiv) any cancellation or termination of a material contract
with a customer or client listed on Schedule 5.15(a) prior to the
scheduled termination date thereof; or
(xv) any other distribution of property or assets by the
Company other than in the Ordinary Course of Business, other than (a)
distributions of nonoperating assets specifically identified on
Schedule 5.25, (b) distributions of real estate required by Section
7.1(c) of this Agreement and (c) distributions of cash or promissory
notes permitted by Annex I hereto.
(b) Except as set forth on Schedule 5.25, the Company has not,
between the Balance Sheet Date and the date hereof, taken any of the actions set
forth in Section 7.3.
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5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The Company has delivered to
AmPaM an accurate schedule (which is set forth on Schedule 5.26) as of the date
of the Agreement of:
(i) the name of each financial institution in which the
Company has an account or safe deposit box;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or
have access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company and
a description of the terms of such power.
5.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the Company and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
Company and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
5.28 RELATIONS WITH GOVERNMENTS. The Company has not, and to the
knowledge of the Company none of the Stockholders or any Affiliate of any of
them has, given or offered anything of value to any governmental official,
political party or candidate for government office or otherwise taken any action
which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any law of similar effect.
5.29 DISCLOSURE. This Agreement, including the Annexes and Schedules
hereto, and the completed questionnaire related to the Hart-Scott Act furnished
to AmPaM by the Company, do not contain an untrue statement of a material fact
concerning the Company or omit to state a material fact concerning the Company
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing does not apply to statements contained in or omitted from any
of such documents made or omitted in reliance upon information furnished in
writing by AmPaM.
5.30 NO WARRANTIES OR INSURANCE. Except for warranty liability under
applicable law and except for warranty liability under the warranties issued by
the Company of the types described on Schedule 5.30, the Company has no
liability to any person under any warranty and the Company does not offer or
sell insurance or consumer protection plans or other arrangements that could
result in the Company being required to make any payment to or perform any
service for any person.
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5.31 INTEREST IN CUSTOMERS AND SUPPLIERS AND RELATED PARTY
TRANSACTIONS. Except as described on Schedule 5.31 or in Section 8.11, no
Stockholder, officer, director or Affiliate of the Company (i) owns, directly or
indirectly, any financial interest in, or is a director, officer, employee or
affiliate of, any corporation, firm, association or business organization that
is a client, supplier, customer, lessor, lessee or competitor of the Company, or
(ii) is or will be a party to an agreement or relationship with the Company
other than through a customary "at will" employment relationship.
5.32 PRIVATE PLACEMENT MEMORANDUM. None of the information supplied or
to be supplied by the Company in writing specifically for inclusion in the
Private Placement Memorandum contained or, as of the Closing Date, will contain
any untrue statement of a material fact concerning the Company or omitted or
will omit to state any material fact required to be stated therein or necessary
in order to make the statements contained in such information supplied or to be
supplied by the Company concerning the Company, in light of the circumstances
under which they are made, not misleading.
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.
Each Stockholder severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.7 hereof, shall be true at the time of
Closing, and that the representations and warranties set forth in this Section
5(B) shall survive the Closing Date.
5.33 AUTHORITY; OWNERSHIP. Such Stockholder has the full legal right,
power and authority to enter into this Agreement, and this Agreement is a legal,
valid and binding obligation of such Stockholder, enforceable against the
Stockholder in accordance with its terms. Except as set forth on Schedule
5.33(a), the execution and delivery of this Agreement by such Stockholder does
not violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of such Stockholder
under any of the terms, conditions or provisions of (i) the Charter Documents of
the Company, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to such Stockholder or any of such Stockholder's properties
or assets, or (iii) any lease, instrument, agreement, license or permit to which
such Stockholder is now a party or by which such Stockholder or any of such
Stockholder's properties or assets may be bound or affected. Except for (i) any
filings to be made with the SEC pursuant to the 1933 Act and any state
securities authorities in connection with the offer and sale of AmPaM Stock and
AmPaM Notes pursuant to this Agreement, (ii) any filing required to be made
under the Hart-Scott Act in connection with the transactions contemplated by
this Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by such
Stockholder or the consummation by such Stockholder of the transactions
contemplated hereby. Except as set forth on
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Schedule 5.33(b), such Stockholder owns beneficially and of record all of the
shares of the Company Stock identified on Annex I hereto as being owned by such
Stockholder, and, such Company Stock is owned free and clear of all liens,
security interests, pledges, charges, voting trusts, voting agreements,
restrictions, encumbrances and claims of every kind.
5.34 PREEMPTIVE RIGHTS. Such Stockholder does not have, or hereby
waives, any preemptive or other right to acquire shares of Company Stock or
AmPaM Stock that such Stockholder has or may have had. Nothing herein, however,
shall limit or restrict the rights of any Stockholder to acquire AmPaM Stock
pursuant to (i) this Agreement, (ii) any option granted or to be granted by
AmPaM to such Stockholder, (iii) a purchase through a broker in a regular stock
market transaction or (iv) a purchase from a stockholder of a Founding Company
(subject to compliance with any contractual restrictions or securities law
restrictions applicable thereto specified in Section 15 hereof).
5.35 NO COMMITMENT TO DISPOSE OF AMPAM STOCK. No Stockholder is under
any binding commitment or contract to sell, exchange or otherwise dispose of
shares of AmPaM Stock or AmPaM Notes received pursuant to this Agreement.
5.36 DISCLOSURE. The completed Director and Officer Questionnaires with
respect to such Stockholder (if any), the completed investor questionnaire
furnished to AmPaM by such Stockholder in connection with the proposed
acquisition by such Stockholder of AmPaM Stock and AmPaM Notes and any other
information provided to AmPaM in writing by such Stockholder relating
specifically to such Stockholder for inclusion in the Private Placement
Memorandum do not contain an untrue statement of a material fact concerning such
Stockholder or omit to state a material fact concerning such Stockholder
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading.
6. REPRESENTATIONS OF AMPAM
Except as otherwise qualified below, AmPaM represents and warrants that
all of the following representations and warranties in this Section 6 are true
at the date of this Agreement and, subject to Section 7.7 hereof, shall be true
at the time of Closing, and that such representations and warranties shall
survive the Closing Date for a period of eighteen months (the last day of such
period being the "Expiration Date" for purposes of the representations and
warranties set forth in this Section 6), except that the representations and
warranties set forth in Section 6.3, 6.11 and 6.15 shall survive until such time
as the applicable statute of limitations period has run, which shall be deemed
to be the Expiration Date for the representations and warranties set forth in
Sections 6.3, 6.11 and 6.15.
AmPaM acknowledges that in purchasing the shares of Company Stock, it
is relying upon its own independent investigation as well as the representations
and warranties of the Company and the Stockholders as set forth in this
Agreement.
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6.1 DUE ORGANIZATION. AmPaM is a corporation duly incorporated and
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite power and authority to carry on its business as
it is now being conducted and as contemplated by the Private Placement
Memorandum. AmPaM is duly qualified or authorized to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or authorization
necessary, except where the failure to be so qualified or authorized to do
business would not have a Material Adverse Effect. True, complete and correct
copies of the Certificate of Incorporation and By-laws, each as proposed to be
amended and as such documents shall be in effect as of the Closing Date, of
AmPaM (the "AmPaM Charter Documents") are attached hereto as Annex II.
6.2 AUTHORIZATION. (i) The officers of AmPaM executing this Agreement
have the authority to enter into and bind AmPaM to the terms of this Agreement
and (ii) AmPaM has the full legal right, power and authority to enter into this
Agreement and consummate the transactions contemplated hereby. All corporate
acts and other proceedings required to have been taken by AmPaM to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly and properly taken.
6.3 CAPITAL STOCK OF AMPAM. The authorized capital stock of AmPaM is as
set forth in Section 1.3(ii). Immediately prior to the Closing Date, all of the
issued and outstanding shares of the capital stock of AmPaM will be as set forth
in the Private Placement Memorandum, free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind other than any restrictions described in the Private
Placement Memorandum. All of the issued and outstanding shares of the capital
stock of AmPaM have been duly authorized and validly issued, are fully paid and
nonassessable and such shares were offered, issued, sold and delivered by AmPaM
in compliance with all applicable state and Federal laws concerning the issuance
of securities. Further, none of such shares were issued in violation of the
preemptive rights of any past or present stockholder of AmPaM. Upon the Closing
Date, the authorized, issued and outstanding shares of capital stock of AmPaM
will be as set forth in the Private Placement Memorandum under the caption
"Capitalization." Upon the Closing Date, the aggregate number of shares of AmPaM
Stock issued and outstanding on the Closing Date that are owned by Sterling City
Capital, LLC, any Affiliates of Sterling City Capital, LLC and the officers and
directors of AmPaM will not be greater than the number of shares of AmPaM Stock
reflected in the Private Placement Memorandum as the aggregate number of shares
of AmPaM Stock to be issued and outstanding and owned by Sterling City Capital,
LLC, any Affiliates of Sterling City Capital, LLC and the officers and directors
of AmPaM.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements,
except for the arrangements to contribute AmPaM Stock to a deferred stock
compensation plan for the benefit of certain employees as described in Annex I
hereto, and except as set forth in the Private Placement Memorandum, (i) no
option, warrant, call, conversion right or commitment of any kind exists as of
the date of this Agreement which obligates AmPaM to issue any of its authorized
but unissued capital stock; and (ii) AmPaM has no obligation (contingent or
otherwise) to purchase, redeem or
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otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof. The material terms
of any options, warrants or other rights to acquire shares of the stock of AmPaM
referred to in the preceding sentence will be as described in the Private
Placement Memorandum.
6.5 SUBSIDIARIES. As of the date of this Agreement, AmPaM has no
subsidiaries. As of the date of this Agreement, AmPaM does not own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity, and AmPaM is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. The historical financial statements of AmPaM
included in the Private Placement Memorandum (the "AmPaM Financial Statements")
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (except as noted thereon), and the balance
sheet included therein presents fairly the financial position of AmPaM as of its
date. Management of AmPaM believes that the assumptions underlying the pro forma
adjustments utilized in the preparation of such pro forma financial statements
are reasonable, and such pro forma adjustments have been properly applied to the
historical financial amounts in the compilation of the pro forma financial
statements. Based on the representations in Section 5.9 of this Agreement and in
Section 5.9 of each of the Other Agreements, the pro forma financial information
of AmPaM fairly presents the pro forma financial position, results of operations
and other information purported to be shown therein at the respective dates and
for the respective periods specified.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth in the Private
Placement Memorandum, as of the date of this Agreement, AmPaM has no material
liabilities or obligations of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise, other than
liabilities incurred in the ordinary course of business and consistent with past
practices, liabilities or obligations set forth in or contemplated by this
Agreement and the Other Agreements and except for fees incurred in connection
with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth in
the Private Placement Memorandum, AmPaM is not in violation of any law or
regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and its stockholders and, there are no claims,
actions, suits or proceedings, pending or, to the knowledge of AmPaM, threatened
against or affecting, AmPaM, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over it and no notice of any
claim, action, suit or proceeding, whether pending or threatened, has been
received. AmPaM has conducted and is conducting its businesses in compliance in
all material respects with the requirements, standards, criteria and conditions
set forth in applicable Federal, state
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and local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations and is not in violation, in any material respect, of any
of the foregoing.
6.9 NO VIOLATIONS. (a) AmPaM is not in violation of any AmPaM Charter
Document. AmPaM is not in default under any lease, instrument, agreement,
license, or permit to which AmPaM is a party or by which AmPaM or any of its
properties are bound (collectively, the "AmPaM Documents").
(b) The execution and delivery of this Agreement by AmPaM do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of AmPaM under any of the
terms, conditions or provisions of (i) the AmPaM Charter Documents, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to
AmPaM or any of its properties or assets, or (iii) any AmPaM Document; provided
that the representations and warranties specified in clause (ii) of this
sentence (A) are based on information in the investor questionnaires and related
purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements and
(B) are subject to the accuracy and completeness of the information contained in
such investor questionnaires and related purchaser representative questionnaires
and the truthfulness of such representations and warranties. The consummation by
AmPaM of the transactions contemplated hereby will not result in any material
violation, conflict, breach, right of termination or acceleration or creation of
liens under any of the terms, conditions or provisions of the items described in
clauses (i) through (iii) of the preceding sentence, subject, in the case of the
terms, conditions or provisions of the items described in clause (iii) above, to
obtaining (prior to the Closing Date) (x) such approvals, consents or orders
from the SEC, state blue sky authorities and authorities administering the
Hart-Scott Act and (y) such other consents as may be required from commercial
lenders, lessors or other third parties which are listed on Schedule 6.9.
(c) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act and filings with various state securities authorities in connection
with the transactions contemplated by this Agreement, and (ii) any filings
required to be made under the Hart-Scott Act in connection with the transactions
contemplated by this Agreement, none of the AmPaM Documents requires notice to,
or the consent or approval of, any governmental agency or other third party with
respect to the consummation by AmPaM of any of the transactions contemplated
hereby in order to remain in full force and effect, and consummation by AmPaM of
the transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any material right or
benefit under the AmPaM Documents; provided that the representations and
warranties specified in clauses (i) and (ii) of this sentence (A) are based on
information in the investor questionnaires and
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related purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements and
(B) are subject to the accuracy and completeness of the information contained in
such investor questionnaires and related purchaser representative questionnaires
and the truthfulness of such representations and warranties.
(d) Except for (i) any filings with the SEC pursuant to the 1933 Act
and filings with various state securities authorities in connection with the
transactions contemplated by this Agreement and (ii) any filings required under
the Hart-Scott Act in connection with the transactions contemplated by this
Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by AmPaM
or the consummation by AmPaM of the transactions contemplated hereby; provided
that the representations and warranties specified in clauses (i) and (ii) of
this sentence (A) are based on information in the investor questionnaires and
related purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements and
(B) are subject to the accuracy and completeness of the information contained in
such investor questionnaires and related purchaser representative questionnaires
and the truthfulness of such representations and warranties.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by AmPaM and the performance of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of AmPaM and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of AmPaM, enforceable
against AmPaM in accordance with its terms.
6.11 AMPAM STOCK. At the time of issuance thereof and delivery to the
Stockholders, the AmPaM Stock to be delivered to the Stockholders pursuant to
this Agreement will constitute valid, duly authorized and legally issued shares
of AmPaM, fully paid and nonassessable, and with the exception of restrictions
upon resale set forth in Sections 15 and 16 hereof, will be identical in all
substantive respects (which do not include the form of certificate upon which it
is printed or the presence or absence of a CUSIP number on any such certificate)
to the AmPaM Stock issued and outstanding as of the date hereof, other than the
Restricted Common Stock. The AmPaM Stock issued and delivered to the
Stockholders shall at the time of such issuance and delivery be free and clear
of any liens, claims or encumbrances of any kind or character. The offer and
sale of the shares of AmPaM Stock to be issued to the Stockholders pursuant to
this Agreement are not required to be registered under the 1933 Act; provided
that the representations and warranties specified in this sentence (A) are based
on information in the investor questionnaires and related purchaser
representative questionnaires executed and delivered by the Stockholders of the
Company and the
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stockholders of the Other Founding Companies, the representations and warranties
of the Stockholders set forth in Section 16 hereof and the representations and
warranties of the stockholders of the Other Founding Companies set forth in
Section 16 of the Other Agreements and (B) are subject to the accuracy and
completeness of the information contained in such investor questionnaires and
related purchaser representative questionnaires and the truthfulness of such
representations and warranties.
6.12 AMPAM NOTES. The AmPaM Notes have been duly authorized and, at the
Closing Date, will have been duly executed by AmPaM and, when authenticated,
issued and delivered, will constitute valid and binding obligations of AmPaM,
enforceable against AmPaM in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers) reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
6.13 NO SIDE AGREEMENTS. AmPaM has not entered into any agreement with
any of the Founding Companies or any of the Stockholders of the Founding
Companies other than this Agreement, the Other Agreements, the agreements
referred to in this Agreement and in the Other Agreements and the Private
Placement Memorandum. AmPaM has not entered into any agreements providing for
rights to register shares of AmPaM Stock under the 1933 Act except as provided
in Section 17 of this Agreement, in Section 17 of the Other Agreements and in an
agreement with Sterling City Capital, LLC, its Affiliates and officers and
directors of AmPaM having terms substantially similar to those set forth in
Section 17 hereof.
6.14 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. AmPaM was formed in
June 1998 and has conducted no material business since the date of its inception
except for activities related to the transaction contemplated by this Agreement,
the Other Agreements and the Private Placement Memorandum. Except as described
in the Private Placement Memorandum, as of the date of this Agreement, AmPaM
does not own any real property or any material personal property and is not a
party to any other material agreement other than this Agreement, the Other
Agreements and the agreements contemplated hereby and thereby.
6.15 RELATIONS WITH GOVERNMENTS. Neither AmPaM nor any of its
directors, officers or Affiliates has given or offered anything of value to any
government official, political party or candidate for government office, nor has
AmPaM, any of its directors, officers or Affiliates of any of them otherwise
taken any action, which would cause AmPaM to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any law of similar effect.
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6.16 DISCLOSURE. The Private Placement Memorandum delivered to the
Company and the Stockholders does not as of the date hereof contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing does not apply to
statements contained in or omitted from any of such documents made or omitted in
reliance upon, and in conformity with, information furnished to AmPaM by the
Company or the Stockholders in writing specifically for inclusion in the Private
Placement Memorandum.
6.17 OTHER AGREEMENTS. The Other Agreements have been duly authorized,
executed and delivered by AmPaM and constitute the legal, valid and binding
obligation of AmPaM enforceable against AmPaM in accordance with their
respective terms. The terms and conditions of the Other Agreements (excluding
the terms relating to the consideration payable by AmPaM thereunder) are
identical in all material respects to the terms and conditions in this
Agreement.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE; TRANSFER OF REAL ESTATE.
(a) Between the date of this Agreement and the Closing Date, the
Company will afford to the officers and authorized representatives of AmPaM
reasonable access during normal business hours to all of the Company's sites,
properties, books and records and will furnish AmPaM with such additional
financial and operating data and other information as to the business and
properties of the Company as AmPaM may from time to time reasonably request. The
Company will cooperate with AmPaM, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. AmPaM,
the Stockholders and the Company will treat all information obtained in
connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to the Company as confidential
in accordance with the provisions of Section 14 hereof.
(b) Between the date of this Agreement and the Closing Date, AmPaM will
afford to the officers and authorized representatives of the Company access to
all of AmPaM's sites, properties, books and records and will furnish the Company
with such additional financial and operating data and other information as to
the business and properties of AmPaM and the Other Founding Companies as the
Company may from time to time reasonably request. AmPaM will cooperate with the
Company, its representatives, auditors and counsel in the preparation of any
documents or other material which may be required in connection with any
documents or materials required by this Agreement. The Company will cause all
information obtained pursuant to this Section 7.1(b) or obtained in connection
with the negotiation and performance of this Agreement to be treated as
confidential in accordance with the provisions of Section 14 hereof.
(c) Except as set forth on Schedule 7.1, any real property owned by the
Company will be sold or distributed by the Company on terms mutually acceptable
to AmPaM and the Company
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and leased back by the Company on terms no less favorable to the Company than
those available from an unaffiliated party and otherwise reasonably acceptable
to AmPaM at or prior to the Closing Date.
(d) Between the date of this Agreement and the Consummation Date, AmPaM
will use reasonable efforts to hold meetings in Houston, Texas, or such other
place or places as AmPaM shall reasonably determine, to which all of the
Founding Companies will be invited to attend, not less frequently than every 45
days at which the business and affairs of AmPaM and the Founding Companies may
be discussed.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Closing Date, the Company will, except as set forth on
Schedule 7.2:
(i) carry on its businesses in the Ordinary Course of Business
and not introduce any material new method of management, operation or
accounting;
(ii) use all commercially reasonable efforts to maintain its
properties and facilities, including those held under leases, in as
good working order and condition as at present, ordinary wear and tear,
depreciation and insured losses excepted;
(iii) perform in all material respects all of its obligations
under all Material Documents relating to or affecting its respective
assets, properties or rights;
(iv) use its commercially reasonable efforts to keep in full
force and effect present insurance policies or other comparable
insurance coverage;
(v) use its commercially reasonable efforts to maintain and
preserve its business organization intact, retain its respective
present key employees and maintain its relationships with suppliers,
customers and others having business relations with the Company;
(vi) use its commercially reasonable efforts to maintain
compliance with all material permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory
agencies and similar governmental authorities;
(vii) maintain present debt and lease instruments in
accordance with their terms and not enter into new or amended debt or
lease instruments without the knowledge and consent of AmPaM (which
consent shall not be unreasonably withheld), provided that debt and/or
lease instruments may be replaced without the consent of AmPaM if such
replacement instruments are on terms at least as favorable to the
Company as the instruments being replaced;
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(viii) maintain or reduce present salaries and commission
levels for all officers, directors, employees and agents except for
ordinary and customary bonus and salary increases for employees in
accordance with past practices; and
(ix) use commercially reasonable efforts to cause its working
Capital to be at levels consistent with historical levels.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between
the date hereof and the Closing Date, the Company will not, without prior
written consent of AmPaM:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of any kind
other than in connection with the exercise of options or warrants
listed in Schedule 5.4;
(iii) except as permitted pursuant to the terms and conditions
for distributions described in Annex I, declare or pay any dividend, or
make any distribution in respect of its stock whether now or hereafter
outstanding, or purchase, redeem or otherwise acquire or retire for
value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree
to incur any liability or make any capital expenditures, except if it
is in the Ordinary Course of Business or involves an amount not in
excess of three percent (3%) of the Company's gross revenues for fiscal
1997;
(v) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired, except (1) with respect to purchase money
liens incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of three percent (3%) of the Company's
gross revenues for fiscal 1997 necessary or desirable for the conduct
of the businesses of the Company, (2) (A) liens for taxes either not
yet due or being contested in good faith and by appropriate proceedings
(and for which contested taxes adequate reserves have been established
and are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the Ordinary
Course of Business (the liens set forth in clause (2) being referred to
herein as "Statutory Liens"), or (3) liens set forth on Schedule 5.10
and/or Schedule 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the Ordinary Course of Business and
other than distributions of real estate and other assets as permitted
in this Agreement (including Annex I hereto);
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(vii) negotiate for the acquisition of any business or the
start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate
with or into any other corporation;
(ix) waive any material rights or claims of the Company,
provided that the Company may negotiate and adjust bills and accounts
in the course of good faith disputes with customers in a manner
consistent with past practice;
(x) amend or terminate any Material Document except for the
termination of a Material Document in accordance with its terms without
any action on the part of the Company; or
(xi) enter into any other material transaction outside the
Ordinary Course of Business or any transaction prohibited hereunder.
7.4 NO SHOP. None of the Stockholders, the Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than AmPaM
or its authorized agents relating to, any acquisition or purchase of
all or a material amount of the assets of, or any equity interest in,
the Company or a merger, consolidation or business combination of the
Company.
7.5 AGREEMENTS. Except as disclosed on Schedule 7.5(a), the
Stockholders and the Company shall terminate (i) any stockholders agreements,
voting agreements, voting trusts, agreements providing for the grant by the
Company of any options, warrants and employment agreements between the Company
and any employee listed on Schedule 8.11 hereto and (ii) except as otherwise
provided in this Agreement, any existing agreement between the Company and any
Stockholder, on or prior to the Closing Date provided that nothing herein shall
prohibit or prevent the Company from paying (either prior to or on the Closing
Date) notes or other obligations from the Company to the Stockholders described
in Schedule 7.5(b) in accordance with the terms thereof.
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7.6 NOTIFICATION OF CERTAIN MATTERS. Each Stockholder and the Company
shall give prompt notice to AmPaM upon obtaining knowledge of (i) the occurrence
or non-occurrence of any event the occurrence or nonoccurrence of which would be
likely to cause any representation or warranty of the Company or such
Stockholder contained herein to be untrue or inaccurate in any material respect
at or prior to the Closing and (ii) any material failure of such Stockholder or
the Company to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such person hereunder. AmPaM shall give prompt
notice to the Company of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of AmPaM contained herein to be untrue or inaccurate
in any material respect at or prior to the Closing, (ii) any material failure of
AmPaM to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; (iii) any termination of any Other
Agreement for any reason; and (iv) the issuance by the SEC or any state
securities regulatory authority of any issuance of or threatened issuance of any
order challenging the availability of an exemption from registration or
suspending the qualification of any securities described in the Private
Placement Memorandum for sale in any jurisdiction. However, subject to the
provisions of Section 7.7, such notification shall not relieve either the
Company or such Stockholder of their respective obligations under this
Agreement. The delivery of any notice pursuant to this Section 7.6 shall not be
deemed to (i) modify the representations or warranties hereunder of the party
delivering such notice, which modification may only be made pursuant to Section
7.7, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
7.7 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until 24 hours prior to the
Closing Date to notify AmPaM with respect to any matter (i) hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules or (ii) which may
have been omitted from the Schedules previously provided by such party.
Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule
prepared by the Company may be made unless AmPaM consents to such amendment or
supplement; and provided further, that no amendment or supplement to a Schedule
prepared by AmPaM may be made unless the Stockholders consent to such amendment
or supplement. For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Sections 8.1 and
9.1 have been fulfilled, the Schedules hereto, as amended or supplemented with
the consent of AmPaM or the Stockholders, as the case may be, as provided above,
shall be deemed to be the Schedules to this Agreement.
7.8 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
appropriate to carry out the transactions contemplated hereby and to cause the
conditions to the Closing Date to be satisfied as promptly as practicable.
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7.9 AUTHORIZED CAPITAL. Prior to the Closing Date, AmPaM shall maintain
its authorized capital stock as set forth in the Private Placement Memorandum.
7.10 COMPLIANCE WITH THE HART-SCOTT ACT. All parties to this Agreement
hereby recognize that one or more filings under the Hart-Scott Act may be
required in connection with the transactions contemplated herein. If it is
determined by the parties to this Agreement that filings under the Hart-Scott
Act are required, then: (i) each of the parties hereto agrees to cooperate and
use its best efforts to comply with the Hart-Scott Act and (ii) such compliance
by the Stockholders and the parties agree to cooperate and use their best
efforts to cause all filings required under the Hart- Scott Act to be made. If
filings under the Hart-Scott Act are required, the costs and expenses thereof
(including filing fees) shall be borne by AmPaM.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of the Stockholders and the Company with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions. As of
the Closing Date, if any such applicable conditions have not been satisfied, any
one or more of the Stockholders who would be entitled to receive a majority of
the Aggregate Consideration (as defined herein) received by all Stockholders if
the transactions contemplated hereby were consummated shall have the right to
waive any condition not so satisfied. Any act or action of the Stockholders in
consummating the Closing or delivering the certificates representing Company
Stock as of the Closing Date shall constitute a waiver of any conditions not so
satisfied. However, no such waiver shall be deemed to affect the survival of the
representations and warranties of AmPaM contained in Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of AmPaM contained in Section 6 shall be true and
correct as of the Closing Date as though such representations and warranties had
been made as of that time; all of the terms, covenants and conditions of this
Agreement to be complied with and performed by AmPaM on or before the Closing
Date shall have been duly complied with and performed in all material respects;
and certificates to the foregoing effect dated the Closing Date and signed by
the President or any Vice President of AmPaM shall have been delivered to the
Stockholders.
8.2 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of the Company or the Stockholders and that are
required to carry out this Agreement or incidental hereto shall be reasonably
satisfactory to the Company, the Stockholders and their counsel.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the purchase and sale of the Company Stock.
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8.4 OPINION OF COUNSEL. The Company shall have received opinions from
counsel for AmPaM, dated the Closing Date, addressed to the Company and the
Stockholders in the form annexed hereto as Annex III.
8.5 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule 6.9
shall have been obtained; and no action or proceeding shall have been instituted
or threatened to restrain or prohibit the purchase and sale of the Company Stock
and no governmental agency or body shall have taken any other action or made any
request of Company as a result of which Company deems it inadvisable to proceed
with the transactions hereunder.
8.6 GOOD STANDING CERTIFICATES. AmPaM shall have delivered to the
Company a certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Delaware Secretary of State and in each state
in which AmPaM is authorized to do business, showing that AmPaM is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for AmPaM for all periods prior to the Closing have
been filed and paid.
8.7 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred which would constitute a Material Adverse Change with respect to AmPaM
from the date of the Private Placement Memorandum.
8.8 SECRETARY'S CERTIFICATE. The Company shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of AmPaM, certifying the truth and correctness of attached copies of AmPaM's
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and, if required,
the stockholders of AmPaM approving AmPaM's entering into this Agreement and the
Other Agreements and the consummation of the transactions contemplated hereby
and thereby.
8.9 TAX MATTERS. The Stockholders shall have received an opinion of
Andrews & Kurth L.L.P., in substantially the form of Annex IV hereto, that the
AmPaM Plan of Organization will qualify as a tax-free transfer of property under
Section 351 of the Code and that the Stockholders will not recognize gain to the
extent the Stockholders exchange Company Stock for AmPaM Stock (but not cash or
other property) pursuant to this Agreement in connection with the AmPaM Plan of
Organization.
8.10 OTHER FOUNDING COMPANIES. The transactions contemplated by the
Other Agreements are consummated simultaneously with the consummation of the
transactions contemplated by this Agreement.
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8.11 COMPANY RELEASE OF STOCKHOLDERS. The Company shall have delivered
to the Stockholders an instrument dated the Closing Date, in form reasonably
satisfactory to AmPaM and the Stockholders, which shall be effective only upon
the occurrence of the Closing Date, releasing the Stockholders from (i) any and
all claims of the Company against the Stockholders, known and unknown, and (ii)
obligations of the Stockholders to the Company, except for (x) items
specifically identified on Schedule 5.10(a) and Schedule 5.15(b) as being claims
of or obligations to the Company and (y) continuing obligations to the Company
relating to their employment by the Company pursuant to any employment agreement
entered into pursuant to Section 8.11 hereof.
8.12 STERLING CITY CAPITAL TRANSFER RESTRICTIONS. Sterling City
Capital, LLC and each of its Affiliates which owns AmPaM Stock shall have
entered into an agreement with AmPaM containing substantially the same terms and
conditions as are contained in Section 15 and Section 17.
8.13 ELECTION OF CHIEF EXECUTIVE OFFICER. AmPaM shall have taken all
corporate action necessary to elect Robert A. Christianson as Chief Executive
Officer of AmPaM effective immediately following the Closing Date.
8.14 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto as
payable to the Stockholders upon the Closing and (ii) the aggregate cash amounts
specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AMPAM
The obligations of AmPaM with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. As of the Closing Date, if any
such conditions have not been satisfied, AmPaM shall have the right to terminate
this Agreement, or waive any such condition, but no such waiver shall be deemed
to affect the survival of the representations and warranties contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE AND OBLIGATIONS. All
the representations and warranties of the Stockholders and the Company contained
in this Agreement shall be true and correct as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date; all of the terms, covenants and conditions of this Agreement to be
complied with or performed by the Stockholders and the Company on or before the
Closing Date shall have been duly performed or complied with in all material
respects; and the Stockholders shall have delivered to AmPaM certificates dated
the Closing Date and signed by them to such effect.
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9.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the purchase and sale of the Company Stock.
9.3 SECRETARY'S CERTIFICATE. AmPaM shall have received a certificate,
dated the Closing Date and signed by the secretary of the Company, certifying
the truth and correctness of attached copies of the Company's Articles or
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and the
Stockholders approving the execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby.
9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Company
to conduct its business.
9.5 STOCKHOLDERS' RELEASE. The Stockholders shall have delivered to
AmPaM an instrument dated the Closing Date which shall be effective only upon
the occurrence of the Closing releasing the Company and AmPaM from (i) any and
all claims of the Stockholders against the Company and AmPaM and (ii)
obligations of the Company and AmPaM to the Stockholders, except for (A) items
specifically identified on Schedule 5.31 as being claims of or obligations to
the Stockholders, (B) continuing obligations to Stockholders relating to their
employment by the Company pursuant to employment agreements entered into as
specified in Section 8.11 hereof, (C) obligations arising under this Agreement
or the transactions contemplated hereby and (D) claims of Stockholders against
the Company for unreimbursed business expenses incurred by the Stockholders on
behalf of the Company (other than expenses related to the transactions
contemplated by this Agreement) prior to the Closing Date or unreimbursed
medical expenses of the Stockholders incurred prior to the Closing Date which
are covered by the Company's existing health insurance coverage. In the event
that the Closing Date does not occur, then the release instrument referenced
herein shall be void and of no further force or effect.
9.6 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of AmPaM and that are required to carry out the
transactions contemplated by this Agreement or incidental hereto shall have been
reasonably approved by counsel to AmPaM.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the Company and the Stockholders
(and between the Company and entities controlled by the Stockholders) specified
on Schedule 5.31 shall have been terminated effective prior to or as of the
Closing Date without any payment being made by the Company other than payments
made for services rendered, materials provided or other benefits provided to the
Company prior to the Closing Date pursuant to the terms of such agreements as in
effect as of the date of this Agreement.
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9.8 OPINION OF COUNSEL. AmPaM shall have received opinions from counsel
to the Company and the Stockholders, dated the Closing Date, substantially in
the form annexed hereto as Annex V.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule
5.23(b)(2) shall have been obtained; and no action or proceeding shall have been
instituted or threatened to restrain or prohibit the purchase and sale of the
Company Stock and no governmental agency or body shall have taken any other
action or made any request of AmPaM as a result of which AmPaM deems it
inadvisable to proceed with the transactions hereunder.
9.10 GOOD STANDING CERTIFICATES. The Company shall have delivered to
AmPaM a certificate, dated as of a date no earlier than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by AmPaM, in each state in
which the Company is authorized to do business, showing the Company is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the Company for all periods prior to the
Closing have been filed and paid.
9.11 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto as
payable to the Stockholders upon the Closing and (ii) the aggregate cash amounts
specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9.12 FIRPTA CERTIFICATE. Each Stockholder shall have delivered to AmPaM
a certificate to the effect that he is not a foreign person pursuant to Section
1.1445-2(b) of the Treasury regulations.
9.13 RESIGNATIONS OF DIRECTORS AND OFFICERS. Any directors of the
Company, other than those identified on Schedule 2.1, shall have resigned as
directors of the Company. Any officers of the Company, other than those
identified on Schedule 2.2, shall have resigned as officers of the Company.
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10. COVENANTS OF AMPAM AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. AmPaM
shall use reasonable efforts to have the Stockholders released from any and all
guarantees of the Company's indebtedness, including bond obligations, identified
on Schedule 10.1. Prior to obtaining the release of such guarantees, AmPaM shall
provide its guarantee of such indebtedness to the lenders thereof. In the event
that AmPaM cannot obtain such releases from the lenders of any such guaranteed
indebtedness identified on Schedule 10.1 on or prior to 90 days subsequent to
the Closing Date, AmPaM shall promptly pay off or otherwise refinance or retire
such indebtedness such that the Stockholders' personal liability shall be
released. AmPaM will indemnify the Stockholders against any loss or damage
suffered as a result of the personal guarantees.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement, after the Closing Date, AmPaM shall not and
shall not permit any of its Subsidiaries to undertake any act that would
jeopardize the tax-free status of the exchange of Company Stock for AmPaM Stock
(but not cash or other property), including without limitation:
(a) the retirement or reacquisition, directly or indirectly,
of all or part of the AmPaM Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the
benefit of the Stockholders other than as described in the Private Placement
Memorandum or as described in this Agreement.
10.3 PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES.
(a) The Company, if possible, or otherwise the Stockholders
shall file or cause to be filed all income Tax Returns (federal, state, local or
otherwise) of any Acquired Party for all taxable periods that end on or before
the Closing Date, and shall permit AmPaM to review all such Tax Returns prior to
such filings. Unless the Company is a C corporation, the Stockholders shall pay
or cause to be paid all income Tax liabilities (in excess of all amounts already
paid with respect thereto or properly accrued or reserved with respect thereto
on the Financial Statements) with respect to the Company's operations for all
periods through and including the Closing Date.
(b) AmPaM shall file or cause to be filed all separate Returns
of, or that include, any Acquired Party for all taxable periods ending after the
Closing Date.
(c) Unless required by applicable law, regulations or
government proceedings, AmPaM shall not take any action, including any amendment
of a Tax Return of any Acquired Party, if such action would result in additional
Tax liabilities payable by any of the Stockholders for periods ending on or
prior to the Closing Date.
(d) Each party hereto shall, and shall cause its subsidiaries
and Affiliates to, provide to each of the other parties hereto such cooperation
and information as any of them
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reasonably may request in filing any Return, amended Return or claim for refund,
determining a liability for Taxes or a right to refund of Taxes or in conducting
any audit or other proceeding in respect of Taxes. Such cooperation and
information shall include providing copies of all relevant portions of relevant
Returns, together with relevant accompanying schedules and relevant work papers,
relevant documents relating to rulings or other determinations by Taxing
Authorities and relevant records concerning the ownership and Tax basis of
property, which such party may possess. Each party shall make its employees
reasonably available on a mutually convenient basis at its cost to provide
explanation of any documents or information so provided. Subject to the
preceding sentence, each party required to file Returns pursuant to this
Agreement shall bear all costs of filing such Returns.
(e) Each of the Company, AmPaM and each Stockholder shall
comply with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as a tax-free
contribution under Section 351(a) of the Code subject to gain, if any,
recognized on the receipt of cash or other property under Section 351(b) of the
Code.
10.4 DIRECTORS. The persons named in the Private Placement Memorandum
shall be appointed as directors and elected as officers of AmPaM, as and to the
extent set forth in the Private Placement Memorandum, promptly following the
Closing Date; provided, however, that the parties hereto acknowledge that if the
Company consummates an IPO, the persons who will serve as directors and
executive officers of AmPaM will be adjusted as appropriate for a publicly
traded entity, with any such changes being subject to the approval of the
majority of the Board of Directors of AmPaM.
10.5 LEGAL OPINIONS. If required by the lenders pursuant to the terms
of any agreements related to financing of the cash amounts referred to in
Section 9.11 hereof, the Company shall cause its counsel to deliver to such
lenders, at the Closing, an opinion of counsel in substantially the form
attached hereto as Annex V.
11. INDEMNIFICATION
The Stockholders and AmPaM each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS.
(a) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement until the applicable Expiration Date (as defined in
the introductory paragraph to Section 5(A)), provided that for purposes of
clause (iii) below, the applicable Expiration Date shall be the date on which
the applicable statute of limitations expires), from and against all claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by AmPaM
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as a result of or arising from (i) any breach of the representations and
warranties of the Company set forth herein or on the schedules attached hereto
or certificates delivered pursuant to this Agreement, (ii) any breach of any
covenant or agreement on the part of the Company under this Agreement, or (iii)
any liability under the 1933 Act or any Federal or state securities law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating solely to the
Company which was based upon information provided to AmPaM or its counsel in
writing by the Company specifically for inclusion in the Private Placement
Memorandum and is contained in the Private Placement Memorandum, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
Company required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that no Stockholder shall be liable
for any indemnification obligation pursuant to this Section 11.1 in excess of
such Stockholder's pro rata share thereof determined by reference to the
aggregate value of the Base Cash Amount (as defined in Annex I of this
Agreement), the principal amount of AmPaM Notes and the shares of AmPaM Stock
(valued at a price of $13.00 per share) received by such Stockholder pursuant to
Section I.A. of Annex I hereto (without giving effect to the adjustments
provided in Sections I.B. and I.C. thereof) (giving effect to the value of such
AmPaM Stock and without giving effect to such adjustments, collectively, the
"Aggregate Consideration") such Stockholder would receive pursuant to Section I
of Annex I of this Agreement if the transactions contemplated hereby were
consummated in relation to the total Aggregate Consideration all Stockholders
would receive pursuant to Section I of Annex I of this Agreement if the
transactions contemplated hereby were consummated.
(b) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by AmPaM as a result of or arising from (i)
any breach of the representations and warranties of such Stockholder set forth
in Section 5(B) hereof, (ii) any breach of any covenant or agreement on the part
of such Stockholder under this Agreement, or (iii) any liability under the 1933
Act or any Federal or state securities law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating solely to such Stockholder which was based
upon information provided to AmPaM or its counsel in writing by such Stockholder
specifically for inclusion in the Private Placement Memorandum and is contained
in the Private Placement Memorandum, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating solely to such Stockholder required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which such statements were made not misleading.
(c) AmPaM acknowledges and agrees that other than the representations
and warranties of the Company or the Stockholders specifically contained in this
Agreement, there are no representations or warranties of the Company or the
Stockholders, either express or implied, with
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respect to the transactions contemplated by this Agreement, the Company or its
assets, liabilities and business.
11.2 INDEMNIFICATION BY AMPAM. AmPaM covenants and agrees that it will
indemnify, defend, protect and hold harmless the Company and the Stockholders at
all times from and after the date of this Agreement until the applicable
Expiration Date (as defined in the introductory paragraph of Section 6, provided
that for purposes of clause (iii) below, the applicable Expiration Date shall be
the date on which the applicable statute of limitations expires), from and
against all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
Company or the Stockholders as a result of or arising from (i) any breach by
AmPaM of its representations and warranties set forth herein or on the schedules
attached hereto or certificates delivered pursuant to this Agreement, (ii) any
breach of any agreement on the part of AmPaM under this Agreement; or (iii) any
liability under the 1933 Act or any Federal or state securities law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Private Placement Memorandum, or any amendment thereof or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except to the extent such is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission, made
therein in reliance upon, and in conformity with, the representations and
warranties of the Company or the Stockholders specifically contained in this
Agreement or other information furnished to AmPaM by the Company or the
Stockholders in writing specifically for inclusion therein.
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel reasonably
satisfactory to the Indemnified Party, any such matter so long as the
Indemnifying Party pursues the same in good faith and diligently, provided that
the Indemnifying Party shall not settle any criminal proceeding without the
written consent of the Indemnified Party. If the Indemnifying Party undertakes
to defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by Indemnifying Party, provided that if counsel to
the Indemnifying Party shall have a conflict of interest or a conflict of
interest is reasonably likely
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to arise that prevents counsel for the Indemnifying Party from representing such
Indemnified Party, Indemnified Party shall have the right to participate in such
matter through counsel of its own choosing and Indemnifying Party will reimburse
the Indemnified Party for the reasonable expenses of its counsel. After the
Indemnifying Party has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except (i) as set forth in the preceding sentence and (ii) to the
extent such participation is requested by the Indemnifying Party, in which event
the Indemnified Party shall be reimbursed by the Indemnifying Party for
reasonable additional legal expenses and out-of-pocket expenses. If the
Indemnifying Party desires to accept a final and complete settlement of any such
Third Person claim and the Indemnified Party refuses to consent to such
settlement, then the Indemnifying Party's liability under this Section with
respect to such Third Person claim shall be limited to the amount so offered in
settlement by said Third Person. Upon agreement as to such settlement between
said Third Person and the Indemnifying Party, the Indemnifying Party shall, in
exchange for a complete release from the Indemnified Party, promptly pay to the
Indemnified Party the amount agreed to in such settlement. If the Indemnifying
Party does not undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
defense, the Indemnified Party may undertake such defense through counsel of its
choice, at the cost and expense of the Indemnifying Party, and the Indemnified
Party may settle such matter, and the Indemnifying Party shall pay the
Indemnified Party for the settlement amount and any other liabilities or
expenses incurred by the Indemnified Party in connection therewith, provided,
however, that under no circumstances shall the Indemnified Party settle any
Third Person claim without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed. All settlements hereunder
shall effect a complete release of the Indemnified Party, unless the Indemnified
Party otherwise agrees in writing. With respect to any account, note or other
receivable as to which the Stockholders have paid in full any indemnification
obligation pursuant to this Section 11 as a result of a breach of the
representation and warranty made pursuant to Section 5.11 or as to which a claim
in respect thereof has been asserted pursuant to this Section 11 that has been
applied against the Indemnification Threshold with respect to the Stockholders
as a result of a breach of the representation and warranty made pursuant to
Section 5.11, AmPaM shall cause the Company to assign such account, note or
other receivable to the Stockholders. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section
11 shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party to this Agreement with respect to any
provision of this Agreement, provided that, nothing herein shall be construed to
limit the right of a party, in a proper case, to seek injunctive relief for a
breach of this Agreement. AmPaM hereby waives, to the fullest extent permitted
under applicable law, any and all other rights, claims and causes of action,
known or unknown, it or any indemnified person may have against the Company or
any Stockholder relating to this Agreement or the transactions pursuant to this
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Agreement arising under or based upon any Federal, state, local or foreign
statute, law, rule, regulation or otherwise. Any indemnity payment under this
Section 11 shall be treated as an adjustment to the exchange consideration for
Tax purposes unless a final determination (which shall include the execution of
a Form 870-AD or successor form) with respect to the Indemnified Party or any of
its Affiliate causes any such payment not to be treated as an adjustment to the
exchange consideration for U.S. Federal income Tax purposes.
11.5 LIMITATIONS ON INDEMNIFICATION. (a) AmPaM shall not assert any
claim for indemnification under this Section 11 against the Stockholders until
such time as, and solely to the extent that, the aggregate of all claims which
AmPaM may have against the Stockholders shall exceed the greater of (a) 3.0% of
the sum of (i) the cash paid to the Stockholders pursuant to Section 1.2 plus
(ii) the value of the AmPaM Stock delivered to the Stockholders pursuant to
Section 1.2 (calculated as provided in this Section 11.5) plus (iii) the
principal amount of the AmPaM Notes delivered to the Stockholders pursuant to
Section 1.2, or (b) $50,000 (the "Indemnification Threshold"). Stockholders
shall not assert any claim for indemnification hereunder against AmPaM until
such time as, and solely to the extent that, the aggregate of all claims which
Stockholders may have against AmPaM shall exceed $50,000; provided, however,
that this sentence shall not be applicable with respect of any failure by AmPaM
to (i) deliver the consideration specified in Annex I hereto on the Closing Date
upon the satisfaction, or waiver by AmPaM, of all conditions to the occurrence
of the Closing Date specified in Section 9 or (ii) comply with its obligations
pursuant to Section 10.1. After the $50,000 threshold for AmPaM (subject to the
proviso in the preceding sentence) or the Indemnification Threshold for a
Stockholder has been met, all claims must be made in $10,000 increments, which
claims may be cumulated in order to meet such $10,000 thresholds. For purposes
of this paragraph, the AmPaM Stock delivered to the Stockholders shall be valued
at $13.00 per share.
(b) No person shall be entitled to indemnification under this Section
11 if and to the extent that such person's claim for indemnification is directly
or indirectly related to a breach by such person of any representation,
warranty, covenant or other agreement set forth in this Agreement. No claim for
indemnification against the Stockholders shall limit, diminish or change any
obligation of AmPaM pursuant to Section 10.1 hereof.
(c) Notwithstanding any other term of this Agreement, no Stockholder
shall be liable under this Section 11 for an amount which exceeds eighty-five
percent (85%) of the amount of proceeds received by such Stockholder (valued as
of the Closing Date) in connection with the purchase and sale of the Company
Stock. For purposes of this paragraph, the AmPaM Stock shall be valued at $13.00
per share.
(d) A Stockholder may pay any indemnification obligation under Section
11 by means of the payment of cash or a combination of the payment of cash, the
forgiveness of amounts owed pursuant to the AmPaM Notes and the delivery to
AmPaM of shares of AmPaM Stock; provided that the percentage of the
indemnification obligation satisfied by means of the delivery of shares of AmPaM
Stock does not exceed the percentage of AmPaM Stock comprising the total
consideration
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paid to such Stockholder by AmPaM to such Stockholder pursuant to Annex I. For
the purpose of crediting Stockholders for payments made to AmPaM by means of
delivery of shares of AmPaM Stock, the AmPaM Stock shall be valued at $13.00 per
share.
(e) In determining the amount of any loss, liability or expense for
which any party is entitled to indemnification under this Agreement, the gross
amount thereof will be reduced by any correlative insurance proceeds or other
third party indemnity or reimbursement proceeds realized or to be realized by
such party (or, in the case of AmPaM, by AmPaM, the Company or any subsidiary of
AmPaM or the Company) and such correlative insurance proceeds or other third
party indemnity or reimbursement proceeds shall be net of any insurance premium
or other incremental cost or expense owed or payable to any third party which
becomes due as a result of such claim. AmPaM shall use commercially reasonable
efforts to pursue any available insurance coverage or other rights of indemnity
or reimbursement from third parties with respect to any such loss, liability or
expense.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) by mutual consent of AmPaM and the Stockholders;
(ii) by the Stockholders, if the transactions contemplated by
this Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by the Company
or the Stockholders prior to or on the Closing Date;
(iii) by AmPaM, if the transactions contemplated by this
Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by AmPaM prior
to or on the Closing Date;
(iv) by the Stockholders, if a material breach or default
shall be made by AmPaM in the observance or in the due and timely
performance of any of the covenants or agreements contained herein
relating to AmPaM, and the curing of such default shall not have been
made (or in the reasonable judgment of such Stockholders cannot be
made) on or before the Closing Date;
(v) by AmPaM, if a material breach or default shall be made by
the Company or the Stockholders in the observance or in the due and
timely performance of any of the covenants or agreements contained
herein relating to the Company or the Stockholders, and the curing of
such default shall not have been made (or in the reasonable judgment of
AmPaM cannot be made) on or before the Closing Date;
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(vi) by the Stockholders, if the conditions set forth in
Section 8 hereof have not been satisfied or waived as of the Closing
Date; or
(vii) by AmPaM, if the conditions set forth in Section 9
hereof have not been satisfied or waived as of the Closing Date.
12.2 PROCEDURE AND EFFECT OF TERMINATION. A determination to terminate
this Agreement by AmPaM pursuant to Section 12.1 shall be valid and effective
only if a written notice of termination, accompanied by a certified copy of
resolutions of the board of directors of AmPaM that evidence the authorization
of the officer of AmPaM to deliver a written notice of termination of this
Agreement pursuant to Section 12.1, is given to the Stockholders in the manner
specified for notices in this Agreement. A determination to terminate this
Agreement by the Stockholders pursuant to Section 12.1 shall be valid and
effective only if a written notice of termination, signed by Stockholders who
would be entitled to receive a majority of the shares of AmPaM Stock specified
in Section I of Annex I to this Agreement if the transactions contemplated
hereby were consummated, is given to AmPaM in the manner specified for notices
in this Agreement. Upon the giving of notice of termination of this Agreement
pursuant to Section 12.1 as specified in the preceding sentence, this Agreement
shall terminate, and the transactions contemplated hereby shall be abandoned,
without further action by any of the parties hereto. Immediately upon any such
termination, AmPaM shall deliver written notice of such termination to the Other
Founding Companies. If this Agreement is terminated as provided in this Section
12, no party hereto shall have any liability or further obligation hereunder to
any other party, except as provided in Section 14 and Section 18.6, provided,
that, the termination of this Agreement will in no way limit any obligation or
liability of any party based on or arising from a breach or default by such
party with respect to any of its representations, warranties, covenants or
agreements contained in this Agreement including, but not limited to, legal and
audit costs and out of pocket expenses that occurred prior to such termination.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The Stockholders will not, without the
prior written consent of AmPaM, for a period of two (2) years following the
Closing Date, for any reason whatsoever, directly or indirectly, for themselves
or on behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, whether paid or unpaid, in any plumbing, piping,
mechanical, heating, ventilation or air conditioning contracting,
installation or services business or operation, whether for
residential, commercial, industrial or governmental customers, or any
ancillary contracting, installation or services business directly
related thereto (such business and operations referred to herein as the
"Plumbing and Mechanical
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Business"), within 100 miles of where the Company or any of its
subsidiaries conducted business within two (2) years prior to the
Closing Date (the "Territory");
(ii) call upon any person who is, at the Closing Date, within
the Territory, an employee of AmPaM or any subsidiary thereof for the
purpose or with the intent of enticing such employee away from or out
of the employ of AmPaM or any subsidiary thereof;
(iii) call upon any person or entity which is, at the Closing
Date, or which has been within three (3) years prior to the Closing
Date, a customer of AmPaM or any subsidiary thereof, of the Company or
of any of the Other Founding Companies for the purpose of soliciting
customers, orders or contracts for any Plumbing and Mechanical Business
in direct competition with AmPaM within the Territory;
(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor in the Plumbing
and Mechanical Business, which candidate, to the actual knowledge of
such Stockholder after due inquiry, was called upon by AmPaM or any
subsidiary thereof or for which, to the actual knowledge of such
Stockholder after due inquiry, AmPaM or any subsidiary thereof made an
acquisition analysis, for the purpose of acquiring such entity; or
(v) disclose to any person, firm, partnership, corporation or
business the names or identities of any person, firm, partnership,
corporation or business which has been a customer of the Company or any
of its subsidiaries within the two (2) years prior to the Closing Date
for any reason or purpose whatsoever except to the extent that the
Company has in the past disclosed such information to the public for
valid business reasons; or
(vi) testify as an expert witness in matters related to the
Plumbing and Mechanical Business for an adverse party to AmPaM, the
Company or any Other Founding Companies in litigation.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Stockholder from acquiring as a passive investment (i) not more
than one percent (1%) of the capital stock of a competing business whose stock
is traded on a national securities exchange, the NASDAQ Stock Market or
over-the-counter, or (ii) not more than five percent (5%) of the capital stock
of a competing business whose stock is not publicly traded if the Board of
Directors of AmPaM consents to such acquisition.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to
AmPaM as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to AmPaM for which it
would have no other adequate remedy, each Stockholder agrees that the foregoing
covenant may be enforced by AmPaM in the event of breach by such Stockholder, by
injunctions and restraining orders.
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13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
Stockholders in light of the activities and business of AmPaM and the
subsidiaries thereof on the date of the execution of this Agreement and the
current plans of AmPaM as described in the Private Placement Memorandum.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against AmPaM or any subsidiary thereof, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by AmPaM of such
covenants. It is specifically agreed that the period of two (2) years stated at
the beginning of this Section 13, during which the agreements and covenants of
each Stockholder made in this Section 13 shall be effective, shall be computed
by excluding from such computation any time during which such Stockholder is
found to be in violation of any provision of this Section 13 as determined by
any of (i) a written agreement to such effect executed and delivered by AmPaM
and such Stockholder, (ii) a determination by an arbitration panel pursuant to
an arbitration conducted pursuant to Section 18.16 hereof or (iii) a
non-appealable judgment of a court of competent jurisdiction. The covenants
contained in Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto. The covenants contained in Section 13
shall have no effect if the transactions contemplated by this Agreement are not
consummated.
13.6 MATERIALITY. The Company and the Stockholders hereby agree that
the covenants contained in this Section 13 are a material and substantial part
of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company, the Other Founding Companies,
and/or AmPaM, such as operational policies, customer lists, and pricing and cost
policies that are valuable, special and unique assets of the Company's, the
Other Founding Companies' and/or AmPaM's respective businesses. The Stockholders
agree that they will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of AmPaM, (b) following the
Closing, such information may be disclosed by the Stockholders as is required in
the course of performing their duties for AmPaM or the Company and (c) to its
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.1; provided, however
that (i) the foregoing
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disclosure prohibition shall not apply in the event that (i) such information
becomes known to the public generally through no fault of the Stockholders, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, that prior to disclosing any information pursuant to
this clause (ii), the Stockholders shall, if possible, give prior written notice
thereof to AmPaM and provide AmPaM with the opportunity to contest such
disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any of the
Stockholders of the provisions of this Section, AmPaM shall be entitled to an
injunction restraining such Stockholders from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
AmPaM from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages. In the event the transactions
contemplated by this Agreement are not consummated, Stockholders shall have none
of the above-mentioned restrictions on their ability to disseminate confidential
information with respect to the Company.
14.2 AMPAM. AmPaM recognizes and acknowledges that it had in the past
and currently has access to certain confidential information of the Company,
such as operational policies, customer lists, and pricing and cost policies that
are valuable, special and unique assets of the Company's business. AmPaM agrees
that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
the Company, (b) to its counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
14.2, (c) to the Other Founding Companies and their representatives pursuant to
Section 7.1(b) of the Other Agreements and (d) to potential purchasers of
securities of AmPaM to the extent necessary or advisable in connection with the
applicable securities laws; provided, however that the foregoing disclosure
prohibition shall not apply in the event that (A) such information becomes known
to the public generally through no fault of AmPaM, (B) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (B), AmPaM
shall, if possible, give prior written notice thereof to the Company and the
Stockholders and provide the Company and the Stockholders with the opportunity
to contest such disclosure, or (C) the disclosing party reasonably believes that
such disclosure is required in connection with the defense of a lawsuit against
the disclosing party. In the event of a breach or threatened breach by AmPaM of
the provisions of this Section 14.2, the Company and the Stockholders shall be
entitled to an injunction restraining AmPaM from disclosing, in whole or in
part, such confidential information. Nothing herein shall be construed as
prohibiting the Company and the Stockholders from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by this Agreement are not consummated
for any reason, AmPaM shall nevertheless remain subject to this Section 14.2,
except that it shall not be permitted to make any disclosures otherwise than
pursuant to clause (A), (B) or (C) above.
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14.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Sections 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14
shall survive the termination of this Agreement for a period of five years from
the Closing Date.
14.5 RETURN OF INFORMATION. If the transactions contemplated by this
Agreement are not consummated, AmPaM will return or destroy all confidential
information regarding the Company.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS RELATING TO AMPAM STOCK AND AMPAM NOTES. For
a period of two years from the Closing Date or, in the event that the Company
completes an IPO, for a period through the second anniversary of the date of the
closing of such IPO (the "Restricted Period"), no Stockholder shall (i) sell,
assign, exchange, transfer, pledge, or otherwise dispose of any shares of AmPaM
Stock or AmPaM Notes received by the Stockholders pursuant to this Agreement or
any securities convertible into, exchangeable or exercisable for any shares of
AmPaM Stock or AmPaM Notes received by such Stockholder pursuant to this
Agreement, (ii) grant any option to purchase, or otherwise enter into any
contract to sell, assign, transfer, pledge or otherwise dispose of, any shares
of AmPaM Stock or AmPaM Notes received by such Stockholder pursuant to this
Agreement, or (iii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the AmPaM Stock or AmPaM Notes, whether any
such swap or transaction is to be settled by delivery of shares of AmPaM Stock
or AmPaM Notes or other securities, by the delivery or payment of cash or
otherwise, except, in the case of clauses (i), (ii) or (iii) above, (A) as
otherwise agreed by AmPaM, (B) for the sale of shares of AmPaM Stock, and
entering into agreements relating to the sale of shares of AmPaM Stock, pursuant
to Section 17 hereof, (C) for transfers to (I) immediate family members of such
Stockholder who agree with AmPaM in writing to be bound by the restrictions set
forth in this Section 15.1, (II) trusts, limited partnerships or other estate
planning entities for the benefit of such Stockholder or family members of such
Stockholder which have agreed with AmPaM in writing, through action taken by the
trustees, partners or other persons having authority to bind the trust, limited
partnership or other estate planning entity, to be bound by the restrictions set
forth in this Section 15.1, (III) any charitable organization that qualifies for
receipt of charitable contributions under Section 170(c) of the Code which
agrees with AmPaM in writing to be bound by the restrictions set forth in this
Section 15.1, (D) for transfers of AmPaM Stock or AmPaM Notes to AmPaM pursuant
to Section 11.5(d), (E) for transfers to another Stockholder, to another person
or entity who receives shares of AmPaM Stock or AmPaM Notes or AmPaM Series A
Preferred Stock pursuant to the Other Agreements or to Sterling City Capital LLC
or any of its Affiliates provided that (1) such transaction is exempt from the
registration requirements of the 1933 Act as evidenced by the delivery to AmPaM
of an opinion of counsel in form and substance reasonably satisfactory to AmPaM
and
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(2) any such transferee agrees in writing to be bound by the restrictions set
forth in this Section 15.1, (F) transfers of shares of AmPaM Notes, shares of
AmPaM Stock, or grants of options to purchase shares of AmPaM Stock, by such
Stockholder to employees of the Company of up to an aggregate of 15% of the
shares of AmPaM Stock received by such Stockholder pursuant to this Agreement
provided that (1) any such transaction is exempt from the registration
requirements of the 1933 Act as evidenced by the delivery to AmPaM of an opinion
of counsel in form and substance reasonably satisfactory to AmPaM and (2) any
such employee agrees with AmPaM in writing to be bound by the restrictions set
forth in this Section 15.1 or (G) the sale by such Stockholder in an IPO of
shares of AmPaM Stock representing not more than 10% of the Aggregate
Consideration in cash; provided, however, that in no circumstance will a
Stockholder be entitled to sell shares of AmPaM Stock in an IPO to the extent
that the sale of such shares by such Stockholder would result in such
Stockholder receiving in excess of 45% of the Aggregate Consideration in cash;
and, provided further, if AmPaM is advised in writing in good faith by any
managing underwriter of an underwritten offering of the securities being offered
pursuant to any registration statement under Section 17.1 that the number of
shares to be sold by persons other than AmPaM is greater than the number of such
shares which can be offered without adversely affecting the success of the
offering, AmPaM may reduce pro rata (among the Stockholders and all other
selling security holders in the offering) the number of shares offered for the
accounts of such persons (based upon the number of shares held by such person)
to a number deemed satisfactory by such managing underwriter. During the
Restricted Period, the certificates evidencing the AmPaM Stock or AmPaM Notes
delivered to the Stockholders pursuant to Section 3 of this Agreement will bear
a legend substantially in the form set forth below:
THE [SHARES/NOTES] REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE
TERMS OF THE ACQUISITION AGREEMENT PURSUANT TO WHICH SUCH SHARES WERE ISSUED,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, PLEDGE OR OTHER DISPOSITION PRIOR TO EXPIRATION
OF THE RESTRICTED PERIOD REFERRED TO IN THE ACQUISITION AGREEMENT EXCEPT IN
ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT. SUCH RESTRICTIONS ON TRANSFER ARE
SET FORTH IN AN ACQUISITION AGREEMENT, A COPY OF WHICH IS MAINTAINED AT THE
PRINCIPAL OFFICES OF THE ISSUER. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 TRANSFER RESTRICTIONS RELATING TO ADDITIONAL CONSIDERATION. No
Stockholder shall (i) sell, assign, exchange, transfer, pledge, or otherwise
dispose of any right to receive any consideration pursuant to Section II of
Annex I to this Agreement (the "Additional Consideration Right") or any
securities convertible into, exchangeable or exercisable for any Additional
Consideration Right, (ii) grant any option to purchase, or otherwise enter into
any contract to sell, assign, transfer, pledge or otherwise dispose of, any
Additional Consideration Right, or (iii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly
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or indirectly, the economic consequence of ownership of any Additional
Consideration Right, whether any such swap or transaction is to be settled by
delivery of shares of AmPaM Stock or other securities, by the delivery or
payment of cash or otherwise.
16. FEDERAL SECURITIES ACT REPRESENTATIONS
16.1 COMPLIANCE WITH LAW. Each Stockholder acknowledges that the shares
of AmPaM Stock, the Additional Consideration Right and any AmPaM Notes to be
delivered to such Stockholder pursuant to this Agreement have not been and will
not be registered under the 1933 Act (except as provided in Section 17 hereof)
and therefore may not be sold, assigned, exchanged, transferred, pledged or
otherwise disposed of without compliance with the 1933 Act which, among other
matters, would require registration under the 1933 Act unless exemption from the
registration requirements is available for such transaction. The AmPaM Stock,
the Additional Consideration Right and any AmPaM Notes to be acquired by each
Stockholder pursuant to this Agreement is being acquired solely for such
Stockholder's own account, for investment purposes only, and with no present
intention of selling, assigning, exchanging, transferring, pledging, or
otherwise disposing of it. Each Stockholder covenants, warrants and represents
that neither the shares of AmPaM Stock, the Additional Consideration Right nor
any AmPaM Notes issued to such Stockholder will be offered, sold, assigned,
exchanged, pledged, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the 1933 Act and the rules
and regulations of the SEC. All certificates representing the AmPaM Stock shall
bear the following legend in addition to the legend required under Section 15 of
this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each Stockholder is able to bear
the economic risk of an investment in the AmPaM Stock and AmPaM Notes to be
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment. Each Stockholder has substantial knowledge and experience in
making investment decisions of this type (or is relying on qualified purchaser
representatives with such knowledge and experience in making this decision), and
is capable, either individually or with such purchaser representatives, of
evaluating the merits and risks of this investment. Each Stockholder has had an
adequate opportunity to ask questions and receive answers from the officers of
AmPaM concerning any and all matters relating to the transactions described
herein including, without limitation, the background and experience of the
current and proposed officers and directors of AmPaM, the plans for the
operations of the business of AmPaM, the business, operations and financial
condition of the Founding Companies other than the Company, and any plans for
additional acquisitions. Each Stockholder has asked any and all questions of the
nature described in the preceding sentence and all questions have been answered
to such Stockholder's satisfaction. Except as set forth on Schedule 16.2, each
Stockholder is an "accredited investor" as defined in Rule 501(a) of the 1933
Act. Neither the foregoing nor any investigation made by the Stockholders
referred to above shall in any way affect the representations, warranties,
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covenants and agreements of AmPaM made herein except to the extent that AmPaM is
relying upon the representations of the Stockholders in Section 16.1 and in this
Section 16.2 for purposes of AmPaM's representations and warranties in Sections
6.9, 6.11, 6.15 and 6.17 hereof as specified therein.
16.3 RELIANCE BY AMPAM. Each Stockholder acknowledges that AmPaM in
relying upon the representations and covenants of such Stockholder set forth in
Section 16.1 and Section 16.2 for purposes of compliance by AmPaM with Federal
and state securities laws related to the issuance of AmPaM Stock pursuant to
this Agreement and the Other Agreements.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. Whenever AmPaM proposes to register
any AmPaM Stock for its own or other's account under the 1933 Act for a public
offering, other than (i) any shelf or other registration of shares to be used as
consideration for acquisitions of additional businesses by AmPaM and (ii)
registrations relating to employee benefit plans, AmPaM shall give each of the
Stockholders prompt written notice of its intent to do so. Upon the written
request of any of the Stockholders given within 15 calendar days after receipt
of such notice, notwithstanding the provisions of Section 15 (except as
specified below with respect to an IPO), AmPaM shall cause to be included in
such registration all of the AmPaM Stock issued to such Stockholders pursuant to
this Agreement (including any stock issued as or issuable upon the conversion or
exchange of any convertible security, warrant, right or other security which is
issued by AmPaM as a stock split, dividend or other distribution with respect
to, or in exchange for, or in replacement of such AmPaM Stock) which any such
Stockholder requests, other than shares of AmPaM Stock which may then be
immediately sold under Rule 144(k) (or any similar or successor provision)
promulgated under the 1933 Act, and other than shares of AmPaM Stock that have
been theretofore sold by the Stockholder in accordance with the 1933 Act,
provided that AmPaM shall have the right to reduce pro rata the number of shares
of each selling Stockholder included in such registration to the extent that
inclusion of such shares would, in the written opinion of tax counsel to AmPaM
or its independent auditors, jeopardize the status of the transactions
contemplated hereby and by the Private Placement Memorandum as a tax-free
organization under Section 351 of the Code; provided, however, that with respect
to a proposal by AmPaM to register AmPaM Stock under the 1933 Act in connection
with an IPO, no Stockholder shall be permitted pursuant to this Section 17.1 to
have included in such registration more shares of AmPaM Stock than permitted to
be sold by such Stockholder pursuant to Section 15.1. In addition, if AmPaM is
advised in writing in good faith by any managing underwriter of an underwritten
offering of the securities being offered pursuant to any registration statement
under this Section 17.1 that the number of shares to be sold by persons other
than AmPaM is greater than the number of such shares which can be offered
without adversely affecting the success of the offering, AmPaM may reduce pro
rata (among the Stockholders and all other selling security holders in the
offering) the number of shares offered for the accounts of such persons (based
upon the number of shares held by such person) to a number deemed satisfactory
by such managing underwriter. If any Stockholder disapproves of the terms of the
underwriting, that Stockholder may elect to withdraw therefrom by written notice
to AmPaM and the managing underwriter. That
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Stockholder's shares of AmPaM Stock so withdrawn shall also be withdrawn from
registration; provided, however, that, if by the withdrawal of such shares a
greater number of shares of AmPaM Stock held by other Stockholders may be
included in such registration, then AmPaM shall offer to all other Stockholders
of AmPaM the right to include additional shares in the same proportion used in
effecting the above limitations. AmPaM shall not, for a period of two years
following the Closing Date, grant to any other person any rights to cause AmPaM
to register any securities in priority over, or in precedent to, the rights
granted to the Stockholders hereunder and to the stockholders of the Other
Founding Companies pursuant to Section 17 of the Other Agreements.
17.2 REGISTRATION PROCEDURES. Whenever AmPaM is required to register
shares of AmPaM Stock pursuant to Section 17.1, AmPaM will, as expeditiously as
possible:
(i) Prepare and file with the SEC a registration statement
with respect to such shares and use its best efforts to cause such
registration statement to become effective (provided that before filing
a registration statement or prospectus or any amendments or supplements
or term sheets thereto, AmPaM will furnish a representative of the
Stockholders with copies of all such documents proposed to be filed) as
promptly as practical;
(ii) Notify the Stockholders of any stop order issued or
threatened by the SEC and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered;
(iii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 120 days, cause the
prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the 1933
Act; and comply with the provisions of the 1933 Act applicable to it
with respect to the disposition of all securities covered by such
registration statement during the applicable period in accordance with
the intended methods of disposition by the sellers thereof set forth in
such registration statement or supplement to the prospectus;
(iv) Furnish to each Stockholder who so requests such number
of copies of such registration statement, each amendment and supplement
thereto and the prospectus included in such registration statement
(including each preliminary prospectus and any term sheet associated
therewith), and such other documents as such Stockholder may reasonably
request in order to facilitate the disposition of the relevant shares;
(v) Make "generally available to its security holders" (within
the meaning of Rule 158) an earnings statement satisfying the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder no
later than 90 days after the end of the 12-month period beginning with
the first day of AmPaM's first fiscal quarter commencing after the
effective date of the registration statement;
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(vi) Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement at
the earliest possible moment;
(vii) If requested by the managing underwriter or
underwriters, if any, or any participating Stockholder, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters or any
participating Stockholder, as the case may be, reasonably requests to
be included therein, including, without limitation, information with
respect to the number of shares of AmPaM Stock being sold by
participating Stockholders to any underwriter or underwriters, the
purchase price being paid therefor by such underwriter or underwriters
and with respect to any other terms of an underwritten offering of the
shares of AmPaM Stock to be sold in such offering, and promptly make
all required filings of such prospectus by supplement or post-effective
amendment;
(viii) Make available for inspection by participating
Stockholders, any underwriter participating in any disposition pursuant
to such registration statement, and the counsel retained by the
participating Stockholders, counsel for the underwriters and any
accountant or other agent retained by participating Stockholders or any
such underwriter (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of AmPaM
(the "Records"), as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause AmPaM's
officers, directors and employees to supply all information reasonably
requested by any such Inspectors in connection with such registration
statement; provided, that records which AmPaM determines, in good
faith, to be confidential and which AmPaM notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or (ii) the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction after delivery of
sufficient notice to AmPaM to enable AmPaM to contest such subpoena or
order;
(ix) Take all other steps reasonably necessary to effect the
registration of the shares of AmPaM Stock contemplated hereby;
(x) Use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested by
the Stockholders, and to keep such registration or qualification
effective during the period such registration statement is required to
be kept effective, provided that AmPaM shall not be required to become
subject to taxation, to qualify generally to do business or to file a
general consent to service of process in any such states or
jurisdictions;
(xi) Cause all such shares of AmPaM Stock to be listed or
included not later than the date of the first sale of shares of AmPaM
Stock under such registration statement on any
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securities exchanges or trading systems on which similar securities
issued by AmPaM are then listed or included; and
(xii) Notify each Stockholder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within
the period that AmPaM is required to keep the registration statement
effective of the happening of any event as a result of which the
prospectus included in such registration statement (as then in effect),
together with any associated term sheet, contains an untrue statement
of a material fact or omits to state any fact required to be stated
therein or necessary to make the statements therein (in the case of the
prospectus or any preliminary prospectus, in light of the circumstances
under which they were made) not misleading, and, at the request of such
Stockholder, AmPaM promptly will prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of
the covered shares, such prospectus will not contain an untrue
statement of material fact or omit to state any fact required to be
stated therein or necessary to make the statements therein (in the case
of the prospectus or any preliminary prospectus, in light of the
circumstances under which they were made) not misleading.
All expenses incurred in connection with the registration under this
Article 17 and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printer and
accounting fees, but excluding underwriting commissions and discounts), shall be
borne by AmPaM.
17.3 INDEMNIFICATION.
(a) In connection with any registration under Section 17.1,
AmPaM shall indemnify, to the extent permitted by law, each selling Stockholder
(an "Indemnified Party") against all losses, claims, damages, liabilities and
expenses arising out of or resulting from any untrue or alleged untrue statement
of material fact contained or incorporated by reference in any registration
statement, prospectus or preliminary prospectus or associated term sheet or any
omission or alleged omission to state or incorporated by reference therein a
material fact required to be stated or incorporated by reference therein or
necessary to make the statements therein not misleading except insofar as the
same are caused by or contained in or omitted from any information furnished in
writing to AmPaM by such Indemnified Party expressly for use therein or by any
Indemnified Parties' failure to deliver a copy of the registration statement or
prospectus or any amendment or supplements thereto after AmPaM has furnished
such Indemnified Party with a sufficient number of copies of the same.
(b) In connection with any registration under Section 17.1,
each selling Stockholder shall furnish to AmPaM in writing such information
concerning the Stockholder and his or her proposed offering of shares as is
reasonably requested by AmPaM for use in any such registration statement or
prospectus and will indemnify, to the extent permitted by law, AmPaM, its
directors and officers and each person who controls AmPaM (within the meaning of
the 1933 Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of a material fact or any
omission or alleged omission to state therein a material fact required to be
stated in the registration statement or prospectus or any amendment thereof or
supplement thereto or necessary to make the statements therein not misleading,
but only to the extent that such untrue or alleged
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untrue statement or omission or alleged omission is contained in or omitted from
information so furnished in writing to AmPaM by such Stockholder expressly for
use in the registration statement. Notwithstanding the foregoing, the liability
of a Stockholder under this Section 17.3 shall be limited to an amount equal to
the net proceeds actually received by such Stockholder from the sale of the
relevant shares covered by the registration statement.
(c) Any person entitled to indemnification hereunder will (i)
give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) unless in such indemnified parties' reasonable
judgment, a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. Any failure to give prompt notice shall deprive a party of
its right to indemnification hereunder only to the extent that such failure
shall have adversely affected the indemnifying party. If the defense of any
claim is assumed, the indemnifying party will not be subject to any liability
for any settlement made without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party that is not entitled or elects
not, to assume the defense of a claim, will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party, a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
17.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 17.1 covering an underwritten registered offering, (i) each
participating Stockholder shall execute and deliver to AmPaM a written power of
attorney instrument that (A) appoints an officer of AmPaM as such Stockholder's
attorney-in-fact for purposes of executing and delivering an underwriting
agreement among AmPaM, the underwriters named therein and such Stockholder
specifying the terms and conditions applicable to the sale of AmPaM Stock of
such Stockholder in such offering and (B) otherwise is in such form and
containing such provisions as are customary in the securities business for such
an arrangement in connection with an underwritten registered offering in which
one or more stockholders of the issuer are participants, including a provision
that authorizes the attorney-in-fact appointed by such Stockholder to execute
and deliver such an underwriting agreement in the event that the net price per
share to be received by such Stockholder from the sale of the shares of AmPaM
Stock to be sold in such offering is not less than a price specified in such
instrument and (iii) AmPaM and each participating Stockholder agree to enter
into a written agreement with the managing underwriters in such form and
containing such provisions as are customary in the securities business for such
an arrangement between such managing underwriters and companies of AmPaM's size
and investment stature, including indemnification; provided, however, that (A)
such Stockholder shall be exempt and excluded from any indemnification of the
managing underwriters other than with respect to information provided by such
Stockholder with respect to such Stockholder to AmPaM or the managing
underwriters
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specifically for inclusion in any such registration statement and (B) such
Stockholder shall not be obligated to enter into such an underwriting agreement
in the event that the net price per share to be received by such Stockholder
from the sale of shares of AmPaM Stock to be sold in such offering is less than
the floor price specified in the power of attorney instrument executed and
delivered to AmPaM pursuant to clause (i) above.
17.5 TRANSFER OF RIGHTS. The right to cause AmPaM to register shares of
AmPaM Stock under this Agreement may be assigned to a transferee or assignee of
any Stockholder to the extent that such transferee or assignee is a member of
the immediate family of a Stockholder, a trust, limited partnership or other
estate planning entity for the benefit of any such persons or a charitable
organization that qualifies for receipt of charitable contributions under
Section 170(c) of the Code.
17.6 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC that may permit the sale of AmPaM
stock to the public without registration, following an IPO AmPaM agrees to use
its reasonable efforts, from and after the completion of an IPO, to:
(i) make and keep public information regarding AmPaM available
as those terms are understood and defined in Rule 144 under the 1933
Act beginning 90 days following the effective date of a registration
statement relating to an IPO;
(ii) file with the SEC in a timely manner all reports and
other documents required of AmPaM under the 1933 Act and the 1934 Act
at any time after it has become subject to such reporting requirements;
and
(iii) so long as a Stockholder owns any restricted AmPaM
Stock, furnish to each Stockholder forthwith upon written request a
written statement by AmPaM as to its compliance with the current public
information requirements of Rule 144 (at any time from and after 90
days following the effective date of a registration statement relating
to an IPO), and of the 1933 Act and the 1934 Act (any time after it has
become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of AmPaM, and such other reports and
documents so filed as a Stockholder may reasonably request in availing
itself of any rule or regulation of the SEC allowing a Stockholder to
sell any such shares without registration.
18. REDEMPTION OF AMPAM STOCK
18.1 REDEMPTION TRIGGER. In the event that, within three years of the
Closing Date, (i) AmPaM has not consummated an IPO and (ii) any Stockholder has
not received cash (including proceeds from the public or private sale of AmPaM
Stock received as consideration hereunder and the receipt of principal payments,
if any, made with respect to AmPaM Notes held by such Stockholder) equal to or
exceeding 50% of the Aggregate Consideration on or prior to the third
anniversary of the Closing Date, such Stockholder shall have the right (the "Put
Right"), but not the
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obligation, commencing on the third anniversary date of the Closing Date to
require AmPaM to purchase a number of shares of AmPaM Stock then owned by such
Stockholder, subject to the limitations set forth in Section 18.2 below. The
purchase price for such redemption shall be $13.00 per share, such price to be
subject to appropriate adjustment to reflect any reclassification, stock
dividend, subdivision, split-up or combination of shares of AmPaM Stock after
the date hereof.
18.2 MINIMUM REDEMPTION; LIMITATIONS. If the events specified in
Section 18.1(i) and 18.1(ii), with Section 18.1(ii) being determined on an
individual Stockholder basis, have not occurred within the time specified, AmPaM
shall be obligated to purchase from each eligible Stockholder no less than 10%
of the AmPaM Stock held by such Stockholder annually; provided, however, that
the Stockholders shall not be entitled to exercise their Put Rights if and to
the extent the Company has not achieved the Target Net Income (as defined in
Annex I hereto) for the year preceding the year in which a Stockholder seeks to
exercise his Put Right. The redemptions will be funded by internal cash flows or
alternative financing arrangements but AmPaM's obligation to make any redemption
pursuant to this Section 18 will be subject to the covenants and restrictions
contained in AmPaM's then existing private or public debt or equity instruments.
18.3 NOTICE; EXERCISE. The Stockholders may exercise their Put Right by
giving written notice (the "Put Notice") to AmPaM within thirty (30) days of the
third anniversary of the execution hereof. If any Stockholder does not provide
AmPaM with a Put Notice within such thirty-day period, the Put Right applicable
to such Stockholder shall expire. The date for closing the sale of any shares of
AmPaM Stock pursuant to a proper exercise of a Put Right shall in no event be
earlier than 90 days after the date AmPaM receives the Put Notice. Any such
closing shall be at such time of day and place as shall be mutually agreed
between such holder and AmPaM. At such closing AmPaM shall make payment for the
AmPaM Stock to be repurchased by wire transfer of immediately available funds to
a bank account designated by such Stockholder for such purpose and such
Stockholder shall deliver to AmPaM certificates, duly endorsed for transfer,
representing the shares of AmPaM Stock to be purchased and sold pursuant to the
exercise of such Put Right.
18.4 ADDITIONAL REDEMPTIONS. In the event AmPaM has not consummated an
IPO and notwithstanding the foregoing, to the extent the Stockholders who have
received greater than 50% of their Aggregate Consideration in cash wish to
tender AmPaM Stock to AmPaM for purchase, AmPaM will use its commercially
reasonable efforts to continue to repurchase up to 10% of the AmPaM Stock held
by such Stockholder annually.
18.5 TERMINATION OF REDEMPTION OBLIGATION. Put Rights with respect to
any individual Stockholder will terminate upon receipt by such Stockholder of
50% of his Aggregate Consideration in cash; such termination will not, however,
limit such Stockholders ability to participate in the additional redemptions
provided in Section 18.4. Notwithstanding the foregoing, all of AmPaM's
redemption obligations contained in this Section 18 shall terminate on the
earlier to occur of (i) an IPO, (ii) any sale of all or substantially all of
AmPaM's assets in one transaction or series of transactions, (iii) any merger or
consolidation which involves AmPaM and in which AmPaM is not the surviving
entity or (iv) any transaction after which the shares of AmPaM Common Stock, if
any,
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which are then held by persons other than the holders of AmPaM Common Stock
as of the Closing Date constitute 50% or more of AmPaM Common Stock outstanding
as of the date of the consummation of such transaction.
19. GENERAL
19.1 COOPERATION. The Company, Stockholders and AmPaM shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The Company will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the Company cooperate with
AmPaM on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law and except as
provided in Section 17.5) and shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of AmPaM and the Company, and the
heirs, successors and legal representatives of the Stockholders.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company and AmPaM and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the Stockholders, the Company and AmPaM, acting
through their respective officers or trustees, duly authorized by their
respective Boards of Directors. Any disclosure made on any Schedule delivered
pursuant hereto shall be deemed to have been disclosed for purposes of any other
Schedule required hereby, provided that the Company shall make a good faith
effort to cross reference disclosure, as necessary or advisable, between related
Schedules.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument. A telecopied
facsimile of an executed counterpart of this Agreement shall be sufficient to
evidence the binding agreement of each party to the terms hereof. However, each
party agrees to return to the other parties an original, duly executed
counterpart of this Agreement promptly after delivery of a telecopied facsimile
thereof.
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19.5 BROKERS AND AGENT. Except as disclosed on Schedule 18.5, each
party hereto represents and warrants that it employed no broker or agent in
connection with this transaction and agrees to indemnify the other parties
hereto against all loss, cost, damages or expense arising out of claims for fees
or commission of brokers employed or alleged to have been employed by such
indemnifying party.
19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, AmPaM will pay the reasonable fees, expenses and
disbursements of AmPaM and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto, including all costs and expenses incurred in the performance
and compliance with all conditions to be performed by AmPaM under this
Agreement, including the fees and expenses of Arthur Andersen LLP, Andrews &
Kurth L.L.P., and any other person or entity retained by AmPaM, and the costs of
preparing the Private Placement Memorandum incurred in connection with the
subject matter of this Agreement and any amendments thereto. In addition,
whether or not the transactions contemplated herein shall be consummated, AmPaM
will pay the reasonable fees and expenses of Bracewell & Patterson LLP incurred
on behalf of the Company and the Stockholders in connection with the subject
matter of this Agreement. Whether or not the transactions herein contemplated
shall be consummated, the Company will pay all of its costs and expenses
incurred on behalf of the Company and the Stockholders in connection with the
subject matter of this Agreement except that (i) the Company shall not be
required to pay any of the costs, fees and expenses specified above as to which
AmPaM is responsible for the payment thereof and (ii) neither the Company nor
the Stockholders shall be responsible for the payment of the costs, fees and
expenses incurred by or on behalf of AmPaM. Whether or not the transactions
herein contemplated shall be consummated, AmPaM shall reimburse Sterling City
Capital, LLC (or any person or entity which is an Affiliate thereof) for any of
the foregoing fees, expenses and disbursements paid by Sterling City Capital,
LLC (or any person or entity which is an Affiliate thereof) and shall repay
Sterling City Capital, LLC (or any person or entity which is an Affiliate
thereof) for any loans or advances made by Sterling City Capital, LLC (or any
person or entity which is an Affiliate thereof) for the purpose of providing
AmPaM funds to pay any such fees, expenses and disbursements, provided that such
reimbursement and loan repayment obligation shall be limited to the foregoing
fees, expenses, and disbursements which are out-of-pocket expenses of AmPaM,
Sterling City Capital, LLC or any person or entity which is an Affiliate
thereof. Sterling City Capital, LLC shall be reimbursed by AmPaM in the form of
AmPaM Notes. AmPaM retains the right, within a reasonable period following the
Closing Date, to conduct an audit of the expenses for which Sterling City
Capital, LLC is reimbursed. Each Stockholder shall pay all sales, use, transfer,
real property transfer, recording, gains, stock transfer and other similar taxes
and fees ("Transfer Taxes") imposed in connection with the purchase and sale of
the Company Stock, other than Transfer Taxes, if any, imposed by the State of
Delaware. Each Stockholder shall file all necessary documentation and Returns
with respect to such Transfer Taxes. In addition, each Stockholder acknowledges
that he, and not the Company or AmPaM, will pay all Taxes due by him upon
receipt of the consideration payable pursuant to Section 1 hereof. The
Stockholders acknowledge that the risks of the transactions contemplated hereby
include Tax risks, with respect to which the
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Stockholders are relying substantially on the opinion contemplated by Section
8.12 hereof and representations by AmPaM in this Agreement.
19.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person or via a nationally recognized courier service to an officer or agent
of such party.
(a) If to AmPaM addressed to it at:
American Plumbing & Mechanical, Inc.
515 Post Oak Blvd., Suite 450
Houston, Texas 77027
Attention: Chief Executive Officer
with copies to:
Thomas P. Mason
Andrews & Kurth L.L.P.
4200 Chase Tower
Houston, Texas 77002
(b) If to the Stockholders, addressed to them at their addresses
set forth on the signature pages hereto, with copies to:
Terrence A. Mire
Cohen, Todd, Kite & Stanford, LLC
16th Floor, 525 Vine Street
Cincinnati, Ohio 45202-3124
(c) If to the Company, addressed to it at:
Scott W. Teepe, Sr.
Teepe's River City Mechanical, Inc.
2105 Schapelle
Cincinnati, Ohio 45240
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
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19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Texas, excluding any conflicts of law, rule or
principle that might refer same to the laws of another jurisdiction.
19.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties until the respective Expiration
Dates referred to herein with respect thereto or, if no Expiration Date is
applicable with respect thereto, until the expiration of all applicable statute
of limitations periods.
19.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.11 TIME. Time is of the essence with respect to this Agreement.
19.12 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.
19.13 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
19.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of AmPaM, the Company and Stockholders who would receive a
majority of the Aggregate Consideration specified in Section I of Annex I to
this Agreement if the transactions contemplated hereby were consummated. Any
amendment or waiver effected in accordance with this Section 19.15 shall be
binding upon each of the parties hereto, any other person receiving AmPaM Stock
in connection with the purchase and sale of the Company Stock and each future
holder of such AmPaM Stock. Any consent of the Stockholders who would receive a
majority of the Aggregate Consideration pursuant
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to Section I of Annex I of this Agreement if the transactions contemplated
hereby were consummated shall be deemed to be the consent of the Stockholders
for purposes of provisions of this Agreement as to which a consent of the
Stockholders may be requested or required.
19.16 MEDIATION AND ARBITRATION. If a dispute arises out of or relates
to this Agreement, or the breach thereof, and if said dispute cannot be settled
through direct discussions, the parties agree to first endeavor to settle the
dispute in an amicable manner by mediation administered by the American
Arbitration Association under its then prevailing Commercial Mediation Rules,
before resorting to arbitration. Thereafter, any unresolved controversy or claim
arising out of or relating to this Agreement, or the breach thereof, shall be
settled by arbitration administered by the American Arbitration Association in
accordance with its then prevailing Commercial Arbitration Rules. The
enforcement, interpretation and procedural and substantive effect of the
obligation to arbitrate created by this Section 19.16 shall be governed by the
Federal Arbitration Act as amended from time to time, 9 U.S.C. Section 1 et seq.
The parties hereby disclaim any intention to have the substantive or procedural
law of any state or other jurisdiction, other than the law of the United States
as embodied in the Federal Arbitration Act, applied to such obligation. Any such
mediation or arbitration proceeding will be conducted in Houston, Texas.
19.17 INFORMATION PROVIDED FOR PRIVATE PLACEMENT MEMORANDUM. For
purposes of this Agreement, the information provided by the Company in writing
specifically for inclusion in the Private Placement Memorandum shall include
solely (i) the Financial Statements (in the form that they appear in the Private
Placement Memorandum), (ii) any financial statements provided to AmPaM pursuant
to Section 7.9, (iii) the description of the Company contained in the Private
Placement Memorandum under the caption "The Company", (iv) the description of
the Company's results of operations and its liquidity and capital resources, if
any, contained in the Private Placement Memorandum under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and (v) the description, if any, of matters related to the Company
contained in the Private Placement Memorandum under the caption "Certain
Transactions Transactions involving Certain Officers, Directors and
Stockholders". For purposes of this Agreement, the information provided by a
Stockholder in writing specifically for inclusion in the Private Placement
Memorandum shall include only (i) the description, if any, of matters related to
such Stockholder contained in the Private Placement Memorandum under the caption
"Certain Transactions - Transactions involving Certain Officers, Directors and
Stockholders" and (ii) the biographical description of such Stockholder, if any,
contained in the Private Placement Memorandum under the caption "Management."
19.18 EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective upon (i) the execution and delivery of this Agreement by all of the
parties hereto and (ii) the delivery to AmPaM of each Employment Agreement
attached hereto as Annex VI-1 and Annex VI-2 executed by each of the Company,
the employees named therein and AmPaM.
64
<PAGE> 73
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AMERICAN PLUMBING & MECHANICAL, INC.
By: /s/ DAVID BAGGETT
---------------------------------
Name: David Baggett
-------------------------------
Title: Chief Financial Officer
------------------------------
TEEPE'S RIVER CITY MECHANICAL, INC.
By: /s/ STEVEN M. TEEPE
---------------------------------
Steven M. Teepe
President
65
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<PAGE> 74
STOCKHOLDERS: SPOUSES (WITHOUT PERSONAL LIABILITY AND
SOLELY TO ACKNOWLEDGE THE SALE OF THE
COMPANY STOCK BY THE STOCKHOLDER):
/s/ SCOTT W. TEEPE, SR. /s/ HELYN S. TEEPE
- -------------------------------- --------------------------------
Scott W. Teepe, Sr. Helyn S. Teepe
2928 Timberview Dr.
Cincinnati, Ohio 45211
/s/ STEVEN M. TEEPE /s/ LYNDA TEEPE
- -------------------------------- --------------------------------
Steven M. Teepe Lynda Teepe
7160 Eagles Wing Dr.
West Chester, Ohio 45069
66
<PAGE> 1
EXHIBIT 10.12
Execution Copy
- --------------------------------------------------------------------------------
ACQUISITION AGREEMENT
dated as of the 11th day of February, 1999
by and among
AMERICAN PLUMBING & MECHANICAL, INC.
KEITH RIGGS PLUMBING, INC.
and
all of the STOCKHOLDERS of KEITH RIGGS PLUMBING, INC.
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS .........................................................................................................1
1. ACQUISITION OF STOCK.....................................................................................5
1.1 Acquisition.....................................................................................5
1.2 Consideration...................................................................................5
1.3 Certain Information With Respect to the Capital Stock of the Company
and AmPaM.......................................................................................5
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY...........................................................5
2.1 Board of Directors..............................................................................5
2.2 Officers........................................................................................5
3. DELIVERY OF CONSIDERATION................................................................................6
3.1 Stockholders' Consideration.....................................................................6
3.2 Stockholders' Deliveries........................................................................6
4. CLOSING..................................................................................................6
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................6
5.1 Due Organization................................................................................7
5.2 Authorization...................................................................................7
5.3 Capital Stock of the Company....................................................................7
5.4 Transactions in Capital Stock...................................................................8
5.5 No Bonus Shares.................................................................................8
5.6 Subsidiaries; Ownership in Other Entities.......................................................8
5.7 Predecessor Status; etc.........................................................................8
5.8 Spin-off by the Company.........................................................................8
5.9 Financial Statements............................................................................8
5.10 Liabilities and Obligations.....................................................................9
5.11 Accounts and Notes Receivable..................................................................10
5.12 Licenses; Intellectual Property................................................................10
5.13 Environmental Matters..........................................................................11
5.14 Personal Property..............................................................................13
5.15 Significant Customers; Material Contracts and Commitments......................................13
5.16 Real Property..................................................................................14
5.17 Insurance......................................................................................14
5.18 Compensation; Employment Agreements; Labor Matters.............................................15
5.19 Employee Plans.................................................................................15
5.20 Compliance with ERISA..........................................................................16
5.21 Conformity with Law; Litigation................................................................17
</TABLE>
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<TABLE>
<S> <C>
5.22 Taxes..........................................................................................17
5.23 No Violations; No Consent Required, Etc........................................................18
5.24 Government Contracts...........................................................................19
5.25 Absence of Changes.............................................................................19
5.26 Deposit Accounts; Powers of Attorney...........................................................21
5.27 Validity of Obligations........................................................................21
5.28 Relations with Governments.....................................................................21
5.29 Disclosure.....................................................................................21
5.30 No Warranties or Insurance.....................................................................21
5.31 Interest in Customers and Suppliers and Related Party Transactions.............................22
5.32 Private Placement Memorandum...................................................................22
5.33 Authority; Ownership...........................................................................22
5.34 Preemptive Rights..............................................................................23
5.35 No Commitment to Dispose of AmPaM Stock........................................................23
5.36 Disclosure.....................................................................................23
6. REPRESENTATIONS OF AMPAM................................................................................23
6.1 Due Organization...............................................................................24
6.2 Authorization..................................................................................24
6.3 Capital Stock of AmPaM.........................................................................24
6.4 Transactions in Capital Stock..................................................................24
6.5 Subsidiaries...................................................................................25
6.6 Financial Statements...........................................................................25
6.7 Liabilities and Obligations....................................................................25
6.8 Conformity with Law; Litigation................................................................25
6.9 No Violations..................................................................................26
6.10 Validity of Obligations........................................................................27
6.11 AmPaM Stock....................................................................................27
6.12 AmPaM Notes....................................................................................28
6.13 No Side Agreements.............................................................................28
6.14 Business; Real Property; Material Agreements...................................................28
6.15 Relations with Governments.....................................................................28
6.16 Disclosure.....................................................................................28
6.17 Other Agreements...............................................................................29
7. COVENANTS PRIOR TO CLOSING..............................................................................29
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate.................................29
7.2 Conduct of Business Pending Closing............................................................30
7.3 Prohibited Activities..........................................................................31
7.4 No Shop........................................................................................32
7.5 Agreements.....................................................................................32
7.6 Notification of Certain Matters................................................................32
7.7 Amendment of Schedules.........................................................................33
7.8 Further Assurances.............................................................................33
7.9 Authorized Capital.............................................................................33
</TABLE>
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<TABLE>
<S> <C>
7.10 Compliance with the Hart-Scott Act.............................................................33
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
AND COMPANY.............................................................................................34
8.1 Representations and Warranties; Performance of Obligations.....................................34
8.2 Satisfaction...................................................................................34
8.3 No Litigation..................................................................................34
8.4 Opinion of Counsel.............................................................................34
8.5 Consents and Approvals.........................................................................34
8.6 Good Standing Certificates.....................................................................35
8.7 No Material Adverse Change.....................................................................35
8.8 Secretary's Certificate........................................................................35
8.9 Tax Matters....................................................................................35
8.10 Other Founding Companies.......................................................................35
8.11 Company Release of Stockholders................................................................35
8.12 Sterling City Capital Transfer Restrictions....................................................35
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AMPAM............................................................36
9.1 Representations and Warranties; Performance and Obligations....................................36
9.2 No Litigation..................................................................................36
9.3 Secretary's Certificate........................................................................36
9.4 No Material Adverse Effect.....................................................................37
9.5 Stockholders' Release..........................................................................37
9.6 Satisfaction...................................................................................37
9.7 Termination of Related Party Agreements........................................................37
9.8 Opinion of Counsel.............................................................................37
9.9 Consents and Approvals.........................................................................37
9.10 Good Standing Certificates.....................................................................38
9.11 Funding Availability...........................................................................38
9.12 FIRPTA Certificate.............................................................................38
9.13 Resignations of Directors and Officers.........................................................38
10. COVENANTS OF AMPAM AND THE STOCKHOLDERS AFTER CLOSING...................................................38
10.1 Release From Guarantees; Repayment of Certain Obligations......................................38
10.2 Preservation of Tax and Accounting Treatment...................................................39
10.3 Preparation and Filing of Tax Returns; Payment of Taxes........................................39
10.4 Directors......................................................................................40
10.5 Legal Opinions.................................................................................40
11. INDEMNIFICATION.........................................................................................40
11.1 General Indemnification by the Stockholders....................................................40
11.2 Indemnification by AmPaM.......................................................................41
11.3 Third Person Claims............................................................................43
11.4 Exclusive Remedy...............................................................................43
11.5 Limitations on Indemnification.................................................................43
</TABLE>
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<TABLE>
<S> <C>
12. TERMINATION OF AGREEMENT................................................................................45
12.1 Termination....................................................................................45
12.2 Procedure and Effect of Termination............................................................45
13. NONCOMPETITION..........................................................................................46
13.1 Prohibited Activities..........................................................................46
13.2 Damages........................................................................................47
13.3 Reasonable Restraint...........................................................................47
13.4 Severability; Reformation......................................................................47
13.5 Independent Covenant...........................................................................48
13.6 Materiality....................................................................................48
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................48
14.1 Stockholders...................................................................................48
14.2 AmPaM..........................................................................................49
14.3 Damages........................................................................................49
14.4 Survival.......................................................................................49
14.5 Return of Information..........................................................................50
15. TRANSFER RESTRICTIONS...................................................................................50
15.1 Transfer Restrictions Relating to AmPaM Stock and AmPaM Notes..................................50
15.2 Transfer Restrictions Relating to Additional Consideration.....................................51
16. FEDERAL SECURITIES ACT REPRESENTATIONS..................................................................52
16.1 Compliance with Law............................................................................52
16.2 Economic Risk; Sophistication..................................................................52
16.3 Reliance by AmPaM..............................................................................53
17. REGISTRATION RIGHTS.....................................................................................53
17.1 Piggyback Registration Rights..................................................................53
17.2 Registration Procedures........................................................................54
17.3 Indemnification................................................................................56
17.4 Underwriting Agreement.........................................................................57
17.5 Transfer of Rights.............................................................................58
17.6 Rule 144 Reporting.............................................................................58
18. REDEMPTION OF AMPAM STOCK...............................................................................58
18.1 Redemption Trigger.............................................................................58
18.2 Minimum Redemption; Limitations................................................................59
18.3 Notice; Exercise...............................................................................59
18.4 Additional Redemptions.........................................................................59
18.5 Termination of Redemption Obligation...........................................................59
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C>
19. GENERAL.................................................................................................60
19.1 Cooperation....................................................................................60
19.2 Successors and Assigns.........................................................................60
19.3 Entire Agreement...............................................................................60
19.4 Counterparts...................................................................................60
19.5 Brokers and Agent..............................................................................61
19.6 Expenses.......................................................................................61
19.7 Notices........................................................................................62
19.8 Governing Law..................................................................................63
19.9 Survival of Representations and Warranties.....................................................63
19.10 Exercise of Rights and Remedies................................................................63
19.11 Time...........................................................................................63
19.12 Reformation and Severability...................................................................63
19.13 Remedies Cumulative............................................................................63
19.14 Captions.......................................................................................63
19.15 Amendments and Waivers.........................................................................63
19.16 Mediation and Arbitration......................................................................64
19.17 Information Provided for Private Placement Memorandum..........................................64
19.18 Effective Date of Agreement....................................................................64
</TABLE>
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<PAGE> 7
ANNEXES
<TABLE>
<S> <C> <C>
Annex I - Consideration to Be Paid to Stockholders
Annex II - Amended and Restated Certificate of Incorporation and
By-Laws of AmPaM
Annex III - Form of Opinion of Counsel to AmPaM
Annex IV - Form of Tax Opinion
Annex V - Form of Opinion of Counsel to Company and Stockholders
Annex VI-1 - Form of Employment Agreement
Annex VI-2 - Form of Employment Agreement
Annex VI-3 - Form of Employment Agreement
</TABLE>
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<PAGE> 8
SCHEDULES
<TABLE>
<S> <C>
2.1 Board of Directors
2.2 Officers
5.1 Due Organization
5.2 Authorization
5.3 Capital Stock of the Company
5.4 Transactions in Capital Stock; Organization Accounting
5.5 No Bonus Shares
5.6 Subsidiaries; Ownership in Other Entities
5.7 Predecessor Status; etc
5.8 Spin-off by the Company
5.9 Financial Statements
5.10 Liabilities and Obligations
5.11 Accounts and Notes Receivable
5.12 Licenses; Intellectual Property (Schedules 5.12(a)(1), 5.12(a)(2),
5.12(b)(1) and 5.12(b)(2))
5.13 Environmental Matters
5.14 Personal Property
5.15 Significant Customers; Material Contracts and Commitments
(Schedules 5.15(a), 5.15(b) and 5.15 (c))
5.16 Real Property
5.17 Insurance
5.18 Compensation; Employment Agreements; Labor Matters
5.19 Employee Plans
5.20 Compliance with ERISA
5.21 Conformity with Law; Litigation
5.22 Taxes (Schedules 5.22(a) and 5.22(b))
5.23 No Violations, No Consents Required, Etc.
(Schedules 5.23(a), 5.23(b), 5.23(c) and 5.23(e))
5.24 Government Contracts
5.25 Absence of Changes
5.26 Deposit Accounts; Powers of Attorney
5.30 No Warranties or Insurance
5.31 Interest in Customers and Suppliers and Related Party Transactions
5.33 Authority; Ownership (Schedules 5.33(a) and 5.33(b))
6.9 No Violations
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate
7.2 Conduct of Business Pending Closing
7.3 Prohibited Activities
7.5 Agreements
8.11 Employment Agreements
9.7 Termination of Related Party Agreements
10.1 Release From Guarantees; Repayment of Certain Obligations
16.2 Non-accredited Investors
18.5 Brokers and Agents
</TABLE>
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<PAGE> 9
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made as of the 11th day
of February, 1999 by and among AMERICAN PLUMBING & MECHANICAL, INC., a Delaware
corporation ("AmPaM"), KEITH RIGGS PLUMBING, INC., an Arizona corporation (the
"Company"), and the stockholders listed on the signature pages of this Agreement
(the "Stockholders"), which are all the stockholders of the Company.
RECITALS
WHEREAS, the Company is engaged in the plumbing and mechanical services
business;
WHEREAS, as of the date hereof, the Stockholders own, and as of the
Closing Date the Stockholders will own, all of the issued and outstanding
capital stock of the Company (the "Company Stock");
WHEREAS, AmPaM is entering into other separate agreements
simultaneously with this Agreement that are substantially the same as this
Agreement (the "Other Agreements"), each of which is entitled "Acquisition
Agreement," with each of the Other Founding Companies (as defined herein) and
their respective stockholders in order for AmPaM to acquire additional companies
engaged in the plumbing and mechanical services business;
WHEREAS, this Agreement and the Other Agreements constitute the "AmPaM
Plan of Organization;"
WHEREAS, the Stockholders and the boards of directors and the
stockholders of AmPaM, and each of the Other Founding Companies that are parties
to the Other Agreements, have approved and adopted the AmPaM Plan of
Organization as an integrated plan pursuant to which the Stockholders and the
stockholders of each of the other Founding Companies will contribute the capital
stock of each of the Founding Companies to AmPaM, and the Stockholders and the
stockholders of each of the other Founding Companies will acquire the stock of
AmPaM (but not cash or other property) as a tax-free transfer of property under
Section 351 of the Code;
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Stockholders have approved this
Agreement as part of the AmPaM Plan of Organization in order to transfer all of
the issued and outstanding capital stock of the Company to AmPaM; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
<PAGE> 10
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule attached hereto and not otherwise defined shall
have the following meanings for all purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"Acquired Party" means the Company, any subsidiary of the Company and
any member of a Relevant Group.
"Affiliates" means with respect to any person or entity, any other
person or entity that directly or indirectly, controls, is controlled by, or is
under common control with such person or entity.
"AmPaM" has the meaning set forth in the first paragraph of this
Agreement.
"AmPaM Charter Documents" has the meaning set forth in Section 6.1.
"AmPaM Plan of Organization" has the meaning set forth in the recitals
of this Agreement.
"AmPaM Stock" means the common stock, par value $.01 per share, of
AmPaM.
"AmPaM Notes" means those notes issued by AmPaM to the Stockholders as
a portion of the consideration to be received hereunder and in substantially the
form to Annex I as Appendix A.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" has the meaning set forth in the recitals of this
Agreement.
"Delaware GCL" means the General Corporation Law of the State of
Delaware.
"Environmental Laws" has the meaning set forth in Section 5.13(b).
"Expiration Date" has the meaning set forth in Section 5(A) and Section
6, as applicable.
2
<PAGE> 11
"Founding Companies" means the following companies:
Christianson Enterprises, Inc., a Texas corporation;
Christianson Services, Inc., a Texas corporation;
GGR Leasing Corporation, a Texas corporation;
J.A. Croson Company of Florida, a Florida corporation;
J.A. Croson Company, an Ohio corporation; Franklin Fire
Sprinkler Company, an Ohio corporation;
Keith Riggs Plumbing, Inc., an Arizona corporation;
Miller Mechanical Contractors, Inc., a Georgia corporation;
Nelson Mechanical Contractors, Inc., a Florida corporation;
Power Plumbing Inc., a Delaware corporation;
R.C.R. Plumbing, Inc., a California corporation;
Sherwood Mechanical, Inc., a California corporation; and
Teepe's River City Mechanical, Inc., an Ohio corporation.
"GAAP" means generally accepted accounting principles as consistently
applied in the United States.
"Hart-Scott Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Hazardous Substance" has the meaning set forth in Section 5.13(c).
"IPO" means a firm commitment underwritten initial public offering of
AmPaM Stock managed by one or more nationally recognized national investment
banking firms.
"known" or "knowledge," when used in reference to a statement regarding
the existence or absence of facts in this Agreement, is intended by the parties
to mean that the only information to be attributed to such person is information
actually known to (a) the person in the case of an individual, (b) in the case
of a corporation or other entity other than the Company, an officer or director
of such corporation or entity or (c) in the case of the Company and its
Subsidiaries, an officer of the Company listed on Schedule 2.2 hereto, except
for David Baggett.
"Material Adverse Change" means a material adverse change in the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Documents" has the meaning set forth in Section 5.23.
3
<PAGE> 12
"Ordinary Course of Business" means the ordinary course of business
consistent with past customs and practice (including with respect to quantity
and frequency).
"Other Agreements" has the meaning set forth in the recitals of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Plans" has the meaning set forth in Section 5.19.
"Private Placement Memorandum" means the Private Placement Memorandum,
dated as of February 11, 1999, provided to each Stockholder prior to the
execution and delivery of this Agreement which sets forth certain information
relating to the transactions contemplated by this Agreement and the Other
Agreements.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Relevant Group" means the Company and any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a member.
"Restricted Common Stock" has the meaning set forth in Section 1.3(ii).
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"State of Incorporation" means the State of Arizona.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Subsidiaries" means with respect to a person or entity, any
corporation or other entity in which such person or entity owns a 5% or greater
ownership interest.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, employment, excise, property, deed, stamp, alternative
or add-on minimum, or other taxes, assessments, duties, fees, levies or other
governmental charges, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
4
<PAGE> 13
1. ACQUISITION OF STOCK
1.1 ACQUISITION. Upon the terms and subject to the conditions contained
in this Agreement and in reliance upon the representations, warranties,
covenants and agreements contained in this Agreement, on the Closing Date, the
Stockholders shall convey and transfer to AmPaM all of the issued and
outstanding shares of Company Stock as set forth in Annex I hereto.
1.2 CONSIDERATION. The consideration for the Company Stock shall be as
set forth on Annex I to this Agreement.
1.3 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY AND AMPAM. The respective designations and numbers of outstanding shares
and voting rights of each class of outstanding capital stock of the Company and
AmPaM as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
outstanding Company Stock is as set forth on Schedule 5.3 hereto; and
(ii) immediately prior to the Closing Date, the authorized
capital stock of AmPaM will consist of (A) 100,000,000 shares of AmPaM
Stock, of which the number of issued and outstanding shares will be set
forth in the Private Placement Memorandum, (B) 10,000,000 shares of
redeemable preferred stock, of which the number of issued and
outstanding shares will be set forth in the Private Placement
Memorandum, and (C) 5,000,000 shares of Restricted Voting Common Stock,
$.01 per value (the "Restricted Common Stock"), all of which will be
issued and outstanding except as otherwise set forth in the Private
Placement Memorandum.
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY
2.1 BOARD OF DIRECTORS. The Company and the Stockholders shall take
action, including solicitation of resignation of directors, necessary so that
the Board of Directors of the Company as of the Closing Date shall consist only
of the persons identified on Schedule 2.1 hereto.
2.2 OFFICERS. The Company and the Stockholders shall take action,
including solicitation of resignation of officers, necessary so that the
officers of the Company as of the Closing Date shall consist only of the persons
identified on Schedule 2.2 hereto.
5
<PAGE> 14
3. DELIVERY OF CONSIDERATION
3.1 STOCKHOLDERS' CONSIDERATION. On the Closing Date, the Stockholders
shall, upon surrender of certificates evidencing the Company Stock, receive from
AmPaM the respective number of shares of AmPaM Stock, the amount of cash and the
principal amount of AmPaM Notes described on Annex I hereto specified with
respect to each such Stockholder as payable on the Closing Date. All payments of
cash shall be made by certified check or wire transfer of immediately available
funds. Consideration consisting of AmPaM Notes shall be substantially in the
form of Appendix A to Annex I.
3.2 STOCKHOLDERS' DELIVERIES. The Stockholders shall deliver at the
Closing the certificates representing Company Stock, duly endorsed in blank by
the Stockholders, or accompanied by blank stock powers, and with all necessary
transfer tax and other revenue stamps, acquired at the Stockholders' expense,
affixed and canceled. The Stockholders agree promptly to cure any deficiencies
with respect to the endorsement of the stock certificates or other documents of
conveyance with respect to such Company Stock or with respect to the stock
powers accompanying any Company Stock.
4. CLOSING
The consummation of the transactions contemplated by Section 3 (the
"Closing") shall take place on March 31, 1999 or such date not later than May
31, 1999 as AmPaM shall determine by giving written notice of such other date as
provided in Section 18.7 (the "Closing Date") at the offices of Andrews & Kurth
L.L.P., 4200 Chase Tower, 600 Travis, Houston, Texas 77002.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the disclosure schedules attached hereto and
except as otherwise qualified below, the Company represents and warrants that
all of the following representations and warranties in this Section 5(A) are
true at the date of this Agreement and, subject to Section 7.7 hereto, shall be
true at the time of the Closing, and that such representations and warranties
shall survive the Closing Date for a period of eighteen months (the last day of
such period being the "Expiration Date"), except that the representations and
warranties set forth in Sections 5.3, 5.22 and 5.32 hereof shall survive until
such time as the applicable statute of limitations period has run, which shall
be deemed to be the Expiration Date for the representations and warranties set
forth in Sections 5.3, 5.22 and 5.32. For purposes of this Section 5, the term
"Company" shall mean and refer to the Company and all of its Subsidiaries, if
any, and any reference to a Material Adverse Effect on the Company or Material
Adverse Change with respect to the Company shall mean the Company and its
Subsidiaries, taken as a whole. Except as expressly set forth in this Agreement,
the Company expressly disclaims any representation or warranty (express, implied
or otherwise) relating to the
6
<PAGE> 15
Company and any Subsidiary thereof including, without limitation, any warranty
of merchantability or fitness for a particular purpose.
5.1 DUE ORGANIZATION. The Company is a corporation duly incorporated
and organized, validly existing and in good standing under the laws of the State
of Incorporation, and has the requisite power and authority to carry on its
business as it is now being conducted. The Company is duly qualified or
authorized to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or authorization necessary except where the failure to be so
qualified or authorized to do business would not have a Material Adverse Effect
on the Company. Schedule 5.1 sets forth a list of all states in which the
Company is authorized or qualified to do business, which list indicates which of
such entities is authorized or qualified to do business in such states. True,
complete and correct copies of the Certificate or Articles of Incorporation and
By-laws, each as amended, of the Company (the "Charter Documents") are all
attached to Schedule 5.1. The Company has delivered to AmPaM complete and
correct copies of (i) the stock records of the Company and (ii) all minutes of
meetings, written consents and other evidence, if any, of deliberations of or
actions taken by the Company's Board of Directors, any committees of the Board
of Directors and stockholders during the last five years.
5.2 AUTHORIZATION. (i) The officers or other representatives of the
Company executing this Agreement have the authority to enter into and bind the
Company to the terms of this Agreement and (ii) the Company has the full legal
right, power and authority to enter into this Agreement and consummate the
transactions contemplated hereby. Copies of the most recent resolutions adopted
by the Board of Directors of the Company and the most recent resolutions adopted
by the Stockholders, which approve this Agreement and the transactions
contemplated hereby in all respects, certified by the Secretary or an Assistant
Secretary of the Company as being in full force and effect on the date hereof,
are attached hereto as Schedule 5.2.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company and each of its Subsidiaries is as set forth on Schedule 5.3(a). All of
the issued and outstanding shares of the capital stock of the Company are owned
by the Stockholders in the amounts set forth in Schedule 5.3(a). Except as set
forth on Schedule 5.3(a), all of the issued and outstanding capital stock of
each Subsidiary is owned by the Company. All of the issued and outstanding
shares of the capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable, are owned of record by the
Stockholders and further, such shares were offered, issued, sold and delivered
by the Company in compliance with all applicable state and Federal laws
concerning the issuance of securities. Further, none of such shares were issued
in violation of any preemptive rights of any past or present stockholder.
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5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule
5.4(a), the Company has not acquired or redeemed any shares of capital stock of
the Company since January 1, 1996. Except as set forth on Schedule 5.4(b), (i)
no option, warrant, call, conversion right or commitment of any kind exists
which obligates the Company to issue any of its authorized but unissued capital
stock; (ii) the Company has no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any distribution in respect thereof; and
(iii) neither the voting stock structure of the Company nor the relative
ownership of shares among any of its Stockholders has been altered or changed in
contemplation of the AmPaM Plan of Organization. There are no voting trusts,
proxies or other agreements or understandings to which the Company is a party or
is bound with respect to the voting of any shares of capital stock of the
Company.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses in
contemplation of the AmPaM Plan of Organization.
5.6 SUBSIDIARIES; OWNERSHIP IN OTHER ENTITIES. Except as set forth on
Schedule 5.6(a), the Company has no Subsidiaries. Except as set forth in
Schedule 5.6(b), the Company does not presently own, of record or beneficially,
or control, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any corporation, association
or business entity nor is the Company, directly or indirectly, a participant in
any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7(a) is a list of
all predecessor companies of the Company, including the names of any entities
acquired by the Company (by stock purchase, merger or otherwise) or owned by the
Company or from whom the Company previously acquired material assets, in any
case, from the earliest date upon which any Stockholder acquired his or her
stock in any Company. Except as disclosed on Schedule 5.7(b), the Company has
not been, within such period of time, a subsidiary or division of another
corporation or a part of an acquisition which was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
Company or any other person or entity that is an Affiliate of the Company since
January 1, 1996.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 is a copy of:
(i) the balance sheet of the Company as of December 31, 1997
and the related statements of operations, stockholders' equity and cash
flows for the one-year period ended December 31, 1997, together with
the related notes and schedules (such balance sheets, the related
statements of operations, stockholders' equity and cash flows and the
related notes and schedules are referred to herein as the "Year-end
Financial Statements");
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(ii) the balance sheet of the Company as of June 30, 1998 and
the related statements of operations, stockholders' equity and cash
flows for the six-month periods ended June 30, 1997 and 1998, together
with the related notes and schedules (such balance sheets, the related
statements of operations, stockholders' equity and cash flows and the
related notes and schedules are referred to herein as the "Six-Month
Interim Financial Statements");
(iii) the balance sheet of the Company as of September 30,
1998 (the "Balance Sheet Date") and the related statements of
operations, stockholders' equity and cash flows for the nine-month
periods ended September 30, 1997 and 1998 (such balance sheets, the
related statements of operations, stockholders' equity and cash flows
are referred to herein as the "Nine-Month Interim Financial
Statements"); and
(iv) the income statement of the Company for the 12-month
period ended June 30, 1998 (the "Valuation Income Statement").
The Year-end Financial Statements, the Six-Month Interim Financial Statements,
the Nine-Month Interim Financial Statements and the Valuation Income Statement
are collectively called the "Financial Statements". The Financial Statements,
including those included in the Private Placement Memorandum, have been prepared
in accordance with GAAP applied on a consistent basis and fairly present the
financial position of the Company as of the dates thereof and the results of its
operations and changes in financial position for the periods then ended,
subject, in the case of the Six-Month Interim Statements and the Nine-Month
Interim Financial Statements, to normal year-end audit adjustments and any other
adjustments described therein and the absence of certain footnote disclosures.
5.10 LIABILITIES AND OBLIGATIONS. Schedule 5.10(a) sets forth an
accurate list as of the Balance Sheet Date of (i) all material liabilities of
the Company which are not reflected on the balance sheet of the Company at the
Balance Sheet Date or otherwise reflected in the Company Financial Statements at
the Balance Sheet Date which by their nature would be required in accordance
with GAAP to be reflected in the balance sheet, and (ii) all loan agreements,
indemnity or guaranty agreements, bonds, mortgages, pledges or other security
agreements to which the Company is a party or by which its properties may be
bound other than bid bonds and performance bonds made in the Ordinary Course of
Business. Except as set forth on Schedule 5.10(b), since the Balance Sheet Date,
the Company has not incurred any material liabilities or obligations of any
kind, character or description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the Ordinary Course
of Business. The Company has also delivered to AmPaM, on Schedule 5.10(c), a
list of contingent liabilities related to pending litigation or litigation that
has been threatened in writing, or other material liabilities which are not
fixed or otherwise accrued or reserved. For each such contingent liability of
the Company or liability of the Company for which the amount is not fixed or is
contested, the Company has provided to AmPaM the following information:
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<PAGE> 18
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation in the
possession of the Company or its directors,
officers or stockholders relating thereto;
(b) amounts claimed and any other action or
relief sought; and
(c) name of claimant and all other parties to
the claim, suit or proceeding;
(ii) the name of each court or agency before which such claim,
suit or proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted;
and
(iv) a good faith estimate of the maximum amount, if any,
which the Company expects, based on information available, is likely to
become payable with respect to each such liability and the amount, if
any, accrued or reserved for each such potential liability on the
Financial Statements.
AmPaM acknowledges that all estimates referred to above and set forth on
Schedule 5.10(c) are only good faith estimates, and that the Company and the
Stockholders expressly do not represent or warrant that the actual amounts of
such liabilities will be equal to, or more or less than, the amounts of such
estimates.
5.11 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.11(a) sets forth an
accurate list, in all material respects, of the accounts and notes receivable of
the Company, as of the Balance Sheet Date, including any such amounts which are
not reflected in the balance sheet as of the Balance Sheet Date, and including
all receivables from and advances to employees and the Stockholders, which are
identified as such. Schedule 5.11(a) also sets forth a materially accurate aging
of all accounts and notes receivable as of the Balance Sheet Date showing
amounts due in 30-day aging categories. Except to the extent reflected on
Schedule 5.11(b), such accounts, notes and other receivables are collectible in
the amounts shown on Schedule 5.11(a), net of reserves reflected in the balance
sheet as of the Balance Sheet Date.
5.12 LICENSES; INTELLECTUAL PROPERTY. (a) The Company or its employees
hold all licenses, franchises, permits and other governmental authorizations
("Licenses") necessary to conduct the business of the Company, the absence of
which would cause a Material Adverse Effect on the Company, and the Company has
delivered to AmPaM a list that is accurate, in all material respects, and
summary description (which is set forth on Schedule 5.12(a)(1)) of all such
Licenses. At or prior to the Closing, all such Licenses owned or held by any
employee of the Company will be assigned or licensed to the Company for no
additional consideration. The Licenses listed on Schedule 5.12(a)(1) are valid,
and the Company has not received any notice that any person intends to cancel,
terminate or not renew any such License. The Company has conducted and is
conducting its business in compliance in all material respects with the
requirements, standards, criteria and
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<PAGE> 19
conditions set forth in the Licenses listed on Schedule 5.12(a)(1) and is not in
violation of any of the foregoing in any material respect. Except as
specifically provided in Schedule 5.12(a)(2), the consummation by the Company of
the transactions contemplated by this Agreement will not result in a default
under or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such Licenses.
(b) The Company owns or possesses adequate licenses or other rights to
use (without making any payment or granting rights to any person in exchange)
all patents, patent applications, trademarks, copyrights, service marks and
trade names (collectively, the "Intellectual Property") necessary to conduct its
business as currently conducted. A description of any Intellectual Property
licensed by the Company, including the material terms of any such license, is
described on Schedule 5.12(b)(1). Neither the validity of the Intellectual
Property nor the title thereto or use thereof by the Company is being questioned
in any pending litigation, and the conduct of the Company's business, as
currently conducted, does not conflict with licenses, copyrights, uncopyrighted
works, trade marks, service marks, trade names, trade name rights, patents,
patent rights, unpatented inventions or trade secrets of others. Neither the
validity of the Intellectual Property nor the title thereto or use thereof by
the Company is being questioned in any pending or, to the knowledge of the
Company, threatened infringement claims or litigation, and the conduct of the
Company's business, as now conducted, does not conflict with licenses,
copyrights, uncopyrighted works, trade marks, service marks, trade names, trade
name rights, patents, patent rights, unpatented inventions or trade secrets of
others. Except as specifically provided in Schedule 5.12(b)(2), the consummation
by the Company of the transactions contemplated by this Agreement will not
adversely affect the rights and benefits afforded to the Company by any such
Intellectual Property.
5.13 ENVIRONMENTAL MATTERS. (a) Except as set forth in Schedule 5.13
attached hereto, (i) the Company has conducted its businesses in compliance in
all material respects with all applicable Environmental Laws, including, without
limitation, having all environmental permits, licenses and other approvals and
authorizations necessary for the operation of its business as presently
conducted, except where the failure to have such permit, license, approval or
authorization would not have a Material Adverse Effect on the Company, (ii) none
of the properties owned by the Company contain any Hazardous Substance as a
result of any activity of the Company in amounts exceeding the levels permitted
by applicable Environmental Laws, except where amounts in excess of such levels
would not have a Material Adverse Effect on the Company, (iii) the Company has
not received any notices, demand letters or requests for information from any
Federal, state, local or foreign governmental entity or third party indicating
that the Company may be in violation of, or liable under, any Environmental Law
in connection with the ownership or operation of its business, (iv) there are no
civil, criminal or administrative actions, suits, demands, claims, hearings,
investigations or proceedings pending or, to the knowledge of the Company,
threatened, against the Company relating to any violation, or alleged violation,
of any Environmental Law, except where such violation would not have a Material
Adverse Effect on the Company, (v) no reports have been filed, or are required
to be filed, by the Company concerning the release of any Hazardous Substance or
the threatened or actual violation of any Environmental Law, (vi) no Hazardous
Substance has
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<PAGE> 20
been disposed of, released or transported in violation of any applicable
Environmental Law from any properties owned by the Company as a result of any
activity of the Company during the time such properties were owned, leased or
operated by the Company, (vii) there have been no environmental investigations,
studies, audits, tests, reviews or other analyses regarding compliance or
non-compliance with any applicable Environmental Law conducted by or which are
in the possession of the Company relating to the activities of the Company which
are not listed on Schedule 5.13 attached hereto prior to the date hereof, (viii)
to the knowledge of the Company, (A) there are no underground storage tanks on,
in or under any properties owned by the Company and (B) no underground storage
tanks have been closed or removed from any of such properties during the time
such properties were owned, leased or operated by the Company which are not
listed on Schedule 5.13, (ix) to the knowledge of the Company, (A) there is no
asbestos or asbestos-containing material present in any material quantity in any
of the properties owned by the Company, and (B) no asbestos has been removed
from any of such properties during the time such properties were owned, leased
or operated by the Company, and (x) neither the Company nor any of its
properties are subject to any material liabilities or expenditures (fixed or
contingent) relating to any suit, settlement, court order, administrative order,
regulatory requirement, judgment or claim asserted or arising under any
Environmental Law.
(b) As used herein, "Environmental Law" means, as of the Closing Date,
any Federal, state, local or foreign law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, order, judgment,
decree, injunction or agreement with any governmental entity to which the
Company is a party or subject relating to (x) the protection, preservation or
restoration of the environment (including, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource) or to human health or
safety or (y) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of Hazardous Substances, in each case as amended and as in effect on
the Closing Date. The term Environmental Law includes, without limitation, (i)
the Federal Comprehensive Environmental Response Compensation and Liability Act
of 1980, the Superfund Amendments and Reauthorization Act, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976 (including
the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste
Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Federal Occupational Safety and Health Act of
1970, each as amended and as in effect on the Closing Date, and (ii) any common
law or equitable doctrine (including, without limitation, injunctive relief and
tort doctrines such as negligence, nuisance, trespass and strict liability) that
may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of, effects of or exposure to any
Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance presently
listed, defined, designated or classified as hazardous, toxic, radioactive, or
dangerous, or otherwise regulated, under any Environmental Law. Hazardous
Substance includes any substance to which exposure is regulated by any
government authority or any Environmental Law including, without
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<PAGE> 21
limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material, asbestos or
asbestos-containing material, urea formaldehyde foam insulation, lead or
polychlorinated biphenyls.
5.14 PERSONAL PROPERTY. The Company has delivered to AmPaM an accurate
list (which is set forth on Schedule 5.14(a)) of (x) all personal property
material to the operations of the Company as of the Balance Sheet Date included
in "plant, property and equipment" on the balance sheet of the Company as of
such date, (y) all other items of personal property owned by the Company with an
individual value in excess of $15,000 (i) as of the Balance Sheet Date and (ii)
acquired since the Balance Sheet Date and (z) all material leases and agreements
in respect of personal property, including, in the case of each of (x), (y) and
(z), (1) true, complete and correct copies of all such leases and (2) an
indication as to which assets are currently owned, or were formerly owned, by
Stockholders, relatives of Stockholders, or Affiliates of the Company. Except as
set forth on Schedule 5.14(b), (i) all personal property material to, and used
by, the Company in its business is either owned by the Company or leased by the
Company pursuant to a lease included on Schedule 5.14(a), (ii) all of the
personal property listed on Schedule 5.14(a) or replacement property thereof is
in working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14(a) are in full force and effect
and constitute valid and binding agreements of the Company, in each case in
accordance with their respective terms.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
(a) The Company has delivered to AmPaM a materially accurate list
(which is set forth on Schedule 5.15(a)(1)) of all customers (persons or
entities) representing 5% or more of the Company's annual revenues for any
period covered by any of the Financial Statements. Except to the extent set
forth on Schedule 5.15(a)(2), none of such customers has canceled or, to the
knowledge of the Company, are currently threatening to cancel a currently
effective contract with the Company.
(b) The Company has listed on Schedule 5.15(b) all material contracts,
commitments and similar agreements to which the Company is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with customers listed on Schedule 5.15(a), joint venture or partnership
agreements, contracts with any labor organizations, strategic alliances and
options to purchase land), other than agreements listed on Schedules 5.10(a),
Schedule 5.14(a) or Schedule 5.16(a), (a) in existence as of the Balance Sheet
Date and (b) entered into since the Balance Sheet Date, and in each case has
delivered or made available to AmPaM true, complete and correct copies of such
agreements. For purposes of the preceding sentence, a contract, commitment or
similar agreement is "material" if it (i) has a term of more than one year
(other than contracts, commitments or agreements that are cancelable without
liability or penalty within 30 days of notice from the Company of cancellation
or that can be terminated by the Company without material penalty upon notice of
30 days or less) or (ii) requires the payment by or to the Company of more than
$100,000 during any 12-month period. Except for expenditures in the ordinary
course of
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<PAGE> 22
business, the Company has also indicated on Schedule 5.15(b) a summary
description of all plans or projects involving the opening of new operations,
expansion of existing operations, or the acquisition of any personal property,
business or assets requiring, in any event, the payment of more than $50,000 by
the Company during any 12-month period.
(c) Except as set forth on Schedule 5.15(c), the Company is not
required to provide any bonding or other financial security arrangements in any
material amount in connection with any contract listed on Schedule 5.15(b).
5.16 REAL PROPERTY. Schedule 5.16(a) includes a list of all real
property owned or leased by the Company at the date hereof and all other real
property, if any, used by the Company in the conduct of its business. The
Company has good and insurable title to any real property owned by it that is
shown on Schedule 5.16(a), other than property intended to be sold or
distributed prior to the Closing Date as provided in Section 7.1(c) of this
Agreement, and all real property so owned is subject to no mortgage, pledge,
lien, conditional sales agreement, encumbrance, lease, possessory rights of
third parties or charge, except for:
(i) liens reflected on Schedule 5.10(a) or Schedule 5.16(b) as
securing specified liabilities (with respect to which no material
default by the Company exists);
(ii) liens for current taxes not yet payable and assessments
not in default;
(iii) easements for utilities serving the property; and
(iv) easements, covenants and restrictions and other
exceptions to title which do not adversely affect the current use of
the property.
Copies of all leases and agreements in respect of such real property
leased by the Company, which are true, complete and correct in all material
respects, are attached to Schedule 5.16(a), and an indication as to which such
properties, if any, are currently owned, or were formerly owned, by Stockholders
or Affiliates of the Company or Stockholders is included in Schedule 5.16(a).
Except as set forth on Schedule 5.16(b), all of such leases included on Schedule
5.16(a) are, as to the Company, in full force and effect and constitute valid
and binding agreements of the Company in accordance with their respective terms.
5.17 INSURANCE. The Company has delivered to AmPaM (i) an accurate list
as of the Balance Sheet Date of all insurance policies carried by the Company
and (ii) an accurate list of all insurance loss runs or workers compensation
claims received for the past three policy years (which lists are set forth on
Schedule 5.17). The Company has also delivered or made available to AmPaM true,
complete and correct copies of all insurance policies currently in effect that
are referred in Schedule 5.17. Such insurance policies evidence all of the
insurance the Company is required to carry pursuant to all of its contracts and
other agreements and pursuant to all applicable laws. All of such insurance
policies are currently in full force and effect except as stated in Schedule
5.17.
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Since January 1, 1996, no insurance carried by the Company has been canceled by
the insurer and the Company has not been denied coverage under any such policy.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; LABOR MATTERS.
(a) The Company has delivered to AmPaM an accurate list (which is set
forth on Schedule 5.18(a)(1)) showing all officers, directors and key employees
of the Company, listing all employment agreements with such officers, directors
and key employees and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of each of
such persons as of (i) the Balance Sheet Date and (ii) the date hereof. The
Company has provided to AmPaM true, complete and correct copies of any
employment agreements for persons listed on Schedule 5.18(a)(1). Since the
Balance Sheet Date, except as disclosed on Schedule 5.18(a)(2), there have been
no increases in the compensation payable or any bonuses to any officer,
director, key employee or other employee, except ordinary salary increases
implemented on a basis consistent with past practices and except for bonuses
paid on a basis consistent with past practices.
(b) Except as set forth on Schedule 5.18(b), (i) the Company is not
bound by or subject to (and none of its assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) to the knowledge of the
Company, no campaign to establish such arrangement is in progress and (iii)
there is no pending or, to the Company's knowledge, threatened labor dispute
involving the Company and any group of its employees nor has the Company
experienced any labor interruptions over the past three years. The Company
believes its relationship with employees to be generally good.
(c) Except as set forth in Schedule 5.18(c) attached hereto, (i) there
are no claims, actions or proceedings pending or, to the knowledge of the
Company, threatened between the Company and any of its employees, (ii) the
Company has complied in all material respects with all laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, and (iii) the Company has not received written
notice from any person asserting that the Company is liable in any material
amount for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing.
5.19 EMPLOYEE PLANS. The Company has delivered to AmPaM accurate
schedule (Schedule 5.19(a)) showing all employee benefit plans of the Company,
including all employment agreements and other agreements or arrangements
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date and as of the date of
this Agreement. Except for the employee benefit plans, if any, described on
Schedule 5.19(a), the Company does not sponsor, maintain or contribute to any
plan program, fund or arrangement that constitutes an "employee pension benefit
plan", and neither the Company nor any Subsidiary has any obligation to
contribute to or accrue or
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pay any benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan" (within the meaning of Section 3(36) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or any non-qualified deferred
compensation arrangement). For the purposes of this Agreement, the term
"employee pension benefit plan" shall have the same meaning as is given that
term in Section 3(2) of ERISA. The Company has not sponsored, maintained or
contributed to any employee pension benefit plan other than the plans set forth
on Schedule 5.19(a), and, except as described on Schedule 5.19(b), the Company
is not or could not be required to contribute to any retirement plan pursuant to
the provisions of any collective bargaining agreement establishing the terms and
conditions or employment of any of the Company's employees.
Except as set forth on Schedule 5.19(c), the Company is not now, or
will not as a result of its past activities become, liable to the Pension
Benefit Guaranty Corporation or to any multiemployer employee pension benefit
plan under the provisions of Title IV of ERISA.
All employee benefit plans listed on Schedule 5.19(a) and the
administration thereof are in compliance in all material respects with their
terms and all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable federal, state and local
statutes, ordinances and regulations.
All accrued contribution obligations of the Company as of the Balance
Sheet Date with respect to any plan listed on Schedule 5.19(a) have either been
fulfilled in their entirety or are fully reflected on the balance sheet of the
Company as of the Balance Sheet Date.
5.20 COMPLIANCE WITH ERISA. All plans listed on Schedule 5.19(a) that
are intended to qualify under Section 401 (a) of the Code (the "Qualified
Plans") are, and have been so qualified and have been determined by the Internal
Revenue Service to be so qualified, and copies of such determination letters are
attached to Schedule 5.19(a). Except as disclosed on Schedule 5.20, all reports
and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, actuarial reports, audits or tax returns) since January 1, 1992 have been
timely filed or distributed, and copies thereof have been made available to
AmPaM. No such plan listed on Schedule 5.19(a) nor the Company has engaged in
any transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No such Plan listed on Schedule 5.19(a) has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(l) of ERISA; and the Company has not incurred any liability for
excise tax or penalty due to the Internal Revenue Service nor any liability to
the Pension Benefit Guaranty Corporation. The Company further represents that
except as set forth on Schedule 5.20 hereto:
(i) there have been no terminations, partial terminations or
discontinuations of contributions to any Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval
by the Internal Revenue Service;
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(ii) no plan listed on Schedule 5.19(a) subject to the
provisions of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase
is defined in Section 4043 of ERISA) with respect to any such plan
listed in Schedule 5.19(a);
(iv) the Company (including any Subsidiaries) has not incurred
liability under Section 4062 of ERISA; and
(v) no circumstances exist pursuant to which the Company could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to any multiemployer plan or the PBGC under
Title IV of ERISA or to the Internal Revenue Service for any excise tax
or penalty, or being subject to any statutory lien to secure payment of
any such liability) with respect to any plan now or heretofore
maintained or contributed to by any entity other than the Company that
is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 5.21 or Schedule 5.13, the Company has not violated within the five
years prior to the date of this Agreement and is not currently in violation of
any law or regulation or any order of any court or Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it other than violations that would not
have a Material Adverse Effect on the Company; and except to the extent set
forth on Schedule 5.10(c) or Schedule 5.13, there are no claims, actions, suits
or proceedings, pending or, to the knowledge of the Company, threatened in
writing against the Company, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over the Company and no written
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received by the Company, and to the knowledge of the Company there is
no valid basis for any such claim, action, suit or proceeding that could
reasonably be expected to have a Material Adverse Effect on the Company.
5.22 TAXES.
(a) The Company has timely filed all requisite Federal, state and other
Tax Returns or extension requests for all fiscal periods ended on or before the
Balance Sheet Date; and except as set forth on Schedule 5.22(a), there are no
examinations in progress or claims pending against the Company for federal,
state and other Taxes (including penalties and interest) for any period or
periods prior to and including the Balance Sheet Date and no notice of any claim
for Taxes, whether pending or threatened, has been received. All Tax, including
interest and penalties (whether or not shown on any Tax Return), due by the
Company has been paid. The amounts shown as accruals for Taxes on the Financial
Statements are sufficient for the payment of all Taxes of the kinds indicated
(including penalties and interest) for all fiscal periods ended on or before the
date of the respective Financial Statements. Copies of (i) any tax examinations,
(ii) extensions of statutory limitations and
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(iii) the federal and local income Tax Returns and franchise Tax Returns of
Company for their last three (3) fiscal years, or such shorter period of time as
any of them shall have existed, are attached hereto as Schedule 5.22(a) or have
otherwise been delivered to AmPaM. The Company has a taxable year ended December
31. Except as set forth on Schedule 5.22(a), the Company uses the accrual method
of accounting for income tax purposes, and the Company's methods of accounting
have not changed in any material respect in the past five years (except as
required to conform to changes in GAAP). The Company is not an investment
company as defined in Section 351(e)(1) of the Code. The Company is not and has
not during the last five years been a party to any tax sharing agreement or
agreement of similar effect. Except as set forth on Schedule 5.22(a), the
Company is not and has not during the last five years been a member of any
consolidated group for federal tax purposes. The Company has not received, been
denied, or applied for any private letter ruling from the IRS during the last
ten years.
(b) The Stockholders have made a valid election under the provisions of
Subchapter S of the Code and, except as set forth on Schedule 5.22(b), the
Company has not, within the past five years, been subject to Federal income
Taxes under the provisions of Subchapter C of the Code.
5.23 NO VIOLATIONS; NO CONSENT REQUIRED, ETC.
(a) The Company is not in violation of any Charter Document. Except as
set forth on Schedule 5.23(a), the Company is not in default under any lease,
instrument, agreement, license, or permit set forth on Schedule 5.12(a),
Schedule 5.14(a), Schedule 5.15(b) or Schedule 5.16(a) (collectively, the
"Material Documents").
(b) Except as set forth on Schedule 5.23(b)(1), the execution and
delivery of this Agreement by each of the Company and the Stockholders do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company under any of the
terms, conditions or provisions of (i) the Charter Documents of the Company,
(ii) any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental authority
applicable to the Company or any of its properties or assets, or (iii) any
Material Document to which the Company is now a party or by which the Company or
any of its properties or assets may be bound or affected. The consummation by
the Company and the Stockholders of the transactions contemplated hereby will
not result in any material violation, conflict, breach, right of termination or
acceleration or creation of liens under any of the terms, conditions or
provisions of the items described in clauses (i) through (iii) of the preceding
sentence, subject, in the case of the terms, conditions or provisions of the
items described in clause (iii) above, to obtaining (prior to the Effective
Time) such consents as may be required from commercial lenders, lessors or other
third parties as listed on Schedule 5.23(b)(2).
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(c) Except as set forth on Schedule 5.23(c) and except for the
Hart-Scott Act, none of the Material Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to the consummation by the Company and the Stockholders of any of the
transactions contemplated hereby in order to remain in full force and effect,
and consummation by the Company and the Stockholders of the transactions
contemplated hereby will not give rise to any right to termination, cancellation
or acceleration or loss of any material right or benefit under any Material
Document.
(d) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act or with any state securities authorities in connection with the offer
and sale of AmPaM Stock and AmPaM Notes pursuant to this Agreement and (ii) any
filing required to be made under the Hart-Scott Act in connection with the
transactions contemplated by this Agreement, no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby.
(e) Except as set forth on Schedule 5.23(e), none of the Material
Documents prohibits the disclosure or publication by the Company or AmPaM of the
name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company from freely providing services or
selling products to any other customer or potential customer of the Company,
AmPaM or any Other Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24, the
Company is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.25 ABSENCE OF CHANGES. (a) Since the Balance Sheet Date, except as
set forth on Schedule 5.25 or as otherwise contemplated hereby, there has not
been:
(i) any Material Adverse Change in the Company;
(ii) any damage, destruction or casualty loss (whether or not
covered by insurance), alone or in the aggregate, which has caused a
Material Adverse Effect on the Company;
(iii) any change in the authorized capital of the Company or
its outstanding securities or any change in its ownership interests or
any grant of any options, warrants, calls, conversion rights or
commitments;
(iv) any declaration or payment of any dividend or
distribution in respect of the capital stock or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock
of the Company except for distributions that would have been permitted
after the date hereof under Section 7.3(iii) hereof,
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(v) any increase in the compensation, bonus, sales commissions
or fee arrangement payable or to become payable by the Company to any
of its officers, directors, Stockholders, employees, consultants or
agents, except for ordinary and customary bonuses and salary increases
for employees in accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed,
or any event or condition of any character, which has caused a Material
Adverse Effect on the Company;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the Company to any
person, including, without limitation, the Stockholders and their
affiliates, except inventory sold or transferred in the Ordinary Course
of Business;
(viii) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to the Company, including
without limitation any indebtedness or obligation of any Stockholders
or any Affiliate thereof;
(ix) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
material assets, property or rights of the Company or requiring consent
of any party to the transfer and assignment of any such assets,
property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the Ordinary Course of Business;
(xi) any waiver of any material rights or claims of the
Company;
(xii) any amendment or termination of any Material Document to
which the Company is a party except for the termination of a Material
Document in accordance with its terms without any action on the part of
the Company;
(xiii) any transaction by the Company outside the Ordinary
Course of Business;
(xiv) any cancellation or termination of a material contract
with a customer or client listed on Schedule 5.15(a) prior to the
scheduled termination date thereof; or
(xv) any other distribution of property or assets by the
Company other than in the Ordinary Course of Business, other than (a)
distributions of nonoperating assets specifically identified on
Schedule 5.25, (b) distributions of real estate required by Section
7.1(c) of this Agreement and (c) distributions of cash or promissory
notes permitted by Annex I hereto.
(b) Except as set forth on Schedule 5.25, the Company has not,
between the Balance Sheet Date and the date hereof, taken any of the actions set
forth in Section 7.3.
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5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The Company has delivered to
AmPaM an accurate schedule (which is set forth on Schedule 5.26) as of the date
of the Agreement of:
(i) the name of each financial institution in which the
Company has an account or safe deposit box;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or
have access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company and
a description of the terms of such power.
5.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the Company and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
Company and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
5.28 RELATIONS WITH GOVERNMENTS. The Company has not, and to the
knowledge of the Company none of the Stockholders or any Affiliate of any of
them has, given or offered anything of value to any governmental official,
political party or candidate for government office or otherwise taken any action
which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any law of similar effect.
5.29 DISCLOSURE. This Agreement, including the Annexes and Schedules
hereto, and the completed questionnaire related to the Hart-Scott Act furnished
to AmPaM by the Company, do not contain an untrue statement of a material fact
concerning the Company or omit to state a material fact concerning the Company
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing does not apply to statements contained in or omitted from any
of such documents made or omitted in reliance upon information furnished in
writing by AmPaM.
5.30 NO WARRANTIES OR INSURANCE. Except for warranty liability under
applicable law and except for warranty liability under the warranties issued by
the Company of the types described on Schedule 5.30, the Company has no
liability to any person under any warranty and the Company does not offer or
sell insurance or consumer protection plans or other arrangements that could
result in the Company being required to make any payment to or perform any
service for any person.
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5.31 INTEREST IN CUSTOMERS AND SUPPLIERS AND RELATED PARTY
TRANSACTIONS. Except as described on Schedule 5.31 or in Section 8.11, no
Stockholder, officer, director or Affiliate of the Company (i) owns, directly or
indirectly, any financial interest in, or is a director, officer, employee or
affiliate of, any corporation, firm, association or business organization that
is a client, supplier, customer, lessor, lessee or competitor of the Company, or
(ii) is or will be a party to an agreement or relationship with the Company
other than through a customary "at will" employment relationship.
5.32 PRIVATE PLACEMENT MEMORANDUM. None of the information supplied or
to be supplied by the Company in writing specifically for inclusion in the
Private Placement Memorandum contained or, as of the Closing Date, will contain
any untrue statement of a material fact concerning the Company or omitted or
will omit to state any material fact required to be stated therein or necessary
in order to make the statements contained in such information supplied or to be
supplied by the Company concerning the Company, in light of the circumstances
under which they are made, not misleading.
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.
Each Stockholder severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.7 hereof, shall be true at the time of
Closing, and that the representations and warranties set forth in this Section
5(B) shall survive the Closing Date.
5.33 AUTHORITY; OWNERSHIP. Such Stockholder has the full legal right,
power and authority to enter into this Agreement, and this Agreement is a legal,
valid and binding obligation of such Stockholder, enforceable against the
Stockholder in accordance with its terms. Except as set forth on Schedule
5.33(a), the execution and delivery of this Agreement by such Stockholder does
not violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of such Stockholder
under any of the terms, conditions or provisions of (i) the Charter Documents of
the Company, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to such Stockholder or any of such Stockholder's properties
or assets, or (iii) any lease, instrument, agreement, license or permit to which
such Stockholder is now a party or by which such Stockholder or any of such
Stockholder's properties or assets may be bound or affected. Except for (i) any
filings to be made with the SEC pursuant to the 1933 Act and any state
securities authorities in connection with the offer and sale of AmPaM Stock and
AmPaM Notes pursuant to this Agreement, (ii) any filing required to be made
under the Hart-Scott Act in connection with the transactions contemplated by
this Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by such
Stockholder or the consummation by such Stockholder of the transactions
contemplated hereby. Except as set forth on
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Schedule 5.33(b), such Stockholder owns beneficially and of record all of the
shares of the Company Stock identified on Annex I hereto as being owned by such
Stockholder, and, such Company Stock is owned free and clear of all liens,
security interests, pledges, charges, voting trusts, voting agreements,
restrictions, encumbrances and claims of every kind.
5.34 PREEMPTIVE RIGHTS. Such Stockholder does not have, or hereby
waives, any preemptive or other right to acquire shares of Company Stock or
AmPaM Stock that such Stockholder has or may have had. Nothing herein, however,
shall limit or restrict the rights of any Stockholder to acquire AmPaM Stock
pursuant to (i) this Agreement, (ii) any option granted or to be granted by
AmPaM to such Stockholder, (iii) a purchase through a broker in a regular stock
market transaction or (iv) a purchase from a stockholder of a Founding Company
(subject to compliance with any contractual restrictions or securities law
restrictions applicable thereto specified in Section 15 hereof).
5.35 NO COMMITMENT TO DISPOSE OF AMPAM STOCK. No Stockholder is under
any binding commitment or contract to sell, exchange or otherwise dispose of
shares of AmPaM Stock or AmPaM Notes received pursuant to this Agreement.
5.36 DISCLOSURE. The completed Director and Officer Questionnaires with
respect to such Stockholder (if any), the completed investor questionnaire
furnished to AmPaM by such Stockholder in connection with the proposed
acquisition by such Stockholder of AmPaM Stock and AmPaM Notes and any other
information provided to AmPaM in writing by such Stockholder relating
specifically to such Stockholder for inclusion in the Private Placement
Memorandum do not contain an untrue statement of a material fact concerning such
Stockholder or omit to state a material fact concerning such Stockholder
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading.
6. REPRESENTATIONS OF AmPaM
Except as otherwise qualified below, AmPaM represents and warrants that
all of the following representations and warranties in this Section 6 are true
at the date of this Agreement and, subject to Section 7.7 hereof, shall be true
at the time of Closing, and that such representations and warranties shall
survive the Closing Date for a period of eighteen months (the last day of such
period being the "Expiration Date" for purposes of the representations and
warranties set forth in this Section 6), except that the representations and
warranties set forth in Section 6.3, 6.11 and 6.15 shall survive until such time
as the applicable statute of limitations period has run, which shall be deemed
to be the Expiration Date for the representations and warranties set forth in
Sections 6.3, 6.11 and 6.15.
AmPaM acknowledges that in purchasing the shares of Company Stock, it
is relying upon its own independent investigation as well as the representations
and warranties of the Company and the Stockholders as set forth in this
Agreement.
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6.1 DUE ORGANIZATION. AmPaM is a corporation duly incorporated and
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite power and authority to carry on its business as
it is now being conducted and as contemplated by the Private Placement
Memorandum. AmPaM is duly qualified or authorized to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or authorization
necessary, except where the failure to be so qualified or authorized to do
business would not have a Material Adverse Effect. True, complete and correct
copies of the Certificate of Incorporation and By-laws, each as proposed to be
amended and as such documents shall be in effect as of the Closing Date, of
AmPaM (the "AmPaM Charter Documents") are attached hereto as Annex II.
6.2 AUTHORIZATION. (i) The officers of AmPaM executing this Agreement
have the authority to enter into and bind AmPaM to the terms of this Agreement
and (ii) AmPaM has the full legal right, power and authority to enter into this
Agreement and consummate the transactions contemplated hereby. All corporate
acts and other proceedings required to have been taken by AmPaM to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly and properly taken.
6.3 CAPITAL STOCK OF AmPaM. The authorized capital stock of AmPaM is as
set forth in Section 1.3(ii). Immediately prior to the Closing Date, all of the
issued and outstanding shares of the capital stock of AmPaM will be as set forth
in the Private Placement Memorandum, free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind other than any restrictions described in the Private
Placement Memorandum. All of the issued and outstanding shares of the capital
stock of AmPaM have been duly authorized and validly issued, are fully paid and
nonassessable and such shares were offered, issued, sold and delivered by AmPaM
in compliance with all applicable state and Federal laws concerning the issuance
of securities. Further, none of such shares were issued in violation of the
preemptive rights of any past or present stockholder of AmPaM. Upon the Closing
Date, the authorized, issued and outstanding shares of capital stock of AmPaM
will be as set forth in the Private Placement Memorandum under the caption
"Capitalization." Upon the Closing Date, the aggregate number of shares of AmPaM
Stock issued and outstanding on the Closing Date that are owned by Sterling City
Capital, LLC, any Affiliates of Sterling City Capital, LLC and the officers and
directors of AmPaM will not be greater than the number of shares of AmPaM Stock
reflected in the Private Placement Memorandum as the aggregate number of shares
of AmPaM Stock to be issued and outstanding and owned by Sterling City Capital,
LLC, any Affiliates of Sterling City Capital, LLC and the officers and directors
of AmPaM.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth in the Private Placement Memorandum, (i) no option, warrant,
call, conversion right or commitment of any kind exists as of the date of this
Agreement which obligates AmPaM to issue any of its authorized but unissued
capital stock; and (ii) AmPaM has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof. The material terms of any
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options, warrants or other rights to acquire shares of the stock of AmPaM
referred to in the preceding sentence will be as described in the Private
Placement Memorandum.
6.5 SUBSIDIARIES. As of the date of this Agreement, AmPaM has no
subsidiaries. As of the date of this Agreement, AmPaM does not own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity, and AmPaM is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. The historical financial statements of AmPaM
included in the Private Placement Memorandum (the "AmPaM Financial Statements")
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (except as noted thereon), and the balance
sheet included therein presents fairly the financial position of AmPaM as of its
date. Management of AmPaM believes that the assumptions underlying the pro forma
adjustments utilized in the preparation of such pro forma financial statements
are reasonable, and such pro forma adjustments have been properly applied to the
historical financial amounts in the compilation of the pro forma financial
statements. Based on the representations in Section 5.9 of this Agreement and in
Section 5.9 of each of the Other Agreements, the pro forma financial information
of AmPaM fairly presents the pro forma financial position, results of operations
and other information purported to be shown therein at the respective dates and
for the respective periods specified.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth in the Private
Placement Memorandum, as of the date of this Agreement, AmPaM has no material
liabilities or obligations of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise, other than
liabilities incurred in the ordinary course of business and consistent with past
practices, liabilities or obligations set forth in or contemplated by this
Agreement and the Other Agreements and except for fees incurred in connection
with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth in
the Private Placement Memorandum, AmPaM is not in violation of any law or
regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and its stockholders and, there are no claims,
actions, suits or proceedings, pending or, to the knowledge of AmPaM, threatened
against or affecting, AmPaM, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over it and no notice of any
claim, action, suit or proceeding, whether pending or threatened, has been
received. AmPaM has conducted and is conducting its businesses in compliance in
all material respects with the requirements, standards, criteria and conditions
set forth in applicable Federal, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations and is not in
violation, in any material respect, of any of the foregoing.
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6.9 NO VIOLATIONS. (a) AmPaM is not in violation of any AmPaM Charter
Document. AmPaM is not in default under any lease, instrument, agreement,
license, or permit to which AmPaM is a party or by which AmPaM or any of its
properties are bound (collectively, the "AmPaM Documents").
(b) The execution and delivery of this Agreement by AmPaM do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of AmPaM under any of the
terms, conditions or provisions of (i) the AmPaM Charter Documents, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to
AmPaM or any of its properties or assets, or (iii) any AmPaM Document; provided
that the representations and warranties specified in clause (ii) of this
sentence (A) are based on information in the investor questionnaires and related
purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements and
(B) are subject to the accuracy and completeness of the information contained in
such investor questionnaires and related purchaser representative questionnaires
and the truthfulness of such representations and warranties. The consummation by
AmPaM of the transactions contemplated hereby will not result in any material
violation, conflict, breach, right of termination or acceleration or creation of
liens under any of the terms, conditions or provisions of the items described in
clauses (i) through (iii) of the preceding sentence, subject, in the case of the
terms, conditions or provisions of the items described in clause (iii) above, to
obtaining (prior to the Closing Date) (x) such approvals, consents or orders
from the SEC, state blue sky authorities and authorities administering the
Hart-Scott Act and (y) such other consents as may be required from commercial
lenders, lessors or other third parties which are listed on Schedule 6.9.
(c) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act and filings with various state securities authorities in connection
with the transactions contemplated by this Agreement, and (ii) any filings
required to be made under the Hart-Scott Act in connection with the transactions
contemplated by this Agreement, none of the AmPaM Documents requires notice to,
or the consent or approval of, any governmental agency or other third party with
respect to the consummation by AmPaM of any of the transactions contemplated
hereby in order to remain in full force and effect, and consummation by AmPaM of
the transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any material right or
benefit under the AmPaM Documents; provided that the representations and
warranties specified in clauses (i) and (ii) of this sentence (A) are based on
information in the investor questionnaires and related purchaser representative
questionnaires executed and delivered by the Stockholders of the Company and the
stockholders of the Other Founding Companies, the representations and warranties
of the Stockholders set forth in Section 16 hereof and the representations and
warranties of the
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stockholders of the Other Founding Companies set forth in Section 16 of the
Other Agreements and (B) are subject to the accuracy and completeness of the
information contained in such investor questionnaires and related purchaser
representative questionnaires and the truthfulness of such representations and
warranties.
(d) Except for (i) any filings with the SEC pursuant to the 1933 Act
and filings with various state securities authorities in connection with the
transactions contemplated by this Agreement and (ii) any filings required under
the Hart-Scott Act in connection with the transactions contemplated by this
Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by AmPaM
or the consummation by AmPaM of the transactions contemplated hereby; provided
that the representations and warranties specified in clauses (i) and (ii) of
this sentence (A) are based on information in the investor questionnaires and
related purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements and
(B) are subject to the accuracy and completeness of the information contained in
such investor questionnaires and related purchaser representative questionnaires
and the truthfulness of such representations and warranties.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by AmPaM and the performance of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of AmPaM and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of AmPaM, enforceable
against AmPaM in accordance with its terms.
6.11 AmPaM STOCK. At the time of issuance thereof and delivery to the
Stockholders, the AmPaM Stock to be delivered to the Stockholders pursuant to
this Agreement will constitute valid, duly authorized and legally issued shares
of AmPaM, fully paid and nonassessable, and with the exception of restrictions
upon resale set forth in Sections 15 and 16 hereof, will be identical in all
substantive respects (which do not include the form of certificate upon which it
is printed or the presence or absence of a CUSIP number on any such certificate)
to the AmPaM Stock issued and outstanding as of the date hereof, other than the
Restricted Common Stock. The AmPaM Stock issued and delivered to the
Stockholders shall at the time of such issuance and delivery be free and clear
of any liens, claims or encumbrances of any kind or character. The offer and
sale of the shares of AmPaM Stock to be issued to the Stockholders pursuant to
this Agreement are not required to be registered under the 1933 Act; provided
that the representations and warranties specified in this sentence (A) are based
on information in the investor questionnaires and related purchaser
representative questionnaires executed and delivered by the Stockholders of the
Company and the stockholders of the Other Founding Companies, the
representations and warranties of the Stockholders set forth in Section 16
hereof and the representations and warranties of the stockholders of the Other
Founding Companies set forth in Section 16 of the Other Agreements and (B) are
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subject to the accuracy and completeness of the information contained in such
investor questionnaires and related purchaser representative questionnaires and
the truthfulness of such representations and warranties.
6.12 AmPaM NOTES. The AmPaM Notes have been duly authorized and, at the
Closing Date, will have been duly executed by AmPaM and, when authenticated,
issued and delivered, will constitute valid and binding obligations of AmPaM,
enforceable against AmPaM in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers) reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
6.13 NO SIDE AGREEMENTS. AmPaM has not entered into any agreement with
any of the Founding Companies or any of the Stockholders of the Founding
Companies other than this Agreement, the Other Agreements, the agreements
referred to in this Agreement and in the Other Agreements and the Private
Placement Memorandum. AmPaM has not entered into any agreements providing for
rights to register shares of AmPaM Stock under the 1933 Act except as provided
in Section 17 of this Agreement, in Section 17 of the Other Agreements and in an
agreement with Sterling City Capital, LLC, its Affiliates and officers and
directors of AmPaM having terms substantially similar to those set forth in
Section 17 hereof.
6.14 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. AmPaM was formed in
June 1998 and has conducted no material business since the date of its inception
except for activities related to the transaction contemplated by this Agreement,
the Other Agreements and the Private Placement Memorandum. Except as described
in the Private Placement Memorandum, as of the date of this Agreement, AmPaM
does not own any real property or any material personal property and is not a
party to any other material agreement other than this Agreement, the Other
Agreements and the agreements contemplated hereby and thereby.
6.15 RELATIONS WITH GOVERNMENTS. Neither AmPaM nor any of its
directors, officers or Affiliates has given or offered anything of value to any
government official, political party or candidate for government office, nor has
AmPaM, any of its directors, officers or Affiliates of any of them otherwise
taken any action, which would cause AmPaM to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any law of similar effect.
6.16 DISCLOSURE. The Private Placement Memorandum delivered to the
Company and the Stockholders does not as of the date hereof contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing does not apply to
statements contained in or omitted from any of such documents made or omitted in
reliance upon, and in conformity with, information furnished to AmPaM by the
Company or the Stockholders in writing specifically for inclusion in the Private
Placement Memorandum.
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6.17 OTHER AGREEMENTS. The Other Agreements have been duly authorized,
executed and delivered by AmPaM and constitute the legal, valid and binding
obligation of AmPaM enforceable against AmPaM in accordance with their
respective terms. The terms and conditions of the Other Agreements (excluding
the terms relating to the consideration payable by AmPaM thereunder) are
identical in all material respects to the terms and conditions in this
Agreement.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE; TRANSFER OF REAL ESTATE.
(a) Between the date of this Agreement and the Closing Date, the
Company will afford to the officers and authorized representatives of AmPaM
reasonable access during normal business hours to all of the Company's sites,
properties, books and records and will furnish AmPaM with such additional
financial and operating data and other information as to the business and
properties of the Company as AmPaM may from time to time reasonably request. The
Company will cooperate with AmPaM, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. AmPaM,
the Stockholders and the Company will treat all information obtained in
connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to the Company as confidential
in accordance with the provisions of Section 14 hereof.
(b) Between the date of this Agreement and the Closing Date, AmPaM will
afford to the officers and authorized representatives of the Company access to
all of AmPaM's sites, properties, books and records and will furnish the Company
with such additional financial and operating data and other information as to
the business and properties of AmPaM and the Other Founding Companies as the
Company may from time to time reasonably request. AmPaM will cooperate with the
Company, its representatives, auditors and counsel in the preparation of any
documents or other material which may be required in connection with any
documents or materials required by this Agreement. The Company will cause all
information obtained pursuant to this Section 7.1(b) or obtained in connection
with the negotiation and performance of this Agreement to be treated as
confidential in accordance with the provisions of Section 14 hereof.
(c) Except as set forth on Schedule 7.1, any real property owned by the
Company will be sold or distributed by the Company on terms mutually acceptable
to AmPaM and the Company and leased back by the Company on terms no less
favorable to the Company than those available from an unaffiliated party and
otherwise reasonably acceptable to AmPaM at or prior to the Closing Date.
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7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Closing Date, the Company will, except as set forth on
Schedule 7.2:
(i) carry on its businesses in the Ordinary Course of Business
and not introduce any material new method of management, operation or
accounting;
(ii) use all commercially reasonable efforts to maintain its
properties and facilities, including those held under leases, in as
good working order and condition as at present, ordinary wear and tear,
depreciation and insured losses excepted;
(iii) perform in all material respects all of its obligations
under all Material Documents relating to or affecting its respective
assets, properties or rights;
(iv) use its commercially reasonable efforts to keep in full
force and effect present insurance policies or other comparable
insurance coverage;
(v) use its commercially reasonable efforts to maintain and
preserve its business organization intact, retain its respective
present key employees and maintain its relationships with suppliers,
customers and others having business relations with the Company;
(vi) use its commercially reasonable efforts to maintain
compliance with all material permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory
agencies and similar governmental authorities;
(vii) maintain present debt and lease instruments in
accordance with their terms and not enter into new or amended debt or
lease instruments without the knowledge and consent of AmPaM (which
consent shall not be unreasonably withheld), provided that debt and/or
lease instruments may be replaced without the consent of AmPaM if such
replacement instruments are on terms at least as favorable to the
Company as the instruments being replaced;
(viii) maintain or reduce present salaries and commission
levels for all officers, directors, employees and agents except for
ordinary and customary bonus and salary increases for employees in
accordance with past practices; and
(ix) use commercially reasonable efforts to cause the actual
amount of its Current Assets (as defined in Annex I hereto) to be not
less than 150% of the actual amount of its Current Liabilities (as
defined in Annex I hereto).
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7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between
the date hereof and the Closing Date, the Company will not, without prior
written consent of AmPaM:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of any kind
other than in connection with the exercise of options or warrants
listed in Schedule 5.4;
(iii) except as permitted pursuant to the terms and conditions
for distributions described in Annex I, declare or pay any dividend, or
make any distribution in respect of its stock whether now or hereafter
outstanding, or purchase, redeem or otherwise acquire or retire for
value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree
to incur any liability or make any capital expenditures, except if it
is in the Ordinary Course of Business or involves an amount not in
excess of three percent (3%) of the Company's gross revenues for fiscal
1997;
(v) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired, except (1) with respect to purchase money
liens incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of three percent (3%) of the Company's
gross revenues for fiscal 1997 necessary or desirable for the conduct
of the businesses of the Company, (2) (A) liens for taxes either not
yet due or being contested in good faith and by appropriate proceedings
(and for which contested taxes adequate reserves have been established
and are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the Ordinary
Course of Business (the liens set forth in clause (2) being referred to
herein as "Statutory Liens"), or (3) liens set forth on Schedule 5.10
and/or Schedule 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the Ordinary Course of Business and
other than distributions of real estate and other assets as permitted
in this Agreement (including Annex I hereto);
(vii) negotiate for the acquisition of any business or the
start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate
with or into any other corporation;
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(ix) waive any material rights or claims of the Company,
provided that the Company may negotiate and adjust bills and accounts
in the course of good faith disputes with customers in a manner
consistent with past practice;
(x) amend or terminate any Material Document except for the
termination of a Material Document in accordance with its terms without
any action on the part of the Company; or
(xi) enter into any other material transaction outside the
Ordinary Course of Business or any transaction prohibited hereunder.
7.4 NO SHOP. None of the Stockholders, the Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than AmPaM
or its authorized agents relating to, any acquisition or purchase of
all or a material amount of the assets of, or any equity interest in,
the Company or a merger, consolidation or business combination of the
Company.
7.5 AGREEMENTS. Except as disclosed on Schedule 7.5(a), the
Stockholders and the Company shall terminate (i) any stockholders agreements,
voting agreements, voting trusts, agreements providing for the grant by the
Company of any options, warrants and employment agreements between the Company
and any employee listed on Schedule 8.11 hereto and (ii) except as otherwise
provided in this Agreement, any existing agreement between the Company and any
Stockholder, on or prior to the Closing Date provided that nothing herein shall
prohibit or prevent the Company from paying (either prior to or on the Closing
Date) notes or other obligations from the Company to the Stockholders described
in Schedule 7.5(b) in accordance with the terms thereof.
7.6 NOTIFICATION OF CERTAIN MATTERS. Each Stockholder and the Company
shall give prompt notice to AmPaM upon obtaining knowledge of (i) the occurrence
or non-occurrence of any event the occurrence or nonoccurrence of which would be
likely to cause any representation or warranty of the Company or such
Stockholder contained herein to be untrue or inaccurate in any material respect
at or prior to the Closing and (ii) any material failure of such Stockholder or
the Company to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such person hereunder. AmPaM shall give prompt
notice to the Company of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of AmPaM contained herein to be untrue or inaccurate
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in any material respect at or prior to the Closing, (ii) any material failure of
AmPaM to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; (iii) any termination of any Other
Agreement for any reason; and (iv) the issuance by the SEC or any state
securities regulatory authority of any issuance of or threatened issuance of any
order challenging the availability of an exemption from registration or
suspending the qualification of any securities described in the Private
Placement Memorandum for sale in any jurisdiction. However, subject to the
provisions of Section 7.7, such notification shall not relieve either the
Company or such Stockholder of their respective obligations under this
Agreement. The delivery of any notice pursuant to this Section 7.6 shall not be
deemed to (i) modify the representations or warranties hereunder of the party
delivering such notice, which modification may only be made pursuant to Section
7.7, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
7.7 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until 24 hours prior to the
Closing Date to notify AmPaM with respect to any matter (i) hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules or (ii) which may
have been omitted from the Schedules previously provided by such party.
Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule
prepared by the Company may be made unless AmPaM consents to such amendment or
supplement; and provided further, that no amendment or supplement to a Schedule
prepared by AmPaM may be made unless the Stockholders consent to such amendment
or supplement. For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Sections 8.1 and
9.1 have been fulfilled, the Schedules hereto, as amended or supplemented with
the consent of AmPaM or the Stockholders, as the case may be, as provided above,
shall be deemed to be the Schedules to this Agreement.
7.8 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
appropriate to carry out the transactions contemplated hereby and to cause the
conditions to the Closing Date to be satisfied as promptly as practicable.
7.9 AUTHORIZED CAPITAL. Prior to the Closing Date, AmPaM shall maintain
its authorized capital stock as set forth in the Private Placement Memorandum.
7.10 COMPLIANCE WITH THE HART-SCOTT ACT. All parties to this Agreement
hereby recognize that one or more filings under the Hart-Scott Act may be
required in connection with the transactions contemplated herein. If it is
determined by the parties to this Agreement that filings under the Hart-Scott
Act are required, then: (i) each of the parties hereto agrees to cooperate and
use its best efforts to comply with the Hart-Scott Act and (ii) such compliance
by the Stockholders and the parties agree to cooperate and use their best
efforts to cause all filings required under the Hart- Scott Act to be made. If
filings under the Hart-Scott Act are required, the costs and expenses thereof
(including filing fees) shall be borne by AmPaM.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND
COMPANY
The obligations of the Stockholders and the Company with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions. As of
the Closing Date, if any such applicable conditions have not been satisfied, any
one or more of the Stockholders who would be entitled to receive a majority of
the Aggregate Consideration (as defined herein) received by all Stockholders if
the transactions contemplated hereby were consummated shall have the right to
waive any condition not so satisfied. Any act or action of the Stockholders in
consummating the Closing or delivering the certificates representing Company
Stock as of the Closing Date shall constitute a waiver of any conditions not so
satisfied. However, no such waiver shall be deemed to affect the survival of the
representations and warranties of AmPaM contained in Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of AmPaM contained in Section 6 shall be true and
correct as of the Closing Date as though such representations and warranties had
been made as of that time; all of the terms, covenants and conditions of this
Agreement to be complied with and performed by AmPaM on or before the Closing
Date shall have been duly complied with and performed in all material respects;
and certificates to the foregoing effect dated the Closing Date and signed by
the President or any Vice President of AmPaM shall have been delivered to the
Stockholders.
8.2 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of the Company or the Stockholders and that are
required to carry out this Agreement or incidental hereto shall be reasonably
satisfactory to the Company, the Stockholders and their counsel.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the purchase and sale of the Company Stock.
8.4 OPINION OF COUNSEL. The Company shall have received opinions from
counsel for AmPaM, dated the Closing Date, addressed to the Company and the
Stockholders in the form annexed hereto as Annex III.
8.5 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule 6.9
shall have been obtained; and no action or proceeding shall have been instituted
or threatened to restrain or prohibit the purchase and sale of the Company Stock
and no governmental agency or body shall have taken any other action or made any
request of Company as a result of which Company deems it inadvisable to proceed
with the transactions hereunder.
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8.6 GOOD STANDING CERTIFICATES. AmPaM shall have delivered to the
Company a certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Delaware Secretary of State and in each state
in which AmPaM is authorized to do business, showing that AmPaM is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for AmPaM for all periods prior to the Closing have
been filed and paid.
8.7 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred which would constitute a Material Adverse Change with respect to AmPaM
from the date of the Private Placement Memorandum.
8.8 SECRETARY'S CERTIFICATE. The Company shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of AmPaM, certifying the truth and correctness of attached copies of AmPaM's
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and, if required,
the stockholders of AmPaM approving AmPaM's entering into this Agreement and the
Other Agreements and the consummation of the transactions contemplated hereby
and thereby.
8.9 TAX MATTERS. The Stockholders shall have received an opinion of
Andrews & Kurth L.L.P., in substantially the form of Annex IV hereto, that the
AmPaM Plan of Organization will qualify as a tax-free transfer of property under
Section 351 of the Code and that the Stockholders will not recognize gain to the
extent the Stockholders exchange Company Stock for AmPaM Stock (but not cash or
other property) pursuant to this Agreement in connection with the AmPaM Plan of
Organization.
8.10 OTHER FOUNDING COMPANIES. The transactions contemplated by the
Other Agreements are consummated simultaneously with the consummation of the
transactions contemplated by this Agreement.
8.11 COMPANY RELEASE OF STOCKHOLDERS. The Company shall have delivered
to the Stockholders an instrument dated the Closing Date, in form reasonably
satisfactory to AmPaM and the Stockholders, which shall be effective only upon
the occurrence of the Closing Date, releasing the Stockholders from (i) any and
all claims of the Company against the Stockholders, known and unknown, and (ii)
obligations of the Stockholders to the Company, except for (x) items
specifically identified on Schedule 5.10(a) and Schedule 5.15(b) as being claims
of or obligations to the Company and (y) continuing obligations to the Company
relating to their employment by the Company pursuant to any employment agreement
entered into pursuant to Section 8.11 hereof.
8.12 STERLING CITY CAPITAL TRANSFER RESTRICTIONS. Sterling City
Capital, LLC and each of its Affiliates which owns AmPaM Stock shall have
entered into an agreement with AmPaM containing substantially the same terms and
conditions as are contained in Section 15 and Section 17.
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8.13 ELECTION OF CHIEF EXECUTIVE OFFICER. AmPaM shall have taken all
corporate action necessary to elect Robert A. Christianson as Chief Executive
Officer of AmPaM effective immediately following the Closing Date.
8.14 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto as
payable to the Stockholders upon the Closing and (ii) the aggregate cash amounts
specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AMPAM
The obligations of AmPaM with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. As of the Closing Date, if any
such conditions have not been satisfied, AmPaM shall have the right to terminate
this Agreement, or waive any such condition, but no such waiver shall be deemed
to affect the survival of the representations and warranties contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE AND OBLIGATIONS. All
the representations and warranties of the Stockholders and the Company contained
in this Agreement shall be true and correct as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date; all of the terms, covenants and conditions of this Agreement to be
complied with or performed by the Stockholders and the Company on or before the
Closing Date shall have been duly performed or complied with in all material
respects; and the Stockholders shall have delivered to AmPaM certificates dated
the Closing Date and signed by them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the purchase and sale of the Company Stock.
9.3 SECRETARY'S CERTIFICATE. AmPaM shall have received a certificate,
dated the Closing Date and signed by the secretary of the Company, certifying
the truth and correctness of attached copies of the Company's Articles or
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and the
Stockholders approving the execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby.
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9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Company
to conduct its business.
9.5 STOCKHOLDERS' RELEASE. The Stockholders shall have delivered to
AmPaM an instrument dated the Closing Date which shall be effective only upon
the occurrence of the Closing releasing the Company and AmPaM from (i) any and
all claims of the Stockholders against the Company and AmPaM and (ii)
obligations of the Company and AmPaM to the Stockholders, except for (A) items
specifically identified on Schedule 5.31 as being claims of or obligations to
the Stockholders, (B) continuing obligations to Stockholders relating to their
employment by the Company pursuant to employment agreements entered into as
specified in Section 8.11 hereof, (C) obligations arising under this Agreement
or the transactions contemplated hereby and (D) claims of Stockholders against
the Company for unreimbursed business expenses incurred by the Stockholders on
behalf of the Company (other than expenses related to the transactions
contemplated by this Agreement) prior to the Closing Date or unreimbursed
medical expenses of the Stockholders incurred prior to the Closing Date which
are covered by the Company's existing health insurance coverage. In the event
that the Closing Date does not occur, then the release instrument referenced
herein shall be void and of no further force or effect.
9.6 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of AmPaM and that are required to carry out the
transactions contemplated by this Agreement or incidental hereto shall have been
reasonably approved by counsel to AmPaM.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the Company and the Stockholders
(and between the Company and entities controlled by the Stockholders) specified
on Schedule 5.31 shall have been terminated effective prior to or as of the
Closing Date without any payment being made by the Company other than payments
made for services rendered, materials provided or other benefits provided to the
Company prior to the Closing Date pursuant to the terms of such agreements as in
effect as of the date of this Agreement.
9.8 OPINION OF COUNSEL. AmPaM shall have received opinions from counsel
to the Company and the Stockholders, dated the Closing Date, substantially in
the form annexed hereto as Annex V.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule
5.23(b)(2) shall have been obtained; and no action or proceeding shall have been
instituted or threatened to restrain or prohibit the purchase and sale of the
Company Stock and no
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governmental agency or body shall have taken any other action or made any
request of AmPaM as a result of which AmPaM deems it inadvisable to proceed with
the transactions hereunder.
9.10 GOOD STANDING CERTIFICATES. The Company shall have delivered to
AmPaM a certificate, dated as of a date no earlier than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by AmPaM, in each state in
which the Company is authorized to do business, showing the Company is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the Company for all periods prior to the
Closing have been filed and paid.
9.11 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto as
payable to the Stockholders upon the Closing and (ii) the aggregate cash amounts
specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9.12 FIRPTA CERTIFICATE. Each Stockholder shall have delivered to AmPaM
a certificate to the effect that he is not a foreign person pursuant to Section
1.1445-2(b) of the Treasury regulations.
9.13 RESIGNATIONS OF DIRECTORS AND OFFICERS. Any directors of the
Company, other than those identified on Schedule 2.1, shall have resigned as
directors of the Company. Any officers of the Company, other than those
identified on Schedule 2.2, shall have resigned as officers of the Company.
10. COVENANTS OF AmPaM AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. AmPaM
shall use reasonable efforts to have the Stockholders released from any and all
guarantees of the Company's indebtedness, including bond obligations, identified
on Schedule 10.1. Prior to obtaining the release of such guarantees, AmPaM shall
provide its guarantee of such indebtedness to the lenders thereof. In the event
that AmPaM cannot obtain such releases from the lenders of any such guaranteed
indebtedness identified on Schedule 10.1 on or prior to 90 days subsequent to
the Closing Date, AmPaM shall promptly pay off or otherwise refinance or retire
such indebtedness such that the Stockholders' personal liability shall be
released. AmPaM will indemnify the Stockholders against any loss or damage
suffered as a result of the personal guarantees.
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10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement, after the Closing Date, AmPaM shall not and
shall not permit any of its Subsidiaries to undertake any act that would
jeopardize the tax-free status of the exchange of Company Stock for AmPaM Stock
(but not cash or other property), including without limitation:
(a) the retirement or reacquisition, directly or indirectly,
of all or part of the AmPaM Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the
benefit of the Stockholders other than as described in the Private Placement
Memorandum or as described in this Agreement.
10.3 PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES.
(a) The Company, if possible, or otherwise the Stockholders
shall file or cause to be filed all income Tax Returns (federal, state, local or
otherwise) of any Acquired Party for all taxable periods that end on or before
the Closing Date, and shall permit AmPaM to review all such Tax Returns prior to
such filings. Unless the Company is a C corporation, the Stockholders shall pay
or cause to be paid all income Tax liabilities (in excess of all amounts already
paid with respect thereto or properly accrued or reserved with respect thereto
on the Financial Statements) with respect to the Company's operations for all
periods through and including the Closing Date.
(b) AmPaM shall file or cause to be filed all separate Returns
of, or that include, any Acquired Party for all taxable periods ending after the
Closing Date.
(c) Unless required by applicable law, regulations or
government proceedings, AmPaM shall not take any action, including any amendment
of a Tax Return of any Acquired Party, if such action would result in additional
Tax liabilities payable by any of the Stockholders for periods ending on or
prior to the Closing Date.
(d) Each party hereto shall, and shall cause its subsidiaries
and Affiliates to, provide to each of the other parties hereto such cooperation
and information as any of them reasonably may request in filing any Return,
amended Return or claim for refund, determining a liability for Taxes or a right
to refund of Taxes or in conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of all
relevant portions of relevant Returns, together with relevant accompanying
schedules and relevant work papers, relevant documents relating to rulings or
other determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which such party may possess. Each party
shall make its employees reasonably available on a mutually convenient basis at
its cost to provide explanation of any documents or information so provided.
Subject to the preceding sentence, each party required to file Returns pursuant
to this Agreement shall bear all costs of filing such Returns.
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(e) Each of the Company, AmPaM and each Stockholder shall
comply with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as a tax-free
contribution under Section 351(a) of the Code subject to gain, if any,
recognized on the receipt of cash or other property under Section 351(b) of the
Code.
10.4 DIRECTORS. The persons named in the Private Placement Memorandum
shall be appointed as directors and elected as officers of AmPaM, as and to the
extent set forth in the Private Placement Memorandum, promptly following the
Closing Date; provided, however, that the parties hereto acknowledge that if the
Company consummates an IPO, the persons who will serve as directors and
executive officers of AmPaM will be adjusted as appropriate for a publicly
traded entity, with any such changes being subject to the approval of the
majority of the Board of Directors of AmPaM.
10.5 LEGAL OPINIONS. If required by the lenders pursuant to the terms
of any agreements related to financing of the cash amounts referred to in
Section 9.11 hereof, the Company shall cause its counsel to deliver to such
lenders, at the Closing, an opinion of counsel in substantially the form
attached hereto as Annex V.
11. INDEMNIFICATION
The Stockholders and AmPaM each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS.
(a) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement until the applicable Expiration Date (as defined in
the introductory paragraph to Section 5(A)), provided that for purposes of
clause (iii) below, the applicable Expiration Date shall be the date on which
the applicable statute of limitations expires), from and against all claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by AmPaM as a result of
or arising from (i) any breach of the representations and warranties of the
Company set forth herein or on the schedules attached hereto or certificates
delivered pursuant to this Agreement, (ii) any breach of any covenant or
agreement on the part of the Company under this Agreement, or (iii) any
liability under the 1933 Act or any Federal or state securities law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating solely to the
Company which was based upon information provided to AmPaM or its counsel in
writing by the Company specifically for inclusion in the Private Placement
Memorandum and is contained in the Private Placement Memorandum, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
Company required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that no Stockholder shall be liable
for any
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indemnification obligation pursuant to this Section 11.1 in excess of such
Stockholder's pro rata share thereof determined by reference to the aggregate
value of the Base Cash Amount (as defined in Annex I of this Agreement), the
principal amount of AmPaM Notes and the shares of AmPaM Stock (valued at a price
of $13.00 per share) received by such Stockholder pursuant to Section I.A. of
Annex I hereto (without giving effect to the adjustments provided in Sections
I.B. and I.C. thereof) (giving effect to the value of such AmPaM Stock and
without giving effect to such adjustments, collectively, the "Aggregate
Consideration") such Stockholder would receive pursuant to Section I of Annex I
of this Agreement if the transactions contemplated hereby were consummated in
relation to the total Aggregate Consideration all Stockholders would receive
pursuant to Section I of Annex I of this Agreement if the transactions
contemplated hereby were consummated.
(b) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by AmPaM as a result of or arising from (i)
any breach of the representations and warranties of such Stockholder set forth
in Section 5(B) hereof, (ii) any breach of any covenant or agreement on the part
of such Stockholder under this Agreement, or (iii) any liability under the 1933
Act or any Federal or state securities law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating solely to such Stockholder which was based
upon information provided to AmPaM or its counsel in writing by such Stockholder
specifically for inclusion in the Private Placement Memorandum and is contained
in the Private Placement Memorandum, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating solely to such Stockholder required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which such statements were made not misleading.
(c) AmPaM acknowledges and agrees that other than the representations
and warranties of the Company or the Stockholders specifically contained in this
Agreement, there are no representations or warranties of the Company or the
Stockholders, either express or implied, with respect to the transactions
contemplated by this Agreement, the Company or its assets, liabilities and
business.
11.2 INDEMNIFICATION BY AmPaM. AmPaM covenants and agrees that it will
indemnify, defend, protect and hold harmless the Company and the Stockholders at
all times from and after the date of this Agreement until the applicable
Expiration Date (as defined in the introductory paragraph of Section 6, provided
that for purposes of clause (iii) below, the applicable Expiration Date shall be
the date on which the applicable statute of limitations expires), from and
against all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
Company or the Stockholders as a result of or arising from (i) any breach by
AmPaM of its representations and warranties set forth herein or on the schedules
attached
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hereto or certificates delivered pursuant to this Agreement, (ii) any breach of
any agreement on the part of AmPaM under this Agreement; or (iii) any liability
under the 1933 Act or any Federal or state securities law or regulation, at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Private Placement
Memorandum, or any amendment thereof or supplement thereto, or arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except to the extent such is based upon an untrue statement or
alleged untrue statement, or omission or alleged omission, made therein in
reliance upon, and in conformity with, the representations and warranties of the
Company or the Stockholders specifically contained in this Agreement or other
information furnished to AmPaM by the Company or the Stockholders in writing
specifically for inclusion therein.
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel reasonably
satisfactory to the Indemnified Party, any such matter so long as the
Indemnifying Party pursues the same in good faith and diligently, provided that
the Indemnifying Party shall not settle any criminal proceeding without the
written consent of the Indemnified Party. If the Indemnifying Party undertakes
to defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by Indemnifying Party, provided that if counsel to
the Indemnifying Party shall have a conflict of interest or a conflict of
interest is reasonably likely to arise that prevents counsel for the
Indemnifying Party from representing such Indemnified Party, Indemnified Party
shall have the right to participate in such matter through counsel of its own
choosing and Indemnifying Party will reimburse the Indemnified Party for the
reasonable expenses of its counsel. After the Indemnifying Party has notified
the Indemnified Party of its intention to undertake to defend or settle any such
asserted liability, and for so long as the Indemnifying Party diligently pursues
such defense, the Indemnifying Party shall not be liable for any additional
legal expenses incurred by the Indemnified Party in connection with any defense
or settlement of such asserted liability, except (i) as set forth in the
preceding sentence and (ii) to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the
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Indemnifying Party's liability under this Section with respect to such Third
Person claim shall be limited to the amount so offered in settlement by said
Third Person. Upon agreement as to such settlement between said Third Person and
the Indemnifying Party, the Indemnifying Party shall, in exchange for a complete
release from the Indemnified Party, promptly pay to the Indemnified Party the
amount agreed to in such settlement. If the Indemnifying Party does not
undertake to defend such matter to which the Indemnified Party is entitled to
indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense through counsel of its choice, at
the cost and expense of the Indemnifying Party, and the Indemnified Party may
settle such matter, and the Indemnifying Party shall pay the Indemnified Party
for the settlement amount and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith, provided, however, that under no
circumstances shall the Indemnified Party settle any Third Person claim without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. With respect to any account, note or other
receivable as to which the Stockholders have paid in full any indemnification
obligation pursuant to this Section 11 as a result of a breach of the
representation and warranty made pursuant to Section 5.11 or as to which a claim
in respect thereof has been asserted pursuant to this Section 11 that has been
applied against the Indemnification Threshold with respect to the Stockholders
as a result of a breach of the representation and warranty made pursuant to
Section 5.11, AmPaM shall cause the Company to assign such account, note or
other receivable to the Stockholders. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section
11 shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party to this Agreement with respect to any
provision of this Agreement, provided that, nothing herein shall be construed to
limit the right of a party, in a proper case, to seek injunctive relief for a
breach of this Agreement. AmPaM hereby waives, to the fullest extent permitted
under applicable law, any and all other rights, claims and causes of action,
known or unknown, it or any indemnified person may have against the Company or
any Stockholder relating to this Agreement or the transactions pursuant to this
Agreement arising under or based upon any Federal, state, local or foreign
statute, law, rule, regulation or otherwise. Any indemnity payment under this
Section 11 shall be treated as an adjustment to the exchange consideration for
Tax purposes unless a final determination (which shall include the execution of
a Form 870-AD or successor form) with respect to the Indemnified Party or any of
its Affiliate causes any such payment not to be treated as an adjustment to the
exchange consideration for U.S. Federal income Tax purposes.
11.5 LIMITATIONS ON INDEMNIFICATION. (a) AmPaM shall not assert any
claim for indemnification under this Section 11 against the Stockholders until
such time as, and solely to the extent that, the aggregate of all claims which
AmPaM may have against the Stockholders shall exceed the greater of (a) 3.0% of
the sum of (i) the cash paid to the Stockholders pursuant to Section 1.2 plus
(ii) the value of the AmPaM Stock delivered to the Stockholders pursuant to
Section 1.2
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(calculated as provided in this Section 11.5) plus (iii) the principal amount of
the AmPaM Notes delivered to the Stockholders pursuant to Section 1.2, or (b)
$50,000 (the "Indemnification Threshold"). Stockholders shall not assert any
claim for indemnification hereunder against AmPaM until such time as, and solely
to the extent that, the aggregate of all claims which Stockholders may have
against AmPaM shall exceed $50,000; provided, however, that this sentence shall
not be applicable with respect of any failure by AmPaM to (i) deliver the
consideration specified in Annex I hereto on the Closing Date upon the
satisfaction, or waiver by AmPaM, of all conditions to the occurrence of the
Closing Date specified in Section 9 or (ii) comply with its obligations pursuant
to Section 10.1. After the $50,000 threshold for AmPaM (subject to the proviso
in the preceding sentence) or the Indemnification Threshold for a Stockholder
has been met, all claims must be made in $10,000 increments, which claims may be
cumulated in order to meet such $10,000 thresholds. For purposes of this
paragraph, the AmPaM Stock delivered to the Stockholders shall be valued at
$13.00 per share.
(b) No person shall be entitled to indemnification under this Section
11 if and to the extent that such person's claim for indemnification is directly
or indirectly related to a breach by such person of any representation,
warranty, covenant or other agreement set forth in this Agreement. No claim for
indemnification against the Stockholders shall limit, diminish or change any
obligation of AmPaM pursuant to Section 10.1 hereof.
(c) Notwithstanding any other term of this Agreement, no Stockholder
shall be liable under this Section 11 for an amount which exceeds eighty-five
percent (85%) of the amount of proceeds received by such Stockholder (valued as
of the Closing Date) in connection with the purchase and sale of the Company
Stock. For purposes of this paragraph, the AmPaM Stock shall be valued at $13.00
per share.
(d) A Stockholder may pay any indemnification obligation under Section
11 by means of the payment of cash or a combination of the payment of cash, the
forgiveness of amounts owed pursuant to the AmPaM Notes and the delivery to
AmPaM of shares of AmPaM Stock; provided that the percentage of the
indemnification obligation satisfied by means of the delivery of shares of AmPaM
Stock does not exceed the percentage of AmPaM Stock comprising the total
consideration paid to such Stockholder by AmPaM to such Stockholder pursuant to
Annex I. For the purpose of crediting Stockholders for payments made to AmPaM by
means of delivery of shares of AmPaM Stock, the AmPaM Stock shall be valued at
$13.00 per share.
(e) In determining the amount of any loss, liability or expense for
which any party is entitled to indemnification under this Agreement, the gross
amount thereof will be reduced by any correlative insurance proceeds or other
third party indemnity or reimbursement proceeds realized or to be realized by
such party (or, in the case of AmPaM, by AmPaM, the Company or any subsidiary of
AmPaM or the Company) and such correlative insurance proceeds or other third
party indemnity or reimbursement proceeds shall be net of any insurance premium
or other incremental cost or expense owed or payable to any third party which
becomes due as a result of such claim. AmPaM
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shall use commercially reasonable efforts to pursue any available insurance
coverage or other rights of indemnity or reimbursement from third parties with
respect to any such loss, liability or expense.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) by mutual consent of AmPaM and the Stockholders;
(ii) by the Stockholders, if the transactions contemplated by
this Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by the Company
or the Stockholders prior to or on the Closing Date;
(iii) by AmPaM, if the transactions contemplated by this
Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by AmPaM prior
to or on the Closing Date;
(iv) by the Stockholders, if a material breach or default
shall be made by AmPaM in the observance or in the due and timely
performance of any of the covenants or agreements contained herein
relating to AmPaM, and the curing of such default shall not have been
made (or in the reasonable judgment of such Stockholders cannot be
made) on or before the Closing Date;
(v) by AmPaM, if a material breach or default shall be made by
the Company or the Stockholders in the observance or in the due and
timely performance of any of the covenants or agreements contained
herein relating to the Company or the Stockholders, and the curing of
such default shall not have been made (or in the reasonable judgment of
AmPaM cannot be made) on or before the Closing Date;
(vi) by the Stockholders, if the conditions set forth in
Section 8 hereof have not been satisfied or waived as of the Closing
Date; or
(vii) by AmPaM, if the conditions set forth in Section 9
hereof have not been satisfied or waived as of the Closing Date.
12.2 PROCEDURE AND EFFECT OF TERMINATION. A determination to terminate
this Agreement by AmPaM pursuant to Section 12.1 shall be valid and effective
only if a written notice of termination, accompanied by a certified copy of
resolutions of the board of directors of AmPaM that evidence the authorization
of the officer of AmPaM to deliver a written notice of termination of this
Agreement pursuant to Section 12.1, is given to the Stockholders in the manner
specified for notices
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in this Agreement. A determination to terminate this Agreement by the
Stockholders pursuant to Section 12.1 shall be valid and effective only if a
written notice of termination, signed by Stockholders who would be entitled to
receive a majority of the shares of AmPaM Stock specified in Section I of Annex
I to this Agreement if the transactions contemplated hereby were consummated, is
given to AmPaM in the manner specified for notices in this Agreement. Upon the
giving of notice of termination of this Agreement pursuant to Section 12.1 as
specified in the preceding sentence, this Agreement shall terminate, and the
transactions contemplated hereby shall be abandoned, without further action by
any of the parties hereto. Immediately upon any such termination, AmPaM shall
deliver written notice of such termination to the Other Founding Companies. If
this Agreement is terminated as provided in this Section 12, no party hereto
shall have any liability or further obligation hereunder to any other party,
except as provided in Section 14 and Section 18.6, provided, that, the
termination of this Agreement will in no way limit any obligation or liability
of any party based on or arising from a breach or default by such party with
respect to any of its representations, warranties, covenants or agreements
contained in this Agreement including, but not limited to, legal and audit costs
and out of pocket expenses that occurred prior to such termination.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The Stockholders will not, without the
prior written consent of AmPaM, for a period of two (2) years following the
Closing Date, for any reason whatsoever, directly or indirectly, for themselves
or on behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, whether paid or unpaid, in any plumbing, piping,
mechanical, heating, ventilation or air conditioning contracting,
installation or services business or operation, whether for
residential, commercial, industrial or governmental customers, or any
ancillary contracting, installation or services business directly
related thereto (such business and operations referred to herein as the
"Plumbing and Mechanical Business"), within 100 miles of where the
Company or any of its subsidiaries conducted business within two (2)
years prior to the Closing Date (the "Territory");
(ii) call upon any person who is, at the Closing Date, within
the Territory, an employee of AmPaM or any subsidiary thereof for the
purpose or with the intent of enticing such employee away from or out
of the employ of AmPaM or any subsidiary thereof;
(iii) call upon any person or entity which is, at the Closing
Date, or which has been within three (3) years prior to the Closing
Date, a customer of AmPaM or any subsidiary thereof, of the Company or
of any of the Other Founding Companies for the purpose of soliciting
customers, orders or contracts for any Plumbing and Mechanical Business
in direct competition with AmPaM within the Territory;
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(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor in the Plumbing
and Mechanical Business, which candidate, to the actual knowledge of
such Stockholder after due inquiry, was called upon by AmPaM or any
subsidiary thereof or for which, to the actual knowledge of such
Stockholder after due inquiry, AmPaM or any subsidiary thereof made an
acquisition analysis, for the purpose of acquiring such entity; or
(v) disclose to any person, firm, partnership, corporation or
business the names or identities of any person, firm, partnership,
corporation or business which has been a customer of the Company or any
of its subsidiaries within the two (2) years prior to the Closing Date
for any reason or purpose whatsoever except to the extent that the
Company has in the past disclosed such information to the public for
valid business reasons; or
(vi) testify as an expert witness in matters related to the
Plumbing and Mechanical Business for an adverse party to AmPaM, the
Company or any Other Founding Companies in litigation.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Stockholder from acquiring as a passive investment (i) not more
than one percent (1%) of the capital stock of a competing business whose stock
is traded on a national securities exchange, the NASDAQ Stock Market or
over-the-counter, or (ii) not more than five percent (5%) of the capital stock
of a competing business whose stock is not publicly traded if the Board of
Directors of AmPaM consents to such acquisition.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to
AmPaM as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to AmPaM for which it
would have no other adequate remedy, each Stockholder agrees that the foregoing
covenant may be enforced by AmPaM in the event of breach by such Stockholder, by
injunctions and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
Stockholders in light of the activities and business of AmPaM and the
subsidiaries thereof on the date of the execution of this Agreement and the
current plans of AmPaM as described in the Private Placement Memorandum.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
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13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against AmPaM or any subsidiary thereof, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by AmPaM of such
covenants. It is specifically agreed that the period of two (2) years stated at
the beginning of this Section 13, during which the agreements and covenants of
each Stockholder made in this Section 13 shall be effective, shall be computed
by excluding from such computation any time during which such Stockholder is
found to be in violation of any provision of this Section 13 as determined by
any of (i) a written agreement to such effect executed and delivered by AmPaM
and such Stockholder, (ii) a determination by an arbitration panel pursuant to
an arbitration conducted pursuant to Section 18.16 hereof or (iii) a
non-appealable judgment of a court of competent jurisdiction. The covenants
contained in Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto. The covenants contained in Section 13
shall have no effect if the transactions contemplated by this Agreement are not
consummated.
13.6 MATERIALITY. The Company and the Stockholders hereby agree that
the covenants contained in this Section 13 are a material and substantial part
of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company, the Other Founding Companies,
and/or AmPaM, such as operational policies, customer lists, and pricing and cost
policies that are valuable, special and unique assets of the Company's, the
Other Founding Companies' and/or AmPaM's respective businesses. The Stockholders
agree that they will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of AmPaM, (b) following the
Closing, such information may be disclosed by the Stockholders as is required in
the course of performing their duties for AmPaM or the Company and (c) to its
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.1; provided, however
that (i) the foregoing disclosure prohibition shall not apply in the event that
(i) such information becomes known to the public generally through no fault of
the Stockholders, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), the Stockholders shall, if
possible, give prior written notice thereof to AmPaM and provide AmPaM with the
opportunity to contest such disclosure, or (iii) the disclosing party reasonably
believes that such disclosure is required in connection with the defense of a
lawsuit against the disclosing party. In the event of a breach or threatened
breach by any of the Stockholders of the provisions of this Section, AmPaM shall
be entitled to an injunction restraining such Stockholders from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting AmPaM from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages. In the event the
transactions contemplated
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by this Agreement are not consummated, Stockholders shall have none of the
above-mentioned restrictions on their ability to disseminate confidential
information with respect to the Company.
14.2 AmPaM. AmPaM recognizes and acknowledges that it had in the past
and currently has access to certain confidential information of the Company,
such as operational policies, customer lists, and pricing and cost policies that
are valuable, special and unique assets of the Company's business. AmPaM agrees
that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
the Company, (b) to its counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
14.2, (c) to the Other Founding Companies and their representatives pursuant to
Section 7.1(b) of the Other Agreements and (d) to potential purchasers of
securities of AmPaM to the extent necessary or advisable in connection with the
applicable securities laws; provided, however that the foregoing disclosure
prohibition shall not apply in the event that (A) such information becomes known
to the public generally through no fault of AmPaM, (B) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (B), AmPaM
shall, if possible, give prior written notice thereof to the Company and the
Stockholders and provide the Company and the Stockholders with the opportunity
to contest such disclosure, or (C) the disclosing party reasonably believes that
such disclosure is required in connection with the defense of a lawsuit against
the disclosing party. In the event of a breach or threatened breach by AmPaM of
the provisions of this Section 14.2, the Company and the Stockholders shall be
entitled to an injunction restraining AmPaM from disclosing, in whole or in
part, such confidential information. Nothing herein shall be construed as
prohibiting the Company and the Stockholders from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by this Agreement are not consummated
for any reason, AmPaM shall nevertheless remain subject to this Section 14.2,
except that it shall not be permitted to make any disclosures otherwise than
pursuant to clause (A), (B) or (C) above.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Sections 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14
shall survive the termination of this Agreement for a period of five years from
the Closing Date.
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14.5 RETURN OF INFORMATION. If the transactions contemplated by this
Agreement are not consummated, AmPaM will return or destroy all confidential
information regarding the Company.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS RELATING TO AMPAM STOCK AND AMPAM NOTES. For
a period of two years from the Closing Date or, in the event that the Company
completes an IPO, for a period through the second anniversary of the date of the
closing of such IPO (the "Restricted Period"), no Stockholder shall (i) sell,
assign, exchange, transfer, pledge, or otherwise dispose of any shares of AmPaM
Stock or AmPaM Notes received by the Stockholders pursuant to this Agreement or
any securities convertible into, exchangeable or exercisable for any shares of
AmPaM Stock or AmPaM Notes received by such Stockholder pursuant to this
Agreement, (ii) grant any option to purchase, or otherwise enter into any
contract to sell, assign, transfer, pledge or otherwise dispose of, any shares
of AmPaM Stock or AmPaM Notes received by such Stockholder pursuant to this
Agreement, or (iii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the AmPaM Stock or AmPaM Notes, whether any
such swap or transaction is to be settled by delivery of shares of AmPaM Stock
or AmPaM Notes or other securities, by the delivery or payment of cash or
otherwise, except, in the case of clauses (i), (ii) or (iii) above, (A) as
otherwise agreed by AmPaM, (B) for the sale of shares of AmPaM Stock, and
entering into agreements relating to the sale of shares of AmPaM Stock, pursuant
to Section 17 hereof, (C) for transfers to (I) immediate family members of such
Stockholder who agree with AmPaM in writing to be bound by the restrictions set
forth in this Section 15.1, (II) trusts, limited partnerships or other estate
planning entities for the benefit of such Stockholder or family members of such
Stockholder which have agreed with AmPaM in writing, through action taken by the
trustees, partners or other persons having authority to bind the trust, limited
partnership or other estate planning entity, to be bound by the restrictions set
forth in this Section 15.1, (III) any charitable organization that qualifies for
receipt of charitable contributions under Section 170(c) of the Code which
agrees with AmPaM in writing to be bound by the restrictions set forth in this
Section 15.1, (D) for transfers of AmPaM Stock or AmPaM Notes to AmPaM pursuant
to Section 11.5(d), (E) for transfers to another Stockholder, to another person
or entity who receives shares of AmPaM Stock or AmPaM Notes or AmPaM Series A
Preferred Stock pursuant to the Other Agreements or to Sterling City Capital LLC
or any of its Affiliates provided that (1) such transaction is exempt from the
registration requirements of the 1933 Act as evidenced by the delivery to AmPaM
of an opinion of counsel in form and substance reasonably satisfactory to AmPaM
and (2) any such transferee agrees in writing to be bound by the restrictions
set forth in this Section 15.1, (F) transfers of shares of AmPaM Notes, shares
of AmPaM Stock, or grants of options to purchase shares of AmPaM Stock, by such
Stockholder to employees of the Company of up to an aggregate of 15% of the
shares of AmPaM Stock received by such Stockholder pursuant to this Agreement
provided that (1) any such transaction is exempt from the registration
requirements of the 1933 Act as evidenced by the delivery to AmPaM of an opinion
of counsel in form and substance reasonably satisfactory to AmPaM and (2) any
such employee agrees with AmPaM in writing to be bound by the restrictions set
forth in this Section 15.1 or (G) the sale by such Stockholder in an IPO of
shares of AmPaM Stock representing not more than 10% of the Aggregate
Consideration in cash; provided,
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however, that in no circumstance will a Stockholder be entitled to sell shares
of AmPaM Stock in an IPO to the extent that the sale of such shares by such
Stockholder would result in such Stockholder receiving in excess of 45% of the
Aggregate Consideration in cash; and, provided further, if AmPaM is advised in
writing in good faith by any managing underwriter of an underwritten offering of
the securities being offered pursuant to any registration statement under
Section 17.1 that the number of shares to be sold by persons other than AmPaM is
greater than the number of such shares which can be offered without adversely
affecting the success of the offering, AmPaM may reduce pro rata (among the
Stockholders and all other selling security holders in the offering) the number
of shares offered for the accounts of such persons (based upon the number of
shares held by such person) to a number deemed satisfactory by such managing
underwriter. During the Restricted Period, the certificates evidencing the AmPaM
Stock or AmPaM Notes delivered to the Stockholders pursuant to Section 3 of this
Agreement will bear a legend substantially in the form set forth below:
THE [SHARES/NOTES] REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE
TERMS OF THE ACQUISITION AGREEMENT PURSUANT TO WHICH SUCH SHARES WERE ISSUED,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, PLEDGE OR OTHER DISPOSITION PRIOR TO EXPIRATION
OF THE RESTRICTED PERIOD REFERRED TO IN THE ACQUISITION AGREEMENT EXCEPT IN
ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT. SUCH RESTRICTIONS ON TRANSFER ARE
SET FORTH IN AN ACQUISITION AGREEMENT, A COPY OF WHICH IS MAINTAINED AT THE
PRINCIPAL OFFICES OF THE ISSUER. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 TRANSFER RESTRICTIONS RELATING TO ADDITIONAL CONSIDERATION. No
Stockholder shall (i) sell, assign, exchange, transfer, pledge, or otherwise
dispose of any right to receive any consideration pursuant to Section II of
Annex I to this Agreement (the "Additional Consideration Right") or any
securities convertible into, exchangeable or exercisable for any Additional
Consideration Right, (ii) grant any option to purchase, or otherwise enter into
any contract to sell, assign, transfer, pledge or otherwise dispose of, any
Additional Consideration Right, or (iii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of any Additional
Consideration Right, whether any such swap or transaction is to be settled by
delivery of shares of AmPaM Stock or other securities, by the delivery or
payment of cash or otherwise.
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16. FEDERAL SECURITIES ACT REPRESENTATIONS
16.1 COMPLIANCE WITH LAW. Each Stockholder acknowledges that the shares
of AmPaM Stock, the Additional Consideration Right and any AmPaM Notes to be
delivered to such Stockholder pursuant to this Agreement have not been and will
not be registered under the 1933 Act (except as provided in Section 17 hereof)
and therefore may not be sold, assigned, exchanged, transferred, pledged or
otherwise disposed of without compliance with the 1933 Act which, among other
matters, would require registration under the 1933 Act unless exemption from the
registration requirements is available for such transaction. The AmPaM Stock,
the Additional Consideration Right and any AmPaM Notes to be acquired by each
Stockholder pursuant to this Agreement is being acquired solely for such
Stockholder's own account, for investment purposes only, and with no present
intention of selling, assigning, exchanging, transferring, pledging, or
otherwise disposing of it. Each Stockholder covenants, warrants and represents
that neither the shares of AmPaM Stock, the Additional Consideration Right nor
any AmPaM Notes issued to such Stockholder will be offered, sold, assigned,
exchanged, pledged, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the 1933 Act and the rules
and regulations of the SEC. All certificates representing the AmPaM Stock shall
bear the following legend in addition to the legend required under Section 15 of
this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each Stockholder is able to bear
the economic risk of an investment in the AmPaM Stock and AmPaM Notes to be
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment. Each Stockholder has substantial knowledge and experience in
making investment decisions of this type (or is relying on qualified purchaser
representatives with such knowledge and experience in making this decision), and
is capable, either individually or with such purchaser representatives, of
evaluating the merits and risks of this investment. Each Stockholder has had an
adequate opportunity to ask questions and receive answers from the officers of
AmPaM concerning any and all matters relating to the transactions described
herein including, without limitation, the background and experience of the
current and proposed officers and directors of AmPaM, the plans for the
operations of the business of AmPaM, the business, operations and financial
condition of the Founding Companies other than the Company, and any plans for
additional acquisitions. Each Stockholder has asked any and all questions of the
nature described in the preceding sentence and all questions have been answered
to such Stockholder's satisfaction. Except as set forth on Schedule 16.2, each
Stockholder is an "accredited investor" as defined in Rule 501(a) of the 1933
Act. Neither the foregoing nor any investigation made by the Stockholders
referred to above shall in any way affect the representations, warranties,
covenants and agreements of AmPaM made herein except to the extent that AmPaM is
relying upon the representations of the Stockholders in Section 16.1 and in this
Section 16.2 for purposes of
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AmPaM's representations and warranties in Sections 6.9, 6.11, 6.15 and 6.17
hereof as specified therein.
16.3 RELIANCE BY AmPaM. Each Stockholder acknowledges that AmPaM in
relying upon the representations and covenants of such Stockholder set forth in
Section 16.1 and Section 16.2 for purposes of compliance by AmPaM with Federal
and state securities laws related to the issuance of AmPaM Stock pursuant to
this Agreement and the Other Agreements.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. Whenever AmPaM proposes to register
any AmPaM Stock for its own or other's account under the 1933 Act for a public
offering, other than (i) any shelf or other registration of shares to be used as
consideration for acquisitions of additional businesses by AmPaM and (ii)
registrations relating to employee benefit plans, AmPaM shall give each of the
Stockholders prompt written notice of its intent to do so. Upon the written
request of any of the Stockholders given within 15 calendar days after receipt
of such notice, notwithstanding the provisions of Section 15 (except as
specified below with respect to an IPO), AmPaM shall cause to be included in
such registration all of the AmPaM Stock issued to such Stockholders pursuant to
this Agreement (including any stock issued as or issuable upon the conversion or
exchange of any convertible security, warrant, right or other security which is
issued by AmPaM as a stock split, dividend or other distribution with respect
to, or in exchange for, or in replacement of such AmPaM Stock) which any such
Stockholder requests, other than shares of AmPaM Stock which may then be
immediately sold under Rule 144(k) (or any similar or successor provision)
promulgated under the 1933 Act, and other than shares of AmPaM Stock that have
been theretofore sold by the Stockholder in accordance with the 1933 Act,
provided that AmPaM shall have the right to reduce pro rata the number of shares
of each selling Stockholder included in such registration to the extent that
inclusion of such shares would, in the written opinion of tax counsel to AmPaM
or its independent auditors, jeopardize the status of the transactions
contemplated hereby and by the Private Placement Memorandum as a tax-free
organization under Section 351 of the Code; provided, however, that with respect
to a proposal by AmPaM to register AmPaM Stock under the 1933 Act in connection
with an IPO, no Stockholder shall be permitted pursuant to this Section 17.1 to
have included in such registration more shares of AmPaM Stock than permitted to
be sold by such Stockholder pursuant to Section 15.1. In addition, if AmPaM is
advised in writing in good faith by any managing underwriter of an underwritten
offering of the securities being offered pursuant to any registration statement
under this Section 17.1 that the number of shares to be sold by persons other
than AmPaM is greater than the number of such shares which can be offered
without adversely affecting the success of the offering, AmPaM may reduce pro
rata (among the Stockholders and all other selling security holders in the
offering) the number of shares offered for the accounts of such persons (based
upon the number of shares held by such person) to a number deemed satisfactory
by such managing underwriter. If any Stockholder disapproves of the terms of the
underwriting, that Stockholder may elect to withdraw therefrom by written notice
to AmPaM and the managing underwriter. That Stockholder's shares of AmPaM Stock
so withdrawn shall also be withdrawn from registration; provided, however, that,
if by the withdrawal of such shares a greater number of shares of AmPaM
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Stock held by other Stockholders may be included in such registration, then
AmPaM shall offer to all other Stockholders of AmPaM the right to include
additional shares in the same proportion used in effecting the above
limitations. AmPaM shall not, for a period of two years following the Closing
Date, grant to any other person any rights to cause AmPaM to register any
securities in priority over, or in precedent to, the rights granted to the
Stockholders hereunder and to the stockholders of the Other Founding Companies
pursuant to Section 17 of the Other Agreements.
17.2 REGISTRATION PROCEDURES. Whenever AmPaM is required to register
shares of AmPaM Stock pursuant to Section 17.1, AmPaM will, as expeditiously as
possible:
(i) Prepare and file with the SEC a registration statement
with respect to such shares and use its best efforts to cause such
registration statement to become effective (provided that before filing
a registration statement or prospectus or any amendments or supplements
or term sheets thereto, AmPaM will furnish a representative of the
Stockholders with copies of all such documents proposed to be filed) as
promptly as practical;
(ii) Notify the Stockholders of any stop order issued or
threatened by the SEC and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered;
(iii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 120 days, cause the
prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the 1933
Act; and comply with the provisions of the 1933 Act applicable to it
with respect to the disposition of all securities covered by such
registration statement during the applicable period in accordance with
the intended methods of disposition by the sellers thereof set forth in
such registration statement or supplement to the prospectus;
(iv) Furnish to each Stockholder who so requests such number
of copies of such registration statement, each amendment and supplement
thereto and the prospectus included in such registration statement
(including each preliminary prospectus and any term sheet associated
therewith), and such other documents as such Stockholder may reasonably
request in order to facilitate the disposition of the relevant shares;
(v) Make "generally available to its security holders" (within
the meaning of Rule 158) an earnings statement satisfying the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder no
later than 90 days after the end of the 12-month period beginning with
the first day of AmPaM's first fiscal quarter commencing after the
effective date of the registration statement;
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(vi) Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement at
the earliest possible moment;
(vii) If requested by the managing underwriter or
underwriters, if any, or any participating Stockholder, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters or any
participating Stockholder, as the case may be, reasonably requests to
be included therein, including, without limitation, information with
respect to the number of shares of AmPaM Stock being sold by
participating Stockholders to any underwriter or underwriters, the
purchase price being paid therefor by such underwriter or underwriters
and with respect to any other terms of an underwritten offering of the
shares of AmPaM Stock to be sold in such offering, and promptly make
all required filings of such prospectus by supplement or post-effective
amendment;
(viii) Make available for inspection by participating
Stockholders, any underwriter participating in any disposition pursuant
to such registration statement, and the counsel retained by the
participating Stockholders, counsel for the underwriters and any
accountant or other agent retained by participating Stockholders or any
such underwriter (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of AmPaM
(the "Records"), as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause AmPaM's
officers, directors and employees to supply all information reasonably
requested by any such Inspectors in connection with such registration
statement; provided, that records which AmPaM determines, in good
faith, to be confidential and which AmPaM notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or (ii) the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction after delivery of
sufficient notice to AmPaM to enable AmPaM to contest such subpoena or
order;
(ix) Take all other steps reasonably necessary to effect the
registration of the shares of AmPaM Stock contemplated hereby;
(x) Use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested by
the Stockholders, and to keep such registration or qualification
effective during the period such registration statement is required to
be kept effective, provided that AmPaM shall not be required to become
subject to taxation, to qualify generally to do business or to file a
general consent to service of process in any such states or
jurisdictions;
(xi) Cause all such shares of AmPaM Stock to be listed or
included not later than the date of the first sale of shares of AmPaM
Stock under such registration statement on any
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securities exchanges or trading systems on which similar securities
issued by AmPaM are then listed or included; and
(xii) Notify each Stockholder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within
the period that AmPaM is required to keep the registration statement
effective of the happening of any event as a result of which the
prospectus included in such registration statement (as then in effect),
together with any associated term sheet, contains an untrue statement
of a material fact or omits to state any fact required to be stated
therein or necessary to make the statements therein (in the case of the
prospectus or any preliminary prospectus, in light of the circumstances
under which they were made) not misleading, and, at the request of such
Stockholder, AmPaM promptly will prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of
the covered shares, such prospectus will not contain an untrue
statement of material fact or omit to state any fact required to be
stated therein or necessary to make the statements therein (in the case
of the prospectus or any preliminary prospectus, in light of the
circumstances under which they were made) not misleading.
All expenses incurred in connection with the registration under this
Article 17 and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printer and
accounting fees, but excluding underwriting commissions and discounts), shall be
borne by AmPaM.
17.3 INDEMNIFICATION.
(a) In connection with any registration under Section 17.1,
AmPaM shall indemnify, to the extent permitted by law, each selling Stockholder
(an "Indemnified Party") against all losses, claims, damages, liabilities and
expenses arising out of or resulting from any untrue or alleged untrue statement
of material fact contained or incorporated by reference in any registration
statement, prospectus or preliminary prospectus or associated term sheet or any
omission or alleged omission to state or incorporated by reference therein a
material fact required to be stated or incorporated by reference therein or
necessary to make the statements therein not misleading except insofar as the
same are caused by or contained in or omitted from any information furnished in
writing to AmPaM by such Indemnified Party expressly for use therein or by any
Indemnified Parties' failure to deliver a copy of the registration statement or
prospectus or any amendment or supplements thereto after AmPaM has furnished
such Indemnified Party with a sufficient number of copies of the same.
(b) In connection with any registration under Section 17.1,
each selling Stockholder shall furnish to AmPaM in writing such information
concerning the Stockholder and his or her proposed offering of shares as is
reasonably requested by AmPaM for use in any such registration statement or
prospectus and will indemnify, to the extent permitted by law, AmPaM, its
directors and officers and each person who controls AmPaM (within the meaning of
the 1933 Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged
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untrue statement of a material fact or any omission or alleged omission to state
therein a material fact required to be stated in the registration statement or
prospectus or any amendment thereof or supplement thereto or necessary to make
the statements therein not misleading, but only to the extent that such untrue
or alleged untrue statement or omission or alleged omission is contained in or
omitted from information so furnished in writing to AmPaM by such Stockholder
expressly for use in the registration statement. Notwithstanding the foregoing,
the liability of a Stockholder under this Section 17.3 shall be limited to an
amount equal to the net proceeds actually received by such Stockholder from the
sale of the relevant shares covered by the registration statement.
(c) Any person entitled to indemnification hereunder will (i)
give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) unless in such indemnified parties' reasonable
judgment, a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. Any failure to give prompt notice shall deprive a party of
its right to indemnification hereunder only to the extent that such failure
shall have adversely affected the indemnifying party. If the defense of any
claim is assumed, the indemnifying party will not be subject to any liability
for any settlement made without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party that is not entitled or elects
not, to assume the defense of a claim, will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party, a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
17.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 17.1 covering an underwritten registered offering, (i) each
participating Stockholder shall execute and deliver to AmPaM a written power of
attorney instrument that (A) appoints an officer of AmPaM as such Stockholder's
attorney-in-fact for purposes of executing and delivering an underwriting
agreement among AmPaM, the underwriters named therein and such Stockholder
specifying the terms and conditions applicable to the sale of AmPaM Stock of
such Stockholder in such offering and (B) otherwise is in such form and
containing such provisions as are customary in the securities business for such
an arrangement in connection with an underwritten registered offering in which
one or more stockholders of the issuer are participants, including a provision
that authorizes the attorney-in-fact appointed by such Stockholder to execute
and deliver such an underwriting agreement in the event that the net price per
share to be received by such Stockholder from the sale of the shares of AmPaM
Stock to be sold in such offering is not less than a price specified in such
instrument and (iii) AmPaM and each participating Stockholder agree to enter
into a written agreement with the managing underwriters in such form and
containing such provisions as are customary in the securities business for such
an arrangement between such managing underwriters and companies of AmPaM's size
and investment stature, including indemnification; provided, however, that (A)
such Stockholder shall be exempt and excluded from any indemnification of the
managing underwriters other than with respect to information provided by such
Stockholder with respect to such Stockholder to AmPaM or the managing
underwriters
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specifically for inclusion in any such registration statement and (B) such
Stockholder shall not be obligated to enter into such an underwriting agreement
in the event that the net price per share to be received by such Stockholder
from the sale of shares of AmPaM Stock to be sold in such offering is less than
the floor price specified in the power of attorney instrument executed and
delivered to AmPaM pursuant to clause (i) above.
17.5 TRANSFER OF RIGHTS. The right to cause AmPaM to register shares of
AmPaM Stock under this Agreement may be assigned to a transferee or assignee of
any Stockholder to the extent that such transferee or assignee is a member of
the immediate family of a Stockholder, a trust, limited partnership or other
estate planning entity for the benefit of any such persons or a charitable
organization that qualifies for receipt of charitable contributions under
Section 170(c) of the Code.
17.6 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC that may permit the sale of AmPaM
stock to the public without registration, following an IPO AmPaM agrees to use
its reasonable efforts, from and after the completion of an IPO, to:
(i) make and keep public information regarding AmPaM available
as those terms are understood and defined in Rule 144 under the 1933
Act beginning 90 days following the effective date of a registration
statement relating to an IPO;
(ii) file with the SEC in a timely manner all reports and
other documents required of AmPaM under the 1933 Act and the 1934 Act
at any time after it has become subject to such reporting requirements;
and
(iii) so long as a Stockholder owns any restricted AmPaM
Stock, furnish to each Stockholder forthwith upon written request a
written statement by AmPaM as to its compliance with the current public
information requirements of Rule 144 (at any time from and after 90
days following the effective date of a registration statement relating
to an IPO), and of the 1933 Act and the 1934 Act (any time after it has
become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of AmPaM, and such other reports and
documents so filed as a Stockholder may reasonably request in availing
itself of any rule or regulation of the SEC allowing a Stockholder to
sell any such shares without registration.
18. REDEMPTION OF AmPaM STOCK
18.1 REDEMPTION TRIGGER. In the event that, within three years of the
Closing Date, (i) AmPaM has not consummated an IPO and (ii) any Stockholder has
not received cash (including proceeds from the public or private sale of AmPaM
Stock received as consideration hereunder and the receipt of principal payments,
if any, made with respect to AmPaM Notes held by such Stockholder) equal to or
exceeding 50% of the Aggregate Consideration on or prior to the third
anniversary of the Closing Date, such Stockholder shall have the right (the "Put
Right"), but not the
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obligation, commencing on the third anniversary of the Closing Date to require
AmPaM to purchase a number of shares of AmPaM Stock then owned by such
Stockholder, subject to the limitations set forth in Section 18.2 below. The
purchase price for such redemption shall be $13.00 per share, such price to be
subject to appropriate adjustment to reflect any reclassification, stock
dividend, subdivision, split-up or combination of shares of AmPaM Stock after
the date hereof.
18.2 MINIMUM REDEMPTION; LIMITATIONS. If the events specified in
Section 18.1(i) and 18.1(ii), with Section 18.1(ii) being determined on an
individual Stockholder basis, have not occurred within the time specified, AmPaM
shall be obligated to purchase from each eligible Stockholder no less than 10%
of the AmPaM Stock held by such Stockholder annually; provided, however, that
the Stockholders shall not be entitled to exercise their Put Rights if and to
the extent the Company has not achieved the Target Net Income (as defined in
Annex I hereto) for the year preceding the year in which a Stockholder seeks to
exercise his Put Right. The redemptions will be funded by internal cash flows or
alternative financing arrangements but AmPaM's obligation to make any redemption
pursuant to this Section 18 will be subject to the covenants and restrictions
contained in AmPaM's then existing private or public debt or equity instruments.
18.3 NOTICE; EXERCISE. The Stockholders may exercise their Put Right by
giving written notice (the "Put Notice") to AmPaM within thirty (30) days of the
third anniversary of the execution hereof. If any Stockholder does not provide
AmPaM with a Put Notice within such thirty-day period, the Put Right applicable
to such Stockholder shall expire. The date for closing the sale of any shares of
AmPaM Stock pursuant to a proper exercise of a Put Right shall in no event be
earlier than 90 days after the date AmPaM receives the Put Notice. Any such
closing shall be at such time of day and place as shall be mutually agreed
between such holder and AmPaM. At such closing AmPaM shall make payment for the
AmPaM Stock to be repurchased by wire transfer of immediately available funds to
a bank account designated by such Stockholder for such purpose and such
Stockholder shall deliver to AmPaM certificates, duly endorsed for transfer,
representing the shares of AmPaM Stock to be purchased and sold pursuant to the
exercise of such Put Right.
18.4 ADDITIONAL REDEMPTIONS. In the event AmPaM has not consummated an
IPO and notwithstanding the foregoing, to the extent the Stockholders who have
received greater than 50% of their Aggregate Consideration in cash wish to
tender AmPaM Stock to AmPaM for purchase, AmPaM will use its commercially
reasonable efforts to continue to repurchase up to 10% of the AmPaM Stock held
by such Stockholder annually.
18.5 TERMINATION OF REDEMPTION OBLIGATION. Put Rights with respect to
any individual Stockholder will terminate upon receipt by such Stockholder of
50% of his Aggregate Consideration in cash; such termination will not, however,
limit such Stockholders ability to participate in the additional redemptions
provided in Section 18.4. Notwithstanding the foregoing, all of AmPaM's
redemption obligations contained in this Section 18 shall terminate on the
earlier to occur of (i) an IPO, (ii) any sale of all or substantially all of
AmPaM's assets in one transaction or series of transactions, (iii) any merger or
consolidation which involves AmPaM and in which AmPaM is not the surviving
entity or (iv) any transaction after which the shares of AmPaM Common Stock, if
any,
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which are then held by persons other than the holders of AmPaM Common Stock as
of the Closing Date constitute 50% or more of AmPaM Common Stock outstanding as
of the date of the consummation of such transaction.
19. GENERAL
19.1 COOPERATION. The Company, Stockholders and AmPaM shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The Company will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the Company cooperate with
AmPaM on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law and except as
provided in Section 17.5) and shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of AmPaM and the Company, and the
heirs, successors and legal representatives of the Stockholders.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company and AmPaM and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the Stockholders, the Company and AmPaM, acting
through their respective officers or trustees, duly authorized by their
respective Boards of Directors. Any disclosure made on any Schedule delivered
pursuant hereto shall be deemed to have been disclosed for purposes of any other
Schedule required hereby, provided that the Company shall make a good faith
effort to cross reference disclosure, as necessary or advisable, between related
Schedules.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument. A telecopied
facsimile of an executed counterpart of this Agreement shall be sufficient to
evidence the binding agreement of each party to the terms hereof. However, each
party agrees to return to the other parties an original, duly executed
counterpart of this Agreement promptly after delivery of a telecopied facsimile
thereof.
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19.5 BROKERS AND AGENT. Except as disclosed on Schedule 18.5, each
party hereto represents and warrants that it employed no broker or agent in
connection with this transaction and agrees to indemnify the other parties
hereto against all loss, cost, damages or expense arising out of claims for fees
or commission of brokers employed or alleged to have been employed by such
indemnifying party.
19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, AmPaM will pay the reasonable fees, expenses and
disbursements of AmPaM and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto, including all costs and expenses incurred in the performance
and compliance with all conditions to be performed by AmPaM under this
Agreement, including the fees and expenses of Arthur Andersen LLP, Andrews &
Kurth L.L.P., and any other person or entity retained by AmPaM, and the costs of
preparing the Private Placement Memorandum incurred in connection with the
subject matter of this Agreement and any amendments thereto. In addition,
whether or not the transactions contemplated herein shall be consummated, AmPaM
will pay the reasonable fees and expenses of Bracewell & Patterson LLP incurred
on behalf of the Company and the Stockholders in connection with the subject
matter of this Agreement. Whether or not the transactions herein contemplated
shall be consummated, the Company will pay all of its costs and expenses
incurred on behalf of the Company and the Stockholders in connection with the
subject matter of this Agreement except that (i) the Company shall not be
required to pay any of the costs, fees and expenses specified above as to which
AmPaM is responsible for the payment thereof and (ii) neither the Company nor
the Stockholders shall be responsible for the payment of the costs, fees and
expenses incurred by or on behalf of AmPaM. Whether or not the transactions
herein contemplated shall be consummated, AmPaM shall reimburse Sterling City
Capital, LLC (or any person or entity which is an Affiliate thereof) for any of
the foregoing fees, expenses and disbursements paid by Sterling City Capital,
LLC (or any person or entity which is an Affiliate thereof) and shall repay
Sterling City Capital, LLC (or any person or entity which is an Affiliate
thereof) for any loans or advances made by Sterling City Capital, LLC (or any
person or entity which is an Affiliate thereof) for the purpose of providing
AmPaM funds to pay any such fees, expenses and disbursements, provided that such
reimbursement and loan repayment obligation shall be limited to the foregoing
fees, expenses, and disbursements which are out-of-pocket expenses of AmPaM,
Sterling City Capital, LLC or any person or entity which is an Affiliate
thereof. Sterling City Capital, LLC shall be reimbursed by AmPaM in the form of
AmPaM Notes. AmPaM retains the right, within a reasonable period following the
Closing Date, to conduct an audit of the expenses for which Sterling City
Capital, LLC is reimbursed. Each Stockholder shall pay all sales, use, transfer,
real property transfer, recording, gains, stock transfer and other similar taxes
and fees ("Transfer Taxes") imposed in connection with the purchase and sale of
the Company Stock, other than Transfer Taxes, if any, imposed by the State of
Delaware. Each Stockholder shall file all necessary documentation and Returns
with respect to such Transfer Taxes. In addition, each Stockholder acknowledges
that he, and not the Company or AmPaM, will pay all Taxes due by him upon
receipt of the consideration payable pursuant to Section 1 hereof. The
Stockholders acknowledge that the risks of the transactions contemplated hereby
include Tax risks, with respect to which the Stockholders are relying
substantially on the opinion contemplated by Section 8.12 hereof and
representations by AmPaM in this Agreement.
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19.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person or via a nationally recognized courier service to an officer or agent
of such party.
(a) If to AmPaM addressed to it at:
American Plumbing & Mechanical, Inc.
515 Post Oak Blvd., Suite 450
Houston, Texas 77027
Attention: Chief Executive Officer
with copies to:
Thomas P. Mason
Andrews & Kurth L.L.P.
4200 Chase Tower
Houston, Texas 77002
(b) If to the Stockholders, addressed to them at their addresses set
forth on the signature pages hereto, with copies to:
Craig Campbell
Dana & Associates
1234 S. Power Road
Mesa, Arizona 85206-3700
(c) If to the Company, addressed to it at:
Russell Riggs
Keith Riggs Plumbing, Inc.
422 South Drew
Mesa, Arizona 85210
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
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19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Texas, excluding any conflicts of law, rule or
principle that might refer same to the laws of another jurisdiction.
19.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties until the respective Expiration
Dates referred to herein with respect thereto or, if no Expiration Date is
applicable with respect thereto, until the expiration of all applicable statute
of limitations periods.
19.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.11 TIME. Time is of the essence with respect to this Agreement.
19.12 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.
19.13 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
19.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of AmPaM, the Company and Stockholders who would receive a
majority of the Aggregate Consideration specified in Section I of Annex I to
this Agreement if the transactions contemplated hereby were consummated. Any
amendment or waiver effected in accordance with this Section 19.15 shall be
binding upon each of the parties hereto, any other person receiving AmPaM Stock
in connection with the purchase and sale of the Company Stock and each future
holder of such AmPaM Stock. Any
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consent of the Stockholders who would receive a majority of the Aggregate
Consideration pursuant to Section I of Annex I of this Agreement if the
transactions contemplated hereby were consummated shall be deemed to be the
consent of the Stockholders for purposes of provisions of this Agreement as to
which a consent of the Stockholders may be requested or required.
19.16 MEDIATION AND ARBITRATION. If a dispute arises out of or relates
to this Agreement, or the breach thereof, and if said dispute cannot be settled
through direct discussions, the parties agree to first endeavor to settle the
dispute in an amicable manner by mediation administered by the American
Arbitration Association under its then prevailing Commercial Mediation Rules,
before resorting to arbitration. Thereafter, any unresolved controversy or claim
arising out of or relating to this Agreement, or the breach thereof, shall be
settled by arbitration administered by the American Arbitration Association in
accordance with its then prevailing Commercial Arbitration Rules. The
enforcement, interpretation and procedural and substantive effect of the
obligation to arbitrate created by this Section 19.16 shall be governed by the
Federal Arbitration Act as amended from time to time, 9 U.S.C. Section 1 et seq.
The parties hereby disclaim any intention to have the substantive or procedural
law of any state or other jurisdiction, other than the law of the United States
as embodied in the Federal Arbitration Act, applied to such obligation. Any such
mediation or arbitration proceeding will be conducted in Houston, Texas.
19.17 INFORMATION PROVIDED FOR PRIVATE PLACEMENT MEMORANDUM. For
purposes of this Agreement, the information provided by the Company in writing
specifically for inclusion in the Private Placement Memorandum shall include
solely (i) the Financial Statements (in the form that they appear in the Private
Placement Memorandum), (ii) any financial statements provided to AmPaM pursuant
to Section 7.9, (iii) the description of the Company contained in the Private
Placement Memorandum under the caption "The Company", (iv) the description of
the Company's results of operations and its liquidity and capital resources, if
any, contained in the Private Placement Memorandum under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and (v) the description, if any, of matters related to the Company
contained in the Private Placement Memorandum under the caption "Certain
Transactions Transactions involving Certain Officers, Directors and
Stockholders". For purposes of this Agreement, the information provided by a
Stockholder in writing specifically for inclusion in the Private Placement
Memorandum shall include only (i) the description, if any, of matters related to
such Stockholder contained in the Private Placement Memorandum under the caption
"Certain Transactions - Transactions involving Certain Officers, Directors and
Stockholders" and (ii) the biographical description of such Stockholder, if any,
contained in the Private Placement Memorandum under the caption "Management."
19.18 EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective upon (i) the execution and delivery of this Agreement by all of the
parties hereto and (ii) the delivery to AmPaM of each Employment Agreement
attached hereto as Annex VI-1, Annex VI-2 and Annex VI-3 executed by each of the
Company, the employees named therein and AmPaM.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AMERICAN PLUMBING & MECHANICAL, INC.
By: /s/ DAVID BAGGETT
-----------------------------------
Name: David Baggett
---------------------------------
Title: Chief Financial Officer
--------------------------------
KEITH RIGGS PLUMBING, INC.
By: /s/ RUSSELL K. RIGGS
-----------------------------------
Russell K. Riggs
Chief Executive Officer
[Remainder of page intentionally left blank]
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<TABLE>
<S> <C>
STOCKHOLDERS: SPOUSES (WITHOUT PERSONAL LIABILITY AND
SOLELY TO ACKNOWLEDGE THE SALE OF THE
COMPANY STOCK BY THE STOCKHOLDER):
Russell K. Riggs or Sundy, Trustees of
The Russell K. Riggs and Sundy S. Riggs
Trust u/a/d 12/31/95
1751 E. Grove
Mesa, Arizona 85204
By: /s/ RUSSELL K. RIGGS
-------------------------------------
Russell K. Riggs
Trustee
/s/ GERALD M. RIGGS /s/ CYNTHIA J. RIGGS
- ---------------------------------------- ---------------------------------------
Gerald M. Riggs Cynthia J. Riggs
1376 N. Rockwell Street
Gilbert, Arizona 85234
Sam B. Sherwood and Vicki S. Sherwood,
Trustees of The Sam B. Sherwood and
Vicki S. Sherwood Trust u/a/d 6/20/95
3507 E. Harmony Avenue
Mesa, Arizona 85204
By: /s/ SAM B. SHERWOOD
-------------------------------------
Sam B. Sherwood
Trustee
/s/ ALMA GOODMAN /s/ GARY N. GOODMAN
- ---------------------------------------- ---------------------------------------
Alma Goodman Gary N. Goodman
1156 N. Rico Circle
Mesa, Arizona 85213
</TABLE>
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V. Keith Riggs II and Anne M. Riggs
3829 East Grove
Mesa, Arizona 85206
By: /s/ V. KEITH RIGGS II
-------------------------------------
V. Keith Riggs II
By: /s/ ANNE M. RIGGS
-------------------------------------
Anne M. Riggs
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EXHIBIT 10.13
Execution Copy
- --------------------------------------------------------------------------------
ACQUISITION AGREEMENT
dated as of the 11th day of February, 1999
by and among
AMERICAN PLUMBING & MECHANICAL, INC.
POWER PLUMBING INC.
and
all of the STOCKHOLDERS of POWER PLUMBING INC.
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS .....................................................................1
1. ACQUISITION OF STOCK.................................................5
1.1 Acquisition...................................................5
1.2 Consideration.................................................5
1.3 Certain Information With Respect to the
Capital Stock of the Company and AmPaM.....................5
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY.......................5
2.1 Board of Directors............................................5
2.2 Officers......................................................5
3. DELIVERY OF CONSIDERATION............................................6
3.1 Stockholders' Consideration...................................6
3.2 Stockholders' Deliveries......................................6
4. CLOSING..............................................................6
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................6
5.1 Due Organization..............................................7
5.2 Authorization.................................................7
5.3 Capital Stock of the Company..................................7
5.4 Transactions in Capital Stock.................................8
5.5 No Bonus Shares...............................................8
5.6 Subsidiaries; Ownership in Other Entities.....................8
5.7 Predecessor Status; etc.......................................8
5.8 Spin-off by the Company.......................................8
5.9 Financial Statements..........................................8
5.10 Liabilities and Obligations...................................9
5.11 Accounts and Notes Receivable................................10
5.12 Licenses; Intellectual Property..............................10
5.13 Environmental Matters........................................11
5.14 Personal Property............................................13
5.15 Significant Customers; Material Contracts and Commitments....13
5.16 Real Property................................................14
5.17 Insurance....................................................14
5.18 Compensation; Employment Agreements; Labor Matters...........15
5.19 Employee Plans...............................................15
5.20 Compliance with ERISA........................................16
5.21 Conformity with Law; Litigation..............................17
</TABLE>
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<TABLE>
<S> <C>
5.22 Taxes........................................................17
5.23 No Violations; No Consent Required, Etc......................18
5.24 Government Contracts.........................................19
5.25 Absence of Changes...........................................19
5.26 Deposit Accounts; Powers of Attorney.........................20
5.27 Validity of Obligations......................................21
5.28 Relations with Governments...................................21
5.29 Disclosure...................................................21
5.30 No Warranties or Insurance...................................21
5.31 Interest in Customers and Suppliers and
Related Party Transactions.................................21
5.32 Private Placement Memorandum.................................22
5.33 Authority; Ownership.........................................22
5.34 Preemptive Rights............................................23
5.35 No Commitment to Dispose of AmPaM Stock......................23
5.36 Disclosure...................................................23
6. REPRESENTATIONS OF AMPAM............................................23
6.1 Due Organization.............................................23
6.2 Authorization................................................24
6.3 Capital Stock of AmPaM.......................................24
6.4 Transactions in Capital Stock................................24
6.5 Subsidiaries.................................................25
6.6 Financial Statements.........................................25
6.7 Liabilities and Obligations..................................25
6.8 Conformity with Law; Litigation..............................25
6.9 No Violations................................................26
6.10 Validity of Obligations......................................27
6.11 AmPaM Stock..................................................27
6.12 AmPaM Notes..................................................28
6.13 No Side Agreements...........................................28
6.14 Business; Real Property; Material Agreement..................28
6.15 Relations with Governments...................................28
6.16 Disclosure...................................................28
6.17 Other Agreements.............................................29
7. COVENANTS PRIOR TO CLOSING..........................................29
7.1 Access and Cooperation; Due Diligence;
Transfer of Real Estate...................................29
7.2 Conduct of Business Pending Closing..........................30
7.3 Prohibited Activities........................................31
7.4 No Shop......................................................32
7.5 Agreements...................................................32
7.6 Notification of Certain Matters..............................32
7.7 Amendment of Schedules.......................................33
7.8 Further Assurances...........................................33
7.9 Authorized Capital...........................................33
</TABLE>
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<TABLE>
<S> <C>
7.10 Compliance with the Hart-Scott Act...........................33
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
AND COMPANY.........................................................34
8.1 Representations and Warranties; Performance of Obligations...34
8.2 Satisfaction.................................................34
8.3 No Litigation................................................34
8.4 Opinion of Counsel...........................................34
8.5 Consents and Approvals.......................................34
8.6 Good Standing Certificates...................................35
8.7 No Material Adverse Change...................................35
8.8 Secretary's Certificate......................................35
8.9 Tax Matters..................................................35
8.10 Other Founding Companies.....................................35
8.11 Company Release of Stockholders..............................35
8.12 Sterling City Capital Transfer Restrictions..................35
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AMPAM........................36
9.1 Representations and Warranties; Performance and Obligations..36
9.2 No Litigation................................................36
9.3 Secretary's Certificate......................................36
9.4 No Material Adverse Effect...................................37
9.5 Stockholders' Release........................................37
9.6 Satisfaction.................................................37
9.7 Termination of Related Party Agreements......................37
9.8 Opinion of Counsel...........................................37
9.9 Consents and Approvals.......................................37
9.10 Good Standing Certificates...................................38
9.11 Funding Availability.........................................38
9.12 FIRPTA Certificate...........................................38
9.13 Resignations of Directors and Officers.......................38
10. COVENANTS OF AMPAM AND THE STOCKHOLDERS AFTER CLOSING...............38
10.1 Release From Guarantees; Repayment of Certain Obligations....38
10.2 Preservation of Tax and Accounting Treatment.................39
10.3 Preparation and Filing of Tax Returns; Payment of Taxes......39
10.4 Directors....................................................40
10.5 Legal Opinions...............................................40
11. INDEMNIFICATION.....................................................40
11.1 General Indemnification by the Stockholders..................40
11.2 Indemnification by AmPaM.....................................41
11.3 Third Person Claims..........................................42
11.4 Exclusive Remedy.............................................43
11.5 Limitations on Indemnification...............................43
</TABLE>
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<TABLE>
<S> <C>
12. TERMINATION OF AGREEMENT............................................45
12.1 Termination..................................................45
12.2 Procedure and Effect of Termination..........................45
13. NONCOMPETITION......................................................46
13.1 Prohibited Activities........................................46
13.2 Damages......................................................47
13.3 Reasonable Restraint.........................................47
13.4 Severability; Reformation....................................47
13.5 Independent Covenant.........................................48
13.6 Materiality..................................................48
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...........................48
14.1 Stockholders.................................................48
14.2 AmPaM........................................................49
14.3 Damages......................................................49
14.4 Survival.....................................................49
14.5 Return of Information........................................50
15. TRANSFER RESTRICTIONS...............................................50
15.1 Transfer Restrictions Relating to AmPaM Stock
and AmPaM Notes...........................................50
15.2 Transfer Restrictions Relating to Additional Consideration...51
16. FEDERAL SECURITIES ACT REPRESENTATIONS..............................52
16.1 Compliance with Law..........................................52
16.2 Economic Risk; Sophistication................................52
16.3 Reliance by AmPaM............................................53
17. REGISTRATION RIGHTS.................................................53
17.1 Piggyback Registration Rights................................53
17.2 Registration Procedures......................................54
17.3 Indemnification..............................................56
17.4 Underwriting Agreement.......................................57
17.5 Transfer of Rights...........................................58
17.6 Rule 144 Reporting...........................................58
18. REDEMPTION OF AMPAM STOCK...........................................58
18.1 Redemption Trigger...........................................58
18.2 Minimum Redemption; Limitations..............................59
18.3 Notice; Exercise.............................................59
18.4 Additional Redemptions.......................................59
18.5 Termination of Redemption Obligation.........................59
</TABLE>
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19. GENERAL.............................................................60
19.1 Cooperation..................................................60
19.2 Successors and Assigns.......................................60
19.3 Entire Agreement.............................................60
19.4 Counterparts.................................................60
19.5 Brokers and Agent............................................61
19.6 Expenses.....................................................61
19.7 Notices......................................................62
19.8 Governing Law................................................62
19.9 Survival of Representations and Warranties...................63
19.10 Exercise of Rights and Remedies..............................63
19.11 Time.........................................................63
19.12 Reformation and Severability.................................63
19.13 Remedies Cumulative..........................................63
19.14 Captions.....................................................63
19.15 Amendments and Waivers.......................................63
19.16 Mediation and Arbitration....................................64
19.17 Information Provided for Private Placement Memorandum........64
19.18 Effective Date of Agreement..................................64
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ANNEXES
Annex I - Consideration to Be Paid to Stockholders
Annex II - Amended and Restated Certificate of Incorporation and
By-Laws of AmPaM
Annex III - Form of Opinion of Counsel to AmPaM
Annex IV - Form of Tax Opinion
Annex V - Form of Opinion of Counsel to Company and Stockholders
Annex VI-1 - Form of Employment Agreement
Annex VI-2 - Form of Employment Agreement
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SCHEDULES
2.1 Board of Directors
2.2 Officers
5.1 Due Organization
5.2 Authorization
5.3 Capital Stock of the Company
5.4 Transactions in Capital Stock; Organization Accounting
5.5 No Bonus Shares
5.6 Subsidiaries; Ownership in Other Entities
5.7 Predecessor Status; etc
5.8 Spin-off by the Company
5.9 Financial Statements
5.10 Liabilities and Obligations
5.11 Accounts and Notes Receivable
5.12 Licenses; Intellectual Property (Schedules 5.12(a)(1),
5.12(a)(2),5.12(b)(1) and 5.12(b)(2))
5.13 Environmental Matters
5.14 Personal Property
5.15 Significant Customers; Material Contracts and Commitments
(Schedules 5.15(a), 5.15(b) and 5.15 (c))
5.16 Real Property
5.17 Insurance
5.18 Compensation; Employment Agreements; Labor Matters
5.19 Employee Plans
5.20 Compliance with ERISA
5.21 Conformity with Law; Litigation
5.22 Taxes (Schedules 5.22(a) and 5.22(b))
5.23 No Violations, No Consents Required, Etc.
(Schedules 5.23(a), 5.23(b), 5.23(c) and 5.23(e))
5.24 Government Contracts
5.25 Absence of Changes
5.26 Deposit Accounts; Powers of Attorney
5.30 No Warranties or Insurance
5.31 Interest in Customers and Suppliers and Related Party Transactions
5.33 Authority; Ownership (Schedules 5.33(a) and 5.33(b))
6.9 No Violations
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate
7.2 Conduct of Business Pending Closing
7.3 Prohibited Activities
7.5 Agreements
8.11 Employment Agreements
9.7 Termination of Related Party Agreements
10.1 Release From Guarantees; Repayment of Certain Obligations
16.2 Non-accredited Investors
18.5 Brokers and Agents
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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made as of the 11th day
of February, 1999 by and among AMERICAN PLUMBING & MECHANICAL, INC., a Delaware
corporation ("AmPaM"), POWER PLUMBING INC., a Delaware corporation (the
"Company"), and the stockholders listed on the signature pages of this Agreement
(the "Stockholders"), which are all the stockholders of the Company.
RECITALS
WHEREAS, the Company is engaged in the plumbing and mechanical services
business;
WHEREAS, as of the date hereof, the Stockholders own, and as of the
Closing Date the Stockholders will own, all of the issued and outstanding
capital stock of the Company (the "Company Stock");
WHEREAS, AmPaM is entering into other separate agreements
simultaneously with this Agreement that are substantially the same as this
Agreement (the "Other Agreements"), each of which is entitled "Acquisition
Agreement," with each of the Other Founding Companies (as defined herein) and
their respective stockholders in order for AmPaM to acquire additional companies
engaged in the plumbing and mechanical services business;
WHEREAS, this Agreement and the Other Agreements constitute the "AmPaM
Plan of Organization;"
WHEREAS, the Stockholders and the boards of directors and the
stockholders of AmPaM, and each of the Other Founding Companies that are parties
to the Other Agreements, have approved and adopted the AmPaM Plan of
Organization as an integrated plan pursuant to which the Stockholders and the
stockholders of each of the other Founding Companies will contribute the capital
stock of each of the Founding Companies to AmPaM, and the Stockholders and the
stockholders of each of the other Founding Companies will acquire the stock of
AmPaM (but not cash or other property) as a tax-free transfer of property under
Section 351 of the Code;
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Stockholders have approved this
Agreement as part of the AmPaM Plan of Organization in order to transfer all of
the issued and outstanding capital stock of the Company to AmPaM; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
<PAGE> 10
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule attached hereto and not otherwise defined shall
have the following meanings for all purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"Acquired Party" means the Company, any subsidiary of the Company and
any member of a Relevant Group.
"Affiliates" means with respect to any person or entity, any other
person or entity that directly or indirectly, controls, is controlled by, or is
under common control with such person or entity.
"AmPaM" has the meaning set forth in the first paragraph of this
Agreement.
"AmPaM Charter Documents" has the meaning set forth in Section 6.1.
"AmPaM Plan of Organization" has the meaning set forth in the recitals
of this Agreement.
"AmPaM Stock" means the common stock, par value $.01 per share, of
AmPaM.
"AmPaM Notes" means those notes issued by AmPaM to the Stockholders as
a portion of the consideration to be received hereunder and in substantially the
form to Annex I as Appendix A.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" has the meaning set forth in the recitals of this
Agreement.
"Delaware GCL" means the General Corporation Law of the State of
Delaware.
"Environmental Laws" has the meaning set forth in Section 5.13(b).
"Expiration Date" has the meaning set forth in Section 5(A) and Section
6, as applicable.
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"Founding Companies" means the following companies:
Christianson Enterprises, Inc., a Texas corporation;
Christianson Services, Inc., a Texas corporation;
GGR Leasing Corporation, a Texas corporation;
J.A. Croson Company of Florida, a Florida corporation;
J.A. Croson Company, an Ohio corporation;
Franklin Fire Sprinkler Company, an Ohio corporation;
Keith Riggs Plumbing, Inc., an Arizona corporation;
Miller Mechanical Contractors, Inc., a Georgia corporation;
Nelson Mechanical Contractors, Inc., a Florida corporation;
Power Plumbing Inc., a Delaware corporation;
R.C.R. Plumbing, Inc., a California corporation;
Sherwood Mechanical, Inc., a California corporation; and
Teepe's River City Mechanical, Inc., an Ohio corporation.
"GAAP" means generally accepted accounting principles as consistently
applied in the United States.
"Hart-Scott Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Hazardous Substance" has the meaning set forth in Section 5.13(c).
"IPO" means a firm commitment underwritten initial public offering of
AmPaM Stock managed by one or more nationally recognized national investment
banking firms.
"known" or "knowledge," when used in reference to a statement regarding
the existence or absence of facts in this Agreement, is intended by the parties
to mean that the only information to be attributed to such person is information
actually known to (a) the person in the case of an individual, (b) in the case
of a corporation or other entity other than the Company, an officer or director
of such corporation or entity or (c) in the case of the Company and its
Subsidiaries, an officer of the Company listed on Schedule 2.2 hereto, except
for David Baggett.
"Material Adverse Change" means a material adverse change in the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Documents" has the meaning set forth in Section 5.23.
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<PAGE> 12
"Ordinary Course of Business" means the ordinary course of business
consistent with past customs and practice (including with respect to quantity
and frequency).
"Other Agreements" has the meaning set forth in the recitals of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Plans" has the meaning set forth in Section 5.19.
"Private Placement Memorandum" means the Private Placement Memorandum,
dated as of February 11,1999, provided to each Stockholder prior to the
execution and delivery of this Agreement which sets forth certain information
relating to the transactions contemplated by this Agreement and the Other
Agreements.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Relevant Group" means the Company and any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a member.
"Restricted Common Stock" has the meaning set forth in Section 1.3(ii).
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"State of Incorporation" means the State of Delaware.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Subsidiaries" means with respect to a person or entity, any
corporation or other entity in which such person or entity owns a 5% or greater
ownership interest.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, employment, excise, property, deed, stamp, alternative
or add-on minimum, or other taxes, assessments, duties, fees, levies or other
governmental charges, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
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<PAGE> 13
1. ACQUISITION OF STOCK
1.1 ACQUISITION. Upon the terms and subject to the conditions
contained in this Agreement and in reliance upon the representations,
warranties, covenants and agreements contained in this Agreement, on the Closing
Date, the Stockholders shall convey and transfer to AmPaM all of the issued and
outstanding shares of Company Stock as set forth in Annex I hereto.
1.2 CONSIDERATION. The consideration for the Company Stock shall
be as set forth on Annex I to this Agreement.
1.3 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY AND AMPAM. The respective designations and numbers of outstanding shares
and voting rights of each class of outstanding capital stock of the Company and
AmPaM as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
outstanding Company Stock is as set forth on Schedule 5.3 hereto; and
(ii) immediately prior to the Closing Date, the authorized
capital stock of AmPaM will consist of (A) 100,000,000 shares of AmPaM
Stock, of which the number of issued and outstanding shares will be set
forth in the Private Placement Memorandum, (B) 10,000,000 shares of
redeemable preferred stock, of which the number of issued and
outstanding shares will be set forth in the Private Placement
Memorandum, and (C) 5,000,000 shares of Restricted Voting Common Stock,
$.01 per value (the "Restricted Common Stock"), all of which will be
issued and outstanding except as otherwise set forth in the Private
Placement Memorandum.
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY
2.1 BOARD OF DIRECTORS. The Company and the Stockholders shall
take action, including solicitation of resignation of directors, necessary so
that the Board of Directors of the Company as of the Closing Date shall consist
only of the persons identified on Schedule 2.1 hereto.
2.2 OFFICERS. The Company and the Stockholders shall take action,
including solicitation of resignation of officers, necessary so that the
officers of the Company as of the Closing Date shall consist only of the persons
identified on Schedule 2.2 hereto.
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<PAGE> 14
3. DELIVERY OF CONSIDERATION
3.1 STOCKHOLDERS' CONSIDERATION. On the Closing Date, the
Stockholders shall, upon surrender of certificates evidencing the Company Stock,
receive from AmPaM the respective number of shares of AmPaM Stock, the amount of
cash and the principal amount of AmPaM Notes described on Annex I hereto
specified with respect to each such Stockholder as payable on the Closing Date.
All payments of cash shall be made by certified check or wire transfer of
immediately available funds. Consideration consisting of AmPaM Notes shall be
substantially in the form of Appendix A to Annex I.
3.2 STOCKHOLDERS' DELIVERIES. The Stockholders shall deliver at
the Closing the certificates representing Company Stock, duly endorsed in blank
by the Stockholders, or accompanied by blank stock powers, and with all
necessary transfer tax and other revenue stamps, acquired at the Stockholders'
expense, affixed and canceled. The Stockholders agree promptly to cure any
deficiencies with respect to the endorsement of the stock certificates or other
documents of conveyance with respect to such Company Stock or with respect to
the stock powers accompanying any Company Stock.
4. CLOSING
The consummation of the transactions contemplated by Section 3 (the
"Closing") shall take place on March 31, 1999 or such date not later than May
31, 1999 as AmPaM shall determine by giving written notice of such other date as
provided in Section 18.7 (the "Closing Date") at the offices of Andrews & Kurth
L.L.P., 4200 Chase Tower, 600 Travis, Houston, Texas 77002.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the disclosure schedules attached hereto and
except as otherwise qualified below, the Company represents and warrants that
all of the following representations and warranties in this Section 5(A) are
true at the date of this Agreement and, subject to Section 7.7 hereto, shall be
true at the time of the Closing, and that such representations and warranties
shall survive the Closing Date for a period of eighteen months (the last day of
such period being the "Expiration Date"), except that the representations and
warranties set forth in Sections 5.3, 5.22 and 5.32 hereof shall survive until
such time as the applicable statute of limitations period has run, which shall
be deemed to be the Expiration Date for the representations and warranties set
forth in Sections 5.3, 5.22 and 5.32. For purposes of this Section 5, the term
"Company" shall mean and refer to the Company and all of its Subsidiaries, if
any, and any reference to a Material Adverse Effect on the Company or Material
Adverse Change with respect to the Company shall mean the Company and its
Subsidiaries, taken as a whole. Except as expressly set forth in this Agreement,
the Company expressly disclaims any representation or warranty (express, implied
or otherwise) relating to the
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<PAGE> 15
Company and any Subsidiary thereof including, without limitation, any warranty
of merchantability or fitness for a particular purpose.
5.1 DUE ORGANIZATION. The Company is a corporation duly
incorporated and organized, validly existing and in good standing under the laws
of the State of Incorporation, and has the requisite power and authority to
carry on its business as it is now being conducted. The Company is duly
qualified or authorized to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or authorization necessary except where
the failure to be so qualified or authorized to do business would not have a
Material Adverse Effect on the Company. Schedule 5.1 sets forth a list of all
states in which the Company is authorized or qualified to do business, which
list indicates which of such entities is authorized or qualified to do business
in such states. True, complete and correct copies of the Certificate or Articles
of Incorporation and By-laws, each as amended, of the Company (the "Charter
Documents") are all attached to Schedule 5.1. The Company has delivered to AmPaM
complete and correct copies of (i) the stock records of the Company and (ii) all
minutes of meetings, written consents and other evidence, if any, of
deliberations of or actions taken by the Company's Board of Directors, any
committees of the Board of Directors and stockholders during the last five
years.
5.2 AUTHORIZATION. (i) The officers or other representatives of
the Company executing this Agreement have the authority to enter into and bind
the Company to the terms of this Agreement and (ii) the Company has the full
legal right, power and authority to enter into this Agreement and consummate the
transactions contemplated hereby. Copies of the most recent resolutions adopted
by the Board of Directors of the Company and the most recent resolutions adopted
by the Stockholders, which approve this Agreement and the transactions
contemplated hereby in all respects, certified by the Secretary or an Assistant
Secretary of the Company as being in full force and effect on the date hereof,
are attached hereto as Schedule 5.2.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of
the Company and each of its Subsidiaries is as set forth on Schedule 5.3(a). All
of the issued and outstanding shares of the capital stock of the Company are
owned by the Stockholders in the amounts set forth in Schedule 5.3(a). Except as
set forth on Schedule 5.3(a), all of the issued and outstanding capital stock of
each Subsidiary is owned by the Company. All of the issued and outstanding
shares of the capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable, are owned of record by the
Stockholders and further, such shares were offered, issued, sold and delivered
by the Company in compliance with all applicable state and Federal laws
concerning the issuance of securities. Further, none of such shares were issued
in violation of any preemptive rights of any past or present stockholder.
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<PAGE> 16
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule
5.4(a), the Company has not acquired or redeemed any shares of capital stock of
the Company since January 1, 1996. Except as set forth on Schedule 5.4(b), (i)
no option, warrant, call, conversion right or commitment of any kind exists
which obligates the Company to issue any of its authorized but unissued capital
stock; (ii) the Company has no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any distribution in respect thereof; and
(iii) neither the voting stock structure of the Company nor the relative
ownership of shares among any of its Stockholders has been altered or changed in
contemplation of the AmPaM Plan of Organization. There are no voting trusts,
proxies or other agreements or understandings to which the Company is a party or
is bound with respect to the voting of any shares of capital stock of the
Company.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of
the shares of Company Stock was issued pursuant to awards, grants or bonuses in
contemplation of the AmPaM Plan of Organization.
5.6 SUBSIDIARIES; OWNERSHIP IN OTHER ENTITIES. Except as set
forth on Schedule 5.6(a), the Company has no Subsidiaries. Except as set forth
in Schedule 5.6(b), the Company does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the Company, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7(a) is a
list of all predecessor companies of the Company, including the names of any
entities acquired by the Company (by stock purchase, merger or otherwise) or
owned by the Company or from whom the Company previously acquired material
assets, in any case, from the earliest date upon which any Stockholder acquired
his or her stock in any Company. Except as disclosed on Schedule 5.7(b), the
Company has not been, within such period of time, a subsidiary or division of
another corporation or a part of an acquisition which was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8,
there has not been any sale, spin-off or split-up of material assets of either
the Company or any other person or entity that is an Affiliate of the Company
since January 1, 1996.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 is a
copy of:
(i) the balance sheet of the Company as of December 31, 1997
and the related statement of operations, stockholders' equity and cash
flows for the one-year period ended December 31, 1997, together with
the related notes and schedules (such balance sheets, the related
statements of operations, stockholders' equity and cash flows and the
related notes and schedules are referred to herein as the "Year-end
Financial Statements");
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<PAGE> 17
(ii) the balance sheet of the Company as of June 30, 1998 and
the related statements of operations, stockholders' equity and cash
flows for the six-month periods ended June 30, 1997 and 1998, together
with the related notes and schedules (such balance sheets, the related
statements of operations, stockholders' equity and cash flows and the
related notes and schedules are referred to herein as the "Six-Month
Interim Financial Statements");
(iii) the balance sheet of the Company as of September 30,
1998 (the "Balance Sheet Date") and the related statements of
operations, stockholders' equity and cash flows for the nine-month
periods ended September 30, 1997 and 1998 (such balance sheets, the
related statements of operations, stockholders' equity and cash flows
are referred to herein as the "Nine-Month Interim Financial
Statements"); and
(iv) the income statement of the Company for the 12-month
period ended June 30, 1998 (the "Valuation Income Statement").
The Year-end Financial Statements, the Six-Month Interim Financial Statements,
the Nine-Month Interim Financial Statements and the Valuation Income Statement
are collectively called the "Financial Statements". The Financial Statements,
including those included in the Private Placement Memorandum, have been prepared
in accordance with GAAP applied on a consistent basis and fairly present the
financial position of the Company as of the dates thereof and the results of its
operations and changes in financial position for the periods then ended,
subject, in the case of the Six-Month Interim Financial Statements and the
Nine-Month Interim Financial Statements, to normal year-end audit adjustments
and any other adjustments described therein and the absence of certain footnote
disclosures.
5.10 LIABILITIES AND OBLIGATIONS. Schedule 5.10(a) sets forth an
accurate list as of the Balance Sheet Date of (i) all material liabilities of
the Company which are not reflected on the balance sheet of the Company at the
Balance Sheet Date or otherwise reflected in the Company Financial Statements at
the Balance Sheet Date which by their nature would be required in accordance
with GAAP to be reflected in the balance sheet, and (ii) all loan agreements,
indemnity or guaranty agreements, bonds, mortgages, pledges or other security
agreements to which the Company is a party or by which its properties may be
bound other than bid bonds and performance bonds made in the Ordinary Course of
Business. Except as set forth on Schedule 5.10(b), since the Balance Sheet Date,
the Company has not incurred any material liabilities or obligations of any
kind, character or description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the Ordinary Course
of Business. The Company has also delivered to AmPaM, on Schedule 5.10(c), a
list of contingent liabilities related to pending litigation or litigation that
has been threatened in writing, or other material liabilities which are not
fixed or otherwise accrued or reserved. For each such contingent liability of
the Company or liability of the Company for which the amount is not fixed or is
contested, the Company has provided to AmPaM the following information:
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<PAGE> 18
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation in the
possession of the Company or its directors,
officers or stockholders relating thereto;
(b) amounts claimed and any other action or relief
sought; and
(c) name of claimant and all other parties to the
claim, suit or proceeding;
(ii) the name of each court or agency before which such
claim, suit or proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted;
and
(iv) a good faith estimate of the maximum amount, if any,
which the Company expects, based on information available, is likely to
become payable with respect to each such liability and the amount, if
any, accrued or reserved for each such potential liability on the
Financial Statements.
AmPaM acknowledges that all estimates referred to above and set forth on
Schedule 5.10(c) are only good faith estimates, and that the Company and the
Stockholders expressly do not represent or warrant that the actual amounts of
such liabilities will be equal to, or more or less than, the amounts of such
estimates.
5.11 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.11(a) sets forth an
accurate list, in all material respects, of the accounts and notes receivable of
the Company, as of the Balance Sheet Date, including any such amounts which are
not reflected in the balance sheet as of the Balance Sheet Date, and including
all receivables from and advances to employees and the Stockholders, which are
identified as such. Schedule 5.11(a) also sets forth a materially accurate aging
of all accounts and notes receivable as of the Balance Sheet Date showing
amounts due in 30-day aging categories. Except to the extent reflected on
Schedule 5.11(b), such accounts, notes and other receivables are collectible in
the amounts shown on Schedule 5.11(a), net of reserves reflected in the balance
sheet as of the Balance Sheet Date.
5.12 LICENSES; INTELLECTUAL PROPERTY. (a) The Company or its
employees hold all licenses, franchises, permits and other governmental
authorizations ("Licenses") necessary to conduct the business of the Company,
the absence of which would cause a Material Adverse Effect on the Company, and
the Company has delivered to AmPaM a list that is accurate, in all material
respects, and summary description (which is set forth on Schedule 5.12(a)(1)) of
all such Licenses. At or prior to the Closing, all such Licenses owned or held
by any employee of the Company will be assigned or licensed to the Company for
no additional consideration. The Licenses listed on Schedule 5.12(a)(1) are
valid, and the Company has not received any notice that any person intends to
cancel, terminate or not renew any such License. The Company has conducted and
is conducting its business in compliance in all material respects with the
requirements, standards, criteria and
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<PAGE> 19
conditions set forth in the Licenses listed on Schedule 5.12(a)(1) and is not in
violation of any of the foregoing in any material respect. Except as
specifically provided in Schedule 5.12(a)(2), the consummation by the Company of
the transactions contemplated by this Agreement will not result in a default
under or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such Licenses.
(b) The Company owns or possesses adequate licenses or other
rights to use (without making any payment or granting rights to any person in
exchange) all patents, patent applications, trademarks, copyrights, service
marks and trade names (collectively, the "Intellectual Property") necessary to
conduct its business as currently conducted. A description of any Intellectual
Property licensed by the Company, including the material terms of any such
license, is described on Schedule 5.12(b)(1). Neither the validity of the
Intellectual Property nor the title thereto or use thereof by the Company is
being questioned in any pending litigation, and the conduct of the Company's
business, as currently conducted, does not conflict with licenses, copyrights,
uncopyrighted works, trade marks, service marks, trade names, trade name rights,
patents, patent rights, unpatented inventions or trade secrets of others.
Neither the validity of the Intellectual Property nor the title thereto or use
thereof by the Company is being questioned in any pending or, to the knowledge
of the Company, threatened infringement claims or litigation, and the conduct of
the Company's business, as now conducted, does not conflict with licenses,
copyrights, uncopyrighted works, trade marks, service marks, trade names, trade
name rights, patents, patent rights, unpatented inventions or trade secrets of
others. Except as specifically provided in Schedule 5.12(b)(2), the consummation
by the Company of the transactions contemplated by this Agreement will not
adversely affect the rights and benefits afforded to the Company by any such
Intellectual Property.
5.13 ENVIRONMENTAL MATTERS. (a) Except as set forth in
Schedule 5.13 attached hereto, (i) the Company has conducted its businesses in
compliance in all material respects with all applicable Environmental Laws,
including, without limitation, having all environmental permits, licenses and
other approvals and authorizations necessary for the operation of its business
as presently conducted, except where the failure to have such permit, license,
approval or authorization would not have a Material Adverse Effect on the
Company, (ii) none of the properties owned by the Company contain any Hazardous
Substance as a result of any activity of the Company in amounts exceeding the
levels permitted by applicable Environmental Laws, except where amounts in
excess of such levels would not have a Material Adverse Effect on the Company,
(iii) the Company has not received any notices, demand letters or requests for
information from any Federal, state, local or foreign governmental entity or
third party indicating that the Company may be in violation of, or liable under,
any Environmental Law in connection with the ownership or operation of its
business, (iv) there are no civil, criminal or administrative actions, suits,
demands, claims, hearings, investigations or proceedings pending or, to the
knowledge of the Company, threatened, against the Company relating to any
violation, or alleged violation, of any Environmental Law, except where such
violation would not have a Material Adverse Effect on the Company, (v) no
reports have been filed, or are required to be filed, by the Company concerning
the release of any Hazardous Substance or the threatened or actual violation of
any Environmental Law, (vi) no Hazardous Substance has
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<PAGE> 20
been disposed of, released or transported in violation of any applicable
Environmental Law from any properties owned by the Company as a result of any
activity of the Company during the time such properties were owned, leased or
operated by the Company, (vii) there have been no environmental investigations,
studies, audits, tests, reviews or other analyses regarding compliance or
non-compliance with any applicable Environmental Law conducted by or which are
in the possession of the Company relating to the activities of the Company which
are not listed on Schedule 5.13 attached hereto prior to the date hereof, (viii)
to the knowledge of the Company, (A) there are no underground storage tanks on,
in or under any properties owned by the Company and (B) no underground storage
tanks have been closed or removed from any of such properties during the time
such properties were owned, leased or operated by the Company which are not
listed on Schedule 5.13, (ix) to the knowledge of the Company, (A) there is no
asbestos or asbestos-containing material present in any material quantity in any
of the properties owned by the Company, and (B) no asbestos has been removed
from any of such properties during the time such properties were owned, leased
or operated by the Company, and (x) neither the Company nor any of its
properties are subject to any material liabilities or expenditures (fixed or
contingent) relating to any suit, settlement, court order, administrative order,
regulatory requirement, judgment or claim asserted or arising under any
Environmental Law.
(b) As used herein, "Environmental Law" means, as of the Closing
Date, any Federal, state, local or foreign law, statute, ordinance, rule,
regulation, code, license, permit, authorization, approval, consent, order,
judgment, decree, injunction or agreement with any governmental entity to which
the Company is a party or subject relating to (x) the protection, preservation
or restoration of the environment (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface land,
subsurface land, plant and animal life or any other natural resource) or to
human health or safety or (y) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Hazardous Substances, in each case as amended
and as in effect on the Closing Date. The term Environmental Law includes,
without limitation, (i) the Federal Comprehensive Environmental Response
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic
Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act,
the Federal Occupational Safety and Health Act of 1970, each as amended and as
in effect on the Closing Date, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such as
negligence, nuisance, trespass and strict liability) that may impose liability
or obligations for injuries or damages due to, or threatened as a result of, the
presence of, effects of or exposure to any Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance
presently listed, defined, designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated, under any Environmental Law.
Hazardous Substance includes any substance to which exposure is regulated by any
government authority or any Environmental Law including, without
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<PAGE> 21
limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material, asbestos or
asbestos-containing material, urea formaldehyde foam insulation, lead or
polychlorinated biphenyls.
5.14 PERSONAL PROPERTY. The Company has delivered to AmPaM an
accurate list (which is set forth on Schedule 5.14(a)) of (x) all personal
property material to the operations of the Company as of the Balance Sheet Date
included in "plant, property and equipment" on the balance sheet of the Company
as of such date, (y) all other items of personal property owned by the Company
with an individual value in excess of $15,000 (i) as of the Balance Sheet Date
and (ii) acquired since the Balance Sheet Date and (z) all material leases and
agreements in respect of personal property, including, in the case of each of
(x), (y) and (z), (1) true, complete and correct copies of all such leases and
(2) an indication as to which assets are currently owned, or were formerly
owned, by Stockholders, relatives of Stockholders, or Affiliates of the Company.
Except as set forth on Schedule 5.14(b), (i) all personal property material to,
and used by, the Company in its business is either owned by the Company or
leased by the Company pursuant to a lease included on Schedule 5.14(a), (ii) all
of the personal property listed on Schedule 5.14(a) or replacement property
thereof is in working order and condition, ordinary wear and tear excepted and
(iii) all leases and agreements included on Schedule 5.14(a) are in full force
and effect and constitute valid and binding agreements of the Company, in each
case in accordance with their respective terms.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
(a) The Company has delivered to AmPaM a materially accurate list
(which is set forth on Schedule 5.15(a)(1)) of all customers (persons or
entities) representing 5% or more of the Company's annual revenues for any
period covered by any of the Financial Statements. Except to the extent set
forth on Schedule 5.15(a)(2), none of such customers has canceled or, to the
knowledge of the Company, are currently threatening to cancel a currently
effective contract with the Company.
(b) The Company has listed on Schedule 5.15(b) all material
contracts, commitments and similar agreements to which the Company is a party or
by which it or any of its properties are bound (including, but not limited to,
contracts with customers listed on Schedule 5.15(a), joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land), other than agreements listed on
Schedules 5.10(a), Schedule 5.14(a) or Schedule 5.16(a), (a) in existence as of
the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and in
each case has delivered or made available to AmPaM true, complete and correct
copies of such agreements. For purposes of the preceding sentence, a contract,
commitment or similar agreement is "material" if it (i) has a term of more than
one year (other than contracts, commitments or agreements that are cancelable
without liability or penalty within 30 days of notice from the Company of
cancellation or that can be terminated by the Company without material penalty
upon notice of 30 days or less) or (ii) requires the payment by or to the
Company of more than $100,000 during any 12-month period. Except for
expenditures in the ordinary course of
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business, the Company has also indicated on Schedule 5.15(b) a summary
description of all plans or projects involving the opening of new operations,
expansion of existing operations, or the acquisition of any personal property,
business or assets requiring, in any event, the payment of more than $50,000 by
the Company during any 12-month period.
(c) Except as set forth on Schedule 5.15(c), the Company is not
required to provide any bonding or other financial security arrangements in any
material amount in connection with any contract listed on Schedule 5.15(b).
5.16 REAL PROPERTY. Schedule 5.16(a) includes a list of all real
property owned or leased by the Company at the date hereof and all other real
property, if any, used by the Company in the conduct of its business. The
Company has good and insurable title to any real property owned by it that is
shown on Schedule 5.16(a), other than property intended to be sold or
distributed prior to the Closing Date as provided in Section 7.1(c) of this
Agreement, and all real property so owned is subject to no mortgage, pledge,
lien, conditional sales agreement, encumbrance, lease, possessory rights of
third parties or charge, except for:
(i) liens reflected on Schedule 5.10(a) or Schedule 5.16(b)
as securing specified liabilities (with respect to which no material
default by the Company exists);
(ii) liens for current taxes not yet payable and assessments
not in default;
(iii) easements for utilities serving the property; and
(iv) easements, covenants and restrictions and other
exceptions to title which do not adversely affect the current use of
the property.
Copies of all leases and agreements in respect of such real property
leased by the Company, which are true, complete and correct in all material
respects, are attached to Schedule 5.16(a), and an indication as to which such
properties, if any, are currently owned, or were formerly owned, by Stockholders
or Affiliates of the Company or Stockholders is included in Schedule 5.16(a).
Except as set forth on Schedule 5.16(b), all of such leases included on Schedule
5.16(a) are, as to the Company, in full force and effect and constitute valid
and binding agreements of the Company in accordance with their respective terms.
5.17 INSURANCE. The Company has delivered to AmPaM (i) an accurate
list as of the Balance Sheet Date of all insurance policies carried by the
Company and (ii) an accurate list of all insurance loss runs or workers
compensation claims received for the past three policy years (which lists are
set forth on Schedule 5.17). The Company has also delivered or made available to
AmPaM true, complete and correct copies of all insurance policies currently in
effect that are referred in Schedule 5.17. Such insurance policies evidence all
of the insurance the Company is required to carry pursuant to all of its
contracts and other agreements and pursuant to all applicable laws. All of such
insurance policies are currently in full force and effect except as stated in
Schedule 5.17.
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Since January 1, 1996, no insurance carried by the Company has been canceled by
the insurer and the Company has not been denied coverage under any such policy.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; LABOR MATTERS.
(a) The Company has delivered to AmPaM an accurate list (which is
set forth on Schedule 5.18(a)(1)) showing all officers, directors and key
employees of the Company, listing all employment agreements with such officers,
directors and key employees and the rate of compensation (and the portions
thereof attributable to salary, bonus and other compensation, respectively) of
each of such persons as of (i) the Balance Sheet Date and (ii) the date hereof.
The Company has provided to AmPaM true, complete and correct copies of any
employment agreements for persons listed on Schedule 5.18(a)(1). Since the
Balance Sheet Date, except as disclosed on Schedule 5.18(a)(2), there have been
no increases in the compensation payable or any bonuses to any officer,
director, key employee or other employee, except ordinary salary increases
implemented on a basis consistent with past practices and except for bonuses
paid on a basis consistent with past practices.
(b) Except as set forth on Schedule 5.18(b), (i) the Company is
not bound by or subject to (and none of its assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) to the knowledge of the
Company, no campaign to establish such arrangement is in progress and (iii)
there is no pending or, to the Company's knowledge, threatened labor dispute
involving the Company and any group of its employees nor has the Company
experienced any labor interruptions over the past three years. The Company
believes its relationship with employees to be generally good.
(c) Except as set forth in Schedule 5.18(c) attached hereto,
(i) there are no claims, actions or proceedings pending or, to the knowledge of
the Company, threatened between the Company and any of its employees, (ii) the
Company has complied in all material respects with all laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, and (iii) the Company has not received written
notice from any person asserting that the Company is liable in any material
amount for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing.
5.19 EMPLOYEE PLANS. The Company has delivered to AmPaM accurate
schedule (Schedule 5.19(a)) showing all employee benefit plans of the Company,
including all employment agreements and other agreements or arrangements
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date and as of the date of
this Agreement. Except for the employee benefit plans, if any, described on
Schedule 5.19(a), the Company does not sponsor, maintain or contribute to any
plan program, fund or arrangement that constitutes an "employee pension benefit
plan", and neither the Company nor any Subsidiary has any obligation to
contribute to or accrue or
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pay any benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan" (within the meaning of Section 3(36) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or any non-qualified deferred
compensation arrangement). For the purposes of this Agreement, the term
"employee pension benefit plan" shall have the same meaning as is given that
term in Section 3(2) of ERISA. The Company has not sponsored, maintained or
contributed to any employee pension benefit plan other than the plans set forth
on Schedule 5.19(a), and, except as described on Schedule 5.19(b), the Company
is not or could not be required to contribute to any retirement plan pursuant to
the provisions of any collective bargaining agreement establishing the terms and
conditions or employment of any of the Company's employees.
Except as set forth on Schedule 5.19(c), the Company is not now, or
will not as a result of its past activities become, liable to the Pension
Benefit Guaranty Corporation or to any multiemployer employee pension benefit
plan under the provisions of Title IV of ERISA.
All employee benefit plans listed on Schedule 5.19(a) and the
administration thereof are in compliance in all material respects with their
terms and all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable federal, state and local
statutes, ordinances and regulations.
All accrued contribution obligations of the Company as of the Balance
Sheet Date with respect to any plan listed on Schedule 5.19(a) have either been
fulfilled in their entirety or are fully reflected on the balance sheet of the
Company as of the Balance Sheet Date.
5.20 COMPLIANCE WITH ERISA. All plans listed on Schedule 5.19(a)
that are intended to qualify under Section 401 (a) of the Code (the "Qualified
Plans") are, and have been so qualified and have been determined by the Internal
Revenue Service to be so qualified, and copies of such determination letters are
attached to Schedule 5.19(a). Except as disclosed on Schedule 5.20, all reports
and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, actuarial reports, audits or tax returns) since January 1, 1992 have been
timely filed or distributed, and copies thereof have been made available to
AmPaM. No such plan listed on Schedule 5.19(a) nor the Company has engaged in
any transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No such Plan listed on Schedule 5.19(a) has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(l) of ERISA; and the Company has not incurred any liability for
excise tax or penalty due to the Internal Revenue Service nor any liability to
the Pension Benefit Guaranty Corporation. The Company further represents that
except as set forth on Schedule 5.20 hereto:
(i) there have been no terminations, partial terminations or
discontinuations of contributions to any Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval
by the Internal Revenue Service;
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(ii) no plan listed on Schedule 5.19(a) subject to the
provisions of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase
is defined in Section 4043 of ERISA) with respect to any such plan
listed in Schedule 5.19(a);
(iv) the Company (including any Subsidiaries) has not
incurred liability under Section 4062 of ERISA; and
(v) no circumstances exist pursuant to which the Company
could have any direct or indirect liability whatsoever (including, but
not limited to, any liability to any multiemployer plan or the PBGC
under Title IV of ERISA or to the Internal Revenue Service for any
excise tax or penalty, or being subject to any statutory lien to secure
payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the
Company that is, or at any time was, a member of a "controlled group"
(as defined in Section 412(n)(6)(B) of the Code) that includes the
Company.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set
forth on Schedule 5.21 or Schedule 5.13, the Company has not violated within the
five years prior to the date of this Agreement and is not currently in violation
of any law or regulation or any order of any court or Federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it other than violations that would not
have a Material Adverse Effect on the Company; and except to the extent set
forth on Schedule 5.10(c) or Schedule 5.13, there are no claims, actions, suits
or proceedings, pending or, to the knowledge of the Company, threatened in
writing against the Company, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over the Company and no written
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received by the Company, and to the knowledge of the Company there is
no valid basis for any such claim, action, suit or proceeding that could
reasonably be expected to have a Material Adverse Effect on the Company.
5.22 TAXES. The Company has timely filed all requisite Federal,
state and other Tax Returns or extension requests for all fiscal periods ended
on or before the Balance Sheet Date; and except as set forth on Schedule
5.22(a), there are no examinations in progress or claims pending against the
Company for federal, state and other Taxes (including penalties and interest)
for any period or periods prior to and including the Balance Sheet Date and no
notice of any claim for Taxes, whether pending or threatened, has been received.
All Tax, including interest and penalties (whether or not shown on any Tax
Return), due by the Company has been paid. The amounts shown as accruals for
Taxes on the Financial Statements are sufficient for the payment of all Taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before the date of the respective Financial Statements. Copies of
(i) any tax examinations, (ii) extensions of statutory limitations and (iii) the
federal and local income Tax Returns and franchise Tax Returns of Company for
their last three (3) fiscal years, or such shorter period of time as any of them
shall
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have existed, are attached hereto as Schedule 5.22(a) or have otherwise been
delivered to AmPaM. The Company has a taxable year ended December 31. Except as
set forth on Schedule 5.22(a), the Company uses the accrual method of accounting
for income tax purposes, and the Company's methods of accounting have not
changed in any material respect in the past five years (except as required to
conform to changes in GAAP). The Company is not an investment company as defined
in Section 351(e)(1) of the Code. The Company is not and has not during the last
five years been a party to any tax sharing agreement or agreement of similar
effect. Except as set forth on Schedule 5.22(a), the Company is not and has not
during the last five years been a member of any consolidated group for federal
tax purposes. The Company has not received, been denied, or applied for any
private letter ruling from the IRS during the last ten years.
5.23 NO VIOLATIONS; NO CONSENT REQUIRED, ETC.
(a) The Company is not in violation of any Charter Document.
Except as set forth on Schedule 5.23(a), the Company is not in default under any
lease, instrument, agreement, license, or permit set forth on Schedule 5.12(a),
Schedule 5.14(a), Schedule 5.15(b) or Schedule 5.16(a) (collectively, the
"Material Documents").
(b) Except as set forth on Schedule 5.23(b)(1), the execution and
delivery of this Agreement by each of the Company and the Stockholders do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company under any of the
terms, conditions or provisions of (i) the Charter Documents of the Company,
(ii) any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental authority
applicable to the Company or any of its properties or assets, or (iii) any
Material Document to which the Company is now a party or by which the Company or
any of its properties or assets may be bound or affected. The consummation by
the Company and the Stockholders of the transactions contemplated hereby will
not result in any material violation, conflict, breach, right of termination or
acceleration or creation of liens under any of the terms, conditions or
provisions of the items described in clauses (i) through (iii) of the preceding
sentence, subject, in the case of the terms, conditions or provisions of the
items described in clause (iii) above, to obtaining (prior to the Effective
Time) such consents as may be required from commercial lenders, lessors or other
third parties as listed on Schedule 5.23(b)(2).
(c) Except as set forth on Schedule 5.23(c) and except for the
Hart-Scott Act, none of the Material Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to the consummation by the Company and the Stockholders of any of the
transactions contemplated hereby in order to remain in full force and effect,
and consummation by the Company and the Stockholders of the transactions
contemplated hereby will not give rise to any right to termination, cancellation
or acceleration or loss of any material right or benefit under any Material
Document.
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(d) Except for (i) any filings to be made with the SEC pursuant
to the 1933 Act or with any state securities authorities in connection with the
offer and sale of AmPaM Stock and AmPaM Notes pursuant to this Agreement and
(ii) any filing required to be made under the Hart-Scott Act in connection with
the transactions contemplated by this Agreement, no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby.
(e) Except as set forth on Schedule 5.23(e), none of the Material
Documents prohibits the disclosure or publication by the Company or AmPaM of the
name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company from freely providing services or
selling products to any other customer or potential customer of the Company,
AmPaM or any Other Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24,
the Company is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.25 ABSENCE OF CHANGES. (a) Since the Balance Sheet Date, except
as set forth on Schedule 5.25 or as otherwise contemplated hereby, there has not
been:
(i) any Material Adverse Change in the Company;
(ii) any damage, destruction or casualty loss (whether or not
covered by insurance), alone or in the aggregate, which has caused a
Material Adverse Effect on the Company;
(iii) any change in the authorized capital of the Company or
its outstanding securities or any change in its ownership interests or
any grant of any options, warrants, calls, conversion rights or
commitments;
(iv) any declaration or payment of any dividend or
distribution in respect of the capital stock or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock
of the Company except for distributions that would have been permitted
after the date hereof under Section 7.3(iii) hereof,
(v) any increase in the compensation, bonus, sales
commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, Stockholders, employees,
consultants or agents, except for ordinary and customary bonuses and
salary increases for employees in accordance with past practice;
(vi) any work interruptions, labor grievances or claims
filed, or any event or condition of any character, which has caused a
Material Adverse Effect on the Company;
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(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the Company to any
person, including, without limitation, the Stockholders and their
affiliates, except inventory sold or transferred in the Ordinary Course
of Business;
(viii) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to the Company, including
without limitation any indebtedness or obligation of any Stockholders
or any Affiliate thereof;
(ix) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
material assets, property or rights of the Company or requiring consent
of any party to the transfer and assignment of any such assets,
property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the Ordinary Course of Business;
(xi) any waiver of any material rights or claims of the
Company;
(xii) any amendment or termination of any Material Document
to which the Company is a party except for the termination of a
Material Document in accordance with its terms without any action on
the part of the Company;
(xiii) any transaction by the Company outside the Ordinary
Course of Business;
(xiv) any cancellation or termination of a material contract
with a customer or client listed on Schedule 5.15(a) prior to the
scheduled termination date thereof; or
(xv) any other distribution of property or assets by the
Company other than in the Ordinary Course of Business, other than (a)
distributions of nonoperating assets specifically identified on
Schedule 5.25, (b) distributions of real estate required by Section
7.1(c) of this Agreement and (c) distributions of cash or promissory
notes permitted by Annex I hereto.
(b) Except as set forth on Schedule 5.25, the Company has
not, between the Balance Sheet Date and the date hereof, taken any of the
actions set forth in Section 7.3.
5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The Company has
delivered to AmPaM an accurate schedule (which is set forth on Schedule 5.26) as
of the date of the Agreement of:
(i) the name of each financial institution in which the
Company has an account or safe deposit box;
(ii) the names in which the accounts or boxes are held;
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(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or
have access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company and
a description of the terms of such power.
5.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the Company and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
Company and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
5.28 RELATIONS WITH GOVERNMENTS. The Company has not, and to the
knowledge of the Company none of the Stockholders or any Affiliate of any of
them has, given or offered anything of value to any governmental official,
political party or candidate for government office or otherwise taken any action
which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any law of similar effect.
5.29 DISCLOSURE. This Agreement, including the Annexes and
Schedules hereto, and the completed questionnaire related to the Hart-Scott Act
furnished to AmPaM by the Company, do not contain an untrue statement of a
material fact concerning the Company or omit to state a material fact concerning
the Company necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing does not apply to statements contained in or omitted from any
of such documents made or omitted in reliance upon information furnished in
writing by AmPaM.
5.30 NO WARRANTIES OR INSURANCE. Except for warranty liability
under applicable law and except for warranty liability under the warranties
issued by the Company of the types described on Schedule 5.30, the Company has
no liability to any person under any warranty and the Company does not offer or
sell insurance or consumer protection plans or other arrangements that could
result in the Company being required to make any payment to or perform any
service for any person.
5.31 INTEREST IN CUSTOMERS AND SUPPLIERS AND RELATED PARTY
TRANSACTIONS. Except as described on Schedule 5.31 or in Section 8.11, no
Stockholder, officer, director or Affiliate of the Company (i) owns, directly or
indirectly, any financial interest in, or is a director, officer, employee or
affiliate of, any corporation, firm, association or business organization that
is a client, supplier, customer, lessor, lessee or competitor of the Company, or
(ii) is or will be a party to an agreement or relationship with the Company
other than through a customary "at will" employment relationship.
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5.32 PRIVATE PLACEMENT MEMORANDUM. None of the information
supplied or to be supplied by the Company in writing specifically for inclusion
in the Private Placement Memorandum contained or, as of the Closing Date, will
contain any untrue statement of a material fact concerning the Company or
omitted or will omit to state any material fact required to be stated therein or
necessary in order to make the statements contained in such information supplied
or to be supplied by the Company concerning the Company, in light of the
circumstances under which they are made, not misleading.
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.
Each Stockholder severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.7 hereof, shall be true at the time of
Closing, and that the representations and warranties set forth in this Section
5(B) shall survive the Closing Date.
5.33 AUTHORITY; OWNERSHIP. Such Stockholder has the full legal
right, power and authority to enter into this Agreement, and this Agreement is a
legal, valid and binding obligation of such Stockholder, enforceable against the
Stockholder in accordance with its terms. Except as set forth on Schedule
5.33(a), the execution and delivery of this Agreement by such Stockholder does
not violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of such Stockholder
under any of the terms, conditions or provisions of (i) the Charter Documents of
the Company, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to such Stockholder or any of such Stockholder's properties
or assets, or (iii) any lease, instrument, agreement, license or permit to which
such Stockholder is now a party or by which such Stockholder or any of such
Stockholder's properties or assets may be bound or affected. Except for (i) any
filings to be made with the SEC pursuant to the 1933 Act and any state
securities authorities in connection with the offer and sale of AmPaM Stock and
AmPaM Notes pursuant to this Agreement, (ii) any filing required to be made
under the Hart-Scott Act in connection with the transactions contemplated by
this Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by such
Stockholder or the consummation by such Stockholder of the transactions
contemplated hereby. Except as set forth on Schedule 5.33(b), such Stockholder
owns beneficially and of record all of the shares of the Company Stock
identified on Annex I hereto as being owned by such Stockholder, and, such
Company Stock is owned free and clear of all liens, security interests, pledges,
charges, voting trusts, voting agreements, restrictions, encumbrances and claims
of every kind.
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5.34 PREEMPTIVE RIGHTS. Such Stockholder does not have, or hereby
waives, any preemptive or other right to acquire shares of Company Stock or
AmPaM Stock that such Stockholder has or may have had. Nothing herein, however,
shall limit or restrict the rights of any Stockholder to acquire AmPaM Stock
pursuant to (i) this Agreement, (ii) any option granted or to be granted by
AmPaM to such Stockholder, (iii) a purchase through a broker in a regular stock
market transaction or (iv) a purchase from a stockholder of a Founding Company
(subject to compliance with any contractual restrictions or securities law
restrictions applicable thereto specified in Section 15 hereof).
5.35 NO COMMITMENT TO DISPOSE OF AMPAM STOCK. No Stockholder is
under any binding commitment or contract to sell, exchange or otherwise dispose
of shares of AmPaM Stock or AmPaM Notes received pursuant to this Agreement.
5.36 DISCLOSURE. The completed Director and Officer Questionnaires
with respect to such Stockholder (if any), the completed investor questionnaire
furnished to AmPaM by such Stockholder in connection with the proposed
acquisition by such Stockholder of AmPaM Stock and AmPaM Notes and any other
information provided to AmPaM in writing by such Stockholder relating
specifically to such Stockholder for inclusion in the Private Placement
Memorandum do not contain an untrue statement of a material fact concerning such
Stockholder or omit to state a material fact concerning such Stockholder
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading.
6. REPRESENTATIONS OF AMPAM
Except as otherwise qualified below, AmPaM represents and warrants that
all of the following representations and warranties in this Section 6 are true
at the date of this Agreement and, subject to Section 7.7 hereof, shall be true
at the time of Closing, and that such representations and warranties shall
survive the Closing Date for a period of eighteen months (the last day of such
period being the "Expiration Date" for purposes of the representations and
warranties set forth in this Section 6), except that the representations and
warranties set forth in Section 6.3, 6.11 and 6.15 shall survive until such time
as the applicable statute of limitations period has run, which shall be deemed
to be the Expiration Date for the representations and warranties set forth in
Sections 6.3, 6.11 and 6.15.
AmPaM acknowledges that in purchasing the shares of Company Stock, it
is relying upon its own independent investigation as well as the representations
and warranties of the Company and the Stockholders as set forth in this
Agreement.
6.1 DUE ORGANIZATION. AmPaM is a corporation duly incorporated and
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite power and authority to carry on its business as
it is now being conducted and as contemplated by the Private Placement
Memorandum. AmPaM is duly qualified or authorized to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of
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its properties makes such qualification or authorization necessary, except where
the failure to be so qualified or authorized to do business would not have a
Material Adverse Effect. True, complete and correct copies of the Certificate of
Incorporation and By-laws, each as proposed to be amended and as such documents
shall be in effect as of the Closing Date, of AmPaM (the "AmPaM Charter
Documents") are attached hereto as Annex II.
6.2 AUTHORIZATION. (i) The officers of AmPaM executing this
Agreement have the authority to enter into and bind AmPaM to the terms of this
Agreement and (ii) AmPaM has the full legal right, power and authority to enter
into this Agreement and consummate the transactions contemplated hereby. All
corporate acts and other proceedings required to have been taken by AmPaM to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and properly
taken.
6.3 CAPITAL STOCK OF AMPAM. The authorized capital stock of
AmPaM is as set forth in Section 1.3(ii). Immediately prior to the Closing Date,
all of the issued and outstanding shares of the capital stock of AmPaM will be
as set forth in the Private Placement Memorandum, free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind other than any restrictions described in the Private
Placement Memorandum. All of the issued and outstanding shares of the capital
stock of AmPaM have been duly authorized and validly issued, are fully paid and
nonassessable and such shares were offered, issued, sold and delivered by AmPaM
in compliance with all applicable state and Federal laws concerning the issuance
of securities. Further, none of such shares were issued in violation of the
preemptive rights of any past or present stockholder of AmPaM. Upon the Closing
Date, the authorized, issued and outstanding shares of capital stock of AmPaM
will be as set forth in the Private Placement Memorandum under the caption
"Capitalization." Upon the Closing Date, the aggregate number of shares of AmPaM
Stock issued and outstanding on the Closing Date that are owned by Sterling City
Capital, LLC, any Affiliates of Sterling City Capital, LLC and the officers and
directors of AmPaM will not be greater than the number of shares of AmPaM Stock
reflected in the Private Placement Memorandum as the aggregate number of shares
of AmPaM Stock to be issued and outstanding and owned by Sterling City Capital,
LLC, any Affiliates of Sterling City Capital, LLC and the officers and directors
of AmPaM.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other
Agreements and except as set forth in the Private Placement Memorandum, (i) no
option, warrant, call, conversion right or commitment of any kind exists as of
the date of this Agreement which obligates AmPaM to issue any of its authorized
but unissued capital stock; and (ii) AmPaM has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof. The material terms of any options, warrants or other rights to
acquire shares of the stock of AmPaM referred to in the preceding sentence will
be as described in the Private Placement Memorandum.
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6.5 SUBSIDIARIES. As of the date of this Agreement, AmPaM has no
subsidiaries. As of the date of this Agreement, AmPaM does not own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity, and AmPaM is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. The historical financial statements of
AmPaM included in the Private Placement Memorandum (the "AmPaM Financial
Statements") have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods indicated (except as noted thereon), and the
balance sheet included therein presents fairly the financial position of AmPaM
as of its date. Management of AmPaM believes that the assumptions underlying the
pro forma adjustments utilized in the preparation of such pro forma financial
statements are reasonable, and such pro forma adjustments have been properly
applied to the historical financial amounts in the compilation of the pro forma
financial statements. Based on the representations in Section 5.9 of this
Agreement and in Section 5.9 of each of the Other Agreements, the pro forma
financial information of AmPaM fairly presents the pro forma financial position,
results of operations and other information purported to be shown therein at the
respective dates and for the respective periods specified.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth in the Private
Placement Memorandum, as of the date of this Agreement, AmPaM has no material
liabilities or obligations of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise, other than
liabilities incurred in the ordinary course of business and consistent with past
practices, liabilities or obligations set forth in or contemplated by this
Agreement and the Other Agreements and except for fees incurred in connection
with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set
forth in the Private Placement Memorandum, AmPaM is not in violation of any law
or regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and its stockholders and, there are no claims,
actions, suits or proceedings, pending or, to the knowledge of AmPaM, threatened
against or affecting, AmPaM, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over it and no notice of any
claim, action, suit or proceeding, whether pending or threatened, has been
received. AmPaM has conducted and is conducting its businesses in compliance in
all material respects with the requirements, standards, criteria and conditions
set forth in applicable Federal, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations and is not in
violation, in any material respect, of any of the foregoing.
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6.9 NO VIOLATIONS. (a) AmPaM is not in violation of any AmPaM
Charter Document. AmPaM is not in default under any lease, instrument,
agreement, license, or permit to which AmPaM is a party or by which AmPaM or any
of its properties are bound (collectively, the "AmPaM Documents").
(b) The execution and delivery of this Agreement by AmPaM do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of AmPaM under any of the
terms, conditions or provisions of (i) the AmPaM Charter Documents, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to
AmPaM or any of its properties or assets, or (iii) any AmPaM Document; provided
that the representations and warranties specified in clause (ii) of this
sentence (A) are based on information in the investor questionnaires and related
purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements and
(B) are subject to the accuracy and completeness of the information contained in
such investor questionnaires and related purchaser representative questionnaires
and the truthfulness of such representations and warranties. The consummation by
AmPaM of the transactions contemplated hereby will not result in any material
violation, conflict, breach, right of termination or acceleration or creation of
liens under any of the terms, conditions or provisions of the items described in
clauses (i) through (iii) of the preceding sentence, subject, in the case of the
terms, conditions or provisions of the items described in clause (iii) above, to
obtaining (prior to the Closing Date) (x) such approvals, consents or orders
from the SEC, state blue sky authorities and authorities administering the
Hart-Scott Act and (y) such other consents as may be required from commercial
lenders, lessors or other third parties which are listed on Schedule 6.9.
(c) Except for (i) any filings to be made with the SEC pursuant to
the 1933 Act and filings with various state securities authorities in connection
with the transactions contemplated by this Agreement, and (ii) any filings
required to be made under the Hart-Scott Act in connection with the transactions
contemplated by this Agreement, none of the AmPaM Documents requires notice to,
or the consent or approval of, any governmental agency or other third party with
respect to the consummation by AmPaM of any of the transactions contemplated
hereby in order to remain in full force and effect, and consummation by AmPaM of
the transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any material right or
benefit under the AmPaM Documents; provided that the representations and
warranties specified in clauses (i) and (ii) of this sentence (A) are based on
information in the investor questionnaires and related purchaser representative
questionnaires executed and delivered by the Stockholders of the Company and the
stockholders of the Other Founding Companies, the representations and warranties
of the
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Stockholders set forth in Section 16 hereof and the representations and
warranties of the stockholders of the Other Founding Companies set forth in
Section 16 of the Other Agreements and (B) are subject to the accuracy and
completeness of the information contained in such investor questionnaires and
related purchaser representative questionnaires and the truthfulness of such
representations and warranties.
(d) Except for (i) any filings with the SEC pursuant to the 1933
Act and filings with various state securities authorities in connection with the
transactions contemplated by this Agreement and (ii) any filings required under
the Hart-Scott Act in connection with the transactions contemplated by this
Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by AmPaM
or the consummation by AmPaM of the transactions contemplated hereby; provided
that the representations and warranties specified in clauses (i) and (ii) of
this sentence (A) are based on information in the investor questionnaires and
related purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements and
(B) are subject to the accuracy and completeness of the information contained in
such investor questionnaires and related purchaser representative questionnaires
and the truthfulness of such representations and warranties.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by AmPaM and the performance of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of AmPaM and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of AmPaM, enforceable
against AmPaM in accordance with its terms.
6.11 AMPAM STOCK. At the time of issuance thereof and delivery to
the Stockholders, the AmPaM Stock to be delivered to the Stockholders pursuant
to this Agreement will constitute valid, duly authorized and legally issued
shares of AmPaM, fully paid and nonassessable, and with the exception of
restrictions upon resale set forth in Sections 15 and 16 hereof, will be
identical in all substantive respects (which do not include the form of
certificate upon which it is printed or the presence or absence of a CUSIP
number on any such certificate) to the AmPaM Stock issued and outstanding as of
the date hereof, other than the Restricted Common Stock. The AmPaM Stock issued
and delivered to the Stockholders shall at the time of such issuance and
delivery be free and clear of any liens, claims or encumbrances of any kind or
character. The offer and sale of the shares of AmPaM Stock to be issued to the
Stockholders pursuant to this Agreement are not required to be registered under
the 1933 Act; provided that the representations and warranties specified in this
sentence (A) are based on information in the investor questionnaires and related
purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements and
(B) are
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subject to the accuracy and completeness of the information contained in such
investor questionnaires and related purchaser representative questionnaires and
the truthfulness of such representations and warranties.
6.12 AMPAM NOTES. The AmPaM Notes have been duly authorized and,
at the Closing Date, will have been duly executed by AmPaM and, when
authenticated, issued and delivered, will constitute valid and binding
obligations of AmPaM, enforceable against AmPaM in accordance with their terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers)
reorganization, moratorium or similar laws affecting enforcement of creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
6.13 NO SIDE AGREEMENTS. AmPaM has not entered into any agreement
with any of the Founding Companies or any of the Stockholders of the Founding
Companies other than this Agreement, the Other Agreements, the agreements
referred to in this Agreement and in the Other Agreements and the Private
Placement Memorandum. AmPaM has not entered into any agreements providing for
rights to register shares of AmPaM Stock under the 1933 Act except as provided
in Section 17 of this Agreement, in Section 17 of the Other Agreements and in an
agreement with Sterling City Capital, LLC, its Affiliates and officers and
directors of AmPaM having terms substantially similar to those set forth in
Section 17 hereof.
6.14 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. AmPaM was
formed in June 1998 and has conducted no material business since the date of its
inception except for activities related to the transaction contemplated by this
Agreement, the Other Agreements and the Private Placement Memorandum. Except as
described in the Private Placement Memorandum, as of the date of this Agreement,
AmPaM does not own any real property or any material personal property and is
not a party to any other material agreement other than this Agreement, the Other
Agreements and the agreements contemplated hereby and thereby.
6.15 RELATIONS WITH GOVERNMENTS. Neither AmPaM nor any of its
directors, officers or Affiliates has given or offered anything of value to any
government official, political party or candidate for government office, nor has
AmPaM, any of its directors, officers or Affiliates of any of them otherwise
taken any action, which would cause AmPaM to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any law of similar effect.
6.16 DISCLOSURE. The Private Placement Memorandum delivered to the
Company and the Stockholders does not as of the date hereof contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing does not apply to
statements contained in or omitted from any of such documents made or omitted in
reliance upon, and in conformity with, information furnished to AmPaM by the
Company or the Stockholders in writing specifically for inclusion in the Private
Placement Memorandum.
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6.17 OTHER AGREEMENTS. The Other Agreements have been duly
authorized, executed and delivered by AmPaM and constitute the legal, valid and
binding obligation of AmPaM enforceable against AmPaM in accordance with their
respective terms. The terms and conditions of the Other Agreements (excluding
the terms relating to the consideration payable by AmPaM thereunder) are
identical in all material respects to the terms and conditions in this
Agreement.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE; TRANSFER OF REAL ESTATE.
(a) Between the date of this Agreement and the Closing Date, the
Company will afford to the officers and authorized representatives of AmPaM
reasonable access during normal business hours to all of the Company's sites,
properties, books and records and will furnish AmPaM with such additional
financial and operating data and other information as to the business and
properties of the Company as AmPaM may from time to time reasonably request. The
Company will cooperate with AmPaM, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. AmPaM,
the Stockholders and the Company will treat all information obtained in
connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to the Company as confidential
in accordance with the provisions of Section 14 hereof.
(b) Between the date of this Agreement and the Closing Date, AmPaM
will afford to the officers and authorized representatives of the Company
access to all of AmPaM's sites, properties, books and records and will furnish
the Company with such additional financial and operating data and other
information as to the business and properties of AmPaM and the Other Founding
Companies as the Company may from time to time reasonably request. AmPaM will
cooperate with the Company, its representatives, auditors and counsel in the
preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. The
Company will cause all information obtained pursuant to this Section 7.1(b) or
obtained in connection with the negotiation and performance of this Agreement to
be treated as confidential in accordance with the provisions of Section 14
hereof.
(c) Except as set forth on Schedule 7.1, any real property owned by
the Company will be sold or distributed by the Company on terms mutually
acceptable to AmPaM and the Company and leased back by the Company on terms no
less favorable to the Company than those available from an unaffiliated party
and otherwise reasonably acceptable to AmPaM at or prior to the Closing Date.
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7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Closing Date, the Company will, except as set forth on
Schedule 7.2:
(i) carry on its businesses in the Ordinary Course of
Business and not introduce any material new method of management,
operation or accounting;
(ii) use all commercially reasonable efforts to maintain its
properties and facilities, including those held under leases, in as
good working order and condition as at present, ordinary wear and tear,
depreciation and insured losses excepted;
(iii) perform in all material respects all of its obligations
under all Material Documents relating to or affecting its respective
assets, properties or rights;
(iv) use its commercially reasonable efforts to keep in full
force and effect present insurance policies or other comparable
insurance coverage;
(v) use its commercially reasonable efforts to maintain and
preserve its business organization intact, retain its respective
present key employees and maintain its relationships with suppliers,
customers and others having business relations with the Company;
(vi) use its commercially reasonable efforts to maintain
compliance with all material permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory
agencies and similar governmental authorities;
(vii) maintain present debt and lease instruments in
accordance with their terms and not enter into new or amended debt or
lease instruments without the knowledge and consent of AmPaM (which
consent shall not be unreasonably withheld), provided that debt and/or
lease instruments may be replaced without the consent of AmPaM if such
replacement instruments are on terms at least as favorable to the
Company as the instruments being replaced;
(viii) maintain or reduce present salaries and commission
levels for all officers, directors, employees and agents except for
ordinary and customary bonus and salary increases for employees in
accordance with past practices; and
(ix) use commercially reasonable efforts to cause the actual
amount of its Current Assets (as defined in Annex I hereto) to be not
less than 150% of the actual amount of its Current Liabilities (as
defined in Annex I hereto).
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7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3,
between the date hereof and the Closing Date, the Company will not, without
prior written consent of AmPaM:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of any kind
other than in connection with the exercise of options or warrants
listed in Schedule 5.4;
(iii) except as permitted pursuant to the terms and
conditions for distributions described in Annex I, declare or pay any
dividend, or make any distribution in respect of its stock whether now
or hereafter outstanding, or purchase, redeem or otherwise acquire or
retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree
to incur any liability or make any capital expenditures, except if it
is in the Ordinary Course of Business or involves an amount not in
excess of three percent (3%) of the Company's gross revenues for fiscal
1997;
(v) create, assume or permit to exist any mortgage, pledge
or other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired, except (1) with respect to purchase money
liens incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of three percent (3%) of the Company's
gross revenues for fiscal 1997 necessary or desirable for the conduct
of the businesses of the Company, (2) (A) liens for taxes either not
yet due or being contested in good faith and by appropriate proceedings
(and for which contested taxes adequate reserves have been established
and are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the Ordinary
Course of Business (the liens set forth in clause (2) being referred to
herein as "Statutory Liens"), or (3) liens set forth on Schedule 5.10
and/or Schedule 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the Ordinary Course of Business and
other than distributions of real estate and other assets as permitted
in this Agreement (including Annex I hereto);
(vii) negotiate for the acquisition of any business or the
start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate
with or into any other corporation;
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(ix) waive any material rights or claims of the Company,
provided that the Company may negotiate and adjust bills and accounts
in the course of good faith disputes with customers in a manner
consistent with past practice;
(x) amend or terminate any Material Document except for the
termination of a Material Document in accordance with its terms without
any action on the part of the Company; or
(xi) enter into any other material transaction outside the
Ordinary Course of Business or any transaction prohibited hereunder.
7.4 NO SHOP. None of the Stockholders, the Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or
offers from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than AmPaM
or its authorized agents relating to, any acquisition or purchase of
all or a material amount of the assets of, or any equity interest in,
the Company or a merger, consolidation or business combination of the
Company.
7.5 AGREEMENTS. Except as disclosed on Schedule 7.5(a), the
Stockholders and the Company shall terminate (i) any stockholders agreements,
voting agreements, voting trusts, agreements providing for the grant by the
Company of any options, warrants and employment agreements between the Company
and any employee listed on Schedule 8.11 hereto and (ii) except as otherwise
provided in this Agreement, any existing agreement between the Company and any
Stockholder, on or prior to the Closing Date provided that nothing herein shall
prohibit or prevent the Company from paying (either prior to or on the Closing
Date) notes or other obligations from the Company to the Stockholders described
in Schedule 7.5(b) in accordance with the terms thereof.
7.6 NOTIFICATION OF CERTAIN MATTERS. Each Stockholder and the
Company shall give prompt notice to AmPaM upon obtaining knowledge of (i) the
occurrence or non-occurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty of the Company or
such Stockholder contained herein to be untrue or inaccurate in any material
respect at or prior to the Closing and (ii) any material failure of such
Stockholder or the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such person hereunder. AmPaM shall
give prompt notice to the Company of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of AmPaM contained herein to be untrue or inaccurate
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in any material respect at or prior to the Closing, (ii) any material failure of
AmPaM to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; (iii) any termination of any Other
Agreement for any reason; and (iv) the issuance by the SEC or any state
securities regulatory authority of any issuance of or threatened issuance of any
order challenging the availability of an exemption from registration or
suspending the qualification of any securities described in the Private
Placement Memorandum for sale in any jurisdiction. However, subject to the
provisions of Section 7.7, such notification shall not relieve either the
Company or such Stockholder of their respective obligations under this
Agreement. The delivery of any notice pursuant to this Section 7.6 shall not be
deemed to (i) modify the representations or warranties hereunder of the party
delivering such notice, which modification may only be made pursuant to Section
7.7, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
7.7 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until 24 hours prior
to the Closing Date to notify AmPaM with respect to any matter (i) hereafter
arising or discovered which, if existing or known at the date of this Agreement,
would have been required to be set forth or described in the Schedules or (ii)
which may have been omitted from the Schedules previously provided by such
party. Notwithstanding the foregoing sentence, no amendment or supplement to a
Schedule prepared by the Company may be made unless AmPaM consents to such
amendment or supplement; and provided further, that no amendment or supplement
to a Schedule prepared by AmPaM may be made unless the Stockholders consent to
such amendment or supplement. For all purposes of this Agreement, including
without limitation for purposes of determining whether the conditions set forth
in Sections 8.1 and 9.1 have been fulfilled, the Schedules hereto, as amended or
supplemented with the consent of AmPaM or the Stockholders, as the case may be,
as provided above, shall be deemed to be the Schedules to this Agreement.
7.8 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
appropriate to carry out the transactions contemplated hereby and to cause the
conditions to the Closing Date to be satisfied as promptly as practicable.
7.9 AUTHORIZED CAPITAL. Prior to the Closing Date, AmPaM shall
maintain its authorized capital stock as set forth in the Private Placement
Memorandum.
7.10 COMPLIANCE WITH THE HART-SCOTT ACT. All parties to this
Agreement hereby recognize that one or more filings under the Hart-Scott Act may
be required in connection with the transactions contemplated herein. If it is
determined by the parties to this Agreement that filings under the Hart-Scott
Act are required, then: (i) each of the parties hereto agrees to cooperate and
use its best efforts to comply with the Hart-Scott Act and (ii) such compliance
by the Stockholders and the parties agree to cooperate and use their best
efforts to cause all filings required under the Hart-Scott Act to be made. If
filings under the Hart-Scott Act are required, the costs and expenses thereof
(including filing fees) shall be borne by AmPaM.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND
COMPANY
The obligations of the Stockholders and the Company with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions. As of
the Closing Date, if any such applicable conditions have not been satisfied, any
one or more of the Stockholders who would be entitled to receive a majority of
the Aggregate Consideration (as defined herein) received by all Stockholders if
the transactions contemplated hereby were consummated shall have the right to
waive any condition not so satisfied. Any act or action of the Stockholders in
consummating the Closing or delivering the certificates representing Company
Stock as of the Closing Date shall constitute a waiver of any conditions not so
satisfied. However, no such waiver shall be deemed to affect the survival of the
representations and warranties of AmPaM contained in Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.
All representations and warranties of AmPaM contained in Section 6 shall be true
and correct as of the Closing Date as though such representations and warranties
had been made as of that time; all of the terms, covenants and conditions of
this Agreement to be complied with and performed by AmPaM on or before the
Closing Date shall have been duly complied with and performed in all material
respects; and certificates to the foregoing effect dated the Closing Date and
signed by the President or any Vice President of AmPaM shall have been delivered
to the Stockholders.
8.2 SATISFACTION. All actions, proceedings, instruments and
documents that are not within the control of the Company or the Stockholders and
that are required to carry out this Agreement or incidental hereto shall be
reasonably satisfactory to the Company, the Stockholders and their counsel.
8.3 NO LITIGATION. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the purchase and sale of the Company Stock.
8.4 OPINION OF COUNSEL. The Company shall have received opinions
from counsel for AmPaM, dated the Closing Date, addressed to the Company and the
Stockholders in the form annexed hereto as Annex III.
8.5 CONSENTS AND APPROVALS. All necessary consents of and filings
with any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule 6.9
shall have been obtained; and no action or proceeding shall have been instituted
or threatened to restrain or prohibit the purchase and sale of the Company Stock
and no governmental agency or body shall have taken any other action or made any
request of Company as a result of which Company deems it inadvisable to proceed
with the transactions hereunder.
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8.6 GOOD STANDING CERTIFICATES. AmPaM shall have delivered to the
Company a certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Delaware Secretary of State and in each state
in which AmPaM is authorized to do business, showing that AmPaM is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for AmPaM for all periods prior to the Closing have
been filed and paid.
8.7 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall
have occurred which would constitute a Material Adverse Change with respect to
AmPaM from the date of the Private Placement Memorandum.
8.8 SECRETARY'S CERTIFICATE. The Company shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of AmPaM, certifying the truth and correctness of attached copies of AmPaM's
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and, if required,
the stockholders of AmPaM approving AmPaM's entering into this Agreement and the
Other Agreements and the consummation of the transactions contemplated hereby
and thereby.
8.9 TAX MATTERS. The Stockholders shall have received an opinion
of Andrews & Kurth L.L.P., in substantially the form of Annex IV hereto, that
the AmPaM Plan of Organization will qualify as a tax-free transfer of property
under Section 351 of the Code and that the Stockholders will not recognize gain
to the extent the Stockholders exchange Company Stock for AmPaM Stock (but not
cash or other property) pursuant to this Agreement in connection with the AmPaM
Plan of Organization.
8.10 OTHER FOUNDING COMPANIES. The transactions contemplated by the
Other Agreements are consummated simultaneously with the consummation of the
transactions contemplated by this Agreement.
8.11 COMPANY RELEASE OF STOCKHOLDERS. The Company shall have
delivered to the Stockholders an instrument dated the Closing Date, in form
reasonably satisfactory to AmPaM and the Stockholders, which shall be effective
only upon the occurrence of the Closing Date, releasing the Stockholders from
(i) any and all claims of the Company against the Stockholders, known and
unknown, and (ii) obligations of the Stockholders to the Company, except for (x)
items specifically identified on Schedule 5.10(a) and Schedule 5.15(b) as being
claims of or obligations to the Company and (y) continuing obligations to the
Company relating to their employment by the Company pursuant to any employment
agreement entered into pursuant to Section 8.11 hereof.
8.12 STERLING CITY CAPITAL TRANSFER RESTRICTIONS. Sterling City
Capital, LLC and each of its Affiliates which owns AmPaM Stock shall have
entered into an agreement with AmPaM containing substantially the same terms and
conditions as are contained in Section 15 and Section 17.
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8.13 ELECTION OF CHIEF EXECUTIVE OFFICER. AmPaM shall have taken
all corporate action necessary to elect Robert A. Christianson as Chief
Executive Officer of AmPaM effective immediately following the Closing Date.
8.14 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto as
payable to the Stockholders upon the Closing and (ii) the aggregate cash amounts
specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AMPAM
The obligations of AmPaM with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. As of the Closing Date, if any
such conditions have not been satisfied, AmPaM shall have the right to terminate
this Agreement, or waive any such condition, but no such waiver shall be deemed
to affect the survival of the representations and warranties contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE AND OBLIGATIONS.
All the representations and warranties of the Stockholders and the Company
contained in this Agreement shall be true and correct as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of such date; all of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Stockholders and the Company
on or before the Closing Date shall have been duly performed or complied with in
all material respects; and the Stockholders shall have delivered to AmPaM
certificates dated the Closing Date and signed by them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or threatened to
restrain or prohibit the purchase and sale of the Company Stock.
9.3 SECRETARY'S CERTIFICATE. AmPaM shall have received a
certificate, dated the Closing Date and signed by the secretary of the Company,
certifying the truth and correctness of attached copies of the Company's
Articles or Certificate of Incorporation (including amendments thereto), By-Laws
(including amendments thereto), and resolutions of the board of directors and
the Stockholders approving the execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby.
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9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall
have occurred with respect to the Company which would constitute a Material
Adverse Effect, and the Company shall not have suffered any material loss or
damages to any of its properties or assets, whether or not covered by insurance,
which change, loss or damage materially affects or impairs the ability of the
Company to conduct its business.
9.5 STOCKHOLDERS' RELEASE. The Stockholders shall have delivered
to AmPaM an instrument dated the Closing Date which shall be effective only upon
the occurrence of the Closing releasing the Company and AmPaM from (i) any and
all claims of the Stockholders against the Company and AmPaM and (ii)
obligations of the Company and AmPaM to the Stockholders, except for (A) items
specifically identified on Schedule 5.31 as being claims of or obligations to
the Stockholders, (B) continuing obligations to Stockholders relating to their
employment by the Company pursuant to employment agreements entered into as
specified in Section 8.11 hereof, (C) obligations arising under this Agreement
or the transactions contemplated hereby and (D) claims of Stockholders against
the Company for unreimbursed business expenses incurred by the Stockholders on
behalf of the Company (other than expenses related to the transactions
contemplated by this Agreement) prior to the Closing Date or unreimbursed
medical expenses of the Stockholders incurred prior to the Closing Date which
are covered by the Company's existing health insurance coverage. In the event
that the Closing Date does not occur, then the release instrument referenced
herein shall be void and of no further force or effect.
9.6 SATISFACTION. All actions, proceedings, instruments and
documents that are not within the control of AmPaM and that are required to
carry out the transactions contemplated by this Agreement or incidental hereto
shall have been reasonably approved by counsel to AmPaM.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth
on Schedule 9.7, all existing agreements between the Company and the
Stockholders (and between the Company and entities controlled by the
Stockholders) specified on Schedule 5.31 shall have been terminated effective
prior to or as of the Closing Date without any payment being made by the Company
other than payments made for services rendered, materials provided or other
benefits provided to the Company prior to the Closing Date pursuant to the terms
of such agreements as in effect as of the date of this Agreement.
9.8 OPINION OF COUNSEL. AmPaM shall have received opinions from
counsel to the Company and the Stockholders, dated the Closing Date,
substantially in the form annexed hereto as Annex V.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings
with any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule
5.23(b)(2) shall have been obtained; and no action or proceeding shall have been
instituted or threatened to restrain or prohibit the purchase and sale of the
Company Stock and no
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governmental agency or body shall have taken any other action or made any
request of AmPaM as a result of which AmPaM deems it inadvisable to proceed with
the transactions hereunder.
9.10 GOOD STANDING CERTIFICATES. The Company shall have delivered
to AmPaM a certificate, dated as of a date no earlier than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by AmPaM, in each state in
which the Company is authorized to do business, showing the Company is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the Company for all periods prior to the
Closing have been filed and paid.
9.11 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto as
payable to the Stockholders upon the Closing and (ii) the aggregate cash amounts
specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9.12 FIRPTA CERTIFICATE. Each Stockholder shall have delivered to
AmPaM a certificate to the effect that he is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.13 RESIGNATIONS OF DIRECTORS AND OFFICERS. Any directors of the
Company, other than those identified on Schedule 2.1, shall have resigned as
directors of the Company. Any officers of the Company, other than those
identified on Schedule 2.2, shall have resigned as officers of the Company.
10. COVENANTS OF AMPAM AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS.
AmPaM shall use reasonable efforts to have the Stockholders released from any
and all guarantees of the Company's indebtedness, including bond obligations,
identified on Schedule 10.1. Prior to obtaining the release of such guarantees,
AmPaM shall provide its guarantee of such indebtedness to the lenders thereof.
In the event that AmPaM cannot obtain such releases from the lenders of any such
guaranteed indebtedness identified on Schedule 10.1 on or prior to 90 days
subsequent to the Closing Date, AmPaM shall promptly pay off or otherwise
refinance or retire such indebtedness such that the Stockholders' personal
liability shall be released. AmPaM will indemnify the Stockholders against any
loss or damage suffered as a result of the personal guarantees.
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10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement, after the Closing Date, AmPaM shall not and
shall not permit any of its Subsidiaries to undertake any act that would
jeopardize the tax-free status of the exchange of Company Stock for AmPaM Stock
(but not cash or other property), including without limitation:
(a) the retirement or reacquisition, directly or indirectly,
of all or part of the AmPaM Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the
benefit of the Stockholders other than as described in the Private Placement
Memorandum or as described in this Agreement.
10.3 PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES.
(a) The Company, if possible, or otherwise the Stockholders
shall file or cause to be filed all income Tax Returns (federal, state, local or
otherwise) of any Acquired Party for all taxable periods that end on or before
the Closing Date, and shall permit AmPaM to review all such Tax Returns prior to
such filings. Unless the Company is a C corporation, the Stockholders shall pay
or cause to be paid all income Tax liabilities (in excess of all amounts already
paid with respect thereto or properly accrued or reserved with respect thereto
on the Financial Statements) with respect to the Company's operations for all
periods through and including the Closing Date.
(b) AmPaM shall file or cause to be filed all separate
Returns of, or that include, any Acquired Party for all taxable periods ending
after the Closing Date.
(c) Unless required by applicable law, regulations or
government proceedings, AmPaM shall not take any action, including any amendment
of a Tax Return of any Acquired Party, if such action would result in additional
Tax liabilities payable by any of the Stockholders for periods ending on or
prior to the Closing Date.
(d) Each party hereto shall, and shall cause its
subsidiaries and Affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request in filing any
Return, amended Return or claim for refund, determining a liability for Taxes or
a right to refund of Taxes or in conducting any audit or other proceeding in
respect of Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file Returns pursuant to this Agreement shall bear all costs of filing such
Returns.
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(e) Each of the Company, AmPaM and each Stockholder shall
comply with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as a tax-free
contribution under Section 351(a) of the Code subject to gain, if any,
recognized on the receipt of cash or other property under Section 351(b) of the
Code.
10.4 DIRECTORS. The persons named in the Private Placement
Memorandum shall be appointed as directors and elected as officers of AmPaM, as
and to the extent set forth in the Private Placement Memorandum, promptly
following the Closing Date; provided, however, that the parties hereto
acknowledge that if the Company consummates an IPO, the persons who will serve
as directors and executive officers of AmPaM will be adjusted as appropriate for
a publicly traded entity, with any such changes being subject to the approval of
the majority of the Board of Directors of AmPaM.
10.5 LEGAL OPINIONS. If required by the lenders pursuant to the
terms of any agreements related to financing of the cash amounts referred to in
Section 9.11 hereof, the Company shall cause its counsel to deliver to such
lenders, at the Closing, an opinion of counsel in substantially the form
attached hereto as Annex V.
11. INDEMNIFICATION
The Stockholders and AmPaM each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS.
(a) Each Stockholder covenants and agrees that such Stockholder
will indemnify, defend, protect and hold harmless AmPaM at all times, from and
after the date of this Agreement until the applicable Expiration Date (as
defined in the introductory paragraph to Section 5(A)), provided that for
purposes of clause (iii) below, the applicable Expiration Date shall be the date
on which the applicable statute of limitations expires), from and against all
claims, damages, actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by AmPaM as a result of
or arising from (i) any breach of the representations and warranties of the
Company set forth herein or on the schedules attached hereto or certificates
delivered pursuant to this Agreement, (ii) any breach of any covenant or
agreement on the part of the Company under this Agreement, or (iii) any
liability under the 1933 Act or any Federal or state securities law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating solely to the
Company which was based upon information provided to AmPaM or its counsel in
writing by the Company specifically for inclusion in the Private Placement
Memorandum and is contained in the Private Placement Memorandum, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
Company required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that no Stockholder shall be liable
for any
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indemnification obligation pursuant to this Section 11.1 in excess of such
Stockholder's pro rata share thereof determined by reference to the aggregate
value of the Base Cash Amount (as defined in Annex I of this Agreement), the
principal amount of AmPaM Notes and the shares of AmPaM Stock (valued at a price
of $13.00 per share) received by such Stockholder pursuant to Section I.A. of
Annex I hereto (without giving effect to the adjustments provided in Sections
I.B. and I.C. thereof) (giving effect to the value of such AmPaM Stock and
without giving effect to such adjustments, collectively, the "Aggregate
Consideration") such Stockholder would receive pursuant to Section I of Annex I
of this Agreement if the transactions contemplated hereby were consummated in
relation to the total Aggregate Consideration all Stockholders would receive
pursuant to Section I of Annex I of this Agreement if the transactions
contemplated hereby were consummated.
(b) Each Stockholder covenants and agrees that such Stockholder
will indemnify, defend, protect and hold harmless AmPaM at all times, from and
after the date of this Agreement, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by AmPaM as a result of or arising from (i)
any breach of the representations and warranties of such Stockholder set forth
in Section 5(B) hereof, (ii) any breach of any covenant or agreement on the part
of such Stockholder under this Agreement, or (iii) any liability under the 1933
Act or any Federal or state securities law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating solely to such Stockholder which was based
upon information provided to AmPaM or its counsel in writing by such Stockholder
specifically for inclusion in the Private Placement Memorandum and is contained
in the Private Placement Memorandum, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating solely to such Stockholder required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which such statements were made not misleading.
(c) AmPaM acknowledges and agrees that other than the
representations and warranties of the Company or the Stockholders specifically
contained in this Agreement, there are no representations or warranties of the
Company or the Stockholders, either express or implied, with respect to the
transactions contemplated by this Agreement, the Company or its assets,
liabilities and business.
11.2 INDEMNIFICATION BY AMPAM. AmPaM covenants and agrees that it
will indemnify, defend, protect and hold harmless the Company and the
Stockholders at all times from and after the date of this Agreement until the
applicable Expiration Date (as defined in the introductory paragraph of Section
6, provided that for purposes of clause (iii) below, the applicable Expiration
Date shall be the date on which the applicable statute of limitations expires),
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by the Company or the Stockholders as a result of or arising from (i)
any breach by AmPaM of its representations and warranties set forth herein or on
the schedules attached
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hereto or certificates delivered pursuant to this Agreement, (ii) any breach of
any agreement on the part of AmPaM under this Agreement; or (iii) any liability
under the 1933 Act or any Federal or state securities law or regulation, at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Private Placement
Memorandum, or any amendment thereof or supplement thereto, or arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except to the extent such is based upon an untrue statement or
alleged untrue statement, or omission or alleged omission, made therein in
reliance upon, and in conformity with, the representations and warranties of the
Company or the Stockholders specifically contained in this Agreement or other
information furnished to AmPaM by the Company or the Stockholders in writing
specifically for inclusion therein.
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto
(hereinafter the "Indemnified Party") has received notice of or has knowledge of
any claim by a person not a party to this Agreement ("Third Person"), or the
commencement of any action or proceeding by a Third Person, the Indemnified
Party shall, as a condition precedent to a claim with respect thereto being made
against any party obligated to provide indemnification pursuant to Section 11.1
or 11.2 hereof (hereinafter the "Indemnifying Party"), give the Indemnifying
Party written notice of such claim or the commencement of such action or
proceeding. Such notice shall state the nature and the basis of such claim and a
reasonable estimate of the amount thereof. The Indemnifying Party shall have the
right to defend and settle, at its own expense and by its own counsel reasonably
satisfactory to the Indemnified Party, any such matter so long as the
Indemnifying Party pursues the same in good faith and diligently, provided that
the Indemnifying Party shall not settle any criminal proceeding without the
written consent of the Indemnified Party. If the Indemnifying Party undertakes
to defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by Indemnifying Party, provided that if counsel to
the Indemnifying Party shall have a conflict of interest or a conflict of
interest is reasonably likely to arise that prevents counsel for the
Indemnifying Party from representing such Indemnified Party, Indemnified Party
shall have the right to participate in such matter through counsel of its own
choosing and Indemnifying Party will reimburse the Indemnified Party for the
reasonable expenses of its counsel. After the Indemnifying Party has notified
the Indemnified Party of its intention to undertake to defend or settle any such
asserted liability, and for so long as the Indemnifying Party diligently pursues
such defense, the Indemnifying Party shall not be liable for any additional
legal expenses incurred by the Indemnified Party in connection with any defense
or settlement of such asserted liability, except (i) as set forth in the
preceding sentence and (ii) to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the
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Indemnifying Party's liability under this Section with respect to such Third
Person claim shall be limited to the amount so offered in settlement by said
Third Person. Upon agreement as to such settlement between said Third Person and
the Indemnifying Party, the Indemnifying Party shall, in exchange for a complete
release from the Indemnified Party, promptly pay to the Indemnified Party the
amount agreed to in such settlement. If the Indemnifying Party does not
undertake to defend such matter to which the Indemnified Party is entitled to
indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense through counsel of its choice, at
the cost and expense of the Indemnifying Party, and the Indemnified Party may
settle such matter, and the Indemnifying Party shall pay the Indemnified Party
for the settlement amount and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith, provided, however, that under no
circumstances shall the Indemnified Party settle any Third Person claim without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. With respect to any account, note or other
receivable as to which the Stockholders have paid in full any indemnification
obligation pursuant to this Section 11 as a result of a breach of the
representation and warranty made pursuant to Section 5.11 or as to which a claim
in respect thereof has been asserted pursuant to this Section 11 that has been
applied against the Indemnification Threshold with respect to the Stockholders
as a result of a breach of the representation and warranty made pursuant to
Section 5.11, AmPaM shall cause the Company to assign such account, note or
other receivable to the Stockholders. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this
Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any
action seeking damages or any other form of monetary relief brought by any party
to this Agreement against another party to this Agreement with respect to any
provision of this Agreement, provided that, nothing herein shall be construed to
limit the right of a party, in a proper case, to seek injunctive relief for a
breach of this Agreement. AmPaM hereby waives, to the fullest extent permitted
under applicable law, any and all other rights, claims and causes of action,
known or unknown, it or any indemnified person may have against the Company or
any Stockholder relating to this Agreement or the transactions pursuant to this
Agreement arising under or based upon any Federal, state, local or foreign
statute, law, rule, regulation or otherwise. Any indemnity payment under this
Section 11 shall be treated as an adjustment to the exchange consideration for
Tax purposes unless a final determination (which shall include the execution of
a Form 870-AD or successor form) with respect to the Indemnified Party or any of
its Affiliate causes any such payment not to be treated as an adjustment to the
exchange consideration for U.S. Federal income Tax purposes.
11.5 LIMITATIONS ON INDEMNIFICATION. (a) AmPaM shall not assert any
claim for indemnification under this Section 11 against the Stockholders until
such time as, and solely to the extent that, the aggregate of all claims which
AmPaM may have against the Stockholders shall exceed the greater of (a) 3.0% of
the sum of (i) the cash paid to the Stockholders pursuant to Section 1.2
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plus (ii) the value of the AmPaM Stock delivered to the Stockholders pursuant to
Section 1.2 (calculated as provided in this Section 11.5) plus (iii) the
principal amount of the AmPaM Notes delivered to the Stockholders pursuant to
Section 1.2, or (b) $50,000 (the "Indemnification Threshold"). Stockholders
shall not assert any claim for indemnification hereunder against AmPaM until
such time as, and solely to the extent that, the aggregate of all claims which
Stockholders may have against AmPaM shall exceed $50,000; provided, however,
that this sentence shall not be applicable with respect of any failure by AmPaM
to (i) deliver the consideration specified in Annex I hereto on the Closing Date
upon the satisfaction, or waiver by AmPaM, of all conditions to the occurrence
of the Closing Date specified in Section 9 or (ii) comply with its obligations
pursuant to Section 10.1. After the $50,000 threshold for AmPaM (subject to the
proviso in the preceding sentence) or the Indemnification Threshold for a
Stockholder has been met, all claims must be made in $10,000 increments, which
claims may be cumulated in order to meet such $10,000 thresholds. For purposes
of this paragraph, the AmPaM Stock delivered to the Stockholders shall be valued
at $13.00 per share.
(b) No person shall be entitled to indemnification under this
Section 11 if and to the extent that such person's claim for indemnification is
directly or indirectly related to a breach by such person of any representation,
warranty, covenant or other agreement set forth in this Agreement. No claim for
indemnification against the Stockholders shall limit, diminish or change any
obligation of AmPaM pursuant to Section 10.1 hereof.
(c) Notwithstanding any other term of this Agreement, no
Stockholder shall be liable under this Section 11 for an amount which exceeds
eighty-five percent (85%) of the amount of proceeds received by such Stockholder
(valued as of the Closing Date) in connection with the purchase and sale of the
Company Stock. For purposes of this paragraph, the AmPaM Stock shall be valued
at $13.00 per share.
(d) A Stockholder may pay any indemnification obligation under
Section 11 by means of the payment of cash or a combination of the payment of
cash, the forgiveness of amounts owed pursuant to the AmPaM Notes and the
delivery to AmPaM of shares of AmPaM Stock; provided that the percentage of the
indemnification obligation satisfied by means of the delivery of shares of AmPaM
Stock does not exceed the percentage of AmPaM Stock comprising the total
consideration paid to such Stockholder by AmPaM to such Stockholder pursuant to
Annex I. For the purpose of crediting Stockholders for payments made to AmPaM by
means of delivery of shares of AmPaM Stock, the AmPaM Stock shall be valued at
$13.00 per share.
(e) In determining the amount of any loss, liability or expense
for which any party is entitled to indemnification under this Agreement, the
gross amount thereof will be reduced by any correlative insurance proceeds or
other third party indemnity or reimbursement proceeds realized or to be realized
by such party (or, in the case of AmPaM, by AmPaM, the Company or any subsidiary
of AmPaM or the Company) and such correlative insurance proceeds or other third
party indemnity or reimbursement proceeds shall be net of any insurance premium
or other incremental cost or expense owed or payable to any third party which
becomes due as a result of such claim. AmPaM
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shall use commercially reasonable efforts to pursue any available insurance
coverage or other rights of indemnity or reimbursement from third parties with
respect to any such loss, liability or expense.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date solely:
(i) by mutual consent of AmPaM and the Stockholders;
(ii) by the Stockholders, if the transactions contemplated
by this Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by the Company
or the Stockholders prior to or on the Closing Date;
(iii) by AmPaM, if the transactions contemplated by this
Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by AmPaM prior
to or on the Closing Date;
(iv) by the Stockholders, if a material breach or default
shall be made by AmPaM in the observance or in the due and timely
performance of any of the covenants or agreements contained herein
relating to AmPaM, and the curing of such default shall not have been
made (or in the reasonable judgment of such Stockholders cannot be
made) on or before the Closing Date;
(v) by AmPaM, if a material breach or default shall be made
by the Company or the Stockholders in the observance or in the due and
timely performance of any of the covenants or agreements contained
herein relating to the Company or the Stockholders, and the curing of
such default shall not have been made (or in the reasonable judgment of
AmPaM cannot be made) on or before the Closing Date;
(vi) by the Stockholders, if the conditions set forth in
Section 8 hereof have not been satisfied or waived as of the Closing
Date; or
(vii) by AmPaM, if the conditions set forth in Section 9
hereof have not been satisfied or waived as of the Closing Date.
12.2 PROCEDURE AND EFFECT OF TERMINATION. A determination to
terminate this Agreement by AmPaM pursuant to Section 12.1 shall be valid and
effective only if a written notice of termination, accompanied by a certified
copy of resolutions of the board of directors of AmPaM that evidence the
authorization of the officer of AmPaM to deliver a written notice of termination
of this Agreement pursuant to Section 12.1, is given to the Stockholders in the
manner specified for notices
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in this Agreement. A determination to terminate this Agreement by the
Stockholders pursuant to Section 12.1 shall be valid and effective only if a
written notice of termination, signed by Stockholders who would be entitled to
receive a majority of the shares of AmPaM Stock specified in Section I of Annex
I to this Agreement if the transactions contemplated hereby were consummated, is
given to AmPaM in the manner specified for notices in this Agreement. Upon the
giving of notice of termination of this Agreement pursuant to Section 12.1 as
specified in the preceding sentence, this Agreement shall terminate, and the
transactions contemplated hereby shall be abandoned, without further action by
any of the parties hereto. Immediately upon any such termination, AmPaM shall
deliver written notice of such termination to the Other Founding Companies. If
this Agreement is terminated as provided in this Section 12, no party hereto
shall have any liability or further obligation hereunder to any other party,
except as provided in Section 14 and Section 18.6, provided, that, the
termination of this Agreement will in no way limit any obligation or liability
of any party based on or arising from a breach or default by such party with
respect to any of its representations, warranties, covenants or agreements
contained in this Agreement including, but not limited to, legal and audit costs
and out of pocket expenses that occurred prior to such termination.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The Stockholders will not, without the
prior written consent of AmPaM, for a period of two (2) years following the
Closing Date, for any reason whatsoever, directly or indirectly, for themselves
or on behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, whether paid or unpaid, in any plumbing, piping,
mechanical, heating, ventilation or air conditioning contracting,
installation or services business or operation, whether for
residential, commercial, industrial or governmental customers, or any
ancillary contracting, installation or services business directly
related thereto (such business and operations referred to herein as the
"Plumbing and Mechanical Business"), within 100 miles of where the
Company or any of its subsidiaries conducted business within two (2)
years prior to the Closing Date (the "Territory");
(ii) call upon any person who is, at the Closing Date,
within the Territory, an employee of AmPaM or any subsidiary thereof
for the purpose or with the intent of enticing such employee away from
or out of the employ of AmPaM or any subsidiary thereof;
(iii) call upon any person or entity which is, at the Closing
Date, or which has been within three (3) years prior to the Closing
Date, a customer of AmPaM or any subsidiary thereof, of the Company or
of any of the Other Founding Companies for the purpose of soliciting
customers, orders or contracts for any Plumbing and Mechanical Business
in direct competition with AmPaM within the Territory;
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(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor in the Plumbing
and Mechanical Business, which candidate, to the actual knowledge of
such Stockholder after due inquiry, was called upon by AmPaM or any
subsidiary thereof or for which, to the actual knowledge of such
Stockholder after due inquiry, AmPaM or any subsidiary thereof made an
acquisition analysis, for the purpose of acquiring such entity; or
(v) disclose to any person, firm, partnership, corporation
or business the names or identities of any person, firm, partnership,
corporation or business which has been a customer of the Company or any
of its subsidiaries within the two (2) years prior to the Closing Date
for any reason or purpose whatsoever except to the extent that the
Company has in the past disclosed such information to the public for
valid business reasons; or
(vi) testify as an expert witness in matters related to the
Plumbing and Mechanical Business for an adverse party to AmPaM, the
Company or any Other Founding Companies in litigation.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Stockholder from acquiring as a passive investment (i) not more
than one percent (1%) of the capital stock of a competing business whose stock
is traded on a national securities exchange, the NASDAQ Stock Market or
over-the-counter, or (ii) not more than five percent (5%) of the capital stock
of a competing business whose stock is not publicly traded if the Board of
Directors of AmPaM consents to such acquisition.
13.2 DAMAGES. Because of the difficulty of measuring economic
losses to AmPaM as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to AmPaM for which
it would have no other adequate remedy, each Stockholder agrees that the
foregoing covenant may be enforced by AmPaM in the event of breach by such
Stockholder, by injunctions and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that
the foregoing covenants in this Section 13 impose a reasonable restraint on the
Stockholders in light of the activities and business of AmPaM and the
subsidiaries thereof on the date of the execution of this Agreement and the
current plans of AmPaM as described in the Private Placement Memorandum.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13
are severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
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13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against AmPaM or any subsidiary thereof, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by AmPaM of such
covenants. It is specifically agreed that the period of two (2) years stated at
the beginning of this Section 13, during which the agreements and covenants of
each Stockholder made in this Section 13 shall be effective, shall be computed
by excluding from such computation any time during which such Stockholder is
found to be in violation of any provision of this Section 13 as determined by
any of (i) a written agreement to such effect executed and delivered by AmPaM
and such Stockholder, (ii) a determination by an arbitration panel pursuant to
an arbitration conducted pursuant to Section 18.16 hereof or (iii) a
non-appealable judgment of a court of competent jurisdiction. The covenants
contained in Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto. The covenants contained in Section 13
shall have no effect if the transactions contemplated by this Agreement are not
consummated.
13.6 MATERIALITY. The Company and the Stockholders hereby agree
that the covenants contained in this Section 13 are a material and substantial
part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that
they had in the past, currently have, and in the future may possibly have,
access to certain confidential information of the Company, the Other Founding
Companies, and/or AmPaM, such as operational policies, customer lists, and
pricing and cost policies that are valuable, special and unique assets of the
Company's, the Other Founding Companies' and/or AmPaM's respective businesses.
The Stockholders agree that they will not disclose such confidential information
to any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except (a) to authorized representatives of AmPaM, (b)
following the Closing, such information may be disclosed by the Stockholders as
is required in the course of performing their duties for AmPaM or the Company
and (c) to its counsel and other advisers, provided that such advisers (other
than counsel) agree to the confidentiality provisions of this Section 14.1;
provided, however that (i) the foregoing disclosure prohibition shall not apply
in the event that (i) such information becomes known to the public generally
through no fault of the Stockholders, (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), the Stockholders shall,
if possible, give prior written notice thereof to AmPaM and provide AmPaM with
the opportunity to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by any of the Stockholders of the provisions of this Section,
AmPaM shall be entitled to an injunction restraining such Stockholders from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting AmPaM from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages. In the
event the transactions contemplated
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by this Agreement are not consummated, Stockholders shall have none of the
above-mentioned restrictions on their ability to disseminate confidential
information with respect to the Company.
14.2 AmPaM. AmPaM recognizes and acknowledges that it had in the
past and currently has access to certain confidential information of the
Company, such as operational policies, customer lists, and pricing and cost
policies that are valuable, special and unique assets of the Company's business.
AmPaM agrees that, prior to the Closing, or if the transactions contemplated by
this Agreement are not consummated, it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
the Company, (b) to its counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
14.2, (c) to the Other Founding Companies and their representatives pursuant to
Section 7.1(b) of the Other Agreements and (d) to potential purchasers of
securities of AmPaM to the extent necessary or advisable in connection with the
applicable securities laws; provided, however that the foregoing disclosure
prohibition shall not apply in the event that (A) such information becomes known
to the public generally through no fault of AmPaM, (B) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (B), AmPaM
shall, if possible, give prior written notice thereof to the Company and the
Stockholders and provide the Company and the Stockholders with the opportunity
to contest such disclosure, or (C) the disclosing party reasonably believes that
such disclosure is required in connection with the defense of a lawsuit against
the disclosing party. In the event of a breach or threatened breach by AmPaM of
the provisions of this Section 14.2, the Company and the Stockholders shall be
entitled to an injunction restraining AmPaM from disclosing, in whole or in
part, such confidential information. Nothing herein shall be construed as
prohibiting the Company and the Stockholders from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by this Agreement are not consummated
for any reason, AmPaM shall nevertheless remain subject to this Section 14.2,
except that it shall not be permitted to make any disclosures otherwise than
pursuant to clause (A), (B) or (C) above.
14.3 DAMAGES. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants in Sections 14.1 and
14.2, and because of the immediate and irreparable damage that would be caused
for which they would have no other adequate remedy, the parties hereto agree
that, in the event of a breach by any of them of the foregoing covenants, the
covenant may be enforced against the other parties by injunctions and
restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14
shall survive the termination of this Agreement for a period of five years from
the Closing Date.
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14.5 RETURN OF INFORMATION. If the transactions contemplated by
this Agreement are not consummated, AmPaM will return or destroy all
confidential information regarding the Company.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS RELATING TO AmPaM STOCK AND AmPaM NOTES.
For a period of two years from the Closing Date or, in the event that the
Company completes an IPO, for a period through the second anniversary of the
date of the closing of such IPO (the "Restricted Period"), no Stockholder shall
(i) sell, assign, exchange, transfer, pledge, or otherwise dispose of any shares
of AmPaM Stock or AmPaM Notes received by the Stockholders pursuant to this
Agreement or any securities convertible into, exchangeable or exercisable for
any shares of AmPaM Stock or AmPaM Notes received by such Stockholder pursuant
to this Agreement, (ii) grant any option to purchase, or otherwise enter into
any contract to sell, assign, transfer, pledge or otherwise dispose of, any
shares of AmPaM Stock or AmPaM Notes received by such Stockholder pursuant to
this Agreement, or (iii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the AmPaM Stock or AmPaM Notes, whether any
such swap or transaction is to be settled by delivery of shares of AmPaM Stock
or AmPaM Notes or other securities, by the delivery or payment of cash or
otherwise, except, in the case of clauses (i), (ii) or (iii) above, (A) as
otherwise agreed by AmPaM, (B) for the sale of shares of AmPaM Stock, and
entering into agreements relating to the sale of shares of AmPaM Stock, pursuant
to Section 17 hereof, (C) for transfers to (I) immediate family members of such
Stockholder who agree with AmPaM in writing to be bound by the restrictions set
forth in this Section 15.1, (II) trusts, limited partnerships or other estate
planning entities for the benefit of such Stockholder or family members of such
Stockholder which have agreed with AmPaM in writing, through action taken by the
trustees, partners or other persons having authority to bind the trust, limited
partnership or other estate planning entity, to be bound by the restrictions set
forth in this Section 15.1, (III) any charitable organization that qualifies for
receipt of charitable contributions under Section 170(c) of the Code which
agrees with AmPaM in writing to be bound by the restrictions set forth in this
Section 15.1, (D) for transfers of AmPaM Stock or AmPaM Notes to AmPaM pursuant
to Section 11.5(d), (E) for transfers to another Stockholder, to another person
or entity who receives shares of AmPaM Stock or AmPaM Notes or AmPaM Series A
Preferred Stock pursuant to the Other Agreements or to Sterling City Capital LLC
or any of its Affiliates provided that (1) such transaction is exempt from the
registration requirements of the 1933 Act as evidenced by the delivery to AmPaM
of an opinion of counsel in form and substance reasonably satisfactory to AmPaM
and (2) any such transferee agrees in writing to be bound by the restrictions
set forth in this Section 15.1, (F) transfers of shares of AmPaM Notes, shares
of AmPaM Stock, or grants of options to purchase shares of AmPaM Stock, by such
Stockholder to employees of the Company of up to an aggregate of 15% of the
shares of AmPaM Stock received by such Stockholder pursuant to this Agreement
provided that (1) any such transaction is exempt from the registration
requirements of the 1933 Act as evidenced by the delivery to AmPaM of an opinion
of counsel in form and substance reasonably satisfactory to AmPaM and (2) any
such employee agrees with AmPaM in writing to be bound by the restrictions set
forth in this Section 15.1 or (G) the sale by such Stockholder in an IPO of
shares of AmPaM Stock representing not more than 10% of the Aggregate
Consideration in cash; provided,
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however, that in no circumstance will a Stockholder be entitled to sell shares
of AmPaM Stock in an IPO to the extent that the sale of such shares by such
Stockholder would result in such Stockholder receiving in excess of 45% of the
Aggregate Consideration in cash; and, provided further, if AmPaM is advised in
writing in good faith by any managing underwriter of an underwritten offering of
the securities being offered pursuant to any registration statement under
Section 17.1 that the number of shares to be sold by persons other than AmPaM is
greater than the number of such shares which can be offered without adversely
affecting the success of the offering, AmPaM may reduce pro rata (among the
Stockholders and all other selling security holders in the offering) the number
of shares offered for the accounts of such persons (based upon the number of
shares held by such person) to a number deemed satisfactory by such managing
underwriter. During the Restricted Period, the certificates evidencing the AmPaM
Stock or AmPaM Notes delivered to the Stockholders pursuant to Section 3 of this
Agreement will bear a legend substantially in the form set forth below:
THE [SHARES/NOTES] OR AMPAM NOTES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO THE TERMS OF THE ACQUISITION AGREEMENT PURSUANT TO WHICH SUCH SHARES
WERE ISSUED, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY
ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, PLEDGE OR OTHER DISPOSITION
PRIOR TO EXPIRATION OF THE RESTRICTED PERIOD REFERRED TO IN THE ACQUISITION
AGREEMENT EXCEPT IN ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT. SUCH
RESTRICTIONS ON TRANSFER ARE SET FORTH IN AN ACQUISITION AGREEMENT, A COPY OF
WHICH IS MAINTAINED AT THE PRINCIPAL OFFICES OF THE ISSUER. UPON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE
DATE SPECIFIED ABOVE.
15.2 TRANSFER RESTRICTIONS RELATING TO ADDITIONAL CONSIDERATION. No
Stockholder shall (i) sell, assign, exchange, transfer, pledge, or otherwise
dispose of any right to receive any consideration pursuant to Section II of
Annex I to this Agreement (the "Additional Consideration Right") or any
securities convertible into, exchangeable or exercisable for any Additional
Consideration Right, (ii) grant any option to purchase, or otherwise enter into
any contract to sell, assign, transfer, pledge or otherwise dispose of, any
Additional Consideration Right, or (iii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of any Additional
Consideration Right, whether any such swap or transaction is to be settled by
delivery of shares of AmPaM Stock or other securities, by the delivery or
payment of cash or otherwise.
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16. FEDERAL SECURITIES ACT REPRESENTATIONS
16.1 COMPLIANCE WITH LAW. Each Stockholder acknowledges that the
shares of AmPaM Stock, the Additional Consideration Right and any AmPaM Notes to
be delivered to such Stockholder pursuant to this Agreement have not been and
will not be registered under the 1933 Act (except as provided in Section 17
hereof) and therefore may not be sold, assigned, exchanged, transferred, pledged
or otherwise disposed of without compliance with the 1933 Act which, among other
matters, would require registration under the 1933 Act unless exemption from the
registration requirements is available for such transaction. The AmPaM Stock,
the Additional Consideration Right and any AmPaM Notes to be acquired by each
Stockholder pursuant to this Agreement is being acquired solely for such
Stockholder's own account, for investment purposes only, and with no present
intention of selling, assigning, exchanging, transferring, pledging, or
otherwise disposing of it. Each Stockholder covenants, warrants and represents
that neither the shares of AmPaM Stock, the Additional Consideration Right nor
any AmPaM Notes issued to such Stockholder will be offered, sold, assigned,
exchanged, pledged, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the 1933 Act and the rules
and regulations of the SEC. All certificates representing the AmPaM Stock shall
bear the following legend in addition to the legend required under Section 15 of
this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each Stockholder is able to
bear the economic risk of an investment in the AmPaM Stock and AmPaM Notes to be
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment. Each Stockholder has substantial knowledge and experience in
making investment decisions of this type (or is relying on qualified purchaser
representatives with such knowledge and experience in making this decision), and
is capable, either individually or with such purchaser representatives, of
evaluating the merits and risks of this investment. Each Stockholder has had an
adequate opportunity to ask questions and receive answers from the officers of
AmPaM concerning any and all matters relating to the transactions described
herein including, without limitation, the background and experience of the
current and proposed officers and directors of AmPaM, the plans for the
operations of the business of AmPaM, the business, operations and financial
condition of the Founding Companies other than the Company, and any plans for
additional acquisitions. Each Stockholder has asked any and all questions of the
nature described in the preceding sentence and all questions have been answered
to such Stockholder's satisfaction. Except as set forth on Schedule 16.2, each
Stockholder is an "accredited investor" as defined in Rule 501(a) of the 1933
Act. Neither the foregoing nor any investigation made by the Stockholders
referred to above shall in any way affect the representations, warranties,
covenants and agreements of AmPaM made herein except to the extent that AmPaM is
relying upon the representations of the Stockholders in Section 16.1 and in this
Section 16.2 for purposes of
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AmPaM's representations and warranties in Sections 6.9, 6.11, 6.15 and 6.17
hereof as specified therein.
16.3 RELIANCE BY AmPaM. Each Stockholder acknowledges that AmPaM in
relying upon the representations and covenants of such Stockholder set forth in
Section 16.1 and Section 16.2 for purposes of compliance by AmPaM with Federal
and state securities laws related to the issuance of AmPaM Stock pursuant to
this Agreement and the Other Agreements.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. Whenever AmPaM proposes to
register any AmPaM Stock for its own or other's account under the 1933 Act for a
public offering, other than (i) any shelf or other registration of shares to be
used as consideration for acquisitions of additional businesses by AmPaM and
(ii) registrations relating to employee benefit plans, AmPaM shall give each of
the Stockholders prompt written notice of its intent to do so. Upon the written
request of any of the Stockholders given within 15 calendar days after receipt
of such notice, notwithstanding the provisions of Section 15 (except as
specified below with respect to an IPO), AmPaM shall cause to be included in
such registration all of the AmPaM Stock issued to such Stockholders pursuant to
this Agreement (including any stock issued as or issuable upon the conversion or
exchange of any convertible security, warrant, right or other security which is
issued by AmPaM as a stock split, dividend or other distribution with respect
to, or in exchange for, or in replacement of such AmPaM Stock) which any such
Stockholder requests, other than shares of AmPaM Stock which may then be
immediately sold under Rule 144(k) (or any similar or successor provision)
promulgated under the 1933 Act, and other than shares of AmPaM Stock that have
been theretofore sold by the Stockholder in accordance with the 1933 Act,
provided that AmPaM shall have the right to reduce pro rata the number of shares
of each selling Stockholder included in such registration to the extent that
inclusion of such shares would, in the written opinion of tax counsel to AmPaM
or its independent auditors, jeopardize the status of the transactions
contemplated hereby and by the Private Placement Memorandum as a tax-free
organization under Section 351 of the Code; provided, however, that with respect
to a proposal by AmPaM to register AmPaM Stock under the 1933 Act in connection
with an IPO, no Stockholder shall be permitted pursuant to this Section 17.1 to
have included in such registration more shares of AmPaM Stock than permitted to
be sold by such Stockholder pursuant to Section 15.1. In addition, if AmPaM is
advised in writing in good faith by any managing underwriter of an underwritten
offering of the securities being offered pursuant to any registration statement
under this Section 17.1 that the number of shares to be sold by persons other
than AmPaM is greater than the number of such shares which can be offered
without adversely affecting the success of the offering, AmPaM may reduce pro
rata (among the Stockholders and all other selling security holders in the
offering) the number of shares offered for the accounts of such persons (based
upon the number of shares held by such person) to a number deemed satisfactory
by such managing underwriter. If any Stockholder disapproves of the terms of the
underwriting, that Stockholder may elect to withdraw therefrom by written notice
to AmPaM and the managing underwriter. That Stockholder's shares of AmPaM Stock
so withdrawn shall also be withdrawn from registration; provided, however, that,
if by the withdrawal of such shares a greater number of shares of AmPaM
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Stock held by other Stockholders may be included in such registration, then
AmPaM shall offer to all other Stockholders of AmPaM the right to include
additional shares in the same proportion used in effecting the above
limitations. AmPaM shall not, for a period of two years following the Closing
Date, grant to any other person any rights to cause AmPaM to register any
securities in priority over, or in precedent to, the rights granted to the
Stockholders hereunder and to the stockholders of the Other Founding Companies
pursuant to Section 17 of the Other Agreements.
17.2 REGISTRATION PROCEDURES. Whenever AmPaM is required to
register shares of AmPaM Stock pursuant to Section 17.1, AmPaM will, as
expeditiously as possible:
(i) Prepare and file with the SEC a registration statement
with respect to such shares and use its best efforts to cause such
registration statement to become effective (provided that before filing
a registration statement or prospectus or any amendments or supplements
or term sheets thereto, AmPaM will furnish a representative of the
Stockholders with copies of all such documents proposed to be filed) as
promptly as practical;
(ii) Notify the Stockholders of any stop order issued or
threatened by the SEC and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered;
(iii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 120 days, cause the
prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the 1933
Act; and comply with the provisions of the 1933 Act applicable to it
with respect to the disposition of all securities covered by such
registration statement during the applicable period in accordance with
the intended methods of disposition by the sellers thereof set forth in
such registration statement or supplement to the prospectus;
(iv) Furnish to each Stockholder who so requests such number
of copies of such registration statement, each amendment and supplement
thereto and the prospectus included in such registration statement
(including each preliminary prospectus and any term sheet associated
therewith), and such other documents as such Stockholder may reasonably
request in order to facilitate the disposition of the relevant shares;
(v) Make "generally available to its security holders"
(within the meaning of Rule 158) an earnings statement satisfying the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder no
later than 90 days after the end of the 12-month period beginning with
the first day of AmPaM's first fiscal quarter commencing after the
effective date of the registration statement;
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(vi) Make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the registration statement
at the earliest possible moment;
(vii) If requested by the managing underwriter or
underwriters, if any, or any participating Stockholder, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters or any
participating Stockholder, as the case may be, reasonably requests to
be included therein, including, without limitation, information with
respect to the number of shares of AmPaM Stock being sold by
participating Stockholders to any underwriter or underwriters, the
purchase price being paid therefor by such underwriter or underwriters
and with respect to any other terms of an underwritten offering of the
shares of AmPaM Stock to be sold in such offering, and promptly make
all required filings of such prospectus by supplement or post-effective
amendment;
(viii) Make available for inspection by participating
Stockholders, any underwriter participating in any disposition pursuant
to such registration statement, and the counsel retained by the
participating Stockholders, counsel for the underwriters and any
accountant or other agent retained by participating Stockholders or any
such underwriter (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of AmPaM
(the "Records"), as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause AmPaM's
officers, directors and employees to supply all information reasonably
requested by any such Inspectors in connection with such registration
statement; provided, that records which AmPaM determines, in good
faith, to be confidential and which AmPaM notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or (ii) the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction after delivery of
sufficient notice to AmPaM to enable AmPaM to contest such subpoena or
order;
(ix) Take all other steps reasonably necessary to effect the
registration of the shares of AmPaM Stock contemplated hereby;
(x) Use its best efforts to register or qualify the
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as shall be
reasonably requested by the Stockholders, and to keep such registration
or qualification effective during the period such registration
statement is required to be kept effective, provided that AmPaM shall
not be required to become subject to taxation, to qualify generally to
do business or to file a general consent to service of process in any
such states or jurisdictions;
(xi) Cause all such shares of AmPaM Stock to be listed or
included not later than the date of the first sale of shares of AmPaM
Stock under such registration statement on any
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securities exchanges or trading systems on which similar securities
issued by AmPaM are then listed or included; and
(xii) Notify each Stockholder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within
the period that AmPaM is required to keep the registration statement
effective of the happening of any event as a result of which the
prospectus included in such registration statement (as then in effect),
together with any associated term sheet, contains an untrue statement
of a material fact or omits to state any fact required to be stated
therein or necessary to make the statements therein (in the case of the
prospectus or any preliminary prospectus, in light of the circumstances
under which they were made) not misleading, and, at the request of such
Stockholder, AmPaM promptly will prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of
the covered shares, such prospectus will not contain an untrue
statement of material fact or omit to state any fact required to be
stated therein or necessary to make the statements therein (in the case
of the prospectus or any preliminary prospectus, in light of the
circumstances under which they were made) not misleading.
All expenses incurred in connection with the registration under this
Article 17 and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printer and
accounting fees, but excluding underwriting commissions and discounts), shall be
borne by AmPaM.
17.3 INDEMNIFICATION.
(a) In connection with any registration under Section 17.1,
AmPaM shall indemnify, to the extent permitted by law, each selling Stockholder
(an "Indemnified Party") against all losses, claims, damages, liabilities and
expenses arising out of or resulting from any untrue or alleged untrue statement
of material fact contained or incorporated by reference in any registration
statement, prospectus or preliminary prospectus or associated term sheet or any
omission or alleged omission to state or incorporated by reference therein a
material fact required to be stated or incorporated by reference therein or
necessary to make the statements therein not misleading except insofar as the
same are caused by or contained in or omitted from any information furnished in
writing to AmPaM by such Indemnified Party expressly for use therein or by any
Indemnified Parties' failure to deliver a copy of the registration statement or
prospectus or any amendment or supplements thereto after AmPaM has furnished
such Indemnified Party with a sufficient number of copies of the same.
(b) In connection with any registration under Section 17.1,
each selling Stockholder shall furnish to AmPaM in writing such information
concerning the Stockholder and his or her proposed offering of shares as is
reasonably requested by AmPaM for use in any such registration statement or
prospectus and will indemnify, to the extent permitted by law, AmPaM, its
directors and officers and each person who controls AmPaM (within the meaning of
the 1933 Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged
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untrue statement of a material fact or any omission or alleged omission to state
therein a material fact required to be stated in the registration statement or
prospectus or any amendment thereof or supplement thereto or necessary to make
the statements therein not misleading, but only to the extent that such untrue
or alleged untrue statement or omission or alleged omission is contained in or
omitted from information so furnished in writing to AmPaM by such Stockholder
expressly for use in the registration statement. Notwithstanding the foregoing,
the liability of a Stockholder under this Section 17.3 shall be limited to an
amount equal to the net proceeds actually received by such Stockholder from the
sale of the relevant shares covered by the registration statement.
(c) Any person entitled to indemnification hereunder will
(i) give prompt notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified parties'
reasonable judgment, a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. Any failure to give prompt notice shall
deprive a party of its right to indemnification hereunder only to the extent
that such failure shall have adversely affected the indemnifying party. If the
defense of any claim is assumed, the indemnifying party will not be subject to
any liability for any settlement made without its consent (but such consent
shall not be unreasonably withheld). An indemnifying party that is not entitled
or elects not, to assume the defense of a claim, will not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party, a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
17.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 17.1 covering an underwritten registered offering, (i) each
participating Stockholder shall execute and deliver to AmPaM a written power of
attorney instrument that (A) appoints an officer of AmPaM as such Stockholder's
attorney-in-fact for purposes of executing and delivering an underwriting
agreement among AmPaM, the underwriters named therein and such Stockholder
specifying the terms and conditions applicable to the sale of AmPaM Stock of
such Stockholder in such offering and (B) otherwise is in such form and
containing such provisions as are customary in the securities business for such
an arrangement in connection with an underwritten registered offering in which
one or more stockholders of the issuer are participants, including a provision
that authorizes the attorney-in-fact appointed by such Stockholder to execute
and deliver such an underwriting agreement in the event that the net price per
share to be received by such Stockholder from the sale of the shares of AmPaM
Stock to be sold in such offering is not less than a price specified in such
instrument and (iii) AmPaM and each participating Stockholder agree to enter
into a written agreement with the managing underwriters in such form and
containing such provisions as are customary in the securities business for such
an arrangement between such managing underwriters and companies of AmPaM's size
and investment stature, including indemnification; provided, however, that (A)
such Stockholder shall be exempt and excluded from any indemnification of the
managing underwriters other than with respect to information provided by such
Stockholder with respect to such Stockholder to AmPaM or the managing
underwriters
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specifically for inclusion in any such registration statement and (B) such
Stockholder shall not be obligated to enter into such an underwriting agreement
in the event that the net price per share to be received by such Stockholder
from the sale of shares of AmPaM Stock to be sold in such offering is less than
the floor price specified in the power of attorney instrument executed and
delivered to AmPaM pursuant to clause (i) above.
17.5 TRANSFER OF RIGHTS. The right to cause AmPaM to register
shares of AmPaM Stock under this Agreement may be assigned to a transferee or
assignee of any Stockholder to the extent that such transferee or assignee is a
member of the immediate family of a Stockholder, a trust, limited partnership or
other estate planning entity for the benefit of any such persons or a charitable
organization that qualifies for receipt of charitable contributions under
Section 170(c) of the Code.
17.6 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the SEC that may permit the sale of
AmPaM stock to the public without registration, following an IPO AmPaM agrees to
use its reasonable efforts, from and after the completion of an IPO, to:
(i) make and keep public information regarding AmPaM
available as those terms are understood and defined in Rule 144 under
the 1933 Act beginning 90 days following the effective date of a
registration statement relating to an IPO;
(ii) file with the SEC in a timely manner all reports and
other documents required of AmPaM under the 1933 Act and the 1934 Act
at any time after it has become subject to such reporting requirements;
and
(iii) so long as a Stockholder owns any restricted AmPaM
Stock, furnish to each Stockholder forthwith upon written request a
written statement by AmPaM as to its compliance with the current public
information requirements of Rule 144 (at any time from and after 90
days following the effective date of a registration statement relating
to an IPO), and of the 1933 Act and the 1934 Act (any time after it has
become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of AmPaM, and such other reports and
documents so filed as a Stockholder may reasonably request in availing
itself of any rule or regulation of the SEC allowing a Stockholder to
sell any such shares without registration.
18. REDEMPTION OF AMPAM STOCK
18.1 REDEMPTION TRIGGER. In the event that, within three years of
the Closing Date, (i) AmPaM has not consummated an IPO and (ii) any Stockholder
has not received cash (including proceeds from the public or private sale of
AmPaM Stock received as consideration hereunder and the receipt of principal
payments, if any, made with respect to AmPaM Notes held by such Stockholder)
equal to or exceeding 50% of the Aggregate Consideration on or prior to the
third anniversary of the Closing Date, such Stockholder shall have the right
(the "Put Right"), but not the
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obligation, commencing on the third anniversary date of the Closing Date to
require AmPaM to purchase a number of shares of AmPaM Stock then owned by such
Stockholder, subject to the limitations set forth in Section 18.2 below. The
purchase price for such redemption shall be $13.00 per share, such price to be
subject to appropriate adjustment to reflect any reclassification, stock
dividend, subdivision, split-up or combination of shares of AmPaM Stock after
the date hereof.
18.2 MINIMUM REDEMPTION; LIMITATIONS. If the events specified in
Section 18.1(i) and 18.1(ii), with Section 18.1(ii) being determined on an
individual Stockholder basis, have not occurred within the time specified, AmPaM
shall be obligated to purchase from each eligible Stockholder no less than 10%
of the AmPaM Stock held by such Stockholder annually; provided, however, that
the Stockholders shall not be entitled to exercise their Put Rights if and to
the extent the Company has not achieved the Target Net Income (as defined in
Annex I hereto) for the year preceding the year in which a Stockholder seeks to
exercise his Put Right. The redemptions will be funded by internal cash flows or
alternative financing arrangements but AmPaM's obligation to make any redemption
pursuant to this Section 18 will be subject to the covenants and restrictions
contained in AmPaM's then existing private or public debt or equity instruments.
18.3 NOTICE; EXERCISE. The Stockholders may exercise their Put
Right by giving written notice (the "Put Notice") to AmPaM within thirty (30)
days of the third anniversary of the execution hereof. If any Stockholder does
not provide AmPaM with a Put Notice within such thirty-day period, the Put Right
applicable to such Stockholder shall expire. The date for closing the sale of
any shares of AmPaM Stock pursuant to a proper exercise of a Put Right shall in
no event be earlier than 90 days after the date AmPaM receives the Put Notice.
Any such closing shall be at such time of day and place as shall be mutually
agreed between such holder and AmPaM. At such closing AmPaM shall make payment
for the AmPaM Stock to be repurchased by wire transfer of immediately available
funds to a bank account designated by such Stockholder for such purpose and such
Stockholder shall deliver to AmPaM certificates, duly endorsed for transfer,
representing the shares of AmPaM Stock to be purchased and sold pursuant to the
exercise of such Put Right.
18.4 ADDITIONAL REDEMPTIONS. In the event AmPaM has not consummated
an IPO and notwithstanding the foregoing, to the extent the Stockholders who
have received greater than 50% of their Aggregate Consideration in cash wish to
tender AmPaM Stock to AmPaM for purchase, AmPaM will use its commercially
reasonable efforts to continue to repurchase up to 10% of the AmPaM Stock held
by such Stockholder annually.
18.5 TERMINATION OF REDEMPTION OBLIGATION. Put Rights with respect
to any individual Stockholder will terminate upon receipt by such Stockholder of
50% of his Aggregate Consideration in cash; such termination will not, however,
limit such Stockholders ability to participate in the additional redemptions
provided in Section 18.4. Notwithstanding the foregoing, all of AmPaM's
redemption obligations contained in this Section 18 shall terminate on the
earlier to occur of (i) an IPO, (ii) any sale of all or substantially all of
AmPaM's assets in one transaction or series of transactions, (iii) any merger or
consolidation which involves AmPaM and in which AmPaM is not the surviving
entity or (iv) any transaction after which the shares of AmPaM Common Stock, if
any,
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which are then held by persons other than the holders of AmPaM Common Stock as
of the Closing Date constitute 50% or more of AmPaM Common Stock outstanding as
of the date of the consummation of such transaction.
19. GENERAL
19.1 COOPERATION. The Company, Stockholders and AmPaM shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The Company will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the Company cooperate with
AmPaM on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law and except as
provided in Section 17.5) and shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of AmPaM and the Company, and the
heirs, successors and legal representatives of the Stockholders.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company and AmPaM and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the Stockholders, the Company and AmPaM, acting
through their respective officers or trustees, duly authorized by their
respective Boards of Directors. Any disclosure made on any Schedule delivered
pursuant hereto shall be deemed to have been disclosed for purposes of any other
Schedule required hereby, provided that the Company shall make a good faith
effort to cross reference disclosure, as necessary or advisable, between related
Schedules.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously
in two (2) or more counterparts, each of which shall be deemed an original and
all of which together shall constitute but one and the same instrument. A
telecopied facsimile of an executed counterpart of this Agreement shall be
sufficient to evidence the binding agreement of each party to the terms hereof.
However, each party agrees to return to the other parties an original, duly
executed counterpart of this Agreement promptly after delivery of a telecopied
facsimile thereof.
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19.5 BROKERS AND AGENT. Except as disclosed on Schedule 18.5, each
party hereto represents and warrants that it employed no broker or agent in
connection with this transaction and agrees to indemnify the other parties
hereto against all loss, cost, damages or expense arising out of claims for fees
or commission of brokers employed or alleged to have been employed by such
indemnifying party.
19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, AmPaM will pay the reasonable fees, expenses and
disbursements of AmPaM and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto, including all costs and expenses incurred in the performance
and compliance with all conditions to be performed by AmPaM under this
Agreement, including the fees and expenses of Arthur Andersen LLP, Andrews &
Kurth L.L.P., and any other person or entity retained by AmPaM, and the costs of
preparing the Private Placement Memorandum incurred in connection with the
subject matter of this Agreement and any amendments thereto. In addition,
whether or not the transactions contemplated herein shall be consummated, AmPaM
will pay the reasonable fees and expenses of Bracewell & Patterson LLP incurred
on behalf of the Company and the Stockholders in connection with the subject
matter of this Agreement. Whether or not the transactions herein contemplated
shall be consummated, the Company will pay all of its costs and expenses
incurred on behalf of the Company and the Stockholders in connection with the
subject matter of this Agreement except that (i) the Company shall not be
required to pay any of the costs, fees and expenses specified above as to which
AmPaM is responsible for the payment thereof and (ii) neither the Company nor
the Stockholders shall be responsible for the payment of the costs, fees and
expenses incurred by or on behalf of AmPaM. Whether or not the transactions
herein contemplated shall be consummated, AmPaM shall reimburse Sterling City
Capital, LLC (or any person or entity which is an Affiliate thereof) for any of
the foregoing fees, expenses and disbursements paid by Sterling City Capital,
LLC (or any person or entity which is an Affiliate thereof) and shall repay
Sterling City Capital, LLC (or any person or entity which is an Affiliate
thereof) for any loans or advances made by Sterling City Capital, LLC (or any
person or entity which is an Affiliate thereof) for the purpose of providing
AmPaM funds to pay any such fees, expenses and disbursements, provided that such
reimbursement and loan repayment obligation shall be limited to the foregoing
fees, expenses, and disbursements which are out-of-pocket expenses of AmPaM,
Sterling City Capital, LLC or any person or entity which is an Affiliate
thereof. Sterling City Capital, LLC shall be reimbursed by AmPaM in the form of
AmPaM Notes. AmPaM retains the right, within a reasonable period following the
Closing Date, to conduct an audit of the expenses for which Sterling City
Capital, LLC is reimbursed. Each Stockholder shall pay all sales, use, transfer,
real property transfer, recording, gains, stock transfer and other similar taxes
and fees ("Transfer Taxes") imposed in connection with the purchase and sale of
the Company Stock, other than Transfer Taxes, if any, imposed by the State of
Delaware. Each Stockholder shall file all necessary documentation and Returns
with respect to such Transfer Taxes. In addition, each Stockholder acknowledges
that he, and not the Company or AmPaM, will pay all Taxes due by him upon
receipt of the consideration payable pursuant to Section 1 hereof. The
Stockholders acknowledge that the risks of the transactions contemplated hereby
include Tax risks, with respect to which the Stockholders are relying
substantially on the opinion contemplated by Section 8.12 hereof and
representations by AmPaM in this Agreement.
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19.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person or via a nationally recognized courier service to an officer or agent
of such party.
(a) If to AmPaM addressed to it at:
American Plumbing & Mechanical, Inc.
515 Post Oak Blvd., Suite 450
Houston, Texas 77027
Attention: Chief Executive Officer
with copies to:
Thomas P. Mason
Andrews & Kurth L.L.P.
4200 Chase Tower
Houston, Texas 77002
(b) If to the Stockholders, addressed to them at their addresses
set forth on the signature pages hereto.
(c) If to the Company, addressed to it at:
Mason Pearsall, Jr.
Power Plumbing Inc.
6401 Bingle, Suite 222
Houston, Texas 77092
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Texas, excluding any conflicts of law, rule or
principle that might refer same to the laws of another jurisdiction.
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19.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations, warranties, covenants and agreements of the parties made herein
and at the time of the Closing or in writing delivered pursuant to the
provisions of this Agreement shall survive the consummation of the transactions
contemplated hereby and any examination on behalf of the parties until the
respective Expiration Dates referred to herein with respect thereto or, if no
Expiration Date is applicable with respect thereto, until the expiration of all
applicable statute of limitations periods.
19.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.11 TIME. Time is of the essence with respect to this Agreement.
19.12 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.
19.13 REMEDIES CUMULATIVE. No right, remedy or election given by
any term of this Agreement shall be deemed exclusive but each shall be
cumulative with all other rights, remedies and elections available at law or in
equity.
19.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
19.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived only with
the written consent of AmPaM, the Company and Stockholders who would receive a
majority of the Aggregate Consideration specified in Section I of Annex I to
this Agreement if the transactions contemplated hereby were consummated. Any
amendment or waiver effected in accordance with this Section 19.15 shall be
binding upon each of the parties hereto, any other person receiving AmPaM Stock
in connection with the purchase and sale of the Company Stock and each future
holder of such AmPaM Stock. Any consent of the Stockholders who would receive a
majority of the Aggregate Consideration pursuant to Section I of Annex I of this
Agreement if the transactions contemplated hereby were consummated shall be
deemed to be the consent of the Stockholders for purposes of provisions of this
Agreement as to which a consent of the Stockholders may be requested or
required.
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19.16 MEDIATION AND ARBITRATION. If a dispute arises out of or
relates to this Agreement, or the breach thereof, and if said dispute cannot be
settled through direct discussions, the parties agree to first endeavor to
settle the dispute in an amicable manner by mediation administered by the
American Arbitration Association under its then prevailing Commercial Mediation
Rules, before resorting to arbitration. Thereafter, any unresolved controversy
or claim arising out of or relating to this Agreement, or the breach thereof,
shall be settled by arbitration administered by the American Arbitration
Association in accordance with its then prevailing Commercial Arbitration Rules.
The enforcement, interpretation and procedural and substantive effect of the
obligation to arbitrate created by this Section 19.16 shall be governed by the
Federal Arbitration Act as amended from time to time, 9 U.S.C. Section 1 et seq.
The parties hereby disclaim any intention to have the substantive or procedural
law of any state or other jurisdiction, other than the law of the United States
as embodied in the Federal Arbitration Act, applied to such obligation. Any such
mediation or arbitration proceeding will be conducted in Houston, Texas.
19.17 INFORMATION PROVIDED FOR PRIVATE PLACEMENT MEMORANDUM. For
purposes of this Agreement, the information provided by the Company in writing
specifically for inclusion in the Private Placement Memorandum shall include
solely (i) the Financial Statements (in the form that they appear in the Private
Placement Memorandum), (ii) any financial statements provided to AmPaM pursuant
to Section 7.9, (iii) the description of the Company contained in the Private
Placement Memorandum under the caption "The Company", (iv) the description of
the Company's results of operations and its liquidity and capital resources, if
any, contained in the Private Placement Memorandum under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and (v) the description, if any, of matters related to the Company
contained in the Private Placement Memorandum under the caption "Certain
Transactions Transactions involving Certain Officers, Directors and
Stockholders". For purposes of this Agreement, the information provided by a
Stockholder in writing specifically for inclusion in the Private Placement
Memorandum shall include only (i) the description, if any, of matters related to
such Stockholder contained in the Private Placement Memorandum under the caption
"Certain Transactions - Transactions involving Certain Officers, Directors and
Stockholders" and (ii) the biographical description of such Stockholder, if any,
contained in the Private Placement Memorandum under the caption "Management."
19.18 EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective upon (i) the execution and delivery of this Agreement by all of the
parties hereto and (ii) the delivery to AmPaM of each Employment Agreement
attached hereto as Annex VI-1 and Annex VI-2 executed by each of the Company,
the employees named therein and AmPaM.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AMERICAN PLUMBING & MECHANICAL, INC.
By: /s/ DAVID BAGGETT
--------------------------------
Name: David Baggett
------------------------------
Title: Chief Financial Officer
-----------------------------
POWER PLUMBING INC.
By: /s/ JAMES N. POWER
--------------------------------
James N. Power
President
[Remainder of page intentionally left blank]
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STOCKHOLDERS: SPOUSES (WITHOUT PERSONAL LIABILITY AND
SOLELY TO ACKNOWLEDGE THE SALE OF THE
COMPANY STOCK BY THE STOCKHOLDER):
/s/ MASON PEARSALL, JR. /s/ PATRICIA PEARSALL
- ------------------------------ ------------------------------
Mason Pearsall, Jr. Patricia Pearsall
15401 Clevedon
Houston, Texas
/s/ GUY N. MATHIEU
- ------------------------------
Guy N. Mathieu
10990 West Road #207
Houston, Texas 77064
/s/ JAMES N. POWER /s/ JENNY POWER RYAN
- ------------------------------ ------------------------------
James N. Power Jenny Power Ryan
14415 Wickhurst Place
Cypress, Texas 77429
/s/ MARTIN J. POWER /s/ SHELLY B. POWER
- ------------------------------ ------------------------------
Martin J. Power Shelly B. Power
1712 Morse
Houston, Texas 77019
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<PAGE> 1
EXHIBIT 10.14
Execution Copy
- --------------------------------------------------------------------------------
ACQUISITION AGREEMENT
dated as of 11th day of February, 1999
by and among
AMERICAN PLUMBING & MECHANICAL, INC.
SHERWOOD MECHANICAL, INC.
and
all of the STOCKHOLDERS of SHERWOOD MECHANICAL, INC.
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
RECITALS .........................................................................................................1
1. ACQUISITION OF STOCK.....................................................................................5
1.1 Acquisition.....................................................................................5
1.2 Consideration...................................................................................5
1.3 Certain Information With Respect to the Capital Stock of the Company and AmPaM..................5
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY...........................................................5
2.1 Board of Directors..............................................................................5
2.2 Officers........................................................................................5
3. DELIVERY OF CONSIDERATION................................................................................6
3.1 Stockholders' Consideration.....................................................................6
3.2 Stockholders' Deliveries........................................................................6
4. CLOSING..................................................................................................6
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................6
5.1 Due Organization................................................................................7
5.2 Authorization...................................................................................7
5.3 Capital Stock of the Company....................................................................7
5.4 Transactions in Capital Stock...................................................................8
5.5 No Bonus Shares.................................................................................8
5.6 Subsidiaries; Ownership in Other Entities.......................................................8
5.7 Predecessor Status; etc.........................................................................8
5.8 Spin-off by the Company.........................................................................8
5.9 Financial Statements............................................................................8
5.10 Liabilities and Obligations.....................................................................9
5.11 Accounts and Notes Receivable..................................................................10
5.12 Licenses; Intellectual Property................................................................10
5.13 Environmental Matters..........................................................................11
5.14 Personal Property..............................................................................13
5.15 Significant Customers; Material Contracts and Commitments......................................13
5.16 Real Property..................................................................................14
5.17 Insurance......................................................................................14
5.18 Compensation; Employment Agreements; Labor Matters.............................................15
5.19 Employee Plans.................................................................................15
5.20 Compliance with ERISA..........................................................................16
5.21 Conformity with Law; Litigation................................................................17
</TABLE>
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<TABLE>
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5.22 Taxes..........................................................................................17
5.23 No Violations; No Consent Required, Etc........................................................18
5.24 Government Contracts...........................................................................19
5.25 Absence of Changes.............................................................................19
5.26 Deposit Accounts; Powers of Attorney...........................................................20
5.27 Validity of Obligations........................................................................21
5.28 Relations with Governments.....................................................................21
5.29 Disclosure.....................................................................................21
5.30 No Warranties or Insurance.....................................................................21
5.31 Interest in Customers and Suppliers and Related Party Transactions.............................21
5.32 Private Placement Memorandum...................................................................22
5.33 Authority; Ownership...........................................................................22
5.34 Preemptive Rights..............................................................................23
5.35 No Commitment to Dispose of AmPaM Stock........................................................23
5.36 Disclosure.....................................................................................23
6. REPRESENTATIONS OF AMPAM................................................................................23
6.1 Due Organization...............................................................................23
6.2 Authorization..................................................................................24
6.3 Capital Stock of AmPaM.........................................................................24
6.4 Transactions in Capital Stock..................................................................24
6.5 Subsidiaries...................................................................................25
6.6 Financial Statements...........................................................................25
6.7 Liabilities and Obligations....................................................................25
6.8 Conformity with Law; Litigation................................................................25
6.9 No Violations..................................................................................26
6.10 Validity of Obligations........................................................................27
6.11 AmPaM Stock....................................................................................27
6.12 AmPaM Notes....................................................................................28
6.13 No Side Agreements.............................................................................28
6.14 Business; Real Property; Material Agreements...................................................28
6.15 Relations with Governments.....................................................................28
6.16 Disclosure.....................................................................................28
6.17 Other Agreements...............................................................................29
7. COVENANTS PRIOR TO CLOSING..............................................................................29
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate.................................29
7.2 Conduct of Business Pending Closing............................................................30
7.3 Prohibited Activities..........................................................................31
7.4 No Shop........................................................................................32
7.5 Agreements.....................................................................................32
7.6 Notification of Certain Matters................................................................32
7.7 Amendment of Schedules.........................................................................33
7.8 Further Assurances.............................................................................33
7.9 Authorized Capital.............................................................................33
</TABLE>
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<TABLE>
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7.10 Compliance with the Hart-Scott Act.............................................................33
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND
COMPANY.................................................................................................34
8.1 Representations and Warranties; Performance of Obligations.....................................34
8.2 Satisfaction...................................................................................34
8.3 No Litigation..................................................................................34
8.4 Opinion of Counsel.............................................................................34
8.5 Consents and Approvals.........................................................................34
8.6 Good Standing Certificates.....................................................................35
8.7 No Material Adverse Change.....................................................................35
8.8 Secretary's Certificate........................................................................35
8.9 Tax Matters....................................................................................35
8.10 Other Founding Companies.......................................................................35
8.11 Company Release of Stockholders................................................................35
8.12 Sterling City Capital Transfer Restrictions....................................................35
8.13 Election of Chief Executive Officer............................................................36
8.14 Funding Availability...........................................................................36
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AMPAM............................................................36
9.1 Representations and Warranties; Performance and Obligations....................................36
9.2 No Litigation..................................................................................36
9.3 Secretary's Certificate........................................................................36
9.4 No Material Adverse Effect.....................................................................37
9.5 Stockholders' Release..........................................................................37
9.6 Satisfaction...................................................................................37
9.7 Termination of Related Party Agreements........................................................37
9.8 Opinion of Counsel.............................................................................37
9.9 Consents and Approvals.........................................................................37
9.10 Good Standing Certificates.....................................................................38
9.11 Funding Availability...........................................................................38
9.12 FIRPTA Certificate.............................................................................38
9.13 Resignations of Directors and Officers.........................................................38
10. COVENANTS OF AMPAM AND THE STOCKHOLDERS AFTER CLOSING...................................................38
10.1 Release From Guarantees; Repayment of Certain Obligations......................................38
10.2 Preservation of Tax and Accounting Treatment...................................................39
10.3 Preparation and Filing of Tax Returns; Payment of Taxes........................................39
10.4 Directors......................................................................................40
10.5 Legal Opinions.................................................................................40
11. INDEMNIFICATION.........................................................................................40
11.1 General Indemnification by the Stockholders....................................................40
11.2 Indemnification by AmPaM.......................................................................41
11.3 Third Person Claims............................................................................42
</TABLE>
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<TABLE>
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11.4 Exclusive Remedy...............................................................................43
11.5 Limitations on Indemnification.................................................................43
12. TERMINATION OF AGREEMENT................................................................................45
12.1 Termination....................................................................................45
12.2 Procedure and Effect of Termination............................................................45
13. NONCOMPETITION..........................................................................................46
13.1 Prohibited Activities..........................................................................47
13.2 Damages........................................................................................47
13.3 Reasonable Restraint...........................................................................47
13.4 Severability; Reformation......................................................................47
13.5 Independent Covenant...........................................................................48
13.6 Materiality....................................................................................48
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................48
14.1 Stockholders...................................................................................48
14.2 AmPaM..........................................................................................49
14.3 Damages........................................................................................49
14.4 Survival.......................................................................................49
14.5 Return of Information..........................................................................50
15. TRANSFER RESTRICTIONS...................................................................................50
15.1 Transfer Restrictions Relating to AmPaM Stock and AmPaM Notes..................................50
15.2 Transfer Restrictions Relating to Additional Consideration.....................................51
16. FEDERAL SECURITIES ACT REPRESENTATIONS..................................................................52
16.1 Compliance with Law............................................................................52
16.2 Economic Risk; Sophistication..................................................................52
16.3 Reliance by AmPaM..............................................................................53
17. REGISTRATION RIGHTS.....................................................................................53
17.1 Piggyback Registration Rights..................................................................53
17.2 Registration Procedures........................................................................54
17.3 Indemnification................................................................................56
17.4 Underwriting Agreement.........................................................................57
17.5 Transfer of Rights.............................................................................58
17.6 Rule 144 Reporting.............................................................................58
18. REDEMPTION OF AMPAM STOCK...............................................................................58
18.1 Redemption Trigger.............................................................................58
18.2 Minimum Redemption; Limitations................................................................59
18.3 Notice; Exercise...............................................................................59
18.4 Additional Redemptions.........................................................................59
18.5 Termination of Redemption Obligation...........................................................59
</TABLE>
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<TABLE>
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19. GENERAL.................................................................................................60
19.1 Cooperation....................................................................................60
19.2 Successors and Assigns.........................................................................60
19.3 Entire Agreement...............................................................................60
19.4 Counterparts...................................................................................60
19.5 Brokers and Agent..............................................................................60
19.6 Expenses.......................................................................................61
19.7 Notices........................................................................................62
19.8 Governing Law..................................................................................62
19.9 Survival of Representations and Warranties.....................................................63
19.10 Exercise of Rights and Remedies................................................................63
19.11 Time...........................................................................................63
19.12 Reformation and Severability...................................................................63
19.13 Remedies Cumulative............................................................................63
19.14 Captions.......................................................................................63
19.15 Amendments and Waivers.........................................................................63
19.16 Mediation and Arbitration......................................................................64
19.17 Information Provided for Private Placement Memorandum..........................................64
19.18 Effective Date of Agreement....................................................................64
</TABLE>
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<PAGE> 7
ANNEXES
Annex I - Consideration to Be Paid to Stockholders
Annex II - Amended and Restated Certificate of Incorporation and
By-Laws of AmPaM
Annex III - Form of Opinion of Counsel to AmPaM
Annex IV - Form of Tax Opinion
Annex V - Form of Opinion of Counsel to Company and Stockholders
Annex VI-1 - Form of Employment Agreement
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SCHEDULES
2.1 Board of Directors
2.2 Officers
5.1 Due Organization
5.2 Authorization
5.3 Capital Stock of the Company
5.4 Transactions in Capital Stock; Organization Accounting
5.5 No Bonus Shares
5.6 Subsidiaries; Ownership in Other Entities
5.7 Predecessor Status; etc
5.8 Spin-off by the Company
5.9 Financial Statements
5.10 Liabilities and Obligations
5.11 Accounts and Notes Receivable
5.12 Licenses; Intellectual Property (Schedules 5.12(a)(1), 5.12(a)(2),
5.12(b)(1) and 5.12(b)(2))
5.13 Environmental Matters
5.14 Personal Property
5.15 Significant Customers; Material Contracts and Commitments
(Schedules 5.15(a), 5.15(b) and 5.15 (c))
5.16 Real Property
5.17 Insurance
5.18 Compensation; Employment Agreements; Labor Matters
5.19 Employee Plans
5.20 Compliance with ERISA
5.21 Conformity with Law; Litigation
5.22 Taxes (Schedules 5.22(a) and 5.22(b))
5.23 No Violations, No Consents Required, Etc.
(Schedules 5.23(a), 5.23(b), 5.23(c) and 5.23(e))
5.24 Government Contracts
5.25 Absence of Changes
5.26 Deposit Accounts; Powers of Attorney
5.30 No Warranties or Insurance
5.31 Interest in Customers and Suppliers and Related Party Transactions
5.33 Authority; Ownership (Schedules 5.33(a) and 5.33(b))
6.9 No Violations
7.1 Access and Cooperation; Due Diligence; Transfer of Real Estate
7.2 Conduct of Business Pending Closing
7.3 Prohibited Activities
7.5 Agreements
8.11 Employment Agreements
9.7 Termination of Related Party Agreements
10.1 Release From Guarantees; Repayment of Certain Obligations
16.2 Non-accredited Investors
18.5 Brokers and Agents
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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made as of the 11th day
of February, 1999 by and among AMERICAN PLUMBING & MECHANICAL, INC., a Delaware
corporation ("AmPaM"), SHERWOOD MECHANICAL, INC., a California corporation (the
"Company"), and the stockholders listed on the signature pages of this Agreement
(the "Stockholders"), which are all the stockholders of the Company.
RECITALS
WHEREAS, the Company is engaged in the plumbing and mechanical services
business;
WHEREAS, as of the date hereof, the Stockholders own, and as of the
Closing Date the Stockholders will own, all of the issued and outstanding
capital stock of the Company (the "Company Stock");
WHEREAS, AmPaM is entering into other separate agreements
simultaneously with this Agreement that are substantially the same as this
Agreement (the "Other Agreements"), each of which is entitled "Acquisition
Agreement," with each of the Other Founding Companies (as defined herein) and
their respective stockholders in order for AmPaM to acquire additional companies
engaged in the plumbing and mechanical services business;
WHEREAS, this Agreement and the Other Agreements constitute the "AmPaM
Plan of Organization;"
WHEREAS, the Stockholders and the boards of directors and the
stockholders of AmPaM, and each of the Other Founding Companies that are parties
to the Other Agreements, have approved and adopted the AmPaM Plan of
Organization as an integrated plan pursuant to which the Stockholders and the
stockholders of each of the other Founding Companies will contribute the capital
stock of each of the Founding Companies to AmPaM, and the Stockholders and the
stockholders of each of the other Founding Companies will acquire the stock of
AmPaM (but not cash or other property) as a tax-free transfer of property under
Section 351 of the Code;
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Stockholders have approved this
Agreement as part of the AmPaM Plan of Organization in order to transfer all of
the issued and outstanding capital stock of the Company to AmPaM; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
<PAGE> 10
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule attached hereto and not otherwise defined shall
have the following meanings for all purposes of this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"Acquired Party" means the Company, any subsidiary of the Company and
any member of a Relevant Group.
"Affiliates" means with respect to any person or entity, any other
person or entity that directly or indirectly, controls, is controlled by, or is
under common control with such person or entity.
"AmPaM" has the meaning set forth in the first paragraph of this
Agreement.
"AmPaM Charter Documents" has the meaning set forth in Section 6.1.
"AmPaM Plan of Organization" has the meaning set forth in the recitals
of this Agreement.
"AmPaM Stock" means the common stock, par value $.01 per share, of
AmPaM.
"AmPaM Notes" means those notes issued by AmPaM to the Stockholders as
a portion of the consideration to be received hereunder and in substantially the
form to Annex I as Appendix A.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" has the meaning set forth in the recitals of this
Agreement.
"Delaware GCL" means the General Corporation Law of the State of
Delaware.
"Environmental Laws" has the meaning set forth in Section 5.13(b).
"Expiration Date" has the meaning set forth in Section 5(A) and Section
6, as applicable.
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<PAGE> 11
"Founding Companies" means the following companies:
Christianson Enterprises, Inc., a Texas corporation;
Christianson Services, Inc., a Texas corporation;
GGR Leasing Corporation, a Texas corporation;
J.A. Croson Company of Florida, a Florida corporation;
J.A. Croson Company, an Ohio corporation;
Franklin Fire Sprinkler Company, an Ohio corporation;
Keith Riggs Plumbing, Inc., an Arizona corporation;
Miller Mechanical Contractors, Inc., a Georgia corporation;
Nelson Mechanical Contractors, Inc., a Florida corporation;
Power Plumbing Inc., a Delaware corporation;
R.C.R. Plumbing, Inc., a California corporation;
Sherwood Mechanical, Inc., a California corporation; and
Teepe's River City Mechanical, Inc., an Ohio corporation.
"GAAP" means generally accepted accounting principles as consistently
applied in the United States.
"Hart-Scott Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Hazardous Substance" has the meaning set forth in Section 5.13(c).
"IPO" means a firm commitment underwritten initial public offering of
AmPaM Stock managed by one or more nationally recognized national investment
banking firms.
"known" or "knowledge," when used in reference to a statement regarding
the existence or absence of facts in this Agreement, is intended by the parties
to mean that the only information to be attributed to such person is information
actually known to (a) the person in the case of an individual, (b) in the case
of a corporation or other entity other than the Company, an officer or director
of such corporation or entity or (c) in the case of the Company and its
Subsidiaries, an officer of the Company listed on Schedule 2.2 hereto, except
for David Baggett.
"Material Adverse Change" means a material adverse change in the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the subject entity and its subsidiaries taken as a whole.
"Material Documents" has the meaning set forth in Section 5.23.
3
<PAGE> 12
"Ordinary Course of Business" means the ordinary course of business
consistent with past customs and practice (including with respect to quantity
and frequency).
"Other Agreements" has the meaning set forth in the recitals of this
Agreement.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Plans" has the meaning set forth in Section 5.19.
"Private Placement Memorandum" means the Private Placement Memorandum,
dated as of February 11, 1999, provided to each Stockholder prior to the
execution and delivery of this Agreement which sets forth certain information
relating to the transactions contemplated by this Agreement and the Other
Agreements.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Relevant Group" means the Company and any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a member.
"Restricted Common Stock" has the meaning set forth in Section 1.3(ii).
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"State of Incorporation" means the State of California.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Subsidiaries" means with respect to a person or entity, any
corporation or other entity in which such person or entity owns a 5% or greater
ownership interest.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, employment, excise, property, deed, stamp, alternative
or add-on minimum, or other taxes, assessments, duties, fees, levies or other
governmental charges, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
4
<PAGE> 13
1. ACQUISITION OF STOCK
1.1 ACQUISITION. Upon the terms and subject to the conditions contained
in this Agreement and in reliance upon the representations, warranties,
covenants and agreements contained in this Agreement, on the Closing Date, the
Stockholders shall convey and transfer to AmPaM all of the issued and
outstanding shares of Company Stock as set forth in Annex I hereto.
1.2 CONSIDERATION. The consideration for the Company Stock shall be as
set forth on Annex I to this Agreement.
1.3 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY AND AMPAM. The respective designations and numbers of outstanding shares
and voting rights of each class of outstanding capital stock of the Company and
AmPaM as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
outstanding Company Stock is as set forth on Schedule 5.3 hereto; and
(ii) immediately prior to the Closing Date, the authorized
capital stock of AmPaM will consist of (A) 100,000,000 shares of AmPaM
Stock, of which the number of issued and outstanding shares will be set
forth in the Private Placement Memorandum, (B) 10,000,000 shares of
redeemable preferred stock, of which the number of issued and
outstanding shares will be set forth in the Private Placement
Memorandum, and (C) 5,000,000 shares of Restricted Voting Common Stock,
$.01 per value (the "Restricted Common Stock"), all of which will be
issued and outstanding except as otherwise set forth in the Private
Placement Memorandum.
2. BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY
2.1 BOARD OF DIRECTORS. The Company and the Stockholders shall take
action, including solicitation of resignation of directors, necessary so that
the Board of Directors of the Company as of the Closing Date shall consist only
of the persons identified on Schedule 2.1 hereto.
2.2 OFFICERS. The Company and the Stockholders shall take action,
including solicitation of resignation of officers, necessary so that the
officers of the Company as of the Closing Date shall consist only of the persons
identified on Schedule 2.2 hereto.
5
<PAGE> 14
3. DELIVERY OF CONSIDERATION
3.1 STOCKHOLDERS' CONSIDERATION. On the Closing Date, the Stockholders
shall, upon surrender of certificates evidencing the Company Stock, receive from
AmPaM the respective number of shares of AmPaM Stock, the amount of cash and the
principal amount of AmPaM Notes described on Annex I hereto specified with
respect to each such Stockholder as payable on the Closing Date. All payments of
cash shall be made by certified check or wire transfer of immediately available
funds. Consideration consisting of AmPaM Notes shall be substantially in the
form of Appendix A to Annex I.
3.2 STOCKHOLDERS' DELIVERIES. The Stockholders shall deliver at the
Closing the certificates representing Company Stock, duly endorsed in blank by
the Stockholders, or accompanied by blank stock powers, and with all necessary
transfer tax and other revenue stamps, acquired at the Stockholders' expense,
affixed and canceled. The Stockholders agree promptly to cure any deficiencies
with respect to the endorsement of the stock certificates or other documents of
conveyance with respect to such Company Stock or with respect to the stock
powers accompanying any Company Stock.
4. CLOSING
The consummation of the transactions contemplated by Section 3 (the
"Closing") shall take place on March 31, 1999 or such date not later than May
31, 1999 as AmPaM shall determine by giving written notice of such other date as
provided in Section 18.7 (the "Closing Date") at the offices of Andrews & Kurth
L.L.P., 4200 Chase Tower, 600 Travis, Houston, Texas 77002.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the disclosure schedules attached hereto and
except as otherwise qualified below, the Company represents and warrants that
all of the following representations and warranties in this Section 5(A) are
true at the date of this Agreement and, subject to Section 7.7 hereto, shall be
true at the time of the Closing, and that such representations and warranties
shall survive the Closing Date for a period of eighteen months (the last day of
such period being the "Expiration Date"), except that the representations and
warranties set forth in Sections 5.3, 5.22 and 5.32 hereof shall survive until
such time as the applicable statute of limitations period has run, which shall
be deemed to be the Expiration Date for the representations and warranties set
forth in Sections 5.3, 5.22 and 5.32. For purposes of this Section 5, the term
"Company" shall mean and refer to the Company and all of its Subsidiaries, if
any, and any reference to a Material Adverse Effect on the Company or Material
Adverse Change with respect to the Company shall mean the Company and its
Subsidiaries, taken as a whole. Except as expressly set forth in this Agreement,
the Company expressly disclaims any representation or warranty (express, implied
or otherwise) relating to the
6
<PAGE> 15
Company and any Subsidiary thereof including, without limitation, any warranty
of merchantability or fitness for a particular purpose.
5.1 DUE ORGANIZATION. The Company is a corporation duly incorporated
and organized, validly existing and in good standing under the laws of the State
of Incorporation, and has the requisite power and authority to carry on its
business as it is now being conducted. The Company is duly qualified or
authorized to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or authorization necessary except where the failure to be so
qualified or authorized to do business would not have a Material Adverse Effect
on the Company. Schedule 5.1 sets forth a list of all states in which the
Company is authorized or qualified to do business, which list indicates which of
such entities is authorized or qualified to do business in such states. True,
complete and correct copies of the Certificate or Articles of Incorporation and
By-laws, each as amended, of the Company (the "Charter Documents") are all
attached to Schedule 5.1. The Company has delivered to AmPaM complete and
correct copies of (i) the stock records of the Company and (ii) all minutes of
meetings, written consents and other evidence, if any, of deliberations of or
actions taken by the Company's Board of Directors, any committees of the Board
of Directors and stockholders during the last five years.
5.2 AUTHORIZATION. (i) The officers or other representatives of the
Company executing this Agreement have the authority to enter into and bind the
Company to the terms of this Agreement and (ii) the Company has the full legal
right, power and authority to enter into this Agreement and consummate the
transactions contemplated hereby. Copies of the most recent resolutions adopted
by the Board of Directors of the Company and the most recent resolutions adopted
by the Stockholders, which approve this Agreement and the transactions
contemplated hereby in all respects, certified by the Secretary or an Assistant
Secretary of the Company as being in full force and effect on the date hereof,
are attached hereto as Schedule 5.2.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company and each of its Subsidiaries is as set forth on Schedule 5.3(a). All of
the issued and outstanding shares of the capital stock of the Company are owned
by the Stockholders in the amounts set forth in Schedule 5.3(a). Except as set
forth on Schedule 5.3(a), all of the issued and outstanding capital stock of
each Subsidiary is owned by the Company. All of the issued and outstanding
shares of the capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable, are owned of record by the
Stockholders and further, such shares were offered, issued, sold and delivered
by the Company in compliance with all applicable state and Federal laws
concerning the issuance of securities. Further, none of such shares were issued
in violation of any preemptive rights of any past or present stockholder.
7
<PAGE> 16
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule
5.4(a), the Company has not acquired or redeemed any shares of capital stock of
the Company since January 1, 1996. Except as set forth on Schedule 5.4(b), (i)
no option, warrant, call, conversion right or commitment of any kind exists
which obligates the Company to issue any of its authorized but unissued capital
stock; (ii) the Company has no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any distribution in respect thereof; and
(iii) neither the voting stock structure of the Company nor the relative
ownership of shares among any of its Stockholders has been altered or changed in
contemplation of the AmPaM Plan of Organization. There are no voting trusts,
proxies or other agreements or understandings to which the Company is a party or
is bound with respect to the voting of any shares of capital stock of the
Company.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses in
contemplation of the AmPaM Plan of Organization.
5.6 SUBSIDIARIES; OWNERSHIP IN OTHER ENTITIES. Except as set forth on
Schedule 5.6(a), the Company has no Subsidiaries. Except as set forth in
Schedule 5.6(b), the Company does not presently own, of record or beneficially,
or control, directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any corporation, association
or business entity nor is the Company, directly or indirectly, a participant in
any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth on Schedule 5.7(a) is a list of
all predecessor companies of the Company, including the names of any entities
acquired by the Company (by stock purchase, merger or otherwise) or owned by the
Company or from whom the Company previously acquired material assets, in any
case, from the earliest date upon which any Stockholder acquired his or her
stock in any Company. Except as disclosed on Schedule 5.7(b), the Company has
not been, within such period of time, a subsidiary or division of another
corporation or a part of an acquisition which was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
Company or any other person or entity that is an Affiliate of the Company since
January 1, 1996.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 is a copy of:
(i) the balance sheet of the Company as of September 30, 1997
and the related statements of operations, stockholders' equity and cash
flows for the one-year period ended September 30, 1997, together with
the related notes and schedules (such balance sheets, the related
statements of operations, stockholders' equity and cash flows and the
related notes and schedules are referred to herein as the "Year-end
Financial Statements");
8
<PAGE> 17
(ii) the balance sheet of the Company as of June 30, 1998 and
the related statements of operations, stockholders' equity and cash
flows for the nine-month periods ended June 30, 1997 and 1998, together
with the related notes and schedules (such balance sheets, the related
statements of operations, stockholders' equity and cash flows and the
related notes and schedules are referred to herein as the "Nine-Month
Interim Financial Statements");
(iii) the balance sheet of the Company as of September 30,
1998 (the "Balance Sheet Date") and the related statements of
operations, stockholders' equity and cash flows for the twelve-month
periods ended September 30, 1997 and 1998 (such balance sheets, the
related statements of operations, stockholders' equity and cash flows
are referred to herein as the "Twelve-Month Interim Financial
Statements"); and
(iv) the income statement of the Company for the 12-month
period ended June 30, 1998 (the "Valuation Income Statement").
The Year-end Financial Statements, the Nine-Month Interim Financial Statements,
the Twelve-Month Interim Financial Statements and the Valuation Income Statement
are collectively called the "Financial Statements". The Financial Statements,
including those included in the Private Placement Memorandum, have been prepared
in accordance with GAAP applied on a consistent basis and fairly present the
financial position of the Company as of the dates thereof and the results of its
operations and changes in financial position for the periods then ended,
subject, in the case of the Nine-Month Interim Financial Statements and the
Twelve-Month Interim Financial Statements, to normal year-end audit adjustments
and any other adjustments described therein and the absence of certain footnote
disclosures.
5.10 LIABILITIES AND OBLIGATIONS. Schedule 5.10(a) sets forth an
accurate list as of the Balance Sheet Date of (i) all material liabilities of
the Company which are not reflected on the balance sheet of the Company at the
Balance Sheet Date or otherwise reflected in the Company Financial Statements at
the Balance Sheet Date which by their nature would be required in accordance
with GAAP to be reflected in the balance sheet, and (ii) all loan agreements,
indemnity or guaranty agreements, bonds, mortgages, pledges or other security
agreements to which the Company is a party or by which its properties may be
bound other than bid bonds and performance bonds made in the Ordinary Course of
Business. Except as set forth on Schedule 5.10(b), since the Balance Sheet Date,
the Company has not incurred any material liabilities or obligations of any
kind, character or description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the Ordinary Course
of Business. The Company has also delivered to AmPaM, on Schedule 5.10(c), a
list of contingent liabilities related to pending litigation or litigation that
has been threatened in writing, or other material liabilities which are not
fixed or otherwise accrued or reserved. For each such contingent liability of
the Company or liability of the Company for which the amount is not fixed or is
contested, the Company has provided to AmPaM the following information:
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(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation in the possession
of the Company or its directors, officers or
stockholders relating thereto;
(b) amounts claimed and any other action or relief sought;
and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(ii) the name of each court or agency before which such claim,
suit or proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted;
and
(iv) a good faith estimate of the maximum amount, if any,
which the Company expects, based on information available, is likely to
become payable with respect to each such liability and the amount, if
any, accrued or reserved for each such potential liability on the
Financial Statements.
AmPaM acknowledges that all estimates referred to above and set forth on
Schedule 5.10(c) are only good faith estimates, and that the Company and the
Stockholders expressly do not represent or warrant that the actual amounts of
such liabilities will be equal to, or more or less than, the amounts of such
estimates.
5.11 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.11(a) sets forth an
accurate list, in all material respects, of the accounts and notes receivable of
the Company, as of the Balance Sheet Date, including any such amounts which are
not reflected in the balance sheet as of the Balance Sheet Date, and including
all receivables from and advances to employees and the Stockholders, which are
identified as such. Schedule 5.11(a) also sets forth a materially accurate aging
of all accounts and notes receivable as of the Balance Sheet Date showing
amounts due in 30-day aging categories. Except to the extent reflected on
Schedule 5.11(b), such accounts, notes and other receivables are collectible in
the amounts shown on Schedule 5.11(a), net of reserves reflected in the balance
sheet as of the Balance Sheet Date.
5.12 LICENSES; INTELLECTUAL PROPERTY. (a) The Company or its employees
hold all licenses, franchises, permits and other governmental authorizations
("Licenses") necessary to conduct the business of the Company, the absence of
which would cause a Material Adverse Effect on the Company, and the Company has
delivered to AmPaM a list that is accurate, in all material respects, and
summary description (which is set forth on Schedule 5.12(a)(1)) of all such
Licenses. At or prior to the Closing, all such Licenses owned or held by any
employee of the Company will be assigned or licensed to the Company for no
additional consideration. The Licenses listed on Schedule 5.12(a)(1) are valid,
and the Company has not received any notice that any person intends to cancel,
terminate or not renew any such License. The Company has conducted and is
conducting its business in compliance in all material respects with the
requirements, standards, criteria and
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<PAGE> 19
conditions set forth in the Licenses listed on Schedule 5.12(a)(1) and is not in
violation of any of the foregoing in any material respect. Except as
specifically provided in Schedule 5.12(a)(2), the consummation by the Company of
the transactions contemplated by this Agreement will not result in a default
under or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such Licenses.
(b) The Company owns or possesses adequate licenses or other rights to
use (without making any payment or granting rights to any person in exchange)
all patents, patent applications, trademarks, copyrights, service marks and
trade names (collectively, the "Intellectual Property") necessary to conduct its
business as currently conducted. A description of any Intellectual Property
licensed by the Company, including the material terms of any such license, is
described on Schedule 5.12(b)(1). Neither the validity of the Intellectual
Property nor the title thereto or use thereof by the Company is being questioned
in any pending litigation, and the conduct of the Company's business, as
currently conducted, does not conflict with licenses, copyrights, uncopyrighted
works, trade marks, service marks, trade names, trade name rights, patents,
patent rights, unpatented inventions or trade secrets of others. Neither the
validity of the Intellectual Property nor the title thereto or use thereof by
the Company is being questioned in any pending or, to the knowledge of the
Company, threatened infringement claims or litigation, and the conduct of the
Company's business, as now conducted, does not conflict with licenses,
copyrights, uncopyrighted works, trade marks, service marks, trade names, trade
name rights, patents, patent rights, unpatented inventions or trade secrets of
others. Except as specifically provided in Schedule 5.12(b)(2), the consummation
by the Company of the transactions contemplated by this Agreement will not
adversely affect the rights and benefits afforded to the Company by any such
Intellectual Property.
5.13 ENVIRONMENTAL MATTERS. (a) Except as set forth in Schedule 5.13
attached hereto, (i) the Company has conducted its businesses in compliance in
all material respects with all applicable Environmental Laws, including, without
limitation, having all environmental permits, licenses and other approvals and
authorizations necessary for the operation of its business as presently
conducted, except where the failure to have such permit, license, approval or
authorization would not have a Material Adverse Effect on the Company, (ii) none
of the properties owned by the Company contain any Hazardous Substance as a
result of any activity of the Company in amounts exceeding the levels permitted
by applicable Environmental Laws, except where amounts in excess of such levels
would not have a Material Adverse Effect on the Company, (iii) the Company has
not received any notices, demand letters or requests for information from any
Federal, state, local or foreign governmental entity or third party indicating
that the Company may be in violation of, or liable under, any Environmental Law
in connection with the ownership or operation of its business, (iv) there are no
civil, criminal or administrative actions, suits, demands, claims, hearings,
investigations or proceedings pending or, to the knowledge of the Company,
threatened, against the Company relating to any violation, or alleged violation,
of any Environmental Law, except where such violation would not have a Material
Adverse Effect on the Company, (v) no reports have been filed, or are required
to be filed, by the Company concerning the release of any Hazardous Substance or
the threatened or actual violation of any Environmental Law, (vi) no Hazardous
Substance has
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<PAGE> 20
been disposed of, released or transported in violation of any applicable
Environmental Law from any properties owned by the Company as a result of any
activity of the Company during the time such properties were owned, leased or
operated by the Company, (vii) there have been no environmental investigations,
studies, audits, tests, reviews or other analyses regarding compliance or
non-compliance with any applicable Environmental Law conducted by or which are
in the possession of the Company relating to the activities of the Company which
are not listed on Schedule 5.13 attached hereto prior to the date hereof, (viii)
to the knowledge of the Company, (A) there are no underground storage tanks on,
in or under any properties owned by the Company and (B) no underground storage
tanks have been closed or removed from any of such properties during the time
such properties were owned, leased or operated by the Company which are not
listed on Schedule 5.13, (ix) to the knowledge of the Company, (A) there is no
asbestos or asbestos-containing material present in any material quantity in any
of the properties owned by the Company, and (B) no asbestos has been removed
from any of such properties during the time such properties were owned, leased
or operated by the Company, and (x) neither the Company nor any of its
properties are subject to any material liabilities or expenditures (fixed or
contingent) relating to any suit, settlement, court order, administrative order,
regulatory requirement, judgment or claim asserted or arising under any
Environmental Law.
(b) As used herein, "Environmental Law" means, as of the Closing Date,
any Federal, state, local or foreign law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, order, judgment,
decree, injunction or agreement with any governmental entity to which the
Company is a party or subject relating to (x) the protection, preservation or
restoration of the environment (including, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource) or to human health or
safety or (y) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of Hazardous Substances, in each case as amended and as in effect on
the Closing Date. The term Environmental Law includes, without limitation, (i)
the Federal Comprehensive Environmental Response Compensation and Liability Act
of 1980, the Superfund Amendments and Reauthorization Act, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976 (including
the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste
Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Federal Occupational Safety and Health Act of
1970, each as amended and as in effect on the Closing Date, and (ii) any common
law or equitable doctrine (including, without limitation, injunctive relief and
tort doctrines such as negligence, nuisance, trespass and strict liability) that
may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of, effects of or exposure to any
Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance presently
listed, defined, designated or classified as hazardous, toxic, radioactive, or
dangerous, or otherwise regulated, under any Environmental Law. Hazardous
Substance includes any substance to which exposure is regulated by any
government authority or any Environmental Law including, without
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<PAGE> 21
limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material, asbestos or
asbestos-containing material, urea formaldehyde foam insulation, lead or
polychlorinated biphenyls.
5.14 PERSONAL PROPERTY. The Company has delivered to AmPaM an accurate
list (which is set forth on Schedule 5.14(a)) of (x) all personal property
material to the operations of the Company as of the Balance Sheet Date included
in "plant, property and equipment" on the balance sheet of the Company as of
such date, (y) all other items of personal property owned by the Company with an
individual value in excess of $15,000 (i) as of the Balance Sheet Date and (ii)
acquired since the Balance Sheet Date and (z) all material leases and agreements
in respect of personal property, including, in the case of each of (x), (y) and
(z), (1) true, complete and correct copies of all such leases and (2) an
indication as to which assets are currently owned, or were formerly owned, by
Stockholders, relatives of Stockholders, or Affiliates of the Company. Except as
set forth on Schedule 5.14(b), (i) all personal property material to, and used
by, the Company in its business is either owned by the Company or leased by the
Company pursuant to a lease included on Schedule 5.14(a), (ii) all of the
personal property listed on Schedule 5.14(a) or replacement property thereof is
in working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14(a) are in full force and effect
and constitute valid and binding agreements of the Company, in each case in
accordance with their respective terms.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
(a) The Company has delivered to AmPaM a materially accurate list
(which is set forth on Schedule 5.15(a)(1)) of all customers (persons or
entities) representing 5% or more of the Company's annual revenues for any
period covered by any of the Financial Statements. Except to the extent set
forth on Schedule 5.15(a)(2), none of such customers has canceled or, to the
knowledge of the Company, are currently threatening to cancel a currently
effective contract with the Company.
(b) The Company has listed on Schedule 5.15(b) all material contracts,
commitments and similar agreements to which the Company is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with customers listed on Schedule 5.15(a), joint venture or partnership
agreements, contracts with any labor organizations, strategic alliances and
options to purchase land), other than agreements listed on Schedules 5.10(a),
Schedule 5.14(a) or Schedule 5.16(a), (a) in existence as of the Balance Sheet
Date and (b) entered into since the Balance Sheet Date, and in each case has
delivered or made available to AmPaM true, complete and correct copies of such
agreements. For purposes of the preceding sentence, a contract, commitment or
similar agreement is "material" if it (i) has a term of more than one year
(other than contracts, commitments or agreements that are cancelable without
liability or penalty within 30 days of notice from the Company of cancellation
or that can be terminated by the Company without material penalty upon notice of
30 days or less) or (ii) requires the payment by or to the Company of more than
$100,000 during any 12-month period. Except for expenditures in the ordinary
course of
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<PAGE> 22
business, the Company has also indicated on Schedule 5.15(b) a summary
description of all plans or projects involving the opening of new operations,
expansion of existing operations, or the acquisition of any personal property,
business or assets requiring, in any event, the payment of more than $50,000 by
the Company during any 12-month period.
(c) Except as set forth on Schedule 5.15(c), the Company is not
required to provide any bonding or other financial security arrangements in any
material amount in connection with any contract listed on Schedule 5.15(b).
5.16 REAL PROPERTY. Schedule 5.16(a) includes a list of all real
property owned or leased by the Company at the date hereof and all other real
property, if any, used by the Company in the conduct of its business. The
Company has good and insurable title to any real property owned by it that is
shown on Schedule 5.16(a), other than property intended to be sold or
distributed prior to the Closing Date as provided in Section 7.1(c) of this
Agreement, and all real property so owned is subject to no mortgage, pledge,
lien, conditional sales agreement, encumbrance, lease, possessory rights of
third parties or charge, except for:
(i) liens reflected on Schedule 5.10(a) or Schedule 5.16(b)
as securing specified liabilities (with respect to which no material
default by the Company exists);
(ii) liens for current taxes not yet payable and assessments
not in default;
(iii) easements for utilities serving the property; and
(iv) easements, covenants and restrictions and other
exceptions to title which do not adversely affect the current use of
the property.
Copies of all leases and agreements in respect of such real property
leased by the Company, which are true, complete and correct in all material
respects, are attached to Schedule 5.16(a), and an indication as to which such
properties, if any, are currently owned, or were formerly owned, by Stockholders
or Affiliates of the Company or Stockholders is included in Schedule 5.16(a).
Except as set forth on Schedule 5.16(b), all of such leases included on Schedule
5.16(a) are, as to the Company, in full force and effect and constitute valid
and binding agreements of the Company in accordance with their respective terms.
5.17 INSURANCE. The Company has delivered to AmPaM (i) an accurate list
as of the Balance Sheet Date of all insurance policies carried by the Company
and (ii) an accurate list of all insurance loss runs or workers compensation
claims received for the past three policy years (which lists are set forth on
Schedule 5.17). The Company has also delivered or made available to AmPaM true,
complete and correct copies of all insurance policies currently in effect that
are referred in Schedule 5.17. Such insurance policies evidence all of the
insurance the Company is required to carry pursuant to all of its contracts and
other agreements and pursuant to all applicable laws. All of such insurance
policies are currently in full force and effect except as stated in Schedule
5.17.
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Since January 1, 1996, no insurance carried by the Company has been canceled by
the insurer and the Company has not been denied coverage under any such policy.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; LABOR MATTERS.
(a) The Company has delivered to AmPaM an accurate list (which is set
forth on Schedule 5.18(a)(1)) showing all officers, directors and key employees
of the Company, listing all employment agreements with such officers, directors
and key employees and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of each of
such persons as of (i) the Balance Sheet Date and (ii) the date hereof. The
Company has provided to AmPaM true, complete and correct copies of any
employment agreements for persons listed on Schedule 5.18(a)(1). Since the
Balance Sheet Date, except as disclosed on Schedule 5.18(a)(2), there have been
no increases in the compensation payable or any bonuses to any officer,
director, key employee or other employee, except ordinary salary increases
implemented on a basis consistent with past practices and except for bonuses
paid on a basis consistent with past practices.
(b) Except as set forth on Schedule 5.18(b), (i) the Company is not
bound by or subject to (and none of its assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) to the knowledge of the
Company, no campaign to establish such arrangement is in progress and (iii)
there is no pending or, to the Company's knowledge, threatened labor dispute
involving the Company and any group of its employees nor has the Company
experienced any labor interruptions over the past three years. The Company
believes its relationship with employees to be generally good.
(c) Except as set forth in Schedule 5.18(c) attached hereto, (i) there
are no claims, actions or proceedings pending or, to the knowledge of the
Company, threatened between the Company and any of its employees, (ii) the
Company has complied in all material respects with all laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, and (iii) the Company has not received written
notice from any person asserting that the Company is liable in any material
amount for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing.
5.19 EMPLOYEE PLANS. The Company has delivered to AmPaM accurate
schedule (Schedule 5.19(a)) showing all employee benefit plans of the Company,
including all employment agreements and other agreements or arrangements
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date and as of the date of
this Agreement. Except for the employee benefit plans, if any, described on
Schedule 5.19(a), the Company does not sponsor, maintain or contribute to any
plan program, fund or arrangement that constitutes an "employee pension benefit
plan", and neither the Company nor any Subsidiary has any obligation to
contribute to or accrue or
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<PAGE> 24
pay any benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan" (within the meaning of Section 3(36) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or any non-qualified deferred
compensation arrangement). For the purposes of this Agreement, the term
"employee pension benefit plan" shall have the same meaning as is given that
term in Section 3(2) of ERISA. The Company has not sponsored, maintained or
contributed to any employee pension benefit plan other than the plans set forth
on Schedule 5.19(a), and, except as described on Schedule 5.19(b), the Company
is not or could not be required to contribute to any retirement plan pursuant to
the provisions of any collective bargaining agreement establishing the terms and
conditions or employment of any of the Company's employees.
Except as set forth on Schedule 5.19(c), the Company is not now, or
will not as a result of its past activities become, liable to the Pension
Benefit Guaranty Corporation or to any multiemployer employee pension benefit
plan under the provisions of Title IV of ERISA.
All employee benefit plans listed on Schedule 5.19(a) and the
administration thereof are in compliance in all material respects with their
terms and all applicable provisions of ERISA and the regulations issued
thereunder, as well as with all other applicable federal, state and local
statutes, ordinances and regulations.
All accrued contribution obligations of the Company as of the Balance
Sheet Date with respect to any plan listed on Schedule 5.19(a) have either been
fulfilled in their entirety or are fully reflected on the balance sheet of the
Company as of the Balance Sheet Date.
5.20 COMPLIANCE WITH ERISA. All plans listed on Schedule 5.19(a) that
are intended to qualify under Section 401 (a) of the Code (the "Qualified
Plans") are, and have been so qualified and have been determined by the Internal
Revenue Service to be so qualified, and copies of such determination letters are
attached to Schedule 5.19(a). Except as disclosed on Schedule 5.20, all reports
and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, actuarial reports, audits or tax returns) since January 1, 1992 have been
timely filed or distributed, and copies thereof have been made available to
AmPaM. No such plan listed on Schedule 5.19(a) nor the Company has engaged in
any transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No such Plan listed on Schedule 5.19(a) has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(l) of ERISA; and the Company has not incurred any liability for
excise tax or penalty due to the Internal Revenue Service nor any liability to
the Pension Benefit Guaranty Corporation. The Company further represents that
except as set forth on Schedule 5.20 hereto:
(i) there have been no terminations, partial terminations or
discontinuations of contributions to any Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval
by the Internal Revenue Service;
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<PAGE> 25
(ii) no plan listed on Schedule 5.19(a) subject to the
provisions of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase
is defined in Section 4043 of ERISA) with respect to any such plan
listed in Schedule 5.19(a);
(iv) the Company (including any Subsidiaries) has not incurred
liability under Section 4062 of ERISA; and
(v) no circumstances exist pursuant to which the Company could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to any multiemployer plan or the PBGC under
Title IV of ERISA or to the Internal Revenue Service for any excise tax
or penalty, or being subject to any statutory lien to secure payment of
any such liability) with respect to any plan now or heretofore
maintained or contributed to by any entity other than the Company that
is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 5.21 or Schedule 5.13, the Company has not violated within the five
years prior to the date of this Agreement and is not currently in violation of
any law or regulation or any order of any court or Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it other than violations that would not
have a Material Adverse Effect on the Company; and except to the extent set
forth on Schedule 5.10(c) or Schedule 5.13, there are no claims, actions, suits
or proceedings, pending or, to the knowledge of the Company, threatened in
writing against the Company, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over the Company and no written
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received by the Company, and to the knowledge of the Company there is
no valid basis for any such claim, action, suit or proceeding that could
reasonably be expected to have a Material Adverse Effect on the Company.
5.22 TAXES. The Company has timely filed all requisite Federal, state
and other Tax Returns or extension requests for all fiscal periods ended on or
before the Balance Sheet Date; and except as set forth on Schedule 5.22(a),
there are no examinations in progress or claims pending against the Company for
federal, state and other Taxes (including penalties and interest) for any period
or periods prior to and including the Balance Sheet Date and no notice of any
claim for Taxes, whether pending or threatened, has been received. All Tax,
including interest and penalties (whether or not shown on any Tax Return), due
by the Company has been paid. The amounts shown as accruals for Taxes on the
Financial Statements are sufficient for the payment of all Taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before the date of the respective Financial Statements. Copies of (i) any tax
examinations, (ii) extensions of statutory limitations and (iii) the federal and
local income Tax Returns and franchise Tax Returns of Company for their last
three (3) fiscal years, or such shorter period of time as any of them shall
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<PAGE> 26
have existed, are attached hereto as Schedule 5.22(a) or have otherwise been
delivered to AmPaM. The Company has a taxable year ended September 30. Except as
set forth on Schedule 5.22(a), the Company uses the accrual method of accounting
for income tax purposes, and the Company's methods of accounting have not
changed in any material respect in the past five years (except as required to
conform to changes in GAAP). The Company is not an investment company as defined
in Section 351(e)(1) of the Code. The Company is not and has not during the last
five years been a party to any tax sharing agreement or agreement of similar
effect. Except as set forth on Schedule 5.22(a), the Company is not and has not
during the last five years been a member of any consolidated group for federal
tax purposes. The Company has not received, been denied, or applied for any
private letter ruling from the IRS during the last ten years.
5.23 NO VIOLATIONS; NO CONSENT REQUIRED, ETC.
(a) The Company is not in violation of any Charter Document. Except as
set forth on Schedule 5.23(a), the Company is not in default under any lease,
instrument, agreement, license, or permit set forth on Schedule 5.12(a),
Schedule 5.14(a), Schedule 5.15(b) or Schedule 5.16(a) (collectively, the
"Material Documents").
(b) Except as set forth on Schedule 5.23(b)(1), the execution and
delivery of this Agreement by each of the Company and the Stockholders do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company under any of the
terms, conditions or provisions of (i) the Charter Documents of the Company,
(ii) any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental authority
applicable to the Company or any of its properties or assets, or (iii) any
Material Document to which the Company is now a party or by which the Company or
any of its properties or assets may be bound or affected. The consummation by
the Company and the Stockholders of the transactions contemplated hereby will
not result in any material violation, conflict, breach, right of termination or
acceleration or creation of liens under any of the terms, conditions or
provisions of the items described in clauses (i) through (iii) of the preceding
sentence, subject, in the case of the terms, conditions or provisions of the
items described in clause (iii) above, to obtaining (prior to the Effective
Time) such consents as may be required from commercial lenders, lessors or other
third parties as listed on Schedule 5.23(b)(2).
(c) Except as set forth on Schedule 5.23(c) and except for the
Hart-Scott Act, none of the Material Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to the consummation by the Company and the Stockholders of any of the
transactions contemplated hereby in order to remain in full force and effect,
and consummation by the Company and the Stockholders of the transactions
contemplated hereby will not give rise to any right to termination, cancellation
or acceleration or loss of any material right or benefit under any Material
Document.
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(d) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act or with any state securities authorities in connection with the offer
and sale of AmPaM Stock and AmPaM Notes pursuant to this Agreement and (ii) any
filing required to be made under the Hart-Scott Act in connection with the
transactions contemplated by this Agreement, no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby.
(e) Except as set forth on Schedule 5.23(e), none of the Material
Documents prohibits the disclosure or publication by the Company or AmPaM of the
name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company from freely providing services or
selling products to any other customer or potential customer of the Company,
AmPaM or any Other Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24, the
Company is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.25 ABSENCE OF CHANGES. (a) Since the Balance Sheet Date, except as
set forth on Schedule 5.25 or as otherwise contemplated hereby, there has not
been:
(i) any Material Adverse Change in the Company;
(ii) any damage, destruction or casualty loss (whether or not
covered by insurance), alone or in the aggregate, which has caused a
Material Adverse Effect on the Company;
(iii) any change in the authorized capital of the Company or
its outstanding securities or any change in its ownership interests or
any grant of any options, warrants, calls, conversion rights or
commitments;
(iv) any declaration or payment of any dividend or
distribution in respect of the capital stock or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock
of the Company except for distributions that would have been permitted
after the date hereof under Section 7.3(iii) hereof,
(v) any increase in the compensation, bonus, sales commissions
or fee arrangement payable or to become payable by the Company to any
of its officers, directors, Stockholders, employees, consultants or
agents, except for ordinary and customary bonuses and salary increases
for employees in accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed,
or any event or condition of any character, which has caused a Material
Adverse Effect on the Company;
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(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of the Company to any
person, including, without limitation, the Stockholders and their
affiliates, except inventory sold or transferred in the Ordinary Course
of Business;
(viii) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to the Company, including
without limitation any indebtedness or obligation of any Stockholders
or any Affiliate thereof;
(ix) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
material assets, property or rights of the Company or requiring consent
of any party to the transfer and assignment of any such assets,
property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the Ordinary Course of Business;
(xi) any waiver of any material rights or claims of the
Company;
(xii) any amendment or termination of any Material Document to
which the Company is a party except for the termination of a Material
Document in accordance with its terms without any action on the part of
the Company;
(xiii) any transaction by the Company outside the Ordinary
Course of Business;
(xiv) any cancellation or termination of a material contract
with a customer or client listed on Schedule 5.15(a) prior to the
scheduled termination date thereof; or
(xv) any other distribution of property or assets by the
Company other than in the Ordinary Course of Business, other than (a)
distributions of nonoperating assets specifically identified on
Schedule 5.25, (b) distributions of real estate required by Section
7.1(c) of this Agreement and (c) distributions of cash or promissory
notes permitted by Annex I hereto.
(b) Except as set forth on Schedule 5.25, the Company has not,
between the Balance Sheet Date and the date hereof, taken any of the actions set
forth in Section 7.3.
5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The Company has delivered to
AmPaM an accurate schedule (which is set forth on Schedule 5.26) as of the date
of the Agreement of:
(i) the name of each financial institution in which the
Company has an account or safe deposit box;
(ii) the names in which the accounts or boxes are held;
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(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or
have access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company and
a description of the terms of such power.
5.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the Company and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
Company and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
5.28 RELATIONS WITH GOVERNMENTS. The Company has not, and to the
knowledge of the Company none of the Stockholders or any Affiliate of any of
them has, given or offered anything of value to any governmental official,
political party or candidate for government office or otherwise taken any action
which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any law of similar effect.
5.29 DISCLOSURE. This Agreement, including the Annexes and Schedules
hereto, and the completed questionnaire related to the Hart-Scott Act furnished
to AmPaM by the Company, do not contain an untrue statement of a material fact
concerning the Company or omit to state a material fact concerning the Company
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing does not apply to statements contained in or omitted from any
of such documents made or omitted in reliance upon information furnished in
writing by AmPaM.
5.30 NO WARRANTIES OR INSURANCE. Except for warranty liability under
applicable law and except for warranty liability under the warranties issued by
the Company of the types described on Schedule 5.30, the Company has no
liability to any person under any warranty and the Company does not offer or
sell insurance or consumer protection plans or other arrangements that could
result in the Company being required to make any payment to or perform any
service for any person.
5.31 INTEREST IN CUSTOMERS AND SUPPLIERS AND RELATED PARTY
TRANSACTIONS. Except as described on Schedule 5.31 or in Section 8.11, no
Stockholder, officer, director or Affiliate of the Company (i) owns, directly or
indirectly, any financial interest in, or is a director, officer, employee or
affiliate of, any corporation, firm, association or business organization that
is a client, supplier, customer, lessor, lessee or competitor of the Company, or
(ii) is or will be a party to an agreement or relationship with the Company
other than through a customary "at will" employment relationship.
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5.32 PRIVATE PLACEMENT MEMORANDUM. None of the information supplied or
to be supplied by the Company in writing specifically for inclusion in the
Private Placement Memorandum contained or, as of the Closing Date, will contain
any untrue statement of a material fact concerning the Company or omitted or
will omit to state any material fact required to be stated therein or necessary
in order to make the statements contained in such information supplied or to be
supplied by the Company concerning the Company, in light of the circumstances
under which they are made, not misleading.
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.
Each Stockholder severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.7 hereof, shall be true at the time of
Closing, and that the representations and warranties set forth in this Section
5(B) shall survive the Closing Date.
5.33 AUTHORITY; OWNERSHIP. Such Stockholder has the full legal right,
power and authority to enter into this Agreement, and this Agreement is a legal,
valid and binding obligation of such Stockholder, enforceable against the
Stockholder in accordance with its terms. Except as set forth on Schedule
5.33(a), the execution and delivery of this Agreement by such Stockholder does
not violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of such Stockholder
under any of the terms, conditions or provisions of (i) the Charter Documents of
the Company, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to such Stockholder or any of such Stockholder's properties
or assets, or (iii) any lease, instrument, agreement, license or permit to which
such Stockholder is now a party or by which such Stockholder or any of such
Stockholder's properties or assets may be bound or affected. Except for (i) any
filings to be made with the SEC pursuant to the 1933 Act and any state
securities authorities in connection with the offer and sale of AmPaM Stock and
AmPaM Notes pursuant to this Agreement, (ii) any filing required to be made
under the Hart-Scott Act in connection with the transactions contemplated by
this Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by such
Stockholder or the consummation by such Stockholder of the transactions
contemplated hereby. Except as set forth on Schedule 5.33(b), such Stockholder
owns beneficially and of record all of the shares of the Company Stock
identified on Annex I hereto as being owned by such Stockholder, and, such
Company Stock is owned free and clear of all liens, security interests, pledges,
charges, voting trusts, voting agreements, restrictions, encumbrances and claims
of every kind.
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5.34 PREEMPTIVE RIGHTS. Such Stockholder does not have, or hereby
waives, any preemptive or other right to acquire shares of Company Stock or
AmPaM Stock that such Stockholder has or may have had. Nothing herein, however,
shall limit or restrict the rights of any Stockholder to acquire AmPaM Stock
pursuant to (i) this Agreement, (ii) any option granted or to be granted by
AmPaM to such Stockholder, (iii) a purchase through a broker in a regular stock
market transaction or (iv) a purchase from a stockholder of a Founding Company
(subject to compliance with any contractual restrictions or securities law
restrictions applicable thereto specified in Section 15 hereof).
5.35 NO COMMITMENT TO DISPOSE OF AMPAM STOCK. No Stockholder is under
any binding commitment or contract to sell, exchange or otherwise dispose of
shares of AmPaM Stock or AmPaM Notes received pursuant to this Agreement.
5.36 DISCLOSURE. The completed Director and Officer Questionnaires with
respect to such Stockholder (if any), the completed investor questionnaire
furnished to AmPaM by such Stockholder in connection with the proposed
acquisition by such Stockholder of AmPaM Stock and AmPaM Notes and any other
information provided to AmPaM in writing by such Stockholder relating
specifically to such Stockholder for inclusion in the Private Placement
Memorandum do not contain an untrue statement of a material fact concerning such
Stockholder or omit to state a material fact concerning such Stockholder
necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading.
6. REPRESENTATIONS OF AMPAM
Except as otherwise qualified below, AmPaM represents and warrants that
all of the following representations and warranties in this Section 6 are true
at the date of this Agreement and, subject to Section 7.7 hereof, shall be true
at the time of Closing, and that such representations and warranties shall
survive the Closing Date for a period of eighteen months (the last day of such
period being the "Expiration Date" for purposes of the representations and
warranties set forth in this Section 6), except that the representations and
warranties set forth in Section 6.3, 6.11 and 6.15 shall survive until such time
as the applicable statute of limitations period has run, which shall be deemed
to be the Expiration Date for the representations and warranties set forth in
Sections 6.3, 6.11 and 6.15.
AmPaM acknowledges that in purchasing the shares of Company Stock, it
is relying upon its own independent investigation as well as the representations
and warranties of the Company and the Stockholders as set forth in this
Agreement.
6.1 DUE ORGANIZATION. AmPaM is a corporation duly incorporated and
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite power and authority to carry on its business as
it is now being conducted and as contemplated by the Private Placement
Memorandum. AmPaM is duly qualified or authorized to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of
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its properties makes such qualification or authorization necessary, except where
the failure to be so qualified or authorized to do business would not have a
Material Adverse Effect. True, complete and correct copies of the Certificate of
Incorporation and By-laws, each as proposed to be amended and as such documents
shall be in effect as of the Closing Date, of AmPaM (the "AmPaM Charter
Documents") are attached hereto as Annex II.
6.2 AUTHORIZATION. (i) The officers of AmPaM executing this Agreement
have the authority to enter into and bind AmPaM to the terms of this Agreement
and (ii) AmPaM has the full legal right, power and authority to enter into this
Agreement and consummate the transactions contemplated hereby. All corporate
acts and other proceedings required to have been taken by AmPaM to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly and properly taken.
6.3 CAPITAL STOCK OF AmPaM. The authorized capital stock of AmPaM is as
set forth in Section 1.3(ii). Immediately prior to the Closing Date, all of the
issued and outstanding shares of the capital stock of AmPaM will be as set forth
in the Private Placement Memorandum, free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind other than any restrictions described in the Private
Placement Memorandum. All of the issued and outstanding shares of the capital
stock of AmPaM have been duly authorized and validly issued, are fully paid and
nonassessable and such shares were offered, issued, sold and delivered by AmPaM
in compliance with all applicable state and Federal laws concerning the issuance
of securities. Further, none of such shares were issued in violation of the
preemptive rights of any past or present stockholder of AmPaM. Upon the Closing
Date, the authorized, issued and outstanding shares of capital stock of AmPaM
will be as set forth in the Private Placement Memorandum under the caption
"Capitalization." Upon the Closing Date, the aggregate number of shares of AmPaM
Stock issued and outstanding on the Closing Date that are owned by Sterling City
Capital, LLC, any Affiliates of Sterling City Capital, LLC and the officers and
directors of AmPaM will not be greater than the number of shares of AmPaM Stock
reflected in the Private Placement Memorandum as the aggregate number of shares
of AmPaM Stock to be issued and outstanding and owned by Sterling City Capital,
LLC, any Affiliates of Sterling City Capital, LLC and the officers and directors
of AmPaM.
6.4 TRANSACTIONS IN CAPITAL STOCK. Except for the Other Agreements and
except as set forth in the Private Placement Memorandum, (i) no option, warrant,
call, conversion right or commitment of any kind exists as of the date of this
Agreement which obligates AmPaM to issue any of its authorized but unissued
capital stock; and (ii) AmPaM has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof. The material terms of any options, warrants or other rights to acquire
shares of the stock of AmPaM referred to in the preceding sentence will be as
described in the Private Placement Memorandum.
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6.5 SUBSIDIARIES. As of the date of this Agreement, AmPaM has no
subsidiaries. As of the date of this Agreement, AmPaM does not own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity, and AmPaM is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. The historical financial statements of AmPaM
included in the Private Placement Memorandum (the "AmPaM Financial Statements")
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (except as noted thereon), and the balance
sheet included therein presents fairly the financial position of AmPaM as of its
date. Management of AmPaM believes that the assumptions underlying the pro forma
adjustments utilized in the preparation of such pro forma financial statements
are reasonable, and such pro forma adjustments have been properly applied to the
historical financial amounts in the compilation of the pro forma financial
statements. Based on the representations in Section 5.9 of this Agreement and in
Section 5.9 of each of the Other Agreements, the pro forma financial information
of AmPaM fairly presents the pro forma financial position, results of operations
and other information purported to be shown therein at the respective dates and
for the respective periods specified.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth in the Private
Placement Memorandum, as of the date of this Agreement, AmPaM has no material
liabilities or obligations of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise, other than
liabilities incurred in the ordinary course of business and consistent with past
practices, liabilities or obligations set forth in or contemplated by this
Agreement and the Other Agreements and except for fees incurred in connection
with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth in
the Private Placement Memorandum, AmPaM is not in violation of any law or
regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and its stockholders and, there are no claims,
actions, suits or proceedings, pending or, to the knowledge of AmPaM, threatened
against or affecting, AmPaM, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over it and no notice of any
claim, action, suit or proceeding, whether pending or threatened, has been
received. AmPaM has conducted and is conducting its businesses in compliance in
all material respects with the requirements, standards, criteria and conditions
set forth in applicable Federal, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations and is not in
violation, in any material respect, of any of the foregoing.
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6.9 NO VIOLATIONS. (a) AmPaM is not in violation of any AmPaM Charter
Document. AmPaM is not in default under any lease, instrument, agreement,
license, or permit to which AmPaM is a party or by which AmPaM or any of its
properties are bound (collectively, the "AmPaM Documents").
(b) The execution and delivery of this Agreement by AmPaM do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of AmPaM under any of the
terms, conditions or provisions of (i) the AmPaM Charter Documents, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to
AmPaM or any of its properties or assets, or (iii) any AmPaM Document; provided
that the representations and warranties specified in clause (ii) of this
sentence (A) are based on information in the investor questionnaires and related
purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements and
(B) are subject to the accuracy and completeness of the information contained in
such investor questionnaires and related purchaser representative questionnaires
and the truthfulness of such representations and warranties. The consummation by
AmPaM of the transactions contemplated hereby will not result in any material
violation, conflict, breach, right of termination or acceleration or creation of
liens under any of the terms, conditions or provisions of the items described in
clauses (i) through (iii) of the preceding sentence, subject, in the case of the
terms, conditions or provisions of the items described in clause (iii) above, to
obtaining (prior to the Closing Date) (x) such approvals, consents or orders
from the SEC, state blue sky authorities and authorities administering the
Hart-Scott Act and (y) such other consents as may be required from commercial
lenders, lessors or other third parties which are listed on Schedule 6.9.
(c) Except for (i) any filings to be made with the SEC pursuant to the
1933 Act and filings with various state securities authorities in connection
with the transactions contemplated by this Agreement, and (ii) any filings
required to be made under the Hart-Scott Act in connection with the transactions
contemplated by this Agreement, none of the AmPaM Documents requires notice to,
or the consent or approval of, any governmental agency or other third party with
respect to the consummation by AmPaM of any of the transactions contemplated
hereby in order to remain in full force and effect, and consummation by AmPaM of
the transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any material right or
benefit under the AmPaM Documents; provided that the representations and
warranties specified in clauses (i) and (ii) of this sentence (A) are based on
information in the investor questionnaires and related purchaser representative
questionnaires executed and delivered by the Stockholders of the Company and the
stockholders of the Other Founding Companies, the representations and warranties
of the Stockholders set forth in Section 16 hereof and the representations and
warranties of the
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stockholders of the Other Founding Companies set forth in Section 16 of the
Other Agreements and (B) are subject to the accuracy and completeness of the
information contained in such investor questionnaires and related purchaser
representative questionnaires and the truthfulness of such representations and
warranties.
(d) Except for (i) any filings with the SEC pursuant to the 1933 Act
and filings with various state securities authorities in connection with the
transactions contemplated by this Agreement and (ii) any filings required under
the Hart-Scott Act in connection with the transactions contemplated by this
Agreement, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by AmPaM
or the consummation by AmPaM of the transactions contemplated hereby; provided
that the representations and warranties specified in clauses (i) and (ii) of
this sentence (A) are based on information in the investor questionnaires and
related purchaser representative questionnaires executed and delivered by the
Stockholders of the Company and the stockholders of the Other Founding
Companies, the representations and warranties of the Stockholders set forth in
Section 16 hereof and the representations and warranties of the stockholders of
the Other Founding Companies set forth in Section 16 of the Other Agreements and
(B) are subject to the accuracy and completeness of the information contained in
such investor questionnaires and related purchaser representative questionnaires
and the truthfulness of such representations and warranties.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by AmPaM and the performance of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of AmPaM and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of AmPaM, enforceable
against AmPaM in accordance with its terms.
6.11 AmPaM STOCK. At the time of issuance thereof and delivery to the
Stockholders, the AmPaM Stock to be delivered to the Stockholders pursuant to
this Agreement will constitute valid, duly authorized and legally issued shares
of AmPaM, fully paid and nonassessable, and with the exception of restrictions
upon resale set forth in Sections 15 and 16 hereof, will be identical in all
substantive respects (which do not include the form of certificate upon which it
is printed or the presence or absence of a CUSIP number on any such certificate)
to the AmPaM Stock issued and outstanding as of the date hereof, other than the
Restricted Common Stock. The AmPaM Stock issued and delivered to the
Stockholders shall at the time of such issuance and delivery be free and clear
of any liens, claims or encumbrances of any kind or character. The offer and
sale of the shares of AmPaM Stock to be issued to the Stockholders pursuant to
this Agreement are not required to be registered under the 1933 Act; provided
that the representations and warranties specified in this sentence (A) are based
on information in the investor questionnaires and related purchaser
representative questionnaires executed and delivered by the Stockholders of the
Company and the stockholders of the Other Founding Companies, the
representations and warranties of the Stockholders set forth in Section 16
hereof and the representations and warranties of the stockholders of the Other
Founding Companies set forth in Section 16 of the Other Agreements and (B) are
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subject to the accuracy and completeness of the information contained in such
investor questionnaires and related purchaser representative questionnaires and
the truthfulness of such representations and warranties.
6.12 AmPaM NOTES. The AmPaM Notes have been duly authorized and, at the
Closing Date, will have been duly executed by AmPaM and, when authenticated,
issued and delivered, will constitute valid and binding obligations of AmPaM,
enforceable against AmPaM in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers) reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
6.13 NO SIDE AGREEMENTS. AmPaM has not entered into any agreement with
any of the Founding Companies or any of the Stockholders of the Founding
Companies other than this Agreement, the Other Agreements, the agreements
referred to in this Agreement and in the Other Agreements and the Private
Placement Memorandum. AmPaM has not entered into any agreements providing for
rights to register shares of AmPaM Stock under the 1933 Act except as provided
in Section 17 of this Agreement, in Section 17 of the Other Agreements and in an
agreement with Sterling City Capital, LLC, its Affiliates and officers and
directors of AmPaM having terms substantially similar to those set forth in
Section 17 hereof.
6.14 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. AmPaM was formed in
June 1998 and has conducted no material business since the date of its inception
except for activities related to the transaction contemplated by this Agreement,
the Other Agreements and the Private Placement Memorandum. Except as described
in the Private Placement Memorandum, as of the date of this Agreement, AmPaM
does not own any real property or any material personal property and is not a
party to any other material agreement other than this Agreement, the Other
Agreements and the agreements contemplated hereby and thereby.
6.15 RELATIONS WITH GOVERNMENTS. Neither AmPaM nor any of its
directors, officers or Affiliates has given or offered anything of value to any
government official, political party or candidate for government office, nor has
AmPaM, any of its directors, officers or Affiliates of any of them otherwise
taken any action, which would cause AmPaM to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any law of similar effect.
6.16 DISCLOSURE. The Private Placement Memorandum delivered to the
Company and the Stockholders does not as of the date hereof contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing does not apply to
statements contained in or omitted from any of such documents made or omitted in
reliance upon, and in conformity with, information furnished to AmPaM by the
Company or the Stockholders in writing specifically for inclusion in the Private
Placement Memorandum.
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6.17 OTHER AGREEMENTS. The Other Agreements have been duly authorized,
executed and delivered by AmPaM and constitute the legal, valid and binding
obligation of AmPaM enforceable against AmPaM in accordance with their
respective terms. The terms and conditions of the Other Agreements (excluding
the terms relating to the consideration payable by AmPaM thereunder) are
identical in all material respects to the terms and conditions in this
Agreement.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE; TRANSFER OF REAL ESTATE.
(a) Between the date of this Agreement and the Closing Date, the
Company will afford to the officers and authorized representatives of AmPaM
reasonable access during normal business hours to all of the Company's sites,
properties, books and records and will furnish AmPaM with such additional
financial and operating data and other information as to the business and
properties of the Company as AmPaM may from time to time reasonably request. The
Company will cooperate with AmPaM, its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by this Agreement. AmPaM,
the Stockholders and the Company will treat all information obtained in
connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect to the Company as confidential
in accordance with the provisions of Section 14 hereof.
(b) Between the date of this Agreement and the Closing Date, AmPaM will
afford to the officers and authorized representatives of the Company access to
all of AmPaM's sites, properties, books and records and will furnish the Company
with such additional financial and operating data and other information as to
the business and properties of AmPaM and the Other Founding Companies as the
Company may from time to time reasonably request. AmPaM will cooperate with the
Company, its representatives, auditors and counsel in the preparation of any
documents or other material which may be required in connection with any
documents or materials required by this Agreement. The Company will cause all
information obtained pursuant to this Section 7.1(b) or obtained in connection
with the negotiation and performance of this Agreement to be treated as
confidential in accordance with the provisions of Section 14 hereof.
(c) Except as set forth on Schedule 7.1, any real property owned by the
Company will be sold or distributed by the Company on terms mutually acceptable
to AmPaM and the Company and leased back by the Company on terms no less
favorable to the Company than those available from an unaffiliated party and
otherwise reasonably acceptable to AmPaM at or prior to the Closing Date.
(d) The Stockholder shall cause the guarantees referred to in Schedule
5.10 to be fully and unconditionally released by the beneficiaries thereof
within 60 days following the Closing Date.
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7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Closing Date, the Company will, except as set forth on
Schedule 7.2:
(i) carry on its businesses in the Ordinary Course of Business
and not introduce any material new method of management, operation or
accounting;
(ii) use all commercially reasonable efforts to maintain its
properties and facilities, including those held under leases, in as
good working order and condition as at present, ordinary wear and tear,
depreciation and insured losses excepted;
(iii) perform in all material respects all of its obligations
under all Material Documents relating to or affecting its respective
assets, properties or rights;
(iv) use its commercially reasonable efforts to keep in full
force and effect present insurance policies or other comparable
insurance coverage;
(v) use its commercially reasonable efforts to maintain and
preserve its business organization intact, retain its respective
present key employees and maintain its relationships with suppliers,
customers and others having business relations with the Company;
(vi) use its commercially reasonable efforts to maintain
compliance with all material permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory
agencies and similar governmental authorities;
(vii) maintain present debt and lease instruments in
accordance with their terms and not enter into new or amended debt or
lease instruments without the knowledge and consent of AmPaM (which
consent shall not be unreasonably withheld), provided that debt and/or
lease instruments may be replaced without the consent of AmPaM if such
replacement instruments are on terms at least as favorable to the
Company as the instruments being replaced;
(viii) maintain or reduce present salaries and commission
levels for all officers, directors, employees and agents except for
ordinary and customary bonus and salary increases for employees in
accordance with past practices; and
(ix) use commercially reasonable efforts to cause the actual
amount of its Current Assets (as defined in Annex I hereto) to be not
less than 150% of the actual amount of its Current Liabilities (as
defined in Annex I hereto).
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7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between
the date hereof and the Closing Date, the Company will not, without prior
written consent of AmPaM:
(i) make any change in its Charter Documents;
(ii) issue any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of any kind
other than in connection with the exercise of options or warrants
listed in Schedule 5.4;
(iii) except as permitted pursuant to the terms and conditions
for distributions described in Annex I, declare or pay any dividend, or
make any distribution in respect of its stock whether now or hereafter
outstanding, or purchase, redeem or otherwise acquire or retire for
value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree
to incur any liability or make any capital expenditures, except if it
is in the Ordinary Course of Business or involves an amount not in
excess of three percent (3%) of the Company's gross revenues for fiscal
1997;
(v) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired, except (1) with respect to purchase money
liens incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of three percent (3%) of the Company's
gross revenues for fiscal 1997 necessary or desirable for the conduct
of the businesses of the Company, (2) (A) liens for taxes either not
yet due or being contested in good faith and by appropriate proceedings
(and for which contested taxes adequate reserves have been established
and are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the Ordinary
Course of Business (the liens set forth in clause (2) being referred to
herein as "Statutory Liens"), or (3) liens set forth on Schedule 5.10
and/or Schedule 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of
any property or equipment except in the Ordinary Course of Business and
other than distributions of real estate and other assets as permitted
in this Agreement (including Annex I hereto);
(vii) negotiate for the acquisition of any business or the
start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate
with or into any other corporation;
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(ix) waive any material rights or claims of the Company,
provided that the Company may negotiate and adjust bills and accounts
in the course of good faith disputes with customers in a manner
consistent with past practice;
(x) amend or terminate any Material Document except for the
termination of a Material Document in accordance with its terms without
any action on the part of the Company; or
(xi) enter into any other material transaction outside the
Ordinary Course of Business or any transaction prohibited hereunder.
7.4 NO SHOP. None of the Stockholders, the Company, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than AmPaM
or its authorized agents relating to, any acquisition or purchase of
all or a material amount of the assets of, or any equity interest in,
the Company or a merger, consolidation or business combination of the
Company.
7.5 AGREEMENTS. Except as disclosed on Schedule 7.5(a), the
Stockholders and the Company shall terminate (i) any stockholders agreements,
voting agreements, voting trusts, agreements providing for the grant by the
Company of any options, warrants and employment agreements between the Company
and any employee listed on Schedule 8.11 hereto and (ii) except as otherwise
provided in this Agreement, any existing agreement between the Company and any
Stockholder, on or prior to the Closing Date provided that nothing herein shall
prohibit or prevent the Company from paying (either prior to or on the Closing
Date) notes or other obligations from the Company to the Stockholders described
in Schedule 7.5(b) in accordance with the terms thereof.
7.6 NOTIFICATION OF CERTAIN MATTERS. Each Stockholder and the Company
shall give prompt notice to AmPaM upon obtaining knowledge of (i) the occurrence
or non-occurrence of any event the occurrence or nonoccurrence of which would be
likely to cause any representation or warranty of the Company or such
Stockholder contained herein to be untrue or inaccurate in any material respect
at or prior to the Closing and (ii) any material failure of such Stockholder or
the Company to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such person hereunder. AmPaM shall give prompt
notice to the Company of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of AmPaM contained herein to be untrue or inaccurate
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in any material respect at or prior to the Closing, (ii) any material failure of
AmPaM to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; (iii) any termination of any Other
Agreement for any reason; and (iv) the issuance by the SEC or any state
securities regulatory authority of any issuance of or threatened issuance of any
order challenging the availability of an exemption from registration or
suspending the qualification of any securities described in the Private
Placement Memorandum for sale in any jurisdiction. However, subject to the
provisions of Section 7.7, such notification shall not relieve either the
Company or such Stockholder of their respective obligations under this
Agreement. The delivery of any notice pursuant to this Section 7.6 shall not be
deemed to (i) modify the representations or warranties hereunder of the party
delivering such notice, which modification may only be made pursuant to Section
7.7, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
7.7 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until 24 hours prior to the
Closing Date to notify AmPaM with respect to any matter (i) hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules or (ii) which may
have been omitted from the Schedules previously provided by such party.
Notwithstanding the foregoing sentence, no amendment or supplement to a Schedule
prepared by the Company may be made unless AmPaM consents to such amendment or
supplement; and provided further, that no amendment or supplement to a Schedule
prepared by AmPaM may be made unless the Stockholders consent to such amendment
or supplement. For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Sections 8.1 and
9.1 have been fulfilled, the Schedules hereto, as amended or supplemented with
the consent of AmPaM or the Stockholders, as the case may be, as provided above,
shall be deemed to be the Schedules to this Agreement.
7.8 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or
appropriate to carry out the transactions contemplated hereby and to cause the
conditions to the Closing Date to be satisfied as promptly as practicable.
7.9 AUTHORIZED CAPITAL. Prior to the Closing Date, AmPaM shall maintain
its authorized capital stock as set forth in the Private Placement Memorandum.
7.10 COMPLIANCE WITH THE HART-SCOTT ACT. All parties to this Agreement
hereby recognize that one or more filings under the Hart-Scott Act may be
required in connection with the transactions contemplated herein. If it is
determined by the parties to this Agreement that filings under the Hart-Scott
Act are required, then: (i) each of the parties hereto agrees to cooperate and
use its best efforts to comply with the Hart-Scott Act and (ii) such compliance
by the Stockholders and the parties agree to cooperate and use their best
efforts to cause all filings required under the Hart- Scott Act to be made. If
filings under the Hart-Scott Act are required, the costs and expenses thereof
(including filing fees) shall be borne by AmPaM.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of the Stockholders and the Company with respect to
actions to be taken on the Closing Date are subject to the satisfaction or
waiver on or prior to the Closing Date of all of the following conditions. As of
the Closing Date, if any such applicable conditions have not been satisfied, any
one or more of the Stockholders who would be entitled to receive a majority of
the Aggregate Consideration (as defined herein) received by all Stockholders if
the transactions contemplated hereby were consummated shall have the right to
waive any condition not so satisfied. Any act or action of the Stockholders in
consummating the Closing or delivering the certificates representing Company
Stock as of the Closing Date shall constitute a waiver of any conditions not so
satisfied. However, no such waiver shall be deemed to affect the survival of the
representations and warranties of AmPaM contained in Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of AmPaM contained in Section 6 shall be true and
correct as of the Closing Date as though such representations and warranties had
been made as of that time; all of the terms, covenants and conditions of this
Agreement to be complied with and performed by AmPaM on or before the Closing
Date shall have been duly complied with and performed in all material respects;
and certificates to the foregoing effect dated the Closing Date and signed by
the President or any Vice President of AmPaM shall have been delivered to the
Stockholders.
8.2 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of the Company or the Stockholders and that are
required to carry out this Agreement or incidental hereto shall be reasonably
satisfactory to the Company, the Stockholders and their counsel.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the purchase and sale of the Company Stock.
8.4 OPINION OF COUNSEL. The Company shall have received opinions from
counsel for AmPaM, dated the Closing Date, addressed to the Company and the
Stockholders in the form annexed hereto as Annex III.
8.5 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule 6.9
shall have been obtained; and no action or proceeding shall have been instituted
or threatened to restrain or prohibit the purchase and sale of the Company Stock
and no governmental agency or body shall have taken any other action or made any
request of Company as a result of which Company deems it inadvisable to proceed
with the transactions hereunder.
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8.6 GOOD STANDING CERTIFICATES. AmPaM shall have delivered to the
Company a certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Delaware Secretary of State and in each state
in which AmPaM is authorized to do business, showing that AmPaM is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for AmPaM for all periods prior to the Closing have
been filed and paid.
8.7 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred which would constitute a Material Adverse Change with respect to AmPaM
from the date of the Private Placement Memorandum.
8.8 SECRETARY'S CERTIFICATE. The Company shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of AmPaM, certifying the truth and correctness of attached copies of AmPaM's
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and, if required,
the stockholders of AmPaM approving AmPaM's entering into this Agreement and the
Other Agreements and the consummation of the transactions contemplated hereby
and thereby.
8.9 TAX MATTERS. The Stockholders shall have received an opinion of
Andrews & Kurth L.L.P., in substantially the form of Annex IV hereto, that the
AmPaM Plan of Organization will qualify as a tax-free transfer of property under
Section 351 of the Code and that the Stockholders will not recognize gain to the
extent the Stockholders exchange Company Stock for AmPaM Stock (but not cash or
other property) pursuant to this Agreement in connection with the AmPaM Plan of
Organization.
8.10 OTHER FOUNDING COMPANIES. The transactions contemplated by the
Other Agreements are consummated simultaneously with the consummation of the
transactions contemplated by this Agreement.
8.11 COMPANY RELEASE OF STOCKHOLDERS. The Company shall have delivered
to the Stockholders an instrument dated the Closing Date, in form reasonably
satisfactory to AmPaM and the Stockholders, which shall be effective only upon
the occurrence of the Closing Date, releasing the Stockholders from (i) any and
all claims of the Company against the Stockholders, known and unknown, and (ii)
obligations of the Stockholders to the Company, except for (x) items
specifically identified on Schedule 5.10(a) and Schedule 5.15(b) as being claims
of or obligations to the Company and (y) continuing obligations to the Company
relating to their employment by the Company pursuant to any employment agreement
entered into pursuant to Section 8.11 hereof.
8.12 STERLING CITY CAPITAL TRANSFER RESTRICTIONS. Sterling City
Capital, LLC and each of its Affiliates which owns AmPaM Stock shall have
entered into an agreement with AmPaM containing substantially the same terms and
conditions as are contained in Section 15 and Section 17.
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8.13 ELECTION OF CHIEF EXECUTIVE OFFICER. AmPaM shall have taken all
corporate action necessary to elect Robert A. Christianson as Chief Executive
Officer of AmPaM effective immediately following the Closing Date.
8.14 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto as
payable to the Stockholders upon the Closing and (ii) the aggregate cash amounts
specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF AMPAM
The obligations of AmPaM with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. As of the Closing Date, if any
such conditions have not been satisfied, AmPaM shall have the right to terminate
this Agreement, or waive any such condition, but no such waiver shall be deemed
to affect the survival of the representations and warranties contained in
Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE AND OBLIGATIONS. All
the representations and warranties of the Stockholders and the Company contained
in this Agreement shall be true and correct as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date; all of the terms, covenants and conditions of this Agreement to be
complied with or performed by the Stockholders and the Company on or before the
Closing Date shall have been duly performed or complied with in all material
respects; and the Stockholders shall have delivered to AmPaM certificates dated
the Closing Date and signed by them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the purchase and sale of the Company Stock.
9.3 SECRETARY'S CERTIFICATE. AmPaM shall have received a certificate,
dated the Closing Date and signed by the secretary of the Company, certifying
the truth and correctness of attached copies of the Company's Articles or
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and the
Stockholders approving the execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby.
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9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the Company which would constitute a Material Adverse
Effect, and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the Company
to conduct its business.
9.5 STOCKHOLDERS' RELEASE. The Stockholders shall have delivered to
AmPaM an instrument dated the Closing Date which shall be effective only upon
the occurrence of the Closing releasing the Company and AmPaM from (i) any and
all claims of the Stockholders against the Company and AmPaM and (ii)
obligations of the Company and AmPaM to the Stockholders, except for (A) items
specifically identified on Schedule 5.31 as being claims of or obligations to
the Stockholders, (B) continuing obligations to Stockholders relating to their
employment by the Company pursuant to employment agreements entered into as
specified in Section 8.11 hereof, (C) obligations arising under this Agreement
or the transactions contemplated hereby and (D) claims of Stockholders against
the Company for unreimbursed business expenses incurred by the Stockholders on
behalf of the Company (other than expenses related to the transactions
contemplated by this Agreement) prior to the Closing Date or unreimbursed
medical expenses of the Stockholders incurred prior to the Closing Date which
are covered by the Company's existing health insurance coverage. In the event
that the Closing Date does not occur, then the release instrument referenced
herein shall be void and of no further force or effect.
9.6 SATISFACTION. All actions, proceedings, instruments and documents
that are not within the control of AmPaM and that are required to carry out the
transactions contemplated by this Agreement or incidental hereto shall have been
reasonably approved by counsel to AmPaM.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the Company and the Stockholders
(and between the Company and entities controlled by the Stockholders) specified
on Schedule 5.31 shall have been terminated effective prior to or as of the
Closing Date without any payment being made by the Company other than payments
made for services rendered, materials provided or other benefits provided to the
Company prior to the Closing Date pursuant to the terms of such agreements as in
effect as of the date of this Agreement.
9.8 OPINION OF COUNSEL. AmPaM shall have received opinions from counsel
to the Company and the Stockholders, dated the Closing Date, substantially in
the form annexed hereto as Annex V.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; any waiting
periods under the Hart-Scott Act, if applicable, shall have expired or been
terminated; all consents and approvals of third parties listed on Schedule
5.23(b)(2) shall have been obtained; and no action or proceeding shall have been
instituted or threatened to restrain or prohibit the purchase and sale of the
Company Stock and no
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governmental agency or body shall have taken any other action or made any
request of AmPaM as a result of which AmPaM deems it inadvisable to proceed with
the transactions hereunder.
9.10 GOOD STANDING CERTIFICATES. The Company shall have delivered to
AmPaM a certificate, dated as of a date no earlier than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by AmPaM, in each state in
which the Company is authorized to do business, showing the Company is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the Company for all periods prior to the
Closing have been filed and paid.
9.11 FUNDING AVAILABILITY. AmPaM shall have entered into binding
agreements with financial institutions, lenders or investors that provide AmPaM
with sufficient funds to pay (i) the cash amounts specified in Annex I hereto as
payable to the Stockholders upon the Closing and (ii) the aggregate cash amounts
specified in Annex I to each of the Other Agreements as payable to the
stockholders of the Other Founding Companies upon the Closing; and all
conditions to the funding of the cash amounts necessary to make such payments
specified in the agreements related to such financing arrangements, other than
the closing of the transactions contemplated by this Agreement and the Other
Agreements, shall have been satisfied as of the Closing Date.
9.12 FIRPTA CERTIFICATE. Each Stockholder shall have delivered to AmPaM
a certificate to the effect that he is not a foreign person pursuant to Section
1.1445-2(b) of the Treasury regulations.
9.13 RESIGNATIONS OF DIRECTORS AND OFFICERS. Any directors of the
Company, other than those identified on Schedule 2.1, shall have resigned as
directors of the Company. Any officers of the Company, other than those
identified on Schedule 2.2, shall have resigned as officers of the Company.
10. COVENANTS OF AMPAM AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. AmPaM
shall use reasonable efforts to have the Stockholders released from any and all
guarantees of the Company's indebtedness, including bond obligations, identified
on Schedule 10.1. Prior to obtaining the release of such guarantees, AmPaM shall
provide its guarantee of such indebtedness to the lenders thereof. In the event
that AmPaM cannot obtain such releases from the lenders of any such guaranteed
indebtedness identified on Schedule 10.1 on or prior to 90 days subsequent to
the Closing Date, AmPaM shall promptly pay off or otherwise refinance or retire
such indebtedness such that the Stockholders' personal liability shall be
released. AmPaM will indemnify the Stockholders against any loss or damage
suffered as a result of the personal guarantees.
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10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement, after the Closing Date, AmPaM shall not and
shall not permit any of its Subsidiaries to undertake any act that would
jeopardize the tax-free status of the exchange of Company Stock for AmPaM Stock
(but not cash or other property), including without limitation:
(a) the retirement or reacquisition, directly or indirectly,
of all or part of the AmPaM Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the
benefit of the Stockholders other than as described in the Private Placement
Memorandum or as described in this Agreement.
10.3 PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES.
(a) The Company, if possible, or otherwise the Stockholders
shall file or cause to be filed all income Tax Returns (federal, state, local or
otherwise) of any Acquired Party for all taxable periods that end on or before
the Closing Date, and shall permit AmPaM to review all such Tax Returns prior to
such filings. Unless the Company is a C corporation, the Stockholders shall pay
or cause to be paid all income Tax liabilities (in excess of all amounts already
paid with respect thereto or properly accrued or reserved with respect thereto
on the Financial Statements) with respect to the Company's operations for all
periods through and including the Closing Date.
(b) AmPaM shall file or cause to be filed all separate Returns
of, or that include, any Acquired Party for all taxable periods ending after the
Closing Date.
(c) Unless required by applicable law, regulations or
government proceedings, AmPaM shall not take any action, including any amendment
of a Tax Return of any Acquired Party, if such action would result in additional
Tax liabilities payable by any of the Stockholders for periods ending on or
prior to the Closing Date.
(d) Each party hereto shall, and shall cause its subsidiaries
and Affiliates to, provide to each of the other parties hereto such cooperation
and information as any of them reasonably may request in filing any Return,
amended Return or claim for refund, determining a liability for Taxes or a right
to refund of Taxes or in conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of all
relevant portions of relevant Returns, together with relevant accompanying
schedules and relevant work papers, relevant documents relating to rulings or
other determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which such party may possess. Each party
shall make its employees reasonably available on a mutually convenient basis at
its cost to provide explanation of any documents or information so provided.
Subject to the preceding sentence, each party required to file Returns pursuant
to this Agreement shall bear all costs of filing such Returns.
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(e) Each of the Company, AmPaM and each Stockholder shall
comply with the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as a tax-free
contribution under Section 351(a) of the Code subject to gain, if any,
recognized on the receipt of cash or other property under Section 351(b) of the
Code.
10.4 DIRECTORS. The persons named in the Private Placement Memorandum
shall be appointed as directors and elected as officers of AmPaM, as and to the
extent set forth in the Private Placement Memorandum, promptly following the
Closing Date; provided, however, that the parties hereto acknowledge that if the
Company consummates an IPO, the persons who will serve as directors and
executive officers of AmPaM will be adjusted as appropriate for a publicly
traded entity, with any such changes being subject to the approval of the
majority of the Board of Directors of AmPaM.
10.5 LEGAL OPINIONS. If required by the lenders pursuant to the terms
of any agreements related to financing of the cash amounts referred to in
Section 9.11 hereof, the Company shall cause its counsel to deliver to such
lenders, at the Closing, an opinion of counsel in substantially the form
attached hereto as Annex V.
11. INDEMNIFICATION
The Stockholders and AmPaM each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS.
(a) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement until the applicable Expiration Date (as defined in
the introductory paragraph to Section 5(A)), provided that for purposes of
clause (iii) below, the applicable Expiration Date shall be the date on which
the applicable statute of limitations expires), from and against all claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by AmPaM as a result of
or arising from (i) any breach of the representations and warranties of the
Company set forth herein or on the schedules attached hereto or certificates
delivered pursuant to this Agreement, (ii) any breach of any covenant or
agreement on the part of the Company under this Agreement, or (iii) any
liability under the 1933 Act or any Federal or state securities law or
regulation, at common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact relating solely to the
Company which was based upon information provided to AmPaM or its counsel in
writing by the Company specifically for inclusion in the Private Placement
Memorandum and is contained in the Private Placement Memorandum, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
Company required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that no Stockholder shall be liable
for any
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indemnification obligation pursuant to this Section 11.1 in excess of such
Stockholder's pro rata share thereof determined by reference to the aggregate
value of the Base Cash Amount (as defined in Annex I of this Agreement), the
principal amount of AmPaM Notes and the shares of AmPaM Stock (valued at a price
of $13.00 per share) received by such Stockholder pursuant to Section I.A. of
Annex I hereto (without giving effect to the adjustments provided in Sections
I.B. and I.C. thereof) (giving effect to the value of such AmPaM Stock and
without giving effect to such adjustments, collectively, the "Aggregate
Consideration") such Stockholder would receive pursuant to Section I of Annex I
of this Agreement if the transactions contemplated hereby were consummated in
relation to the total Aggregate Consideration all Stockholders would receive
pursuant to Section I of Annex I of this Agreement if the transactions
contemplated hereby were consummated.
(b) Each Stockholder covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless AmPaM at all times, from and after
the date of this Agreement, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) incurred by AmPaM as a result of or arising from (i)
any breach of the representations and warranties of such Stockholder set forth
in Section 5(B) hereof, (ii) any breach of any covenant or agreement on the part
of such Stockholder under this Agreement, (iii) the guarantees of the Company
listed on Schedule 5.10 or (iv) any liability under the 1933 Act or any Federal
or state securities law or regulation, at common law or otherwise, arising out
of or based upon any untrue statement or alleged untrue statement of a material
fact relating solely to such Stockholder which was based upon information
provided to AmPaM or its counsel in writing by such Stockholder specifically for
inclusion in the Private Placement Memorandum and is contained in the Private
Placement Memorandum, or any amendment thereof or supplement thereto, or arising
out of or based upon any omission or alleged omission to state therein a
material fact relating solely to such Stockholder required to be stated therein
or necessary to make the statements therein in light of the circumstances in
which such statements were made not misleading.
(c) AmPaM acknowledges and agrees that other than the representations
and warranties of the Company or the Stockholders specifically contained in this
Agreement, there are no representations or warranties of the Company or the
Stockholders, either express or implied, with respect to the transactions
contemplated by this Agreement, the Company or its assets, liabilities and
business.
11.2 INDEMNIFICATION BY AmPaM. AmPaM covenants and agrees that it will
indemnify, defend, protect and hold harmless the Company and the Stockholders at
all times from and after the date of this Agreement until the applicable
Expiration Date (as defined in the introductory paragraph of Section 6, provided
that for purposes of clause (iii) below, the applicable Expiration Date shall be
the date on which the applicable statute of limitations expires), from and
against all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
Company or the Stockholders as a result of or arising from (i) any breach by
AmPaM of its representations and warranties set forth herein or on the schedules
attached
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hereto or certificates delivered pursuant to this Agreement, (ii) any breach of
any agreement on the part of AmPaM under this Agreement; or (iii) any liability
under the 1933 Act or any Federal or state securities law or regulation, at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Private Placement
Memorandum, or any amendment thereof or supplement thereto, or arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except to the extent such is based upon an untrue statement or
alleged untrue statement, or omission or alleged omission, made therein in
reliance upon, and in conformity with, the representations and warranties of the
Company or the Stockholders specifically contained in this Agreement or other
information furnished to AmPaM by the Company or the Stockholders in writing
specifically for inclusion therein.
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel reasonably
satisfactory to the Indemnified Party, any such matter so long as the
Indemnifying Party pursues the same in good faith and diligently, provided that
the Indemnifying Party shall not settle any criminal proceeding without the
written consent of the Indemnified Party. If the Indemnifying Party undertakes
to defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by Indemnifying Party, provided that if counsel to
the Indemnifying Party shall have a conflict of interest or a conflict of
interest is reasonably likely to arise that prevents counsel for the
Indemnifying Party from representing such Indemnified Party, Indemnified Party
shall have the right to participate in such matter through counsel of its own
choosing and Indemnifying Party will reimburse the Indemnified Party for the
reasonable expenses of its counsel. After the Indemnifying Party has notified
the Indemnified Party of its intention to undertake to defend or settle any such
asserted liability, and for so long as the Indemnifying Party diligently pursues
such defense, the Indemnifying Party shall not be liable for any additional
legal expenses incurred by the Indemnified Party in connection with any defense
or settlement of such asserted liability, except (i) as set forth in the
preceding sentence and (ii) to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the
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Indemnifying Party's liability under this Section with respect to such Third
Person claim shall be limited to the amount so offered in settlement by said
Third Person. Upon agreement as to such settlement between said Third Person and
the Indemnifying Party, the Indemnifying Party shall, in exchange for a complete
release from the Indemnified Party, promptly pay to the Indemnified Party the
amount agreed to in such settlement. If the Indemnifying Party does not
undertake to defend such matter to which the Indemnified Party is entitled to
indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense through counsel of its choice, at
the cost and expense of the Indemnifying Party, and the Indemnified Party may
settle such matter, and the Indemnifying Party shall pay the Indemnified Party
for the settlement amount and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith, provided, however, that under no
circumstances shall the Indemnified Party settle any Third Person claim without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. With respect to any account, note or other
receivable as to which the Stockholders have paid in full any indemnification
obligation pursuant to this Section 11 as a result of a breach of the
representation and warranty made pursuant to Section 5.11 or as to which a claim
in respect thereof has been asserted pursuant to this Section 11 that has been
applied against the Indemnification Threshold with respect to the Stockholders
as a result of a breach of the representation and warranty made pursuant to
Section 5.11, AmPaM shall cause the Company to assign such account, note or
other receivable to the Stockholders. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section
11 shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party to this Agreement with respect to any
provision of this Agreement, provided that, nothing herein shall be construed to
limit the right of a party, in a proper case, to seek injunctive relief for a
breach of this Agreement. AmPaM hereby waives, to the fullest extent permitted
under applicable law, any and all other rights, claims and causes of action,
known or unknown, it or any indemnified person may have against the Company or
any Stockholder relating to this Agreement or the transactions pursuant to this
Agreement arising under or based upon any Federal, state, local or foreign
statute, law, rule, regulation or otherwise. Any indemnity payment under this
Section 11 shall be treated as an adjustment to the exchange consideration for
Tax purposes unless a final determination (which shall include the execution of
a Form 870-AD or successor form) with respect to the Indemnified Party or any of
its Affiliate causes any such payment not to be treated as an adjustment to the
exchange consideration for U.S. Federal income Tax purposes.
11.5 LIMITATIONS ON INDEMNIFICATION. (a) AmPaM shall not assert any
claim for indemnification under this Section 11 against the Stockholders until
such time as, and solely to the extent that, the aggregate of all claims which
AmPaM may have against the Stockholders shall exceed the greater of (a) 3.0% of
the sum of (i) the cash paid to the Stockholders pursuant to Section 1.2 plus
(ii) the value of the AmPaM Stock delivered to the Stockholders pursuant to
Section 1.2
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(calculated as provided in this Section 11.5) plus (iii) the principal amount of
the AmPaM Notes delivered to the Stockholders pursuant to Section 1.2, or (b)
$50,000 (the "Indemnification Threshold"). Stockholders shall not assert any
claim for indemnification hereunder against AmPaM until such time as, and solely
to the extent that, the aggregate of all claims which Stockholders may have
against AmPaM shall exceed $50,000; provided, however, that this sentence shall
not be applicable with respect of any failure by AmPaM to (i) deliver the
consideration specified in Annex I hereto on the Closing Date upon the
satisfaction, or waiver by AmPaM, of all conditions to the occurrence of the
Closing Date specified in Section 9 or (ii) comply with its obligations pursuant
to Section 10.1. After the $50,000 threshold for AmPaM (subject to the proviso
in the preceding sentence) or the Indemnification Threshold for a Stockholder
has been met, all claims must be made in $10,000 increments, which claims may be
cumulated in order to meet such $10,000 thresholds. For purposes of this
paragraph, the AmPaM Stock delivered to the Stockholders shall be valued at
$13.00 per share.
(b) No person shall be entitled to indemnification under this Section
11 if and to the extent that such person's claim for indemnification is directly
or indirectly related to a breach by such person of any representation,
warranty, covenant or other agreement set forth in this Agreement. No claim for
indemnification against the Stockholders shall limit, diminish or change any
obligation of AmPaM pursuant to Section 10.1 hereof.
(c) Notwithstanding any other term of this Agreement, no Stockholder
shall be liable under this Section 11 for an amount which exceeds eighty-five
percent (85%) of the amount of proceeds received by such Stockholder (valued as
of the Closing Date) in connection with the purchase and sale of the Company
Stock. For purposes of this paragraph, the AmPaM Stock shall be valued at $13.00
per share.
(d) A Stockholder may pay any indemnification obligation under Section
11 by means of the payment of cash or a combination of the payment of cash, the
forgiveness of amounts owed pursuant to the AmPaM Notes and the delivery to
AmPaM of shares of AmPaM Stock; provided that the percentage of the
indemnification obligation satisfied by means of the delivery of shares of AmPaM
Stock does not exceed the percentage of AmPaM Stock comprising the total
consideration paid to such Stockholder by AmPaM to such Stockholder pursuant to
Annex I. For the purpose of crediting Stockholders for payments made to AmPaM by
means of delivery of shares of AmPaM Stock, the AmPaM Stock shall be valued at
$13.00 per share.
(e) In determining the amount of any loss, liability or expense for
which any party is entitled to indemnification under this Agreement, the gross
amount thereof will be reduced by any correlative insurance proceeds or other
third party indemnity or reimbursement proceeds realized or to be realized by
such party (or, in the case of AmPaM, by AmPaM, the Company or any subsidiary of
AmPaM or the Company) and such correlative insurance proceeds or other third
party indemnity or reimbursement proceeds shall be net of any insurance premium
or other incremental cost or expense owed or payable to any third party which
becomes due as a result of such claim. AmPaM
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shall use commercially reasonable efforts to pursue any available insurance
coverage or other rights of indemnity or reimbursement from third parties with
respect to any such loss, liability or expense.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date solely:
(i) by mutual consent of AmPaM and the Stockholders;
(ii) by the Stockholders, if the transactions contemplated by
this Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by the Company
or the Stockholders prior to or on the Closing Date;
(iii) by AmPaM, if the transactions contemplated by this
Agreement to take place at the Closing Date shall not have been
consummated by June 30, 1999, unless the failure of such transactions
to be consummated is due to a breach of this Agreement by AmPaM prior
to or on the Closing Date;
(iv) by the Stockholders, if a material breach or default
shall be made by AmPaM in the observance or in the due and timely
performance of any of the covenants or agreements contained herein
relating to AmPaM, and the curing of such default shall not have been
made (or in the reasonable judgment of such Stockholders cannot be
made) on or before the Closing Date;
(v) by AmPaM, if a material breach or default shall be made by
the Company or the Stockholders in the observance or in the due and
timely performance of any of the covenants or agreements contained
herein relating to the Company or the Stockholders, and the curing of
such default shall not have been made (or in the reasonable judgment of
AmPaM cannot be made) on or before the Closing Date;
(vi) by the Stockholders, if the conditions set forth in
Section 8 hereof have not been satisfied or waived as of the Closing
Date; or
(vii) by AmPaM, if the conditions set forth in Section 9
hereof have not been satisfied or waived as of the Closing Date.
12.2 PROCEDURE AND EFFECT OF TERMINATION. A determination to terminate
this Agreement by AmPaM pursuant to Section 12.1 shall be valid and effective
only if a written notice of termination, accompanied by a certified copy of
resolutions of the board of directors of AmPaM that evidence the authorization
of the officer of AmPaM to deliver a written notice of termination of this
Agreement pursuant to Section 12.1, is given to the Stockholders in the manner
specified for notices
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in this Agreement. A determination to terminate this Agreement by the
Stockholders pursuant to Section 12.1 shall be valid and effective only if a
written notice of termination, signed by Stockholders who would be entitled to
receive a majority of the shares of AmPaM Stock specified in Section I of Annex
I to this Agreement if the transactions contemplated hereby were consummated, is
given to AmPaM in the manner specified for notices in this Agreement. Upon the
giving of notice of termination of this Agreement pursuant to Section 12.1 as
specified in the preceding sentence, this Agreement shall terminate, and the
transactions contemplated hereby shall be abandoned, without further action by
any of the parties hereto. Immediately upon any such termination, AmPaM shall
deliver written notice of such termination to the Other Founding Companies. If
this Agreement is terminated as provided in this Section 12, no party hereto
shall have any liability or further obligation hereunder to any other party,
except as provided in Section 14 and Section 18.6, provided, that, the
termination of this Agreement will in no way limit any obligation or liability
of any party based on or arising from a breach or default by such party with
respect to any of its representations, warranties, covenants or agreements
contained in this Agreement including, but not limited to, legal and audit costs
and out of pocket expenses that occurred prior to such termination.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The Stockholders will not, without the
prior written consent of AmPaM, for a period of two (2) years following the
Closing Date, for any reason whatsoever, directly or indirectly, for themselves
or on behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, whether paid or unpaid, in any plumbing, piping,
mechanical, heating, ventilation or air conditioning contracting,
installation or services business or operation, whether for
residential, commercial, industrial or governmental customers, or any
ancillary contracting, installation or services business directly
related thereto (such business and operations referred to herein as the
"Plumbing and Mechanical Business"), within 100 miles of where the
Company or any of its subsidiaries conducted business within two (2)
years prior to the Closing Date (the "Territory");
(ii) call upon any person who is, at the Closing Date, within
the Territory, an employee of AmPaM or any subsidiary thereof for the
purpose or with the intent of enticing such employee away from or out
of the employ of AmPaM or any subsidiary thereof;
(iii) call upon any person or entity which is, at the Closing
Date, or which has been within three (3) years prior to the Closing
Date, a customer of AmPaM or any subsidiary thereof, of the Company or
of any of the Other Founding Companies for the purpose of soliciting
customers, orders or contracts for any Plumbing and Mechanical Business
in direct competition with AmPaM within the Territory;
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(iv) call upon any prospective acquisition candidate, on any
Stockholder's own behalf or on behalf of any competitor in the Plumbing
and Mechanical Business, which candidate, to the actual knowledge of
such Stockholder after due inquiry, was called upon by AmPaM or any
subsidiary thereof or for which, to the actual knowledge of such
Stockholder after due inquiry, AmPaM or any subsidiary thereof made an
acquisition analysis, for the purpose of acquiring such entity; or
(v) disclose to any person, firm, partnership, corporation or
business the names or identities of any person, firm, partnership,
corporation or business which has been a customer of the Company or any
of its subsidiaries within the two (2) years prior to the Closing Date
for any reason or purpose whatsoever except to the extent that the
Company has in the past disclosed such information to the public for
valid business reasons; or
(vi) testify as an expert witness in matters related to the
Plumbing and Mechanical Business for an adverse party to AmPaM, the
Company or any Other Founding Companies in litigation.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Stockholder from acquiring as a passive investment (i) not more
than one percent (1%) of the capital stock of a competing business whose stock
is traded on a national securities exchange, the NASDAQ Stock Market or
over-the-counter, or (ii) not more than five percent (5%) of the capital stock
of a competing business whose stock is not publicly traded if the Board of
Directors of AmPaM consents to such acquisition.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to
AmPaM as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to AmPaM for which it
would have no other adequate remedy, each Stockholder agrees that the foregoing
covenant may be enforced by AmPaM in the event of breach by such Stockholder, by
injunctions and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
Stockholders in light of the activities and business of AmPaM and the
subsidiaries thereof on the date of the execution of this Agreement and the
current plans of AmPaM as described in the Private Placement Memorandum.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
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13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any Stockholder
against AmPaM or any subsidiary thereof, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by AmPaM of such
covenants. It is specifically agreed that the period of two (2) years stated at
the beginning of this Section 13, during which the agreements and covenants of
each Stockholder made in this Section 13 shall be effective, shall be computed
by excluding from such computation any time during which such Stockholder is
found to be in violation of any provision of this Section 13 as determined by
any of (i) a written agreement to such effect executed and delivered by AmPaM
and such Stockholder, (ii) a determination by an arbitration panel pursuant to
an arbitration conducted pursuant to Section 18.16 hereof or (iii) a
non-appealable judgment of a court of competent jurisdiction. The covenants
contained in Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto. The covenants contained in Section 13
shall have no effect if the transactions contemplated by this Agreement are not
consummated.
13.6 MATERIALITY. The Company and the Stockholders hereby agree that
the covenants contained in this Section 13 are a material and substantial part
of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company, the Other Founding Companies,
and/or AmPaM, such as operational policies, customer lists, and pricing and cost
policies that are valuable, special and unique assets of the Company's, the
Other Founding Companies' and/or AmPaM's respective businesses. The Stockholders
agree that they will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of AmPaM, (b) following the
Closing, such information may be disclosed by the Stockholders as is required in
the course of performing their duties for AmPaM or the Company and (c) to its
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.1; provided, however
that (i) the foregoing disclosure prohibition shall not apply in the event that
(i) such information becomes known to the public generally through no fault of
the Stockholders, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), the Stockholders shall, if
possible, give prior written notice thereof to AmPaM and provide AmPaM with the
opportunity to contest such disclosure, or (iii) the disclosing party reasonably
believes that such disclosure is required in connection with the defense of a
lawsuit against the disclosing party. In the event of a breach or threatened
breach by any of the Stockholders of the provisions of this Section, AmPaM shall
be entitled to an injunction restraining such Stockholders from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting AmPaM from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages. In the event the
transactions contemplated
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by this Agreement are not consummated, Stockholders shall have none of the
above-mentioned restrictions on their ability to disseminate confidential
information with respect to the Company.
14.2 AMPAM. AmPaM recognizes and acknowledges that it had in the past
and currently has access to certain confidential information of the Company,
such as operational policies, customer lists, and pricing and cost policies that
are valuable, special and unique assets of the Company's business. AmPaM agrees
that, prior to the Closing, or if the transactions contemplated by this
Agreement are not consummated, it will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
the Company, (b) to its counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
14.2, (c) to the Other Founding Companies and their representatives pursuant to
Section 7.1(b) of the Other Agreements and (d) to potential purchasers of
securities of AmPaM to the extent necessary or advisable in connection with the
applicable securities laws; provided, however that the foregoing disclosure
prohibition shall not apply in the event that (A) such information becomes known
to the public generally through no fault of AmPaM, (B) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (B), AmPaM
shall, if possible, give prior written notice thereof to the Company and the
Stockholders and provide the Company and the Stockholders with the opportunity
to contest such disclosure, or (C) the disclosing party reasonably believes that
such disclosure is required in connection with the defense of a lawsuit against
the disclosing party. In the event of a breach or threatened breach by AmPaM of
the provisions of this Section 14.2, the Company and the Stockholders shall be
entitled to an injunction restraining AmPaM from disclosing, in whole or in
part, such confidential information. Nothing herein shall be construed as
prohibiting the Company and the Stockholders from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
In the event the transactions contemplated by this Agreement are not consummated
for any reason, AmPaM shall nevertheless remain subject to this Section 14.2,
except that it shall not be permitted to make any disclosures otherwise than
pursuant to clause (A), (B) or (C) above.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Sections 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14
shall survive the termination of this Agreement for a period of five years from
the Closing Date.
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14.5 RETURN OF INFORMATION. If the transactions contemplated by this
Agreement are not consummated, AmPaM will return or destroy all confidential
information regarding the Company.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS RELATING TO AMPAM STOCK AND AMPAM NOTES. For
a period of two years from the Closing Date or, in the event that the Company
completes an IPO, for a period through the second anniversary of the date of the
closing of such IPO (the "Restricted Period"), no Stockholder shall (i) sell,
assign, exchange, transfer, pledge, or otherwise dispose of any shares of AmPaM
Stock or AmPaM Notes received by the Stockholders pursuant to this Agreement or
any securities convertible into, exchangeable or exercisable for any shares of
AmPaM Stock or AmPaM Notes received by such Stockholder pursuant to this
Agreement, (ii) grant any option to purchase, or otherwise enter into any
contract to sell, assign, transfer, pledge or otherwise dispose of, any shares
of AmPaM Stock or AmPaM Notes received by such Stockholder pursuant to this
Agreement, or (iii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the AmPaM Stock or AmPaM Notes, whether any
such swap or transaction is to be settled by delivery of shares of AmPaM Stock
or AmPaM Notes or other securities, by the delivery or payment of cash or
otherwise, except, in the case of clauses (i), (ii) or (iii) above, (A) as
otherwise agreed by AmPaM, (B) for the sale of shares of AmPaM Stock, and
entering into agreements relating to the sale of shares of AmPaM Stock, pursuant
to Section 17 hereof, (C) for transfers to (I) immediate family members of such
Stockholder who agree with AmPaM in writing to be bound by the restrictions set
forth in this Section 15.1, (II) trusts, limited partnerships or other estate
planning entities for the benefit of such Stockholder or family members of such
Stockholder which have agreed with AmPaM in writing, through action taken by the
trustees, partners or other persons having authority to bind the trust, limited
partnership or other estate planning entity, to be bound by the restrictions set
forth in this Section 15.1, (III) any charitable organization that qualifies for
receipt of charitable contributions under Section 170(c) of the Code which
agrees with AmPaM in writing to be bound by the restrictions set forth in this
Section 15.1, (D) for transfers of AmPaM Stock or AmPaM Notes to AmPaM pursuant
to Section 11.5(d), (E) for transfers to another Stockholder, to another person
or entity who receives shares of AmPaM Stock or AmPaM Notes or AmPaM Series A
Preferred Stock pursuant to the Other Agreements or to Sterling City Capital LLC
or any of its Affiliates provided that (1) such transaction is exempt from the
registration requirements of the 1933 Act as evidenced by the delivery to AmPaM
of an opinion of counsel in form and substance reasonably satisfactory to AmPaM
and (2) any such transferee agrees in writing to be bound by the restrictions
set forth in this Section 15.1, (F) transfers of shares of AmPam Notes, shares
of AmPaM Stock, by such Stockholder to employees of the Company of up to an
aggregate of 15% of the shares of AmPaM Stock received by such Stockholder
pursuant to this Agreement provided that (1) any such transaction is exempt from
the registration requirements of the 1933 Act as evidenced by the delivery to
AmPaM of an opinion of counsel in form and substance reasonably satisfactory to
AmPaM and (2) any such employee agrees with AmPaM in writing to be bound by the
restrictions set forth in this Section 15.1 or (G) the sale by such Stockholder
in an IPO of shares of AmPaM Stock representing not more than 10% of the
Aggregate Consideration in cash; provided, however, that in no circumstance will
a Stockholder be
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entitled to sell shares of AmPaM Stock in an IPO to the extent that the sale of
such shares by such Stockholder would result in such Stockholder receiving in
excess of 45% of the Aggregate Consideration in cash; and, provided further, if
AmPaM is advised in writing in good faith by any managing underwriter of an
underwritten offering of the securities being offered pursuant to any
registration statement under Section 17.1 that the number of shares to be sold
by persons other than AmPaM is greater than the number of such shares which can
be offered without adversely affecting the success of the offering, AmPaM may
reduce pro rata (among the Stockholders and all other selling security holders
in the offering) the number of shares offered for the accounts of such persons
(based upon the number of shares held by such person) to a number deemed
satisfactory by such managing underwriter. During the Restricted Period, the
certificates evidencing the AmPaM Stock or AmPaM Notes delivered to the
Stockholders pursuant to Section 3 of this Agreement will bear a legend
substantially in the form set forth below:
THE [SHARES/NOTES] REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE
TERMS OF THE ACQUISITION AGREEMENT PURSUANT TO WHICH SUCH SHARES WERE ISSUED,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, PLEDGE OR OTHER DISPOSITION PRIOR TO EXPIRATION
OF THE RESTRICTED PERIOD REFERRED TO IN THE ACQUISITION AGREEMENT EXCEPT IN
ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT. SUCH RESTRICTIONS ON TRANSFER ARE
SET FORTH IN AN ACQUISITION AGREEMENT, A COPY OF WHICH IS MAINTAINED AT THE
PRINCIPAL OFFICES OF THE ISSUER. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE.
15.2 TRANSFER RESTRICTIONS RELATING TO ADDITIONAL CONSIDERATION. No
Stockholder shall (i) sell, assign, exchange, transfer, pledge, or otherwise
dispose of any right to receive any consideration pursuant to Section II of
Annex I to this Agreement (the "Additional Consideration Right") or any
securities convertible into, exchangeable or exercisable for any Additional
Consideration Right, (ii) grant any option to purchase, or otherwise enter into
any contract to sell, assign, transfer, pledge or otherwise dispose of, any
Additional Consideration Right, or (iii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of any Additional
Consideration Right, whether any such swap or transaction is to be settled by
delivery of shares of AmPaM Stock or other securities, by the delivery or
payment of cash or otherwise.
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16. FEDERAL SECURITIES ACT REPRESENTATIONS
16.1 COMPLIANCE WITH LAW. Each Stockholder acknowledges that the shares
of AmPaM Stock, the Additional Consideration Right and any AmPaM Notes to be
delivered to such Stockholder pursuant to this Agreement have not been and will
not be registered under the 1933 Act (except as provided in Section 17 hereof)
and therefore may not be sold, assigned, exchanged, transferred, pledged or
otherwise disposed of without compliance with the 1933 Act which, among other
matters, would require registration under the 1933 Act unless exemption from the
registration requirements is available for such transaction. The AmPaM Stock,
the Additional Consideration Right and any AmPaM Notes to be acquired by each
Stockholder pursuant to this Agreement is being acquired solely for such
Stockholder's own account, for investment purposes only, and with no present
intention of selling, assigning, exchanging, transferring, pledging, or
otherwise disposing of it. Each Stockholder covenants, warrants and represents
that neither the shares of AmPaM Stock, the Additional Consideration Right nor
any AmPaM Notes issued to such Stockholder will be offered, sold, assigned,
exchanged, pledged, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the 1933 Act and the rules
and regulations of the SEC. All certificates representing the AmPaM Stock shall
bear the following legend in addition to the legend required under Section 15 of
this Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER
HEREOF COMPLIES WITH THE ACT AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
16.2 ECONOMIC RISK; SOPHISTICATION. Each Stockholder is able to bear
the economic risk of an investment in the AmPaM Stock and AmPaM Notes to be
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment. Each Stockholder has substantial knowledge and experience in
making investment decisions of this type (or is relying on qualified purchaser
representatives with such knowledge and experience in making this decision), and
is capable, either individually or with such purchaser representatives, of
evaluating the merits and risks of this investment. Each Stockholder has had an
adequate opportunity to ask questions and receive answers from the officers of
AmPaM concerning any and all matters relating to the transactions described
herein including, without limitation, the background and experience of the
current and proposed officers and directors of AmPaM, the plans for the
operations of the business of AmPaM, the business, operations and financial
condition of the Founding Companies other than the Company, and any plans for
additional acquisitions. Each Stockholder has asked any and all questions of the
nature described in the preceding sentence and all questions have been answered
to such Stockholder's satisfaction. Except as set forth on Schedule 16.2, each
Stockholder is an "accredited investor" as defined in Rule 501(a) of the 1933
Act. Neither the foregoing nor any investigation made by the Stockholders
referred to above shall in any way affect the representations, warranties,
covenants and agreements of AmPaM made herein except to the extent that AmPaM is
relying upon the representations of the Stockholders in Section 16.1 and in this
Section 16.2 for purposes of
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AmPaM's representations and warranties in Sections 6.9, 6.11, 6.15 and 6.17
hereof as specified therein.
16.3 RELIANCE BY AmPaM. Each Stockholder acknowledges that AmPaM in
relying upon the representations and covenants of such Stockholder set forth in
Section 16.1 and Section 16.2 for purposes of compliance by AmPaM with Federal
and state securities laws related to the issuance of AmPaM Stock pursuant to
this Agreement and the Other Agreements.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. Whenever AmPaM proposes to register
any AmPaM Stock for its own or other's account under the 1933 Act for a public
offering, other than (i) any shelf or other registration of shares to be used as
consideration for acquisitions of additional businesses by AmPaM and (ii)
registrations relating to employee benefit plans, AmPaM shall give each of the
Stockholders prompt written notice of its intent to do so. Upon the written
request of any of the Stockholders given within 15 calendar days after receipt
of such notice, notwithstanding the provisions of Section 15 (except as
specified below with respect to an IPO), AmPaM shall cause to be included in
such registration all of the AmPaM Stock issued to such Stockholders pursuant to
this Agreement (including any stock issued as or issuable upon the conversion or
exchange of any convertible security, warrant, right or other security which is
issued by AmPaM as a stock split, dividend or other distribution with respect
to, or in exchange for, or in replacement of such AmPaM Stock) which any such
Stockholder requests, other than shares of AmPaM Stock which may then be
immediately sold under Rule 144(k) (or any similar or successor provision)
promulgated under the 1933 Act, and other than shares of AmPaM Stock that have
been theretofore sold by the Stockholder in accordance with the 1933 Act,
provided that AmPaM shall have the right to reduce pro rata the number of shares
of each selling Stockholder included in such registration to the extent that
inclusion of such shares would, in the written opinion of tax counsel to AmPaM
or its independent auditors, jeopardize the status of the transactions
contemplated hereby and by the Private Placement Memorandum as a tax-free
organization under Section 351 of the Code; provided, however, that with respect
to a proposal by AmPaM to register AmPaM Stock under the 1933 Act in connection
with an IPO, no Stockholder shall be permitted pursuant to this Section 17.1 to
have included in such registration more shares of AmPaM Stock than permitted to
be sold by such Stockholder pursuant to Section 15.1. In addition, if AmPaM is
advised in writing in good faith by any managing underwriter of an underwritten
offering of the securities being offered pursuant to any registration statement
under this Section 17.1 that the number of shares to be sold by persons other
than AmPaM is greater than the number of such shares which can be offered
without adversely affecting the success of the offering, AmPaM may reduce pro
rata (among the Stockholders and all other selling security holders in the
offering) the number of shares offered for the accounts of such persons (based
upon the number of shares held by such person) to a number deemed satisfactory
by such managing underwriter. If any Stockholder disapproves of the terms of the
underwriting, that Stockholder may elect to withdraw therefrom by written notice
to AmPaM and the managing underwriter. That Stockholder's shares of AmPaM Stock
so withdrawn shall also be withdrawn from registration; provided, however, that,
if by the withdrawal of such shares a greater number of shares of AmPaM
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Stock held by other Stockholders may be included in such registration, then
AmPaM shall offer to all other Stockholders of AmPaM the right to include
additional shares in the same proportion used in effecting the above
limitations. AmPaM shall not, for a period of two years following the Closing
Date, grant to any other person any rights to cause AmPaM to register any
securities in priority over, or in precedent to, the rights granted to the
Stockholders hereunder and to the stockholders of the Other Founding Companies
pursuant to Section 17 of the Other Agreements.
17.2 REGISTRATION PROCEDURES. Whenever AmPaM is required to register
shares of AmPaM Stock pursuant to Section 17.1, AmPaM will, as expeditiously as
possible:
(i) Prepare and file with the SEC a registration statement
with respect to such shares and use its best efforts to cause such
registration statement to become effective (provided that before filing
a registration statement or prospectus or any amendments or supplements
or term sheets thereto, AmPaM will furnish a representative of the
Stockholders with copies of all such documents proposed to be filed) as
promptly as practical;
(ii) Notify the Stockholders of any stop order issued or
threatened by the SEC and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered;
(iii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 120 days, cause the
prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the 1933
Act; and comply with the provisions of the 1933 Act applicable to it
with respect to the disposition of all securities covered by such
registration statement during the applicable period in accordance with
the intended methods of disposition by the sellers thereof set forth in
such registration statement or supplement to the prospectus;
(iv) Furnish to each Stockholder who so requests such number
of copies of such registration statement, each amendment and supplement
thereto and the prospectus included in such registration statement
(including each preliminary prospectus and any term sheet associated
therewith), and such other documents as such Stockholder may reasonably
request in order to facilitate the disposition of the relevant shares;
(v) Make "generally available to its security holders" (within
the meaning of Rule 158) an earnings statement satisfying the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder no
later than 90 days after the end of the 12-month period beginning with
the first day of AmPaM's first fiscal quarter commencing after the
effective date of the registration statement;
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(vi) Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement at
the earliest possible moment;
(vii) If requested by the managing underwriter or
underwriters, if any, or any participating Stockholder, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters or any
participating Stockholder, as the case may be, reasonably requests to
be included therein, including, without limitation, information with
respect to the number of shares of AmPaM Stock being sold by
participating Stockholders to any underwriter or underwriters, the
purchase price being paid therefor by such underwriter or underwriters
and with respect to any other terms of an underwritten offering of the
shares of AmPaM Stock to be sold in such offering, and promptly make
all required filings of such prospectus by supplement or post-effective
amendment;
(viii) Make available for inspection by participating
Stockholders, any underwriter participating in any disposition pursuant
to such registration statement, and the counsel retained by the
participating Stockholders, counsel for the underwriters and any
accountant or other agent retained by participating Stockholders or any
such underwriter (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of AmPaM
(the "Records"), as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause AmPaM's
officers, directors and employees to supply all information reasonably
requested by any such Inspectors in connection with such registration
statement; provided, that records which AmPaM determines, in good
faith, to be confidential and which AmPaM notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or (ii) the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction after delivery of
sufficient notice to AmPaM to enable AmPaM to contest such subpoena or
order;
(ix) Take all other steps reasonably necessary to effect the
registration of the shares of AmPaM Stock contemplated hereby;
(x) Use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested by
the Stockholders, and to keep such registration or qualification
effective during the period such registration statement is required to
be kept effective, provided that AmPaM shall not be required to become
subject to taxation, to qualify generally to do business or to file a
general consent to service of process in any such states or
jurisdictions;
(xi) Cause all such shares of AmPaM Stock to be listed or
included not later than the date of the first sale of shares of AmPaM
Stock under such registration statement on any
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securities exchanges or trading systems on which similar securities
issued by AmPaM are then listed or included; and
(xii) Notify each Stockholder at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act within
the period that AmPaM is required to keep the registration statement
effective of the happening of any event as a result of which the
prospectus included in such registration statement (as then in effect),
together with any associated term sheet, contains an untrue statement
of a material fact or omits to state any fact required to be stated
therein or necessary to make the statements therein (in the case of the
prospectus or any preliminary prospectus, in light of the circumstances
under which they were made) not misleading, and, at the request of such
Stockholder, AmPaM promptly will prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of
the covered shares, such prospectus will not contain an untrue
statement of material fact or omit to state any fact required to be
stated therein or necessary to make the statements therein (in the case
of the prospectus or any preliminary prospectus, in light of the
circumstances under which they were made) not misleading.
All expenses incurred in connection with the registration under this
Article 17 and compliance with securities and blue sky laws (including all
registration, filing, listing, escrow agent, qualification, legal, printer and
accounting fees, but excluding underwriting commissions and discounts), shall be
borne by AmPaM.
17.3 INDEMNIFICATION.
(a) In connection with any registration under Section 17.1,
AmPaM shall indemnify, to the extent permitted by law, each selling Stockholder
(an "Indemnified Party") against all losses, claims, damages, liabilities and
expenses arising out of or resulting from any untrue or alleged untrue statement
of material fact contained or incorporated by reference in any registration
statement, prospectus or preliminary prospectus or associated term sheet or any
omission or alleged omission to state or incorporated by reference therein a
material fact required to be stated or incorporated by reference therein or
necessary to make the statements therein not misleading except insofar as the
same are caused by or contained in or omitted from any information furnished in
writing to AmPaM by such Indemnified Party expressly for use therein or by any
Indemnified Parties' failure to deliver a copy of the registration statement or
prospectus or any amendment or supplements thereto after AmPaM has furnished
such Indemnified Party with a sufficient number of copies of the same.
(b) In connection with any registration under Section 17.1,
each selling Stockholder shall furnish to AmPaM in writing such information
concerning the Stockholder and his or her proposed offering of shares as is
reasonably requested by AmPaM for use in any such registration statement or
prospectus and will indemnify, to the extent permitted by law, AmPaM, its
directors and officers and each person who controls AmPaM (within the meaning of
the 1933 Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged
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untrue statement of a material fact or any omission or alleged omission to state
therein a material fact required to be stated in the registration statement or
prospectus or any amendment thereof or supplement thereto or necessary to make
the statements therein not misleading, but only to the extent that such untrue
or alleged untrue statement or omission or alleged omission is contained in or
omitted from information so furnished in writing to AmPaM by such Stockholder
expressly for use in the registration statement. Notwithstanding the foregoing,
the liability of a Stockholder under this Section 17.3 shall be limited to an
amount equal to the net proceeds actually received by such Stockholder from the
sale of the relevant shares covered by the registration statement.
(c) Any person entitled to indemnification hereunder will (i)
give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) unless in such indemnified parties' reasonable
judgment, a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. Any failure to give prompt notice shall deprive a party of
its right to indemnification hereunder only to the extent that such failure
shall have adversely affected the indemnifying party. If the defense of any
claim is assumed, the indemnifying party will not be subject to any liability
for any settlement made without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party that is not entitled or elects
not, to assume the defense of a claim, will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party, a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
17.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 17.1 covering an underwritten registered offering, (i) each
participating Stockholder shall execute and deliver to AmPaM a written power of
attorney instrument that (A) appoints an officer of AmPaM as such Stockholder's
attorney-in-fact for purposes of executing and delivering an underwriting
agreement among AmPaM, the underwriters named therein and such Stockholder
specifying the terms and conditions applicable to the sale of AmPaM Stock of
such Stockholder in such offering and (B) otherwise is in such form and
containing such provisions as are customary in the securities business for such
an arrangement in connection with an underwritten registered offering in which
one or more stockholders of the issuer are participants, including a provision
that authorizes the attorney-in-fact appointed by such Stockholder to execute
and deliver such an underwriting agreement in the event that the net price per
share to be received by such Stockholder from the sale of the shares of AmPaM
Stock to be sold in such offering is not less than a price specified in such
instrument and (iii) AmPaM and each participating Stockholder agree to enter
into a written agreement with the managing underwriters in such form and
containing such provisions as are customary in the securities business for such
an arrangement between such managing underwriters and companies of AmPaM's size
and investment stature, including indemnification; provided, however, that (A)
such Stockholder shall be exempt and excluded from any indemnification of the
managing underwriters other than with respect to information provided by such
Stockholder with respect to such Stockholder to AmPaM or the managing
underwriters
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specifically for inclusion in any such registration statement and (B) such
Stockholder shall not be obligated to enter into such an underwriting agreement
in the event that the net price per share to be received by such Stockholder
from the sale of shares of AmPaM Stock to be sold in such offering is less than
the floor price specified in the power of attorney instrument executed and
delivered to AmPaM pursuant to clause (i) above.
17.5 TRANSFER OF RIGHTS. The right to cause AmPaM to register shares of
AmPaM Stock under this Agreement may be assigned to a transferee or assignee of
any Stockholder to the extent that such transferee or assignee is a member of
the immediate family of a Stockholder, a trust, limited partnership or other
estate planning entity for the benefit of any such persons or a charitable
organization that qualifies for receipt of charitable contributions under
Section 170(c) of the Code.
17.6 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the SEC that may permit the sale of AmPaM
stock to the public without registration, following an IPO AmPaM agrees to use
its reasonable efforts, from and after the completion of an IPO, to:
(i) make and keep public information regarding AmPaM available
as those terms are understood and defined in Rule 144 under the 1933
Act beginning 90 days following the effective date of a registration
statement relating to an IPO;
(ii) file with the SEC in a timely manner all reports and
other documents required of AmPaM under the 1933 Act and the 1934 Act
at any time after it has become subject to such reporting requirements;
and
(iii) so long as a Stockholder owns any restricted AmPaM
Stock, furnish to each Stockholder forthwith upon written request a
written statement by AmPaM as to its compliance with the current public
information requirements of Rule 144 (at any time from and after 90
days following the effective date of a registration statement relating
to an IPO), and of the 1933 Act and the 1934 Act (any time after it has
become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of AmPaM, and such other reports and
documents so filed as a Stockholder may reasonably request in availing
itself of any rule or regulation of the SEC allowing a Stockholder to
sell any such shares without registration.
18. REDEMPTION OF AmPaM STOCK
18.1 REDEMPTION TRIGGER. In the event that, within three years of the
Closing Date, (i) AmPaM has not consummated an IPO and (ii) any Stockholder has
not received cash (including proceeds from the public or private sale of AmPaM
Stock received as consideration hereunder and the receipt of principal payments,
if any, made with respect to AmPaM Notes held by such Stockholder) equal to or
exceeding 50% of the Aggregate Consideration on or prior to the third
anniversary of the Closing Date, such Stockholder shall have the right (the "Put
Right"), but not the obligation, commencing on the third anniversary date of the
Closing Date to require AmPaM to
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purchase a number of shares of AmPaM Stock then owned by such Stockholder,
subject to the limitations set forth in Section 18.2 below. The purchase price
for such redemption shall be $13.00 per share, such price to be subject to
appropriate adjustment to reflect any reclassification, stock dividend,
subdivision, split-up or combination of shares of AmPaM Stock after the date
hereof.
18.2 MINIMUM REDEMPTION; LIMITATIONS. If the events specified in
Section 18.1(i) and 18.1(ii), with Section 18.1(ii) being determined on an
individual Stockholder basis, have not occurred within the time specified, AmPaM
shall be obligated to purchase from each eligible Stockholder no less than 10%
of the AmPaM Stock held by such Stockholder annually; provided, however, that
the Stockholders shall not be entitled to exercise their Put Rights if and to
the extent the Company has not achieved the Target Net Income (as defined in
Annex I hereto) for the year preceding the year in which a Stockholder seeks to
exercise his Put Right. The redemptions will be funded by internal cash flows or
alternative financing arrangements but AmPaM's obligation to make any redemption
pursuant to this Section 18 will be subject to the covenants and restrictions
contained in AmPaM's then existing private or public debt or equity instruments.
18.3 NOTICE; EXERCISE. The Stockholders may exercise their Put Right by
giving written notice (the "Put Notice") to AmPaM within thirty (30) days of the
third anniversary of the execution hereof. If any Stockholder does not provide
AmPaM with a Put Notice within such thirty-day period, the Put Right applicable
to such Stockholder shall expire. The date for closing the sale of any shares of
AmPaM Stock pursuant to a proper exercise of a Put Right shall in no event be
earlier than 90 days after the date AmPaM receives the Put Notice. Any such
closing shall be at such time of day and place as shall be mutually agreed
between such holder and AmPaM. At such closing AmPaM shall make payment for the
AmPaM Stock to be repurchased by wire transfer of immediately available funds to
a bank account designated by such Stockholder for such purpose and such
Stockholder shall deliver to AmPaM certificates, duly endorsed for transfer,
representing the shares of AmPaM Stock to be purchased and sold pursuant to the
exercise of such Put Right.
18.4 ADDITIONAL REDEMPTIONS. In the event AmPaM has not consummated an
IPO and notwithstanding the foregoing, to the extent the Stockholders who have
received greater than 50% of their Aggregate Consideration in cash wish to
tender AmPaM Stock to AmPaM for purchase, AmPaM will use its commercially
reasonable efforts to continue to repurchase up to 10% of the AmPaM Stock held
by such Stockholder annually.
18.5 TERMINATION OF REDEMPTION OBLIGATION. Put Rights with respect to
any individual Stockholder will terminate upon receipt by such Stockholder of
50% of his Aggregate Consideration in cash; such termination will not, however,
limit such Stockholders ability to participate in the additional redemptions
provided in Section 18.4. Notwithstanding the foregoing, all of AmPaM's
redemption obligations contained in this Section 18 shall terminate on the
earlier to occur of (i) an IPO, (ii) any sale of all or substantially all of
AmPaM's assets in one transaction or series of transactions, (iii) any merger or
consolidation which involves AmPaM and in which AmPaM is not the surviving
entity or (iv) any transaction after which the shares of AmPaM Common Stock, if
any, which are then held by persons other than the holders of AmPaM Common Stock
as of the Closing
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Date constitute 50% or more of AmPaM Common Stock outstanding as of the date of
the consummation of such transaction.
19. GENERAL
19.1 COOPERATION. The Company, Stockholders and AmPaM shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The Company will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the Company cooperate with
AmPaM on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law and except as
provided in Section 17.5) and shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of AmPaM and the Company, and the
heirs, successors and legal representatives of the Stockholders.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company and AmPaM and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the Stockholders, the Company and AmPaM, acting
through their respective officers or trustees, duly authorized by their
respective Boards of Directors. Any disclosure made on any Schedule delivered
pursuant hereto shall be deemed to have been disclosed for purposes of any other
Schedule required hereby, provided that the Company shall make a good faith
effort to cross reference disclosure, as necessary or advisable, between related
Schedules.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument. A telecopied
facsimile of an executed counterpart of this Agreement shall be sufficient to
evidence the binding agreement of each party to the terms hereof. However, each
party agrees to return to the other parties an original, duly executed
counterpart of this Agreement promptly after delivery of a telecopied facsimile
thereof.
19.5 BROKERS AND AGENT. Except as disclosed on Schedule 18.5, each
party hereto represents and warrants that it employed no broker or agent in
connection with this transaction and agrees to indemnify the other parties
hereto against all loss, cost, damages or expense arising out of claims for fees
or commission of brokers employed or alleged to have been employed by such
indemnifying party.
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19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, AmPaM will pay the reasonable fees, expenses and
disbursements of AmPaM and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto, including all costs and expenses incurred in the performance
and compliance with all conditions to be performed by AmPaM under this
Agreement, including the fees and expenses of Arthur Andersen LLP, Andrews &
Kurth L.L.P., and any other person or entity retained by AmPaM, and the costs of
preparing the Private Placement Memorandum incurred in connection with the
subject matter of this Agreement and any amendments thereto. In addition,
whether or not the transactions contemplated herein shall be consummated, AmPaM
will pay the reasonable fees and expenses of Bracewell & Patterson LLP incurred
on behalf of the Company and the Stockholders in connection with the subject
matter of this Agreement. Whether or not the transactions herein contemplated
shall be consummated, the Company will pay all of its costs and expenses
incurred on behalf of the Company and the Stockholders in connection with the
subject matter of this Agreement except that (i) the Company shall not be
required to pay any of the costs, fees and expenses specified above as to which
AmPaM is responsible for the payment thereof and (ii) neither the Company nor
the Stockholders shall be responsible for the payment of the costs, fees and
expenses incurred by or on behalf of AmPaM. Whether or not the transactions
herein contemplated shall be consummated, AmPaM shall reimburse Sterling City
Capital, LLC (or any person or entity which is an Affiliate thereof) for any of
the foregoing fees, expenses and disbursements paid by Sterling City Capital,
LLC (or any person or entity which is an Affiliate thereof) and shall repay
Sterling City Capital, LLC (or any person or entity which is an Affiliate
thereof) for any loans or advances made by Sterling City Capital, LLC (or any
person or entity which is an Affiliate thereof) for the purpose of providing
AmPaM funds to pay any such fees, expenses and disbursements, provided that such
reimbursement and loan repayment obligation shall be limited to the foregoing
fees, expenses, and disbursements which are out-of-pocket expenses of AmPaM,
Sterling City Capital, LLC or any person or entity which is an Affiliate
thereof. Sterling City Capital, LLC shall be reimbursed by AmPaM in the form of
AmPaM Notes. AmPaM retains the right, within a reasonable period following the
Closing Date, to conduct an audit of the expenses for which Sterling City
Capital, LLC is reimbursed. Each Stockholder shall pay all sales, use, transfer,
real property transfer, recording, gains, stock transfer and other similar taxes
and fees ("Transfer Taxes") imposed in connection with the purchase and sale of
the Company Stock, other than Transfer Taxes, if any, imposed by the State of
Delaware. Each Stockholder shall file all necessary documentation and Returns
with respect to such Transfer Taxes. In addition, each Stockholder acknowledges
that he, and not the Company or AmPaM, will pay all Taxes due by him upon
receipt of the consideration payable pursuant to Section 1 hereof. The
Stockholders acknowledge that the risks of the transactions contemplated hereby
include Tax risks, with respect to which the Stockholders are relying
substantially on the opinion contemplated by Section 8.12 hereof and
representations by AmPaM in this Agreement.
61
<PAGE> 70
19.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person or via a nationally recognized courier service to an officer or agent
of such party.
(a) If to AmPaM addressed to it at:
American Plumbing & Mechanical, Inc.
515 Post Oak Blvd., Suite 450
Houston, Texas 77027
Attention: Chief Executive Officer
with copies to:
Thomas P. Mason
Andrews & Kurth L.L.P.
4200 Chase Tower
Houston, Texas 77002
(b) If to the Stockholders, addressed to them at their addresses
set forth on the signature pages hereto.
(c) If to the Company, addressed to it at:
Bob Sherwood
Sherwood Mechanical, Inc.
13630 Danielson St.
Powcey, California 92064
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Texas, excluding any conflicts of law, rule or
principle that might refer same to the laws of another jurisdiction.
62
<PAGE> 71
19.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties until the respective Expiration
Dates referred to herein with respect thereto or, if no Expiration Date is
applicable with respect thereto, until the expiration of all applicable statute
of limitations periods.
19.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.11 TIME. Time is of the essence with respect to this Agreement.
19.12 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.
19.13 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
19.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of AmPaM, the Company and Stockholders who would receive a
majority of the Aggregate Consideration specified in Section I of Annex I to
this Agreement if the transactions contemplated hereby were consummated. Any
amendment or waiver effected in accordance with this Section 19.15 shall be
binding upon each of the parties hereto, any other person receiving AmPaM Stock
in connection with the purchase and sale of the Company Stock and each future
holder of such AmPaM Stock. Any consent of the Stockholders who would receive a
majority of the Aggregate Consideration pursuant to Section I of Annex I of this
Agreement if the transactions contemplated hereby were consummated shall be
deemed to be the consent of the Stockholders for purposes of provisions of this
Agreement as to which a consent of the Stockholders may be requested or
required.
63
<PAGE> 72
19.16 MEDIATION AND ARBITRATION. If a dispute arises out of or relates
to this Agreement, or the breach thereof, and if said dispute cannot be settled
through direct discussions, the parties agree to first endeavor to settle the
dispute in an amicable manner by mediation administered by the American
Arbitration Association under its then prevailing Commercial Mediation Rules,
before resorting to arbitration. Thereafter, any unresolved controversy or claim
arising out of or relating to this Agreement, or the breach thereof, shall be
settled by arbitration administered by the American Arbitration Association in
accordance with its then prevailing Commercial Arbitration Rules. The
enforcement, interpretation and procedural and substantive effect of the
obligation to arbitrate created by this Section 19.16 shall be governed by the
Federal Arbitration Act as amended from time to time, 9 U.S.C. Section 1 et seq.
The parties hereby disclaim any intention to have the substantive or procedural
law of any state or other jurisdiction, other than the law of the United States
as embodied in the Federal Arbitration Act, applied to such obligation. Any such
mediation or arbitration proceeding will be conducted in Houston, Texas.
19.17 INFORMATION PROVIDED FOR PRIVATE PLACEMENT MEMORANDUM. For
purposes of this Agreement, the information provided by the Company in writing
specifically for inclusion in the Private Placement Memorandum shall include
solely (i) the Financial Statements (in the form that they appear in the Private
Placement Memorandum), (ii) any financial statements provided to AmPaM pursuant
to Section 7.9, (iii) the description of the Company contained in the Private
Placement Memorandum under the caption "The Company", (iv) the description of
the Company's results of operations and its liquidity and capital resources, if
any, contained in the Private Placement Memorandum under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and (v) the description, if any, of matters related to the Company
contained in the Private Placement Memorandum under the caption "Certain
Transactions Transactions involving Certain Officers, Directors and
Stockholders". For purposes of this Agreement, the information provided by a
Stockholder in writing specifically for inclusion in the Private Placement
Memorandum shall include only (i) the description, if any, of matters related to
such Stockholder contained in the Private Placement Memorandum under the caption
"Certain Transactions - Transactions involving Certain Officers, Directors and
Stockholders" and (ii) the biographical description of such Stockholder, if any,
contained in the Private Placement Memorandum under the caption "Management."
19.18 EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective upon (i) the execution and delivery of this Agreement by all of the
parties hereto and (ii) the delivery to AmPaM of each Employment Agreement
attached hereto as Annex VI-1 executed by each of the Company, the employees
named therein and AmPaM.
64
<PAGE> 73
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AMERICAN PLUMBING & MECHANICAL, INC.
By: /s/ DAVID BAGGETT
---------------------------------
Name: David Baggett
-------------------------------
Title: Chief Financial Officer
------------------------------
SHERWOOD MECHANICAL, INC.
By: /s/ ROBERT W. SHERWOOD
---------------------------------
Robert W. Sherwood
President
By: /s/ MITCHELL C. ROBERTS
---------------------------------
Mitchell C. Roberts
Vice President
[Remainder of page intentionally left blank]
65
<PAGE> 74
STOCKHOLDERS:
/s/ ROBERT W. SHERWOOD
- ----------------------------------
Robert W. Sherwood
11610 Scripps Lake Drive
San Diego, California 92131
66
<PAGE> 1
EXHIBIT 12
AMERICAN PLUMBING & MECHANICAL, INC. AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Four Months Four Months Year Ended Three Months Ended
Years Ended August 31, Ended Ended December 31, March 31,
------------------------------ December 31, December 31, ------------------ ------------------
1994 1995 1996 1995 1996 1997 1998 1998 1999
------- ------- -------- ------------ ------------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CHRISTIANSON (ACCOUNTING
ACQUIROR)
Earnings:
Income before income
taxes . . . . . . . . . $ 256 $ 838 $ 1,343 $ 370 $(1,402) $ 1,967 $ 648 $ 449 $ 3,564
Fixed charges . . . . . . 93 133 152 49 52 252 269 165 197
------- ------- -------- -------- ------- ------- ------- ------ -------
$ 349 $ 971 $ 1,495 419 $(1,350) $ 2,219 $ 917 $ 614 $ 3,761
======= ======= ======== ======== ======= ======= ======= ====== =======
Fixed Charges:
Interest expense . . . . . $ 10 $ 72 $ 92 $ 29 $ 33 $ 102 $ 116 $ 37 $ 27
Portion of rental cost
representing interest . 83 61 60 20 19 150 153 128 170
------- ------- -------- -------- ------- ------- ------- ------ -------
$ 93 $ 133 $ 152 49 $ 52 $ 252 $ 269 $ 165 $ 197
======= ======= ======== ======== ======= ======= ======= ====== =======
Ratio of earnings to fixed
charges . . . . . . . . . 3.7x 7.3x 9.9x 8.6X --x 8.8x 3.4x 3.7x 19.1x
======= ======= ======== ======== ======= ======= ======= ====== =======
PRO FORMA COMBINED:
Earnings:
Income before income
taxes . . . . . . . . . $18,710 $ 8,395
Fixed charges . . . . . . 16,412 4,114
Preference dividends . . . (1,363) (341)
------- -------
$33,759 $12,168
======= =======
Fixed Charges:
Interest expense . . . . .
Amortized premiums,
discounts and
capitalized expenses $14,201 $ 3,550
related to debt . . . . 500 125
Portion of rental cost
representing interest . 348 98
Preference dividends . . . 1,363 341
------- -------
$16,412 $ 4,114
======= =======
Ratio of earnings to fixed
charges . . . . . . . . . 2.1x 3.0x
======= =======
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Houston, Texas
June 15, 1999
<PAGE> 1
EXHIBIT 99.1
AMERICAN PLUMBING & MECHANICAL, INC.
LETTER OF TRANSMITTAL
FOR TENDER OF ALL OUTSTANDING
11 5/8% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A
IN EXCHANGE FOR
11 5/8% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
PURSUANT TO THE PROSPECTUS DATED __________, 1999
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON __________, 1999, UNLESS THE EXCHANGE OFFER IS EXTENDED.
TO: STATE STREET BANK AND TRUST COMPANY (THE "EXCHANGE AGENT")
By Mail or Hand Delivery: By Registered or Certified Mail:
State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Window, Fifth Floor Corporate Trust Department
2 Avenue De Lafayette P.O. Box 778
Boston, Massachusetts 02111-1724 Boston, Massachusetts 02102-0778
Attention: Kellie Mullen Attention: Kellie Mullen
By Facsimile Transmission:
(for Eligible Institutions only)
State Street Bank and Trust Company
(617) 664-5395
Attention: Kellie Mullen
For Information or Confirmation by Telephone:
(617) 664-5587
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OR TRANSMISSION TO A
FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID
DELIVERY. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES, IS AT
THE RISK OF THE HOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. THE INSTRUCTIONS
ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned acknowledges that he or she has received the
Prospectus, dated __________, 1999 (the "Prospectus") of American Plumbing &
Mechanical, Inc., a Delaware Corporation (the "Company") and this Letter of
Transmittal and the instructions hereto (the "Letter of Transmittal"), which
together constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 principal amount of its 115/8% Senior Subordinated Notes due 2008, Series
B (the "Exchange Notes") that have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement of
which the Prospectus is a part, for each $1,000 principal amount of its
outstanding 115/8% Senior Subordinated Notes due 2008, Series A (the "Old
Notes"), of which $125,000,000 aggregate principal amount is outstanding, upon
the terms and subject to the conditions set forth in the Prospectus. The term
"Expiration Date" shall mean 5:00 p.m., New York City time, on __________, 1999,
unless the Company, in its sole discretion, extends the Exchange Offer, in which
case the term shall mean the latest date and time to which the Exchange Offer is
extended by the Company.
<PAGE> 2
This Letter of Transmittal is to be used either if (i) certificates
representing Old Notes are to be physically delivered to the Exchange Agent
herewith by Holders, (ii) tender of Old Notes is to be made by book-entry
transfer to an account maintained by the Exchange Agent at The Depository Trust
Company ("DTC"), pursuant to the procedures set forth in "The Exchange
Offer--Procedures for Tendering" in the Prospectus by any financial institution
that is a participant in DTC and whose name appears on a security position
listing as the owner of Old Notes or (iii) tender of Old Notes is to be made
according to the guaranteed delivery procedures set forth in the Prospectus
under "The Exchange Offer--Guaranteed Delivery Procedures." Delivery of this
Letter of Transmittal and any other required documents must be made to the
Exchange Agent. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT.
The term "Holder" as used herein means any person in whose name Old
Notes are registered on the books of the Company or any other person who has
obtained a properly completed bond power from the registered holder.
All Holders of Old Notes who wish to tender their Old Notes must, prior
to the Expiration Date: (1) complete, sign, and deliver this Letter of
Transmittal, or a facsimile thereof, to the Exchange Agent, in person or to the
address set forth above; and (2) tender (and not withdraw) his or her Old Notes
or, if a tender of Old Notes is to be made by book-entry transfer to the account
maintained by the Exchange Agent at DTC, confirm such book-entry transfer (a
"Book-Entry Confirmation"), in each case in accordance with the procedures for
tendering described in the instructions to this Letter of Transmittal. Holders
of Old Notes whose certificates are not immediately available, or who are unable
to deliver their certificates or Book-Entry Confirmation and all other documents
required by this Letter of Transmittal to be delivered to the Exchange Agent on
or prior to the Expiration Date, must tender their Old Notes according to the
guaranteed delivery procedures set forth under the caption "The Exchange Offer
- -- Guaranteed Delivery Procedures" in the Prospectus. (See Instruction 2.)
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of the Old Notes validly tendered and not withdrawn and
the issuance of the Exchange Notes will be made promptly following the
Expiration Date. For the purposes of the Exchange Offer, the Company shall be
deemed to have accepted for exchange validly tendered Old Notes when, as and if
the Company has given written notice thereof to the Exchange Agent.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW. THE INSTRUCTIONS INCLUDED IN THIS
LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR
FOR ADDITIONAL COPIES OF THE PROSPECTUS, THIS LETTER OF TRANSMITTAL AND THE
NOTICE OF GUARANTEED DELIVERY MAY BE DIRECTED TO THE EXCHANGE AGENT. SEE
INSTRUCTION 12 HEREIN.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD
NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY AND COMPLY WITH
ALL OF ITS TERMS.
-2-
<PAGE> 3
List below the Old Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule, attached hereto. The
minimum permitted tender is $1,000 in principal amount of 115/8% Senior
Subordinated Notes due 2008, Series A. All other tenders must be in integral
multiples of $1,000.
DESCRIPTION OF 115/8% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A
BOX I
<TABLE>
<CAPTION>
Name(s) and Address(es) of Registered Holder(s) *
(Please fill in, if blank)
- ------------------------------------------------------------------ ---------------------------------------------------
(A) (B)
Aggregate Principal
Amount Tendered
Certificate Number(s)* (if less than all)**
- ------------------------------------------------------------------ ---------------------------------------------------
<S> <C> <C>
-------------------------- -----------------------
-------------------------- -----------------------
-------------------------- -----------------------
-------------------------- -----------------------
Total Principal Amount
of Old Notes Tendered
========================== =======================
</TABLE>
- ----------------
* Need not be completed by book-entry holders.
** Need not be completed by Holders who wish to tender with respect to all
Old Notes listed.
-3-
<PAGE> 4
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS
BOX II
================================================================================
SPECIAL REGISTRATION INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5, 6 AND 7)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered, or Exchange Notes issued in exchange for Old Notes accepted for
exchange, are to be issued in the name of someone other than the undersigned.
Issue certificate(s) to:
Name
---------------------------------------------------------------------------
(PLEASE PRINT)
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
- --------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
================================================================================
BOX III
================================================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5, 6 AND 7)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered, or Exchange Notes issued in exchange for Old Notes accepted for
exchange, are to be delivered to someone other than the undersigned.
Deliver certificate(s) to:
Name
---------------------------------------------------------------------------
(PLEASE PRINT)
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
- --------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
================================================================================
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER
WITH THE CERTIFICATE(S) FOR OLD NOTES OR A CONFIRMATION OF BOOK-ENTRY TRANSFER
OF SUCH OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS) OR, IF GUARANTEED DELIVERY
PROCEDURES ARE TO BE COMPLIED WITH, A NOTICE OF GUARANTEED DELIVERY, MUST BE
RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
[ ] CHECK HERE IF OLD NOTES ARE BEING DELIVERED BY DTC TO AN ACCOUNT
MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
-----------------------------------
[ ]The Depository Trust Company
Account Number
--------------------------------------------------
Transaction Code Number
-----------------------------------------
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and all other documents required hereby to the Exchange
Agent on or prior to the Expiration Date may tender their Old Notes according to
the guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures." (See Instruction 2.)
-4-
<PAGE> 5
[ ] CHECK HERE IF OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of tendering Holder(s)
-----------------------------------------
Date of Execution of Notice of Guaranteed Delivery
---------------------
Name of Institution which Guaranteed Delivery
--------------------------
Transaction Code Number
------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
------------------------------------------------------------------
Address:
---------------------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undesigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities, it acknowledges
that it will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to American Plumbing & Mechanical, Inc. (the
"Company") the principal amount of Old Notes indicated above.
Subject to and effective upon the acceptance for exchange of the
principal amount of Old Notes tendered hereby in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the order
of, the Company all right, title and interest in and to the Old Notes tendered
hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as its agent and attorney-in-fact (with full knowledge that the Exchange
Agent also acts as the agent of the Company and as Trustee and Registrar under
the Indenture for the Old Notes and the Exchange Notes) with respect to the
tendered Old Notes with full power of substitution (such power of attorney being
deemed an irrevocable power coupled with an interest), subject only to the right
of withdrawal described in the Prospectus, to (i) deliver certificates for such
Old Notes to the Company or transfer ownership of such Old Notes on the account
books maintained by DTC, together, in either such case, with all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company and
(ii) present such Old Notes for transfer on the books of the Company and receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Old Notes, all in accordance with the terms of the Exchange Offer.
The undersigned acknowledges that the Exchange Offer is being made in
reliance upon interpretative advice given by the staff of the Securities and
Exchange Commission to third parties in connection with transactions similar to
the Exchange Offer, so that the Exchange Notes issued pursuant to the Exchange
Offer in exchange for the Old Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than a broker-dealer who
purchased
-5-
<PAGE> 6
such Old Notes directly from the Company for resale pursuant to Rule 144A or any
other available exemption under the Securities Act or a person that is an
"affiliate" of the Company or any Guarantor within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holders' business and such holders have
no arrangement with any person to participate in the distribution of such
Exchange Notes.
The undersigned agrees that acceptance of any tendered Old Notes by the
Company and the issuance of Exchange Notes in exchange therefor shall constitute
performance in full by the Company of its obligations under the registration
rights agreement, (as referred to in the Prospectus) and that, upon the issuance
of the Exchange Notes, the Company will have no further obligations or
liabilities thereunder (except in certain limited circumstances).
The undersigned represents and warrants that (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being acquired in the ordinary
course of business of the person receiving Exchange Notes (which shall be the
undersigned unless otherwise indicated in the box entitled "Special Delivery
Instructions" above) (the "Recipient"), (ii) neither the undersigned nor the
Recipient (if different) is engaged in, intends to engage in or has any
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes, and (iii) neither the undersigned nor the Recipient (if
different) is an "affiliate" of the Company or any Guarantor as defined in Rule
405 under the Securities Act. If the undersigned is not a broker-dealer, the
undersigned further represents that it is not engaged in, and does not intend to
engage in, a distribution of the Exchange Notes. If the undersigned is a
broker-dealer, the undersigned further (x) represents that it acquired Old Notes
for the undersigned's own account as a result of market-making activities or
other trading activities, (y) represents that it has not entered into any
arrangement or understanding with the Company or any "affiliate" of the Company
(within the meaning of Rule 405 under the Securities Act) to distribute the
Exchange Notes to be received in the Exchange Offer and (z) acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act (for
which purposes delivery of the Prospectus, as the same may be hereafter
supplemented or amended, shall be sufficient) in connection with any resale of
Exchange Notes received in the Exchange Offer. Such a broker-dealer will not be
deemed, solely by reason of such acknowledgment and prospectus delivery, to
admit that it is an "underwriter" within the meaning of the Securities Act.
The undersigned understands and agrees that the Company reserves the
right not to accept tendered Old Notes from any tendering holder if the Company
determines, in its sole and absolute discretion, that such acceptance could
result in a violation of applicable securities laws.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire Exchange Notes issuable upon the exchange of such
tendered Old Notes, and that, when the same are accepted for exchange, the
Company will acquire good and unencumbered title thereto, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claim. The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed to be necessary or desirable by the
Exchange Agent or the Company in order to complete the exchange, assignment and
transfer of tendered Old Notes or transfer of ownership of such Old Notes on the
account books maintained by a book-entry transfer facility.
The undersigned understands and acknowledges that the Company reserves
the right in its sole discretion to purchase or make offers for any Old Notes
that remain outstanding subsequent to the Expiration Date or, as set forth in
the Prospectus under the caption "The Exchange Offer--Procedures for Tendering,"
to terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Old Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers could differ from the terms
of the Exchange Offer.
The undersigned understands that the Company may accept the
undersigned's tender by delivering written notice of acceptance to the Exchange
Agent, at which time the undersigned's right to withdraw such tender will
terminate. For purposes of the Exchange Offer, the Company shall be deemed to
have accepted validly tendered Old Notes when, as and if the Company has given
oral (which shall be confirmed in writing) or written notice thereof to the
Exchange Agent.
-6-
<PAGE> 7
The undersigned understands that the first interest payment following
the Expiration Date will include unpaid interest on the Old Notes accrued
through the date of issuance of the Exchange Notes.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
The undersigned acknowledges that the Exchange Offer is subject to the
more detailed terms set forth in the Prospectus and, in case of any conflict
between the terms of the Prospectus and this Letter of Transmittal, the
Prospectus shall prevail.
If any tendered Old Notes are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Old Notes
will be returned (except as noted below with respect to tenders through DTC), at
the Company's cost and expense, to the undersigned at the address shown below or
at a different address as may be indicated herein under "Special Delivery
Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns. This tender may be withdrawn only in
accordance with the procedures set forth in this Letter of Transmittal.
By acceptance of the Exchange Offer, each broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer hereby acknowledges and agrees
that upon the receipt of notice by the Company of the happening of any event
which makes any statement in the Prospectus untrue in any material respect or
which requires the making of any changes in the Prospectus in order to make the
statements therein not misleading (which notice the Company agrees to deliver
promptly to such broker-dealer), such broker-dealer will suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission and has furnished copies of the amended or
supplemented prospectus to such broker-dealer.
Unless otherwise indicated under "Special Registration Instructions,"
please issue the certificates representing the Exchange Notes issued in exchange
for the Old Notes accepted for exchange and return any certificates for Old
Notes not tendered or not exchanged, in the name(s) of the undersigned (or, in
either such event in the case of Old Notes tendered by DTC, by credit to the
account at DTC). Similarly, unless otherwise indicated under "Special Delivery
Instructions," please send the certificates representing the Exchange Notes
issued in exchange for the Old Notes accepted for exchange and any certificates
for Old Notes not tendered or not exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s), unless, in either event, tender is being made through DTC. In the
event that both "Special Registration Instructions" and "Special Delivery
Instructions" are completed, please issue the certificates representing the
Exchange Notes issued in exchange for the Old Notes accepted for exchange in the
name(s) of, and return any certificates for Old Notes not tendered or not
exchanged to, the person(s) so indicated. The undersigned understands that the
Company has no obligations pursuant to the "Special Registration Instructions"
or "Special Delivery Instructions" to transfer any Old Notes from the name of
the registered Holder(s) thereof if the Company does not accept for exchange any
of the Old Notes so tendered.
Holders who wish to tender the Old Notes and (i) whose Old Notes are
not immediately available or (ii) who cannot deliver their Old Notes, this
Letter of Transmittal or any other documents required hereby to the Exchange
Agent prior to the Expiration Date, may tender their Old Notes according to the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 1
regarding the completion of the Letter of Transmittal.
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
AND WHETHER OR NOT TENDER IS TO BE MADE
-7-
<PAGE> 8
PURSUANT TO THE GUARANTEED DELIVERY PROCEDURES
This Letter of Transmittal must be signed by the registered holder(s)
as their name(s) appear on the Old Notes or, if tendered by a participant in
DTC, exactly as such participant's name appears on a security listing as the
owner of Old Notes, or by person(s) authorized to become registered holder(s) by
a properly completed bond power from the registered holder(s), a copy of which
must be transmitted with this Letter of Transmittal. If Old Notes to which this
Letter of Transmittal relate are held of record by two or more joint holders,
then all such holders must sign this Letter of Transmittal. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
then such person must (i) set forth his or her full title below and (ii) unless
waived by the Company, submit evidence satisfactory to the Company of such
person's authority so to act. (See Instruction 4.)
X
- ---------------------------------------- --------------------------------
Date
X
- ---------------------------------------- --------------------------------
Date
Signature(s) of Holder(s) or
Authorized Signatory
Name(s): Address:
------------------------ -----------------------------------
------------------------ -----------------------------------
(Please Print) (including Zip Code)
Capacity: Area Code and Telephone Number:
---------------------- ------------
Social Security No.:
------------
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
-8-
<PAGE> 9
BOX IV
================================================================================
SIGNATURE GUARANTEE (SEE INSTRUCTION 1)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
- --------------------------------------------------------------------------------
(Name of Eligible Institution Guaranteeing Signatures)
- --------------------------------------------------------------------------------
(Address (including zip code) and Telephone Number
(including area code) of Firm)
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Printed Name)
- --------------------------------------------------------------------------------
(Title)
Date:
---------------------
================================================================================
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Guarantee of Signatures. Signatures on this Letter of Transmittal
need not be guaranteed if (a) this Letter of Transmittal is signed by the
registered holder(s) of the Old Notes tendered herewith and such holder(s) have
not completed the box set forth herein entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instructions" or (b) such
Old Notes are tendered for the account of an Eligible Institution. (See
Instruction 6.) Otherwise, all signatures on this Letter of Transmittal or a
notice of withdrawal, as the case may be, must be guaranteed by a member firm of
a registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an office
or correspondent in the United States (an "Eligible Institution"). All
signatures on bond powers and endorsements on certificates must also be
guaranteed by an Eligible Institution.
2. Delivery of this Letter of Transmittal and Old Notes. Certificates
for all physically delivered Old Notes or confirmation of any book-entry
transfer to the Exchange Agent at DTC of Old Notes tendered by book-entry
transfer, as well as, in each case (including cases where tender is affected by
book-entry transfer), a properly completed and duly executed copy of this Letter
of Transmittal or facsimile hereof and any other documents required by this
Letter of Transmittal must be received by the Exchange Agent at its address set
forth herein prior to 5:00 p.m., New York City time, on the Expiration Date.
The method of delivery of the tendered Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the Holder and the delivery will be deemed made only when
actually received by the Exchange Agent. If Old Notes are sent by mail,
registered mail with return receipt requested, properly insured, is recommended.
In all cases, sufficient time should be allowed to ensure timely delivery. No
Letter of Transmittal or Old Notes should be sent to the Company.
The Exchange Agent will make a request to establish an account with
respect to the Old Notes at the Depositary for purposes of the Exchange Offer
within two business days after receipt of this Prospectus, and any financial
institution that is a participant in the Depositary may make book-entry delivery
of Old Notes by causing the Depositary to transfer
-9-
<PAGE> 10
such Old Notes into the Exchange Agent's account at the Depositary in accordance
with the Depositary's procedures for transfer. However, although delivery of Old
Notes may be effected through book-entry transfer at the Depositary, the Letter
of Transmittal, with any required signature guarantees or an Agent's Message (as
defined below) in connection with a book-entry transfer and any other required
documents, must, in any case, be transmitted to and received by the Exchange
Agent at the address specified on the cover page of the Letter of Transmittal on
or prior to the Expiration Date or the guaranteed delivery procedures described
below must be complied with.
A Holder may tender Old Notes that are held through the Depositary by
transmitting its acceptance through the Depositary's Automatic Tender Offer
Program, for which the transaction will be eligible, and the Depositary will
then edit and verify the acceptance and send an Agent's Message to the Exchange
Agent for its acceptance. The term "Agent's Message" means a message transmitted
by the Depositary to, and received by, the Exchange Agent and forming part of
the Book-Entry Confirmation, which states that the Depositary has received an
express acknowledgment from each participant in the Depositary tendering the Old
Notes and that such participant has received the Letter of Transmittal and
agrees to be bound by the terms of the Letter of Transmittal and the Company may
enforce such agreement against such participant.
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available, or (ii) who cannot deliver their Old Notes, this
Letter of Transmittal or any other documents required hereby to the Exchange
Agent prior to the Expiration Date or comply with book-entry transfer procedures
on a timely basis must tender their Old Notes according to the guaranteed
delivery procedures set forth in the Prospectus. See "Exchange Offer
- --Guaranteed Delivery Procedures." Pursuant to such procedure: (i) such tender
must be made by or through an Eligible Institution; (ii) prior to the Expiration
Date, the Exchange Agent must have received from the Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, overnight courier, mail or hand delivery) setting forth the name
and address of the Holder of the Old Notes, the certificate number or numbers of
such Old Notes and the principal amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within three New York Stock
Exchange trading days after the Expiration Date, this Letter of Transmittal (or
facsimile hereof) together with the certificate(s) representing the Old Notes
and any other required documents will be deposited by the Eligible Institution
with the Exchange Agent; and (iii) such properly completed and executed Letter
of Transmittal (or facsimile hereof), as well as all other documents required by
this Letter of Transmittal and the certificate(s) representing all tendered Old
Notes in proper form for transfer (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at DTC), must be received by
the Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date, all in the manner provided in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures." Any Holder who wishes to
tender his Old Notes pursuant to the guaranteed delivery procedures described
above must ensure that the Exchange Agent receives the Notice of Guaranteed
Delivery prior to 5:00 p.m., New York City time, on the Expiration Date. Upon
request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to
Holders who wish to tender their Old Notes according to the guaranteed delivery
procedures set forth above.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes, and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. All tendering holders, by execution of this Letter of
Transmittal (or facsimile thereof), shall waive any right to receive notice of
the acceptance of the Old Notes for exchange. The Company reserves the absolute
right to reject any and all Old Notes not properly tendered or any Old Notes the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the right to waive any irregularities or
conditions of tender as to particular Old Notes. The Company's interpretation of
the terms and conditions of the Exchange Offer (including the instructions in
this Letter of Transmittal) shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
must be cured within such time as the Company shall determine. Neither the
Company, the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Old Notes,
nor shall any of them incur any liability for failure to give such notification.
Tenders of Old Notes will not be deemed to have been made until such defects or
irregularities have been cured to the Company's satisfaction or waived. Any Old
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holders pursuant to the
Company's determination, unless otherwise provided in this Letter of Transmittal
as soon as practicable following the Expiration Date. The Exchange Agent has no
fiduciary duties to the Holders with respect to the Exchange Offer and is acting
solely on the basis of directions of the Company.
-10-
<PAGE> 11
3. Inadequate Space. If the space provided is inadequate, the
certificate numbers and/or the number of Old Notes should be listed on a
separate signed schedule attached hereto.
4. Tender by Holder. Only a Holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial owner of Old Notes who is not the
registered Holder and who wishes to tender should arrange with such registered
holder to execute and deliver this Letter of Transmittal on such beneficial
owner's behalf or must, prior to completing and executing this Letter of
Transmittal and delivering his Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such beneficial owner's name or obtain
a properly completed bond power from the registered holder or properly endorsed
certificates representing such Old Notes.
5. Partial Tenders; Withdrawals. Tenders of Old Notes will be accepted
only in integral multiples of $1,000. If less than the entire principal amount
of any Old Notes is tendered, the tendering Holder should fill in the principal
amount tendered in the third column of the box entitled "Description of 115/8%
Senior Subordinated Notes due 2008, Series A" above. The entire principal amount
of any Old Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated. If the entire principal amount of all Old
Notes is not tendered, then Old Notes for the principal amount of Old Notes not
tendered and a certificate or certificates representing Exchange Notes issued in
exchange for any Old Notes accepted will be sent to the Holder at his or her
registered address, unless a different address is provided in the "Special
Delivery Instructions" box above on this Letter of Transmittal or unless tender
is made through DTC, promptly after the Old Notes are accepted for exchange.
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date. To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes, or, in the case of Old Notes
transferred by book-entry transfer the name and number of the account at DTC to
be credited), (iii) be signed by the Depositor in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Registrar with respect to the Old
Notes register the transfer of such Old Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Old Notes are
to be registered, if different from that of the Depositor. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company, whose determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for purposes of the Exchange Offer and no Exchange Notes
will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Any Old Notes which have been tendered but which are not
accepted for exchange by the Company will be returned to the Holder thereof
without cost to such Holder as soon as practicable after withdrawal, rejection
of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may
be retendered by following one of the procedures described in the Prospectus
under "The Exchange Offer--Procedures for Tendering" at any time prior to the
Expiration Date.
6. Signatures on the Letter of Transmittal; Bond Powers and
Endorsements. If this Letter of Transmittal (or facsimile hereof) is signed by
the registered holder(s) of the Old Notes tendered hereby, the signature must
correspond with the name(s) as written on the face of the Old Note without
alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many copies of this Letter of
Transmittal as there are different registrations of Old Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders (which term, for the Purposes described herein,
shall include a book-entry transfer facility whose name appears on a security
listing as the owner of the Old Notes) of Old Notes tendered and the certificate
or certificates for Exchange Notes issued in exchange
-11-
<PAGE> 12
therefor is to be issued (or any untendered principal amount of Old Notes to be
reissued) to the registered Holder, then such Holder need not and should not
endorse any tendered Old Notes, nor provide a separate bond power. In any other
case, such Holder must either properly endorse the Old Notes tendered or
transmit a properly completed separate bond power with this Letter of
Transmittal with the signatures on the endorsement or bond power guaranteed by
an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a
person other than the registered Holder or Holders of any Old Notes listed, such
Old Notes must be endorsed or accompanied by appropriate bond powers in each
case signed as the name of the registered Holder or Holders appears on the Old
Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 6 must be guaranteed by an Eligible Institution.
7. Special Registration and Delivery Instructions. Tendering Holders
should indicate, in the applicable box or boxes, the name and address to which
Exchange Notes or substitute Old Notes for principal amounts not tendered or not
accepted for exchange are to be issued or sent, if different from the name and
address of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
8. Backup Federal Income Tax Withholding and Substitute Form W-9. Under
the federal income tax laws, payments that may be made by the Company on account
of Exchange Notes issued pursuant to the Exchange Offer may be subject to backup
withholding at the rate of 31%. In order to avoid such backup withholding, each
tendering holder should complete and sign the Substitute Form W-9 included in
this Letter of Transmittal and either (a) provide the correct taxpayer
identification number ("TIN") and certify, under penalties of perjury, that the
TIN provided is correct and that (i) the holder has not been notified by the
Internal Revenue Service (the "IRS") that the holder is subject to backup
withholding as a result of failure to report all interest or dividends or (ii)
the IRS has notified the holder that the holder is no longer subject to backup
withholding; or (b) provide an adequate basis for exemption. If the tendering
holder has not been issued a TIN and has applied for one, or intends to apply
for one in the near future, such holder should write "Applied For" in the space
provided for the TIN in Part I of the Substitute Form W-9, sign and date the
Substitute Form W-9 and sign the Certificate of Payee Awaiting Taxpayer
Identification Number. If "Applied For" is written in Part I, the Company (or
the Paying Agent under the indenture governing the Exchange Notes) shall retain
31% of payments made to the tendering holder during the sixty-day period
following the date of the Substitute Form W-9. If the Holder furnishes the
Exchange Agent or the Company with its TIN within sixty days after the date of
the Substitute Form W-9, the Company (or the Paying Agent) shall remit such
amounts retained during the sixty-day period to the Holder and no further
amounts shall be retained or withheld from payments made to the Holder
thereafter. If, however, the Holder has not provided the Exchange Agent or the
Company with its TIN within such sixty-day period, the Company (or the Paying
Agent) shall remit such previously retained amounts to the IRS as backup
withholding. In general, if a Holder is an individual, the TIN is the Social
Security number of such individual. If the Exchange Agent or the Company are not
provided with the correct TIN, the Holder may be subject to a $50 penalty
imposed by the IRS. Certain Holders (including, among others, certain
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, such Holder must submit a statement (generally,
IRS Form W-8), signed under penalties of perjury, attesting to that individual's
exempt status. Such statements can be obtained from the Exchange Agent. For
further information concerning backup withholding and instructions for
completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the Substitute
Form W-9 if Old Notes are registered in more than one name), consult the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
-12-
<PAGE> 13
Failure to complete the Substitute Form W-9 will not, by itself, cause
Old Notes to be deemed invalidly tendered, but may require the Company (or the
Paying Agent) to withhold 31% of the amount of any payments made on account of
the Exchange Notes. Backup withholding is not an additional federal income tax.
Rather, the federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If backup withholding
results in an overpayment of taxes, a refund may be obtained from the IRS.
9. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing Exchange Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are to
be registered in the name of, any person other than the registered holder of the
Old Notes tendered hereby, or if tendered Old Notes are registered in the name
of a person other than the person signing this Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or on any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with this Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder. See the Prospectus under "The Exchange Offer--Solicitation of Tenders;
Fees and Expenses."
Except as provided in this Instruction 9, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
10. Waiver of Conditions. The Company reserves the right, in their sole
discretion, to amend, waive or modify specified conditions in the Exchange Offer
in the case of any Old Notes tendered.
11. Mutilated, Lost, Stolen or Destroyed Old Notes. Any tendering
Holder whose Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated herein for further
instructions.
12. Requests for Assistance or Additional Copies. Requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address specified in
the Prospectus. Holder may also contact their broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Exchange Offer.
-13-
<PAGE> 14
(DO NOT WRITE IN SPACE BELOW)
<TABLE>
<S> <C> <C>
CERTIFICATE SURRENDERED OLD NOTES TENDERED OLD NOTES ACCEPTED
----------------------- ------------------ ------------------
----------------------- ------------------ ------------------
Date Received Accepted by Checked by
------------------ ------- --------
Delivery Prepared by Checked by Date
------------------ ------- --------------
</TABLE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose tendered Old Notes are
accepted for payment is required to provide the Exchange Agent (as payer) with
such Holder's correct TIN on Substitute Form W-9 below or otherwise establish a
basis for exemption from backup withholding. If such Holder is an individual,
the TIN is his social security number. If the Exchange Agent is not provided
with the correct TIN, a $50 penalty may be imposed by the IRS, and payments made
pursuant to the Exchange Offer may be subject to backup withholding.
Certain Holders (including, among others, certain corporations and
certain foreign persons) are not subject to these backup withholding and
reporting requirements. Exempt Holders should indicate their exempt status on
Substitute Form W-9. A foreign person may qualify as an exempt recipient by
submitting to the Exchange Agent a properly completed IRS Form W-8, signed under
penalties of perjury, attesting to that Holder's exempt status. A Form W-8 can
be obtained from the Exchange Agent. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
If backup withholding applies, the Exchange Agent is required to
withhold 31% of any payments made to the Holder or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the IRS.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to the
Exchange Offer, the Holder is required to provide the Exchange Agent with
either: (i) the Holder's correct TIN by completing the Substitute Form W-9
below, certifying that the TIN provided on Substitute Form W-9 is correct (or
that such Holder is awaiting a TIN) and that (A) the Holder has not been
notified by the IRS that the Holder is subject to backup withholding as a result
of failure to report all interest or dividends or (B) the IRS has notified the
Holder that the Holder is no longer subject to backup withholding or (ii) an
adequate basis for exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered Holder of
the Old Notes. If the Old Notes are held in more than one name or are held not
in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
-14-
<PAGE> 15
CERTIFICATION OF PAYEE AWAITING TAXPAYER INDEMNIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer Identification
Number has not been issued to me, and that I mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administration Office (or I intend to mail or
deliver an application in the near future). I understand that if I do not
provide a Taxpayer Identification Number to the payer, 31% of all payments made
to me on account of the Exchange Notes shall be retained until I provide a
Taxpayer Identification Number to the payer and that, if I do not provide my
Taxpayer Identification Number within sixty days, such retained amounts shall be
remitted to the Internal Revenue Service as backup withholding and 31% of all
reportable payments made to me thereafter will be withheld and remitted to the
Internal Revenue Service until I provide a Taxpayer Identification Number.
SIGNATURE DATE
-------------------------------------- --------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE
EXCHANGE NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
-15-
<PAGE> 16
<TABLE>
<S> <C>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 8) Department of the Treasury
INTERNAL REVENUE SERVICE
PAYER'S NAME: AMERICAN PLUMBING & MECHANICAL, INC.
========================================================================================================================
SUBSTITUTE PART I - TAXPAYER IDENTIFICATION NUMBER (TIN) SOCIAL SECURITY NUMBER
FORM W-9 ENTER YOUR TIN IN THE APPROPRIATE BOX. FOR ------------------------------
INDIVIDUALS, THIS IS YOUR SOCIAL SECURITY NUMBER (SSN). OR
DEPARTMENT OF THE TREASURY FOR SOLE PROPRIETORS, SEE THE INSTRUCTIONS IN THE
INTERNAL REVENUE SERVICE ENCLOSED GUIDELINES. FOR OTHER ENTITIES, IT IS YOUR EMPLOYER IDENTIFICATION NUMBER
EMPLOYER IDENTIFICATION NUMBER (EIN). IF YOU DO NOT
REQUEST FOR TAXPAYER HAVE A NUMBER, SEE HOW TO GET A TIN IN THE ENCLOSED ------------------------------
IDENTIFICATION NUMBER GUIDELINES.
AND CERTIFICATION
NOTE: IF THE ACCOUNT IS IN MORE THAN ONE NAME, SEE
THE CHART ON PAGE 2 OF THE ENCLOSED GUIDELINES FOR
INSTRUCTIONS ON WHOSE NUMBER TO ENTER.
-----------------------------------------------------------------------------------------
PART II - FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING
(See Part II instructions in the enclosed Guidelines.)
- ------------------------------------------------------------------------------------------------------------------------
PART III - CERTIFICATION - UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be
issued to me), and
(2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure
to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup
withholding.
Signature Date , 1999
--------------------------------------------------- ------------------------------------
========================================================================================================================
</TABLE>
CERTIFICATION INSTRUCTIONS.-You must cross out item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding because
you have failed to report all interest or dividends on your tax return. For real
estate transactions, item 2 does not apply. For mortgage interest paid, the
acquisition or abandonment of secured property, cancellation of debt,
contributions to an individual retirement arrangement (IRA), and generally
payments other than interest and dividends, you are not required to sign the
Certification, but you must provide your correct TIN.
-16-
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR 11 5/8% SENIOR SUBORDINATED NOTES DUE 2008, Series A OF
AMERICAN PLUMBING & MECHANICAL, INC.
As set forth in the Prospectus dated __________, 1999 (the
"Prospectus") of American Plumbing & Mechanical, Inc. (the "Company") and in the
Letter of Transmittal (the "Letter of Transmittal"), this form or a form
substantially equivalent to this form must be used to accept the Exchange Offer
(as defined below) if the certificates for the outstanding 115/8% Senior
Subordinated Notes due 2008, Series A (the "Old Notes") of the Company and all
other documents required by the Letter of Transmittal cannot be delivered to the
Exchange Agent by the expiration of the Exchange Offer or compliance with
book-entry transfer procedures cannot be effected on a timely basis. Such form
may be delivered by hand or transmitted by facsimile transmission, telex or mail
to the Exchange Agent no later than the Expiration Date, and must include a
signature guarantee by an Eligible Institution as set forth below.
TO:
State Street Bank and Trust Company (the "Exchange Agent")
By Mail or Hand Delivery: By Registered or Certified Mail:
State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Window, Fifth Floor Corporate Trust Department
2 Avenue De Lafayette P.O. Box 778
Boston, Massachusetts 02111-1724 Boston, Massachusetts 02102-0778
Attention: Kellie Mullen Attention: Kellie Mullen
By Facsimile Transmission:
(for Eligible Institutions only)
State Street Bank and Trust Company
(617) 664-5395
Attention: Kellie Mullen
For Information or Confirmation by Telephone:
(617) 664-5587
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY. THE METHOD OF DELIVERY OF ALL DOCUMENTS,
INCLUDING CERTIFICATES, IS AT THE RISK OF THE HOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
THE INSTRUCTIONS ACCOMPANYING THE LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY
BEFORE THIS NOTICE OF GUARANTEED DELIVERY IS COMPLETED.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the instructions thereto, such
signatures must appear in the applicable space provided on the Letter of
Transmittal for Guarantee of Signature(s).
<PAGE> 2
Ladies and Gentlemen:
The undersigned acknowledges receipt of the Prospectus and the related
Letter of Transmittal which describes the Company's offer (the "Exchange Offer")
to exchange $1,000 in principal amount of a new series of 115/8% Senior
Subordinated Notes due 2008, Series B (the "Exchange Notes") for each $1,000 in
principal amount of the Old Notes.
The undersigned hereby tenders to the Company the aggregate principal
amount of Old Notes set forth below on the terms and conditions set forth in the
Prospectus and the related Letter of Transmittal pursuant to the guaranteed
delivery procedure set forth in the "The Exchange Offer--Guaranteed Delivery
Procedures" section in the Prospectus and the accompanying Letter of
Transmittal.
The undersigned understands that no withdrawal of a tender of Old Notes
may be made on or after the expiration date of the Exchange Offer. The
undersigned understands that for a withdrawal of a tender of Old Notes to be
effective, a written notice of withdrawal that complies with the requirements of
the Exchange Offer must be timely received by the Exchange Agent at one of its
addresses specified on the cover of this Notice of Guaranteed Delivery prior to
the Expiration Date.
The undersigned understands that the exchange of Old Notes for Exchange
Notes pursuant to the Exchange Offer will be made only after timely receipt by
the Exchange Agent of (i) such Old Notes (or Book-Entry Confirmation of the
transfer of such Old Notes into the Exchange Agent's account at The Depository
Trust Company (the "Depositary" or "DTC")) and (ii) a Letter of Transmittal (or
facsimile thereof) with respect to such Old Notes, properly completed and duly
executed, with any required signature guarantees, this Notice of Guaranteed
Delivery and any other documents required by the Letter of Transmittal or a
properly transmitted Agent's Message. The term "Agent's Message" means a message
transmitted by the Depositary to, and received by, the Exchange Agent and
forming part of the confirmation of a book-entry transfer, which states that the
Depositary has received an express acknowledgment from each participant in the
Depositary tendering the Old Notes and that such participant has received the
Letter of Transmittal and agrees to be bound by the terms of the Letter of
Transmittal and the Company may enforce such agreement against such participant.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and every obligation of the undersigned under
this Notice of Guaranteed Delivery shall be binding upon the heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives,
successors and assigns of the undersigned.
-2-
<PAGE> 3
PLEASE SIGN AND COMPLETE
<TABLE>
<S> <C>
Signature(s) of Registered Owner(s) or Authorized Name(s) of Registered Holder(s)
Signatory:
------------------------------------------ -----------------------------------------------------
- ----------------------------------------------------- -----------------------------------------------------
- ----------------------------------------------------- -----------------------------------------------------
Principal Amount of Old Notes Tendered: Address:
--------------------------------------------
- ----------------------------------------------------- -----------------------------------------------------
Certificate No(s) of Old Notes (if available): Area Code and Telephone No.:
-------------------------
- ----------------------------------------------------- If Old Notes will be delivered by book-entry transfer
at The Depository Trust Company, insert
- ----------------------------------------------------
Depository Account No.:
- ----------------------------------------------------- ------------------------------
Date:
-----------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the registered Holder(s) of
Old Notes exactly as its (their) name(s) appear on certificates for Old Notes or
on a security position listing as the owner of Old Notes, or by person(s)
authorized to become registered Holder(s) by endorsements and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must
provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
-------------------------------------------------------------------
-------------------------------------------------------------------
Capacity:
-------------------------------------------------------------------
Address(es):
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
DO NOT SEND OLD NOTES WITH THIS FORM. OLD NOTES SHOULD BE SENT TO THE EXCHANGE
AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL.
-3-
<PAGE> 4
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or a correspondent in the
United States, or otherwise an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended,
hereby (a) represents that each holder of Old Notes on whose behalf this tender
is being made "own(s)" the Old Notes covered hereby within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (b) represents that such tender of Old Notes complies with Rule 14e-4 of
the Exchange Act and (c) guarantees that, within three New York Stock Exchange
trading days from the expiration date of the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof),
together with certificates representing the Old Notes covered hereby in proper
form for transfer (or confirmation of the book-entry transfer of such Old Notes
into the Exchange Agent's account at The Depository Trust Company, pursuant to
the procedure for book-entry transfer set forth in the Prospectus) and required
documents will be deposited by the undersigned with the Exchange Agent.
The undersigned acknowledges that it must deliver the Letter of
Transmittal and Old Notes tendered hereby to the Exchange Agent within the time
period set forth above and that failure to do so could result in financial loss
to the undersigned.
Name of Firm:
------------------------ -------------------------------------
Authorized Signature
Address: Name:
----------------------------- --------------------------------
Title:
- ------------------------------------- --------------------------------
Area Code and Telephone No.: Date:
----------- --------------------------------
-4-
<PAGE> 1
EXHIBIT 99.3
AMERICAN PLUMBING & MECHANICAL, INC.
OFFER TO EXCHANGE
its
11 5/8% Senior Subordinated Notes Due 2008, Series B
for any and all of its
11 5/8% Senior Subordinated Notes due 2008, Series A
To Our Clients:
Enclosed for your consideration are the Prospectus dated __________,
1999 (the "Prospectus") and the related Letter of Transmittal (which together
with the Prospectus constitute the "Exchange Offer") in connection with the
offer by American Plumbing & Mechanical, Inc., a Delaware corporation (the
"Company"), to exchange its outstanding 115/8% Senior Subordinated Notes due
2008, Series A (the "Exchange Notes") for any and all of the outstanding 115/8%
Senior Subordinated Notes due 2008, Series B (the "Old Notes"), upon the terms
and subject to the conditions set forth in the Exchange Offer.
We are the Registered Holders of Old Notes held for your account. An
exchange of the Old Notes can be made only by us as the Registered Holders and
pursuant to your instructions. The Letter of Transmittal is furnished to you for
your information only and cannot be used by you to exchange the Old Notes held
by us for your account. The Exchange Offer provides a procedure for holders to
tender by means of guaranteed delivery.
We request information as to whether you wish us to exchange any or all
of the Old Notes held by us for your account upon the terms and subject to the
conditions of the Exchange Offer.
Your attention is directed to the following:
1. The Exchange Notes will be exchanged for the Old Notes at the
rate of $1,000 principal amount of Exchange Notes for each $1,000
principal amount of Old Notes. Interest on the Notes will accrue at the
rate of 115/8% per annum and will be payable semi-annually on each
April 15 and October 15 commencing October 15, 1999, to the holders of
record of Notes at the close of business on the April 1 and October 1,
respectively, immediately preceding such interest payment date.
Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the
original date of issuance. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months. The form and terms of
the Exchange Notes are identical in all material respects to the form
and terms of the Old Notes, except that (i) the offering of the
Exchange Notes has been registered under the Securities Act of 1933, as
amended (the "Securities Act"), (ii) the Exchange Notes will not be
subject to transfer restrictions and (iii) certain provisions relating
to an increase in the stated interest rate on the Old Notes provided
for under certain circumstances will be eliminated.
2. Based on an interpretation by the staff of the Securities and
Exchange Commission, Exchange Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder
which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act or a "broker" or "dealer" registered under the
Securities Exchange Act of 1934, as amended) without compliance with
the registration and prospectus delivery provisions of the Securities
Act, provided that such Exchange Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement
or understanding with any person to participate in the distribution of
such Exchange Notes. See the discussion in the Prospectus under "The
Exchange Offer--Purpose and Effect of the Exchange Offer."
<PAGE> 2
3. The Exchange Offer is not conditioned on any minimum principal
amount of Old Notes being tendered.
4. Notwithstanding any other term of the Exchange Offer, the
Company will not be required to accept for exchange, or exchange
Exchange Notes for, any Old Notes not theretofore accepted for
exchange, and may terminate or amend the Exchange Offer as provided
herein before the acceptance of such Old Notes, if any of the
conditions described in the Prospectus under "The Exchange
Offer--Conditions to the Exchange Offer" exist.
5. Tendered Old Notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on , 1999.
6. Any transfer taxes applicable to the exchange of the Old Notes
pursuant to the Offer will be paid by the Company, except as otherwise
provided in the Prospectus under "The Exchange Offer--Solicitation of
Tenders; Fees and Expenses" and in Instruction 9 of the Letter of
Transmittal.
If you wish to have us tender any or all of your Old Notes, please so
instruct us by completing, detaching and returning to us the instruction form
attached hereto. An envelope to return your instructions is enclosed. If you
authorize a tender of your Old Notes, the entire principal amount of Old Notes
held for your account will be tendered unless otherwise specified on the
instruction form. Your instructions should be forwarded to us in ample time to
permit us to submit a tender on your behalf by the Expiration Date.
The Exchange Offer is not being made to, nor will tenders be accepted
from or on behalf of, holders of the Old Notes in any jurisdiction in which the
making of the Exchange Offer or acceptance thereof would not be in compliance
with the laws of such jurisdiction or would otherwise not be in compliance with
any provision of any applicable security law.
-2-
<PAGE> 1
EXHIBIT 99.4
AMERICAN PLUMBING & MECHANICAL, INC.
OFFER TO EXCHANGE
its
115/8% Senior Subordinated Notes Due 2008, Series B
for any and all of its
115/8% Senior Subordinated Notes due 2008, Series A
To Brokers, Dealers, Commercial
Banks, Trust Companies and
Other Nominees:
We are enclosing herewith an offer by American Plumbing & Mechanical,
Inc., a Delaware corporation (the "Company"), to exchange its 115/8% Senior
Subordinated Notes due 2008, Series B (the "Exchange Notes") for any and all of
its outstanding 115/8% Senior Subordinated Notes due 2008, Series A (the "Old
Notes"), upon the terms and subject to the conditions set forth in the
accompanying Prospectus dated __________, 1999 (the "Prospectus") and related
Letter of Transmittal (which together with the Prospectus constitutes the
"Exchange Offer").
The Exchange Offer provides a procedure for holders to tender the Old
Notes by means of guaranteed delivery.
The Exchange Offer will expire at 5:00 p.m., New York City time, on
__________, 1999, unless extended (the "Expiration Date"). Tendered Old Notes
may be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
Based on an interpretation by the staff of the Securities and Exchange
Commission, Exchange Notes issued pursuant to the Exchange Offer in exchange for
Old Notes may be offered for resale, resold and otherwise transferred by holders
thereof (other than any such holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act or a "broker" or
"dealer" registered under the Securities Exchange Act of 1934, as amended)
without compliance with the registration and prospectus delivery provisions of
the Securities Act provided that such Exchange Notes are acquired in the
ordinary course of such holders' business and such holders have no arrangement
with any person to participate in the distribution of such Exchange Notes. See
the discussion in the Prospectus under "The Exchange Offer--Purpose and Effect
of the Exchange Offer."
The Exchange Offer is not conditioned on any minimum principal amount
of Old Notes being tendered.
Notwithstanding any other term of the Exchange Offer, the Company will
not be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes not theretofore accepted for exchange, and may terminate or amend the
Exchange Offer as provided herein before the acceptance of such Old Notes, if
any of the conditions described in the Prospectus under "The Exchange
Offer--Conditions to the Exchange Offer" exist.
The Company reserves the right not to accept tendered Old Notes from
any tendering holder if the Company determines, in its sole and absolute
discretion, that such acceptance could result in a violation of applicable
securities laws.
For your information and for forwarding to your clients for whom you
hold Old Notes registered in your name or in the name of your nominee, we are
enclosing the following documents:
1. A Prospectus dated __________, 1999.
2. A Letter of Transmittal for your use and for the information of your
clients.
<PAGE> 2
3. A printed form of letter which may be sent to your clients for whose
accounts you hold Old Notes registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Exchange Offer.
4. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 of the Internal Revenue Service (included in Letter of
Transmittal).
WE URGE YOU TO CONTACT YOUR
CLIENTS AS PROMPTLY AS POSSIBLE.
Any inquiries you may have with respect to the Exchange Offer may be
addressed to, and additional copies of the enclosed materials may be obtained
from, the Exchange Agent at the following telephone number: (617) 664- 5587.
Very truly yours,
AMERICAN PLUMBING & MECHANICAL, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU AS
THE AGENT OF THE COMPANY, THE EXCHANGE AGENT OR ANY OTHER PERSON OR AUTHORIZE
YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF
ANY OF THEM IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS
ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
-2-
<PAGE> 1
EXHIBIT 99.5
AMERICAN PLUMBING & MECHANICAL, INC.
OFFER TO EXCHANGE
its
115/8% Senior Subordinated Notes Due 2008, Series B
for any and all of its
115/8% Senior Subordinated Notes due 2008, Series A
INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER
The undersigned acknowledge(s) receipt of your letter and the enclosed
Prospectus and the related Letter of Transmittal, in connection with the offer
by American Plumbing & Mechanical, Inc. (the "Company") to exchange the 115/8%
Senior Subordinated Notes due 2008, Series A (the "Old Notes").
This will instruct you to tender the principal amount of Old Notes
indicated below held by you for the account of the undersigned, upon the terms
and subject to the conditions set forth in the Prospectus and the related Letter
of Transmittal.
The undersigned represents that (i) the 115/8% Senior Subordinated
Notes due 2008, Series B (the "Exchange Notes") to be acquired pursuant to the
Exchange Offer in exchange for the Old Notes designated below are being obtained
in the ordinary course of business of the person receiving such Exchange Notes,
(ii) neither the undersigned nor any other person receiving such Exchange Notes
is participating, intends to participate, or has any arrangement or
understanding with any person to participate, in the distribution of such
Exchange Notes, and (iii) it is not an "affiliate," as defined under Rule 405 of
the Securities Act of 1933 (the "Securities Act"), of the Company or, if it is
an affiliate, that it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
If the undersigned is a "broker" or "dealer" registered under the
Securities Exchange Act of 1934 that acquired Old Notes for its own account
pursuant to its market-making or other trading activities (other than Old Notes
acquired directly from the Company), the undersigned understands and
acknowledges that it may be deemed to be an "underwriter" within the meaning of
the Securities Act and, therefore, must deliver a prospectus relating to the
Exchange Notes in connection with any resales by it of Exchange Notes acquired
for its own account in the Exchange Offer. Notwithstanding the foregoing, the
undersigned does not thereby admit that it is an "underwriter" within the
meaning of the Securities Act.
YOU ARE HEREBY INSTRUCTED TO TENDER ALL OLD NOTES HELD FOR THE ACCOUNT OF THE
UNDERSIGNED UNLESS OTHERWISE INDICATED BELOW.
[ ] DO NOT TENDER ANY OLD NOTES
[ ] TENDER OLD NOTES IN THE AGGREGATE PRINCIPAL AMOUNT OF $_______________
SIGNATURE:
- --------------------------------------------------------------------------------
NAME OF BENEFICIAL OWNER (PLEASE PRINT)
BY
------------------------------------------------------------------------------
SIGNATURE
- --------------------------------------------------------------------------------
ADDRESS
- --------------------------------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER
DATED: , 1999
