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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 26, 1998
Date of Report (Date of earliest event reported)
ANALYTICAL SURVEYS, INC.
(Exact name of registrant as specified in its charter)
COLORADO
(State of incorporation)
0-13111
(Commission File Number)
084-846389
(IRS Employer Identification No.)
941 North Meridian Street
Indianapolis, Indiana 46204
(Address of principal executive offices)
(317)-634-1000
(Registrant's telephone number)
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Item 2. Acquisition or Disposition of Assets
On June 26, 1998, Analytical Surveys, Inc. (the "Company") acquired all
of the outstanding stock of Cartotech, Inc. ("Cartotech"), a Texas
corporation, 11900 Crownpoint Drive, San Antonio, Texas from The Epner Family
Limited Partnership (the "Epner Partnership"), The Braverman Family Limited
Partnership (the "Braverman Partnership"), The Cartotech, Inc. Employee Stock
Ownership and 401(k) Trust (the "ESOP") and Albert Naumann, III (collectively
referred to as the "Shareholders"), who constitute all of the shareholders of
Cartotech. The transaction was consummated via a merger (the "Merger") of
Cartotech with and into Surveys Holdings, Inc. ("Holdings"), a Texas
corporation, and a wholly-owned subsidiary of the Company. Cartotech is
engaged in the business of data conversion, digital mapping and database
construction in the geographic information systems industry.
Consideration paid for Cartotech consisted of a net amount of cash of
approximately $7,700,000 and 354,167 restricted shares of Analytical Surveys,
Inc. no par value common stock (the "Common Stock"). The number of shares of
Common Stock issued was determined in part by the average closing price of
the Common Stock over the ten trading days before and after June 12, 1998,
the day after the transaction was publicly announced. The Common Stock is
subject to contractual restrictions on sale or transfer and a registration
rights agreement. The ESOP has agreed not to sell any of the Common Stock it
receives for one year. The Epner Partnership, the Braverman Partnership and
Albert Naumann, III (collectively referred to as the "Non-ESOP Shareholders")
have agreed not to sell any of the Common Stock received in the Merger for
one year; between June 27, 1999 and June 26, 2000, inclusive, each of the
Non-ESOP Shareholders may transfer up to one-half of the Common Stock
received in the Merger. The Shareholders also have certain additional
incidental registration rights beginning after June 26, 1999. The
Shareholders have granted to the Company an option to purchase at the market
price, in lieu of registration, any shares that they subject to an incidental
registration. A Non-ESOP Shareholder is allowed to make transfers to a trust
or other entity created for the exclusive benefit of, or beneficially owned
exclusively by, such Non-ESOP Shareholder at any time, but any transferee is
subject to the same restrictions as apply to such Non-ESOP Shareholder.
Prior to the Merger, there was no material relationship between the
Company or any of its affiliates, officers or directors and Cartotech or any
of its affiliates, officers or directors. Martin Epner, who served as
President of Cartotech and who controls the Epner Partnership, will serve the
Company in a consulting capacity under an 18-month agreement, and Albert
Naumann III will serve as president of the subsidiary under a 2-year
employment agreement.
On June 3, 1998, the Company replaced its existing lines of credit with
a 3-year, $11.0 million secured line of credit and a $10.0 million line of
credit for acquisitions (which is due in quarterly installments over a
five-year period), and the Company refinanced $16.0 million of term debt.
The lender under the new credit facilities is Bank One, Colorado, N.A.
Borrowings under the new credit facilities bear interest at a rate per annum
equal to, at the Company's option, (i) the bank's prime rate, or (ii) an
adjusted London Interbank Offered Rate ("LIBOR") plus a margin ranging from
1.25% to 2.25%. The Company borrowed approximately $8.3 million under the
new acquisition line of credit to fund the cash portion of the acquisition of
Cartotech and related expenses.
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The Common Stock was newly issued from the previously authorized but
unissued shares of the Company.
The assets of the business acquired included contracts with customers
and equipment used in Cartotech's data conversion business. The Company
intends to continue to operate the business in substantially the same
general manner and in the same location.
Certain statements made in this Report on Form 8-K are forward looking
statements within the meaning of the Private Securities Litigation Act of
1995. Actual results may differ materially from the Company's expectations.
A number of uncertainties and other factors could cause actual results to
differ materially from such forward looking statements. More detailed
description of the factors that could affect the Company's financial results
are included in the Company's Annual Report on Form 10-K and other filings
with the Securities and Exchange Commission. The Company assumes no
obligation to update this report.
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired
It is impractical for the registrant to provide the required financial
statements of the business acquired in time for inclusion in the initial
filing of this report on Form 8-K. The required financial statements of the
business acquired will be provided by an amendment to this report on Form 8-K
as soon as practical, which is expected to be within 60 days.
(b) Pro forma financial information
It is impractical for the registrant to provide the required pro forma
financial information in time for inclusion in the initial filing of this
report on Form 8-K. The required pro forma financial information will be
provided by an amendment to this report on Form 8-K as soon as practical,
which is expected to be within 60 days.
(c) Exhibits
2. Plan of acquisition, reorganization, arrangement, liquidation or
succession:
2.1 Agreement and Plan of Merger dated June 11, 1998 by and among
Analytical Surveys, Inc. and Surveys Holdings, Inc. on the one hand, and The
Epner Family Limited Partnership, The Braverman Family Limited Partnership,
The Cartotech, Inc. Employee Stock Ownership and 401(k) Trust and Albert
Naumann, III.
2.2 Registration Rights Agreement dated June 26, 1998, among
Analytical Surveys, Inc. and The Epner Family Limited Partnership, The
Braverman Family Limited Partnership and Albert Naumann, III.
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2.3 Registration Rights Agreement dated June 26, 1998, between
Analytical Surveys, Inc. and The Cartotech, Inc. Employee Stock Ownership and
401(k) Trust.
2.4 Lock-up Agreement dated June 26, 1998, among The Epner Family
Limited Partnership, The Braverman Family Limited Partnership, The Cartotech,
Inc. Employee Stock Ownership and 401(k) Trust and Albert Naumann, III
The Merger Agreement included the following additional schedules, which are
not included as a part of this report but which the registrant agrees to
submit to the Commission upon request: customary disclosure schedules,
opinions of counsel, employment agreements, a consulting agreement with
Martin Epner. Escrow Agreement, Option Buy-Out Agreements, Articles of
Incorporation and bylaws of Cartotech, Articles of Merger, Bill of Sale,
Press Release, and Consent Letters.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Analytical Surveys, Inc.
By: /s/ Scott C. Benger
---------------------------------------
Scott C. Benger
Secretary/ Treasurer
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AGREEMENT AND PLAN OF MERGER
AMONG
ANALYTICAL SURVEYS, INC.,
SURVEYS HOLDINGS, INC.
AND THE
SHAREHOLDERS
OF
CARTOTECH, INC.
AS OF JUNE 11, 1998
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AGREEMENT AND PLAN OF MERGER
This Merger Agreement (this "Agreement") is entered into as of June
11, 1998, by and among (a) Analytical Surveys, Inc., a Colorado corporation
("ASI"); (b) Surveys Holdings, Inc., a Texas corporation ("Holdings") and a
wholly-owned subsidiary of ASI; and (c) the Cartotech, Inc. Employee Stock
Ownership & 401(k) Trust (the "ESOP") established by Cartotech, Inc. (the
"Company"), the Epner Family Limited Partnership (the "Epner Partnership"),
the Braverman Family Limited Partnership (the "Braverman Partnership") and
Albert Naumann III ("Naumann"). The ESOP, the Epner Partnership, the
Braverman Partnership and Naumann are each referred to as a "Shareholder" and
collectively as the "Shareholders."
RECITALS
The Company and the Shareholders desire that the Company merge with
and into Holdings (the "Merger"), and ASI and Holdings also desire that the
Company merge with and into Holdings, upon the terms and conditions set forth
in this Agreement and in accordance with the Texas Business Corporation Act
and that all of the issued and outstanding capital stock of the Company (the
"Shares") be converted upon such Merger into the right to receive such number
of shares of common stock, no par value of ASI ("Common Stock") and cash as
is provided in this Agreement.
AGREEMENT
The parties agree as follows:
ARTICLE I.
DEFINITIONS
1.1 For purposes of this Agreement:
ADJUSTED NET WORTH means the assets minus the liabilities as
shown on the Latest Balance Sheet and the Closing Date Balance Sheet, as
applicable.
ADJUSTMENT DATE means the date that is agreed to by the Company
and the Shareholders' Agent, but if no agreement is reached then such date is
the first business day that falls 75 days after the Closing.
ADVERSE CONSEQUENCES means all actions, suits, proceedings,
investigations, complaints, claims, demands, Orders, liabilities, liens,
losses, damages, penalties, fines, settlements, costs (including removal and
remediation costs), expenses and fees (including court costs and reasonable
fees and expenses of counsel and other
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experts).
AFFILIATE means any Person controlled by, controlling, or under
common control with another Person.
AFFILIATED GROUP means any affiliated group within the meaning
of Code Section 1504 or any similar group defined under a similar provision
of state, local or foreign law.
ALLOCATED SHARES means the Shares held by the ESOP that are not
Unallocated Shares.
ASI DISCLOSURE DOCUMENTS means the disclosure documents
prepared by ASI and approved by the Company, relating to ASI, the Common
Stock, and the Merger.
ASI INDEMNITEE has the meaning given to such term in Section
9.2.
ASI SHARE VALUE means the average of the closing price of the
Common Stock on Nasdaq on each of the first twenty days on which trading in
the Common Stock occurs on Nasdaq, beginning on May 29, 1998 [ASSUMES A JUNE
12 PUBLIC ANNOUNCEMENT DATE AND JUNE 26 CLOSING, BUT THE SAME DATES WILL
APPLY REGARDLESS OF WHEN THE CLOSING OCCURS; THE CLOSING MUST OCCUR BY JULY
10].
BENEFIT ARRANGEMENT has the meaning given to such term in
Section 4.1(n)(iii).
BUSINESS DAYS means any weekday that is not a national holiday.
CLOSING AND CLOSING DATE have the meanings given to such terms
in Section 7.1.
CLOSING DATE BALANCE SHEET has the meaning given to such term
in Section 2.8.
CODE means the Internal Revenue Code of 1986, as amended.
COMMON STOCK has the meaning given to such term in the Recitals.
COMPANY ESOP DEBT means the Company-to-Bank ESOP Debt and the
Company-to Partnership ESOP Debt.
COMPANY EMPLOYEE BENEFIT PLANS have the meaning given in
Section 4.1(n)(i).
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COMPANY-TO-BANK ESOP DEBT means the (i) indebtedness of the
Company under the term note #5101720, payable to NationsBank of Texas, N.A.
("NationsBank") in the outstanding amount of $345,833.21 as of May 31, 1998,
(ii) indebtedness of the Company under the term note #5339221, payable to
NationsBank in the outstanding amount of $86,072.73 as of May 31, 1998, and
(iii) indebtedness of the Company under the term note #5450036, payable to
NationsBank in the outstanding amount of $248,008.20 as of May 31, 1998, all
of which were incurred by the Company in connection with the ESOP's purchase
of Shares.
COMPANY-TO-PARTNERSHIP ESOP DEBT means the indebtedness of the
Company under the two promissory notes with (i) one such note payable to
Braverman Partnership in the outstanding amount of $256,057.76 as of May 31,
1998, and (ii) the other such note payable to the Epner Partnership in the
outstanding amount of $256,057.76 as of May 31, 1998, both of which were
incurred by the Company in connection with the ESOP's purchase of Shares.
COMPANY DISCLOSURE DOCUMENTS means the disclosure documents
prepared by the Company and approved by ASI relating to the Company, the
Shares and the Merger.
CONIC TRANSACTION means the transaction described in Section
2.10.
CONTRACT VALUE means the sum of revenues paid to the Company,
amounts owed to the Company, and amounts to become payable to the Company
upon performance of the services required under a contract, in progress as of
the Closing Date, signed by the Company and the customer but not yet
commenced, or awarded to the Company but not yet signed by both the Company
and the customer.
CREDITED VALUE of the Common Stock on any date will be the average
of the closing price of the Common Stock on each of the 10 trading days ending
one trading day prior to that date as reported by the principal exchange on
which the Common Stock is traded on each such day or, if the Common Stock is not
traded on an exchange on any of such 10 trading days, as reported by Nasdaq. If
the closing price of the Common Stock is not reported for any such day, the
Credited Value of the Common Stock will be the average of the bid and asked
prices for that day as reported by Nasdaq, or, if bid and asked prices are not
reported by Nasdaq on any such day, as reported by the National Quotation
Bureau, Inc. If the Credited Value cannot be determined in any of the ways
described above, the Credited Value will mean the value of the Common Stock as
determined by the Shareholders' Agent and by ASI in any reasonable manner, or,
if they cannot agree, then by arbitration in accordance with
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Section 10.2.
EFFECTIVE DATE has the meaning given in Section 2.3.
EMPLOYEE BENEFIT PLAN means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) qualified defined
benefit retirement plan or arrangement which is an Employee Pension Benefit
Plan (including any Multiemployer Plan) or (d) Employee Welfare Benefit Plan.
EMPLOYEE PENSION BENEFIT PLAN has the meaning given to such
term in ERISA Section 3(2).
EMPLOYEE WELFARE BENEFIT PLAN has the meaning given to such
term in ERISA Section 3(1).
ENCUMBRANCE means any mortgage, pledge, conditional sale
agreement, charge, claim, interest of another Person, lien, security
interest, title defect or other encumbrance.
ENVIRONMENTAL OBLIGATIONS means all present Legal Requirements
and Permits concerning land use, public health, safety, welfare or the
environment, including, without limitation, the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.), as amended, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. Section
9601 et seq.), as amended, and the Occupational Safety and Health Act, as
amended, and any civil liability (under any Legal Requirement or under common
law) to any Person.
ERISA means the Employee Retirement Income Security Act of
1974, as amended, and any regulations, rules or orders promulgated under the
Employee Retirement Income Security Act of 1974, as amended.
ESCROW AGENT will be BankOne Colorado.
ESCROW AGREEMENT means the Escrow Agreement among ASI, the
Shareholders, and the Escrow Agent in the form of EXHIBIT A.
ESOP-TO-COMPANY ESOP DEBT means the indebtedness of the ESOP to
the Company in the outstanding amount of $1,192,029.66 as of May 31, 1998.
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ESOP TRUSTEE means Gene Barber.
GAAP means generally accepted accounting principles as in
effect from time to time in the United States, as consistently applied, and
in accordance with all pronouncements of the Financial Accounting Standards
Board.
GOVERNMENTAL AUTHORITY means the United States of America, any
state, commonwealth, territory or possession of the United States of America,
any political subdivision of any of them (including counties, municipalities,
home-rule cities and the like), and any agency, authority or instrumentality
of any of the foregoing, including, without limitation, any court, tribunal,
department, bureau, commission or board.
INCOME TAX means any federal, state or local Tax based on
income, gross receipts, or profits, including any interest, penalty, or
similar payment obligation arising in connection with such Tax, including the
Texas corporate franchise tax.
INDEPENDENT FIDUCIARY means Consulting Fiduciaries, Inc.
INTELLECTUAL PROPERTY means all trade, corporate, business and
product names, trademarks, trademark rights, service marks, copyrights,
patents, patent rights, trade secrets, and computer software (other than
software not used or useful in the business of the Company and other than
readily available software purchased at a cost of less than $5,000 in the
aggregate for all sites and seats using such software), and all
registrations, licenses and applications pertaining to any of them.
INCENTIVE STOCK OPTION means those incentive stock options
issue by the Company to certain employees of the Company giving the holder of
each such option the right to purchase Shares in accordance with the terms of
the incentive stock option plan and the grant issuing the option to such
employee.
LATEST BALANCE SHEET has the meaning given to such term in
Section 4.1(e).
LEGAL REQUIREMENT means any constitution, statute, ordinance,
code, or other law (including common law), rule, regulation, Order, notice,
standard, procedure or other requirement enacted, adopted, applied or issued
by any Governmental Authority.
LINE OF CREDIT NOTES means the (i) indebtedness of the Company
under the accounts receivable line of credit note #5445044, payable to
NationsBank in the
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outstanding amount of $300,000.00 as of May 31, 1998, (ii) indebtedness of
the Company under the equipment line of credit note #5194238, payable to
NationsBank in the outstanding amount of $10,490.34 as of May 31, 1998, (iii)
indebtedness of the Company under the equipment line of credit note #5209796,
payable to NationsBank in the outstanding amount of $20,784.98 as of May 31,
1998, (iv) indebtedness of the Company under the equipment line of credit
note #5241195, payable to NationsBank in the outstanding amount of $9,171.24
as of May 31, 1998, and (v) indebtedness of the Company under the equipment
line of credit note #5259825, payable to NationsBank in the outstanding
amount of $10,846.00 as of May 31, 1998.
LIQUIDATION DATE means the later of (i) the date that any
Adverse Consequence becomes a liability of the party suffering the Adverse
Consequence as determined in accordance with GAAP, and (ii) the date that the
party suffering the Adverse Consequence gives the other party notice under
Section 9.4(a).
LOCK-UP AGREEMENT means the Lock-Up Agreement between ASI and
the Shareholders in the form of EXHIBIT B.
MERGER has the meaning given it in the Recitals.
MULTIEMPLOYER PLAN has the meaning given to such term in ERISA
Section 3(37). OPTIONS means the stock options described in Section 4.1(c)
and SCHEDULE 4.1(C).
NON-ESOP SHAREHOLDERS means the Epner Partnership, the
Braverman Partnership and Naumann.
OPTION BUY OUT AGREEMENT means the agreement entered into
between the Company and each of the Option Holders providing for the
Company's purchase of the Incentive Stock Options, which agreement is in the
form of EXHIBIT C.
OPTION HOLDERS means those employees of the Company identified
in part (iii) of SCHEDULE 4.1(c) holding the right to purchase Shares from
the Company pursuant to the terms of the grant under the Incentive Stock
Option, and identifying which of such Option Holders have options to purchase
Shares (and for how many Shares) at a purchase price of $60.36 per Share and
which (and for how many Shares) at a purchase price of $85.08 per Share.
ORDERS means all judgments, injunctions, orders, rulings,
decrees, directives, notices of violation or other requirements of any
Governmental Authority or
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arbitrator having jurisdiction in the matter, including a bankruptcy court or
trustee.
OTHER ASI AGREEMENTS means any documents and instruments
executed and delivered by ASI or Holdings at Closing, excluding this
Agreement.
OTHER SHAREHOLDER AGREEMENTS means any documents and
instruments executed and delivered by any of the Shareholders upon the
signing of this Agreement, or at Closing, excluding this Agreement.
PERMITS means all permits, licenses, consents, franchises,
authorizations, approvals, privileges, waivers, exemptions, variances,
exclusionary or inclusionary Orders and other concessions, whether
governmental or private, including, without limitation, those relating to
environmental, public health, welfare or safety matters.
PERMITTED ENCUMBRANCES means: (i) liens for Taxes and other
governmental charges not yet due or delinquent; (ii) mechanics', carriers',
workmen's, repairmen's or other like Encumbrances arising or incurred in the
ordinary course of business with respect to liabilities that are not yet due
or delinquent; (iii) those Encumbrances listed on SCHEDULE 1.1; and (iv)
other Encumbrances, if any, which, individually or in the aggregate, would
not materially detract from the value of the asset to which it relates or
materially impair the ability of the Company to use the asset to which it
relates in substantially the same manner as it was used prior to the Closing;
provided, in the case of each Encumbrance described in (i), (ii) and (iv),
that the liability secured by such Encumbrance is fully reflected on the face
of the Closing Date Balance Sheet and that such liability does not otherwise
constitute a breach of any representation, warranty or covenant of any of the
Shareholders in this Agreement.
PERSON means an individual, partnership, corporation,
association, joint stock company, trust, joint venture, limited liability
company, unincorporated organization or Governmental Authority.
PREMISES means the real property, buildings and improvements on
such real property constituting the business premises of the Company located
at (i) 11900 Crownpoint Drive, Suite 100, San Antonio, Texas, (ii) 12000
Crownpoint Drive, suite 175, San Antonio, Texas, (iii) 11900 Crownpoint
Drive, suites 140, 160 and 180, San Antonio, Texas, (iv) 1690 North Major
Drive, Suite 203, Beaumont, Texas and (v) 1712 N. Frazier, Suite 213, Conroe
Texas.
PRIME RATE is the prime rate as published, from time to time,
in THE WALL STREET JOURNAL.
PRINCIPAL CUSTOMER has the meaning given to such term in
Section 4.1(p).
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PRO RATA SHARE means (a) with respect to a Shareholder, an
amount determined by multiplying the number of Shares held by such
Shareholder as of the Effective Date by $112.60, and dividing such product by
the $18,325,000, and (b) with respect to the Option Holders, an amount
determined by dividing the payment to the Option Holder under Section 2.6(b)
by $18,325,000.
QUALIFIED has the meaning given to such term in Section
4.1(n)(vii).
REGISTRATION RIGHTS AGREEMENT #1 means the Registration Rights
Agreement between ASI and the ESOP in the form of EXHIBIT D.
REGISTRATION RIGHTS AGREEMENT #2 means the Registration Rights
Agreement between ASI, the Epner Partnership, the Braverman Partnership and
Naumann in the form of EXHIBIT E.
RIGHT means any right, property interest, concession, patent,
trademark, trade name, copyright, know-how or other proprietary right of
another Person.
SHAREHOLDER INDEMNITEE has the meaning given to such term in
Section 9.1.
SHAREHOLDERS has the meaning given to such term in the preamble
to this Agreement.
SHAREHOLDERS' AGENT has the meaning given to such term in
Section 3.1.
SHARES has the meaning given to such term in the Recitals.
SERP means the supplemental executive retirement plan adopted
on December 15, 1997, for the benefit of Martin Epner, a copy of which is
attached as SCHEDULE 4.1(n).
SURVIVAL PERIOD means, with respect to a representation or
warranty, the applicable period after the Closing Date during which such
representation or warranty survives pursuant to Section 11.13.
SURVIVING CORPORATION will be Holdings.
TAX means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties,
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capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, documentary, personal property,
sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, including any
interest, penalty or addition.
TAX RETURN means any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment to any of them, and including any amendment of any of
them.
UNALLOCATED SHARES means the Shares held by the ESOP which have
not been allocated to the accounts of the ESOP participants as of the Closing.
ARTICLE II.
THE MERGER
2.1 THE MERGER. At the Effective Date, the Company will be merged
with and into Holdings on the terms and conditions set forth below as
permitted by and in accordance with the Texas Business Corporation Act. Upon
the Effective Date, the separate existence of the Company will cease;
Holdings, as the Surviving Corporation, will continue to exist under and be
governed by the Texas Business Corporation Act; and the articles of
incorporation and bylaws in the form attached to this Agreement as EXHIBIT
2.1 will become the articles of incorporation and bylaws of Holdings until
further amended in accordance with the provisions of such articles and bylaws
and applicable law.
2.2 ARTICLES OF MERGER. On the Closing Date, the Company and
Holdings will cause the Articles of Merger in the form of EXHIBIT 2.2
attached to this Agreement (the "Articles of Merger") to be executed and
filed with the Secretary of State of the State of Texas as provided in the
Texas Business Corporation Act. The purpose of the Surviving Corporation
will be to engage in any and all business activities in which a corporation
is permitted to engage in accordance with the Texas Business Corporation Act.
2.3 EFFECTIVE DATE OF THE MERGER. The Merger will become effective
immediately upon the filing of the Articles of Merger with the Secretary of
State of the State of Texas or on such other date thereafter as the parties
may agree. The date and time of such effectiveness is sometimes referred to
as the "Effective Date" in this Agreement.
2.4 CERTAIN INTENDED EFFECTS OF THE MERGER. The parties intend that
the Merger be treated as a tax-free "reorganization" under Section
368(a)(1)(A) and (a)(2)(D) of the Internal Revenue Code of 1986, as amended
(the "Code"). The parties agree to report
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the transaction in such manner.
2.5 DIRECTORS AND OFFICERS.
(a) From and after the Effective Date, the members of the
Board of Directors of the Surviving Corporation will consist of the members
of the Board of Directors of Holdings (as constituted immediately prior to
the Effective Date) until changed in accordance with the articles of
incorporation and bylaws of the Surviving Corporation and applicable law.
(b) From and after the Effective Date, the officers of the
Surviving Corporation will consist of the officers of Holdings (as
constituted immediately prior to the Effective Date) until changed in
accordance with the articles of incorporation and bylaws of the Surviving
Corporation and applicable law.
2.6 CONVERSION.
(a) At Closing, each Share will, without any further action on
the part of ASI or Holdings, on the one hand, or the Company or any of the
Shareholders, on the other hand, be converted into the right to receive
directly from ASI the following:
(i) $51.33 in cash, plus based on $7,700,000, plus the
cash paid for the Conic Transaction under Section
2.10, less the cash needed to fund the payments to
the Option Holders under (b), which sum is to be
divided by 157,096, which is to be the number of
outstanding Shares as of the Effective Date, plus
(ii) shares of Common Stock based on the following
formula:
R = $10,625,000 DIVIDED BY N
-----------
A
Where
A = the ASI Share Value, except that, "A" will be $20 if
the ASI Share Value is less than $20,
and "A" will be $30 if the ASI Share Value is greater than
$30.
N = the number of outstanding shares, and
R = the number of shares of Common Stock to be issued per
10
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Share,
such that no more than an aggregate of 531,250 shares of Common
Stock will be issued and no fewer than an aggregate of 354,167
shares of Common Stock will be issued.
[ASI may pay $1,000,000 of the cash consideration one Business Day after the
Closing Date.]
(b) At Closing, each Option Holder will be entitled to
receive in cash from ASI an amount equal to $46.43 per Share covered by an
option, except for the options held by John Federowicz, for which the payment
will be $21.71 per Share, for a total payment of $636,155, except that ASI
will deposit 7.4% of such cash as Escrowed Property under the Escrow
Agreement.
(c) The Common Stock and cash comprising the Escrowed
Property (as defined in the Escrow Agreement) will be subtracted from the
Common Stock issued and the cash paid to the Shareholders at Closing and will
be deposited into the Escrow Account (as defined in the Escrow Agreement).
Out of the cash consideration paid to the ESOP pursuant to this Agreement
with respect to the Unallocated Shares in the ESOP (after reduction by reason
of the foregoing transfer to the Escrow Account), an amount will be paid in
cash to the Surviving Corporation sufficient to fully retire the
ESOP-to-Company Debt.
(d) All cash payments at Closing that are payable directly
to Shareholders or Option Holders will be made by wire transfer of
immediately available funds to the accounts designated by the Shareholders'
Agent.
(e) The parties desire that the value of the Common Stock be
at least 45% of the total consideration being paid to the Shareholders under
the Merger, based on the closing price of the Common Stock on Nasdaq as of
the Business Day prior to the Closing Date, discounted by 30%. Accordingly,
if the 45% level would not be satisfied, the parties agree that the amount of
cash payable to the Shareholders under Section 2.6(a)(i) will be decreased,
and the number of shares of Common Stock issuable to the Shareholders under
Section 2.6(a)(ii) will be increased until the 45% level is satisfied. The
parties agree that the total consideration for the Shareholders, calculated
as the sum of (i) cash plus (ii) the product of shares of Common Stock
multiplied by the closing price of the Common Stock on Nasdaq as of the
Business Day prior to the Closing Date, discounted by 30%, will not change as
the result of any adjustments made in accordance with this Section 2.6(e).
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2.7 NO FRACTIONAL SHARES. No certificate or scrip representing
fractional shares of Common Stock will be issued to the Shareholders upon
conversion of the Shares pursuant to the Merger, and no dividend, stock split
or interest will relate to any such fractional shares. In lieu of any
fractional share of Common Stock being issued, cash will be paid to or the
Shareholders in respect of such fractional share based on the ASI Share Value.
2.8 CLOSING DATE BALANCE SHEET. Within 30 days after the end of the
month during which the Effective Date occurs, the Shareholders will deliver
to ASI at the Shareholders' expense an internally prepared, unaudited
consolidated balance sheet for the Company as of the end of the month during
which the Effective Date occurs. The Shareholders will also deliver a
schedule reconciling the shareholders' equity accounts ("Reconciliation
Schedule") by determining the pre-tax earnings (or loss) of the Company
during the month in which the Effective Date occurs, pro rating such pre-tax
earnings (or loss) over the Business Days during such month through the
Effective Date, and using on such Reconciliation Schedule such pro rated
pre-tax earnings (or loss) instead of the actual pre-tax earnings (or loss)
for the partial month ended on the Effective Date, and then giving effect to
the estimated income taxes on any such earnings. (Such balance sheet,
together with the Reconciliation Schedule, are referred to as the "Closing
Date Balance Sheet"). Except as provided in the immediately preceding
sentence, the Closing Date Balance Sheet will be prepared in accordance with
GAAP on a basis consistent with the accounting policies applied by the
Company for the December 31, 1997 audited Financial Statements of the
Company. The Closing Date Balance Sheet will reflect the estimated amount of
any excise tax that may become payable by the Company or Surviving
Corporation which is attributable to the disposition of Shares or Common
Stock in connection with the Merger or the subsequent disposition of Common
Stock by the ESOP, as set forth in Section 4.1(g)(vi), the amount of any
unpaid fees and expenses by the Company or the ESOP to their respective
counsel or accountants (but only $7,500, which is one-half of the fee of
Sherman & Howard L.L.C. for the rendering of its tax opinion concerning the
Merger), the amount of any unpaid fees and expenses payable to the Seller's
Broker, unpaid appraisal fees for the Conic stock, $23,365.35 (which is the
amount agreed to be borne by the Shareholders to compensate ASI with respect
to certain obligations under the employment agreement for Dan DeCourcy), the
amount payable to Martin Epner under the SERP, and any other expenses of the
Company incurred in connection with the Merger (other than the buyout of the
options under the Option Buy Out Agreements).
2.9 ADJUSTMENTS; PROCEDURE. Following delivery of the Closing Date
Balance Sheet in accordance with Section 2.8, certain procedures will apply
and adjustments to the amounts payable under Section 2.6 will be made in
accordance with the Pro Rata Shares of the Shareholders and the Option
Holders, as follows:
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(a) ASI will examine the Closing Date Balance Sheet to
determine whether it believes the Closing Date Balance Sheet was prepared in
accordance with the provisions of this Agreement. In connection with that
examination, the Shareholders will provide, and will cause the Company's
accountants to provide, ASI and ASI's accountants with access to such
information as ASI may reasonably request to make that determination,
including access to all work papers and calculations of the Company related
to the preparation of the Closing Date Balance Sheet.
(b) Within 10 days after receipt of the Closing Date Balance
Sheet, ASI will, in a written notice to the Shareholders' Agent, either
accept the Closing Date Balance Sheet or object to it by describing in
reasonable detail any proposed adjustments to the Closing Date Balance Sheet
and the reasons for such proposals. If the Shareholders' Agent has not
received such notice of proposed adjustments within such 10-day period, ASI
will be deemed to have accepted the Closing Date Balance Sheet, but if ASI's
failure to give such notice results from the Shareholders' failure to timely
provide information requested by ASI under Section 2.9(a) and if ASI has so
informed the Shareholders' Agent of such failure during such 10-day period,
the time within which ASI must give such notice will be extended until a
reasonable time after the Shareholders provide the information requested by
ASI.
(c) If any adjustments to the Closing Date Balance Sheet are
proposed, ASI and the Shareholders' Agent will negotiate in good faith to
resolve any dispute, but if the dispute is not resolved within 10 days
following the Shareholders' Agent's receipt of the proposed adjustments, ASI
and the Shareholders' Agent will retain a mutually acceptable nationally
recognized independent public accounting firm to resolve such dispute, which
resolution will be final and binding. The fees and expenses of any such
accounting firm will be shared equally by ASI and the Shareholders and such
accounting firm will be retained by a retention letter executed by the
parties that specifies that the determination by said firm of any such
disputes concerning the Closing Date Balance Sheet will be resolved in
accordance with GAAP on a basis consistent with the accounting policies
applied by the Company in its December 31, 1997 audited Financial Statements.
If ASI and the Shareholders' Agent are unable to agree on a mutually
acceptable independent public accounting firm to resolve such dispute, the
dispute will be resolved by arbitration in accordance with Section 10.2.
(d) On the Adjustment Date (if no dispute occurs), or within
10 business days after the resolution of a dispute (if a dispute occurs and
is to be resolved in accordance with Section 2.9(c)), as the case may be,
then to the extent that the Adjusted Net Worth of the Company as set forth on
the Closing Date Balance Sheet is less than $2,550,000 (before giving effect
to the Conic Transaction, but after giving
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effect to all of the other adjustments described in the last sentence of
Section 2.8, including the tax payable in connection with the Conic
Transaction), the Shareholders and the Option Holders will pay to ASI the
difference between such two amounts (the "Closing Date Deficit"), except that
an amount equal the lesser of the Closing Date Deficit and the estimated
excise tax described in Section 4.1(g)(vi) (the "Epner Surcharge") will be
payable solely by the Epner Partnership out of its share of the Escrow
Account. Except as provided with respect to an Epner Surcharge, any Closing
Date Deficit will be taken from the cash in the Escrow Account based on the
Pro Rata Shares of the Shareholders and the Option Holders. If the cash in
the Escrow Account that is attributable to the Shareholders is insufficient
to pay the Closing Date Deficit, then the Pro Rata Share of the Shareholders
will be taken from the Escrow in the form of Common Stock based on the
Credited Value of the escrowed Common Stock, determined as of the date that
the amount of the claim against the Escrow Account is determined. If any
amounts are taken from the Epner Partnership's share of the Escrow Account as
the result of an Epner Surcharge, and if, as a result, insufficient proceeds
remain in the Escrow Account that are attributable to the Epner Partnership
to cover any Closing Date Deficit or any other claim against the Escrow
Account, then the Epner Partnership will be required, within 10 days after
demand by ASI or any Shareholder, to replenish the Escrow Account with cash
(up to the amount of the Epner Surcharge) sufficient to cause the Epner
Partnership to bear its share of the liability. Any payments due under this
Section 2.9(d) will include interest accrued from the Closing Date to the
date of such payment at the Prime Rate.
2.10 CONIC TRANSACTION. Immediately prior to the consummation of the
Merger, (a) the Non-ESOP Shareholders will pay to the Company cash in the
aggregate amount of $1,000,000 and (b) the Company will transfer to the
Non-ESOP Shareholders all of the common stock of Conic, Inc. held by the
Company and will execute and deliver to the Non-ESOP Shareholders a bill of
sale in the form of EXHIBIT 2.10(b).
ARTICLE III.
SHAREHOLDERS' AGENT
3.1 AGENT FOR SHAREHOLDERS. The Shareholders designate Martin Epner
(the "Shareholders' Agent") as agent to act for and on behalf of all of the
Shareholders with respect to actions to be taken by any of the Shareholders
under the terms of this Agreement. Specifically, each Shareholder hereby
authorizes and irrevocably appoints the Shareholders' Agent as its or his
exclusive agent and attorney-in-fact to act on behalf of each of them (a) to
amend, without notice to or consent of any Shareholder, the provisions of
this Agreement or any Other ASI Agreement or Other Shareholder Agreement (i)
to the extent such amendment does not, in the opinion of the Shareholders'
Agent, materially adversely affect the rights of any Shareholder or (ii) to
cure any ambiguity, defect or inconsistency in any such agreement and (b)
with respect
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to all matters which are the subject of this Agreement or the Escrow
Agreement, to exercise any and all powers, authority and discretion conferred
upon the Shareholders (other than matters for which the Shareholders do not
have joint and several liability), including, without limitation, (i)
receiving or giving all notices, instructions, other communications, consents
or agreements that may be necessary, required or given with respect to such
matters; (ii) asserting, settling, compromising, or defending, or determining
not to assert, settle, compromise or defend, any claims which any Shareholder
may assert, or have the right to assert, against ASI, or any claims which ASI
may assert, or have the right to assert, against any Shareholder; (iii)
receiving and distributing the Common Stock and cash after the conversion
provided for in Section 2.6; and (iv) making such changes or modifications to
the schedules and this Agreement as it determines are reasonably necessary to
facilitate consummation of the transactions contemplated under this
Agreement. The Shareholders' Agent accepts such authorization and
appointment. ASI and Holdings will have the right to deal with the
Shareholders' Agent exclusively and will be entitled to rely conclusively on
the Shareholders' Agent's determination or action. If the Shareholders'
Agent resigns, dies or becomes disabled, the remaining Shareholders hereby
appoint Albert Naumann III as substitute agent for the Shareholders for all
purposes under this Agreement as if such Person was the original
Shareholders' Agent. Upon the receipt of written evidence satisfactory to
ASI to the effect that the Shareholders' Agent has been substituted as agent
of the Shareholders by reason of his death, disability or resignation, ASI
and Holdings will be entitled to rely on such substituted agent to the same
extent as they were theretofore entitled to rely upon the Shareholders' Agent
with respect to the matters covered by this Section. No Shareholder will act
with respect to any of the matters which are the subject of this Agreement
(other than matters for which the Shareholders do not have joint and several
liability, as listed in Section 9.7) except through the Shareholders' Agent.
The Shareholders acknowledge and agree that ASI and Holdings may deal
exclusively with the Shareholders' Agent in respect of such matters. Neither
the Shareholders' Agent nor any of his or its employees or agents will be
liable to the Shareholders for any action taken or omitted to be taken or
suffered in good faith by it under or in connection with this Agreement,
except that the Shareholders' Agent will be liable for his willful
misconduct. The Shareholders' Agent will be responsible for performing the
tasks specifically designated under this Agreement, but the Shareholders'
Agent, in its capacity as such, will not be liable to the Company, Holdings,
ASI, or the other Shareholders in any manner for the effectiveness,
enforceability, collectibility, genuineness, perfection, validity,
sufficiency or the due execution of this Agreement, the Escrow Agreement or
any of the Other ASI Agreements or Other Shareholder Agreements, or for the
due authorization, authenticity or accuracy of the representations and
warranties in this Agreement or in any other certificate, report, notice,
consent, opinion, statement, or other document furnished or to be furnished
under this Agreement, and the Shareholders' Agent will be entitled to rely
upon any of the foregoing believed by it to be genuine and correct and to
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have been signed and sent or made by the proper Person. This power of
attorney is coupled with an interest and is irrevocable. Each Shareholder
acknowledges that he or it has made such investigation as such Shareholder
deems necessary to inform himself or itself of the affairs of ASI and
Holdings and has made his or its own investigation of the operations and
affairs of ASI and Holdings and that in entering into this Agreement he or it
has not relied and will not rely upon any information or representations
furnished or given by the Shareholders' Agent.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERs. The
Shareholders jointly and severally represent and warrant to ASI and Holdings
as follows, as of the date of this Agreement:
(a) ORGANIZATION, GOOD STANDING, ETC. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas, and is qualified to do business as a foreign
corporation and is in good standing in Rhode Island, Mississippi,
Massachusetts, Delaware, Maryland, New Jersey, Connecticut, Florida, Arkansas
and California which are the only jurisdictions in which such qualification
is necessary and in which the failure to be so qualified would have a
material adverse effect on the business or properties of the Company (and
also is qualified to do business and in good standing in Pennsylvania,
Wisconsin, Illinois, and Louisiana). The Company has all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted. True and complete copies of (i) the
articles of incorporation (certified by the Secretary of State of Texas) and
(ii) the bylaws of the Company, both as currently in effect, have been
delivered to ASI by the Company and the Shareholders, and the Company is not
in violation of any provision of its articles of incorporation or bylaws.
True copies of the minute books, the stock certificate books, and stock
record books of the Company have been delivered to ASI by the Shareholders.
(b) SUBSIDIARIES. Except for the 600 shares of common stock
of Conic Systems and the shares of common stock of CANTEX Conversion
Services, Inc., Inc., the Company does not own, and since January 1, 1994,
has not owned, directly or indirectly, any equity interest in any
corporation, partnership, joint venture or other business entity.
(c) OWNERSHIP AND CAPITALIZATION. Part (i) of SCHEDULE 4.1(c)
sets forth a correct and complete description of the number of shares of
authorized capital stock of the Company and their par value. Each
Shareholder owns, beneficially and of
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record, free and clear of any Encumbrance, the numbers of Shares set forth
opposite their respective names on part (ii) of SCHEDULE 4.1(c). The Shares
set forth in part (ii) of SCHEDULE 4.1(c) in the aggregate constitute all of
the issued and outstanding capital stock of the Company. Part (iii) of
SCHEDULE 4.1(c) sets forth the number of Shares issuable upon the exercise of
all Incentive Stock Options, the exercise price for the Incentive Stock
Options, the identity of the Option Holders of the Incentive Stock Options
and the number of Shares subject to the options held by each Option Holder.
Except for the issued and outstanding capital stock set forth in SCHEDULE
4.1(c), the Incentive Stock Options disclosed on SCHEDULE 4.1(c), and the
SERP, (i) all of the issued and outstanding shares of the Company's capital
stock have been duly authorized and validly issued and are fully paid and
nonassessable, (ii) there is no authorized or outstanding stock or security
convertible into or exchangeable for, or any authorized or outstanding
option, warrant or other right to subscribe for or to purchase, or convert
any obligation into, any unissued shares of the Company's capital stock or
any treasury stock, and the Company has not agreed to issue any security so
convertible or exchangeable or any such option, warrant or other right, (iii)
there are no authorized or outstanding stock appreciation, phantom stock,
profit participation or similar rights with respect to the Company, (iv)
except as disclosed on SCHEDULE 4.1(c), there are no voting trusts, voting
agreements, proxies or other agreements or understandings with respect to any
capital stock of the Company, (v) except as disclosed on SCHEDULE 4.1(c),
there are no existing rights of first refusal, buy-sell arrangements,
options, warrants, rights, calls, or other commitments or restrictions of any
character relating to any of the Shares, except those restrictions on
transfer imposed by the Securities Act of 1933, as amended, and applicable
state securities laws.
(d) AUTHORITY; NO VIOLATION.
(i) Each Shareholder has full and absolute right,
power, authority and legal capacity to execute, deliver and perform this
Agreement and all Other Shareholder Agreements to which they are a party,
and, assuming the due authorization, execution and delivery of this Agreement
and the Other Shareholder Agreements by the other parties to such agreements,
this Agreement constitutes, and the Other Shareholder Agreements constitute,
the legal, valid and binding obligations of, and will be enforceable in
accordance with their respective terms against, each Shareholder, except as
such enforcement is subject to the effect of (A) any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting
creditors' rights generally and (B) general principles of equity, including,
without limitation, concepts of reasonableness, good faith and fair dealing,
and other similar doctrines affecting the enforceability of agreements
generally (regardless of whether considered in a proceeding in equity or at
law).
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(ii) The execution, delivery and performance of this
Agreement and the Other Shareholder Agreements by the Shareholders and the
consummation of the transactions contemplated by each such agreement will not
(A) violate any Legal Requirement to which any of the Shareholders is
subject, or (B) except as set forth in SCHEDULE 4.1(d), violate, with or
without the giving of notice or the lapse of time or both, or result in the
breach of any provision of, or constitute a default under, or result in the
creation of any Encumbrance upon any properties, assets or business of any of
the Shareholders, pursuant to, any indenture, mortgage, deed of trust, lien,
lease, license, Permit, agreement, instrument or other arrangement to which
any of the Shareholders is a party or by which any of the Shareholders, or
any of their respective assets and properties is bound or subject, but for
purposes of this representation and warranty, any right on the part of the
other party to such agreement to terminate any such agreement upon the
execution, delivery and performance of this Agreement and the Other
Shareholder Agreements or the consummation of the transactions contemplated
by each such agreement will not constitute a breach of this representation
and warranty (whether or not the agreement is listed on SCHEDULE 4.1(d)).
(iii) The execution, delivery and performance of this
Agreement and the Other Shareholder Agreements by the Company and the
consummation of the transactions contemplated by each such agreement will not
(A) violate (x) any Legal Requirements to which the Company is subject or (y)
any provision of the articles of incorporation or bylaws of the Company, or
(B) except as set forth in SCHEDULE 4.1(d), violate, with or without the
giving of notice or the lapse of time or both, or result in the breach of any
provision of, or constitute a default under, or result in the creation of any
Encumbrance upon any properties, assets or business of the Company pursuant
to, any indenture, mortgage, deed of trust, lien, lease, license, Permit,
agreement, instrument or other arrangement to which the Company is a party or
by which the Company or any of its respective assets and properties is bound
or subject, but for purposes of this representation and warranty, any right
on the part of the other party to such agreement to terminate any such
agreement upon the execution, delivery and performance of this Agreement and
the Other Shareholder Agreements or the consummation of the transactions
contemplated by each such agreement will not constitute a breach of this
representation and warranty (whether or not the agreement is listed on
SCHEDULE 4.1(d).
(iv) Except for notices that have been given and
consents that have been obtained by any of the Shareholders prior to the
execution of this Agreement (which are set forth in SCHEDULE 4.1(d)), neither
the Company nor any of the Shareholders need give any notice to, make any
filing with or obtain any authorization, consent or approval of any
Governmental Authority in order for the parties to consummate the
transactions contemplated by this Agreement and the Other Shareholder
Agreements. Neither any of the Shareholders nor the Company is a party
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to any litigation or proceeding (and, to the best knowledge of the
Shareholders, no such litigation or proceeding has been threatened), that
seeks to prohibit or delay, or that seeks damages as a result of, the
execution and delivery of this Agreement by any of the Shareholders or the
consummation of the transactions contemplated by this Agreement.
(v) Each Option Holder has full and absolute right,
power, authority and legal capacity to execute, deliver and perform the
Option Buy Out Agreement and, assuming the due authorization, execution and
delivery of the Option Buy Out Agreement by the other parties to such
agreement, the Option Buy Out Agreement constitutes, the legal, valid and
binding obligations of, and will be enforceable in accordance with its terms
against, each Option Holder, except as such enforcement is subject to the
effect of (A) any applicable bankruptcy, insolvency, reorganization or
similar laws relating to or affecting creditors' rights generally and (B)
general principles of equity, including, without limitation, concepts of
reasonableness, good faith and fair dealing, and other similar doctrines
affecting the enforceability of agreements generally (regardless of whether
considered in a proceeding in equity or at law). None of the Option Holders
is a party to any litigation or proceeding (and, to the best knowledge of the
Shareholders, no such litigation or proceeding has been threatened), that
seeks to prohibit or delay, or that seeks damages as a result of, the
execution and delivery of the Option Buy Out Agreement by any of the Option
Holders or the consummation of the transactions contemplated by this
Agreement and by the Option Buy Out Agreement.
(vi) Neither the Epner Partnership nor the Braverman
Partnership has taken any action to cause either of such partnerships to
become a limited liability limited partnership or otherwise to cause the
general partner of either such partnership not to be liable in its capacity
as a general partner of a limited partnership.
(e) FINANCIAL STATEMENTS. The Company has delivered to ASI
complete and correct copies of (i) audited balance sheets and related
statements of income, stockholders' equity and cash flow of the Company as of
and for the years ended December 31, 1997, and 1996 and all notes and
schedules thereto and (ii) the unaudited internally prepared balance sheets
of the Company and the related unaudited statements of income as of April 30,
1998 (collectively, the "Financial Statements"). The Financial Statements
are in accordance with the books and records of the Company and were prepared
in accordance with GAAP and present fairly the Company's financial position,
results of operations and changes in financial position as of the dates and
for the periods indicated, subject in the case of the unaudited Financial
Statements only to standard year-end adjustments (none of which will be
material in amount) and the omission of footnotes. The unaudited balance
sheet as of April 30,
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1998, is called the "Latest Balance Sheet." At the date of the Latest
Balance Sheet, the Company had no liability or obligation, whether accrued,
absolute, fixed or contingent (including liabilities for taxes or unusual
forward or long-term commitments), required by GAAP to be reflected or
reserved against in that balance sheet that were not fully reflected or
reserved against on the Latest Balance Sheet. The balance sheets included in
the Financial Statements reflect capitalized computer software costs and
capitalized mapping inventory at net realizable value as required by SFAS No.
96. Copies of the financial statements described in clause (i) are attached
as SCHEDULE 4.1(e)(i), and copies of the financial statements described in
clause (ii) of this Section are attached as SCHEDULE 4.1(e)(ii).
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since April 30,
1998, except as disclosed in SCHEDULE 4.1(f), and except for the Conic
Transaction, the Company has not (i) incurred any debt, indebtedness or other
liability, except current liabilities incurred in the ordinary course of
business; (ii) delayed or postponed the payment of accounts payable or other
liabilities or accelerated the collection of any receivable beyond stated,
normal terms except in the ordinary course of business; (iii) sold or
otherwise transferred any of its equipment or other assets or properties,
except in the ordinary course of business and except for equipment no longer
needed in the Company's business that was sold for fair market value; (iv)
canceled, compromised, settled, released, waived, written-off or expensed any
account or note receivable, right, debt or claim involving more than $10,000
in the aggregate, except to the extent that such amount is reserved in the
Closing Date Balance Sheet; (v) changed in any significant manner the way in
which it conducts business; (vi) made or granted any individual wage or
salary increase in excess of 10% or $2.00 per hour, any general wage or
salary increase, or increased employee benefits of any kind or nature; (vii)
entered into any contract or agreement, or made any commitment, involving
more than $50,000; (viii) accelerated, terminated, delayed, modified or
canceled any agreement, contract, lease or license (or series of related
agreements, contracts, leases and licenses) involving more than $50,000; (ix)
suffered any material adverse change to or in its business, assets, financial
condition, or existing relationships with customers or suppliers; (x) made
any payment or transfer to or for the benefit of any of the Shareholders or
permitted any Person, including, without limitation, any of the Shareholders,
to withdraw assets from the Company (except for reimbursements of expenses
and payment of salaries, if made in the ordinary course); (xi) suffered any
other significant occurrence, event, incident, action, failure to act or
transaction outside the ordinary course of business; or (xii) agreed to
incur, take, enter into, make or permit any of the matters described in
clauses (i) through (xi).
(g) TAX MATTERS.
(i) The Company has filed all Income Tax Returns and all
other
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Tax Returns that it was required to file, except for the 1997 federal
corporate income tax return of the Company, and the 1997 Texas franchise tax
return, as to which extensions until September 15, 1998, were obtained. The
amount of Income Taxes paid by the Company when the Company applied for an
extension for the filing of its 1997 federal corporate income tax return
equals or exceeds the amount of federal corporate income tax payable by the
Company with respect to 1997, except that the payment made in connection with
the extension was late but the Company has incurred no penalty or interest
obligations with respect to such late return, and no amounts are payable in
connection with the 1997 Texas franchise tax return. All such Income Tax
Returns and all other Tax Returns were correct and complete in all material
respects. All Income Taxes and all other Taxes owed by the Company (whether
or not shown on any Tax Return) have been paid. The Company is currently the
beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction where the Company
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Encumbrances on any of the assets of the Company
that arose in connection with any failure (or alleged failure) to pay any Tax.
(ii) The Company withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, any Shareholder or other third
party.
(iii) There is no pending or threatened dispute or claim
concerning any Tax liability of the Company. SCHEDULE 4.1(g)(iii) lists all
federal, state, local and foreign income Tax Returns filed with respect to the
Company for taxable periods ended on or after December 31, 1994, identifies
those Tax Returns that have been audited and identifies those Tax Returns that
currently are the subject of audit. The Company has delivered to ASI correct
and complete copies of all federal income Tax Returns and Texas corporate
franchise Tax Returns, and all examination reports, and statements of
deficiencies filed or assessed against or agreed to by the Company since
December 31, 1994.
(iv) The Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(v) Neither the Company nor any of the Shareholders has
ever filed a consent pursuant to Section 341(f) of the Code relating to
collapsible corporations. The Company has not made any payments, is not
obligated to make any payments and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G. The Company has not been a United States
real property holding corporation within the
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meaning of Code Section 897(c)(2) during the applicable period specified
in Code Section 897(c)(1)(A)(ii). The Company disclosed on its federal
income Tax Returns all positions taken that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section 6662.
The Company is not a party to any Tax allocation or sharing agreement. The
Company has not been of an Affiliated Group filing a consolidated federal
income Tax Return (other than a group the common parent of which was the
Company) and have no liability for the Taxes of any Person (other than the
Company) under Treasury Regulation Section 1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or successor, by contract
or otherwise.
(vi) Upon the consummation of the Merger and
disposition of the Common Stock by the ESOP, the Surviving Corporation will
be required to pay an excise tax occasioned by the disposition of the Shares
owned by the ESOP. The excise tax will be in the maximum amount of 10% of
2.1% of the value of all of the Shares as of the date of Closing, will be an
obligation of the Surviving Corporation, and will be reflected as a liability
in the Closing Date Balance Sheet.
(vii) SCHEDULE 4.1(g)(vii) sets forth the following
information with respect to the Company as of the most recent practicable
date: (A) the basis of the Company in its assets; and (B) the amount of any
net operating loss, net capital loss, unused investment or other credit,
unused foreign tax credit or excess charitable contribution allowable to the
Company.
(h) ASSETS AND PROPERTIES.
(i) Except as set forth in SCHEDULE 4.1(h)(i), the
Company has good title to (or, in the case of the assets that are leased,
valid leasehold interests in) all the assets that are used by the Company in
its business, free and clear of all Encumbrances (except for Permitted
Encumbrances). Such assets consist of the tangible and intangible assets of
the Company in existence as of the Closing Date. Such assets are all of the
tangible and intangible assets used by the Company in its business as
conducted by the Company since January 1, 1998. Such assets and any
equipment leased by the Company from third parties encompass all equipment
used by the Company to generate the income reflected in the financial
statements attached as SCHEDULE 4.1(e)(i). SCHEDULE 4.1(h)(i) lists all the
third party equipment leased by the Company as of the date of this Agreement.
The Company does not lease any equipment from any of the Shareholders. All
of the Company's tangible assets are located on the Premises, except for
field equipment used on job sites in the ordinary course of business.
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(ii) The Premises constitute all of the real property,
buildings and improvements used by the Company in its business. The Premises
are supplied with utilities and other services necessary for the operation of
the Premises. To the best knowledge of each Shareholder, the Premises have
received all approvals of Governmental Authorities (including Permits)
required in connection with the occupation and operation of the Premises and
have been occupied, operated and maintained in accordance with applicable
Legal Requirements. Neither any of the Shareholders, nor the Company has
received notice of violation of any Legal Requirement or Permit relating to
the condition or their operation of the Premises which has an adverse effect
on the ability of the Company to utilize the Premises or requires the Company
to incur expense in order to utilize the Premises.
(iii) The Company has received no notice from any party
to any lease with respect to any Premises that such party has repudiated any
provision of such lease, or that there are any disputes, oral agreements or
continuing waivers in effect as to any such lease, and, to the best knowledge
of the Shareholders, no such repudiation, dispute, agreement or waiver has
occurred.
(i) Attached as SCHEDULE 4.1(i) is a list of the following
contracts and agreements not yet substantially performed to which the Company is
a party:
(i) Any agreement (or group of related agreements) for
the sale of goods or the furnishing of services involving reasonably anticipated
total revenues in excess of $200,000;
(ii) Any agreement (or group of related agreements) for
the purchase of goods or services involving reasonably anticipated total
payments in excess of $200,000;
(iii) Any agreement (or group of related agreements) for
the lease of personal property or real property to or from any Person providing
for lease payments in excess of $5,000 per annum, other than agreements that may
be terminated without cause and without penalty by the Company on 30 days or
less notice to such Person;
(iv) All confidentiality and non-competition agreements,
mortgages, deeds of trust, indentures, loan agreements, credit agreements,
promissory notes and guaranties;
(v) Each note or account receivable from, loan or
advance to, and agreement for the purchase, sale or lease of goods or services
to or from, any of the Shareholders, or any Affiliate of the Shareholders, or
any officer, director or
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employee of the Company; and
(vi) All guaranty, warranty and indemnity agreements
provided or delivered by the Company to any of its customers (but excluding such
agreements included as provisions in the service agreements with customers).
With respect to each such contract and except as disclosed on SCHEDULE 4.1(i):
(A) the contract is valid, in full force and effect, and enforceable in
accordance with its terms, except as such enforcement is subject to the effect
of any applicable bankruptcy, insolvency, reorganization or similar laws
relating to or affecting creditors' rights generally and general principles of
equity, including, without limitation, concepts of reasonableness, good faith
and fair dealing, and other similar doctrines affecting the enforceability of
agreements generally (regardless of whether considered in a proceeding in equity
or at law); (B) no action or claim is pending or, to the best knowledge of the
Shareholders, threatened to revoke, modify, terminate or render invalid any such
contract; and (C) to the best knowledge of the Shareholders, neither the
Company, nor any other party is in breach or default in the performance of any
of its respective obligations under, and, no event exists which, with the giving
of notice or the lapse of time or both, would constitute a breach or default on
the part of a party to, such contract that is continued unremedied, except for
breaches or defaults which will not have a material adverse effect on the
business or properties of the Company. Copies of the contracts delivered to ASI
are true and complete. The prepayment of the Company-to-Bank ESOP Debt,
Company-to- Partnership ESOP Debt and the Line of Credit Notes is not
prohibited and will not result in the imposition of any prepayment penalty or
similar obligation.
Also set forth on SCHEDULE 4.1(i) is a list setting forth the following items:
(vii) All items of equipment, machinery and other tangible
personal property of the Company (including that which, as of the date of this
Agreement, has no book value), and the original cost, depreciation and book
value (with such book value set forth on a projected basis as of December 31,
1998) of all such items which are included in the Latest Balance Sheet;
(viii) All Permits, licenses, Orders, registrations,
certificates and similar rights of the Company;
(ix) The names and current rates of compensation as of
March 31, 1998 of all employees of the Company whose annual rate of compensation
is $40,000 or more;
(x) All items of Intellectual Property owned by the
Company, or
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which are used by the Company in its business, and in each case where the
Company is not the owner, the name of the owner of the Intellectual Property;
and
(xi) The name of each bank or other financial
institution or entity in which the Company has an account or safe deposit box
(with the identifying account number or symbol) and the names of all persons
authorized to draw on such account or to have access to such safe deposit box.
(j) LITIGATION; COMPLIANCE WITH APPLICABLE LAWS AND RIGHTS.
(i) There is no outstanding Order against, and, except
as set forth on SCHEDULE 4.1(j)(i), there is no litigation, proceeding,
arbitration or investigation by any Governmental Authority or other Person
pending or, to the best knowledge of the Shareholders, threatened against, the
Company, its properties or its business.
(ii) Except as set forth on SCHEDULE 4.1(j)(ii), to the
best knowledge of the Shareholders, the Company and its assets (including its
Premises, facilities, machinery and equipment) are not in violation of any
applicable Legal Requirement. Except as set forth in SCHEDULE 4.1(j)(ii),
neither any of the Shareholders, nor the Company has received notice from any
Governmental Authority or other Person of any violation or alleged violation of
any Legal Requirement which has not been finally resolved on a basis that
involves no continuing obligation or liability to the Company.
(k) ACCOUNTS RECEIVABLE. The accounts receivable of the
Company reflected on the Latest Balance Sheet and on the Closing Date Balance
Sheet have arisen in the ordinary course of business and reflect bona fide
business arrangements; no payor has given any of the Shareholders or the
Company written notice of any inability to pay such account receivable in due
course or of any claim or defense against payment of such account receivable;
to the Shareholders' best knowledge, no oral statements to such effect have
been made to any Shareholder or the Company; to the Shareholders' best
knowledge, no basis exists for any payor to raise any claim or defense
against payment with respect to any such account receivable; and SCHEDULE
4.1(k) sets forth a true and correct statement regarding the aging of such
accounts receivable as of a date within 10 days of the date of this Agreement.
(l) PRODUCT QUALITY, WARRANTY AND LIABILITY. No product or
service provided or delivered by the Company to customers on or prior to the
date of this Agreement is subject to any guaranty, warranty or other indemnity
beyond the terms set forth in the written agreement with such customer or as may
be imposed or required by any Legal Requirement. All product or service
liability claims that have been asserted against the Company since January 1,
1998, or, regardless, of when it was asserted,
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which remains unresolved or which is the subject of an agreement by the
Company to correct, whether covered by insurance or not and whether
litigation has resulted or not, other than those listed and summarized on
SCHEDULE 4.1(j)(i), are listed and summarized on SCHEDULE 4.1(l).
(m) INSURANCE. The Company has policies of insurance
(i) covering risk of loss on the Company's assets, (ii) covering products and
services liability and liability for fire, property damage, personal injury and
workers' compensation coverage and (iii) for business interruption, all of which
are set forth in SCHEDULE 4.1(k), which also includes the dates of coverage of
such insurance. All such insurance policies are valid, in full force and effect
and enforceable in accordance with their respective terms and no party has
repudiated any provision of such policies. To the best of Shareholders'
knowledge neither the Company nor any other party to any such policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices) in the performance of any of their respective obligations
under any such policy; no insurer under any such insurance policy has denied
coverage or reserved against coverage concerning any claim made by the Company;
and, to the best knowledge of the Shareholders, no event exists which, with the
giving of notice or the lapse of time or both, would constitute a breach,
default or event of default, or permit termination, modification or acceleration
under any such policy. All premiums which are due on such policies as of the
date of this Agreement have been paid on such policies as of the date of this
Agreement. All claims made during such five-year period with respect to any
insurance coverage of the Company, other than claims made by or on behalf of
employees of the Company or under the Company's health insurance policy and
other than those described on SCHEDULE 4.1(l), are set forth on SCHEDULE 4.1(m).
(n) PENSION AND EMPLOYEE BENEFIT MATTERS.
(i) SCHEDULE 4.1(n) lists each Employee Benefit Plan of
the Company and each entity which is a member of the controlled group with the
Company (as defined under ERISA Section 4001(a)(14)) (the "Company Employee
Benefit Plans") that: (A) is subject to any provision of ERISA; (B) is
maintained, administered or contributed to by the Company or any controlled
group member; (C) covers any employee or former employee of the Company or any
controlled group entity; or (D) under which the Company or any controlled group
entity has any liability to make contributions or pay benefits. Copies of the
current versions of all such plans, summary plan descriptions, and, if
applicable, related trust agreements, and all amendments of such plans have been
delivered by the Shareholders to ASI and attached to this Agreement as part of
SCHEDULE 4.1(n), and the Shareholders have delivered to ASI the three most
recent annual reports (Form 5500 including Schedule B if applicable) and summary
annual reports prepared in connection with each such plan required to file an
annual report.
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(ii) The only Company Employee Benefit Plans that
individually or collectively would constitute Employee Pension Benefit Plans
are identified in SCHEDULE 4.1(n). No Company Employee Benefit Plan is
subject to the Plan Termination Insurance provisions of Title IV of ERISA.
The Company and each controlled group member have not incurred any liability
under Title IV of ERISA arising in connection with the termination of any
plan covered or previously covered by Title IV of ERISA.
(iii) The Shareholders have delivered to ASI a current,
complete and correct copy of the Company's Employee Manual (the "Manual").
Except as otherwise set forth in SCHEDULE 4.1(n) the Manual lists each
written, and to the best knowledge of the Shareholders, each oral,
employment, severance or other similar contract, arrangement or policy and
each plan or arrangement providing for insurance coverage (including any
self-insured arrangements), disability benefits, supplemental unemployment
benefits, vacation benefits, retirement benefits, deferred compensation,
profit sharing, bonuses, stock options, stock appreciation rights or other
forms of incentive compensation, reduced interest or interest free loans,
mortgages, relocation assistance or post-retirement insurance, compensation
or other benefits that: (A) is not an Employee Benefit Plan; (B) is entered
into, maintained or contributed to, by the Company and each controlled group
member and (C) covers any employee or former employee of the Company or any
controlled group member. Such contracts, plans and arrangements as are
described in this Section are referred to collectively as the "Benefit
Arrangements." Copies of each of these Benefit Arrangements either are set
forth in full in the Manual or have been made available to ASI or are listed
as "Other Benefit Arrangements" on SCHEDULE 4.1(n). The Company has no
liability under any other Benefit Arrangements that no longer are in effect.
(iv) Except as set forth in any Company Employee
Benefit Plan or Benefit Arrangement identified in SCHEDULE 4.1(n) and except
as provided by a Legal Requirement or any collective bargaining agreement or
any employment contract identified on SCHEDULE 4.1(n), the employment of all
persons presently employed or retained by the Company is terminable at will.
(v) Except as expressly so identified in SCHEDULE
4.1(n), no Company Employee Benefit Plan is a "Multiemployer Plan."
(vi) No Company Employee Benefit Plan is maintained in
connection with any trust described in Section 501(c)(9) of the Code. Any
assets of any Company Employee Benefit Plan that are subject to the trust
requirement of ERISA Section 403 are held in trust in compliance with ERISA
Section 403.
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(vii) Each Company Employee Benefit Plan that is an
Employer Pension Benefit Plan is intended to be qualified within the meaning of
Section 401(a) of the Code ("Qualified") is so Qualified, has been so Qualified
during the period from its adoption to date, has been administered in a manner
that would not adversely affect its Qualified status and has received a
currently effective determination letter (or a determination letter has been
timely requested) from the Internal Revenue Service that the Plan is (or
continues to be) currently Qualified for federal income tax purposes. The
Company has delivered to ASI copies of such determination letters and any
pending applications, and copies of such letters and applications have been
attached to this Agreement as part of SCHEDULE 4.1(n). Each trust in which the
assets of any such Employee Pension Benefit Plan are held is exempt from tax
pursuant to Section 501(a) of the Code.
(viii) There have been no prohibited transactions with
respect to any Company Employee Benefit Plan. No "Fiduciary" (as defined in
Section 3(21) of ERISA) has any liability for breach of fiduciary duty or any
other failure to act or comply in connection with the administration or
investment of the assets of any such Company Employee Benefit Plan. No action,
suit, proceeding, hearing or investigation with respect to the administration or
the investment of the assets of any Company Employee Benefit Plan (other than
routine claims for benefits) is pending or, to the best knowledge of the
Shareholders is threatened. To the best knowledge of the Shareholders, there is
no basis for any such action, suit, proceeding, hearing or investigation.
(ix) Except as set forth in SCHEDULE 4.1(n) The Company
and each controlled group member do not maintain and have never maintained nor
contribute, or ever have contributed, or ever have been required to contribute,
to any Company Employee Benefit Plan providing health or medical benefits for
current or future retired or terminated employees, their spouses or their
dependents (other than in accordance with Code Section 4980B). No condition
exists that would prevent the Company or any controlled group member from
amending or terminating any Company Employee Benefit Plan or Benefit Arrangement
providing health or medical benefits in respect of any active or retired
employees of the Company or any controlled group member (other than in
accordance with Code Section 4980B).
(x) Each Company Employee Benefit Plan and Benefit
Arrangement has been maintained and administered in compliance with its terms
and with the requirements prescribed by any and all Legal Requirements,
including but not limited to ERISA and the Code, that are applicable to such
Plans. Nothing done or omitted to be done and no transaction or holding of any
asset under or in connection
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with any Company Employee Benefit Plan or Benefit Arrangement has made or
will make the Company, any controlled group member, any officer or director
of the Company or of any controlled group member subject to any liability
under Title I of ERISA or any liability for any Tax under Section 4971, 4972,
4974 or Section 4975 through 4980B, inclusive, of the Code.
(xi) Any Company Employee Benefit Plan that is a
"group health plan" (as defined in Code Section 5000(b)(l)) has been
administered in accordance with the requirements of Part 6 of Subtitle B of
Title I of ERISA and Code Section 4980B and nothing done or omitted to be
done in connection with maintenance or administration of any Company Employee
Benefit Plan that is a "group health plan" has made or will make the Company
or any controlled group member subject to any liability under Title I of
ERISA, excise Tax liability under Code Section 4980B or has resulted or will
result in any loss of income exclusion for a participant under Code Sections
105(h) or 106.
(xii) There is no contract, agreement, plan or
arrangement covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount
that would not be deductible pursuant to the terms of Section 280G or
162(a)(l) of the Code.
(xiii) The Company and each controlled group member have
made, before the date of this Agreement, all required contributions and
premium payments under each Company Employee Benefit Plan and Benefit
Arrangement for all completed fiscal years including contributions that may
not by law have otherwise been required to be made until the due date for
filing the Tax Return for any completed fiscal year.
(xiv) Except as disclosed in SCHEDULE 4.1(n), there has
not been with respect to the Company's or any controlled group member's
active or retired employees, any amendment to, written interpretation or
announcement (whether or not written) by the Company relating to, or change
in employee participation or coverage under, any Company Employee Benefit
Plan or Benefit Arrangement that would increase the expense of maintaining or
funding benefits under such Company Employee Benefit Plan or Benefit
Arrangement above the level of the expense incurred in respect of such for
the fiscal year ended on December 31, 1997, except as set forth in SCHEDULE
4.1(n).
(xv) No condition (other than pursuant to a Legal
Requirement) exists that would have prevented the Company from terminating
any Company Employee Benefit Plan, prior to the date of this Agreement other
than the imposition of an excise tax that will arise from the sale of the
Common Stock by the ESOP. Except
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as otherwise provided in this Agreement or any employment contract
entered into upon the Closing of the transactions contemplated by this
Agreement, the Shareholders acknowledge that ASI will have no obligation to
any of the Shareholders (other than pursuant to a Legal Requirement) to
employ any employee of the Company or to continue any Company Employee
Benefit Plan, and will have no liability to any of the Shareholders under any
plan or arrangement maintained by the Company for the benefit of any employee.
(xvi) Except as set forth in SCHEDULE 4.1(n) There are
no retired employees of the Company or any controlled group member who are
receiving or are entitled to receive any payments from the Company or any
controlled group member which are not fully funded by an Employee Pension
Benefit Plan of the Company or a controlled group member.
(o) EMPLOYEES AND LABOR. Since April 30, 1998, the Company
has not received any notice, and to the best knowledge of the Shareholders,
there is no reason to believe that any executive or key employee of the
Company, or any group of employees of the Company, has any plans to terminate
his, her or its employment with the Company, except as set forth in SCHEDULE
4.1(o). No executive or key employee is subject to any agreement,
obligation, Order or other legal hindrance that impedes or might impede such
executive or key employee from devoting his or her full business time to the
affairs of the Company, and, if such person becomes an employee of ASI, to
the affairs of ASI after the date of this Agreement. The Company will not be
required to give any notice under the Worker Adjustment and Retraining
Notification Act, as amended, or any similar Legal Requirement as a result of
this Agreement, the Other Shareholder Agreements or the transactions
contemplated by them. Except as set forth in SCHEDULE 4.1(o), the Company
does not have any pending, or to the best of Shareholders' knowledge,
threatened labor relations problems or disputes, and the Company has not
experienced any strikes, grievances, claims of unfair labor practices or
other collective bargaining disputes. The Company is not a party to and is
not bound by any collective bargaining agreement, there is no union or
collective bargaining unit at the Company's facilities, and no union
organization effort has been threatened, initiated or is in progress with
respect to any employees of the Company.
(p) CUSTOMER RELATIONSHIPS. SCHEDULE 4.1(p) lists each
customer (the "Principal Customers") that individually or with its Affiliates
accounted for a Contract Value of $300,000 or more. To the best knowledge of
the Shareholders and except as set forth in SCHEDULE 4.1(p), the Company has
good commercial working relationships with the Principal Customers. Since
December 31, 1997, no Principal Customer has canceled or otherwise terminated
its relationship with the Company, materially decreased or limited its
contribution of revenue to the Company, or indicated an intention to take any
such action. Except as set forth in SCHEDULE 4.1(p), none of the
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Shareholders has any basis to anticipate any material problems with the
Company's customer, supplier or business relationships. None of the
Shareholders have received written or oral communication from a Principal
Customer that the execution and delivery of this Agreement by either party or
the consummation of the transactions contemplated by this Agreement will
cause such Principal Customer to terminate or materially reduce the service
provided by the Company under its agreements with such Principal Customer
after the date of this Agreement (other than in connection with normal
rundowns in services provided as a result of the completion of services
contemplated in such Agreements).
(q) ENVIRONMENTAL MATTERS. The Company has complied with
and is in compliance with all Environmental Laws, except to the extent that
noncompliance with any Environmental Laws, either singly or in the aggregate,
(i) has not had and will not have any material Adverse Consequences, and (ii)
will not necessitate any material expenditure by or on behalf of the Company.
The Company has obtained and adhered to all necessary permits and other
approvals necessary to treat, transport, store, dispose of and otherwise
handle hazardous wastes, hazardous materials and hazardous substances (as
those terms and any similar terms are defined in any Environmental Law, and
which are referred to in this Agreement as "Hazardous Wastes, Hazardous
Materials and Hazardous Substances"), a list of all of which permits and
approvals is set forth on SCHEDULE 4.1(q), and has reported to the
appropriate authorities, to the extent required by all Environmental Laws,
all past and present sites owned and operated by the Company where Hazardous
Wastes, Hazardous Materials or Hazardous Substances have been treated,
stored, disposed of or otherwise handled. There have been no releases or
threats of releases (as defined in Environmental Laws) at, from, in or on any
property owned or operated by the Company except as permitted by
Environmental Laws. There is no on-site or offsite location to which the
Company has transported or disposed of Hazardous Wastes, Hazardous Materials
or Hazardous Substances or arranged for the transportation of Hazardous
Wastes, Hazardous Materials or Hazardous Substances which is the subject of
any federal, state, local or foreign enforcement action or any other
investigation which could lead to any claim against the Company, ASI or the
Surviving Corporation for any clean-up cost, remedial work, damage to natural
resources, property damage or personal injury. The Company does not have any
contingent liability in connection with any release of any Hazardous Waste,
Hazardous Material or Hazardous Substance into the environment.
(r) INTELLECTUAL PROPERTY. The Company owns or has the legal
right to use each item of Intellectual Property required to be identified on
SCHEDULE 4.1(i). Except as set forth on SCHEDULE 4.1(r), the sale of the Shares
to ASI will not affect the Company's right to use any such Intellectual
Property. To the best knowledge of the Shareholders, the continued operation of
the business of the Company as currently conducted will not interfere with,
infringe upon, misappropriate or conflict with any
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Intellectual Property rights of another Person. To the best knowledge of the
Shareholders, no other Person has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual
Property rights of the Company. Except as set forth on SCHEDULE 4.1(i), the
Company has not granted any license, sublicense or permission with respect to
any Intellectual Property owned or used in the Company's business.
(s) BROKERS. The Company retained Duncan-Smith Co.
("Duncan") to act on its behalf in negotiations relative to this Agreement
and the transactions contemplated by this Agreement, and a brokerage fee of
$142,500 is payable to Duncan, which fee is payable by the Company. No other
amounts are payable to Duncan in connection with the Merger or otherwise.
(t) DISCLOSURE. In connection with the Merger and the
conversion of the Shares under this Agreement, each Shareholder has complied
with the requirements of Rule 10b-5 of the Securities and Exchange Commission.
4.2 REPRESENTATIONS AND WARRANTIES OF ASI AND HOLDINGS. ASI and
Holdings jointly and severally represent and warrant to the Shareholders as
follows, as of the date of this Agreement:
(a) ORGANIZATION AND QUALIFICATION, ETC. ASI and Holdings
are corporations duly organized, validly existing and in good standing under
the laws of the State of Colorado and of the State of Texas, respectively,
and have corporate power and authority to own, lease and operate their
properties and assets and to carry on their businesses as they are now being
conducted. ASI and Holdings are duly qualified to do business and are in
good standing in each jurisdiction where the failure to be so qualified would
have a material adverse effect on the business or properties of ASI or
Holdings.
(b) AUTHORITY RELATIVE TO AGREEMENT. ASI and Holdings have
full and absolute right, power and authority to execute, deliver and perform
this Agreement and any Other ASI Agreements to which they are a party, and to
consummate the transactions contemplated on their part by this Agreement and
the Other ASI Agreements. The execution and delivery of this Agreement by
ASI and Holdings, and the consummation by ASI and Holdings of the
transactions contemplated on their part by this Agreement and the Other ASI
Agreements have been duly authorized by ASI's board of directors and
Holdings' board of directors. No other corporate approvals on the part of
the board of directors or shareholders of either ASI or Holdings are
necessary to authorize the execution and delivery of this Agreement and the
Other ASI Agreements. This Agreement and any Other ASI Agreements to which
they are a party have been duly executed and delivered by ASI and Holdings
and, assuming the due
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authorization, execution and delivery of this Agreement and the Other ASI
Agreements by the other parties to such agreements, are valid and binding
agreements, enforceable against ASI and Holdings in accordance with their
respective terms, except as such enforcement is subject to the effect of (i)
any applicable bankruptcy, insolvency, reorganization or similar laws
relating to or affecting creditors' rights generally and (ii) general
principles of equity, including, without limitation, concepts of
reasonableness, good faith and fair dealing, and other similar doctrines
affecting the enforceability of agreements generally (regardless of whether
considered in a proceeding in equity or at law).
(c) NON-CONTRAVENTION. The execution, delivery and
performance of this Agreement and the Other ASI Agreements and the
consummation of the transactions contemplated by this Agreement and by the
Other ASI Agreements will not, (i) violate any provision of the articles of
incorporation or bylaws of either ASI or Holdings, or (ii) violate, or
result, with the giving of notice or the lapse of time or both, in a
violation of, any provision of, or result in the acceleration of or entitle
any party to accelerate (whether after the giving of notice or lapse of time
or both) any obligation under, or result in the creation or imposition of any
encumbrance upon any of the property of ASI or Holdings pursuant to any
provision of any mortgage or lien or lease, agreement, license or instrument
or any order, arbitration award, judgment or decree to which ASI or Holdings
is a party or by which any of their assets are bound and do not and will not
violate or conflict with any other material restriction of any kind or
character to which either ASI or Holdings is subject or by which any of their
assets may be bound, and the same does not and will not constitute an event
permitting termination of any such mortgage or lien or lease, agreement,
license or instrument to which either ASI or Holdings is a party or (iii)
violate any Legal Requirement to which either ASI or Holdings is subject.
Neither ASI nor Holdings is a party to any litigation or proceeding (and, to
the best knowledge of ASI and Holdings, no such litigation or proceeding has
been threatened), that seeks to prohibit or delay, or that seeks damages as a
result of, the execution and delivery of this Agreement by ASI and Holdings
or the consummation of the transactions contemplated by this Agreement.
(d) GOVERNMENT APPROVALS. No consent, authorization, order
or approval of, or filing or registration with, any governmental commission,
board or other regulatory body is required for or in connection with the
execution and delivery of this Agreement and the Other ASI Agreements by ASI
and Holdings, the execution and delivery of this Agreement by ASI and
Holdings, and the consummation by ASI and Holdings of the transactions
contemplated by this Agreement and the Other ASI Agreements.
(e) SEC REPORTS. ASI has filed (and has provided the Company
with copies of all required forms, reports and documents which it has been
required to file
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with the Securities and Exchange Commission (the "Commission") since
September 30, 1997 (collectively, the "SEC Reports"), each of which has
complied in all material respects with all applicable requirements of the
Securities Act of 1933, as amended and the Securities Exchange Act of 1934,
as amended. As of their respective dates, the SEC Reports, including,
without limitation, any financial statements or schedules included in such
financial statements, did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated in such financial
statements or necessary in order to make the statements in such financial
statements, in light of the circumstances under which they were made, not
misleading, except, in the case of any SEC Report, any statement or omission
in such SEC Report that has been corrected or otherwise disclosed in a
subsequent SEC Report. The audited financial statements of ASI in its Annual
Report on Form 10-K for the fiscal year ended September 30, 1997, and the
unaudited interim financial statements of ASI in its Quarterly Reports on
Form 10-Q for the fiscal quarters ended December 31, 1997, and March 31,
1998, have been prepared in accordance with GAAP, fairly present the
consolidated financial position of ASI and its subsidiaries as of the dates
of such statements and their consolidated results of operations and changes
in financial position for the periods then ended (subject to normal year-end
adjustments and the absence of certain footnote disclosures in the case of
any unaudited interim financial statements).
(f) CAPITALIZATION OF ASI. As of the date of this
Agreement, the authorized capital stock of ASI consists of 100,000,000 shares
of common stock, of which approximately 6,294,535 shares are validly issued
and outstanding, fully paid and nonassessable, and 2,500,000 shares of
preferred stock, no par value, none of which is outstanding. Except pursuant
to ASI's employee stock option and restricted stock purchase plans, as of the
date of this Agreement, ASI has no commitments to issue or sell any shares of
its capital stock or any securities or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for or acquire
from ASI, any shares of its capital stock and no securities or obligations
evidencing such rights are outstanding.
(g) CAPITALIZATION OF HOLDINGS. As of the date of this
Agreement, the authorized capital stock of Holdings consists of 1,000 shares
of common stock, of which 100 shares are validly issued and outstanding,
fully paid and nonassessable. As of the date of this Agreement, Holdings has
no commitments to issue or sell any shares of its capital stock or any
securities or obligations convertible into or exchangeable for, or giving any
person any right to subscribe for or acquire from Holdings, any shares of its
capital stock and no securities or obligations evidencing such rights are
outstanding.
(h) NASDAQ. The shares of Common Stock to be issued to the
Shareholders at the Closing will be issued in compliance with all requirements
necessary for the shares of Common Stock to be quoted on the NASDAQ national
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market.
(i) COMMON STOCK ISSUED TO THE SHAREHOLDERS. The shares of
Common Stock to be issued to the Shareholders as consideration in accordance
with Article II have been duly and validly authorized for issuance by ASI
and, when the shares of Common Stock are issued and delivered to the
Shareholders as provided by this Agreement, such shares will have been
validly issued, fully paid and nonassessable, and the issuance of such shares
will not be subject to any preemptive or similar rights. The Common Stock
issued to the ESOP will be freely tradable upon registration in accordance
with the terms of the Registration Rights Agreement.
(j) ABSENCE OF MATERIAL ADVERSE CHANGE. Since April 30,
1998, to the date of this Agreement, ASI has not experienced any material
adverse change to its assets, its business, or its business prospects. As of
the date of this Agreement, there is no existing event or condition as to
which ASI is required to file a Current Report on Form 8-K, and no pending
transactions (other than the transaction contemplated by this Agreement) or
anticipated events or conditions that would require the filing of a Current
Report on Form 8-K, which has not previously been disclosed in the SEC
Reports.
(k) BROKERS. ASI retained Dain Rauscher Incorporated
("Dain") to act on its behalf in negotiations relative to this Agreement and
the transactions contemplated by this Agreement. Any finder's fee, brokerage
commission, or similar payment owed to Dain will be paid by ASI.
4.3 REPRESENTATIONS AS TO KNOWLEDGE. Any representation and
warranty made in Article IV to the "best knowledge" of a party means matters
actually known by such party and matters which would come to such party's
attention in the course of exercising reasonable diligence in the operation
of such party's business ("Constructive Knowledge"), including (i) in the
case of the Shareholders, inquiry of Martin Epner, Albert Naumann III, Dan
DeCourcy, Don Fryhover, Kenneth Clifford, John Federowicz, Linda Kane, and
Wendy Martin and (ii) in the case of ASI and Holdings, inquiry of Sidney V.
Corder, Scott C. Benger, John J. Dillon, III, and Randal J. Sage. Any matter
that is within the actual knowledge or Constructive Knowledge of any
Shareholder will be deemed to be within the best knowledge of all of the
Shareholders. Any matter that is within the actual knowledge or Constructive
Knowledge of Sidney V. Corder, Scott C. Benger, John J. Dillon, III, or
Randal J. Sage will be deemed to be within the best knowledge of ASI and
Holding.
ARTICLE V.
ADDITIONAL COVENANTS AND AGREEMENTS
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5.1 CONDUCT OF BUSINESS. During the period from the date of this
Agreement to the Effective Date, except as otherwise contemplated by this
Agreement and except for changes that the Company reasonably determines to be
necessary and prudent business practice that are not material and as to which
the Company gives prior notice to ASI, the Shareholders will cause the
Company to, and the Company will: conduct its respective operations according
to its ordinary and usual course of business; use its commercially reasonable
efforts to preserve substantially intact its respective business
organization; keep available the services of its officers and employees;
maintain its respective present relationships with licensors, suppliers,
distributors, customers and others having significant business relationships
with it; and confer with representatives of ASI to keep them informed with
respect to the general status of the on-going operations of the business of
the Company.
5.2 ACCESS TO INFORMATION. During the period from the date of this
Agreement to the Effective Date, the Shareholders will cause the Company to,
and the Company will: provide access to ASI to the business and properties of
the Company and information concerning their respective financial and legal
condition, as ASI deems necessary or advisable in connection with the
consummation of the transactions contemplated by this Agreement (but such
access will be during normal business hours and will not interfere with
normal operations of the Company); permit ASI and its authorized
representatives, including its independent accountants and counsel, after the
date of this Agreement and until the Effective Date, full access to the
premises, books and records of the Company during normal business hours; and
furnish ASI with such financial and operating data and other information with
respect to the business and properties of the Company, as ASI from time to
time reasonably requests. During the period from the date of this Agreement
to the Effective Date, ASI will provide the Company with access to any
information relating to ASI's and Holdings' financial and legal condition and
such other information concerning ASI and Holdings as reasonably requested by
the Company in connection with the transactions contemplated by this
Agreement.
5.3 CONSENTS AND AUTHORIZATIONS. As soon as practicable, each of
the parties to this Agreement will commence to take all reasonable action to
obtain all authorizations, consents, orders and approvals of all third
parties and of all federal, state and local regulatory bodies and officials
which may be or become necessary for its execution and delivery of, and the
performance of its obligations pursuant to, this Agreement and will cooperate
fully with the other parties in promptly seeking to obtain all such
authorizations, consents, orders and approvals.
5.4 NON-ASSIGNABLE LICENSES, LEASES AND CONTRACTS. As soon as
practicable, the Shareholders and the Company will use their commercially
reasonable efforts to
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obtain and deliver to ASI at or prior to the Effective Date such consents,
approvals or waivers as are required in order that any contract listed on
SCHEDULE 4.1(i) (other than the contract with First Energy (Ohio Edison), as
to which the provisions of Section 6.1(m) apply) which would be breached or
violated, or would give any other party the right to cancel the same, as a
result of the occurrence of the Merger under this Agreement, will not be so
breached or violated or result in such right of cancellation.
5.5 VOTE OF ESOP PARTICIPANTS. As soon as practicable, the Company
and each of the Shareholders will cause the Company Disclosure Documents to
be prepared and to be delivered to the Persons who have authority under the
terms of the ESOP to vote the Allocated Shares concerning the approval or
non-approval of the Merger, to deliver the ASI Disclosure Documents to such
Persons, and to cause a vote to occur by such Persons concerning the Merger.
As soon as practicable, ASI will prepare the ASI Disclosure Documents and
will make such filings as are necessary to satisfy the registration
requirements of, or an exemption from, the Securities Act of 1933 and
applicable state law. The Company Disclosure Documents are subject to the
approval of ASI and the ASI Disclosure Documents are subject to the approval
of the Shareholders, such approvals not to be unreasonably withheld. The
Independent Fiduciary prior to the Closing will direct the ESOP Trustee not
to cause the ESOP to exercise dissenters' rights under the Business
Corporation Act, Article 5.11. Albert Naumann III prior to the Closing will
instruct the Independent Fiduciary to direct the ESOP Trustee to vote all of
his Shares held by the ESOP in favor of the Merger, and will take any
additional steps as may be necessary with respect to such Shares to cause the
Merger to occur.
5.6 NOTIFICATIONS OF EXCEPTIONS. The Company and each of the
Shareholders will notify ASI, within two business days (and in any event
prior to the Closing Date) after any of them has become aware of such
matters, concerning any exception to any of the representations and
warranties set forth in Section 4.1, to the extent any such exception arises,
or the Company or any such Shareholder otherwise becomes aware of such
exception, from the date of this Agreement through the Closing Date. Such
notice will include a description in reasonable detail of the facts and
circumstances that cause there to be an exception to such representations and
warranties ASI and Holding will notify the Company and the Shareholders
Agent, within two business days (and in any event prior to the Closing Date)
after any of them has become aware of such matters, concerning any exception
to any of the representations and warranties set forth in Section 4.2, to the
extent any such exception arises, or ASI or Holding otherwise becomes aware
of such exception, from the date of this Agreement through the Closing Date.
Such notice will include a description in reasonable detail of the facts and
circumstances that cause there to be an exception to such representations and
warranties.
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5.7 STANDSTILL PROVISIONS. During the period from the date of this
Agreement through the Effective Date, except as otherwise contemplated by this
Agreement, the Shareholders will cause the Company not to, and the Company will
not:
(a) make any change in its articles of incorporation or
by-laws;
(b) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(c) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase, redeem
or otherwise acquire or retire for value any shares of its stock;
(d) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except in the normal
course of business consistent with past practice in an amount not in excess of
$25,000;
(e) create or assume any mortgage, pledge or other lien or
encumbrance upon any assets or properties whether now owned or hereafter
acquired, except (i) with respect to purchase money liens incurred in
connection with the acquisition of equipment with an aggregate cost not in
excess of $25,000 necessary or desirable for the conduct of the businesses of
the Company, (ii) (A) liens for taxes either not yet due or being contested
in good faith and by appropriate proceedings (and for which contested taxes
adequate reserves have been established and are being maintained) or (B)
materialmen's, mechanics', workers', repairmen's, employees' or other like
liens arising in the ordinary course of business (the liens set forth in
clause (ii) being referred to in this Agreement as "Statutory Liens");
(f) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(g) negotiate for the acquisition of any business or the
start-up of any new business;
(h) merge or consolidate or agree to merge or consolidate with
or into any other corporation or other entity;
(i) waive any material rights or claims, provided that the
Company may negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice;
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(j) commit a material breach or amend or terminate any material
agreement, permit, license or other right;
(k) enter into any other transaction outside the ordinary
course of its business or prohibited under this Agreement; or
(l) increase or commit to any increase in the salary, bonus,
commission or other compensation of any officer, director, employee or agent
of the Company, except as disclosed on SCHEDULE 5.7(k).
Furthermore, the Company will cause the ESOP not to increase the amount of
ESOP-to-Company ESOP Debt, allocate shares to participants outside the
ordinary course, or take any other action regarding the ESOP outside the
ordinary course.
5.8 NO-SHOP. None of the Shareholders or the Company will, and each
of the Shareholders and the Company will cause each of their agents, officers,
directors, trustees or any representative not to, during the period commencing
on the date of this Agreement and ending with the earlier to occur of the
Effective Date or the termination of this Agreement in accordance with its
terms, directly or indirectly:
(a) solicit or initiate the submission of proposals or offers
from any person for,
(b) participate in any discussions pertaining to, or
(c) furnish any information to any person other than ASI or
its authorized agents relating to, any acquisition or purchase of all or a
material amount of the assets of, or any equity interest in, the Company or a
merger, consolidation or business combination involving the Company. If any
of the Shareholders, the Company, or if any agent, officer, director, trustee
or any representative of any of the foregoing receives a proposal or offer
relating to any acquisition or purchase of all or a material amount of the
assets of, or any equity interest in, the Company or a merger, consolidation
or business combination involving the Company, the Shareholders will
immediately notify ASI and will promptly provide to ASI a copy of any
documents relating to such proposal or offer.
5.9 PRESS RELEASES AND ANNOUNCEMENTS. During the period from the
date of this Agreement to the Effective Date, ASI may issue press releases
and may make such public announcements or filings as it reasonably believes
are required by law. The parties have approved the press release to be
published on June 12, 1998, in the form of EXHIBIT 5.9.
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5.10 RULE 144 SALES. ASI will provide Shareholders with all
information relating to ASI which may be reasonably necessary in order to
permit the Common Stock to be sold in accordance with the terms of the
Lock-Up Agreement and Rule 144.
5.11 TERMINATION OF ESOP. Immediately prior to the Closing Date,
the Company will terminate the ESOP by appropriate action and will provide
evidence of such termination to ASI. After the Effective Date, ASI will
cause all assets of the ESOP (other than the 401(k) assets of the ESOP) to be
distributed to the participants of the ESOP in accordance with the terms of
the ESOP, and will permit such participants to directly rollover the 401(k)
assets of the ESOP (other than the Common Stock in such accounts) to the
401(k) plan of ASI or to receive a distribution of such 401(k) assets. ASI
will use reasonable efforts to obtain a determination letter from the
Internal Revenue Service concerning such termination, and to cause the
foregoing distributions to be made promptly thereafter.
5.12 PAYMENT OF SERP LIABILITY. ASI will cause Surviving
Corporation, within 180 days after the adjustment Date, to pay to Martin
Epner the liability owing to Martin Epner under the SERP, as reflected on the
Closing Date Balance Sheet.
5.13 TAX COVENANT. ASI will continue the Company's historic
business or use at least a significant portion of the Company's historic
business assets in a business, in each case as conducted or held by the
Company at the time of the Merger and in each case within the meaning of
Treasury Regulation 1.368-1(d) under Section 368 of the Code.
5.14 GAINSHARE PROGRAM. ASI will cause the surviving Corporation to
pay the "GainShare" to employees under the Company's gainshare plan for the
first quarter of 1998 in July 1998 and for the second quarter in October,
1998, in the amounts set forth in SCHEDULE 5.7(h); no gainshare will be
accrued for the month of June 1998.
5.15 ASSURANCES. Each party will take all actions reasonably
necessary to consummate the transactions contemplated by this Agreement.
ARTICLE VI.
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ASI. The
obligations of ASI and Holdings to consummate the Merger under this Agreement
are subject to the satisfaction or
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waiver by ASI prior to or on the Effective Date of each of the following
conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company and the Shareholders contained
in this Agreement or in any closing certificate or document delivered to ASI
pursuant to this Agreement are true and correct at and as of the Effective
Date as though made at and as of that time, other than such representations
and warranties as are specifically made as of another date (which
representations and warranties are true and correct at and as of the date
made), and the Company and the Shareholders will each have delivered to ASI a
certificate to that effect.
(b) COMPLIANCE WITH COVENANTS. The Company and the
Shareholders have performed and complied in all material respects with all
covenants of this Agreement to be performed or complied with by them at or
prior to the Effective Date, and the Company and the Shareholders each have
delivered to ASI a certificate to that effect.
(c) ALL PROCEEDINGS TO BE SATISFACTORY. The Articles of
Merger have been filed and accepted by the Texas Secretary of State. ASI has
received certified or other copies of all documents relating to the Company
and the Shareholders incident to the transactions contemplated by this
Agreement as ASI may reasonably request and such documents are reasonably
satisfactory in form and substance to ASI.
(d) OPINION OF COUNSEL FOR THE COMPANY AND THE SHAREHOLDERS.
ASI has received the favorable opinion of Chucker & Reibach, special counsel
to the Company and the Non-ESOP Shareholders, dated the Effective Date,
substantially in the form and to the effect set forth in EXHIBIT 6.1(d).
(e) OPINION OF COUNSEL FOR THE ESOP. ASI has received the
favorable opinion of Menke & Associates, special counsel to the ESOP, such
opinion dated the Effective Date, and substantially in the form and to the
effect set forth in EXHIBIT 6.1(e).
(f ) LEGAL ACTIONS OR PROCEEDINGS. No legal action or
proceeding has been instituted after the date of this Agreement against the
Company or any Shareholder, or against ASI or Holdings, arising by reason of
the Merger pursuant to this Agreement, which is reasonably likely (i) to
restrain, prohibit or invalidate the consummation of the transactions
contemplated by this Agreement or (ii) to have a material adverse effect on
the Company or ASI.
(g) WAIVER OF DISSENTERS' RIGHTS. Each of the Non-ESOP
Shareholders has delivered to ASI, at the time of the signing of this
Agreement, a letter dated as of
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the date of this Agreement, in form and substance reasonably satisfactory to
ASI, to the effect that each such Non-ESOP Shareholder waives all dissenters'
rights under the Texas Business Corporation Act, Article 5.11.
(h) INVESTOR REPRESENTATION LETTER. Each of the
Shareholders has delivered to ASI, at the time of the signing of this
Agreement, a letter dated as of the date of this Agreement, in form and
substance reasonably satisfactory to ASI, to the effect that each such
Shareholder is knowledgeable about the business of ASI and of the Company.
(i) REGISTRATION RIGHTS AGREEMENTS. The pertinent parties
have entered into Registration Rights Agreement #1 and Registration Rights
Agreement #2.
(j) SUPPORTING DOCUMENTS. On or prior to the Effective
Date, ASI has received copies of the following supporting documents:
(i) (A) copies of the Articles of Incorporation of
the Company, and all amendments thereto, certified as of a recent date by the
Secretary of State of Texas and (B) a certificate of said Secretary dated as
of a recent date as to the due incorporation and good standing of the Company
and (if available in Texas) listing all documents of the Company on file with
said Secretary; and
(ii) certificates of the Secretary or an Assistant
Secretary of the Company, dated the Effective Date and certifying
substantially to the effect (A) that attached thereto is a true and complete
copy of the By-laws of the Company as in effect on the date of such
certification and at all times since December 31, 1997; (B) that attached
thereto is a true and complete copy of resolutions adopted by the Board of
Directors and the Shareholders of the Company authorizing the execution,
delivery and performance of this Agreement and that all such resolutions are
still in full force and effect and are all the resolutions adopted in
connection with the transactions contemplated by this Agreement; (C) that the
Articles of Incorporation of the Company have not been amended since the date
of the last amendment referred to in the certificate (if any) delivered
pursuant to clause (B) above; and (D) as to the incumbency and specimen
signature of each officer of the Company executing this Agreement and any
certificate or instrument furnished pursuant to this Agreement, and a
certificate by another officer of the Company as to the incumbency and
signature of the officer signing the certificates referred to in this
paragraph (ii).
(k) TAX MATTERS. The Shareholders have delivered to ASI
Colorado Tax Representation Letters, in form of EXHIBIT 6.1(k), and an
affidavit of non-foreign status with respect to each Shareholder and the
Company, in the form required by
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Section 1445 of the Code and the regulations thereunder, signed under
penalties of perjury. The Shareholders understand that such affidavits will
be retained by ASI and will be made available to the Internal Revenue Service
upon request.
(l) GOVERNMENTAL APPROVALS. All consents and approvals
described in Section 5.3 have been obtained, in form and substance reasonably
satisfactory to ASI.
(m) FIRST ENERGY (OHIO EDISON) LETTER. The Company has
obtained from First Energy (Ohio Edison) an executed letter in the form of
EXHIBIT 6.1(m), with only such changes as are satisfactory to ASI in form and
substance.
(n) ESCROW AGREEMENT. The parties have entered into the
Escrow Agreement.
(o) BUY-OUT OF OPTIONS. The Company and the Option Holders
have entered into the Option Buy Out Agreement.
(p) LOCK-UP AGREEMENT. ASI and the Shareholders have
entered into the Lock-Up Agreement.
(q) RETIREMENT OF ESOP DEBT. The ESOP has committed, in a
manner satisfactory to ASI, to using cash consideration received in the
Merger and allocable to the Unallocated Shares to fully retire the
ESOP-to-Company ESOP Debt.
(r) EMPLOYMENT AND RELATED CONTRACTS. Each of Albert
Naumann III, Donald Fryhover, Dan DeCourcy, John Federowicz, and Ken Clifford
has entered into an employment agreement with ASI, Martin Epner has entered
into a Consulting Agreement with ASI, and Sheldon Braverman has entered into
a covenant not to compete, each of which contracts to be in the form of the
various agreements attached as EXHIBIT 6.1(r).
(s) TAX OPINION. ASI has received from Sherman & Howard
L.L.C. an opinion, reasonably satisfactory to ASI, to the effect that the
Merger will qualify as a tax-free "reorganization" under Section 368(a)(1)(A)
and (a)(2)(D) of the Code.
(t) DISSENTERS RIGHTS. The ESOP has waived dissenters
rights under the Texas Business Corporation Act, Article 5.11, in a manner
satisfactory to ASI in its sole discretion.
All such documents must be reasonably satisfactory in form and substance to
ASI.
6.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
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SHAREHOLDERS. The obligations of the Company and the Shareholders to
consummate the Merger under this Agreement are subject to the satisfaction in
all material respects or waiver by the Shareholders' Agent prior to or on the
Effective Date of each of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of ASI and Holdings contained in this
Agreement or in any closing certificate or document delivered to the Company
and/or the Shareholders pursuant to this Agreement are true and correct on
and as of the Effective Date as though made at and as of that date, other
than such representations and warranties as are specifically made as of
another date (which representations and warranties are true and correct at
and as of the date made), and ASI has delivered to the Shareholders and the
Company a certificate to that effect.
(b) COMPLIANCE WITH COVENANTS. ASI has performed and
complied in all material respects with all covenants of this Agreement to be
performed or complied with by ASI and/or Holdings on or prior to the
Effective Date, and ASI has delivered to the Company and the Shareholders a
certificate to such effect.
(c) ALL PROCEEDINGS TO BE SATISFACTORY. The Company and the
Shareholders have received all such counterpart originals or certified or
other copies of all documents relating to ASI incident to the transactions
contemplated by this Agreement and by the Registration Rights Agreement as
the Company and the Shareholders may reasonably request and such documents
are reasonably satisfactory in form and substance to the Company and the
Shareholders.
(d) OPINION OF COUNSEL FOR ASI. The Company and the
Shareholders have received the favorable opinion of Sherman & Howard L.L.C.,
counsel to ASI, dated the Effective Date, substantially in the form and to
the effect set forth in EXHIBIT 6.2(d).
(e) LEGAL ACTIONS OR PROCEEDINGS. No legal action or
proceeding has been instituted that is reasonably likely to (i) restrain,
prohibit, violate or otherwise affect the consummation of the transactions
contemplated by this Agreement or (ii) have a material adverse effect on ASI.
(f ) SUPPORTING DOCUMENTS. On or prior to the Effective
Date, the Company, the Shareholders have received copies of the following
supporting documents:
(i) (A) copies of the Articles of Incorporation of
ASI and Holdings, and all amendments thereto, certified as of a recent date
by the Secretary of
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State of the State of Colorado, in the case of ASI, or by the Secretary of
State of the State of Texas, in the case of Holdings, and (B) a certificate
of said Secretaries dated as of a recent date as to the due incorporation and
good standing of ASI and Holdings, as the case may be, and listing all
documents of the relevant company on file with said Secretary; and
(ii) a certificate of the Secretary or an Assistant
Secretary of each of ASI and Holdings dated the Effective Date and certifying
substantially to the effect (A) that attached thereto is a true and complete
copy of the By-laws of the particular company as in effect on the date of
such certification and at all times since December 31, 1997 (or since
inception, in the case of Holdings); (B) that attached thereto is a true and
complete copy of resolutions adopted by the Board of Directors of the
particular company authorizing the execution, delivery and performance of
this Agreement, and that all such resolutions are still in full force and
effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement; (C) that the Articles of
Incorporation of the particular corporation have not been amended since the
date of the last amendment referred to in the certificate (if any) delivered
pursuant to clause (B) above; and (D) as to the incumbency and specimen
signature of each officer of the particular company executing this Agreement
and a certification by another officer of such company as to the incumbency
and signature of the officer signing the certificate referred to in this
paragraph (ii).
(g) REGISTRATION RIGHTS AGREEMENTS. The pertinent parties
have entered into Registration Rights Agreement #1 and Registration Rights
Agreement #2.
(h) ESCROW AGREEMENT. The parties have entered into the
Escrow Agreement.
(i) LOCK-UP AGREEMENT. ASI and the Shareholders have
entered into the Lock-Up Agreement.
(j) OPTION BUY OUT AGREEMENT. The Company and the Option
Holders have entered into the Option Buy Out Agreement.
(k) RETIREMENT OF DEBT. ASI has committed, in a manner
satisfactory to Shareholders, to direct the Surviving Corporation to pay the
Company-to-Bank ESOP Debt and the Company-to-Partnership ESOP Debt
immediately following Closing.
(l) LINE OF CREDIT NOTES. The Shareholders' Agent has
received from Surviving Corporation evidence that either (i) the Line of
Credit Notes have been paid in full or provision for such payment at Closing
has been made, or (ii) all personal guarantees of the Line of Credit Notes
have been canceled and delivered to the
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Shareholder's Agent.
(m) EMPLOYMENT AND RELATED CONTRACTS. ASI has entered into
an employment contract or a consulting agreement with each of Albert Naumann
III, Donald Fryhover, Dan DeCourcy, John Federowicz, and Ken Clifford, and
Martin Epner has entered into a Consulting Agreement with ASI, each of which
contracts to be in the form of the various agreements attached as EXHIBIT
6.1(r).
(n) TAX OPINION. The Company and the Shareholders have
received from Sherman & Howard L.L.C. an opinion, reasonably satisfactory to
the Shareholders' Agent, to the effect that the Merger will qualify as a
tax-free "reorganization" under Section 368(a)(1)(A) and (a)(2)(D) of the
Code.
All such documents must be reasonably satisfactory in form and substance to
the Company and the Shareholders.
ARTICLE VII.
CLOSING; TERMINATION
7.1 CLOSING. The consummation of the transactions contemplated by
this Agreement ("Closing") will occur at the offices of the Company on the
date and time specified by ASI by notice given to the Shareholders' Agent
(the "Closing Date"), but such date must be between June 26, 1998, and July
10, 1998, inclusive, and the actual Closing Date must be specified by ASI by
notice to the Shareholders' Agent not later than one business day prior to
the Date of Closing.
7.2 DELIVERY OF CERTIFICATES. At the Closing, (a) the Shareholders
will deliver to ASI the certificates representing the Shares, duly endorsed
in blank by the Shareholders, or accompanied by blank stock powers, and with
all necessary transfer tax and other revenue stamps, acquired at the
Shareholders' expense, affixed and canceled, and (b) ASI will deliver to the
Shareholders certificates representing the Common Stock and ASI's check or
checks in payment of the cash portion of the Merger consideration. Any cash
payments will be wired to the Shareholders pursuant to wiring instructions
provided by the Shareholders' Agent. The Shareholders agree promptly to cure
any deficiencies with respect to the endorsement of the stock certificates or
other documents of conveyance with respect to such Shares or with respect to
the stock powers accompanying any Shares.
7.3 TERMINATION. (a) If the Closing has not occurred by July 10,
1998, any party may terminate this Agreement by notice to the other parties,
but any such termination will not relieve any party (including the
terminating party) from liability for any breach of this Agreement occurring
prior to such termination.
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(b) If on June 26, 1998, the closing price of the Common Stock on
Nasdaq, when multiplied by the number of shares of Common Stock to be issued
to the ESOP under Section 2.6(a)(ii), plus the cash payable to the ESOP under
Section 2.6(a)(ii), does not equal at least $5,266,123 (such closing price
being referred to as the "Target Price"), then ASI, upon notice to the
Shareholders' Agent (given not later than June 27, 1998), may terminate this
Agreement, without liability (but any such termination will not relieve any
party, including ASI, from liability for any breach of this Agreement
occurring prior to such termination), or ASI may issue such number of
additional shares of Common Stock to the ESOP such that the sum of the shares
of Common Stock to be issued to the ESOP under Section 2.6(a)(ii), plus such
number of additional shares of Common Stock, multiplied by the closing price
of the Common Stock on the Business Day prior to the Closing Date, plus the
cash payable to the ESOP under Section 2.6(a)(i), equals $5,266,123. If,
under the provisions of the first sentence of this Section 7.3(b), ASI does
not elect to terminate this Agreement on June 27, 1998, or to issue such
additional shares of Common Stock, and if on none of the Business Days
between June 26, 1998, and July 9, 1998, inclusive (the "Closing Period"),
the closing price of the Common Stock on Nasdaq equals or exceeds the Target
Price, then ASI, upon notice to the Shareholders' Agent (given not later than
July 10, 1998), may terminate this Agreement, without liability (but any such
termination will not relieve any party, including ASI, from liability for any
breach of this Agreement occurring prior to such termination). If ASI, under
the provisions of the first sentence of this Section 7.3(b), has not elected
to terminate this Agreement on June 27, 1998 or to issue such additional
shares of Common Stock, and if at any time during the Closing Period, the
Target Price is reached, ASI will have no right to terminate this Agreement
under this Section 7.3(b), and, if all the other conditions to ASI's
obligations to consummate the transactions under this Agreement have been
satisfied, ASI will be obligated to consummate the transactions contemplated
by this Agreement on the next Business Day after such Target Price is reached
during the Closing Period. Under any circumstance in which a closing occurs
and the closing price of the Common Stock on Nasdaq on the Business Day prior
to the Closing Date does not equal or exceed the Target Price, then ASI will
issue such number of additional shares of Common Stock such that the sum of
the shares of Common Stock to be issued to the ESOP under Section 2.6(a)(ii),
plus such number of additional shares of Common Stock, multiplied by the
closing price of the Common Stock on Nasdaq on the Business Day prior to the
Closing Date, plus the cash payable to the ESOP under Section 2.6(a)(i),
equals $5,266,123.
ARTICLE VIII.
POST-CLOSING COVENANTS
The parties agree as follows with respect to the period following Closing.
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8.1 FURTHER ASSURANCES. If after Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of
the parties will take such further action as any other party reasonably may
request, all at the sole cost and expense of the requesting party (unless the
requesting party is entitled to indemnification for such action under Article
IX). Such further action includes, but is not limited to, the execution and
delivery of additional instruments and documents and the use of the
Shareholders' reasonable best efforts to obtain any requested consent or
approval from a Principal Customer.
8.2 COOPERATION. If and for so long as any party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand in connection with (a) any
transaction contemplated by this Agreement or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing
Date involving any of the Company's assets or business, each of the other
parties will cooperate with such party and its counsel in the contest or
defense, make available their personnel, and provide such testimony and
access to their books and records as will be reasonably necessary in
connection with the contest or defense, all at the sole cost and expense of
the contesting or defending party (unless the contesting or defending party
is entitled to indemnification under Article IX).
8.3 POST-CLOSING ANNOUNCEMENTS. Following Closing, the
Shareholders will not issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
approval of ASI and the Shareholders' Agent.
8.4 FINANCIAL STATEMENTS. The Shareholders will, upon request of
ASI, cooperate with ASI to produce such historical and on-going financial
statements and audits concerning the Company as ASI may request, all at the
sole cost and expense of ASI.
8.5 ACCESS TO BOOKS AND RECORDS. Following the Closing, ASI and
Holdings will permit the Shareholders and their authorized representatives,
during normal business hours and upon reasonable notice, to have access to,
and examine and make copies of, all books and records of the Company which
relate to transactions or events occurring on or prior to the Closing Date
and transactions or events occurring subsequent to the Closing Date which are
related to or arise out of transactions or events occurring prior to the
Closing Date, to the extent reasonably necessary for the Shareholders to
defend any claim for indemnification under this Agreement, or to prepare any
tax return or effectively defend any tax audit or claim relating to periods
prior to the Closing.
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8.6 CERTAIN TAX MATTERS.
(a) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. ASI
will prepare or cause to be prepared and filed or caused to be filed all Tax
Returns for the Company for all periods ending on or prior to the Closing
Date which are filed after the Closing Date. Tax returns relating to periods
ending on or prior to the Closing Date will be prepared by KPMG Peat Marwick.
ASI will permit the Shareholders' Agent to review and comment on each such
Tax Return described in the preceding sentence prior to filing. In the event
the Shareholders' Agent does not agree with any Tax Return prepared by ASI,
Shareholders' Agent will notify ASI within 20 days after receipt of such Tax
Return. Upon ASI's receipt of such notice, the parties will endeavor to
reach an agreement on the disputed item(s) in the Tax Return. If ASI and the
Shareholders' Agent are unable to resolve the dispute, then the Shareholders
will reimburse ASI for the Taxes of the Company that Shareholders' Agent
believes are due. Any excess disputed amount will be submitted by ASI as a
claim to the Escrow Agent and will be resolved in accordance with the terms
of the Escrow Agreement. The Shareholders will reimburse ASI for any
undisputed Taxes of the Company and its subsidiaries with respect to such
periods within 15 days after payment by ASI of such Taxes to the extent such
Taxes are not reflected in the reserve for Tax liability (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) shown on the face of the Closing Date Balance Sheet.
(b) COOPERATION ON TAX MATTERS. ASI, Holdings, the
Shareholders, and the Shareholders' Agent will cooperate fully, as and to the
extent reasonably requested by the other parties, in connection with the
filing of Tax Returns pursuant to this Section and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation will include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided under this Subsection. ASI and the Shareholders agree: (i) to
retain all books and records with respect to Tax matters pertinent to the
Company relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the extent
notified by ASI or the Shareholders' Agent, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (ii) to give the other parties
reasonable written notice prior to the transferring, destroying or discarding
of any such books and records, and, if any of the other parties so request,
to allow such other parties to take possession of such books and records.
ASI, the Shareholders, and the Shareholders' Agent further agree, upon
request, to use their best efforts to obtain any certificate or other
document from any governmental authority or any other Person as may be
necessary to mitigate, reduce or
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eliminate any Tax that could be imposed, including without limitation, with
respect to the transactions contemplated by this Agreement.
8.7 EMPLOYEE MATTERS. The employees of the Company will become
employees of the Surviving Corporation following the Merger, and such
employment will be employment at will or in accordance with contracts in
effect at the Effective Date. Surviving Corporation recognizes that employees
of the Company have accrued unused vacation as of the date of the Merger.
Surviving Corporation acknowledges the liability for accrued unused vacation
and will permit such employees to use such unused vacation time over a
reasonable period after the Closing. Thereafter, for so long as the
employees of the Surviving Corporation are employed by the Surviving
Corporation, and except to the extent that any of them may have written
employment agreements with ASI that provide to the contrary, (a) ASI may
cause them to be paid, depending on their duties and responsibilities, in
accordance with the compensation policies of ASI, with respect to its
employees generally; (b) the Company's employee benefit plans may be
terminated as soon as practicable after the Effective Date; and (c) to the
extent that the Company's employee benefit plans are so terminated, the
employees of the Company will be entitled to participate in the benefit plans
that ASI maintains for its employees generally on substantially the same
terms and conditions as other employees of ASI. For this purpose, each "year
of service" with the Company will be treated as a "year of service" with ASI.
ARTICLE IX.
REMEDIES FOR BREACHES OF THIS AGREEMENT
9.1 INDEMNIFICATION BY ASI. From and after Closing, ASI will
indemnify, defend and hold harmless the Shareholders and their heirs,
personal representatives, successors and permitted assigns (the "Shareholder
Indemnitees") from and against any and all Adverse Consequences resulting or
arising from, relating to or incurred in connection with: (a) any breach of
any representation, warranty or covenant of ASI or Holdings contained in this
Agreement or in any of the Other ASI Agreements, and (b) any broker's or
finder's fee or other commission resulting from any services alleged to have
been rendered to or at the request of ASI or Holdings with respect to this
Agreement or any of the transactions contemplated by this Agreement. The
foregoing indemnification obligations will survive the Closing except to the
extent limited by Section 11.13.
9.2 INDEMNIFICATION BY SHAREHOLDERS. From and after Closing, the
Non-ESOP Shareholders and, subject to Section 9.5(a), the ESOP will
indemnify, defend and hold harmless ASI, Holdings, the Company and their
respective officers, directors and controlling persons (the "ASI
Indemnitees") from and against any and all Adverse Consequences resulting or
arising from, relating to or incurred in connection with: (a)
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any breach of any representation, warranty, or covenant of any of the
Shareholders contained in this Agreement or in any of the Other Shareholder
Agreements, (b) any broker's or finder's fee or other commission resulting
from any services alleged to have been rendered to or at the request of any
of the Shareholders or the Company with respect to this Agreement or any of
the transactions contemplated by this Agreement (other than the fee payable
to Duncan as described in Section 4.1(s)); and (c) any Environmental
Obligation incurred by any ASI Indemnitee, resulting or arising from,
relating to or incurred in connection with (i) any event, fact, circumstance
or condition (to the extent any such event, fact, circumstance or condition
occurred or existed at or prior to the Closing and even if the Adverse
Consequence manifests itself after the Closing) and (ii) any act or omission
(to the extent such act or omission occurred prior to the Closing Date and
even if the Adverse Consequence manifests itself after the Closing), (d) any
Adverse Consequence incurred by any ASI Indemnitee, resulting or arising
from, relating to or incurred in connection with (i) the Company's purchase,
sale, or ownership of shares of common stock of Conic Systems, Inc. or of
CANTEX Conversion Services, Inc., (ii) the operations, property ownership,
tax obligations, Legal Requirements, management, or contract obligations of
Conic Systems, Inc. or of CANTEX Conversion Services, Inc., including any and
all claims against any ASI Indemnitee by any past or present shareholder,
officer, director, employee, consultant, manager, agent, creditor of Conic
Systems, Inc. or of CANTEX Conversion Services, Inc., whether any event,
fact, circumstance, condition, act or omission, giving rise to such Adverse
Consequence occurs or manifests itself before or after the Closing Date, and
(e) any Adverse Consequence incurred by any ASI Indemnitee, resulting or
arising from, relating to or incurred in connection with any claim made or to
be made after the date of this Agreement by Timothy W. Smith against any ASI
Indemnitee (the "Smith Claim"), including claims for lost wages and benefits,
attorney's fees, costs of court, interest, exemplary damages, stock, and
stock option rights. The foregoing indemnification obligations will survive
the Closing except to the extent limited by Section 11.13.
9.3 [RESERVED.]
9.4 NOTICE OF CLAIM; RIGHT TO PARTICIPATE IN AND DEFEND THIRD PARTY
CLAIM.
(a) If any indemnified party receives notice of the
assertion of any claim, the commencement of any suit, action or proceeding,
or the imposition of any penalty or assessment by a third party in respect of
which indemnity may be sought under this Agreement (a "Third Party Claim"),
and the indemnified party intends to seek indemnity under this Agreement,
then the indemnified party will promptly provide the indemnifying party with
prompt written notice of such Third Party Claim, but in any event not later
than 30 calendar days after receipt of such notice of Third Party Claim. The
failure by an indemnified party to notify an indemnifying party of a Third
Party Claim will
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not relieve the indemnifying party of any indemnification responsibility
under this Article, except to the extent, if any, that such failure
prejudices the ability of the indemnifying party to defend such Third Party
Claim.
(b) The indemnifying party will have the right to control
the defense, compromise or settlement of a Third Party Claim with its own
counsel (reasonably satisfactory to the indemnified party) if the
indemnifying party delivers written notice to the indemnified party within
seven days following the indemnifying party's receipt of notice of a Third
Party Claim from the indemnified party which acknowledges its obligations to
indemnify the indemnified party with respect to such Third Party Claim in
accordance with this Article; provided, however, that the indemnifying party
will not enter into any settlement of any Third Party Claim which would
impose or create any obligation or any financial or other liability on the
part of the indemnified party if such liability or obligation (i) requires
more than the payment of a liquidated sum or (ii) is not covered by the
indemnification provided to the indemnified party under this Agreement. In
its defense, compromise or settlement of any Third Party Claim, the
indemnifying party will timely provide the indemnified party with such
information with respect to such defense, compromise or settlement as the
indemnified party may request, and will not assume any position or take any
action that would impose an obligation of any kind on, or restrict the
actions of, the indemnified party. The indemnified party will be entitled
(at the indemnified party's expense) to participate in, but not control, the
defense by the indemnifying party of any Third Party Claim with its own
counsel.
(c) If the indemnifying party does not undertake the
defense, compromise or settlement of a Third Party Claim in accordance with
subsection (b) of this Section, the indemnified party will have the right to
control the defense or settlement of such Third Party Claim with counsel of
its choosing; provided, however, that the indemnified party will not settle
or compromise any Third Party Claim without the indemnifying party's prior
written consent (which consent will not be unreasonably withheld), unless the
terms of such settlement or compromise release the indemnified party or the
indemnifying party from any and all liability with respect to the Third Party
Claim. The indemnifying party will be entitled (at the indemnifying party's
expense) to participate in the defense of any Third Party Claim with its own
counsel.
(d) The indemnified party will assert any indemnifiable
claim under this Agreement that is not a Third Party Claim by promptly
delivering notice of such claim to the indemnifying party. If the
indemnifying party does not respond to such notice within 60 days after its
receipt, it will have no further right to contest the validity of such claim.
(e) Notwithstanding the foregoing provisions, ASI will have
the right to control the prosecution of the declaratory judgment action
involving the Smith Claim and the defense of any claims brought by Timothy W.
Smith prior to or after the date of
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this Agreement, with counsel reasonably acceptable to the Shareholders'
Agent, and to settle or compromise the Smith Claim, with the consent of the
Shareholders' Agent, such consent not to be unreasonably withheld. Any costs
incurred by ASI involving the Smith Claim, including attorneys' fees and
costs of settlement will be an indemnifiable expense of the Shareholders.
9.5 LIMITATIONS.
(a) The maximum aggregate amount that the ASI Indemnitees
may recover on account of all Adverse Consequences under this Article IX will
be limited to $9,000,000, and the maximum aggregate amount that the ASI
Indemnitees may recover from the ESOP is that portion of the ESOP's cash and
Common Stock received at Closing that has been deposited into Escrow pursuant
to the terms of the Escrow Agreement.
(b) The indemnification provisions of this Article will
constitute the exclusive remedy by either party against the other arising by
virtue of a breach of any representation, warranty, or covenant under this
Agreement, absent fraud. The foregoing provision is not intended to limit
any party from seeking recourse against the other party under any law that
provides a cause of action that is independent of the rights granted by this
Agreement.
(c) Notwithstanding the provisions of this Article, upon the
Effective Date, the Company will not have any duty, except to the extent
covered by insurance, to indemnify any of the Shareholders (whether in their
capacities as officers, directors or otherwise) or to contribute funds for
the benefit of any of the Shareholders, under the articles of incorporation
or bylaws of the Company, under any resolution, contract, insurance policy,
arrangement or understanding, or under the provisions of any statute
governing the Company, or otherwise, to the extent that the facts,
circumstances, or events that otherwise would give rise to a claim of
indemnification or contribution constitute a breach of a representation,
warranty or covenant under this Agreement, regardless of any limitation
period under Section 11.13(b) or (c).
(d) The amounts for which the indemnifying party is liable
to the indemnified party under this Article will be increased by interest on
the amount of Adverse Consequences, at a rate equal to two percentage points
above the Prime Rate, accrued from the Liquidation Date.
(e) No ASI Indemnitee will be entitled to indemnification
for a breach by any of the Shareholders of a representation and warranty in
Section 4.1 to the extent that (i) any of Sidney V. Corder, Scott C. Benger,
John J. Dillon, III, or Randal J. Sage at or prior to the Closing had actual
knowledge of the fact or circumstance constituting
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such breach and at or prior to the Closing had actual knowledge that such
fact or circumstance constituted a breach, and (ii) no Shareholder and none
of Martin Epner, Albert Naumann III, and Wendy Martin had actual knowledge of
such fact or circumstances.
9.6 BASKET AND DEDUCTIBLE. Except as provided in the immediately
succeeding sentence, no indemnified party will be entitled to indemnification
from an indemnifying party under Sections 9.1 or 9.2 unless and until the
aggregate amount of Adverse Consequences with respect to which all ASI
Indemnitees or Shareholder Indemnitees, as the case may be, would otherwise
be entitled to assert under Section 9.1 or 9.2, whichever is applicable,
exceeds $200,000, at which point the indemnified party will be entitled to
indemnification for all Adverse Consequences. ASI will be entitled to seek
indemnification with respect to the Smith Claim without regard to the
foregoing provision, and any amount paid to ASI with respect to the Smith
Claim will not count against the $200,000 basket provided for in the
preceding sentence.
9.7 OBLIGATIONS OF SHAREHOLDERS. All of the obligations of the
Shareholders under this Agreement, including obligations arising from any
breach of a representation and warranty under Section 4.1 or Section 4.2 and
indemnification obligations under Section 9.2, are (a) except as provided in
this Section 9.7, joint and several as between the Shareholders as a group on
the one hand, and ASI or Holdings on the other hand, and (b) are pro rata
(based upon the number of Shares owned by such Shareholder over the total
number of Shares owned by all Shareholders) as among the Shareholders, except
that once the ESOP's interest in the Escrow has been exhausted to cover
indemnification claims of ASI Indemnitees, the Non-ESOP Shareholders will be
liable on a joint and several basis as between such Non-ESOP Shareholders
and, as among Non-ESOP Shareholders, will be liable on a pro rata basis
(based on the number of Shares owned by such Non-ESOP Shareholder over the
total number of Shares owned by all Non-ESOP Shareholders (such that the ASI
Indemnitees will be indemnified with respect to all Adverse Consequences
(subject to Sections 9.5(a) and 9.6) even if recourse against the ESOP may be
limited). Notwithstanding the foregoing, the obligations of the Shareholders
are several as to any breach of a representation or warranty set forth in the
first three sentences of Section 4.1(c) and in Section 4.1(d)(i) and (ii).
9.8 SHAREHOLDER WAIVER.
(a) Effective on the Effective Date, without any further
action required by any party, the Shareholders (but with respect to the ESOP
only to the extent not prohibited by section 410 of ERISA) waive (the
"Waiver") any and all obligations, claims, liabilities, actions, suits,
proceedings or demands of any kind or character, including but not limited
to, claims for indemnification, which any of such Shareholders
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now has or may hereafter have against the Company based upon events, actions
or omissions occurring or claims arising prior to the date of this Agreement,
whether or not such Shareholder has knowledge of such claims (the "Claims").
The Waiver includes, but is not limited to, Claims arising under any (i)
agreement, arrangement, or understanding (whether or not in writing), (ii)
any articles of incorporation, certificate of incorporation, bylaws or other
documents, and (iii) under common law, and any Claims for indemnification
against the Company which might arise as a result of a claim made against any
Shareholder by any third party or by any other Shareholder.
(b) In connection with the Waiver each Shareholder represents
and warrants to the Company as follows:
(i) Such Shareholder has received independent legal
advice from his or its attorneys, to the extent that such Shareholder has deemed
necessary, with respect to the advisability of making the Waiver.
(ii) Except for the representations and warranties
contained in this Section 9.6, neither the Company, nor any agent, employee,
representative or attorney for the Company, has made any statement or
representation to such Shareholder to induce such Shareholder in making the
Waiver, and none of such Shareholders has relied upon any such statement,
representation or promise of the Company, or any agent, employee, representative
or attorney for the Company, in making the Waiver.
(iii) Such Shareholder has made such investigation of the
facts pertaining to the Waiver and of all the matters pertaining to it as he or
it deemed necessary, and no such Shareholder has been induced by any promise or
representation by the Company or any of their respective agents, employees,
representatives or attorneys with respect to any such matter.
(iv) Such Shareholder has read this Section 9.6 and
understands its contents.
(v) In making the Waiver, such Shareholder assumes the
risk of any misrepresentation, concealment or mistake, and if such Shareholder
should subsequently discover that any fact was concealed from him or it, or that
his or its understanding of the facts or of the law was incorrect, such
Shareholder will not be entitled to set aside the Waiver by reason of this
Agreement. The Waiver is intended to be final and binding regardless of any
claims of misrepresentations, promise made without the intention of performance,
concealment of fact, mistake of fact or law, or any other circumstances
whatsoever.
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(c) Each Shareholder covenants not to commence any action,
lawsuit or other legal proceeding in law or in equity against the Company based
upon or arising out of any fact or matter covered by the Waiver.
(i) Should any Shareholder, at any time after such
Shareholder makes the Waiver, commence any action, lawsuit or other legal
proceeding, in law or in equity or otherwise, in breach of the covenant not to
sue contained in this Section 9.6, such Shareholder by this Agreement agrees to
indemnify and hold harmless the Company from and against any liability, loss,
cost, expense or judgment arising out of or occasioned by such action, including
but not limited to, the amount of any judgment or settlement entered into in
resolution of said action and attorneys' fees.
(ii) If any Shareholder, at any time after such
Shareholder makes the Waiver, commences any action, lawsuit or other legal
proceeding, in law or in equity or otherwise against any Person, and in
connection with such action, lawsuit or other legal proceeding, such Person
makes a claim for indemnification against the Company, such Shareholder by this
Agreement agrees to indemnify and hold harmless the Company from and against any
liability, loss, cost, expense or judgment arising out of or occasioned by such
action by such Person, including but not limited to, the amount of any judgment
or settlement entered into in resolution of said action and attorneys' fees.
(d) Each Shareholder represents and warrants that he or it has
not prior to the date of this Agreement assigned or transferred or purported to
assign or transfer, to any person or entity, any claims or matters released
pursuant to the Waiver. Each Shareholder further covenants that he or it will
not at any time after the date of this Agreement, assign or transfer or purport
to assign or transfer, to any person or entity, any claims or matters, known or
unknown, released pursuant to the Waiver. Each Shareholder by this Agreement
agrees to indemnify and hold harmless the Company from and against any loss,
cost or expense, including but not limited to, attorneys' fees, arising out of
or occasioned by, or arising in connection with, any such assignment or
transfer, or any purported such assignment or transfer, of any claims or other
matters released pursuant to the Waiver.
(e) The releases made by the Shareholders pursuant to the
Waiver will inure to the benefit of and will be binding upon the heirs, personal
representatives, successors and assigns of the Company.
9.9 ESCROW WITHDRAWAL. The ASI Indemnitees will be required to seek
recourse first against the cash in the Escrow Account and then against the
shares of Common Stock deposited in the Escrow Account before seeking recourse
directly
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against the Shareholders for any indemnification obligation of the
Shareholders under this Article. The ASI Indemnitees may, however,
immediately seek recourse directly against the Shareholders, other than the
ESOP, if the sum of cash held in the Escrow Account plus the Credited Value
of the escrowed Common Stock, determined as of the Liquidation Date, of any
claim by the ASI Indemnitees, is less than the amount reasonably claimed by
all ASI Indemnitees under all outstanding claims as to which a Liquidation
Date has occurred. Notwithstanding the existence of an Escrow Account,
nothing will prevent the Shareholders from paying cash in satisfaction of
their indemnification obligations under this Article. The ASI Indemnitees
right to seek recourse against the ESOP is limited to the amount of cash and
Common Shares deposited by the ESOP into the Escrow Account.
9.10 SHAREHOLDER ACKNOWLEDGMENT.
TO THE EXTENT THE PROVISIONS OF THIS AGREEMENT MAY PROVIDE FOR INDEMNIFICATION
FOR AN ASI INDEMNITEE'S OWN NEGLIGENT ACTS, EACH SHAREHOLDER ACKNOWLEDGES THAT
IT UNDERSTANDS AND ACCEPTS SUCH PROVISIONS.
ARTICLE X.
ALTERNATIVE DISPUTE RESOLUTION
10.1 MEDIATION. If a dispute arises under or in connection with this
Agreement, including, without limitation, those involving claims for specific
performance or other equitable relief, notice must be given pursuant to Section
11.6. After such notice has been given by one party to the other, the parties
in good faith will attempt to negotiate or mediate a resolution of the dispute
with the aid of a mediator who has been mutually agreed upon by the parties.
10.2 ARBITRATION. If such efforts provided for in Section 10.1 do not
within 30 days resolve the dispute, upon demand of any party, whether made
before or after the institution of any judicial proceeding, the dispute will be
resolved by binding arbitration under the Commercial Arbitration Rules of the
American Arbitration Association. Institution of a judicial proceeding by a
party does not waive the right of that party to demand arbitration under this
Agreement, provided that arbitration is commenced within 70 days after such
judicial proceedings are commenced. Disputes may include, without limitation,
tort claims, counterclaims, claims brought as class actions, claims arising from
documents executed in the future, or claims arising out of or connected with the
transactions contemplated by this Agreement and the Other ASI Agreements and
Other Shareholder Agreements. The American Arbitration Association will choose
one arbitrator to hear the parties and settle any dispute. All arbitration
hearings will be conducted in Kansas City, Missouri. Any pre-trial discovery
and/or depositions will be
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conducted in the venue of the party against whom discovery is sought or in
the venue of the party being deposed, respectively. All applicable statutes
of limitation will apply to any dispute. The arbitrator will have no power
to award punitive or exemplary damages, to ignore or vary the terms of this
Agreement or any Other ASI Agreement or Other Shareholder Agreement, and will
be bound to apply controlling law. The Shareholders and ASI each will pay
for one-half of the arbitrator's fees and expenses and each such party will
bear its own costs and expenses incurred in connection with the arbitration,
except that the arbitrator will award either party reimbursement of its share
of the costs and expenses of arbitration, such party's costs and expenses
(including attorneys' fees and expenses), and any special or extraordinary
fees or costs incurred by the Escrow Agent in connection with any such
arbitration or dispute, if the other party commences or conducts the
arbitration in bad faith. A judgment upon the award may be entered in any
court having jurisdiction. Notwithstanding anything to the contrary
contained in this Section 10.2, the parties preserve, without diminution,
certain remedies that any of them may employ or exercise freely, either
alone, in conjunction with, or during a dispute. The parties to this
Agreement have the right to proceed in any court of proper jurisdiction or by
self-help to exercise or prosecute the following remedies, as applicable: (i)
all rights of self-help including peaceful occupation of real property and
collection of rents, set off and peaceful possession of personal property;
(ii) obtaining provisional or ancillary remedies including temporary
injunctive relief, sequestration, garnishment, attachment, appointment of a
receiver and filing an involuntary bankruptcy proceeding; and (iii) when
applicable, a judgment by confession of judgment. All awards of permanent
injunctive relief may be awarded only by the arbitrator. Preservation of
these remedies does not limit the power of an arbitrator to grant similar
remedies that may be requested by a party in a dispute.
ARTICLE XI.
MISCELLANEOUS
11.1 NO THIRD-PARTY BENEFICIARIES. This Agreement will not confer any
rights or remedies upon any Person other than the parties and their respective
successors and permitted assigns.
11.2 ENTIRE AGREEMENT. This Agreement (including the Other Shareholder
Agreements and Other ASI Agreements) constitutes the entire agreement among the
parties and supersedes any prior understandings, agreements or representations
by or among the parties, written or oral, to the extent they relate in any way
to the subject matter of this Agreement.
11.3 SUCCESSION AND ASSIGNMENT. This Agreement will be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. At or after the Closing, any party may assign his or its
rights under this
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<PAGE>
Agreement as permitted by law, including, without limitation, any assignment
of any claim of indemnification to any debt or equity financing source, but
no assignment will release the assigning party of his or its obligations
under this Agreement.
11.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original and all of which together
will be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the execution
of a counterpart of this Agreement.
11.5 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
11.6 NOTICES. All notices, requests, demands, claims, and other
communications under this Agreement will be in writing. Any notice, request,
demand, claim, or other communication under this Agreement will be deemed duly
given only if it is sent by registered or certified mail, return receipt
requested, postage prepaid, or by courier, telecopy or facsimile, and addressed
to the intended recipient as set forth below:
If to the Shareholders or the
Company, to Shareholders'
Agent at:
Copy to:
Martin Epner Chucker & Reibach
________________________ 1 1/2 North Robinson Street
________________________ Richmond, Virginia 23220
Attn: Robert E. Reibach, Esq.
Telecopy: Telecopy : (804) 355-8875
and to the ESOP at: Copies to:
Consulting Fiduciaries, Inc.
________________________ 2745 Riverwoods Road
________________________ Riverwoods, Illinois 60015
Attn: David Heald
Telecopy: (847) 945-5611
Menke & Associates
114 Sansome Street, Suite 1000
San Francisco, CA 94104
Attn: Victor Alam
59
<PAGE>
Telecopy: (415) 362-3268
If to ASI or Holdings: Copy to:
Analytical Surveys, Inc. Sherman & Howard L.L.C.
941 North Meridian Street 633 Seventeenth Street, Suite 3000
Indianapolis, Indiana 46204 Denver, Colorado 80202
Attn: Sidney V. Corder Attn: James F. Wood, Esq.
Telecopy: (317) 634-0633 Telecopy: (303) 298-0940
Notices will be deemed given three Business Days after mailing if sent by
certified mail, when delivered if sent by courier, and one Business Day after
receipt of confirmation by person or machine if sent by telecopy or facsimile
transmission (except that, solely for purposes of the notice provided for in
Sections 7.1 and 7.3(b), a telecopied notice will be deemed given on the same
day it is sent if such day is a Business Day or on the next Business Day if such
day is not a Business Day). Any party may change the address to which notices,
requests, demands, claims and other communications under this Agreement are to
be delivered by giving the other parties notice in the manner set forth in this
Agreement.
11.7 GOVERNING LAW. This Agreement will be governed by and construed
in accordance with the domestic laws of the State of Texas without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Texas or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of Texas.
11.8 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement will be valid unless the same is in writing and signed by ASI,
Holdings and all of the Shareholders (unless signature is only required by the
Shareholders' Agent pursuant to Section 3.1). No waiver by any party of any
default, misrepresentation or breach of warranty or covenant under this
Agreement, whether intentional or not, will be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant under
this Agreement or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence, and no waiver will be effective unless set forth in
writing and signed by the party against whom such waiver is asserted.
11.9 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction will not affect
the validity or enforceability of the remaining terms and provisions of this
Agreement or the validity or
60
<PAGE>
enforceability of the offending term or provision in any other situation or
in any other jurisdiction.
11.10 EXPENSES. Except as otherwise provided in this Agreement, ASI,
Holdings, the Company, and each of the Shareholders will each pay any and all
fees and expenses incurred by it, or him or them in connection with the
negotiation, preparation, execution and performance of this Agreement. ASI
acknowledges that the fees and expenses of Chucker & Reibach have been incurred
by the Company and not the Shareholders.
11.11 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement will be construed as if drafted
jointly by the parties and no presumption or burden of proof will arise favoring
or disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. The word "including" will mean including without limitation.
The parties intend that each representation, warranty and covenant contained in
this Agreement will have independent significance. If any party breaches any
representation, warranty or covenant contained in this Agreement in any respect,
the fact that there exists another representation, warranty or covenant relating
to the same subject matter (regardless of the relative levels of specificity)
which the party has not breached will not detract from or mitigate the fact that
the party is in breach of the first representation, warranty or covenant.
11.12 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated in this Agreement by
reference and made a part of this Agreement.
11.13 SURVIVAL. The representations and warranties made in this
Agreement will survive the Closing Date until two years after the Closing Date,
except that:
(a) the representations and warranties of the Shareholders in
Sections 4.1(a), (b), (c), (d)(ii)(A) and d(iii)(A) will survive forever;
(b) the representations and warranties of ASI and Holdings in
Sections 4.2(a), (b), (c) (but only as to clauses (i) and (iii) of Section
4.2(c)), (d), (f), and (i) will survive forever; and
(c) the representations and warranties of the Shareholders in
Sections 4.1(g) and (n) will survive until the expiration of the applicable
statutes of limitations with respect to any such claims that could be brought
regarding such matters (including any extensions of any statutes of
limitations), plus a period of 60 days.
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<PAGE>
No party will have any obligation to indemnify any person pursuant to this
Agreement with respect to any breach of a representation or warranty unless a
specific claim has been validly made under this Agreement on or prior to the
applicable period set forth above, except that, if a party has a reasonable
basis to believe that an indemnifiable claim will arise and gives notice to the
other party concerning such matter within the applicable period set forth above,
then all rights of such party to seek indemnification with respect to such
matter will survive.
The parties to this Agreement have executed this Agreement as of the date
first above written.
ASI:
ANALYTICAL SURVEYS, INC.
By:
-----------------------------
Name: Sidney V. Corder
Title: President
HOLDINGS:
SURVEYS HOLDINGS, INC.
By:
-----------------------------
Name: Sidney V. Corder
Title: President
SHAREHOLDERS:
EMPLOYEE STOCK OWNERSHIP AND 401(k) TRUST
By:
-----------------------------
Name: Gene Barber
62
<PAGE>
Title: Trustee
THE EPNER FAMILY LIMITED PARTNERSHIP
By:
------------------------------------
Martin Epner, General Partner
By:
------------------------------------
Marcia Epner, General Partner
THE BRAVERMAN FAMILY LIMITED PARTNERSHIP
By:
----------------------------------------
Sheldon Braverman, General Partner
By:
-------------------------------------
Phyllis Braverman, General Partner
- -------------------------------------
Albert Naumann, III
- -------------------------------------
Martin Epner, in his individual capacity, has executed on this signature line to
evidence his agreement to the payment of the SERP liability at the time and in
the manner described in Section 5.12.
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TABLE OF CONTENTS
Exhibits: Schedules:
- --------- -----------
Exhibit A Schedule 1.1
Exhibit B Schedule 2.6(c)
Exhibit C Schedule 4.1(c)
Exhibit D Schedule 4.1(d)
Exhibit E Schedule 4.1(e)(i)
Exhibit 2.1 Schedule 4.1(e)(ii)
Exhibit 2.2 Schedule 4.1(f)
Exhibit 2.10(b) Schedule 4.1(g)(iii)
Exhibit 5.9 Schedule 4.1(g)(vii)
Exhibit 6.1(d) Schedule 4.1(h)(i)
Exhibit 6.1(e) Schedule 4.1(i)
Exhibit 6.1(m) Schedule 4.1(j)(i)
Exhibit 6.1(r) Schedule 4.1(j)(ii)
Exhibit 6.2(d) Schedule 4.1(k)
Schedule 4.1(l)
Schedule 4.1(m)
Schedule 4.1(n)
Schedule 4.1(o)
Schedule 4.1(p)
Schedule 4.1(q)
Schedule 4.1(r)
Schedule 5.7(k)
64
<PAGE>
REGISTRATION RIGHTS AGREEMENT
(Including Restrictions on Transfer)
[Individuals]
June 26, 1998
TO THE PERSONS LISTED ON THE
ATTACHED DISTRIBUTION LIST
Dear Sirs:
This Agreement is being executed in conjunction with a Lock-Up Agreement
dated the same date as this Agreement. This will confirm that in connection
with the merger (the "Merger") of Cartotech, Inc., a Texas corporation
("Cartotech") with and into Surveys Holdings, Inc., a Texas corporation (the
"Company"), pursuant to the Agreement and Plan of Merger dated June 11, 1998
(the "Merger Agreement"), between Analytical Surveys, Inc., a Colorado
corporation ("ASI"), and the Company on the one hand, and the Cartotech, Inc.
Employee Stock Ownership and 401(k) Trust (the "ESOP"), The Epner Family Limited
Partnership (the "Epner Partnership"), The Braverman Family Limited Partnership
(the "Braverman Partnership") and Albert Naumann, III ("Naumann," with the Epner
Partnership, the Braverman Partnership and Naumann being individually referred
to as a "Shareholder" and collectively as the "Shareholders") on the other hand,
the Investor Representation Letter dated June 26, 1998 executed by the ESOP and
by each Shareholder, and related transfer documents, ASI hereby covenants and
agrees with each of you, and with any Permitted Transferee of the Restricted
Stock (as defined below), as follows:
1. CERTAIN DEFINITIONS. The following terms have the following
respective meanings:
"AGREEMENT" means this Registration Rights Agreement.
"CLOSING DATE" means the date of this Registration Rights Agreement.
"COMMISSION" means the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act.
"COMMON STOCK" means the shares of common stock, no par value, of ASI as
constituted as of the date of this Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same are in effect at the time.
"PERMITTED TRANSFEREES" means, for each Shareholder, trusts or other
entities created for the exclusive benefit of, or beneficially owned exclusively
by, a Shareholder.
<PAGE>
"REGISTRATION EXPENSES" means the expenses so described in Section 7.
"RESTRICTED STOCK" means the shares of Common Stock issued to the
Shareholders pursuant to the Merger Agreement and any additional shares of
Common Stock or other securities issued in respect of such shares in connection
with a stock dividend, stock split, recapitalization, reclassification or other
transaction affecting ASI's outstanding Common Stock.
"SECURITIES ACT" means the Securities Act of 1933 or any similar federal
statute, and the rules and regulations of the Commission under the Securities
Act of 1933, all as the same are in effect at the time.
"SELLING EXPENSES" means the expenses so described in Section 7.
"TRANSFER" means a sale, exchange, assignment, pledge or other disposition
of Restricted Stock or any interest in such Restricted Stock, whether voluntary
or by operation of law, excluding a Transfer to a Permitted Transferee.
2. RESTRICTIVE LEGEND. Each certificate representing Restricted Stock
until such legend is removed or such shares are sold in accordance with the
other provisions of this Agreement, will be stamped or otherwise imprinted with
a legend substantially in the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE (A) HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE,
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY
HAVE BEEN REGISTERED UNDER THAT ACT AND ALL APPLICABLE STATE
SECURITIES LAWS OR EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS
THEREOF ARE AVAILABLE, AS ESTABLISHED TO THE SATISFACTION OF THE
COMPANY, BY OPINION OF COUNSEL OR OTHERWISE, AND (B) ARE SUBJECT TO
CONTRACTUAL RESTRICTIONS ON RESALE AND TRANSFER UNDER AGREEMENTS
BETWEEN THE HOLDER AND THE COMPANY, COPIES OF WHICH ARE AVAILABLE FOR
INSPECTION AT THE OFFICES OF THE COMPANY."
3. RESTRICTIONS ON SALE AND NOTICE OF PROPOSED TRANSFER. None of the
Shareholders will Transfer any shares of the Restricted Stock prior to the first
anniversary of the Closing Date, except in accordance with the Lock-Up Agreement
and the requirements of Section 9. After the first anniversary, the
Shareholders may transfer the One-Year Shares (as defined in the Lock-Up
Agreement) pursuant to the exercise of Incidental Rights (as defined below) as
set forth in Section 4(a)(ii).
<PAGE>
Prior to any proposed transfer of any Restricted Stock (other than under
the circumstances described in Section 4), the transferring Shareholder will
give written notice to ASI of its intention to effect such transfer. Each such
notice will describe the manner of the proposed transfer and, if requested by
ASI will be accompanied by an opinion of counsel reasonably satisfactory to ASI
to the effect that the proposed transfer of the Restricted Stock may be effected
without registration under the Securities Act and any state securities laws, at
which point such Restricted Stock may be transferred in accordance with the
terms of its notice. Each certificate of Restricted Stock transferred as
provided above will bear the legend set forth in Section 2, unless (i) such
transfer is in accordance with the provisions of Rule 144 (or any other rule
permitting public sale without registration under the Securities Act) or (ii)
the opinion of counsel referred to above is to the further effect that the
transferee and any subsequent transferee would be entitled to transfer such
securities in a public sale without registration under the Securities Act.
The foregoing restrictions on transferability of Restricted Stock will
terminate as to any particular shares of Restricted Stock when such shares have
been effectively registered under the Securities Act and sold or otherwise
disposed of in accordance with the intended method of disposition by the seller
or sellers of such shares set forth in the registration statement concerning
such shares, or when the legend set forth in Section 2 is removed from the
certificates representing such shares in accordance with the immediately
preceding sentence of this Section 3. If the transferring Shareholder is able
to demonstrate to the reasonable satisfaction of ASI (and its counsel) that the
provisions of Rule 144(k) of the Securities Act are available to the
transferring Shareholder without limitation, the transferring Shareholder will
be entitled to receive from ASI without expense, a new certificate not bearing
the restrictive legend set forth in Section 2.
4. INCIDENTAL REGISTRATION RIGHTS.
(a) The Shareholders have incidental registration rights as described
in Section 4(b) (the "Incidental Rights") with respect to the One-Year Shares,
with the following limitations: (i) the Shareholders will have no Incidental
Rights prior to the first anniversary of the Closing Date, and (ii) after the
first anniversary, but before the second anniversary, of the Closing Date the
Incidental Rights are limited to the One-Year Shares owned by a Shareholder.
(b) After the first anniversary of the Closing Date, and before the
second anniversary of the Closing Date, each time ASI proposes to register any
of its equity securities under the Securities Act (other than a registration
effected solely to implement an employee benefit or stock option plan, to sell
shares obtained under any employee benefit or stock-option plan or a transaction
to which Rule 145 or any other similar rule of the Commission under the
Securities Act is applicable, or a registration on any form which is not
available for the registration of Restricted Stock), ASI will give written
notice to the Shareholders of its intention to do so. Any Shareholder may give
ASI a written request to register all or some of the Restricted Stock in the
registration described in the written notice from ASI, provided that such
written request is given within 20 days after receipt of any such notice from
ASI, with such
<PAGE>
request stating the number of shares of Restricted Stock to be disposed of
and the intended method of disposition of such Restricted Stock. Upon receipt
of such request, ASI will use its best efforts to cause promptly all such
shares of Restricted Stock intended to be disposed of to be registered under
the Securities Act so as to permit their sale or other disposition in
accordance with the intended methods set forth in the request for
registration; PROVIDED, HOWEVER, that if the registration relates to an
underwritten offering, (i) the requesting Shareholders' right to have shares
of Restricted Stock included in the registration will be contingent upon the
requesting Shareholders agreeing to include such Restricted Stock in the
offering and entering into an underwriting agreement as provided in Section
6, and (ii) if the managing underwriter of such offering determines
reasonably and in good faith in writing that the inclusion of all of the
shares of Restricted Stock as to which the requesting Shareholders have
requested registration would adversely affect the offering, the number of
shares to be registered for the account of such requesting Shareholders will
be reduced to the extent necessary to reduce the total number of shares to be
included in such offering to the amount recommended by such managing
underwriter. Any reduction under clause (ii) will be made against all
persons (other than ASI) who have elected to include shares of Common Stock
in the registration pursuant to the exercise of incidental registration
rights granted by ASI, in proportion to the number of shares that each had
been entitled to request, and had requested, ASI to include in the
registration. The Incidental Rights under this section apply to a
registration to be effected for securities to be sold for the account of ASI,
as well as a registration statement which includes securities to be offered
for the account of other holders of ASI equity securities.
5. PURCHASE IN LIEU OF REGISTRATION. If the Shareholders exercise
Incidental Rights as to any shares of the Restricted Stock (a "Registration
Notice"), then ASI will have the option (the "Option"), which Option may be
exercised only to the extent not prohibited by Section 7-106-401 of the Colorado
Business Corporation Act, to purchase any or all of such shares, in lieu of
registering them, at the current market price determined as follows: as to each
share of Common Stock, the average of the daily closing prices for the Common
Stock for the 20 consecutive trading days before the day the Registration Notice
was received by ASI. The closing price for each day will be the last reported
sale price regular way, or, in case no such reported sale takes place on such
day, the reported closing price regular way, in either case on the composite
tape, or if the Common Stock is not quoted on the composite tape, on the
principal United States securities exchange registered under the Securities
Exchange Act of 1934, on which the Common Stock is listed or admitted to
trading, or if it is not listed or admitted to trading on any such exchange, the
closing sale price (or the average of the quoted closing bid and asked prices if
no sale is reported) as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), or any comparable system, or if
the Common Stock is not quoted on the NASDAQ, or any comparable system, the
average of the closing bid and asked prices quoted to the public by a person
then making a market in the Common Stock, and if no person is a market maker in
the Common Stock, then the average of the closing bid and asked prices furnished
by any member of the National Association of Securities Dealers, Inc. ASI may
exercise the Option at any time within 15 days after receiving the Registration
Notice by giving the selling Shareholders written notice of its election to
exercise. Such notice must specify the number of shares of the Restricted Stock
that ASI elects to purchase, the current market price as determined according to
the formula set forth above, and the date of payment for such shares,
<PAGE>
which will be within 60 days after ASI's receipt of the Registration Notice.
On the date fixed for payment in ASI's notice of exercise, the selling
Shareholders will deliver certificates representing the shares of Restricted
Stock that ASI has elected to purchase, duly endorsed for transfer to ASI,
free and clear of liens, claims and encumbrances, to ASI at its principal
executive offices against payment by ASI of the purchase price for such
shares. If ASI elects to purchase less than all of the shares covered by a
Registration Notice, it will be obligated to register the balance of such
shares, subject to the provisions of Section 4.
6. REGISTRATION PROCEDURES. As to any shares of Restricted Stock that are
subject to a Registration Notice under the Incidental Rights and as to which ASI
does not exercise the Option provided for in Section 5, ASI will:
(a) after the expiration of the period within which ASI may exercise
the Option, prepare and file with the Commission, a registration statement
with respect to such securities;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement to comply with the provisions
of the Securities Act with respect to the disposition of all Restricted
Stock covered by such registration statement in accordance with the selling
Shareholders intended method of disposition set forth in such registration
statement for such period;
(c) furnish to the selling Shareholders and to each underwriter such
number of copies of the registration statement and the prospectus included
in the registration statement (including each preliminary prospectus) as
such persons may reasonably request in order to facilitate the public sale
or other disposition of Restricted Stock covered by such registration
statement;
(d) use its best efforts to register or qualify Restricted Stock
covered by such registration statement under the securities or blue sky
laws of such jurisdictions as the selling Shareholders or, in the case of
an underwritten public offering, the managing underwriter, reasonably
requests, if such registrations are required by law;
(e) immediately notify the selling Shareholders and each underwriter,
at any time when a prospectus relating to such registration statement is
required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus contained in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated in such
prospectus or necessary to make the statements in such prospectus not
misleading in light of the circumstances then existing;
(f) use its best efforts (if the offering is underwritten) to
furnish, at the request of the selling Shareholders on the date that
Restricted Stock is delivered to
<PAGE>
the underwriters for sale pursuant to such registration: (i) an opinion
dated such date of counsel representing ASI for the purposes of such
registration, addressed to the underwriters and to the ESOP Trustee
stating that such registration statement has become effective under the
Securities Act and that (A) to the best knowledge of such counsel no
stop order suspending the effectiveness of such registration statement
has been issued and no proceedings for that purpose have been instituted
or are pending or contemplated under the Securities Act, (B) the
registration statement, the related prospectus, and each amendment or
supplement of each of them, comply as to form in all material respects
with the requirements of the Securities Act and the applicable rules and
regulations of the Commission under the Securities Act (except that such
counsel need express no opinion as to financial statements and other
financial and statistical data contained in each of them), and (C) to
such other effects as may reasonably be requested by counsel for the
underwriters or by the selling Shareholders or their counsel, and (ii) a
letter dated such date from the independent public accountants retained
by ASI, addressed to the underwriters and to the selling Shareholders,
stating that they are independent public accountants within the meaning
of the Securities Act and that, in the opinion of such accountant; the
financial statements of ASI included in the registration statement or
the prospectus, or any amendment or supplement of such statement or
prospectus, comply as to form in all material respects with the
applicable accounting requirements of the Securities Act, and such
letter will additionally cover such other financial matters with respect
to the registration in respect of which such letter is being given as
such underwriters may reasonably request;
(g) make available for inspection by the selling Shareholders and any
attorney, accountant or other agent retained by any of them, all financial
and other records, pertinent corporate documents and properties of ASI and
cause ASI's officers, directors and employees to supply all information
reasonably requested by the selling Shareholders or any such attorney,
accountant or agent in connection with such registration statement;
(h) as expeditiously as is reasonably practicable, cause all
Restricted Stock covered by the registration statement to be listed on each
securities exchange on which similar securities of ASI are then listed; and
(i) provide a transfer agent and registrar for all Restricted Stock
covered by the registration statement not later than the effective date of
such registration statement.
ASI will be entitled to control the timing of the registration process in
all respects and may withdraw or terminate any such registration at any time.
In connection with each registration under this Agreement, the selling
Shareholders will furnish to ASI in writing such information with respect to
themselves and the
<PAGE>
proposed distribution by them as will be reasonably necessary in order to
assure compliance with federal and applicable state securities laws.
In connection with each registration pursuant to Section 4 covering an
underwritten public offering, ASI and the selling Shareholders will enter into a
written agreement with the managing underwriter selected in the manner provided
above in such form and containing such provisions as are customary in the
securities business for such an arrangement between major underwriters and
companies of ASI's size and investment stature; PROVIDED, HOWEVER, that such
agreement will not contain any such provision applicable to ASI or the selling
Shareholders which is inconsistent with the provisions of this Agreement and
provided, further, that the time and place of the closing under said agreement
will be as mutually agreed upon among ASI, such managing underwriter, and the
selling Shareholders.
7. EXPENSES.
(j) All expenses incurred in complying with Section 4, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel and independent public accountants for ASI, fees of
the Commission and National Association of Securities Dealers, Inc., transfer
taxes and fees of transfer agents and registrars, but excluding any Selling
Expenses and fees and expenses of counsel for the selling Shareholders or any
other expenses of such Shareholders, are referred to as "Registration Expenses".
All underwriting discounts, selling commissions applicable to the sale of the
Restricted Stock, and any customary and reasonable underwriter's expense
allowances expressed on a percentage of the proceeds of the offering, are
referred to as "Selling Expenses".
(k) ASI will pay all Registration Expenses in connection with each
registration statement filed pursuant to Section 4. All Selling Expenses in
connection with any registration statement filed pursuant to Section 4 will be
borne pro rata by the participating Shareholders.
8. INDEMNIFICATION. In the event of a registration of any of the
Restricted Stock under the Securities Act pursuant to Section 4, ASI will
indemnify and hold harmless the selling Shareholders, and each underwriter of
Restricted Stock under the Securities Act and each other person, if any, who
controls the selling Shareholders or any underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which the selling Shareholders or underwriter or controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect of such losses,
claims, damages or liabilities) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
registration statement under which such Restricted Stock was registered, any
preliminary prospectus or final prospectus contained in such registration
statement, or any amendment or supplement of such registration statement, or
arise out of or are based upon the omission or alleged omission to state in such
registration statement or prospectus a material fact required to be therein or
necessary to make the statements therein not misleading, and will reimburse the
selling Shareholders, each such underwriter and each such controlling person for
any legal or other expenses reasonably incurred
<PAGE>
by them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however that ASI will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability 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 the selling Shareholders, any underwriter or any
controlling person in writing specifically for use in such registration
statement or prospectus.
If there is a registration of any of the Restricted Stock under the
Securities Act pursuant to Section 4, the selling Shareholders will indemnify
and hold harmless ASI and each person, if any, who controls ASI within the
meaning of the Securities Act, each officer of ASI who signs the registration
statement, each director of ASI, each underwriter and each person who
controls any underwriter within the meaning of the Securities Act, against
all losses, claims, damages or liabilities, joint or several, to which ASI or
such officer or director or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect of such losses, claims,
damages or liabilities) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the
registration statement under which such Restricted Stock was registered, any
preliminary prospectus or final prospectus contained in such registration
statement or any amendment or supplement of such registration statement, or
arise out of or are based upon the omission or alleged omission to state in
such registration statement or prospectus a material fact required to be
stated therein or necessary to make the statements therein not misleading,
and will reimburse ASI and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the selling Shareholders
will be liable under this Agreement in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with information
furnished in writing to ASI by the selling Shareholders specifically for use
in such registration statement or prospectus provided, further, however that
the liability of the selling Shareholders under this Agreement will be
limited to the proportion of any such loss, claim, damage, liability or
expense which is equal to the proportion that the public offering price of
shares sold by the selling Shareholders under such registration statement
bears to the total public offering price of all securities sold under such
registration statement, but not to exceed the proceeds received by the
selling Shareholders from the sale of the Restricted Stock covered by such
registration statement.
Promptly after receipt by an indemnified party under this Agreement of
notice of the commencement of any action, such indemnified party will, if a
claim in respect of such action is to be made against the indemnifying party
under this Agreement, promptly notify the indemnifying party in writing of such
claim but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party except to the
extent that the indemnifying party is prejudiced by such omission or delay. In
case any such action is brought against any indemnified party and it notifies
the indemnifying party of the commencement of such action, the indemnifying
party will be entitled to participate in and, to the extent it wishes, to assume
and undertake the defense of such action with counsel reasonably
<PAGE>
satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense of such action, the indemnifying party will not be
liable to such indemnified party under this Section 8 for any legal expenses
subsequently incurred by such indemnified party in connection with the
defense of such action other than reasonable costs of investigation and of
liaison with counsel so selected (unless such indemnified party reasonably
objects to such assumption on the grounds that there are likely to be
defenses available to it which are different from or in addition to, and are
in conflict with, the defenses available to such indemnifying party, in which
event the indemnified party will be reimbursed by the indemnifying party for
the reasonable expenses incurred in connection with retaining its separate
legal counsel, but only to the extent of such conflict). The indemnifying
party will lose its right to defend, contest, litigate and settle a matter if
it fails to contest such matter diligently. No matter will be settled by an
indemnifying party without the prior written consent of the indemnified
party, unless such settlement contains a full and unconditional release of
the indemnified party.
Notwithstanding the foregoing, any indemnified party has the right to
retain its own counsel in any such action, but the fees and disbursements of
such counsel will be at the expense of such indemnified party unless (i) the
indemnifying party fails to retain counsel for the indemnified person as
aforesaid or (ii) the indemnifying party and such indemnified party mutually
agree to the retention of such counsel. The indemnifying party will not, in
connection with any action or related actions in the same jurisdiction, be
liable for the fees and disbursements of more than one separate firm
qualified in such jurisdiction to act as counsel for the indemnified party.
The indemnifying party will not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there is a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.
If the indemnification provided for in the first two paragraphs of this
Section 8 is unavailable or insufficient to hold harmless an indemnified
party under such paragraphs in respect of any losses, claims, damages or
liabilities or actions in respect of such losses, claims, damages or
liabilities, then each indemnifying party will in lieu of indemnifying such
indemnified party contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
actions in such proportion as appropriate to reflect the relative fault of
ASI, on the one hand, and the underwriters and the selling Shareholders, on
the other, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or actions, as well as any other
relevant equitable considerations. ASI and the Shareholders agree that it
would not be just and equitable if contributions pursuant to this paragraph
were determined by pro rata allocation or by any other method of allocation
which did not take account of the equitable considerations referred to above
in this paragraph. Notwithstanding the provisions of this paragraph, no
Shareholder will be required to contribute any amount in excess of the lesser
of (i) the proportion that the public offering price of shares sold by such
Shareholder under such registration statement bears to the total public
offering price of all securities sold under such registration statement, but
not to exceed the proceeds received by such Shareholder for the sale of the
Restricted Stock covered by such registration statement and (ii) the amount
of any damages which it would have otherwise been required to pay by reason
of
<PAGE>
such untrue or alleged untrue statement or omission. No person guilty of
fraudulent misrepresentations (within the meaning of Section 11(f) of the
Securities Act), will be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
The indemnification of underwriters provided for in this Section 8 will be
on such other terms and conditions as are at the time customary and reasonably
required by such underwriters. The indemnification provided for under this
Agreement will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party and will survive the transfer of
the shares of Restricted Stock.
9. PERMITTED TRANSFEREES.
(a) In order to Transfer Restricted Stock to a Permitted Transferee,
the Shareholders will submit the certificates representing the shares to ASI
together with (i) a written agreement satisfactory in form and substance to ASI
signed by the Permitted Transferee agreeing to be bound by all of the terms and
provisions of this Agreement applicable to the Shareholders, (ii) such evidence
as ASI may reasonably request that the proposed transferee is a Permitted
Transferee; (iii) an opinion of counsel reasonably satisfactory to ASI that the
proposed Transfer may be effective without registration under the Securities Act
and any state securities laws. The certificate issued in the name of the
Permitted Transferee will bear the legend referred to in Section 2.
(b) Following any Transfer of Restricted Stock to a Permitted
Transferee, the transferring Shareholder and all of his Permitted Transferees
will be jointly and severally liable for the performance of the obligations of
such Shareholder under this Agreement, and the rights of such Shareholder under
this Agreement will be exercised by a single representative of all holders of
such Shareholder's portion of the Restricted Stock. As long as a Shareholder is
alive and legally competent and continues to own any share of Restricted Stock,
such Shareholder will be that representative. Upon the death or incompetency of
such Shareholder, his executor or conservator will appoint a Permitted
Transferee as successor representative. Upon the Transfer by a Shareholder of
all of his Restricted Stock, if any Permitted Transferee will own Restricted
Stock after the Transfer, such Shareholder will appoint a Permitted Transferee
as successor representative. If any successor representative appointed by a
Shareholder or his executor or conservator resigns or ceases to own Restricted
Stock, the Permitted Transferees will appoint a successor representative by
majority vote of the shares of Restricted Stock then owned by all Permitted
Transferees. A Shareholder or other person or persons appointing or electing a
successor representative will give written notice of such election or
appointment to ASI, identifying the successor representative. ASI will be
entitled to rely without inquiry on the instructions of the representative last
identified to it as provided above and may disregard any contrary claims or
demands by any other holder of such Restricted Stock.
(c) After any Transfer to a Permitted Transferee, all provisions of
this Agreement will apply to all shares, transactions or actions of the
Shareholders and all Permitted Transferees in the aggregate.
10. MISCELLANEOUS.
<PAGE>
(a) In order to make available to the Shareholders the benefits of
certain rules and regulations of the Commission which may permit the sale of the
shares of Restricted Stock to the public without registration, ASI agrees that,
when required by law, it will use its best efforts to: (i) make and keep
public information available, as those terms are understood and defined in Rule
144 of the Commission, at all times; (ii) file with the Commission in a timely
manner all reports and other documents required of ASI under the Securities Act
and the Exchange Act; and (iii) so long as any of the Shareholders own any
shares of Restricted Stock, furnish a Shareholder, promptly after such
Shareholder's request a written statement by ASI as to its compliance with the
reporting requirements of Rule 144.
(b) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties to this Agreement will bind and inure to the
benefit of the respective successors and assigns of the parties to this
Agreement whether so expressed or not.
(c) All notices, requests, demands, claims, and other communications
under this Agreement will be in writing. Any notice, request, demand, claim, or
other communication under this Agreement will be deemed duly given only if it is
sent by registered or certified mail, return receipt requested, postage prepaid,
or by courier, telecopy or facsimile, and addressed to the intended recipient as
set forth below:
(i) if to ASI to it at: Analytical Surveys, Inc., 941 North
Meridian Street, Indianapolis, Indiana 46204, Attention: Sidney V. Corder;
and
(ii) if to a Shareholder at the address for notice set forth
opposite such Shareholder's signature below.
Notices will be deemed given three days after mailing if sent by certified mail,
when delivered if sent by courier, and one business day after receipt of
confirmation by person or machine if sent by telecopy or facsimile transmission.
Any party may change the address to which notices, requests, demands, claims and
other communications under this Agreement are to be delivered by giving the
other parties notice in the manner set forth in this Agreement.
(d) This Agreement will be governed by and construed in accordance
with the laws of the State of Colorado.
(e) Any dispute arising under this Agreement will be resolved in
accordance with Article X (Alternative Dispute Resolution) of the Merger
Agreement.
(f) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter of this Agreement and may not be modified or
amended except in writing.
(g) This Agreement may be executed in two or more counterparts, each
of which will be deemed an original, but all of which together will constitute
one and the same instrument.
<PAGE>
(h) All references in this Agreement to "Sections" refer to the
pertinent provision of this Agreement unless provided otherwise.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Please indicate your acceptance of the foregoing by signing and returning
the enclosed counterpart of this Agreement, whereupon this Agreement will be a
binding agreement between ASI and you.
Very truly yours,
Analytical Surveys, Inc.
By:
Title:
AGREED TO AND ACCEPTED ADDRESS FOR NOTICE:
as of the date first
above written
THE EPNER FAMILY LIMITED
PARTNERSHIP
By: The Epner Family Limited Partnership
Martin Epner, General Partner 403 Squires Row
San Antonio, TX 78213
By:
Marcia Epner, General Partner
THE BRAVERMAN FAMILY LIMITED
PARTNERSHIP
By: The Braverman Family Limited Partnership
Sheldon Braverman, General Partner 1100 North Main Avenue
San Antonio, TX 78212
By:
Phyllis Braverman, General Partner
Albert Naumann, III
Albert Naumann, III 11900 Crownpoint Drive, #100
San Antonio, TX 78233
<PAGE>
REGISTRATION RIGHTS AGREEMENT
[ESOP]
June 26, 1998
Cartotech, Inc. Employee Stock
Ownership and 401(k) Plan
Attention: Independent Fiduciary
Consulting Fiduciaries
2745 Riverwoods Road
Riverwoods, IL 60015
Dear Sirs:
This Agreement is being executed in conjunction with a Lock-Up Agreement
dated the same date as this Agreement. This will confirm that in connection
with the merger (the "Merger") of Cartotech, Inc., a Texas corporation
("Cartotech") with and into Surveys Holdings, Inc., a Texas corporation (the
"Company"), pursuant to the Agreement and Plan of Merger dated June 11, 1998
(the "Merger Agreement"), between Analytical Surveys, Inc., a Colorado
corporation ("ASI"), and the Company on the one hand, and the Cartotech, Inc.
Employee Stock Ownership and 401(k) Trust (the "ESOP"), The Epner Family Limited
Partnership, The Braverman Family Limited Partnership and Albert Naumann, III
(individually a "Shareholder" and collectively the "Shareholders") on the other
hand, the Investor Representation Letter dated June 26, 1998 executed by each
Shareholder, and related transfer documents, ASI hereby covenants and agrees
with the ESOP as follows:
1. CERTAIN DEFINITIONS. The following terms have the following
respective meanings:
"AGREEMENT" means this Registration Rights Agreement.
"CLOSING DATE" means the date of this Registration Rights Agreement.
"COMMISSION" means the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act.
"COMMON STOCK" means the shares of common stock, no par value, of ASI as
constituted as of the date of this Agreement.
"ESOP STOCK" means the shares of Common Stock issued to the ESOP pursuant
to the Merger Agreement and any additional shares of Common Stock or other
securities issued in respect of such shares in connection with a stock dividend,
stock split, recapitalization, reclassification or other transaction affecting
ASI's outstanding Common Stock.
"ESOP TRUSTEE" means the individual or entity designated by the ESOP to act
on
<PAGE>
its behalf.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same are in effect at the time.
"REGISTRATION EXPENSES" means the expenses so described in Section 8.
"SECURITIES ACT" means the Securities Act of 1933 or any similar federal
statute, and the rules and regulations of the Commission under the Securities
Act of 1933, all as the same are in effect at the time.
"SELLING EXPENSES" means the expenses so described in Section 8.
"TRADING DAY" means a day on which shares of the Common Stock are traded on
NASDAQ or on any principal exchange on which the Common Stock is traded.
2. RESTRICTIVE LEGEND. Each certificate representing ESOP Stock until
such legend is removed or such shares are sold in accordance with the other
provisions of this Agreement, will be stamped or otherwise imprinted with a
legend substantially in the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE (A) HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE,
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY
HAVE BEEN REGISTERED UNDER THAT ACT AND ALL APPLICABLE STATE
SECURITIES LAWS OR EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS
THEREOF ARE AVAILABLE, AS ESTABLISHED TO THE SATISFACTION OF THE
COMPANY, BY OPINION OF COUNSEL OR OTHERWISE, AND (B) ARE SUBJECT TO
CONTRACTUAL RESTRICTIONS ON RESALE AND TRANSFER UNDER AGREEMENTS
BETWEEN THE HOLDER AND THE COMPANY, COPIES OF WHICH ARE AVAILABLE FOR
INSPECTION AT THE OFFICES OF THE COMPANY."
3. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of any
ESOP Stock (other than under the circumstances described in Section 4), the ESOP
Trustee will give written notice to ASI of its intention to effect such
transfer. Each such notice will describe the manner of the proposed transfer
and, if requested by ASI will be accompanied by an opinion of counsel reasonably
satisfactory to ASI to the effect that the proposed transfer of the ESOP Stock
may be effected without registration under the Securities Act and any state
securities laws, at which point such ESOP Stock may be transferred in accordance
with the terms of its notice. Each certificate of ESOP Stock transferred as
provided above will bear the legend set forth in
<PAGE>
Section 2, unless (i) such transfer is in accordance with the provisions of
Rule 144 (or any other rule permitting public sale without registration under
the Securities Act) or (ii) the opinion of counsel referred to above is to
the further effect that the transferee and any subsequent transferee would be
entitled to transfer such securities in a public sale without registration
under the Securities Act.
The foregoing restrictions on transferability of ESOP Stock will terminate
as to any particular shares of ESOP Stock when such shares have been effectively
registered under the Securities Act and sold or otherwise disposed of in
accordance with the intended method of disposition by the seller or sellers of
such shares set forth in the registration statement concerning such shares, or
when the legend set forth in Section 2 is removed from the certificates
representing such shares in accordance with the immediately preceding sentence
of this Section 3. If the ESOP Trustee is able to demonstrate to the reasonable
satisfaction of ASI (and its counsel) that the provisions of Rule 144(k) of the
Securities Act are available to the ESOP without limitation, the ESOP Trustee
will be entitled to receive from ASI without expense, a new certificate not
bearing the restrictive legend set forth in Section 2.
4. INCIDENTAL REGISTRATION RIGHTS.
(a) The ESOP has incidental registration rights as described in
Section 4(b) (the "Incidental Rights") with respect to all of the shares of
ESOP Stock, after the first anniversary of the Closing Date, and before the
second anniversary of the Closing Date.
(b) After the first anniversary of the Closing Date, and before
the second anniversary of the Closing Date, each time ASI proposes to
register any of its equity securities under the Securities Act (other
than a registration effected solely to implement an employee benefit or
stock option plan, to sell shares obtained under any employee benefit or
stock-option plan or a transaction to which Rule 145 or any other
similar rule of the Commission under the Securities Act is applicable,
or a registration on any form which is not available for the
registration of ESOP Stock), ASI will give written notice to the ESOP
Trustee of its intention to do so. The ESOP Trustee may give ASI a
written request to register all or some of the ESOP Stock in the
registration described in the written notice from ASI, provided that
such written request is given within 20 days after receipt of any such
notice from ASI, with such request stating the number of shares of ESOP
Stock to be disposed of and the intended method of disposition of such
ESOP Stock. Upon receipt of such request, ASI will use its best efforts
to cause promptly all such shares of ESOP Stock intended to be disposed
of to be registered under the Securities Act so as to permit its sale or
other disposition in accordance with the intended methods set forth in
the request for registration; PROVIDED, HOWEVER, that if the
registration relates to an underwritten offering, (i) the ESOP Trustee's
right to have shares of ESOP Stock included in the registration will be
contingent upon the ESOP Trustee agreeing to include such ESOP Stock in
the offering and entering into an underwriting agreement as
<PAGE>
provided in Section 6, and (ii) if the managing underwriter of such
offering determines reasonably and in good faith in writing that the
inclusion of all of the shares of ESOP Stock as to which the ESOP
Trustee has requested registration would adversely affect the offering,
the number of shares to be registered will be reduced to the extent
necessary to reduce the total number of shares to be included in such
offering to the amount recommended by such managing underwriter. Any
reduction under clause (ii) will be made against all persons (other than
ASI) who have elected to include shares of Common Stock in the
registration pursuant to the exercise of incidental registration rights
granted by ASI, in proportion to the number of shares that each had been
entitled to request, and had requested, ASI to include in the
registration. The Incidental Rights under this section apply to a
registration to be effected for securities to be sold for the account of
ASI, as well as a registration statement which includes securities to be
offered for the account of other holders of ASI equity securities.
5. PURCHASE IN LIEU OF REGISTRATION. If the ESOP Trustee exercises the
Incidental Rights as to any shares of the ESOP Stock (a "Registration Notice"),
then ASI will have the option (the "Option"), which Option may be exercised only
to the extent not prohibited by Section 7-106-401 of the Colorado Business
Corporation Act, to purchase any or all of such shares, in lieu of registering
them, at the current market price determined as follows: as to each share of
Common Stock, the closing price on the date that is three Trading Days after the
Exercise Notice (as defined below) is given will be the last reported sale price
regular way, or, in case no such reported sale takes place on such day, the
reported closing price regular way, in either case on the composite tape, or if
the Common Stock is not quoted on the composite tape, on the principal United
States securities exchange registered under the Securities Exchange Act of 1934,
on which the Common Stock is listed or admitted to trading, or if it is not
listed or admitted to trading on any such exchange, the closing sale price (or
the average of the quoted closing bid and asked prices if no sale is reported)
as reported by the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), or any comparable system, or if the Common Stock is
not quoted on the NASDAQ, or any comparable system, the average of the closing
bid and asked prices quoted to the public by a person then making a market in
the Common Stock, and if no person is a market maker in the Common Stock, then
the average of the closing bid and asked prices furnished by any member of the
National Association of Securities Dealers, Inc. ASI may exercise the Option at
any time within 15 days after receiving the Registration Notice by giving the
ESOP Trustee written notice of its election to exercise (the "Exercise Notice").
The Exercise Notice must specify the number of shares of ESOP Stock that ASI
elects to purchase, and the date of payment for the Shares, which will be the
fourth Trading Day after the receipt of the Exercise Notice. On such date, the
ESOP Trustee will deliver certificates representing the shares of ESOP Stock
that ASI has elected to purchase, duly endorsed for transfer to ASI, free and
clear of liens, claims and encumbrances, to ASI at its principal executive
offices against payment by ASI of the purchase price, as determined according to
the formula set forth above, for such shares. If ASI elects to purchase less
than all of the shares covered by a Registration Notice, it will be obligated to
register the balance of such shares, subject to the provisions of Section 4.
<PAGE>
6. REGISTRATION PROCEDURES. As to any shares of ESOP Stock that are
subject to a Registration Notice under the Incidental Rights and as to which ASI
does not exercise the Option provided for in Section 5, ASI will:
(a) after the expiration of the period within which ASI may exercise
the Option, prepare and file with the Commission, a registration statement
with respect to such securities;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement to comply with the provisions
of the Securities Act with respect to the disposition of all ESOP Stock
covered by such registration statement in accordance with the ESOP
Trustee's intended method of disposition set forth in such registration
statement for such period;
(c) furnish to the ESOP Trustee and to each underwriter such number
of copies of the registration statement and the prospectus included in the
registration statement (including each preliminary prospectus) as such
persons may reasonably request in order to facilitate the public sale or
other disposition of ESOP Stock covered by such registration statement;
(d) use its best efforts to register or qualify ESOP Stock covered by
such registration statement under the securities or blue sky laws of such
jurisdictions as the ESOP Trustee or, in the case of an underwritten public
offering, the managing underwriter, reasonably requests, if such
registrations are required by law;
(e) immediately notify the ESOP Trustee and each underwriter, at any
time when a prospectus relating to such registration statement is required
to be delivered under the Securities Act, of the happening of any event as
a result of which the prospectus contained in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits
to state any material fact required to be stated in such prospectus or
necessary to make the statements in such prospectus not misleading in light
of the circumstances then existing;
(f) use its best efforts (if the offering is underwritten) to
furnish, at the request of the ESOP Trustee on the date that ESOP Stock is
delivered to the underwriters for sale pursuant to such registration:
(i) an opinion dated such date of counsel representing ASI for the purposes
of such registration, addressed to the underwriters and to the ESOP Trustee
stating that such registration statement has become effective under the
Securities Act and that (A) to the best knowledge of such counsel no stop
order suspending the effectiveness of such registration statement has been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act, (B) the registration
statement, the related prospectus, and each amendment or supplement
<PAGE>
of each of them, comply as to form in all material respects with the
requirements of the Securities Act and the applicable rules and regulations
of the Commission under the Securities Act (except that such counsel need
express no opinion as to financial statements and other financial and
statistical data contained in each of them), and (C) to such other effects
as may reasonably be requested by counsel for the underwriters or by the
ESOP Trustee or its counsel, and (ii) a letter dated such date from the
independent public accountants retained by ASI, addressed to the
underwriters and to the ESOP Trustee, stating that they are independent
public accountants within the meaning of the Securities Act and that, in
the opinion of such accountant; the financial statements of ASI included in
the registration statement or the prospectus, or any amendment or
supplement of such statement or prospectus, comply as to form in all
material respects with the applicable accounting requirements of the
Securities Act, and such letter will additionally cover such other
financial matters with respect to the registration in respect of which such
letter is being given as such underwriters may reasonably request;
(g) make available for inspection by the ESOP Trustee and any
attorney, accountant or other agent retained by him, all financial and
other records, pertinent corporate documents and properties of ASI and
cause ASI's officers, directors and employees to supply all information
reasonably requested by the ESOP Trustee or any such attorney, accountant
or agent in connection with such registration statement;
(h) as expeditiously as is reasonably practicable, cause all ESOP
Stock covered by the registration statement to be listed on each securities
exchange on which similar securities of ASI are then listed; and
(i) provide a transfer agent and registrar for all ESOP Stock covered
by the registration statement not later than the effective date of such
registration statement.
ASI will be entitled to control the timing of the registration process in
all respects and may withdraw or terminate any such registration at any time.
In connection with each registration under this Agreement, the ESOP Trustee
will furnish to ASI in writing such information with respect to the ESOP and the
proposed distribution by it as will be reasonably necessary in order to assure
compliance with federal and applicable state securities laws.
In connection with each registration pursuant to Section 4 covering an
underwritten public offering, ASI and the ESOP Trustee will enter into a written
agreement with the managing underwriter selected in the manner provided above in
such form and containing such provisions as are customary in the securities
business for such an arrangement between major underwriters and companies of
ASI's size and investment stature; PROVIDED, HOWEVER, that such agreement will
not contain any such provision applicable to ASI or the ESOP which is
<PAGE>
inconsistent with the provisions of this Agreement and provided, further, that
the time and place of the closing under said agreement will be as mutually
agreed upon among ASI, such managing underwriter, and the ESOP Trustee.
7. EXPENSES.
(a) All expenses incurred in complying with Section 4, including,
without limitation, all registration and filing fees, printing expenses,
fees and disbursements of counsel and independent public accountants for
ASI, fees of the Commission and National Association of Securities Dealers,
Inc., transfer taxes and fees of transfer agents and registrars, but
excluding any Selling Expenses and fees and expenses of counsel for the
ESOP or any other expenses of the ESOP, are referred to as "Registration
Expenses". All underwriting discounts, selling commissions applicable to
the sale of ESOP Stock, and any customary and reasonable underwriter's
expense allowances expressed on a percentage of the proceeds of the
offering, are referred to as "Selling Expenses".
(b) ASI will pay all Registration Expenses in connection with each
registration statement filed pursuant to Section 4. All Selling Expenses
in connection with any registration statement filed pursuant to Section 4
will be borne by the ESOP.
8. INDEMNIFICATION. In the event of a registration of any of the ESOP
Stock under the Securities Act pursuant to Section 4, ASI will indemnify and
hold harmless the ESOP, and each underwriter of ESOP Stock under the Securities
Act and each other person, if any, who controls the ESOP or any underwriter
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the ESOP or underwriter or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect of such losses,
claims, damages or liabilities) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
registration statement under which such ESOP Stock was registered, any
preliminary prospectus or final prospectus contained in such registration
statement, or any amendment or supplement of such registration statement, or
arise out of or are based upon the omission or alleged omission to state in such
registration statement or prospectus a material fact required to be therein or
necessary to make the statements therein not misleading, and will reimburse the
ESOP, each such underwriter and each such controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER
that ASI will not be liable in any such case if and to the extent that any such
loss, claim, damage or liability 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 the ESOP, any underwriter or any
controlling person in writing specifically for use in such registration
statement or prospectus.
In the event of a registration of any ESOP Stock under the Securities Act
pursuant to Section 4, the ESOP will indemnify and hold harmless ASI and each
person, if any, who
<PAGE>
controls ASI within the meaning of the Securities Act, each officer of
ASI who signs the registration statement, each director of ASI, each
underwriter and each person who controls any underwriter within the
meaning of the Securities Act, against all losses, claims, damages or
liabilities, joint or several, to which ASI or such officer or director
or underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect of such losses, claims, damages or
liabilities) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement under which such ESOP Stock was registered, any
preliminary prospectus or final prospectus contained in such
registration statement or any amendment or supplement of such
registration statement, or arise out of or are based upon the omission
or alleged omission to state in such registration statement or
prospectus a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse ASI and
each such officer, director, underwriter and controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or
action; PROVIDED, HOWEVER, that the ESOP will be liable under this
Agreement in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information furnished in
writing to ASI by the ESOP specifically for use in such registration
statement or prospectus provided, further, however that the liability of
the ESOP under this Agreement will be limited to the proportion of any
such loss, claim, damage, liability or expense which is equal to the
proportion that the public offering price of shares sold by the ESOP
under such registration statement bears to the total public offering
price of all securities sold under such registration statement, but not
to exceed the proceeds received by the ESOP from the sale of the ESOP
Stock covered by such registration statement.
Promptly after receipt by an indemnified party under this Agreement of
notice of the commencement of any action, such indemnified party will, if a
claim in respect of such action is to be made against the indemnifying party
under this Agreement, promptly notify the indemnifying party in writing of such
claim but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party except to the
extent that the indemnifying party is prejudiced by such omission or delay. In
case any such action is brought against any indemnified party and it notifies
the indemnifying party of the commencement of such action, the indemnifying
party will be entitled to participate in and, to the extent it wishes, to assume
and undertake the defense of such action with counsel reasonably satisfactory to
such indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense of such
action, the indemnifying party will not be liable to such indemnified party
under this Section 8 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense of such action other than
reasonable costs of investigation and of liaison with counsel so selected
(unless such indemnified party reasonably objects to such assumption on the
grounds that there are likely to be defenses available to it which are different
from or in addition to, and are in conflict with, the defenses available to such
indemnifying party, in which event the indemnified party will be reimbursed by
the indemnifying party for the reasonable expenses incurred in connection with
retaining its separate legal counsel, but only to the extent of such conflict).
The indemnifying
<PAGE>
party will lose its right to defend, contest, litigate and settle a
matter if it fails to contest such matter diligently. No matter will be
settled by an indemnifying party without the prior written consent of
the indemnified party, unless such settlement contains a full and
unconditional release of the indemnified party.
Notwithstanding the foregoing, any indemnified party has the right to
retain its own counsel in any such action, but the fees and disbursements of
such counsel will be at the expense of such indemnified party unless (i) the
indemnifying party fails to retain counsel for the indemnified person as
aforesaid or (ii) the indemnifying party and such indemnified party mutually
agree to the retention of such counsel. The indemnifying party will not, in
connection with any action or related actions in the same jurisdiction, be
liable for the fees and disbursements of more than one separate firm qualified
in such jurisdiction to act as counsel for the indemnified party. The
indemnifying party will not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there is a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.
If the indemnification provided for in the first two paragraphs of this
Section 8 is unavailable or insufficient to hold harmless an indemnified party
under such paragraphs in respect of any losses, claims, damages or liabilities
or actions in respect of such losses, claims, damages or liabilities, then each
indemnifying party will in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of ASI, on the one hand, and the
underwriters and the ESOP, on the other, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
actions, as well as any other relevant equitable considerations. ASI and the
ESOP agree that it would not be just and equitable if contributions pursuant to
this paragraph were determined by pro rata allocation or by any other method of
allocation which did not take account of the equitable considerations referred
to above in this paragraph. Notwithstanding the provisions of this paragraph,
the ESOP will not be required to contribute any amount in excess of the lesser
of (i) the proportion that the public offering price of shares sold by the ESOP
under such registration statement bears to the total public offering price of
all securities sold under such registration statement, but not to exceed the
proceeds received by the ESOP for the sale of ESOP Stock covered by such
registration statement and (ii) the amount of any damages which it would have
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission. No person guilty of fraudulent misrepresentations
(within the meaning of Section 11(f) of the Securities Act), will be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.
The indemnification of underwriters provided for in this Section 8 will be
on such other terms and conditions as are at the time customary and reasonably
required by such underwriters. The indemnification provided for under this
Agreement will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party and will survive the transfer of
the shares of ESOP Stock.
9. MISCELLANEOUS.
<PAGE>
(a) In order to make available to the ESOP the benefits of certain
rules and regulations of the Commission which may permit the sale of the
shares of ESOP Stock to the public without registration, ASI agrees that,
when required by law, it will use its best efforts to: (i) make and keep
public information available, as those terms are understood and defined in
Rule 144 of the Commission, at all times; (ii) file with the Commission in
a timely manner all reports and other documents required of ASI under the
Securities Act and the Exchange Act; and (iii) so long as the ESOP owns any
shares of ESOP Stock, furnish the ESOP, promptly after the ESOP requests, a
written statement by ASI as to its compliance with the reporting
requirements of Rule 144.
(b) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties to this Agreement will bind and inure to the
benefit of the respective successors and assigns of the parties to this
Agreement whether so expressed or not, except that the benefits accorded by
this Agreement will cease to apply to any shares of the ESOP Stock that are
transferred or distributed by the ESOP.
(c) All notices, requests, demands, claims, and other communications
under this Agreement will be in writing. Any notice, request, demand,
claim, or other communication under this Agreement will be deemed duly
given only if it is sent by registered or certified mail, return receipt
requested, postage prepaid, or by courier, telecopy or facsimile, and
addressed to the intended recipient as set forth below:
(i) if to ASI to it at: Analytical Surveys, Inc., 941 North
Meridian Street, Indianapolis, Indiana 46204, Attention: Sidney V.
Corder; and
(ii) if to the ESOP to it, care of the ESOP Trustee, at:
Consulting Fiduciaries, 2745 Riverwoods Road, Riverwoods, IL 60015.
Notices will be deemed given three days after mailing if sent by certified mail,
when delivered if sent by courier, and one business day (meaning a weekday other
than a day on which national banks are closed) after receipt of confirmation by
person or machine if sent by telecopy or facsimile transmission; except that any
Exercise Notice delivered pursuant to Section 6 will be deemed given only if
sent by courier on the date of such Exercise Notice. Any party may change the
address to which notices, requests, demands, claims and other communications
under this Agreement are to be delivered by giving the other parties notice in
the manner set forth in this Agreement.
(d) This Agreement will be governed by and construed in accordance
with the laws of the State of Colorado.
<PAGE>
(e) Any dispute arising under this Agreement will be resolved in
accordance with Article X (Alternative Dispute Resolution) of the Merger
Agreement.
(f) Except where specifically indicated, this Agreement constitutes
the entire agreement of the parties with respect to the subject matter of
this Agreement and may not be modified or amended except in writing.
(g) This Agreement may be executed in two or more counterparts, each
of which will be deemed an original, but all of which together will
constitute one and the same instrument.
(h) All references in this Agreement to "Sections" refer to the
pertinent provision of this Agreement unless provided otherwise.
Please indicate your acceptance of the foregoing by signing and returning
the enclosed counterpart of this Agreement, whereupon this Agreement will be a
binding agreement between ASI and you.
Very truly yours,
Analytical Surveys, Inc.
By: Sidney V. Corder
Title: Chief Executive Officer
AGREED TO AND ACCEPTED
as of the date first
above written
Cartotech, Inc. Employee Stock Ownership
and 401(k) Plan
By:
Gene Barber, ESOP Trustee
<PAGE>
LOCK-UP AGREEMENT
This Lock-Up Agreement (this "Agreement") is made as of June 26,
1998, by and among the Cartotech, Inc. Employee Stock Ownership and 401(k)
Trust (the "ESOP"), The Epner Family Limited Partnership (the "Epner
Partnership"), The Braverman Family Limited Partnership (the "Braverman
Partnership"), and Albert Naumann, III ("Naumann") (each a "Shareholder" and
collectively, the "Shareholders"), and Analytical Surveys, Inc., a Colorado
corporation (the "Company"). Any transferee of a Shareholder that is a
Permitted Transferee (as defined below) of such Shareholder will for all
purposes of this Agreement be deemed a Shareholder.
RECITALS
A. The Company and Surveys Holdings, Inc. ("Holdings") on the one
hand, and the Shareholders on the other hand, have entered into an Agreement
and Plan of Merger dated as of June 11, 1998 (the "Merger Agreement")
pursuant to which Cartotech, Inc. ("Cartotech") will merge with and into
Holdings, and the Shareholders as the sole shareholders of Cartotech, will
receive cash and shares of Company common stock (the "Shares"). Pursuant to
an Escrow Agreement dated June 26, 1998 between the Company, the
Shareholders, and Bank One, Colorado, N.A., the Company will transfer a
portion of the cash and Shares directly into escrow. This Agreement is being
executed in conjunction with Registration Rights Agreements between the
Company and the Epner Partnership, the Braverman Partnership and Naumann (the
"Non-ESOP Shareholders"), and between the Company and the ESOP (the
"Registration Rights Agreements").
B. The Shareholders own the Shares as follows:
<TABLE>
<CAPTION>
Shareholder Number of Shares
----------- ----------------
<S> <C>
The ESOP 123,321 shares
The Epner Partnership 101,398 shares
The Braverman Partnership 101,398 shares
Naumann 28,050 shares
</TABLE>
C. The parties desire to limit the transfer of the Shares in the
manner set forth in this Agreement.
AGREEMENT
The parties agree as follows:
1. RESTRICTIONS ON TRANSFER.
(a) From the date of this Agreement to, and including, June 26,
1999, except as expressly provided in this Agreement, no Shareholder may
transfer any of the Shares or any interest in the Shares.
<PAGE>
(b) From June 27, 1999, to, and including, June 26, 2000, each of
the Non-ESOP Shareholders may transfer up to 50% of the Shares (the "One-Year
Shares") held by it or him, subject to the provisions of Section 3. In
addition, any or all of the One-Year Shares may be sold pursuant to the
Registration Rights Agreement to which the Non-ESOP Shareholders are a party.
(c) After June 26, 2000, each of the Non-ESOP Shareholders may
transfer the remainder of the Shares held by it or him, without restriction
under this Agreement, but any such transfer will remain subject to the
requirements of state and federal securities laws.
(d) After June 26, 1999, and before June 27, 2000, the ESOP may
transfer all of the Shares held by it, subject to the provisions of Section 3.
(e) After June 26, 2000, the ESOP may transfer any of the Shares,
without restriction under this Agreement, but any such transfer will remain
subject to the requirements of state and federal securities laws.
(f) For purposes of this Agreement, "transfer" includes any sale,
gift, pledge, or other disposition, by voluntary act of a Shareholder or by
operation of law, as a result of which any person acquires or obtains a right
to acquire any interest in or rights in respect of the Shares.
2. TRANSFERS TO PERMITTED TRANSFEREES.
(a) A Shareholder may transfer any or all of its or his Shares to
a "Permitted Transferee." For purposes of this Agreement, "Permitted
Transferee" means (i) as to the Non-ESOP Shareholders, any trusts or other
entities created for the exclusive benefit of, or beneficially owned
exclusively by, a Shareholder; (ii) as to the ESOP, any participant or
beneficiary of the ESOP; and (iii) as to any Shareholder, a bona fide pledgee
of Shares.
(b) A transfer to a Permitted Transferee is not effective until
such Permitted Transferee executes and delivers to the Company a document in
the form of EXHIBIT A to this Agreement by which such Permitted Transferee
agrees to be bound by the terms of this Agreement.
3. SALE VOLUME LIMITATIONS. During the periods described in Section
1(b) and 1(d), with respect to each Shareholder, except for sales by such
Shareholder to a Permitted Transferee of such Shareholder, and including any
sales of Shares by a Permitted Transferee of such Shareholder other than the
ESOP (as to whom the volume limitations of this Section 3 will be calculated
separately as to each such Permitted Transferee), the number of Shares sold
by a Shareholder in any 90 day period may not exceed the greater of the
following:
(a) one percent of the shares of common stock of the Company
outstanding as shown by the most recent report or statement published by the
Company; or
-2-
<PAGE>
(b) the average weekly reported volume of trading of common stock
of the Company on all national securities exchanges and/or reported through
the automated quotation system of a registered securities association during
the four calendar weeks preceding the date of the sale of the Shares (the
"Sale Date"); or
(c) the average weekly reported volume of trading of common stock
of the Company reported through the consolidated transaction reporting
system, contemplated by Rule 11Aa3-1 under the Securities Exchange Act of
1934, as amended, during the four calendar weeks preceding the Sale Date.
4. ENDORSEMENT ON STOCK CERTIFICATES. All stock certificates
representing Shares will bear the following legend:
"THE SHARES EVIDENCED BY THIS CERTIFICATE (A) HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE,
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY
HAVE BEEN REGISTERED UNDER THAT ACT AND ALL APPLICABLE STATE
SECURITIES LAWS OR EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS
THEREOF ARE AVAILABLE, AS ESTABLISHED TO THE SATISFACTION OF THE
COMPANY, BY OPINION OF COUNSEL OR OTHERWISE, AND (B) ARE SUBJECT TO
CONTRACTUAL RESTRICTIONS ON RESALE AND TRANSFER UNDER AGREEMENTS
BETWEEN THE HOLDER AND THE COMPANY, COPIES OF WHICH ARE AVAILABLE FOR
INSPECTION AT THE OFFICES OF THE COMPANY."
5. SALE OF ASSETS, REDEMPTION OR LIQUIDATION. Nothing contained in
this Agreement will limit the Company's ability, in accordance with
applicable law, to sell or otherwise dispose of all or substantially all of
its assets, to redeem all or any part of the stock held by any Shareholder,
or to liquidate, either partially or completely.
6. NOTICES. All notices, requests, demands, claims, and other
communications under this Agreement will be in writing. Any notice, request,
demand, claim, or other communication under this Agreement will be deemed
duly given only if it is sent by registered or certified mail, return receipt
requested, postage prepaid, or by courier, telecopy or facsimile, and
addressed to the intended recipient as set forth below:
(a) if to the Company to it at: Analytical Surveys, Inc., 941
North Meridian Street, Indianapolis, Indiana 46204, Attention: Sidney V.
Corder; and
(b) if to a Shareholder at the address for notice set forth
opposite such Shareholder's signature below.
Notices will be deemed given three days after mailing if sent by certified
mail, when delivered if sent by courier, and one business day after receipt
of confirmation by person or machine if sent
-3-
<PAGE>
by telecopy or facsimile transmission. Any party may change the address to
which notices, requests, demands, claims and other communications under this
Agreement are to be delivered by giving the other parties notice in the
manner set forth in this Agreement.
7. DISPUTE RESOLUTION. All disputes arising out of or related to this
Agreement, including any claims that all or any part of this Agreement is
invalid, illegal, voidable, or void, will be settled by arbitration, pursuant
to the Merger Agreement.
8. GENERAL PROVISIONS.
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter of this
Agreement and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter of
this Agreement.
(b) BENEFIT. This Agreement will be binding upon and inure to the
benefit of the parties, their personal representatives, successors and
assigns.
(c) AMENDMENT. This Agreement may be amended at any time and from
time to time by a written instrument signed by all of the parties to this
Agreement.
(d) GOVERNING LAW. The laws of the State of Colorado will govern
this Agreement and the construction of any of its terms.
(e) WAIVER. No waiver by any party of any provision of this
Agreement will be deemed to extend to any other circumstance or occurrence,
and no waiver will be effective unless set forth in writing and signed by the
party against whom such waiver is asserted. The restrictions on transfer set
forth in this Agreement are for the benefit of the Company only, and may be
waived as to any Shareholders by the Company only, without any restriction
imposed by any other Shareholder.
(f) ORIGINAL. This Agreement will be signed in one original,
which will be deposited with the Company at its registered office.
(g) PHOTOCOPIES. A photocopy of this Agreement will be delivered
to the Company and to each Shareholder.
-4-
<PAGE>
The parties to this Agreement have executed this Agreement as of the
date first written above.
SHAREHOLDERS: ADDRESS FOR NOTICE:
THE CARTOTECH, INC. EMPLOYEE
STOCK OWNERSHIP AND 401(K) TRUST
By: The Cartotech, Inc. Employee Stock
---------------------------------- Ownership and 401(K) Trust
Gene Barber, Trustee
THE EPNER FAMILY LIMITED
PARTNERSHIP
By: The Epner Family Limited Partnership
---------------------------------- 403 Squires Row
Martin Epner, General Partner San Antonio, TX 78213
By:
----------------------------------
Marcia Epner, General Partner
THE BRAVERMAN FAMILY LIMITED
PARTNERSHIP
By: The Braverman Family Limited Partnership
---------------------------------- 1100 North Main Avenue
Sheldon Braverman, General Partner San Antonio, TX 78212
By:
----------------------------------
Phyllis Braverman, General Partner
Albert Naumann, III
Albert Naumann, III 11900 Crownpoint Drive, #100
San Antonio, TX 78233
COMPANY:
ANALYTICAL SURVEYS, INC.
By: Analytical Surveys, Inc
----------------------------- 941 North Meridian Street
Sidney V. Corder,
Chief Executive Officer
-5-
<PAGE>
Indianapolis, IN 46204-1061
-6-
<PAGE>
EXHIBIT A
DOCUMENT TO BE SIGNED BY TRANSFEREE
The undersigned, being a transferee of shares of the common stock of
Analytical Surveys, Inc. (the "Company"), agrees to be bound by all of the terms
of a Lock-Up Agreement (the "Agreement") dated June 23, 1998, between the
Company and the Shareholders (as defined in the Agreement). The undersigned
acknowledges that he or she will for all purposes be deemed a "Shareholder" (as
defined in the Agreement) and that the Agreement will apply to all Shares of the
Company now owned or hereafter acquired by the undersigned. The undersigned's
address and telecopy number for purposes of Section 6 of the Agreement are set
forth below:
-------------------------------------------
(Type or Print Name)
-------------------------------------------
(Street Address)
-------------------------------------------
(City, State and Zip Code)
-------------------------------------------
(Facsimile Number)
-------------------------------------------
(Signature)
-------------------------------------------
(Date)
