<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
ITEQ, INC.
(Name of Issuer)
Common Stock, par value $.001 per share
(Title of Class of Securities)
450430103
(CUSIP Number)
Richard L. Wynne
Porter & Hedges, L.L.P.
700 Louisiana, Suite 3500
Houston, Texas 77002-2764
(713) 226-0600
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
May 27, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 450430103 PAGE 2 OF 6 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
MARK E. JOHNSON
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 1,368,062
SHARES -------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
-0-
OWNED BY
------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,368,062
PERSON ------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
-0-
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,368,062
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.3%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTION BEFORE FILLING OUT!
INCLUDED BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND SIGNATURE ATTESTATION.
<PAGE> 3
Page 3 of 6
ITEM 1. SECURITY AND ISSUER.
This statement is filed with respect to shares of common stock, par
value $.001 per share (the "Common Stock"), of ITEQ, Inc., formerly known as
Air-Cure Technologies, Inc. (the "Issuer"). The address of the Issuer's
principal executive offices is 2727 Allen Parkway, Suite 760, Houston, Texas
77019.
ITEM 2. IDENTITY AND BACKGROUND.
Mark E. Johnson is an individual whose business address is 2727 Allen
Parkway, Suite 760, Houston, Texas 77019. Mr. Johnson is a director and
chairman of the board, president and chief executive officer of the Issuer.
Mr. Johnson has not, during the past five years, been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or a party to
a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation which respect to such laws. Mr. Johnson is a U.S. citizen.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Mr. Johnson initially acquired his shares of Common Stock in exchange
for an aggregate of 42,500 shares of common stock of Allied Industries, Inc.
("Allied"), pursuant to the terms of the Agreement and Plan of Merger dated
October 13, 1995 (the "Merger Agreement"), among the Issuer, its wholly-owned
subsidiary, Air-Cure Acquisition Corporation, Allied and Mr. Johnson and Pierre
S. Melcher, as owners of all of the capital stock of Allied.
ITEM 4. PURPOSE OF THE TRANSACTION.
The transaction that gave rise to this filing was the sale (the
"Sale") by Mark E. Johnson and Pierre S. Melcher of 300,000 shares and 400,000
shares of Common Stock respectively, which shares represent more than 1% of the
issued and outstanding Common Stock. The Sale occurred on May 27, 1997,
pursuant to closing of a firm commitment underwritten public offering of Common
Stock on behalf of the Company and certain selling stockholders (including
Messrs. Johnson and Melcher) under Registration Statement on Form S-2 No.
333-23245, declared effective by the Securities and Exchange Commission on May
20, 1997.
As a result of the Sale, Messrs. Johnson and Melcher are no longer
entitled to nominate two persons to the Issuer's board of directors. These
nomination rights formed the basis of the group filing by Messrs. Johnson and
Melcher of their initial Schedule 13D and amendments thereto. Accordingly,
simultaneously with the Sale, Mr. Johnson determined that a group filing of
Schedule 13D is no longer appropriate, and accordingly, has made this filing.
<PAGE> 4
Page 4 of 6
Mr. Johnson has no present intention to acquire or dispose of
additional shares of Common Stock, although such intention is subject to change
at any time.
Although, Mr. Johnson has no specific plans or proposals regarding the
Issuer in his capacity as a shareholder, he will continue to evaluate all
alternatives with regard to his shares of Common Stock. Except as set forth
above, Mr. Johnson has no present plans or proposals of the type referred to
in clauses (a) through (j) of Item 4 of Schedule 13D, although he reserves the
right to do so in the future.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Mr Johnson is the beneficial owner of 1,368,062 shares of the Common
Stock, representing 8.3% of the Issuer's Common Stock. These shares
of Common Stock include (i) 1,364,062 shares of Common Stock held
directly by Mr. Johnson and (ii) 4,000 shares of Common stock held
indirectly through an individual retirement account.
(b) Mr. Johnson has the sole power to vote and to direct the vote and the
sole power to dispose of and direct the disposition of all 1,368,062
shares of Common Stock.
(c) On December 20, 1996, Mr. Johnson purchased, through an individual
retirement account, 1000 shares of Common Stock at $4.4375 per share
in an open market transaction.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Mr. Johnson executed a Stock Distribution Agreement (with the Issuer)
dated December 28, 1995 ("Stock Distribution Agreement"). The Stock
Distribution Agreement provides, among other things, that (a) the Issuer will
use its best commercial efforts to keep the registration statement described in
the Merger Agreement (the "Registration Statement") covering the resale of
shares registered on Mr. Johnson's behalf current and effective for three years
after the closing of the Merger Agreement (which period expires December 1998),
(b) if Mr. Johnson intends to sell any of such shares under the Registration
Statement, he will give written notice to the Issuer at least two business days
prior to making any offers or sales of such shares, and (c) Mr. Johnson agrees
that he will offer and sell shares under the Registration Statement only in
compliance with applicable securities laws.
Mr. Johnson executed a Lock-Up Agreement with Deutsche Morgan Grenfell
Inc., EVEREN Securities, Inc. and Sanders Morris Mundy, acting as
representatives of the several underwriters, dated June 3, 1997, in connection
with a underwritten public offering of the Issuer's Common Stock. The Lock-Up
Agreement provides, among other things, that Mr. Johnson will not for a period
of 180 days, without the prior written consent of Deutsche Morgan Grenfell
Inc., except as provided in the
<PAGE> 5
Page 5 of 6
related Underwriting Agreement, (a) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant for the sale of, or otherwise dispose of or
transfer any shares of Common Stock or any security convertible into or
exchangeable or exercisable for Common Stock, (b) file or demand that the
Company file any registration statement under the Securities Act of 1933 with
respect to any of the foregoing or (c) enter into any swap or other agreement
that transfers, in whole or in part, directly or indirectly, the economic
consequences of ownership of the Common Stock.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit A Agreement and Plan of Merger dated as of October 13, 1995,
among the Issuer, Air-Cure Acquisition Corporation, Allied
Industries, Inc., Mark E. Johnson and Pierre S. Melcher.
Exhibit B Stock Distribution Agreement between the Issuer and Mark E.
Johnson dated December 28, 1995.
Exhibit C Lock-Up Agreement among Deutsche Morgan Grenfell Inc., EVEREN
Securities, Inc. and Sanders Morris Mundy, as representatives
of the several underwriters, and Mark E. Johnson, dated June
3, 1997.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 6
Page 6 of 6
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: June 18, 1997
/s/ Mark E. Johnson
-------------------------------
Mark E. Johnson
<PAGE> 7
INDEX TO EXHIBITS
Exhibit A Agreement and Plan of Merger dated as of October 13, 1995,
among the Issuer, Air-Cure Acquisition Corporation, Allied
Industries, Inc., Mark E. Johnson and Pierre S. Melcher.
Exhibit B Stock Distribution Agreement between the Issuer and Mark E.
Johnson dated December 28, 1995.
Exhibit C Lock-Up Agreement among Deutsche Morgan Grenfell Inc., EVEREN
Securities, Inc. and Sanders Morris Mundy, as representatives
of the several underwriters, and Mark E. Johnson, dated June
3, 1997.
<PAGE> 1
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Articles of Incorporation and Bylaws of Allied
Following Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Directors and Officers of Allied After Effective
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2 CONVERSION AND EXCHANGE OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Conversion and Exchange of Allied Stock at
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Conversion of Newco Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3 THE BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 4 REPRESENTATIONS AND WARRANTIES OF ALLIED AND THE
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1 Corporate Existence; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Capitalization and Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.6 Permits, Licenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.7 Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.8 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.9 Transactions With Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.10 Contracts and Agreements; Adverse Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.11 Title and Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.12 Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.13 Employment Agreements and Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.14 Continuation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.15 Copies Complete; No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.16 No Governmental Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.17 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.18 No Hazardous Waste, Other Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.19 No Exposure to Hazardous or Toxic Substances . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.20 Underground Storage Tanks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.21 Disposal Facilities Used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.22 Absence of Certain Changes, Events or
Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.23 Tax Returns and Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.24 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.25 Representations Relating to Tax-Free
Reorganizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.26 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.27 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.28 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.29 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.30 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.31 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.32 Representations and Warranties Relating to
Pooling-of-Interests Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.33 Brokers, Finders, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.34 Approval by Allied's Shareholders and
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.35 Warranty of Allied Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(a) Preparation of Closing Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Right to Dispute Closing Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(c) Warranty of Closing Balance Sheet and
Remedy for Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5 REPRESENTATIONS AND WARRANTIES OF AIR-CURE . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 Copies Complete; No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.6 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.7 No Liabilities of Newco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.8 Valid Issuance of Air-Cure Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.9 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.10 Filings with the Securities and Exchange
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.11 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.12 Absence of Certain Changes, Events or
Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.13 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.14 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.15 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.16 Brokers, Finders, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.17 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.18 Representations Relating to Tax-Free
Reorganizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.19 Representations and Warranties Relating to
Pooling-of-Interests Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 6 RESALES OF AIR-CURE STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Pooling Restrictions on Transactions in Air-Cure Stock . . . . . . . . . . . . . . . . . . . . . 22
6.2 Amendment to Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.3 Expenses of Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.4 Stock Distribution Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 7 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1 Conduct of Business of Allied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.3 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.4 Notification of Material Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.5 Certain Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.6 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.7 Release and Hold Harmless of Allied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.8 Noncompetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.9 Board Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.10 Convertible Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.11 Air-Cure Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.12 Amendment of Shareholders' Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.13 Allied Income Taxes for 1995/6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.14 Conduct of Business of Air-Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 8 CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.1 Conditions to the Obligations of Air-Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(a) Accuracy of Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(b) Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(c) No Adverse Proceedings or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(d) Deliveries at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(e) Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(f) Qualification as Pooling of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(g) Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(h) Landlord Estoppel Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(i) Lien Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.2 Conditions to Obligations of the Shareholders
and Allied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(a) Accuracy of Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(b) Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(c) No Adverse Proceedings or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(d) Deliveries at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(e) Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(f) American Stock Exchange Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(g) Effectiveness of Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(h) Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(i) Payment of Certain Allied Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(j) Waiver of Receipt of Payments Under Air
-Cure Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 9 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.1 Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.2 Deliveries by Shareholders at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.3 Deliveries by Air-Cure at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.4 Expenses of Merger Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 10 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.1 Mutual Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.2 By Air-Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.3 By Allied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 11 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.1 General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.2 Limitations on Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(a) Indemnification Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(b) Indemnification Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(c) Limitations on Indemnified Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(d) Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(e) Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(f) Defense of Third-Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 12 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.2 Integrated Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.3 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.4 Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.6 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.7 Counterpart Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.8 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
-v-
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
12.9 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.10 Negation of Third-Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.11 Knowledge Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.12 Relationship of Disclosures in Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
-vi-
<PAGE> 8
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement"), dated as of
October ____, 1995, is entered into between and among AIR-CURE TECHNOLOGIES,
INC. ("Air-Cure"), a Delaware corporation; AIR-CURE ACQUISITION CORPORATION
("Newco"), a Texas corporation and a wholly-owned subsidiary of Air-Cure;
ALLIED INDUSTRIES, INC. ("Allied"), a Texas corporation; and MARK E. JOHNSON
and PIERRE S. MELCHER, (collectively, the "Shareholders").
WHEREAS, the respective Boards of Directors of Air-Cure, Newco, and
Allied have approved the merger of Newco with and into Allied (the "Merger")
upon the terms and subject to the conditions set forth herein and have approved
this Agreement as a "plan of reorganization" within the meaning of Section
368(a)(1)(A) and Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended (the "Code"); and
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, and agreements herein contained, the
parties agree as follows:
SECTION 1
THE MERGER
1.1 Effect of the Merger. In accordance with the provisions of
this Agreement and the Texas Business Corporation Act (the "TBCA"), at the
Effective Time (as defined in Section 1.2 hereof), Newco shall be merged with
and into Allied; the separate existence of Newco shall cease; and Allied as the
surviving corporation shall continue its corporate existence under the laws of
the State of Texas. Pursuant to the Merger, Allied shall possess all the
rights, privileges, powers, and franchises of Newco and shall be subject to all
the restrictions, disabilities, and duties of Newco; all rights, privileges,
powers, and franchises of Newco and all property, real, personal, and mixed,
belonging to Newco shall be vested in Allied; and all property, rights,
privileges, powers, and franchises and every other interest shall be thereafter
as effectually the property of Allied as they were of Newco, and the title to
any real estate vested by deed or otherwise in Newco shall not revert or be in
any way impaired by reason of the Merger, provided that all rights of creditors
and all liens upon any
<PAGE> 9
property of Newco shall be preserved unimpaired and all debts, liabilities, and
duties of Newco shall thenceforth attach to Allied as may be enforced against
Newco to the same extent as if said debts, liabilities, and duties have been
incurred or contracted by Allied. Without limiting the generality of the
foregoing, the Merger shall have the effects as set forth in the TBCA.
1.2 Effective Time of the Merger. The Merger shall become
effective upon issuance of a certificate of merger subsequent to the filing of
Articles of Merger with the Office of the Secretary of State of Texas, which
filing shall be made simultaneously with the closing of the transactions
contemplated by this Agreement in accordance with Section 9, below. The date
and time when the Merger shall become effective is referred to as the
"Effective Time."
1.3 Articles of Incorporation and Bylaws of Allied Following
Effective Time. The Articles of Incorporation and Bylaws of Allied, as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation and Bylaws of Allied immediately after the Effective Time.
1.4 Directors and Officers of Allied After Effective Time.
(a) Directors. The following persons shall be the
directors of Allied immediately after the Effective Time:
Michael P. Lawlor
Lawrance W. McAfee
Mark E. Johnson
(b) Officers. The officers of Allied serving immediately
prior to the Effective Time shall be the officers of Allied
immediately after the Effective Time.
-2-
<PAGE> 10
SECTION 2
CONVERSION AND EXCHANGE OF STOCK
2.1 Conversion and Exchange of Allied Stock at Effective Time.
At the Effective Time, all shares of Allied common stock, par value $1.00 per
share, (the "Allied Stock") shall be converted into that number of shares of
Air-Cure common stock, par value $.001 per share, (the "Air-Cure Stock")
obtained by dividing $16,200,000 by the Agreed Value. For purposes of this
Agreement, the term "Agreed Value" shall mean the average closing price per
share of Air-Cure Stock on the American Stock Exchange for the twenty (20)
trading days of the Air-Cure Stock immediately preceding the third trading day
which immediately precedes the Closing Date; provided, however, that if the
Agreed Value so determined equals or exceeds $4.25 per share, then the Agreed
Value shall be $4.25 per share, and if the Agreed Value as so determined is
equal to or less than $3.75 per share, then the Agreed Value shall be $3.75 per
share, subject to adjustment in the event of any permissible stock split, stock
dividend, or recapitalization of Air-Cure as a result of which the total number
of shares of Air-Cure Stock is increased or decreased for no consideration. The
Air-Cure Stock into which the Allied Stock shall be converted shall be divided
among the shareholders of Allied (sometimes referred to herein as the "Resulting
Air-Cure Shareholders") in such proportions as the Allied Stock is owned
immediately before the Effective Time. Not less than five (5) business days
prior to the Closing Date, the Shareholders shall provide to Air-Cure an updated
Schedule 4.3B which will list all persons who will be Resulting Air-Cure
Shareholders at the Effective Time along with the number of shares of Allied
Stock which will be owned by them immediately prior to the Effective Time.
Air-Cure will rely on this updated Schedule 4.3B when issuing shares of Air-Cure
Stock to the Resulting Air-Cure Shareholders in the Merger. The aggregate
amount of Air-Cure Stock to be received by the shareholders of Allied in the
Merger is referred to as the "Merger Consideration".
2.2 Conversion of Newco Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of Air-Cure as the sole
stockholder of Newco, each issued and outstanding share of common stock of
Newco, par value $.01 per share, shall be converted into one share of common
stock, par value $1.00 per share, of Allied.
-3-
<PAGE> 11
2.3 No Fractional Shares. No certificates or scrip for fractional
shares of Air-Cure Stock shall be issued in the Merger. Each holder of Allied
Stock who would have otherwise been entitled to receive a fractional share of
Air- Cure Stock shall be entitled instead to receive a whole share in lieu of a
fractional share of Air-Cure Stock from Air-Cure.
SECTION 3
THE BUSINESS
As of the date of this Agreement, Allied is engaged generally in the
business of custom fabrication of process equipment and containment vessels for
the petrochemical industry and other industries utilizing various metals,
including exotic metals and alloys (referred to herein as the "Business").
SECTION 4
REPRESENTATIONS AND WARRANTIES OF ALLIED AND THE SHAREHOLDERS
In order to induce Air-Cure to enter into this Agreement, each
Shareholder (severally and not jointly) and Allied represent and warrant to
Air-Cure, effective as of the date of this Agreement and at all times up to the
Effective Time, each of the following:
4.1 Corporate Existence; Qualification. Allied is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Texas and is qualified or licensed and in good standing in all
jurisdictions in which the nature of the Business or the properties owned by it
require it to be qualified or licensed to do business, except where failure to
be qualified or licensed will not have a material adverse effect on it.
4.2 Subsidiaries. Allied has no subsidiaries or other equity
interests (controlling or otherwise) in any corporation, association or other
entity, nor is it a partner in nor a party to any partnership or joint venture.
-4-
<PAGE> 12
4.3 Capitalization and Shareholders. Schedule 4.3A lists all
shareholders of Allied and the number and class of shares of stock owned by
them. Schedule 4.3B lists the Resulting Air-Cure Shareholders of Allied as of
the date of this Agreement and assuming the conversion of Allied's 8%
Convertible Subordinated Notes (the "Convertible Notes") and also lists the
number and class of shares to be owned by them. As provided for in Section
2.1, the Shareholders will provide to Air-Cure an updated Schedule 4.3B which
will be true and accurate as of the date provided to Air-Cure and which shall
be true and accurate immediately prior to the Effective Time. The Shareholders
have, and at Closing all shareholders of Allied will have, good title to all of
the Allied Stock of record and beneficially, free and clear of all liens,
pledges, claims, contract restrictions and encumbrances of any kind.
Otherwise, none of the Allied Stock is subject to any buy-sell agreement or any
other contractual right or restriction. No shareholder of Allied has or will
be permitted to exercise any preemptive right in connection with the Merger.
All issued and outstanding shares of Allied Stock have been duly
authorized and validly issued and are fully paid and nonassessable. Allied
does not have any other authorized series or class of stock or any other
securities of any kind. There are no outstanding subscriptions, options,
contracts, commitments, warrants, calls, agreements, understandings or other
arrangements or rights of any character affecting or relating in any manner to
the issuance of stock or other securities of Allied (whether by subscription,
option, exchange, right of conversion, right of refusal or otherwise) or
entitling anyone to acquire shares of stock or other securities of any kind of
Allied, other than upon conversion of the Convertible Notes.
4.4 Authority. Allied has all requisite right, power and
authority to own, lease and operate its properties, to carry on the Business as
the Business has previously been carried on, and to perform its obligations
under this Agreement. This Agreement is a valid and legally binding obligation
of Allied and the Shareholders, enforceable against them in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to the
enforcement of creditors' rights generally and
-5-
<PAGE> 13
by general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.5 Financial Statements. Allied has delivered to Air-Cure copies
of the following financial statements (the "Financial Statements") of Allied at
Exhibit 4.5:
(i) Balance Sheet, as of June 30, 1995 and December 31,
1994; and
(ii) Statement of Operations and Retained Earnings for the
six months ended June 30, 1995 and for the period from inception to
December 31, 1994.
The Financial Statements (including the notes thereto) are true and correct in
all material respects, do not contain any misstatement of a material matter or
omit to state any matter required to make such Financial Statements not
misleading, and present fairly the financial condition of Allied as of the
dates and periods described therein, all in accordance with generally accepted
accounting principles, subject, in the case of the unaudited Financial
Statements, to year-end audit adjustments and the absence of complete
footnotes.
4.6 Permits, Licenses, Etc. Allied has delivered to Air-Cure a
summary description at Schedule 4.6 of all permits, licenses, approvals,
authorizations, applications, franchises, engineering or environmental studies
or reports, certificates, trademarks, trade names, patents, patent
applications, and similar such items and rights relating to its Business. All
of the foregoing items are adequate for the operation of the Business, are
valid and in full force and effect and will be owned by or licensed to Allied
at the Effective Time.
4.7 Tangible Assets. Allied has delivered to Air-Cure a list at
Schedule 4.7, as of August 31, 1995, of all of the tangible assets having a
book value in excess of $1,000 (including any single classification or category
of assets having an aggregate value in excess of $1,000) and comprising a part
of the Business and which shall be owned by Allied at the Effective Time,
except
-6-
<PAGE> 14
for those assets which are disposed of prior to the Effective Time in
accordance with this Agreement, including, without limitation, identification
of each vehicle by description and serial number, identification of other
machinery and equipment by type and amount and a general description of parts,
supplies and inventory which relate to such equipment or inventory. Schedule
4.7 also includes a list of all applicable title reports and title insurance
policies and all leases, including those covering vehicles. All of the
vehicles, machinery and equipment shall be in the same condition which they
were in as of August 31, 1995, less ordinary wear and tear. All leases of
fixed assets are in full force and effect and binding upon the parties thereto,
and none of the parties thereto shall be in breach of any material provisions
thereof at the Effective Time, the effect of which would have a material
adverse effect on Allied.
4.8 Inventory. All inventory owned by Allied is and will be
valued at the lower of cost or market, in accordance with GAAP consistently
applied, and is and will be free of any liens or encumbrances except as
disclosed on the schedules to this Agreement. All finished goods inventories
of Allied are and will be in good, merchantable and usable condition and
salable in the ordinary course of business, and all raw materials and work in
process inventory of Allied are and will be consumable in the ordinary course
of business.
4.9 Transactions With Related Parties. Each Shareholder
represents and warrants that neither he nor any person who is a Related Party
to him, as defined below, has any claim of any nature against Allied, and
Allied has no claim of any kind against any Related Party. For purposes of
this Agreement, a Related Party means any spouse, sibling, lineal ancestor or
lineal descendant of the Shareholder.
4.10 Contracts and Agreements; Adverse Restrictions.
(a) Allied has delivered to Air-Cure a list at Schedule
4.10, as of the date hereof, and has made available to Air-Cure a copy
of all material contracts and agreements to which Allied is a party or
by which it or any of its property
-7-
<PAGE> 15
is bound (including, but not limited to, joint venture or partnership
agreements, contracts with any labor organizations, loan agreements,
bonds, mortgages, liens, pledges or other security agreements in any
way relating to the Business). All such contracts and agreements
included in Schedule 4.10 are in full force and effect and binding
upon Allied, and to the knowledge of Allied and each Shareholder, the
other parties thereto, and none of the parties thereto is in breach of
any provisions thereof which would have a material adverse effect on
Allied.
(b) Except as set forth on Schedule 4.10, Allied is not a
party to any judgment, order, writ, injunction, decree or award which,
singly or in the aggregate, materially and adversely affects or is
likely to materially and adversely affect, the Business or other
operations, properties, assets or condition of Allied.
4.11 Title and Liens.
(a) At the Effective Time, Allied will collectively have
good and indefeasible title to all assets and leasehold estates, real
and personal, owned and used in the Business, subject to no mortgage,
pledge, lien, encumbrance or charge, except for:
(i) liens or security interests reflected on
Schedule 4.11 as securing specified liabilities that are not
yet payable;
(ii) liens for current taxes and assessments that
are not yet due and payable; and
(iii) easements, rights of way, encroachments or
other reductions or matters affecting title which do not
significantly detract from the value of or prevent the assets
from being used for their intended purposes and otherwise
which do not in the aggregate have a significantly adverse
effect on any material part of the Business.
-8-
<PAGE> 16
(b) Allied does not own any real estate.
However, Allied owns a leasehold interest in that certain
premises located at 2828 Clinton Drive, Houston, Texas (the
"Premises"), pursuant to the Lease Agreement, dated February
4, 1994, between Brown & Root, Inc., as lessor, and Allied
(formerly A. I. Acquisition Company, Inc.), as lessee. The
Premises is properly zoned in order to allow its current use
in the Business, and there are no claims or demands pending
or, to the knowledge of the Shareholders, threatened by any
party against the Premises which, if valid, would create in,
or confer on, any party other than Allied, any right, title or
interest in or to the Premises or any portion thereof or any
interest therein except as reserved to the lessor under the
Lease Agreement, a copy of which has been provided to Air-Cure
by Allied.
4.12 Personnel. Allied has delivered to Air-Cure a list at
Schedule 4.12, as of the date hereof, of all officers, directors and employees
(by type or classification) of Allied and their respective rates of
compensation (including the portions thereof attributable to bonuses),
including any other salary, bonus or other payment arrangement made with any of
them.
4.13 Employment Agreements and Benefit Plans. Allied has delivered
to Air-Cure a copy of Allied's employment agreement with Lloyd R. Slinkard,
which is the only legally enforceable employment agreement which Allied has in
effect. Allied has also delivered to Air-Cure a copy of its Section 401(k)
qualified employee benefit plan (the "Plan"), which has been adopted by Allied.
Other than the Plan and the employment agreement with Slinkard, Allied has no
pension, profit-sharing, deferred compensation, stock option, employee stock
purchase or other employee benefit plan or arrangement. The Plan is in
substantial compliance with all applicable provisions of ERISA and the
regulations issued thereunder, as well as with all other applicable laws. The
Plan has been determined by the Internal Revenue Service to be so qualified
under Section 401(a) of the Code, and a copy of the IRS determination letter
has been provided to Air-Cure. Except as set forth in Schedule 4.13, all
reports and other documents required to be filed with any governmental agency
or distributed to plan participants or beneficiaries (including, but not
limited to, audits or tax returns) have been timely filed or distributed. No
-9-
<PAGE> 17
person has engaged in any transaction prohibited under the provisions of
Section 4975 of the Code or Section 406 of ERISA with respect to any such plan.
Neither Allied nor any Shareholder has incurred any liability for excise tax or
penalty due to the Internal Revenue Service.
4.14 Continuation of Business. It is the contemplation of the
parties that substantially all management level employees who are regularly
engaged in the performance of services in the Business prior to Closing shall
continue to be willing to perform those same services on the same terms and
conditions as they were performed prior to Closing, and the Shareholders have
no reason to know of any management level employees who will not so continue to
perform those services as aforesaid. Likewise, the Shareholders know of no
reason why the Business may not be carried on in the same manner following
Closing as it has been carried on prior to Closing, except to the extent that
Air-Cure causes that Business to change following Closing.
4.15 Copies Complete; No Default. The copies of the Articles of
Incorporation and Bylaws, both as amended to date, of Allied and the copies of
all leases, instruments, agreements, licenses, permits, certificates or other
documents which have been provided to Air-Cure in connection with the
transactions contemplated hereby are substantially complete and accurate and
are true and correct copies of the originals thereof; and except as set forth
in Schedule 4.15 hereto, the execution of this Agreement and the performance of
the obligations hereunder will not violate or result in a breach or constitute
a default under any of the terms or provisions thereof.
4.16 No Governmental Contracts. Except as set forth on Schedule
4.16, Allied is not a party to any governmental contract subject to price
redetermination or renegotiation.
4.17 Bank Accounts. Allied has delivered to Air-Cure a list at
Schedule 4.17, as of the date hereof, of:
-10-
<PAGE> 18
(a) the name of each bank in which Allied has accounts or
safe deposit boxes;
(b) the names in which the accounts or boxes are held;
(c) the type of account; and
(d) the name of each person authorized to draw thereon or
have access thereto.
Allied shall regularly update Schedule 4.17, and at Closing the Shareholders
shall certify the updated Schedule 4.17 as true and correct.
4.18 No Hazardous Waste, Other Facilities.
(a) To the knowledge of Allied and each Shareholder,
Allied has never transported or disposed of, or contracted for the
transportation or disposal of, hazardous wastes, hazardous substances,
infectious or medical waste, radioactive waste or sewage sludges in
violation of the Resource Conservation and Recovery Act of 1976, as
amended, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Atomic Energy Act of 1954, as
amended, or any comparable state laws, or rules or regulations
promulgated under any of the foregoing.
(b) To the knowledge of Allied and each Shareholder,
Allied has not ever owned, operated and/or leased a waste transfer,
treatment, storage or disposal facility, except as described on
Schedule 4.18.
4.19 No Exposure to Hazardous or Toxic Substances. To the
knowledge of Allied and each Shareholder, none of Allied's employees have, in
the course and scope of employment with Allied, been exposed in a manner which
would be detrimental to their health to hazardous, infectious, radioactive or
toxic wastes or substances as those terms are defined in the Resource
Conservation and Recovery Act of 1976, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Atomic Energy Act of 1954, as amended, or any comparable state
-11-
<PAGE> 19
laws, or rules and regulations promulgated under any of the foregoing.
4.20 Underground Storage Tanks. To the knowledge of Allied and
each Shareholder, except as set forth in Schedule 4.20, Allied has never owned
or leased any real estate having any underground storage tanks containing
petroleum products or wastes or other hazardous substances and regulated by 40
CFR 280 and/or other applicable federal, state or local laws, rules,
regulations and requirements.
4.21 Disposal Facilities Used. To the knowledge of Allied and each
Shareholder, Allied has delivered to Air-Cure a list at Schedule 4.21, as of
the date hereof, of all persons or entities utilized at any time since February
4, 1994 by Allied for the disposal of any waste materials to any disposal sites
(including dumps, landfills and all other disposal facilities).
4.22 Absence of Certain Changes, Events or Conditions. Except as
described in Schedule 4.22, since June 30, 1995, Allied has: (a) conducted its
business in the ordinary course, and has not engaged or agreed to engage in any
extraordinary transaction except at arm's length and for fair consideration;
(b) not disposed of any of its assets, except in the ordinary course of
business; (c) not materially increased the level of compensation of any
officer; (d) not issued any stock or securities or rights with respect to any
stock or securities, or paid any dividends, redeemed any securities or
otherwise caused any assets of Allied to be distributed to any of its
shareholders; (e) not borrowed any funds under existing lines of credit or
otherwise, except as reasonably necessary for the ordinary operation of its
business in a manner, and in amounts, in keeping with current business
requirements, or made any loans or guaranteed the obligations of any other
persons; (f) not suffered any material and adverse change in its assets,
Business, or operations, nor have its assets suffered any material and adverse
change in value other than through ordinary wear and depreciation; (g) not
changed or amended its charter documents or bylaws; (h) not entered into any
contract, commitment, or transaction which is not in the ordinary course of its
business; and (i) not failed to keep its properties and assets insured with at
least as much liability
-12-
<PAGE> 20
and property damage, fire, and other casualty coverage as was effective at June
30, 1995.
4.23 Tax Returns and Audits. Except as set forth in Schedule 4.23,
Allied has: (a) filed in accordance with applicable laws all federal, state,
and local tax returns required to be filed by it; (b) paid all taxes,
assessments, penalties, and interest charges shown to be due and payable on
each such return or otherwise required to be paid; and (c) accrued or created
reserves for all taxes due or to become due by it with respect to the months
ending before the date of this Agreement. The federal income tax return of
Allied for any taxable year has not been examined by the Internal Revenue
Service. The income tax liabilities of Allied have been satisfied or properly
accrued and reflected on the June 30, 1995 Financial Statements for all taxable
years prior to and including the taxable year ended December 31, 1994. Allied
has not been delinquent in the payment of any tax, assessment or governmental
charge, nor has any tax deficiency been proposed or assessed against it which
has not been satisfied. Allied has not executed any waiver of the statute of
limitations on the assessment or collection of any tax. Copies of the federal
and state income tax returns of Allied, and all adjustments and amendments to
such returns, for the year ended December 31, 1994, together with copies of all
reports, as filed, of any taxing authority relating to examinations thereof,
have been previously delivered to Air-Cure, and to the Shareholders' knowledge,
are accurate and complete. Allied has withheld or otherwise collected all
taxes or amounts it is required to withhold or collect under any applicable
federal, state, or local law, including, without limitation, any amounts
required to be withheld or collected with respect to social security,
unemployment compensation, sales or use taxes or workers' compensation, and all
such amounts have been timely remitted to the proper authorities.
4.24 Litigation. To the knowledge of the Shareholders, Allied is
not subject to or bound by any court, regulatory commission, board or
administrative judgment, order or decree, and no suit, action, proceeding or
other litigation in any court or before any administrative or arbitration panel
or commission or before or by any governmental department or agency to which
Allied is a party or which affects the Business or properties of Allied is now
pending. The Shareholders have no knowledge of any governmental proceeding
-13-
<PAGE> 21
or investigation involving Allied. To the knowledge of Allied and each
Shareholder, there are no existing violations of federal, state or local laws,
ordinances, rules, regulations or orders by Allied which materially and
adversely affect the Business or property of Allied or the possession, use,
occupancy or operation of any of its facilities or business. To the knowledge
of Allied and each Shareholder, Allied has not engaged in any discriminatory or
unfair labor practices which have not heretofore been discontinued, and any
such discontinued practices have been disclosed in writing to Air- Cure by
Allied. There is no grievance or other labor dispute pending or, to the
knowledge of Allied and each Shareholder, threatened, against Allied.
4.25 Representations Relating to Tax-Free Reorganizations. There
is no plan or intention by any of the Resulting Air-Cure Shareholders to sell,
exchange, or otherwise dispose of a number of shares of Air-Cure Stock received
in the Merger that would reduce the Resulting Air-Cure Shareholders' ownership
of Air-Cure Stock to a number of shares having a value, as of the Effective
Time, of less than 50% of the value of all of the formerly outstanding Allied
Stock as of the Effective Time. Shares of Allied Stock and shares of Air-Cure
Stock held by any Resulting Air-Cure Shareholders and otherwise sold, redeemed,
or disposed of prior to or subsequent to the Merger will be considered in
making this representation.
4.26 Insurance. Allied has maintained and at the Effective Time
Allied shall have in full force and effect motor vehicle and comprehensive
general liability insurance and worker's compensation insurance covering its
Business, its properties and operations, and fire and extended coverage
insurance with respect to its properties as is reasonably necessary to
adequately insure and protect its properties and assets. Schedule 4.26
contains a complete list by title of all such insurance policies and binders
and a description of all pending claims (including the amount of coverage
thereunder) in effect as of the date of this Agreement. Such insurance
policies are owned exclusively by Allied. All insurance policies and binders
relating to such coverage are identified by title on Schedule 4.26. Except as
specified in such policies and binders, the Shareholders have no knowledge that
any such insurance policies are subject to any retroactive rate or audit
adjustments or
-14-
<PAGE> 22
co-insurance arrangements. No notice of cancellation or nonrenewal of or
disallowance of any claim under any such policy or binder has been received by
Allied. To the knowledge of Allied and each Shareholder, such insurance
coverage may be renewed upon the expiration thereof at premiums substantially
equivalent to those currently being paid, except for changes in such premiums
applicable to insureds similarly situated or as a result of increased levels of
Allied's operations.
4.27 No Conflicts. Neither the execution and delivery of this
Agreement nor any of the related documents contemplated hereby will violate,
conflict with, or result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or both would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Allied or otherwise
comprising a part of the Business under any of the terms, conditions or
provisions of (i) its charter documents or bylaws, (ii) except as set forth in
Schedule 4.27, any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation, to which Allied is a party
or to which it or any of its assets may be subject.
4.28 Consents. Except as set forth on Schedule 4.28 or another
schedule hereto, no notice to, approval by, filing with, or authorization,
consent or approval of any federal, state, local or other public body, agency
or authority or any other third party is necessary for the consummation of the
transactions contemplated by this Agreement and the carrying on of the Business
by Allied following the Closing Date.
4.29 Environmental Matters. To the knowledge of Allied and each
Shareholder, Allied currently is and at all times in the past has operated in
substantial compliance in all material respects with all federal, state and
local laws, rules and regulations (collectively, the "environmental laws")
relating to the use, management, handling, transport, treatment, generation,
storage, disposal, release or discharge of hazardous substances or wastes.
-15-
<PAGE> 23
No governmental agency has conducted any extraordinary audits, assessments,
tests or other reviews in connection with Allied's compliance with any
environmental law.
4.30 Disclosure. No representation or warranty made by Allied or
any Shareholder in this Agreement and no statement contained in any
certificate, schedule, list or other instrument or document delivered by Allied
or any Shareholder on or prior to the Effective Time contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary to make the statements contained herein or therein not
misleading.
4.31 Compliance with Laws. To the knowledge of Allied and each
Shareholder, Allied has conducted and/or is conducting the Business, and has
used and is using its property in substantial compliance with all applicable
federal, state and local environmental, land use, and zoning laws and
regulations, except where the failure to comply with such laws and regulations,
in the aggregate, has not and will not have a material adverse effect on
Allied.
4.32 Representations and Warranties Relating to
Pooling-of-Interests Accounting. Neither Allied nor either Shareholder will
knowingly take or cause to be taken any action or cause any matter to occur
which might reasonably prevent the Merger to be accounted for as a
pooling-of-interests.
4.33 Brokers, Finders, Etc. All negotiations relating to this
Agreement and transactions contemplated hereby have been carried on without the
intervention of any broker, finder, or other person acting on behalf of Allied
or the Shareholders in any manner as to give rise to any claim against Allied
for any brokerage, finder's, or similar fee or commission, except for the
amount that will be due to Prudential Securities, Inc., pursuant to an
agreement with Prudential Securities, Inc. attached hereto as Exhibit 4.33.
4.34 Approval by Allied's Shareholders and Directors. This
Agreement, the Merger, and all transactions contemplated hereby
-16-
<PAGE> 24
have been duly approved by the Board of Directors of Allied and by the
shareholders of Allied in accordance with applicable law and the Bylaws and the
Articles of Incorporation of Allied. Immediately following the execution of
this Agreement, the Shareholders will provide to Air-Cure a copy, certified by
the Shareholders to be true and correct, of the resolutions of the Board of
Directors and Shareholders of Allied approving this Agreement, the Merger, and
the transactions contemplated hereby. No shareholder or other person has
exercised any appraisal or dissenter's rights in connection with the Merger nor
will there occur any exercise of appraisal or dissenter's rights in connection
with the Merger.
4.35 Warranty of Allied Shareholders' Equity.
(a) Preparation of Closing Balance Sheet. Not later than
sixty (60) days following the Closing Date, Air-Cure shall prepare and
deliver to the Shareholders a balance sheet (the "Closing Balance
Sheet") of Allied prepared as of the time immediately prior to the
Effective Time. The Closing Balance Sheet shall reflect all assets
and liabilities of Allied and otherwise shall be prepared in
accordance with generally accepted accounting principles ("GAAP") and
in a manner not inconsistent with Allied's June 30, 1995 Financial
Statements referred to in Section 4.5, above. All of the parties
hereto shall cooperate fully with each other in the preparation of the
Closing Balance Sheet, and the Shareholders shall have access at all
reasonable times to review workpapers, books and records relating to
the preparation of the Closing Balance Sheet.
(b) Right to Dispute Closing Balance Sheet. Either
Shareholder shall have the right to dispute the Closing Balance Sheet
by giving notice of dispute to Air-Cure within thirty (30) days after
the Closing Balance Sheet has been given to that Shareholder. Such
notice shall set forth in detail the reasons for the dispute and the
Shareholder's proposed adjustments to the Closing Balance Sheet. If a
Shareholder does not give notice of dispute to Air-Cure within such
thirty-day period in accordance with the foregoing, the Closing
Balance Sheet as prepared by Air-Cure shall become final and binding
upon that Shareholder. If a Shareholder
-17-
<PAGE> 25
does give notice of dispute to Air-Cure within such thirty-day period,
Air-Cure and the Shareholder shall endeavor in good faith to reach
agreement on all of the disputed items within the thirty-day period
following Air-Cure's receipt of the Shareholder's notice. If the
parties are unable to reach an agreement on the disputed items during
such thirty-day period, then the disputed items which have not been
resolved shall be submitted to the accounting firm of Coopers &
Lybrand, Baltimore, Maryland (and if for any reason it is unwilling or
unable to serve, then another independent accounting firm mutually
agreeable to the Shareholders and Air-Cure will serve) for
determination and resolution on the basis of such procedures as such
accounting firm, in its sole judgment, deems applicable and
appropriate, taking into account GAAP and the terms of this Agreement.
Such accounting firm shall review the disputed matters and as promptly
as practicable deliver to Air-Cure and to the Shareholder a statement
setting forth its determination as to the proper treatment of the
matters in dispute, and such determination shall be final and binding
upon that Shareholder without any further right of appeal. In the
event both Shareholders give notices of disputed items and those
notices are in any way in conflict or inconsistent with each other as
to any disputed item, then such items shall not be considered as
disputed hereunder unless the Shareholders resolve the conflict or
inconsistency between themselves and give a new notice to Air-Cure
with respect to that item. All charges of such accounting firm and
other expenses directly incurred in making such determination shall be
borne equally by Air-Cure and the Shareholders. The Shareholders
shall determine as between themselves how the charges of such
accounting firm shall be borne.
(c) Warranty of Closing Balance Sheet and Remedy for
Breach. The Shareholders warrant that the Allied stockholders' equity
as shown on the Closing Balance Sheet, as finally prepared and binding
upon the parties in accordance with Sections 2.2(a) and (b), will not
be less than $2,300,000 immediately prior to the Effective Time. In
the event of the breach of this warranty, then Air-Cure shall have the
right to give notice thereof to the Shareholders, whereupon the
Shareholders shall have ten (10) days to cause to be returned to
Air-Cure that number of shares of Air-Cure Stock equal to (i) the
amount by which $2,300,000 exceeds the amount of the
-18-
<PAGE> 26
Allied stockholders' equity as shown on the Closing Balance Sheet
divided by (ii) the Agreed Value, as that term is defined in Section
2.1, subject to adjustment in the event of any permissible stock
split, stock dividend, or recapitalization of Air-Cure as a result of
which the total number of shares of Air-Cure Stock is increased or
decreased for no consideration. The aforesaid right of Air-Cure to
demand the return of shares of Air-Cure Stock shall be the sole and
exclusive remedy of Air-Cure in the event of a breach of the warranty
set forth in this Section 4.34(c).
SECTION 5
REPRESENTATIONS AND WARRANTIES OF AIR-CURE
Air-Cure represents and warrants to the Shareholders, effective as of
the date of this Agreement and at all times up to the Effective Time, each of
the following:
5.1 Corporate Organization. Each of Air-Cure and Newco is a
corporation duly organized, validly existing and in good standing under the
laws of the states of Delaware and Texas, respectively, and is qualified or
licensed and in good standing in all jurisdictions in which the nature of its
business or the properties owned by it require it to be qualified or licensed
to do business, except where failure to be qualified or licensed will not have
a material adverse effect on it.
5.2 Authorization. Air-Cure has all requisite right, power and
authority to own, lease and operate its properties, to carry on its business as
its business has previously been carried on, and to perform its obligations
under this Agreement. Each of Air-Cure and Newco has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Boards of Directors of Air-Cure and
Newco have duly authorized the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Air-Cure and Newco and constitutes the valid and
binding agreement of Air-Cure and Newco, enforceable against them in accordance
with its terms,
-19-
<PAGE> 27
except as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors'
rights generally and except as such enforceability may be affected by equitable
principles (whether considered in a proceeding at law or in equity).
5.3 Capitalization. The authorized stock and securities of
Air-Cure consist of one million (1,000,000) shares of preferred stock, none of
which are outstanding, and twenty million (20,000,000) shares of common stock,
$.001 par value per share, of which 7,313,386 shares are issued and
outstanding. The authorized stock and securities of Newco consist solely of
ten thousand (10,000) shares of common stock, $.01 par value per share, of
which one thousand (1,000) shares are issued and outstanding and are owned by
Air-Cure. All of such issued and outstanding shares of capital stock of
Air-Cure and Newco have been duly authorized and validly issued and are fully
paid and nonassessable. There are no outstanding subscriptions, options,
contracts, commitments, warrants, calls, agreements, understandings or other
arrangements or rights of any character affecting or relating in any manner to
the issuance of capital stock or other securities of Air-Cure (whether by
subscription, option, exchange, right of conversion, right of refusal, or
otherwise) or entitling anyone to acquire shares of the capital stock of
Air-Cure or other securities of any kind of Air-Cure except as set forth in
Air-Cure's Prospectus referred to in Section 6.2.
5.4 Subsidiaries. All outstanding shares of stock of the
subsidiary corporations owned by Air-Cure are validly issued, fully paid, and
non-assessable, and Air-Cure has good title thereto free and clear of any
encumbrance of any nature, except for security interests granted therein to
Air-Cure's commercial lenders. Each such subsidiary is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction under which it is incorporated and has full requisite corporate
power and authority to own its property and carry on its business as presently
conducted by it and is, or at the Effective Time will be, duly qualified or
licensed to do business in and is, or at the Effective Time will be, in good
standing as a foreign corporation authorized to do business in all
jurisdictions in which the character of the properties owned or the nature of
the business
-20-
<PAGE> 28
conducted makes such qualifications or licensing necessary, except where the
failure to be so qualified or licensed would not have a material adverse effect
on the financial condition, properties or business of such subsidiary. Where
appropriate and consistent with the context of this Agreement, references to
Air-Cure in this Section 5 shall refer also to subsidiary corporations of
Air-Cure.
5.5 Copies Complete; No Default. The copies of all documents
which have been delivered by Air-Cure to Allied in connection with the
transactions contemplated hereby are substantially complete and accurate and
are true and correct copies of the originals thereof; and the execution of this
Agreement and the performance of the obligations hereunder will not violate or
result in a breach or constitute a default under any of the terms and
provisions thereof.
5.6 No Conflict. Neither the execution and delivery of this
Agreement nor any other related documents contemplated hereby will violate,
conflict with, or result in a breach of any provisions of or constitute a
default (or an event which, with the giving of notice or lapse of time, or
both, would constitute a default) under or result in the termination of or
accelerate the performance required by or result in a right of termination or
acceleration under or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Air-Cure or Newco
under any of the terms, conditions or provisions of (i) the charter documents
or bylaws of Air-Cure and Newco, or (ii) any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which Air-Cure or Newco is a party or to which either of them or any of their
properties or assets may be subject.
5.7 No Liabilities of Newco. Newco is not subject to any
liabilities, obligations, claims, whether absolute or contingent, liquidated or
unliquidated. Newco was formed solely for the purpose of consummating the
transactions contemplated by this Agreement and has not engaged in any business
or other activities whatsoever. As a result of the Merger, Allied will hold
100% of Newco's assets.
-21-
<PAGE> 29
5.8 Valid Issuance of Air-Cure Stock. The shares of Air-Cure
Stock to be delivered to the Resulting Air- Cure Shareholders at Closing have
been duly authorized and, upon issuance thereof in accordance with the terms of
this Agreement, will be validly issued, fully paid and non-assessable.
5.9 Disclosure. Air-Cure has delivered or made available to the
Shareholders true and complete copies of (a) all annual reports filed with the
Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), since
December 31, 1991, (b) Air-Cure's quarterly and other reports filed with the
Commission since December 31, 1992, (c) all definitive proxy solicitation
materials filed with the Commission since December 31, 1991, and (d) any
registration statements declared effective by the Commission since December 31,
1991.
5.10 Filings with the Securities and Exchange Commission. Air-Cure
and Newco have made all filings with the SEC that they have been required to
make under the Securities Act and the Exchange Act (collectively the "Public
Reports"). Each of the Public Reports has complied with the Securities Act and
the Exchange Act in all material respects. None of the Public Reports, as of
their respective dates, contained any untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading; except that Air-Cure makes no representation or warranty with
respect to any statement, information or omission in the Prospectus, after it
is amended pursuant to Section 6.2, which is approved for use in or omission
from the Prospectus by Allied or either Shareholder or its/his counsel, and
which is based upon any written statement or written information furnished by
Allied or either Shareholder.
5.11 Financial Statements. Air-Cure has filed Quarterly Reports on
Form 10-Q for the fiscal quarter ended June 30, 1995 and an Annual Report on
Form 10-K for the fiscal year ended December 31, 1994 (the "Most Recent Fiscal
Period"). The financial statements included in these Public Reports (including
the related notes and schedules) have been prepared in accordance with GAAP
-22-
<PAGE> 30
applied on a consistent basis and present fairly the consolidated financial
condition of Air-Cure and its subsidiaries as of the indicated dates and the
consolidated results of operations of Air-Cure and its subsidiaries for the
indicated periods, are correct and complete in all material respects, and are
consistent with the books and records of Air-Cure and its subsidiaries;
provided, however, that the interim statements are subject to normal year-end
adjustments.
5.12 Absence of Certain Changes, Events or Conditions. Except as
described in any other schedule or exhibit hereto or in any other document
referred to herein, since June 30, 1995, Air-Cure has: (a) conducted its
business in the ordinary course and has not engaged or agreed to engage in any
extraordinary transaction except at arm's length and for fair consideration;
(b) not disposed of any of its assets, except in the ordinary course of
business; (c) not issued any stock or securities or rights with respect to any
stock or securities (except pursuant to existing stock plans), or paid any
dividends, redeemed any securities or otherwise caused any assets of Air-Cure
to be distributed to any of its shareholders; (d) not borrowed any funds under
existing lines of credit or otherwise, except in furtherance of its business
and in a manner, and in amounts, in keeping with current business requirements,
or made any loans or guaranteed the obligations of any other persons; (e) not
suffered any material and adverse change in its assets, business, or
operations, nor have its assets suffered any material and adverse change in
value other than through ordinary wear and depreciation; (f) not changed or
amended its charter documents or bylaws except to change its name from Air-Cure
Environmental, Inc. to Air-Cure Technologies, Inc.; (g) not entered into any
contract, commitment, or transaction which is not in the ordinary course of its
business; (h) not failed to keep its property damage, fire, and other casualty
coverage as was effective at June 30, 1995; and (i) not materially increased
the compensation of any officer.
5.13 Consents. Except as otherwise referred to in this Agreement,
no notice to, approval by, filing with, or authorization, consent or approval
of, any federal, state, local or other public body, agency or authority or any
other third party is necessary for the consummation of the transactions
contemplated by this Agreement.
-23-
<PAGE> 31
5.14 Litigation. To the knowledge of Air-Cure, it is not subject
to or bound by any court, regulatory commission, board or administrative
judgment, order or decree, and no suit, action, proceeding or other litigation
in any court or before any administrative or arbitration panel or commission or
before or by any governmental department or agency to which Air-Cure is a party
or which affects the business or properties of Air-Cure is now pending.
Air-Cure has no knowledge of any governmental proceeding or investigation
involving Air-Cure. There are no existing violations of federal, state or
local laws, ordinances, rules, regulations or orders by Air-Cure which
materially and adversely affect the business or property of Air-Cure or the
possession, use, occupancy or operation of any of its facilities or business.
To the knowledge of Air-Cure, it has not engaged in any discriminatory or
unfair labor practices which have not heretofore been discontinued. To the
knowledge of Air-Cure, there is no grievance or other labor dispute pending or
threatened, against Air-Cure.
5.15 Compliance with Laws. Air-Cure has conducted and/or is
conducting its business, and has used and is using its property in substantial
compliance with all applicable federal, state and local environmental, land
use, and zoning laws and regulations, except where the failure to comply with
such laws and regulations, in the aggregate, has not and will not have a
material adverse effect on Air-Cure.
5.16 Brokers, Finders, Etc. All negotiations relating to this
Agreement and transactions contemplated hereby have been carried on without the
intervention of any broker, finder, or other person acting on behalf of
Air-Cure in any manner as to give rise to any claim against Air-Cure for any
brokerage, finder's, or similar fee or commission.
5.17 Employee Benefit Plans. The Air-Cure Prospectus, referred to
in Section 6.2, lists all qualified employee benefit plans of Air-Cure. All
such employee benefit plans are in substantial compliance with all applicable
provisions of ERISA and the regulations issued thereunder, as well as with all
other applicable laws. Such plans that are intended to qualify under
-24-
<PAGE> 32
Section 401(a) of the Code have been determined by the Internal Revenue Service
to be so qualified. All reports and other documents required to be filed with
any governmental agency or distributed to plan participants or beneficiaries
(including, but not limited to, actuarial reports, audits or tax returns) have
been timely filed or distributed. No person has engaged in any transaction
prohibited under the provisions of Section 4975 of the Code or Section 406 of
ERISA with respect to any such plan. Air-Cure has not incurred any liability
for excise tax or penalty due to the Internal Revenue Service.
5.18 Representations Relating to Tax-Free Reorganizations.
(a) Prior to the Merger, Air-Cure will be in control of
Newco within the meaning of Code Section 368(c).
(b) Following the Merger, Air-Cure has no plan or
intention to permit or cause Allied to issue additional shares of
Allied capital stock which would result in Air-Cure losing control of
Allied within the meaning of Section 368(c) of the Internal Revenue
Code.
(c) Air-Cure has no plan or intention to reacquire any of
the Air-Cure Stock issued in the Merger.
(d) Air-Cure has no plan or intention to (i) liquidate
Allied (ii) merge Allied with or into another corporation (except to
redomicile Allied from Texas to Delaware), (iii) sell or otherwise
dispose of the stock of Allied except for transfers of stock to
corporations controlled by Air-Cure, or (iv) cause Allied to sell or
otherwise dispose of any of its assets or of any of the assets
acquired from Newco, except for dispositions made in the ordinary
course of business or transfers of assets to a corporation controlled
by Allied.
(e) Newco will have no liabilities assumed by Allied, and
will not transfer to Allied any assets subject to liabilities, in the
Merger.
(f) Newco was formed expressly for the purpose of
effecting the Merger, and as a result of the Merger, Allied
-25-
<PAGE> 33
will hold 100% of Newco's assets held by Newco immediately prior to
the Merger.
(g) Following the Merger, Air-Cure shall cause Allied to
continue its historic Business or use a significant portion of its
historic Business assets in a business.
(h) Air-Cure and Newco will pay their respective
expenses, if any, incurred in connection with the Merger.
(i) There is no intercorporate indebtedness existing
between Air-Cure and Allied or between Newco and Allied.
(j) The Air-Cure Stock exchanged for the Allied Stock is
voting common stock of Air-Cure as described in Code Section
368(a)(2)(E).
(k) Air-Cure does not own, nor has it owned in the past
five (5) years, any shares of stock of Allied.
(l) Neither Air-Cure nor Newco is an investment company
as defined in Code Section 368(a)(2)(F)(iii) and (iv).
5.19 Representations and Warranties Relating to
Pooling-of-Interests Accounting. Air-Cure will not knowingly take or cause to
be taken any action or cause any matter to occur which might reasonably prevent
the Merger to be accounted for as a pooling-of-interests.
SECTION 6
RESALES OF AIR-CURE STOCK
6.1 Pooling Restrictions on Transactions in Air-Cure Stock. It is
a material factor to Air-Cure in entering into this Agreement that the
transactions contemplated by this Agreement be treated as a
"pooling-of-interests" for accounting purposes. Therefore, notwithstanding any
other provision of this Agreement, prior to notice by Air-Cure to the
Shareholders of the publication and dissemination by Air-Cure of consolidated
financial results which include results of combined operations of Allied and
Air-Cure for
-26-
<PAGE> 34
at least a thirty-day period on a consolidated basis following the Closing
Date, no person who receives Air-Cure Stock in the Merger (referred to herein
as a "Resulting Air-Cure Shareholder") shall sell or otherwise transfer or
dispose of, or in any other way reduce his or her risk relative to, any share
of the Air-Cure Stock received by that Resulting Air- Cure Shareholder
(including, by way of example and not limitation, engaging in put, call,
short-sale, straddle or similar market transactions). The SEC has issued
Accounting Series Releases Nos. 130 and 135, as amended, (collectively the
"ASRs") setting forth certain restrictions applicable to the availability of
"pooling-of-interests" accounting treatment in transactions of the type
contemplated by this Agreement. The Shareholders, therefore, agree with
Air-Cure that each Resulting Air-Cure Shareholder will hold his or her shares
of Air-Cure Stock and will comply with the ASRs until the requirements of the
ASRs have been met. As soon as practicable following the Merger, Air-Cure
shall publish financial results covering at least thirty (30) days of
post-Merger combined operations. Additionally, the certificates evidencing the
Air-Cure Stock to be received by the Resulting Air-Cure Shareholders will bear
a legend substantially in the form set forth below:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED, AND AIR-CURE TECHNOLOGIES, INC. SHALL NOT BE
REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, TRANSFER OR ASSIGNMENT
PRIOR TO THE PUBLICATION AND DISSEMINATION OF FINANCIAL STATEMENTS BY
AIR-CURE TECHNOLOGIES, INC. WHICH INCLUDE THE RESULTS OF AT LEAST
THIRTY (30) DAYS OF COMBINED OPERATIONS OF AIR-CURE TECHNOLOGIES, INC.
AND ALLIED INDUSTRIES, INC. ACQUIRED BY AIR-CURE TECHNOLOGIES, INC.
FOR WHICH THESE SHARES ARE ISSUED. UPON THE WRITTEN REQUEST OF THE
SHAREHOLDERS DIRECTED TO AIR-CURE TECHNOLOGIES, INC., THE ISSUER
AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED
WITH THE TRANSFER AGENTS) WHEN THE REQUIREMENTS OF ACCOUNTING SERIES
RELEASE NOS. 130 AND 135, AS AMENDED, OF THE SECURITIES AND EXCHANGE
COMMISSION HAVE BEEN MET.
6.2 Amendment to Registration Statement. Air-Cure has delivered
to the Shareholders and the Shareholders acknowledge receipt of the Air-Cure
prospectus (the "Prospectus"), which
-27-
<PAGE> 35
constitutes a part of Registration Statement Number 33-92308 (the "Registration
Statement") filed by Air-Cure with the Securities and Exchange Commission. At
the date of this Agreement, the Prospectus is current and effective. As soon
as possible following the execution of this Agreement, Air-Cure shall file an
amendment to its Registration Statement for the purpose of updating the
information contained in the Prospectus to reflect the transactions
contemplated by this Agreement and to permit the Air-Cure Stock to be issued to
the Resulting Air-Cure Shareholder under Section 2.1. The Amendment to the
Registration Statement will also be intended to register the resale of the
Air-Cure Stock by the Resulting Air-Cure Shareholders, subject to compliance
with the applicable securities laws and other laws regarding such resale. Such
registration of the resale of the Air-Cure Stock shall cover 30% of the shares
of Air-Cure Stock issued to each Resulting Air-Cure Shareholder in the Merger
during the first year following the Closing, then an additional 30% during the
second year following the Closing, and the balance during the third year
following the Closing. Any shares of Air-Cure Stock not resold by a Resulting
Air-Cure Shareholder during the period following the Closing in which those
shares are registered for resale will continue to be registered for resale,
provided however, that Air-Cure will have no obligation to register or to
continue the registration of any such shares for resale following the
expiration of three (3) years from the Closing Date. The registration rights
granted under this Section 6.2 shall be nontransferable. The Resulting
Air-Cure Shareholders whose Air-Cure Stock will be registered for resale are
listed on Schedule 4.3B. The Shareholders shall cooperate fully with Air-Cure
by furnishing all information concerning all Resulting Air-Cure Shareholders
and Allied required or appropriate for preparation and inclusion in the
amendment to the Registration Statement. Air-Cure shall use its reasonable
best efforts to cause the amendment to the Registration Statement to become
effective as soon as possible after filing. The shares of Air-Cure Stock to be
issued to the Shareholders pursuant to Section 2.1 will be issued under the
Registration Statement. In connection with such registration, Air-Cure shall
also register such shares under the Blue Sky laws of the states which may be
specified by the Shareholders; provided that Air-Cure shall not be required to
register such shares in a state if it would be required to (i) qualify as a
foreign corporation in such state and it is not otherwise required to be so
qualified, (ii) consent to general
-28-
<PAGE> 36
service of process in such state, or (iii) incur unreasonable expense in
registering in such state.
6.3 Expenses of Registration. All expenses incurred in connection
with any registration, qualification or compliance pursuant to this Section 6,
including all registration, filing and qualification fees, printing expenses,
fees and disbursements of counsel for Air-Cure and expenses of any special
audits incidental to or required by such registration, shall be borne by
Air-Cure. In addition, Air-Cure shall furnish such number of prospectuses and
other documents as the Shareholders shall reasonably request. However,
notwithstanding the foregoing, Air-Cure shall not pay any underwriting fees,
discounts, or commissions or any other "costs to sell" any shares of Air-Cure
Stock received by the Resulting Air-Cure Shareholders in the Merger, nor will
Air-Cure be obligated to pay any other expenses which may in any way jeopardize
the ability and right of Air-Cure to account for the Merger as a pooling of
interests for financial accounting purposes.
6.4 Stock Distribution Agreement. At Closing, the Resulting
Air-Cure Shareholders and Air-Cure shall enter into the Stock Distribution
Agreement in the form attached hereto as Exhibit 6.4, which sets forth certain
agreements of the Resulting Air-Cure Shareholders relating to the Resulting
Air-Cure Shareholders' resale of their Air-Cure Stock.
SECTION 7
COVENANTS
The Shareholders hereby covenant and promise to Air-Cure and where
expressly stated, Air-Cure hereby covenants and promises to the Shareholders
the following:
7.1 Conduct of Business of Allied. Except as otherwise provided
for in Schedule 7.1 or as otherwise contemplated by this Agreement, during the
period from the date of this Agreement to the Effective Time, Allied will
conduct the Business and operations according to its ordinary and usual course
and consistent with past practice, and will use its commercial best efforts to
preserve
-29-
<PAGE> 37
intact its business organization, to keep available the services of its
officers and employees and to maintain satisfactory relationships with
licensors, licensees, suppliers, contractors, distributors, customers and
others having business relationships with it. Without limiting the generality
of the foregoing, and except as otherwise expressly provided in or contemplated
by this Agreement, prior to the Effective Time, Allied will not, without the
prior written consent of Air-Cure:
(a) amend its Certificate of Incorporation or Bylaws;
(b) authorize for issuance, issue, sell or deliver
(whether through the issuance or granting of additional options,
warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any securities convertible into shares of
stock of any class;
(c) split, combine or reclassify any shares of Allied
Stock, or redeem or otherwise acquire any shares of its Stock;
(d) (i) create, incur or assume any debt (other than
debt created, incurred or assumed in the ordinary course of its
business, consistent with past practice; (ii) create, incur or assume
any (A) long-term debt (including capitalized lease obligations), or
(B) short-term debt except trade payables incurred in the ordinary
course of business and consistent with past practice; (iii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person; or (iv) make any loans, advances or capital contributions to,
or investments in, any other person or entity, other than short-term
investments in financial instruments in the ordinary course of
business and consistent with past practice;
(e) (i) increase in any manner the compensation of any
of its directors, officers or highly paid employees except as set
forth on Schedule 7.1(e); or (ii) commit itself to any additional
pension, profit- sharing, bonus, incentive, deferred compensation,
stock purchase, stock option, stock appreciation right, group
insurance, severance pay, retirement or other employee benefit plan,
agreement or arrangement, or to any employment or consulting agreement
with or for the benefit of
-30-
<PAGE> 38
any person, or amend any of such plans or any of such agreements in
existence on the date hereof;
(f) sell, transfer, mortgage, or otherwise dispose of or
encumber any interest in real property;
(g) except in the ordinary course of business and
consistent with past practice or pursuant to contractual obligations
existing on the date hereof (i) sell, transfer, mortgage, or otherwise
dispose of or encumber any personal property; (ii) pay, discharge or
satisfy claims, liabilities or obligations (absolute, accrued,
contingent or otherwise); or (iii) cancel any debts or waive any
claims or rights;
(h) make any capital expenditure or commitment except in
the ordinary course of business consistent with past practices;
(i) enter into any other agreements, commitments or
contracts which, individually or in the aggregate, are material to
Allied, except agreements, commitments or contracts expressly provided
for or contemplated by this Agreement or purchase orders or sales
contracts in the ordinary course of business, consistent with past
practice and not in excess of current requirements or for the
provision of data processing or related services in the ordinary
course of business and consistent with past practice, or otherwise
make any material change in the conduct of the Business or operations
of Allied;
(j) approve or recommend to its shareholders, or
undertake, either as the surviving, disappearing or acquiring
corporation, any other merger, consolidation, assets acquisition or
disposition or tender offer or other takeover transaction;
(k) make any distribution with respect to the Allied
Stock; or
(l) agree, whether in writing or otherwise, to do any of
the foregoing.
-31-
<PAGE> 39
7.2 Access to Information.
(a) Allied will afford Air-Cure and its representatives
access, during normal business hours, to all of its business,
operations, properties, books, files and records and will cooperate in
Air-Cure's examination thereof. Air-Cure agrees that all information,
including the existence and contents of this Agreement and the other
agreements among the parties, so provided will be treated as
confidential (except for necessary disclosures to professional
advisors, and except for securities law disclosures, and further
except for disclosures by Air-Cure to any underwriter with whom
Air-Cure negotiates to offer and sell its stock), that Air-Cure will
not disclose or make any use of such confidential information unless
the same is or shall become available to it through nonconfidential
means or shall otherwise come into the public domain. If the
transactions contemplated by this Agreement are not consummated for
any reason, then after this Agreement is terminated, Air-Cure will
continue to hold in confidence all information obtained from Allied
and will return to Allied all copies of any confidential documents
obtained by Air-Cure in connection with the transactions contemplated
by this Agreement.
(b) Air-Cure will afford Allied and the Shareholders
access, during normal business hours, to all of its business,
operations, properties, books, files and records and will cooperate
with Allied and the Shareholders in the audit and examination thereof
and will do everything reasonably necessary to enable Allied and the
Shareholders to make a complete examination of the business, assets
and properties of Air-Cure and the condition thereof. Allied and the
Shareholders agree that all information, including the existence and
contents of this Agreement and the other agreements among the parties,
so provided will be treated as confidential (except for necessary
disclosures to professional advisors), that neither Allied nor the
Shareholders will disclose or make any use of such confidential
information unless the same is or shall become available to it through
nonconfidential means or shall otherwise come into the public domain.
If the transactions contemplated by this Agreement are not consummated
for any reason, then after this Agreement is terminated, Allied and
the Shareholders will continue to
-32-
<PAGE> 40
hold in confidence all information obtained from Air-Cure and will
return to Air-Cure all copies of any confidential documents obtained
by Allied or the Shareholders in connection with the transactions
contemplated by this Agreement.
7.3 Public Announcements. The Shareholders will cause Allied, its
officers and directors, employees, and agents to consult with Air-Cure before
issuing any press release or otherwise making any public statements with
respect to the transactions contemplated by this Agreement and shall not issue
any such press release or make any such public statement without Air-Cure's
prior approval. Air-Cure shall consult with Allied before issuing any press
release with respect to any transactions contemplated by this Agreement.
7.4 Notification of Material Events. Each party shall promptly
notify the other in writing of the occurrence of any event which will or could
reasonably be expected to result in its failure to satisfy any of the
representations, warranties, covenants, or conditions specified in this
Agreement.
7.5 Certain Employee Matters. Allied will take all steps
reasonably necessary to maintain and enforce all employment contracts and
noncompetition and nondisclosure agreements which it now has and has had with
its employees and former employees.
7.6 Employment Agreements. Each of Mark E. Johnson and Pierre S.
Melcher has executed an employment agreement in the forms attached hereto as
Exhibits 7.6A and 7.6B, respectively, to become effective at Closing. The
parties agree to use their best efforts to cause each of Lloyd R. Slinkard and
Preston Fenn to execute prior to Closing an employment agreement in the forms
attached hereto as Exhibits 7.6C and 7.6D, respectively, to become effective at
Closing.
Air-Cure and the Shareholders represent and warrant to each other and
agree that the compensation to be paid to the Shareholders under their
employment agreements has been separately
-33-
<PAGE> 41
bargained for and is independent from the Merger Consideration to be received
by them pursuant to this Agreement.
7.7 Release and Hold Harmless of Allied. Each officer of Allied
listed in Section 7.6 shall execute and deliver to Air-Cure at Closing a
written release, in the form of Exhibit 7.7, releasing and holding Allied
harmless at all times from and after the date of this Agreement from and
against any and all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses arising out of any agreement or
other matter existing as between Allied and such officer, director, or
Shareholder at any time prior to the Effective Time.
7.8 Noncompetition.
(a) Each Shareholder agrees that for a period of two (2)
years following the Closing Date, he shall not, directly or
indirectly, participate in any business or investment activity, either
personally or by, for, or through any other person, or as an officer,
director, shareholder, owner, partner, joint venturer, or in any other
capacity on behalf of himself or any other company or person, which is
in competition with any business engaged in by Air-Cure or any of its
subsidiaries then existing as of the Effective Time; except that, this
Section 7.8(a) shall not prohibit a Shareholder from owning less than
five percent (5%) of any class of publicly traded stock or security of
any company. Further, during such two-year period, no Shareholder
shall call upon any employee of Air-Cure or any of its subsidiaries
for the purpose or with an intent of enticing that employee away from
or out of the employ of Air-Cure or any of its subsidiaries for any
reason whatsoever.
(b) Because of the difficulty of measuring economic loss
to Air-Cure as a result of the breach of the foregoing covenant, and
because of the immediate and irreparable damage that would be caused
to Air-Cure for which it would have no adequate remedy, the covenant
may be enforced by Allied or Air-Cure by injunctions and restraining
orders as well as by any other legal remedy available to them at law.
-34-
<PAGE> 42
(c) It is agreed by the parties that the foregoing
covenants in this Section 7.8 impose a reasonable restraint on the
Shareholders in light of the activities and business of Air-Cure.
(d) The covenants in this Section 7.8 are severable and
separate, and the unenforceability of any specific covenant shall not
affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope,
time or territorial restrictions set forth are unreasonable, then it
is the intention of the parties that such restrictions be enforced to
the fullest extent which the court deems reasonable, and the Agreement
shall thereby be reformed.
(e) The Shareholders hereby agree that this covenant is a
material and substantial part of this transaction.
7.9 Board Representatives. Immediately following Closing and for
so long as the Shareholders own Air-Cure Stock issued to them in the Merger
which in the aggregate is equal to or exceeds twenty percent (20%) of all
issued and outstanding Air-Cure Stock, then the Shareholders shall have the
right to cause to be nominated to the Air-Cure Board of Directors two (2)
persons, not more than one of whom may be an employee of Air-Cure (which for
purposes of this Section 7.9 includes any subsidiary of Air-Cure) and one (1)
person who is not an employee of Air-Cure. Any such person designated by the
Shareholders to be nominated as a director must meet the qualifications for
membership on the Board of Directors which are generally applicable to all
members of the Board of Directors. The designation of any such persons to be
nominated to the Board of Directors shall be made by the Shareholders in a
joint notice to Air-Cure. The persons nominated by the Shareholders shall be
voted upon at the annual meeting of shareholders of Air-Cure. The Shareholders
shall have the right annually to give their joint notice to Air-Cure of the
directors whom they wish to be nominated to the Board of Directors at the
Air-Cure annual meeting of shareholders. This notice shall be given by the
Shareholders to Air-Cure in a timely manner which will permit Air-Cure to cause
these persons to be included in Air-Cure's proxy statement and other necessary
disclosures, communications, and filings. In the event any person so nominated
by the Shareholders serves on the
-35-
<PAGE> 43
Board of Directors and then fails to serve or continue to serve for any reason,
the Shareholders shall have the right to nominate a successor to be elected to
serve on the Board of Directors, which successor must meet the qualifications
to serve on the Board of Directors as set forth herein. Any person so
nominated by the Shareholders and who meets the foregoing requirements will be
recommended by the Board of Directors to the Air-Cure shareholders for
election. Prior to Closing, the Shareholders may advise Air-Cure by joint
notice containing the names of two (2) persons, not more than one of whom may
be an employee of Air-Cure, whom the Shareholders desire to serve on the Board
of Directors of Air-Cure immediately following Closing. Upon timely receipt of
this notice from the Shareholders, Air-Cure shall take such action as is
necessary and appropriate to cause those persons designated by the Shareholders
to become members of the Air-Cure Board of Directors immediately following
Closing, provided that those persons meet the qualifications referred to above.
Those persons will serve on the Board of Directors in accordance with the
bylaws and rules and procedures adopted by Air-Cure until the next annual
meeting of shareholders of Air-Cure or unless they fail to serve or continue to
serve for any reason.
7.10 Convertible Notes.
(a) Immediately following the execution of this
Agreement, the Shareholders shall cause Allied to deliver to each
holder of a Convertible Note the "Company Notice" as required by the
Convertible Subordinated Note Purchase Agreement (the "Note Purchase
Agreement"). The Shareholders will cause Allied to comply with the
requirements of Section 8 as well as all other requirements imposed
upon Allied by the Note Purchase Agreement. At the same time that
Allied sends the Company Notice to the holders of the Convertible
Notes, it will send a copy of the Company Notice to Air-Cure. Allied
will also promptly give to Air-Cure copies of all other correspondence
given to and received from the holders of the Convertible Notes with
respect to the Note Purchase Agreement. Any such holder who elects to
convert that holder's Convertible Note and who owns Allied Stock at
the Effective Time shall participate on a pro rata basis with the
other holders of Allied Stock in the Merger.
-36-
<PAGE> 44
(b) If any holder of a Convertible Note does not elect to
convert that holder's Convertible Note following receipt of the
Company Notice as described in Section 7.10(a), above, then Air-Cure
shall have the right to require Allied to exercise its redemption
right under Section 6 of the Note Purchase Agreement in a manner which
will cause the redemption to occur prior to the Effective Time of the
Merger.
7.11 Air-Cure Shareholders' Meeting. As promptly as practicable
following the date of this Agreement, Air- Cure, in accordance with applicable
law and its Certificate of Incorporation and Bylaws, shall call, give notice
of, and hold a special meeting of its shareholders for the purpose of
considering and taking action upon the Merger and this Agreement and such other
matters as may be necessary to consummate the transactions provided for herein.
Air-Cure shall further prepare and file with the SEC a preliminary proxy
statement relating to the matters to be considered at the special shareholders'
meeting and will use its reasonable best efforts to obtain and furnish the
information required to be included by the SEC in that proxy statement, and
respond promptly to any comments made by the SEC with respect to the
preliminary proxy statement and to cause a definitive proxy statement to be
mailed to its shareholders.
7.12 Amendment of Shareholders' Agreement. Promptly following the
execution of this Agreement, the parties to that certain Shareholders'
Agreement, dated February 4, 1994, as amended, between and among Allied
(formerly, A.I. Acquisition Company, Inc.) and the Shareholders and
Shareholders' spouses listed therein shall be amended, in form and substance
satisfactory to Air-Cure, to the effect that no term or provision of the
Shareholders' Agreement will have any force or effect whatsoever with respect
to any event, circumstance, or other matter occurring or existing in connection
with this Agreement and the consummation of all matters contemplated under this
Agreement, including but not limited to the acquisition of all of the Allied
Stock by Air-Cure in the Merger. A copy of this amendment will be furnished by
the Shareholders to Air-Cure within ten (10) days after execution of this
Agreement.
-37-
<PAGE> 45
7.13 Allied Income Taxes for 1995/6. The parties acknowledge that
the tax year of Allied during which the Effective Time occurs will be divided
into a short S corporation year and a short C corporation year. The parties
agree that the taxable income or loss of Allied for the calendar year in which
the Effective Time occurs shall be divided between the short S corporation year
and the short C corporation year under the normal tax accounting rules as
provided for under Code Section 1362(e) and the Treasury Regulations
thereunder. The Shareholders will be responsible for causing Allied to file
all necessary income tax returns for Allied's short S corporation year ending
at or about the Effective Time. Such returns shall be complete in all
respects, and the Allied Shareholders shall indemnify Allied and Air-Cure for
any expenses or payments which Allied may incur following the Effective Time as
a result of the Allied tax return for its short S corporation year. Allied and
the Shareholders further agree and represent and warrant to Air- Cure that as a
result of the conversion of Allied from a C corporation to an S corporation on
January 1, 1995, Allied was not required to recognize any LIFO recapture tax
within the meaning of Section 1363(d) of the Internal Revenue Code.
Notwithstanding the foregoing, Allied and the Shareholders shall have the
right, if they so desire, to cause the subchapter S election of Allied to
terminate prior to the Effective Time, in which event Allied would become a C
corporation. If Allied and the Shareholders desire to cause Allied's
subchapter S election to terminate, they shall give notice thereof to Air-Cure
not less than ten (10) days prior to the date upon which the S election will
terminate. Further, Allied and the Shareholders will not permit the S election
to terminate earlier than one (1) day prior to the Effective Time, and all tax
items of income, gain, loss, deduction, and credit of Allied up to but
excluding the date of such termination shall be reported on the final Allied
Form 1120S income tax return and none of it will be reportable on the Allied
Form 1120 corporation income tax return required to be filed by Allied
following the Effective Time.
7.14 Conduct of Business of Air-Cure. Except as otherwise provided
for in any schedule or exhibit hereto or in any other document referred to
herein, or as otherwise contemplated by this Agreement, during the period from
the date of this Agreement to the Effective Time, Air-Cure will conduct its
business and operations according to its ordinary and usual course and
consistent with past
-38-
<PAGE> 46
practice, and will use its commercial best efforts to preserve intact its
business organization, to keep available the services of its officers and
employees and to maintain satisfactory relationships with licensors, licensees,
suppliers, contractors, distributors, customers and others having business
relationships with it. Without limiting the generality of the foregoing, and
except as otherwise expressly provided in or contemplated by this Agreement,
prior to the Effective Time, Air-Cure will not, without the prior written
consent of Allied:
(a) amend its Certificate of Incorporation or Bylaws;
(b) authorize for issuance, issue, sell or deliver
(whether through the issuance or granting of additional options,
warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any securities convertible into shares of
stock of any class except pursuant to or in accordance with presently
existing agreements, plans, or arrangements with respect to any of the
foregoing;
(c) split, combine or reclassify any shares of Air-Cure
Stock, or redeem or otherwise acquire any shares of the Air-Cure
Stock;
(d) create, incur or assume any debt in excess of
$3,000,000 (other than debt created, incurred or assumed in
furtherance of its business, consistent with past practice and except
in connection with the acquisition of another company or business not
prohibited by this Agreement);
(e) (i) increase in any manner the compensation of any
of its directors, officers or highly paid employees; or (ii) commit
itself to any not presently existing pension, profit-sharing, bonus,
incentive, deferred compensation, stock purchase, stock option, stock
appreciation right, group insurance, severance pay, retirement or
other employee benefit plan, agreement or arrangement, or to any
employment or consulting agreement with or for the benefit of any
person, or amend any of such plans or any of such agreements in
existence on the date hereof in any material way which would be
adverse to the Shareholders;
-39-
<PAGE> 47
(f) sell, transfer, mortgage, or otherwise dispose of or
encumber any interest in real property except in furtherance of its
business;
(g) except in furtherance of its business and consistent
with past practice or pursuant to contractual obligations existing on
the date hereof (i) sell, transfer, mortgage, or otherwise dispose of
or encumber any personal property; (ii) pay, discharge or satisfy
claims, liabilities or obligations (absolute, accrued, contingent or
otherwise); or (iii) cancel any debts or waive any claims or rights;
(h) except as contemplated by this Agreement, acquire or
agree to acquire any other companies or businesses for an agreed price
in excess of $3,000,000 in the aggregate; or
(i) agree, whether in writing or otherwise, to do any of
the foregoing.
SECTION 8
CLOSING CONDITIONS
8.1 Conditions to the Obligations of Air-Cure. Each and every
obligation of Air-Cure under this Agreement and under the other agreements,
instruments, and documents related to this Agreement (the "Related Documents")
shall be subject to the satisfaction, as of Closing, of each of the following
conditions, each of which can be waived by Air- Cure, but only in writing:
(a) Accuracy of Representations and Warranties. All of
the representations and warranties of Allied and the Shareholders
contained in this Agreement shall be true and correct as of the date
hereof and shall be deemed to have been made again at Closing and
shall then be true and correct.
(b) Performance of Covenants. Each of the covenants and
other obligations of Allied and the Shareholders to be performed by
them on or before Closing pursuant to the terms hereof shall have been
duly performed and complied with in all material respects.
-40-
<PAGE> 48
(c) No Adverse Proceedings or Events. No suit, action or
other proceeding shall be pending before any court or governmental
agency in which it is sought to restrain or prohibit any of the
transactions contemplated by this Agreement or to obtain damages or
other relief in connection with this Agreement or the transactions
contemplated hereby, unless such suit, action or proceeding is without
substantial merit or basis.
(d) Deliveries at Closing. All documents or instruments
required to be delivered at Closing by Allied and the Shareholders
shall be delivered and tendered at Closing.
(e) Opinion of Counsel. At Closing, Air-Cure shall
receive an opinion from Porter & Hedges L.L.P., counsel to Allied and
the Shareholders, dated the Closing Date, in the form set forth at
Exhibit 8.1(e).
(f) Qualification as Pooling of Interest. There shall be
no material risk that the Merger will not qualify as a "pooling of
interests" for financial accounting purposes.
(g) Shareholder Approval. This Agreement, the Merger,
and the transactions contemplated hereby shall have been duly approved
at a special meeting of shareholders of Air-Cure by the requisite
affirmative vote of shareholders of Air-Cure required in accordance
with applicable law and the Certificate of Incorporation and Bylaws of
Air-Cure.
(h) Landlord Estoppel Letter. Allied shall present to
Air-Cure on or before Closing an estoppel letter from Brown & Root,
Inc. stating that Allied is in full and complete compliance with its
obligations under the Lease Agreement referred to in Section 4.11(b).
(i) Lien Releases. Upon payment of the Allied
Indebtedness by Air-Cure referred to in Section 8.3(i) at Closing,
Air-Cure shall receive lien releases from Southwest Bank of Texas,
N.A. and Brown & Root, Inc. with respect to all liens which they have
securing any obligations under the indebtedness referred to in Section
8.3(i).
-41-
<PAGE> 49
8.2 Conditions to Obligations of the Shareholders and Allied.
Each and every obligation of Allied and the Shareholders under this Agreement
shall be subject to the satisfaction at Closing of the following conditions,
each of which may be waived, but only in writing, by Allied:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Air-Cure and Newco contained in this
Agreement shall be true and correct as of the date hereof and shall be
deemed to have been made again at Closing and shall then be true and
correct.
(b) Performance of Covenants. Each of the covenants and
other obligations of Air-Cure to be performed by it on or before
Closing pursuant to the terms hereof shall have been duly performed
and complied with in all material respects.
(c) No Adverse Proceedings or Events. No suit, action or
other proceeding shall be pending before any court or governmental
agency in which it is sought to restrain or prohibit any of the
transactions contemplated by this Agreement or to obtain damages or
other relief in connection with this Agreement or the transactions
contemplated hereby, unless such suit, action or proceeding is without
substantial merit or basis.
(d) Deliveries at Closing. All documents or instruments
required to be delivered at Closing by Air-Cure and Newco shall be
delivered and tendered at Closing.
(e) Opinion of Counsel. At Closing, Air-Cure's counsel,
Hartzog Conger & Cason, a professional corporation, shall deliver to
the Shareholders its opinion, dated the Closing Date, in the form set
forth at Exhibit 8.2(e).
(f) American Stock Exchange Listing. At Closing,
Air-Cure's common stock shall be listed for trading on the American
Stock Exchange or on NASDAQ.
(g) Effectiveness of Registration Statement. At Closing,
the amendment to the Registration Statement referred to in Section 6.2
shall have been declared effective by the Commission.
-42-
<PAGE> 50
(h) Shareholder Approval. Prior to Closing, the
shareholders of Air-Cure shall have approved the Merger as
contemplated by Section 7.11.
(i) Payment of Certain Allied Indebtedness. At Closing,
Air-Cure shall have paid in full the indebtedness of Allied to
Southwest Bank of Texas, N.A. and to Brown & Root, Inc. in the
approximate payoff amount set forth on Schedule 8.2(i).
(j) Waiver of Receipt of Payments Under Air-Cure
Employment Agreements. Michael P. Lawlor, Lawrance W. McAfee, and
Kamlesh R. Tejwani are each parties to employment agreements with
Air-Cure which provide that upon a change in control of Air-Cure, the
employee thereunder may, at his discretion, terminate his employment
with and receive a cash payment from Air-Cure. At Closing, Michael P.
Lawlor, Lawrance W. McAfee, and Kamlesh R. Tejwani shall each have
executed a waiver which provides that he waives the right to receive
any such payments under his employment agreement.
SECTION 9
CLOSING
9.1 Time and Place. The closing (the "Closing") of the
transactions contemplated in this Agreement shall occur as soon as all
conditions to Closing contained herein are satisfied, but in any event no later
than March 31, 1996, (the "Closing Date"), at Annapolis, Maryland, or at such
other place or at such other time as the parties may mutually agree upon.
9.2 Deliveries by Shareholders at Closing. At Closing,
the Shareholders and Allied shall deliver the following Related Documents, each
of which shall be fully executed and completed as appropriate or as required
under this Agreement:
(a) all stock certificates representing all shares of
Allied Stock issued and outstanding as of the Effective Time;
(b) the opinion of counsel referred to in Section 8.1(e)
and in the form attached hereto as Exhibit 8.1(e);
-43-
<PAGE> 51
(c) the Employment Agreements referred to in Section 7.6
and in the form attached hereto as Exhibits 7.6A through D;
(d) all corporate books, minutes, records, tax returns,
reports, files, and other materials of any kind related to Allied and
the Business;
(e) an executed copy of the Stock Distribution Agreement
required pursuant to Section 6.4;
(f) the forms of releases referred to in Section 7.7 and
in the form attached hereto as Exhibit 7.7;
(g) the landlord estoppel letter referred to in Section
8.1(h);
(h) the documentation with respect to the conversion or
redemption of the Convertible Notes as referred to in Section 7.10;
and
(i) all other certificates, documents, and other
instruments required to be delivered by Allied and the Shareholders
pursuant to this Agreement.
9.3 Deliveries by Air-Cure at Closing. At Closing, Air-Cure shall
deliver the following Related Documents, each of which shall be fully executed
and completed as appropriate or as required under this Agreement:
(a) all stock certificates representing all shares of
Air-Cure Stock required to be delivered by Air-Cure to the
Shareholders pursuant to this Agreement;
(b) the opinion of counsel to Air-Cure referred to in
Section 8.2(e) and in the form attached hereto as Exhibit 8.2(e);
(c) an executed copy of the Stock Distribution Agreement
required pursuant to Section 6.4;
(d) the Employment Agreements referred to in Section 7.6
and in the forms attached hereto as Exhibits 7.6A through D;
-44-
<PAGE> 52
(e) all other certificates, documents, and other
instruments required to be delivered by Air-Cure pursuant to this
Agreement.
9.4 Expenses of Merger Transaction. Allied may pay the ordinary
and reasonable legal and accounting fees and expenses incurred by Allied and
the Shareholders relating to the period up to and through the Closing of the
Merger transaction. Air-Cure shall have the right to review any such fees and
expenses prior to Closing. All such fees and expenses shall be reflected in
the Closing Balance Sheet.
SECTION 10
TERMINATION
10.1 Mutual Consent. This Agreement may be terminated by the
mutual consent of Allied and Air-Cure.
10.2 By Air-Cure. This Agreement may be terminated by Air-Cure if
a material default should be made by Allied or any Shareholder in the
observance of or in the due and timely performance by any of them of any of the
agreements and covenants herein contained, or if there shall have been a
material breach by any of them of any of the warranties and representations
herein contained, or if the conditions of this Agreement to be complied with or
performed by any of them at or before Closing shall not have been complied with
or performed at the time required for such compliance or performance and such
noncompliance or nonperformance shall not have been waived by Air-Cure.
10.3 By Allied. This Agreement may be terminated by Allied, if a
material default shall be made by Air-Cure or Newco in the observance of or in
the due and timely performance by Air-Cure or Newco of any agreements and
covenants of Air-Cure or Newco herein contained, or if there shall have been a
material breach by Air-Cure or Newco of any of the warranties and
representations of Air-Cure or Newco, or if the conditions of this Agreement to
be complied with or performed by Air-Cure or Newco at or before
-45-
<PAGE> 53
Closing shall not have been complied with or performed at the time required for
such compliance or performance and such noncompliance or nonperformance shall
have not been waived by Allied.
SECTION 11
INDEMNIFICATION
Each of the Shareholders hereby severally makes the following
indemnities, and where specifically stated, Air- Cure and Newco make the
following indemnities, which shall not be in limitation of any remedies and
rights otherwise available to the indemnified persons under this Agreement or
by law:
11.1 General Indemnity.
(a) Subject to the limitations set forth in Section 11.2,
each Shareholder (the "Indemnitor") agrees that he will severally, and
not jointly, indemnify and hold harmless Air-Cure and Allied and their
respective officers, directors, employees, and agents (the
"Indemnitees") from and against all losses, damages, costs, and
expenses relating to any claims, actions, suits, proceedings, demands,
assessments, and adjustments, including reasonable attorneys' fees and
expenses of investigation (collectively, the "Indemnified Losses"),
reasonably incurred by the aforesaid Indemnities as a result of or
incident to any material breach by that Shareholder of any
representation, warranty, covenant, or agreement set forth herein or
on any schedule, exhibit, or certificate attached hereto (an
"Indemnification Event). With respect to any Indemnification Event
relating to an environmental matter, the Indemnified Losses shall also
include any costs and expenses of analysis, testing, remediation,
transportation, incineration, treatment, or other necessary and
appropriate disposition or mitigation of a hazardous environmental
condition.
(b) Subject to the limitations set forth in Section 11.2,
Air-Cure (the "Indemnitor") agrees that it will indemnify and hold
harmless the Shareholders (the "Indemnitees") from and against all
losses, damages, costs
-46-
<PAGE> 54
and expenses relating to any claims, actions, suits, proceedings,
demands, assessments, and adjustments, including reasonable attorneys'
fees and expenses of investigation (collectively, the "Indemnified
Losses"), reasonably incurred by the aforesaid Indemnitees as a result
of or incident to any material breach by Air-Cure or Newco of any
representation, warranty, covenant, or agreement set forth herein or
on any schedule, exhibit, or certificate attached hereto (an
"Indemnification Event").
11.2 Limitations on Indemnity. An Indemnitee, as described in
Section 11.1(a) or (b) above, may seek indemnification from an Indemnitor,
described in that same section above, for any Indemnified Loss resulting from
an Indemnification Event which occurs during the Indemnification Period, all as
provided for as following:
(a) Indemnification Period. The "Indemnification Period"
shall begin as of the Effective Time and shall expire upon the first
to occur of (i) the expiration of six (6) months from the Effective
Time and (ii) the first date following the Effective Time upon which
there is issued by Air-Cure's auditors an independent audit report on
Air-Cure which includes the combined operations of Air-Cure and
Allied.
(b) Indemnification Procedure. If an Indemnitee
reasonably believes that an Indemnification Event has occurred or is
existing during the Indemnification Period with respect to which the
Indemnitee would have a right of indemnification against an
Indemnitor, then the Indemnitee may give notice (the "Indemnification
Notice") to each Indemnitor with respect to whom a claim for
Indemnification is being made. The Indemnification Notice shall
describe in reasonable detail the alleged Indemnification Event, the
basis for which the Indemnitee believes that there is an
Indemnification Event, the amount of Indemnified Losses theretofore
paid by the Indemnitee, and an estimate of the total amount of
Indemnified Losses which the Indemnitee believes may be incurred by
the Indemnitee with respect to the Indemnification Event. Any
purported Indemnitee who does not give an Indemnification Notice with
respect to an Indemnification Event during the Indemnification Period
shall be deemed to have waived the
-47-
<PAGE> 55
right to receive indemnification for that Indemnification Event.
(c) Limitations on Indemnified Losses. If an
Indemnification Notice is timely given, then the Indemnified Losses
which the Indemnitee may be entitled to recover hereunder shall
include any such Indemnified Losses incurred by the Indemnitee during
a one-year period following the Closing Date. However, no
indemnification shall be allowed for any Indemnification Event unless
the total amount of Indemnified Losses payable to the Indemnitee
exceed $250,000 in the aggregate. In addition, Air-Cure shall not be
obligated to pay any Indemnified Losses which in the aggregate exceed
$1,500,000, nor shall either Shareholder be obligated to pay any
Indemnified Losses which in the aggregate exceed $750,000.
(d) Dispute Resolution. Any disputes involving
indemnification hereunder shall be resolved in the manner described in
Section 12.6 relating to dispute resolution.
(e) Third-Party Beneficiaries. Any Indemnitee who is not
a signatory party to this Agreement shall nevertheless be deemed to be
a third-party beneficiary of this Agreement for purposes of this
Section 11.
(f) Defense of Third-Party Claims. In the event any
claim, action, suit, proceeding, demand, assessment, or adjustment is
asserted against any Indemnitee hereunder other than by an Indemnitor
(such claim, action, suit, proceeding, demand, assessment, or
adjustment being referred to herein as a "Third-Party Claim"), then
the Indemnitee shall defend the Third-Party Claim in a diligent,
prudent, and good faith manner, with counsel reasonably satisfactory
to the Indemnitor. The Indemnitee shall also use reasonable efforts
to mitigate, to the extent reasonably possible under the
circumstances, the amount of the Indemnified Losses with respect to
the Third-Party Claim. The Indemnitee shall not make or agree to make
any payments in settlement or compromise of any Third-Party Claims or
consent to the entry of any judgment with respect to any Third-Party
Claim without the consent of the Indemnitor, which consent shall not
be unreasonably withheld. Nothing contained herein shall prevent the
Indemnitor and Indemnitee from further agreeing as between
-48-
<PAGE> 56
themselves as to the allocation between them of the duties,
responsibilities, and costs of defense and settlement of any such
Third-Party Claims. At all times, the Indemnitor and Indemnitee will
advise and consult with each other regarding the matters contained in
this Section 11 and shall be under a duty to act cooperatively and in
good faith.
(g) In the event any Indemnitor is obligated to pay any
Indemnified Loss under this Agreement, then the Indemnitor shall have
the right to defer payment of that Indemnified Loss for a period of up
to ninety (90) days, and the amount of the payment so deferred shall
bear interest at the rate of ten percent (10%) per annum.
SECTION 12
GENERAL
12.1 Notices. All notices required or permitted herein must be in
writing and shall be deemed to have been duly given the first business day
following the date of service if served personally or by telecopier, telex or
other similar communication to the party or parties to whom notice is to be
given, or on the third business day after mailing if mailed to the party or
parties to whom notice is to be given by registered or certified mail, return
receipt requested, postage prepaid, to the party to whom notice is to be given
at the address set forth below or to such other addresses as either party
hereto may designate to the other by notice from time to time for this purpose.
All notices and other communications to the Shareholders shall be given as
follows:
Shareholders: Mark E. Johnson and
Pierre S. Melcher
2828 Clinton Drive
Houston, Texas 77020-8402
-49-
<PAGE> 57
With a copy to: Richard L. Wynne
Porter & Hedges L.L.P.
700 Louisiana, Suite 3500
Houston, Texas 77002
Air-Cure: Air-Cure Technologies, Inc.
275 West Street, Ste. 204
Annapolis, Maryland 21401
ATTN: Lawrance W. McAfee
With a copy to: Hartzog Conger & Cason
1600 Bank of Oklahoma Plaza
201 Robert S. Kerr
Oklahoma City, Oklahoma 73102
(405) 235-7000
Attn: Len Cason
Telecopier No.: (405) 235-7329
12.2 Integrated Agreement. This instrument contains and
constitutes the entire agreement between and among the parties herein and
supersedes all prior agreements and understandings between the parties hereto
relating to the subject matter hereof, including but not limited to that
certain letter, dated September 11, 1995. There are no agreements,
understandings, restrictions, warranties or representations among the parties
relating to the subject matter hereof other than those set forth or referred to
herein. All exhibits attached hereto and all schedules delivered pursuant
hereto are hereby incorporated herein and made a part of this Agreement. This
instrument is not intended to have any legal effect whatsoever, or to be a
legally binding agreement or any evidence thereof, until it has been signed by
all parties hereto. Any reference to this Agreement shall be deemed to also
refer to the exhibits, schedules, and attachments hereto.
12.3 Construction. This Agreement shall be construed, enforced and
governed in accordance with the laws of the State of Texas. All pronouns and
any variations thereof shall be deemed to
-50-
<PAGE> 58
refer to the masculine, feminine or neuter gender thereof or to the plurals of
each, as the identity of the person or persons or the context may require. The
descriptive headings contained in this Agreement are for reference purposes
only and are not intended to describe, interpret, define or limit the scope,
extent or intent of this Agreement or any provision contained herein.
12.4 Invalidity. If any provision contained in this Agreement
shall for any reason be held to be invalid, illegal, void or unenforceable in
any respect, such provisions shall be deemed modified so as to constitute a
provision conforming as nearly as possible to such invalid, illegal, void or
unenforceable provisions while still remaining valid and enforceable, and the
remaining terms or provisions contained herein shall not be affected thereby.
12.5 Binding Effect. This Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties hereto and their respective
heirs, executors, personal representatives, successors and assigns.
12.6 Dispute Resolution. Any dispute arising in any way out of
this Agreement and which cannot be resolved by good faith negotiations between
the parties within thirty (30) days after either party shall have notified the
other party in writing of its desire to arbitrate the dispute shall be
submitted to and settled through binding arbitration in accordance with the
rules of the American Arbitration Association as from time to time in effect.
The arbitration proceedings shall be conducted by a sole arbitrator who shall
be an attorney with not less than ten (10) years experience in commercial law.
All disputes or claims of the parties subject to arbitration shall be
consolidated into a single arbitration proceeding. The arbitration proceedings
shall be conducted in Houston, Texas. The award or determination of the
arbitrator shall be final and binding upon all parties and shall be subject to
enforcement in any court of competent jurisdiction. The arbitrator shall have
the authority to award costs and expenses of arbitration to either party as the
arbitrator sees fit.
-51-
<PAGE> 59
12.7 Counterpart Execution. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one and the same instrument.
12.8 Amendment and Waiver. This Agreement may be amended at any
time, but only by an instrument in writing executed by all parties hereto. A
party hereto may waive any requirement to be performed by the other party,
provided that such waiver shall be in writing and executed by the party waiving
the requirement.
12.9 Time of Essence. Time shall be of the essence with respect to
the performance by the parties hereto of their respective obligations
hereunder.
12.10 Negation of Third-Party Beneficiary. Except as provided in
Section 11, nothing contained in this Agreement, expressed or implied, is
intended to confer upon any person, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason of
this Agreement, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third person to any party to this
Agreement.
12.11 Knowledge Defined. For purposes of this Agreement, an
individual person will be deemed to know or have knowledge of any matter if
that person has actual knowledge of that matter. A person will be deemed to
have actual knowledge of any matter if, based upon clear and convincing
evidence, during the course of that person's business and affairs, (i) that
person should have knowledge of such matter and (ii) it would be highly
unlikely that such person did not have actual knowledge of that matter. In
determining whether a person has knowledge of a matter, that person shall not
be expected to conduct any inquiry or investigation into any matter.
12.12 Relationship of Disclosures in Schedules and Exhibits. If any
matter is required to be identified in this Agreement and is
-52-
<PAGE> 60
not so identified, but instead is included in a different schedule or exhibit,
then that matter shall be deemed to have been included in the identified
schedule or exhibit.
IN WITNESS WHEREOF, the parties hereto have executed below.
AIR-CURE TECHNOLOGIES, INC.
By: /s/ Michael P. Lawlor
-----------------------------
President and CEO
AIR-CURE ACQUISITION CORPORATION
By: /s/ Michael P. Lawlor
-----------------------------
President
ALLIED INDUSTRIES, INC.
By: /s/ Mark E. Johnson
-----------------------------
President
SHAREHOLDERS:
/s/ Mark E. Johnson
--------------------------------
Mark E. Johnson
/s/ Pierre S. Melcher
--------------------------------
Pierre S. Melcher
-53-
<PAGE> 1
EXHIBIT B
STOCK DISTRIBUTION AGREEMENT
This Stock Distribution Agreement (the "Agreement") is made this 28th day of
December, 1995, between MARK E. JOHNSON (the "Shareholder") and AIR-CURE
TECHNOLOGIES, INC., a Delaware corporation (the "Company").
R E C I T A L S:
Pursuant to that certain Agreement and Plan of Merger, dated October
13, 1995 (the "Merger Agreement"), among the Company, the Shareholder and
certain other parties thereto, and to which this Agreement is attached at
Exhibit 6.4, the Company is issuing to the Shareholder, as of the date of this
Agreement (which is also the "Closing Date" under the Merger Agreement)
1,935,752 shares (the "Shares") of its common stock, par value $.001 per share
(the "Common Stock").
The Merger Agreement provides that the Company is required to register
for resale 30% of the Shares during the first year following the date hereof,
then an additional 30% of such Shares during the second year following the date
hereof, and the balance of such shares during the third year following the date
hereof. All Shares registered for resale by the Company from time to time are
referred to herein as the "Registered Shares." The Company has filed an
amendment to Registration Statement No. 33-92308 (the "Registration Statement")
previously filed by the Company with the Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933, as amended (the "Securities
Act"), which permits the Registered Shares to be resold by the Shareholder
subject to the terms and conditions of this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Distribution of the Shares. The parties shall comply with the
following provisions with respect to any offer to sell or any sale of any of
the Registered Shares by the Shareholder.
(a) The Company will use its best commercial efforts,
subject to the Shareholder's performing his obligations under this
Agreement, to keep the Registration Statement covering the resale of
any Registered Shares current and effective for three (3) years after
the date of this Agreement, or for such shorter period if the
Shareholder sooner disposes of all of the Registered Shares. The
Company shall file such amendments and supplements to the Registration
Statement during this three-year period as may be necessary to keep it
current and effective. The Shareholder acknowledges that there may be
times when the Registration Statement is not current and effective
because of the time necessary to prepare supplements and amendments to
the Registration Statement and to obtain effectiveness of amendments
to the Registration Statement.
<PAGE> 2
(b) In the event the Shareholder intends to sell any
Registered Shares under the Registration Statement, the Shareholder
agrees to provide written notice to the Company at least two (2)
business days prior to making any offers or sales of the Registered
Shares, which written notice shall specify the number of Registered
Shares which the Shareholder proposes to offer and sell and which
shall describe any changes to the information set forth in the
Registration Statement and the prospectus (the "Prospectus") included
as a part thereof, as the same may have been amended and supplemented
from time to time, concerning the Shareholder or the plan of
distribution of the Registered Shares. The Shareholder represents and
warrants that such information as so updated will be true and correct
and will not omit information necessary to make the statements
contained therein not misleading. Within two (2) business days after
its receipt of such written notice, the Company shall (i) notify the
Shareholder that no supplement or amendment is then required with
respect to the Prospectus, or (ii) notify the Shareholder that such a
supplement or amendment is required, in which event the Company shall
prepare and file with the SEC such supplement or amendment as soon as
reasonably practicable and shall endeavor to cause any such amendment
to become effective. Immediately after filing a supplement with the
SEC or immediately after an amendment is declared effective by the
SEC, whichever is appropriate, the Company will provide copies thereof
to the Shareholder, as provided in Section l(c), and the Shareholder
may then commence offers and sales of Registered Shares under the
Registration Statement.
(c) The Shareholder agrees that he will offer and sell
Registered Shares only in compliance with the Securities Act and the
rules and regulations promulgated thereunder. Specifically, without
limiting the foregoing, the Shareholder agrees not to use any
prospectus (as that term is defined under the Securities Act) for the
purpose of offering or selling any of the Registered Shares to the
public except for the Prospectus, as the same may be supplemented and
amended from time to time. The Company will furnish to the
Shareholder such numbers of copies of the Prospectus, including all
supplements and amendments thereto, as the Shareholder may reasonably
request in order to facilitate the offer and sale of the Registered
Shares.
(d) The Shareholder agrees not to make any offers or
sales of Registered Shares in violation of the Securities Exchange Act
of 1934 (the "Exchange Act") and the rules and regulations promulgated
thereunder. Specifically, without limiting the foregoing, the
Shareholder agrees as follows:
(i) Neither the Shareholder nor any affiliate of
the Shareholder shall engage in any practice which would
violate Rule l0b-6 of the Exchange Act.
(ii) Neither the Shareholder nor any affiliate of
the Shareholder shall effect any stabilizing transactions in
violation of Rule l0b-7 of the Exchange Act.
<PAGE> 3
(e) The Shareholder agrees, in accordance with his
obligations under the Securities Act and the Exchange Act and to
permit the Company to comply with its obligations thereunder, to
promptly notify the Company as and when any Registered Shares are sold
under the Registration Statement and when the Shareholder elects to
terminate all further offers and sales of Registered Shares under the
Registration Statement.
2. Notices. All notices required or permitted herein must be in
writing and shall be deemed to have been duly given the first business day
following the date of service if served personally or by telecopier, telex or
other similar communication to the party or parties to whom notice is to be
given, or on the third business day after mailing if mailed to the party or
parties to whom notice is to be given by registered or certified mail, return
receipt requested, postage prepaid, to the party to whom notice is to be given
at the address set forth below or to such other addresses as either party
hereto may designate to the other by notice from time to time for this purpose.
Shareholder: Mark E. Johnson
2828 Clinton Drive
Houston, Texas 77020-8402
With a copy to:
Porter & Hedges, L.L.P.
700 Louisiana, Suite 3500
Houston, Texas 77002
(713) 226-0647
ATTN: Richard (Dick) L. Wynne
Telecopier No. (713) 228-1331
Air-Cure: Air-Cure Technologies, Inc.
275 West Street, Suite 204
Annapolis, Maryland 21401
ATTN: Lawrence W. McAfee
Telecopier No. (410) 268-2450
<PAGE> 4
With a copy to:
Hartzog Conger & Cason
1600 Bank of Oklahoma Plaza
201 Robert S. Kerr
Oklahoma City, Oklahoma 73112
(405) 235-7000
ATTN: Len Cason
Telecopier No. (405) 235-7329
3. Integrated Agreement. This Agreement supersedes all prior
agreements and understandings between the parties hereto relating to the
subject matter hereof, including the Merger Agreement, but only to the extent
its provisions may be inconsistent with this Agreement.
4. Construction. This Agreement shall be construed, enforced and
governed in accordance with the laws of the State of Delaware, without regard
to conflict of law principles. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine or neuter gender thereof or to
the plurals of each, as the identity of the person or persons or the context
may require. The descriptive headings contained in this Agreement are for
reference purposes only and are not intended to describe, interpret, define or
limit the scope, extent or intent of this Agreement or any provision contained
herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date above written.
THE COMPANY: AIR-CURE TECHNOLOGIES, INC.
By: /s/ Michael P. Lawlor
----------------------------------
Michael P. Lawlor, President
SHAREHOLDER:
/s/ Mark E. Johnson
------------------------------------
Mark E. Johnson
<PAGE> 1
EXHIBIT C
LOCK-UP AGREEMENT FOR SELLING STOCKHOLDERS
April 3, 1997
Deutsche Morgan Grenfell Inc.
EVEREN Securities, Inc.
Sanders Morris Mundy
as Representatives of the several
Underwriters to be named in the
within-mentioned Underwriting Agreement
31 West 52nd Street
New York, New York 10019
Re: Proposed Public Offering by ITEQ, Inc.
The undersigned, a stockholder of ITEQ, Inc. (the "Company"),
understands that Deutsche Morgan Grenfell Inc., EVEREN Securities, Inc., and
Sanders Morris Mundy, acting as representatives (the "Representatives") of the
several underwriters (the "Underwriters"), propose to enter into an
Underwriting Agreement (the "Underwriting Agreement") with the Company
providing for the public offering of shares of the Company's common stock, par
value $.01 per share (the "Common Stock").
In recognition of the benefit that such an offering will confer upon
the undersigned as a stockholder of the Company, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each underwriter to be named in the
Underwriting Agreement that from the date hereof until the expiration of the
period of 180 days after the date of the Prospectus (as defined in the
Underwriting Agreement), the undersigned will not, without the prior written
consent of Deutsche Morgan Grenfell Inc. on behalf of the Underwriters,
directly or indirectly, except as provided in the Underwriting Agreement, (i)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer any shares of the Company's
Common Stock or any securities convertible into or exchangeable or exercisable
for Common Stock, whether now owned or hereafter acquired by the undersigned or
with respect to which the undersigned has or hereafter acquires the power of
disposition, or file or demand that the Company file any registration statement
under the Securities Act of 1933, as amended, with respect to any of the
foregoing, or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Common Stock, whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities,
in cash or otherwise.
<PAGE> 2
LOCK-UP AGREEMENT FOR SELLING STOCKHOLDERS
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Agreement, and that, upon request,
the undersigned will execute any additional documents necessary or desirable in
connection with the enforcement hereof. All authority herein conferred or
agreed to be conferred shall survive the death or incapacity of the
undersigned, and any obligations of the undersigned shall be binding upon the
heirs, personal representatives, successors, and assigns of the undersigned.
Very truly yours,
MARK E. JOHNSON
Signature: /s/ Mark E. Johnson
---------------------
Accepted as of the date
first set forth above:
DEUTSCHE MORGAN GRENFELL INC.
EVEREN SECURITIES, INC.
SANDERS MORRIS MUNDY
By: Deutsche Morgan Grenfell Inc.
Signature:
-------------------------
Title:
-----------------------------
