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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: February 14, 1996
(date of earliest event reported)
REPUBLIC INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-9787 73-1105145
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(State or other (Commission File (I.R.S. Employer
jurisdiction Number) Identification No.)
of incorporation)
200 East Las Olas Blvd.
Suite 1400
Ft. Lauderdale, Florida 33301
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(Address of principal executive offices)(Zip code)
(305) 627-6000
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(Registrant's telephone number, including area code)
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With respect to each contract, agreement or other document referred to
herein and filed with the Securities and Exchange Commisssion (the
"Commission") as an exhibit to this report, reference is made to the exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.
ITEM 5. OTHER EVENTS.
PROPOSED ACQUISITIONS.
THE DENVER FIRE REPORTER & PROTECTIVE CO. AND GUARDIAN SECURITY
SERVICES, INC. On February 15, 1996, Republic Industries, Inc., a Delaware
corporation ("Republic"), RI/DFRP, Inc., and RI/GS Merger Corp., both
newly-formed Colorado corporations and wholly-owned subsidiaries of Republic
(collectively, the "Denver Merger Subs"), The Denver Fire Reporter & Protective
Co., and Guardian Security Services, Inc., both Colorado corporations
(collectively, the "Denver Alarm Companies"), and John Stewart Jackson, the
shareholder of the Denver Alarm Companies, entered into a Merger Agreement (the
"Denver Agreement"). The Denver Agreement is attached hereto as Exhibit 2.1
and is incorporated herein by reference for all purposes.
The Denver Agreement provides for the mergers of the Denver Merger
Subs with and into the Denver Alarm Companies, resulting in the Denver Alarm
Companies becoming wholly-owned subsidiaries of Republic (the "Denver
Mergers"), on the terms set forth in the Denver Agreement. The Denver Mergers
will be accounted for as pooling of interests business combinations. In
exchange for all of the issued and outstanding shares of capital stock of the
Denver Alarm Companies, John Stewart Jackson will be issued an aggregate of
approximately 1.6 million shares of common stock, $0.01 par value, of Republic
("Republic Common Stock"). The terms and conditions of the Denver Agreement
were determined by arm's-length negotiations between Republic and the Denver
Alarm Companies. The shares of Republic Common Stock to be issued in the
Denver Mergers will be restricted under the Securities Act of 1933 (the
"Securities Act"), and will be registered under the Securities Act for resale
by John Stewart Jackson as soon as permitted under the terms of the Denver
Agreement.
Closing of the transactions contemplated under the Denver Agreement is
subject to satisfying customary closing conditions and obtaining certain
regulatory approvals, including expiration or early termination of applicable
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
("HSR Act"). The transactions contemplated by the Denver Agreement will close
promptly when all conditions are satisfied or waived, which is expected to
occur by February 27, 1996, and under the Denver
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Agreement the closing of the Denver Mergers can occur no later than March 1,
1996, unless the parties otherwise agree.
The Denver Alarm Companies provide installation, monitoring and
maintenance services to approximately 27,000 residential and commercial
accounts in Denver, Fort Collins, Boulder, Colorado Springs, and Pueblo,
Colorado. The Denver Alarm Companies will continue to employ John Stewart
Jackson and other officers and key employees after the closing of the Denver
Mergers, and these individuals will be eligible to receive option grants from
time to time under Republic's employee stock option plans.
INCENDERE, INC., AREA CONTAINER SERVICES, INC., AND SMITHTON
SANITATION SERVICE, INC. On February 14, 1996, Republic, RI/Area, Inc., a
Virginia corporation, and RI/Smith, Inc., a North Carolina corporation, and
both wholly-owned subsidiaries of Republic (collectively, the "Schaubach Merger
Subs"), Incendere, Inc., a Virginia corporation, Area Container Services, Inc.,
a Virginia corporation, and Smithton Sanitation Service, Inc., a North Carolina
corporation (collectively, the "Schaubach Companies"), and Dwight C. Schaubach,
James D. Schaubach, Emmett K. Moore, Charles F. Moore, and R.D. Cuthrell, who
are all of shareholders of the Schaubach Companies, entered into a
Reorganization Agreement (the "Schaubach Agreement"). The Schaubach Agreement
is attached hereto as Exhibit 2.2 and is incorporated herein by reference for
all purposes.
The Schaubach Agreement provides for the mergers of the Schaubach
Merger Subs with and into Area Container Services, Inc. and Smithton Sanitation
Service, Inc., and provides for a share exchange between Republic and Dwight C.
Schaubach with respect to Incendere, Inc., resulting in the Schaubach Companies
becoming wholly-owned subsidiaries of Republic (the "Schaubach Transactions"),
on the terms set forth in the Schaubach Agreement. The Schaubach Transactions
will be accounted for as pooling of interests business combinations. In
exchange for all of the issued and outstanding shares of capital stock of the
Schaubach Companies, Dwight C. Schaubach and the other shareholders of the
Schaubach Companies will be issued an aggregate of approximately 1.3 million
shares of Republic Common Stock. The terms and conditions of the Schaubach
Agreement were determined by arm's-length negotiations between Republic and the
Schaubach Companies. The shares of Republic Common Stock to be issued in the
Schaubach Transactions will be restricted under the Securities Act, and will be
registered under the Securities Act for resale by Dwight C. Schaubach and the
other shareholders of the Schaubach Companies as soon as permitted under the
terms of the Schaubach Agreement.
Closing of the transactions contemplated under the Schaubach Agreement
is subject to satisfying customary closing conditions
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and obtaining certain regulatory approvals, including expiration or early
termination of applicable waiting periods under the HSR Act. The transactions
contemplated by the Schaubach Agreement will close promptly when all conditions
are satisfied or waived, which is expected to occur by March 1, 1996, and under
the Schaubach Agreement the closing of the Schaubach Transactions can occur no
later than May 31, 1996, unless the parties otherwise agree.
The Schaubach Companies provide solid waste collection and recycling
services to more than 11,000 residential, commercial and industrial customers
in southeastern Virginia and eastern North Carolina, and provide transportation
of medical waste throughout the Mid-Atlantic states for more than 7,000
customers. The Schaubach Companies will continue to employ Dwight C. Schaubach
and other officers and key employees after the closing of the Schaubach
Transactions, and these individuals will be eligible to receive option grants
from time to time under Republic's employee stock option plans.
ITEM 7. FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. Not applicable
at this time. Financial statements for each of the Denver
Alarm Companies and/or the Schaubach Companies will be filed
after the closing of each such acquisition.
(b) PRO FORMA FINANCIAL INFORMATION. Not applicable at this time.
Pro Forma Financial Information, if required, for the
acquisitions of the Denver Alarm Companies and/or the
Schaubach Companies, will be filed after the closing of such
acquisitions.
(c) EXHIBITS. The Exhibits to this Report are listed in the
Exhibit Index set forth elsewhere herein.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
REPUBLIC INDUSTRIES, INC.
Date: February 22, 1996 By: /s/ Gregory K. Fairbanks
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Gregory K. Fairbanks,
Chief Financial Officer and
Executive Vice President
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
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<S> <C>
2.1 Merger Agreement dated as of February 15, 1996 by and among
Republic Industries, Inc., a Delaware corporation; RI/DFRP,
Inc., a Colorado corporation; RI/GS Merger Corp., a Colorado
corporation; The Denver Fire Reporter & Protective Co., a
Colorado corporation; Guardian Security Services, Inc., a
Colorado corporation; and John Stewart Jackson, a Colorado
resident.
2.2 Reorganization Agreement dated as of February 14, 1996 by and
among Republic Industries, Inc., a Delaware corporation;
RI/AREA, INC., a Virginia corporation; RI/SMITH, INC., a North
Carolina corporation; INCENDERE, INC., a Virginia corporation,
AREA CONTAINER SERVICES, INC., a Virginia corporation,
SMITHTON SANITATION SERVICE, INC., a North Carolina
corporation; and Dwight C. Schaubach, James D. Schaubach,
Emmett K. Moore, Charles F. Moore and R.D. Cuthrell, each a
resident of Virginia or North Carolina.
</TABLE>
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Exhibit 2.1
MERGER AGREEMENT
This Merger Agreement (this "Agreement") is entered into as of
February 15, 1996, by and among Republic Industries, Inc., a Delaware
corporation ("Republic"); RI/DFRP, Inc., RI/GS Merger Corp., each a Colorado
corporation and a wholly-owned subsidiary of Republic (together, the "Republic
Merger Subs", and together with Republic, the "Republic Companies"); The Denver
Fire Reporter & Protective Co. ("Denver Fire") and Guardian Security Services,
Inc. ("Guardian"), each a Colorado corporation (together, the "Alarm
Companies"); and J. Stewart Jackson, the sole shareholder of each of the Alarm
Companies (the "Shareholder"). Certain other capitalized terms used herein are
defined in Article XI.
RECITALS
The Boards of Directors of Republic and the Alarm Companies have
determined that it is in the best interests of their respective shareholders
for Republic to acquire the Alarm Companies upon the terms and subject to the
conditions set forth in this Agreement. In order to effectuate the
transaction, Republic has organized the Republic Merger Subs as wholly-owned
subsidiaries and the parties have agreed, subject to the terms and conditions
set forth in this Agreement, to merge the Republic Merger Subs with and into
the Alarm Companies so that each of the Alarm Companies continue as surviving
corporations. As a result, each of the Alarm Companies will become a
wholly-owned subsidiary of Republic, and the Shareholder will be issued certain
shares of the voting common stock, $0.01 par value per share (the "Common
Stock"), of Republic.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
THE MERGERS
1.1 THE MERGERS. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined below), and pursuant to the terms
and conditions set forth in the Plans of Merger and Reorganization attached
hereto as Exhibits A and B (the "Plans of Merger"), the Republic Merger Subs
will be merged into
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and with the Alarm Companies (the "Mergers"), as follows: (a) RI/DFRP, Inc.
will be merged with and into Denver Fire and (b) RI/GS Merger Corp. will be
merged with and into Guardian. The terms and conditions of each of the Plans
of Merger are incorporated herein by reference as if fully set forth herein.
As a result of the Mergers, the separate corporate existences of each of the
Republic Merger Subs shall cease and the Alarm Companies shall continue as
surviving corporations and wholly-owned subsidiaries of Republic.
1.2 THE CLOSING. Subject to the terms and conditions of this
Agreement, the consummation of the Mergers (the "Closing") shall take place on
February 27, 1996 (and in any event within five business days) after
satisfaction or waiver of the conditions set forth in Articles VI and VII
hereof, at the offices of Friedlob Sanderson Raskin Paulson & Tourtillott, LLC,
1400 Glenarm Place, Suite 300, Denver, Colorado 80202, or at such other
location agreed upon by the parties.
1.3 [INTENTIONALLY OMITTED]
1.4 FILING OF ARTICLES OF MERGER. At the time of the Closing, the
parties shall cause the Mergers to be consummated at the same time by filing
duly executed Articles of Merger (with the respective completed Plan of Merger
annexed thereto) with the Department of State of the State of Colorado, in such
form as Republic determines is required by and is in accordance with the
relevant provisions of the Colorado Business Corporations Act (the "CBCA") (the
date and time of such filing is referred to herein as the "Effective Time").
1.5 ISSUANCE OF REPUBLIC SHARES. At the Effective Time, by virtue
of the Mergers and without any further action on the part of the parties hereto
(i) each share of common stock, $1.00 par value per share, of Denver Fire
("Denver Fire Stock) shall be converted and exchanged for 1,040.3785 shares
(the "Denver Fire Conversion Amount") of Republic Common Stock and (ii) each
share of common stock, $1.00 par value per share, of Guardian ("Guardian Common
Stock") shall be converted into and exchanged for 74.170 shares (the "Guardian
Conversion Amount") of Republic Common Stock. Republic shall issue to the
Shareholder duly executed certificates, in valid form registered in his name
evidencing that number of shares of Republic Common Stock determined, to the
nearest whole share (i) by multiplying (a) the Denver Fire Conversion Amount
times (b) the number of shares of Denver Fire Stock owned of record by the
Shareholder on the Effective Date as set forth on Schedule 3.5 and (ii) by
multiplying (c) the Guardian Conversion Amount times (d) the number of shares
of Guardian Stock owned of record by the Shareholder on the Effective Date as
set forth on Schedule 3.5.
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1.6 DELIVERY OF CERTIFICATES. At the Closing, the Shareholder
shall deliver the certificates representing all of the issued and outstanding
shares of capital stock of each of the Alarm Companies to Republic for
cancellation, and Republic shall deliver duly executed certificates, in valid
form, representing the shares of Republic Common Stock to be issued pursuant to
Section 1.5 in the following manner: (i) Republic shall deliver to the
Shareholder one or more certificates evidencing ninety percent (90%) of such
shares of Republic Common Stock (rounded to the nearest whole share), and (ii)
Republic shall set aside and hold in accordance with Article IX the
certificates evidencing the balance of such shares of Republic Common Stock
(the "Held Back Shares"). The shares of Republic Common Stock, including the
Held Back Shares, issuable by Republic in the Mergers are sometimes referred to
herein as the "Republic Shares".
1.7 ACCOUNTING AND TAX TREATMENT. The parties hereto acknowledge
and agree that the transactions contemplated hereby shall be treated as a
pooling of interests combination and as a tax-free reorganization under Section
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE REPUBLIC COMPANIES
As a material inducement to the Shareholder to enter into this
Agreement and to consummate the transactions contemplated hereby, each of the
Republic Companies jointly and severally makes the following representations
and warranties to the Shareholder:
2.1 CORPORATE STATUS. Republic is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Each of the Republic Merger Subs is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado. Each of
the Republic Merger Subs is a wholly- owned subsidiary of Republic. There is
no pending or threatened proceeding for the dissolution, liquidation,
insolvency or rehabilitation of any of the Republic Companies.
2.2 CORPORATE POWER AND AUTHORITY. Each of the Republic Companies
has the corporate power and authority to execute and deliver this Agreement, to
perform its respective obligations hereunder and to consummate the transactions
contemplated hereby. Each of the Republic Companies has taken all action
necessary to authorize its execution and delivery of this Agreement, the
performance of its respective obligations hereunder and the consummation of the
transactions contemplated hereby.
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2.3 ENFORCEABILITY. This Agreement has been duly executed and
delivered by each of the Republic Companies and constitutes a legal, valid and
binding obligation of each of the Republic Companies, enforceable against each
of the Republic Companies in accordance with its terms, except as the same may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.
2.4 REPUBLIC COMMON STOCK. Upon consummation of the Mergers and
the issuance and delivery of certificates representing the Republic Shares to
the Shareholder, the Republic Shares will be validly issued, fully paid and
non- assessable shares of Republic Common Stock.
2.5 NO COMMISSIONS. None of the Republic Companies has incurred
any obligation for any finder's or broker's or agent's fees or commissions or
similar compensation in connection with the transactions contemplated hereby.
2.6 CAPITALIZATION. The authorized capital stock of Republic
consists of 350,000,000 shares of Republic Common Stock and 5,000,000 shares of
preferred stock. As of February 8, 1996, (i) 76,967,114 shares of Republic
Common Stock were validly issued and outstanding, fully paid and nonassessable
and not issued in violation of any preemptive right of any stockholder of
Republic, and (ii) no shares of preferred stock were issued and outstanding.
The Republic Shares to be issued in the Mergers will be "voting stock" within
the meaning of the Code.
2.7 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by Republic, nor the consummation by Republic of
the transactions contemplated hereby, nor compliance by Republic with any of
the provisions hereof will (a) conflict with or result in any breach of any
provision of its First Amended and Restated Certificate of Incorporation or
Bylaws, (b) violate, conflict with, constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in the creation of any lien, upon any of the properties or assets of
Republic or any of its subsidiaries (the "Republic Subsidiaries") under any of
the terms, conditions or provisions of any contract or lien, to which Republic
or any Republic Subsidiary is a party or to which they or any of their
respective properties or assets may be subject, except for such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of
liens or other encumbrances, which, individually or in the aggregate, will not
have a Material Adverse Effect on Republic, (c) violate any judgment, ruling,
order, writ,
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injunction, decree, statute, rule or regulation applicable to Republic or any
Republic Subsidiary or any of their respective properties or assets, except for
such violations which, individually or in the aggregate, will not have a
Material Adverse Effect on Republic, or (d) require any consent, approval,
authorization or permit of or from, or filing with or notification to, any
Governmental Authority except (i) pursuant to the Exchange Act or the
Securities Act, (ii) filings required under the securities or blue sky laws of
the various states, (iii) filings required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (iv) consents,
approvals, authorizations, permits, filings or notifications which have either
been obtained or made prior to the Closing or which, if not obtained or made,
will neither, individually or in the aggregate, have a Material Adverse Effect
on Republic nor restrict Republic's legal authority to execute and deliver this
Agreement and consummate the transactions contemplated hereby, or (v) any
filing required to be made by the Alarm Companies or the Shareholder.
2.8 REPORTS AND FINANCIAL STATEMENTS; NASDAQ COMPLIANCE. Within
the last three years, except where failure to have done so did not and would
not have a Material Adverse Effect on Republic, Republic has filed all reports,
registrations and statements, together with any required amendments thereto,
that it was required to file with the SEC under the Exchange Act, including,
but not limited to Forms 10-K, Forms 10-Q, Forms 8-K and proxy statements
(collectively, the "Republic Reports"). Republic has previously furnished to
the Shareholder copies of all Republic Reports filed with the SEC since January
1, 1995, and with respect to Republic Reports filed after the date of this
Agreement until the Effective Date, will promptly furnish to the Shareholder,
copies of each of the Republic Reports filed with the SEC during such period.
As of their respective dates (but taking into account any amendments filed
prior to the date of this Agreement), the Republic Reports complied, or, with
respect to Republic Reports filed after the date of this Agreement, will
comply, in all material respects with all the rules and regulations promulgated
by the SEC and did not contain, or, with respect to Republic Reports filed
after the date of this Agreement, will 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. Republic has taken all necessary action
to ensure its continued inclusion in, and the continued eligibility of the
Republic Common Stock for trading on, the NASDAQ Stock Market under all
currently effective inclusion requirements.
2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
Republic Reports filed by Republic with the SEC prior to the date of this
Agreement, since December 31, 1994 to the date of this Agreement, there has not
been any change in the financial
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condition, results of operations or business of Republic and the Republic
Subsidiaries that either individually or in the aggregate would have a Material
Adverse Effect on the financial condition of Republic.
2.10 ACCOUNTING AND TAX MATTERS. Neither Republic nor, to the best
of its Knowledge, any of its Affiliates, has taken or agreed to take any action
that would prevent Republic from accounting for the business combination to be
effected by the Mergers as a "pooling of interests." Republic warrants that it
has no current intention of disposing of any of the capital stock of the Alarm
Companies to be received by Republic in the Mergers. Republic agrees that from
and after the Effective Time, it will not take any action to cause the Mergers
to lose their tax free status.
2.11 INFORMATION REGARDING KEY PERSON. To the knowledge of
Republic, without independent investigation, the statements attributed to H.
Wayne Huizenga in the press release dated February 14, 1996 and attached hereto
as Exhibit 2.11 regarding his health are correct.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
As a material inducement to each of the Republic Companies to enter
into this Agreement and to consummate the transactions contemplated hereby, the
Shareholder makes the following representations and warranties to the Republic
Companies:
3.1 CORPORATE STATUS. Each of the Alarm Companies is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Colorado and has the requisite power and authority to own
or lease its properties and to carry on its business as now being conducted.
Each of the Alarm Companies is legally qualified to transact business as a
foreign corporation in all jurisdictions where the nature of its properties and
the conduct of its business requires such qualification (all of which
jurisdictions are listed on Schedule 3.1) and is in good standing in each of
the jurisdictions in which it is so qualified. There is no pending or
threatened proceeding for the dissolution, liquidation, insolvency or
rehabilitation of any of the Alarm Companies.
3.2 POWER AND AUTHORITY. Each of the Alarm Companies has the
power and authority to execute and deliver this Agreement, to perform its
respective obligations hereunder and to consummate the transactions
contemplated hereby. Each of the Alarm Companies has taken all action
necessary to authorize the execution and delivery of this Agreement, the
performance of its respective obligations hereunder and the consummation of the
transactions contemplated hereby. The Shareholder is an individual residing in
the State of
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Colorado with the requisite competence and authority to execute and deliver
this Agreement, to perform his obligations hereunder and to consummate the
transactions contemplated hereby.
3.3 ENFORCEABILITY. This Agreement has been duly executed and
delivered by the Shareholder and each of the Alarm Companies and constitutes
the legal, valid and binding obligation enforceable against the Shareholder and
each of the Alarm Companies in accordance with its terms, except as the same
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally and
general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.
3.4 CAPITALIZATION. Schedule 3.4 sets forth, with respect to each
of the Alarm Companies, (a) the number of authorized shares of each class of
capital stock, (b) the number of issued and outstanding shares of each class of
capital stock, and (c) the number of shares of each class of capital stock
which are held in treasury. All of the issued and outstanding shares of
capital stock of each of the Alarm Companies (a) have been duly authorized and
validly issued and are fully paid and non-assessable, (b) were issued in
compliance with all applicable state and federal securities laws, and (c) were
not issued in violation of any preemptive rights or rights of first refusal.
No preemptive rights or rights of first refusal exist with respect to the
shares of capital stock of the Alarm Companies, and no such rights arise by
virtue of or in connection with the transactions contemplated hereby. There
are no outstanding or authorized rights, options, warrants, convertible
securities, subscription rights, conversion rights, exchange rights or other
agreements or commitments of any kind that could require any of the Alarm
Companies to issue or sell any shares of its capital stock (or securities
convertible into or exchangeable for shares of its capital stock). There are
no outstanding stock appreciation, phantom stock, profit participation or other
similar rights with respect to any of the Alarm Companies. There are no
proxies, voting rights or other agreements or understandings with respect to
the voting or transfer of the capital stock of any of the Alarm Companies.
None of the Alarm Companies has any obligation to redeem or otherwise acquire
any of its outstanding shares of capital stock.
3.5 SHAREHOLDERS OF THE ALARM COMPANIES. The Shareholder is the
sole record and beneficial owner of shares of capital stock of the Alarm
Companies. Set forth on Schedule 3.5 is the Shareholder's address and social
security number, and the number of outstanding shares of each class of capital
stock of the Alarm Companies owned by the Shareholder as of the date hereof.
The Shareholder owns such shares of capital stock of the Alarm
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Companies free and clear of all Liens, restrictions and claims of every kind.
3.6 NO VIOLATION. The execution and delivery of this Agreement by
the Shareholder and each of the Alarm Companies, the performance by them of
their respective obligations hereunder and the consummation by them of the
transactions contemplated by this Agreement will not (i) contravene any
provision of the articles of incorporation or bylaws of any of the Alarm
Companies, (ii) violate or conflict with any federal, state or local law,
statute, ordinance, rule, regulation or any decree, writ, injunction, judgment
or order of any Governmental Authority or of any arbitration award which is
either applicable to, binding upon or enforceable against the Shareholder or
any of the Alarm Companies, (iii) conflict with, result in any breach of, or
constitute a default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default) under, or give rise to a right
to terminate, amend, modify, abandon or accelerate, any Contract which is
applicable to, binding upon or enforceable against any of the Alarm Companies
or the Shareholder, (iv) result in or require the creation or imposition of any
Lien upon or with respect to any of the property or assets of any of the Alarm
Companies, or (v) require the consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority, any
court or tribunal or any other Person, except (i) any applicable filings
required under the HSR Act, (ii) any filings required to be made by the
Republic Companies, (iii) any filings required to be made by the Alarm
Companies with the U.S. Department of Defense and state and local licensing
authorities, and (iv) the filing of appropriate forms under regulations related
to Section 368 of the Code.
3.7 RECORDS OF THE ALARM COMPANIES. The copies of the articles of
incorporation and bylaws of each of the Alarm Companies which were provided to
Republic are true, accurate and complete and reflect all amendments made
through the date of this Agreement. To the Knowledge of the Shareholder or any
of the Alarm Companies, the minute books for each of the Alarm Companies made
available to Republic for review were correct and complete in all material
respects as of the date of such review, no further entries have been made
through the date of this Agreement (except for entries which the Shareholder
has delivered to Republic), each contains the true signatures of the persons
purporting to have signed them. All material corporate actions taken by any of
the Alarm Companies have been duly authorized or ratified.
3.8 SUBSIDIARIES. None of the Alarm Companies owns, directly or
indirectly, any outstanding voting securities of or other interests in, or
controls, any corporation, partnership, joint venture or other business entity.
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3.9 FINANCIAL STATEMENTS. The Shareholder has delivered to
Republic the individual financial statements of each of the Alarm Companies for
the ten month period ended October 31, 1995, prepared internally by financial
department employees of the Alarm Companies (collectively, the "Financial
Statements"), a copy of which is attached to Schedule 3.9 hereto. The balance
sheets dated as of October 31, 1995 of each of the Alarm Companies included in
the Financial Statements are referred to herein together as the "Current
Balance Sheet". The Financial Statements of Denver Fire have been prepared
substantially on a cash basis method of accounting, and the Financial
Statements of Guardian have been prepared on an accrual basis method of
accounting, in each case prior to certain adjustments normally made by the
Alarm Companies consistent with past practice. The Financial Statements of the
Alarm Companies do not materially misrepresent their respective operations for
each of the periods covered thereby.
3.10 CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Except as
disclosed in Schedule 3.10, or except as contemplated by this Agreement, since
the date of the Current Balance Sheet, none of the Alarm Companies has (i)
issued any capital stock or other securities; (ii) except in the ordinary
course of business customary with past practice, made any distribution of or
with respect to its capital stock or other securities or purchased or redeemed
any of its securities; (iii) paid any bonus to or increased the rate of
compensation of any of its officers or salaried employees or amended any other
terms of employment of such persons other than in the ordinary course of
business consistent with past practice; (iv) sold, leased or transferred any of
its properties or assets other than in the ordinary course of business
consistent with past practice; (v) made or obligated itself to make capital
expenditures out of the ordinary course of business consistent with past
practice; (vi) made any payment in respect of its liabilities other than in the
ordinary course of business consistent with past practice; (vii) incurred any
obligations or liabilities (including any indebtedness) or entered into any
transaction or series of transactions involving in excess of $25,000 in the
aggregate out of the ordinary course of business, except for this Agreement and
the transactions contemplated hereby; (viii) suffered any theft, damage,
destruction or casualty loss, not covered by insurance for which a timely claim
was filed, other than in the ordinary course of business consistent with past
practice; (ix) suffered any extraordinary losses (whether or not covered by
insurance); (x) waived, cancelled, compromised or released any rights other
than in the ordinary course of business consistent with past practice; (xi)
made or adopted any change in its accounting practice or policies; (xii) made
any adjustment to its books and records (including, without limitation, any
write-up or revaluation increasing the book value of any assets) other than in
respect of the conduct of its business activities in the ordinary course
consistent with past practice; (xiii) entered into
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any transaction with any Affiliate other than intercompany transactions in the
ordinary course of business consistent with past practice; (xiv) entered into
any employment agreement, except for oral agreements entered into in the
ordinary course of business, all of which agreements are limited to
employment-at-will agreements, or except as otherwise disclosed in Schedule
3.17; (xv) terminated, amended or modified any agreement other than in the
ordinary course of business consistent with past practice; (xvi) imposed any
security interest on the "Owned Properties", the "Leasehold Premises" or any
of the "Assets" (as each such term is defined herein), other than in the
ordinary course of business consistent with past practice; (xvii) delayed
paying any accounts payable which are due and payable except to the extent
being contested in good faith; (xviii) made or pledged any charitable
contribution other than in the ordinary course of business consistent with past
practice; or (xix) entered into any other transaction or been subject to any
event which has or may have a Material Adverse Effect on the Alarm Companies
other than economic or regulatory changes generally known throughout the
industry in which the Alarm Companies operate; or (xx) agreed to do or
authorized any of the foregoing.
3.11 LIABILITIES OF THE ALARM COMPANIES. None of the Alarm
Companies has any liabilities or obligations whether accrued, absolute,
contingent or otherwise, except (a) to the extent specifically set forth in or
incorporated by express reference in any of the Schedules attached hereto and
(b) liabilities incurred in the ordinary course of business. In preparing the
Financial Statements, the Alarm Companies have not changed their respective
methods of accounting with respect to the booking or disposition of liabilities
from the methods of accounting with respect to such matters utilized in
preparing previous financial statements. As of the Effective Time, the
combined aggregate debt of the Alarm Companies will not exceed $50,000. As
used in the previous sentence, "debt" of the Alarm Companies shall mean the
current and long-term portions of bank debt, mortgages or other notes or loans
payable, including notes or loans payable to shareholders, and remaining
payments or pay-off amounts on capitalized or non-capitalized equipment leases;
"debt" shall not include any intercompany debt between the Alarm Companies.
3.12 LITIGATION. Except as set forth on Schedule 3.12, there is no
action, suit, or other legal or administrative proceeding or governmental
investigation pending, or to the Knowledge of the Shareholder, threatened,
anticipated or contemplated against, by or affecting any of the Alarm
Companies, or any of their respective properties or assets, or the Shareholder,
or which questions the validity or enforceability of this Agreement or the
transactions contemplated hereby, and, to the Knowledge of the Shareholder or
any of the Alarm Companies, there is no basis for any of the foregoing. There
are no outstanding orders, decrees or
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stipulations issued by any Governmental Authority in any proceeding to which
any of the Alarm Companies is or was a party which have not been complied with
in full or which continue to impose any material obligations on any of the
Alarm Companies.
3.13 ENVIRONMENTAL MATTERS.
3.13.1 None of the Alarm Companies has transported, stored,
treated or disposed, nor has it knowingly allowed or arranged for any
third parties to transport, handle, treat or dispose of Hazardous
Substances or other waste to or at any location other than a site
lawfully permitted to receive such Hazardous Substances or other waste
for such purposes, nor has it performed, knowingly arranged for or
knowingly allowed by any method or procedure such transportation,
storage, treatment or disposal in contravention of any laws or
regulations. None of the Alarm Companies has stored, handled, treated
or disposed of, or knowingly allowed or arranged for any third parties
to store, handle, treat or dispose of, Hazardous Substances or other
waste upon property owned or leased by it, except as permitted by law.
For purposes of this Section 3.13, the term "Hazardous Substances"
shall include: (i) any "Hazardous Substance", "Pollutant" or
"Contaminant" as defined in the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. Section 9601, et
seq., or the regulations promulgated thereunder ("CERCLA"); (ii) any
hazardous waste as that term is defined in applicable state or local
law; (iii) any substance containing petroleum, as that term is defined
in Section 9001(8) of the Resource Conservation and Recovery Act, as
amended ("RCRA"), 42 U.S.C. Section 6991(8) or in 40 C.F.R. Section
280.1; or (iv) any other substance for which any governmental entity
with jurisdiction over the Owned Properties or the Leasehold Premises
requires special handling in its generation, handling, use,
collection, storage, treatment or disposal.
3.13.2 Except as set forth on Schedule 3.13, There has not
occurred, nor is there presently occurring, a Release of any Hazardous
Substance on, into or beneath the surface of any parcel of the Owned
Properties or the Leasehold Premises. For purposes of this Section
3.13, the term "Release" shall have the meaning given it in CERCLA.
3.13.3 None of the Alarm Companies has shipped, transported
or disposed of, nor has it knowingly allowed or arranged, by contract,
agreement or otherwise, for any third parties to ship, transport or
dispose of, any Hazardous Substance or other waste to or at a site
which, pursuant to CERCLA or any similar state law, (i) has been
placed on the National Priorities List or its state equivalent, or
(ii) the
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Environmental Protection Agency or the relevant state agency has
proposed or is proposing to place on the National Priorities List or
its state equivalent. None of the Alarm Companies has received
notice, nor does it have Knowledge of any facts which could give rise
to any notice, that any of the Alarm Companies is a potentially
responsible party for a federal or state environmental cleanup site or
for corrective action under CERCLA or any other applicable law or
regulation. None of the Alarm Companies has submitted nor was
required to submit any notice pursuant to Section 103(c) of CERCLA
with respect to the Owned Properties or the Leasehold Premises. None
of the Alarm Companies has received any written or oral request for
information in connection with any federal or state environmental
cleanup site. None of the Alarm Companies has been required to
undertake, nor has it undertaken, response or remedial actions or
clean-up actions of any kind at the request of any federal, state or
local governmental entity, or at the request of any other person or
entity.
3.13.4 Except as otherwise set forth on Schedule 3.13, none
of the Alarm Companies has ever used any Underground Storage Tanks or
Aboveground Storage Tanks, and there are not now nor, to the Knowledge
of the Shareholder or any of the Alarm Companies, have there ever been
any Underground Storage Tanks or Aboveground Storage Tanks on the
Owned Properties or the Leasehold Premises. For purposes of this
Section 3.13, the terms "Underground Storage Tanks" and "Aboveground
Storage Tanks" shall have the meanings given them in RCRA.
3.13.5 Except as set forth on Schedule 3.13, there is no
asbestos in or on any of the Owned Properties or Leasehold Premises.
3.13.6 There are no laws, regulations, ordinances, licenses,
permits or orders relating to environmental or worker safety matters
currently requiring any work, repairs, construction or capital
expenditures with respect to the assets or properties of any of the
Alarm Companies.
3.13.7 Schedule 3.17 identifies (i) all environmental
audits, assessments or occupational health studies undertaken by any
of the Alarm Companies or its agents or, to the Knowledge of the
Shareholder, undertaken by governmental agencies; (ii) the results of
any ground, water, soil, air or asbestos monitoring undertaken by any
of the Alarm Companies or its agents or, to the Knowledge of the
Shareholder or any of the Alarm Companies, undertaken by governmental
agencies relating to or affecting any of its properties or assets;
(iii) all written communications between any of the Alarm Companies
and any environmental agencies; and (iv) all
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citations issued under the Occupational Safety and Health Act (29
U.S.C. Sections 651 et seq.) relating to or affecting any of the Alarm
Companies or any of its properties or assets.
3.14 REAL ESTATE.
3.14.1 The Alarm Companies do not own any real property or
any interest therein except as set forth on Schedule 3.14(a) (the
"Owned Properties"), which Schedule sets forth the location and size
of, and principal improvements and buildings on, the Owned Properties.
Except as set forth on Schedule 3.14(a), with respect to each such
parcel of Owned Property:
(i) The Alarm Company owning such Owned Property
has good and marketable title to the parcel of Owned Property,
free and clear of any Lien other than (x) liens for real
estate taxes not yet due and payable; (y) recorded easements,
covenants, and other restrictions which do not materially
impair the current use, occupancy or value of the property
subject thereto, and (z) encumbrances and restrictions
described in the title insurance policies listed on Schedule
3.14(a), all of which policies have been previously delivered
or made available to Republic by the Shareholder;
(ii) there are no pending or, to the Knowledge of
the Shareholder or any of the Alarm Companies, threatened
condemnation proceedings, suits or administrative actions
relating to the Owned Properties or other matters affecting
adversely the current use, occupancy or value thereof;
(iii) the legal descriptions for the parcels of
Owned Property contained in the deeds thereof describe such
parcels fully and adequately; to the Knowledge of the
Shareholder or any of the Alarm Companies (i) the buildings
and improvements are located within the boundary lines of the
described parcels of land, are not in violation of applicable
setback requirements, zoning laws and ordinances (and none of
the properties or buildings or improvements thereon are
subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications) and do not encroach
on any easement which may burden the land; (ii) the land does
not serve any adjoining property for any purpose inconsistent
with the use of the land; and (iii) the Owned Properties are
not located, to any material degree, within any flood plain
(such that a mortgagee would require a mortgagor to obtain
flood insurance) or subject to any similar type restriction
for which any
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permits or licenses necessary to the use thereof have not been
obtained;
(iv) all facilities have received all approvals of
Governmental Authorities (including licenses and permits)
required in connection with the ownership or operation thereof
and have been operated and maintained in accordance with
applicable laws, ordinances, rules and regulations;
(v) there are no Contracts written or oral,
granting to any party or parties the right of use or occupancy
of any portion of the parcels of Owned Property;
(vi) there are no outstanding options or rights of
first refusal to purchase the parcels of Owned Property, or
any portion thereof or interest therein;
(vii) there are no parties (other than the Alarm
Companies) in possession of the parcels of Owned Property;
(viii) all facilities located on the parcels of
Owned Property are supplied with utilities and other services
reasonably necessary for the operation of such facilities;
(ix) the parcels of Owned Property abut on and
have direct vehicular access to a public road, or have access
to a public road via a permitted route, and there is no
pending or, to the Shareholder's Knowledge, threatened
termination of the foregoing access rights;
(x) all improvements and buildings on the Owned
Property are in good repair and working order, normal wear and
tear excepted, and are adequate for the use of such Owned
Property in the manner in which presently used; and
(xi) there are no service contracts, management
agreements or similar agreements which affect the parcels of
Owned Property.
3.14.2 Schedule 3.14(b) sets forth a list of all real estate
leases, licenses or similar agreements ("Leases") to which any of the
Alarm Companies is a party (copies of which have previously been
furnished to Republic), in each case, setting forth (A) the lessor and
lessee thereof and the date and term of each of the Leases, (B) the
location, including address, of each property covered thereby, and (C)
a brief
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description (including size and function) of the principal
improvements and buildings thereon (the "Leasehold Premises"), all of
which are within the property set-back and building lines of the
respective property. The Leases are in full force and effect and have
not been amended except as set forth on Schedule 3.14(b). No event
has occurred which, with the passage of time or the giving of notice
or both, would cause a material breach of or default under any of such
Leases. There is no breach or, to the Knowledge of the Shareholder or
any of the Alarm Companies, anticipated breach by any party to such
Leases. Except as set forth on Schedule 3.14(b), with respect to each
such Leasehold Premises:
(i) One or more of the Alarm Companies has valid
leasehold interests in the Leasehold Premises, free and clear
of any Liens, covenants and easements or title defects of any
nature whatsoever, other than landlord liens for payment of
rent, utilities and the like, all of which are current;
(ii) The portions of the buildings located on the
Leasehold Premises that are used in the Alarm Companies'
businesses are each in good repair and working order, normal
wear and tear excepted, and are in the aggregate sufficient to
satisfy each of the Alarm Companies' current business
activities as conducted thereat;
(iii) Each of the Leasehold Premises (A) has direct
access to public roads or access to public roads via a
permitted route, such access being sufficient to satisfy the
current transportation requirements of each of the Alarm
Companies' businesses as presently conducted at such parcel;
and (B) is served by all utilities in such quantity and
quality as are sufficient to satisfy the current normal
business activities as conducted at such parcel; and
(iv) None of the Alarm Companies has received notice
of (A) any condemnation proceeding with respect to any portion
of the Leasehold Premises or any access thereto, and, to the
Knowledge of the Shareholder or any of the Alarm Companies, no
such proceeding is contemplated by any Governmental Authority;
or (B) any special assessment which may affect any of the
Leasehold Premises, and, to the Knowledge of the Shareholder
or any of the Alarm Companies, no such special assessment is
contemplated by any Governmental Authority.
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3.15 GOOD TITLE TO AND CONDITION OF ASSETS.
3.15.1 Each of the Alarm Companies has good title to all of
its Assets (as hereinafter defined), free and clear of any Liens
(other than Liens referenced in the Current Balance Sheet and notes
thereto and Liens of public record) or restrictions on use. For
purposes of this Agreement, the term "Assets" means all of the
properties and assets of the Alarm Companies, other than the Owned
Properties, the Leasehold Premises and the assets listed on Schedule
3.15.1, whether personal or mixed, tangible or intangible, wherever
located.
3.15.2 Except as otherwise set forth on Schedule 3.15.2, the
Fixed Assets (as hereinafter defined) currently in use or necessary
for the business and operations of the Alarm Companies are in workable
operating condition, normal wear and tear excepted. For purposes of
this Agreement, the term "Fixed Assets" means all vehicles, machinery,
equipment, tools, supplies, furniture and fixtures used by or located
on the premises of each of the Alarm Companies or set forth on the
Current Balance Sheet or acquired by the Alarm Companies since the
date of the Current Balance Sheet. Schedule 3.15.2 lists the vehicles
owned, leased or used by the Alarm Companies, setting forth the make,
model, description of body and chassis, vehicle identification number,
and year of manufacture for each vehicle, whether it is owned or
leased, and if owned, the name of any lienholder and the amount of the
lien, and if leased, the name of the lessor, the remaining lease term,
the aggregate remaining lease payments and the general terms of the
lease. Schedule 3.15.2 also lists all other leased equipment, with
the name of the lessor, the remaining lease term, and the aggregate
remaining lease payments on such equipment.
3.16 COMPLIANCE WITH LAWS.
3.16.1 Each of the Alarm Companies is and has been in
compliance with all laws, regulations and orders applicable to its
business and operations (as conducted by it now and in the past), the
payment of employees and independent contractors, the Assets, the
Owned Properties and the Leasehold Premises and any other properties
and assets (in each case owned or used by it now or in the past).
None of the Alarm Companies has been cited, fined or otherwise
notified of any asserted past or present failure to comply with any
laws, regulations or orders and no proceeding with respect to any such
violation is pending or, to the Knowledge of the Shareholder or any of
the Alarm Companies, threatened.
3.16.2 None of the Alarm Companies is subject to any
Contract, decree or injunction in which any of the Alarm
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Companies is a party which restricts the continued operation of any
business or the expansion thereof to other geographical areas,
customers and suppliers or lines of business.
3.17 LABOR AND EMPLOYMENT MATTERS. Schedule 3.17 sets forth the
name, address, social security number and current rate of compensation of each
of the employees of each of the Alarm Companies. None of the Alarm Companies
is a party to or bound by any collective bargaining agreement or any other
agreement with a labor union, and there has been no effort by any labor union
during the 24 months prior to the date hereof to organize any employees of any
of the Alarm Companies into one or more collective bargaining units. There is
no pending or, to the Knowledge of the Shareholder or any of the Alarm
Companies, threatened labor dispute, strike or work stoppage which affects or
which may affect the business of any of the Alarm Companies or which may
interfere with their continued operation. To the Knowledge of the Shareholder
or any of the Alarm Companies, none of the Alarm Companies nor any agent,
representative or employee of any of the Alarm Companies has within the last 24
months committed any unfair labor practice as defined in the National Labor
Relations Act, as amended, and there is no pending or, to the Knowledge of the
Shareholder or any of the Alarm Companies, threatened charge or complaint
against any of the Alarm Companies by or with the National Labor Relations
Board or any representative thereof. There has been no strike, walkout or work
stoppage involving any of the employees of any of the Alarm Companies during
the 24 months prior to the date hereof. Neither the Shareholder nor any of the
Alarm Companies is aware that any executive or key employee or group of
employees has any plans to terminate his, her or their employment with any of
the Alarm Companies. Schedule 3.17 contains the form and general description
of each contract, agreement or plan of the following nature, whether formal or
informal, and whether or not in writing, to which any of the Alarm Companies is
a party or under which any of the Alarm Companies has an obligation: (i)
employment agreements, (ii) employee handbooks, policy statements and similar
plans, (iii) noncompetition agreements and (iv) consulting agreements (copies
of which have been made available to Republic).
3.18 EMPLOYEE BENEFIT PLANS.
3.18.1 Except as set forth in Schedule 3.18, none of the
Alarm Companies nor any member of its controlled group within the
meaning of Section 414 of the Code, maintains or contributes to, or at
any time in the preceding five calendar years, maintained or
contributed to: (i) any non-qualified deferred compensation or
retirement plans or arrangements; (ii) any qualified defined
contribution retirement plans or arrangements; (iii) any qualified
defined benefit pension plan; (iv) any other plan, program, agreement
or arrangement under which former employees of any of the Alarm
Companies or
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its beneficiaries are entitled, or current employees of any of the
Alarm Companies will be entitled following termination of employment,
to medical, health, life insurance or other benefits other than
pursuant to benefit continuation rights granted by state or federal
law; or (v) any other employee benefit, health, welfare, severance,
vacation, medical, disability, life insurance, stock, stock purchase
or stock option plan, program, agreement, arrangement, custom,
practice or policy. The plans described in Schedule 3.18 are referred
to herein as the "Plans".
3.18.2 The administration of the Plans complies in all
respects with the requirements of the Employee Retirement Income
Security Act of 1974 ("ERISA"), and the Plans meet any applicable
requirements for favorable tax treatment under the Code in both form
and operation. All of the Plans which constitute employee pension
benefit plans or employee welfare plans subject to ERISA and the
trusts or other funding vehicles related to the Plans have been
maintained in compliance in both form and operation with the
requirements of ERISA. The costs of administering the Plans,
including fees for the trustee and other service providers which are
customarily paid by the any of the Alarm Companies, have been paid or
will be paid prior to the Effective Date or are reflected in the
Current Balance Sheet. There have been no prohibited transactions as
defined in Section 406 of ERISA or Section 4975 of the Code with
respect to any of the Plans or any parties in interest or disqualified
persons with respect to the Plans or any reduction or curtailment of
accrued benefits with respect to any of the Plans. There are no
pending or, to the Knowledge of the Shareholder or any of the Alarm
Companies, threatened claims, lawsuits, or arbitrations which have
been asserted or instituted against the Plans, any fiduciaries thereof
with respect to their duties to the Plans or the assets of any of the
trusts under any of the Plans. None of the Alarm Companies has any
plans, programs, agreements or arrangements or other commitments to
its employees, former employees or their beneficiaries under which it
has any obligation to provide any retiree or other employee benefit
payments which are not adequately funded through a trust or other
funding arrangement.
3.18.3 To the extent applicable, the Alarm Companies have
furnished Republic with true and complete copies of: (i) the Plans
and any related trusts or funding vehicles, policies or contracts and
the related summary plan descriptions with respect to each Plan; (ii)
the most recent determination letters received from the Internal
Revenue Service regarding the Plans and copies of any pending
applications, filings or notices with respect to any of the Plans with
the Internal Revenue Service, the Pension Benefit Guaranty
Corporation, the
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Department of Labor or any other governmental agency; (iii) the latest
financial statements and annual reports for each of the Plans and
related trusts or funding vehicles, policies or contracts as of the
end of the most recent plan year with respect to which the filing date
for such information has passed; (iv) the reports of the most recent
actuarial valuations of the Plans; (v) copies of all corporate
resolutions or other documents pertaining to the adoption of the Plans
or any amendments thereto or to the appointment of any fiduciaries
thereunder and copies of any investment management agreement
thereunder and of any fiduciary insurance policies, surety bonds,
rules, regulations or policies of the trustees or of any committee
thereunder; and (vi) copies of any communications or notices provided
to employees or plan participants with respect to the Plans along with
information concerning the date and extent of distribution of such
communications.
3.19 TAX MATTERS. All Tax Returns required to be filed prior to
the date hereof with respect to each of the Alarm Companies or any of its
income, properties, franchises or operations have been timely filed, each such
Tax Return has been prepared in compliance with all applicable laws and
regulations, and all such Tax Returns are true and accurate in all respects.
All Taxes due and payable by or with respect to each of the Alarm Companies
have been paid or will be accrued on the books and records of each of the Alarm
Companies as of the Closing. Each of the Alarm Companies has duly and validly
filed elections for "S" corporation status under the Code, and such "S"
elections have not been revoked or terminated and none of the Alarm Companies
or the Shareholder has taken any action which would cause a termination of the
"S" election. Except as set forth in Schedule 3.19 hereto: (i) with respect to
each taxable period of each of the Alarm Companies, either such taxable period
has been audited by the relevant taxing authority or the time for assessing or
collecting Taxes with respect to each such taxable period has closed and such
taxable period is not subject to review by any relevant taxing authority; (ii)
no deficiency or proposed adjustment which has not been settled or otherwise
resolved for any amount of Taxes has been asserted or assessed by any taxing
authority against any of the Alarm Companies; (iii) none of the Alarm Companies
has consented to extend the time in which any Taxes may be assessed or
collected by any taxing authority; (iv) none of the Alarm Companies has
requested or been granted an extension of the time for filing any Tax Return to
a date later than the Effective Time; (v) there is no action, suit, taxing
authority proceeding, or audit or claim for refund now in progress, pending or
threatened against or with respect to any of the Alarm Companies regarding
Taxes; (vi) none of the Alarm Companies has made an election or filed a consent
under Section 341(f) of the Code (or any corresponding provision of state,
local or foreign law) on or prior to the Effective Time; (vii) there are no
Liens
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for Taxes (other than for current Taxes not yet due and payable) upon the
assets of any of the Alarm Companies; (viii) none of the Alarm Companies will
be required (A) as a result of a change in method of accounting for a taxable
period ending on or prior to the Effective Date, to include any adjustment
under Section 481(c) of the Code (or any corresponding provision of state,
local or foreign law) in taxable income for any taxable period (or portion
thereof) beginning after the Effective Time or (B) as a result of any "closing
agreement," as described in Section 7121 of the Code (or any corresponding
provision of state, local or foreign law), to include any item of income or
exclude any item of deduction from any taxable period (or portion thereof)
beginning after the Effective Time; (ix) none of the Alarm Companies has been a
member of an affiliated group (as defined in Section 1504 of the Code) or filed
or been included in a combined, consolidated or unitary income Tax Return; (x)
none of the Alarm Companies is a party to or bound by any tax allocation or tax
sharing agreement and has no current or potential contractual obligation to
indemnify any other Person with respect to Taxes; (xi) no taxing authority is
entitled to any additional Taxes against any of the Alarm Companies for any
period for which Tax Returns have been filed; (xii) none of the Alarm Companies
has made any payments, and is not and will not become obligated (under any
contract entered into on or before the Effective Date) to make any payments,
that will be non-deductible under Section 280G of the Code (or any
corresponding provision of state, local or foreign law); (xiii) none of the
Alarm Companies has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code (or any corresponding
provision of state, local or foreign law) during the applicable period
specified in Section 897(c)(1)(a)(ii) of the Code (or any corresponding
provision of state, local or foreign law); (xiv) no claim has ever been made by
a taxing authority in a jurisdiction where any of the Alarm Companies does not
file Tax Returns that such Alarm Company is or may be subject to Taxes assessed
by such jurisdiction; (xv) none of the Alarm Companies has permanent
establishment in any foreign country, as defined in the relevant tax treaty
between the United States of America and such foreign country; (xvi) true,
correct and complete copies of all income and sales Tax Returns filed by or
with respect to the Alarm Companies for the past three years have been
furnished or made available to Republic; and (xvii) none of the Alarm Companies
will be subject to any Tax for the period ending at the Effective Time for any
period for which a Tax Return has not been filed imposed pursuant to Section
1374 or Section 1375 of the Code (or any corresponding provision of state,
local or foreign law); and (xviii) no sales or use tax (other than sales tax on
aircraft, boats, mobile homes and motor vehicles), non-recurring intangibles
tax, documentary stamp tax or other excise tax (or comparable tax imposed by
any governmental entity) will be payable by any of the Alarm Companies by
virtue of the transactions completed in this Agreement.
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3.20 INSURANCE. Each of the Alarm Companies is covered by valid,
outstanding and enforceable policies of insurance issued to it by reputable
insurers covering its properties, assets and business against risks of the
nature normally insured against by corporations in the same or similar lines of
business and in coverage amounts typically and reasonably carried by such
corporations (the "Insurance Policies"). Such Insurance Policies are in full
force and effect, and all premiums due thereon have been paid. As of the
Effective Time, each of the Insurance Policies will be in full force and
effect. None of the Insurance Policies will lapse or terminate as a result of
the transactions contemplated by this Agreement. Each of the Alarm Companies
has complied with the provisions of such Insurance Policies. Schedule 3.20
contains (i) a complete and correct list of all Insurance Policies and all
amendments and riders thereto (copies of which have been provided to Republic)
and (ii) a detailed description of each pending claim under any of the
Insurance Policies for an amount in excess of $10,000 that relates to loss or
damage to the properties, assets or businesses of any of the Alarm Companies
(other than those which are covered in full by insurance). None of the Alarm
Companies has failed to give, in a timely manner, any notice required under any
of the Insurance Policies to preserve its rights thereunder.
3.21 [INTENTIONALLY OMITTED]
3.22 LICENSES AND PERMITS. Each of the Alarm Companies possesses
all licenses and required governmental or official approvals, permits or
authorizations (collectively, the "Permits") for its business and operations.
All such Permits are valid and in full force and effect, each of the Alarm
Companies is in full compliance with their requirements, and no proceeding is
pending or, to the Knowledge of the Shareholder or any of the Alarm Companies,
threatened to revoke or amend any of them. None of such Permits is or will be
impaired or in any way affected by (i) the execution and delivery of this
Agreement by any of the Alarm Companies or by the Shareholder or (ii) the
consummation of the transactions contemplated hereby.
3.23 ADEQUACY OF THE ASSETS; RELATIONSHIPS WITH CUSTOMERS AND
SUPPLIERS; AFFILIATE TRANSACTIONS. The Assets, the Alarm Companies' leased
personal property (including leased vehicles, copiers and office equipment),
Owned Properties and Leasehold Premises constitute, in the aggregate, all of
the assets and property necessary for the conduct of the businesses of the
Alarm Companies in the manner in which and to the extent to which such
businesses are currently being conducted. Except for Eastman Technology, Inc.
(Edicon Systems Division), no current supplier to any of the Alarm Companies of
items essential to the conduct of their business has threatened to terminate
its business relationship with the Alarm Companies for any reason. Except as
otherwise
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set forth on Schedule 3.23, neither the Shareholder nor any of the Alarm
Companies has any direct or indirect interest in any customer, supplier or
competitor of the Alarm Companies, or in any person from whom or to whom the
Alarm Companies lease real or personal property. Except as set forth on
Schedule 3.23, no officer, director or shareholder of any of the Alarm
Companies, or any person related by blood or marriage to any such person or any
entity in which any such person owns any beneficial interest, is a party to any
Contract or transaction with any of the Alarm Companies or has any interest in
any property used by any of the Alarm Companies.
3.24 INTELLECTUAL PROPERTY. Each of the Alarm Companies has full
legal right, title and interest in and to all trademarks, servicemarks,
tradenames, copyrights, know-how, patents, trade secrets, licenses (including
licenses for the use of computer software programs), and other intellectual
property used in the conduct of its business (the "Intellectual Property").
The conduct of each of the Alarm Companies' business as presently conducted and
the unrestricted conduct and the unrestricted use and exploitation of the
Intellectual Property does not infringe or misappropriate any rights held or
asserted by any Person, and, to the Knowledge of the Shareholder or any of the
Alarm Companies, no Person is infringing on the Intellectual Property. No
payments not made in the ordinary course of business are required for the
continued use of the Intellectual Property. None of the Intellectual Property
has ever been declared invalid or unenforceable, or is the subject of any
pending or, to the Knowledge of the Shareholder or any of the Alarm Companies,
threatened action for opposition, cancellation, declaration, infringement, or
invalidity, unenforceability or misappropriation or like claim, action or
proceeding. Schedule 3.24 sets forth a list of all Intellectual Property owned
by any of the Alarm Companies and lists all trademark, tradename and patent
applications that are currently pending.
3.25 CONTRACTS. Schedule 3.25 sets forth a list of each Contract
to which any of the Alarm Companies is a party or by which any of the Alarm
Companies or its properties and assets are bound and which is material to the
business, assets, properties or prospects of any of the Alarm Companies (the
"Designated Contracts"), true and correct copies of which have been provided to
Republic. The copy of each Designated Contract supplied by the Alarm Companies
to Republic is a true and complete copy of the document it purports to
represent and reflects all amendments thereto made through the date of this
Agreement. None of the Alarm Companies has violated any of the material terms
or conditions of any Designated Contract or any term or condition which would
permit termination or material modification of any Designated Contract, and all
of the covenants to be performed by any other party thereto have been fully
performed and there are no material uninsured
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claims for breach of indemnification or notice of default or termination under
any Designated Contract. No event has occurred, which constitutes, or after
notice or the passage of time, or both, would constitute a material default by
any of the Alarm Companies under any Designated Contract, and no such event has
occurred which constitutes or would constitute a material default by any other
party. None of the Alarm Companies is subject to any material liability or
payment resulting from renegotiation of amounts paid it under any Designated
Contract. As used in this Section, Designated Contracts shall include, without
limitation, (a) loan agreements, indentures, mortgages, pledges,
hypothecations, deeds of trust, conditional sale or title retention agreements,
security agreements, equipment financing obligations or guaranties, or other
sources of contingent liability in respect of any indebtedness or obligations
to any other Person, or letters of intent or commitment letters with respect to
same; (b) contracts obligating the Alarm Companies to provide products or
services for a period of one year or more, excluding standard alarm monitoring
contracts entered into in the ordinary course of business without material
modification from the preprinted forms used by any of the Alarm Companies in
the ordinary course of its business; (c) leases of real property, and leases of
personal property not cancelable without penalty on notice of sixty (60) days
or less or calling for payment of an annual gross rental exceeding $25,000; (d)
distribution, sales agency or franchise or similar agreements, or agreements
providing for an independent contractor's services, or letters of intent with
respect to same; (e) employment agreements, management service agreements,
consulting agreements, confidentiality agreements, non-competition agreements
and any other agreements relating to any employee, officer or director of any
of the Alarm Companies; (f) licenses, assignments or transfers of trademarks,
trade names, service marks, patents, copyrights, trade secrets or know how, or
other agreements regarding proprietary rights or intellectual property; (g) any
Contract relating to pending capital expenditures by any of the Alarm Companies
in excess of $25,000; and (h) other material Contracts or understandings,
irrespective of subject matter and whether or not in writing, not entered into
in the ordinary course of business and not otherwise disclosed on the
Schedules, which are in excess of $25,000.
3.26 CUSTOMER LISTS. Schedule 3.26 is a true, correct and complete
list of all existing customers of the Alarm Companies as of the date which is 5
days prior to Closing, who have entered into alarm monitoring contracts and who
represent in the aggregate substantially all of the customers of the Alarm
Companies that are subscribing to its alarm monitoring services as of the date
of such Schedule. Schedule 3.26 sets forth each such customer's account
number, billing cycle, type of service, rates charged and expiration date of
current contract term. Except as specifically identified on Schedule 3.26, no
customer of any of the Alarm
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Companies will account for more than 1% of the combined recurring revenue of
the Alarm Companies for the current fiscal year.
3.27 [INTENTIONALLY OMITTED]
3.28 INVESTMENT INTENT; SECURITIES DOCUMENTS. The Shareholder is
acquiring the Republic Shares hereunder for his own account for investment and
not with a view to, or for the sale in connection with, any distribution of any
of the Republic Shares, except in compliance with applicable state and federal
securities laws. The Shareholder has had the opportunity to discuss the
transactions contemplated hereby with Republic and has had the opportunity to
obtain such information pertaining to the Republic Companies as has been
requested. The Shareholder is an "accredited investor" within the meaning of
Regulation D promulgated under the Securities Act and has such Knowledge and
experience in business or financial matters that he or his advisors are capable
of evaluating the merits and risks of an investment in the Republic Shares.
3.29 BUSINESS LOCATIONS. As of the date hereof, none of the Alarm
Companies has any office or place of business other than as identified on
Schedules 3.14(a) and 3.14(b) and the Alarm Companies' principal place of
business in each state in which any Alarm Company does business and chief
executive offices (as such terms are used in subsection 9-401 of the Uniform
Commercial Code as enacted in the State of Colorado as of the date hereof) are
indicated on Schedule 3.14(a) or 3.14(b) and, except for equipment leased to
customers in the ordinary course of business, all locations where the Alarm
Companies' equipment, inventory, chattel paper and books and records are
located as of the date hereof are fully identified on Schedules 3.14(a) and
3.14(b).
3.30 NAMES; PRIOR ACQUISITIONS. All names under which each of the
Alarm Companies does business as of the date hereof are listed on Schedule
3.30. Except as set forth on Schedule 3.30, none of the Alarm Companies has
changed its name or used any assumed or fictitious name, or been the surviving
entity in a merger, acquired any business or changed its principal place of
business or chief executive office, within the past three years.
3.31 NO COMMISSIONS. Neither the Shareholder nor any of the Alarm
Companies has incurred any obligation for any finder's or broker's or agent's
fees or commissions or similar compensation in connection with the transactions
contemplated hereby.
3.32 ACCOUNTING AND TAX MATTERS. Neither any of the Alarm
Companies nor any of its Affiliates has taken or agreed to take any action that
would prevent Republic from accounting for the business combination to be
effected by the Mergers as a "pooling of interests". The Alarm Companies agree
that from and after the date
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hereof until the Effective Date, they will not take any actions to cause the
Mergers to lose their tax free status.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGERS
4.1 CONDUCT OF BUSINESSES BY THE ALARM COMPANIES PENDING THE
MERGERS. Each of the Alarm Companies covenants and agrees that, between the
date of this Agreement and the Effective Time, the businesses of each of the
Alarm Companies shall be conducted only in, and none of the Alarm Companies
shall take any action except in, the ordinary course of business, consistent
with past practice. Each of the Alarm Companies shall use its best efforts to
preserve intact its business organization, to keep available the services of
its current officers, employees and consultants and to preserve its present
relationships with customers, suppliers and other persons with which it has
significant business relations. By way of amplification and not limitation,
except as contemplated by this Agreement, none of the Alarm Companies shall,
between the date of this Agreement and the Effective Time, directly or
indirectly, do or propose or agree to do any of the following without the prior
written consent of Republic:
4.1.1 amend or otherwise change its articles of
incorporation or bylaws or equivalent organizational documents;
4.1.2 issue, sell, pledge, dispose of, encumber, or,
authorize the issuance, sale, pledge, disposition, grant or
encumbrance of (i) any shares of its capital stock of any class, or
any options, warrants, convertible securities or other rights of any
kind to acquire any shares of such capital stock, or any other
ownership interest, of it or (ii) any of its assets, tangible or
intangible, except in the ordinary course of business consistent with
past practice;
4.1.3 declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock;
4.1.4 reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its
capital stock;
4.1.5 (i) acquire (including, without limitation, for cash
or shares of stock), by merger, consolidation, or acquisition of stock
or assets) any interest in any corporation, partnership or other
business organization or division thereof or any assets, or make any
investment either
25
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by purchase of stock or securities, contributions of capital or
property transfer, or, except in the ordinary course of business,
consistent with past practice, purchase any property or assets of any
other Person, (ii) incur any indebtedness for borrowed money, except
in the ordinary course of business consistent with past practice, or
issue any debt securities or assume, guarantee or endorse or otherwise
as an accommodation become responsible for, the obligations of any
Person, or make any loans or advances, or (iii) enter into any
Designated Contract other than in the ordinary course of business,
consistent with past practice;
4.1.6 other than in the ordinary course of business
consistent with past practice, increase the compensation payable or to
become payable to its officers or employees, or, except as presently
bound to do, grant any severance or termination pay to, or enter into
any employment or severance agreement with, any of its directors,
officers or other employees, or establish, adopt, enter into or amend
or take any action to accelerate any rights or benefits which any
collective bargaining, bonus, profit sharing, trust, compensation,
stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
directors, officers or employees;
4.1.7 except for the contemplated change by Denver Fire
from a cash basis to an accrual basis method of accounting on the
Effective Date, take any action other than in the ordinary course of
business and in a manner consistent with past practice with respect to
accounting policies or procedures;
4.1.8 pay, discharge or satisfy any existing claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with
past practice of due and payable liabilities, as appropriate, or
liabilities incurred after the date hereof in the ordinary course of
business and consistent with past practice;
4.1.9 except in the ordinary course of business consistent
with past practices, increase or decrease prices charged to its
customers, except for previously announced price changes, or take any
other action which might reasonably result in any material increase in
the loss of customers through non-renewal or termination of service
contracts or other causes; or
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4.1.10 agree, in writing or otherwise, to take or authorize
any of the foregoing actions or any action which would make any
representation or warranty in Article III untrue or incorrect.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby.
5.2 COVENANTS OF THE ALARM COMPANIES. The Shareholder shall cause
the Alarm Companies to comply with all of the covenants of the Alarm Companies
under this Agreement.
5.3 COOPERATION. Each of the parties agrees to cooperate with the
other in the preparation and filing of all forms, notifications, reports and
information, if any, required or reasonably deemed advisable pursuant to any
law, rule or regulation or the rules of any exchange on which the Republic
Common Stock is listed or the NASDAQ Stock Market in connection with the
transactions contemplated by this Agreement and to use their respective best
efforts to agree jointly on a method to overcome any objections by any
Governmental Authority to any such transactions.
5.4 OTHER ACTIONS. Each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all appropriate actions,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated herein, including, without limitation, using its best
efforts to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of Governmental Authorities and parties to Contracts
with the Alarm Companies as are necessary for the consummation of the
transactions contemplated hereby. Each of parties shall make on a prompt and
timely basis all governmental or regulatory notifications and filings required
to be made by it for the consummation of the transactions contemplated hereby.
Each of the parties also agrees to use it best efforts to defend all lawsuits
or other legal proceedings challenging this Agreement or the consummation of
the transactions contemplated hereby and to lift or rescind any injunction or
restraining order adversely affecting the ability of the parties to consummate
the transactions contemplated hereby.
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5.5 ACCESS TO INFORMATION. From the date hereof to the Effective
Time, each of the Alarm Companies shall (and shall cause its directors,
officers, employees, auditors, counsel and agents) to afford Republic and
Republic's officers, employees, auditors, counsel and agents reasonable access
at all reasonable times to its properties, offices, and other facilities, to
its officers and employees and to all books and records, and shall furnish such
persons with all financial, operating and other data and information as may be
requested and which can be made available without unreasonable effort or
expense to the Alarm Companies. No information provided to or obtained by
Republic and included on any schedule hereto shall affect any representation or
warranty in this Agreement. Republic agrees to hold in confidence all
documents and information concerning the Alarm Companies so furnished, and if
the Mergers are not consummated as contemplated hereby, such confidence shall
be maintained in accordance with the Confidential Disclosure Agreement between
Republic and Denver Fire dated November 6, 1995.
5.6 NOTIFICATION OF CERTAIN MATTERS. The Shareholder and Republic
shall give prompt notice to the other of the occurrence or non-occurrence of
any event which would likely cause any representation or warranty made by
either such party herein to be untrue or inaccurate, or any covenant,
condition, or agreement made by either such party herein not to be complied
with or satisfied.
5.7 [INTENTIONALLY OMITTED]
5.8 CONFIDENTIALITY; PUBLICITY. Except as may be required by law
or as otherwise permitted or expressly contemplated herein, no party hereto or
its respective Affiliates, employees, agents and representatives shall disclose
to any third party this Agreement or the subject matter or the consideration or
other terms and conditions hereof without the prior consent of the other
parties hereto. No press release or other public announcement related to this
Agreement or the transactions contemplated hereby shall be issued by any party
hereto without the prior approval of the other parties, except that Republic
may make such public disclosure which it believes in good faith to be required
by law or by the terms of any listing agreement with a securities exchange, in
which case, Republic will consult with the Shareholder, in advance of any such
public disclosure, with respect to the fact and content thereof. Republic will
provide the Shareholder with a copy of the written form of any such public
disclosure.
5.9 NO OTHER DISCUSSIONS. The Alarm Companies, the Shareholder
and their respective Affiliates, employees, agents and representatives will not
(i) initiate, encourage the initiation by others of discussions or negotiations
with third parties or respond to solicitations by third persons relating to any
merger, sale or other disposition of any substantial part of the assets,
business or properties of the Alarm Companies (whether by merger,
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<PAGE> 29
consolidation, sale of stock or otherwise) or (ii) enter into any agreement or
commitment (whether or not binding) with respect to any of the foregoing
transactions. The Shareholder will immediately notify Republic if any third
party attempts to initiate any solicitation, discussion or negotiation with
respect to any of the foregoing transactions.
5.10 SHAREHOLDER. On the Effective Date, Republic or an Affiliate
thereof shall enter into an employment agreement with the Shareholder, in form
and substance acceptable to the Shareholder. Such employment agreement shall
provide, among other things, that the Shareholder will (i) continue as
president of the Alarm Companies, and (ii) be eligible to participate in
Republic's benefit package, including its stock option plan, to the same extent
as other similarly situated employees of Republic or its Affiliates. If such
Employment Agreement is with an Affiliate of Republic, Republic shall guarantee
the payments required to be made thereunder.
5.11 [INTENTIONALLY OMITTED]
5.12 TRADING IN REPUBLIC COMMON STOCK. Except as otherwise
expressly consented to by Republic, from the date of this Agreement until the
Effective Time, none of the Alarm Companies or the Shareholder (nor any
Affiliate thereof) will directly or indirectly purchase or sell (including
short sales) any shares of Republic Common Stock.
5.13 SCHEDULES. In the event the Schedules to this Agreement are
not completed as of the date hereof, the Shareholder agrees to deliver to
Republic a complete copy of such Schedules not less than two business days
prior to the Closing. The Shareholder has previously delivered to Republic
copies of any such Schedules which are complete as of the date hereof.
5.14 RESTRICTIVE COVENANTS.
5.14.1 In order to assure that Republic will realize the
benefits of the Mergers, the Shareholder agrees that neither he nor
any of his Affiliates shall:
(a) directly or indirectly, for a period of three
years following the Effective Date, (i) engage in (as an
owner, partner, employee, agent, consultant or otherwise) any
business which would be competitive with the business
conducted by the Alarm Companies or any of their Affiliates on
the Effective Date in the following counties in the State of
Colorado: Weld, Larimer, Boulder, Adams, Denver, Jefferson,
Gilpin, Arapahoe, Douglas, Elbert, Teller, El Paso, Fremont,
Pueblo, Huerfano, Otero, Park, Morgan and Clear Creek (the
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"Territory") or (ii) acquire or retain any financial interest
in any business which is so engaged in the Territory, except
that this provision shall not prevent the Shareholder from
acquiring and holding not to exceed 4% of the outstanding
shares of voting common stock of a company which is engaged in
such a competitive business if such shares are available to
the general public on any national securities exchange or the
over-the-counter market;
(b) directly or indirectly, for a period of three
years following the Effective Date: (i) induce any customer of
any of the Alarm Companies at the Effective Date to patronize
any business similar to any of those described in clause (a);
(ii) canvass, solicit or accept from any customer of any of
the Alarm Companies at the Effective Date any business similar
to any of those described in clause (a); or (iii) request or
advise any individual or company which is a customer of any of
the Alarm Companies at the Effective Date to withdraw, curtail
or cancel any such customer's business with any of the Alarm
Companies, except when there is a valid business reason for
such request or advice and neither the Shareholder nor any of
his Affiliates will benefit financially as a result of such
withdrawal, curtailment or cancellation;
(c) directly or indirectly, for a period of one
year following the Effective Date, employ, or knowingly permit
any company or business directly or indirectly controlled by
him, to employ, any person who was employed by any of the
Alarm Companies on or within 3 months of the Effective Date,
or in any manner seek to induce such person to leave his or
her employment; provided, however, that the prohibition
contained in this clause (c) shall not apply with respect to
any such person (i) who did not receive an offer of employment
from Republic or an Affiliate thereof, (ii) who received and
accepted such an offer, but whose employment was subsequently
terminated by Republic or an Affiliate thereof or (iii) who
decides to leave the employ of any of the Alarm Companies of
his or her own free will, provided that the number of people
referred to in this clause (iii) shall not exceed five, unless
Republic hereafter expressly consents to a higher number; or
(d) except as may be reasonably necessary to
enable the Shareholder to respond to any inquiry or
litigation, or except for any valid business reason not
detrimental to the respective businesses of the Alarm
Companies, directly or indirectly, at any time following
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the Effective Date, in any way utilize, disclose, copy,
reproduce or retain in its or his possession any of the
proprietary rights or records of the Alarm Companies,
including any of their customer lists.
5.14.2 The Shareholder agrees and acknowledges that the
restrictions contained in paragraph 5.14.1 are reasonable in scope and
duration, and are necessary to protect Republic after the Effective
Date. If, however, any provision of paragraph 5.14.1 of this Section
5.14, as applied to any party or to any circumstances, is adjudged by
a court to be invalid or unenforceable, the same will in no way affect
any other provision of the said paragraph 5.14.1 or any other part of
this Agreement, the application of such provision in any other
circumstances or the validity or enforceability of this Agreement. If
any such provision, or any part thereof, is held to be unenforceable
because of the duration of such provision or the area covered thereby,
the parties agree that the court making such determination will have
the power to reduce the duration and/or area of such provision, and/or
to delete specific words or phrases, and in its reduced form such
provision will then be enforceable and will be enforced. Upon breach
of any provision of paragraph 5.14.1 of this Section 5.14, Republic
will be entitled to injunctive relief, since the remedy at law would
be inadequate and insufficient. In addition, Republic will be
entitled to such damages as it can show it has sustained by reason of
such breach.
5.15 OPTION TO PURCHASE REAL ESTATE. Republic hereby grants to the
Shareholder an option to purchase the real property located at 314 East 20th
Avenue, Denver, Colorado (Legal Description: L 1 to 4 Inc Blk 72 H C Browns
Addition, City and County of Denver), at an exercise price of $115,000. Such
option shall be exercisable for a period of two years beginning the Effective
Date. Shareholder shall be allowed to continue using such property to the
extent currently being used, without charge.
5.16 PAYMENT OF RECEIVABLE. Within 180 days after the Effective
Date, the Shareholder agrees to pay, or cause to be paid, to the Alarm
Companies the $80,000 aggregate receivable owing to the Alarm Companies from
certain Affiliates of the Shareholder who are not involved in the electronic
security business.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE REPUBLIC COMPANIES
The obligations of the Republic Companies to effect the Mergers shall
be subject to the fulfillment at or prior to the
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Effective Time of the following conditions, any or all of which may be waived
in whole or in part by the Republic Companies:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Shareholder contained
in this Agreement shall be true and correct at and as of the Effective Time
with the same force and effect as though made at and as of that time except (i)
for changes specifically permitted by or disclosed pursuant to this Agreement,
and (ii) that those representations and warranties which address matters only
as of a particular date shall remain true and correct as of such date. Each of
the Alarm Companies and the Shareholder shall have performed and complied with
all of its obligations required by this Agreement to be performed or complied
with at or prior to the Effective Time. Each of the Alarm Companies and the
Shareholder shall have delivered to the Republic Companies a certificate, dated
as of the Effective Time, and signed in the case of each of the Alarm
Companies, by the President, certifying that such representations and
warranties are true and correct and that all such obligations have been
performed and complied with.
6.2 NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY.
Between the date hereof and the Effective Time, (i) there shall have been no
Material Adverse Change of any of the Alarm Companies, (ii) there shall have
been no adverse federal, state or local legislative or regulatory change
affecting in any material respect the services, products or business of any of
the Alarm Companies, and (iii) none of the properties and assets of the Alarm
Companies shall have been damaged by fire, flood, casualty, Act of God or
public enemy or other cause (regardless of insurance coverage for such damage)
which damages may have a Material Adverse Change on any of the Alarm Companies,
and there shall have been delivered to the Republic Companies a certificate to
that effect, dated the Effective Time and signed by or on behalf of the Alarm
Companies and the Shareholder.
6.3 CORPORATE CERTIFICATE. The Shareholder shall have delivered
to the Republic Companies (i) true, correct and complete copies of the articles
of incorporation and bylaws of each of the Alarm Companies as in effect
immediately prior to the Effective Time, (ii) copies of resolutions adopted by
the Board of Directors and shareholders of each of the Alarm Companies
authorizing the transactions contemplated by this Agreement, and (iii) a
certificate of good standing of the Alarm Companies issued by the Secretary of
State of the State of Colorado and each other state in which each of the Alarm
Companies is qualified to do business as of a date not more than ten days prior
to the Effective Time, certified in each case as of the Effective Time by the
Secretary of each of the Alarm Companies as being true, correct and complete.
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6.4 OPINION OF COUNSEL. The Republic Companies shall have
received an opinion, in form and substance reasonably acceptable to the
Republic Companies, dated as of the Effective Time from counsel for the Alarm
Companies and the Shareholder.
6.5 CONSENTS. The Alarm Companies shall have received consents to
the transactions contemplated hereby and waivers of rights to terminate or
modify any material rights or obligations of the Alarm Companies from any
person from whom such consent or waiver is required under any Designated
Contract or instrument as of a date not more than ten days prior to the
Effective Time, or who, as a result of the transactions contemplated hereby,
would have such rights to terminate or modify such Contracts or instruments,
either by the terms thereof or as a matter of law.
6.6 SECURITIES LAWS. Republic shall have received all necessary
consents and otherwise complied with any state Blue Sky or securities laws
applicable to the issuance of the Republic Shares, in connection with the
transactions contemplated hereby.
6.7 POOLING LETTERS. Republic shall have received from Arthur
Andersen LLP, a letter dated the Effective Time, confirming that the
transactions contemplated hereby, if consummated, can properly be accounted for
as a pooling of interests combination in accordance with GAAP and the criteria
of Accounting Principles Board Opinion No. 16 and the regulations of the SEC.
6.8 UNDERTAKINGS. At or prior to the Closing, the Shareholder
shall have delivered to Republic a letter agreement relating to Rule 145 under
the Securities Act and "pooling of interests" criteria, in the form and
substance acceptable to Republic.
6.9 DELIVERY OF STOCK. At the Closing, the Shareholder shall have
delivered to the Republic Companies all certificates evidencing the shares of
capital stock of the Alarm Companies held by him, which shall, in the aggregate
constitute all of the then outstanding shares of stock of all the Alarm
Companies.
6.10 STOCK POWERS. At the Closing, the Shareholder shall have
delivered to Republic, for use in connection with the Held Back Shares, ten
stock powers executed in blank.
6.11 NO ADVERSE LITIGATION. There shall not be pending or
threatened any action or proceeding by or before any court or other
governmental body which shall seek to restrain, prohibit, invalidate or collect
damages arising out of the Mergers or any other transaction contemplated
hereby, and which, in the judgment of Republic, makes it inadvisable to proceed
with the Mergers and other transactions contemplated hereby.
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6.12 [INTENTIONALLY OMITTED]
6.13 HART-SCOTT-RODINO REQUIREMENTS. The waiting period imposed by
the HSR Act with respect to the transactions contemplated by this Agreement
shall have expired or been terminated and no injunction or other order
prohibiting the consummation of the Mergers shall have been entered by any
court.
6.14 SCHEDULES. Republic shall be satisfied that the Schedules to
this Agreement do not disclose any information not previously known to Republic
that could have a Material Adverse Effect on the Alarm Companies.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF
THE ALARM COMPANIES AND THE SHAREHOLDER
The obligations of the Shareholder and the Alarm Companies to effect
the Mergers shall be subject to the fulfillment at or prior to the Effective
Time of the following conditions, any or all of which may be waived in whole or
in part by the Shareholder:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of each of the Republic
Companies contained in this Agreement shall be true and correct at and as of
the Effective Time with the same force and effect as though made at and as of
that time except (i) for changes specifically permitted by or disclosed
pursuant to this Agreement, and (ii) that those representations and warranties
which address matters only as of a particular date shall remain true and
correct as of such date. Each of the Republic Companies shall have performed
and complied with all of its obligations required by this Agreement to be
performed or complied with at or prior to the Effective Time. Each of the
Republic Companies shall have delivered to the Shareholder a certificate, dated
as of the Effective Time, and signed by the President or any Vice President
thereof certifying that such representations and warranties are true and
correct and that all such obligations have been performed and complied with.
7.2 REPUBLIC SHARES. At the Closing, Republic shall deliver to
the Shareholder (i) certificates representing the Republic Shares required to
be issued to them hereunder, other than the Held Back Shares, and (ii) copies
of stock certificates representing the Held Back Shares.
7.3 NO ADVERSE LITIGATION. There shall not be pending or
threatened any action or proceeding by or before any court or other
governmental body which shall seek to restrain, prohibit,
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invalidate or collect damages arising out of the Merger or any other
transaction contemplated hereby, and which in the judgment of the Shareholder
makes it inadvisable to proceed with the Mergers and other transactions.
7.4 HART-SCOTT-RODINO REQUIREMENTS. The waiting period imposed by
the HSR Act with respect to the transactions contemplated by this Agreement
shall have expired or been terminated and no injunction or other order
prohibiting the consummation of the Mergers shall have been entered by any
court.
7.5 SECURITIES LAWS. Republic shall have received all necessary
consents and otherwise complied with any state Blue Sky or securities laws
applicable to the issuance of the Republic Shares, in connection with the
transactions contemplated hereby.
7.6 CERTIFIED RESOLUTIONS OF REPUBLIC'S BOARD. Republic shall
have delivered at the closing certified resolutions of its Board of Directors
authorizing and approving this Agreement, the Mergers and transactions
contemplated hereby and thereby.
7.7 OPINION OF COUNSEL. The Shareholder shall have received an
opinion, in form and substance reasonably acceptable to the Shareholder, dated
as of the Effective Time from counsel for the Republic Companies.
7.8 RETENTION OF KEY PERSON. H. Wayne Huizenga shall still be the
Chief Executive Officer of Republic and he shall not have publicly announced
or, to the Knowledge of Republic, be considering his resignation from such
office.
7.9 COLORADO SPRINGS LEASE. Republic or its nominee shall have
entered into a triple-net commercial lease with respect to the property located
in Colorado Springs, Colorado, at which the Alarm Companies conduct alarm
monitoring operations. Such lease shall provide for (i) a rental term of five
years beginning the Effective Date; (ii) a yearly rental amount equal to an
amount to be agreed upon by at least two Colorado Springs real estate agents
selected by the parties hereto; (iii) an annual increase in such rental amount
based on the Consumer Price Index; and (iv) such other commercially reasonable
terms and conditions as are typically contained in commercial leases.
7.10 EMPLOYMENT AGREEMENT; OPTION AGREEMENT. Republic and the
Shareholder shall have entered into (i) the Employment Agreement described in
Section 5.10 and (ii) an Option Agreement relating to the property described in
Section 5.15.
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ARTICLE VIII
REGISTRATION RIGHTS
The Shareholder shall have the following registration rights with
respect to the Republic Shares issued to him hereunder:
8.1 REGISTRATION RIGHTS FOR REPUBLIC SHARES; FILING OF
REGISTRATION STATEMENT. As soon as reasonably practical after the Effective
Time (but in any event not more than 10 days following the expiration of the
restrictions on resale of the Republic Shares by the Shareholder imposed under
rules regarding "pooling of interests" business combinations), Republic will
cause a registration statement to be filed under the Securities Act or, an
existing registration statement to be amended for the purpose of registering
the Republic Shares for resale by a Holder thereof (the "Registration
Statement"). For purposes of this Article, a person is deemed to be a "Holder"
of Republic Shares whenever such person owns Republic Shares. Republic will
use its reasonable best efforts to have the Registration Statement become
effective and cause the Republic Shares to be registered under the Securities
Act, and registered, qualified or exempted under the state securities laws of
such jurisdictions as any Holder of Republic Shares reasonably requests, as
soon as is reasonably practicable.
8.2 EXPENSES OF REGISTRATION. Republic shall pay all expenses
incurred by Republic in connection with the registration, qualification and/or
exemption of the Republic Shares, including any SEC and state securities law
registration and filing fees, printing expenses, fees and disbursements of
Republic's counsel and accountants, transfer agents' and registrars' fees, fees
and disbursements of experts used by Republic in connection with such
registration, qualification and/or exemption, and expenses incidental to any
amendment or supplement to the Registration Statement or prospectuses contained
therein. Republic shall not, however, be liable for any sales, broker's or
underwriting commissions upon sale by any Holder of any of the Republic Shares.
8.3 FURNISHING OF DOCUMENTS. Republic shall furnish to the
Holders such reasonable number of copies of the Registration Statement, such
prospectuses as are contained in the Registration Statement and such other
documents as the Holders may reasonably request in order to facilitate the
offering and sale of the Republic Shares.
8.4 AMENDMENTS AND SUPPLEMENTS. Republic shall prepare and
promptly file with the SEC and promptly notify the Holders of the filing of
such amendments or supplements to the Registration Statement or prospectuses
contained therein as may be necessary to correct any statements or omissions
if, at the time when a prospectus relating to the Republic Shares is required
to be
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delivered under the Securities Act, any event shall have occurred as a result
of which any such prospectus or any other prospectus as then in effect would
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Republic shall also
advise the Holders promptly after it shall receive notice or obtain Knowledge
thereof, of the issuance of any stop order by the SEC suspending the
effectiveness of the Registration Statement or the initiation or threatening of
any proceeding for that purpose and promptly use its reasonable best efforts to
prevent the issuance of any stop order or to obtain its withdrawal if such stop
order should be issued.
8.5 DURATION. Republic shall maintain the effectiveness of the
Registration Statement until such time as Republic reasonably determines, based
on an opinion of counsel, that the Holders will be eligible to sell all of the
Republic Shares then owned by the Holders without the need for continued
registration of the shares, in the three month period immediately following the
termination of the effectiveness of the Registration Statement. Republic's
obligations contained in Sections 8.1 and 8.4 shall terminate on the third
anniversary of the Effective Dates.
8.6 FURTHER INFORMATION. If Republic Shares owned by a Holder are
included in any registration, such Holder shall furnish Republic such
information regarding itself as Republic may reasonably request and as shall be
required in connection with any registration, qualification or compliance
referred to in this Agreement.
8.7 INDEMNIFICATION.
8.7.1 Republic will indemnify and hold harmless the Holders
and each Person, if any, who controls a Holder within the meaning of
the Securities Act, from and against any and all losses, damages,
liabilities, costs and expenses to which the Holders or any such
controlling Person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities, costs
or expenses are caused by any untrue statement or alleged untrue
statement of any material fact contained in the Registration
Statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or based upon the omission or
alleged omission to state therein 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;
provided, however, that, Republic will not be liable in any such case
to the extent that any such loss, claim, damage, liability, cost or
expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity
with
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information furnished by or on behalf of any Holder or such
controlling Person in writing specifically for use in the preparation
thereof.
8.7.2 The obligation of Republic to include in the
Registration Statement the Republic Shares of each Holder is subject
to the requirement that such Holder deliver to Republic an agreement
pursuant to which the Holders, jointly and severally, will indemnify
and hold harmless Republic and each Person, if any, who controls
Republic within the meaning of the Securities Act, from and against
any and all losses, damages, liabilities, costs and expenses to which
Republic or any such controlling Person may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein 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,
to the extent that such untrue statement or alleged untrue statement
or omission or alleged omission was so made in reliance upon and in
strict conformity with written information furnished by or on behalf
of any Holder specifically for use in the preparation thereof.
8.7.3 Promptly after receipt by an indemnified party
pursuant to the provisions of paragraph 8.7.1 or 8.7.2 of this Section
8.7 of notice of the commencement of any action involving the subject
matter of the foregoing indemnity provisions, such indemnified party
will, if a claim thereof is to be made against the indemnifying party
pursuant to the provisions of said paragraph 8.7.1 or 8.7.2, promptly
notify the indemnifying party of the commencement thereof; but the
omission to so notify the indemnifying party will not relieve it from
any liability which it may have hereunder unless the indemnifying
party has been materially prejudiced thereby nor will such failure to
so notify the indemnifying party relieve it from any liability which
it may have to any indemnified party otherwise than hereunder. In
case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party; provided, however,
if the defendants in any action include both the indemnified party and
the indemnifying party and there is a conflict of interest which would
prevent
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counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties shall have the
right to select separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties. After notice
from the indemnifying party to such indemnified party of its election
to so assume the defense thereof, the indemnifying party will not be
liable to such indemnified party pursuant to the provisions of said
paragraph 8.7.1 or 8.7.2 for any legal or other expense subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the
provisions of the preceding sentence, (ii) the indemnifying party
shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a
reasonable time after the notice of the commencement of the action, or
(iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party.
8.7.4 In the event any of the Republic Shares are sold by
any Holder or Holders in an underwritten public offering consented to
by Republic, Republic shall provide indemnification to the
underwriters of such offering and any Person controlling any such
underwriter on behalf of the Holder or Holders making the offering;
provided, however, that Republic shall not be required to consent to
any such underwriting or to provide such indemnification in respect of
the matters described in the proviso to the first sentence of Section
8.7.1.
ARTICLE IX
INDEMNIFICATION
9.1 AGREEMENT BY THE SHAREHOLDER TO INDEMNIFY. Except as
specifically limited by this Article IX, the Shareholder agrees to indemnify
and hold each of the Republic Companies harmless from and against the aggregate
of all Indemnifiable Damages (as defined below).
9.1.1 For purposes of this Agreement, "Indemnifiable
Damages" means, without duplication, the aggregate of all expenses,
losses, costs, deficiencies, liabilities and damages (including,
without limitation, related counsel and paralegal fees and expenses)
incurred or suffered by any of the Republic Companies, on a pre-tax
basis, to the extent (i) resulting from any inaccurate representation
or warranty made by the Shareholder in this Agreement, (ii) resulting
from any breach of the covenants or agreements made by the Alarm
Companies or
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the Shareholder in this Agreement, or (iii) resulting from any
inaccuracy in any certificate delivered by any of the Alarm Companies
or the Shareholder pursuant to this Agreement. Indemnifiable Damages
shall not include any Taxes incurred by the Republic Companies from
and after the Effective Date as a result of the change by Denver Fire,
on the Effective Date, from a cash basis to an accrual basis method of
accounting.
9.1.2 [INTENTIONALLY OMITTED]
9.1.3 Each of the representations and warranties made by
the Shareholder in this Agreement or pursuant hereto shall survive for
a period of one year after the Effective Time, notwithstanding any
investigation at any time made by or on behalf of the Republic
Companies, and upon expiration of such one year period, such
representations and warranties shall expire, except with respect to
claims resulting from a breach of any representation, warranty or
covenant relating to Republic incurring any taxes because of the
disqualification of any of the Alarm Companies' "S" corporation
elections prior to the date preceding the Effective Time (a "Tax
Claim"); written notice of any such Tax Claim must be received prior
to the expiration of the statutory period during which any taxing
authority may bring a claim against the Alarm Companies, the
Shareholder or Republic for taxes which are the subject of any such
Tax Claim. No claim for the recovery of Indemnifiable Damages may be
asserted by the Republic Companies against the Shareholder after such
representations and warranties shall thus expire, provided, however,
that claims for Indemnifiable Damages first asserted within the
applicable period shall not thereafter be barred.
9.1.4 The Republic Companies acknowledge and consent that
their exclusive remedy for breach of any representation, warranty,
covenant or agreement made by the Shareholder in or pursuant to this
Agreement, if and until the same shall be exhausted, shall be the
recovery by set-off against the Held Back Shares pursuant to Section
9.2 hereof; provided, however, that upon either the exhaustion of the
Held Back Shares or the termination of the set aside of the Held Back
Shares in accordance with its terms, the Republic Companies may
thereupon seek to recover by any legal means Indemnifiable Damages
directly from the Shareholder or his successors in interest.
9.1.5 Notwithstanding anything to the contrary in this
Section 9.1, (i) the Shareholder shall be liable to the Republic
Companies with respect to any claim for Indemnifiable Damages only to
the extent that all Indemnifiable Damages incurred by them exceed an
aggregate of $400,000 and (ii) the total amount of Indemnifiable
Damages for which the
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Shareholder shall be liable to the Republic Companies hereunder shall
not exceed $7.5 million, subject, however to the following
qualifications:
(a) if the Shareholder is required to make any
payment or payments in respect of any Taxes of any of the
Alarm Companies which allows Republic to realize a tax benefit
measurable in dollars, then the dollar amount set forth in
clause (i) of this Section 9.1.5 shall be increased by the
amount of any such tax benefit; and
(b) the limitations on the amount of Indemnifiable
Damages for which the Shareholder shall be liable to the
Republic Companies hereunder shall not apply with respect to
any Indemnifiable Damages suffered by the Republic Companies
resulting from the breach by the Shareholder of any of the
representations and warranties contained in Sections 3.5, 3.10
and, subject to the last sentence of Section 9.1.1, 3.19.
9.2 SECURITY FOR THE SHAREHOLDER INDEMNIFICATION OBLIGATION. As
security for the agreement by the Shareholder to indemnify and hold the
Republic Companies harmless as described in Section 9.1, at the Closing,
Republic shall set aside and hold certificates representing the Held Back
Shares issued pursuant to this Agreement.
9.2.1 Each of the Republic Companies may set off against
the Held Back Shares any Indemnifiable Damages which it is entitled to
recover under Section 9.1 subject, however, to the following terms and
conditions:
(a) The Republic Companies shall give written
notice to the Shareholder of any claim for Indemnifiable
Damages or any other damages hereunder, which notice shall set
forth (i) the amount or estimated amount of Indemnifiable
Damages which the Republic Companies claim to have sustained
by reason thereof, and (ii) the basis of the claim therefor;
(b) Such set off shall be effected on the later
to occur of the expiration of 10 business days from the date
of such notice (the "Notice of Contest Period") or, if such
claim is contested, the date the dispute is resolved, and such
set off shall be charged against the Held Back Shares;
(c) If, prior to the expiration of the Notice of
Contest Period, the Shareholder shall notify the Republic
Companies in writing of an intention to dispute
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the claim and if such dispute is not resolved within 30 days
after expiration of the Notice of Contest Period (the
"Resolution Period"), then such dispute shall be resolved by a
committee of three disinterested arbitrators (one appointed by
the Shareholder, one appointed by Republic and one appointed
by the two arbitrators so appointed), which shall be appointed
within 60 days after the expiration of the Resolution Period.
The arbitrators shall abide by the rules of the American
Arbitration Association and their decision shall be made
within 45 days of being appointed and shall be final and
binding on all parties;
(d) As soon as the Held Back Shares are
registered and any restrictions on sale imposed under Rule 145
of the Securities Act are terminated, the Shareholder may
instruct Republic to sell some or all of the Held Back Shares
and the net proceeds thereof shall be substituted for such
Held Back Shares in any set off to be made by the Republic
Companies pursuant to any claim hereunder, subject to any
applicable SEC and other regulations. Republic shall pay the
Shareholder simple interest at a 5% annual rate on any such
net proceeds it may hold; and
(e) For purposes of this Section 9.2, any Held
Back Shares not sold as provided in clause (d) of this Section
9.2 shall be valued at $29.00 per share.
9.2.2 Except with respect to shares transferred pursuant to
the foregoing right of setoff (and in the case of such shares, until
the same are transferred), all Held Back Shares shall be deemed to be
owned by the Shareholder and the Shareholder shall be entitled to vote
the same and to receive all cash dividends declared thereon; provided,
however, that, there shall also be deposited with Republic subject to
the terms of this Section 9.2, all shares of Republic Common Stock
issued to the Shareholder as a result of any stock dividend or stock
split with respect to the Held Back Shares. All stock issued upon
Held Back Shares shall be distributed to the person or entity entitled
to receive such Held Back Shares together with such Held Back Shares.
9.2.3 The Republic Companies agree to deliver to the
Shareholder, no later than the first anniversary of the Effective
Date, any Held Back Shares then held by them (or proceeds from the
sale of the Held Back Shares) unless there then remains unresolved any
claim for Indemnifiable Damages or other damages hereunder as to which
notice has been given, in which event any Held Back Shares remaining
on deposit (or proceeds from the sale of Held Back Shares) after such
claim
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shall have been satisfied shall be returned to the Shareholder
promptly after the time of satisfaction.
9.2.4 If the Held Back Shares are insufficient to set off a
claim for Indemnifiable Damages (or have been delivered to the
Shareholder prior to the making or resolution of such a claim), then
the Republic Companies may take any action or exercise any remedy
available to them by appropriate legal proceedings to collect the
Indemnifiable Damages, and, subject to any applicable SEC and other
regulations, the Shareholder may satisfy any such claims for
Indemnifiable Damages in cash or Republic Shares (which, for purposes
of this Section 9.2.4, shall be valued at $29.00 per share.
9.3 ADJUSTMENTS TO MERGER CONSIDERATION. All payments for
Indemnifiable Damages made pursuant to this Article IX shall be treated as
adjustments to the consideration granted in the Merger.
9.4 AGREEMENT BY REPUBLIC TO INDEMNIFY. Republic agrees to
indemnify and hold the Shareholder harmless from and against any Indemnifiable
Damages (as that term is defined in Section 9.1.1, but as would be applied if
the damages were suffered by the Shareholder) suffered as a result of (i) any
inaccurate representation or warranty made by any of the Republic Companies in
this Agreement, (ii) any breach of the covenants or agreements made by any of
the Republic Companies in this Agreement, or (iii) any inaccuracy in any
certificate delivered by any of the Republic Companies pursuant to this
Agreement.
ARTICLE X
SECURITIES LAW MATTERS
The parties agree as follows with respect to the sale or other
disposition after Effective Time of the Republic Shares:
10.1 DISPOSITION OF SHARES. The Shareholder represents and
warrants that the Republic Shares being acquired by him hereunder are being
acquired and will be acquired for his own account and will not be sold or
otherwise disposed of, except pursuant to (i) an exemption from the
registration requirements under the Securities Act, which does not require the
filing by Republic with the SEC of any registration statement, offering
circular or other document, in which case, the Shareholder shall first supply
to Republic an opinion of counsel (which counsel and opinions shall be
reasonably satisfactory to Republic) that such exemption is available, or (ii)
a registration statement filed by Republic with the SEC under the Securities
Act.
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10.2 LEGEND. The certificate representing the Republic Shares
shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT BEING FILED UNDER OR PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER THAT AN EXEMPTION
FROM REGISTRATION IS AVAILABLE, AND ALSO MAY NOT BE TRANSFERRED OR
DISPOSED OF BY THE HOLDER WITHOUT COMPLIANCE WITH SECURITIES AND
EXCHANGE COMMISSION ACCOUNTING SERIES RELEASES 130 AND 135.
Republic may, unless a registration statement is in effect covering
the Republic Shares and the holding periods under the SEC's regulations and
requirements regarding "pooling of interests" combinations are complied with,
place stop transfer orders with its transfer agents with respect to such
certificates.
ARTICLE XI
DEFINITIONS
11.1 DEFINED TERMS. As used herein, the following terms shall have
the following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations under the Exchange Act, as
in effect on the date hereof.
"Contract" means any indenture, lease, sublease, license, loan
agreement, mortgage, note, indenture, restriction, will, trust,
commitment, obligation or other contract, agreement or instrument,
whether written or oral.
"Effective Date" means the date on which the Effective Time
occurs.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in
effect in the United States of America from time to time.
"Governmental Authority" means any nation or government, any
state, regional, local or other political subdivision thereof, and any
entity or official exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
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"Knowledge" means, with respect to an individual, actual
knowledge after reasonable investigation, and, with respect to an
entity, means the Knowledge (as so defined) of its directors and
officers.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, but not limited
to, any conditional sale or other title retention agreement, any lease
in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code or comparable
law or any jurisdiction in connection with such mortgage, pledge,
security interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a change (or
effect), in the condition (financial or otherwise), properties,
assets, liabilities, rights, obligations, operations, business or
prospects of the specified corporation or corporations, considered in
the aggregate, which change (or effect) individually or in the
aggregate, is materially adverse to such condition, properties,
assets, liabilities, rights, obligations, operations, business or
prospects.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, estate, trust, unincorporated
association, joint venture, Governmental Authority or other entity, of
whatever nature.
"Register", "registered" and "registration" refer to a
registration of the offering and sale of securities effected by
preparing and filing a registration statement in compliance with the
Securities Act and the declaration or ordering of the effectiveness of
such registration statement.
"Republic Shares" means the shares of Republic Common Stock
which the Shareholders receive in connection with the Mergers.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Tax Return" means any tax return, filing or information
statement required to be filed in connection with or with respect to
any Taxes, reporting of income or related matters; and
"Taxes" means all taxes, fees or other assessments, including,
but not limited to, income, excise, property, sales, franchise,
intangible, withholding, social security and
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unemployment taxes imposed by any federal, state, local or foreign
governmental agency, and any interest or penalties related thereto.
11.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the
defined meanings when used in any certificates, reports or other
documents made or delivered pursuant hereto or thereto, unless the
context otherwise requires.
(b) Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) As used herein, the neuter gender shall also denote
the masculine and feminine, and the masculine gender shall also denote
the neuter and feminine, where the context so permits.
ARTICLE XII
TERMINATION, AMENDMENT AND WAIVER
12.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of all of the parties
hereto at any time prior to the Closing;
(b) by Republic in the event of a material breach by the
Shareholder or any of the Alarm Companies of any provision of this
Agreement, or by the Shareholder in the event of a material breach by
the Republic Companies of any provision of this Agreement; or
(c) by Republic or the Shareholder, if the Closing shall
not have occurred by March 1, 1996, or such other date as may be
agreed upon by such parties.
12.2 EFFECT OF TERMINATION. Except as provided in Article IX, in
the event of termination of this Agreement pursuant to Section 12.1, this
Agreement and the Plans of Merger shall forthwith become void; provided,
however, that nothing herein shall relieve any party from liability for the
willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement. The Confidential Disclosure Agreement
referenced in Section 5.5 and the confidentiality provisions in Section 5.5
will survive any termination of this Agreement.
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ARTICLE XIII
GENERAL PROVISIONS
13.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing, shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid), to the
following addresses and telecopy numbers (or to such other addresses or
telecopy numbers which such party shall designate in writing to the other
party), and shall be deemed received on the earlier of the time of actual
receipt or five days after mailing:
(a) IF TO ANY OF THE REPUBLIC COMPANIES TO:
Republic Industries, Inc.
200 East Las Olas Blvd., Suite 1400
Ft. Lauderdale, FL 33301
Attn: General Counsel
Telecopy: (954) 779-3884
(b) IF TO THE SHAREHOLDER OR ANY OF THE ALARM COMPANIES
TO:
J. Stewart Jackson
1955 Sherman Street
Denver, CO 80203
Telecopy: (303) 575-0381
WITH A COPY TO:
Friedlob Sanderson Raskin Paulson
& Tourtillott, LLC
1400 Glenarm Place, Suite 300
Denver, CO 80202-5099
Attn: Raymond Friedlob
Telecopy: (303) 595-3159
13.2 ENTIRE AGREEMENT. The Confidential Disclosure Agreement
described in Section 5.5 hereof and this Agreement (including the Exhibits and
Schedules attached hereto) and the other documents delivered at the Closing
pursuant hereto or in connection herewith, contains the entire understanding of
the parties in respect of its subject matter and supersedes all prior
agreements and understandings (oral or written) between or among the parties
with respect to such subject matter. The Exhibits and Schedules constitute a
part hereof as though set forth in full herein.
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13.3 EXPENSES. Except as otherwise provided herein, the parties
shall pay their own fees and expenses, including their own counsel fees,
incurred in connection with this Agreement or any transaction contemplated
hereby.
13.4 AMENDMENT; WAIVER. This Agreement may not be modified,
amended, supplemented, canceled or discharged, except by written instrument
executed by all parties. No failure to exercise, and no delay in exercising,
any right, power or privilege under this Agreement shall operate as a waiver,
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude the exercise of any other right, power or privilege. No
waiver of any breach of any provision shall be deemed to be a waiver of any
preceding or succeeding breach of the same or any other provision, nor shall
any waiver be implied from any course of dealing between the parties. No
extension of time for performance of any obligations or other acts hereunder or
under any other agreement shall be deemed to be an extension of the time for
performance of any other obligations or any other acts. The rights and
remedies of the parties under this Agreement are in addition to all other
rights and remedies, at law or equity, that they may have against each other.
13.5 BINDING EFFECT. The rights and obligations of this Agreement
shall bind and inure to the benefit of the parties and their respective
successors and assigns. Nothing expressed or implied herein shall be construed
to give any other person any legal or equitable rights hereunder. Except as
expressly provided herein, the rights and obligations of this Agreement may not
be assigned by any party without the prior written consent of all other parties
hereto.
13.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together
shall constitute one and the same instrument.
13.7 INTERPRETATION. When a reference is made in this Agreement to
an article, section, paragraph, clause, schedule or exhibit, such reference
shall be deemed to be to this Agreement unless otherwise indicated. The
headings contained herein and on the schedules are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement
or the schedules. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." Time shall be of the essence in this Agreement.
13.8 GOVERNING LAW; INTERPRETATION. EXCEPT AS TO MATTERS REQUIRED
UNDER THIS AGREEMENT TO BE RESOLVED BY ARBITRATION, THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED FOR ALL PURPOSES BY THE LAWS OF THE
STATE OF COLORADO APPLICABLE TO
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CONTRACTS EXECUTED AND TO BE WHOLLY PERFORMED WITHIN SUCH STATE, EXCLUDING THE
LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW. THE PARTIES CONSENT TO THE
JURISDICTION OF ANY OF THE FEDERAL OR STATE COURTS LOCATED IN THE STATE OF
COLORADO IN CONNECTION WITH ANY SUIT TO ENFORCE THE RIGHTS OF ANY PARTY UNDER
THIS AGREEMENT.
13.9 INVESTMENT REPRESENTATIONS. Each party herein expressly
represents and warrants to all other parties hereto that (a) before executing
this Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party
has had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arms' length negotiations conducted by and among the
parties and their respective counsel.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
REPUBLIC INDUSTRIES, INC.
By: /s/ Robert A. Guerin
--------------------------
Name: Robert A. Guerin
Title: Senior Vice President
RI/DFRP, INC.
By: /s/ Robert A. Guerin
----------------------------
Name: Robert A. Guerin
Title: Vice President
RI/GS MERGER CORP.
By: /s/ Robert A. Guerin
----------------------------
Name: Robert A. Guerin
Title: Vice President
DENVER FIRE REPORTER AND
PROTECTIVE CO.
By: /s/ J. Stewart Jackson
----------------------------
J. Stewart Jackson, President
GUARDIAN SECURITY SERVICES, INC.
By: /s/ J. Stewart Jackson
-----------------------------
J. Stewart Jackson, President
/s/ J. Stewart Jackson
--------------------------------
J. Stewart Jackson, individually
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Exhibit 2.2
REORGANIZATION AGREEMENT
This Reorganization Agreement (this "Agreement") is entered into as of
February 14, 1996 by and among REPUBLIC INDUSTRIES, INC., a Delaware
corporation ("Republic"); RI/AREA, INC., a Virginia corporation and
wholly-owned subsidiary of Republic ("RI/AREA"), and RI/SMITH, INC., a North
Carolina corporation and wholly-owned subsidiary of Republic ("RI/SMITH", and
together with RI/AREA, the "Republic Merger Subs", and together with Republic,
the "Republic Companies"); INCENDERE, INC., a Virginia corporation
("INCENDERE"), AREA CONTAINER SERVICES, INC., a Virginia corporation ("ACS")
and SMITHTON SANITATION SERVICE, INC., a North Carolina corporation ("SMITHTON"
and together with INCENDERE and ACS, the "Schaubach Companies"); and DWIGHT C.
SCHAUBACH, JAMES D. SCHAUBACH, EMMETT K. MOORE, CHARLES F. MOORE and R.D.
CUTHRELL, each a resident of the state of either Virginia or North Carolina and
who constitute all of the shareholders of one or more of the Schaubach
Companies (together, the "Shareholders"). Certain other capitalized terms used
herein are defined in Article XI or elsewhere throughout this Agreement.
RECITALS
The Boards of Directors of Republic and the Schaubach Companies have
determined that it is in the best interests of their respective shareholders
for Republic to acquire the Schaubach Companies upon the terms and subject to
the conditions set forth in this Agreement. In order to effectuate the
transactions, (i) Republic has organized the Republic Merger Subs as
wholly-owned subsidiaries, and the parties have agreed, subject to the terms
and conditions set forth in this Agreement, to merge the Republic Merger Subs
with and into ACS and Smithton so that each of ACS and Smithton continue as
surviving corporations, and (ii) Republic shall acquire all of the outstanding
shares of Incendere from Dwight C. Schaubach in a statutory share exchange. As
a result, each of the Schaubach Companies will become a wholly-owned subsidiary
of Republic, and each of the Shareholders will be issued certain shares of
common stock of Republic.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants
and agreements contained herein, the parties hereto agree as follows:
<PAGE> 2
ARTICLE I
THE MERGERS AND SHARE EXCHANGE
1.1 THE MERGERS. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined below), and pursuant to the terms
and conditions set forth in the Plans of Merger and Reorganization annexed
hereto as Exhibits A and B (the "Plans of Merger"), the Republic Merger Subs
will be merged into and with ACS and Smithton (the "Mergers") as follows:
(a) RI/AREA will be merged with and into ACS; and
(b) RI/SMITH will be merged with and into SMITHTON.
The terms and conditions of the Plans of Merger are incorporated herein by
reference as if fully set forth herein. As a result of the Mergers, the
separate corporate existence of each of the Republic Merger Subs shall cease
and each of ACS and Smithton shall continue as surviving corporations and
wholly-owned subsidiaries of Republic.
1.2 THE SHARE EXCHANGE. Subject to the terms and conditions of
this Agreement, at the Effective Time (as defined below), and pursuant to the
terms and conditions set forth in the Plan of Share Exchange and Reorganization
annexed hereto as Exhibit C (the "Plan of Share Exchange"), Republic shall
acquire all of the outstanding shares of capital stock of Incendere from Dwight
C. Schaubach in a share exchange (the "Share Exchange") and Republic shall
issue shares of common stock, $0.01 par value per share, of Republic ("Republic
Common Stock") to Dwight C. Schaubach in the Share Exchange. The terms and
conditions of the Plan of Share Exchange are incorporated herein by reference
as if fully set forth herein. As a result of the Share Exchange, Incendere
shall become a wholly-owned subsidiary of Republic.
1.3 THE CLOSING. Subject to the terms and conditions of this
Agreement, the consummation of the Mergers and the Share Exchange (the
"Closing") shall take place as promptly as practicable (and in any event within
five (5) business days) after satisfaction or waiver of the conditions set
forth in Articles VI and VII, at the offices of Akerman, Senterfitt & Eidson,
P.A. in Miami, Florida, or such other place as the parties may otherwise agree.
The parties shall use their best efforts to cause the Mergers and the Share
Exchange to become effective on or before March 1, 1996.
1.4 PLANS OF MERGER. Pursuant to the Plans of Merger, an
aggregate of 478,720 shares of Republic Common Stock will be issued in the
Mergers in exchange for all issued and outstanding shares of capital stock of
each of ACS and Smithton as follows:
(a) 275,115 shares of Republic Common Stock will be
issued in exchange for all of the issued and
outstanding shares of common stock of ACS; and
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(b) 203,605 shares of Republic Common Stock will be
issued in exchange for all of the issued and
outstanding shares of common stock of Smithton.
1.5 PLAN OF SHARE EXCHANGE. Pursuant to the Plan of Share
Exchange, an aggregate of 803,980 shares of Republic Common Stock will be
issued in the Share Exchange to Dwight C. Schaubach in exchange for all issued
and outstanding shares of capital stock of Incendere.
1.6 FILING OF ARTICLES OF MERGER AND ARTICLES OF SHARE EXCHANGE.
At the time of the Closing, the parties shall cause the transactions to be
consummated by filing duly executed (i) Articles of Merger (with the respective
Plan of Merger annexed thereto) for the Merger of RI/AREA with and into ACS
with the State Corporation Commission of the Commonwealth of Virginia, (ii)
Articles of Merger (with the respective Plan of Merger annexed thereto) for the
Merger of RI/SMITH with and into Smithton with the Department of State of the
State of North Carolina, and (iii) Articles of Share Exchange (with the Plan of
Share Exchange annexed thereto) for the Share Exchange with the State
Corporation Commission of the Commonwealth of Virginia. The Articles of Merger
and Articles of Share Exchange shall be in such form as Republic determines is
required by and is in accordance with the relevant provisions of the Stock or
Business Corporation Acts of Virginia and North Carolina (the "BCAs"). The
date and time that the Mergers and Share Exchange become effective is referred
to herein as the "Effective Date" or "Effective Time".
1.7 ISSUANCE OF REPUBLIC SHARES. At the Effective Time, by
virtue of the Mergers and the Share Exchange and without any further action on
the part of the parties hereto, Republic shall issue to each Shareholder duly
executed certificates, in valid form registered in such Shareholder's name,
evidencing that number of shares of Republic Common Stock determined, to the
nearest whole share, pursuant to each of the respective Plans of Merger and
Plan of Share Exchange based on the number of shares of capital stock of the
Schaubach Companies owned by such Shareholder on the Effective Date as set
forth on Schedule 3.5 hereto.
1.8 DELIVERY OF CERTIFICATES. At the Closing, the Shareholders
shall deliver the certificates representing all of the issued and outstanding
shares of capital stock of each of the Schaubach Companies to Republic for
cancellation, and Republic shall deliver the certificates representing the
shares of Republic Common Stock issued pursuant to Section 1.5 in the following
manner: (i) Republic shall deliver to each such holder one or more certificates
evidencing ninety percent (90%) of such shares of Republic Common Stock
(rounded to the nearest whole share), and (ii) Republic shall set aside and
hold in accordance with Article IX the certificates evidencing the balance of
such shares of Republic Common Stock (the "Held Back Shares"). The shares of
Republic Common Stock, including the Held Back Shares, issuable by Republic in
the Mergers and the Share Exchange are sometimes referred to herein as the
"Republic Shares".
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1.9 ACCOUNTING AND TAX TREATMENT. The parties hereto
acknowledge and agree that the transactions contemplated hereby shall be
treated for accounting purposes as pooling of interests business combinations
and for tax purposes as tax-free reorganizations under Section 368(a) of the
Code.
1.10 ADJUSTMENT TO CONSIDERATION. If the Effective Date is on or
after March 2, 1996, and if the closing bid price of a share of Republic Common
Stock on the Nasdaq Stock Market equals or is less than $23.00 per share on any
three trading days between March 2, 1996 and such day as is ten (10) days prior
to the Effective Date, as reported (absent manifest error) by the Wall Street
Journal (Eastern Edition), then the parties agree that the aggregate number of
Republic Shares to be issued in the Mergers and the Share Exchange shall be
adjusted to equal the quotient of $38,000,000 divided by the average closing
bid price of a share of Republic Common Stock on the Nasdaq Stock Market for
the five consecutive trading days which precede the third trading day which is
immediately prior to the Effective Date, as reported (absent manifest error) by
the Wall Street Journal (Eastern Edition). The adjusted number of Republic
Shares shall be allocated in proportion to the allocation of the Republic
Shares as set forth in Sections 1.4 and 1.5 above, and then substituted
therefor. In addition, the definition of "Average Closing Sale Price" shall be
adjusted from $29.625 to the average closing bid price as determined in this
Section 1.10.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE REPUBLIC COMPANIES
As a material inducement to each of the Schaubach Companies and the
Shareholders to enter into this Agreement and to consummate the transactions
contemplated hereby, each of the Republic Companies jointly and severally makes
the following representations and warranties to the Schaubach Companies and the
Shareholders:
2.1 CORPORATE STATUS. Republic is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Each of the Republic Merger Subs is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of the Republic Merger Subs is a wholly-owned subsidiary of Republic,
within the meaning of Section 368(a)(2)(E) of the Code and Revenue Ruling
74-564, 1974-2 C.B. 124.
2.2 CORPORATE POWER AND AUTHORITY. Each of the Republic
Companies has the corporate power and authority to execute and deliver this
Agreement, to perform its respective obligations hereunder and to consummate
the transactions contemplated hereby. Each of the Republic Companies has taken
all action necessary to authorize its execution and delivery of this Agreement,
the
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performance of its respective obligations hereunder and the consummation of the
transactions contemplated hereby.
2.3 ENFORCEABILITY. This Agreement has been duly executed and
delivered by each of the Republic Companies and constitutes a legal, valid and
binding obligation of each of the Republic Companies, enforceable against each
of the Republic Companies in accordance with its terms, except as the same may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.
2.4 REPUBLIC COMMON STOCK. Upon consummation of the Mergers and
the issuance and delivery of certificates representing the Republic Shares to
the Shareholders, the Republic Shares will be validly issued, fully paid and
non-assessable shares of Republic Common Stock, free and clear of all Liens
consented to by Republic or created by Republic's actions.
2.5 NO COMMISSIONS. None of the Republic Companies has incurred
any obligation for any finder's or broker's or agent's fees or commissions or
similar compensation in connection with the transactions contemplated hereby.
2.6 CAPITALIZATION. The authorized capital stock of Republic
consists of 350,000,000 shares of Republic Common Stock and 5,000,000 shares of
preferred stock. As of February 13, 1996, (i) 76,967,114 shares of Republic
Common Stock were validly issued and outstanding, fully paid and nonassessable
and not issued in violation of any preemptive right of any stockholder of
Republic, and (ii) no shares of preferred stock were issued and outstanding.
The Republic Shares to be issued in the Merger will be "voting stock" within
the meaning of the Code. Not more than 30,000,000 shares of Republic Common
Stock have been reserved for issuance as of the date hereof pursuant to various
stock option plans, warrants, and pending contracts for business acquisitions,
and no other shares of Republic Common Stock and no shares of preferred stock,
or any rights, options, warrants, convertible securities, subscription rights
or other agreements or commitments of any kind obligating Republic to issue or
sell any other shares of Republic Common Stock or preferred stock, are
outstanding or have been authorized, as of the date hereof. All issued and
outstanding shares of capital stock of the Republic Merger Subs are owned
beneficially and of record by Republic. No other shares of capital stock of
the Republic Merger Subs or any rights, options, warrants, convertible
securities, subscription rights or other agreements or commitments of any kind
obligating any of the Republic Merger Subs to issue or sell any other such
shares are outstanding or have been authorized.
2.7 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by Republic, nor the consummation by Republic of
the transactions contemplated hereby,
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nor compliance by Republic with any of the provisions hereof will (a) conflict
with or result in any breach of any provision of its First Amended and Restated
Certificate of Incorporation, as amended, (b) violate, conflict with,
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration of, or result in the creation of any lien, upon any of the
properties or assets of Republic or any of its subsidiaries (the "Republic
Subsidiaries") under any of the terms, conditions or provisions of any contract
or lien, to which Republic or any Republic Subsidiary is a party or to which
they or any of their respective properties or assets may be subject, except for
such violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens or other encumbrances, which, individually or in the
aggregate, will not have a Material Adverse Effect on Republic, (c) violate any
judgment, ruling, order, writ, injunction, decree, statute, rule or regulation
applicable to Republic or any Republic subsidiary or any of their respective
properties or assets, except for such violations which, individually or in the
aggregate, will not have a Material Adverse Effect on Republic, or (d) require
any consent, approval, authorization or permit of or from, or filing with or
notification to, any Governmental Authority except (i) pursuant to the Exchange
Act and the Securities Act, (ii) filings required under the securities or blue
sky laws of the various states, (iii) filings required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (iv) consents, approvals, authorizations, permits, filings or
notifications which have either been obtained or made prior to the Closing or
which, if not obtained or made, will neither, individually or in the aggregate,
have a Material Adverse Effect on Republic nor restrict Republic's legal
authority to execute and deliver this Agreement and consummate the transactions
contemplated hereby, or (v) any filings required to be made by the Schaubach
Companies or the Shareholders. Republic has taken all actions necessary to
ensure its continued inclusion in, and the continued eligibility of the
Republic Common Stock for trading on, the Nasdaq Stock Market under all
currently effective inclusion requirements.
2.8 REPORTS AND FINANCIAL STATEMENTS. Within the last three
years, except where failure to have done so did and would not have a Material
Adverse Effect on Republic, Republic has filed all reports, registrations and
statements, together with any required amendments thereto, that it was required
to file with the SEC, including, but not limited to Forms 10-K, Forms 10-Q,
Forms 8-K and proxy statements (collectively, the "Republic Reports").
Republic has previously furnished to the Schaubach Companies and made available
to the Shareholders copies of all Republic Reports filed with the SEC since
January 1, 1995, and with respect to Republic Reports filed after the date of
this Agreement until the Effective Date, will promptly furnish to the Schaubach
Companies and make available to the Shareholders, copies of each of the
Republic Reports filed with the SEC during such period. As of their respective
dates (but taking into account any amendments filed
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prior to the date of this Agreement), the Republic Reports complied, or, with
respect to Republic Reports filed after the date of this Agreement, will
comply, in all material respects with all the rules and regulations promulgated
by the SEC and did not contain, or, with respect to Republic Reports filed
after the date of this Agreement, will 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.
2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in Republic Reports filed by Republic with the SEC prior to the date of this
Agreement, since December 31, 1994 to the date of this Agreement, there has not
been any change in the financial condition, results of operations or business
of Republic and the Republic Subsidiaries that either individually or in the
aggregate would have a Material Adverse Effect on the financial condition of
Republic.
2.10 ACCOUNTING AND TAX MATTERS. Neither Republic nor, to the
best of its knowledge, any of its affiliates, has taken or agreed to take any
action that would prevent Republic from accounting for the business
combinations to be effected by the Mergers and the Share Exchange as a "pooling
of interests." Republic warrants that it has no present intention of disposing
of any of the capital stock of the Schaubach Companies to be received by
Republic in the Mergers and the Share Exchange. Republic agrees that from and
after the Effective Time, it will not take any action to cause the Mergers or
the Share Exchange to lose its tax free status.
2.11 GOVERNING DOCUMENTS. Republic has delivered or made
available to the Shareholders true, accurate and complete copies of the
Certificate of Incorporation and Bylaws of Republic in effect as of the date
hereof.
2.12 SURVIVAL. Each of the representations and warranties made
by Republic in this Agreement or pursuant hereto shall survive for a period of
one year after the Effective Time, notwithstanding any investigation at any
time made by or on behalf of the Shareholders, except that the representations
and warranties of the Republic Companies contained in Sections 2.1, 2.2, 2.3,
2.4 and 2.10 shall not expire but shall continue indefinitely.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS
As a material inducement to each of the Republic Companies to enter
into this Agreement and to consummate the transactions contemplated hereby,
each of the Shareholders jointly and severally makes the following
representations and warranties to Republic:
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3.1 CORPORATE STATUS. Each of the Schaubach Companies is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has the requisite power and
authority to own or lease its properties and to carry on its business as now
being conducted. Except as disclosed on Schedule 3.1, each of the Schaubach
Companies is legally qualified to transact business as a foreign corporation in
all jurisdictions where the nature of its properties and the conduct of its
business requires such qualification (all of which jurisdictions are listed on
Schedule 3.1) and is in good standing in each of the jurisdictions in which it
is so qualified. There is no pending or threatened proceeding for the
dissolution, liquidation, insolvency or rehabilitation of any of the Schaubach
Companies.
3.2 POWER AND AUTHORITY. Each of the Schaubach Companies has
the power and authority to execute and deliver this Agreement, to perform its
respective obligations hereunder and to consummate the transactions
contemplated hereby. Each of the Schaubach Companies has taken all action
necessary to authorize the execution and delivery of this Agreement, the
performance of its respective obligations hereunder and the consummation of the
transactions contemplated hereby. Each of the Shareholders are individuals
residing in the State of Virginia or North Carolina with the requisite
competence and authority to execute and deliver this Agreement, to perform his
respective obligations hereunder and to consummate the transactions
contemplated hereby.
3.3 ENFORCEABILITY. This Agreement has been duly executed and
delivered by each of the Schaubach Companies and the Shareholders, and
constitutes the legal, valid and binding obligation of each of them,
enforceable against them in accordance with its terms, except as the same may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.
3.4 CAPITALIZATION. Schedule 3.4 sets forth, with respect to
each of the Schaubach Companies, (a) the number of authorized shares of each
class of its capital stock, (b) the number of issued and outstanding shares of
each class of its capital stock, and (c) the number of shares of each class of
its capital stock which are held in treasury. All of the issued and
outstanding shares of capital stock of each of the Schaubach Companies (i) have
been duly authorized and validly issued and are fully paid and non-assessable,
(ii) were issued in compliance with all applicable state and federal securities
laws, and (iii) were not issued in violation of any preemptive rights or rights
of first refusal. No preemptive rights or rights of first refusal exist with
respect to the shares of capital stock of any of the Schaubach Companies which
has not been waived with respect to the transactions contemplated hereby, and
no such rights arise by virtue of or in connection with the transactions
contemplated hereby. There are no outstanding or authorized rights, options,
warrants, convertible securities,
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subscription rights, conversion rights, exchange rights or other agreements or
commitments of any kind that could require any of the Schaubach Companies to
issue or sell any shares of its capital stock (or securities convertible into
or exchangeable for shares of its capital stock). There are no outstanding
stock appreciation, phantom stock, profit participation or other similar rights
with respect to any of the Schaubach Companies. There are no proxies, voting
rights or other agreements or understandings with respect to the voting or
transfer of the capital stock of any of the Schaubach Companies which have not
been waived with respect to the transactions contemplated hereby. Except as
disclosed on Schedule 3.4, none of the Schaubach Companies is obligated to
redeem or otherwise acquire any of its outstanding shares of capital stock.
All parties to those certain Shareholders' Agreements dated October 25, 1994
and October 31, 1994, respectively, with respect to ACS and Smithton,
respectively, have agreed to terminate such Shareholders' Agreements effective
as of the Closing.
3.5 SHAREHOLDERS OF THE SCHAUBACH COMPANIES. Schedule 3.5 sets
forth, with respect to each of the Schaubach Companies, (a) the name, address
and federal taxpayer identification number of, and the number of outstanding
shares of each class of its capital stock owned by, each shareholder of record
as of the close of business on the date of this Agreement; and (b) the name,
address and federal taxpayer identification number of, and number of shares of
each class of its capital stock beneficially owned by, each beneficial owner of
outstanding shares of capital stock (to the extent that record and beneficial
ownership of any such shares are different). The Shareholders constitute all
of the holders of all issued and outstanding shares of capital stock of all of
the Schaubach Companies, and each of the Shareholders owns such shares as is
set forth on Schedule 3.5, free and clear of all Liens, restrictions and claims
of any kind other than those set forth on Schedule 3.5.
3.6 NO VIOLATION. Except as set forth on Schedule 3.6 or
matters which would not have a Material Adverse Effect on the Schaubach
Companies or the transactions contemplated hereby, the execution and delivery
of this Agreement by each of the Schaubach Companies and the Shareholders, the
performance by them of their respective obligations hereunder and the
consummation by them of the transactions contemplated by this Agreement will
not (i) contravene any provision of the articles of incorporation or bylaws of
any of the Schaubach Companies, (ii) violate or conflict with any law, statute,
ordinance, rule, regulation, decree, writ, injunction, judgment or order of any
Governmental Authority or of any arbitration award which is either applicable
to, binding upon or enforceable against any of the Schaubach Companies or any
of the Shareholders, (iii) conflict with, result in any breach of, or
constitute a default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default) under, or give rise to a right
to terminate, amend, modify, abandon or accelerate, any Contract which is
applicable to, binding upon or enforceable against any of the Schaubach
Companies or any of the Shareholders, (iv) result in or require the creation or
imposition
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of any Lien upon or with respect to any of the property or assets of any of the
Schaubach Companies, or (v) require the consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Authority, any
court or tribunal or any other Person, except any applicable filings required
under the HSR Act, and any SEC and other filings required to be made by the
Republic Companies.
3.7 RECORDS OF THE SCHAUBACH COMPANIES. The copies of the
respective articles of incorporation and bylaws of the Schaubach Companies
which were provided to Republic are true, accurate and complete and reflect all
amendments made through the date of this Agreement. Except as disclosed on
Schedule 3.7, the minute books for the Schaubach Companies made available to
Republic for review were correct and complete in all material respects as of
the date of such review, no further entries have been made through the date of
this Agreement, such minute books contain the true signatures of the persons
purporting to have signed them, and such minute books contain an accurate
record of all material corporate actions of the shareholders and directors (and
any committees thereof) of the Schaubach Companies taken by written consent or
at a meeting since incorporation. All material corporate actions taken by any
of the Schaubach Companies have been duly authorized or ratified. All
accounts, books, ledgers and official and other records of the Schaubach
Companies have been fully, properly and accurately kept and completed in all
material respects, and there are no material inaccuracies or discrepancies of
any kind contained therein. The stock ledgers of the Schaubach Companies, as
previously made available to Republic, contain accurate and complete records of
all issuances, transfers and cancellations of shares of the capital stock of
the Schaubach Companies.
3.8 SUBSIDIARIES. None of the Schaubach Companies owns,
directly or indirectly, any outstanding voting securities of or other interests
in, or controls, any other corporation, partnership, joint venture or other
business entity.
3.9 FINANCIAL STATEMENTS. The Shareholders have delivered to
Republic the following financial statements of the Schaubach Companies: (a)
the Financial Statements, including the notes thereto, for the years ended
December 31, 1994 and 1993 of INCENDERE, audited by Ernst & Young LLP; (b) the
Financial Statements, including the notes thereto, for the year ended December
31, 1994 of ACS, audited by Blowe and Spady; and (c) the balance sheet,
including the notes thereto, as of October 31, 1994 of SMITHTON, audited by
Blowe and Spady (collectively, the "Financial Statements"), copies of which are
attached to Schedule 3.9 hereto. The balance sheets of INCENDERE and ACS dated
as of December 31, 1994 and of SMITHTON dated as of October 31, 1994 included
in the Financial Statements are referred to herein as the "Current Balance
Sheet." Except as set forth on Schedule 3.9, the Financial Statements fairly
present the financial position of the Schaubach Companies in the aggregate at
each of the balance sheet dates, and fairly present the results of operations
of each of ACS and Incendere for the periods covered thereby, and the Financial
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Statements have been prepared in accordance with GAAP consistently applied
throughout the periods indicated. The books and records of the Schaubach
Companies fully and fairly reflect all of their respective transactions,
properties, assets and liabilities. There are no special or non-recurring
items of income or expense of ACS or Incendere during the periods covered by
the Financial Statements that were material to the Schaubach Companies, taken
as a whole, and the balance sheets included in the Financial Statements do not
reflect any writeup or revaluation increasing the book value of any assets,
except as specifically disclosed in the notes thereto.
3.10 CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Since the
date of the respective Current Balance Sheet for each of the Schaubach
Companies, except as set forth on Schedule 3.10, none of the Schaubach
Companies has (i) issued any capital stock or other securities; (ii) made any
distribution of or with respect to its capital stock or other securities or
purchased or redeemed any of its securities; (iii) paid any bonus to or
increased the rate of compensation of any of its officers or, except in the
ordinary course of business consistent with past practices, salaried employees,
or amended in any material respect any other terms of employment of such
persons; (iv) sold, leased or transferred any of its properties or assets other
than in the ordinary course of business consistent with past practice; (v) made
or obligated itself to make capital expenditures out of the ordinary course of
business consistent with past practice; (vi) made any payment in respect of its
liabilities other than in the ordinary course of business consistent with past
practice; (vii) incurred any obligations or liabilities (including any
indebtedness) or entered into any transaction or series of transactions
involving in excess of $25,000 in the aggregate out of the ordinary course of
business, except for this Agreement and the transactions contemplated hereby;
(viii) suffered any theft, damage, destruction or casualty loss, not covered by
insurance and for which a timely claim was filed, in excess of $25,000 in the
aggregate; (ix) suffered any extraordinary losses (whether or not covered by
insurance); (x) waived, cancelled, compromised or released any rights having a
value in excess of $25,000 in the aggregate; (xi) made or adopted any change in
its accounting practice or policies; (xii) made any adjustment to its books and
records other than in respect of the conduct of its business activities in the
ordinary course consistent with past practice; (xiii) entered into any
transaction with any Affiliate other than intercompany transactions in the
ordinary course of business consistent with past practice; (xiv) entered into
any employment agreement; (xv) terminated, amended or modified any agreement
involving an amount in excess of $25,000; (xvi) imposed any security interest
or other Lien on any of its assets other than in the ordinary course of
business consistent with past practice; (xvii) delayed paying any accounts
payable which is due and payable except to the extent being contested in good
faith; (xviii) made or pledged any charitable contribution other than in the
ordinary course of business consistent with past practice; (xix) entered into
any other transaction or been subject to any event which has or may have a
Material Adverse Effect on any of the Schaubach Companies; or (xx) agreed to do
or authorized any of the foregoing.
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3.11 LIABILITIES OF THE SCHAUBACH COMPANIES. Except as set forth
on Schedule 3.11, the Schaubach Companies do not have any material liabilities
or obligations, whether accrued, absolute, contingent or otherwise, except (a)
to the extent reflected or taken into account in the Current Balance Sheet and
not heretofore paid or discharged, (b) to the extent specifically set forth in
or incorporated by express reference in any of the Schedules attached hereto,
(c) liabilities incurred in the ordinary course of business consistent with
past practice since the date of the Current Balance Sheet (none of which
relates to breach of contract, breach of warranty, tort, infringement or
violation of law, or which arose out of any action, suit, claim, governmental
investigation or arbitration proceeding), (d) normal accruals,
reclassifications, and audit adjustments which would be reflected on an audited
financial statement and which would not be material in the aggregate, and (e)
liabilities incurred in the ordinary course of business prior to the date of
the Current Balance Sheet which, in accordance with GAAP consistently applied,
were not recorded thereon. Except for any possible liability arising out of the
matters disclosed on Schedule 3.12, Incendere will not incur any liability with
respect to or arising out of the distribution and spin-off of its incinerator
business and assets to G. Elliott Schaubach, Jr., and has no liability for any
operations of the incinerator business owned and operated by American Waste
Industries, Inc. subsequent to the date of the distribution and spin-off
thereof except as expressly provided for in the agreements relating thereto
previously delivered to Republic. The aggregate amount of indebtedness for
deferred purchase price of assets and for borrowed money, including principal
and accrued but unpaid interest, and including remaining payments on
capitalized equipment leases and indebtedness to which the ACS Site (as
hereinafter defined) is subject, of the Schaubach Companies, will not exceed
$11,500,000, and their combined net worth will be no less than $(500,000), as
of the Effective Time.
3.12 LITIGATION. Except as set forth on Schedule 3.12, there is
no action, suit, or other legal or administrative proceeding or governmental
investigation pending, or to the knowledge of the Schaubach Companies or the
Shareholders, threatened, anticipated or contemplated against, by or affecting
any of the Schaubach Companies, or any of their respective properties or
assets, or the Shareholders, or which question the validity or enforceability
of this Agreement or the transactions contemplated hereby, and, to the
knowledge of the Shareholders, there is no basis for any of the foregoing.
There are no outstanding orders, decrees or stipulations issued by any
Governmental Authority in any proceeding to which the Schaubach Companies is or
was a party which have not been complied with in full or which continue to
impose any material obligations on the Schaubach Companies.
3.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule
3.13:
(a) Except for violations or liabilities which would not
reasonably be expected, individually or in the aggregate, to
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have a Material Adverse Effect on the Company, (i) the Company is and has at
all times been in substantial compliance with all material Environmental,
Health and Safety Laws (as defined herein) governing its business, operations,
properties and assets, including, without limitation, Environmental, Health and
Safety Laws with respect to discharges into the ground water, surface water and
soil, emissions into the ambient air, and generation, accumulation, storage,
treatment, transportation, transfer, labeling, handling, manufacturing, use,
spilling, leaking, dumping, discharging, release or disposal of Hazardous
Substances (as defined herein), or other Waste (as described herein); (ii) none
of the Shareholders has any knowledge that the Company is currently liable for
any penalties, fines or forfeitures for failure to comply with any
Environmental, Health and Safety Laws; and (iii) the Company is in substantial
compliance with all notice, record keeping and reporting requirements of all
Environmental, Health and Safety Laws, and has complied substantially with all
informational requests or demands arising under the Environmental, Health and
Safety Laws.
(b) The Company has obtained, or caused to be obtained,
and is in substantial compliance with, all material licenses, certificates,
permits, approvals and registrations (collectively "Licenses") required by the
Environmental, Health and Safety Laws for the ownership of its properties and
assets and the operation of its business as presently conducted, including,
without limitation, all air emission, water discharge, water use and solid
waste, hazardous waste and other Waste generation, transportation, transfer,
storage, treatment or disposal Licenses. Copies of such Licenses have been
provided to Republic. There are no material administrative or judicial
investigations, notices, claims or other proceedings pending or, to the
knowledge of the Shareholders, threatened by any Governmental Authority or
third parties against the Company, its businesses, operations, properties, or
assets, which question the validity or entitlement of the Company to any
License required by the Environmental, Health and Safety Laws for the ownership
of each of the properties and assets of the Company and the operation of its
business or wherein an unfavorable decision, ruling or finding could have a
Material Adverse Effect on the Company.
(c) The Company has not received any non-compliance
order, warning letter, notice of violation, claim, suit, action, judgment, or
administrative or judicial proceeding pending against or involving the Company,
its business, operations, properties, or assets, issued by any Governmental
Authority or third party with respect to any Environmental, Health and Safety
Laws in connection with the ownership by the Company of its properties or
assets or the operation of its business, which has not been resolved to the
satisfaction of the issuing Governmental Authority or which would have a
Material Adverse Effect on the Company.
(d) The Company is in substantial compliance with, and
is not in breach of or default under any applicable writ, order, judgment,
injunction, governmental communication or decree issued
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pursuant to the Environmental, Health and Safety Laws and no event has occurred
or is continuing which, with the passage of time or the giving of notice or
both, would constitute such non-compliance, breach or default thereunder.
(e) Except for violations or liabilities which would not
reasonably be expected, individually or in aggregate, to have a Material
Adverse Effect on the Company:
(1) (i) The Company has not generated,
manufactured, used, transported, transferred, stored, handled,
treated, spilled, leaked, dumped, discharged, released or disposed,
nor has it allowed or arranged for any third parties to generate,
manufacture, use, transport, transfer, store, handle, treat, spill,
leak, dump, discharge, release or dispose of, Hazardous Substances or
other waste to or at any location other than a site lawfully permitted
to receive such Hazardous Substances or other waste for such purposes,
nor has it performed, arranged for or allowed by any method or
procedure such generation, manufacture, use, transportation, transfer,
storage, treatment, spillage, leakage, dumping, discharge, release or
disposal in contravention of any Environmental, Health and Safety
Laws; and (ii) the Company has not generated, manufactured, used,
stored, handled, treated, spilled, leaked, dumped, discharged,
released or disposed of, or allowed or arranged for any third parties
to generate, manufacture, use, store, handle, treat, spill, leak,
dump, discharge, release or dispose of, Hazardous Substances or other
waste upon property owned or leased by it, except as permitted by law.
For purposes of this Section the term "Hazardous Substances" shall be
construed broadly to include any toxic or hazardous substance,
material, or waste, and any other contaminant, pollutant or
constituent thereof, whether liquid, solid, semi-solid, sludge and/or
gaseous, including without limitation, chemicals, compounds,
by-products, pesticides, asbestos containing materials, petroleum or
petroleum products, and polychlorinated biphenyls, the presence of
which requires investigation or remediation under any Environmental,
Health and Safety Laws or which are or become regulated, listed or
controlled by, under or pursuant to any Environmental Health and
Safety Laws, including, without limitation, the United States
Department of Transportation Table (49 CFR 172, 101) or by the
Environmental Protection Agency as hazardous substances (40 CFR Part
302) and any amendments thereto; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the
Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C.
Section 9601, et seq. (hereinafter collectively "CERCLA"); the Solid
Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 and subsequent Hazardous and Solid Waste
Amendments of 1984, 42 U.S.C. Section 6901 et seq. (hereinafter,
collectively "RCRA"); the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. Section 1801, et seq.; the Clean Water Act, as
amended, 33 U.S.C. Section 1311, et seq.; the Clean Air Act, as
amended (42 U.S.C. Section 7401-7642); Toxic
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Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq; the
Federal Insecticide, Fungicide, and Rodenticide Act as amended, 7
U.S.C. Section 136-136y ("FIFRA"); the Emergency Planning and Community
Right-to-Know Act of 1986 as amended, 42 U.S.C. Section 11001, et seq.
(Title III of SARA) ("EPCRA"); the Occupational Safety and Health Act
of 1970, as amended, 29 U.S.C. Section 651, et seq. ("OSHA"); any
similar state statute, or any future amendments to, or regulations
implementing such statutes, laws, ordinances, codes, rules,
regulations, orders, rulings, or decrees, or which has been or shall be
determined or interpreted at any time by any Governmental Authority to
be a hazardous or toxic substance regulated under any other statute,
law, regulation, order, code, rule, order, or decree. For purposes of
this Section the term "Waste" shall be construed broadly to include
agricultural wastes, biomedical wastes, biological wastes, construction
and demolition debris, garbage, household wastes, industrial solid
wastes, liquid wastes, recyclable materials, sludge, solid wastes,
special wastes, used oils, white goods, and yard trash.
(2) The Company has not caused, or allowed to be
caused or permitted, either by action or inaction, a Release or
Discharge, of any Hazardous Substance on, into or beneath the surface
of any parcel of the Owned Properties (as hereinafter defined) or the
Leased Premises (as hereinafter defined). There has not occurred, nor
is there presently occurring, a Release or Discharge of any Hazardous
Substance on, into or beneath the surface of any parcel of the Owned
Properties or the Leased Premises. For purposes of this Section, the
terms "Release" and "Discharge" shall have the meanings given them in
the Environmental, Health and Safety Laws.
(3) The Company has not generated, handled,
manufactured, treated, stored, used, shipped, transported,
transferred, or disposed of, nor has it allowed or arranged, by
contract, agreement or otherwise, for any third parties to generate,
handle, manufacture, treat, store, use, ship, transport, transfer or
dispose of, any Hazardous Substance or other Waste to or at a site
which, pursuant to CERCLA or any similar state law (i) has been placed
on the National Priorities List or its state equivalent; or (ii) the
Environmental Protection Agency or the relevant state agency has
notified the Company that it has proposed or is proposing to place on
the National Priorities List or its state equivalent. Neither the
Company nor the Shareholders has received notice, and neither the
Company nor the Shareholders has knowledge of any facts which could
give rise to any notice, that the Company is a potentially responsible
party for a federal or state environmental cleanup site or for
corrective action under CERCLA, RCRA or any other applicable
Environmental Health and Safety Laws. The Company has not submitted
nor was required to submit any notice pursuant to Section 103(c) of
CERCLA with respect to the Leased Premises or the Owned Properties.
The Company has not received any
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written or oral request for information in connection with any federal
or state environmental cleanup site, or in connection with any of the
real property or premises where the Company has transported,
transferred or disposed of other Wastes. The Company has not been
required to and has not undertaken any environmental response or
remedial actions or clean-up actions at the request of any
Governmental Authorities or at the request of any other third party.
(f) The Company does not use, nor has it used, any
Aboveground Storage Tanks or Underground Storage Tanks, and there are not now
nor have there ever been any Underground Storage Tanks on the Leasehold
Premises or the Owned Properties. For purposes of this Section, the terms
"Aboveground Storage Tanks" and "Underground Storage Tanks" shall have the
meanings given them in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule, regulation,
order ruling, or decree governing Aboveground Storage Tanks or Underground
Storage Tanks.
(g) Schedule 3.13 identifies (i) all environmental
audits, assessments or occupational health studies undertaken by the Company or
its agents or, to the knowledge of the Company or the Shareholders, undertaken
by any Governmental Authority, or any third party, relating to or affecting the
Company or any of the Leased Premises or the Owned Properties; (ii) the results
of any ground, water, soil, air or asbestos monitoring undertaken by the
Company or its agents or, to the knowledge of the Company or the Shareholders,
undertaken by any Governmental Authority or any third party, relating to or
affecting the Company or any of the Leased Premises or the Owned Properties;
(iii) all written communications between the Company and any Governmental
Authority arising under or related to Environmental, Health and Safety Laws;
and (iv) all citations issued under OSHA, or similar state or local statutes,
laws, ordinances, codes, rules, regulations, orders, rulings, or decrees,
relating to or affecting either of the Company or any of the Leased Premises or
the Owned Properties.
(h) The Company has operated and continues to operate in
substantial compliance with all Environmental, Health & Safety Laws governing
the handling, use and exposure to and disposal of asbestos or asbestos-
containing materials. There are no claims, actions, suits, or, to the
knowledge of the Shareholders, governmental investigations or proceedings
before any Governmental Authority or third party pending, or to the knowledge
of the Shareholders, threatened against or directly affecting the Company, or
any of its assets or operations relating to the use, handling or exposure to
and disposal of asbestos or asbestos-containing materials in connection with
their assets and operations.
(i) As used in this Agreement, "Environmental, Health
and Safety Laws" means all federal, state, regional or local statutes, laws,
rules, regulations, codes, orders, plans, injunctions, decrees, rulings, or
ordinances or judicial or administrative interpretations thereof, any of which
govern or
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relate to pollution, protection of the environment, public health and safety,
air emissions, water discharges, hazardous or toxic substances, solid or
hazardous waste or occupational health and safety, as any of these terms are or
may be defined in such statutes, laws, rules, regulations, codes, orders,
plans, injunctions, decrees, rulings and changes or ordinances, or judicial or
administrative interpretations thereof, including, without limitation, RCRA,
CERCLA, the Hazardous Materials Transportation Act, the Toxic Substances
Control Act, the Clean Air Act, the Clean Water Act, FIFRA, EPCRA and OSHA.
(j) Schedule 3.13 identifies the operations and
activities, and locations thereof, which have been conducted and are being
conducted by the Company on any of the Owned Properties or the Leased Premises
which have materially involved the generation, accumulation, storage,
treatment, transportation, labelling, handling, manufacturing, use, spilling,
leaking, dumping, discharging, release or disposal of Hazardous Substances.
(k) Schedule 3.13 identifies the locations to which the
Company has ever transferred, transported, hauled, moved, or disposed of Waste
and the types and volumes of Waste transferred, transported, hauled, moved, or
disposed of to each such location.
(l) As used in this Section, the term "the Company" is
deemed to refer to any and all of the Schaubach Companies.
3.14 REAL ESTATE
(a) As of the Effective Time, none of the Schaubach
Companies will own any real property or any interest therein except as set
forth on Schedule 3.14(a) (the "Owned Properties"), which Schedule sets forth
the location and size of, and principal improvements and buildings on, the
Owned Properties, together with a list of all title insurance policies relating
to such properties, all of which policies have previously been delivered or
made available to Republic by the Schaubach Companies. With respect to each
such parcel of Owned Property, except as set forth on Schedule 3.14(a):
(i) One of the Schaubach Companies has good and
marketable title to the parcel of Owned Property, free and clear of
any Lien other than (x) liens for real estate taxes not yet due and
payable; (y) recorded easements, covenants, and other restrictions
which do not impair the current use, occupancy or value of the
property subject thereto, and (z) encumbrances and restrictions
described in the title insurance policies listed on Schedule 3.14(a);
(ii) there are no pending or, to the knowledge of the
Shareholders, threatened condemnation proceedings, suits or
administrative actions relating to the Owned Properties or other
matters affecting materially and adversely the current use, occupancy
or value thereof;
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(iii) the legal descriptions for the parcels of Owned
Property contained in the deeds thereof describe such parcels fully
and adequately; the buildings and improvements are located within the
boundary lines of the described parcels of land, are not in violation
of applicable setback requirements, local comprehensive plan
provisions, zoning laws and ordinances, and do not encroach on any
easement which may burden the land; the land does not serve any
adjoining property for any purpose inconsistent with the use of the
land; and the Owned Properties are not located within any flood plain
(such that a mortgagee would require a mortgagor to obtain flood
insurance) or subject to any similar type restriction for which any
permits or licenses necessary to the use thereof have not been
obtained;
(iv) to the knowledge of the Schaubach Companies and
the Shareholders, all facilities have received all approvals of
Governmental Authorities (including licenses and permits) required in
connection with the ownership or operation thereof and have been
operated and maintained in accordance with applicable laws,
ordinances, rules and regulations in all material respects;
(v) there are no Contracts granting to any party or
parties the right of use or occupancy of any portion of the parcels of
Owned Property;
(vi) there are no outstanding options or rights of
first refusal to purchase the parcels of Owned Property, or any
portion thereof or interest therein;
(vii) there are no parties (other than the Company and
its subsidiaries) in possession of the parcels of Owned Property;
(viii) to the knowledge of the Schaubach Companies and
the Shareholders, all facilities located on the parcels of Owned
Property are supplied with utilities and other services necessary for
the operation of such facilities, including gas, electricity, water,
telephone, sanitary sewer and storm sewer, all of which services are
adequate in accordance with all applicable laws, ordinances, rules and
regulations, and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefitting the parcels of Owned
Property;
(ix) each parcel of Owned Property abuts on and has
direct vehicular access to a public road, or has access to a public
road via a permanent, irrevocable, appurtenant easement benefitting
the parcel of Owned Property; access to the property is provided by
paved public right-of-way with adequate curb cuts available; and there
is no pending or, to the knowledge of the
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Shareholders, threatened termination of the foregoing access rights;
(x) except for matters or conditions which would not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Schaubach Companies, all improvements
and buildings on the Owned Property are in good repair (reasonable
wear and tear excepted) and are safe for occupancy and use, free from
termites or other wood-destroying organisms; the roofs thereof are
watertight; and the structural components and systems (including
plumbing, electrical, air conditioning/heating, and sprinklers) are in
good working order and adequate for the use of such Owned Property in
the manner in which presently used; and
(xi) there are no service contracts, management
agreements or similar agreements which affect the parcels of Owned
Property that are not terminable without penalty by the Schaubach
Companies on no more than sixty (60) days notice.
(b) Schedule 3.14(b) sets forth a list of all leases,
licenses or similar agreements ("Leases") to which any of the Schaubach
Companies is a party (copies of which have previously been furnished to
Republic), in each case, setting forth (A) the lessor and lessee thereof and
the date and term of each of the Leases, (B) the legal description, if known ,
and the street address, of each property covered thereby, and (C) a brief
description (including size and function) of the principal improvements and
buildings thereon (the "Leased Premises"), to the knowledge of the
Shareholders, all of which are within the property set-back and building lines
of the respective property. The Leases are in full force and effect and have
not been amended, and to the knowledge of the Shareholders, no party thereto is
in default or breach under any such Lease. To the knowledge of the
Shareholders, no event has occurred which, with the passage of time or the
giving of notice or both, would cause a material breach of or default under any
of such Leases. To the knowledge of the Shareholders, there is no breach or
anticipated breach by any other party to such Leases. With respect to each
such Leased Premises:
(i) One of the Schaubach Companies has valid
leasehold interests in the Leased Premises, free and clear of any
Liens, covenants and easements or title defects of any nature
whatsoever;
(ii) Except for matters or conditions which would not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect on the Schaubach Companies, the portions of
the buildings located on the Leased Premises that are used in the
business of any of the Schaubach Companies are each in good repair and
condition, normal wear and tear excepted, and are in the aggregate
sufficient to satisfy such
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company's current and reasonably anticipated normal business
activities as conducted thereat;
(iii) Each of the Leased Premises (a) has direct
access to public roads or access to public roads by means of a
perpetual access easement, such access being sufficient to satisfy the
current and reasonably anticipated normal transportation requirements
of the Company's business as presently conducted at such parcel; and
(b) is served by all utilities in such quantity and quality as are
sufficient to satisfy the current normal business activities as
conducted at such parcel; and
(iv) None of the Schaubach Companies has received notice
of (a) any condemnation proceeding with respect to any portion of the
Leased Premises or any access thereto, and to the knowledge of the
Shareholders, no such proceeding is contemplated by any Governmental
Authority; or (b) any special assessment which may affect any of the
Leased Premises, and to the knowledge of the Shareholders, no such
special assessment is contemplated by any Governmental Authority.
3.15 GOOD TITLE TO AND CONDITION OF ASSETS.
(a) Except as set forth on Schedule 3.15(a), the
Schaubach Companies have good and marketable title to all of their respective
Assets (as hereinafter defined), free and clear of any Liens or restrictions on
use. For purposes of this Agreement, the term "Assets" means all of the
properties and assets of the Schaubach Companies, other than the Owned
Properties and the Leased Premises, whether personal or mixed, tangible or
intangible, wherever located.
(b) Except for matters or conditions which would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on the Schaubach Companies, the Fixed Assets (as hereinafter
defined) currently in use or necessary for the business and operations of the
Schaubach Companies are in good operating condition, normal wear and tear
excepted. For purposes of this Agreement, the term "Fixed Assets" means all
vehicles, machinery, equipment, tools, supplies, leasehold improvements,
furniture and fixtures used by any of the Schaubach Companies or set forth on
the Current Balance Sheet or acquired by any of the Schaubach Companies since
the date of the Current Balance Sheet. Schedule 3.15(b) lists the vehicles
owned, leased or used by the Schaubach Companies, setting forth the make,
model, description of body and chassis, vehicle identification number, and year
of manufacture, and for each vehicle, whether it is owned or leased, and if
owned, the name of any lienholder and the amount of the lien, and if leased,
the name of the lessor and the general terms of the lease, and, whether owned
or leased, if it is used to transport, transfer, handle, dispose or haul Waste
materials.
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3.16 COMPLIANCE WITH LAWS.
(a) Each of the Schaubach Companies is and has been in
material compliance with all laws, regulations and orders applicable to it, its
business and operations (as conducted by it now and in the past), the Assets,
the Owned Properties and the Leased Premises and any other properties and
assets (in each case owned or used by it now or in the past) the noncompliance
with which could have a Material Adverse Effect on the Schaubach Companies.
None of the Schaubach Companies has been cited, fined or otherwise notified of
any asserted past or present failure to comply in any material respect with any
laws, regulations or orders and no proceeding with respect to any such
violation is pending or, to the knowledge of the Shareholders, threatened.
(b) None of the Schaubach Companies, or any of their
employees or agents, has made any payment of funds in connection with their
business which is prohibited by law, and no funds have been set aside to be
used in connection with their business for any payment prohibited by law.
(c) Each of the Schaubach Companies is and at all times
has been in substantial compliance with the terms and provisions of the
Immigration Reform and Control Act of 1986, as amended (the "Immigration Act").
With respect to each Employee (as defined in 8 C.F.R. 274a.1(f)) of the
Schaubach Companies for whom compliance with the Immigration Act by any of them
as employer is required, such company has on file a true, accurate and complete
copy of (i) each Employee's Form I-9 (Employment Eligibility Verification Form)
and (ii) all other records, documents or other papers prepared, procured and/or
retained by such company pursuant to the Immigration Act. None of the
Schaubach Companies has been cited, fined, served with a Notice of Intent to
Fine or with a Cease and Desist Order, nor has any action or administrative
proceeding been initiated or, to the knowledge of the Shareholders, threatened
against any of them, by the Immigration and Naturalization Service by reason of
any actual or alleged failure to comply with the Immigration Act.
(d) Except as set forth on Schedule 3.16, none of the
Schaubach Companies is subject to any Contract, decree or injunction in which
any such company is a party which restricts the continued operation of any
business or the expansion thereof to other geographical areas, customers and
suppliers or lines of business.
3.17 LABOR AND EMPLOYMENT MATTERS. Schedule 3.17 sets forth the
name, address, social security number and current rate of compensation of each
of the employees of the Schaubach Companies. None of the Schaubach Companies
is a party to or bound by any collective bargaining agreement or any other
agreement with a labor union, and, except as set forth on Schedule 3.17 hereto,
there has been no effort by any labor union during the 24 months prior to the
date hereof to organize any employees of any of the Schaubach Companies into
one or more collective bargaining units. There is
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no pending or, to the knowledge of the Shareholders, threatened labor dispute,
strike or work stoppage which affects or which may affect the business of the
Schaubach Companies or which may interfere with their continued operations.
None of the Schaubach Companies nor any agent, representative or employee
thereof has within the last 24 months committed any unfair labor practice as
defined in the National Labor Relations Act, as amended, and there is no
pending or, to the knowledge of the Shareholders, threatened charge or
complaint against any of the Schaubach Companies by or with the National Labor
Relations Board or any representative thereof. There has been no strike,
walkout or work stoppage involving any of the employees of the Schaubach
Companies during the 24 months prior to the date hereof. None of the
Shareholders is aware that any executive or key employee or group of employees
has any plans to terminate his, her or their employment with any of the
Schaubach Companies as a result of the Mergers or otherwise. Schedule 3.17
identifies each contract, agreement or plan of the following nature, whether
formal or informal, and whether or not in writing, to which any of the
Schaubach Companies or is a party or under which any of them has an obligation:
(i) employment agreements, (ii) employee handbooks, policy statements and
similar plans, (iii) noncompetition agreements and (iv) consulting agreements.
Each of the Schaubach Companies has complied in all material respects with
applicable laws, rules and regulations relating to employment, civil rights and
equal employment opportunities, including but not limited to, the Civil Rights
Act of 1964, the Fair Labor Standards Act, and the Americans with Disabilities
Act, as amended.
3.18 EMPLOYEE BENEFIT PLANS.
(a) Employee Benefit Plans. Schedule 3.18 contains a
list setting forth each employee benefit plan or arrangement of the Schaubach
Companies, including but not limited to employee pension benefit plans, as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), multiemployer plans, as defined in Section 3(37) of
ERISA, employee welfare benefit plans, as defined in Section 3(1) of ERISA,
deferred compensation plans, stock option plans, bonus plans, stock purchase
plans, hospitalization, disability and other insurance plans, severance or
termination pay plans and policies, whether or not described in Section 3(3) of
ERISA, in which employees, their spouses or dependents, of any of the Schaubach
Companies participate ("Employee Benefit Plans"). True and accurate copies of
each of the Employee Benefit Plans presently maintained by the Schaubach
Companies, together with the most recent annual reports on Form 5500 and
summary plan descriptions with respect thereto, were furnished to Republic.
(b) Compliance with Law. With respect to each Employee
Benefit Plan (i) each has been administered in all material respects in
compliance with its terms and with all applicable laws, including, but not
limited to, ERISA and the Internal Revenue Code of 1986, as amended (the
"Code"); (ii) no material actions, suits, claims (other than claims for
benefits in the ordinary course of
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business by members) or disputes are pending, or, to the knowledge of the
Shareholders, threatened; (iii) no audits, inquiries, reviews, proceedings,
claims, or demands are pending with any governmental or regulatory agency; (iv)
there are no facts which could give rise to any material liability in the event
of any such investigation, claim, action, suit, audit, review, or other
proceeding; (v) all material reports, returns, and similar documents required
to be filed with any governmental agency or distributed to any plan participant
have been duly or timely filed or distributed; and (vi) no "prohibited
transaction" has occurred within the meaning of ERISA or the Code.
(c) Qualified Plans. With respect to each Employee
Benefit Plan intended to qualify under Code Section 401(a) or 403(a) (i) the
Internal Revenue Service has issued a favorable determination letter, true and
correct copies of which have been furnished to Republic, that such plans are
qualified and exempt from federal income taxes; (ii) no such determination
letter has been revoked nor, to the knowledge of the Shareholders, has
revocation been threatened, nor has any amendment or other action or omission
occurred with respect to any such plan since the date of its most recent
determination letter or application therefor in any respect which would
adversely affect its qualification or materially increase its costs; (iii) no
such plan has been amended in a manner that would require security to be
provided in accordance with Section 401(a)(29) of the Code; (iv) no reportable
event (within the meaning of Section 4043 of ERISA) has occurred, other than
one for which the 30-day notice requirement has been waived; (v) as of the
Effective Date, the present value of all liabilities that would be "benefit
liabilities" under Section 4001(a)(16) of ERISA if benefits described in Code
Section 411(d)(6)(B) were included will not exceed the then current fair market
value of the assets of such plan (determined using the actuarial assumptions
used for the most recent actuarial valuation for such plan); (vi) all
contributions to, and payments from and with respect to such plans, which may
have been required to be made in accordance with such plans and, when
applicable, Section 302 of ERISA or Section 412 of the Code, have been timely
made; and (vii) all such contributions to the plans, and all payments under the
plans (except those to be made from a trust qualified under Section 401(a) of
the Code) and all payments with respect to the plans (including, without
limitation, PBGC (as defined below) and insurance premiums) for any period
ending before the Closing Date that are not yet, but will be, required to be
made are properly accrued and reflected on the Current Balance Sheet.
(d) Multiemployer Plans. The Schaubach Companies do not
maintain, and have never maintained, any, or had any liability to any,
multiemployer plan, within the meaning of Section 4001(a)(3) of ERISA.
(e) Welfare Plans. Except as set forth on Schedule 3.18
and except for the continuation coverage requirements of Sections 601 of ERISA
and Section 4980B of the Code, (i) None of the Schaubach Companies are
obligated under any employee welfare
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benefit plan as described in Section 3(1) of ERISA ("Welfare Plan") to provide
medical or death benefits with respect to any employee or former employee of
any of the Schaubach Companies or their predecessors after termination of
employment; (ii) each of the Schaubach Companies has complied in all material
respects with the notice and continuation coverage requirements of Section
4980B of the Code and the regulations thereunder with respect to each Welfare
Plan that is, or was during any taxable year for which the statute of
limitations on the assessment of federal income taxes remains, open, by consent
or otherwise, a group health plan within the meaning of Section 5000(b)(1) of
the Code; and (iii) except as set forth on Schedule 3.18, there are no
reserves, assets, surplus or prepaid premiums under any Welfare Plan which is
an Employee Benefit Plan. The consummation of the transactions contemplated by
this Agreement will not entitle any individual to severance pay, and, will not
accelerate the time of payment or vesting, or increase the amount of
compensation, due to any individual.
(f) Controlled Group Liability. None of the Schaubach
Companies, or any entity that would be aggregated with them under Code Section
414(b), (c), (m) or (o): (i) has ever terminated or withdrawn from an employee
benefit plan under circumstances resulting (or expected to result) in liability
to the Pension Benefit Guaranty Corporation ("PBGC"), the fund by which the
employee benefit plan is funded, or any employee or beneficiary for whose
benefit the plan is or was maintained (other than routine claims for benefits);
(ii) has any assets subject to (or expected to be subject to) a lien for unpaid
contributions to any employee benefit plan; (iii) has failed to pay premiums to
the PBGC when due; (iv) is subject to (or expected to be subject to) an excise
tax under Code Section 4971; (v) has engaged in any transaction which would
give rise to liability under Section 4069 or Section 4212(c) of ERISA; or (vi)
has violated Code Section 4980B or Section 601 through 608 of ERISA.
(g) Other Liabilities. (i) None of the Employee Benefit
Plans obligates any of the Schaubach Companies to pay separation, severance,
termination or similar benefits solely as a result of any transaction
contemplated by this Agreement or solely as a result of a "change of control"
(as such term is defined in Section 280G of the Code); (ii) all required or
discretionary (in accordance with historical practices) payments, premiums,
contributions, reimbursements, or accruals for all periods ending prior to or
as of the Effective Date shall have been made or properly accrued on the
Current Balance Sheet or will be properly accrued on the books and records of
the Schaubach Companies as of the Effective Date; and (iii) none of the
Employee Benefit Plans has any unfunded liabilities which are not reflected on
the Current Balance Sheet or the books and records of the Schaubach Companies.
3.19 TAX MATTERS. All Tax Returns required to be filed prior to
the date hereof with respect to each of the Schaubach Companies or any of their
income, properties, franchises or operations have been timely filed, each such
Tax Return has been prepared in compliance with all applicable laws and
regulations, and all such
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Tax Returns are true and accurate in all material respects. Except as set
forth on Schedule 3.19, all Taxes due or incurred prior to the date hereof and
payable by or with respect to each of the Schaubach Companies have been paid,
and are accrued on the Current Balance Sheet or will be accrued on their books
and records as of the Closing. Except as set forth in Schedule 3.19 hereto:
(i) with respect to each taxable period of the Schaubach Companies ending prior
to the date hereof, either such taxable period has been audited by the relevant
taxing authority or the time for assessing or collecting Taxes with respect to
each such taxable period has closed and such taxable period is not subject to
review by any relevant taxing authority; (ii) no deficiency or proposed
adjustment which has not been settled or otherwise resolved for any amount of
Taxes has been asserted or assessed by any taxing authority against any of the
Schaubach Companies; (iii) none of the Schaubach Companies have consented to
extend the time in which any Taxes may be assessed or collected by any taxing
authority; (iv) none of the Schaubach Companies have requested or been granted
an extension of the time for filing any Tax Return to a date later than the
Effective Time; (v) there is no action, suit, taxing authority proceeding, or
audit or claim for refund now in progress, pending or, to the knowledge of the
Shareholders, threatened against or with respect to any of the Schaubach
Companies regarding Taxes; (vi) none of the Schaubach Companies has made an
election or filed a consent under Section 341(f) of the Code (or any
corresponding provision of state, local or foreign law) on or prior to the
Effective Time; (vii) there are no Liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of any of the Schaubach
Companies; (viii) none of the Schaubach Companies will be required (A) as a
result of a change in method of accounting for a taxable period ending on or
prior to the Effective Date, to include any adjustment under Section 481(c) of
the Code (or any corresponding provision of state, local or foreign law) in
taxable income for any taxable period (or portion thereof) beginning after the
Effective Time or (B) as a result of any "closing agreement," as described in
Section 7121 of the Code (or any corresponding provision of state, local or
foreign law), to include any item of income or exclude any item of deduction
from any taxable period (or portion thereof) beginning after the Effective
Time; (ix) none of the Schaubach Companies have been a member of an affiliated
group (as defined in Section 1504 of the Code) or filed or been included in a
combined, consolidated or unitary income Tax Return; (x) none of the Schaubach
Companies is a party to or bound by any tax allocation or tax sharing agreement
or has any current or potential contractual obligation to indemnify any other
Person with respect to Taxes; (xi) none of the Schaubach Companies has made any
payments, and none is or will become obligated (under any contract entered into
on or before the Effective Date) to make any payments, that will be
non-deductible under Section 280G of the Code (or any corresponding provision
of state, local or foreign law); (xii) none of the Schaubach Companies has been
a United States real property holding corporation within the meaning of Section
897(c)(2) of the Code (or any corresponding provision of state, local or
foreign law) during the applicable period specified in Section 897(c)(1)(a)(ii)
of the Code (or any
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corresponding provision of state, local or foreign law); (xiii) no claim has
ever been made by a taxing authority in a jurisdiction where any of the
Schaubach Companies do not file Tax Returns that such company is or may be
subject to Taxes assessed by such jurisdiction; (xiv) none of the Schaubach
Companies has any permanent establishment in any foreign country, as defined in
the relevant tax treaty between the United States of America and such foreign
country; (xv) true, correct and complete copies of all income and sales Tax
Returns filed by or with respect to each of the Schaubach Companies for the
past three years have been furnished or made available to Republic; (xvi) none
of the Schaubach Companies will be subject to any Taxes for the period ending
at the Effective Time for any period for which a Tax Return has not been filed,
imposed pursuant to Section 1374 or Section 1375 of the Code (or any
corresponding provision of state, local or foreign law); and (xvii) each of the
Schaubach Companies has duly and validly filed elections for "S" corporation
status under the Code, and none of such "S" elections have been revoked or
terminated and none of the Schaubach Companies or the Shareholders have taken
any action, other than closing the transactions contemplated by this Agreement,
which would cause a termination of such "S" elections.
3.20 INSURANCE. Each of the Schaubach Companies is covered by
valid, outstanding and enforceable policies of insurance issued to them by
reputable insurers covering their respective properties, assets and businesses
against risks of the nature normally insured against by corporations in the
same or similar lines of business and in coverage amounts typically and
reasonably carried by such corporations (the "Insurance Policies"). Such
Insurance Policies are in full force and effect, and all premiums due thereon
have been paid. As of the Effective Time, each of the Insurance Policies will
be in full force and effect. None of the Insurance Policies will lapse or
terminate as a result of the transactions contemplated by this Agreement. Each
of the Schaubach Companies have complied in all material respects with the
provisions of such Insurance Policies. Schedule 3.20 contains (i) a complete
and correct list of all Insurance Policies and all amendments and riders
thereto (copies of which have been provided to Republic) and (ii) a detailed
description of each pending claim under any of the Insurance Policies for an
amount in excess of $10,000 that relates to loss or damage to the properties,
assets or businesses of any of the Schaubach Companies. To the knowledge of
the Schaubach Companies and the Shareholders, none of the Schaubach Companies
have failed to give, in a timely manner, any notice required under any of the
Insurance Policies to preserve their rights thereunder.
3.21 RECEIVABLES. All of the Receivables (as hereinafter
defined) are valid and legally binding, represent bona fide transactions and
arose in the ordinary course of business of the Schaubach Companies. All of
the Receivables are good and collectible receivables, and will be collected in
full in accordance with the terms of such receivables (and in any event, except
for ACS's receivable from Ford Motor Company, within six months following the
Closing), without setoff or counterclaims,
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subject to the allowance for doubtful accounts, if any, set forth on the
Current Balance Sheet as reasonably adjusted since the date of the Current
Balance Sheet in the ordinary course of business consistent with past practice,
or, in the case of ACS and Smithton, subject to a reasonable allowance for
doubtful accounts to be established in connection with the closing of their
1995 year-end accounts. For purposes of this Agreement, the term "Receivables"
means all receivables of the Schaubach Companies, including all trade account
receivables arising from the provision of services, sale of inventory, notes
receivable, and insurance proceeds receivable.
3.22 LICENSES AND PERMITS. Except as set forth on Schedule 3.22,
each of the Schaubach Companies possess all licenses and required governmental
or official approvals, permits or authorizations (collectively, the "Permits")
for their respective businesses and operations, including with respect to the
operation of each of the Owned Properties and Leased Premises, except where the
failure to obtain such Permits would not have a Material Adverse Effect on any
of the Schaubach Companies. Except as set forth on Schedule 3.22, all material
Permits are valid and in full force and effect, each of the Schaubach Companies
is in material compliance with the respective requirements thereof, and no
proceeding is pending or, to the knowledge of the Shareholders, threatened to
revoke or amend any of such material Permits. None of such Permits is or will
be materially impaired or in any way affected by the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
3.23 ADEQUACY OF THE ASSETS; RELATIONSHIPS WITH CUSTOMERS AND
SUPPLIERS; AFFILIATED TRANSACTIONS. The Assets, Owned Properties and Leased
Premises constitute, in the aggregate, all of the assets and properties
necessary for the conduct of the business of the Schaubach Companies in the
manner in which and to the extent to which such business is currently being
conducted. No current supplier to the Schaubach Companies of items essential
to the conduct of their business will or has, to the knowledge of the
Shareholders, threatened to terminate its business relationship with them for
any reason. Except as set forth on Schedule 3.23, none of the Schaubach
Companies have any direct or indirect interest in any customer, supplier or
competitor of any of the Schaubach Companies, or in any person from whom or to
whom any of the Schaubach Companies leases real or personal property. Except
as set forth on Schedule 3.23, to the knowledge of the Shareholders, no
officer, director or shareholder of any of the Schaubach Companies, nor any
person related by blood or marriage to any such person, nor any entity in which
any such person owns any beneficial interest, is a party to any Contract or
transaction with any of the Schaubach Companies or has any interest in any
property used by any of the Schaubach Companies.
3.24 INTELLECTUAL PROPERTY. Each of the Schaubach Companies has
full legal right, title and interest in and to all trademarks, servicemarks,
tradenames, copyrights, know-how, patents, trade secrets, licenses (including
licenses for the use of computer
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software programs), and other intellectual property used in the conduct of its
business (the "Intellectual Property"). The conduct of the business of the
Schaubach Companies as presently conducted, and the unrestricted conduct and
the unrestricted use and exploitation of the Intellectual Property, does not
infringe or misappropriate in any material respect any rights held or asserted
by any Person, and no Person is infringing on the Intellectual Property. No
payments are required for the continued use of the Intellectual Property. None
of the Intellectual Property has ever been declared invalid or unenforceable,
or is the subject of any pending or, to the knowledge of the Shareholders,
threatened action for opposition, cancellation, declaration, infringement, or
invalidity, unenforceability or misappropriation or like claim, action or
proceeding.
3.25 CONTRACTS. Schedule 3.25 sets forth a list of each Contract
to which any of the Schaubach Companies is a party or by which any of them or
their properties and assets are bound and which is material to the business,
assets, properties or prospects of the Schaubach Companies, taken as a whole
(the "Designated Contracts"), true and correct copies of which have been
provided to Republic. The copy of each Designated Contract furnished to
Republic is a true and complete copy of the document it purports to represent
and reflects all amendments thereto made through the date of this Agreement.
None of the Schaubach Companies has violated any of the material terms or
conditions of any Designated Contract or any term or condition which would
permit termination or material modification of any Designated Contract, and, to
the knowledge of the Shareholders, all of the material covenants to be
performed by any other party thereto, if due to be performed by the date
hereof, have been performed in all material respects and there are no claims
for breach or indemnification or notice of default or termination under any
Designated Contract. No event has occurred which constitutes, or after notice
or the passage of time, or both, would constitute, a material default by any of
the Schaubach Companies under any Designated Contract, and, to the knowledge of
the Shareholders, no such event has occurred which constitutes or would
constitute a material default by any other party. None of the Schaubach
Companies is subject to any liability or payment resulting from renegotiation
of amounts paid it under any Designated Contract. As used in this Section,
Designated Contracts shall include, without limitation, (a) loan agreements,
indentures, mortgages, pledges, hypothecations, deeds of trust, conditional
sale or title retention agreements, security agreements, equipment financing
obligations or guaranties, or other sources of contingent liability in respect
of any indebtedness or obligations to any other Person, or letters of intent or
commitment letters with respect to same; (b) contracts obligating any of the
Schaubach Companies to provide products or services for a period of one year or
more, excluding standard waste collection and disposal contracts entered into
in the ordinary course of business without material modification from the
preprinted forms used by the Schaubach Companies in the ordinary course of
their business; (c) leases of real property, and leases of personal property
not cancelable without penalty on notice of sixty (60) days or less or calling
for
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payment of an annual gross rental exceeding Twenty-Five Thousand Dollars
($25,000.00); (d) distribution, sales agency or franchise or similar
agreements, or agreements providing for an independent contractor's services,
or letters of intent with respect to same; (e) employment agreements,
management service agreements, consulting agreements, confidentiality
agreements, non-competition agreements and any other agreements relating to any
employee, officer or director of any of the Schaubach Companies; (f) licenses,
assignments or transfers of trademarks, trade names, service marks, patents,
copyrights, trade secrets or know how, or other agreements regarding
proprietary rights or intellectual property; (g) any Contract relating to
pending capital expenditures by any of the Schaubach Companies involving more
than $100,000; and (h) other material Contracts or understandings, irrespective
of subject matter and whether or not in writing, not entered into in the
ordinary course of business by any of the Schaubach Companies and not otherwise
disclosed on the Schedules.
3.26 CUSTOMER LISTS AND RECURRING REVENUE. Schedule 3.26 is a
true, correct and complete list of all existing municipal, county or city or
other large customers (collectively, the "Material Customers") of any of the
Schaubach Companies who have entered into valid and enforceable long-term
(i.e., more than one year) waste collection and disposal, recycling or other
franchises or agreements with any one or more of the Schaubach Companies.
True, correct and complete copies of such franchises and agreements, and any
ordinances relating thereto, have been furnished to Republic. Other than the
Material Customers listed on Schedule 3.26, no customer of any of the Schaubach
Companies as of the date of this Agreement accounts for more than $200,000 of
gross revenue in their most recent fiscal year. Schedule 3.26 sets forth each
Material Customer's name, address, account number, term of franchise or
agreement, billing cycle, type of service and rates charged. The average gross
combined monthly revenue generated for the Schaubach Companies by the Material
Customers is listed on Schedule 3.26 for the three calendar month period ended
December 31, 1995.
3.27 ACCURACY OF REPRESENTATIONS MADE BY THE SHAREHOLDERS. No
representation or warranty made by the Shareholders to Republic in this
Agreement and the various Schedules attached hereto, contains or shall contain
any untrue statement of a material fact or omits any material fact necessary to
make the information contained therein not misleading. The Shareholders have
provided or made available to Republic true, accurate and complete copies of
all documents listed or described in the various Schedules attached hereto.
3.28 INVESTMENT INTENT; ACCREDITED INVESTOR STATUS; SECURITIES
DOCUMENTS. Each of the Shareholders is acquiring the Republic Shares hereunder
for his, her or its own account for investment and not with a view to, or for
the sale in connection with, any distribution of any of the Republic Shares,
except in compliance with applicable state and federal securities laws. Each
of the Shareholders has had the opportunity to discuss the transactions
contemplated hereby with Republic and has had the
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opportunity to obtain such information pertaining to the Republic Companies as
has been requested, including but not limited to filings made by Republic with
the SEC under the Exchange Act. Each of the Shareholders has such knowledge
and experience in business or financial matters that he is capable of
evaluating the merits and risks of an investment in the Republic Shares.
3.29 BUSINESS LOCATIONS. As of the date hereof, the Schaubach
Companies have no office or place of business other than as identified on
Schedules 3.14(a) and 3.14(b) and each of the Schaubach Companies' principal
places of business and chief executive offices are indicated on Schedule
3.14(a) or 3.14(b), and, except for equipment leased or provided to customers
for their use in disposing of waste in the ordinary course of business, all
locations where the equipment, inventory, chattel paper and books and records
of the Schaubach Companies are located as of the date hereof are fully
identified on Schedules 3.14(a) and 3.14(b).
3.30 NAMES; PRIOR ACQUISITIONS. All names under which any of the
Schaubach Companies does business as of the date hereof are specified on
Schedule 3.30. Except as set forth on Schedule 3.30, none of the Schaubach
Companies has changed its name or used any assumed or fictitious name, or been
the surviving entity in a merger, acquired any business or changed its
principal place of business or chief executive office, within the past three
years.
3.31 NO COMMISSIONS. None of the Schaubach Companies or
Shareholders has incurred any obligation for any finder's or broker's or
agent's fees or commissions or similar compensation in connection with the
transactions contemplated hereby.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
4.1 CONDUCT OF BUSINESS BY THE SCHAUBACH COMPANIES PENDING THE
MERGERS. Each of the Schaubach Companies covenants and agrees that, between
the date of this Agreement and the Effective Time, the business of the
Schaubach Companies shall be conducted only in, and the Schaubach Companies
shall not take any action except in, the ordinary course of business,
consistent with past practice. Each of the Schaubach Companies shall use
their reasonable best efforts to preserve intact their respective business
organizations, to keep available the services of their current officers,
employees and consultants, and to preserve their present relationships with
customers, suppliers and other persons with which they have significant
business relations. By way of amplification and not limitation, except as
contemplated by this Agreement, each of the Schaubach Companies shall not,
between the date of this Agreement and the Effective Time, directly or
indirectly, do or propose or agree to do any of the following without the prior
written consent of Republic:
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(a) amend or otherwise change its articles of incorporation or
bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, encumber, or, authorize the
issuance, sale, pledge, disposition, grant or encumbrance of (i) any shares of
its capital stock of any class, except as provided in Section 5.13, or any
options, warrants, convertible securities or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest, of
it or (ii) any of its assets, tangible or intangible, except in the ordinary
course of business consistent with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to
any of its capital stock, except that Incendere may pay dividends at the rate
of $12,500 per month and each of the Schaubach Companies may make distributions
of cash in amounts reasonably necessary to fund the Shareholders' payment of
income taxes resulting from the pass-through of taxable income to the
Shareholders arising out of the operations of the Schaubach Companies prior to
the Effective Time;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, for cash or
shares of stock), by merger, consolidation, or acquisition of stock or assets,
any interest in any corporation, partnership or other business organization or
division thereof or any assets, or make any investment either by purchase of
stock or securities, contributions of capital or property transfer, or, except
in the ordinary course of business, consistent with past practice, purchase any
property or assets of any other Person, (ii) incur any indebtedness for
borrowed money other than advances under existing credit lines, or issue any
debt securities or assume, guarantee or endorse (other than in the ordinary
course of business consistent with past practice) or otherwise as an
accommodation become responsible for, the obligations of any Person, or make
any loans or advances, or (iii) enter into any Contract other than in the
ordinary course of business, consistent with past practice;
(f) increase the compensation payable or to become payable to
its officers or employees, or, except as presently bound to do, grant any
severance or termination pay to, or enter into any employment or severance
agreement with, any of its directors, officers or other employees, or
establish, adopt, enter into or amend or take any action to accelerate any
rights or benefits
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which any collective bargaining, bonus, profit sharing, trust, compensation,
stock option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any directors, officers or employees;
(g) take any action other than in the ordinary course of
business and in a manner consistent with past practice with respect to
accounting policies or procedures;
(h) pay, discharge or satisfy any existing claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of due and payable
liabilities reflected or reserved against in its financial statements, as
appropriate, or liabilities incurred after the date hereof in the ordinary
course of business and consistent with past practice;
(i) increase or decrease published prices or prices charged to
any substantial group of customers, except for previously announced price
changes, or take any other action which might reasonably result in any material
increase in the loss of customers through non-renewal or termination of service
contracts or other causes; or
(j) agree, in writing or otherwise, to take or authorize any of
the foregoing actions or any action which would make any representation or
warranty in Article III untrue or incorrect in any material respect.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 FURTHER ASSURANCES. Each party shall execute and deliver
such additional instruments and other documents and shall take such further
actions as may be reasonably necessary or appropriate to effectuate, carry out
and comply with all of the terms of this Agreement and the transactions
contemplated hereby.
5.2 COMPLIANCE WITH COVENANTS. The Shareholders shall use their
reasonable best efforts to cause the Schaubach Companies to comply with all of
the respective covenants of the Schaubach Companies under this Agreement.
5.3 COOPERATION. Each of the parties agrees to cooperate with
the other in the preparation and filing of all forms, notifications, reports
and information, if any, required or reasonably deemed advisable pursuant to
any law, rule or regulation
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or the rules of any exchange on which the Republic Common Stock is listed or
The Nasdaq Stock Market in connection with the transactions contemplated by
this Agreement and to use their respective reasonable best efforts to agree
jointly on a method to overcome any objections by any Governmental Authority to
any such transactions.
5.4 HSR ACT AND OTHER ACTIONS. Each of the parties hereto shall
(i) make promptly (and in no event later than the earlier of February 16, 1996
or five (5) business days following the date hereof) its respective filings, if
any, and thereafter make any other required submissions, under the HSR Act,
with respect to the transactions contemplated hereby, and (ii) use its
reasonable best efforts to take, or cause to be taken, all appropriate actions,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated herein, including, without limitation, using its best
efforts to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of any Governmental Authority and parties to
Contracts with any of the Schaubach Companies as are necessary for the
consummation of the transactions contemplated hereby. Each of parties shall
make on a prompt and timely basis all governmental or regulatory notifications
and filings required to be made by it for the consummation of the transactions
contemplated hereby. The parties also agree to use reasonable best efforts to
defend all lawsuits or other legal proceedings challenging this Agreement or
the consummation of the transactions contemplated hereby and to lift or rescind
any injunction or restraining order or other order adversely affecting the
ability of the parties to consummate the transactions contemplated hereby.
5.5 ACCESS TO INFORMATION. From the date hereof to the
Effective Time, each of the Schaubach Companies shall (and shall cause its and
their directors, officers, employees, auditors, counsel and agents to) afford
Republic and Republic's officers, employees, auditors, counsel and agents
reasonable access at all reasonable times to its and their properties, offices,
and other facilities, to its and their officers and employees and to all books
and records, and shall furnish such persons with all financial, operating and
other data and information as may be requested. Republic agrees to keep all
such information disclosed pursuant to this Section confidential.
5.6 NOTIFICATION OF CERTAIN MATTERS. Each of the parties hereto
shall give prompt notice to the other of the occurrence or non-occurrence of
any event which would likely cause any representation or warranty contained
herein to be untrue or inaccurate in any material respect, or any covenant,
condition, or agreement contained herein not to be complied with or satisfied
in all material respects.
5.7 TAX TREATMENT. Republic, the Schaubach Companies and the
Shareholders will use their respective best efforts to cause the Mergers and
the Share Exchange to qualify as reorganizations
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under the provisions of Section 368(a) of the Code and will not take any action
after the Mergers and the Share Exchange are effected to cause the Mergers or
the Share Exchange to lose their tax-free status. All parties hereto agree to
file the Plans of Merger or the Plan of Share Exchange, as the case may be,
with their respective federal income tax returns for the year in which the
Mergers and the Share Exchange are effective, and to comply with the reporting
requirements of Treasury Regulation 1.368-3.
5.8 CONFIDENTIALITY; PUBLICITY. Except as may be required by
law or as otherwise permitted or expressly contemplated herein, no party hereto
or their respective Affiliates, employees, agents and representatives shall
disclose to any third party this Agreement or the subject matter or terms
hereof without the prior consent of the other parties hereto. No press release
or other public announcement related to this Agreement or the transactions
contemplated hereby shall be issued by any party hereto without the prior
approval of the other parties, except that Republic may make such public
disclosure which it believes in good faith to be required by law or by the
terms of any listing agreement with or requirements of a securities exchange
(in which case Republic will consult with an officer of the Schaubach Companies
prior to making such disclosure).
5.9 NO OTHER DISCUSSIONS. Prior to the Effective Time or the
termination of this Agreement pursuant to Article XII, the Schaubach Companies,
the Shareholders, and their respective Affiliates, employees, agents and
representatives will not (i) initiate, or encourage the initiation by others
of, discussions or negotiations with third parties, or respond to solicitations
by third persons, relating to any merger, sale or other disposition of any
substantial part of the assets, business or properties of any of the Schaubach
Companies (whether by merger, consolidation, sale of stock or otherwise) or
(ii) enter into any agreement or commitment (whether or not binding) with
respect to any of the foregoing transactions. The Shareholders will
immediately notify Republic if any third party attempts to initiate any
solicitation, discussion or negotiation with respect to any of the foregoing
transactions.
5.10 RESTRICTIVE COVENANTS. In order to assure that Republic
will realize the benefits of the Mergers and the Share Exchange, each of the
Shareholders jointly and severally agrees with Republic that he will not for a
period of three years from the Effective Time:
(a) directly or indirectly, alone or as a partner, joint
venturer, officer, director, employee, consultant, agent, independent
contractor or stockholder of any company or business, engage in any
business activity in Virginia or North Carolina (and with respect only
to Dwight C. Schaubach, those additional states in which Incendere
presently conducts business) which is directly or indirectly in
competition with the business conducted by the Schaubach Companies at
the Effective Time;
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provided, however, that, the beneficial ownership of less than five
percent (5%) of the shares of stock of any corporation having a class
of equity securities actively traded on a national securities exchange
or over-the-counter market shall not be deemed, in and of itself, to
violate the prohibitions of this Section;
(b) directly or indirectly (i) induce any Person which
is a customer of any of the Schaubach Companies at the Effective Time
to patronize any business directly or indirectly in competition with
the business conducted by any of the Schaubach Companies; (ii)
canvass, solicit or accept from any Person which is a customer of any
of the Schaubach Companies, any such competitive business; or (iii)
request or advise any Person which is a customer of any of the
Schaubach Companies at the Effective Time to withdraw, curtail or
cancel any such customer's business with the Schaubach Companies or
their successors;
(c) directly or indirectly employ, or knowingly permit
any company or business directly or indirectly controlled by him, to
employ, any person (other than employees who are not key employees of
any of the Schaubach Companies and who performed a substantial part of
their services for entities other than the Schaubach Companies) who
was employed by any of the Schaubach Companies at or within six months
prior to the Effective Time, or in any manner seek to induce any such
person to leave his or her employment;
(d) directly or indirectly, at any time following the
Effective Time, in any way utilize, disclose, copy, reproduce or
retain in his possession any of the Schaubach Companies' proprietary
rights or records, including, but not limited to, any of their
customer lists.
The Shareholders agree and acknowledge that the restrictions contained in this
Section are reasonable in scope and duration and are necessary to protect
Republic after the Effective Time. If any provision of this Section as applied
to any party or to any circumstance is adjudged by a court to be invalid or
unenforceable, the same will in no way affect any other circumstance or the
validity or enforceability of this Agreement. If any such provision, or any
part thereof, is held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision, and/or to delete specific words or phrases, and in its reduced
form, such provision shall then be enforceable and shall be enforced. The
parties agree and acknowledge that the breach of this Section will cause
irreparable damage to Republic and upon breach of any provision of this
Section, Republic shall be entitled to injunctive relief, specific performance
or other equitable relief; provided, however, that, this shall in no way limit
any
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other remedies which Republic may have (including, without limitation, the
right to seek monetary damages).
5.11 ENVIRONMENTAL ASSESSMENT. Republic shall be entitled to
have conducted, at its expense, prior to Closing, an environmental assessment
of the Owned Properties and Leased Premises (hereinafter referred to as
"Environmental Assessment"). The Environmental Assessment may include, but not
be limited to, a physical examination of the Owned Property or Leased Premises,
and any structures, facilities, or equipment located thereon, soil samples,
ground and surface water samples, storage tank testing, review of pertinent
records, documents, and Licenses of the Schaubach Companies. The Shareholders
shall provide Republic or its designated agents or consultants with the access
to such property which Republic, its agents or consultants require to conduct
the Environmental Assessment. If the Environmental Assessment identifies
environmental contamination which requires remediation or further evaluation
under the Environmental, Health, and Safety Laws or if the results of the
Environmental Assessment are otherwise not satisfactory to Republic in its sole
and reasonable discretion, then Republic may elect not to close the
transactions contemplated by this Agreement in which case this Agreement shall
be terminated and the parties shall be released from any and all obligations
hereunder. Republic's failure or decision not to conduct any such
Environmental Assessment shall not affect any representation or warranty of the
Shareholders under this Agreement.
5.12 TRADING IN REPUBLIC COMMON STOCK. Except as otherwise
expressly consented to by Republic, from the date of this Agreement until the
Effective Time, none of the Schaubach Companies or the Shareholders (nor any
Affiliates thereof) will directly or indirectly purchase or sell (including
short sales) any shares of Republic Common Stock in any transactions effected
on The Nasdaq Stock Market, the Toronto Stock Exchange or otherwise.
5.13 ISSUANCE OF ADDITIONAL SHARES BY ACS. At the Closing, but
prior to the Effective Time, ACS shall acquire from Schaubach Rentals, a
Virginia partnership ("Schaubach Rentals") the real property located at 2652
East Indian River Road, Chesapeake, Virginia (the "ACS Site") presently
occupied by ACS, in consideration of which ACS shall issue an additional
39.73352 of its common shares to Schaubach Rentals. At Closing, Dwight C.
Schaubach, as general partner of Schaubach Rentals, shall cause Schaubach
Rentals to execute an appropriate amendment or joinder hereto providing for
Schaubach Rentals to become a "Shareholder" under the terms of this Agreement
and to be bound by the terms hereof as a Shareholder as though an original
party hereto.
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ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE REPUBLIC COMPANIES
The obligations of the Republic Companies to effect the Mergers and
the Share Exchange shall be subject to the fulfillment at or prior to the
Effective Time of the following conditions, any or all of which may be waived
in whole or in part by the Republic Companies:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE
WITH OBLIGATIONS. The representations and warranties of the Shareholders
contained in this Agreement shall be true and correct in all material respects
at and as of the Effective Time with the same force and effect as though made
at and as of that time except (i) for changes specifically permitted by or
disclosed pursuant to this Agreement, and (ii) that those representations and
warranties which address matters only as of a particular date shall remain true
and correct as of such date. Each of the Schaubach Companies and the
Shareholders shall have performed and complied in all material respects with
all of their respective obligations required by this Agreement to be performed
or complied with at or prior to the Effective Time. Each of the Schaubach
Companies and the Shareholders shall have delivered to the Republic Companies a
certificate, dated as of the Effective Time, duly signed (in the case of each
of the Schaubach Companies, by its Chief Executive Officer and Chief Financial
Officer), certifying that such representations and warranties are true and
correct in all material respects and that all such obligations have been
performed and complied with in all material respects.
6.2 NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY.
Between the date hereof and the Effective Time, (i) there shall have been no
Material Adverse Change to any of the Schaubach Companies, (ii) there shall
have been no adverse federal, state or local legislative or regulatory change
affecting in any material respect the services, products or business of any of
the Schaubach Companies, provided that adoption of "flow control" legislation
shall not be deemed an adverse change for purposes hereof, and (iii) none of
the properties and assets of any of the Schaubach Companies shall have been
damaged by fire, flood, casualty, act of God or the public enemy or other cause
(regardless of insurance coverage for such damage) which damages may have a
Material Adverse Effect thereon, and there shall have been delivered to the
Republic Companies a certificate to that effect, dated the Effective Time and
signed by or on behalf of the Schaubach Companies and the Shareholders.
6.3 CORPORATE CERTIFICATE. The Shareholders shall have
delivered to the Republic Companies (i) copies of the articles of incorporation
and bylaws of each of the Schaubach Companies as in effect immediately prior to
the Effective Time, (ii) copies of resolutions adopted by the Board of
Directors and shareholders of each of the Schaubach Companies authorizing the
transactions contemplated by this Agreement, and (iii) a certificate of good
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standing of each of the Schaubach Companies issued by the appropriate state
office of the state of each such company's state of incorporation and each
other state in which such companies are qualified to do business as of a date
not more than thirty days prior to the Effective Time, certified in each case
as of the Effective Time by the Secretary of each such company as being true,
correct and complete.
6.4 OPINION OF COUNSEL. The Republic Companies shall have
received an opinion dated as of the Effective Time from counsel for the
Schaubach Companies and the Shareholders, in form and substance reasonably
acceptable to the Republic Companies, which may be in the form of an "Accord"
opinion under the Legal Opinion Accord of the Section of Business Law of the
American Bar Association, to the effect that:
(i) each of the Schaubach Companies is a
corporation duly organized and existing and in good standing under the
laws of the State of its incorporation and has the necessary corporate
power and authority to carry on the business now conducted by it and
to own or lease the properties now owned or leased by it;
(ii) each of the Schaubach Companies has
obtained all necessary authorizations and consents of its Board of
Directors and the Shareholders to effect the Mergers and the Share
Exchange;
(iii) All issued and outstanding shares of capital
stock of each of the Schaubach Companies are owned as set forth on
Schedule 3.5 hereto (as adjusted in accordance with Section 5.13
hereof);
(iv) other than as disclosed in Schedule 3.12
hereto, such counsel does not know or have reason to believe that
there is any litigation, proceeding or investigation pending or
threatened which would result in any material adverse change in the
properties, business or condition of the Schaubach Companies, or which
questions the validity of this Agreement;
(v) This Agreement is a valid and binding
obligation of each of the Schaubach Companies, and the Shareholders,
and enforceable against each of the Schaubach Companies and the
Shareholders in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally
and by general equitable principles.
6.5 CONSENTS. The Schaubach Companies shall have received
consents to the transactions contemplated hereby and waivers of rights to
terminate or modify any material rights or obligations of the Schaubach
Companies from any person from whom such consent or waiver is required under
any Designated Contract or instrument as
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of a date not more than ten days prior to the Effective Time, or who, as a
result of the transactions contemplated hereby, would have such rights to
terminate or modify such Contracts or instruments, either by the terms thereof
or as a matter of law.
6.6 SECURITIES LAWS. Republic shall have received all necessary
consents and otherwise complied with any state Blue Sky or securities laws
applicable to the issuance of the Republic Shares, in connection with the
transactions contemplated hereby.
6.7 POOLING LETTERS. Republic shall have received from Arthur
Andersen LLP, a letter dated the Effective Time, confirming that the
transactions contemplated hereby, if consummated, can properly be accounted for
as a pooling of interests combination in accordance with GAAP and the criteria
of Accounting Principles Board Opinion No. 16 and the regulations of the SEC.
6.8 RULE 145 UNDERTAKINGS. At or prior to the Closing, the
Shareholders shall have delivered to Republic a letter agreement relating to
Rule 145 under the Securities Act and "pooling of interests" criteria, in form
and substance reasonably satisfactory to the Republic Companies.
6.9 SCHAUBACH COMPANIES STOCK. At the Closing, each of the
Shareholders shall have delivered to Republic all certificates evidencing the
shares of capital stock of any of the Schaubach Companies held by him.
6.10 STOCK POWERS. At the Closing, each of the Shareholders
shall have delivered to Republic, for use in connection with the Held Back
Shares, ten stock powers executed in blank, with signatures guaranteed.
6.11 NO ADVERSE LITIGATION. There shall not be pending or
threatened any action or proceeding by or before any court or other
governmental body which shall seek to restrain, prohibit, invalidate or collect
damages arising out of the Mergers or the Share Exchange or any other
transaction contemplated hereby, and which, in the reasonable judgment of
Republic, makes it inadvisable to proceed with the Mergers, the Share Exchange
and the other transactions contemplated hereby.
6.12 HSR ACT WAITING PERIOD. Any applicable HSR Act waiting
period shall have expired or been terminated.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF
THE SCHAUBACH COMPANIES AND THE SHAREHOLDERS
The obligations of the Schaubach Companies and the Shareholders to
effect the Mergers and the Share Exchange shall be subject to the fulfillment
at or prior to the Effective Time of the
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following conditions, any or all of which may be waived in whole or in part by
the Schaubach Companies and the Shareholders:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE
WITH OBLIGATIONS. The representations and warranties of each of the Republic
Companies contained in this Agreement shall be true and correct in all material
respects at and as of the Effective Time with the same force and effect as
though made at and as of that time except (i) for changes specifically
permitted by or disclosed pursuant to this Agreement, and (ii) that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date. Each of the Republic
Companies shall have performed and complied in all material respects with all
of its obligations required by this Agreement to be performed or complied with
at or prior to the Effective Time. Each of the Republic Companies shall have
delivered to the Company a certificate, dated as of the Effective Time, and
signed by an executive officer, certifying that such representations and
warranties are true and correct in all material respects and that all such
obligations have been performed and complied with in all material respects.
7.2 REPUBLIC SHARES. At the Closing, Republic shall have issued
all of the Republic Shares and shall have delivered to the Shareholders (i)
certificates representing the Republic Shares issued to them hereunder, other
than the Held Back Shares, and (ii) copies of stock certificates representing
the Held Back Shares issued to them.
7.3 NO ADVERSE LITIGATION. There shall not be pending or
threatened any action or proceeding by or before any court or other
governmental body which shall seek to restrain, prohibit, invalidate or collect
damages arising out of the Mergers, the Share Exchange, or any of the other
transaction contemplated hereby, and which in the reasonable judgment of the
Shareholders makes it inadvisable to proceed with the Mergers, the Share
Exchange and the other transactions contemplated hereby.
7.4 HSR ACT WAITING PERIOD. Any applicable HSR Act Waiting
Period shall have expired or been terminated.
7.5 KEY PERSONNEL. H. Wayne Huizenga shall be a member of
Republic's Board of Directors as of the Effective Time.
7.6 NO CASH DIVIDENDS. Republic shall not have declared or paid
any cash dividends with respect to its Common Stock between the date hereof and
the Effective Time.
7.7 NO STOCK ADJUSTMENTS. Republic shall not have declared or
caused to occur a stock split or stock dividend with respect to the Republic
Common Stock without proportionately adjusting the number of shares of Republic
Common Stock to be issued pursuant to the Mergers and the Share Exchange.
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7.8 CAPITALIZATION. Republic shall not have amended its First
Amended and Restated Certificate of Incorporation to change its capitalization
from that described in Section 2.6 herein, except to increase the number of
authorized shares of Republic Common Stock.
7.9 OPINION OF COUNSEL. The Schaubach Companies and the
Shareholders shall have received an opinion dated as of the Effective Time from
counsel for Republic, in the form and substance reasonably acceptable to the
Schaubach Companies and the Shareholders, which may be in the form of an
"Accord" opinion, to the effect that:
(i) Republic is a corporation duly organized and
existing and in good standing under the laws of the State of Delaware
and has the necessary corporate power and authority to carry on the
business now conducted by it and to own or lease the properties now
owned by it;
(ii) Republic has obtained all necessary
authorizations and consents of its Board of Directors to effect the
Mergers and the Share Exchange and no consent of its shareholders is
required;
(iii) Insofar as is known to such counsel, there is no
litigation, proceeding or investigation pending or threatened which
would result in any Material Adverse Change in the properties,
business or condition of Republic or which questions the validity of
this Agreement;
(iv) This Agreement is a valid and binding obligation
of the Republic Companies in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the enforcement of creditors'
rights generally and general principles of equity;
(v) The Republic Shares are validly issued, fully
paid and non-assessable shares of Republic Common Stock.
ARTICLE VIII
REGISTRATION RIGHTS
The Shareholders shall have the following registration rights with
respect to the Republic Shares issued to them hereunder:
8.1 REGISTRATION RIGHTS FOR REPUBLIC SHARES; FILING OF
REGISTRATION STATEMENT. Republic will utilize its reasonable best efforts to
cause, as soon as practicable following the Effective Time, a registration
statement to be filed under the Securities Act or an existing registration
statement to be amended for the purpose of registering the Republic Shares for
resale by a Holder thereof
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(the "Registration Statement"). For purposes of this Article, a person is
deemed to be a "Holder" of Republic Shares whenever such person is the record
owner of Republic Shares. Republic will use its reasonable best efforts to (i)
have the Registration Statement become effective and cause the Republic Shares
to be registered under the Securities Act, and registered, qualified or
exempted under the state securities laws of such jurisdictions as any Holder
reasonably requests, as soon as is reasonably practicable; (ii) cause the
Republic Shares to be listed on the Nasdaq Stock Market or such other national
securities exchange on which Republic Common Stock is then listed and obtain
all approvals from the Nasdaq Stock Market or such exchange for trading
thereon; (iii) provide a transfer agent and registrar for the Republic Common
Stock, including the Republic Shares; and (iv) upon the sale of any Republic
Shares pursuant to such registration statement, remove all restrictive legends
from all certificates evidencing the Republic Shares.
8.2 EXPENSES OF REGISTRATION. Republic shall pay all expenses
incurred by Republic in connection with the registration, qualification and/or
exemption of the Republic Shares, including any SEC, Nasdaq Stock Market and
state securities law registration and filing fees, printing expenses, fees and
disbursements of Republic's counsel and accountants, transfer agents' and
registrars' fees, fees and disbursements of experts used by Republic in
connection with such registration, qualification and/or exemption, and expenses
incidental to any amendment or supplement to the Registration Statement or
prospectuses contained therein. Republic shall not, however, be liable for any
sales, broker's or underwriting commissions upon sale by any Holder of any of
the Republic Shares.
8.3 FURNISHING OF DOCUMENTS. Republic shall furnish to the
Holders such reasonable number of copies of the Registration Statement, such
prospectuses as are contained in the Registration Statement and such other
documents as the Holders may reasonably request in order to facilitate the
offering of the Republic Shares.
8.4 AMENDMENTS AND SUPPLEMENTS. Republic shall prepare and
promptly file with the SEC and promptly notify the Holders of the filing of
such amendments or supplements to the Registration Statement or prospectuses
contained therein as may be necessary to correct any statements or omissions
if, at the time when a prospectus relating to the Republic Shares is required
to be delivered under the Securities Act, any event shall have occurred as a
result of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Republic shall also
advise the Holders promptly after it shall receive notice or obtain knowledge
thereof, of the issuance of any stop order by the SEC suspending the
effectiveness of the Registration Statement or the initiation or threatening of
any proceeding for that purpose and promptly use its
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reasonable best efforts to prevent the issuance of any stop order or to obtain
its withdrawal if such stop order should be issued.
8.5 DURATION. Republic shall maintain the effectiveness of the
Registration Statement until such time as Republic reasonably determines, based
on an opinion of counsel, that the Holders will be eligible to sell all of the
Shares then owned by the Holders without the need for continued registration of
the shares, in the three month period immediately following the termination of
the effectiveness of the Registration Statement. Republic's obligations
contained in Sections 8.1, 8.3 and 8.4 shall terminate on the second
anniversary of the Effective Date.
8.6 FURTHER INFORMATION. If Republic Shares owned by a Holder
are included in any registration, such Holder shall furnish Republic such
information regarding itself as Republic may reasonably request and as shall be
required in connection with any registration, qualification or compliance
referred to in this Agreement.
8.7 INDEMNIFICATION.
(a) Republic will indemnify and hold harmless the
Holders and each person, if any, who controls a Holder within the meaning of
the Securities Act, from and against any and all losses, damages, liabilities,
costs and expenses to which the Holders or any such controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities, costs or expenses are caused by any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or based upon the omission or alleged
omission to state therein 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; provided, however, that, Republic will
not be liable in any such case to the extent that any such loss, claim, damage,
liability, cost or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by or on behalf of any Holder or such
controlling person in writing specifically for use in the preparation thereof.
(b) Each of the Holders, individually and not jointly,
will indemnify and hold harmless Republic and each person, if any, who controls
Republic within the meaning of the Securities Act, from and against any and all
losses, damages, liabilities, costs and expenses to which Republic or any such
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are caused by
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary
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to make the statements therein, in light of the circumstances under which they
were made, not misleading, to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was so made in reliance upon
and in strict conformity with written information furnished by or on behalf of
that Holder specifically for use in the preparation thereof; provided, however,
that the indemnification obligations of each Holder hereunder shall be limited
to the amount of gross proceeds received by such Holder from the sale of
Republic Shares pursuant to the Registration Statement.
(c) Promptly after receipt by an indemnified party
pursuant to the provisions of paragraph (a) or (b) of this Section of notice of
the commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said
paragraph (a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the indemnifying party will
not relieve it from any liability which it may have hereunder unless and only
to the extent that the indemnifying party has been materially prejudiced
thereby nor will such failure to so notify the indemnifying party relieve it
from any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party;
provided, however, if the defendants in any action include both the indemnified
party and the indemnifying party and there is a conflict of interest which
would prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties shall have the right to
select separate counsel to participate in the defense of such action on behalf
of such indemnified party or parties. After notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of said paragraph (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the provisions
of the preceding sentence, (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after the notice of the commencement of the
action, or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party.
(d) In the event any of the Republic Shares are sold by
any Holder or Holders in an underwritten public offering consented to by
Republic, Republic shall provide indemnification to the underwriters of such
offering and any person controlling any such
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<PAGE> 45
underwriter on behalf of the Holder or Holders making the offering; provided,
however, that Republic shall not be required to consent to any such
underwriting or to provide such indemnification in respect of the matters
described in the proviso to the first sentence of Section 8.7(a).
8.8 ADDITIONAL UNDERTAKINGS.
(a) In order to facilitate the resale by Holders of Republic
Shares during any period in which the Registration Statement shall not be
effective, Republic shall use its best efforts to take all action and file with
the SEC such information as the SEC may require as a condition to the
availability of Rule 144 or Rule 145 under the Securities Act (or any successor
exemptive rule hereafter in effect).
(b) During the three (3) years following the Effective Date,
Republic shall use its best efforts to maintain its listing on The Nasdaq Stock
Market or other nationally recognized securities exchange.
ARTICLE IX
INDEMNIFICATION
9.1 AGREEMENT BY THE SHAREHOLDERS TO INDEMNIFY. After the
Effective Time, the Shareholders jointly and severally agree to indemnify and
hold Republic harmless from and against the aggregate of all expenses, losses,
costs, deficiencies, liabilities and damages (including, without limitation,
reasonable related counsel and paralegal fees and expenses) incurred or
suffered by Republic in excess of $250,000, arising out of or resulting from
(i) any breach of a representation or warranty made by the Shareholders in or
pursuant to this Agreement, except for matters disclosed to Republic prior to
Closing pursuant to Section 5.6 hereof which matters were not known to the
Shareholders prior to the execution hereof, (ii) any claims, suits or
proceedings relating to or arising out of the distribution and spin-off by
Incendere of its incinerator business and assets, or (iii) any inaccuracy in
any certificate delivered by any of the Schaubach Companies or any Shareholder
pursuant to this Agreement (collectively, "Indemnifiable Damages"). Without
limiting the generality of the foregoing, with respect to the measurement of
Indemnifiable Damages, Republic shall have the right to be put in the same
pre-tax consolidated financial position as it would have been in had each of
the representations and warranties of the Shareholders hereunder been true and
correct. The total Indemnifiable Damages shall not exceed $5,000,000 in the
aggregate; provided, however, that up to an additional $2,500,000 of
Indemnifiable Damages may be collected by Republic if required to indemnify
Republic for Indemnifiable Damages arising out of any breach of the
representations and warranties contained in Section 3.13 or Section 3.19(xvii)
or arising out of the matters referred to in clause (ii) of the first sentence
of Section 9.1.
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9.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Shareholders in this Agreement or
pursuant hereto shall survive for a period of one year after the Effective Time
except as follows: (i) the representations and warranties of the Shareholders
contained in Section 3.19, with respect to the Schaubach Companies' "S"
corporation elections shall expire at the time the period of limitations
(including any extensions thereof pursuant to the delivery of waivers of the
applicable period of limitations) expires for the assessment by the taxing
authority of additional Taxes with respect to such matter; and (ii) the
representations and warranties of the Shareholders contained in Sections 3.1,
3.2, 3.3, 3.4, and 3.5 shall not expire but shall survive indefinitely. No
claim for the recovery of Indemnifiable Damages may be asserted by Republic
against the Shareholders after such representations and warranties shall thus
expire, provided, however, that claims for Indemnifiable Damages first asserted
by written notice within the applicable period shall not thereafter be barred.
Notwithstanding any facts determinable by any party by investigation, each
party shall have the right to fully rely on the representations, warranties,
covenants and agreements of the other parties contained in this Agreement or in
any other documents or papers delivered in connection herewith. Each
representation, warranty, covenant and agreement of the parties contained in
this Agreement is independent of each other representation, warranty, covenant
and agreement.
9.3 SECURITY FOR THE SHAREHOLDERS' INDEMNIFICATION OBLIGATION.
As security for the agreement by the Shareholders to indemnify and hold
Republic harmless as described in this Article IX at the Closing, Republic
shall set aside and hold certificates representing the Held Back Shares issued
pursuant to this Agreement. Republic may set off against the Held Back Shares
any Indemnifiable Damages or other damages hereunder for which the Shareholders
may be responsible pursuant to this Agreement subject, however, to the
following terms and conditions:
(a) Republic shall give written notice to the
Shareholders of any claim for Indemnifiable Damages, which notice
shall set forth (i) the amount of Indemnifiable Damages or other
damages hereunder which Republic claims to have sustained by reason
thereof, (ii) the basis of such claim and (iii) copies of all
documentation and other evidence in support of such claim;
(b) Unless the Indemnifiable Damages arise from a claim
of a third party, with respect to which the Shareholders have elected
to assume the defense of and pay any resulting liability, judgment or
settlement thereof, such set off shall be effected on the later to
occur on the expiration of 30 days from the date of such notice (the
"Notice of Contest Period") or, if such claim is contested, the date
the dispute is resolved in accordance with paragraph (c) below, and
such set off
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<PAGE> 47
shall be charged proportionally against the shares set aside;
(c) If, prior to the expiration of the Notice of Contest
Period, the Shareholders shall notify Republic in writing of an
intention to dispute the claim and if such dispute is not resolved
within 30 days after expiration of such period (the "Resolution
Period"), then Republic shall submit such dispute to arbitration which
shall be conducted in Norfolk, Virginia by a committee of three
arbitrators (one appointed by the Shareholders, one appointed by
Republic and one appointed by the two arbitrators so appointed), which
shall be appointed within 60 days after the expiration of the
Resolution Period. The arbitrators shall permit discovery in
accordance with the Federal Rules of Civil Procedure and shall abide
by the commercial arbitration rules of the American Arbitration
Association and their decision shall be made within 45 days of being
appointed and shall be final and binding on all parties. If the
judgment of the arbitrators is adverse to the Shareholders, the amount
thereof shall be paid by the Shareholders within ten (10) days of the
written decision of the arbitrators, which when aggregated with all
Indemnifiable Damages shall not exceed the applicable limitations set
forth at the end of Section 9.1. In the event the Shareholders do not
pay within such ten day period, then Republic shall within five (5)
days thereafter, set off against such portion of the Held Back Shares
as shall have an aggregate value equal to the amount of the final
judgment of the arbitrators;
(d) After the Held Back Shares are registered and any
restrictions on sale imposed under the Securities Act or otherwise are
terminated, the Shareholders may instruct Republic to sell some or all
of the Held Back Shares and the net proceeds thereof shall be
substituted for such Held Back Shares in any set off to be made by
Republic pursuant to any claim hereunder subject to continued
compliance with any applicable SEC and other regulations. The
Shareholders may direct that such proceeds be reinvested in investment
grade securities subject to the security interest contemplated herein;
(e) For purposes of this Article, the shares of Republic
Common Stock not sold as provided in clause (d) of this Section shall
be valued at the Average Closing Sale Price.
(f) For purposes of this Article, Republic may rely on a
writing signed only by Dwight C. Schaubach as constituting the
instructions, notice or other communication of or with all of the
Shareholders.
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<PAGE> 48
9.4 VOTING OF AND DIVIDENDS ON THE HELD BACK SHARES. Except
with respect to shares transferred pursuant to the foregoing right of setoff
(and in the case of such shares, until the same are transferred), all Held Back
Shares shall be deemed to be owned by the Shareholders and the Shareholders
shall be entitled to vote the same; provided, however, that, there shall also
be deposited with Republic subject to the terms of this Article, all shares of
Republic Common Stock issued to the Shareholders as a result of any stock
dividend or stock split and all cash issuable to the Shareholders as a result
of any cash dividend, with respect to the Held Back Shares. All stock and cash
issued or paid upon Held Back Shares shall be distributed to the person or
entity entitled to receive such Held Back Shares together with such Held Back
Shares.
9.5 DELIVERY OF HELD BACK SHARES. Republic agrees to deliver to
the Shareholders no later than the first anniversary of the Effective Time any
Held Back Shares then held by it (or proceeds from the Held Back Shares) unless
there then remains unresolved any claim for Indemnifiable Damages or other
damages hereunder as to which notice has been given, in which event any Held
Back Shares remaining on deposit (or proceeds from the sale of Held Back
Shares) after such claim shall have been satisfied shall be returned to the
Shareholders promptly after the time of satisfaction.
9.6 ADJUSTMENT TO MERGER CONSIDERATION. All setoffs of Held
Back Shares or other payments for Indemnifiable Damages made pursuant to this
Article IX shall be treated as adjustments to the consideration granted in the
Mergers and Share Exchange under Article I.
9.7 NO BAR. If the Held Back Shares are insufficient to set off
any claim for Indemnifiable Damages or other damages made hereunder (or have
been delivered to the Shareholders prior to the making or resolution of such
claim), then Republic may take any action or exercise any remedy available to
it by appropriate legal proceedings to collect the Indemnifiable Damages or
other damages; provided, however, following consummation of the Mergers, a
claim for Indemnifiable Damages pursuant to this Article IX shall be Republic's
sole and exclusive remedy for any breach of the representations and warranties,
contained herein or in any certificate delivered in connection with the
Closing, or for any inaccuracy in any certificate delivered by any of the
Schaubach Companies or any Shareholder pursuant to this Agreement, and in
consideration of such limitation, the Shareholders agree to waive any and all
rights of contribution or other claims he or she may have against the Schaubach
Companies with respect to the breach of any of the Schaubach Companies'
representations and warranties.
9.8 AGREEMENT BY REPUBLIC TO INDEMNIFY. After the Effective
Time, Republic agrees to indemnify and hold the Shareholders harmless from and
against the aggregate of all expenses, losses, costs, deficiencies, liabilities
and damages (including, without limitation, reasonable related counsel and
paralegal fees and expenses) incurred or suffered by the Shareholders arising
out of
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<PAGE> 49
or resulting from any breach of a representation or warranty made by Republic
in or pursuant to this Agreement. Each of the representations and warranties
made by Republic in this Agreement shall survive for a period of one year after
the Effective Time, and no claim for indemnification for a breach of a
representation or warranty made by Republic may be asserted by the Shareholders
against Republic after such representations and warranties shall thus expire,
provided, however, that claims for indemnification first asserted in writing
within the one year period shall not thereafter be barred. Notwithstanding the
foregoing, Republic shall not be liable to the Shareholders with respect to any
claim for indemnification for a breach of a representation or warranty made by
Republic unless all such claims incurred by the Shareholders exceed an
aggregate of $250,000, in which case Republic shall be liable only for the
amount in excess of $250,000, and further provided that Republic shall not be
liable to the Shareholders with respect to any such claims in excess of
$5,000,000 in the aggregate; provided, however, that up to an additional
$33,000,000 of indemnifiable damages may be collected by the Shareholders if
required to indemnify the Shareholders for any indemnifiable damages arising
out of a breach of a representation or warranty made by Republic in Sections
2.3, 2.4 or 2.10 hereof. Republic will satisfy any obligation of
indemnification under this Section 9.8 by delivery of shares of Republic Common
Stock only. In determining the number of shares of Republic Common Stock to be
delivered to satisfy any indemnification obligation by Republic, the value of
such Republic Common Stock shall be determined by the Average Closing Sale
Price.
ARTICLE X
SECURITIES LAW MATTERS
The parties agree as follows with respect to the sale or other
disposition after Effective Time of the Republic Shares:
10.1 DISPOSITION OF SHARES. The Shareholders represent and
warrant that the shares of Republic Common Stock being acquired by them
hereunder are being acquired and will be acquired for their own respective
accounts and will not be sold or otherwise disposed of, except pursuant to (a)
an exemption from the registration requirements under the Securities Act, which
does not require the filing by Republic with the SEC of any registration
statement, offering circular or other document, in which case, the Shareholders
shall first supply to Republic an opinion of counsel (which counsel and
opinions shall be satisfactory to Republic) that such exception is available,
or (b) an effective registration statement filed by Republic with the SEC under
the Securities Act.
10.2 LEGEND. (a) The certificates representing the Republic
Shares shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER
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<PAGE> 50
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND IN COMPLIANCE WITH APPLICABLE
SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO, OR IN ACCORDANCE
WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE, AND ALSO
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER
WITHOUT COMPLIANCE WITH THE SECURITIES AND EXCHANGE COMMISSION'S
ACCOUNTING SERIES RELEASES 130 AND 135.
Republic may, unless a registration statement is in effect covering such
shares, place stop transfer orders with its transfer agents with respect to
such certificates in accordance with federal securities laws.
(b) In connection with any sale by a Holder of Republic Shares
included in the Registration Statement referred to in Article VIII hereof,
Republic agrees to cause the legend set forth in this Section 10.2 to be
promptly removed from the certificates representing the Republic Shares sold
and to cause related stop transfer restrictions to be lifted with respect to
such shares upon delivery to Republic or its transfer agent of a written
representation (in a form reasonably acceptable to Republic) from the Holder or
the Holder's securities broker regarding the manner of sale and such other
matters as shall be reasonably requested by Republic. Following removal of a
legend as set forth above (and assuming that the Registration Statement shall
then be effective), the Republic Shares referred to in such notice shall be
transferable without restriction under the federal securities laws.
ARTICLE XI
DEFINITIONS
11.1 DEFINED TERMS. As used herein, the following terms shall
have the following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations under the Exchange Act, as
in effect on the date hereof.
"Average Closing Sale Price" shall mean $29.625 per share
of Republic Common Stock.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contract" means any agreement, contract, lease, note,
mortgage, indenture, loan agreement, franchise agreement, covenant,
employment agreement, license, instrument, purchase and sales order,
commitment, undertaking, obligation, whether written or oral, express
or implied.
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in
effect in the United States of America from time to time.
"Governmental Authority" means any nation or government, any
state, regional, local or other political subdivision thereof, and any
entity or official exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, but not limited
to, any conditional sale or other title retention agreement, any lease
in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code or comparable
law or any jurisdiction in connection with such mortgage, pledge,
security interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a change (or
effect), in the condition (financial or otherwise), properties,
assets, liabilities, rights, obligations, operations, business or
prospects which change (or effect) individually or in the aggregate,
is materially adverse to such condition, properties, assets,
liabilities, rights, obligations, operations, business or prospects,
and when such term is used with respect to the Schaubach Companies,
the existence of a Material Adverse Change (or Effect) shall be
determined by reference to the Schaubach Companies in the aggregate.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, estate, trust, unincorporated
association, joint venture, Governmental Authority or other entity, of
whatever nature.
"Register", "registered" and "registration" refer to a
registration of the offering and sale of securities effected by
preparing and filing a registration statement in compliance with the
Securities Act and the declaration or ordering of the effectiveness of
such registration statement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
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"Tax Return" means any tax return, filing or information
statement required to be filed in connection with or with respect to
any Taxes; and
"Taxes" means all taxes, fees or other assessments,
including, but not limited to, income, excise, property, sales,
franchise, intangible, withholding, social security and unemployment
taxes imposed by any federal, state, local or foreign governmental
agency, and any interest or penalties related thereto.
11.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the
defined meanings when used in any certificates, reports or other documents made
or delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a
comparable meaning when used in the plural, and vice versa.
(c) All matters of an accounting nature in connection
with this Agreement and the transactions contemplated hereby shall be
determined in accordance with GAAP applied on a basis consistent with prior
periods, where applicable.
(d) As used herein, the neuter gender shall also denote
the masculine and feminine, and the masculine gender shall also denote the
neuter and feminine, where the context so permits.
ARTICLE XII
TERMINATION, AMENDMENT AND WAIVER
12.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of all of the parties
hereto at any time prior to the Closing; or
(b) by either Republic or the Schaubach Companies at any
time prior to the Closing Date if there shall be a pending or
threatened action or proceeding before any court or other governmental
body which shall seek to restrain, prohibit or invalidate the
transactions contemplated hereby, and which, in the reasonable
judgment of such party, makes it inadvisable to proceed with the
transactions contemplated by this Agreement; or
(c) by Republic in the event of a material breach by any
of the Schaubach Companies or any of the Shareholders of any provision
of this Agreement, or by the Schaubach Companies in the event of a
material breach
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<PAGE> 53
by any of the Republic Companies of any provision of this Agreement; or
(d) by either Republic or the Schaubach Companies, if
the Closing shall not have occurred by May 31, 1996.
12.2 EFFECT OF TERMINATION. Except as provided in Article IX, in
the event of termination of this Agreement pursuant to Section 12.1, this
Agreement and the Plans of Merger shall forthwith become void; provided,
however, that nothing herein shall relieve any party from liability for the
willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
ARTICLE XIII
GENERAL PROVISIONS
13.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by
certified or registered mail (first class postage pre-paid), guaranteed
overnight delivery, or facsimile transmission if such transmission is confirmed
by delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall
designate in writing to the other party):
(a) IF TO ANY OF THE REPUBLIC COMPANIES TO:
Republic Industries, Inc.
200 East Las Olas Blvd., Suite 1400
Ft. Lauderdale, FL 33301
Attn: Richard L. Handley, General Counsel
Telecopy: (305) 779-3884
WITH A COPY TO:
Akerman, Senterfitt & Eidson, P.A.
One Southeast Third Avenue, 28th Floor
Miami, Florida 33131
Attention: Jonathan L. Awner, Esq.
Telecopy: (305) 374-5095
(b) IF TO THE SCHAUBACH COMPANIES AND/OR THE
SHAREHOLDERS TO:
Incendere, Inc.
3710 Indian River Road
Chesapeake, VA 23325
Attn: Dwight C. Schaubach, President
Telecopy: (804) 424-7737
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<PAGE> 54
WITH A COPY TO:
Willcox & Savage, P.C.
1800 NationsBank Center
One Commercial Place
Norfolk, VA 23510
Attention: Keith C. Cuthrell, Jr., Esq.
Telecopy: (804) 628-5566
13.2 ENTIRE AGREEMENT. This Agreement (including the Exhibits
and Schedules attached hereto) and other documents delivered at the Closing
pursuant hereto, contains the entire understanding of the parties in respect of
its subject matter and supersedes all prior agreements and understandings (oral
or written) between or among the parties with respect to such subject matter.
The Exhibits and Schedules constitute a part hereof as though set forth in full
above.
13.3 EXPENSES. Except as otherwise provided herein, the parties
shall pay their own fees and expenses, including their own counsel fees,
incurred in connection with this Agreement or any transaction contemplated
hereby. The $45,000 filing fee for the notification to be made by Dwight C.
Schaubach under the HSR Act as an "Acquiring Person" shall be paid by
Incendere.
13.4 AMENDMENT; WAIVER. This Agreement may not be modified,
amended, supplemented, canceled or discharged, except by written instrument
executed by all parties. No failure to exercise, and no delay in exercising,
any right, power or privilege under this Agreement shall operate as a waiver,
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude the exercise of any other right, power or privilege. No
waiver of any breach of any provision shall be deemed to be a waiver of any
preceding or succeeding breach of the same or any other provision, nor shall
any waiver be implied from any course of dealing between the parties. No
extension of time for performance of any obligations or other acts hereunder or
under any other agreement shall be deemed to be an extension of the time for
performance of any other obligations or any other acts. Except as provided in
Article IX, the rights and remedies of the parties under this Agreement are in
addition to all other rights and remedies, at law or equity, that they may have
against each other.
13.5 BINDING EFFECT; ASSIGNMENT. The rights and obligations of
this Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall
be construed to give any other person any legal or equitable rights hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned by any party without the prior written consent of
the other parties.
13.6 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original but all of which together
shall constitute one and the same instrument.
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<PAGE> 55
13.7 INTERPRETATION. When a reference is made in this Agreement
to an article, section, paragraph, clause, schedule or exhibit, such reference
shall be deemed to be to this Agreement unless otherwise indicated. The
headings contained herein and on the schedules are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement
or the schedules. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." Time shall be of the essence in this Agreement.
13.8 GOVERNING LAW; INTERPRETATION. This Agreement shall be
construed in accordance with and governed for all purposes by the laws of the
State of Florida applicable to contracts executed and to be wholly performed
within such State.
13.9 ARM'S LENGTH NEGOTIATIONS. Each party herein expressly
represents and warrants to all other parties hereto that (a) before executing
this Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party
has had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.
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<PAGE> 56
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
REPUBLIC INDUSTRIES, INC., a
Delaware corporation
By: /s/ Richard L. Handley
-------------------------------
Name: Richard L. Handley
Title: Senior Vice President
RI/AREA, INC., A VIRGINIA
CORPORATION
By: /s/ Richard L. Handley
--------------------------------
Name: Richard L. Handley
Title: Vice President
RI/SMITH, INC., A NORTH CAROLINA
CORPORATION
By: /s/ Richard L. Handley
---------------------------------
Name: Richard L. Handley
Title: Vice President
INCENDERE, INC., A VIRGINIA
CORPORATION
By: Dwight C. Schaubach
---------------------------------
Name: Dwight C. Schaubach
Title: President
AREA CONTAINER SERVICES, INC., A
VIRGINIA CORPORATION
By: /s/ Dwight C. Schaubach
---------------------------------
Name: Dwight C. Schaubach
Title: Chief Executive Officer
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<PAGE> 57
SMITHTON SANITATION SERVICE, INC.,
A NORTH CAROLINA CORPORATION
By: /s/ Dwight C. Schaubach
---------------------------------
Name: Dwight C. Schaubach
Title: President
/s/ Dwight C. Schaubach
------------------------------------
Dwight C. Schaubach, individually
/s/ James D. Schaubach
------------------------------------
James D. Schaubach, individually
/s/ Emmett K. Moore
------------------------------------
Emmett K. Moore, individually
/s/ Charles F. Moore
------------------------------------
Charles F. Moore, individually
/s/ R.D. Cuthrell
------------------------------------
R.D. Cuthrell, individually
57
