<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) March 1, 2000
Commission File No. 333-81139
AMERICAN PLUMBING & MECHANICAL, INC.
(Exact name of Registrant as Specified in Its Charter)
DELAWARE 76-0577626
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
1950 LOUIS HENNA BLVD. 78664
ROUND ROCK, TEXAS (ZIP Code)
(Address of Principal Executive Offices)
(512) 246-5260
(Registrant's telephone number, including area code)
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Lindy Dennis Industries, Inc. and Affiliates:
We have audited the accompanying combined balance sheet of Lindy Dennis
Industries, Inc. and Affiliates as of December 31, 1999, and the related
combined statements of income, cash flows and stockholders' equity for the year
then ended. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Lindy Dennis
Industries, Inc. and Affiliates as of December 31, 1999, and the results of
their operations and their cash flows for the year then ended, in conformity
with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Houston, Texas
May 5, 2000
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LINDY DENNIS INDUSTRIES, INC. AND AFFILIATES
COMBINED BALANCE SHEET
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
December 31,
1999
-------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,743
Accounts receivable, net 5,636
Related party receivables 75
Inventories 683
Costs and estimated earnings in excess of billings on uncompleted contracts 2,748
Prepaid expenses and other current assets 93
-------------
Total current assets 10,978
PROPERTY AND EQUIPMENT, net 2,053
OTHER ASSETS 33
-------------
Total assets $ 13,064
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 2,549
Current maturities of long-term debt 309
Deferred tax liability 45
Income taxes payable 877
Billings in excess of costs and estimated earnings on uncompleted contracts 1,710
-------------
Total current liabilities 5,490
LONG-TERM DEBT, net of current maturities 300
-------------
Total liabilities 5,790
-------------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY:
Common stock, $100 par value, 500 shares authorized, 397 shares issued and
outstanding for Lindy Dennis Industries, Inc., $1 par value, 1,000 shares
authorized, issued and outstanding for each of Krahenbuhl Plumbing, Inc.
and Green Valley Plumbing, Inc., no par value, 100,000 shares authorized,
10,000 issued and outstanding for LDI Heating and Air Conditioning, no par
value, 200,000 shares authorized, 125,000 shares issued and outstanding for
LDI Mechanical
178
Additional paid in capital 205
Stockholder receivable (1,299)
Retained earnings 8,190
-------------
Total stockholders' equity 7,274
-------------
Total liabilities and stockholders' equity $ 13,064
=============
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
2
<PAGE> 4
LINDY DENNIS INDUSTRIES, INC. AND AFFILIATES
COMBINED STATEMENT OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
-------------
<S> <C>
REVENUES $ 37,058
COST OF REVENUES (including depreciation) 27,485
-------------
Gross profit 9,573
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 4,546
-------------
Income from operations 5,027
OTHER INCOME (EXPENSE):
Interest income 132
Interest expense (85)
Other 113
-------------
Other income, net 160
-------------
INCOME BEFORE PROVISION FOR INCOME TAXES 5,187
PROVISION FOR INCOME TAXES 850
-------------
NET INCOME $ 4,337
=============
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
3
<PAGE> 5
LINDY DENNIS INDUSTRIES, INC. AND AFFILIATES
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Common Stock Additional Total
----------------------- Paid In Stockholder Retained Stockholders'
Shares Amount Capital Receivable Earnings Equity
---------- ---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 137,397 $ 178 $ 205 $ (286) $ 4,700 $ 4,797
Distributions to stockholders -- -- -- (847) (847)
Advances to stockholder -- -- (1,013) -- (1,013)
Net income -- -- -- -- 4,337 4,337
---------- ---------- ---------- ---------- ---------- ----------
BALANCE, December 31, 1999 137,397 $ 178 $ 205 $ (1,299) $ 8,190 $ 7,274
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
4
<PAGE> 6
LINDY DENNIS INDUSTRIES, INC. AND AFFILIATES
COMBINED STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
-------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,337
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization 412
Bad debt expense 63
Loss on disposal of property and equipment 76
Deferred income taxes (28)
Increase (decrease) in cash flows from:
Accounts receivable, net (1,041)
Inventories (224)
Costs and estimated earnings in excess of billings on uncompleted contracts (1,728)
Prepaid expenses and other current assets 58
Accounts payable and accrued expenses 1,037
Billings in excess of costs and estimated earnings on uncompleted contracts 109
-------------
Net cash provided by operating activities 3,071
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property and equipment (1,286)
Proceeds from sale of property and equipment 23
-------------
Net cash used in investing activities (1,263)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on bank credit facility (67)
Payments on long-term debt (130)
Advances to stockholder (1,013)
Distributions to stockholders (847)
-------------
Net cash used in financing activities (2,057)
-------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (249)
CASH AND CASH EQUIVALENTS, beginning of year 1,992
-------------
CASH AND CASH EQUIVALENTS, end of year $ 1,743
=============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for-
Interest $ 85
Income taxes 112
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
5
<PAGE> 7
LINDY DENNIS INDUSTRIES, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Lindy Dennis Industries, Inc., a Texas corporation, together with LDI
Heating and Air Conditioning and LDI Mechanical, both California corporations,
and Krahenbuhl Plumbing, Inc., Krahenbuhl Fire Sprinklers, LLC and Green Valley
Plumbing, Inc., Nevada corporations, (the "Combined Companies") are commonly
owned and managed, and all transactions within the Combined Companies have been
eliminated in consolidation. Unless distinction is necessary, the Combined
Companies shall be referred to herein as the "Company". The Company operates
primarily as a heating, ventilation and air conditioning ("HVAC") contractor
specializing in the multifamily residential market in California and Nevada. The
Company performs the majority of its contract work under fixed price
arrangements with contract terms generally ranging from six to twelve months.
In March 1999, the sole stockholder of Lindy Dennis Industries, Inc.
acquired a 35 percent interest in Krahenbuhl Plumbing, Inc., Krahenbuhl Fire
Sprinklers, LLC and Green Valley Plumbing, Inc. from an existing stockholder of
the companies.
On March 1, 2000, American Plumbing and Mechanical, Inc. (AMPAM),
acquired all outstanding shares of the Company's common stock in exchange for
cash and shares of AMPAM common stock(See Note 11).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
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.
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 improvements 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 income.
Revenue Recognition
The Company recognizes revenue from construction contracts on the
percentage-of-completion method measured by the percentage of cost incurred 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
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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. Revenues from
services are recognized when services are performed.
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 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 accounts.
Income Taxes
All of the Combined Companies with the exception of Lindy Dennis
Industries, Inc. and Krahenbuhl Fire Sprinklers, LLC have elected S Corporation
status, as defined by the Internal Revenue Code. Once S Corporation status is
elected, a company itself is not subject to taxation for federal purposes,
rather, its 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 taxes consists only of state income taxes for the
Combined Companies that have elected S Corporation status and both federal and
state taxes for Lindy Dennis Industries, Inc. which is a C Corporation.
The Company follows the liability method of accounting for income taxes
for those companies recording 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 principles
generally accepted accounting United States 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. Reference is
made to the "Revenue Recognition" section of this note for discussion of some of
the significant estimates reflected in the Company's financial statements.
Realization of Long-Lived Assets
In the event that facts and circumstances indicate that property and
equipment or other long-lived assets may be impaired, an evaluation of
recoverability will be performed. The result of any impairment would be to
expense the difference between the fair value of such property and its carrying
value. No such impairment had occurred at December 31, 1999.
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Fair Value of Financial Instruments
The carrying amounts reflected in the accompanying balance sheet for
cash, accounts receivable, costs and estimated earnings in excess of billings on
uncompleted contracts, accounts payable and accrued expenses, accounts
payable-related parties, and billings in excess of costs and estimated earnings
on uncompleted contracts and the credit facility approximate fair value due to
the short term nature of the instruments.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Accounts receivable consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Contract receivables $ 5,714
Other accounts receivable 12
Allowance for uncollectable accounts (90)
----------
$ 5,636
==========
Installation contracts in progress are as follows (in thousands):
December 31,
1999
----------
Costs incurred on contracts in progress $ 37,874
Estimated earnings on contracts in progress 17,876
----------
55,750
Less - Billings to date (54,712)
----------
1,038
==========
Costs and estimated earnings in excess of billings on uncompleted contracts 2,748
Billings in excess of costs and estimated earnings on uncompleted contracts (1,710)
----------
$ 1,038
==========
Accounts payable and accrued expenses consist of the following (in
thousands):
</TABLE>
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
Accounts payable, trade $ 2,015
Accrued warranty 100
Accrued payroll 184
Accrued vacation 142
Accrued insurance 82
Other accrued expenses 26
----------
$ 2,549
==========
</TABLE>
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<PAGE> 10
4. PROPERTY AND EQUIPMENT, NET:
Property and equipment, net consists of the following (in thousands):
<TABLE>
<CAPTION>
Estimated
Useful Lives December 31,
In Years 1999
------------ -------------
<S> <C> <C>
Vehicles and equipment 5 $ 1,479
Office equipment 5-7 771
Leasehold improvements 5 818
-------------
3,068
Less - Accumulated depreciation and amortization (1,015)
-------------
$ 2,053
=============
</TABLE>
The accompanying combined statement of income reflects depreciation and
amortization expense of approximately $412,000 for the year ended December 31,
1999. The Company purchased vehicles for approximately $305,000 through the
issuance of long-term debt (See Note 5).
5. LINE OF CREDIT AND LONG-TERM DEBT:
On March 1, 2000, AMPAM repaid all of the Company's outstanding debt in
connection with their acquisition of the Company (See Note 1).
The Company's debt obligations consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1999
------------
<S> <C>
$200,000 line of credit with a bank, due August 2000, interest of 10 percent per annum at $ 143
December 31, 1999, secured by certain assets of the Company
$200,000 line of credit with a bank, due July 2000, interest of 6.35 percent per
annum at December 31, 1999, secured by a $200,000 certificate of deposit 40
Various notes payable maturing through 2007, interest ranging from 0 percent to 10.5
percent per annum, secured by related vehicles and equipment 373
Note payable to Mr. Lindy Dennis, due November 2003, interest of 7.5 percent per annum
at December 31, 1999, guaranteed by a stockholder 21
Note payable to an investment group, due October 2002, no interest, guaranteed by a
stockholder 11
Note payable to Lindy Dennis Air Conditioning Company, an unaffiliated company, due
June 2004, interest of 7.5 percent per annum at December 31, 1999, guaranteed by
a stockholder
21
------------
609
Less: Current Maturities (309)
------------
$ 300
============
</TABLE>
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<PAGE> 11
6. STOCKHOLDER RECEIVABLE:
At December 31, 1999, the Company had a stockholder receivable for cash
advances of approximately $1,299,000. This amount was subsequently distributed
to the stockholder. As it was the stockholder's intent to receive a distribution
for the amount, the receivable has been included in stockholders' equity in the
accompanying balance sheet and statement of stockholders' equity.
7. OPERATING LEASES:
The Company leases certain facilities under operating leases with
related parties, and leases other facilities, vehicles and equipment under
operating leases from third parties. Lease expiration dates vary, and future
minimum lease payments are as follows (in thousands):
<TABLE>
<CAPTION>
Related Third
Parties Parties
------------ ------------
<S> <C> <C>
Year ending December 31- $ $
2000 300 197
2001 300 148
2002 300 88
2003 300 41
2004 300 30
Thereafter 167 29
------------ ------------
$ 1,667 $ 533
============ ============
</TABLE>
Total rent payments for the year ended December 31, 1999 were
approximately $272,000 and $35,000 to related parties and third parties,
respectively.
8. INCOME TAXES:
Federal and state income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
--------------
<S> <C>
Federal --
Current $ 809
Deferred (25)
State
Current 69
Deferred (3)
--------------
$ 850
==============
</TABLE>
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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>
Year Ended
December 31,
1999
------------
<S> <C>
Provision at the statutory rate $ 1,815
Increase (decrease) resulting from --
Earnings of companies taxed as S Corporations (1,033)
Permanent differences 2
State income tax, net of benefit for federal deduction 66
----------
$ 850
==========
</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>
December 31,
1999
------------
<S> <C>
Deferred income tax assets --
Reserves and accrued expenses $ 29
Deferred income tax liability --
Property and equipment (45)
----------
Net deferred income tax liabilities $ (16)
==========
</TABLE>
9. EMPLOYEE BENEFIT PLANS:
The Company had 401(k) plans in place as of December 31, 1999 with
varied contribution rates and vesting schedules. AMPAM is combining the assets
of the various plans into a unified AMPAM 401(k) plan.
10. COMMITMENTS AND CONTINGENCIES:
Litigation
The Company is involved in disputes and/or legal actions arising in the
ordinary course of business. Management does not believe the outcome of such
disputes and/or legal actions will have a material adverse effect on the
Company's financial position or result 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.
11
<PAGE> 13
11. MAJOR CUSTOMERS AND RISK CONCENTRATION:
The Company had no customers whose sales exceeded 10 percent of total
revenues during the year ended December 31, 1999.
In general, the Company performs its services under contract terms that
entitle it to progress payments, and is typically, by law, granted a lien
interest on the work until paid. The Company is exposed to potential credit
risks related to changes in business and economic factors. However, management
believes that its contract acceptance, billing, and collection policies are
adequate to minimize the potential credit risks.
Additionally, 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.
12. SUBSEQUENT EVENTS:
On March 1, 2000, AMPAM acquired through merger, all of the stock of
the Company in exchange for cash and AMPAM's common stock. AMPAM also negotiated
and entered into certain leases with the Company's former stockholders relating
to the land and buildings from which the Company operates. The Company is now a
wholly owned subsidiary of AMPAM.
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(b) Pro Forma Financial Information
AMERICAN PLUMBING AND MECHANICAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(In Thousands, Except Per Share Amounts)
American Plumbing and Mechanical, Inc., a Delaware corporation, (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
residential and commercial/institutional markets. On April 1, 1999, the Company
acquired ten U.S. businesses (the "Founding Companies") and completed the
initial financings. Subsequently, the Company acquired the outstanding stock of
two additional companies and the assets of a third company (the "Subsequent
Acquisitions").
On March 1, 2000, the Company acquired all the stock of Lindy Dennis Industries,
Inc. and Affiliates ("LDI"), which includes Lindy Dennis Industries, Inc., a
Texas Corporation, together with LDI Heating and Air Conditioning and LDI
Mechanical, both California corporations, and Krahenbuhl Plumbing, Inc.,
Krahenbuhl Fire Sprinklers, LLC and Green Valley Plumbing, Inc., Nevada
corporations, through the issuance of 1,346,154 shares of the Company's common
stock and cash consideration of approximately $12 million. The cash
consideration was provided by the Company's credit facility. The purchase was
accounted for under the purchase method of accounting and LDI is considered a
significant subsidiary pursuant to the rules of the Securities and Exchange
Commission.
The following unaudited pro forma combined statements of operations present the
Company, restated for the Founding Companies, the Subsequent Acquisitions and
LDI as if the acquisitions by the Company occurred on January 1, 1999.
Statements of operations are provided for the year ended December 31, 1999 and
for the Company's most recent interim period ended March 31, 2000. The balance
sheet as of the most recent interim date can be found in the Company's quarterly
report on Form 10-Q for the quarterly period March 31, 2000.
The pro forma adjustments are based upon preliminary estimates, available
information and certain assumptions that management deemed appropriate. Final
purchase accounting adjustments will be made on the basis of appraisals and
evaluations and, therefore, may differ from the pro forma adjustments presented
herein. These pro forma financial statements should be read in conjunction with
the historical financial statements and notes thereto for the fiscal year ended
December 31, 1999, included in the Company's Form 10-K and the Company's
quarterly report on Form 10-Q for the quarterly period ended March 31, 2000. The
pro forma condensed statements of operations are not necessarily indicative of
what actual results of operations would have been had the transaction occurred
at the beginning of the periods presented nor does it purport to indicate the
results of future operations of the Company.
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<PAGE> 15
AMERICAN PLUMBING AND MECHANICAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Pro Forma
AMPAM excluding Pro Forma
LDI LDI AMPAM
Year Ended Year Ended Year Ended
December 31, December 31, Pro Forma December 31,
1999 1999 Adjustments(1) 1999
---------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
REVENUES $ 451,004 $ 37,058 $ -- $ 488,062
COST OF REVENUES
(including depreciation) 361,521 27,485 -- 389,006
------------- ------------- ------------- -------------
Gross profit 89,483 9,573 -- 99,056
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 39,282 4,546 (605) A 43,223
GOODWILL AMORTIZATION 4,857 -- 621 B 5,478
NONCASH STOCK
COMPENSATION EXPENSE 7,992 -- -- 7,992
------------- ------------- ------------- -------------
Income from operations 37,352 5,027 (16) 42,363
OTHER INCOME
(EXPENSE):
Interest income 330 132 -- 462
Interest expense (16,826) (85) (1,062) C (17,973)
Other 607 113 -- 720
------------- ------------- ------------- -------------
Other income, net (15,889) 160 (1,062) (16,791)
------------- ------------- ------------- -------------
INCOME BEFORE PROVISION
FOR INCOME TAXES and
EXTRAORDINARY LOSS 21,463 5,187 (1,078) 25,572
PROVISION FOR INCOME TAXES 14,592 850 1,173 D 16,615
------------- ------------- ------------- -------------
INCOME BEFORE EXTRAORDINARY LOSS 6,871 4,337 (2,251) 8,957
------------- ------------- ------------- -------------
EXTRAORDINARY LOSS ON
DEBT EXTINGUISHMENT,
net of tax benefit 455 -- -- 455
------------- ------------- ------------- -------------
NET INCOME 6,416 4,337 (2,251) 8,502
------------- ------------- ------------- -------------
PREFERRED DIVIDENDS 1,365 -- -- 1,365
------------- ------------- ------------- -------------
NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS $ 5,051 $ 4,337 $ (2,251) $ 7,137
============= ============= ============= =============
</TABLE>
See accompanying notes to pro forma unaudited condensed
consolidated financial statements.
14
<PAGE> 16
AMERICAN PLUMBING AND MECHANICAL, INC. & AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Pro Forma
AMPAM LDI AMPAM
Three Months Two Months Three Months
Ended Ended Ended
March 31, February 29, Pro Forma March 31,
2000 2000 Adjustments(1) 2000
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES $ 125,137 $ 8,830 $ -- $ 133,967
COST OF REVENUES
(including depreciation) 102,990 6,700 -- 109,690
------------- ------------- ------------- -------------
Gross profit 22,147 2,130 -- 24,277
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 11,489 825 (73) A 12,241
GOODWILL AMORTIZATION 1,300 -- 103 B 1,403
------------- ------------- ------------- -------------
Income from operations 9,358 1,305 (30) 10,633
OTHER INCOME
(EXPENSE):
Interest income 32 -- -- 32
Interest expense (4,740) (6) (181) C (4,927)
Other 182 183 -- 365
------------- ------------- ------------- -------------
Other income, net (4,526) 177 (181) (4,530)
------------- ------------- ------------- -------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 4,832 1,482 (211) D 6,104
PROVISION FOR
INCOME TAXES 2,385 296 282 2,963
------------- ------------- ------------- -------------
NET INCOME 2,447 1,187 (493) 3,141
------------- ------------- ------------- -------------
PREFERRED DIVIDENDS 341 -- -- 341
------------- ------------- ------------- -------------
NET INCOME AVAILABLE TO
COMMON STOCKHOLDERS $ 2,106 $ 1,187 $ (493) $ 2,800
============= ============= ============= =============
</TABLE>
See accompanying notes to pro forma unaudited
condensed consolidated financial statements.
15
<PAGE> 17
AMERICAN PLUMBING AND MECHANICAL, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Pro forma adjustments related to the Acquisition:
A. Reflects a reduction in compensation paid to the previous owners
prospectively and agreed to as part of their employment agreement.
B. Records the amortization expense of goodwill recorded as a result of
the purchase over its estimated useful life of 30 years.
C. Reflects the additional interest associated with the borrowings
incurred to complete the acquisition of LDI.
D. Provides for federal and state income tax expense at an effective rate
of 39 percent as if all the affiliates had been taxed as a C
corporation for the year ended December 31, 1999, and the two months
ended February 29, 2000.
(c) Exhibits
10.1 Acquisition Agreement dated February 14, 2000 by and between
American Plumbing & Mechanical, Inc., LDI Mechanical, Inc.,
Lindy Dennis Industries, Inc., LDI Heating & Air Conditioning,
Krahenbuhl Plumbing, Inc., Krahenbuhl Fire Sprinklers, LLC,
Green Valley Plumbing, Inc., and their stockholders.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: May 15, 2000 AMERICAN PLUMBING AND MECHANICAL, INC
By /s/ David C. Baggett
--------------------------------------
Senior Vice President and
Chief Financial Officer
16
<PAGE> 18
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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10.1 Acquisition Agreement dated February 14, 2000 by and between
American Plumbing & Mechanical, Inc., LDI Mechanical, Inc.,
Lindy Dennis Industries, Inc., LDI Heating & Air Conditioning,
Krahenbuhl Plumbing, Inc., Krahenbuhl Fire Sprinklers, LLC,
Green Valley Plumbing, Inc., and their stockholders.
<PAGE> 1
EXHIBIT 10.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF
FEBRUARY 14, 2000
AMONG
AMERICAN PLUMBING & MECHANICAL, INC.,
LDI MECHANICAL, INC.,
LINDY DENNIS INDUSTRIES, INC.,
LDI HEATING & AIR CONDITIONING,
LDI MECHANICAL,
KRAHENBUHL PLUMBING INCORPORATED,
KRAHENBUHL FIRE SPRINKLERS LLC AND
GREEN VALLEY PLUMBING, INC.
AND
LLOYD C. SMITH,
SANDRA A. SMITH,
JAMES K. KRAHENBUHL, TRUSTEE U/D/T 4/22/99,
KAYLEEN B. KRAHENBUHL, TRUSTEE U/D/T 4/22/99
AND
JEFFERY L. MINARIK
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TABLE OF CONTENTS
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ARTICLE I The Merger...........................................................................................1
Section 1.1. The Merger.............................................................................1
Section 1.2. Conversion of Shares...................................................................2
Section 1.3. Merger Consideration Adjustment........................................................3
Section 1.4. Surrender and Payment..................................................................4
Section 1.5. Withholding Rights.....................................................................4
Section 1.6. Lost Certificates......................................................................4
Section 1.7. Other Documents to be Delivered Immediately Prior to the
Effective Time........................................................................ 4
Section 1.8. Conditions to the Obligations of the Company Stockholders..............................6
Section 1.9. Conditions to the Obligations of AMPAM.................................................6
Section 1.10. Termination............................................................................7
ARTICLE II The Surviving Corporation...........................................................................8
Section 2.1. Certificate of Incorporation. ........................................................8
Section 2.2. Bylaws. ..............................................................................8
Section 2.3. Directors and Officers.................................................................8
ARTICLE III Representations and Warranties of the Company Stockholders.........................................8
Section 3.1. Organization and Qualification.........................................................8
Section 3.2. Capitalization; Ownership..............................................................9
Section 3.3. Authorization..........................................................................9
Section 3.4. Consents and Approvals; No Violation...................................................9
Section 3.5. Affiliate Relationships...............................................................10
Section 3.6. Financial Statements..................................................................10
Section 3.7. Undisclosed Liabilities...............................................................11
Section 3.8. Accounts and Notes Receivables........................................................11
Section 3.9. Assets................................................................................11
Section 3.10. Material Contracts, Commitments and Customers.........................................12
Section 3.11. Operating Authority...................................................................13
Section 3.12. Bank Account Information..............................................................13
Section 3.13. Conduct of Business Since Company Unaudited Balance Sheet Date........................13
Section 3.14. Litigation; Orders....................................................................15
Section 3.15. Labor Matters.........................................................................15
Section 3.16. Compliance with Laws..................................................................15
Section 3.17. Insurance.............................................................................15
Section 3.18. Environmental Matters.................................................................15
Section 3.19. Taxes.................................................................................16
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Section 3.20. Employee Benefit Plans................................................................18
Section 3.21. Brokerage Fees and Commissions........................................................20
Section 3.22. Tax Treatment.........................................................................20
ARTICLE IV Representations and Warranties of AMPAM............................................................20
Section 4.1. Organization and Qualification........................................................20
Section 4.2. Capitalization........................................................................20
Section 4.3. Authorization.........................................................................21
Section 4.4. Consents and Approval; No Violation...................................................21
Section 4.5. SEC Filings...........................................................................22
Section 4.6. Tax Treatment.........................................................................22
ARTICLE V Additional Covenants and Agreements.................................................................22
Section 5.1. Reasonable Best Efforts...............................................................22
Section 5.2. Certain Filings.......................................................................22
Section 5.3. Public Announcements..................................................................22
Section 5.4. Further Assurances....................................................................23
Section 5.5. Notices of Certain Events.............................................................23
Section 5.6. Release from Guarantees...............................................................23
Section 5.7. Future Cooperation; Tax Matters.......................................................23
Section 5.8. Expenses..............................................................................24
Section 5.9. Repayment of Related Party Indebtedness...............................................24
Section 5.10. FIRPTA Certificate....................................................................24
Section 5.11. Preparation and Filing of Tax Returns.................................................24
Section 5.12. Transfer of Real Property.............................................................25
Section 5.13. Antitrust Law Compliance..............................................................25
Section 5.14. Pending Closing.......................................................................25
Section 5.15. Notification of Certain Matters.......................................................27
Section 5.16. Amendment of Schedules................................................................28
Section 5.17. Board of Directors Seat...............................................................28
Section 5.18. Company's Health Benefits and 401K Contributions......................................28
Section 5.19. Access to Materials...................................................................28
ARTICLE VI Indemnification....................................................................................28
Section 6.1. Indemnification by the Company Stockholders...........................................28
Section 6.2. Indemnification Related to Tax Liabilities............................................29
Section 6.3. Indemnification Related to Accounts Receivable........................................29
Section 6.4. Indemnification by AMPAM..............................................................29
Section 6.5. Indemnification Proceedings...........................................................30
Section 6.6. Exclusive Remedy......................................................................31
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Section 6.7. Limitations on Indemnification.........................................................31
Section 6.8. Indemnification if Negligence of Indemnitee............................................33
Section 6.9. No Third Party Beneficiaries...........................................................33
ARTICLE VII Noncompetition Covenants...........................................................................33
Section 7.1. Prohibited Activities..................................................................33
Section 7.2. Equitable Relief.......................................................................34
Section 7.3. Reasonable Restraint...................................................................34
Section 7.4. Severability; Reformation..............................................................35
Section 7.5. Material and Independent Covenant......................................................35
Section 7.6. Materiality............................................................................35
ARTICLE VIII Applicable Securities Laws/Transfer Restrictions..................................................36
Section 8.1. Company Stockholders' Representations and Warranties
Concerning Securities..................................................................36
Section 8.2. Transfer Restrictions Relating to AMPAM Common Stock...................................36
ARTICLE IX Registration Rights.................................................................................37
Section 9.1. Piggyback Registration Rights..........................................................37
Section 9.2. Registration Procedures................................................................38
Section 9.3. Indemnification........................................................................40
Section 9.4. Underwriting Agreement.................................................................41
Section 9.5. Transfer of Rights.....................................................................42
Section 9.6. Rule 144 Reporting.....................................................................42
ARTICLE X Nondisclosure of Confidential Information............................................................43
Section 10.1. General................................................................................43
Section 10.2. Equitable Relief.......................................................................43
Section 10.3. Non-Public Information.................................................................43
Section 10.4. Survival...............................................................................44
Section 10.5. Return of Information..................................................................44
ARTICLE XI Redemption of AMPAM Stock...........................................................................45
Section 11.1. Redemption Trigger.....................................................................45
Section 11.2. Minimum Redemption; Limitations........................................................45
Section 11.3. Notice; Limitations....................................................................45
Section 11.4. Termination of Redemption Obligation...................................................46
ARTICLE XII Miscellaneous......................................................................................46
Section 12.1. Governing Law..........................................................................46
Section 12.2. Entire Agreement.......................................................................46
Section 12.3. Notices................................................................................46
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Section 12.4. Successors and Assigns.................................................................47
Section 12.5. Survival of Representations and Warranties.............................................47
Section 12.6. Headings; Definitions..................................................................47
Section 12.7. Amendments and Waivers.................................................................47
Section 12.8. Construction of Certain Provisions.....................................................48
Section 12.9. Severability...........................................................................48
Section 12.10. Jurisdiction...........................................................................48
Section 12.11. Waiver of Jury Trial...................................................................48
Section 12.12. Specific Performance...................................................................48
Section 12.13. Counterparts; Effectiveness............................................................49
Section 12.14. Mutual Indemnification Against Claims of Brokers.......................................49
Section 12.15. Definitions and Usage..................................................................49
</TABLE>
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EXHIBITS AND SCHEDULES
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Exhibit A Form of Employment Agreement - President
Exhibit B Form of Employment Agreement - Management
Exhibit C Form of Opinion of Counsel to Company Stockholders
Exhibit D Form of Certificate of Secretary of the Company
Exhibit E Form of Company Stockholder Release
Exhibit F Form of Company Stockholder Receipt
Exhibit G Form of Cross-Receipt
Exhibit H Form of Opinion of Andrews & Kurth L.L.P.
Exhibit I Form of Certificate Certifying Representations and Warranties
Exhibit J Form of Lease
Schedule 1.5 Required Withholding
Schedule 2.3 Officers of Surviving Corporation
Schedule 3.1 Organization and Qualification of Company
Schedule 3.2 Ownership of Company Stock and Delivery Instructions
Schedule 3.4 Company Consents and Approvals; No Violation
Schedule 3.5 Affiliate Relationships
Schedule 3.6 Company Financial Statements
Schedule 3.7 Company Undisclosed Liabilities
Schedule 3.8 Company Accounts and Notes Receivables
Schedule 3.9 Company Assets
Schedule 3.10 Material Contracts, Commitments and Customers
Schedule 3.11 Company Operating Authority
Schedule 3.12 Company Bank Account Information
Schedule 3.13 Company Conduct of Business
Schedule 3.14 Company Litigation; Orders
Schedule 3.15 Company Labor Agreements
Schedule 3.17 Company Insurance
Schedule 3.18 Company Disposal Sites
Schedule 3.19 Company Taxes
Schedule 3.20 Company Employee Benefit Plans
Schedule 3.21 Company Brokerage Fees and Commissions
Schedule 4.4 AMPAM Consents and Approvals; No Violation
Schedule 5.6 Company Stockholder Guarantees
Schedule 5.9 Repayment of Advances, Receivables and Loans
Schedule 5.12 Transfer of Real Property
Schedule 5.14 Actions Pending Closing
</TABLE>
v
<PAGE> 7
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of February 14,
2000, among American Plumbing & Mechanical, Inc., a Delaware corporation
("AMPAM"), LDI Mechanical, Inc., a Delaware corporation and a wholly owned
subsidiary of AMPAM ("Acquisition"), Lindy Dennis Industries, Inc., a Texas
corporation, LDI Heating & Air Conditioning, a California corporation, LDI
Mechanical, a California corporation, Krahenbuhl Plumbing Incorporated, a Nevada
corporation, Krahenbuhl Fire Sprinklers LLC, a Nevada limited liability company,
and Green Valley Plumbing, Inc., a Nevada corporation (collectively the
"Company"), and Lloyd C. Smith, Sandra A. Smith, James K. Krahenbuhl and Kayleen
B. Krahenbuhl, Trustees u/d/t 4/22/99, and Jeffery L. Minarik, who are all of
the stockholders and/or members of the Company (together, the "Company
Stockholders").
RECITALS:
WHEREAS, the Boards of Directors of AMPAM and the Company have
determined that the combination of AMPAM and the Company is in the best
interests of the stockholders and/or members of AMPAM and the Company,
respectively;
WHEREAS, the Company Stockholders desire to convey to AMPAM all of the
issued and outstanding shares of capital stock and membership interest of the
Company, free and clear of all liens, and the Company Stockholders agree to be
bound by a covenant not to compete;
WHEREAS, AMPAM desires to acquire such shares of capital stock and
membership interest of the Company as more fully set forth herein and enforce
the covenant not to compete; and
WHEREAS, AMPAM, the Company and the Company Stockholders intend the
combination of AMPAM and the Company to qualify as a tax-free reorganization
under the provisions of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations thereunder;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. (a) Subject to the execution of this Agreement and
the delivery of the documents listed in Section 1.7, at the Effective Time (as
hereinafter defined), the Company shall be merged (the "Merger") with and into
Acquisition in accordance with the General
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<PAGE> 8
Corporation Law of the State of Delaware ("Delaware Law") and the laws of the
states of organization of the Company (collectively "Company Law"), whereupon
the separate existence of the Company shall cease, and Acquisition shall be the
surviving corporation (the "Surviving Corporation").
(b) Immediately following the execution of this Agreement and the
delivery of the documents listed in Section 1.7, and the satisfaction or waiver
of the conditions contained in Section 1.8 and Section 1.9, the Company and
Acquisition will file a certificate of merger with the Delaware Secretary of
State (the "Certificate of Merger") and appropriate merger documents with the
Texas, California and Nevada Secretary of State (the "State Certificates"), and
make all other filings or recordings required by Delaware Law or Company Law in
connection with the Merger. The Merger shall become effective at such time (the
"Effective Time") as the Certificate of Merger and the State Certificates are
duly filed with the Delaware, Texas, California and Nevada Secretary of State
(or at such later time as may be agreed in writing by the parties hereto and
specified in the Certificate of Merger and the State Certificates).
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, assets, powers, privileges, and franchises and be
subject to all of the obligations, liabilities, restrictions, and disabilities
of the Company and Acquisition, all as provided under Delaware Law.
(d) The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Andrews & Kurth, L.L.P. in
Houston, Texas, at 10:00 a.m., on a day within 5 business days following the
date on which regulatory approval under the Hart Scott Act (as defined) is
received or on such other day and time as shall be agreed to by the parties.
This Closing shall coincide with the Effective Time.
SECTION 1.2. CONVERSION OF SHARES. At the Effective Time:
(a) the shares of common stock of the Company ("Company Common Stock")
and membership interest of the Company ("Company Membership Interest")
outstanding immediately prior to the Effective Time (the Company Common Stock
and the Company Membership Interest outstanding immediately prior to the
Effective Time shall hereinafter be referred to collectively as the "Company
Stock" unless some distinction is necessary) shall be converted into the right
to receive, without interest, an aggregate consideration equal to 1,346,154
shares of common stock, $0.01 par value, of AMPAM ("AMPAM Common Stock") and
$12,000,000 in cash, as adjusted by Section 1.3 (collectively, the "Merger
Consideration").
(b) each share of common stock of Acquisition outstanding immediately
prior to the Effective Time shall remain outstanding and represent, after the
Effective Time, one share of common stock of the Surviving Corporation, and
shall constitute the only outstanding shares of capital stock of the Surviving
Corporation.
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<PAGE> 9
(c) AMPAM shall issue to non-stockholder employees of the Company, as
determined by the Company and approved by AMPAM, 195,000 non-qualified stock
options, at an option price per share to be determined by AMPAM within thirty
(30) days after the Effective Time, which will vest 20% per year over a five
year period beginning on the date of such grant.
SECTION 1.3. MERGER CONSIDERATION ADJUSTMENT.
(a) Within three (3) days before the anticipated date of Closing, the
Company Stockholders will cause the Company to prepare an estimated balance
sheet of the Company (the "Estimated Balance Sheet") at the Company's expense
which will be dated as of the Effective Time (as defined in Section 12.15) and
will deliver such Estimated Balance Sheet to AMPAM for its review. The cash
portion only of the Merger Consideration set forth in Section 1.2 hereof to be
paid on the date of Closing shall then be adjusted (the "Adjustments") as
follows (the "Adjusted Merger Consideration"):
(i) increased by the amount, if any, by which the Actual Working
Capital (as defined in Section 12.15) as reflected on the Estimated
Balance Sheet exceeds the Target Working Capital (as defined in
Section 12.15);
(ii) reduced by the amount, if any, by which the Target Working
Capital exceeds the Actual Working Capital as reflected on the
Estimated Balance Sheet; and
(iii) reduced by the amount, if any, of Actual Indebtedness (as
defined in Section 12.15) (except for any Actual Indebtedness used in
the calculation of Actual Working Capital), as reflected on the
Estimated Balance Sheet.
(b) Within the sixty (60) day period following the Closing, AMPAM and
the Company Stockholders will attempt in good faith to finalize the Company's
Estimated Balance Sheet, such finalized balance sheet to be referred to herein
as the "Final Balance Sheet". If AMPAM and the Company Stockholders cannot
mutually agree on a Final Balance Sheet within this sixty (60) day period, then
immediately following the conclusion of such sixty (60) day period the Final
Balance Sheet shall be delivered to the independent accounting firm of
Pricewaterhouse Coopers. Pricewaterhouse Coopers shall have thirty (30) days to
review the Final Balance Sheet and its determinations within such period shall
be final and binding on the parties. To the extent the Final Balance Sheet
differs from the Estimated Balance Sheet and to the extent these differences
would increase or decrease the Adjustments as calculated pursuant to Section
1.3(a), the cash portion only of the Adjusted Merger Consideration shall then be
further adjusted (the "Readjusted Merger Consideration") in the same manner as
the formula used in Section 1.3(a).
(c) The settlement or payment of the Adjustments to the cash portion
only of the Merger Consideration pursuant to Section 1.3(a) shall occur on the
date of Closing. The settlement
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<PAGE> 10
or payment of the Adjustments to the cash portion of the Adjusted Merger
Consideration pursuant to Section 1.3(b) shall occur within ten (10) business
days after the Final Balance Sheet is finalized.
SECTION 1.4. SURRENDER AND PAYMENT. At the Effective Time, the Company
Stockholders will deliver to AMPAM the certificates listed on Schedule 3.2 (the
"Certificates") representing all of the outstanding shares of Company Stock, and
AMPAM will, in exchange therefor, issue and deliver to the Company Stockholders
the AMPAM Common Stock, and pay to the Company Stockholders by wire transfer in
immediately available funds the Adjusted Merger Consideration (subject to
further readjustment, if necessary, to arrive at the Readjusted Merger
Consideration), divided among the Company Stockholders in accordance with the
written instructions provided in Schedule 3.2. The Certificates will be duly
endorsed (or accompanied by duly executed stock powers), with signatures of
those Company Stockholders not present at the closing guaranteed by a commercial
bank.
SECTION 1.5. WITHHOLDING RIGHTS. Each of the Surviving Corporation and
AMPAM shall be entitled to deduct and withhold from the consideration otherwise
payable to any Person (as defined in Section 12.15) pursuant to this Article I
such amounts as it is required to deduct and withhold with respect to the making
of such payment under any provision of federal, state, local, or foreign tax
law. These amounts are set forth in Schedule 1.5 to this Agreement. To the
extent that amounts are so withheld by the Surviving Corporation or AMPAM, as
the case may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Company Stock in respect of
which such deduction and withholding was made by the Surviving Corporation or
AMPAM, as the case may be.
SECTION 1.6. LOST CERTIFICATES. If any Certificate shall have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen, or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity against
any claim that may be made against it with respect to such Certificate, AMPAM
will issue in exchange for such lost, stolen, or destroyed Certificate, the
Merger Consideration to be paid in respect of the shares of Company Stock
represented by such Certificates as contemplated by this Article I.
SECTION 1.7. OTHER DOCUMENTS TO BE DELIVERED IMMEDIATELY PRIOR TO THE
EFFECTIVE TIME.
(a) Immediately prior to the Effective Time and at the Closing, the
Company and the Company Stockholders will deliver to AMPAM:
(i) an Employment Agreement (collectively with the employment
agreements specified in Section 1.7(a) (ii), the "Employment
Agreements"), in the form attached hereto as Exhibit A, for Lloyd C.
Smith;
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(ii) Employment Agreements each in the form attached hereto as
Exhibit B, for each of the following employees of the Company: Michael
Smith, Robert Smith, James K. Krahenbuhl, Jeffrey L. Minarik and Byrl
Lumby;
(iii) an opinion of counsel to the Company Stockholders in the
form attached hereto as Exhibit C;
(iv) a Certificate of the Secretary of the Company in the form
attached hereto as Exhibit D;
(v) a release executed by the Company Stockholders in the form
attached hereto as Exhibit E;
(vi) the minute book and corporate seal of the Company;
(vii) receipts executed by the Company Stockholders in the form
attached hereto as Exhibit F;
(viii) a cross-receipt executed by the Company Stockholders in
the form attached hereto as Exhibit G;
(ix) a certificate dated as of the Closing executed by the
President of the Company and the Company Stockholders in the form
attached hereto as Exhibit I certifying that the representations and
warranties set forth in Article III are true and correct; and
(x) Leases each in the form attached hereto as Exhibit J, with
Smith Properties LLC for the properties located at 1740 Delilah
Street, Corona, California, and 3862 East Post Road, Las Vegas,
Nevada, and with Plumbing Properties LLC for the property located at
3842 East Post Road, Las Vegas, Nevada (collectively the "Leases").
(b) Immediately prior to the Effective Time and at the Closing, AMPAM
and Acquisition will deliver to the Company Stockholders:
(i) the Employment Agreements executed by a duly authorized
representative of AMPAM or Acquisition on behalf of the Surviving
Corporation;
(ii) an opinion of Andrews & Kurth L.L.P. in the form attached
hereto as Exhibit H;
(iii) a cross-receipt executed by AMPAM in the form attached
hereto as Exhibit G;
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<PAGE> 12
(iv) a certificate dated as of the Closing executed by an
executive officer of AMPAM in the form attached hereto as Exhibit I
certifying that the representations and warranties set forth in
Article IV are true and correct; and
(v) the Leases executed by a duly authorized representative of
AMPAM or Acquisition on behalf of the Surviving Corporation.
SECTION 1.8. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY STOCKHOLDERS. The
obligations of the Company Stockholders to consummate the Merger are subject to
the fulfillment, at or before the Closing, of all of the following conditions,
any one or more of which may be waived by the Company Stockholders.
(a) The representations and warranties of AMPAM and Acquisition
contained in this Agreement shall be true as of the Effective Time, subject to
changes in the Schedules pursuant to Section 5.16.
(b) All of the obligations of AMPAM and Acquisition to be performed at
or before the Closing pursuant to the terms of this Agreement shall have been
duly performed.
(c) The documents necessary to consummate the Merger shall have been
filed with the Secretary of State of the State of Delaware and the Secretary of
State of Texas, California and Nevada.
(d) The Company Stockholders shall have received an opinion of counsel
to AMPAM in the form of Exhibit H regarding certain matters.
(e) No event or circumstance shall have occurred which would constitute
an AMPAM Material Adverse Change (as defined in Section 12.15).
SECTION 1.9. CONDITIONS TO THE OBLIGATIONS OF AMPAM. The obligations of
AMPAM and Acquisition to consummate the Merger are subject to the fulfillment,
at or before the Closing, of all the following conditions, any one or more of
which may be waived by AMPAM.
(a) The representations and warranties of the Company Stockholders
contained in this Agreement shall be true as of the Effective Time, subject to
changes in the Schedules pursuant to Section 5.16 that have been approved by
AMPAM, if necessary.
(b) All of the obligations of the Company and the Company Stockholders
to be performed at or before the Closing pursuant to the terms of this Agreement
shall have been duly performed, including without limitation those set forth in
Article I hereof.
(c) AMPAM shall have received an opinion of counsel to the Company
Stockholders in the form of Exhibit C regarding certain matters.
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<PAGE> 13
(d) The documents necessary to consummate the Merger shall have been
filed with the Secretary of State of the State of Delaware and the Secretary of
State of the States of Texas, California and Nevada.
(e) All waiting, review and investigation periods (and any extensions
thereof) applicable to the consummation of the Merger under the Hart Scott Act
shall have expired or been terminated.
SECTION 1.10. TERMINATION. (a) This Agreement may be terminated at any time
prior to the Closing solely:
(i) by mutual consent of AMPAM and the Company Stockholders;
(ii) by all of the Company Stockholders on the one hand, or by
AMPAM (acting through its board of directors), on the other hand, if
the transactions contemplated by this Agreement to take place at the
Closing shall not have been consummated by March 31, 2000, unless the
failure of such transactions to be consummated is due to the willful
failure of the party seeking to terminate this Agreement to perform
any of its obligations under this Agreement to the extent required to
be performed by it prior to the Closing. Additionally, if the reason
for the failure of the Closing to occur by this date is that
regulatory approval under the Hart Scott Act has not been received in
time for the Closing to occur by March 31, 2000, then, the Closing may
be extended by the mutual agreement of the parties to a date five days
after such regulatory approval is received;
(iii) by the Company Stockholders on the one hand, or by AMPAM,
on the other hand, if a material breach or material default shall be
made by the other party in the observance or in the due and timely
performance of any of the covenants or agreements contained herein,
and the curing or waiver of such material breach or material default
shall not have been made on or before the Closing;
(iv) by either party if, pursuant to Section 5.16, that party
wishes to amend their Schedules and the other party refuses to consent
to such amendment;
(v) by the Company Stockholders, if the conditions set forth in
Section 1.8 hereof have not been satisfied or waived as of the
Closing; or
(vi) by AMPAM, if the conditions set forth in Section 1.9 hereof
have not been satisfied or waived as of the Closing.
(b) Procedure and Effect of Termination. In the event of a termination
pursuant to this Section 1.10, written notice setting forth the reasons thereof
shall forthwith be given by the terminating party to the other party. If this
Agreement is terminated as provided in this Section 1.10, no party shall have
any liability or further obligation hereunder to any other party, except as
provided
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<PAGE> 14
in Article X, 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.
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1. CERTIFICATE OF INCORPORATION. The certificate of incorporation
of Acquisition in effect at the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until amended in accordance with
applicable law.
SECTION 2.2. BYLAWS. The bylaws of Acquisition in effect at the Effective
Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 2.3. DIRECTORS AND OFFICERS. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the directors of the Surviving Corporation shall be as set
forth on Schedule 2.3 hereto and (ii) the officers of the Surviving Corporation
shall be as set forth on Schedule 2.3 hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY STOCKHOLDERS
Each Company Stockholder jointly and severally represents and warrants
to AMPAM and Acquisition that all of the following representations and
warranties in this Article III are true (i) as of the date of execution of this
Agreement, (ii) as of the Effective Time subject to Section 5.16, and (iii) for
a period of two years from the Closing (the last day of such period being the
"Expiration Date"), except that the representations and warranties set forth in
Sections 3.2, 3.18 and 3.19 shall survive until such time as the applicable
statute of limitations period has run, which expired statute of limitations
period shall be deemed to be the Expiration Date for the representations and
warranties set forth in Sections 3.2, 3.18 and 3.19. Except as expressly set
forth in this Agreement, the Company Stockholders expressly disclaim any
representation or warranty (express, implied or otherwise) relating to the
Company including, without limitation, any warranty of merchantability or
fitness for a particular purpose.
SECTION 3.1. ORGANIZATION AND QUALIFICATION. The Company is a corporation
or limited liability company duly organized, validly existing, and in good
standing under the laws of the state of its incorporation or organization and
has the requisite corporate power to carry on its business as it is now being
conducted. The Company is duly qualified to conduct business as a foreign
corporation or organization in every state of the United States in which its
ownership or lease of
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property or the conduct of its business and operations makes such qualification
necessary, except for such states in which the Company's failure to be so
qualified is not reasonably expected to have, individually or in the aggregate,
a Company Material Adverse Effect (as defined in Section 12.15). Schedule 3.1
contains a list of all jurisdictions in which the Company is authorized or
qualified to do business. Prior to the Closing, the Company will deliver to
AMPAM true and complete copies of the articles of incorporation or organization
and bylaws or operating agreement of the Company, in each instance including any
amendments thereto, as currently in effect.
SECTION 3.2. CAPITALIZATION; OWNERSHIP. The authorized capital stock and
membership interest of the Company is set forth on Schedule 3.2 and are issued
and outstanding. The Company Stock are all of the issued and outstanding shares
of capital stock and membership interest of the Company and have been duly
authorized and validly issued and are fully paid and nonassessable and free of
preemptive rights. Except as set forth in Schedule 3.2, there are not, as of the
date hereof, any outstanding or authorized subscriptions, options, warrants,
calls, rights, commitments, or any other agreements of any character (any of the
foregoing, a "Commitment") obligating the Company to issue any additional shares
of capital stock of the Company, or any other securities convertible into or
evidencing the right to subscribe for any shares of capital stock of the
Company. The Company Stockholders own the respective number of shares of Company
Stock set forth on Schedule 3.2 attached hereto, free and clear of all Liens (as
defined in Section 12.15). Each of the Company Stockholders has full legal
right, power and authority to exchange, assign and transfer or cause to be
exchanged, assigned or transferred their respective shares of Company Stock. The
delivery to AMPAM of the Company Stock pursuant to the terms of this Agreement
will transfer valid title thereto, free and clear of all Liens.
SECTION 3.3. AUTHORIZATION. The Company has the requisite corporate or
limited liability company power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated by this Agreement. The
Company Stockholders and/or the Board of Directors of the Company have by
unanimous written consent (a) determined that participating in the Merger is in
the best interests of the Company and its stockholders or members and (b)
approved this Agreement and the Merger. No other corporate proceedings on the
part of the Company or the Company Stockholders are necessary to authorize the
execution and delivery of this Agreement or the consummation by the Company and
the Company Stockholders of the transactions contemplated hereby. This Agreement
has been duly authorized, executed, and delivered by the Company and the Company
Stockholders and constitutes the valid and binding obligation of the Company and
the Company Stockholders, enforceable against the Company and the Company
Stockholders in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfers, reorganization, moratorium, and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principals.
SECTION 3.4. CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by the Company or the Company Stockholders, nor
the consummation by the Company or the Company Stockholders of the transactions
contemplated by this Agreement, will:
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<PAGE> 16
(a) require any consent, approval, authorization, or permit of, or filing with
or notification to, any Governmental Authority (as defined in Section 12.15),
except (i) the filing of a Certificate of Merger in accordance with Delaware
Law, (ii) the filing of the State Certificates in accordance with Company Law,
(iii) any regulatory approvals or routine governmental consents, including
approvals in connection with the Hart Scott Act, normally acquired before or
after the consummation of transactions such as transactions of the nature
contemplated by this Agreement, which consents and approvals are listed on
Schedule 3.4, or (iv) where the failure to obtain such consent, approval,
authorization, or permit, or to make such filing or notification, is not
reasonably expected to have, individually or in the aggregate, a Company
Material Adverse Effect or prevent or delay, in any material respect, the
consummation of the transactions contemplated by this Agreement; (b) result in a
default (or give rise to any right of termination, cancellation, or
acceleration) under any of the terms, conditions, or provisions of any contract,
commitment or similar agreement to which the Company is a party, except (i) as
set forth on Schedule 3.4 or (ii) for such defaults (or rights of termination,
cancellation, or acceleration) as to which requisite waivers or consents have
been obtained or which are not reasonably expected to have, individually or in
the aggregate, a Company Material Adverse Effect or prevent or delay, in any
material respect, the consummation of the transactions contemplated by this
Agreement; or (c) assuming compliance with the matters referred to in Section
3.4(a), violate any order, writ, injunction, decree, statute, rule, or
regulation applicable to the Company, or any of its assets, except for
violations which are not reasonably expected to have, individually or in the
aggregate, a Company Material Adverse Effect or prevent or delay, in any
material respect, the consummation of the transactions contemplated by this
Agreement. The Company is not, and the transactions contemplated by this
Agreement will not result, in violation of its Articles of Incorporation or
Bylaws.
SECTION 3.5. AFFILIATE RELATIONSHIPS. Except as set forth on Schedule 3.5,
none of the Company Stockholders nor any Affiliate (as defined in Section 12.15)
of any of the Company Stockholders, and no director, officer, employee or agent
of or consultant to the Company, owns, directly or indirectly, in whole or in
part, any property, assets or right, tangible or intangible, which is associated
with any property, asset or right owned by the Company or which the Company is
operating or using or the use of which is necessary for its business. Also
included in Schedule 3.5 is disclosure of any relationships which any of the
Company Stockholders have, or any director, officer, employee, or agent of or
consultant to the Company has, with the Company or any other corporation,
partnership, firm, association or business organization, entity or enterprise
which is a competitor, potential competitor, supplier or customer of the
Company. The Persons named on Schedule 3.5 are the only Persons who may be
deemed Affiliates of the Company under Rule 145 of the Securities Act of 1933,
as amended (the "1933 Act").
SECTION 3.6. FINANCIAL STATEMENTS. Attached as Schedule 3.6 are (a) the
balance sheet, statement of income and statement of cash flows of the Company as
of and for the years ended December 31, 1996, 1997 and 1998 (the "Company
Financial Statements") and (b) the unaudited consolidated balance sheet,
statement of income and statement of cash flows of the Company as of and for the
year ended December 31, 1999 (the "Company Unaudited Financial Statements"). The
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<PAGE> 17
Company Financial Statements and the Company Unaudited Financial Statements
present fairly the consolidated financial position, results of operations, and
changes in financial position of the Company as of the respective dates or for
the respective periods to which they apply in accordance with United States
generally accepted accounting principles, consistently applied ("GAAP").
SECTION 3.7. UNDISCLOSED LIABILITIES. Schedule 3.7 sets forth an accurate
list as of the Company Unaudited Balance Sheet Date (as defined below) of (i)
all liabilities of the Company which are reflected in the balance sheet
contained in the Company Unaudited Financial Statements and (ii) any liabilities
of any kind of the Company which are not reflected in the balance sheet included
in the Company Unaudited Financial Statements. Except as set forth on Schedule
3.7 or as reflected, reserved against, or otherwise disclosed in the Company
Unaudited Financial Statements, the Company did not, at the date of the
unaudited balance sheet included in the Company Unaudited Financial Statements
(the "Company Unaudited Balance Sheet Date") and does not have, at the date
hereof, any liabilities or obligations, whether accrued, contingent, absolute,
determined, determinable or otherwise, that may have, individually or in the
aggregate, a Company Material Adverse Effect.
SECTION 3.8. ACCOUNTS AND NOTES RECEIVABLES. Schedule 3.8 sets forth an
accurate list as of the Company Unaudited Balance Sheet Date of the accounts and
notes receivable of the Company, including receivables from and advances to
employees of the Company and the Company Stockholders. Included in Schedule 3.8
is an aging of all accounts and notes receivable showing amounts due in 30-day
aging categories. The trade and other accounts receivable of the Company which
are classified as current assets on the balance sheet as of the Company
Unaudited Balance Sheet Date are bona fide receivables, were acquired in the
ordinary course of business, are stated in accordance with GAAP and, subject to
the reserve for doubtful accounts, need not be written-off as uncollectible.
Except to the extent reflected on Schedule 3.8, such accounts and notes are
collectible in the amount shown on Schedule 3.8.
SECTION 3.9. ASSETS. Schedule 3.9 sets forth an accurate list of all real
and personal property included in "property and equipment" on the balance sheet
of the Company as of the Company Unaudited Balance Sheet Date and all other
tangible assets of the Company with a value in excess of $5,000 (i) owned by the
Company as of the Company Unaudited Balance Sheet Date and (ii) acquired since
the Company Unaudited Balance Sheet Date, including in each case true, complete
and correct copies of leases for significant equipment and for all real property
leased by the Company and descriptions of all real property on which buildings,
warehouses, workshops, garages and other structures used in the operation of the
business of the Company are situated. Schedule 3.9 indicates which assets are
currently owned, or were formerly owned, by the Company Stockholders or
Affiliates of the Company or the Company Stockholders. Except as specifically
identified on Schedule 3.9, all of the tangible assets, vehicles and other
significant machinery and equipment of the Company listed on Schedule 3.9 are in
good working order and condition, ordinary wear and tear excepted, and have been
maintained in accordance with standard industry practices. All fixed assets used
by the Company that are material to the operation of the Company's business
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<PAGE> 18
are either owned by the Company or leased under an agreement identified on
Schedule 3.9. All leases set forth on Schedule 3.9 are in full force and effect
and constitute valid and binding agreements of the parties thereto in accordance
with their respective terms.
Schedule 3.9 contains true, complete and correct copies of all title
reports and title insurance policies received by the Company with respect to
real property it leases. Schedule 3.9 also includes a summary description of all
plans or projects involving the opening of new operations, expansion of existing
operations or the acquisition of any real property or existing business, to
which management of the Company has devoted effort or expenditure in the
two-year period prior to the date of this Agreement, which if pursued by the
Company would require additional expenditures of capital.
The Company has good and indefeasible title to the tangible and
intangible personal property owned and used in their business, including the
properties identified on Schedule 3.9, subject to no mortgage, pledge, lien,
claim, conditional sales agreement, encumbrance or charge, except for liens
reflected on Schedule 3.9, liens for current Taxes not yet payable and
assessments not in default, easements for utilities serving only the property,
and easements, covenants and restrictions and other exceptions to title shown of
record in the appropriate public records in the jurisdictions in which the
properties, assets and leasehold estates are located, which do not adversely
affect the Company's use of the property.
SECTION 3.10. MATERIAL CONTRACTS, COMMITMENTS AND CUSTOMERS. Schedule 3.10
sets forth an accurate list as of the Company Unaudited Balance Sheet Date of
(i) all material contracts, commitments and similar agreements to which the
Company is a party or by which they or any of their property is bound
(including, but not limited to, joint venture or partnership agreements,
contracts with any labor organizations, loan agreements, indemnity or guaranty
agreements, bonds, mortgages, liens, pledges or other security agreements) and
the Company Stockholders have delivered true copies of such agreements to AMPAM
and (ii) all customers representing 5% or more of the Company's revenues, taken
as a whole, in any of the periods covered by the Company Financial Statements or
the Company Unaudited Financial Statements. 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 as
disclosed on Schedule 3.10, all such agreements are in full force and effect and
none of such contracts or agreements unduly burdens or restricts the Company in
the ordinary course of its business. None of the Company's customers or
suppliers has canceled service or products, as appropriate. Except to the extent
set forth on Schedule 3.10, (i) the Company has complied with all material
commitments and obligations and are not in default under any contracts and
agreements and no notice of default has been received and (ii) none of the
Company's customers listed pursuant to (ii) above has canceled or substantially
reduced or is currently attempting or threatening to cancel
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<PAGE> 19
or substantially reduce its use of the Company's products or services. Except as
set forth on Schedule 3.10, the Company is not now, nor has it ever been, a
party to any contracts subject to price redetermination or renegotiation.
SECTION 3.11. OPERATING AUTHORITY. The Company possesses all material
governmental licenses, permits, franchises, and other authorizations
("Licenses") of any Governmental Authority that are necessary to the ownership
or operation of their business as currently conducted, and all such Licenses are
in full force and effect, except where the failure to possess any License or the
failure to be in full force and effect is not reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect, and the
Company is not in default in any respect relating thereto. No proceeding is
pending or, to the Company Stockholders' Knowledge, is threatened seeking the
revocation or limitation of any such License that is reasonably expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
Schedule 3.11 sets forth an accurate list and summary description as of
the Company Unaudited Balance Sheet Date of all Licenses, certificates,
trademarks, trade names, patents, patent applications and copyrights related to
the assets owned or held by the Company. The Licenses and other rights listed on
Schedule 3.11 are valid, and the Company has not received any notice that any
person intends to cancel, terminate or not renew any such License or other
right. 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 and other rights listed on Schedule 3.11 and is not in
violation of any of the foregoing in any material respect. Except as
specifically provided in Schedule 3.11, the consummation 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 or other rights.
SECTION 3.12. BANK ACCOUNT INFORMATION. Schedule 3.12 contains an accurate
list of the names and addresses of every bank and other financial institution in
which Company maintains an account (whether checking, savings or otherwise),
lock box, or safe deposit box, and the account numbers and persons having
signature authority or legal access thereto.
SECTION 3.13. CONDUCT OF BUSINESS SINCE COMPANY UNAUDITED BALANCE SHEET
DATE. Except as expressly contemplated by this Agreement and except as set forth
on Schedule 3.13, since the Company Unaudited Balance Sheet Date there has not
been:
(i) any Company Material Adverse Change (as defined in Section
12.15);
(ii) any damage, destruction or casualty loss (whether or not
covered by insurance), alone or in the aggregate, which has caused a
Company Material Adverse Effect on the Company;
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<PAGE> 20
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in ownership interests or any
grant of any options, warrants, calls, conversion rights or
commitments;
(iv) any dividend or any distribution declared or paid with
respect to, or purchases or redemptions of any of the Company Stock;
(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 Company
Material Adverse Effect;
(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 Company Stockholders and their
Affiliates, except inventory sold or transferred in the Ordinary
Course of Business (as defined in Section 12.15);
(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 Company Stockholders or any
Affiliate thereof;
(iv) 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 3.10 prior to the scheduled
termination date thereof; or
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<PAGE> 21
(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 3.13 and (b) distributions of real estate required by Section
5.12 of this Agreement.
SECTION 3.14. LITIGATION; ORDERS. Except as set forth on Schedule 3.14, as
of the date hereof, there are no Actions (as defined in Section 12.15) pending
or, to the Company Stockholders' Knowledge, threatened against the Company.
Except as set forth on Schedule 3.14, as of the date hereof there are no
judgments or outstanding orders, injunctions, decrees, stipulations, or awards
(whether rendered by a court or administrative agency or by arbitration) against
the Company.
SECTION 3.15. LABOR MATTERS. Except as set forth on Schedule 3.15, there
are no agreements with labor unions or associations representing employees of
the Company. No material work stoppage against the Company is pending or, to the
Company Stockholders' Knowledge, threatened. The Company has not been nor is
involved in or, to the Company Stockholders' Knowledge, is threatened with any
labor dispute, arbitration, lawsuit, or administrative proceeding relating to
labor matters involving the employees of the Company (excluding routine workers'
compensation claims) that is reasonably expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
SECTION 3.16. COMPLIANCE WITH LAWS. The conduct of the business by the
Company complies with all statutes, laws, regulations, ordinances, rules,
judgments, orders, or decrees applicable thereto (other than Environmental Laws
(as hereinafter defined) which are governed solely by Section 3.18), except for
violations or failures so to comply, if any, that would not have, individually
or in the aggregate, a Company Material Adverse Effect.
SECTION 3.17. INSURANCE. Schedule 3.17 sets forth a list of all insurance
policies issued in favor of the Company which relate to its business, and all
such policies are currently in force and effect. True and complete copies of all
such policies have been delivered to AMPAM. A true and complete list of all
insurance loss runs and workers' compensation claims received for the past three
(3) policy years has been delivered to AMPAM. The insurance carried by the
Company, which the Company Stockholders believe to be adequate in character and
amount, is with financially sound and reputable insurers unaffiliated with any
of the Company Stockholders or the Company. None of such policies is a "claims
made" policy. All insurance policies carried by the Company are currently in
full force and effect. The Company's insurance has never been canceled and the
Company has never been denied coverage or experienced a substantial increase in
premiums or substantial reduction in coverage from one policy period to the next
period.
SECTION 3.18. ENVIRONMENTAL MATTERS. Other than violations that would not
have, individually or in the aggregate, a Company Material Adverse Effect, the
Company is in compliance with all applicable Environmental Laws. Without
limitation of the foregoing, there are no past, existing, pending or, to the
Company Stockholders' Knowledge, threatened actions, suits,
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<PAGE> 22
investigations, inquiries, proceedings or clean-up obligations by or to any
Governmental Authority relating to any Environmental Laws with respect to the
Company, except for actions, suits, investigations, inquiries, proceedings, and
obligations that would not have, individually or in the aggregate, a Company
Material Adverse Effect. To the Company Stockholders' Knowledge (i) there are no
underground storage tanks on, in or under any properties owned by the Company
and 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 3.18 and (ii) there is no asbestos or
asbestos-containing material present in any of the properties owned by the
Company, and no asbestos has been removed from any of such properties during the
time such properties were owned, leased or operated by the Company. Neither the
Company nor any of its respective 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. All notices, permits,
or similar authorizations, if any, required to be obtained or filed in
connection with the operations of the Company, including, without limitation,
treatment, storage, disposal, or release of a hazardous substance or solid waste
into the environment, have been duly obtained or filed, other than any such
notices, permits, or similar authorizations the failure of which to obtain or
file is not reasonably expected to have, individually or in the aggregate, a
Company Material Adverse Effect. The term "release" has the meaning specified in
CERCLA (as hereinafter defined), and the term "disposal" (or "disposed") has the
meaning specified in RCRA (as hereinafter defined). For the purposes hereof,
"Environmental Laws" shall mean any and all laws, statutes, ordinances, rules,
regulations, orders, or determinations of any Governmental Authority pertaining
to the environment in effect on the date of this Agreement and in effect at such
time in any and all jurisdictions in which the Company operates, including,
without limitation, the Clean Air Act, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended ("CERCLA"),
the Federal Water Pollution Control Act, as amended, the Resource Conservation
and Recovery Act, as amended ("RCRA"), the Safe Drinking Water Act, as amended,
the Toxic Substances Control Act, as amended, comparable state and local laws
and other material environmental protection laws in effect on the date of this
Agreement. Schedule 3.18 lists all disposal sites that the Company has utilized
as of the Company Unaudited Balance Sheet Date.
SECTION 3.19. TAXES. (a) Except as set forth on Schedule 3.19, the Company
has filed when due all Company Returns (as defined in Section 12.15), and has,
except for Taxes that are being contested in good faith and set forth on
Schedule 3.19, timely paid and discharged all Tax obligations shown thereon and
adequate reserves have been established on the books of the Company for all
Taxes for which the Company is liable but payment is not yet due, (ii) the
Company Returns correctly and accurately reflect the facts regarding the income,
business and assets, operations, activities, status, or other matters of the
Company, and any other information required to be shown thereon, and are not
subject to penalties under Section 6662 of the Code, relating to
accuracy-related penalties, or any corresponding provision of applicable state,
local, or foreign Tax law or any predecessor provision of law, and (iii) the
Company has not received any notice of any Tax deficiency outstanding, proposed,
or assessed against or allocable to it, nor has it executed any
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waiver of any statute of limitations on the assessment or collection of any Tax,
or executed or filed with the Internal Revenue Service or any other Governmental
Authority any agreement now in effect extending the period for assessment or
collection of any Taxes against the Company. No liens for Taxes exist upon the
assets of the Company except liens for Taxes that are not yet due. The Company
is not and never has been subject to Tax in any jurisdiction outside the United
States. No litigation with respect to any Tax for which the Company is asserted
to be liable is pending or, to the Knowledge of the Company or any Company
Stockholder, threatened, and no basis which the Company or any Company
Stockholder believes to be valid exists on which any claim for any such Tax can
be asserted against the Company. There are no requests for rulings or
determinations in respect of any Taxes pending between the Company and any
taxing authority. No issues have been raised and remain pending by any taxing
authority in connection with the examination of any return of the Company. All
deficiencies asserted and assessments made, if any, as a result of or in
connection with any examination have been paid in full or are fully reflected as
a liability in the financial statements. The Company is not and never has been
party to any Tax allocation or sharing agreement. All amounts required to be
withheld by the Company and paid to governmental agencies for income, social
security, unemployment insurance, sales, excise, use and other Taxes have been
collected or withheld and paid to the proper taxing authority. For purposes of
this Agreement, "Tax" or "Taxes" means taxes of any kind, levies, or other like
assessments, customs, duties, imposts, charges, or fees, including, without
limitation, income, gross receipts, ad valorem, value added, excise, real or
personal property, asset, sales, use, license, payroll, transaction, capital,
net worth and franchise taxes, estimated taxes, withholding, employment, social
security, workers compensation, utility, severance, production, unemployment
compensation, occupation, premium, windfall profits, transfer, and gains taxes
or other governmental taxes imposed or payable to the United States, or any
state, county, local, or foreign government or subdivision or agency thereof,
and in each instance such term shall include any interest, penalties, or
additions to tax attributable to or imposed with respect to any such tax,
including penalties for the failure to file any tax return or report.
(b) The Company has never been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the Code, other than as a
common parent corporation.
(c) None of the assets of the Company is property that the Company is
required to treat as being owned by any other Person pursuant to the "safe
harbor lease" provisions of former Section 168(f)(8) of the Code.
(d) None of the assets of the Company directly or indirectly secures
any debt the interest on which is tax-exempt under Section 103(a) of the Code.
(e) None of the assets of the Company is "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
(f) The Company has not agreed to make, nor is it required to make, any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise.
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<PAGE> 24
(g) The Company has not participated in, nor will it participate in, an
international boycott within the meaning of Section 999 of the Code.
(h) The Company neither has nor had a permanent establishment in any
foreign country, as defined in any applicable tax treaty or convention between
the United States and such foreign country.
(i) The Company has not filed a consent pursuant to the collapsible
corporation provisions of Section 341(f) of the Code (or any corresponding
provision of state, local, or foreign income tax law) or agreed to have Section
341(f)(2) of the Code (or any corresponding provision of state, local, or
foreign income tax law) apply to any disposition of any asset owned by it.
(j) Neither the Company nor any Company Stockholder is a "foreign person"
as that term is defined in Section 1445(f)(3) of the Code.
(k) The Company has not made, is not obligated to make and is not a party
to any agreement that would require it to make any payment that is not
deductible under Section 280G of the Code.
(l) No asset of the Company is subject to any provision of applicable law
that eliminates or reduces the allowance for depreciation or amortization in
respect of that asset below the allowance generally available to an asset of its
type.
SECTION 3.20. EMPLOYEE BENEFIT PLANS. (a) Schedule 3.20 contains a list of
all "employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes
referred to herein as "Company Pension Plans"), "employee welfare benefit plans"
(as defined in Section 3(l) of ERISA, hereinafter a "Company Welfare Plan"),
stock option, stock purchase, incentive, bonus, deferred compensation plans or
arrangements, vacation, change in control, stay-on bonus plans or arrangements,
and other material employee compensation and fringe benefit plans or agreements,
maintained, contributed to, or pursuant to which the Company has or may have any
liability, whether or not heretofore terminated (all the foregoing being herein
called "Company Benefit Plans"). The Company has delivered to AMPAM an accurate
list (which is set forth on Schedule 3.20) 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) December 31,1999 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 3.20. Since December
31, 1999, except as disclosed on Schedule 3.20, there have been no increases in
the compensation payable or any special bonuses to any officer, director, key
employee or other employee, except ordinary salary increases implemented on a
basis consistent with past practices. The Company has made available to AMPAM
true, complete, and correct copies of (1) each Company Benefit Plan and any
subsequently adopted amendments thereto (or, in the case of unwritten Company
Benefit Plans,
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<PAGE> 25
descriptions thereof), (2) the most recent annual report on Form 5500 filed with
respect to each Company Benefit Plan (if any such report was required), (3) the
most recent summary plan description for each Company Benefit Plan for which
such a summary plan description is required (with all summaries of material
modifications provided after the most recent summary plan description was
distributed), (4) each trust agreement, group annuity contract and service
agreement relating to any Company Benefit Plan and (5) each favorable
determination letter from the Internal Revenue Service with respect to each
Company Benefit Plan that is intended to be qualified under Section 401(a) of
the Code.
(b) All Company Benefit Plans are and have been administered in compliance
with their terms and all applicable laws, including, without limitation, ERISA
and the Code, except where the failure to so administer the Company Benefit
Plans or to comply with such laws would not have, individually or in the
aggregate, a Company Material Adverse Effect. There are no pending or, to the
Company Stockholders' Knowledge, threatened investigations by any governmental
entity, termination proceedings, or other, suits or proceedings against or
involving any Company Benefit Plan. All such plans that are intended to qualify
(the "Qualified Plans") under Section 401(a) of the Code 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
3.20. Except as disclosed on Schedule 3.20, all reports and other documents
required to be filed with any Governmental Authority or distributed to plan
participants or beneficiaries (including, but not limited to, actuarial reports,
audits or tax returns) have been timely filed or distributed, and copies thereof
are included as part of Schedule 3.20 hereof.
(c) All contributions to, and payments from, the Company Benefit Plans
required to be made in accordance with the Company Benefit Plans or applicable
law have been timely made. All accrued contribution obligations of the Company
with respect to any Company Benefit Plan have either been fulfilled in their
entirety or are fully reflected on the balance sheet in the Company Financial
Statements and the Company Unaudited Financial Statements.
(d) No Company Benefit Plan is subject to Section 302 or Title IV of ERISA
or Section 412 of the Code or is a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA or a "multiple employer's plan" within the meaning
of Section 413 of the Code.
(e) (i) No "prohibited transaction" (under Section 4975 of the Code or
Section 406 of ERISA) has occurred with respect to any Company Benefit Plan and
(ii) there has been no breach of any fiduciary duty with respect to any Company
Benefit Plan, other than, in the case of (i) and (ii), those that are not
reasonably expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(f) The Company does not maintain or contribute to any Company Welfare Plan
that could not be unilaterally terminated by the Company at any time without
liability.
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(g) Except as set forth on Schedule 3.20, there are no assets of any
Company Benefit Plan that are not readily tradeable on a national securities
exchange, including the NASDAQ Stock Market.
SECTION 3.21. BROKERAGE FEES AND COMMISSIONS. Except as set forth on
Schedule 3.21, neither the Company nor the Company Stockholders has incurred any
obligation or entered into any agreement for any investment banking, brokerage
or finder's fee, or commission in respect of the transactions contemplated by
this Agreement for which AMPAM or the Company shall incur any liability.
SECTION 3.22. TAX TREATMENT. Neither the Company nor, to the Company
Stockholders' Knowledge, any of its Affiliates has taken, has agreed or failed
to take, or intends to take any action or has any Knowledge of any fact or
circumstance that would prevent the Merger from qualifying as a reorganization
within the meaning of Section 368 of the Code (a "368 Reorganization").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AMPAM
AMPAM represents and warrants to the Company Stockholders that all of
the representations and warranties in this Article IV are true (i) as of the
date of execution of this Agreement, (ii) as of the Effective Time subject to
Section 5.16, and (iii) for a period of two years from the Closing (the last day
of such period being the "Expiration Date"), except that the representations and
warranties set forth in Section 4.2 and Section 4.5 shall survive until such
time as the applicable statute of limitations period has run, which expired
statute of limitations period shall be deemed to be the Expiration Date for the
representations and warranties set forth in Sections 4.2 and 4.5.
SECTION 4.1. ORGANIZATION AND QUALIFICATION. Each of AMPAM and Acquisition
is a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation, and AMPAM has the requisite corporate
power to carry on its business as it is now conducted. AMPAM and Acquisition are
duly qualified to conduct business as a foreign corporation in each jurisdiction
in which its ownership or lease of property or the conduct of its business and
operations makes such qualification necessary, except for such jurisdictions in
which AMPAM's or Acquisition's failure to be so qualified is not reasonably
expected to have, individually or in the aggregate, an AMPAM Material Adverse
Effect (as defined in Section 12.15).
SECTION 4.2. CAPITALIZATION. (a) The authorized capital stock of AMPAM
consists of 100,000,000 shares of AMPAM Common Stock, 5,000,000 shares of
Restricted Common Stock and 10,000,000 shares of preferred stock. As of December
31, 1999, there were outstanding 11,463,115 shares of AMPAM Common Stock
(including no shares of treasury stock), 2,423,517 shares of restricted voting
common stock and 1,048,820 shares of 10% Cumulative Redeemable Convertible
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Preferred Stock Series A. All outstanding shares of capital stock of AMPAM have
been duly authorized and validly issued and are fully paid and non-assessable
and free of preemptive rights.
(b) The AMPAM Common Stock to be issued as part of the Merger Consideration
have been duly authorized and, when issued and delivered in accordance with the
terms of this Agreement, will have been validly issued and will be fully paid
and non-assessable, and the issuance thereof is not subject to any preemptive or
other similar right.
SECTION 4.3. AUTHORIZATION. The execution, delivery and performance by
AMPAM and Acquisition of this Agreement, and the consummation by AMPAM and
Acquisition of the transactions contemplated hereby, are within the corporate
powers of AMPAM and Acquisition and have been duly authorized by all necessary
corporate action. This Agreement has been duly executed and delivered by AMPAM
and Acquisition and constitutes the valid and binding obligation of AMPAM and
Acquisition enforceable against AMPAM and Acquisition in accordance with its
terms.
SECTION 4.4. CONSENTS AND APPROVAL; NO VIOLATION. Neither the execution and
delivery of this Agreement by AMPAM and Acquisition, nor the consummation by
AMPAM and Acquisition of the transactions contemplated by this Agreement, will:
(a) require any consent, approval, authorization, or permit of, or filing with
or notification to, any Governmental Authority, except (i) the filing of the
Certificate of Merger in accordance with Delaware Law, (ii) the filing of the
State Certificates in accordance with Company Law, (iii) compliance with any
applicable requirements of the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and foreign or state securities or Blue Sky laws, (iv)
any regulatory approvals or routine governmental consents, including approvals
in connection with the Hart Scott Act, normally acquired before or after the
consummation of transactions such as transactions of the nature contemplated by
this Agreement which consents and approvals are listed on Schedule 4.4, or (v)
where the failure to obtain such consent, approval, authorization, or permit, or
to make such filing or notification, is not reasonably expected to have,
individually or in the aggregate, an AMPAM Material Adverse Effect or prevent or
delay, in any material respect, the consummation of the transactions
contemplated by this Agreement; (b) result in a default (or give rise to any
right of termination, cancellation, or acceleration) under any of the terms,
conditions, or provisions of any agreement or other instrument binding upon
AMPAM or any of its subsidiaries, except for such defaults (or rights of
termination, cancellation, or acceleration) as to which requisite waivers or
consents have been obtained or which are not reasonably expected to have,
individually or in the aggregate, an AMPAM Material Adverse Effect or prevent or
delay, in any material respect, the consummation of the transactions
contemplated by this Agreement; or (c) assuming compliance with the matters
referred to in Section 4.4(a), violate any order, writ, injunction, decree,
statute, rule, or regulation applicable to AMPAM or any of its subsidiaries or
any of their assets, except for violations which are not reasonably expected to
have, individually or in the aggregate, an AMPAM Material Adverse Effect or
prevent or delay, in any material respect, the consummation of the transactions
contemplated by this Agreement.
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<PAGE> 28
SECTION 4.5. SEC FILINGS. (a) AMPAM has filed with the Securities and
Exchange Commission ("SEC") all material forms, statements, reports and
documents (the "AMPAM SEC Filings") required to be filed by it under the 1934
Act and the rules and regulations thereunder.
(b) As of its filing date, each AMPAM SEC Filing complied as to form in all
material respects with the applicable requirements of the 1934 Act.
(c) As of its filing date, each AMPAM SEC Filing filed pursuant to the 1934
Act did not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
(d) AMPAM has previously delivered to the Company Stockholders copies of
AMPAM's private placement memorandum, dated January 13, 2000 (the "PPM"). As of
its date, the PPM did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
SECTION 4.6. TAX TREATMENT. AMPAM has not taken, will not take, and has not
failed to take any action, and does not know of any fact, occurrence or
circumstance, that would prevent the Merger from qualifying as a 368
Reorganization.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 5.1. REASONABLE BEST EFFORTS. Subject to the terms and conditions
of this Agreement, each party will use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper, or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement.
SECTION 5.2. CERTAIN FILINGS. The Company and AMPAM shall cooperate with
one another (i) in determining whether any action by or in respect of, or filing
with, any Governmental Authority is required, or any actions, consents,
approvals, or waivers are required to be obtained from parties to any material
agreements, in connection with the consummation of the transactions contemplated
by this Agreement and (ii) in taking such actions or making such filings,
furnishing information required in connection therewith and seeking timely to
obtain such actions, consents, approvals, or waivers.
SECTION 5.3. PUBLIC ANNOUNCEMENTS. Without the prior consent of AMPAM,
which consent shall not be unreasonably withheld, none of the Company or the
Company Stockholders will issue, or permit any agent or Affiliate to issue, any
press releases or otherwise make or permit any
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agent or Affiliate to make, any public statements with respect to this Agreement
or the transactions contemplated by this Agreement.
SECTION 5.4. FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Acquisition,
any deeds, bills of sale, assignments, or assurances, and to take and do, in the
name and on behalf of the Company or Acquisition, any other actions and things,
to vest, perfect, or confirm of record or otherwise in the Surviving Corporation
any and all right, title, and interest in, to, and under any of the rights,
properties, or assets of the Company acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger.
SECTION 5.5. NOTICES OF CERTAIN EVENTS. Each of the Company, the Company
Stockholders, Acquisition and AMPAM shall promptly notify the other parties
hereto of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice or other communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement;
(c) any actions, suits, claims, investigations or proceedings commenced or,
to its Knowledge, threatened against, relating to, or involving or otherwise
affecting such party that relate to the consummation of the transactions
contemplated by this Agreement; and
(d) any material failure on its part to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.5(d) shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 5.6. RELEASE FROM GUARANTEES. Following the Effective Time, AMPAM
and the Surviving Corporation shall use reasonable efforts to have the Company
Stockholders released from the personal guarantees of the Company's indebtedness
identified on Schedule 5.6. In the event that AMPAM cannot obtain releases of
any such guarantees on or prior to one hundred and twenty (120) days subsequent
to the Effective Time, AMPAM shall pay off or otherwise refinance or retire such
indebtedness.
SECTION 5.7. FUTURE COOPERATION; TAX MATTERS. At AMPAM's expense, the
Company, Company Stockholders, Acquisition and AMPAM shall each deliver or cause
to be delivered to the other following the Effective Time such additional
instruments as the other may reasonably request for the purpose of fully
carrying out this Agreement. At AMPAM's expense, the Company Stockholders will
cooperate and use their reasonable best efforts to have the present officers,
directors and employees of and independent accountants to the Company cooperate
with AMPAM
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<PAGE> 30
at and after the Effective Time in furnishing information, evidence, testimony
and other assistance in connection with any actions, proceedings, arrangements
or disputes of any nature with respect to matters pertaining to all periods
prior to the Effective Time, including, without limitation, consent to the
inclusion of any independent auditor's report in documents filed by AMPAM under
the 1933 Act or 1934 Act.
SECTION 5.8. EXPENSES. AMPAM and Acquisition on one hand, and the Company
Stockholders on the other, will each pay their own fees, expenses and
disbursements of their respective agents, representatives, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement and any amendment thereto.
SECTION 5.9. REPAYMENT OF RELATED PARTY INDEBTEDNESS. Concurrently with the
Closing of this Agreement, (i) the Company Stockholders shall repay to the
Company all amounts outstanding as advances to or receivables from the Company
Stockholders and (ii) the Company shall repay all amounts outstanding under
loans to the Company from the Company Stockholders. Such advances, receivables
and loans, and the amounts thereof, are listed on Schedule 5.9.
SECTION 5.10. FIRPTA CERTIFICATE. Each Company Stockholder will deliver 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.
SECTION 5.11. PREPARATION AND FILING OF TAX RETURNS. (a) The Company
Stockholders shall file or cause to be filed all required Company tax returns
for all taxable periods that end on or before the Effective Time, but in each
case only after AMPAM has reviewed such filings and consented thereto.
(b) AMPAM shall file or cause to be filed all tax returns for all taxable
periods ending after the Effective Time.
(c) 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 tax returns,
amended tax returns 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 tax 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 tax returns pursuant to this Agreement shall bear all costs of filing
such tax returns.
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<PAGE> 31
SECTION 5.12. TRANSFER OF REAL PROPERTY. At or prior to the Effective Time,
except as set forth on Schedule 5.12, 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.
SECTION 5.13. ANTITRUST LAW COMPLIANCE. Not later than five business days
after the date hereof, the Company, the Company Stockholders and AMPAM shall, at
AMPAM's sole cost and expense, prepare and file with the United States
Department of Justice (the "Department") and the Federal Trade Commission (the
"FTC") the notification and report form with respect to the transactions
contemplated by this Agreement as required pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "Hart Scott Act"). The Company, the
Company Stockholders and AMPAM shall each cooperate with the other in
preparation of such filings and shall promptly comply with any reasonable
request by the Department or the FTC for supplemental information and shall use
their best efforts to obtain early termination of the waiting period under the
Hart Scott Act.
SECTION 5.14. PENDING CLOSING. (a) Between the date of this Agreement and
the Effective Time, the Company Stockholders will, and will cause the Company
to, except as set forth on Schedule 5.14:
(i) carry on its respective businesses in substantially the same
manner as it has heretofore;
(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
excepted;
(iii) perform in all material respects all of its respective
obligations under agreements relating to or affecting its respective
assets, properties or rights;
(iv) use all 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 respective relationships with
suppliers, customers and others having business relations with the
Company;
(vi) use 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;
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(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), except 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;
(ix) 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; and
(x) avoid taking any actions or undertaking any transactions that
would prevent or impede the Merger from qualifying as a 368
Reorganization.
(b) Except as disclosed on Schedule 5.14, between the date hereof and the
Effective Time, the Company will not, without prior written consent of AMPAM:
(i) make any change in its charter or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or
purchase, redeem or otherwise acquire or retire for value any shares
of its stock, except for distributions in the Ordinary Course of
Business;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except if it is
in the normal course of business (consistent with past practice) or
involves an amount not in excess of three percent (3%) of the
Company's revenues for the 12 months ended December 31, 1999;
(v) create, assume or permit to exist any new mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired, except with respect to purchase money
liens incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of three percent
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<PAGE> 33
(3%) of the Company's revenues for the 12 months ended December 31,
1999, necessary or desirable for the conduct of the businesses of the
Company;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment, except in the Ordinary Course of Business or
pursuant to Section 5.12;
(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, provided, further, that such adjustments shall not
be deemed to be included in Schedule 5.14 unless specifically listed
thereon;
(x) amend or terminate any material agreement, permit, license or
other right of the Company, except in the Ordinary Course of Business;
or
(xi) enter into any other transaction outside the Ordinary Course
of Business or prohibited hereunder.
(c) None of the Company 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 Effective Time 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.
SECTION 5.15. NOTIFICATION OF CERTAIN MATTERS. The Company Stockholders
shall give prompt notice to AMPAM upon obtaining Knowledge of (i) the occurrence
or non-occurrence of any event of which would be likely to cause any
representation or warranty contained herein to be untrue or inaccurate and (ii)
any failure of any Company 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 Stockholders of
(i) the occurrence or non-occurrence of any event of which would be likely to
cause any representation or warranty of AMPAM contained herein to be untrue or
inaccurate and (ii) any failure of AMPAM to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder.
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SECTION 5.16. 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 Effective Time to notify the other party 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
Company 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 Section 1.8 and Section 1.9 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.
SECTION 5.17. BOARD OF DIRECTORS SEAT. AMPAM agrees that the management of
AMPAM or the Board of Directors of AMPAM will nominate Lloyd C. Smith for a
Class I Director seat on AMPAM's Board of Directors effective April 1, 2000, and
that the term of a Class I Director is three years.
SECTION 5.18. COMPANY'S HEALTH BENEFITS AND 401K CONTRIBUTIONS. AMPAM and
Acquisition agree that the Surviving Corporation, as of the Effective Time or as
soon as practicable thereafter, will increase (i) the Company's participating
percentage associated with the Company's health insurance plan to 100% for the
employee only and (ii) the Company's 401K plan matching percentage to 50% of the
employee's contribution up to 6% of said employee's salary, as allowed by law.
SECTION 5.19. ACCESS TO MATERIALS. For a period of five (5) years after the
Effective Time, the Company Stockholders will have reasonable access to all
documents, materials, information and instruments of the Company.
ARTICLE VI
INDEMNIFICATION
The Company Stockholders and AMPAM each make the following covenants:
SECTION 6.1. INDEMNIFICATION BY THE COMPANY STOCKHOLDERS. (a) The Company
Stockholders covenant and agree that they, jointly and severally, will
indemnify, defend, protect, and hold harmless AMPAM, the Company, and the
Surviving Corporation, and their respective officers, directors, employees,
stockholders, agents, representatives, and Affiliates (the "AMPAM
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<PAGE> 35
Indemnitees") at all times from and after the date of this Agreement until the
applicable Expiration Date from and against all claims, damages, losses,
liabilities (joint or several), obligations, penalties, defenses, actions,
lawsuits, proceedings, judgments, demands, assessments, adjustments, costs, and
expenses (including specifically, but without limitation, reasonable fees,
disbursements, and expenses of attorneys, accountants, other professional
advisors and of expert witnesses and reasonable costs of investigation and
preparation) (collectively "Damages"), as they are incurred, directly or
indirectly resulting from, relating to or arising out of (i) any breach of or
inaccuracy in, or any allegation or claim by a third party which, if true, would
constitute a breach or inaccuracy in, any representation or warranty set forth
herein or in the Schedules or certificates delivered in connection herewith;
(ii) any breach or non-performance, partial or total, by the Company or any of
the Company Stockholders of any covenant or agreement of the Company (or any
Affiliate or subsidiary thereof) or the Company Stockholders (or any Affiliate
or subsidiary thereof) contained in this Agreement; or (iii) the Company
Litigation referenced in Schedule 3.14.
(b) AMPAM acknowledges and agrees that other than the representations and
warranties of the Company Stockholders specifically contained in this Agreement,
there are no representations or warranties of the Company Stockholders, either
express or implied, with respect to the transactions contemplated by this
Agreement, the Company, or the Company's assets, liabilities or business.
SECTION 6.2. INDEMNIFICATION RELATED TO TAX LIABILITIES. The Company
Stockholders shall retain liability, and shall indemnify AMPAM, for the payment
of any Tax liabilities, net of any Tax benefits, with respect to the conduct of
the business of the Company prior to and up to the Effective Time.
SECTION 6.3. INDEMNIFICATION RELATED TO ACCOUNTS RECEIVABLE. Should the
Company Stockholders indemnify AMPAM for a breach of the representation and
warranty contained in Section 3.8 related to collectibility of accounts
receivable, AMPAM shall pay to the Company Stockholders any net amounts after
attorney fees that are received by the Surviving Corporation or AMPAM after the
Company Stockholders make such indemnification payments with respect to accounts
receivable outstanding on the Company Unaudited Balance Sheet Date. The Company
Stockholders may pursue the collection of such accounts receivable at their own
cost and for their own account if the Board of Directors of the Surviving
Corporation elects not to pursue the collection of such accounts receivable.
SECTION 6.4. INDEMNIFICATION BY AMPAM. AMPAM covenants and agrees that it
will indemnify, defend, protect and hold harmless the Company Stockholders (the
"Stockholder Indemnitees") at all times from and after the date of this
Agreement from and against all claims, Damages, losses, liabilities (joint or
several), obligations, penalties, defenses, actions, lawsuits, proceedings,
judgments, demands, assessments, adjustments, costs, and expenses (including
specifically, but without limitation, fees, disbursements, and expenses of
attorneys, accountants,
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<PAGE> 36
other professional advisors and of expert witnesses and costs of investigation
and preparation), as they are incurred, directly or indirectly resulting from,
relating to or arising out of:
(i) any breach of or any inaccuracy in, or any claim by a third
party which, if true, would constitute a breach or inaccuracy in, any
representation or warranty of AMPAM set forth herein or in the
Schedules or certificates delivered in connection herewith;
(ii) any breach or non-performance, partial or total, by AMPAM of
any covenant or agreement of AMPAM (or any Affiliate or subsidiary
thereof) contained in 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 on any untrue statement or alleged untrue statement of a
material fact contained in the PPM, or any amendment of or supplement
to the PPM, or arising out of or based on 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.
SECTION 6.5. INDEMNIFICATION PROCEEDINGS. Promptly after a party
indemnified pursuant to this Article VI ("Indemnitee") has received notice of or
has Knowledge of any claim by a person not a party to this Agreement ("third
party") or the commencement of any action or proceeding by a third party, the
Indemnitee shall promptly, and in any event within 60 days of the assertion of
any claim or the discovery of any fact upon which Indemnitee intends to base a
claim for indemnification under this Agreement ("Indemnitee Claim"), as a
condition precedent to the Indemnitee Claim, give written notice to the party or
parties from whom indemnification is sought ("Indemnitor") of such claim by the
third party. Such notice shall state the nature and the basis of such claim and
a reasonable estimate of the amount thereof. If the Indemnitor does not object
in writing to such indemnification claim within 30 days after receiving notice
thereof, the Indemnitee shall be entitled to recover promptly from the
Indemnitor the amount of such claim (but such recovery shall not limit the
amount of any additional indemnification to which the Indemnitee may be entitled
pursuant to Section 6.1 or 6.3, as the case may be), and no later objection by
the Indemnitor shall be permitted. If the Indemnitor agrees that he, she or it
has an indemnification obligation but objects that he, she or it is obligated to
pay only a lesser amount, the Indemnitee shall nevertheless be entitled to
recover promptly from the Indemnitor the lesser amount, without prejudice to the
Indemnitee's claim for the difference. In the event of any Indemnitee Claim,
Indemnitor, at its option, shall have the right to defend or settle, at its own
expense and by its own counsel, any such matter so long as the Indemnitor
pursues the same in good faith and diligently. If the Indemnitor undertakes to
defend or settle, it shall promptly notify the Indemnitee of its intention to do
so, within the Indemnitor's 30-day objection period set forth above, and the
Indemnitee shall cooperate with the Indemnitor and its counsel in the defense
thereof and in any settlement thereof. Notwithstanding the foregoing, the
Indemnitee shall have the right to participate in any matter through counsel of
its own choosing at Indemnitor's own expense; provided that the Indemnitor's
counsel shall always be lead counsel and
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shall determine all litigation and settlement steps, strategy and the like.
Except as set forth in the preceding sentence, after the Indemnitor has notified
the Indemnitee of its intention to undertake to defend or settle any such
asserted liability, and for so long as the Indemnitor diligently pursues such
defense, the Indemnitor shall not be liable for any additional legal expenses
incurred by the Indemnitee in connection with any defense or settlement of such
asserted liability, except to the extent such participation is requested by the
Indemnitor, in which event the Indemnitee shall be reimbursed by the Indemnitor
for reasonable additional legal expenses, out-of-pocket expenses and allocable
share of employee compensation incurred in connection with such participation
for any employee whose participation is so requested. If the Indemnitor desires
to accept a final and complete settlement of any such third party claim and the
Indemnitee refuses to consent to any such settlement which contains a complete
and irrevocable release of Indemnitee of all current and future claims related
to or arising out of the matter in dispute, then the Indemnitor's liability
under this Section with respect to such third party claim shall be limited to
the amount so offered in settlement by said third party. If the Indemnitor does
not undertake to defend such matter to which the Indemnitee is entitled to
indemnification hereunder, or fails diligently to pursue such defense, the
Indemnitee may undertake such defense through counsel of its choice, at the cost
and expense of the Indemnitor, and the Indemnitee may settle such matter,
without the consent of the Indemnitor, and the Indemnitor shall immediately
reimburse the Indemnitee for the amount paid in such settlement and any other
liabilities or expenses incurred (including all legal fees and expenses) by the
Indemnitee in connection therewith as such amounts, liabilities, expenses and
fees are incurred. In the event that the Indemnitee does not elect to defend
such matter to which the Indemnitee is entitled to indemnification hereunder,
then any failure of the Indemnitee to defend or to participate in the defense of
such matter, shall not relieve the Indemnitor of its obligations hereunder.
SECTION 6.6. EXCLUSIVE REMEDY. The indemnification provided for in this
Article VI 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 of the Company Stockholders 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 Article VI shall be treated as an adjustment to the Merger
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 Indemnitee
or any of its Affiliate causes any such payment not to be treated as an
adjustment to the Merger Consideration for U.S. Federal income Tax purposes.
SECTION 6.7. LIMITATIONS ON INDEMNIFICATION. (a) AMPAM shall not assert any
claim for indemnification under this Article VI against the Company Stockholders
until such time as, and solely to the extent that, the aggregate of all claims
which AMPAM may have against the Company
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Stockholders shall exceed 3.0% of the Merger Consideration (the "Indemnification
Threshold"). The Company 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 Company Stockholders may have
against AMPAM shall exceed the Indemnification Threshold; provided, however,
that this sentence shall not be applicable with respect of any failure by AMPAM
to comply with its obligations pursuant to Section 1.2, Section 1.3 and Section
5.6. After the Indemnification Threshold 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.
(b) No person shall be entitled to indemnification under this Article VI 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 Company Stockholders shall limit, diminish or change
any obligation of AMPAM pursuant to Section 5.6 hereof.
(c) Notwithstanding any other term of this Agreement, no Company
Stockholder shall be liable under this Article VI for an amount which exceeds
eighty-five percent (85%) of the amount of proceeds received by such Company
Stockholder (valued as of the Closing) in connection with the purchase and sale
of the Company Stock.
(d) A Company Stockholder may pay any indemnification obligation under
Article VI by means of the payment of cash or a combination of the payment of
cash and the delivery to AMPAM of shares of AMPAM stock; provided that AMPAM
shall have the right to reduce pro rata the number of shares of each Company
Stockholder included in the payment of such indemnification obligation to the
extent that inclusion of such shares would, in the written opinion of tax
counsel to AMPAM or its independent auditors, cause the transactions
contemplated hereby to fail as a 368 Reorganization. For the purpose of
crediting Company 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 any
party for such loss, liability or expense (or, in the case of AMPAM, by AMPAM,
Acquisition or any subsidiary of AMPAM or Acquisition) 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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SECTION 6.8. INDEMNIFICATION IF NEGLIGENCE OF INDEMNITEE. The
indemnification provided in this Article VI shall be applicable whether or not
negligence of the Indemnitee is alleged or proven.
SECTION 6.9. NO THIRD PARTY BENEFICIARIES. The foregoing indemnification is
given solely for the purpose of protecting the AMPAM Indemnitees and the
Stockholder Indemnitees and shall not be deemed extended to, or interpreted in a
manner to confer any benefit, right, or cause of action upon, any other Person.
ARTICLE VII
NONCOMPETITION COVENANTS
SECTION 7.1. PROHIBITED ACTIVITIES. Except as otherwise provided in the
Employment Agreements, the Company Stockholders will not, during the term of
their employment with the Surviving Corporation and for a period of two (2)
years immediately following the termination of a Stockholder's employment with
the Surviving Corporation or AMPAM, directly or indirectly, for themselves or on
behalf of or in conjunction with any Person:
(a) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial or advisory 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
directly related thereto (such business and operations referred to herein as the
"Plumbing and Mechanical Business"), in direct competition with AMPAM or any of
its subsidiaries within 100 miles of where AMPAM or any of its subsidiaries
conducts business, including any territory serviced by AMPAM or any of its
subsidiaries (which subsidiaries, for purposes of this Article VII shall
include, without limitation, the Surviving Corporation) (the "Territory");
(b) call upon any Person who is, at that time, within the Territory, an
employee of AMPAM or any of its subsidiaries for the purpose or with the intent
of enticing such employee away from or out of the employ of AMPAM or any of its
subsidiaries;
(c) call upon any Person who is, at that time, or which has been, within
one (1) year prior to that time, a customer of AMPAM or any of its subsidiaries
within the Territory for the purpose of soliciting customers, orders or
contracts for any Plumbing and Mechanical Business within the Territory;
(d) call upon any prospective acquisition candidate, on any Company
Stockholder's own behalf or on behalf of any competitor of AMPAM or any of its
subsidiaries, which candidate, to the Knowledge of such Stockholder after due
inquiry, was called upon by AMPAM or any subsidiary
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thereof or for which AMPAM or any subsidiary thereof made an acquisition
analysis, for the purpose of acquiring such entity; or
(e) disclose customers, whether in existence or proposed, of AMPAM or any
of its subsidiaries to any person, firm, partnership, corporation or business
for any reason or purpose whatsoever except to the extent that AMPAM or any of
its subsidiaries has in the past disclosed such information to the public, any
person, firm partnership, corporation, business or other entity for valid
business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any Company Stockholder from (i) acquiring as an investment not more
than one percent (1%) of the capital stock of a company engaged in the Plumbing
and Mechanical Business whose stock is publicly traded on a national securities
exchange, the NASDAQ Stock Market or an over-the-counter or similar market, (ii)
acquiring as an investment not more than one percent (1%) of the capital stock
of a competing business whose stock is not publicly traded if the AMPAM Board of
Directors consents to such acquisition, or (iii) engaging in activities,
directly or indirectly, related to owning, leasing, developing, or selling real
estate. Any ownership interest in any business which is in competition with
AMPAM or any of its subsidiaries shall immediately be disclosed to the AMPAM
Board of Directors.
SECTION 7.2. EQUITABLE RELIEF. 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 Company Stockholder
agrees that the foregoing covenants may be enforced by AMPAM by injunctions,
restraining orders, and other equitable actions and agrees to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such injunctive or any other equitable relief.
SECTION 7.3. REASONABLE RESTRAINT. It is agreed by the parties hereto that
the foregoing covenants in this Article VII impose a reasonable restraint on the
Company Stockholders in light of the activities and business of AMPAM and its
subsidiaries on the date of the execution of this Agreement and the current
plans of AMPAM and its subsidiaries; but it is also the intent of AMPAM and the
Company Stockholders that such covenants be construed and enforced in accordance
with the changing activities, business, and locations of AMPAM and its
subsidiaries throughout the term of this covenant whether before or after the
Effective Time, unless the Company Stockholder was conducting such new business
prior to AMPAM or any of its subsidiaries conducting such new business. For
example, if, subsequent to the Effective Time or during the term of the Company
Stockholder's employment with the Surviving Corporation, as applicable, AMPAM or
one of its subsidiaries engages in new and different activities, enters a new
business, or establishes new locations for its current or new activities or
business in addition to or other than the activities or business it is currently
conducting in the locations currently established therefor, then the Company
Stockholders will be precluded from soliciting the customers or employees of
such new activities
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or business or from such new location and from directly competing with such new
activities or business within 100 miles of where such new activities, business
or locations are conducted, unless the Company Stockholder was conducting such
new activities or business prior to AMPAM or any of its subsidiaries conducting
such new activities or business.
SECTION 7.4. SEVERABILITY; REFORMATION. The covenants in this Article VII
are severable and separate, and the unenforceability of any specific covenant
shall not affect the continuing validity and enforceability of any other
covenant. In the event any court of competent jurisdiction shall determine that
the scope, time or territorial restrictions set forth in this Article VII 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 this
Agreement shall thereby be reformed.
SECTION 7.5. MATERIAL AND INDEPENDENT COVENANT. The Company Stockholders
acknowledge that their agreements with the covenants set forth in this Article
VII are material conditions to AMPAM's agreement to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. All of the
covenants in this Article VII 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 Company Stockholder against AMPAM or one of its subsidiaries,
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 two (2) year period during which the agreements and covenants of each
Company Stockholder made in this Article VII shall survive shall be computed by
excluding from such computation any time during which such Company Stockholder
is in violation of any provision of this Article VII. The covenants contained in
this Article VII shall not be affected by any breach of any other provision
hereof by any party hereto.
SECTION 7.6. MATERIALITY. The Company and the Company Stockholders hereby
agree that this covenant is a material and substantial part of this transaction.
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ARTICLE VIII
APPLICABLE SECURITIES LAWS/TRANSFER RESTRICTIONS
SECTION 8.1. COMPANY STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES
CONCERNING SECURITIES. As of the date hereof and as of the Effective Time, the
Company Stockholders hereby make the following representations and warranties to
and for the benefit of AMPAM: (i) that the Company Stockholders have been
provided with copies of the PPM and have been provided as much time and
opportunity as they deemed appropriate to review and study such PPM, and to
consult with AMPAM regarding the merits and risks of the transactions
contemplated by this Agreement; (ii) that the Company Stockholders have had
adequate opportunity to ask questions of and receive answers from the officers
of AMPAM pertaining to the purchase of the AMPAM Common Stock pursuant to the
Merger, and (iii) all such questions have been answered to the satisfaction of
the Company Stockholders.
SECTION 8.2. TRANSFER RESTRICTIONS RELATING TO AMPAM COMMON STOCK. For a
period of two years from the Effective Time or, in the event that AMPAM
completes an IPO (as defined in Section 12.15), 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 Common Stock received by the Stockholder pursuant
to this Agreement or any securities convertible into, exchangeable or
exercisable for any shares of AMPAM Common 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 Common 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 indirectly, the
economic consequence of ownership of the AMPAM Common Stock, whether any such
swap or transaction is to be settled by delivery of shares of AMPAM Common 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 11 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 8.2,
(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 8.2, (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 8.2.
or (D) pursuant to Article IX hereof, the sale by such Stockholder in an IPO of
shares of AMPAM stock representing not more than 10% of such Stockholder's pro
rata share of the cash portion of the Adjusted or Readjusted (as appropriate)
Merger Consideration; provided, however, that AMPAM shall have the right to
reduce pro rata the
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number of shares of each selling Company Stockholder included in such IPO to the
extent that inclusion of such shares would, in the opinion of tax counsel to
AMPAM or its independent auditors, cause the transactions contemplated hereby to
fail as a 368 Reorganization; and provided further, if AMPAM is advised in
writing in good faith by any managing underwriter of an unwritten offering of
the securities being offered pursuant to any registration statement under
Article IX 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 all
AMPAM stockholders and all other security holders in the offering the number of
shares offered for the accounts of such persons (based on the number of shares
held by such person) to a number deemed satisfactory by such managing
underwriter. During this restricted period, the certificates evidencing the
AMPAM Common Stock delivered to the Stockholders pursuant to this Agreement will
bear a legend substantially in the form set forth below:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE TERMS OF
THE AGREEMENT AND PLAN OF MERGER 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 AGREEMENT AND PLAN OF MERGER EXCEPT
IN ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT. SUCH RESTRICTIONS ON TRANSFER
ARE SET FORTH IN AN AGREEMENT AND PLAN OF MERGER, 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.
ARTICLE IX
REGISTRATION RIGHTS
SECTION 9.1. 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 Company Stockholders prompt written notice of its intent to do so. Upon the
written request of any of the Company Stockholders given within 15 calendar days
after receipt of such notice, notwithstanding the provisions of Section 8
(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 Company
Stockholders pursuant to this Agreement (including any stock issued as or
issuable
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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 Company 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 Company 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 Company 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, cause the
transactions contemplated hereby to fail as a 368 Reorganization; provided,
however, that with respect to a proposal by AMPAM to register AMPAM stock under
the 1933 Act in connection with an IPO, no Company Stockholder shall be
permitted pursuant to this Section 9.1 to have included in such registration
more shares of AMPAM stock than permitted to be sold by such Company Stockholder
pursuant to Section 8. 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 9.1 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 Company
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 Company Stockholder disapproves of the terms of the
underwriting, that Company Stockholder may elect to withdraw therefrom by
written notice to AMPAM and the managing underwriter. That Company 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 Company 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, 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
Company Stockholders hereunder. Notwithstanding anything in this Agreement to
the contrary, if AMPAM has entered or enters into any agreement with any Person
providing for rights to register shares of AMPAM stock under the 1933 Act and
such rights are more favorable (as determined by the Company Stockholder's in
their sole discretion) than the rights set forth in Section 9, then AMPAM
acknowledges and agrees that the Company Stockholders shall have the right to
elect to have those more favorable terms apply in lieu of any less favorable
terms contained in Section 9 of this Agreement.
SECTION 9.2. REGISTRATION PROCEDURE. Whenever AMPAM is required to register
shares of AMPAM stock pursuant to Section 9.1, 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
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furnish a representative of the Company Stockholders with copies of all such
documents proposed to be filed) as promptly as practical; (ii) Notify the
Company 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
Company 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 Company
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 Company Stockholder, promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriter or underwriters or any participating Company 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 Company Stockholders, any
underwriter participating in any disposition pursuant to such registration
statement, and the counsel retained by the participating Company Stockholders,
counsel for the underwriters and any accountant or other agent retained by
participating Company 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
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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 Company 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
Company 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 Company
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 9 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.
SECTION 9.3. INDEMNIFICATION.
(a) In connection with any registration under Section 9.1, AMPAM shall
indemnify, to the extent permitted by law, each selling Company 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.
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(b) In connection with any registration under Section 9.1, each selling
Company Stockholder shall furnish to AMPAM in writing such information
concerning the Company 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 Company Stockholder expressly for use in the
registration statement. Notwithstanding the foregoing, the liability of a
Company Stockholder under this Section 9.3 shall be limited to an amount equal
to the net proceeds actually received by such Company 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.
SECTION 9.4. UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Section 9.1 covering an underwritten registered offering, (i) each
participating Company Stockholder shall execute and deliver to AMPAM a written
power of attorney instrument that (A) appoints an officer of AMPAM as such
Company Stockholder's attorney-in-fact for purposes of executing and delivering
an underwriting agreement among AMPAM, the underwriters named therein and such
Company Stockholder specifying the terms and conditions applicable to the sale
of AMPAM stock of such Company 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
Company Stockholder to execute and deliver such an underwriting agreement in the
event that the net price per share to be received by such Company Stockholder
from the sale of the shares of AMPAM stock to be sold in
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such offering is not less than a price specified in such instrument and (iii)
AMPAM and each participating Company 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 Company
Stockholder shall be exempt and excluded from any indemnification of the
managing underwriters other than with respect to information provided by such
Company Stockholder with respect to such Company Stockholder to AMPAM or the
managing underwriters specifically for inclusion in any such registration
statement and (B) such Company 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 Company 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.
SECTION 9.5. TRANSFER OF RIGHTS. The right to cause AMPAM to register
shares of AMPAM Common Stock under this Agreement may be assigned to a
transferee or assignee of AMPAM Common Stock of any Company Stockholder to the
extent that such transferee or assignee is a member of the immediate family of a
Company 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.
SECTION 9.6. 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 Common 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 Company
Stockholder owns any restricted AMPAM stock, furnish to each Company 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
Company Stockholder may reasonably request in availing itself of any rule or
regulation of the SEC allowing a Company Stockholder to sell any such shares
without registration.
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ARTICLE X
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
SECTION 10.1. GENERAL. The Company 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 or the Surviving
Corporation, such as lists of customers or employees, operational policies, and
pricing and cost policies that are valuable, special, and unique assets of the
Company and will be valuable, special, and unique assets of the Surviving
Corporation. The Company Stockholders agree that they will not disclose such
confidential information to any Person for any purpose or reason whatsoever,
except (a) to authorized representatives of AMPAM, (b) following the Closing,
such information may be disclosed by the Company Stockholders as is required in
the course of performing their duties for AMPAM or the Surviving Corporation and
(c) to their counsel and other advisers, provided that such advisers (other than
counsel) agree to the confidentiality provisions of this Section 10.1; provided,
however that 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 Company 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 Company
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 Company Stockholders of the
provisions of this Section, AMPAM shall be entitled to an injunction restraining
the Company 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, the Company Stockholders shall have none of
the above-mentioned restrictions on their ability to disseminate confidential
information with respect to the Company.
SECTION 10.2. EQUITABLE RELIEF. Because of the difficulty of measuring
economic losses as a result of the breach of the foregoing covenants, and
because of the immediate and irreparable damage that would be caused for which
the Company, the Surviving Corporation, and/or AMPAM would have no other
adequate remedy, the Company Stockholders agree that the foregoing covenants may
be enforced against them by injunctions, restraining orders, and other equitable
actions and agree to waive any requirement for the securing or posting of any
bond in connection with the obtaining of any such injunctive or any other
equitable relief.
SECTION 10.3. NON-PUBLIC INFORMATION. The Company Stockholders hereby
acknowledge that if they become aware of "material non-public information" (as
defined under applicable securities laws) regarding AMPAM, that they will be
required, under applicable securities laws, to refrain from trading in AMPAM
securities or disclosing any such information while such information is
non-public. The Company Stockholders further agree to communicate such
requirement to all personnel of the Company, the Surviving Corporation or
others, having Knowledge of such "material non-public information" regarding
AMPAM.
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SECTION 10.4. SURVIVAL. The obligations of the parties under this Article X
shall survive the termination or Closing, as the case may be, of this Agreement
for a period of five years.
SECTION 10.5. RETURN OF INFORMATION. If the transactions contemplated by
this Agreement are not consummated, each of AMPAM and the Company Stockholders
will return all confidential information regarding the other and the terms and
conditions of the Confidentiality.
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ARTICLE XI
REDEMPTION OF AMPAM STOCK
SECTION 11.1. REDEMPTION TRIGGER. In the event that, within three years of
the Effective Time, (i) AMPAM has not consummated an IPO and (ii) any Company
Stockholder has not received cash (including proceeds from the public or private
sale of AMPAM Stock received as consideration hereunder) equal to or exceeding
50% of the Adjusted or Readjusted (as appropriate) Merger Consideration received
by each Company Stockholder, such Company Stockholder shall have the right (the
"Put Right"), but not the obligation, commencing on the third anniversary of the
Effective Time to require AMPAM to purchase a number of shares of AMPAM Common
Stock then owned by such Company Stockholder, subject to Section 11.2 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 Common Stock
after the Effective Time.
SECTION 11.2. MINIMUM REDEMPTION; LIMITATIONS. If the events specified in
Section 11.1(i) and Section 11.1(ii), with Section 11.1(ii) being determined on
an individual Company Stockholder basis, have not occurred within the time
specified, AMPAM shall be obligated, pursuant to the Put Right, to purchase
annually from each eligible Company Stockholder no less than 10% of the AMPAM
Common Stock held by such Company Stockholder; provided, however, that the
Company Stockholders shall not be entitled to exercise their Put Rights if and
to the extent that (i) the Surviving Corporation has not achieved $6,000,000 of
adjusted earnings before interest, taxes, depreciation and amortization before
corporate allocations for charges and credits ("Adjusted EBITDA") for the year
preceding the year in which a Company Stockholder seeks to exercise his Put
Right, or (ii) the exercise of the Put Rights would, in the written opinion of
tax counsel to AMPAM or its independent auditors cause the transactions
contemplated hereby to fail as a 368 Reorganization. If AMPAM and the Company
Stockholders disagree on the amount of Adjusted EBITDA for the preceding year,
such determination of Adjusted EBITDA will be made by an independent accounting
firm and its determination will be final and binding on all parties. The
redemptions will be funded by internal cash flows or alternative financing
arrangements but AMPAM's obligation to make any redemption pursuant to this
Article XI will be subject to the covenants and restrictions contained in
AMPAM's private or public debt or equity instruments then in existence.
SECTION 11.3. NOTICE; EXERCISE. The Company Stockholders may exercise their
Put Right by giving written notice (the "Put Notice") to AMPAM within thirty
(30) days after the third anniversary of the Effective Time. If any Company
Stockholder does not provide AMPAM with a Put Notice within such thirty-day
period, the Put Right applicable to such Company Stockholder shall expire. The
date for closing the sale of any shares of AMPAM Common 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
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agreed between such holder and AMPAM. At such closing, AMPAM shall make payment
for the AMPAM Common Stock to be repurchased by wire transfer of immediately
available funds to a bank account designated by such Company Stockholder for
such purpose and such Company Stockholder shall deliver to AMPAM certificates,
duly endorsed for transfer, representing the shares of AMPAM Common Stock to be
purchased and sold pursuant to the exercise of such Put Right.
SECTION 11.4. TERMINATION OF REDEMPTION OBLIGATION. Put Rights with respect
to any individual Company Stockholder will terminate upon receipt by such
Company Stockholder of 50% of the value of his or her Adjusted or Readjusted (as
appropriate) Merger Consideration in cash. Notwithstanding the foregoing, all of
AMPAM's redemption obligations contained in this Article XI 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 Effective Time constitute 50% or more of AMPAM Common Stock
outstanding as of the date of the consummation of such transaction.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without reference to
the choice of law principles thereof.
SECTION 12.2. ENTIRE AGREEMENT. This Agreement, together with the Schedules
and Exhibits hereto, constitute the entire agreement between the parties with
respect to the subject matter hereof, and there are no agreements,
understandings, representations, or warranties between the parties other than
those set forth or referred to herein.
SECTION 12.3. NOTICES. All notices hereunder shall be sufficient upon
receipt for all purposes hereunder if in writing and delivered personally, sent
by documented overnight delivery service or, to the extent receipt is confirmed,
telecopy, telefax, or other electronic transmission service to the appropriate
address or number as set forth below.
If to AMPAM or Acquisition, to:
American Plumbing & Mechanical, Inc.
1950 Louis Henna Blvd.
Round Rock, Texas 78664
Attention: Carl Wimberley
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Fax Number: (512) 246-5290
if to the Company or the Company Stockholders, to:
Lindy Dennis Industries, Inc.
1740 Delilah Street
Corona, California 92879
Attention: Lloyd C. Smith
Fax Number: (909) 817-0217
SECTION 12.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that no party may assign, delegate, or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of each other party hereto, except AMPAM or Acquisition may transfer or
assign, in whole or from time to time in part, to one or more of their
Affiliates, the right to enter into the transactions contemplated by this
Agreement, but any such transfer or assignment will not relieve AMPAM or
Acquisition of its obligations hereunder. This Agreement is not intended to
confer upon any Person not a party hereto any rights or remedies hereunder, and
no Person other than the parties hereto or such Persons described above is
entitled to rely on any representation, warranty, or covenant contained herein.
SECTION 12.5. 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.
SECTION 12.6. HEADINGS; DEFINITIONS. The Section and Article headings
contained in this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement. All references
to Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated. All capitalized terms defined herein are
equally applicable to both the singular and plural forms of such terms.
SECTION 12.7. AMENDMENTS AND WAIVERS. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Any
party hereto may, only by an instrument in writing, waive compliance by any
other party hereto with any term or provision of this Agreement on the part of
such other party hereto to be performed or complied with. The waiver by any
party hereto of a breach of any term or provision of this Agreement shall not be
construed as a waiver of any subsequent breach.
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SECTION 12.8. CONSTRUCTION OF CERTAIN PROVISIONS. It is understood and
agreed that the specification of any dollar amount in the representations and
warranties contained in this Agreement or the inclusion of any specific item in
the Schedules or Exhibits is not intended to imply that such amounts or higher
or lower amounts, or the items so included or other items, are or are not
material, and no party shall use the fact of the setting of such amounts or the
fact of the inclusion of any such item in the Schedules in any dispute or
controversy between the parties as to whether any obligation, item, or matter
not described herein or included in a Schedule or Exhibit is or is not material
for purposes of this Agreement. It is agreed that neither party shall allege
that a provision of this Agreement shall be construed against a party because
such party drafted such provision.
SECTION 12.9. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal, or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal, or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated by this
Agreement are fulfilled to the extent possible.
SECTION 12.10. JURISDICTION. Any legal action, suit, or proceeding in law
or equity arising out of or relating to this Agreement and transactions
contemplated by this Agreement may only be instituted in any state or federal
court in Travis County, Austin, Texas, and each party agrees not to assert, by
way of motion, as a defense, or otherwise, in any such action, suit, or
proceeding, any claim that it is not subject personally to the jurisdiction of
such court, that its property is exempt or immune from attachment or execution,
that the action, suit, or proceeding is brought in an inconvenient forum, that
the venue of the action, suit, or proceeding is improper or that this Agreement,
or the subject matter hereof or thereof may not be enforced in or by such court.
Each party further irrevocably submits to the jurisdiction of any such court in
any such action, suit, or proceeding. Any and all service of process and any
other notice in any such action, suit, or proceeding shall be effective against
any party if given by registered or certified mail, return receipt requested, or
by any other means of mail which requires a signed receipt, postage prepaid,
mailed to such party at the address listed in Section 12.3. Nothing herein
contained shall be deemed to affect the right of any party to serve process in
any manner permitted by law.
SECTION 12.11. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 12.12. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof in addition to any other
remedy to which they are entitled at law or in equity.
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SECTION 12.13. COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other party. In making proof
of this Agreement, it shall not be necessary to produce or account for more than
one such counterpart. 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 promptly deliver to the other
parties an original, duly executed counterpart of this Agreement.
SECTION 12.14. MUTUAL INDEMNIFICATION AGAINST CLAIMS OF BROKERS. Each party
agrees to indemnify the other against all loss, cost, Damages or expense arising
out of claims for fees or commissions of brokers employed or alleged to have
been employed by such party.
SECTION 12.15. DEFINITIONS AND USAGE. For the purposes of this Agreement:
"368 Reorganization" shall have the meaning specified in
Section 3.22.
"1933 Act" shall have the meaning specified in Section 3.5.
"1934 Act" shall have the meaning specified in Section 4.4.
"Acquisition" shall have the meaning specified in the
introductory paragraph of this Agreement.
"Actions" shall mean any actions, suits, arbitrations,
inquiries, proceedings or investigations by or before any Governmental
Authority.
"Actual Indebtedness" shall mean the aggregate amount of Debt
Obligations reflected on the Estimated or Final (as appropriate)
Balance Sheet.
"Actual Working Capital" shall mean the aggregate amount of
(a) all current assets reflected on the Estimated or Final (as
appropriate) Balance Sheet less (b) all current liabilities reflected
on the Estimated or Final (as appropriate) Date Balance Sheet
(excluding short-term debt and the current portion of long-term debt to
the extent the same is included in Actual Indebtedness).
"Adjusted EBITDA" shall have the meaning specified in Section
11.2.
"Adjusted Merger Consideration" shall have the meaning
specified in Section 1.3(a).
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<PAGE> 56
"Adjustments" shall have the meaning specified in Section
1.3(a).
"Affiliate" or "affiliate" means, with respect to any Person,
any other Person directly or indirectly controlling, controlled by, or
under common control with such Person.
"Agreement" shall have the meaning specified in the
introductory paragraph of this Agreement and Plan of Merger.
"AMPAM" shall have the meaning specified in the introductory
paragraph of this Agreement.
"AMPAM Common Stock" shall have the meaning specified in
Section 1.2(a).
"AMPAM Indemnitees" shall have the meaning specified in
Section 6.1.
"AMPAM Material Adverse Change" shall mean a material adverse
change in the business, operations, properties, assets or condition
(financial or otherwise), of AMPAM taken as a whole.
"AMPAM Material Adverse Effect" shall mean any fact,
circumstance, event, or condition which has or would have a materially
adverse effect on the business, operations, properties, condition
(financial or otherwise), assets, liabilities, results of operations or
prospects of AMPAM and its subsidiaries, taken as a whole.
"AMPAM SEC Filings" shall have the meaning specified in
Section 4.5(a).
"CERCLA" shall have the meaning specified in Section 3.18.
"Certificates" shall have the meaning specified in Section
1.4.
"Certificate of Merger" shall have the meaning specified in
Section 1.1(b).
"Closing" shall have the meaning specified in Section 1.1(d).
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto.
"Commitment" shall have the meaning specified in Section 3.2.
"Company" shall have the meaning specified in the introductory
paragraph of this Agreement.
"Company Benefit Plans" shall have the meaning specified in
Section 3.20(a).
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"Company Common Stock" shall have the meaning specified in
Section 1.2(a).
"Company Financial Statements" shall have the meaning
specified in Section 3.6.
"Company Law" shall have the meaning specified in Section
1.1(a).
"Company Material Adverse Effect" shall mean any fact,
circumstance, event, or condition which has or would have a materially
adverse effect on the business, operations, properties, condition
(financial or otherwise), assets, liabilities, results of operations or
prospects of the Company, taken as a whole.
"Company Material Adverse Change" shall mean a material
adverse change in the business, operations, properties, assets or
condition (financial or otherwise), of the Company taken as a whole.
"Company Membership Interest" shall have the meaning specified
in Section 1.2(a).
"Company Pension Plans" shall have the meaning specified in
Section 3.20(a).
"Company Returns" shall mean all returns, declarations,
reports, statements, and other documents required to be filed by the
Company in respect of Taxes, and the term "Company Return" means any
one of the foregoing Company Returns.
"Company Stock" shall have the meaning specified in Section
1.2(a).
"Company Stockholders" shall have the meaning specified in the
introductory paragraph of this Agreement.
"Company Unaudited Balance Sheet Date" shall have the meaning
specified in Section 3.7.
"Company Unaudited Financial Statements" shall have the
meaning specified in Section 3.6.
"Company Welfare Plan" shall have the meaning specified in
Section 3.20(a).
"Damages" shall have the meaning specified in Section 6.1.
"Debt Obligations" shall mean any contract, agreement,
indenture, note or other instrument relating to the borrowing of money,
any capitalized lease obligation, any obligation properly classified as
indebtedness or debt under GAAP or any guarantee or other
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contingent liability in respect of any indebtedness or obligation of
any Person (other than the endorsement of negotiable instruments for
deposit or collection in the ordinary course of business) and shall
specifically include any loans or advances to or from the Company
Stockholders or their respective Affiliates.
"Delaware Law" shall have the meaning prescribed in Section
1.1(a).
"Department" shall have the meaning specified in Section 5.13.
"disposal" or "disposed" shall have the meaning specified in
Section 3.18.
"Effective Time" shall have the meaning specified in Section
1.1(b).
"Employment Agreements" shall have the meaning specified in
Section 1.7(a)(i).
"Environmental Laws" shall have the meaning specified in
Section 3.18.
"ERISA" shall have the meaning specified in Section 3.20(a).
"Estimated Balance Sheet" shall have the meaning specified in
Section 1.3(a).
"Expiration Date" shall have the meaning specified in Article
III and Article IV.
"Final Balance Sheet" shall have the meaning specified in
Section 1.3(b).
"FTC" shall have the meaning specified in Section 5.13.
"GAAP" shall have the meaning specified in Section 3.6.
"Governmental Authority" shall mean (a) the United States of
America, (b) any state, county, municipality, or other governmental
subdivision within the United States of America, and (c) any court or
any governmental department, commission, board, bureau, agency, or
other instrumentality of the United States of America or of any state,
county, municipality, water rights, taxing, or zoning authority, or
other governmental subdivision within the United States of America.
"Hart Scott Act" shall have the meaning specified in Section
5.13.
"Indemnification Threshold" shall have the meaning specified
in Section 6.7.
"Indemnified Party" shall have the meaning specified in
Section 9.3.
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<PAGE> 59
"Indemnitee" shall have the meaning specified in Section 6.5.
"Indemnitee Claim" shall have the meaning specified in Section
6.5.
"Indemnitor" shall have the meaning specified in Section 6.5.
"Inspectors" shall have the meaning specified in Section 9.2.
"IPO" shall mean an initial public offering of AMPAM stock.
"Knowledge" when used in relation to any Person shall mean the
actual (but not constructive) knowledge of such Person or such Person's
officers after reasonable inquiry.
"Leases" shall have the meaning specified in Section
1.7(a)(x).
"Licenses" shall have the meaning specified in Section 3.11.
"Liens" shall mean all liens, mortgages, security interests,
pledges, equities, claims, options, and other encumbrances of any kind.
"Merger" shall have the meaning specified in Section 1.1(a).
"Merger Consideration" shall have the meaning specified in
Section 1.2(a).
"officer" means in the case of AMPAM and the Company, any
executive officer of AMPAM or the Company, as applicable, within the
meaning of Rule 3b-7 of the 1934 Act.
"Ordinary Course of Business" shall mean the ordinary course
of business consistent with past customs and practice (including with
respect to quantity and frequency).
"Person" shall mean an individual, partnership, corporation,
limited liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, Governmental Authority
or other legal entity of any kind.
"Plumbing and Mechanical Business" shall have the meaning
specified in Section 7.1(a).
"PPM" shall have the meaning specified in Section 4.5(d).
"Put Notice" shall have the meaning specified in Section 11.3.
"Put Right" shall have the meaning specified in Section 11.1.
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"Qualified Plans" shall have the meaning set forth in Section
3.20(b).
"RCRA" shall have the meaning specified in Section 3.18.
"Readjusted Merger Consideration" shall have the meaning
specified in Section 1.3(b).
"Records" shall have the meaning specified in Section 9.2.
"release" shall have the meaning specified in Section 3.18.
"Restricted Period" shall have the meaning specified in
Section 8.2.
"SEC" shall have the meaning specified in Section 4.5(a).
"State Certificates" shall have the meaning specified in
Section 1.1(b).
"Stockholder Indemnitees" shall have the meaning specified in
Section 6.4.
"subsidiary" means, with respect to any Person, any entity of
which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other Persons
performing similar functions are at any time directly or indirectly
owned by such Person.
"Surviving Corporation" shall have the meaning specified in
Section 1.1(a).
"Target Working Capital" shall mean $5,500,000.
"Tax" or "Taxes" shall have the meaning specified in Section
3.19(a).
"Territory" shall have the meaning specified in Section
7.1(a).
"third party" shall have the meaning specified in Section 6.5.
A reference in this Agreement to any statute shall be to such
statute as amended from time to time, and the rules and regulations
promulgated thereunder.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
- 54 -
<PAGE> 61
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
AMERICAN PLUMBING & MECHANICAL, INC.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
LDI MECHANICAL, INC.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
LINDY DENNIS INDUSTRIES, INC.
By:
--------------------------------
Name: Lloyd C. Smith
Title: President
------------------------------------
Lloyd C. Smith
------------------------------------
Sandra A. Smith
- 55 -
<PAGE> 62
LDI HEATING & AIR CONDITIONING
By:
--------------------------------
Name: Lloyd C. Smith
Title: President
------------------------------------
Lloyd C. Smith
LDI MECHANICAL
By:
--------------------------------
Name: Lloyd C. Smith
Title: President
------------------------------------
Lloyd C. Smith
------------------------------------
Jeffery L. Minarik
KRAHENBUHL PLUMBING INCORPORATED
By:
--------------------------------
Name: James K. Krahenbuhl
Title: President
------------------------------------
Lloyd C. Smith
------------------------------------
Jeffery L. Minarik, Trustee u/d/t
4/22/99
- 56 -
<PAGE> 63
------------------------------------
Kayleen B. Krahenbuhl, Trustee u/d/t
4/22/99
KRAHENBUHL FIRE SPRINKLERS LLC
By:
--------------------------------
Name: James K. Krahenbuhl
Title: Manager
------------------------------------
Lloyd C. Smith
------------------------------------
James K. Krahenbuhl, Trustee u/d/t
4/22/99
------------------------------------
Kayleen B. Krahenbuhl, Trustee u/d/t
4/22/99
GREEN VALLEY PLUMBING, INC.
By:
--------------------------------
Name: James K. Krahenbuhl
Title: Manager
------------------------------------
Lloyd C. Smith
------------------------------------
James K. Krahenbuhl, Trustee u/d/t
4/22/99
------------------------------------
Kayleen B. Krahenbuhl, Trustee u/d/t
4/22/99
- 57 -
<PAGE> 64
SCHEDULE 1.5 REQUIRED WITHHOLDING
There are no amounts required to be withheld from the consideration otherwise
payable to any Person pursuant to Article I under provisions of federal, state,
local, or foreign tax law.
<PAGE> 65
SCHEDULE 2.3 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION
Officers
--------
President Lloyd C. Smith
Chief Financial Officer David C. Baggett
and Chief Accounting
Officer, Vice President
and Secretary
Vice President Robert Smith
Vice President Michael Smith
Vice President - Plumbing James K. Krahenbuhl
Vice President - Commercial Jeff Minarik
Assistant Chief Financial Byrl Lumby
Officer and Assistant
Secretary
Directors
---------
David C. Baggett
Robert A. Christianson
Lloyd C. Smith
<PAGE> 66
SCHEDULE 3.1 ORGANIZATION AND QUALIFICATION OF COMPANY
<TABLE>
<CAPTION>
- ------------------------------------ ---------------------------------- -------------------------------------
JURISDICTION(S) OF FOREIGN
ENTITY JURISDICTION OF ORGANIZATION QUALIFICATION
- ------------------------------------ ---------------------------------- -------------------------------------
<S> <C> <C>
Lindy Dennis Industries, Inc. Texas California, Nevada, New Jersey
- ------------------------------------ ---------------------------------- -------------------------------------
LDI Heating & Air Conditioning California Arizona
- ------------------------------------ ---------------------------------- -------------------------------------
LDI Mechanical California None
- ------------------------------------ ---------------------------------- -------------------------------------
California
Krahenbuhl Plumbing Incorporated Nevada
- ------------------------------------ ---------------------------------- -------------------------------------
Nevada
Krahenbuhl Fire Sprinklers LLC None
- ------------------------------------ ---------------------------------- -------------------------------------
Nevada
Green Valley Plumbing, Inc. None
- ------------------------------------ ---------------------------------- -------------------------------------
</TABLE>
<PAGE> 67
SCHEDULE 3.2 OWNERSHIP OF COMPANY STOCK AND DELIVERY INSTRUCTIONS
LINDY DENNIS INDUSTRIES, INC.
<TABLE>
<CAPTION>
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
UNADJUSTED
COMPANY STOCK NUMBER OF SHARES OF NUMBER OF SHARES OF CASH
CERTIFICATE NO. RECORD HOLDER COMPANY STOCK AMPAM COMMON STOCK CONSIDERATION
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Lloyd C. Smith and
Sandra A. Smith,
1 husband and wife as 397 670,495 $ 5,103,478
community property
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
</TABLE>
LDI HEATING AND AIR CONDITIONING
<TABLE>
<CAPTION>
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
UNADJUSTED
COMPANY STOCK NUMBER OF SHARES OF NUMBER OF SHARES OF CASH
CERTIFICATE NO. RECORD HOLDER COMPANY STOCK AMPAM COMMON STOCK CONSIDERATION
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
1 Lloyd C. Smith 10,000 670,494 $ 5,103,478
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
</TABLE>
LDI MECHANICAL
<TABLE>
<CAPTION>
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
UNADJUSTED
COMPANY STOCK NUMBER OF SHARES OF NUMBER OF SHARES OF CASH
CERTIFICATE NO. RECORD HOLDER COMPANY STOCK AMPAM COMMON STOCK CONSIDERATION
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
1 Lloyd C. Smith 68,750 2,841 $ 55,402
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
2 Jeffrey L. Minarik 56,250 2,324 $ 45,335(1)
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
</TABLE>
(1) NO ADJUSTMENTS ARE TO BE APPLIED TO THE UNADJUSTED CASH CONSIDERATION
FOR THE SHAREHOLDER.
<PAGE> 68
KRAHENBUHL PLUMBING INCORPORATED
<TABLE>
<CAPTION>
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
UNADJUSTED
COMPANY STOCK NUMBER OF SHARES OF NUMBER OF SHARES OF CASH
CERTIFICATE NO. RECORD HOLDER COMPANY STOCK AMPAM COMMON STOCK CONSIDERATION
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
5 Lloyd C. Smith 350 0 $ 584,257
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
James K. Krahenbuhl
and Kayleen B.
6 Krahenbuhl, Trustees 650 0 $ 1,085,050(1)
u/d/t 4/22/99
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
</TABLE>
KRAHENBUHL FIRE SPRINKLERS LLC
<TABLE>
<CAPTION>
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
UNADJUSTED
NUMBER OF SHARES OF CASH
RECORD HOLDER MEMBER INTEREST AMPAM COMMON STOCK CONSIDERATION
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Lloyd C. Smith 35% 0 $ 7,700
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
James K. Krahenbuhl
and Kayleen B.
Krahenbuhl, Trustees 65% 0 $ 14,300(1)
u/d/t 4/22/99
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
</TABLE>
(1) NO ADJUSTMENTS ARE TO BE APPLIED TO THE UNADJUSTED CASH CONSIDERATION
FOR THE SHAREHOLDER.
<PAGE> 69
GREEN VALLEY PLUMBING, INC.
<TABLE>
<CAPTION>
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
UNADJUSTED
COMPANY STOCK NUMBER OF SHARES OF NUMBER OF SHARES OF CASH
CERTIFICATE NO. RECORD HOLDER COMPANY STOCK AMPAM COMMON STOCK CONSIDERATION
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
4 Lloyd C. Smith 350 0 350
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
James K. Krahenbuhl
and Kayleen B.
5 Krahenbuhl, Trustees 650 0 650(1)
u/d/t 4/22/99
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
</TABLE>
(1) NO ADJUSTMENTS ARE TO BE APPLIED TO THE UNADJUSTED CASH CONSIDERATION
FOR THE SHAREHOLDER.
<PAGE> 70
SCHEDULE 3.4 COMPANY CONSENTS AND APPROVALS; NO VIOLATION
Attached hereto is a list of all regulatory approvals or routine governmental
consents required for any of the transactions contemplated hereby to remain in
full force and effect, except where the failure to obtain such consent,
approval, authorization, or permit, or to make such filing or notification, is
not reasonably expected to have, individually or in the aggregate, a Company
Material Adverse Effect or prevent or delay in any material respect, the
consummation of the transactions contemplated by this Agreement, as well as a
list of all material contracts, commitments or similar agreements to which the
Company is a party and under which the consummation of any of the transactions
contemplated hereby may result in a default (or give rise to any right of
termination, cancellation or acceleration) except for such defaults (or rights
of termination, cancellation, or acceleration) as to which requisite waivers or
consents have been obtained or which are not reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect or prevent
or delay, in any material respect, the consummation of the transactions
contemplated by this Agreement:
A. Regulatory Approvals or Routine Governmental Consents:
1. Early termination letter regarding the Hart Scott Act (see
Schedule 4.4 included elsewhere herein).
B. Material Contracts or Commitments or Similar Agreements:
1. See attached list.
<PAGE> 71
SCHEDULE 3.5 AFFILIATE RELATIONSHIPS
(i) There is no property, asset or right, tangible or intangible, which is
associated with any property, asset or right owned or operated by the
Company, which is also owned, directly or indirectly, in whole or in
part, by any of the Company Stockholders or any director, officer,
employee of or consultant to the Company.
(ii) Attached hereto is a list of any relationships which any of the Company
Stockholders have, or any director, officer, employee, or agent of or
consultant to the Company has, with any other corporation, partnership,
firm, association or business organization, entity or enterprise which
is a competitor, potential competitor, supplier or customer of the
Company:
<PAGE> 72
SCHEDULE 3.6 COMPANY FINANCIAL STATEMENTS
Attached hereto are the following Company Financial Statements and the Company
Unaudited Financial Statements.
A. Company Financial Statements:
1. Lindy Dennis Industries, Inc.
a. Reviewed Financial Statements for the years ended December
31, 1998 and 1997.
b. Reviewed Financial Statements for the years ended December
31, 1997 and 1996.
2. LDI Heating & Air Conditioning
a. Reviewed Financial Statements for the years ended December
31, 1998 and 1997.
Note: LDI Heating & Air Conditioning was established in December
1996. No operations were conducted by the company for the
year ended December 31, 1996.
3. LDI Mechanical
a. Reviewed Financial Statements for the year ended December
31, 1998.
Note: LDI Mechanical was as established in 1998.
4. Krahenbuhl Plumbing, Incorporated
a. Compiled Financial Statements for the year ended December
31, 1998.
b. Compiled Financial Statements for the year ended December
31, 1997.
c. Compiled Financial Statements for the year ended December
31, 1996.
<PAGE> 73
5. Krahenbuhl Fire Sprinklers LLC
a. Internal Balance Sheet and Income Statement for the year
ended December 31, 1998.
Note: Krahenbuhl Fire Sprinklers LLC was established in 1998.
6. Green Valley Plumbing, Inc.
a. Internal Balance Sheet and Income Statement year ended
December 31, 1998.
b. Internal Balance Sheet and Income Statement year ended
December 31, 1997
Note: Green Valley Plumbing, Inc. was established in 1997.
B. Company Unaudited Financial Statements:
1. LDI and Affiliates
a. Consolidated Balance Sheet and Income Statement for the year
ended December 31, 1999.
<PAGE> 74
SCHEDULE 3.7 COMPANY UNDISCLOSED LIABILITIES
Attached hereto is an accurate list as of the Company Unaudited Balance Sheet
Date of (i) all liabilities of the Company which are reflected in the balance
sheet contained in the Company Unaudited Financial Statements and (ii) all
liabilities of any kind of the Company which are not reflected in such balance
sheet.
i. Liabilities reflected on Company Unaudited Financial Statements:
See attached detail.
ii. Liabilities not reflected on Company Unaudited Financial Statements:
None.
<PAGE> 75
SCHEDULE 3.8 COMPANY ACCOUNTS AND NOTES RECEIVABLES
(i) Attached hereto is an accurate list as of the Company Unaudited Balance
Sheet Date of the accounts and notes receivable of the Company,
including an aging of all accounts and notes receivable showing amounts
due in 30-day aging categories.
(ii) Attached hereto is an accurate list of receivables from and advances to
employees of the Company and the Company Stockholders.
<PAGE> 76
SCHEDULE 3.9 COMPANY ASSETS
(i) Attached hereto is an accurate list of all real and personal property
included in "property and equipment" on the balance sheet of the
Company as of the Company Unaudited Balance Sheet Date and all other
tangible assets of the Company with a value in excess of $5,000 (a)
owned by the Company as of the Company Unaudited Balance Sheet Date and
(b) acquired since the Company Unaudited Balance Sheet Date, including
in each case true, complete and correct copies of leases for
significant equipment and for all real property leased by the Company
and descriptions of all real property on which buildings, warehouses,
workshops, garages and other structures used in the operation of the
business of the Company are situated.
(ii) Attached hereto is a list of those assets of the Company that are
currently owned, or were formerly owned, by the Company Stockholders or
Affiliates of the Company.
None.
(iii) Attached hereto are true, complete and correct copies of all title
reports and title insurance policies received or owned by the Company.
Not Applicable. Company does not own any real estate.
(iv) There are no plans or projects involving the opening of new operations,
expansion of existing operations or the acquisition of any real
property or existing business, to which management of the Company has
devoted effort or expenditure in the two-year period prior to the date
hereof, which if pursued by the Company would require additional
expenditures of capital.
(iv) None of the personal property of the Company is subject to any liens.
<PAGE> 77
SCHEDULE 3.10 MATERIAL CONTRACTS, COMMITMENTS AND CUSTOMERS
(i) Attached hereto is an accurate list as of the Company Unaudited Balance
Sheet Date of (a) all material contracts, commitments and similar
agreements to which the Company is a party or by which they or any of
their property is bound (including, but not limited to, joint venture
or partnership agreements, contracts with any labor organizations, loan
agreements, indemnity or guaranty agreements, bonds, mortgages, liens,
pledges or other security agreements) and (b) all customers
representing 5% or more of the Company's revenues, taken as a whole, in
any of the periods covered by the Company Financial Statements or the
Company Unaudited Financial Statements:
(ii) None of the Company's customers or suppliers have canceled or
substantially reduced service or products during the period covered by
the Company Unaudited Financial Statements or are currently attempting
or threatening to cancel or substantially reduce their use of the
Company's products or services.
(iii) The Company has complied with all material commitments and obligations
and is not in default under the contracts and agreements listed in (i)
above.
(iv) The Company does not have any contracts subject to price
redetermination or renegotiation.:
<PAGE> 78
SCHEDULE 3.11 COMPANY OPERATING AUTHORITY
Attached hereto is an accurate list and summary description as of the Company
Unaudited Balance Sheet Date of all Licenses, certificates, trademarks, trade
names, patents, patent applications and copyrights related to the assets owned
or held by the Company, all of which are in full force and effect:
<PAGE> 79
SCHEDULE 3.12 COMPANY BANK ACCOUNT INFORMATION
Attached hereto is an accurate list of the names and addresses of every bank and
other financial institution in which Company maintains an account (whether
checking, savings or otherwise), lock box, or safe deposit box, and the account
numbers and persons having signature authority or legal access thereto:
<PAGE> 80
SCHEDULE 3.13 COMPANY CONDUCT OF BUSINESS
Attached hereto is a description of any and all events occurring since the
Company Unaudited Balance Sheet Date of the type described in Section 3.13:
<PAGE> 81
SCHEDULE 3.14 COMPANY LITIGATION; ORDERS
(i) Attached hereto is an accurate list of all Actions pending or, to the
Company Stockholders' Knowledge, threatened against the Company:
(ii) Attached hereto is an accurate list of all judgments or outstanding
orders, injunctions, decrees, stipulations, or awards (whether rendered
by a court or administrative agency or by arbitration) against the
Company:
<PAGE> 82
SCHEDULE 3.15 COMPANY LABOR AGREEMENTS
There are no agreements with labor unions or associations representing employees
of the Company.
<PAGE> 83
SCHEDULE 3.17 COMPANY INSURANCE
Attached hereto is an accurate list of all insurance policies currently in
effect issued in favor of the Company that relate to their businesses:
<PAGE> 84
SCHEDULE 3.18 COMPANY DISPOSAL SITES
There are no disposal sites which the Company has utilized as of the Company
Unaudited Balance Sheet Date.
<PAGE> 85
SCHEDULE 3.19 COMPANY TAXES
(i) Attached hereto is an accurate list of all instances where the Company
has not filed when due all Company Returns or not timely paid or
discharged all Tax obligations:
(ii) Attached hereto is an accurate list of all instances where the Company
returns do not correctly and accurately reflect facts regarding the
income, business and assets, operations, activities, status or other
matters of the Company and any other information required to be shown
thereon and instances where the Company is subject to penalties under
Section 6662 of the Code, relating to accuracy-related penalties, or
any corresponding provision of applicable state, local, or foreign Tax
law or any predecessor provision of law:
(iii) Attached hereto is an accurate list of all instances where the Company
has received any notice of any Tax deficiency outstanding, proposed, or
assessed against or allocable to it, or has executed any waiver of any
statute of limitations on the assessment or collection of any Tax, or
executed or filed with the Internal Revenue Service or any other
Governmental Authority any agreement not in effect extending the period
for assessment or collection of any Taxes against the Company.
<PAGE> 86
SCHEDULE 3.20 COMPANY EMPLOYEE BENEFIT PLANS
(i) Attached hereto is an accurate list and copies of all Company Benefit
Plans:
(ii) There are no instances where the Company Benefit Plans have not been
administered in compliance with their terms.
(iii) Attached hereto are all reports and other documents that are required
to be filed with any Governmental Authority or distributed to plan
participants or beneficiaries.
(iv) Attached hereto is a list of all officers, directors and key employees
of the Company and their rate of compensation as of December 31, 1999
and the date hereof.
<PAGE> 87
SCHEDULE 3.21 COMPANY BROKERAGE FEES AND COMMISSIONS
There are no obligations or agreements incurred or entered into by the Company
relating to the payment of any investment banking, brokerage or finder's fee or
commission in respect of the transactions contemplated by this Agreement.
<PAGE> 88
SCHEDULE 4.4 AMPAM CONSENTS AND APPROVALS; NO VIOLATION
Attached hereto is a list of all regulatory approvals or routine governmental
consents required for any of the transactions contemplated hereby to remain in
full force and effect, except where the failure to obtain such consent,
approval, authorization, or permit, or to make such filing or notification, is
not reasonably expected to have, individually or in the aggregate, an AMPAM
Material Adverse Effect or prevent or delay in any material respect, the
consummation of the transactions contemplated by this Agreement, as well as a
list of all material contracts, commitments or similar agreements to which AMPAM
is a party and under which the consummation of any of the transactions
contemplated hereby may result in a default (or give rise to any right of
termination, cancellation or acceleration) except for such defaults (or rights
of termination, cancellation, or acceleration) as to which requisite waivers or
consents have been obtained or which are not reasonably expected to have,
individually or in the aggregate, an AMPAM Material Adverse Effect or prevent or
delay, in any material respect, the consummation of the transactions
contemplated by this Agreement:
A. Regulatory Approvals or Routine Governmental Consents:
1. Early termination letter regarding the Hart Scott Act.
B. Material Contracts or Commitments or Similar Agreements:
1. The Consent received by AMPAM from its Lenders (as defined in
the Consent) regarding the consummation of the transaction
contemplated by the Agreement.
<PAGE> 89
SCHEDULE 5.6 COMPANY STOCKHOLDER GUARANTEES
Attached hereto is an accurate list of the Company's indebtedness that the
Company Stockholders have personally guaranteed:
<PAGE> 90
SCHEDULE 5.9 REPAYMENT OF ADVANCES, RECEIVABLES AND LOANS
Attached hereto is an accurate list of (i) Company advances to or receivables
from the Company Stockholders and (ii) loans to the Company from the Company
Stockholders:
<PAGE> 91
SCHEDULE 5.12 TRANSFER OF REAL PROPERTY
There is no real property owned by the Company that is not being distributed to
the Stockholders and leased back by the Company.
<PAGE> 92
SCHEDULE 5.14 ACTIONS PENDING CLOSING
Attached hereto is a list of any and all events occurring between the date of
this Agreement and the Effective Time of the type described in Section 5.14.
Section 5.14 (vii) - Pending sale of 1998 Lemon truck to GMAC and lease of new
2000 Chevy truck which may be finalized before or after effective date of
merger.
