Securities and Exchange Commission
Washington, DC 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): January 2, 1998
Arguss Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-19589 02-0413153
(State or other IRS Employer (Commission File No.)
jurisdiction Identification No.
of incorporation)
One Church Street
Rockville, Maryland 20850
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 315-0027
Item 2. Acquisition or Disposition of Assets:
On January 2, 1998, Arguss Holdings, Inc. ("Arguss") acquired the
stock of Can Am Construction, Inc. ("Can-Am") and Schenck
Communications, Inc. ("Schenck"), and merged them into its wholly-
owned subsidiary, White Mountain Cable Construction Corp ("WMC").
Both acquisitions provide underground and aerial construction
services and splicing for fiber optic and coaxial cable to major
telecommunications customers on a national level. The purchase
price for Can-Am was approximately $28,200,000, and was satisfied
by the issuance of approximately 1,500,000 shares of Arguss
common stock and $12,000,000 in cash. The purchase price for
Schenck was approximately $6,300,000, and was satisfied by the
issuance of approximately 309,000 shares of Arguss common stock
and $3,000,000 in cash.
The Schenck purchase agreement contains provision for additional
payments satisfied by the issuance of Arguss common stock and
cash if certain minimum EBITDA thresholds are met for the year
ended December 31, 1998. One-half of the additional payment will
be satisfied by the issuance of shares of common stock valued at
$9.75 per share and cash. Additional payments earned under the
terms of the agreement will be recorded as an increase of the
total cost of acquisition.
Arguss previously acquired Rite Cable Construction, Inc. ("Rite")
on October 6, 1997. The purchase price was approximately
$3,300,000, and was satisfied by the issuance of approximately
154,000 shares of Arguss common stock and $1,600,000 in cash. The
Rite purchase agreement contains provision for additional
payments by Arguss to the Rite shareholders if certain EBITDA
thresholds are met for the year ended September 30, 1998. One-
half of the additional payment will be satisfied by cash and the
remainder by the issuance of common stock at $8.50 per share.
Rite is included in this filing as part of the acquired group of
related business, since it did not individually meet the
conditions under the definition of significant subsidiary at the
time of purchase.
The Can Am, Schenck and Rite acquisitions (collectively
"Acquisitions") have been accounted for as purchases. The excess
of the total Acquisitions cost over the fair value of the net
assets acquired is being amortized by the straight-line method
over twenty years.
Item 7. Financial Statements and Exhibits:
(a) Financial Statements of Businesses Acquired:
Audited balance sheet of Can Am Construction, Inc. as of
July 31, 1997 and related statements of income, retained
earnings and cash flow for the year then ended.
Unaudited separate company financial information of Can-Am
Construction, Inc. as of September 30, 1997 and related
statements of income and cash flow for the nine months
then ended.
Audited balance sheet of Schenck Communications, Inc. as
of September 30, 1997 and related statements of income,
retained earnings and cash flow for the year then ended.
(b) Pro Forma Financial Information:
Unaudited pro forma balance sheet of Arguss (formerly
Conceptronic, Inc.) as of September 30, 1997 and unaudited
pro forma statements of operations for the fiscal year
ended December 31, 1996 and for the nine months ended
September 30, 1997.
(c) Unaudited consolidating pro forma balance sheets of
Acquisitions as of September 30, 1997 and unaudited
consolidating pro forma statements of operations for the
fiscal year ended December 31, 1996 and for the nine
months ended September 30, 1997.
(d) Exhibits:
10.01 Agreement and plan of merger dated January 2,
1998 by and between Can Am Construction, Inc., Arguss
Holdings, Inc. and White Mountain Cable Construction
Corp.
10.02 Agreement and plan of merger dated January 2,
1998 by and between Schenck Communications, Inc.,
Arguss Holdings, Inc and White Mountain Cable
Construction Corp.
10.03 Agreement and plan of merger dated October 6,
1997 by and between Rite Cable Construction, Inc.,
Arguss Holdings, Inc. and White Mountain Cable
Construction Corp.
23.01 Consent of KPMG Peat Marwick LLP.
23.02 Consent of KPMG Peat Marwick LLP.
Signatures:
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Arguss Holdings, Inc.
Registrant
/s/ Rainer H. Bosselmann
Rainer H. Bosselmann
Chairman of the Board
and Chief Executive Officer
(A) FINANCIAL STATEMENTS OF BUSINESSES
ACQUIRED
CAN-AM CONSTRUCTION, INC.
Financial Statements
July 31, 1997
(With Independent Auditors' Report
Thereon)
Independent Auditors' Report
The Board of Directors
Can-Am Construction, Inc.:
We have audited the accompanying balance sheet of Can-Am Construction,
Inc. as of July 31, 1997 and the related statements of income and
retained earnings and cash flows for the year then ended. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Can-Am
Construction, Inc. as of July 31, 1997 and the results of its
operations and its cash flows for the year then ended in conformity
with generally accepted accounting principles.
Costa Mesa, California
November 6, 1997 /s/KPMG Peat Marwick LLP
CAN-AM CONSTRUCTION, INC.
Balance Sheet
July 31, 1997
Assets
Current assets:
Cash $ 1,220,770
Trade accounts receivable 4,084,670
Prepaid expenses 153,440
Other current assets 136,961
Total current assets 5,595,841
Property, plant and equipment, at cost 7,377,390
Less accumulated depreciation (3,696,295)
Net property, plant and equipment 3,681,095
Other assets 100,500
Total assets $ 9,377,436
Liabilities and Shareholder's Equity
Current liabilities:
Current installments of long-term debt $ 631,386
Accounts payable 692,291
Accrued expenses 275,768
Total current liabilities 1,599,445
Long-term debt, excluding current installments 1,254,940
Deferred compensation payable 80,405
Shareholder's equity:
Common stock, no par value 1,500
Retained earnings 6,441,146
Total shareholder's equity 6,442,646
Commitments and contingencies
Total liabilities and shareholder's equity $ 9,377,436
See accompanying notes to financial statements.
CAM-AM CONSTRUCTION, INC.
Statement of Income and Retained Earnings
Year ended July 31, 1997
Revenues $ 24,638,005
Cost of revenues 18,405,121
Gross profit 6,232,884
Operating expenses 3,394,158
Income from operations 2,838,726
Other expenses:
Interest, net 145,801
Loss on sale of fixed assets 25,413
Income before taxes 2,667,512
Income tax expense 37,944
Net income 2,629,568
Retained earnings at beginning of year 5,673,093
Distribution to shareholder (1,861,515)
Retained earnings at end of year $ 6,441,146
See accompanying notes to financial statements.
CAM-AM CONSTRUCTION, INC.
Statement of Cash Flows
Year ended July 31, 1997
Cash flows from operating activities:
Net income $ 2,629,568
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,089,485
Loss on sale of fixed assets 25,413
Changes in assets and liabilities:
Decrease in trade accounts receivable 14,572
Decrease in prepaid expenses and other current assets 118,971
Increase in other assets (2,422)
Decrease in accounts payable and accrued expenses (293,239)
Increase in deferred compensation payable 23,533
Net cash provided by operating activities 3,605,881
Cash flows from investing activities:
Purchases of fixed assets (222,598)
Proceeds from sale of fixed assets 28,881
Business acquisition (500,000)
Net cash used in investing activities (693,717)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 301,501
Repayments of long-term debt (608,913)
Distributions to shareholder (1,861,515)
Net cash used in financing activities (2,168,927)
Net increase in cash and cash equivalents 743,237
Cash and cash equivalents at beginning of year 477,533
Cash and cash equivalents at end of year $ 1,220,770
Supplemental disclosure of cash paid for:
Interest $ 176,276
Income taxes 79,487
During 1996 the Company financed certain capital
expenditures totaling $767,088.
See accompanying notes to financial statements.
CAN-AM CONSTRUCTION, INC.
Notes to Financial Statements
July 31, 1997
(1)Summary of Significant Accounting Policies
The Company's Activities and Operating Cycle
Can-Am Construction, Inc. (the Company) provides underground
and aerial construction services and splicing for fiber optic
and coaxial cable to major telecommunications customers
primarily on the West Coast. The duration of work varies but
typically extends anywhere from a few weeks to one to three
months.
Revenue and Cost Recognition
Revenue is recognized during the period services are
performed using contractual pricing schedules which detail
the unit prices for individual services performed.
The Company had aggregate sales to three customers which
individually accounted for approximately 52%, 10% and 10% of
total revenues for the year ended July 31, 1997.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and are
depreciated or amortized using the straight-line method over
the estimated useful lives of the assets or, for leasehold
improvements, over the estimated useful lives or the terms of
the lease, whichever is shorter.
Goodwill
The Company acquired Tri-Delta Boring in December 1996.
Goodwill consists of the excess of the purchase price over
the fair value of the net assets acquired. Goodwill is
amortized on a straight-line basis over a period of 15 years.
The Company assesses the recoverability of this intangible
asset by determining whether the goodwill balance can be
recovered through the undiscounted future operating cash
flows generated by the assets of Tri-Delta Boring. The
assessment of the recoverability of goodwill will be impacted
if estimated future operating cash flows are not achieved.
Income Taxes
Effective April 1, 1994, the Company's shareholder elected to
be taxed for Federal income tax purposes as a Subchapter S
Corporation under the Internal Revenue Code. As a result,
the net income and any tax credits of the Company are
included in the personal income tax return of the Company's
shareholder. Accordingly, no provision has been made for
Federal income taxes in the accompanying financial
statements. For state tax purposes, the Company is subject
to an S Corporation tax of 1.5% of pre-tax earnings. No
provision has been made in the accompanying financial
statements for built-in gain taxes which, if any, might be
due in the event of sale of the Company or the sale of any of
its assets.
Use of Estimates
The preparation of the financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
Impairment of Long-Lived Assets
The Company adopted the provisions of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," on January 1, 1996.
This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amount of the assets
exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair
value less costs to sell. Adoption of this Statement did not
have a material impact on the Company's financial position,
results of operations, or liquidity.
(2)Trade Accounts Receivable
A summary of trade accounts receivable follows:
Billed $ 2,372,587
Unbilled 1,570,016
Retainage 142,067
Allowance for doubtful -
accounts
$ 4,084,670
Retainage receivable at July 31, 1997 is expected to be
collected within one year.
(3)Property, Plant and Equipment
A summary of property, plant and equipment follows:
Automobiles and trucks 5 years $ 3,906,688
Furniture and fixtures 5-7 years 256,644
Machinery and equipment 5-7 years 2,750,913
Leasehold improvements 15-39 years 463,145
7,377,390
Less accumulated
depreciation and (3,696,295)
amortization
Property, plant and
equipment, net $ 3,681,095
(4)Acquisition
On December 17, 1996, Can-Am acquired certain assets of Tri-
Delta Boring (Tri-Delta). The total purchase price was
$500,000, consisting of cash paid to seller of $475,000 and a
promissory note due to seller of $25,000. The excess of cost
over the fair value of assets acquired was $100,000 and is
being amortized on a straight-line basis over 15 years. The
results of operations of Tri-Delta prior to the combination
with the Company were not material to the Company's
operations.
(5)Commitments and Contingencies
Long-term Debt
Long-term debt at July 31, 1997 consists of the following:
Promissory note $ 25,000
Term loan 429,807
Asset secured long-term debt with
varying terms and maturities 1,431,519
Total long-term debt 1,886,326
Less current installments (631,386)
Total long-term debt, excluding
current installments $ 1,254,940
In December 1996, the company entered into a one year
promissory note agreement and a five year term loan agreement
in the amounts of $25,000 and $475,000, respectively. The
promissory note bears interest at 7% and is payable in one
lump sum including principal and interest in December 1997.
The term loan is payable in equal monthly installments and
bears interest at approximately 8.9%. Both agreements were
entered into to finance the acquisition of Tri-Delta Boring
completed in December 1996. The company also has several
outstanding term loan agreements with varying maturities used
to finance fixed asset purchases. All loans are secured by
the assets acquired and bear interest rates of 4.8% to 11%.
Scheduled aggregate annual principal payments of long-term
debt are $631,386 for 1998, $607,861 for 1999, $403,240 for
2000, $190,146 for 2001 and $53,693 for 2002.
Deferred Compensation
The company entered into a deferred compensation agreement
with its Chief Executive Officer and sole shareholder in
March, 1994. Under the terms of the agreement, the company
agreed to pay $150,000 at the retirement or death of the
shareholder as an incentive for the shareholder to continue
service with the company for the five-year period commencing
with the date of the agreement. Compensation expense is
recognized evenly over the five-year service period.
Leases
The Company has entered into various noncancelable operating
leases for an automobile and several facilities. Total rent
expense, including related party rent discussed below, for
all operating leases was approximately $325,000 for 1997.
The following is a schedule of future minimum lease payments
for operating leases that had initial or remaining
noncancelable lease terms in excess of one year as of
July 31, 1997:
Year ending July
31:
1998 $ 160,415
1999 153,415
2000 122,785
2001 120,000
2002 120,000
Thereafter 350,000
$ 1,026,615
Capital leases as of July 31, 1997 were not significant.
Contingencies
The Company has certain contingent liabilities resulting from
litigation and claims incident to the ordinary course of
business. Although the outcome of these claims cannot be
predicted with certainty, management believes that the
probable resolution of such contingencies will not materially
affect the financial position or results of operations of the
Company.
(6)Related Party Transactions
Can-Am leases two facilities from the Company's Chief
Executive Officer and sole shareholder. One lease is month-
to-month and the other is a ten year lease expiring in 2005.
Total rent expense related to these facilities was $106,600
in 1997.
Unaudited Separate Company Financial Information
Can-Am Construction, Inc.
September 30, 1997
Note: The accompanying unaudited financial statements do not contain
all disclosures required by generally accepted accounting principles.
In the opinion of Can-Am Construction, Inc. ("Can-Am"), the accompanying
unaudited financial statements contain all adjustments considered by
management necessary to present fairly the financial position of Can-Am
as of September 30, 1997 and the results of operations and cash flow for
the period presented. Can-Am prepares its interim financial information
using the same accounting principles as it does for its annual statements.
Can-Am Construction, Inc.
Unaudited Balance Sheet
As of September 30, 1997
Assets:
Cash $1,758,619
Accounts Receivable, Net 3,493,436
Other Assets Current 191,562
----------
Total Current Assets 5,443,617
Property, Equipment 3,538,835
Other Assets 95,000
----------
Total Assets $9,077,452
Liabilities:
Current Liabilities $1,528,650
Non-Current Liabilities 1,236,880
----------
Total Liabilities 2,765,530
----------
Stockholders' Equity
Common Stock 1,500
Retained Earnings 6,310,422
----------
Total Stockholders' Equity 6,311,922
----------
Total Liabilities and
Stockholders' Equity $9,077,452
----------
Can-Am Construction, Inc.
Unaudited Income Statement
for the Nine Months Ended September 30, 1997
Net Sales $16,307,538
Cost of Sales 11,361,768
----------
Gross Profit 4,945,770
Selling, General & Administrative 1,464,166
Depreciation 839,448
----------
Income from Operations 2,642,156
Other Expense:
Net Interest Expense 121,388
---------
Pre-tax Income 2,520,768
Income Tax Expense 25,000
----------
Net Income $2,495,768
==========
Can-Am Construction, Inc.
Unaudited Statement of Cash Flow
For the Nine Months Ended September 30, 1997
Revenues:
Net Income $2,495,768
Depreciation 839,448
Changes in Assets & Liabilities
Accounts Receivable 1,276,191
Other Assets 78,916
Accounts Payable and
Other Liabilities (2,092,973)
----------
Net Cash from Operations 2,597,350
----------
Cash Flow from Investing Activities:
Capital Expenditures (256,342)
---------
Net from Investing Activities (256,342)
----------
Cash Flow for Financing Activities:
Payments to Shareholder (1,205,675)
Repayments of Lines
of Credit (318,552)
---------
Net from Investing Activities (1,524,227)
Net Increase in Cash 816,781
Cash at Beginning 941,838
---------
Cash at Ending $1,758,619
==========
SCHENCK COMMUNICATIONS, INC.
Financial Statements
September 30, 1997
(With Independent Auditors' Report Thereon)
[KPMG Peat Marwick LLP]
3100 Two Union Square Telephone 206 292 1500
Telefax 206 292 4233
601 Union Stret
Seattle, WA 98101-2327
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Schenck Communications, Inc.:
We have audited the accompanying balance sheet of Schenck
Communications, Inc. as of September 30, 1997, and the related
statements of income, retained earnings, and cash flows for the
year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Schenck Communications, Inc. as of September 30, 1997, and the
results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
Seattle, Washington
November 4, 1997
SCHENCK COMMUNICATIONS, INC.
Balance Sheet
Year Ended September 30, 1997
Assets
Current assets:
Cash and cash equivalents $ 228,075
Trade accounts receivable (notes 2 and 3) 2,808,203
Prepaid expenses 199,916
Other current assets 8,965
Total current assets 3,245,159
Equipment and leasehold improvements (notes 4 and 5):
Construction vehicles and equipment 5,236,245
Computer and office equipment 48,501
Leasehold improvements 21,035
5,305,781
Less accumulated depreciation and amortization 3,304,163
Net equipment and leasehold improvements 2,001,618
Other assets 21,880
$ 5,268,657
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable 1,017,471
Accrued liabilities 242,669
Dividends payable 546,224
Current installments of long-term debt (note 4) 455,948
Total current liabilities 2,262,312
Long-term debt, excluding current installments (note 4) 886,007
Stockholder's equity:
Common stock, $1 par value. Authorized 50,000 shares;
issued and outstanding 1,000 shares 1,000
Retained earnings 2,119,338
Total stockholder's equity 2,120,338
Commitments and contingency
$ 5,268,657
See Accompanying notes to financial statements.
SCHENCK COMMUNICATIONS, INC.
Statement of Income
Year Ended September 30, 1997
Construction revenues $ 14,065,681
Construction costs 10,659,921
Gross profit 3,405,760
General and administrative expenses 800,674
Depreciation 679,611
Operating income 1,925,475
Other expenses (income):
Interest expense 181,141
Interest and other income (33,318)
147,823
Income before state tax provision 1,777,652
State income tax provision 36,000
Net income $ 1,741,652
See Accompanying notes to financial statements.
SCHENCK COMMUNICATIONS, INC.
Statement of Retained Earnings
Year Ended September 30, 1997
Balance at September 30, 1996 $ 1,331,910
Net income 1,741,652
Dividends (954,224)
Balance at September 30, 1997 $ 2,119,338
See accompanying notes to financial statements.
SCHENCK COMMUNICATIONS, INC.
Statement of Cash Flows
Year Ended September 30, 1997
Cash flows from operating activities:
Net income $ 1,741,652
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 679,611
Gain on sale of equipment (26,076)
Change in certain assets and liabilities:
Net increase in receivables, prepaid expenses and
other current assets (661,296)
Net increase in accounts payable and accrued 104,957
liabilities
Net cash provided by operating activities 1,838,848
Cash flows from investing activities:
Purchases of equipment (663,928)
Other assets (4,248)
Proceeds from sale of equipment 51,234
Net cash used in investing activities (616,942)
Cash flows from financing activities:
Decrease in bank short-term financing (578,272)
Proceeds from bank installment debt 309,041
Proceeds from related party loans 154,000
Repayment of installment debt and capital lease (526,286)
obligations
Dividends paid (408,000)
Net cash used in financing activities (1,049,517)
Net increase in cash and cash equivalents 172,389
Cash and cash equivalents at beginning of year 55,686
Cash and cash equivalents at end of year $ 228,075
Supplemental disclosure of cash flow information:
Cash paid during the year for:
State income taxes $ 16,122
Interest 184,641
Supplemental schedule of financing activities:
Dividends payable $ 546,224
Equipment purchased under installment and capital 143,021
lease financing
See Accompanying notes to financial Statements
SCHENCK COMMUNICATIONS, INC.
Notes to Financial Statements
September 30, 1997
(1)Nature of Business and Summary of Significant Accounting
Policies
(a)Nature of Business
The principal business activity of Schenck Communications,
Inc. (Company) consists of providing underground
construction services to cable television, telephone, and
power utilities in the Western United States including
Alaska.
A material portion of the Company's operating services is
performed for a limited number of customers in those
states. All work performed is awarded by competitive bid,
and economic dependency on any one customer is not
considered by management to be relevant to continuing
operations. Three customers accounted for approximately
30%, 24% and 18%, respectively, of the Company's revenues
for the year ended September 30, 1997.
The Company is a wholly-owned subsidiary of Schenck
Communications of Alaska, Inc. (SCAI).
(b)Basis of Presentation
These financial statements have been prepared as of and
for the year ended September 30, 1997. The Company's
normal fiscal year ends on December 31, 1997.
(c)Revenue Recognition
Contracts are generally performed on the unit-of-
completion basis, with weekly progress billings for the
units completed. Such progress billings are recognized as
revenue on the accrual basis of accounting, as invoiced.
The Company also recognizes revenue related to units
completed by the end of the accounting period for which no
invoice has been issued (unbilled receivables).
(d)Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company
considers cash to include cash in operating bank accounts,
savings and money market accounts, cash on hand, and any
other cash investments with a maturity of three months or
less. At times throughout the year the Company may
maintain certain bank accounts in excess of the FDIC
insured limits.
(e)Equipment and Leasehold Improvements
Equipment and leasehold improvements are stated at cost.
Depreciation is computed primarily on the straight-line
method over 5 years for financial reporting purposes.
Expenditures which add to the productivity or extend the
economic lives of the assets are included in prepaid
expenses and amortized over 24 months.
(f)Income Taxes
The Company has elected to have its income or loss
reported directly by its stockholder under provision of
Subchapter S of the Internal Revenue Code (IRC).
Accordingly, no provision or liability for Federal income
tax is reflected in the accompanying financial statements.
The Company has committed to distribute dividends to the
stockholders of SCAI at least sufficient to reimburse them
for Federal income taxes incurred as a result of the S
corporation election. State income taxes are reported and
paid by the Company.
(g)Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
(2)Trade Accounts Receivable
Included within trade accounts receivable are $420,313 of
unbilled receivables and retention of $49,387.
(3)Line of Credit
The Company has a $l,500,000 line of credit with Pacific
Northwest Bank. The loan bears interest at the bank's prime
rate plus l/2 of l% and is collateralized by under 90-day
accounts receivable and the personal guarantee of the
stockholders of SCAI. There are no drawings under the line
of credit as of September 30, 1997.
(4)Long-Term Debt
Long-term debt consists of the following as of September 30,
1997:
Installment notes payable to Pacific Northwest
Bank, repayable in aggregate monthly
installments of $19,265 including accrued $ 468,974
interest at 9%; secured by certain equipment
Installment notes payable to a stockholder of
SCAI, repayable in monthly installments of
$11,219 including interest at 9%; secured by 266,419
certain equipment
Installment notes payable to stockholders of
SCAI, repayable in aggregate monthly 321,455
installments of $4,133 including interest at
8%; unsecured
Installment notes payable to John Deere Credit,
repayable in aggregate monthly installments of
$7,641 including interest at 6.9%; secured by 155,825
certain equipment
Other installment notes 2,274
Capital lease obligations (note 5) 127,008
1,341,955
Less current installments 455,948
$ 886,007
The aggregate long-term debt maturing during the next five
years is approximately as follows:
Years ending September 30:
1998 $ 455,948
1999 357,774
2000 227,495
2001 91,418
2002 36,910
Thereafter 172,410
$ 1,341,955
(5)Capital Lease Obligations
The Company has acquired construction vehicles under
provisions of capital leases. The leased property under
capital leases as of September 30, 1997 has a total cost of
$189,036 and accumulated amortization of $46,273 and is
included in equipment and leasehold improvements.
At September 30, 1997, the future minimum payments under
noncancelable capital leases are as follows:
Years ending September 30:
1998 $61,589
1999 58,323
2000 28,988
Total minimum lease payments 148,900
Less amounts representing interest at
rates ranging from 9% to 14% 21,892
Present value of minimum lease payments
including $48,238 due within twelve $ 127,008
months
(6)Commitments and Contingency
(a)Related Party Transaction
The Company occupies an office-shop facility which is
owned by a partnership controlled by two stockholders of
the Company. The Company's lease, which is for five years
plus an additional five year option, provides for a
current monthly rental of $4,270 plus 67% of all occupancy
costs.
At September 30, 1997, the future minimum lease payments
under this lease are as follows:
Years ending September 30:
1998 $ 51,240
1999 51,240
2000 51,240
2001 51,240
2002 4,270
$ 209,230
(b)Leases
The Company rents equipment and field yard facilities
under various short-term cancelable operating leases in
its normal course of business. Rental expense was
$519,654 for the year ended September 30, 1997, including
the related party lease described in note 6(a).
(c)Employee Benefit Plan
The Company has adopted a profit sharing and employee
savings plan under section 40l(k) of the IRC. This plan
allows eligible employees to defer up to 15% of their
compensation on a pretax basis through contributions to
the savings plan. The Company contributed an additional
$0.50 for every dollar the employee contributed up to 5%
of compensation, which amounted to $46,289 for the year
ended September 30, 1997.
(d)Multiemployer Plan
The Company's union employees participate in a union
administered plan. Amounts charged to pension cost and
contributed to the plan were $137,653 for the year ended
September 30, 1997.
(e)Letter of Intent
On September 16, 1997, the Company signed a letter of
intent to be acquired by White Mountain Construction Corp.
in exchange for cash.
(b) Pro Forma Financial Information
The accompanying pro forma financial statements of operation
presents the results of operations of Arguss, Can Am, Schenck and
Rite as if the acquisitions had occurred as of January 1, 1996.
The pro forma consolidated balance sheet reflects the pro forma
consolidated financial position of the companies as if the
acquisitions had occurred on September 30, 1997. The pro forma
information reflects the total non-contingent consideration paid,
including the issuance of approximately 1,964,000 shares of
Arguss' common stock. (See Item 2. For details.) The pro forma
data is not necessarily indicative of what the results would have
been if the acquisition had occurred on the dates indicated.
Unaudited Pro Forma Consolidated Balance Sheet
As of September 30, 1997
Arguss as Acquisitions Pro Forma Consolidated
Reported (A) As Reported Adjustments(1) Pro Forma
Cash $ 3,161,000 $2,371,564 (250,000)(2) $ 5,282,564
Accounts 12,624,000 8,504,137 21,128,137
Receivable
Net Inventory, 4,504,000 4,504,000
Net
Other Current 1,711,000 606,656 2,317,656
Assets
----------- ------------ ------------ ----------
Total Current 22,000,000 11,482,357 (250,000) 33,232,357
Assets
Property, 9,974,000 6,010,140 15,984,140
Equipment
Goodwill 21,800,000 - 29,528,000(3) 50,221,000
Other Assets - 140,149 140,149
----------- ------------ ------------ ----------
TOTAL ASSETS $53,774,000 $17,632,646 $29,278,000 $100,684,646
========== ========== ======== ==========
Current $12,381,000 $5,735,006 $1,338,000(4) $19,454,006
Non-Current 367,000(5)
Liabilities 6,273,000 2,715,380 16,600,000(6) 25,409,380
----------- ------------ ------------ ----------
Total Liabilities 18,654,000 8,450,386 18,305,000 45,409,386
----------- ------------ ------------ ----------
Stockholders' 35,120,000 9,182,260 10,973,000(7) 55,275,260
Equity
----------- ------------ ------------ ----------
TOTAL LIABILITIES
AND STOCKHOLDERS'
EQUITY $53,774,000 $17,632,646 $29,278,000 $100,684,646
========== ========== =========== ============
Notes to unaudited pro forma combined statement of operations:
(1) Reflects adjustments for the 1997 fourth quarter and 1998
first quarter
acquisitions as if they had occurred as of September 30,
1997.
(2) Reflects the cash element of the Company's other acquisition
costs.
(3) Reflects the estimated goodwill of the transactions.
(4) Reflects the adjustment for current income taxes payable for
Can Am and Schenck
who were Subchapter S corporations.
(5) Reflects the adjustment for deferred taxes payable for Can
Am and Schenck who
were Subchapter S corporations.
(6) Reflects the adjustment for acquisition financing used to
acquire one half of the
value of Can Am and Schenck.
(7) The net impact to equity from issuing 1,964,000 shares to
purchase the Acquisitions.
(A) Reported on Form 10-QSB filed in November 1997.
Unaudited Pro Forma Statement of Operations
For the Nine Months Ended September 30, 1997
Arguss as Acquisitions Pro Forma Consolidated
Reported (B) As Reported Adjustments Pro Forma
(1)
Net Sales $35,826,000 $34,824,029 $70,650,029
Cost of Sales 24,375,000 25,554,830 49,929,830
------------ ----------- ------------ ------------
Gross Profit 11,451,000 9,269,199 20,720,199
------------ ----------- ------------ ------------
Selling
General
and
Administration 5,943,000 2,987,495 8,930,495
Depreciation 824,000 1,554,368 2,378,368
Engineering
and 811,000 811,000
Development
------------ ----------- ------------ ------------
Income From
Operations 3,873,000 4,727,336 8,600,336
------------ ----------- ------------ ------------
Other Expense
Goodwill
Amortization 618,000 1,107,000(2) 1,725,000
Net Interest
Expense 250,000 268,120 1,025,000(3) 1,543,120
------------ ----------- ------------ ------------
Income before
Taxes 3,005,000 4,459,216 (2,132,000) 5,332,216
Income Tax
Expense 1,003,000 61,000 1,313,000(4) 2,377,000
------------ ----------- ------------ ------------
Net Income $2,002,000 $4,398,216 ($3,445,000) $2,955,216
========== ========= =========== ==========
Net Income
Per Share $.26 $.31
=== ===
Weighted
Average
Shares
Outstanding 7,671,000 9,635,000
========= ==========
Notes to Unaudited Pro Forma Combined Statement of Operations:
(1) Reflects adjustments for the fourth quarter 1997 and first
quarter 1998 acquisitions
as if they had taken place on January 1, 1997.
(2) Reflects amortization of approximately $29,528,000 of
goodwill over 20 years.
(3) Reflects adjustment for interest expense for $15,000,000 in
acquisition financing
for Can Am and Schenck and assumed other financing of
$1,600,000 for Rite.
(4) Reflects adjustment for income taxes for Can Am and Schenck
which were previously Subchapter S corporations.
(B) Reported on Form 10-QSB filed in November 1997.
Unaudited Pro Forma Statement of Operations
For the Twelve Months Ended December 31, 1996
Arguss as Acquisitiond Pro Forma Consolidated
Reported (B) As Reported Adjustments Pro Forma
(1)
Net Sales $50,775,543 $49,045,524 $99,821,067
Cost of Sales 36,005,173 37,772,438 73,777,611
----------- ----------- ------------ ------------
Gross Profit 14,770,370 11,273,086 26,043,456
----------- ----------- ------------ ------------
Selling General
and 6,475,559 5,289,388 (1,094,028)(5) 10,670,919
Administration
Depreciation 1,416,056 1,758,769 3,174,825
Engineering
and Development 1,007,086 - - 1,007,086
----------- ----------- ------------ ------------
Income From
Operations 5,871,669 4,224,929 1,094,028 11,190,626
--------- ----------- ------------ ------------
Other Expense
Goodwill 1,277,556 - 1,476,000(2) 2,753,556
Amortization
Net Interest
Expense 466,620 221,843 1,329,000(3) 2,017,463
----------- ----------- ------------ ------------
Income before 4,127,493 4,003,086 (1,710,972) 6,419,607
Taxes
Income Tax 1,937,275 99,329 1,407,671(4) 3,444,275
Expense
----------- ----------- ------------ ------------
Net Income $2,190,218 $3,933,757($3,148,643) $2,975,332
========== ========= =========== ==========
Net Income
Per Share $.45 $.44
=== ===
Weighted
Average
Shares 4,833,592 6,797,592
Outstanding
========= =========
Notes to Unaudited Pro Forma Combined Statement of Operations:
(1) Reflects adjustments for the 1997 third quarter and 1998
first quarter acquisitions
as if they had taken place on January 1, 1996.
(2) Reflects amortization of approximately $29,528,000 of
goodwill over 20 years.
(3) Reflects adjustment for interest expense for $15,000,000 in
acquisition financing
for Can Am and Schenck and assumed other financing of
$1,600,000 for Rite.
(4) Reflects adjustment for income taxes for Can Am and Schenck
which were previously Subchapter S corporations.
(5) Reflects adjustment for compensation expense to Subchapter S
corporation owner.
(B) Reported on Form 8-K filed on October 3, 1997.
(c)
Acquisitions
Consolidating Unaudited Pro Forma Balance Sheets
As of September 30, 1997
Can Am Schenck Rite Total
----------- ----------- ------ --------
Cash $1,758,619 $228,075 $384,870 $2,371,564
Accounts 3,493,436 2,808,203 2,202,498 8,504,137
Receivable, Net
Inventory, Net 0 0 0 0
Other Current 191,562 208,881 206,213 606,656
Assets
----------- ----------- ----------- ----------
Total Current 5,443,617 3,245,159 2,793,581 11,482,357
Assets
Property, 3,538,835 2,001,618 469,687 6,010,140
Equipment
Other Assets 95,000 21,880 23,269 140,149
----------- ----------- ----------- ----------
Total Assets $9,077,452 $5,268,657 $3,286,537 $17,632,646
========== ========== ========== ==========
Current $1,528,650 $2,262,312 $1,944,044 $5,735,006
Liabilities
Non-Current 1,236,880 886,007 592,493 2,715,380
Liabilities
----------- ----------- ----------- ---------
Total 2,765,530 3,148,319 2,536,537 8,450,386
Liabilities
----------- ----------- ----------- ----------
Stockholders' 6,311,922 2,120,338 750,000 9,182,260
Equity
----------- ----------- ----------- ----------
Total
Liabilities and
Stockholders' $9,077,452 $5,268,657 $3,286,537 $17,632,646
Equity
========== ========= ========== ===========
Acquisitions
Unaudited Consolidating Pro Forma Income Statement
For the Nine Months Ended September 30,1997
Can Am Schenck Rite Total
----------- ----------- ------ --------
Net Sales $16,307,538 $11,207,934 $7,308,557 $34,824,029
Cost of Sales 11,361,768 8,080,268 6,112,794 25,554,830
----------- ----------- ------------ ------------
Gross Profit 4,945,770 3,127,666 1,195,763 9,269,199
----------- ----------- ------------ ------------
Selling,
General
& 1,464,166 608,811 914,518 2,987,495
Administrative
Depreciation 839,448 511,108 203,812 1,554,368
Engineering &
Development 0 0 0 0
----------- ----------- ------------ ------------
Income from
Operations 2,642,156 2,007,747 77,433 4,727,336
Other Expense
- -------------
Goodwill 0 0 0 0
Amortization
Net Interest
Expense 121,388 102,370 44,362 268,120
(Income)
----------- ----------- ------------ ------------
Income Before 2,520,768 1,905,377 33,071 4,459,216
Taxes
----------- ----------- ------------ ------------
Income Tax 25,000 26,000 10,000 61,000
Expense
----------- ----------- ------------ ------------
Net Income $2,495,768 $1,879,377 $23,071 $4,398,216
========== ========== ======= ==========
Acquisitions
Unaudited Consolidating Pro Forma Income Statement
For the Year ended December 31, 1996
Can Am Schenck Rite Total
----------- ----------- ------ --------
Net Sales $25,414,134 $14,466,689 $9,164,701 $49,045,524
Cost of Sales 18,378,653 12,155,634 7,238,151 37,772,438
----------- ----------- ----------- ------------
Gross Profit 7,035,481 2,311,055 1,926,550 11,273,086
----------- ----------- ----------- ------------
Selling,
General
& 2,902,242 755,532 1,631,614 5,289,388
Administrative
Depreciation 921,895 643,499 193,375 1,758,769
Engineering &
Development 0 0 0 0
----------- ----------- ----------- ------------
Income from
Operations 3,211,344 912,024 101,561 4,224,929
----------- ----------- ----------- ------------
Other Expense
- --------------
Goodwill 0 0 0 0
Amortization
Net Interest
Expense 116,666 129,952 (24,775) 221,843
(Income)
----------- ----------- ----------- ------------
Income Before 3,094,678 782,072 126,336 4,003,086
Taxes
----------- ----------- ----------- ------------
Income Tax 30,000 33,858 35,471 99,329
Expense
----------- ----------- ----------- ------------
Net Income $3,064,678 $748,214 $90,865 $3,933,757
========== ======== ======= ==========
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, made this 2nd
day of January, 1998, by and between RONALD D. PIERCE
("Pierce"), CAN-AM CONSTRUCTION, INC., a California corporation
(the "Company"), ARGUSS HOLDINGS, INC., a Delaware corporation
(the "Parent"), WHITE MOUNTAIN CABLE CONSTRUCTION CORP. ("White
Mountain"), a Delaware corporation and a 100% subsidiary of
Parent.
INTRODUCTORY STATEMENT
A. Pierce owns Fifteen Hundred (1,500) shares of capital
stock of the Company, which shares, constitute all of the
issued and outstanding capital stock ("Stock") of the Company,
a California corporation doing business as Can-Am Construction,
Inc.
B. The Company is a full service multimedia
communications contractor engaged in the construction,
reconstruction, maintenance, repair, and expansion of CATV,
SMATV systems and other related systems in the
telecommunications industry.
C. Parent has agreed with Pierce for Parent to acquire
the Company by means of a merger of the Company with and into
White Mountain, a wholly owned subsidiary of Parent upon the
terms and subject to the conditions set forth herein.
D. In furtherance of such acquisition, the Boards of
Directors of Parent, White Mountain and the Company have each
approved the plan of merger to merge the Company with and into
White Mountain (the "Merger") in accordance with the applicable
provisions of the Delaware General Corporation Law (the
"DGCL"), and the California General Corporation Law ("CGCL"),
and upon the terms and subject to the conditions set forth
herein.
E. Pursuant to the Merger, the record holders of each
outstanding share of the Company's common stock, $10.00 par
value, shall be entitled to receive the Merger Consideration
(as defined in Section 2.1) so that upon receipt of the Merger
Consideration, such share of the Stock shall be cancelled, all
upon the terms and subject to the conditions set forth herein.
F. The parties hereto intend that this transaction
qualify as a tax free reorganization under Section 368(a)(1)(A)
of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, WITNESSETH, for and in consideration
of the premises and the mutual representations, warranties,
covenants and agreements herein contained and other good and
valuable consideration, receipt of which is hereby
acknowledged, the parties do agree as follows:
DEFINITIONS
The following terms when used in this AGREEMENT AND
PLAN OF MERGER shall have the following meanings:
"Accounts Receivable" means accounts receivable,
notes due from all sources of the Company, and credits for
returned or damaged merchandise.
"Act" shall mean the Securities Act of 1933, as the
same has been and shall be amended from time to time.
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, liabilities,
obligations, taxes, liens, losses, expenses, and fees,
including court costs and attorneys' fees and expenses, net of
all tax savings and insurance proceeds actually received by an
Indemnitee with respect to any of the foregoing.
"Agreed Value of the Company" shall mean the value of
the Company based on the July 1997 Audit. For the purposes of
this Agreement the Agreed Value of the Company is Twenty-Four
Million Dollars ($24,000,000).
"Agreement" means this AGREEMENT AND PLAN OF MERGER.
"Arguss" shall mean the Parent, Arguss Holdings,
Inc., a Delaware corporation with its principal offices located
at One Church Street, Suite 302, Rockville, Maryland 20850, and
its successors and assigns.
"Arguss Stock" shall mean the authorized capital
stock of Arguss.
"Assets" means all property, rights, things of value
and other assets of the Company described, referred to, or
listed, in Section 4.9 of this Agreement.
"CGCL" has the meaning set forth in the introductory
statement above.
"Certificate of Merger" has the meaning set forth in
Section 1.2 below.
" Closing" means the transfer of the Stock to White
Mountain and the payment of the Purchase Price to Pierce
pursuant to this Agreement.
"Closing Balance Sheet" shall mean the internally
generated balance sheet of the Company as of the Closing Date.
"Closing Date" means the date of Closing, established
under Section 3 of this Agreement.
"Code" means the United States Federal Internal
Revenue Code of 1986, as amended.
"Company" shall mean Can-Am Construction, Inc. at all
times prior to the Closing Date, and shall mean the Can-Am
Division of the Surviving Corporation at all time thereafter.
"DGCL" has the meaning set forth in the introductory
statement.
"Employment Agreement" means the Employment
Agreements to be executed by the Company, Pierce and other key
employees of the Company pursuant to Section 6.5 hereof.
"Environmental, Health, and Safety Laws" means the
United States federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational
Safety and Health Act of 1970, each as amended, together with
all other laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges
thereunder of federal, state, local, and foreign governmental
and all agencies thereof) concerning pollution or protection of
the environment, public health and safety, or employee health
and safety, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants,
or chemical, industrial, hazardous, or toxic materials or
wastes (including asbestos and oil or petroleum) (collectively,
"Hazardous Materials") into ambient air, surface, water, ground
water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes.
"Extremely Hazardous Substance" has the meaning set
forth in Section 302 of the Emergency Planning and Community
Right-to-Know Act of 1986, as amended.
"Financial Statement" means the audited financial
statements of the Company for the Company's fiscal year ending
in 1996, and the 12 month period ending July 31, 1997,
including the notes thereto, prepared by the accounting firm of
Deloit, Touche, and acceptable to the accounting firm of KPMG
Peat Marwick. If applicable, the Financial Statements shall be
presented after making all appropriate adjustments required to
present them on an accrual basis for a Subchapter C
corporation.
"GAAP" shall mean in accordance with generally
accepted accounting principles, consistently applied.
"July 1997 Audit" shall mean the audit of the
Company for the twelve (12) month period ending July 31, 1997,
prepared in accordance with generally accepted accounting
principles consistently applied by the accounting firm of KPMG
Peat Marwick. If applicable, for the purposes of this
Agreement, the July 1997 Audit shall be presented after making
all appropriate adjustments required to present them on an
accrual basis for a Subchapter C corporation.
"Net Worth" shall mean the total assets of the
Company, reduced by any value placed on the intangible assets
of the Company, including, but not limited to, goodwill, less
the total liabilities of the Company as those terms are shown
on the Financial Statement after making all appropriate
adjustments, if applicable, required to present them on an
accrual basis for a Subchapter C corporation, prepared in
accordance with Section 4.4 hereof.
"Pierce" shall mean Ronald D. Pierce, a stockholder,
officer and director of the Company, and a signatory to this
Agreement.
"Real Property" shall mean the real property owned by
Pierce and more specifically known as 250 Fischer Avenue, Costa
Mesa, CA 92626.
"Registration Rights Agreement" shall mean the
Registration Rights Agreement executed by Pierce and Parent
pursuant to Section 6.9 hereof.
"Stock" shall mean all of the authorized issued and
outstanding capital stock of the Company, including all
warrants, options, convertible securities or right (contingent
or otherwise) to purchase or acquire stock of the Company.
"Surviving Corporation" has the meaning set forth in
Section 1.1 below.
"White Mountain" has the meaning set forth in the
preface above.
SECTION 1
THE MERGER
1.1 Effective Time. On the Closing Date (as defined
in Section 3), and subject to and upon the fulfillment or
waiver of the terms and conditions of this Agreement, the DGCL
and the CGCL, Parent shall, as of the Closing, acquire the
Company by means of the company being merged with and into
White Mountain, where by the separate corporate existence of
the Company shall cease, and White Mountain shall continue as
the surviving corporation. White Mountain as the surviving
corporation after the Merger is hereinafter sometimes referred
to as the "Surviving Corporation."
1.2 Certificate of Merger. On the Closing Date,
assuming satisfaction or waiver of the conditions set forth in
Section 6, the parties hereto shall cause the Merger to be
consummated by filing Certificates of Merger as contemplated by
the DGCL and the CGCL (the "Certificates of Merger"), together
with any required related certificates, with the Secretary of
State of the State of Delaware, and the Secretary of the State
of California, respectively, in such form as required by, and
executed in accordance with the relevant provisions of, the
DGCL and the CGCL. The date of filing of the respective
Certificates of Merger shall be deemed the Filing Date.
1.3 Effect of the Merger. Upon the consummation of
the Merger, the effect of the merger shall be as provided in
this Agreement, the Certificates of Merger and the applicable
provisions of the DGCL and the CGCL. Without limiting the
generality of the foregoing, and subject thereto, upon the
consummation of the Merger all the property, rights,
privileges, powers and franchises of the Company and White
Mountain shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and White Mountain
shall become the debts, liabilities and duties of the Surviving
Corporation, except that the cumulative adjustment, if any,
required to convert the Company from a cash to an accrual basis
taxpayer shall be reported on the Company's final tax return
and any tax liability attributable to such cumulative
adjustment as of the Closing Date shall be a liability of
Pierce as the shareholder of the Company for the period covered
by the final return. The cumulative adjustment shall be the
excess of the income which the Company would have reported
under the accrual method of accounting through and including
the Closing Date over the income reported by the Company
through its use of the cash basis of accounting as represented
by the accrual basis assets and liabilities of the Company on
its Closing Date financial statement.
1.4 Certificate of Incorporation, By-Laws.
(i) Certificate of Incorporation. Unless
otherwise determined by Parent prior to the Closing Date, upon
the consummation of the Merger the Certificate of Incorporation
of White Mountain, as in effect immediately prior to the
consummation of the Merger, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter
amended in accordance with the DGCL and such Certificate of
Incorporation.
(ii) By-Laws. Unless otherwise determined by
Parent prior to the consummation of the Merger, the By-Laws of
White Mountain, as in effect immediately prior to the closing
date, shall be the By-Laws of the Surviving Corporation until
thereafter amended in accordance with the DGCL, the Certificate
of Incorporation of the Surviving Corporation and such By-Laws.
1.5 Directors and Officers. The directors of White
Mountain immediately prior to the consummation of the Merger,
with the addition of Pierce shall be the initial directors of
the Surviving Corporation, each to hold office in accordance
with the Certificate of Incorporation and By-Laws of the
Surviving Corporation, and the officers of White Mountain
immediately prior to the consummation of the Merger shall be
the initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed
and qualified. Until such time as an insurance policy is in
effect covering Pierce's actions as an officer or director of
the Surviving Corporation, Pierce shall have the option, in his
sole discretion, of attending all meetings of the Board of
Directors of the Surviving Corporation without becoming a
member.
SECTION 2
MERGER CONSIDERATION
2.1 Shares of Company. As of the Filing Date, each
share of Stock issued and outstanding as of the Closing Date,
shall by virtue of the merger and without any action on the
part of the holder thereof, be converted into the right to
receive an amount per share in Arguss Stock and in cash
(collectively the "Merger Consideration"), without interest,
determined in accordance with Section 2.2.
2.2 Merger Consideration. The total merger
consideration to be paid by Parent and White Mountain to Pierce
shall be an amount equal to the Agreed Value of the Company, as
that term is defined in this Agreement. Each share of Stock
shall be entitled to receive a sum equal to the Agreed Value of
the Company divided by the total number of shares of the Stock.
The Merger Consideration shall be paid to Pierce, as
follows:
(a) At Closing, Pierce shall receive the sum
equal to Fifty Per Cent (50%) of the Agreed Value of the
Company through the issuance of shares of Arguss stock as set
forth in Exhibit 2.2(a). For the purposes of determining the
number of shares of Arguss Stock to be issued to Pierce
pursuant to this paragraph 2.2(a), the value of each share of
Arguss Stock shall be Eight Dollars ($8.00).
(b) At Closing, Pierce shall receive the sum
equal to Fifty Per Cent (50%) of the Agreed Value of the
Company in cash, wire transfer, or certified funds as set forth
on Exhibit 2.2(b).
2.3 Allocation of Merger Consideration. The
allocation of the Merger Consideration by Pierce, if desired,
is set forth in Exhibit 2.3.
SECTION 3
CLOSING
The Closing of the Merger shall occur at the offices
of Arguss Holdings, Inc., One Church Street, Suite 302,
Rockville, Maryland 20850, at 2:00 p.m. on the 2nd day of
January, 1998, or at such other time, date and place as Parent
and Pierce may agree (the "Closing Date"). Parties hereto
agree that the Merger may be Closed in Escrow provided all
transfers of any requisite business licenses has not occurred
on or before February 28, 1998.
3.1 Cancellation.
(a) Upon filing of the Certificate of Merger,
each such share of the Stock shall be canceled and shall
thereafter evidence only the right to receive a pro rata share
of the Merger Consideration.
(b) Upon filing of the Certificate of Merger,
each share of the Stock held in the treasury of the Company and
each share of Stock owned directly or indirectly by any wholly
owned Subsidiary of the Company immediately prior to the
consummation of the Merger shall, by virtue of the Merger and
without any action on the part of the holder thereof, cease to
be outstanding, be canceled and retired without payment of any
consideration therefor and cease to exist.
3.2 Delivery of Cash and Exchange of Certificates.
(a) Exchange Procedures. As of the Filing
Date, upon surrender of the certificates representing shares of
the Stock (the "Certificates") for cancellation to Parent
together with such other customary documents as may be required
to transfer the Stock, Pierce shall be entitled to receive in
exchange therefore the Merger Consideration as provided in
Section 2.2(a) and (b), above, and the Certificates so
surrendered shall forthwith be canceled. Each outstanding
Certificate that, prior to the Closing Date, represented shares
of the Stock will be deemed from and after the Closing Date,
for all corporate purposes, to evidence the right to receive a
pro rata share of the Merger Consideration into which such
shares of the Stock shall have been so converted.
(b) No Liability. Neither Parent, White
Mountain, nor the Company shall be liable to any holder of the
Stock for any Merger Consideration delivered to a public
official pursuant to any applicable abandoned property, escheat
or similar law.
(c) Withholding Rights. Pierce will provide
Parent and White Mountain with the appropriate FIRPTA
certificate indicating that no other withholdings are required
by this transaction.
SECTION 4
REPRESENTATIONS, WARRANTIES AND CERTAIN
COVENANTS OF PIERCE AND THE COMPANY
As a material inducement to induce Parent and White
Mountain to consummate the Merger under this Agreement, Pierce
and Company represent and warrant that each of the matters set
forth in this Section 4 are true and correct as of the date
hereof, and acknowledge that Parent and White Mountain's entry
into this Agreement and the performance of their obligations
hereunder are made in reliance upon the completeness and
accuracy of each of the matters set forth herein. The
representations and warranties being made by the Company shall
survive up and until the Closing Date. The representations and
warranties being made by Pierce shall survive as set forth in
Section 12.11, herein.
4.1 Organization, Qualifications and Corporate
Power.
(a) The Company is a corporation duly
incorporated, validly existing and in good standing under the
laws of the State of California. Attached as Exhibit 4.1 is a
list of all states in which the company is qualified to do
business. The Company is duly qualified as a foreign
corporation in each other jurisdiction in which the failure to
be qualified would have a material adverse effect upon the
Company. The Company has the corporate power and authority to
own and hold its properties and to conduct its business as
currently conducted and as proposed to be conducted, to
execute, deliver and perform this Agreement to which it is a
signatory.
(b) Except as listed on Exhibit 4.1, the
Company does not own of record or beneficially, directly or
indirectly, (i) any shares of outstanding capital stock or
securities convertible into capital stock of any other
corporation or (ii) any participating interest in any
partnership, joint venture or other non-corporate business
enterprise.
4.2 Authorization of Agreement.
(a) The execution, delivery and performance by
the Company of this Agreement to which it is a signatory
hereunder have been duly authorized by all requisite corporate
action and will not (i) violate any applicable provision of
law, any order of any court or other agency of government, the
Articles or Certificate of Incorporation or Bylaws of the
Company, or any provision of any indenture, agreement or other
instrument by which the Company, or any of its properties or
assets is bound or affected, or (ii) conflict with, result in a
material breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or
other instrument, or results in being declared void, voidable
or without further binding effect any license, governmental
permit or certification, employee plan, note, bond, mortgage,
indenture, deed of trust, franchise, lease, contract,
agreement, or other instrument or commitment or obligation to
which Company is a party, or by which Company, or any of its
assets, may be bound, subject or affected, (iii) violate any
order, writ, injunction, decree, judgment, or ruling of any
court or governmental authority applicable to Company or any of
its assets, or (iv) except as otherwise provided in this
Agreement, result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever not arising in
the ordinary course of business upon any of the properties or
assets of the Company.
4.3 Capital Stock. The authorized capital stock of
the Company and the holders of the issued and outstanding
shares of such capital stock are set forth in Exhibit 4.3
hereto. Except as disclosed in Exhibit 4.3, there is no (i)
subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any
shares of any class of capital stock of the Company which is
authorized or outstanding, (ii) the Company has no commitments
to issue any shares, warrants, options or other such rights or
to distribute to holders of any class of its capital stock any
evidence of indebtedness or assets, (iii) the Company has no
obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other
distribution in respect thereof, (iv) the Company has no
obligation or commitment to register under the Act any
securities issued or to be issued by it, and (v) the issued and
outstanding shares are fully transferable in accordance with
this Agreement, subject only to Pierce obtaining the consent to
transfer from the Department of Corporation of the State of
California. All of the issued and outstanding shares of the
capital stock of the Company have been validly issued in
compliance with all federal and state securities laws and are
fully paid and non-assessable.
4.4 Financial Statements. The Company has delivered
to Parent the Financial Statements. Such preliminary Financial
Statements to the best of Pierce's knowledge are complete and
correct, have been prepared in accordance with GAAP and fairly
present the financial position of the Company as of such
respective dates after making all appropriate adjustments, if
applicable, required to present them on an accrual basis for a
Subchapter C corporation, and the results of its operations for
the respective periods then ended. The data provided to the
accountants by the Company and Pierce which form the basis of
the Financial Statements are complete, correct and accurate in
all material respects. Except as set forth in such Financial
Statements, the Company has no material obligation or
liability, absolute, accrued or contingent.
4.5 Absence of Changes. Except as listed in
Exhibit 4.5 and since the time period covered by the Financial
Statements, the Company has not:
(a) Transferred, assigned, conveyed or
liquidated any of its assets or entered into any transaction or
incurred any liability or obligation which has a material
adverse effect on the assets or the conduct of its business,
other than in the ordinary course of the Company's business;
(b) Incurred any change in its business,
operations, or financial condition which may have a material
adverse effect on its assets or its business, or become aware
of any event which may result in any such adverse change;
(c) Suffered any material destruction, damage
or loss relating to its assets or the conduct of its business
whether or not covered by insurance;
(d) Suffered, permitted or incurred other than
in the ordinary course of business the imposition of any lien,
charge, encumbrance (which as used herein includes, without
limitation, any mortgage, deed of trust, conveyance to secure
debt or security interest) whether or not contingent in nature,
or claim upon any of its assets, except for any current year
lien with respect to personal or real property taxes not yet
due and payable;
(e) Committed, suffered, permitted or incurred
any default in any liability or obligation which, in the
aggregate, have had or will have a material adverse effect upon
its assets or the conduct of its business;
(f) Made or agreed to any change in the terms
of any contract or instrument to which it is a party which has
a material adverse effect on its assets or the conduct of its
business;
(g) Knowingly waived, canceled, sold or
otherwise disposed of other than in the ordinary course of
business, for less than the face amount thereof, any material
claim or right relating to its assets or the conduct of its
business, which it has against others;
(h) Declared, promised or made any material
distribution from its assets or other payment from the assets
to its shareholders (other than reasonable compensation for
services actually rendered) or issued any additional shares or
rights, options or calls with respect to its shares of capital
stock, or redeemed, purchased or otherwise acquired any of its
shares, or made any change whatsoever in its capital structure;
(i) Paid, agreed to pay or incurred any
material obligation for any payment for, any contribution or
other amount to, or with respect to, any employee benefit plan,
or paid or agreed to pay any bonus or salary increase to its
executive officers or directors, or made any increase in the
pension, retirement or other benefits of its directors or
executive officers other than in the ordinary course of
business;
(j) Committed, suffered, permitted, incurred or
entered into any transaction or event other than in the normal
course of business which would materially increase its
liability for any prior taxable year;
(k) Incurred any other liability or obligation
or entered into any transaction other than in the ordinary
course of business which would have a material adverse effect
on its condition (financial or otherwise); or
(l) Received any notices of, or has reason to
believe, that any of its customers or clients have taken or
contemplate any steps which could materially disrupt its
business relationship with said customer or client or could
result in the material diminution in the value of the business
of the Company as a going concern.
4.6 Actions Pending. Except as listed on Exhibit
4.6, there is no action, suit, investigation, or proceeding
pending or, to the knowledge of the Company or Pierce
threatened against or affecting Pierce, the Company or any of
its properties or rights, before any court or by or before any
governmental body or arbitration board or tribunal and no basis
exists for any such action, suit, investigation or proceeding
which will result in any material liability or affirmative or
negative injunction being imposed on the Company or Pierce.
The foregoing includes, without limiting its generality,
actions pending or threatened (or any basis therefor known to
the Company or Pierce) involving the prior employment of any
employees or prospective employees of the Company or its use,
in connection with its business, of any information or
techniques which might be alleged to be proprietary to its
former employer(s).
4.7 Business Property Rights. To the best of the
Company's or Pierce's knowledge, no person or entity has made
or threatened to make (or has any valid reason to threaten) any
claims that the operation of the business of the Company is or
will be in violation of or infringe on any technology, patents,
copyrights, trademarks, trade names, service marks (and any
application for any of the foregoing) licenses, proprietary
information, know-how, or trade secrets (the "Business Property
Rights"). To the best of the Company's or Pierce's knowledge
no third party is infringing upon or violating any of the
Company's Business Property Rights and the Company has the
exclusive right to use the same. None of the Company's
employees, directors, or stockholders has any valid claim
whatsoever (whether direct, indirect or contingent) of right,
title or interest in or to any of the Company's Business
Property Rights.
4.8 Liabilities. Except as listed in Exhibit 4.8,
the Company has no liabilities or obligations, whether accrued,
absolute, contingent or otherwise (individually or in the
aggregate), which are of a nature required to be reflected in
financial statements prepared in accordance with GAAP, after
making all appropriate adjustments required to present them on
an accrual basis for a Subchapter C corporation, including
without limitation, any liability which might result from an
audit of its tax returns by any appropriate authority except
(i) the liabilities and obligations set forth in the "Financial
Statements") delivered in accordance with Section 4.4 and (ii)
liabilities and obligations incurred for the purpose of
enabling the Company to conduct its normal business (in each
case in normal amounts and incurred only in the ordinary course
of business). Except as disclosed in the Financial Statements,
the Company is not in default with respect to any liabilities
or obligations and all such liabilities or obligations shown
and reflected in the Financial Statements, and such liabilities
incurred or accrued subsequent to the Companies incorporation,
have been, or are being, paid or discharged as they become due,
and all such liabilities and obligations were incurred in the
ordinary course of business.
4.9 Ownership of Assets and Leases. Attached hereto
as Exhibit 4.9(a) is a complete and correct list and brief
description, as of the date of this Agreement, of all real
property and material items of personal property owned by the
Company and all of the leases and other agreements relating to
any real, personal or intangible property owned, used, licensed
or leased by the Company. The Company has good and marketable
title to all of its assets, including those listed on Exhibit
4.9(a), and any income or revenue generated therefrom, in each
case free and clear of any liens, claims, charges, options,
rights of tenants or other encumbrances, except, (i) as
disclosed and reserved against in the Financial Statements (to
the extent and in the amounts so disclosed and reserved
against), (ii) for liens arising from current taxes not yet due
and payable and (iii) as set forth on Exhibit 4.9(b). Each of
the Company's leases and agreements is in full force and effect
and constitutes a legal, valid and binding obligation of the
Company and the other respective parties thereto, enforceable
in accordance with its terms, except as enforceability may be
limited by applicable equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws from
time to time in effect affecting the enforcement of creditors'
rights generally, and, there is not under any of such leases or
agreements existing any default of the Company, or to the best
of the Company's or Pierce's knowledge of any other parties
thereto (or event or condition which, with notice or lapse of
time, or both, would constitute a default). The Company has
not received any notice of violation of any applicable
regulation, ordinance or other law with respect to its
operations or assets, and, to the best of the Company's
knowledge there is not any such violation or grounds therefor
which could adversely affect their assets or the conduct of its
business. The Company is not a party to any contract or
obligation whereby an absolute or contingent right to purchase,
obtain or acquire any rights in any of the assets has been
granted to anyone. There does not exist and will not exist by
virtue of the transactions contemplated by this Agreement any
claim or right of third persons which may be legally asserted
against any of the Company's assets.
4.10 Taxes. The Company has paid all taxes due,
assessed and owed by it as reflected on its tax returns and has
timely filed all federal, state, local and other tax returns
which were required to be filed and which were due prior to the
Closing Date, except for those taxes set forth on
Exhibit 4.10(a). All federal, state, local, and other taxes of
the Company accruable since the filing of such returns have
been properly accrued. No federal income tax returns for the
Company have ever been audited by the Internal Revenue Service
or any state or local taxing authority, except as described in
Exhibit 4.10(b). No other proceedings or other actions which
are still pending or open have been taken for the assessment or
collection of additional taxes of any kind from the Company for
any period for which returns have been filed, and to the
Company's knowledge, no other examination by the Internal
Revenue Service or any other taxing authority affecting the
Company is now pending. Except for those taxes set forth on
Exhibit 4.10(a), taxes which the Company were required by law
to withhold or collect subsequent to the Company's
incorporation, have been withheld or collected and have been
paid over to the proper governmental authorities or are
properly held by the Company for such payment and are so
withheld, collected and paid over as of the date hereof. No
waivers of statutes of limitations with respect to any tax
returns of the Company nor extensions of time for the
assessment of any tax have been given by any current employees
of the Company. There is not and there will not be any
liabilities for federal, state and local income, sales, use,
excise or other taxes arising out of, or attributable to, or
affecting the assets or the conduct of the Company's business
through the close of business on the Closing Date, or
attributable to the conduct of the operations of the Company at
any time for which Parent or the Surviving Corporation will
have any liability for payment or otherwise, including, but not
limited to, any tax assessed or imposed as a result of the
conversion, if applicable, of the Company from a Subchapter S
to a Subchapter C corporation. After the Closing, there does
not and will not exist by virtue of the transactions
contemplated by this Agreement any liability for taxes which
may be asserted by any taxing authority against the Company's
assets or the operation of the business, and no lien or other
encumbrance for taxes will attach to such assets or the
operation of the business. If applicable, the Company has
properly elected to be an S corporation for federal (and, where
permitted, for State and local) tax purposes and has continued
to qualify as an S corporation at all times from the date of
the S corporation election. If applicable, the Company will
continue to qualify as an S corporation through and including
the Closing Date.
4.11 Contracts, Other Agreements. Attached hereto as
Exhibit 4.11(a) is a true and complete list of each material
contract, agreement and other instrument to which the Company
is a party, including, but not limited to, all bank and
financing documents. At Parent's request, the Company shall
deliver to Parent a true and complete copy of any such
contract, agreement or instrument. All of the contracts,
agreements, and instruments described in Exhibit 4.11(a) hereto
are valid and binding upon the Company and the other parties
thereto and are in full force and effect, and, neither the
Company, nor to the best of the Company's or Pierce's knowledge
any other party to any such contract, commitment or arrangement
has breached any provision of, or is in default in any respect
under, the material terms thereof. Except for those listed on
Exhibit 4.11(b), no contract, agreement or other instrument to
which the Company is a party will be materially breached,
violated or result in a default as a result of the transaction
contemplated hereunder.
4.12 Governmental Approvals. Except as set forth on
Exhibit 4.12, no registration or filing with, or consent or
approval of, or other action by, any federal, state or other
governmental agency or instrumentality is or will be necessary
for the valid execution, delivery and performance of this
Agreement by the Company, including, but not limited to, any
approval of the United States Small Business Administration
required to assign any obligation of the Company to the
Surviving Corporation.
4.13 Lack of Defaults. The Company and Pierce know
of no default in performance of any obligation, covenant or
condition contained in any note, debenture, mortgage or other
contract or agreement of any nature or kind to which either is
a party, nor of any default with respect to any order, writ,
injunction or decree of any court, governmental authority or
arbitration board or tribunal to which either is a party, which
would have a material adverse effect on the assets or business
of the Company. The Company and Pierce know of no violation of
any law, ordinance, governmental rule or regulation to which
either is subject, nor has either failed to obtain any
licenses, permits, franchises or other governmental
authorizations necessary for the ownership of their properties
or to the conduct of their business where any such violation or
failure would likely result in a material adverse effect upon
the business of the Company. The Company has conducted and
will conduct its businesses and operations in substantial
compliance with all federal, state, county and municipal laws,
statutes, ordinances and regulations and are in substantial
compliance with all applicable requirements of all federal,
state, county and municipal regulatory authorities.
4.14 Employees and Employee Benefit Plans.
(a) Attached hereto as Exhibit 4.14(a) is a
list of each pension retirement, profit-sharing, deferred
compensation, bonus or other incentive plan, or program
arrangement, agreement or other understanding, or medical,
vision, dental or other health plan, or life insurance or
disability plan, or any other employee benefit plan, including,
without limitation, any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), to which the Company contributes or
is a party or is bound or under which it may have liability and
under which employees or former employees of the Company (or
their beneficiaries) are eligible to participate or derive a
benefit (the foregoing herein referred to as the "Employee
Benefit Plans). The Company has delivered to Parent true,
correct and complete copies of all Employee Benefit Plans, and
the company has complied in all material aspects with any and
all obligations required of it under the terms of any plan
listed on Exhibit 4.14(a).
(b) Attached hereto as Exhibit 4.14(b) are the
names, social security numbers and current rate of compensation
of all salaried and hourly paid employees employed by the
Company as of the date hereof, with all key employees being so
designated, and at Closing the Company will provide an updated
list of all such employees as of the date of closing, such
updated list to be initialed by both parties at Closing.
4.15 Insurance. Attached hereto as Exhibit 4.15 is a
complete and correct list and description of all of the
policies of liability, property, workers' compensation and
other forms of insurance or bonds carried by the Company for
the benefit of or in connection with its assets and businesses.
All of such policies are in full force and effect and there are
no overdue premiums or other payments on such policies and the
Company has not received any notice of cancellation or
termination of any of these policies. Neither Pierces nor the
Company have knowledge of any change or proposed change to any
of the rates set forth in the policies listed on Exhibit 4.15
other than as set out in the Policies.
4.16 Labor Matters. None of the Company's employees
are covered by a collective bargaining agreement, and no
collective bargaining efforts with respect to any of the
Company's employees are pending or, to the knowledge of the
Company threatened. No labor dispute, strike, work stoppage,
employee collective action or labor relations problem of any
kind which has materially adversely affected or may so affect
the Company or any of its businesses or operations, is pending
or, to the knowledge of the Company is threatened. The Company
has complied in all material respects with the reporting and
withholding provisions of the Code and the Federal Insurance
Contribution Act and all similar state and local laws, and with
the federal, state, and local laws, ordinances, rules and
regulations with respect to employment and employment
practices, terms and conditions of employment and of the
workplace, wages and hours and equal employment opportunity.
4.17 Brokers and Finders. Except for the fees listed
on Exhibit 4.17, neither Pierce nor the Company has incurred or
become liable for any commission, fee or other similar payment
to any broker, finder, agent or other intermediary in
connection with the negotiation or execution of this Agreement
or the consummation of the transactions contemplated hereby.
Pierce agrees to be responsible for paying all Broker fees
incurred by the Company as a result of this transaction, if
any.
4.18 Accounts Receivable.
(a) All accounts receivable of the Company
shown on the audited balance sheets of the Company as of the 12
month period ending July 31, 1997, and all notes and accounts
receivable acquired by the Company subsequent to July 31, 1997,
reflect actual transactions, have arisen in the ordinary course
of business and have been collected or are now in the process
of collection without recourse to any judicial proceedings in
the ordinary course of business in the aggregate recorded
amounts thereof, less the applicable allowances reflected on
such balance sheets with respect to the accounts receivable
shown thereon or set up on the respective books of the Company
with respect to the notes and accounts receivable acquired
subsequent to July 31, 1997.
(b) Except as set forth on Exhibit 4.18(b), the
Company has no knowledge as to any of the Company's accounts
receivable being subject to any lien or claim of offset, set
off or counterclaim not provided for by the Company's allowance
for doubtful accounts as of the date of execution hereof.
4.19 Conflicts of Interests. Except as described in
Exhibit 4.19 (a), no officer, director or stockholder of the
Company was or is, directly or indirectly, a joint investor or
co-venturer with, or owner, lessor, lessee, licensor or license
of any real or personal property, tangible or intangible, owned
or used by, or a lender to or debtor of, the Company and the
Company has no commitments or obligations as a result of any
such transactions prior to the date hereof. Except as
described in Exhibit 4.19 (b), and except for directly or
indirectly holding less than five percent (5%) of the
outstanding shares of stock in a company which is publicly
traded, none of such officers, stockholders, or directors own
or have owned, directly or indirectly, individually or
collectively, an interest in any entity which is a competitor,
customer or supplier of (or has any existing contractual
relationship with) the Company.
4.20 Environmental Compliance. Exhibit 4.20(a) sets
forth all government agencies which substantially regulate the
Company's business. Except as listed on Exhibit 4.20(b), the
Company has complied in all material respects with all
applicable federal, state and local laws, ordinances, rules and
regulations with respect to its premises and its operations and
hazardous materials, including, but not limited to, all rules
and regulations promulgated by the Occupational Safety and
Health Administration and the Federal Communications Commission
and have kept its premises free and clear of any liens and
charges imposed pursuant to such laws, ordinances, rules and
regulations. The Company has not received any notice that any
facts or conditions exist which would give rise to any
violation, claim, charge, penalty or liability relating to any
applicable environmental laws, rules or regulations of any
governmental body or agency having jurisdiction over the
premises. For purposes of this section, "Hazardous Materials"
shall include, without limitation, any pollutants or other
toxic or hazardous substances or any solid, liquid, gaseous or
thermal irritant or contaminant, including smoke, vapor, soot,
fumes, acids, alkalis, chemicals and waste (including materials
to be recycled, reconditioned or reclaimed), flammable
materials, explosives, radioactive materials, hazardous waste,
hazardous or toxic substances, or related materials, asbestos
requiring treatment as a matter of law, or any other substance
or materials defined as hazardous or harmful, or requiring
special treatment or special handling by any federal, state or
local environmental law, ordinance, rule or regulation
including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
(33 U.S.C. Sections 1251, et seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Section 1801, et
seq.), the Resource Conservation and Recovery Act, as amended
(42 U.S.C. Sections 6901 et seq.), the Occupational Safety and
Health Act of 1970 and the regulations adopted and publications
promulgated pursuant thereto.
4.21 Ownership of the Stock. Pierce owns all of the
Stock beneficially and of record, free and clear of all liens,
restrictions, encumbrances, charges, and adverse claims and the
Stock to be purchased hereunder constitutes One Hundred Per
Cent (100%) of issued and outstanding stock of the Company.
4.22 Absence of Sensitive Payments. Neither Pierce
nor, to the knowledge of Pierce and Company, any of the
Company's directors, officers, or stockholders:
(a) has made or has agreed to make any
contributions, payments or gifts of funds or property to any
governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift
was or is illegal under the laws of the United States, any
state thereof, or any other jurisdiction (foreign or domestic);
(b) has established or maintained any
unrecorded fund or asset for any purpose, or has made any false
or artificial entries on any of its books or records for any
reason; or
(c) has made or has agreed to make any
contribution or expenditure, or has reimbursed any political
gift or contribution or expenditure made by any other person to
candidates for public office, whether federal, state or
local(foreign or domestic) where such contributions were or
would be a violation of applicable law.
4.23 Approval of Merger; Related Matters. Pierce
represents and warrants that Pierce, in his or her capacity as
a shareholder of the Company (i) approves of and consents to
the Merger as set forth in this Agreement, (ii) waives any
notice of a shareholder's meeting or similar corporate
formality in connection with the approval of the transactions
described herein, including, without limitation, the Merger,
(iii) waives any rights to protest or object to the Merger or
to the exercise of any statutory remedy of appraisal as to the
Stock owned by such Security holder as provided in the CGCL,
(iv) has received a copy of resolutions approving the Merger in
accordance with the CGCL, and (v), to the extent such Pierce
owes any amounts to the Company pursuant to any Promissory Note
issued by such Pierce to the Company, consents to the use of a
portion of the Merger Consideration payable to such Pierce to
pay off each such Promissory Note.
4.24 Tax Free Reorganization. Pierce and the Company
represent and warrant that they will take no action which would
disqualify the Merger from being treated as a tax free
reorganization under the Code.
SECTION 5
REPRESENTATIONS, WARRANTIES AND CERTAIN
COVENANTS OF PARENT AND WHITE MOUNTAIN
As a material inducement to induce Pierce to
consummate the Merger under this Agreement, Parent and White
Mountain represent and warrant that each of the matters set
forth in this Section 5 are true and correct as of the date
hereof, and acknowledge that Pierce's entry into this Agreement
and the performance of their obligations hereunder are made in
reliance upon the completeness and accuracy of each of the
matters set forth herein. The representations and warranties
being made by the Parent and White Mountain shall survive as
set forth in Section 12.11 herein.
5.1 Organization, Standing, etc. Parent and White
Mountain are duly organized, validly existing and in good
standing under the laws of its jurisdiction of their
organization.
5.2 Authorization, etc. The execution and delivery
of this Agreement and any other instruments or documents
required to be executed and delivered hereby, and the purchase
of the Stock contemplated hereby, have been authorized by such
authorities or by such court of competent jurisdiction, if any,
as may be required by applicable law and constitute a valid and
binding obligations of Parent and of White Mountain,
enforceable against them in accordance with the terms of this
Agreement.
5.3 No Breach or Defaults Caused by Agreement. The
making and execution, delivery, and performance by Parent and
White Mountain of this Agreement does and will not breach or
constitute (with due notice or lapse of time or both) any
default in any articles, by-laws, agreements, or instruments of
any kind or character to which Parent or White Mountain are a
signatory or a party, or by which they may be bound, subject
to, or affected, now or in the future.
5.4 Governmental Approvals. Except as set forth in
Section 6.9 and the related Registration Rights Agreement, no
registration or filing with, or consent or approval of, or
other action by, any federal, state, or other governmental
agency or instrumentality, which has not been made or obtained
prior to the execution of this Agreement by Parent or White
Mountain, is or will be necessary for the valid execution,
delivery, and performance of this Agreement by Parent and White
Mountain.
5.5 Brokers Fees. Except for the broker fee owed to
New Venture Capital Corporation set forth in Exhibit 5.5,
Parent and White Mountain represent there are no other brokers
involved in this transaction on their behalf.
5.6 Authorized Shares of Stock. There exists
sufficient authorized, but unissued, shares of Arguss Stock
necessary to enable Parent to satisfy any obligation of it to
issue shares of Arguss Stock pursuant to this Merger Agreement.
5.7 Authorization of Agreement.
(a) The execution, delivery and performance by
Parent or White Mountain of this Agreement to which it is a
signatory hereunder have been duly authorized by all requisite
corporate action and will not (i) violate any applicable
provision of law, any order of any court or other agency of
government, the Articles or Certificate of Incorporation or
Bylaws of the Parent or White Mountain, or any provision of any
indenture, agreement or other instrument by which the Parent or
White Mountain, or any of their properties or assets is bound
or affected, or (ii) conflict with, result in a material breach
of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other
instrument, or results in being declared void, voidable or
without further binding effect any license, governmental permit
or certification, employee plan, note, bond, mortgage,
indenture, deed of trust, franchise, lease, contract,
agreement, or other instrument or commitment or obligation to
which Parent or White Mountain is a party, or by which Parent
or White Mountain, or any of their assets, may be bound,
subject or affected, or (iii) violate any order, writ,
injunction, decree, judgment, or ruling of any court or
governmental authority applicable to Parent or White Mountain
or any of their assets.
5.8 Survival of Can-Am Division. For accounting
purposes, the operations of the Company on the Closing Date
shall remain separate and apart from the other assets,
operations and business of Parent or White Mountain after the
Closing, as a separate and distinct division of Parent and
White Mountain until the initial term of Pierce's Employment
Agreement has been completed. No intercompany charges or
expenses of Parent or White Mountain unrelated to the Can-Am
Division may be charged against the Company during the
calculation of any bonus under said Employment Agreement.
5.9 Accuracy of Filings. Parent represents and
warrants that all filing required by the Act have been filed
and are complete and correct and fairly present the financial
position of the Parent as of the Closing Date.
5.10 Tax Free Reorganization. Parent and White
Mountain represent and warrant that they will take no action
which would disqualify the Merger from being treated as a tax
free reorganization under the Code.
SECTION 6
CONDITIONS TO CLOSING
A. Parent's obligation to consummate the Merger under
this Agreement shall be subject to fulfillment of all of the
following conditions on or prior to the Closing, any of which
may be waived in writing by Parent.
6.1 Performance of Agreements. The Company shall
have performed all agreements contained herein and required to
be performed by it prior to or at the Closing and all of the
representations and warranties made by it and Pierces in this
Agreement shall be true and correct as of the Closing Date.
6.2 Lack of Material Liabilities. The Company shall
have not incurred any material liability, direct or contingent
(as that term is ordinarily used), other than in the ordinary
course of its business, since July 31, 1997; including, but not
limited to, any tax liability resulting from the transaction
contemplated hereby, or by the Company's compliance with any of
the terms and conditions hereof.
6.3 Financial Statements. Parent shall have
received the financial statements. The financial statements
shall be presented, if applicable, after making all appropriate
adjustments required to present them on an accrual basis for a
Subchapter C corporation
6.4 Lack of Defaults. No Event of Default (as
defined in Section 11 hereof) and no event or condition which,
with notice or the lapse of time, or both, would constitute an
Event of Default, shall exist.
6.5 Employment Agreements. Pierce, and those
employees designated as key employees on Exhibit 4.14(b) and
the Company shall have executed the Employment Agreements,
copies of which are attached hereto as Exhibits 6.5(a) -
6.5(__).
6.6 Opinion of Counsel. Parent shall have received
an opinion of counsel from the attorneys for the Company, dated
as of the Closing Date, in form and substance substantially
similar to that attached hereto as Exhibit 6.6.
6.7 Compliance Certificate. The Company shall have
delivered to Parent a certificate executed by its President,
dated the Closing Date, certifying the fulfillment of the
conditions specified in this Section 6 and the accuracy of the
representations and warranties contained in Section 4 hereof.
6.8 Key-Person Term Life Insurance. The Company
shall have applied for an insurance policy on the live of
Pierce, such policy (a) to name the Parent as sole beneficiary,
(b) to be in form and substance satisfactory to the Parent, and
(c) to be in the amount of Four Million Dollars ($4,000,000).
6.9 Registration Rights Agreement. Pierce and
Parent shall have executed the Registration Rights Agreement, a
copy of which is attached hereto as Exhibit 6.9.
6.10 Employee Stock Options. Parent resolves to take
any and all actions necessary, including soliciting the
approval of its shareholders, to grant unqualified stock
options to the employees and in the amounts designated in
Exhibit 6.10.
6.11 Release from Pierce. Pierce shall execute and
deliver to the Parent, in a form satisfactory to Parent's
counsel, a release of any claim that he may have against the
Company for the repayment of any loan, claim for unpaid
compensation, claim for indemnification or otherwise except for
the notes or other obligations set forth in Exhibit 6.11 which
will be paid according to their terms.
6.12 Corporate Documents. Parent shall have received
copies of the following documents:
(a) a certificate of the President of the
Company dated the Closing Date and certifying (i) that attached
thereto is a true and complete copy of the Articles or
Certificate of Incorporation and Bylaws of the Company as in
effect on the date of such certification; and (ii) that
attached thereto is a true and complete copies of resolutions
adopted by the Board of Directors of the Company authorizing
the execution, delivery and performance of this Agreement, and
that all such resolutions are still in full force and effect
and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement; and
(b) such additional supporting documents
and other information with respect to the operations and
affairs of the Company as Parent may reasonably request.
All such documents described in (a) and (b) shall be
satisfactory in form and substance to Parent and its counsel.
6.13 Corporate Filings. All relevant incorporation
and merger documents shall be filed with the appropriate
governmental agencies and shall be attached hereto as
Exhibit 6.13.
6.14 Trustee of Profit Sharing Plan. The Surviving
Corporation shall at Closing cause a successor trustee, if
necessary, for the Company's profit sharing plans to be
appointed.
6.15 Net Worth. The Company shall have as of the
Closing Date, a Net Worth greater than or equal to $6.0
million. To enable the parties to calculate the Net Worth as
of Closing, Pierce shall cause the Closing Balance Sheet to be
delivered to Parent withing ten (10) days of Closing or by
January 21, 1997, whichever occurs later.
6.16 Pierce's Guaranty of Company Debt. Parent and
White Mountain shall obtain the release of all of Pierce's
personal guaranties of the Company's debt set forth on Exhibit
6.16 within thirty (30) days of the Closing Date, and provide
Pierce with written confirmation of such release(s) when
obtained.
6.17 Contract to Lease or Purchase Real Property.
Pierce and Parent shall have executed either a contract to
purchase the Real Property, pursuant to which the Parent shall
acquire the Real Property, within sixty (60) days from the
Closing Date at a mutually agreeable purchase price, or in the
alternative, have entered into a lease at standard market
rates pursuant to which the Can-Am Division of the Surviving
Corporation shall continue to occupy the Real Property.
6.18 Chief Financial Officer. The Company shall, on
or before Closing have hired a chief financial officer to
oversee the financial affairs of Company.
6.19 Exhibits. All exhibits required to be delivered
to Parent and/or White Mountain hereunder which are not
delivered as of the execution of this Agreement shall be
delivered before Closing and shall be acceptable to Parent
and/or White Mountain, in their sole discretion.
B. Pierce's obligation to consummate the Merger under
this Agreement shall be subject to fulfillment of all of the
following conditions on or prior to the Closing, any of which
may be waived in writing, by Pierce.
6.20 Performance of Agreements. The Company shall
have performed all agreements contained herein and required to
be performed by it prior to or at the Closing and all of the
representations and warranties made by it and Pierces in this
Agreement shall be true and correct as of the Closing Date.
6.21 Lack of Defaults. No Event of Default (as
defined in Section 10 hereof) and no event or condition which,
with notice or the lapse of time, or both, would constitute an
Event of Default, shall exist.
6.22 Compliance Certificate. The Company shall have
delivered to Parent a certificate executed by its President,
dated the Closing Date, certifying the fulfillment of the
conditions specified in this Section 6 and the accuracy of the
representations and warranties contained in Section 5 hereof.
6.23 Registration Rights Agreement. Pierce and
Parent shall have executed the Registration Rights Agreement, a
copy of which has been previously attached hereto as
Exhibit 6.9.
6.24 Corporate Filings. All relevant incorporation
and merger documents shall be filed with the appropriate
governmental agencies and shall be attached hereto as
Exhibit 6.23.
6.25 Corporate Documents. Pierce shall have received
copies of the resolutions adopted by the Board of Directors of
Parent authorizing the execution, delivery and performance of
the Agreement.
6.26 Exhibits. All exhibits required to be delivered
to Pierce hereunder which are not delivered as of the execution
of this Agreement shall be delivered before Closing and shall
be acceptable to Pierce, in his sole discretion.
SECTION 7
TRANSACTIONS PRIOR TO CLOSING
Between the date of this Contract and the Closing,
the executive officers and Board of Directors of the Company
shall retain full control of the management and business of the
Company. To enable Parent to prepare for settlement at the
Closing, Parent, Pierce and the Company agree that between the
date hereof and Closing:
7.1 Taxes. The Company will promptly pay and
discharge, or cause to be paid and discharged, their federal,
state and other governmental taxes, assessments, fees and
charges imposed upon it or on any of its property or assets and
timely file any returns and reports in connection with the
foregoing; provided, however, nothing herein shall require the
Company to pay or cause to be paid any tax, assessment, fee or
charge so long as the validity thereof shall be contested in
good faith by appropriate procedures and the Company has set
aside on its books and maintains adequate reserves with respect
thereto or for which disclosure to Parent has been made
pursuant to Exhibits 4.10(a), (b) and/or (c).
7.2 Books of Record and Account; Inspection. The
Company will maintain at all times proper books of record and
account in accordance with GAAP, and will permit any of
Parent's officers or any of its authorized representatives or
accountants to visit and inspect the offices and properties of
the Company, examine the Company's books of account and other
records, and discuss the Company's affairs, finances and
accounts with Parent's appropriate officers and managers, legal
counsel, accountants and auditors, all at normal business hours
and as often as Parent may request provided any such
discussions with accountants will not cause the Company to
incur any material cost with respect to such accountants and
legal counsel.
7.3 Financial Reports. The Company shall furnish to
Parent, within 20 days after the end of each month (and within
45 days after the end of the last month of the Company's fiscal
year), an unaudited financial report of the Company, which
report shall include profit and loss statement, a consolidated
balance sheet, a cash flow analysis, and such other financial
information that Parent may reasonably request.
7.4 Insurance.
(a) The Company will maintain in effect
liability insurance, property insurance, worker's compensation
insurance, the life insurance policies referenced in Section
6.8 and extended coverage insurance on its personal property
referenced in Section 4.15 above, with responsible insurance
companies, against such risks as are customarily insured
against by similar businesses operating in the same vicinity,
and in amounts not less than those (i) recommended by major
insurance companies for similar businesses or (ii) required by
governmental authorities having jurisdiction over all or part
of the Company's operations.
7.5 Notification. The Company will, within two (2)
business days, advise Parent in writing of the following:
(a) The occurrence of an Event of Default;
(b) The filing of any suit, action, other
proceeding against the Company or any investigation which the
Company learns is pending or threatened against it, if the
amount involved or at risk by nature of such suit, action,
other proceeding or investigation exceeds Seventy-Five Thousand
Dollars ($75,000);
(c) The filing, recording or assessment of a
federal, state or local tax lien against the Company or any of
its assets other than in the ordinary course of business;
(d) The occurrence of any reportable event with
respect to any employee benefit plan of the Company or which is
subject to the provisions of ERISA, including a statement
setting forth details as to the reportable event and the action
proposed to be taken with respect thereto, together with a
copy, if available, of the notice of such reportable event
given to the Pension Benefit Guaranty Corporation; and
(e) Any other condition, act or event which the
Company in its good faith judgment believes will adversely
affect Parent's rights under this Agreement.
7.6 Board of Directors' Meetings. Parent shall be
entitled, upon the giving of written notice, to designate two
individuals to attend the meetings of the Board of Directors of
the Company and the Company shall take all appropriate actions
to ensure that Parent's designees receive notice of and are
invited to attend the meetings of the Board of Directors. The
Board of Directors of the Company shall meet no less than once
during each calendar quarter.
7.7 Corporate Existence. The Company shall at all
times cause to be done every act necessary to maintain and
preserve its existence, rights, franchises, and certifications
in the jurisdictions of their incorporation and to remain
qualified as foreign corporations in every jurisdiction in
which qualification is required.
7.8 Maintenance of Properties. The Company shall
maintain or cause to be maintained in good repair, working
order and condition all tangible properties required for its
business and from time to time make or cause to be made all
appropriate repairs and replacements thereof.
7.9 Trade Secrets. The Company will use its best
efforts to maintain the confidentiality of any Business
Property Rights of the Company and will seek to restrict the
ability of any employee having knowledge of such proprietary
information or trade secrets from competing with the Company
through employment and non-competition agreements and similar
arrangements.
7.10 Mergers and Other Transfers. The Company will
not (i) merge or consolidate with any person, firm, association
or corporation, (ii) transfer, sell, assign, lease or otherwise
abandon or dispose of (whether in one transaction or a series
of transactions) any material part of its assets except in the
normal course of business if such transaction would reduce the
net worth of the Company below $6.5 million, (iii) change the
nature of its business, (iv) create any subsidiaries, or (v)
liquidate, dissolve or cease active business operations.
7.11 Certificate of Incorporation and Bylaws. The
Company will not amend its Articles or Certificate of
Incorporation or Bylaws if the result of any such amendment
will have an adverse effect on Parent's rights under this
Agreement.
7.12 Judgments and Liens. Pierces or the Company
shall not create, incur, assume or permit to exist any
mortgage, lien, security interest, charge or encumbrance on any
property or assets now owned or hereafter acquired by the
Company except:
(a) Liens arising out of judgments or awards
(i) which have been in force less than the applicable appeal
period so long as execution is not levied thereunder, or (ii)
in respect of which the Company shall in good faith be
prosecuting an appeal or proceedings for review and in respect
of which the Company shall have secured a subsisting stay of
execution pending such appeal or proceedings for review;
(b) Liens for taxes, assessments or
governmental charges or levies, provided payment thereof shall
not at the time be required;
(c) Deposits, liens, bonds or pledges to secure
payment of worker's compensation, unemployment insurance,
pensions or other social obligations, surety, stay or appeal
bonds, or other similar obligations arising in the ordinary
course of business;
(d) Mechanic's, worker's, repairmen's,
warehousemen's, vendor's, or carrier's liens, or other similar
liens arising in the ordinary course of business and securing
sums which are not past due, or deposits or pledges to obtain
the release of any such liens;
(e) Liens arising by operation of law under
lease agreements made in the ordinary course of business and
confined to the property rented;
(f) Liens on property securing the purchase
price of property acquired after the date hereof provided that
each of such lien (i) is given solely to secure indebtedness
not exceeding one hundred percent (100%) of the lesser of the
cost or fair market value of such property, (ii) does not
extend to any other property and (iii) is given at the time of
acquisition of the property;
(g) Presently outstanding liens;
(h) liens and encumbrances securing
indebtedness to Senior Creditors; and
(i) Extension, renewal or refunding of
indebtedness secured by liens permitted by this Section 7.12,
provided that the then outstanding amount of such indebtedness
is not increased and such liens do not extend to property not
then encumbered thereby.
7.13 Issuances of Capital Stock. The Company will
not issue any of its capital stock to any person or entity or
grant any person or entity an option, warrant, convertible
security or any other right or agreement to acquire any shares
of its capital stock, without the prior written consent of
Parent.
7.14 Purchase of Securities or Assets. The Company
will not purchase the outstanding equity securities of any
other person, firm, association or corporation, except
obligations issued or guaranteed by the United States
government or any state or political subdivision thereof or
other short-term instruments normally marketed by banks and
nationally recognized brokerage firms, provided nothing herein
shall restrict the Company from maintaining accounts with
federally insured banking institutions or money market funds.
7.15 Declaration of Dividends, etc. The Company will
not (i) make, pay or declare any distributions or dividends of
cash or property with respect to its issued shares of Common
Stock; (ii) directly or indirectly redeem, repurchase or
otherwise reacquire any shares of its Common Stock; (iii)
increase the salary or pay any bonuses to any management
employees, officers or directors of the Company; or (iv) make
any payment to Pierce as holder of the stock to cover any and
all tax liability resulting therefrom, if any of the above
actions decreases the net worth of the Company below
$6.0 million.
7.16 Payments to Officers. Except as described on
Exhibit 7.16, the Company shall not loan or advance any amount
to, or sell, transfer or lease any properties or assets (real,
personal or mixed, tangible or intangible), to, or enter into
any agreement or arrangement with, any of the Company's
officers or directors, except for compensation to officers
pursuant to existing agreements, copies of which have been
delivered to Parent, and reimbursement of expenses incurred by
employees of the Company in connection with their employment.
7.17 Indebtedness. The Company shall not incur any
indebtedness for borrowed money, including pension fund loans,
or purchase money indebtedness or guarantee any such
indebtedness or issue or sell any debt securities of the
Company or guarantee in any manner (including, without
limitation, by agreeing to maintain the financial condition of
another person) any debt securities of others, provided,
however, that the Company shall have the right to incur
indebtedness in the ordinary course of business for office
furniture, equipment, trade payables, machinery and vehicles.
7.18 Expenditures. The Company shall not make any
capital investments or capital expenditures in excess of an
aggregate of One Hundred Thousand Dollars ($100,000.00) which
are outside of the ordinary course of the Company's business,
without the consent of Parent.
7.19 Employee Benefit Plans. The Company shall not
adopt any new Employee Benefit Plans but may expand existing
benefits subject to the approval of the Board of Directors.
7.20 Material Contracts. Except as described on
Exhibit 7.20, the Company shall not enter into, assume, renew
or permit to be renewed (including by not giving a permitted
notice of termination) any contract, lease or obligation
outside the ordinary course of business. Except as expressly
set forth therein, the Company shall not modify, amend,
terminate, waive or release any benefit or right under any
employment agreement, or any other material agreement to which
the Company is a party, without the prior written consent of
Parent.
7.21 Non-business Assets. The Company shall not
apply any corporate funds toward the payment of any principal
or interest due or owing for the purchase of any non-corporate
assets.
SECTION 8
COVENANTS NOT TO COMPETE
8.1 Covenant Not to Compete. Except as authorized
by White Mountain and Parent or by the terms of this Agreement,
Pierce shall not, directly or indirectly, alone of with others,
enter into any business related to the construction,
reconstruction, maintenance, repair and expansion of CATV,
SMATV systems and any other related systems in the
telecommunications industry within the United States for a
period of three (3) years from the date of Closing. Further,
Pierce shall not, during such period, disclose, divulge,
communicate, use to the detriment of the Company or Parent or
for the benefit of any other person or persons, or use in any
way, any confidential information or trade secrets of the
Company, including customer list, personnel information, and
other similar data. In addition, Pierce shall not, during such
period, (i) hire or attempt to hire any employee of the
Company, or (ii) interfere with any contract or other
relationship of the Company and any of its customers or
suppliers. Pierce agrees that Parent shall be entitled to
injunctive relief in the event of any breach of the covenants
set forth in this paragraph together with reasonable attorney's
fees and damages. Damages shall only be collectible from the
party breaching this provision.
SECTION 9
A. INDEMNIFICATION BY PIERCE AND THE COMPANY
Pierce and the Company, to the extent set forth in
this Agreement, shall indemnify and hold harmless Parent, White
Mountain and Surviving Corporation against and in respect to
the following, in addition to any losses otherwise specifically
indemnified against in this Agreement, as follows:
9.1 Indemnification by Pierce and the Company.
(a) Breach. Subject to the provision of this
Section 9.1 and except as otherwise more specifically set forth
herein, Pierce and the Company (in his capacity as an
indemnifying party, an "Indemnifying party") covenants and
agrees to jointly and severally indemnify, defend, protect, and
hold harmless each of Parent, White Mountain, the Surviving
Corporation and each of their respective Subsidiaries and
Affiliates (each in its capacity as an indemnified party, an
"Indemnitee") at all times from and after the date of this
Agreement from and against all Adverse Consequences incurred by
such Indemnitee as a result of or incident to (i) any breach of
any representation or warranty of the Company or Pierces set
forth in Section 4 of this Agreement, (ii) any material breach
or nonfulfillment by the Company or Pierce of, or any
noncompliance by the Company or Pierce with, any covenants,
agreement, or obligation contained herein or in any certificate
or other document delivered in connection herewith, (iii) all
damage or deficiency resulting directly from the material
inaccuracy of any list, certificate or other instrument
delivered by or on behalf of Pierce or the Company in
connection herewith, whether made as of the date hereof, or as
of the Closing Date hereunder or otherwise, or resulting from
the non-fulfillment of any agreement on the part of Pierce or
the Company contained in this Agreement or made in connection
with the transactions contemplated hereby.
(b) Environmental Indemnification. The
Company, and Pierce shall jointly and severally, hereby
indemnify each Indemnitee and hold each Indemnitee harmless
from and against any and all damages, losses, liabilities,
costs and expenses of removal, relocation, elimination,
remediation or encapsulation of any Hazardous Materials (as
defined in Section 4.20), obligations, penalties, fines,
impositions, fees, levies, lien removal or bonding costs,
claims, actions, causes of action, injuries, administrative
orders, consent agreements and orders, litigation, demands,
defenses, judgments, suits, proceedings, disbursements or
expenses (including without limitation, attorney's and experts'
reasonable fees and disbursements) of any kind and nature
whatsoever resulting from the operation of the Company's
business as of the Closing Date: (i) which (x) is imposed
upon, or incurred by, Parent by reason of, relating to or
arising out of the violation by the Company prior to the
Closing of any environmental laws, rules or regulations of any
governmental body or agency having jurisdiction over the
premises, or (y) arises out of the discharge, dispersal,
release, storage, treatment, generation, disposal or escape of
any Hazardous Materials, on or from the premises as of the
Closing Date, or (z) arises out of the use, specification, or
inclusion of any product, material or process containing
Hazardous Materials, or the failure to detect the existence or
proportion of Hazardous Materials in the soil, air, surface
water or groundwater, or the performance or failure to perform
the abatement of any Hazardous Materials source as of the
Closing Date or the replacement or removal of any soil, water,
surface water, or groundwater containing Hazardous Materials;
and/or (ii) is imposed upon, or incurred by, Parent by reason
of or relating to any material breach, act, omission or
misrepresentation contained in Section 4.20.
(c) Tax Matters. Company and Pierce shall
jointly and severally indemnify each Indemnitee from and
against all Adverse Consequences incurred by any Indemnitee as
a result of or incident to any Income Taxes or other Taxes
imposed on the Surviving Corporation, the Company or any of
their Subsidiaries or for which the Surviving Corporation,
Company or any of its Subsidiaries may otherwise be liable by
law or regulation (including, without limitation, the
provisions of Treasury Regulation Section 1.1502-6) or
contract, for any taxable year or period that ends on or before
Closing or resulting in any way from this transaction, or the
conversion of the company from a cash basis to an accrual basis
taxpayer (including the failure of Pierces to report as taxable
income the cumulative adjustment to an accrual basis as
provided in section 1.3) or otherwise resulting from the
Company conversion from a Subchapter S to a Subchapter C
corporation. Notwithstanding any language to the contrary,
Company and Pierce shall have no duty to Indemnitees to
indemnify against any adverse tax consequences arising from a
disqualification of this transaction as a tax-free
reorganization to the extent:
(1) Said disqualification arises from acts or
omissions on the part of Parent or White Mountain; or,
(2) Parent or White Mountain obtains a gross
tax benefit from the disqualification.
(i) The Company shall furnish to Parent
copies of the federal, state, and local tax returns of the
Company for the period ending on the Closing Date and shall
obtain the consent of Parent before filing such returns which
consent shall not be unreasonably withheld.
(ii) Except as otherwise provided in this
Agreement, Parent shall have the sole right to represent the
interests of any Indemnitee in any tax audit or administrative
or court proceeding relating to any taxable period, including
without limitation taxable periods ending on or before Closing,
and to compromise, settle, or contest any tax claims in
connection therewith in its sole discretion, provided that
Parent shall provide Pierce with written notice of its intent
to exercise its rights hereunder. Pierce shall have the right,
at their expense, to join Parent in any such defense.
(d) Broker Fee. Each Indemnifying Party
jointly and severally indemnifies each Indemnitee from any
claim made by a broker, finder, agent or other intermediary
against the Company after Closing in connection with the
negotiation or execution of this Agreement or the consummation
of the transactions contemplated hereby.
(e) Costs and Expenses. Except as otherwise
provided in this Agreement, all amounts indemnified pursuant to
this Section 9 shall include all costs and expenses of the
Indemnitee, including, but not limited to, the costs of any
actions, reasonable attorneys fees, and other expenses
necessary to enforce the rights granted hereunder.
(f) Termination of Company's Obligation.
Company's obligation to indemnify Parent, or to contribute to
any party indemnifying Parent, pursuant to this Section 9 shall
expire as of the Filing Date.
(g) Termination of Pierce's Obligation.
Pierce's obligation to indemnify any Indemnitee, or to
contribute to any party indemnifying any Indemnitee, pursuant
to this Section 9 shall expire three (3) years from the Closing
Date, for non-tax matters, and expire six (6) years from the
Closing Date for tax matters or in the event of actual fraud or
intentional non-disclosure.
9.2 Limits of Indemnification. For the purposes of
this Section 9, the Indemnifying Parties Indemnification shall
be limited to those Adverse Consequences which exceed in the
aggregate One Hundred Thousand Dollars ($100,000).
9.3 No Circular Recovery. Pierce hereby agrees that
he will not make any claim for indemnification against either
Parent or White Mountain by reason of the fact that he was a
director, officer, employee agent or other representative of
the Company of any of its Subsidiaries (whether such claim is
for Adverse Consequences of any kind or otherwise and whether
such claim is pursuant to any statute, charter, by-law,
contractual obligation or otherwise) with respect to any claim
for indemnification brought by Parent, the Surviving
Corporation, and their respective Subsidiaries and Affiliates
against Pierces.
B. INDEMNIFICATION BY PARENT AND WHITE MOUNTAIN
Parent and White Mountain, to the extent set forth in
this Section 9B, shall indemnify and hold harmless Pierce
against and in respect to the following:
9.4 (a) Parent's Broker. Parent and White Mountain
jointly and severally indemnify Pierce from any claim made by
the broker listed on Exhibit 5.5 against Pierce in connection
with the negotiation or execution of this Agreement or the
consummation of the transactions contemplated hereby.
(b) Costs and Expenses. Except as otherwise
provided in this Agreement, all amounts indemnified pursuant to
this Section 9B shall include all costs and expenses of the
Indemnitee, including, but not limited to, the costs of any
actions, reasonable attorneys fees, and other expenses
necessary to enforce the rights granted hereunder.
(c) Tax Liability. Parent and White Mountain,
jointly and severally, indemnify Pierce for any liability
arising from his assumption of tax liability to the Franchise
Tax Board of the State of California arising from the
operations of the Company after the Closing Date.
(d) Termination of Parent's and White
Mountain's Obligation. Parent's and White Mountain's
obligation to indemnify Pierce pursuant to this Section 9B
shall expire three (3) years from the Closing Date, for non-tax
matters, and expire six (6) years from the Closing Date for tax
matters or in the event of actual fraud or intentional non-
disclosure.
SECTION 10
TERMINATION
10.1 Termination by Parent or White Mountain. This
Agreement may be terminated by Parent or White Mountain, on or
before the Closing Date, upon the occurrence of the following:
(a) If any of the conditions specified in
Section 6A shall not have been met prior to the Closing Date.
(b) If an event of default, as defined in
Section 11, has occurred, and has not been cured during any
applicable cure period.
10.2 Termination by Pierce. This Agreement may be
terminated by Pierce, on or before the Closing Date if any of
the conditions specified in Section 6B shall not have been met
prior to Closing.
SECTION 11
DEFAULT
11.1 Events of Default. It shall be considered an
Event of Default if any one or more of the following events
shall occur:
(a) If any statement, certificate, report,
representation or warranty of a material nature made or
furnished by the Company under this Agreement shall prove to
have been false or erroneous in any material respect.
(b) The occurrence of any event of material
default under any other financing agreement, note, lease,
mortgage, security agreement, factoring agreement or any other
obligation of the Company the result of which will have a
material adverse effect on the Company unless any such event of
default shall be timely cured under any applicable cure
provision or waived by the person to whom or to which the
Company is obligated or indebted.
11.2 Waiver by Parent. Any failure by Parent to
insist upon strict performance by Pierce or the Company of any
of the terms and provisions of this Agreement, shall not be
deemed to be a waiver of any of the terms and conditions hereof
and Parent shall have the right thereafter to insist upon
strict performance thereof by Pierce or the Company.
SECTION 12
MISCELLANEOUS
12.1 Costs. Except for expenses relating to the
preparation of the July 1997 Audit, which expense shall be
borne by Parent, each party shall pay its own expenses incident
to the transaction contemplated hereby, including fees and
expenses of their attorneys, accountants, appraisers or
consultants, whether or not those transactions are consummated
at Closing, subject to the indemnification and termination
provisions hereof.
12.2 Sales and Transfer Taxes. All state sales taxes
and all transfer taxes and all documentary taxes, if any,
payable in connection with the Merger shall be paid by the
party to whom such taxes are customarily attributed under the
laws of the State of California.
12.3 Relationships to Other Agreements. In the event
of a conflict between any of the provisions of this Agreement
and any other agreement relating to this transaction between
Pierce, Company and Parent, the provisions of this Agreement
shall control.
12.4 Titles and Captions. All section titles or
captions in this Agreement are for convenience of reference and
are not part of this Agreement and shall in no way define,
limit, extend or describe the scope or intent of provisions
herein.
12.5 Exhibits. The Exhibits and Schedules referred
to herein are hereby made a part hereof.
12.6 Applicable Law. This Agreement is to be
governed by, and construed, interpreted, and enforced in
accordance with the laws of Delaware.
12.7 Binding Effect and Assignment. This Agreement
shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties. Notwithstanding the
foregoing, neither the Company nor Parent and/or White Mountain
shall have any right to assign any of its rights or obligations
under this Agreement without the prior written consent of the
other parties hereto.
12.8 Notices. All notices, requests, instructions,
or other documents required hereunder shall be deemed to have
been given or made when delivered by registered or certified
mail, return receipt requested, postage prepaid or by messenger
or overnight delivery service to:
If Pierce then: Ronald D. Pierce
Can-Am Construction, Inc.
250 Fischer Avenue
Costa Mesa, CA 92626
Counsel for Pierce: John G. Bradshaw
A Professional Law Corporation
3 Imperial Promenade, Suite 800
Santa Ana, CA 92707
Attn: John Bradshaw
If Parent then: Arguss Holdings, Inc.
One Church Street, Suite 302
Rockville, Maryland 20850
Attn: Haywood Miller
Counsel for Parent: Bleecker & Bleecker
51 Monroe Street
Suite 1210
Rockville, Maryland 20850
Attn: Steven S. Bleecker
If White Mountain then: White Mountain Cable Construction
Corp.
6 Post Road
Portsmouth, NH 03001
Counsel for White Mountain: Bleecker & Bleecker
51 Monroe Street
Suite 1210
Rockville, Maryland 20850
Attn: Steven S. Bleecker
Any party may from time to time give the others
written notice of a change in the address to which notices are
to be sent and of any successors in interest.
12.9 Severability. Inapplicability or
unenforceability of any provision of this Agreement shall not
impair the operation or validity of any other provision hereof.
If any provision shall be declared inapplicable or
unenforceable, there shall be added automatically as part of
this Agreement a provision as similar in terms to such
inapplicable or unenforceable provision as may be possible and
be legal, valid and enforceable.
12.10 Acceptance or Approval. By accepting all
or approving anything required to be observed, performed, or
fulfilled, or to be given to Parent pursuant to this Agreement,
including, but not limited to, any certificate, balance sheet,
statement of profit or loss or other financial statement, or
insurance policy, Parent shall not be deemed to have accepted
or approved the sufficiency, legality, effectiveness or legal
effect of the same, or of any term, provision, or condition
thereof as to third parties.
12.11 Survival. All covenants, representations,
and warranties made by Pierce and Parent and White Mountain in
this Agreement shall survive the Closing hereunder for a period
of three (3) years, except those as to tax matters, which shall
survive Closing for a period of six (6) years.
12.12 Entire Agreement. This Agreement,
including all Exhibits, constitutes the entire agreement among
the parties hereto pertaining to the subject matter hereof, and
supersedes all prior agreements and understandings pertaining
thereto. No covenant, representation, or condition not
expressed in this Agreement shall affect or be deemed to
interpret, change or restrict the express provisions hereof and
no amendments hereto shall be valid unless made in writing and
signed by all parties hereto.
12.13 Counterparts. This Agreement may be
executed in any number of counterparts, all of which together
shall constitute one instrument.
12.14 Security Matters. (a) By executing this
Agreement, Parent acknowledges that : (i) Parent has been
advised that the Stock has not been and will not have been
registered under the Act or the California or other applicable
securities laws of any state, that Pierce in transferring such
shares to the Parent will be relying, if applicable, upon the
exemption from such registration requirements contained in
Section 4(1) or 4(2) of the Act as a transaction by a person
other than as issuer, underwriter or dealer and the applicable
state exemption; (ii) the Stock may be "restricted" as that
term is used in Rule 144 under the Act as a consequence of
which Parent may not be able to sell the shares unless such
shares are first registered under the Act and any applicable
state securities laws or unless an exemption from such
registration, is, in the opinion of counsel, available; (iii)
the Stock will be acquired by Parent for purposes other than
"distribution" as that term is used in Section 2(11) of the
Act, and (iv) Parent will execute, if Pierce so requests, an
appropriate letter affirming that its intention with respect to
the proposed acquisition of the Stock is that such acquisition
be for investment purposes only and not with a view toward
resale or distribution thereof.
(b) the shares of Arguss Stock are not
registered under the Securities Act of 1933, as amended (the
"1933 Act"), and are being issued without registration on the
grounds that the sale of Arguss Stock hereunder is exempt from
registration under the 1933 Act pursuant to Section 4(2)
thereof and Parent's reliance on such exemption is predicated
on Pierce's representations set forth herein.
This Agreement is made in reliance upon Pierce's
representations to Parent that the shares of Arguss Stock to be
issued will be acquired for investment and not with a view to
the sale or distribution of any part thereof, and that Pierces
have no present intention of selling, granting participation in
or otherwise distributing the same.
Pierce hereby represent that they are experienced in
evaluating and investing in companies such as the Parent, have
such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of this
investment, and have the ability to bear the economic risks of
this investment. Pierces further represent that during the
course of the transaction they have had the opportunity to ask
questions of, and receive answers from, representatives of
Parent concerning the Parent.
Pierces hereby agree that the Arguss Stock may not be
transferred without registration under the 1933 Act or an
exemption therefrom, and that in the absence of an effective
Registration Statement covering the Arguss Stock, or an
available exemption from registration under the 1933 Act, the
Arguss Stock must be held indefinitely. In particular, and
without limiting the foregoing, Pierces are aware that the
Arguss Stock may be not be sold pursuant to Rule 144
promulgated under the 1933 Act unless all conditions of that
Rule are met.
Pierces hereby agree that in no event will they
transfer any of the Arguss Stock other than pursuant to an
effective Registration Statement under the 1933 Act, or
pursuant to the conditions of any legend appearing on said
Arguss Stock.
12.15 Preparation and Filing of SEC Documents.
If and whenever, as a result of the transaction contemplated
hereunder, the Parent is under an obligation to provide
financial information to, or prepare a filing of any kind with,
the United States Securities and Exchange Commission ("SEC"),
Pierce shall assist the Parent in preparing any audited
financial statements required by the SEC for this purpose. The
cost of preparing any such financial statements shall be borne
by the Parent.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
ATTEST: ARGUSS HOLDINGS, INC.
____________________ By: ______________________________
Title: ___________________________
ATTEST: CAN-AM CONSTRUCTION, INC.
____________________ By:______________________________
Title: ___________________________
WITNESS:
____________________
_____________________________(SEAL)
RONALD D. PIERCE
ATTEST: WHITE MOUNTAIN CABLE CONSTRUCTION
CORP.
____________________ By:______________________________
Title: ___________________________
PAGE 61 OF 61 OF AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, made this 2nd day of
January, 1998, by and between EDWARD A. SCHENCK ("E.
Schenck"), IMEL L. WHEAT, JR. ("Wheat") and KEVIN E. SCHENCK
("K. Schenck") (hereinafter collectively referred to as
"Securityholders"), SCHENCK CONSTRUCTION OF ALASKA, INC., an
Alaska corporation (the "Company"), ARGUSS HOLDINGS, INC., a
Delaware corporation (the "Parent"), and WHITE MOUNTAIN CABLE
CONSTRUCTION CORP. ("White Mountain"), a New Hampshire
corporation and a 100% subsidiary of Parent.
INTRODUCTORY STATEMENT
A. Securityholders collectively own One Hundred (100)
shares of capital stock of the Company, which shares constitute
all of the issued and outstanding capital stock ("Stock") of
the Company, an Alaska corporation doing business as Schenck
Construction and as Schenck Communications.
B. The Company is a full service multimedia
communications contractor engaged in the construction,
reconstruction, maintenance, repair, and expansion of CATV,
SMATV systems and other related systems in the
telecommunications industry.
C. Schenck Communications, Inc. ("SCI") is a Washington
Corporation and wholly owned subsidiary of the Company.
D. Parent has agreed with the Securityholders for Parent
to acquire the Company by means of a merger of the Company with
and into White Mountain, a wholly owned subsidiary of Parent
upon the terms and subject to the conditions set forth herein.
E. In furtherance of such acquisition, the Boards of
Directors of Parent, White Mountain and the Company have each
approved the plan of merger to merge the Company with and into
White Mountain (the "Merger") in accordance with the applicable
provisions of the Delaware General Corporation Law (the
"DGCL"), the Alaska General Corporation Law ("AGCL") and the
Washington General Corporation Law ("WGCL"), and upon the terms
and subject to the conditions set forth herein.
F. Pursuant to the Merger, the record holders of each
outstanding share of the Company's common stock, $1.00 par
value, shall be entitled to receive the Merger Consideration
(as defined in Section 2.1) so that upon receipt of the Merger
Consideration, such share of the Stock shall be cancelled, all
upon the terms and subject to the conditions set forth herein.
G. The parties hereto intend that this transaction to
qualify as a tax free reorganization under Section 368(a)(1)(A)
of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, WITNESSETH, for and in consideration of
the promises and the mutual representations, warranties,
covenants and agreements herein contained and other good and
valuable consideration, receipt of which is hereby
acknowledged, the parties do agree as follows:
DEFINITIONS
The following terms when used in this AGREEMENT AND PLAN
OF MERGER shall have the following meanings:
"1998 Value of the Company" shall mean the value of
the Company equal to the product of Three and One-Half (3-1/2)
times the December 1998 12 Month Adjusted Cash Flow.
"1997 Value of the Company" shall mean the value of
the Company equal to the product of Three and One-Half (3-1/2)
times the September 1997 12 Month Adjusted Cash Flow. For the
puposes of this Agreement, the 1997 Value of the Company is
$8,045,096.
"AGCL" has the meaning set forth in the introductory
statement above.
"Accounts Receivable" means accounts receivable,
notes due from all sources of the Company, and credits for
returned or damaged merchandise.
"Act" shall mean the Securities Act of 1933, as the
same has been and shall be amended from time to time.
"Adverse Consequences" means all material actions,
suits, proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments, orders,
decrees, rulings, damages, dues, penalties, fines, costs,
liabilities, obligations, taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses,
net of all tax savings and insurance proceeds actually received
by an Indemnitee with respect to any of the foregoing.
"Agreement" means this AGREEMENT AND PLAN OF MERGER.
"Arguss" shall mean the Parent, Arguss Holdings,
Inc., a Delaware corporation with its principal offices located
at One Church Street, Suite 302, Rockville, Maryland 20850, and
its successors and assigns.
"Arguss Stock" shall mean the authorized capital
stock of Arguss.
"Assets" means all property, rights, things of value
and other assets of the Company described, referred to, or
listed, in Section 4.9 of this Agreement.
"Bonus 1998 Value of the Company" shall mean the
value of the Company equal to the product of Four (4) times the
December 1998 12 Month Adjusted Cash Flow.
"Certificate of Merger" has the meaning set forth in
Section 1.2 below.
" Closing" means the transfer of the Stock to White
Mountain and the payment of the Purchase Price to
Securityholders pursuant to this Agreement.
"Closing Balance Sheet" shall mean the internally
generated closing balance sheet and profit and loss statement
of the Company for the period ending December 31, 1997, as
adjusted to present them on an accrual basis for a Subchapter C
corporation.
"Closing Date" means the date of Closing, established
under Section 3 of this Agreement.
"Code" means the United States Federal Internal
Revenue Code of 1986, as amended.
"Company" means SCA and SCI for all references prior
to the merger and the division or wholly owned subsidiary of
White Mountain that conducts the business of SCA and SCI after
the merger.
"DGCL" has the meaning set forth in the introductory
statement.
"December 1998 Audit" shall mean the audit of the
Company for the twelve (12) month period ending December 31,
1998, prepared in accordance with generally accepted accounting
principles consistently applied by the accounting firm of Carl
and Carlsen, CPA, and acceptable to the accounting firm of KPMG
Peat Marwick.
"December 1998 12 Month Adjusted Cash Flow" shall
mean that value determined in accordance with generally
accepted accounting principles consistently applied, and based
on the December 1998 Audit, equal to the difference between (a)
that number equal to the twelve (12) month net income of the
Company as of December 31, 1998, adjusted by adding back all
deductions taken in determining such number, if any, for
interest, depreciation, amortization and income taxes and (b)
that number equal to the sum of fifty per cent (50%) of the
Company's depreciation for that same period and the amount, if
any, that the total compensation paid or earned by E. Schenck,
Wheat, and K. Schenck during such period exceeded the
compensation paid to such persons for the similar computation
period of the prior year. For the purpose of this calculation,
all interest paid by the Company on that portion of Company's
indebtedness that exceeds its Net Worth by a multiple greater
than three (3) shall not be added back to the Company's net
income in (a). Notwithstanding the form of the December 1998
Audit, no expense of any kind of Parent or White Mountain, or
any of their subsidiaries of affiliates, shall be allocated or
attributed to the Schenck Division of Company, and no assets of
the Schenck Division shall be written off, in determining the
December 1998 12 Month Adjusted Cash Flow, without the prior
written consent of Securityholders.
"Employment Agreement" means the Employment
Agreements to be executed by the Company, E. Schenck, Wheat,
and the other key employees pursuant to Section 6.6 hereof.
"Environmental, Health, and Safety Laws" means the
United States federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational
Safety and Health Act of 1970, each as amended, together with
all other laws (including rules, regulations, codes, and
judicial decisions thereunder of federal, state, local, and
foreign governments and all agencies thereof) concerning
pollution or protection of the environment, public health and
safety, or employee health and safety, including laws relating
to emissions, discharges, releases, or threatened releases of
(Hazardous Materials) into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of Hazardous Materials.
"Escrow Agreement" shall mean the Escrow Agreement
executed by the Securityholders, Company and Parent pursuant to
Section 6.5 and 2.2(c) hereof.
"Escrowed Purchase Price" shall mean that sum equal
to twenty-five per cent (25%) of the 1997 Value of the Company
and placed in escrow pursuant to Section 2.2(c) hereof. For
the purposes of this Agreement, the Escrowed Purchase Price
shall equal $2,011,274.
"Extremely Hazardous Substance" has the meaning set
forth in Section 302 of the Emergency Planning and Community
Right-to-Know Act of 1986, as amended.
"Financial Statements" means collectively the audited
consolidated financial statement of the Company and its
subsidiaries and affiliates for the Company's fiscal year
ending in 1996, and for the twelve (12) month period ending
September 30, 1997, including the notes thereto, prepared by
Carl and Carlsen, CPA, the Company's regular independent
certified public accountant, and accepted by the accounting
firm of KPMG Peat Marwick. The Financial Statements shall be
presented after making all appropriate adjustments required to
present them on an accrual basis for a Subchapter C
corporation.
"GAAP" shall mean in accordance with generally
accepted accounting principles, consistently applied.
"Gross Margin" shall mean the gross margin of the
Company, based on the December 1998 Audit, determined by
deducting from the revenues of the Company all direct material
and labor costs and all other direct operating costs of the
Company, including, but not limited to, all depreciation of the
tangible assets used by the Company in generating such
revenues.
"Hazardous Materials" shall include, without
limitation, any pollutants or other toxic or hazardous
substances or any solid, liquid, gaseous or thermal irritant or
contaminant, including smoke, vapor, soot, fumes, acids,
alkalis, chemicals and waste (including materials to be
recycled, reconditioned or reclaimed), oil or petroleum
flammable materials, explosives, radioactive materials,
hazardous waste, hazardous or toxic substances, or related
materials, asbestos requiring treatment as a matter of law, or
any other substance or materials defined as hazardous or
harmful, or requiring special treatment or special handling by
any federal, state or local environmental law, ordinance, rule
or regulation including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended (42 U.S.C. Sections 9601, et seq.), the Hazardous
Materials Transportation Act, as amended (49 U.S.C. Section
1801, et seq.), the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Sections 6901 et seq.), the Occupational
Safety and Health Act of 1970 and the regulations adopted and
publications promulgated pursuant thereto.
"Initial Payment" shall mean the consideration paid
at closing which is the sum equal to seventy-five per cent
(75%) of the 1997 Value of the Company. For the purposes of
this Agreement, the Initial Payment shall equal $6,033,822.
"Merger" means the merger of SCA and SCI into White
Mountain.
"Merger Consideration" means the aggregate
consideration set forth in Section 2 hereof.
"Net Worth" shall mean the total assets of the
Company, reduced by any value placed on the intangible assets
of the Company, including, but not limited to, goodwill, less
the total liabilities of the Company as those terms are shown
on the Financial Statements and on the Closing Balance Sheet.
"Registration Rights Agreement" shall mean the
Registration Rights Agreement executed by the Securityholders
and Parent pursuant to Section 6.10 hereof.
"E. Schenck" shall mean Edward A. Schenck, a
stockholder, officer and director of the Company and a
signatory to this Agreement.
"K. Schenck" shall mean Kevin E. Schenck, a
stockholder, officer and director of the Company and a
signatory to this Agreement.
"September 1997 Audit" shall mean the audit of the
Company for the twelve (12) month period ending September 30,
1997, prepared in accordance with generally accepted accounting
principles consistently applied by the accounting firm of Carl
and Carlsen, CPA, and acceptable to the accounting firm of KPMG
Peat Marwick.
"September 1997 12 Month Adjusted Cash Flow" shall
mean that value determined in accordance with generally
accepted accounting principles consistently applied, and based
on the September 1997 Audit, equal to the difference between
(a) that number equal to the twelve (12) month net income of
the Company as of September 30, 1997, adjusted by adding back
all deductions taken in determining such number, if any, for
interest, depreciation, amortization and income taxes and (b)
that number equal to the sum of fifty per cent (50%) of the
Company's depreciation for that same period. For the purposes
of this Agreement, the September 1997 Adjusted Cash Flow is
$2,298,599.
."Stock" shall mean all of the authorized issued and
outstanding capital stock of the Company, including all
warrants, options, convertible securities or right (contingent
or otherwise) to purchase or acquire stock of the Company.
"Surviving Corporation" has the meaning set forth in
Section 1.1 below.
"WGCL" has the meaning set forth in the introductory
statement above.
"Wheat" shall mean Imel L. Wheat, Jr., a stockholder,
officer and director of the Company, and a signatory to this
Agreement.
"White Mountain" has the meaning set forth in the
preface above.
SECTION 1
THE MERGER
1.1 Effective Time. On the Closing Date (as defined
in Section 3), and subject to and upon the fulfillment or
waiver of the terms and conditions of this Agreement, the DGCL,
the AGCL, and the WGCL, Parent shall, effective as of
January 2, 1998, acquire the Company by means of the Company
being merged with and into White Mountain, where by the
separate corporate existence of the Company shall cease, and
White Mountain shall continue as the surviving corporation.
White Mountain as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "Surviving
Corporation."
1.2 Certificate of Merger. On the Closing Date,
assuming satisfaction or waiver of the conditions set forth in
Section 6, the parties hereto shall cause the Merger to be
consummated by filing Certificates of Merger as contemplated by
the DGCL, the AGCL, and the WGCL (the "Certificates of
Merger"), together with any required related certificates, with
the Secretary of State of the State of Delaware, the Secretary
of the State of Alaska, and the Secretary of the State of
Washington, respectively, in such form as required by, and
executed in accordance with the relevant provisions of, the
DGCL, the AGCL and the WGCL. The date of filing of the
respective Certificates of Merger shall be deemed the Filing
Date.
1.3 Effect of the Merger. Upon the consummation of
the Merger, the effect of the merger shall be as provided in
this Agreement, the Certificates of Merger and the applicable
provisions of the DGCL, the AGCL, and the WGCL. Without
limiting the generality of the foregoing, and subject thereto,
upon the consummation of the Merger all the property, rights,
privileges, powers and franchises of the Company and White
Mountain shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and White Mountain
shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificate of Incorporation, By-Laws.
(i) Certificate of Incorporation. Unless
otherwise determined by Parent prior to the Closing Date, upon
the consummation of the Merger the Certificate of Incorporation
of White Mountain, as in effect immediately prior to the
consummation of the Merger, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter
amended in accordance with the DGCL and such Certificate of
Incorporation.
(ii) By-Laws. Unless otherwise determined by
Parent prior to the consummation of the Merger, the By-Laws of
White Mountain, as in effect immediately prior to the closing
date, shall be the By-Laws of the Surviving Corporation until
thereafter amended in accordance with the DGCL, the Certificate
of Incorporation of the Surviving Corporation and such By-Laws.
1.5 Directors and Officers. The directors of White
Mountain immediately prior to the consummation of the Merger,
with the addition of one individual appointed by the
Securityholders, in writing, shall be the initial directors of
the Surviving Corporation, each to hold office in accordance
with the Certificate of Incorporation and By-Laws of the
Surviving Corporation, and the officers of White Mountain
immediately prior to the consummation of the Merger shall be
the initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed
and qualified.
SECTION 2
MERGER CONSIDERATION
2.1 Shares of Company. As of the Filing Date, each
share of Stock issued and outstanding as of the Closing Date,
shall by virtue of the merger and without any action on the
part of the holder thereof, be converted into the right to
receive an amount per share in Arguss Stock and in cash
("Merger Consideration"), without interest, determined in
accordance with Section 2.2.
2.2 Merger Consideration. The total merger
consideration to be paid collectively by Parent and White
Mountain to each Securityholder shall either be an amount equal
to the 1998 Value of the Company or an amount equal to the
Bonus 1998 Value of the Company, as those terms are defined in
this Agreement. Each share of Stock shall be entitled to
receive a sum equal to the 1998 Value of the Company or the
Bonus 1998 Value of the Company divided by the total number of
shares of the Stock.
The Merger Consideration shall be paid to the
Securityholders as follows:
(a) At Closing, the Securityholders shall
receive their pro rata share of the sum equal to Fifty Per Cent
(50%) of the Initial Payment through the issuance of shares of
the authorized capital stock of Arguss ("Arguss Stock") as set
forth in Exhibit 2.2(a). For the purposes of determining the
number of shares of Arguss Stock to be issued to the
Securityholders pursuant to this paragraph 2.2(a), the value of
each share of Arguss Stock shall be Nine and 75/100 Dollars
($9.75).
(b) At Closing, the Securityholders shall
receive their pro rata share of the sum equal to Fifty Per Cent
(50%) of the Initial Payment in cash, wire transfer, or
certified funds as set forth on Exhibit 2.2(b).
(c) At Closing, Parent shall deposit the
Escrowed Purchase Price in an Escrow Account to be held and/or
released pursuant to the terms and conditions of the Escrow
Agreement attached as Exhibit 6.5. Fifty Per Cent (50%) of the
Escrowed Purchase Price shall be in the form of a promissory
note and Fifty Per Cent (50%) of the Escrowed Purchase Price
shall be in the form of an irrevocable commitment to issue
shares of Arguss Stock. For the purpose of determining the
number of shares of Arguss Stock to be placed in Escrow
pursuant to this paragraph 2.2(c), the value of each share of
Arguss Stock irrevocably committed shall be Nine and 75/100
Dollars ($9.75). Such Escrow Agreement shall provide therein
for a release of all or part of the Escrow Purchase Price on
December 1, 1998 in accordance with paragraph 2.2(d), below.
(d) On March 1, 1999, Securityholders shall
receive the sum equal to the difference, if any, between
(a) the 1998 Value of the Company and (b) the Initial Payment,
if the Gross Margin of the Company equals or is less than
twenty-five per cent (25%), or the difference, if any, between
(a) the Bonus 1998 Value of the Company and (b) the Initial
Payment, if the Gross Margin of the Company exceeds twenty-five
per cent (25%). Such payment shall be made in equal parts of
cash and Arguss Stock. For the purposes of determining the
number of shares of Arguss Stock to be issued to
Securityholders pursuant to paragraph 2.2(d), the value of each
share of Arguss Stock shall be Nine and 75/100 Dollars ($9.75).
To enable all parties to determine the 1998 Value of the
Company and the Bonus 1998 Value of the Company, the
Securityholders shall cause the December 1998 Audit to be
completed and delivered to Parent, at Parent's expense on or
before March 1, 1999.
(e) The Net Worth of the Company on the Closing
Date shall be the Net Worth of the Company as set forth on the
Closing Balance Sheet. In the event the Net Worth exceeds
$1,700,000 on the Closing Date, such excess shall be paid to
Securityholders in cash on or before 30 days from the Closing
Date. In the event the Net Worth is less than $1,700,000 on
the Closing Date, such deficiency shall be withheld from the
Merger Consideration paid to Securityholders pursuant to
Section 2.2(b), hereof. To enable all parties to determine the
Net Worth of the Company on the Closing Date, the
Securityholders shall cause the Closing Balance Sheet to be
delivered to the Parent within ten (10) days of Closing.
2.3 Allocation of Merger Consideration. The allocation
of the Merger Consideration by Securityholders, if desired, is
set forth in Exhibit 2.3.
SECTION 3
CLOSING
The Closing of the Merger shall occur at the offices
of Arguss Holdings, Inc., One Church Street, Suite 302,
Rockville, Maryland 20850, at 2:00 p.m. on the 5th day of
January, 1998, or at such other time, date and place as Parent
and Securityholders may agree (the "Closing Date"). At the
Closing:
3.1 Cancellation.
(a) Upon filing of the Certificate of Merger,
each such share of the Stock shall be canceled and shall
thereafter evidence only the right to receive a pro rata share
of the Merger Consideration.
(b) Upon filing of the Certificate of Merger,
each share of the Stock held in the treasury of the Company and
each share of Stock owned directly or indirectly by any wholly
owned Subsidiary of the Company immediately prior to the
consummation of the Merger shall, by virtue of the Merger and
without any action on the part of the holder thereof, cease to
be outstanding, be canceled and retired without payment of any
consideration therefor and cease to exist.
3.2 Delivery of Cash and Exchange of Certificates.
(a) Exchange Procedures. As of the Filing
Date, upon surrender of the certificates representing shares of
the Stock (the "Certificates") for cancellation to Parent
together with such other customary documents as may be required
to transfer the Stock, subject to the provisions of the Escrow
Agreement, the holder of such Certificates shall be entitled to
receive in exchange therefore their pro rata share of the
Merger Consideration as provided in Section 2.2(a), (b) and (d)
above, and the Certificates so surrendered shall forthwith be
canceled. Each outstanding Certificate that, prior to the
Closing Date, represented shares of the Stock will be deemed
from and after the Closing Date, for all corporate purposes, to
evidence the right to receive a pro rata share of the Merger
Consideration into which such shares of the Stock shall have
been so converted.
(b) No Liability. Neither Parent, White
Mountain, nor the Company shall be liable to any holder of the
Stock for any Merger Consideration delivered to a public
official pursuant to any applicable abandoned property, escheat
or similar law.
(c) Withholding Rights. Parent shall be
entitled to deduct and withhold from the Merger Consideration
otherwise payable pursuant to this Agreement to any holder of
the Stock such amounts, if any, as Parent is required to deduct
and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign tax law.
To the extent that amounts are so withheld by Parent, such
withheld amount shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares in
respect of which such deduction and withholding was made by
Parent, and Parent shall pay all such withheld amounts to the
proper authorities within the ordinary course of business.
SECTION 4
REPRESENTATIONS, WARRANTIES AND CERTAIN
COVENANTS OF SECURITYHOLDERS AND THE COMPANY
As a material inducement to induce Parent and White
Mountain to consummate the Merger under this Agreement, each
Securityholder and Company represent and warrant that each of
the matters set forth in this Section 4 are true and correct as
of the date hereof, and acknowledge that Parent and White
Mountain's entry into this Agreement and the performance of
their obligations hereunder are made in reliance upon the
completeness and accuracy of each of the matters set forth
herein. The representations and warranties being made by the
Company shall survive up and until the Closing Date. The
representations and warranties being made by the
Securityholders shall survive as set forth in Section 12.11,
herein.
4.1 Organization, Qualifications and Corporate
Power.
(a) The Company is a corporation duly
incorporated, validly existing and in good standing under the
laws of the State of Alaska. Attached as Exhibit 4.1(a) is a
list of all states in which the Company, and its subsidiaries
or affiliates, are qualified to do business. The Company, and
its subsidiaries or affiliates, are duly qualified as a
foreign corporation in each other jurisdiction in which the
failure to be qualified would have a material adverse effect
upon the Company, and its subsidiaries or affiliates. The
Company, and its subsidiaries or affiliates, has the corporate
power and authority to own and hold their properties and to
conduct their businesses as currently conducted and as proposed
to be conducted, to execute, deliver and perform this Agreement
to which the Company is a signatory.
(b) Except as listed on Exhibit 4.1(b), the
Company, and its subsidiaries or affiliates, do not own of
record or beneficially, directly or indirectly, (i) any shares
of outstanding capital stock or securities convertible into
capital stock of any other corporation or (ii) any
participating interest in any partnership, joint venture or
other non-corporate business enterprise.
4.2 Authorization of Agreement.
(a) The execution, delivery and performance by
the Company of this Agreement to which it is a signatory
hereunder have been duly authorized by all requisite corporate
action and will not (i) violate any applicable provision of
law, any order of any court or other agency of government, the
Articles or Certificate of Incorporation or Bylaws of the
Company, or any provision of any indenture, agreement or other
instrument by which the Company, or any of its properties or
assets is bound or affected, or (ii) conflict with, result in a
material breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or
other instrument, or results in being declared void, voidable
or without further binding effect any license, governmental
permit or certification, employee plan, note, bond, mortgage,
indenture, deed of trust, franchise, lease, contract,
agreement, or other instrument or commitment or obligation to
which Company is a party, or by which Company, or any of its
assets, may be bound, subject or affected, (iii) violate any
order, writ, injunction, decree, judgment, or ruling of any
court or governmental authority applicable to Company or any of
its assets, or (iv) except as otherwise provided in this
Agreement, result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever not arising in
the ordinary course of business upon any of the properties or
assets of the Company except as to conflicts, breaches and
violations that will not have a material adverse effect on the
business, property or assets of the Company.
4.3 Capital Stock. The authorized capital stock of
the Company, and its subsidiaries or affiliates, and the
holders of the issued and outstanding shares of such capital
stock are set forth in Exhibit 4.3 hereto. Except as disclosed
in Exhibit 4.3, there is no (i) subscription, warrant, option,
convertible security or other right (contingent or otherwise)
to purchase or acquire any shares of any class of capital stock
of the Company, or of its subsidiaries or affiliates, which is
authorized or outstanding, (ii) the Company, and its
subsidiaries or affiliates, have no commitments to issue any
shares, warrants, options or other such rights or to distribute
to holders of any class of its capital stock any evidence of
indebtedness or assets, (iii) the Company, and its subsidiaries
or affiliates, have no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or make
any other distribution in respect thereof, and (iv) the
Company, and its subsidiaries or affiliates, have no obligation
or commitment to register under the Act any securities issued
or to be issued by it. All of the issued and outstanding
shares of the capital stock of the Company, and of its
subsidiaries or affiliates, have been validly issued in
compliance with all federal and state securities laws and are
fully paid and non-assessable.
4.4 Financial Statements. The Company has delivered
to Parent the Financial Statements and Closing Balance Sheet,
exclusive of the December 1998 Audit which will be delivered to
Parent prior to March 1, 1999. Such preliminary Financial
Statements and Closing Balance Sheet are complete and correct,
have been prepared in accordance with GAAP and fairly present
the consolidated financial position of the Company, and its
subsidiaries or affiliates, as of such respective dates after
making all appropriate adjustments required to present the
Financial Statements and Closing Balance Sheet on an accrual
basis for a Subchapter C corporation, and the results of
operations for the respective periods then ended. Except as
set forth in such Financial Statements and Closing Balance
Sheet or incurred in the ordinary course of business, to the
knowledge of Securityholders and the Company neither the
Company nor any of its subsidiaries or affiliates has any
material obligation or liability, absolute, accrued or
contingent except obligations and liabilities which do not
adversely effect the business, property or assets of the
Company.
4.5 Absence of Changes. Except as listed in
Exhibit 4.5 and since the time period covered by the Financial
Statements, neither the Company nor any of its subsidiaries or
affiliates, have:
(a) Transferred, assigned, conveyed or
liquidated any of its assets or entered into any transaction or
incurred any liability or obligation which affects the assets
or the conduct of its business, other than in the ordinary
course of the Company's business;
(b) Incurred any change in its business,
operations, or financial condition which may have a material
adverse effect on its assets or its business, or become aware
of any event which may result in any such adverse change;
(c) Suffered any material destruction, damage
or loss relating to its assets or the conduct of its business
whether or not covered by insurance;
(d) Suffered, permitted or incurred other than
in the ordinary course of business the imposition of any lien,
charge, encumbrance (which as used herein includes, without
limitation, any mortgage, deed of trust, conveyance to secure
debt or security interest) whether or not contingent in nature,
or claim upon any of its assets, except for any current year
lien with respect to personal or real property taxes not yet
due and payable;
(e) Committed, suffered, permitted or incurred
any default in any liability or obligation which, in the
aggregate, have had or will have a material adverse effect upon
its assets or the conduct of its business;
(f) Made or agreed to any change in the terms
of any contract or instrument to which it is a party which has
a material adverse effect on its assets or the conduct of its
business;
(g) Knowingly waived, canceled, sold or
otherwise disposed of other than in the ordinary course of
business, for less than the face amount thereof, any claim or
right relating to its assets or the conduct of its business,
which it has against others;
(h) Declared, promised or made any distribution
from its assets or other payment from the assets to its
shareholders (other than reasonable compensation for services
actually rendered) or issued any additional shares or rights,
options or calls with respect to its shares of capital stock,
or redeemed, purchased or otherwise acquired any of its shares,
or made any change whatsoever in its capital structure;
(i) Paid, agreed to pay or incurred any
obligation for any payment for, any contribution or other
amount to, or with respect to, any employee benefit plan, or
paid or agreed to pay any bonus or salary increase to its
executive officers or directors, or made any increase in the
pension, retirement or other benefits of its directors or
executive officers other than in the ordinary course of
business;
(j) Committed, suffered, permitted, incurred or
entered into any transaction or event other than in the normal
course of business which would increase its liability for any
prior taxable year;
(k) Incurred any other liability or obligation
or entered into any transaction other than in the ordinary
course of business which would have a material adverse effect
on its condition (financial or otherwise); or
(l) Received any notices of, or has reason to
believe, that any of its customers or clients have taken or
contemplate any steps which could disrupt its business
relationship with said customer or client or could result in
the diminution in the value of the business of the Company as a
going concern.
4.6 Actions Pending. Except as listed on Exhibit
4.6, there is no action, suit, investigation, or proceeding
pending or, to the knowledge of the Company or Securityholders
threatened against or affecting the Securityholders, the
Company, or its subsidiaries or affiliates, or any of its
properties or rights, before any court or by or before any
governmental body or arbitration board or tribunal and no basis
exists for any such action, suit, investigation or proceeding
which will result in any material liability or affirmative or
negative injunction being imposed on the Company, or its
subsidiaries or affiliates, or Securityholders. The foregoing
includes, without limiting its generality, actions pending or
threatened (or any basis therefor known to the Company or
Securityholders) involving the prior employment of any
employees or prospective employees of the Company, or of its
subsidiaries or affiliates, or its use, in connection with its
business, of any information or techniques which might be
alleged to be proprietary to its former employer(s).
4.7 Business Property Rights. To the best of the
Company's or each Securityholders' knowledge, no person or
entity has made or threatened to make (or has any valid reason
to threaten) any claims that the operation of the business of
the Company, or of its subsidiaries or affiliates, is or will
be in violation of or infringe on any technology, patents,
copyrights, trademarks, trade names, service marks (and any
application for any of the foregoing) licenses, proprietary
information, know-how, or trade secrets (the "Business Property
Rights"). To the best of the Company's or each
Securityholders' knowledge no third party is infringing upon or
violating any of the Company's Business Property Rights and the
Company has the exclusive right to use the same. None of the
employees, directors, or stockholders of the Company's or its
subsidiaries or affiliates has any valid claim whatsoever
(whether direct, indirect or contingent) of right, title or
interest in or to any of the Company's Business Property
Rights.
4.8 Liabilities. Except as listed in Exhibit 4.8,
to the knowledge of Securityholders and the Company neither the
Company, or its subsidiaries or affiliates, has any liabilities
or obligations, whether accrued, absolute, contingent or
otherwise (individually or in the aggregate), which are of a
nature required to be reflected in financial statements
prepared in accordance with GAAP, including without limitation,
any liability which might result from an audit of its tax
returns by any appropriate authority except (i) the liabilities
and obligations set forth in the "Financial Statements or
Closing Balance Sheet") delivered in accordance with Section
4.4 and (ii) liabilities and obligations incurred for the
purpose of enabling the Company or its subsidiaries or
affiliates to conduct their normal business (in each case in
normal amounts and incurred only in the ordinary course of
business) except such liabilities and obligations that do not
have a material adverse effect on the business, property and
assets of the Company. Except as disclosed in the Financial
Statements or Closing Balance Sheet, to the knowledge of
Securityholders and the Company neither the Company, nor its
subsidiaries or affiliates, is in default with respect to any
liabilities or obligations and all such liabilities or
obligations shown and reflected in the Financial Statements and
Closing Balance Sheet, and such liabilities incurred or accrued
subsequent to the Company's and its subsidiaries or affiliates
incorporation, have been, or are being, paid or discharged as
they become due, and all such liabilities and obligations were
incurred in the ordinary course of business except with respect
to defaults that do not have a material adverse effect on the
business, property and assets of the Company.
4.9 Ownership of Assets and Leases. Attached hereto
as Exhibit 4.9(a) is a complete and correct list and brief
description, as of the date of this Agreement, of all real
property and material items of personal property owned by the
Company, or by its subsidiaries or affiliates, and all of the
leases and other agreements relating to any real, personal or
intangible property owned, used, licensed or leased by the
Company, its subsidiaries or its affiliates. The Company, its
subsidiaries and its affiliates, have good and marketable title
to all of its assets, including those listed on Exhibit 4.9(a),
and any income or revenue generated therefrom, in each case
free and clear of any liens, claims, charges, options, rights
of tenants or other encumbrances except (i) as disclosed and
reserved against in the Financial Statements (to the extent and
in the amounts so disclosed and reserved against), (ii) for
liens arising from current taxes not yet due and payable and
(iii) as set forth on Exhibit 4.9(b). Each of the leases and
agreements of the Company, its subsidiaries and its affiliates
are in full force and effect and constitute a legal, valid and
binding obligation of the Company, and of its subsidiaries and
affiliates, and the other respective parties thereto,
enforceable in accordance with its terms, except as
enforceability may be limited by applicable equitable
principles or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally, and,
there is not under any of such leases or agreements existing
any default of the Company, or of its subsidiaries or
affiliates, or to the best of the Company's or each
Securityholders' knowledge of any other parties thereto (or
event or condition which, with notice or lapse of time, or
both, would constitute a default). Neither the Company, nor
any of its subsidiaries or affiliates, has received any notice
of violation of any applicable regulation, ordinance or other
law with respect to its operations or assets, and, to the best
of the Company's knowledge there is not any such violation or
grounds therefor which could adversely affect their assets or
the conduct of its business. Neither the Company, nor any of
its subsidiaries or affiliates, is a party to any contract or
obligation whereby an absolute or contingent right to purchase,
obtain or acquire any rights in any of the assets has been
granted to anyone. There does not exist and will not exist by
virtue of the transactions contemplated by this Agreement any
claim or right of third persons which may be legally asserted
against any asset of the Company's, or its subsidiaries or
affiliates.
4.10 Taxes. The Company, and its subsidiaries and
affiliates, have paid all taxes due, assessed and owed by them
as reflected on their tax returns and have timely filed all
federal, state, local and other tax returns which were required
to be filed and which were due prior to the Closing Date,
except for those taxes set forth on Exhibit 4.10(a). All
federal, state, local, and other taxes of the Company, or of
its subsidiaries or affiliates, accruable since the filing of
such returns have been properly accrued. No federal income tax
returns for the Company, or for its subsidiaries or affiliates,
have ever been audited by the Internal Revenue Service or any
state or local taxing authority, except as described in
Exhibit 4.10(b). No other proceedings or other actions which
are still pending or open have been taken for the assessment or
collection of additional taxes of any kind from the Company, or
from its subsidiaries or affiliates, for any period for which
returns have been filed, and to the Company's knowledge, no
other examination by the Internal Revenue Service or any other
taxing authority affecting the Company, or its subsidiaries or
affiliates, is now pending. Except for those taxes set forth
on Exhibit 4.10(a), taxes which the Company, or its
subsidiaries or affiliates, were required by law to withhold or
collect subsequent to the incorporation of the Company or its
subsidiaries or affiliates, have been withheld or collected and
have been paid over to the proper governmental authorities or
are properly held by the Company, or by its subsidiaries or
affiliates, for such payment and are so withheld, collected and
paid over as of the date hereof. No waivers of statutes of
limitations with respect to any tax returns of the Company, or
of its subsidiaries or affiliates, nor extensions of time for
the assessment of any tax have been given by any current
employees of the Company, or of its subsidiaries or affiliates.
There is not and there will not be any liabilities for federal,
state and local income, sales, use, excise or other taxes
arising out of, or attributable to, or affecting the assets or
the conduct of the business of the Company or its subsidiaries
or affiliates, through the close of business on the Closing
Date, or attributable to the conduct of the operations of the
Company, or its subsidiaries or affiliates, at any time for
which Parent or the Surviving Corporation will have any
liability for payment or otherwise, including, but not limited
to, any tax assessed or imposed as a result of any conversion
by the Company or any of its subsidiaries or affiliates from a
Subchapter S to a Subchapter C corporation. After the Closing,
there does not and will not exist by virtue of the transactions
contemplated by this Agreement any liability for taxes which
may be asserted by any taxing authority against the assets of
the Company or its subsidiaries or affiliates, or the operation
of their businesses, and no lien or other encumbrance for taxes
will attach to such assets or the operation of their
businesses.
4.11 Contracts, Other Agreements. Attached hereto as
Exhibit 4.11 is a true and complete list of each material
contract, agreement and other instrument to which the Company,
or its subsidiaries or affiliates, is a party, including, but
not limited to, all bank and financing documents. At Parent's
request, the Company, and its subsidiaries or affiliates, shall
deliver to Parent a true and complete copy of any such
contract, agreement or instrument. All of the contracts,
agreements, and instruments described in Exhibit 4.11 hereto
are valid and binding upon the Company, or its subsidiaries or
affiliates, and the other parties thereto and are in full force
and effect, and, neither the Company, nor to the best of the
Company's or each Securityholders' knowledge any other party to
any such contract, commitment or arrangement has breached any
provision of, or is in default in any respect under, the
material terms thereof. No contract, agreement or other
instrument to which the Company, or its subsidiaries or
affiliates, are a party will be materially breached, violated
or result in a default as a result of the transaction
contemplated hereunder.
4.12 Governmental Approvals. No registration or
filing with, or consent or approval of, or other action by, any
federal, state or other governmental agency or instrumentality
is or will be necessary for the valid execution, delivery and
performance of this Agreement by the Company, including, but
not limited to, any approval of the United States Small
Business Administration required to assign any obligation of
the Company to the Surviving Corporation.
4.13 Lack of Defaults. The Company and
Securityholders know of no default in performance of any
obligation, covenant or condition contained in any note,
debenture, mortgage or other contract or agreement of any
nature or kind to which either is a party, nor of any default
with respect to any order, writ, injunction or decree of any
court, governmental authority or arbitration board or tribunal
to which either is a party, which would have a material adverse
effect on the assets or business of the Company, its
subsidiaries or affiliates. The Company and Securityholders
know of no violation of any law, ordinance, governmental rule
or regulation to which either is subject, nor has either failed
to obtain any licenses, permits, franchises or other
governmental authorizations necessary for the ownership of
their properties or to the conduct of their business where any
such violation or failure would likely result in a material
adverse effect upon the business of the Company, its
subsidiaries or affiliates. The Company, its subsidiaries and
affiliates, have conducted and will conduct their businesses
and operations in substantial compliance with all federal,
state, county and municipal laws, statutes, ordinances and
regulations and are in substantial compliance with all
applicable requirements of all federal, state, county and
municipal regulatory authorities.
4.14 Employees and Employee Benefit Plans.
(a) Attached hereto as Exhibit 4.14(a) is a
list of each pension retirement, profit-sharing, deferred
compensation, bonus or other incentive plan, or program
arrangement, agreement or other understanding, or medical,
vision, dental or other health plan, or life insurance or
disability plan, or any other employee benefit plan, including,
without limitation, any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), to which the Company or SCI
contributes or is a party or is bound or under which it may
have liability and under which employees or former employees of
the Company, or of its subsidiaries or affiliates (or their
beneficiaries) are eligible to participate or derive a benefit
(the foregoing herein referred to as the "Employee Benefit
Plans). The Company has delivered to Parent true, correct and
complete copies of all Employee Benefit Plans, and the Company
has complied in all material aspects with any and all
obligations required of it under the terms of any plan listed
on Exhibit 4.14(a).
(b) Attached hereto as Exhibit 4.14(b) are the
names, social security numbers and current rate of compensation
of all salaried and hourly paid employees employed by the
Company, or by its subsidiaries or affiliates, as of the date
hereof, with all key employees being so designated, and at
Closing the Company will provide an updated list of all such
employees as of the date of closing, such updated list to be
initialed by both parties at Closing.
4.15 Insurance. Attached hereto as Exhibit 4.15 is a
complete and correct list and description of all of the
policies of liability, property, workers' compensation and
other forms of insurance or bonds carried by the Company, or
its subsidiaries or affiliates, for the benefit of or in
connection with their assets and businesses. All of such
policies are in full force and effect and there are no overdue
premiums or other payments on such policies and neither the
Company nor any of its subsidiaries or affiliates, has received
any notice of cancellation or termination of any of these
policies. Neither the Securityholders nor the Company have
knowledge of any change or proposed change to any of the rates
set forth in the policies listed on Exhibit 4.15 other than as
set out in the Policies.
4.16 Labor Matters. Except as set forth on
Exhibit 4.16, none of the employees of the Company or of its
subsidiaries or affiliates are covered by a collective
bargaining agreement, and no collective bargaining efforts with
respect to any of the employees of the Company, its
subsidiaries or affiliates, are pending or, to the knowledge of
the Company threatened. No labor dispute, strike, work
stoppage, employee collective action or labor relations problem
of any kind which has materially adversely affected or may so
affect the Company, or its subsidiaries or affiliates, or any
of their businesses or operations, is pending or, to the
knowledge of the Company is threatened. The Company, and its
subsidiaries or affiliates, have complied in all material
respects with the reporting and withholding provisions of the
Code and the Federal Insurance Contribution Act and all similar
state and local laws, and with the federal, state, and local
laws, ordinances, rules and regulations with respect to
employment and employment practices, terms and conditions of
employment and of the workplace, wages and hours and equal
employment opportunity.
4.17 Brokers and Finders. Except for the fees listed
on Exhibit 4.17, neither the Securityholders nor the Company or
any of its subsidiaries or affiliates, has incurred or become
liable for any commission, fee or other similar payment to any
broker, finder, agent or other intermediary in connection with
the negotiation or execution of this Agreement or the
consummation of the transactions contemplated hereby.
Securityholders agrees to be responsible for paying all Broker
fees incurred by the Company, and its subsidiaries or
affiliates, as a result of this transaction.
4.18 Accounts Receivable.
(a) All accounts receivable of the Company, and
its subsidiaries or affiliates, shown on the consolidated
audited balance sheet of the Company, and its subsidiaries or
affiliates, as of September 30, 1997, and all notes and
accounts receivable acquired by the Company and its
subsidiaries or affiliates subsequent to September 30, 1997,
reflect actual transactions, have arisen in the ordinary course
of business and have been collected or are now in the process
of collection without recourse to any judicial proceedings in
the ordinary course of business in the aggregate recorded
amounts thereof, less the applicable allowances reflected on
such balance sheets with respect to the accounts receivable
shown thereon or set up on the respective books of the Company,
and its subsidiaries or affiliates, with respect to the notes
and accounts receivable acquired subsequent to September 30,
1997.
(b) Except as set forth on Exhibit 4.18(b), the
Company has no knowledge as to any of the accounts receivable
of the Company or of its subsidiaries or affiliates, being
subject to any lien or claim of offset, set off or counterclaim
not provided for by the Company's, its subsidiaries, or
affiliates, allowance for doubtful accounts as of the date of
execution hereof.
4.19 Conflicts of Interests. Except as described in
Exhibit 4.19 (a), no officer, director or stockholder of the
Company, or of its subsidiaries or affiliates, was or is,
directly or indirectly, a joint investor or co-venturer with,
or owner, lessor, lessee, licensor or license of any real or
personal property, tangible or intangible, owned or used by, or
a lender to or debtor of, the Company, its subsidiaries or
affiliates, and neither the Company, nor any of its
subsidiaries or affiliates, has any commitments or obligations
as a result of any such transactions prior to the date hereof.
Except as described in Exhibit 4.19 (b), and except for
directly or indirectly holding less than five percent (5%) of
the outstanding shares of stock in a company which is publicly
traded, none of such officers, stockholders, or directors own
or have owned, directly or indirectly, individually or
collectively, an interest in any entity which is a competitor,
customer or supplier of (or has any existing contractual
relationship with) the Company, its subsidiaries or affiliates.
4.20 Environmental Compliance. Exhibit 4.20(a) sets
forth all government agencies which substantially regulate the
business of the Company, its subsidiaries or affiliates under
Environmental, Health and Safety Laws. Except as listed on
Exhibit 4.20(b), the Company, and its subsidiaries and
affiliates, has complied in all material respects with all
applicable federal, state and local Environmental Health and
Safety Laws with respect to its premises and its operations and
have kept its premises free and clear of any liens and charges
imposed pursuant to such laws. Neither the Company, nor any
its subsidiaries or affiliates, has received any notice that
any facts or conditions exist which would give rise to any
violation, claim, charge, penalty or liability relating to any
applicable Environmental Health and Safety Laws of any
governmental body or agency having jurisdiction over the
premises.
4.21 Ownership of the Stock. The Securityholders own
all of the Stock beneficially and of record, free and clear of
all liens, restrictions, encumbrances, charges, and adverse
claims and the Stock to be purchased hereunder constitutes One
Hundred Per Cent (100%) of issued and outstanding stock of the
Company.
4.22 Absence of Sensitive Payments. Neither the
Securityholders nor, to the knowledge of the Securityholders
and Company, any of the directors, officers, or stockholders of
the Company, its subsidiaries or affiliates:
(a) has made or has agreed to make any
contributions, payments or gifts of funds or property to any
governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift
was or is illegal under the laws of the United States, any
state thereof, or any other jurisdiction (foreign or domestic);
(b) has established or maintained any
unrecorded fund or asset for any purpose, or has made any false
or artificial entries on any of its books or records for any
reason; or
(c) has made or has agreed to make any
contribution or expenditure, or has reimbursed any political
gift or contribution or expenditure made by any other person to
candidates for public office, whether federal, state or
local(foreign or domestic) where such contributions were or
would be a violation of applicable law.
4.23 Approval of Merger; Related Matters. Each of
the Securityholders represents and warrants that such
Securityholders, in his or her capacity as a shareholder of the
Company (i) approves of and consents to the Merger as set forth
in this Agreement, (ii) waives any notice of a shareholder's
meeting or similar corporate formality in connection with the
approval of the transactions described herein, including,
without limitation, the Merger, (iii) waives any rights to
protest or object to the Merger or to the exercise of any
statutory remedy of appraisal as to the Stock owned by such
Securityholders as provided in the AGCL, (iv) has received a
copy of resolutions approving the Merger in accordance with the
AGCL, and (v), to the extent such Securityholders owe any
amounts to the Company, or its subsidiaries or affiliates,
pursuant to any Promissory Note issued by such Securityholders
to the Company, or to its subsidiaries or affiliates, consents
to the use of a portion of the Merger Consideration payable to
such Securityholders to pay off each such Promissory Note.
SECTION 5
REPRESENTATIONS, WARRANTIES AND CERTAIN
COVENANTS OF PARENT AND WHITE MOUNTAIN
As a material inducement to induce Securityholders to
consummate the Merger under this Agreement, Parent and White
Mountain represent and warrant that each of the matters set
forth in this Section 5 are true and correct as of the date
hereof, and acknowledge that Securityholders' entry into this
Agreement and the performance of their obligations hereunder
are made in reliance upon the completeness and accuracy of each
of the matters set forth herein. The representations and
warranties being made by the Parent and White Mountain shall
survive as set forth in Section 12.11 herein.
5.1 Organization, Standing, etc. Parent and White
Mountain are duly organized, validly existing and in good
standing under the laws of its jurisdiction of their
organization.
5.2 Authorization, etc. The execution and delivery
of this Agreement and any other instruments or documents
required to be executed and delivered hereby, and the purchase
of the Stock contemplated hereby, have been authorized by such
authorities or by such court of competent jurisdiction, if any,
as may be required by applicable law and constitute a valid and
binding obligations of Parent and of White Mountain,
enforceable against them in accordance with the terms of this
Agreement.
5.3 No Breach or Defaults Caused by Agreement. The
making and execution, delivery, and performance by Parent and
White Mountain of this Agreement does and will not breach or
constitute (with due notice or lapse of time or both) any
default in any articles, by-laws, agreements, or instruments of
any kind or character to which Parent or White Mountain are a
signatory or a party, or by which they may be bound, subject
to, or affected, now or in the future.
5.4 Governmental Approvals. No registration or
filing with, or consent or approval of, or other action by, any
federal, state, or other governmental agency or
instrumentality, which has not been made or obtained prior to
the execution of this Agreement by Parent or White Mountain, is
or will be necessary for the valid execution, delivery, and
performance of this Agreement by Parent and White Mountain.
5.5 Brokers Fees. Parent and White Mountain
represent there are no brokers, other than those set forth on
Exhibit 5.5, involved in this transaction on their behalf.
Parent and White Mountain shall pay all broker fees
contractually obligated to be paid to those brokers set forth
on said Exhibit.
5.6 Authorized Shares of Stock. There exists
sufficient authorized, but unissued, shares of Arguss Stock
necessary to enable Parent to satisfy any obligation of it to
issue shares of Arguss Stock pursuant to this Merger Agreement.
5.7 Survival of Company. The operations of the
Company on the Closing Date shall remain separate and apart
from the other assets, operations and business of Parent or
White Mountain after the Closing, as a separate and distinct
division of Parent and White Mountain until the December 1998
Audit has been completed. No expenses of Parent or White
Mountain unrelated to the Company may be charged against the
Company during such Audit.
5.8 Support of Company. Parent and White Mountain
shall, after the Closing, use their best efforts to accommodate
the Company in the ordinary course of business, including, but
not limited to, the provision of marketing, financial
(including lines of credit), and other support as may be
reasonably required to enable the Schenck Division to acquire
and complete all contracts and business transactions.
5.9 No Section 338 Election. Neither Parent nor
White Mountain shall make any election under Section 338 of the
Internal Revenue Code of 1986, as amended, with respect to any
part of the transaction contemplated hereunder without the
express written consent of all of the Securityholders.
SECTION 6
CONDITIONS TO CLOSING
Parent's obligation to consummate the Merger under
this Agreement shall be subject to fulfillment of all of the
following conditions on or prior to the Closing, any of which
may be waived in writing by Parent.
6.1 Performance of Agreements. The Company shall
have performed all agreements contained herein and required to
be performed by it prior to or at the Closing and all of the
representations and warranties made by it and Securityholders
in this Agreement shall be true and correct as of the Closing
Date.
6.2 Lack of Material Liabilities. Neither the
Company, nor any of its subsidiaries or affiliates, shall have
incurred any material liability, direct or contingent
(as that term is ordinarily used), other than in the ordinary
course of its business, since September 30, 1997; including,
but not limited to, any tax liability resulting from the
transaction contemplated hereby, or by the Company's compliance
with any of the terms and conditions hereof.
6.3 Financial Statements. Parent shall have
received a balance sheet and profit and loss statement for the
Company, and its subsidiaries or affiliates, as of
September 30, 1997.
6.4 Lack of Defaults. No Event of Default (as
defined in Section 10 hereof) and no event or condition which,
with notice or the lapse of time, or both, would constitute an
Event of Default, shall exist.
6.5 Escrow Agreement. Securityholders, Company,
Parent, White Mountain, and all other parties thereto shall
have executed the Escrow Agreement, a copy of which is attached
hereto as Exhibit 6.5.
6.6 Employment Agreements. E. Schenck and Wheat and
those employees designated as key employees on Exhibit 4.14(b)
and the Company shall have executed the Employment Agreements,
copies of which are attached hereto as Exhibits 6.6(a) -
6.6(b).
6.7 Opinion of Counsel. Parent shall have received
an opinion of counsel from the attorneys for the Company, dated
as of the Closing Date, in form and substance substantially
similar to that attached hereto as Exhibit 6.7.
6.8 Compliance Certificate. The Company shall have
delivered to Parent the certificate, attached hereto as
Exhibit 6.8, executed by its President, dated the Closing Date,
certifying the fulfillment of the conditions specified in this
Section 6 and the accuracy of the representations and
warranties contained in Section 4 hereof.
6.9 Key-Person Term Life Insurance. The Company
shall have applied for an insurance policy on the lives of E.
Schenck and Wheat, such policy (a) to name the Parent as sole
beneficiary, (b) to be in form and substance satisfactory to
the Parent, and (c) to be in the amount of Two Million Dollars
($2,000,000) each.
6.10 Registration Rights Agreement. The
Securityholders and Parent shall have executed the Registration
Rights Agreement, a copy of which is attached hereto as
Exhibit 6.10.
6.11 Employee Stock Options. Parent resolves to take
any and all actions necessary, including soliciting the
approval of its shareholders, to grant unqualified stock
options to the employees and in the amounts designated in
Exhibit 6.11.
6.12 Release from Securityholders. Securityholders
shall execute and deliver to the Parent, in a form satisfactory
to Parent's counsel, a release of any claim that they may have
against the Company, and its subsidiaries or affiliates, for
the repayment of any loan, claim for unpaid compensation, claim
for indemnification or otherwise except for the notes set forth
in Exhibit 6.12.
6.13 Corporate Documents. Parent shall have received
copies of the following documents:
(a) a certificate of the President of the
Company dated the Closing Date and certifying (i) that attached
thereto is a true and complete copy of the Articles or
Certificate of Incorporation and Bylaws of the Company as in
effect on the date of such certification; and (ii) that
attached thereto are true and complete copies of resolutions
adopted by the Board of Directors of the Company authorizing
the execution, delivery and performance of this Agreement, and
that all such resolutions are still in full force and effect
and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement; and
(b) such additional supporting documents
and other information with respect to the operations and
affairs of the Company as Parent may reasonably request.
All such documents described in (a) and (b) shall be
satisfactory in form and substance to Parent and its counsel.
6.14 Corporate Filings. All relevant incorporation
and merger documents shall be filed with the appropriate
governmental agencies and shall be attached hereto as
Exhibit 6.14.
6.15 Trustee of Profit Sharing Plan. The Surviving
Corporation shall at Closing cause a successor trustee, if
necessary, for the Company's, and its subsidiaries or
affiliates, profit sharing plans to be appointed.
6.16 Net Worth. The Company shall have as of the
Closing Date, as shown on the Closing Balance Sheet, a Net
Worth greater than or equal to One Million Seven Hundred
Thousand Dollars ($1,700,000) as adjusted for deferred taxes
and other decreases due to expenses made in the ordinary course
of business. To enable all parties to determine the net Worth
of the Company, the Securityholders shall cause the Closing
Balance Sheet to be delivered to the Parent within ten (10)
days of Closing.
6.17 Securityholders' Guaranty of Company Debt.
Parent and White Mountain shall obtain the release of all of
Securityholders' personal guaranties of the Company's debt
before the Closing Date listed on Exhibit 6.17, and provide
Securityholders with written confirmation of such release from
the Company's creditors holding Securityholders' guaranties at
the Closing. Parent and White Mountain shall use its best
efforts to obtain Securityholders' release from any guaranty
existing prior to Closing but inadvertently omitted from
inclusion on Exhibit 6.17.
6.18 Release of Buy-Sell Rights. Securityholders
shall deliver to Parent a waiver and/or release of any rights
that they may have under that certain Stockholders' Buy-Sell
Agreement dated March 25, 1997 by and between Wheat, E. Schenck
and K. Schenck which would in any way effect the proposed
transaction.
6.19 Spousal Release. Securityholders' spouses,
Caryn Wheat, Christy Schenck and Gail Schenck, shall
acknowledge the proposed transaction hereunder and shall
release any community property claim that they may have to the
Stock, but not as to the proceeds thereof, which would in any
way effect the transaction proposed hereunder.
SECTION 7
TRANSACTIONS PRIOR TO CLOSING
Between the date of this Contract and the Closing,
the executive officers and Board of Directors of the Company
shall retain full control of the management and business of the
Company. To enable Parent to prepare for settlement at the
Closing, Parent, Securityholders and the Company agree that
between the date hereof and Closing:
7.1 Taxes. The Company will promptly pay and
discharge, or cause to be paid and discharged, their federal,
state and other governmental taxes, assessments, fees and
charges imposed upon it or on any of its property or assets and
timely file any returns and reports in connection with the
foregoing; provided, however, nothing herein shall require the
Company to pay or cause to be paid any tax, assessment, fee or
charge so long as the validity thereof shall be contested in
good faith by appropriate procedures and the Company has set
aside on its books and maintains adequate reserves with respect
thereto or for which disclosure to Parent has been made
pursuant to Exhibits 4.10(a) and (b).
7.2 Books of Record and Account; Inspection. The
Company will maintain at all times proper books of record and
account in accordance with GAAP, and will permit any of
Parent's officers or any of its authorized representatives or
accountants to visit and inspect the offices and properties of
the Company, examine the Company's books of account and other
records, and discuss the Company's affairs, finances and
accounts with Parent's appropriate officers and managers, legal
counsel, accountants and auditors, all at normal business hours
and as often as Parent may request provided any such
discussions with accountants will not cause the Company to
incur any material cost with respect to such accountants and
legal counsel.
7.3 Financial Reports. The Company shall furnish to
Parent, within 20 days after the end of each month (and within
45 days after the end of the last month of the Company's fiscal
year), an unaudited financial report of the Company, which
report shall include profit and loss statement, a consolidated
balance sheet, a cash flow analysis, and such other financial
information that Parent may reasonably request.
7.4 Insurance.
(a) The Company will maintain in effect
liability insurance, property insurance, worker's compensation
insurance, the life insurance policies referenced in Section
6.9 and extended coverage insurance on its personal property
referenced in Section 4.15 above, with responsible insurance
companies, against such risks as are customarily insured
against by similar businesses operating in the same vicinity,
and in amounts not less than those (i) recommended by major
insurance companies for similar businesses or (ii) required by
governmental authorities having jurisdiction over all or part
of the Company's operations.
7.5 Notification. The Company will, within two (2)
business days, advise Parent in writing of the following:
(a) The occurrence of an Event of Default;
(b) The filing of any suit, action, other
proceeding against the Company or any investigation which the
Company learns is pending or threatened against it, if the
amount involved or at risk by nature of such suit, action,
other proceeding or investigation exceeds Seventy-Five Thousand
Dollars ($75,000);
(c) The filing, recording or assessment of a
federal, state or local tax lien against the Company or any of
its assets other than in the ordinary course of business;
(d) The occurrence of any reportable event with
respect to any employee benefit plan of the Company or which is
subject to the provisions of ERISA, including a statement
setting forth details as to the reportable event and the action
proposed to be taken with respect thereto, together with a
copy, if available, of the notice of such reportable event
given to the Pension Benefit Guaranty Corporation; and
(e) Any other condition, act or event which the
Company in its good faith judgment believes will adversely
affect Parent's rights under this Agreement.
7.6 Corporate Existence. The Company shall at all
times cause to be done every act necessary to maintain and
preserve its existence, rights, franchises, and certifications
in the jurisdictions of their incorporation and to remain
qualified as foreign corporations in every jurisdiction in
which qualification is required.
7.7 Maintenance of Properties. The Company shall
maintain or cause to be maintained in good repair, working
order and condition all tangible properties required for its
business and from time to time make or cause to be made all
appropriate repairs and replacements thereof.
7.8 Trade Secrets. The Company will use its best
efforts to maintain the confidentiality of any Business
Property Rights of the Company and will seek to restrict the
ability of any employee having knowledge of such proprietary
information or trade secrets from competing with the Company
through employment and non-competition agreements and similar
arrangements.
7.9 Mergers and Other Transfers. The Company will
not (i) merge or consolidate with any person, firm, association
or corporation, (ii) transfer, sell, assign, lease or otherwise
abandon or dispose of (whether in one transaction or a series
of transactions) any material part of its assets except in the
normal course of business if such transaction would reduce the
net worth of the Company below $1,700,000 (as adjusted for
deferred taxes and other decreases due to expenses made in the
ordinary course of business), (iii) change the nature of its
business, (iv) create any subsidiaries, or (v) liquidate,
dissolve or cease active business operations.
7.10 Certificate of Incorporation and Bylaws. The
Company will not amend its Articles or Certificate of
Incorporation or Bylaws if the result of any such amendment
will have an adverse effect on Parent's rights under this
Agreement.
7.11 Judgments and Liens. Neither the
Securityholders nor the Company shall create, incur, assume or
permit to exist any mortgage, lien, security interest, charge
or encumbrance on any property or assets now owned or hereafter
acquired by the Company except:
(a) Liens arising out of judgments or awards
(i) which have been in force less than the applicable appeal
period so long as execution is not levied thereunder, or (ii)
in respect of which the Company shall in good faith be
prosecuting an appeal or proceedings for review and in respect
of which the Company shall have secured a subsisting stay of
execution pending such appeal or proceedings for review;
(b) Liens for taxes, assessments or
governmental charges or levies, provided payment thereof shall
not at the time be required;
(c) Deposits, liens, bonds or pledges to secure
payment of worker's compensation, unemployment insurance,
pensions or other social obligations, surety, stay or appeal
bonds, or other similar obligations arising in the ordinary
course of business;
(d) Mechanic's, worker's, repairmen's,
warehousemen's, vendor's, or carrier's liens, or other similar
liens arising in the ordinary course of business and securing
sums which are not past due, or deposits or pledges to obtain
the release of any such liens;
(e) Liens arising by operation of law under
lease agreements made in the ordinary course of business and
confined to the property rented;
(f) Liens on property securing the purchase
price of property acquired after the date hereof provided that
each of such lien (i) is given solely to secure indebtedness
not exceeding one hundred percent (100%) of the lesser of the
cost or fair market value of such property, (ii) does not
extend to any other property and (iii) is given at the time of
acquisition of the property;
(g) Presently outstanding liens;
(h) liens and encumbrances securing
indebtedness to Senior Creditors; and
(i) Extension, renewal or refunding of
indebtedness secured by liens permitted by this Section 7.11,
provided that the then outstanding amount of such indebtedness
is not increased and such liens do not extend to property not
then encumbered thereby.
7.12 Issuances of Capital Stock. The Company will
not issue any of its capital stock to any person or entity or
grant any person or entity an option, warrant, convertible
security or any other right or agreement to acquire any shares
of its capital stock, without the prior written consent of
Parent.
7.13 Purchase of Securities or Assets. The Company
will not purchase the outstanding equity securities of any
other person, firm, association or corporation, except
obligations issued or guaranteed by the United States
government or any state or political subdivision thereof or
other short-term instruments normally marketed by banks and
nationally recognized brokerage firms, provided nothing herein
shall restrict the Company from maintaining accounts with
federally insured banking institutions or money market funds.
7.14 Declaration of Dividends, etc. The Company will
not (i) make, pay or declare any distributions or dividends of
cash or property with respect to its issued shares of Common
Stock; (ii) directly or indirectly redeem, repurchase or
otherwise reacquire any shares of its Common Stock; (iii)
increase the salary or pay any bonuses to any management
employees, officers or directors of the Company, if such action
decreases the net worth of the Company below One Million Seven
Hundred Thousand Dollars ($1,700,000) as adjusted for deferred
taxes and other decreases due to expenses made in the ordinary
course of business.
Except as set forth on Schedule 7.14, the Company is
further prohibited from declaring or distributing, without the
prior written approval of Parent in its sole discretion, any
executive bonus or other form of additional compensation.
7.15 Payments to Officers. Except as described on
Exhibit 7.15, the Company shall not loan or advance any amount
to, or sell, transfer or lease any properties or assets (real,
personal or mixed, tangible or intangible), to, or enter into
any agreement or arrangement with, any of the Company's
officers or directors, except for compensation to officers
pursuant to existing agreements, copies of which have been
delivered to Parent, and reimbursement of expenses incurred by
employees of the Company in connection with their employment.
7.16 Indebtedness. The Company shall not incur any
indebtedness for borrowed money, including pension fund loans,
or purchase money indebtedness or guarantee any such
indebtedness or issue or sell any debt securities of the
Company or guarantee in any manner (including, without
limitation, by agreeing to maintain the financial condition of
another person) any debt securities of others, provided,
however, that the Company shall have the right to incur
indebtedness in the ordinary course of business for office
furniture, equipment, trade payables, machinery and vehicles.
7.17 Expenditures. The Company shall not make any
capital investments or capital expenditures in excess of an
aggregate of Seventy-Five Thousand Dollars ($75,000) which are
outside of the ordinary course of the Company's business,
without the consent of Parent.
7.18 Employee Benefit Plans. The Company shall not
adopt any new Employee Benefit Plans but may expand existing
benefits subject to the approval of the Board of Directors.
7.19 Material Contracts. Except as described on
Exhibit 7.19, the Company shall not enter into, assume, renew
or permit to be renewed (including by not giving a permitted
notice of termination) any contract, lease or obligation
outside the ordinary course of business. Except as expressly
set forth therein, the Company shall not modify, amend,
terminate, waive or release any benefit or right under any
employment agreement, or any other material agreement to which
the Company is a party, without the prior written consent of
Parent.
7.20 Non-business Assets. The Company shall not
apply any corporate funds toward the payment of any principal
or interest due or owing for the purchase of any non-corporate
assets.
SECTION 8
COVENANTS NOT TO COMPETE
8.1 Covenant Not to Compete. Except as authorized
by White Mountain and Parent or by the terms of this Agreement,
no Securityholder shall, directly or indirectly, alone or with
others, enter into any business related to the construction,
reconstruction, maintenance, repair and expansion of CATV,
SMATV systems and any other related systems in the
telecommunications industry within the Northwestern Continental
United States, in the State of Alaska, or within Two Hundred
(200) miles of an existing Company, and its subsidiaries or
affiliates, project for a period of three (3) years from the
date of Closing. Further, no Securityholder shall, during such
period, disclose, divulge, communicate, use to the detriment of
the Company or Parent or for the benefit of any other person or
persons, or use in any way, any confidential information or
trade secrets of the Company, including customer list,
personnel information, and other similar data. In addition, no
Securityholder shall, during such period, (i) hire or attempt
to hire any employee of the Company, and its subsidiaries or
affiliates, or (ii) interfere with any contract or other
relationship of the Company, and its subsidiaries or
affiliates, and any of its customers or suppliers.
Securityholders agree that Parent shall be entitled to
injunctive relief in the event of any breach of the covenants
set forth in this paragraph together with reasonable attorney's
fees and damages. Damages shall only be collectible from the
party breaching this provision.
SECTION 9
INDEMNIFICATION BY SECURITYHOLDERS AND THE COMPANY
Securityholders and the Company, to the extent set
forth in this Agreement, shall indemnify and hold harmless
Parent, White Mountain and Surviving Corporation against and in
respect to the following, in addition to any losses otherwise
specifically indemnified against in this Agreement, as follows:
9.1 Indemnification by the Securityholders and the
Company.
(a) Breach. Subject to the provision of this
Section 9.1 and except as otherwise more specifically set forth
herein, the Securityholders and the Company (each in his or her
capacity as an indemnifying party, an "Indemnifying party")
covenants and agrees to jointly and severally indemnify,
defend, protect, and hold harmless each of Parent, White
Mountain, the Surviving Corporation and each of their
respective Subsidiaries and Affiliates (each in its capacity as
an indemnified party, an "Indemnitee") at all times from and
after the date of this Agreement from and against all Adverse
Consequences incurred by such Indemnitee as a result of or
incident to (i) any breach of any representation or warranty of
the Company or the Securityholders set forth in Section 4 of
this Agreement, (ii) any material breach or nonfulfillment by
the Company or the Securityholders of, or any noncompliance by
the Company or the Securityholders with, any covenants,
agreement, or obligation contained herein or in any certificate
or other document delivered in connection herewith, (iii) all
damage or deficiency resulting directly from the material
inaccuracy of any list, certificate or other instrument
delivered by or on behalf of Securityholders or the Company in
connection herewith, whether made as of the date hereof, or as
of the Closing Date hereunder or otherwise, or resulting from
the non-fulfillment of any agreement on the part of
Securityholders or the Company contained in this Agreement or
made in connection with the transactions contemplated hereby,
including, but not limited to all losses, liabilities, damages,
costs and expenses (including reasonable attorneys' fees),
incurred by Parent if this Agreement is terminated pursuant to
Section 10 hereof.
(b) Environmental Indemnification. The
Company, and Securityholders shall jointly and severally,
hereby indemnify each Indemnitee and hold each Indemnitee
harmless from and against any and all damages, losses,
liabilities, costs and expenses of removal, relocation,
elimination, remediation or encapsulation of any Hazardous
Materials (as defined in Section 4.20), obligations, penalties,
fines, impositions, fees, levies, lien removal or bonding
costs, claims, actions, causes of action, injuries,
administrative orders, consent agreements and orders,
litigation, demands, defenses, judgments, suits, proceedings,
disbursements or expenses (including without limitation,
attorney's and experts' reasonable fees and disbursements) of
any kind and nature whatsoever resulting from the operation of
the Company's business as of the Closing Date: (i) which (x)
is imposed upon, or incurred by, Parent by reason of, relating
to or arising out of the violation by the Company prior to the
Closing of any environmental laws, rules or regulations of any
governmental body or agency having jurisdiction over the
premises, or (y) arises out of the discharge, dispersal,
release, storage, treatment, generation, disposal or escape of
any Hazardous Materials, on or from the premises as of the
Closing Date, or (z) arises out of the use, specification, or
inclusion of any product, material or process containing
Hazardous Materials, or the failure to detect the existence or
proportion of Hazardous Materials in the soil, air, surface
water or groundwater, or the performance or failure to perform
the abatement of any Hazardous Materials source as of the
Closing Date or the replacement or removal of any soil, water,
surface water, or groundwater containing Hazardous Materials;
and/or (ii) is imposed upon, or incurred by, Parent by reason
of or relating to any material breach, act, omission or
misrepresentation contained in Section 4.20.
(c) Tax Matters. Company and Securityholders
shall jointly and severally indemnify each Indemnitee from and
against all Adverse Consequences incurred by any Indemnitee as
a result of or incident to any Income Taxes or other Taxes
imposed on the Surviving Corporation, the Company or any of
their Subsidiaries or for which the Surviving Corporation,
Company or any of its Subsidiaries may otherwise be liable by
law or regulation (including, without limitation, the
provisions of Treasury Regulation Section 1.1502-6) or
contract, for any taxable year or period that ends on or before
Closing or resulting in any way from this transaction,
including, but not limited to, any taxes imposed as a result of
the disqualification of this transaction as a tax free
reorganization under the Code.
(i) The Company shall furnish to Parent
copies of the federal, state, and local tax returns of the
Company for the period ending on the Closing Date and shall
obtain the consent of Parent before filing such returns which
consent shall not be unreasonably withheld.
(ii) Except as otherwise provided in this
Agreement, Parent shall have the sole right to represent the
interests of any Indemnitee in any tax audit or administrative
or court proceeding relating to any taxable period, including
without limitation taxable periods ending on or before Closing,
and to compromise, settle, or contest any tax claims in
connection therewith in its sole discretion, provided that
Parent shall provide Securityholders with written notice of its
intent to exercise its rights hereunder. Securityholders shall
have the right, at their expense, to join Parent in any such
defense.
(d) Broker Fee. Each Indemnifying Party
jointly and severally indemnifies each Indemnitee from any
claim made by a broker, finder, agent or other intermediary
against the Company after Closing in connection with the
negotiation or execution of this Agreement or the consummation
of the transactions contemplated hereby except for those claims
made against Parent or White Mountain pursuant to Section 5.5,
hereof.
(e) Set-Off. Except as otherwise provided in
this Agreement, Parent shall be entitled to set-off the
Securityholders' or the Company's liability to Parent for
indemnification under this Section 9, or under any other
paragraph of this Agreement, after any dispute regarding such
liability has been resolved by the parties or otherwise, by
crediting the amount of liability in equal parts against the
monies being held in escrow pursuant to Section 2.2(c) of this
Agreement, and against the Arguss Stock being held in escrow
pursuant to Section 2.2(c) by reducing the amount of cash and
Arguss Stock issued to Securityholders pursuant to
Section 2.2(d). In the event that Parent desires to exercise
its rights pursuant to this paragraph, the amount of any
liability alleged by the Parent which is disputed in writing by
the Company or Securityholders shall remain in escrow until
such dispute has been resolved. If such dispute is resolved in
favor of Securityholders, Parent shall pay interest at the
Prime Rate on any amount improperly held commencing from
December 1, 1998.
(f) Costs and Expenses. Except as otherwise
provided in this Agreement, all amounts indemnified pursuant to
this Section 9 shall include all costs and expenses of the
Indemnitee, including, but not limited to, the costs of any
actions, reasonable attorneys fees, and other expenses
necessary to enforce the rights granted hereunder.
(g) Termination of Company's Obligation.
Company's obligation to indemnify Parent, or to contribute to
any party indemnifying Parent, pursuant to this Section 9 shall
expire as of the Filing Date.
(h) Termination of Securityholders' Obligation.
Securityholders' obligation to indemnify any Indemnitee, or to
contribute to any party indemnifying any Indemnitee, pursuant
to this Section 9, shall, except in the event of actual fraud
or intentional non-disclosure, expire three (3) years from the
Closing Date, except as to those involving tax matters, which
obligation shall expire six (6) years from the Closing Date.
9.2 Limits of Indemnification. For the purposes of
this Section 9, the Indemnifying Parties Indemnification shall
be limited to those Adverse Consequences which exceed in the
aggregate One Hundred Thousand Dollars ($100,000).
9.3 No Circular Recovery. Securityholders hereby
agree that they will not make any claim for indemnification
against either Parent or White Mountain by reason of the fact
that he was a director, officer, employee agent or other
representative of the Company of any of its Subsidiaries
(whether such claim is for Adverse Consequences of any kind or
otherwise and whether such claim is pursuant to any statute,
charter, by-law, contractual obligation or otherwise) with
respect to any claim for indemnification brought by Parent, the
Surviving Corporation, and their respective Subsidiaries and
Affiliates against the Securityholders.
SECTION 10
TERMINATION
10.1 Termination by Parent. This Agreement may be
terminated by Parent, on or before the Closing Date, upon the
occurrence of the following:
(a) If any of the material conditions specified
in Section 6 shall not have been met prior to the Closing Date.
(b) If an event of default, as defined in
Section 11, has occurred, and has not been cured during any
applicable cure period.
10.2 Termination by Securityholders. This Agreement
may be terminated by Securityholders, on or before the Closing
Date if any of the conditions specified in Section 5 shall not
have been met prior to Closing.
SECTION 11
DEFAULT
11.1 Events of Default. It shall be considered an
Event of Default if any one or more of the following events
shall occur:
(a) If any statement, certificate, report,
representation or warranty of a material nature made or
furnished by the Company under this Agreement shall prove to
have been false or erroneous in any material respect.
(b) The occurrence of any event of material
default under any other financing agreement, note, lease,
mortgage, security agreement, factoring agreement or any other
obligation of the Company the result of which will have a
material adverse effect on the Company unless any such event of
default shall be timely cured under any applicable cure
provision or waived by the person to whom or to which the
Company is obligated or indebted.
11.2 Waiver by Parent. Any failure by Parent to
insist upon strict performance by the Securityholders or the
Company of any of the terms and provisions of this Agreement,
shall not be deemed to be a waiver of any of the terms and
conditions hereof and Parent shall have the right thereafter to
insist upon strict performance thereof by the Securityholders
or the Company.
SECTION 12
MISCELLANEOUS
12.1 Costs. Except for expenses relating to the
preparation of the December 1998 Audit, each party shall pay
its own expenses incident to the transaction contemplated
hereby, including fees and expenses of their attorneys,
accountants, appraisers or consultants, whether or not those
transactions are consummated at Closing, subject to the
indemnification and termination provisions hereof.
12.2 Sales and Transfer Taxes. All state sales taxes
and all transfer taxes and all documentary taxes, if any,
payable in connection with the Merger shall be paid by the
party to whom such taxes are customarily attributed under the
laws of the State of Alaska.
12.3 Relationships to Other Agreements. In the event
of a conflict between any of the provisions of this Agreement
and any other agreement relating to this transaction between
the Securityholders, Company and Parent, the provisions of this
Agreement shall control.
12.4 Titles and Captions. All article or section
titles or captions in this Agreement are for convenience of
reference and are not part of this Agreement and shall in no
way define, limit, extend or describe the scope or intent of
provisions herein.
12.5 Exhibits. The Exhibits and Schedules referred
to herein are hereby made a part hereof.
12.6 Applicable Law. This Agreement is to be
governed by, and construed, interpreted, and enforced in
accordance with the laws of Delaware.
12.7 Binding Effect and Assignment. This Agreement
shall be binding upon and inure to the benefit of the
successors and assigns of the parties. Notwithstanding the
foregoing, neither the Company nor Parent shall have any right
to assign any of its rights or obligations under this Agreement
without the prior written consent of the other parties hereto.
12.8 Notices. All notices, requests, instructions,
or other documents required hereunder shall be deemed to have
been given or made when delivered by registered or certified
mail, return receipt requested, postage prepaid or by messenger
or overnight delivery service to:
If Company then: Schenck Construction of Alaska,
Inc.
8602 Maltby Road
Woodinville, WA 98072-1530
Counsel for Company: Davis Wright Tremaine
1800 Seafirst Building
10500 NE 8th Street
Bellevue, WA 98004
Attn: Steven J. Hopp
If Securityholder E. Schenck
then: Edward A. Schenck
17102 161st Avenue, NE
Woodinville, WA 98072
Counsel for E. Schenck: Davis Wright Tremaine
1800 Seafirst Building
10500 NE 8th Street
Bellevue, WA 98004
Attn: Steven J. Hopp
If Securityholder K. Schenck
then: Kevin E. Schenck
20525 22nd Avenue, W
Lynwood, WA 98036
Counsel for K. Schenck: Davis Wright Tremaine
1800 Seafirst Building
10500 NE 8th Street
Bellevue, WA 98004
Attn: Steven J. Hopp
If Securityholder Imel L.
Wheat, Jr. then: Imel L. Wheat, Jr.
4010 31st Avenue, NE
Carnation, WA 98014
Counsel for Wheat: Davis Wright Tremaine
1800 Seafirst Building
10500 NE 8th Street
Bellevue, WA 98004
Attn: Steven J. Hopp
If Parent then: Arguss Holdings, Inc.
One Church Street, Suite 302
Rockville, Maryland 20850
Attn: Haywood Miller
Counsel for Parent: Bleecker & Bleecker
51 Monroe Street
Suite 1210
Rockville, Maryland 20850
Attn: Steven S. Bleecker
Any party may from time to time give the others
written notice of a change in the address to which notices are
to be sent and of any successors in interest.
12.9 Severability. Inapplicability or
unenforceability of any provision of this Agreement shall not
impair the operation or validity of any other provision hereof.
If any provision shall be declared inapplicable or
unenforceable, there shall be added automatically as part of
this Agreement a provision as similar in terms to such
inapplicable or unenforceable provision as may be possible and
be legal, valid and enforceable.
12.10 Acceptance or Approval. By accepting all
or approving anything required to be observed, performed, or
fulfilled, or to be given to Parent pursuant to this Agreement,
including, but not limited to, any certificate, balance sheet,
statement of profit or loss or other financial statement, or
insurance policy, Parent shall not be deemed to have accepted
or approved the sufficiency, legality, effectiveness or legal
effect of the same, or of any term, provision, or condition
thereof as to third parties.
12.11 Survival. All covenants, representations,
and warranties made by the Securityholders and Parent in this
Agreement shall survive the Closing hereunder for a period of
three (3) years, except as to those involving tax matters,
which shall survive the closing for a period of six (6) years.
12.12 Entire Agreement. This Agreement,
including all Exhibits, constitutes the entire agreement among
the parties hereto pertaining to the subject matter hereof, and
supersedes all prior agreements and understandings pertaining
thereto. No covenant, representation, or condition not
expressed in this Agreement shall affect or be deemed to
interpret, change or restrict the express provisions hereof and
no amendments hereto shall be valid unless made in writing and
signed by all parties hereto.
12.13 Counterparts. This Agreement may be
executed in any number of counterparts, all of which together
shall constitute one instrument.
12.14 Security Matters. (a) By executing this
Agreement, Parent acknowledges that : (i) Parent has been
advised that the Stock has not been and will not have been
registered under the Act or the Alaska or the Act of Washington
or other applicable securities laws of any state, that the
Securityholders in transferring such shares to the Parent will
be relying, if applicable, upon the exemption from such
registration requirements contained in Section 4(1) or 4(2) of
the Act as a transaction by a person other than as issuer,
underwriter or dealer and the applicable state exemption; (ii)
the Stock may be "restricted" as that term is used in Rule 144
under the Act as a consequence of which Parent may not be able
to sell the shares unless such shares are first registered
under the Act and any applicable state securities laws or
unless an exemption from such registration, is, in the opinion
of counsel, available; (iii) the Stock will be acquired by
Parent for purposes other than "distribution" as that term is
used in Section 2(11) of the Act, and (iv) Parent will execute,
if Securityholders so request, an appropriate letter affirming
that its intention with respect to the proposed acquisition of
the Stock is that such acquisition be for investment purposes
only and not with a view toward resale or distribution thereof.
(b) The shares of Arguss Stock are not
registered under the Securities Act of 1933, as amended (the
"1933 Act"), and are being issued without registration on the
grounds that the sale of Arguss Stock hereunder is exempt from
registration under the 1933 Act pursuant to Section 4(2)
thereof and Parent's reliance on such exemption is predicated
on Securityholders' representations set forth herein.
This Agreement is made in reliance upon
Securityholders' representations to Parent that the shares of
Arguss Stock to be issued will be acquired for investment and
not with a view to the sale or distribution of any part
thereof, and that Securityholders have no present intention of
selling, granting participation in or otherwise distributing
the same.
Securityholders hereby represent that they are
experienced in evaluating and investing in companies such as
the Parent, have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and
risks of this investment, and have the ability to bear the
economic risks of this investment. Securityholders further
represent that during the course of the transaction they have
had the opportunity to ask questions of, and receive answers
from, representatives of Parent concerning the Parent.
Securityholders hereby agree that the Arguss Stock
may not be transferred without registration under the 1933 Act
or an exemption therefrom, and that in the absence of an
effective Registration Statement covering the Arguss Stock, or
an available exemption from registration under the 1933 Act,
the Arguss Stock must be held indefinitely. In particular, and
without limiting the foregoing, Securityholders are aware that
the Arguss Stock may be not be sold pursuant to Rule 144
promulgated under the 1933 Act unless all conditions of that
Rule are met.
Securityholders hereby agree that in no event will
they transfer any of the Arguss Stock other than pursuant to an
effective Registration Statement under the 1933 Act, or
pursuant to the conditions of any legend appearing on said
Arguss Stock.
12.15 Preparation and Filing of SEC Documents.
If and whenever, as a result of the transaction contemplated
hereunder, the Parent is under an obligation to provide
financial information to, or prepare a filing of any kind with,
the United States Securities and Exchange Commission ("SEC"),
Securityholders shall assist the Parent in preparing any
audited financial statements required by the SEC for this
purpose. The cost of preparing any such financial statements
shall be borne by the Parent.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
ATTEST: ARGUSS HOLDINGS, INC.
____________________ By:
______________________________
Title: ___________________________
ATTEST: SCHENCK CONSTRUCTION OF ALASKA, INC.
____________________ By:______________________________
Edward A. Schenck, President
WITNESS:
____________________ ______________________________
EDWARD A. SCHENCK
WITNESS:
____________________ ______________________________
KEVIN E. SCHENCK
WITNESS:
____________________ ______________________________
IMEL L. WHEAT, JR.
ATTEST: WHITE MOUNTAIN CABLE CONSTRUCTION CORP.
____________________ By: ____________________________
Title: ___________________________
PAGE 65 OF 65 OF AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, made this 6th day of
October, 1997, by and between ALVIN K. WRIGHT ("Wright')
(hereinafter referred to as "Securityholder"), RITE CABLE
CONSTRUCTION, INC., a Florida corporation (the "Company"),
ARGUSS HOLDINGS, INC., a Delaware corporation (the "Parent"),
and WHITE MOUNTAIN CABLE CONSTRUCTION CORP. ("White Mountain"),
a Delaware corporation and a 100% subsidiary of Parent .
INTRODUCTORY STATEMENT
A. Securityholder owns One Hundred (100) shares of
capital stock of the Company, which shares constitute all of
the issued and outstanding capital stock ("Stock") of the
Company, a Florida corporation doing business as RITE Cable
Construction, Inc.
B. The Company is a full service multimedia
communications contractor engaged in the construction,
reconstruction, maintenance, repair, and expansion of CATV,
SMATV systems and other related systems in the
telecommunications industry.
C. Parent has agreed with the Securityholder for Parent
to acquire the Company by means of a merger of the Company with
and into White Mountain, a wholly owned subsidiary of Parent
upon the terms and subject to the conditions set forth herein.
D. In furtherance of such acquisition, the Boards of
Directors of Parent, White Mountain and the Company have each
approved the plan of merger to merge the Company with and into
White Mountain (the "Merger") in accordance with the applicable
provisions of the Delaware General Corporation Law (the
"DGCL"), and the Florida General Corporation Law ("FGCL"), and
upon the terms and subject to the conditions set forth herein.
E. Pursuant to the Merger, the record holders of each
outstanding share of the Company's common stock, $.01 par
value, shall be entitled to receive the Merger Consideration
(as defined in Section 2.1) so that upon receipt of the Merger
Consideration, such share of the Stock shall be cancelled, all
upon the terms and subject to the conditions set forth herein.
F. The parties hereto intend that this transaction to
qualify as a tax free reorganization under Section 368(a)(1)(A)
of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, WITNESSETH, for and in consideration of
the premises and the mutual representations, warranties,
covenants and agreements herein contained and other good and
valuable consideration, receipt of which is hereby
acknowledged, the parties do agree as follows:
DEFINITIONS
The following terms when used in this AGREEMENT AND PLAN
OF MERGER shall have the following meanings:
"Accounts Receivable" means accounts receivable,
notes due from all sources of the Company, and credits for
returned or damaged merchandise.
"Act" shall mean the Securities Act of 1933, as the
same has been and shall be amended from time to time.
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, liabilities,
obligations, taxes, liens, losses, expenses, and fees,
including court costs and attorneys' fees and expenses, net of
all tax savings and insurance proceeds actually received by an
Indemnitee with respect to any of the foregoing.
"Agreed Value of the Company" shall mean the value of
the Company equal to the product of Three and One-Half (3-1/2)
times the September 1998 12 Month Adjusted Cash Flow.
"Agreement" means this AGREEMENT AND PLAN OF MERGER.
"Arguss" shall mean the Parent, Arguss Holdings,
Inc., a Delaware corporation with its principal offices located
at One Church Street, Suite 302, Rockville, Maryland 20850, and
its successors and assigns.
"Arguss Stock" shall mean the authorized capital
stock of Arguss.
"Assets" means all property, rights, things of value
and other assets of the Company described, referred to, or
listed, in Section 4.9 of this Agreement.
"Certificate of Merger" has the meaning set forth in
Section 1.2 below.
" Closing" means the transfer of the Stock to White
Mountain and the payment of the Purchase Price to
Securityholder pursuant to this Agreement.
"Closing Balance Sheet" shall mean the internally
generated closing balance sheet and profit and loss statement
of the Company for the period ending September 30, 1997.
"Closing Date" means the date of Closing, established
under Section 3 of this Agreement.
"Code" means the United States Federal Internal
Revenue Code of 1986, as amended.
"DGCL" has the meaning set forth in the introductory
statement.
"Employment Agreement" means the Employment
Agreements to be executed by the Company, Wright , Smith and
other key employees pursuant to Section 6.6 hereof.
"Environmental, Health, and Safety Laws" means the
United States federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational
Safety and Health Act of 1970, each as amended, together with
all other laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges
thereunder of federal, state, local, and foreign governmental
and all agencies thereof) concerning pollution or protection of
the environment, public health and safety, or employee health
and safety, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants,
or chemical, industrial, hazardous, or toxic materials or
wastes (including asbestos and oil or petroleum) (collectively,
"Hazardous Materials") into ambient air, surface, water, ground
water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes.
"Escrow Agreement" shall mean the Escrow Agreement
executed by the Securityholder, Company and Parent pursuant to
Section 6.5 and 2.2(c) hereof.
"Escrowed Purchase Price" shall mean that sum equal
to Eight Hundred Seventy-Five Thousand Dollars ($875,000)
placed in escrow pursuant to Section 2.2(c) hereof.
"Extremely Hazardous Substance" has the meaning set
forth in Section 302 of the Emergency Planning and Community
Right-to-Know Act of 1986, as amended.
"FGCL" has the meaning set forth in the introductory
statement above.
"Financial Statement" means the audited financial
statement of the Company for the Company's fiscal year ending
in 1996, including the notes thereto, prepared by Silver &
Company, P.A., the Company's regular independent certified
public accountant, and accepted by the accounting firm of KPMG
Peat Marwick.
"GAAP" shall mean in accordance with generally
accepted accounting principles, consistently applied.
"Initial Payment" shall mean the consideration paid
at closing which is the sum equal to Two Million Six Hundred
Twenty-Five Thousand Dollars ($2,625,000).
"Merger Consideration" means the aggregate
consideration set forth in Article II hereof.
"NOL" shall mean the net operating loss of the
Company as defined by Section __ of the Internal Revenue Code.
"Net Worth" shall mean the total assets of the
Company, reduced by any value placed on the intangible assets
of the Company, including, but not limited to, goodwill, less
the total liabilities of the Company as those terms are shown
on the Financial Statement and on the Closing Balance Sheet.
"Registration Rights Agreement" shall mean the
Registration Rights Agreement executed by the Securityholder,
Smith and Parent pursuant to Section 6.10 hereof.
"September 1998 Audit" shall mean the audit of the
Company for the twelve (12) month period ending September 30,
1998, prepared in accordance with generally accepted accounting
principles consistently applied by the accounting firm of
Bloom, Gettis, Habib, Silver & Terrone, P.A., and acceptable to
the accounting firm of KPMG Peat Marwick.
"September 1998 12 Month Adjusted Cash Flow" shall
mean that value determined in accordance with generally
accepted accounting principles consistently applied, and based
on the September 1998 Audit, equal to the difference between
(a) that number equal to the twelve (12) month net income of
the Company as of September 30, 1998, adjusted by adding back
all deductions taken in determining such number, if any, for
interest, depreciation, amortization and income taxes and (b)
the number equal to the sum of seventy per cent (70%) of the
Company's depreciation for that same period. For the purpose
of this calculation, all interest paid by the Company on that
portion of Company's indebtedness that exceeds its Net Worth by
a multiple greater than three (3) shall not be added back to
the Company's net income in (a).
"Smith" shall mean Leslie F. Smith, a signatory to
the Employment Agreement and the Registration Rights Agreement.
"Stock" shall mean all of the authorized issued and
outstanding capital stock of the Company, including all
warrants, options, convertible securities or right (contingent
or otherwise) to purchase or acquire stock of the Company.
"Surviving Corporation" has the meaning set forth in
Section 1.1 below.
"White Mountain" has the meaning set forth in the
preface above.
"Wright" shall mean Alvin K. Wright, a stockholder,
officer and director of the Company, and a signatory to this
Agreement.
ARTICLE I
THE MERGER
1.1 Effective Time. On the closing Date (as defined
in Section 3), and subject to and upon the fulfillment or
waiver of the terms and conditions of this Agreement, the DGCL
and the FGCL, Parent shall, as of the Closing, acquire the
Company by means of the company being merged with and into
White Mountain, where by the separate corporate existence of
the Company shall cease, and White Mountain shall continue as
the surviving corporation. White Mountain as the surviving
corporation after the Merger is hereinafter sometimes referred
to as the "Surviving Corporation."
1.2 Certificate of Merger. On the Closing Date,
assuming satisfaction or waiver of the conditions set forth in
Section 6, the parties hereto shall cause the Merger to be
consummated by filing Certificates of Merger as contemplated by
the DGCL and the FGCL (the "Certificates of Merger"), together
with any required related certificates, with the Secretary of
State of the State of Delaware, and the Secretary of the State
of Florida, respectively, in such form as required by, and
executed in accordance with the relevant provisions of, the
DGCL and the FGCL. The date of filing of the respective
Certificates of Merger shall be deemed the Filing Date.
1.3 Effect of the Merger. Upon the consummation of
the Merger, the effect of the merger shall be as provided in
this Agreement, the Certificates of Merger and the applicable
provisions of the DGCL and the FGCL. Without limiting the
generality of the foregoing, and subject thereto, upon the
consummation of the Merger all the property, rights,
privileges, powers and franchises of the Company and White
Mountain shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and White Mountain
shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificate of Incorporation, By-Laws.
(i) Certificate of Incorporation. Unless
otherwise determined by Parent prior to the Closing Date, upon
the consummation of the Merger the Certificate of Incorporation
of White Mountain, as in effect immediately prior to the
consummation of the Merger, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter
amended in accordance with the DGCL and such Certificate of
Incorporation.
(ii) By-Laws. Unless otherwise determined by
Parent prior to the consummation of the Merger, the By-Laws of
White Mountain, as in effect immediately prior to the closing
date, shall be the By-Laws of the Surviving Corporation until
thereafter amended in accordance with the DGCL, the Certificate
of Incorporation of the Surviving Corporation and such By-Laws.
1.5 Directors and Officers. The directors of White
Mountain immediately prior to the consummation of the Merger,
with the addition of Wright shall be the initial directors of
the Surviving Corporation, each to hold office in accordance
with the Certificate of Incorporation and By-Laws of the
Surviving Corporation, and the officers of White Mountain
immediately prior to the consummation of the Merger shall be
the initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed
and qualified. Smith shall be invited to attend all meetings
of the Board or Directors of White Mountain.
ARTICLE II
MERGER CONSIDERATION
2.1 Shares of Company. As of the Filing Date, each
share of Stock issued and outstanding as of the Closing Date,
shall by virtue of the merger and without any action on the
part of the holder thereof, be converted into the right to
receive an amount per share in Arguss Stock and in cash
("Merger Consideration"), without interest, determined in
accordance with Section 2.2.
2.2 Merger Consideration. The total merger
consideration to be paid by Parent and White Mountain to the
Securityholder shall be an amount equal to the Agreed Value of
the Company, as that term is defined in this Agreement. Each
share of Stock shall be entitled to receive a sum equal to the
Agreed Value of the Company divided by the total number of
shares of the Stock.
The Merger Consideration shall be paid to
Securityholder as follows:
(a) At Closing, the Securityholder shall
receive the sum equal to Fifty Per Cent (50%) of the Initial
Payment through the issuance of shares of the authorized
capital stock of Arguss ("Arguss Stock") as set forth in
Exhibit 2.2(a). For the purposes of determining the number of
shares of Arguss Stock to be issued to the Securityholder
pursuant to this paragraph 2.2(a), the value of each share of
Arguss Stock shall be Eight and 50/100 Dollars ($8.50).
(b) At Closing, the Securityholder shall
receive the sum equal to Fifty Per Cent (50%) of the Initial
Payment in cash, wire transfer, or certified funds as set forth
on Exhibit 2.2(b).
(c) At Closing, Parent shall deposit the
Escrowed Purchase Price in an Escrow Account to be held and/or
released pursuant to the terms and conditions of the Escrow
Agreement attached as Exhibit 6.5. Fifty Per Cent (50%) of the
Escrowed Purchase Price shall be in the form of a promissory
note and Fifty Per Cent (50%) of the Escrowed Purchase Price
shall be in the form of an irrevocable commitment to issue
shares of Arguss Stock. For the purpose of determining the
number of shares of Arguss Stock to be placed in Escrow
pursuant to this paragraph 2.2(c), the value of each share of
Arguss Stock irrevocably committed shall be Eight and 50/100
Dollars ($8.50). Such Escrow Agreement shall provide therein
for a release of all or part of the Escrow Purchase Price on
December 1, 1998 in accordance with paragraph 2.2(d), below.
(d) On December 1, 1998, Securityholder shall
receive the sum equal to the difference, if any, between the
(a) Agreed Value of the Company and (b) the Initial Payment.
Such payment shall be made in equal parts of cash and Arguss
Stock. For the purposes of determining the number of shares of
Arguss Stock to be issued to Securityholders pursuant to
paragraph 2.2(d), the value of each share of Arguss Stock shall
be Eight and 50/100 Dollars ($8.50). To enable all parties to
determine the Agreed Value of the Company, the Securityholder
shall cause the September 1998 Audit to be completed and
delivered to Parent, at Parent's expense on or before
December 1, 1998.
(e) In addition to the consideration to be paid
to Securityholder pursuant to Sections 2.2 (a) and (b), at
Closing the Parent shall pay to the Securityholder, in cash or
certified funds, the sum of Three Hundred Thousand Dollars
($300,000.00) in exchange for all of the NOL of the Company.
(f) The Net Worth of the Company on the Closing
Date shall be the Net Worth of the Company as set forth on the
Closing Balance Sheet. In the event the Net Worth exceeds
$750,000 on the Closing Date, such excess shall be paid to
Securityholder in cash on or before 30 days from the Closing
Date. In the event the Net Worth is less than $750,000 on the
Closing Date, such deficiency shall be paid to Parent in cash
on or before 30 days from the Closing Date by deducting such
deficiency from any monies owed to Securityholder by the
Company for any stockholder loans. To enable all parties to
determine the Net Worth of the Company on the Closing Date, the
Securityholder shall cause the Closing Balance Sheet to be
delivered to the Parent within 12 days of Closing.
(g) All consideration required to be paid to
Securityholder pursuant to this Section 2 shall be paid by
Parent on behalf of Securityholder to those parties, and in
those amounts, designated on Exhibit 2.2(g).
ARTICLE III
CLOSING
The Closing of the Merger shall occur at the offices
of Arguss Holdings, Inc., One Church Street, Suite 302,
Rockville, Maryland 20850, at 2:00 p.m. on the 1st day of
October, 1997, or at such other time, date and place as Parent
and Securityholder may agree (the "Closing Date"). At the
Closing:
3.1 Cancellation.
(a) Upon filing of the Certificate of Merger,
each such share of the Stock shall be canceled and shall
thereafter evidence only the right to receive a pro rata share
of the Merger Consideration.
(b) Upon filing of the Certificate of Merger,
each share of the Stock held in the treasury of the Company and
each share of Stock owned directly or indirectly by any wholly
owned Subsidiary of the Company immediately prior to the
consummation of the Merger shall, by virtue of the Merger and
without any action on the part of the holder thereof, cease to
be outstanding, be canceled and retired without payment of any
consideration therefor and cease to exist.
3.2 Delivery of Cash and Exchange of Certificates.
(a) Exchange Procedures. As of the Filing
Date, upon surrender of the certificates representing shares of
the Stock (the "Certificates") for cancellation to Parent
together with such other customary documents as may be required
to transfer the Stock, subject to the provisions of the Escrow
Agreement, the holder of such Certificates shall be entitled to
receive in exchange therefore their pro rata share of the
Merger Consideration as provided in Section 2.2(a), (b), (d),
(e) and (f) above, and the Certificates so surrendered shall
forthwith be canceled. Each outstanding Certificate that,
prior to the Closing Date, represented shares of the Stock will
be deemed from and after the Closing Date, for all corporate
purposes, to evidence the right to receive a pro rata share of
the Merger Consideration into which such shares of the Stock
shall have been so converted.
(b) No Liability. Neither Parent, White
Mountain, nor the Company shall be liable to any holder of the
Stock for any Merger Consideration delivered to a public
official pursuant to any applicable abandoned property, escheat
or similar law.
(c) Withholding Rights. Parent shall be
entitled to deduct and withhold from the Merger Consideration
otherwise payable pursuant to this Agreement to any holder of
the Stock such amounts, if any, as Parent is required to deduct
and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign tax law.
To the extent that amounts are so withheld by Parent, such
withheld amount shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares in
respect of which such deduction and withholding was made by
Parent, and Parent shall pay all such withheld amounts to the
proper authorities within the ordinary course of business.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND CERTAIN
COVENANTS OF SECURITYHOLDER AND THE COMPANY
As a material inducement to induce Parent and White
Mountain to consummate the Merger under this Agreement,
Securityholder and Company represent and warrant that each of
the matters set forth in this Article IV are true and correct
as of the date hereof, and acknowledge that Parent and White
Mountain's entry into this Agreement and the performance of
their obligations hereunder are made in reliance upon the
completeness and accuracy of each of the matters set forth
herein. The representations and warranties being made by the
Company shall survive up and until the Closing Date. The
representations and warranties being made by the Securityholder
shall survive as set forth in Section 12.12, herein.
4.1 Organization, Qualifications and Corporate
Power.
(a) The Company is a corporation duly
incorporated, validly existing and in good standing under the
laws of the State of Florida. Attached as Exhibit 4.1(a) is a
list of all states in which the company is qualified to do
business. The Company is duly qualified as a foreign
corporation in each other jurisdiction in which the failure to
be qualified would have a material adverse effect upon the
Company. The Company has the corporate power and authority to
own and hold its properties and to conduct its business as
currently conducted and as proposed to be conducted, to
execute, deliver and perform this Agreement to which it is a
signatory.
(b) Except as listed on Exhibit 4.1(b), the
Company does not own of record or beneficially, directly or
indirectly, (i) any shares of outstanding capital stock or
securities convertible into capital stock of any other
corporation or (ii) any participating interest in any
partnership, joint venture or other non-corporate business
enterprise.
4.2 Authorization of Agreement.
(a) The execution, delivery and performance by
the Company of this Agreement to which it is a signatory
hereunder have been duly authorized by all requisite corporate
action and will not (i) violate any applicable provision of
law, any order of any court or other agency of government, the
Articles or Certificate of Incorporation or Bylaws of the
Company, or any provision of any indenture, agreement or other
instrument by which the Company, or any of its properties or
assets is bound or affected, or (ii) conflict with, result in a
material breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or
other instrument, or results in being declared void, voidable
or without further binding effect any license, governmental
permit or certification, employee plan, note, bond, mortgage,
indenture, deed of trust, franchise, lease, contract,
agreement, or other instrument or commitment or obligation to
which Company is a party, or by which Company, or any of its
assets, may be bound, subject or affected, (iii) violate any
order, writ, injunction, decree, judgment, or ruling of any
court or governmental authority applicable to Company or any of
its assets, or (iv) except as otherwise provided in this
Agreement, result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever not arising in
the ordinary course of business upon any of the properties or
assets of the Company.
4.3 Capital Stock. The authorized capital stock of
the Company and the holders of the issued and outstanding
shares of such capital stock are set forth in Exhibit 4.3
hereto. Except as disclosed in Exhibit 4.3, there is no (i)
subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any
shares of any class of capital stock of the Company which is
authorized or outstanding, (ii) the Company has no commitments
to issue any shares, warrants, options or other such rights or
to distribute to holders of any class of its capital stock any
evidence of indebtedness or assets, (iii) the Company has no
obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other
distribution in respect thereof, and (iv) the Company has no
obligation or commitment to register under the Act any
securities issued or to be issued by it. All of the issued and
outstanding shares of the capital stock of the Company have
been validly issued in compliance with all federal and state
securities laws and are fully paid and non-assessable.
4.4 Financial Statements. The Company has delivered
to Parent the Financial Statements, exclusive of the September
1998 Audit which will be delivered to Parent prior to
December 1, 1998. Such preliminary Financial Statements are
complete and correct, have been prepared in accordance with
GAAP and fairly present the financial position of the Company
as of such respective dates after making all appropriate
adjustments, if applicable, required to present them on an
accrual basis for a Subchapter C corporation, and the results
of its operations for the respective periods then ended.
Except as set forth in such Financial Statements, the Company
has no material obligation or liability, absolute, accrued or
contingent.
4.5 Absence of Changes. Except as listed in
Exhibit 4.5 and since the time period covered by the Financial
Statements, the Company has not:
(a) Transferred, assigned, conveyed or
liquidated any of its assets or entered into any transaction or
incurred any liability or obligation which affects the assets
or the conduct of its business, other than in the ordinary
course of the Company's business;
(b) Incurred any change in its business,
operations, or financial condition which may have a material
adverse effect on its assets or its business, or become aware
of any event which may result in any such adverse change;
(c) Suffered any material destruction, damage
or loss relating to its assets or the conduct of its business
whether or not covered by insurance;
(d) Suffered, permitted or incurred other than
in the ordinary course of business the imposition of any lien,
charge, encumbrance (which as used herein includes, without
limitation, any mortgage, deed of trust, conveyance to secure
debt or security interest) whether or not contingent in nature,
or claim upon any of its assets, except for any current year
lien with respect to personal or real property taxes not yet
due and payable;
(e) Committed, suffered, permitted or incurred
any default in any liability or obligation which, in the
aggregate, have had or will have a material adverse effect upon
its assets or the conduct of its business;
(f) Made or agreed to any change in the terms
of any contract or instrument to which it is a party which has
a material adverse effect on its assets or the conduct of its
business;
(g) Knowingly waived, canceled, sold or
otherwise disposed of other than in the ordinary course of
business, for less than the face amount thereof, any claim or
right relating to its assets or the conduct of its business,
which it has against others;
(h) Declared, promised or made any distribution
from its assets or other payment from the assets to its
shareholders (other than reasonable compensation for services
actually rendered) or issued any additional shares or rights,
options or calls with respect to its shares of capital stock,
or redeemed, purchased or otherwise acquired any of its shares,
or made any change whatsoever in its capital structure;
(i) Paid, agreed to pay or incurred any
obligation for any payment for, any contribution or other
amount to, or with respect to, any employee benefit plan, or
paid or agreed to pay any bonus or salary increase to its
executive officers or directors, or made any increase in the
pension, retirement or other benefits of its directors or
executive officers other than in the ordinary course of
business;
(j) Committed, suffered, permitted, incurred or
entered into any transaction or event other than in the normal
course of business which would increase its liability for any
prior taxable year;
(k) Incurred any other liability or obligation
or entered into any transaction other than in the ordinary
course of business which would have a material adverse effect
on its condition (financial or otherwise); or
(l) Received any notices of, or has reason to
believe, that any of its customers or clients have taken or
contemplate any steps which could disrupt its business
relationship with said customer or client or could result in
the diminution in the value of the business of the Company as a
going concern.
4.6 Actions Pending. Except as listed on Exhibit
4.6, there is no action, suit, investigation, or proceeding
pending or, to the knowledge of the Company or Securityholder
threatened against or affecting the Securityholder, the Company
or any of its properties or rights, before any court or by or
before any governmental body or arbitration board or tribunal
and no basis exists for any such action, suit, investigation or
proceeding which will result in any material liability or
affirmative or negative injunction being imposed on the Company
or Securityholder. The foregoing includes, without limiting
its generality, actions pending or threatened (or any basis
therefor known to the Company or Securityholder) involving the
prior employment of any employees or prospective employees of
the Company or its use, in connection with its business, of any
information or techniques which might be alleged to be
proprietary to its former employer(s).
4.7 Business Property Rights. To the best of the
Company's or each Securityholders' knowledge, no person or
entity has made or threatened to make (or has any valid reason
to threaten) any claims that the operation of the business of
the Company is or will be in violation of or infringe on any
technology, patents, copyrights, trademarks, trade names,
service marks (and any application for any of the foregoing)
licenses, proprietary information, know-how, or trade secrets
(the "Business Property Rights"). To the best of the Company's
or each Securityholders' knowledge no third party is infringing
upon or violating any of the Company's Business Property Rights
and the Company has the exclusive right to use the same. None
of the Company's employees, directors, or stockholders has any
valid claim whatsoever (whether direct, indirect or contingent)
of right, title or interest in or to any of the Company's
Business Property Rights.
4.8 Liabilities. Except as listed in Exhibit 4.8,
the Company has no liabilities or obligations, whether accrued,
absolute, contingent or otherwise (individually or in the
aggregate), which are of a nature required to be reflected in
financial statements prepared in accordance with GAAP,
including without limitation, any liability which might result
from an audit of its tax returns by any appropriate authority
except (i) the liabilities and obligations set forth in the
"Financial Statements") delivered in accordance with Section
4.4 and (ii) liabilities and obligations incurred for the
purpose of enabling the Company to conduct its normal business
(in each case in normal amounts and incurred only in the
ordinary course of business). Except as disclosed in the
Financial Statements, the Company is not in default with
respect to any liabilities or obligations and all such
liabilities or obligations shown and reflected in the Financial
Statements, and such liabilities incurred or accrued subsequent
to the Companies incorporation, have been, or are being, paid
or discharged as they become due, and all such liabilities and
obligations were incurred in the ordinary course of business.
4.9 Ownership of Assets and Leases. Attached hereto
as Exhibit 4.9(a) is a complete and correct list and brief
description, as of the date of this Agreement, of all real
property and material items of personal property owned by the
Company and all of the leases and other agreements relating to
any real, personal or intangible property owned, used, licensed
or leased by the Company. The Company has good and marketable
title to all of its assets, including those listed on Exhibit
4.9(a), and any income or revenue generated therefrom, in each
case free and clear of any liens, claims, charges, options,
rights of tenants or other encumbrances except (i) as disclosed
and reserved against in the Financial Statements (to the extent
and in the amounts so disclosed and reserved against), (ii) for
liens arising from current taxes not yet due and payable and
(iii) as set forth on Exhibit 4.9(b). Each of the Company's
leases and agreements is in full force and effect and
constitutes a legal, valid and binding obligation of the
Company and the other respective parties thereto, enforceable
in accordance with its terms, except as enforceability may be
limited by applicable equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws from
time to time in effect affecting the enforcement of creditors'
rights generally, and, there is not under any of such leases or
agreements existing any default of the Company, or to the best
of the Company's or each Securityholders' knowledge of any
other parties thereto (or event or condition which, with
notice or lapse of time, or both, would constitute a default).
The Company has not received any notice of violation of any
applicable regulation, ordinance or other law with respect to
its operations or assets, and, to the best of the Company's
knowledge there is not any such violation or grounds therefor
which could adversely affect their assets or the conduct of its
business. The Company is not a party to any contract or
obligation whereby an absolute or contingent right to purchase,
obtain or acquire any rights in any of the assets has been
granted to anyone. There does not exist and will not exist by
virtue of the transactions contemplated by this Agreement any
claim or right of third persons which may be legally asserted
against any of the Company's assets.
4.10 Taxes. The Company has paid all taxes due,
assessed and owed by it as reflected on its tax returns and has
timely filed all federal, state, local and other tax returns
which were required to be filed and which were due prior to the
Closing Date, except for those taxes set forth on
Exhibit 4.10(a). All federal, state, local, and other taxes of
the Company accruable since the filing of such returns have
been properly accrued. No federal income tax returns for the
Company have ever been audited by the Internal Revenue Service
or any state or local taxing authority, except as described in
Exhibit 4.10(b). No other proceedings or other actions which
are still pending or open have been taken for the assessment or
collection of additional taxes of any kind from the Company for
any period for which returns have been filed, and to the
Company's knowledge, no other examination by the Internal
Revenue Service or any other taxing authority affecting the
Company is now pending. Except for those taxes set forth on
Exhibit 4.10(a), taxes which the Company were required by law
to withhold or collect subsequent to the Company's
incorporation, have been withheld or collected and have been
paid over to the proper governmental authorities or are
properly held by the Company for such payment and are so
withheld, collected and paid over as of the date hereof. No
waivers of statutes of limitations with respect to any tax
returns of the Company nor extensions of time for the
assessment of any tax have been given by any current employees
of the Company. There is not and there will not be any
liabilities for federal, state and local income, sales, use,
excise or other taxes arising out of, or attributable to, or
affecting the assets or the conduct of the Company's business
through the close of business on the Closing Date, or
attributable to the conduct of the operations of the Company at
any time for which Parent or the Surviving Corporation will
have any liability for payment or otherwise. After the
Closing, there does not and will not exist by virtue of the
transactions contemplated by this Agreement any liability for
taxes which may be asserted by any taxing authority against the
Company's assets or the operation of the business, and no lien
or other encumbrance for taxes will attach to such assets or
the operation of the business.
4.11 Contracts, Other Agreements. Attached hereto
as Exhibit 4.11 is a true and complete list of each material
contract, agreement and other instrument to which the Company
is a party, including, but not limited to, all bank and
financing documents. At Parent's request, the Company shall
deliver to Parent a true and complete copy of any such
contract, agreement or instrument. All of the contracts,
agreements, and instruments described in Exhibit 4.11 hereto
are valid and binding upon the Company and the other parties
thereto and are in full force and effect, and, neither the
Company, nor to the best of the Company's or each
Securityholders' knowledge any other party to any such
contract, commitment or arrangement has breached any provision
of, or is in default in any respect under, the material terms
thereof. No contract, agreement or other instrument to which
the Company is a party will be materially breached, violated or
result in a default as a result of the transaction contemplated
hereunder.
4.12 Governmental Approvals. No registration or
filing with, or consent or approval of, or other action by, any
federal, state or other governmental agency or instrumentality
is or will be necessary for the valid execution, delivery and
performance of this Agreement by the Company, including, but
not limited to, any approval of the United States Small
Business Administration required to assign any obligation of
the Company to the Surviving Corporation.
4.13 Lack of Defaults. The Company and
Securityholder know of no default in performance of any
obligation, covenant or condition contained in any note,
debenture, mortgage or other contract or agreement of any
nature or kind to which either is a party, nor of any default
with respect to any order, writ, injunction or decree of any
court, governmental authority or arbitration board or tribunal
to which either is a party, which would have a material adverse
effect on the assets or business of the Company. The Company
and Securityholder know of no violation of any law, ordinance,
governmental rule or regulation to which either is subject, nor
has either failed to obtain any licenses, permits, franchises
or other governmental authorizations necessary for the
ownership of their properties or to the conduct of their
business where any such violation or failure would likely
result in a material adverse effect upon the business of the
Company. The Company has conducted and will conduct its
businesses and operations in substantial compliance with all
federal, state, county and municipal laws, statutes, ordinances
and regulations and are in substantial compliance with all
applicable requirements of all federal, state, county and
municipal regulatory authorities.
4.14 Employees and Employee Benefit Plans.
(a) Attached hereto as Exhibit 4.14(a) is a
list of each pension retirement, profit-sharing, deferred
compensation, bonus or other incentive plan, or program
arrangement, agreement or other understanding, or medical,
vision, dental or other health plan, or life insurance or
disability plan, or any other employee benefit plan, including,
without limitation, any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), to which the Company contributes or
is a party or is bound or under which it may have liability and
under which employees or former employees of the Company (or
their beneficiaries) are eligible to participate or derive a
benefit (the foregoing herein referred to as the "Employee
Benefit Plans). The Company has delivered to Parent true,
correct and complete copies of all Employee Benefit Plans, and
the company has complied in all material aspects with any and
all obligations required of it under the terms of any plan
listed on Exhibit 4.14(a).
(b) Attached hereto as Exhibit 4.14(b) are the
names, social security numbers and current rate of compensation
of all salaried and hourly paid employees employed by the
Company as of the date hereof, with all key employees being so
designated, and at Closing the Company will provide an updated
list of all such employees as of the date of closing, such
updated list to be initialed by both parties at Closing.
4.15 Insurance. Attached hereto as Exhibit 4.15 is a
complete and correct list and description of all of the
policies of liability, property, workers' compensation and
other forms of insurance or bonds carried by the Company for
the benefit of or in connection with its assets and businesses.
All of such policies are in full force and effect and there are
no overdue premiums or other payments on such policies and the
Company has not received any notice of cancellation or
termination of any of these policies. Neither the
Securityholders nor the Company have knowledge of any change or
proposed change to any of the rates set forth in the policies
listed on Exhibit 4.15 other than as set out in the Policies.
4.16 Labor Matters. None of the Company's employees
are covered by a collective bargaining agreement, and no
collective bargaining efforts with respect to any of the
Company's employees are pending or, to the knowledge of the
Company threatened. No labor dispute, strike, work stoppage,
employee collective action or labor relations problem of any
kind which has materially adversely affected or may so affect
the Company or any of its businesses or operations, is pending
or, to the knowledge of the Company is threatened. The Company
has complied in all material respects with the reporting and
withholding provisions of the Code and the Federal Insurance
Contribution Act and all similar state and local laws, and with
the federal, state, and local laws, ordinances, rules and
regulations with respect to employment and employment
practices, terms and conditions of employment and of the
workplace, wages and hours and equal employment opportunity.
4.17 Brokers and Finders. Except for the fees
listed on Exhibit 4.17, neither the Securityholder nor the
Company has incurred or become liable for any commission, fee
or other similar payment to any broker, finder, agent or other
intermediary in connection with the negotiation or execution of
this Agreement or the consummation of the transactions
contemplated hereby. Securityholder agrees to be responsible
for paying all Broker fees incurred by the Company as a result
of this transaction.
4.18 Accounts Receivable.
(a) All accounts receivable of the Company
shown on the balance sheets of the Company as of September 30,
1997, and all notes and accounts receivable acquired by the
Company subsequent to September 30, 1997, reflect actual
transactions, have arisen in the ordinary course of business
and have been collected or are now in the process of collection
without recourse to any judicial proceedings in the ordinary
course of business in the aggregate recorded amounts thereof,
less the applicable allowances reflected on such balance sheets
with respect to the accounts receivable shown thereon or set up
on the respective books of the Company with respect to the
notes and accounts receivable acquired subsequent to
September 30, 1997.
(b) Except as set forth on Exhibit 4.18(b), the
Company has no knowledge as to any of the Company's accounts
receivable being subject to any lien or claim of offset, set
off or counterclaim not provided for by the Company's allowance
for doubtful accounts as of the date of execution hereof.
4.19 Conflicts of Interests. Except as described in
Exhibit 4.19 (a), no officer, director or stockholder of the
Company was or is, directly or indirectly, a joint investor or
co-venturer with, or owner, lessor, lessee, licensor or license
of any real or personal property, tangible or intangible, owned
or used by, or a lender to or debtor of, the Company and the
Company has no commitments or obligations as a result of any
such transactions prior to the date hereof. Except as
described in Exhibit 4.19 (b), and except for directly or
indirectly holding less than five percent (5%) of the
outstanding shares of stock in a company which is publicly
traded, none of such officers, stockholders, or directors own
or have owned, directly or indirectly, individually or
collectively, an interest in any entity which is a competitor,
customer or supplier of (or has any existing contractual
relationship with) the Company.
4.20 Environmental Compliance. Exhibit 4.20(a) sets
forth all government agencies which substantially regulate the
Company's business. Except as listed on Exhibit 4.20(b), the
Company has complied in all material respects with all
applicable federal, state and local laws, ordinances, rules and
regulations with respect to its premises and its operations and
hazardous materials, including, but not limited to, all rules
and regulations promulgated by the Occupational Safety and
Health Administration and the Federal Communications Commission
and have kept its premises free and clear of any liens and
charges imposed pursuant to such laws, ordinances, rules and
regulations. The Company has not received any notice that any
facts or conditions exist which would give rise to any
violation, claim, charge, penalty or liability relating to any
applicable environmental laws, rules or regulations of any
governmental body or agency having jurisdiction over the
premises. For purposes of this section, "Hazardous Materials"
shall include, without limitation, any pollutants or other
toxic or hazardous substances or any solid, liquid, gaseous or
thermal irritant or contaminant, including smoke, vapor, soot,
fumes, acids, alkalis, chemicals and waste (including materials
to be recycled, reconditioned or reclaimed), flammable
materials , explosives, radioactive materials, hazardous waste,
hazardous or toxic substances, or related materials, asbestos
requiring treatment as a matter of law, or any other substance
or materials defined as hazardous or harmful, or requiring
special treatment or special handling by any federal, state or
local environmental law, ordinance, rule or regulation
including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
(33 U.S.C. Sections 1251, et seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Section 1801, et
seq.), the Resource Conservation and Recovery Act, as amended
(42 U.S.C. Sections 6901 et seq.), the Occupational Safety and
Health Act of 1970 and the regulations adopted and publications
promulgated pursuant thereto.
4.21 Ownership of the Stock. The Securityholder
owns all of the Stock beneficially and of record, free and
clear of all liens, restrictions, encumbrances, charges, and
adverse claims and the Stock to be purchased hereunder
constitutes One Hundred Per Cent (100%) of issued and
outstanding stock of the Company.
4.22 Absence of Sensitive Payments. Neither the
Securityholder nor, to the knowledge of the Securityholder and
Company, any of the Company's directors, officers, or
stockholders:
(a) has made or has agreed to make any
contributions, payments or gifts of funds or property to any
governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift
was or is illegal under the laws of the United States, any
state thereof, or any other jurisdiction (foreign or domestic);
(b) has established or maintained any
unrecorded fund or asset for any purpose, or has made any false
or artificial entries on any of its books or records for any
reason; or
(c) has made or has agreed to make any
contribution or expenditure, or has reimbursed any political
gift or contribution or expenditure made by any other person to
candidates for public office, whether federal, state or
local(foreign or domestic) where such contributions were or
would be a violation of applicable law.
4.23 Approval of Merger; Related Matters. Each of
the Securityholders represents and warrants that such
Securityholder, in his or her capacity as a shareholder of the
Company (i) approves of and consents to the Merger as set forth
in this Agreement, (ii) waives any notice of a shareholder's
meeting or similar corporate formality in connection with the
approval of the transactions described herein, including,
without limitation, the Merger, (iii) waives any rights to
protest or object to the Merger or to the exercise of any
statutory remedy of appraisal as to the Stock owned by such
Security holder as provided in the FGCL, (iv) has received a
copy of resolutions approving the Merger in accordance with the
FGCL, and (v), to the extent such Securityholder owes any
amounts to the Company pursuant to any Promissory Note issued
by such Securityholder to the Company, consents to the use of a
portion of the Merger Consideration payable to such
Securityholder to pay off each such Promissory Note.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND CERTAIN
COVENANTS OF PARENT AND White Mountain
As a material inducement to induce Securityholder to
consummate the Merger under this Agreement, Parent and White
Mountain represent and warrant that each of the matters set
forth in this Article V are true and correct as of the date
hereof, and acknowledge that Securityholder's entry into this
Agreement and the performance of their obligations hereunder
are made in reliance upon the completeness and accuracy of each
of the matters set forth herein. The representations and
warranties being made by the Parent and White Mountain shall
survive as set forth in Section 12.12 herein.
5.1 Organization, Standing, etc. Parent and White
Mountain are duly organized, validly existing and in good
standing under the laws of its jurisdiction of their
organization.
5.2 Authorization, etc. The execution and delivery
of this Agreement and any other instruments or documents
required to be executed and delivered hereby, and the purchase
of the Stock contemplated hereby, have been authorized by such
authorities or by such court of competent jurisdiction, if any,
as may be required by applicable law and constitute a valid and
binding obligations of Parent and of White Mountain,
enforceable against them in accordance with the terms of this
Agreement.
5.3 No Breach or Defaults Caused by Agreement. The
making and execution, delivery, and performance by Parent and
White Mountain of this Agreement does and will not breach or
constitute (with due notice or lapse of time or both) any
default in any articles, by-laws, agreements, or instruments of
any kind or character to which Parent or White Mountain are a
signatory or a party, or by which they may be bound, subject
to, or affected, now or in the future.
5.4 Governmental Approvals. No registration or
filing with, or consent or approval of, or other action by, any
federal, state, or other governmental agency or
instrumentality, which has not been made or obtained prior to
the execution of this Agreement by Parent or White Mountain, is
or will be necessary for the valid execution, delivery, and
performance of this Agreement by Parent and White Mountain.
5.5 Brokers Fees. Parent and White Mountain
represent there are no brokers, other than those set forth on
Exhibit 5.5, involved in this transaction on their behalf.
Parent and White Mountain shall pay all broker fees
contractually obligated to be paid to those brokers set forth
on said Exhibit.
5.6 Authorized Shares of Stock. There exists
sufficient authorized, but unissued, shares of Arguss Stock
necessary to enable Parent to satisfy any obligation of it to
issue shares of Arguss Stock pursuant to this Merger Agreement.
5.7 Survival of Rite Cable Division. The operations
of the Company on the Closing Date shall remain separate and
apart from the other assets, operations and business of Parent
or White Mountain after the Closing, as a separate and distinct
division of Parent and White Mountain until the September 1998
Audit has been completed. No expenses of Parent or White
Mountain unrelated to the Rite Cable Division may be charged
against the Company during such Audit.
5.8 Support of Rite Cable Division. Parent and White
Mountain shall, after the Closing, use their best efforts to
accommodate the Rite Cable Division in the ordinary course of
business, including, but not limited to, the provision of
marketing, financial (including lines of credit), and other
support as may be reasonably required to enable the Rite Cable
Division to acquire and complete all contracts and business
transactions necessary for that division of Parent to gross at
least $14.5 million in revenues each year.
ARTICLE VI
CONDITIONS TO CLOSING
Parent's obligation to consummate the Merger under
this Agreement shall be subject to fulfillment of all of the
following conditions on or prior to the Closing, any of which
may be waived in writing by Parent.
6.1 Performance of Agreements. The Company shall
have performed all agreements contained herein and required to
be performed by it prior to or at the Closing and all of the
representations and warranties made by it and Securityholders
in this Agreement shall be true and correct as of the Closing
Date.
6.2 Lack of Material Liabilities. The Company shall
have not incurred any material liability, direct or contingent
(as that term is ordinarily used), other than in the ordinary
course of its business, since December 31, 1996; including, but
not limited to, any tax liability resulting from the
transaction contemplated hereby, or by the Company's compliance
with any of the terms and conditions hereof.
6.3 Financial Statements. Parent shall have
received a balance sheet and profit and loss statement for the
Company as of September 30, 1997.
6.4 Lack of Defaults. No Event of Default (as
defined in Article X hereof) and no event or condition which,
with notice or the lapse of time, or both, would constitute an
Event of Default, shall exist.
6.5 Escrow Agreement. Securityholder, Company,
Parent, White Mountain, and all other parties thereto shall
have executed the Escrow Agreement, a copy of which is attached
hereto as Exhibit 6.5.
6.6 Employment Agreements. Wright , Smith and those
employees designated as key employees on Exhibit 4.14(b) and
the Company shall have executed the Employment Agreements,
copies of which are attached hereto as Exhibits 6.6(a) -
6.6(__).
6.7 Opinion of Counsel. Parent shall have received
an opinion of counsel from the attorneys for the Company, dated
as of the Closing Date, in form and substance substantially
similar to that attached hereto as Exhibit 6.7.
6.8 Compliance Certificate. The Company shall have
delivered to Parent the certificate, attached hereto as
Exhibit 6.8, executed by its Chairman, dated the Closing Date,
certifying the fulfillment of the conditions specified in this
Article 6 and the accuracy of the representations and
warranties contained in Article 4 hereof.
6.9 Key-Person Term Life Insurance. The Company
shall have applied for an insurance policy on the life of Les
Smith such policy (a) to name the Parent as sole beneficiary,
(b) to be in form and substance satisfactory to the Parent, and
(c) to be in the amount of Two Million Dollars ($2,000,000).
6.10 Registration Rights Agreement. The
Securityholder and Minority Stockholders and Parent shall have
executed the Registration Rights Agreement, a copy of which is
attached hereto as Exhibit 6.10.
6.11 Employee Stock Options. Parent resolves to take
any and all actions necessary, including soliciting the
approval of its shareholders, to grant unqualified stock
options to the employees and in the amounts designated in
Exhibit 6.11.
6.12 Release from Wright. Wright shall execute and
deliver to the Parent, in a form satisfactory to Parent's
counsel, a release of any claim that he may have against the
Company for the repayment of any loan, claim for unpaid
compensation, claim for indemnification or otherwise except for
the notes set forth in Exhibit 6.12 which, subject to the set-
off right of Parent pursuant to Section 2.2 (f), hereof, will
be paid according to their terms.
6.13 Corporate Documents. Parent shall have received
copies of the following documents:
(a) a certificate of the Chairman of the
Company dated the Closing Date and certifying (i) that attached
thereto is a true and complete copy of the Articles or
Certificate of Incorporation and Bylaws of the Company as in
effect on the date of such certification; and (ii) that
attached thereto are true and complete copies of resolutions
adopted by the Board of Directors of the Company authorizing
the execution, delivery and performance of this Agreement, and
that all such resolutions are still in full force and effect
and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement; and
(b) such additional supporting documents
and other information with respect to the operations and
affairs of the Company as Parent may reasonably request.
All such documents described in (a) and (b) shall be
satisfactory in form and substance to Parent and its counsel.
6.14 Corporate Filings. All relevant incorporation
and merger documents shall be filed with the appropriate
governmental agencies and shall be attached hereto as
Exhibit 6.14.
6.15 Trustee of Profit Sharing Plan. The Surviving
Corporation shall at Closing cause a successor trustee, if
necessary, for the Company's profit sharing plans to be
appointed.
6.16 Net Worth. The Company shall have, as of the
Closing Date, a Net Worth greater than or equal to Seven
Hundred Fifty Thousand Dollars ($750,000).
6.17 Securityholder's Guaranty of Company Debt.
Parent and White Mountain shall obtain the release of all of
Securityholder's personal guaranties of the Company's debt
before the Closing Date listed on Exhibit 6.17, and provide
Securityholder with written confirmation of such release from
the Company's creditors holding Securityholder's guaranties at
the Closing. Parent and White Mountain shall use its best
efforts to obtain Securityholder's release from any guaranty
existing prior to Closing but inadvertently omitted from
inclusion on Exhibit 6.17.
ARTICLE VII
TRANSACTIONS PRIOR TO CLOSING
Between the date of this Contract and the Closing,
the executive officers and Board of Directors of the Company
shall retain full control of the management and business of the
Company. To enable Parent to prepare for settlement at the
Closing, Parent, Securityholder and the Company agree that
between the date hereof and Closing:
7.1 Taxes. The Company will promptly pay and
discharge, or cause to be paid and discharged, their federal,
state and other governmental taxes, assessments, fees and
charges imposed upon it or on any of its property or assets and
timely file any returns and reports in connection with the
foregoing; provided, however, nothing herein shall require the
Company to pay or cause to be paid any tax, assessment, fee or
charge so long as the validity thereof shall be contested in
good faith by appropriate procedures and the Company has set
aside on its books and maintains adequate reserves with respect
thereto or for which disclosure to Parent has been made
pursuant to Exhibits 4.10(a), (b) and/or (c).
7.2 Books of Record and Account; Inspection. The
Company will maintain at all times proper books of record and
account in accordance with GAAP, and will permit any of
Parent's officers or any of its authorized representatives or
accountants to visit and inspect the offices and properties of
the Company, examine the Company's books of account and other
records, and discuss the Company's affairs, finances and
accounts with Parent's appropriate officers and managers, legal
counsel, accountants and auditors, all at normal business hours
and as often as Parent may request provided any such
discussions with accountants will not cause the Company to
incur any material cost with respect to such accountants and
legal counsel.
7.3 Financial Reports. The Company shall furnish to
Parent, within 20 days after the end of each month (and within
45 days after the end of the last month of the Company's fiscal
year), an unaudited financial report of the Company, which
report shall include profit and loss statement, a consolidated
balance sheet, a cash flow analysis, and such other financial
information that Parent may reasonably request.
7.4 Insurance.
(a) The Company will maintain in effect
liability insurance, property insurance, worker's compensation
insurance, the life insurance policies referenced in Section
6.9 and extended coverage insurance on its personal property
referenced in Section 4.15 above, with responsible insurance
companies, against such risks as are customarily insured
against by similar businesses operating in the same vicinity,
and in amounts not less than those (i) recommended by major
insurance companies for similar businesses or (ii) required by
governmental authorities having jurisdiction over all or part
of the Company's operations.
7.5 Notification. The Company will, within two (2)
business days, advise Parent in writing of the following:
(a) The occurrence of an Event of Default;
(b) The filing of any suit, action, other
proceeding against the Company or any investigation which the
Company learns is pending or threatened against it, if the
amount involved or at risk by nature of such suit, action,
other proceeding or investigation exceeds Seventy-Five Thousand
Dollars ($75,000);
(c) The filing, recording or assessment of a
federal, state or local tax lien against the Company or any of
its assets other than in the ordinary course of business;
(d) The occurrence of any reportable event with
respect to any employee benefit plan of the Company or which is
subject to the provisions of ERISA, including a statement
setting forth details as to the reportable event and the action
proposed to be taken with respect thereto, together with a
copy, if available, of the notice of such reportable event
given to the Pension Benefit Guaranty Corporation; and
(e) Any other condition, act or event which the
Company in its good faith judgment believes will adversely
affect Parent's rights under this Agreement.
7.6 Board of Directors' Meetings. Parent shall be
entitled, upon the giving of written notice, to designate two
individuals as members of the Board of Directors of the
Company. The Board of Directors of the Company shall meet no
less than once during each calendar quarter.
7.7 Corporate Existence. The Company shall at all
times cause to be done every act necessary to maintain and
preserve its existence, rights, franchises, and certifications
in the jurisdictions of their incorporation and to remain
qualified as foreign corporations in every jurisdiction in
which qualification is required.
7.8 Maintenance of Properties. The Company shall
maintain or cause to be maintained in good repair, working
order and condition all tangible properties required for its
business and from time to time make or cause to be made all
appropriate repairs and replacements thereof.
7.9 Trade Secrets. The Company will use its best
efforts to maintain the confidentiality of any Business
Property Rights of the Company and will seek to restrict the
ability of any employee having knowledge of such proprietary
information or trade secrets from competing with the Company
through employment and non-competition agreements and similar
arrangements.
7.10 Mergers and Other Transfers. The Company will
not (i) merge or consolidate with any person, firm, association
or corporation, (ii) transfer, sell, assign, lease or otherwise
abandon or dispose of (whether in one transaction or a series
of transactions) any material part of its assets except in the
normal course of business if such transaction would reduce the
net worth of the Company below $750,000, (iii) change the
nature of its business, (iv) create any subsidiaries, or (v)
liquidate, dissolve or cease active business operations.
7.11 Certificate of Incorporation and Bylaws. The
Company will not amend its Articles or Certificate of
Incorporation or Bylaws if the result of any such amendment
will have an adverse effect on Parent's rights under this
Agreement.
7.12 Judgments and Liens. The Securityholders or the
Company shall not create, incur, assume or permit to exist any
mortgage, lien, security interest, charge or encumbrance on any
property or assets now owned or hereafter acquired by the
Company except:
(a) Liens arising out of judgments or awards
(i) which have been in force less than the applicable appeal
period so long as execution is not levied thereunder, or (ii)
in respect of which the Company shall in good faith be
prosecuting an appeal or proceedings for review and in respect
of which the Company shall have secured a subsisting stay of
execution pending such appeal or proceedings for review;
(b) Liens for taxes, assessments or
governmental charges or levies, provided payment thereof shall
not at the time be required;
(c) Deposits, liens, bonds or pledges to secure
payment of worker's compensation, unemployment insurance,
pensions or other social obligations, surety, stay or appeal
bonds, or other similar obligations arising in the ordinary
course of business;
(d) Mechanic's, worker's, repairmen's,
warehousemen's, vendor's, or carrier's liens, or other similar
liens arising in the ordinary course of business and securing
sums which are not past due, or deposits or pledges to obtain
the release of any such liens;
(e) Liens arising by operation of law under
lease agreements made in the ordinary course of business and
confined to the property rented;
(f) Liens on property securing the purchase
price of property acquired after the date hereof provided that
each of such lien (i) is given solely to secure indebtedness
not exceeding one hundred percent (100%) of the lesser of the
cost or fair market value of such property, (ii) does not
extend to any other property and (iii) is given at the time of
acquisition of the property;
(g) Presently outstanding liens;
(h) liens and encumbrances securing
indebtedness to Senior Creditors; and
(i) Extension, renewal or refunding of
indebtedness secured by liens permitted by this Section 7.12,
provided that the then outstanding amount of such indebtedness
is not increased and such liens do not extend to property not
then encumbered thereby.
7.13 Issuances of Capital Stock. The Company will
not issue any of its capital stock to any person or entity or
grant any person or entity an option, warrant, convertible
security or any other right or agreement to acquire any shares
of its capital stock, without the prior written consent of
Parent.
7.14 Purchase of Securities or Assets. The Company
will not purchase the outstanding equity securities of any
other person, firm, association or corporation, except
obligations issued or guaranteed by the United States
government or any state or political subdivision thereof or
other short-term instruments normally marketed by banks and
nationally recognized brokerage firms, provided nothing herein
shall restrict the Company from maintaining accounts with
federally insured banking institutions or money market funds.
7.15 Declaration of Dividends, etc. The Company
will not (i) make, pay or declare any distributions or
dividends of cash or property with respect to its issued shares
of Common Stock; (ii) directly or indirectly redeem, repurchase
or otherwise reacquire any shares of its Common Stock; (iii)
increase the salary or pay any bonuses to any management
employees, officers or directors of the Company, if such action
decreases the net worth of the Company below Seven Hundred
Fifty Thousand Dollars ($750,000).
The Company is further prohibited from declaring or
distributing, without the prior written approval of Parent in
its sole discretion, any executive bonus or other form of
additional compensation.
7.16 Payments to Officers. Except as described on
Exhibit 7.16, the Company shall not loan or advance any amount
to, or sell, transfer or lease any properties or assets (real,
personal or mixed, tangible or intangible), to, or enter into
any agreement or arrangement with, any of the Company's
officers or directors, except for compensation to officers
pursuant to existing agreements, copies of which have been
delivered to Parent, and reimbursement of expenses incurred by
employees of the Company in connection with their employment.
7.17 Indebtedness. The Company shall not incur any
indebtedness for borrowed money, including pension fund loans,
or purchase money indebtedness or guarantee any such
indebtedness or issue or sell any debt securities of the
Company or guarantee in any manner (including, without
limitation, by agreeing to maintain the financial condition of
another person) any debt securities of others, provided,
however, that the Company shall have the right to incur
indebtedness in the ordinary course of business for office
furniture, equipment, trade payables, machinery and vehicles.
7.18 Expenditures. The Company shall not make any
capital investments or capital expenditures in excess of an
aggregate of Fifty Thousand Dollars ($50,000) which are outside
of the ordinary course of the Company's business, without the
consent of Parent.
7.19 Employee Benefit Plans. The Company shall not
adopt any new Employee Benefit Plans but may expand existing
benefits subject to the approval of the Board of Directors.
7.20 Material Contracts. Except as described on
Exhibit 7.20, the Company shall not enter into, assume, renew
or permit to be renewed (including by not giving a permitted
notice of termination) any contract, lease or obligation
outside the ordinary course of business. Except as expressly
set forth therein, the Company shall not modify, amend,
terminate, waive or release any benefit or right under any
employment agreement, or any other material agreement to which
the Company is a party, without the prior written consent of
Parent.
7.21 Non-business Assets. The Company shall not
apply any corporate funds toward the payment of any principal
or interest due or owing for the purchase of any non-corporate
assets.
ARTICLE VIII
COVENANTS NOT TO COMPETE
8.1 Covenant Not to Compete. Except as authorized by
White Mountain and Parent or by the terms of this Agreement,
Securityholder shall not, directly or indirectly, alone of with
others, enter into any business related to the construction,
reconstruction, maintenance, repair and expansion of CATV,
SMATV systems and any other related systems in the
telecommunications industry within the Southeastern United
States, or within Two Hundred (200) miles of an existing
Company project for a period of three (3) years from the date
of Closing; provided, that Securityholder may own or be an
investor in a cable television franchise.. Further,
Securityholder shall not, during such period, disclose,
divulge, communicate, use to the detriment of the Company or
Parent or for the benefit of any other person or persons, or
use in any way, any confidential information or trade secrets
of the Company, including customer list, personnel information,
and other similar data. In addition, Securityholder shall not,
during such period, (i) hire or attempt to hire any employee of
the Company, or (ii) interfere with any contract or other
relationship of the Company and any of its customers or
suppliers. Securityholder agrees that Parent shall be entitled
to injunctive relief in the event of any breach of the
covenants set forth in this paragraph together with reasonable
attorney's fees and damages. Damages shall only be collectible
from the party breaching this provision.
ARTICLE IX
INDEMNIFICATION BY SECURITYHOLDER AND THE COMPANY
Securityholder and the Company, to the extent set
forth in this Agreement, shall indemnify and hold harmless
Parent, White Mountain and Surviving Corporation against and in
respect to the following, in addition to any losses otherwise
specifically indemnified against in this Agreement, as follows:
9.1 Indemnification by the Securityholders and the
Company.
(a) Breach. Subject to the provision of this
Section 9.1 and except as otherwise more specifically set forth
herein, the Securityholder and the Company (each in his or her
capacity as an indemnifying party, an "Indemnifying party")
covenants and agrees to jointly and severally indemnify,
defend, protect, and hold harmless each of Parent, White
Mountain, the Surviving Corporation and each of their
respective Subsidiaries and Affiliates (each in its capacity as
an indemnified party, an "Indemnitee") at all times from and
after the date of this Agreement from and against all Adverse
Consequences incurred by such Indemnitee as a result of or
incident to (i) any breach of any representation or warranty of
the Company or the Securityholder set forth in Section 4 of
this Agreement, (ii) any material breach or nonfulfillment by
the Company or the Securityholder of, or any noncompliance by
the Company or the Securityholder with, any covenants,
agreement, or obligation contained herein or in any certificate
or other document delivered in connection herewith, (iii) all
damage or deficiency resulting directly from the material
inaccuracy of any list, certificate or other instrument
delivered by or on behalf of Securityholder or the Company in
connection herewith, whether made as of the date hereof, or as
of the Closing Date hereunder or otherwise, or resulting from
the non-fulfillment of any agreement on the part of
Securityholder or the Company contained in this Agreement or
made in connection with the transactions contemplated hereby,
including, but not limited to all losses, liabilities, damages,
costs and expenses (including reasonable attorneys' fees),
incurred by Parent if this Agreement is terminated pursuant to
Article 10 hereof.
(b) Environmental Indemnification. The
Company, and Securityholder shall jointly and severally, hereby
indemnify each Indemnitee and hold each Indemnitee harmless
from and against any and all damages, losses, liabilities,
costs and expenses of removal, relocation, elimination,
remediation or encapsulation of any Hazardous Materials (as
defined in Section 4.20), obligations, penalties, fines,
impositions, fees, levies, lien removal or bonding costs,
claims, actions, causes of action, injuries, administrative
orders, consent agreements and orders, litigation, demands,
defenses, judgments, suits, proceedings, disbursements or
expenses (including without limitation, attorney's and experts'
reasonable fees and disbursements) of any kind and nature
whatsoever resulting from the operation of the Company's
business as of the Closing Date: (i) which (x) is imposed
upon, or incurred by, Parent by reason of, relating to or
arising out of the violation by the Company prior to the
Closing of any environmental laws, rules or regulations of any
governmental body or agency having jurisdiction over the
premises, or (y) arises out of the discharge, dispersal,
release, storage, treatment, generation, disposal or escape of
any Hazardous Materials, on or from the premises as of the
Closing Date, or (z) arises out of the use, specification, or
inclusion of any product, material or process containing
Hazardous Materials, or the failure to detect the existence or
proportion of Hazardous Materials in the soil, air, surface
water or groundwater, or the performance or failure to perform
the abatement of any Hazardous Materials source as of the
Closing Date or the replacement or removal of any soil, water,
surface water, or groundwater containing Hazardous Materials;
and/or (ii) is imposed upon, or incurred by, Parent by reason
of or relating to any material breach, act, omission or
misrepresentation contained in Section 4.20.
(c) Tax Matters. Company and Securityholder
shall jointly and severally indemnify each Indemnitee from and
against all Adverse Consequences incurred by any Indemnitee as
a result of or incident to any Income Taxes or other Taxes
imposed on the Surviving Corporation, the Company or any of
their Subsidiaries or for which the Surviving Corporation,
Company or any of its Subsidiaries may otherwise be liable by
law or regulation (including, without limitation, the
provisions of Treasury Regulation Section 1.1502-6) or
contract, for any taxable year or period that ends on or before
Closing or resulting in any way from this transaction,
including, but not limited to, any taxes imposed as a result of
the disqualification of this transaction as a tax free
reorganization under the Code.
(i) The Company shall furnish to Parent
copies of the federal, state, and local tax returns of the
Company for the period ending on the Closing Date and shall
obtain the consent of Parent before filing such returns which
consent shall not be unreasonably withheld.
(ii) Except as otherwise provided in this
Agreement, Parent shall have the sole right to represent the
interests of any Indemnitee in any tax audit or administrative
or court proceeding relating to any taxable period, including
without limitation taxable periods ending on or before Closing,
and to compromise, settle, or contest any tax claims in
connection therewith in its sole discretion, provided that
Parent shall provide Securityholder with written notice of its
intent to exercise its rights hereunder. Securityholder shall
have the right, at their expense, to join Parent in any such
defense.
(d) Broker Fee. Each Indemnifying Party
jointly and severally indemnifies each Indemnitee from any
claim made by a broker, finder, agent or other intermediary
against the Company after Closing in connection with the
negotiation or execution of this Agreement or the consummation
of the transactions contemplated hereby except for those claims
made against Parent or White Mountain pursuant to Section 5.5,
hereof.
(e) Set-Off. Except as otherwise provided in
this Agreement, Parent shall be entitled to set-off the
Securityholder's or the Company's liability to Parent for
indemnification under this Article 9, or under any other
paragraph of this Agreement, after any dispute regarding such
liability has been resolved by the parties or otherwise, by
crediting the amount of liability in equal parts against the
monies being held in escrow pursuant to Section 2.2(c) of this
Agreement, and against the Arguss Stock being held in escrow
pursuant to Section 2.2(c) by reducing the amount of cash and
Arguss Stock issued to Securityholder pursuant to
Section 2.2(d). In the event that Parent desires to exercise
its rights pursuant to this paragraph, the amount of any
liability alleged by the Parent which is disputed in writing by
the Company or Securityholders shall remain in escrow until
such dispute has been resolved.
(f) Costs and Expenses. Except as otherwise
provided in this Agreement, all amounts indemnified pursuant to
this Article 9 shall include all costs and expenses of the
Indemnitee, including, but not limited to, the costs of any
actions, reasonable attorneys fees, and other expenses
necessary to enforce the rights granted hereunder.
(g) Termination of Company's Obligation.
Company's obligation to indemnify Parent, or to contribute to
any party indemnifying Parent, pursuant to this Article 9 shall
expire as of the Filing Date.
(h) Termination of Securityholders' Obligation.
Securityholders' obligation to indemnify any Indemnitee, or to
contribute to any party indemnifying any Indemnitee, pursuant
to this Article 9, shall, except in the event of actual fraud
or intentional non-disclosure, expire three (3) years from the
Closing Date, except as to those involving tax matters, which
obligation shall expire six (6) years from the Closing Date.
9.2 No Circular Recovery. Securityholder hereby
agrees that he will not make any claim for indemnification
against either Parent or White Mountain by reason of the fact
that he or she was a director, officer, employee agent or other
representative of the Company of any of its Subsidiaries
(whether such claim is for Adverse Consequences of any kind or
otherwise and whether such claim is pursuant to any statute,
charter, by-law, contractual obligation or otherwise) with
respect to any claim for indemnification brought by Parent, the
Surviving Corporation, and their respective Subsidiaries and
Affiliates against the Securityholder.
ARTICLE X
TERMINATION
10.1 Termination by Parent. This Agreement may be
terminated by Parent, on or before the Closing Date, upon the
occurrence of the following:
(a) If any of the material conditions specified
in Article 6 shall not have been met prior to the Closing Date.
(b) If an event of default, as defined in
Article 11, has occurred, and has not been cured during any
applicable cure period.
10.2 Termination by Securityholder. This Agreement
may be terminated by Securityholder, on or before the Closing
Date if any of the conditions specified in Article 5 shall not
have been met prior to Closing.
ARTICLE XI
DEFAULT
11.1 Events of Default. It shall be considered an
Event of Default if any one or more of the following events
shall occur:
(a) If any statement, certificate, report,
representation or warranty of a material nature made or
furnished by the Company under this Agreement shall prove to
have been false or erroneous in any material respect.
(b) The occurrence of any event of material
default under any other financing agreement, note, lease,
mortgage, security agreement, factoring agreement or any other
obligation of the Company the result of which will have a
material adverse effect on the Company unless any such event of
default shall be timely cured under any applicable cure
provision or waived by the person to whom or to which the
Company is obligated or indebted.
11.2 Waiver by Parent. Any failure by Parent to
insist upon strict performance by the Securityholder or the
Company of any of the terms and provisions of this Agreement,
shall not be deemed to be a waiver of any of the terms and
conditions hereof and Parent shall have the right thereafter to
insist upon strict performance thereof by the Securityholder or
the Company.
ARTICLE XII
MISCELLANEOUS
12.1 Costs. Except for expenses relating to the
preparation of the Audit, each party shall pay its own expenses
incident to the transaction contemplated hereby, including fees
and expenses of their attorneys, accountants, appraisers or
consultants, whether or not those transactions are consummated
at Closing, subject to the indemnification and termination
provisions hereof.
12.2 Sales and Transfer Taxes. All state sales taxes
and all transfer taxes and all documentary taxes, if any,
payable in connection with the Merger shall be paid by the
party to whom such taxes are customarily attributed under the
laws of the State of Florida.
12.4 Relationships to Other Agreements. In the event
of a conflict between any of the provisions of this Agreement
and any other agreement relating to this transaction between
the Securityholder, Company and Parent, the provisions of this
Agreement shall control.
12.5 Titles and Captions. All article or section
titles or captions in this Agreement are for convenience of
reference and are not part of this Agreement and shall in no
way define, limit, extend or describe the scope or intent of
provisions herein.
12.6 Exhibits. The Exhibits and Schedules referred
to herein are hereby made a part hereof.
12.7 Applicable Law. This Agreement is to be
governed by, and construed, interpreted, and enforced in
accordance with the laws of Delaware.
12.8 Binding Effect and Assignment. This Agreement
shall be binding upon and inure to the benefit of the
successors and assigns of the parties. Notwithstanding the
foregoing, neither the Company nor Parent shall have any right
to assign any of its rights or obligations under this Agreement
without the prior written consent of the other parties hereto.
12.9 Notices. All notices, requests, instructions,
or other documents required hereunder shall be deemed to have
been given or made when delivered by registered or certified
mail, return receipt requested, postage prepaid or by messenger
or overnight delivery service to:
If Securityholder Wright then: Alvin K. Wright
RITE Cable Construction, Inc.
4891 S. Atlantic Avenue
Ponce Inlet, FL 32127
Counsel for Wright: Richard Straughn, Esq.
Straughn, Straughn & Turner
255 Magnolia Avenue, SW
Winter Haven, FL 33883
If Parent then: Arguss Holdings, Inc.
One Church Street, Suite 302
Rockville, Maryland 20850
Attn: Haywood Miller
Counsel for Parent: Bleecker & Bleecker
51 Monroe Street
Suite 1210
Rockville, Maryland 20850
Attn: Steven S. Bleecker
Any party may from time to time give the others
written notice of a change in the address to which notices are
to be sent and of any successors in interest.
12.10 Severability. Inapplicability or
unenforceability of any provision of this Agreement shall not
impair the operation or validity of any other provision hereof.
If any provision shall be declared inapplicable or
unenforceable, there shall be added automatically as part of
this Agreement a provision as similar in terms to such
inapplicable or unenforceable provision as may be possible and
be legal, valid and enforceable.
12.11 Acceptance or Approval. By accepting all
or approving anything required to be observed, performed, or
fulfilled, or to be given to Parent pursuant to this Agreement,
including, but not limited to, any certificate, balance sheet,
statement of profit or loss or other financial statement, or
insurance policy, Parent shall not be deemed to have accepted
or approved the sufficiency, legality, effectiveness or legal
effect of the same, or of any term, provision, or condition
thereof as to third parties.
12.12 Survival. All covenants, representations,
and warranties made by the Securityholder and Parent in this
Agreement shall survive the Closing hereunder for a period of
three (3) years, except as to those involving tax matters,
which shall survive the closing for a period of six (6) years..
12.13 Entire Agreement. This Agreement,
including all Exhibits, constitutes the entire agreement among
the parties hereto pertaining to the subject matter hereof, and
supersedes all prior agreements and understandings pertaining
thereto. No covenant, representation, or condition not
expressed in this Agreement shall affect or be deemed to
interpret, change or restrict the express provisions hereof and
no amendments hereto shall be valid unless made in writing and
signed by all parties hereto.
12.14 Counterparts. This Agreement may be
executed in any number of counterparts, all of which together
shall constitute one instrument.
12.15 Security Matters. (a) By executing this
Agreement, Parent acknowledges that : (i) Parent has been
advised that the Stock has not been and will not have been
registered under the Act or the Florida or other applicable
securities laws of any state, that the Securityholder in
transferring such shares to the Parent will be relying, if
applicable, upon the exemption from such registration
requirements contained in Section 4(1) or 4(2) of the Act as a
transaction by a person other than as issuer, underwriter or
dealer and the applicable state exemption; (ii) the Stock may
be "restricted" as that term is used in Rule 144 under the Act
as a consequence of which Parent may not be able to sell the
shares unless such shares are first registered under the Act
and any applicable state securities laws or unless an exemption
from such registration, is, in the opinion of counsel,
available; (iii) the Stock will be acquired by Parent for
purposes other than "distribution" as that term is used in
Section 2(11) of the Act, and (iv) Parent will execute, if
Securityholder so requests, an appropriate letter affirming
that its intention with respect to the proposed acquisition of
the Stock is that such acquisition be for investment purposes
only and not with a view toward resale or distribution thereof.
(b) The shares of Arguss Stock are not
registered under the Securities Act of 1933, as amended (the
"1933 Act"), and are being issued without registration on the
grounds that the sale of Arguss Stock hereunder is exempt from
registration under the 1933 Act pursuant to Section 4(2)
thereof and Parent's reliance on such exemption is predicated
on Securityholder's representations set forth herein.
This Agreement is made in reliance upon
Securityholder's representations to Parent that the shares of
Arguss Stock to be issued will be acquired for investment and
not with a view to the sale or distribution of any part
thereof, and that Securityholders have no present intention of
selling, granting participation in or otherwise distributing
the same.
Securityholder hereby represent that they are
experienced in evaluating and investing in companies such as
the Parent, have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and
risks of this investment, and have the ability to bear the
economic risks of this investment. Securityholders further
represent that during the course of the transaction they have
had the opportunity to ask questions of, and receive answers
from, representatives of Parent concerning the Parent.
Securityholders hereby agree that the Arguss Stock
may not be transferred without registration under the 1933 Act
or an exemption therefrom, and that in the absence of an
effective Registration Statement covering the Arguss Stock, or
an available exemption from registration under the 1933 Act,
the Arguss Stock must be held indefinitely. In particular, and
without limiting the foregoing, Securityholders are aware that
the Arguss Stock may be not be sold pursuant to Rule 144
promulgated under the 1933 Act unless all conditions of that
Rule are met.
Securityholders hereby agree that in no event will
they transfer any of the Arguss Stock other than pursuant to an
effective Registration Statement under the 1933 Act, or
pursuant to the conditions of any legend appearing on said
Arguss Stock.
12.16 Preparation and Filing of SEC Documents.
If and whenever, as a result of the transaction contemplated
hereunder, the Parent is under an obligation to provide
financial information to, or prepare a filing of any kind with,
the United States Securities and Exchange Commission ("SEC"),
Securityholder shall assist the Parent in preparing any audited
financial statements required by the SEC for this purpose. The
cost of preparing any such financial statements shall be borne
by the Parent.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
ATTEST: ARGUSS HOLDINGS, INC.
____________________ By:______________________________
Title: ___________________________
ATTEST: RITE CABLE CONSTRUCTION, INC.
____________________ By:______________________________
Title: ___________________________
WITNESS:
____________________
_____________________________(SEAL)
ALVIN K. WRIGHT
ATTEST: WHITE MOUNTAIN CABLE CONSTRUCTION CORP.
____________________ By:______________________________
Title: ___________________________
PAGE 60 OF 60 OF AGREEMENT AND PLAN OF
MERGER
Accountants' Consent
The Board of Directors
Can-Am Construction, Inc.:
We consent to the incorporation by reference of our
reports dated November 6, 1997, on the financial statements
of Can-Am Construction, Inc., filed as an exhibit to the Arguss
Holdings, Inc. (the "Company") Form 8-K (the "Form 8-K") dated
January 2, 1998, in the Company's Registration Statement on
Form S-8 (Commission File No. 333-19277), in the Company's
Registration statement on Form S-8 (Commission File No. 333-27017),
in the Company's Registration Statement on Form S-3 (Commission
File No. 333-233083), and in the Form 8-K.
Costa Mesa, California /s/ KPMG Peat Marwick LLP
January 15, 1998
Accountants' Consent
The Board of Directors
Schenck Communications, Inc.:
We consent to the incorporation by reference of our report dated
November 4, 1997, on the financial statements of Schenck
Communications, Inc., filed as an exhibit to the Arguss Holdings, Inc.
(the "Company") Form 8-K (the "Form 8-K") dated January 2, 1998, in the
Company's Registration Statement on Form S-8 (Commission File No.
333-19277), in the Company's Registration Statement on Form S-8
(Commission File No. 333-27017), in the Company's Registration Statement
on Form S-3 (Commission File No. 333-233083), and in the Form 8-K.
Seattle, Washington /s/ KPMG Peat Marwick LLP
January 15, 1998
