Exhibit 2.1
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PURCHASE AGREEMENT
between
COMFORT SYSTEMS USA, INC.
and
EMCOR-CSI HOLDING CO.
Dated as of February 11, 2002
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. Specific Definitions.........................................1
SECTION 1.2. Other Terms..................................................8
SECTION 1.3. Other Definitional Provisions................................8
ARTICLE II
PURCHASE AND SALE
SECTION 2.1. Purchase and Sale............................................9
SECTION 2.2. Purchase Price...............................................9
SECTION 2.3. Deliveries at Closing........................................9
SECTION 2.4. Adjustment Amount and Payment................................9
SECTION 2.5. Adjustment Procedure........................................10
SECTION 2.6. Escrow Amount...............................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 3.1. Organization of Seller; Ownership of the Interests..........12
SECTION 3.2. Authorization...............................................12
SECTION 3.3. Noncontravention............................................12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
SECTION 4.1. Organization................................................13
SECTION 4.2. Authorization...............................................13
SECTION 4.3. Noncontravention............................................13
SECTION 4.4. No Broker...................................................14
SECTION 4.5. Purchase for Investment.....................................14
ARTICLE V
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
AND THE COMPANY SUBSIDIARIES
SECTION 5.1. Organization, Capitalization of the Company.................14
SECTION 5.2. Records.....................................................15
SECTION 5.3. Subsidiaries................................................15
SECTION 5.4. Noncontravention............................................16
SECTION 5.5. Financial Statements........................................16
SECTION 5.6. Undisclosed Liabilities.....................................17
SECTION 5.7. Absence of Change...........................................17
SECTION 5.8. Assets......................................................17
SECTION 5.9. Real Property...............................................17
SECTION 5.10. Intellectual Property.......................................20
SECTION 5.11. Compliance with Law.........................................20
SECTION 5.12. Contracts...................................................21
SECTION 5.13. Litigation; Indemnity Claims................................22
SECTION 5.14. Insurance...................................................23
SECTION 5.15. Employee Benefits...........................................24
SECTION 5.16. Employment Matters..........................................25
SECTION 5.17. Taxes.......................................................26
SECTION 5.18. Transactions With Affiliates................................28
SECTION 5.19. Accounts Receivable; Inventory..............................29
SECTION 5.20. Environmental Matters.......................................29
SECTION 5.21. No Broker...................................................30
SECTION 5.22. Disclosure..................................................30
SECTION 5.23. Product or Service Warranty.................................30
SECTION 5.24. Product or Service Liability................................31
SECTION 5.25. WIP Schedule................................................31
SECTION 5.26. Customers and Suppliers.....................................31
ARTICLE VI
PRE-CLOSING COVENANTS
SECTION 6.1. Further Assurances..........................................32
SECTION 6.2. Conduct of Business.........................................32
SECTION 6.3. Access to Information.......................................34
SECTION 6.4. Notices and Consents........................................35
SECTION 6.5. Publicity...................................................35
SECTION 6.6. Confidentiality.............................................35
SECTION 6.7. Taxes.......................................................36
SECTION 6.8. Exclusivity.................................................36
SECTION 6.9. Update......................................................37
SECTION 6.10. Financial Statements........................................37
SECTION 6.11. Termination of Affiliate Transactions; Release of
Obligations...............................................37
SECTION 6.12. Insurance Authorizations and Confirmations..................38
SECTION 6.13. Bonuses.....................................................38
SECTION 6.14. Certain Real Property Matters...............................38
ARTICLE VII
POST-CLOSING COVENANTS
SECTION 7.1. General.....................................................38
SECTION 7.2. Non-Solicitation............................................39
SECTION 7.3. Employee Benefits...........................................39
SECTION 7.4. WARN Act....................................................39
SECTION 7.5. Litigation Support..........................................39
SECTION 7.6. Transition..................................................40
SECTION 7.7. Third Party Indemnification.................................40
SECTION 7.8. Assumed Obligations.........................................40
SECTION 7.9. Minute Books................................................40
SECTION 7.10. Use of Name.................................................40
SECTION 7.11. Vehicle Leases..............................................41
SECTION 7.12. Audit.......................................................41
SECTION 7.13. Tax Treatment of the Company................................41
SECTION 7.14. Surety Bonds................................................41
SECTION 7.15. National Servicing Organization Transition Issues...........41
SECTION 7.16. Continuation of Insurance Coverage..........................43
SECTION 7.17. Bonding Company Reports.....................................43
SECTION 7.18. Pre-Closing Financial Reporting.............................43
SECTION 7.19. Transfer of Domain Names....................................43
ARTICLE VIII
TAX MATTERS
SECTION 8.1. Tax Indemnification.........................................44
SECTION 8.2. Procedures Relating to Indemnification of Tax Claims........45
SECTION 8.3. Adjustment to Purchase Price................................46
SECTION 8.4. Filing of Tax Returns.......................................46
SECTION 8.5. Cooperation on Tax Matters..................................48
SECTION 8.6. Certain Taxes and Fees......................................48
SECTION 8.7. Carrybacks..................................................48
SECTION 8.8. Refunds and Credits.........................................49
SECTION 8.9. Allocation of Purchase Price; Section 338(h)(10) Elections..49
SECTION 8.10. Tax Sharing Agreements......................................50
ARTICLE IX
CONDITIONS PRECEDENT TO CONSUMMATION OF THE CLOSING
SECTION 9.1. Conditions Precedent to Each Party's Obligations to Close...50
SECTION 9.2. Conditions Precedent to Obligations of the Buyer............50
SECTION 9.3. Conditions Precedent to Obligations of the Seller...........52
ARTICLE X
REMEDIES FOR BREACH
SECTION 10.1. Limitation on and Survival of Representations and
Warranties...............................................53
SECTION 10.2. Indemnification by Seller...................................53
SECTION 10.3. Indemnification by Buyer....................................56
SECTION 10.4. Limitation of Liability.....................................57
SECTION 10.5. Certain Indemnification Matters With Respect to
Receivables..............................................58
SECTION 10.6. Exclusive Remedy............................................59
ARTICLE XI
TERMINATION
SECTION 11.1. Termination.................................................59
SECTION 11.2. Effect of Termination.......................................60
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. Entire Agreement............................................60
SECTION 12.2. Expenses....................................................61
SECTION 12.3. Governing Law; Submission to Jurisdiction...................61
SECTION 12.4. Assignment..................................................61
SECTION 12.5. Notices.....................................................61
SECTION 12.6. Amendment and Waiver........................................62
SECTION 12.7. Counterparts; Headings......................................62
SECTION 12.8. Specific Performance........................................63
SECTION 12.9. Interpretation..............................................63
SECTION 12.10. Severability................................................63
SECTION 12.11. No Third Parties; No Reliance...............................63
SECTION 12.12. Incorporation of Exhibits, Annexes and Schedules............63
EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Transition Services Agreement
ANNEXES
Annex A Company Subsidiaries
Annex B Company Subsidiary Groups
DISCLOSURE SCHEDULES
Schedule 2.2 Assumed Obligations
Schedule 2.5 Accounting Principles
Schedule 3.3(A) Seller Noncontravention Exceptions--Governmental
Authorities
Schedule 3.3(B) Seller Noncontravention Exceptions--Third Parties
Schedule 4.3 Buyer Noncontravention Exceptions
Schedule 4.4 Brokers' and Finders' Fees
Schedule 5.1(a) Jurisdictions, Directors and Officers of the Company
Schedule 5.3(a) Company Subsidiaries
Schedule 5.3(b) Jurisdictions, Directors and Officers of the Company
Subsidiaries
Schedule 5.4(A) Company Noncontravention Exceptions--Governmental
Authorities
Schedule 5.4(B) Company Noncontravention Exceptions--Third Parties
Schedule 5.5 Financial Statements; GAAP Exceptions
Schedule 5.6 Undisclosed Liabilities Exceptions
Schedule 5.7 Absence of Change Exceptions
Schedule 5.9(a) Owned Properties
Schedule 5.9(b) Leased Properties
Schedule 5.10 Intellectual Property
Schedule 5.12 Contracts
Schedule 5.13 Litigation; Indemnity Claims
Schedule 5.14 Insurance
Schedule 5.15(a) Company Plans
Schedule 5.15(c) Employee Benefits: Exceptions
Schedule 5.15(f) Employee Benefits: Claims, Notices, Proceedings
Schedule 5.15(g) Employee Benefits: Parachute Payments
Schedule 5.15(i) Employee Benefits: Trustees
Schedule 5.16 Employment Matters
Schedule 5.17 Taxes
Schedule 5.17(e) Tax Waivers
Schedule 5.18 Transactions with Affiliates
Schedule 5.19(a) Accounts Receivable
Schedule 5.20 Environmental Matters
Schedule 5.23(A) Standard Terms and Conditions
Schedule 5.23(B) Exceptions to Standard Terms and Conditions
Schedule 5.26(a) Material Customer Contracts
Schedule 5.26(b) Supplier Arrangements
Schedule 7.14 Surety Bonds
Schedule 7.15(c) AMN Clients
Schedule 9.2(m) Release of Certain Security Interests
Schedule 10.3(a)(iv) Indemnification of Seller Guarantees
PURCHASE AGREEMENT
This Purchase Agreement is made as of February 11, 2002, by and
among Comfort Systems USA, Inc., a Delaware corporation (the "Seller"), and
EMCOR-CSI Holding Co., a Delaware corporation (the "Buyer").
RECITALS
WHEREAS, the Seller is the sole member and owner of 100% of the
Interests of CSUSA Holdings L.L.C., a Delaware limited liability company (the
"Company");
WHEREAS, the Company owns all the outstanding equity interests of
each of the Subsidiaries listed on Annex A attached hereto (each, a "Company
Subsidiary", and together, the "Company Subsidiaries");
WHEREAS, the Buyer desires to acquire, and the Seller desires to
sell, all the Interests in the Company, and indirectly all the outstanding
capital stock of and ownership interests in the Company Subsidiaries, on the
terms set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants, conditions and agreements set forth
herein, the parties agree as set forth below:
ARTICLE I
DEFINITIONS
SECTION 1.1. Specific Definitions. As used in this Agreement, the
following terms shall have the meanings set forth or as referenced below:
"Action" shall mean any action, claim, suit, hearing, complaint,
demand, injunction, litigation, judgment, arbitration, order, decree, ruling,
or governmental investigation or proceeding.
"Adjustment Amount" shall have the meaning given in Section 2.4.
"Adjustment Escrow Amount" shall have the meaning given in Section
2.2.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control
with, such Person as of the date on which, or at any time during the period
for which, the determination of affiliation is being made.
"Affiliated Group" shall mean any affiliated group within the
meaning of section 1504(a) of the Code or any similar group defined under a
similar provision of state, local or foreign law.
"Agreement" shall mean this Agreement, together with the exhibits,
annexes and schedules hereto, as the same may be amended from time to time in
accordance with the terms hereof.
"Allocations" shall have the meaning given in Section 8.9(c).
"AMC" shall have the meaning given in Section 7.15(c).
"AMC Customer" shall have the meaning given in Section 7.15(c).
"Assumed Obligations" shall have the meaning given in Section 2.2.
"Audited Financial Statements" shall have the meaning given in
Section 6.10.
"Basket" shall have the meaning given in Section 10.4.
"Border Electric" shall have the meaning given in Section 6.14(a).
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banks in New York, New York or Houston, Texas are authorized or
obligated by law or executive order to close.
"Buyer" shall have the meaning given in the Preamble hereto.
"Buyer Claim" shall have the meaning given in Section 10.2(a).
"Buyer Claim Notice" shall have the meaning given in Section
10.2(b).
"Buyer Indemnified Parties" shall have the meaning given in Section
10.2(a).
"Chubb" shall have the meaning given in Section 7.17.
"Clients" shall have the meaning given in Section 7.15(a).
"Closing" shall have the meaning given in Section 2.3(a).
"Closing Date" shall have the meaning given in Section 2.3(a).
"Closing Financial Statements" shall have the meaning given in
Section 2.5(b).
"Closing Net Asset Value" shall have the meaning given in Section
2.5(b).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Comfort Names" shall have the meaning given in Section 7.10.
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"Confidential Information" shall mean any information concerning the
respective businesses and affairs of the Seller, the Company and the Company
Subsidiaries that is not already generally available to the public.
"Confidentiality Agreement" shall have the meaning given in Section
6.6.
"Customer Contracts" shall have the meaning given in Section
5.26(a).
"Company" shall have the meaning given in the Recitals hereto.
"Company Employee" shall mean any employee, director or consultant
or former employee, director or consultant of the Company or any Company
Subsidiary.
"Company Plan" shall mean each "employee benefit plan" (within the
meaning of section 3(3) of ERISA, including multiemployer plans within the
meaning of section 3(37) of ERISA), and all stock purchase, stock option,
severance, employment, change-in-control, fringe benefit, bonus, incentive,
deferred compensation, health, medical and all other employee benefit plans,
agreements, programs, policies or other arrangements, whether or not subject
to ERISA (including any funding mechanism therefor now in effect), whether
formal or informal, oral or written, under which any Company Employee has any
right to benefits sponsored or maintained by the Seller, the Company or any
Company Subsidiary or under which the Company or any Company Subsidiary has
any liability.
"Company Subsidiary" shall have the meaning given in the Recitals
hereto.
"Company Subsidiary Group" shall mean each of the Company Subsidiary
Groups identified on Annex B attached hereto.
"Elections" shall have the meaning given in Section 8.9(a).
"Environmental Laws" shall have the meaning given in Section
5.20(b).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agreement" shall mean the escrow agreement substantially in
the form attached hereto as Exhibit A.
"Escrow Amount" shall have the meaning given in Section 2.2.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Financial Statements" shall mean (i) the unaudited consolidated
balance sheet of the Company as of December 31, 2000, and related unaudited
statement of operating income of the Company for the year then ended and (ii)
the Most Recent Balance Sheet and related unaudited statement of operating
income of the Company for the year then ended.
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"GAAP" shall mean generally accepted accounting principles
consistently applied as in effect in the United States of America at the time
of the preparation of the subject financial statements.
"Governmental Authority" shall mean any federal, state, provincial,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality, or any court or self-regulatory organization, in each case
whether of the United States, any of its possessions or territories, or of any
foreign nation.
"Hazardous Materials" shall have the meaning given in Section
5.20(c).
"Hillside lease" shall have the meaning given in Section 6.14(b).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (15 U.S.C.ss.18a), as amended.
"Indemnification Escrow Amount" shall have the meaning given in 2.2.
"Independent Accountants" shall have the meaning given in Section
2.5(d).
"Intellectual Property" shall mean all (a) inventions, technology,
patents, reissuances, continuations, continuations- in-part, divisions and
reexaminations, (b) trademarks, service marks, trade dress, logos, trade
names, domain names and corporate names, including all goodwill associated
therewith, (c) copyrightable works and copyrights (including software,
databases, data and related documentation), (d) mask works, (e) trade secrets
and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all registrations, applications, renewals,
and recordings in connection therewith and (g) all other proprietary rights.
"Interests" shall mean the membership interests in the Company.
"Knowledge of the Company" shall mean the actual knowledge, after
due inquiry, of any of the directors or executive officers of the Seller, any
of the directors or officers of the Company, and any of the directors or
officers of the Company's Subsidiaries; or the knowledge that should
reasonably have been obtained by such individuals, acting in a manner
consistent with their duties, through a reasonable inquiry of those
individuals having responsibility for the subject of the inquiry.
"Kuempel" shall have the meaning given in Section 7.15(d).
"Laws" shall mean any order, judgment or decree of any Governmental
Authority, any federal, state, local or other statute, law, rule of common
law, code or governmental requirement of any kind, domestic or foreign, and
the rules, regulations and standards promulgated thereunder.
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"Leased Property" shall have the meaning given in Section 5.9(b).
"Liability" shall mean any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Liens" shall mean any and all liens, encumbrances, mortgages,
charges, claims, restrictions, pledges, security interests, title defects,
tenancies (and other possessory interests), easements, rights of way,
covenants, encroachments, conditional sale or other title retention agreements
and other impositions, other than (a) liens for Taxes not yet due and payable,
(b) with respect to any asset, encumbrances and title defects that do not
materially interfere with the existing use of such asset and do not adversely
affect the marketability thereof, including mechanics liens, materialmen liens
and other inchoate liens, provided that the obligations in respect of which
such liens were created are not delinquent, (c) purchase money liens and liens
securing rental payments under capital lease arrangements, (d) deposits or
pledges made in connection with, or to secure payment of, worker's
compensation, unemployment insurance, old age pension programs mandated under
applicable laws or other social security regulations and (e) restrictions on
transfer under federal and state securities laws.
"Losses" shall mean any claims, demands, suits, proceedings,
judgments, losses, liabilities, damages, third-party costs and third-party
expenses (including, but not limited to, reasonable attorneys' fees);
provided, however, that the amount of any Loss shall be reduced by the receipt
of insurance proceeds at any date with respect to such matter net of
third-party expenses incurred and premium increases directly attributable to
such claim; provided, further, that the amount of any Loss for the purposes of
indemnification hereunder shall be determined net of, with respect to any such
Loss, the present value (based on a discount factor equal to the applicable
federal rate as determined under section 1274(d)(1) of the Code) of any Tax
benefit reasonably expected to be realized by the indemnified party (or any
consolidated, combined or unitary group of which the indemnified party is also
a member) arising from the incurrence or payment of such Loss; provided,
further, that the amount of any Loss for the purpose of indemnification
hereunder shall be increased by the present value (based on a discount factor
equal to the applicable federal rate as determined under Section 1274(d)(1) of
the Code) of any Tax cost reasonably expected to be realized by the
indemnified party (or any consolidated, combined or unitary group of which the
indemnified party is also a member) arising from the receipt of any indemnity
payment under Article VIII or Article X ("grossed up" for taxes on such
increase). In computing the amount of any such Tax benefit or Tax cost, the
indemnified party shall be deemed to recognize all other items of gross
income, gain, loss, deduction or credit before recognizing any item arising
from the receipt of any indemnity payment hereunder or the incurrence or
payment of any and all Losses. For the purpose of clarity, it is the parties'
expectation that, for federal income tax purposes, the reasonably expected tax
benefit and tax deficit will generally net to zero and result in no adjustment
under this provision. If either party (or any Affiliate thereof) takes a
position contrary to such expectation on any Tax Return, it shall notify the
other party in writing.
"Material Adverse Effect" or "Material Adverse Change" shall mean,
(a) with respect to each of the Seller, the Company or each Company Subsidiary
Group, as applicable, a
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material adverse effect on or change in (or any development with respect to
the Seller, the Company or each such Company Subsidiary Group, as applicable,
that could reasonably be expected to have a material adverse effect on or
change in) (i) the business, operations, assets, liabilities, financial
condition or results of operations of such entity or group of entities, as
applicable, or (ii) the ability of the Seller to perform its obligations
hereunder or to consummate the transactions contemplated hereby on a timely
basis, and (b) with respect to the Buyer, a material adverse effect on or
change in the ability of the Buyer to perform its obligations hereunder
or consummate the transactions contemplated hereby on a timely basis.
"Material Customer" shall have the meaning given in Section 5.26(a).
"Material Customer Contracts" shall have the meaning given in
Section 5.26(a).
"Maximum Indemnity Amount" shall have the meaning given in Section
10.4.
"Most Recent Balance Sheet" shall mean the unaudited consolidated
balance sheet of the Company as of December 31, 2001.
"Net Asset Value" shall have the meaning given in Section 2.5(a).
"NSO" shall have the meaning given in Section 7.15.
"Objection Notice" shall have the meaning given in Section 2.5(c).
"Objection Period" shall have the meaning given in Section 2.5(c).
"Owned Property" shall have the meaning given in Section 5.9(a).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" shall mean all written permits, consents, licenses and
governmental authorizations, registrations and approvals required for conduct
of the business of the Company and the Company Subsidiaries.
"Person" means an individual, a corporation, a partnership, an
association, a limited liability company, a trust, a governmental authority or
any other entity or organization of any kind.
"Post-Closing Tax Period" shall have the meaning given in Section
8.1(b).
"Pre-Closing Tax Period" shall have the meaning given in Section
8.1(a).
"Predecessor Acquisition Agreements" shall mean, collectively, the
agreements entered into by the Seller or any of its Subsidiaries pursuant to
which the Seller, directly or indirectly through any of its Subsidiaries,
acquired the capital stock (or other equity interests) or assets of the
Company Subsidiaries or their predecessors, as the case may be, and any
disclosure schedules related thereto.
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"Preliminary Purchase Price" shall mean the amount specified in
Section 2.2.
"Process Agent" shall have the meaning given in Section 12.3.
"Purchase Price" shall mean the amount specified in Section 2.4.
"Purchase Price Allocation" shall have the meaning given in Section
8.9(c).
"Rates" shall have the meaning given in Section 7.15(b).
"Receivables" shall have the meaning given in Section 5.19(a).
"Receivables Basket" shall have the meaning given in Section 10.4.
"Retained Subsidiaries" shall have the meaning given in Section
6.11(b).
"S&S" shall have the meaning given in Section 7.15(b).
"Scheduled Amounts" shall have the meaning given in Section 5.19(b).
"Section 338 Allocation" shall have the meaning given in Section
8.9(c).
"Seller" shall have the meaning given in the Preamble hereto.
"Seller Claim" shall have the meaning given in Section 10.3(a).
"Seller Claim Notice" shall have the meaning given in Section
10.3(b).
"Seller Indemnified Parties" shall have the meaning given in Section
10.3(a).
"Shares" shall have the meaning given in Section 8.9(a).
"Straddle Period" shall have the meaning given in Section 8.1(a).
"Subsidiary" shall mean, when used with respect to any Person, any
corporation or other entity (i) of which such Person or any Subsidiary thereof
is a general partner, (ii) of which at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a
majority of the board of directors or others performing similar functions for
such corporation or entity are owned by such Person or a Subsidiary thereof or
(iii) that is directly or indirectly controlled by such Person.
"Target Net Asset Value" shall be $65,900,000, subject to the
adjustments described in Section 11.1(f).
"Tax Proceeding" shall have the meaning given in Section 8.2(a).
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"Tax Returns" shall mean any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Taxes" shall mean any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
section 59A of the Code), customs, duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated or other tax of any kind whatsoever
imposed by any Governmental Authority, including any interest, penalty or
addition thereto.
"Transferred Company Plan" shall mean each Company Plan that will
continue to be maintained or administered or contributed to by the Company or
any Company Subsidiary after the Closing Date.
"Transition Services Agreement" shall mean the transition services
agreement substantially in the form attached hereto as Exhibit B.
"WARN Act" shall mean the Worker Adjustment and Retraining
Notification Act of 1988, 29 U.S.C. ss. 2101 et seq.
"WIP Schedule" shall have the meaning given in Section 5.25.
"Zurich" shall have the meaning given in Section 6.12.
SECTION 1.2. Other Terms. Other terms may be defined elsewhere in
the text of this Agreement and, unless otherwise indicated, shall have such
meaning throughout this Agreement.
SECTION 1.3. Other Definitional Provisions.
(a) The words "hereof", "herein", "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a whole
and not to any particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States dollars.
(d) Accounting terms not defined in Section 1.1 and accounting
terms partly defined in Section 1.1, to the extent not defined, shall have
the respective meanings given to them under GAAP.
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ARTICLE II
PURCHASE AND SALE
SECTION 2.1. Purchase and Sale. On and subject to the terms and
conditions of this Agreement, the Seller agrees to sell, and Buyer agrees to
purchase from the Seller, all right, title and interest of Seller in and to
the Interests for the consideration specified in Section 2.2.
SECTION 2.2. Purchase Price. The Buyer agrees to pay to the Seller
a purchase price (the "Preliminary Purchase Price") equal to the total of (a)
$186,250,000 minus (b) the amount of obligations (including accrued interest)
of the Seller under the promissory notes listed on Schedule 2.2 assumed by the
Buyer on the Closing Date (the "Assumed Obligations"). With respect to a
portion of the Preliminary Purchase Price, $2,500,000 (together with all
interest and profits thereon and proceeds therefrom, the "Adjustment Escrow
Amount") shall be held in escrow to support the adjustment to the Preliminary
Purchase Price described in Sections 2.4 and 2.5 and $5,000,000 (together with
all interest and profits thereon and proceeds therefrom, the "Indemnification
Escrow Amount," together with the Adjustment Escrow Amount, the "Escrow
Amount") shall be held in escrow to support the Seller's indemnification
obligations as provided in Article X. The Preliminary Purchase Price shall be
increased or decreased by the Adjustment Amount in accordance with Section
2.5.
SECTION 2.3. Deliveries at Closing.
(a) The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Simpson Thacher & Bartlett
in New York, New York, commencing at 10:00 a.m. local time on the fifth
Business Day following the satisfaction or waiver of all conditions to the
obligations of the parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions that the respective parties will
take at the Closing itself) or such other date as the Buyer and the Seller may
mutually determine in writing (the "Closing Date").
(b) At the Closing, in addition to the deliveries required to be
made at or prior to the Closing pursuant to Article VI hereof, (i) the Seller
shall sell, assign and transfer to the Buyer all of the Seller's right, title
and interest in and to the Interests free and clear of all Liens, with all
taxes attributable to the transfer of such Interests duly paid or provided for
by the Seller, and (ii) the Buyer shall (A) pay to the Seller cash in an
amount equal to the Preliminary Purchase Price minus the Escrow Amount by wire
transfer of immediately available funds, (B) assume the Assumed Obligations
pursuant to an assumption agreement in form and substance reasonably
satisfactory to the Seller and (C) deposit the Escrow Amount in accordance
with Section 2.6.
SECTION 2.4. Adjustment Amount and Payment. The Preliminary Purchase
Price shall be increased or decreased by the Adjustment Amount in accordance
with this Section 2.4. The "Adjustment Amount" (which may be a positive or
negative number) will be equal to the amount determined by subtracting the
Closing Net Asset Value from the Target Net Asset Value. If the Adjustment
Amount is positive, then the Adjustment Amount shall be paid by wire
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transfer of immediately available funds by the Seller to an account specified
by the Buyer, net of the Adjustment Escrow Amount paid to the Buyer pursuant
to the Escrow Agreement. If the Adjustment Amount is negative, then the
Adjustment Amount shall be paid by wire transfer of immediately available
funds by the Buyer to an account specified by the Seller. The payment of the
Adjustment Amount shall be made together with interest at the rate of six
percent (6%) per annum, which interest shall begin accruing on the Closing
Date and end on the date on which the payment of the Adjustment Amount is
made. Within three Business Days after the calculation of the Closing Net
Asset Value becomes binding and conclusive on the parties pursuant to
Section 2.5 of this Agreement, the Seller or the Buyer, as the case may be,
shall pay the Adjustment Amount as provided for in this Section 2.4. The
Preliminary Purchase Price as so adjusted is referred to herein as the
"Purchase Price".
SECTION 2.5. Adjustment Procedure.
(a) "Net Asset Value" as of a given date shall mean the amount
calculated by subtracting the liabilities of the Company and the Company
Subsidiaries on a consolidated basis from the assets of the Company and the
Company Subsidiaries on a consolidated basis, in each case determined in
accordance with GAAP applied on a basis consistent with the Seller's past
practice (except as expressly required otherwise by the terms of this
Agreement) and prepared on the same basis and using the same accounting
principles, policies and practices used in the Financial Statements.
(b) Within 60 days following the Closing Date, the Buyer (i) shall
prepare, or cause to be prepared, financial statements (the "Closing Financial
Statements") of the Company and the Company Subsidiaries on a consolidated
basis as of the close of business on the Closing Date and for the period from
December 31, 2001 through the close of business on the Closing Date on the
same basis and applying the same accounting principles, policies and practices
that were used in preparing the Financial Statements, including the
principles, policies and practices set forth on Schedule 2.5 (determined on a
pro forma basis as though the parties had not consummated the transactions
contemplated by this Agreement); (ii) shall determine the Net Asset Value as
of the Closing Date (the "Closing Net Asset Value") based on the Closing
Financial Statements and using the same methodology as was used to prepare the
Financial Statements, including the principles, policies and practices set
forth on Schedule 2.5; and (iii) shall deliver to the Seller a signed
statement that includes the Closing Financial Statements and the Buyer's
calculation of the Closing Net Asset Value.
(c) If (i) within 60 days following the Closing Date, the Buyer
delivers to the Seller the Closing Financial Statements and the Buyer's
calculation of the Closing Net Asset Value and (ii) within 60 days following
the delivery by the Buyer to the Seller of the documents described in clause
(i) above (the "Objection Period"), the Seller has not delivered to the Buyer
(A) a written notice (the "Objection Notice") stating the Seller's objection
to the Buyer's calculation of the Closing Net Asset Value and the basis for
such objection and (B) a signed statement that includes the Seller's
calculation of the Closing Net Asset Value, then the Closing Net Asset Value
calculated by the Buyer shall be binding and conclusive on the parties. During
the Objection Period, the Buyer (1) shall promptly furnish or cause to be
furnished to the Seller such work papers and other documents and information
relating to the Closing Financial
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Statements and the Buyer's calculation of the Closing Net Asset Value as the
Seller may request and are available to the Buyer or its agents, including
consolidating financial statements, work-in-progress schedules, receivables
agings and a schedule of adjustments, and (2) shall promptly respond in
reasonable detail to reasonable inquiries by the Buyer with respect to such
work papers, documents and information.
(d) If, during the Objection Period, the Seller delivers to the
Buyer each of the Objection Notice and the Seller's calculation of the Closing
Net Asset Value, then the Buyer and the Seller will use reasonable efforts to
agree upon the calculation of the Closing Net Asset Value. If the parties fail
to agree upon the calculation of the Closing Net Asset Value within 30 days of
the Buyer's receipt of the Objection Notice and the Seller's calculation of
the Closing Net Asset Value, then the Buyer and the Seller shall submit the
matter to PricewaterhouseCoopers in Washington, D.C., certified public
accountants (the "Independent Accountants"), for resolution applying the
principles, policies and practices set forth in Section 2.5(b). If the
determination of the Closing Net Asset Value is submitted to the Independent
Accountants for resolution, each of the Seller and the Buyer (A) shall
promptly furnish or cause to be furnished to the Independent Accountants such
work papers and other documents and information relating to the Closing
Financial Statements and its calculation of the Closing Net Asset Value as the
Independent Accountants may request and are available to such party or its
agents and (B) shall be afforded the opportunity to present to, and discuss
with, the Independent Accountants any material relating to the Closing
Financial Statements and its calculation of the Closing Net Asset Value.
Within 60 days following the submission of such matter to the Independent
Accountants, the Independent Accountants shall determine whether the Buyer's
calculation of the Closing Net Asset Value or the Seller's calculation of the
Closing Net Asset Value more closely approximates the Net Asset Value as of
the Closing Date based on the principles, policies and practices set forth in
Section 2.5(b). Immediately following such determination, the Independent
Accountants shall provide written notice of their determination that (1) the
Buyer's calculation of the Closing Net Asset Value or the Seller's calculation
of the Closing Net Asset Value, as the case may be, more closely approximates
the Net Asset Value as of the Closing Date based on the principles, policies
and practices set forth in Section 2.5(b) and (2) such closer approximation of
the Net Asset Value as of the Closing Date shall be deemed to be the Closing
Net Asset Value for all purposes of this Agreement, shall be final, binding
and conclusive on the parties and shall be used in computing the Adjustment
Amount. The sole duty of the Independent Accountants shall be to determine
whether the Buyer's calculation of the Closing Net Asset Value or the Seller's
calculation of the Closing Net Asset Value more closely approximates the Net
Asset Value as of the Closing Date based on the principles, policies and
practices set forth in Section 2.5(b) and to provide written notice of such
determination to the parties in accordance with this Section 2.5(d).
The Buyer and the Seller shall split all the fees and expenses of
the Independent Accountants.
SECTION 2.6. Escrow Amount. On the Closing Date, the Buyer shall
deposit the Escrow Amount with Bank One National Association (or other
institution selected by the Seller with the reasonable consent of the Buyer),
as escrow agent, such deposit to be governed by the terms set forth herein and
in the Escrow Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller hereby represents and warrants to the Buyer as of the
date hereof as follows:
SECTION 3.1. Organization of Seller; Ownership of the Interests. The
Seller is duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. The Seller holds of record and beneficially
owns 100% of the Interests, free and clear of all Liens. Upon (a) recording
the transfer of the Interests to the Buyer on the books of the Company (for
which there is no impediment), (b) payment for the Interests as contemplated
herein and (c) the release of the Liens granted in respect of the Interests by
the Seller to the lenders under the Seller's senior credit facility, the
transfer of the Interests to the Buyer at the Closing will vest in the Buyer
good and valid title to the Interests, free and clear of all Liens. The Seller
is not a party to any option, warrant, purchase right or other contract or
commitment that could require the Seller to sell, transfer or otherwise
dispose of any equity interests of the Company (other than pursuant to this
Agreement). The Seller is not a party to any voting trust, proxy or other
agreement or understanding with respect to the voting of any equity interests
of the Company.
SECTION 3.2. Authorization. The Seller has full power and authority
to execute and deliver this Agreement and each agreement or instrument to
which it is a party executed and delivered in connection herewith, to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder. The Seller's execution, delivery and
performance of this Agreement and all agreements and instruments to which it
is a party executed and delivered in connection herewith, and its consummation
of the transactions contemplated hereby and thereby, have been duly authorized
by all requisite corporate action on the part of the Seller. This Agreement
and all agreements or instruments executed and delivered by the Seller in
connection herewith have been duly executed and delivered by the Seller and
constitute the legal, valid and binding obligations of the Seller, enforceable
against the Seller in accordance with their respective terms, except to the
extent that enforcement may be affected by applicable bankruptcy,
reorganization, insolvency and similar laws affecting creditors' rights and
remedies generally and by general principles of equity (regardless of whether
enforcement is sought at law or in equity).
SECTION 3.3. Noncontravention. The execution, delivery and
performance by the Seller of this Agreement and each agreement or instrument
to which it is a party executed and delivered in connection herewith and the
consummation of the transactions contemplated hereby and thereby do not and
will not (a) conflict with or violate any Laws applicable to the Seller or any
of its Subsidiaries, (b) conflict with or violate any provision of the
certificate of incorporation or by-laws or other organizational documents of
the Seller or any of its Subsidiaries or (c) violate, result in a breach,
default or acceleration under, or give rise to any penalty or any right of
termination or modification or any other remedy under, any agreement to which
either the Seller or any of its Subsidiaries is a party or by which the Seller
or any of its Subsidiaries is bound, except for such violations, breaches,
defaults, rights of termination or modification and other
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remedies as would not, either individually or in the aggregate, have a
Material Adverse Effect on the Seller. No consent, approval, authorization,
license, order or permit of, or declaration, filing or registration with, or
notification to, any Governmental Authority or any other Person is necessary
or required to be made or obtained by the Seller or any of its Affiliates in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for such
consents, approvals, authorizations, licenses, orders, permits, declarations,
filings, registrations and notifications (i) of (A) Governmental Authorities
which are specifically identified on Schedule 3.3(A) or (B) all other third
parties which are specifically identified on Schedule 3.3(B) or (ii) the
absence of which would not, either individually or in the aggregate, have a
Material Adverse Effect on the Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as of the
date hereof as follows:
SECTION 4.1. Organization. The Buyer is a corporation, duly
incorporated, validly existing and in good standing under the laws
of the State of Delaware.
SECTION 4.2. Authorization. The Buyer has full power and authority
to execute and deliver this Agreement and each agreement or instrument to
which it is a party executed and delivered in connection herewith, to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder. The Buyer's execution, delivery and
performance of this Agreement and all agreements and instruments to which it
is a party executed and delivered in connection herewith, and its consummation
of the transactions contemplated hereby, have been duly authorized by all
requisite corporate action on the part of the Buyer. This Agreement and all
agreements or instruments executed and delivered by the Buyer in connection
herewith have been duly executed and delivered by the Buyer and constitute the
legal, valid and binding obligations of the Buyer, enforceable against the
Buyer in accordance with their respective terms, subject to applicable
bankruptcy, reorganization, insolvency and similar laws affecting creditors'
rights and remedies generally and to general principles of equity (regardless
of whether enforcement is sought at law or in equity).
SECTION 4.3. Noncontravention. The execution, delivery and
performance by the Buyer of this Agreement and each agreement or instrument to
which it is a party executed and delivered in connection herewith and the
consummation of the transactions contemplated hereby and thereby do not and
will not (a) conflict with or violate any Laws applicable to Buyer, (b)
conflict with or violate any provision of the Buyer's certificate of
incorporation or by-laws, or (c) violate, result in a breach, default or
acceleration under, or give rise to any penalty or any right of termination or
modification or any other remedy under, any agreement to which the Buyer is a
party or by which the Buyer is bound, except for such violations, breaches,
defaults, rights of termination or modification and other remedies as would
not, either individually or in the aggregate, have a Material Adverse Effect
on the Buyer. No consent, approval, authorization,
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license, order or permit of, or declaration, filing or registration with, or
notification to, any Governmental Authority or any other Person is necessary
or required to be made or obtained by the Seller or any of its Affiliates in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for such
consents, approvals, authorizations, licenses, orders, permits, declarations,
filings, registrations and notifications (i) which are specifically identified
on Schedule 4.3 or (ii) the absence of which would not, either individually or
in the aggregate, have a Material Adverse Effect on the Buyer.
SECTION 4.4. No Broker. Except as set forth on Schedule 4.4, the
Buyer is not committed to any liability for any brokers' or finders' fees or
any similar fees in connection with the transactions contemplated by this
Agreement.
SECTION 4.5. Purchase for Investment. The Buyer is acquiring the
Interests for its own account for the purpose of investment and not with a
view to or for sale in connection with any distribution thereof, except in
accordance with applicable federal and state securities laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
AND THE COMPANY SUBSIDIARIES
The Seller hereby represents and warrants to the Buyer as of the
date hereof as follows:
SECTION 5.1. Organization, Capitalization of the Company.
(a) Organization. The Company is duly formed, validly existing and
in good standing under the laws of the State of Delaware. The Company has full
limited liability company power and authority to conduct its business as
currently conducted, to own its properties and to lease those properties
leased by it. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is necessary under applicable Law as a result of the conduct of
its business or the ownership or lease of its properties, except for such
failures to be so qualified as would not, either individually or in the
aggregate, have a Material Adverse Effect on the Company or any Company
Subsidiary Group. Schedule 5.1(a) lists (i) each jurisdiction in which the
Company is qualified to do business as a foreign corporation and (ii) the
directors and officers of the Company. The Seller has delivered to the Buyer
true, correct and complete copies of the Company's certificate of formation
and operating agreement, in each case, as amended to the date hereof. The
Company has been formed solely to effect the transactions contemplated hereby
and has not conducted any business except as contemplated hereby.
(b) Capitalization. All Interests in the Company are beneficially
held of record by the Seller. All Interests in the Company have been duly
authorized and validly issued and are
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fully paid and non-assessable, and were not issued in violation of any
preemptive or other similar rights. Except for this Agreement, there are no
existing options, warrants, calls or other agreements or commitments providing
for (i) the issuance or sale of any equity interests of the Company or any
securities or rights convertible into, or exercisable or exchangeable for, any
such equity interests or (ii) the repurchase, redemption or other acquisition
of any equity interests of the Company. There are no shareholder agreements,
voting trusts, proxies or other similar agreements or understandings with
respect to or concerning the equity interests of the Company.
SECTION 5.2. Records. The respective minute books of the Company and
the Company Subsidiaries contain accurate records in all material respects of
all corporate, limited liability company or limited partnership actions of
their respective shareholders, members or partners and boards of directors
(including committees thereof), boards of managers (including committees
thereof) or general partners.
SECTION 5.3. Subsidiaries.
(a) Ownership; Capitalization. The Company has no Subsidiaries other
than the Company Subsidiaries. Schedule 5.3(a) sets forth, for each Company
Subsidiary and each other entity in which a Company Subsidiary owns, directly
or indirectly, any capital stock or other equity securities or ownership
interests, (i) its name and jurisdiction of organization; (ii) the number of
shares of each class of its authorized capital stock or other equity
securities or ownership interests, as applicable; (iii) each of (A) the number
of issued and outstanding shares of each class of its capital stock or other
equity securities or ownership interests, as applicable, (B) the names of the
holders thereof and (C) the number of shares or other equity securities or
ownership interests, as applicable, held by each such holder; and (iv) the
number of shares of its capital stock or other equity securities or ownership
interests held in treasury. Except as set forth in Schedule 5.3(a), neither
the Company nor any Company Subsidiary has any direct or indirect equity
investment or ownership interest in any Person. Except as set forth in
Schedule 5.3(a), the Company is the direct owner of all of the outstanding
shares of capital stock or other equity securities or ownership interests of
each Company Subsidiary and the direct owner of each of the equity investments
or ownership interests set forth on Schedule 5.3(a), in each case, free and
clear of all Liens. All of the shares of capital stock or other equity
securities or ownership interests, as applicable, of each Company Subsidiary
have been duly authorized and validly issued and are fully paid and
non-assessable, and were not issued in violation of any preemptive or other
similar rights. Except for this Agreement, there are no options, warrants,
calls or other agreements of any kind or character for (1) the issuance or
sale of capital stock or other equity securities or ownership interests, as
applicable, of any Company Subsidiary or any securities or rights convertible
into, or exercisable or exchangeable for, any such capital stock, equity
securities or ownership interests, as applicable, or (2) the repurchase,
redemption or other acquisition of any capital stock, other equity securities
or ownership interests, as applicable, of any Company Subsidiary. There are no
shareholder agreements, voting trusts, proxies or other similar agreements or
understandings with respect to or concerning the capital stock, equity
securities or ownership interests, as applicable, of any Company Subsidiary.
(b) Organization. Each Company Subsidiary is duly organized, validly
existing and in good standing under the laws of its state of organization and
has full corporate, limited
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liability company or limited partnership power and authority to conduct its
business as currently conducted, to own its properties and to lease those
properties leased by it. Each Company Subsidiary is duly qualified to do
business as a foreign corporation or business entity and is in good standing
in each jurisdiction in which such qualification is necessary under applicable
Law as a result of the conduct of its business or the ownership of its
properties, except for such failures to be so qualified as would not, either
individually or in the aggregate, have a Material Adverse Effect on the
Company or any Company Subsidiary Group. Schedule 5.3(b) lists (i) each
jurisdiction in which each Company Subsidiary is qualified to do business as a
foreign corporation or other business entity and (ii) the directors and
officers of each Company Subsidiary. The Seller has delivered to the Buyer
true, correct and complete copies of each Company Subsidiary's certificate of
incorporation and bylaws or other organizational documents, in each case as
amended to the date hereof. No Company Subsidiary is in default under or in
violation of any provisions of its certificate of incorporation or bylaws or
other organizational documents.
SECTION 5.4. Noncontravention. The execution, delivery and
performance by the Seller of this Agreement and each agreement or instrument
to which it is a party executed and delivered in connection herewith and the
consummation of the transactions contemplated hereby and thereby do not and
will not (a) conflict with or violate any Laws applicable to the Company or
any Company Subsidiary, (b) conflict with or violate any provision of the
certificate of incorporation or by-laws or other organizational documents of
the Company or any Company Subsidiary or (c) violate, result in a breach,
default or acceleration under, or give rise to any penalty or any right of
termination or modification or any other remedy under, any agreement to which
the Company or any Company Subsidiary is a party or by which the Company or
any Company Subsidiary is bound, except for such violations, breaches,
defaults, rights or termination or modification and other remedies as would
not, either individually or in the aggregate, have a Material Adverse Effect
on the Company or any Company Subsidiary Group. No consent, approval,
authorization, license, order or permit of, or declaration, filing or
registration with, or notification to, any Governmental Authority or any other
Person is necessary or required to be made or obtained by the Company, any
Company Subsidiary or any of their respective Affiliates in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for such consents, approvals,
authorizations, licenses, orders, permits, declarations, filings,
registrations and notifications (i) of (A) Governmental Authorities which are
specifically identified on Schedule 5.4(A) or (B) all other third parties
which are specifically identified on Schedule 5.4(B) or (ii) the absence of
which would not, either individually or in the aggregate, have a Material
Adverse Effect on the Company or any Company Subsidiary Group.
SECTION 5.5. Financial Statements. The Seller has delivered to the
Buyer copies of the Financial Statements set forth on Schedule 5.5. The
Financial Statements (a) present fairly in all material respects the
consolidated financial condition and results of operations of the Company and
the Company Subsidiaries, taken as a whole, as of the dates and for the
periods indicated, (b) except as described in Schedule 5.5, have been prepared
in accordance with GAAP applied on a basis consistent with past practice, (c)
are correct and complete in all material respects, and (d) are consistent in
all material respects with the books and records of the Company and the
Company Subsidiaries (which books and records are correct and complete in all
material respects); provided, however, that the Financial Statements do not
contain footnotes.
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SECTION 5.6. Undisclosed Liabilities. Except as set forth on
Schedule 5.6, neither the Company nor any Company Subsidiary has any material
Liabilities (and there is no basis for any present or future Action against
any of them giving rise to any material Liability), except for (i) Liabilities
set forth on the face of the Most Recent Balance Sheet and (ii) Liabilities
incurred after the date of the Most Recent Balance Sheet in the ordinary
course of business and consistent with past practices; provided that, for
purposes of this Section 5.6, the term "Liability" shall not include any
contractual obligation to the extent such contractual obligation would not be
required to be disclosed as a liability on a balance sheet of the Company or
any Company Subsidiary pursuant to GAAP.
SECTION 5.7. Absence of Change. Except as set forth in Schedule 5.7
or as contemplated by this Agreement, since September 30, 2001, each of the
Company and the Company Subsidiaries (i) has conducted its business in the
ordinary course of business, consistent with past practice, and has not
suffered any change in business, financial condition or results of operations
that has had or would be reasonably likely to have a Material Adverse Effect
on the Company or any Company Subsidiary Group, as the case may be, and (ii)
has not taken any action which, if taken after the date hereof, would
constitute a material breach of Section 6.2.
SECTION 5.8. Assets. Each of the Company and the Company
Subsidiaries has good and marketable title to, or a valid leasehold interest
in, the properties and assets used by it, located on its premises, shown on
the Most Recent Balance Sheet or acquired after the date thereof, free and
clear of all Liens, except for properties and assets disposed of in the
ordinary course of business, consistent with past practice, since the date of
the Most Recent Balance Sheet. All of the buildings, machinery, equipment and
other tangible assets necessary for the conduct of the respective businesses
of the Company and the Company Subsidiaries as currently conducted are in good
and usable condition, ordinary wear and tear excepted, and are being used in
the respective businesses of the Company and the Company Subsidiaries. Such
assets and the other properties being leased by each of the Company and the
Company Subsidiaries pursuant to the leases described on Schedule 5.9(b)
constitute all of the material operating assets being utilized in the conduct
of the respective businesses of the Company and the Company Subsidiaries, and
such assets are free from material defects (patent and latent), have been
maintained in accordance with normal industry practice and are sufficient in
quantity and otherwise suitable for the purposes for which they are currently
used. Except as set forth on Schedule 5.9(a) and Schedule 5.9(b), since
September 30, 2001, no Company Subsidiary has sold any properties, assets or
businesses other than dispositions in the ordinary course of its business,
consistent with past practice.
SECTION 5.9. Real Property.
(a) Schedule 5.9(a) lists, describes briefly and identifies the
owner of all real property and interests in real property owned in fee simple
by each of the Company and the Company Subsidiaries (each, together with all
the buildings, improvements, structures and fixtures located thereon, an
"Owned Property"). The following representations and warranties are true and
correct with respect to the real property identified in Schedule 5.9(a),
except for such exceptions as are identified on Schedule 5.9(a) or as would
not, either individually or in the aggregate, have a Material Adverse Effect
on the Company or any Company Subsidiary Group:
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(i) the identified owner has good and marketable title to the Owned
Property, free and clear of all Liens, except for (A) installments of
special assessments not yet delinquent and (B) recorded easements,
covenants, and other restrictions which do not impair the current use,
occupancy, or value of, or the marketability of title to, the property
subject thereto, and has provided the Buyer with current and valid title
insurance policies for the Owned Property which identify the named
insured as the owner identified on Schedule 5.9(a);
(ii) there are no pending or, to the Knowledge of the Company,
threatened condemnation proceedings, lawsuits, or administrative actions
relating to any Owned Property or other matters affecting and adversely
impairing the current use, occupancy, or value thereof;
(iii) the legal description for each Owned Property contained in the
deed thereof describes such Owned Property fully and adequately; the
buildings and improvements are located within the boundary lines of the
described parcels of land, are not in violation of applicable setback
requirements, zoning laws, and ordinances (and none of the properties or
buildings or improvements thereon are subject to "permitted
non-conforming use" or "permitted non-conforming structure"
classifications), and do not encroach on any easement which may burden
the land; the land does not serve any adjoining property for any purpose
inconsistent with the use of the land; and the property is not located
within any flood plain or subject to any similar type restriction for
which any permits or licenses necessary to the use thereof have not been
obtained;
(iv) each Owned Property has received all approvals of governmental
authorities (including licenses and permits) required in connection with
the ownership or operation thereof and has been operated and maintained
in accordance with, and is not in violation of, applicable laws,
statutes, rules, regulations, ordinances, orders and requirements
applicable to such Owned Property;
(v) there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any party or parties the right
of use or occupancy of any portion of any Owned Property;
(vi) there are no outstanding options or rights of first refusal to
purchase any Owned Property, or any portion thereof or interest therein;
(vii) there are no parties (other than the Company and the Company
Subsidiaries) in possession of any Owned Property, other than tenants
under any written or oral leases disclosed in Schedule 5.9(a) who are in
possession of space to which they are entitled;
(viii) all facilities located on any Owned Property are supplied
with utilities and other services necessary for the operation of such
facilities, including
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gas, electricity, water, telephone, sanitary sewer, and storm sewer, all
of which services are adequate under all applicable laws, ordinances,
rules, and regulations and are provided via public roads or via
permanent, irrevocable, appurtenant easements benefiting such Owned
Property; and
(ix) each Owned Property abuts on and has direct vehicular access to
a public road, or has access to a public road via a permanent,
irrevocable, appurtenant easement benefiting such Owned Property, and
access to the property is provided by paved public right-of-way with
adequate curb cuts available.
(b) Schedule 5.9(b) lists and describes briefly all real property
and interests in real property leased or subleased to or by any of the Company
and the Company Subsidiaries (the "Leased Property"). The Seller has delivered
to the Buyer correct and complete copies of the leases and subleases covered
by the Leased Property listed in Schedule 5.9(b), in each case as amended and
supplemented to date. The following representations and warranties are true
and correct with respect to each lease and sublease covered by the Leased
Property listed in Schedule 5.9(b), except for such exceptions as would not,
either individually or in the aggregate, have a Material Adverse Effect on the
Company or any Company Subsidiary Group.
(i) the lease or sublease is (A) the legal, valid and binding
obligation of the Company or the Company Subsidiary party thereto, (B)
enforceable against the Company or the Company Subsidiary party thereto
and (C) in full force and effect;
(ii) the lease or sublease will continue to be (A) the legal, valid
and binding obligation of the Company or the Company Subsidiary party
thereto, (B) enforceable against the Company or the Company Subsidiary
party thereto and (C) in full force and effect, in each case on identical
terms following the consummation of the transactions contemplated hereby;
(iii) to the Knowledge of the Company, no party to the lease or
sublease is in breach or default in any material respect, and no event
has occurred which, with notice or lapse of time or both, would
constitute a material breach or default or permit termination,
modification or acceleration thereunder;
(iv) to the Knowledge of the Company, no party to the lease or
sublease has repudiated any provision thereof;
(v) except as disclosed in Schedule 5.9(b)(v), there are no
disputes, oral agreements or forbearance programs in effect, as to the
lease or sublease;
(vi) with respect to each sublease, neither the Seller, the Company
nor any Company Subsidiary has received written or oral notice with
respect to any matter that would cause the representations and warranties
set forth in subsections (i) through (v) above not to be true and correct
with respect to the underlying lease;
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(vii) none of the Company or any of the Company Subsidiaries has
assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered
any interest in any Leased Property;
(viii) each Leased Property has received all approvals of
governmental authorities (including licenses and permits) required in
connection with the operation thereof and has been operated and
maintained in accordance with, and is not in violation of, applicable
laws, rules, regulations, ordinances, orders and requirements applicable
to such Leased Property;
(ix) all facilities located on each Leased Property are supplied
with utilities and other services necessary for the operation of such
facilities; and
(x) to the Knowledge of the Company, neither the Seller, the Company
nor any Company Subsidiary has received written or oral notice that the
owner of any Leased Property does not have good and marketable title to
such Leased Property, free and clear of all Liens, except for
installments of special easements not yet delinquent and recorded
easements, covenants, and other restrictions which do not impair the
current use, occupancy, or value of, or the marketability of title to,
the property subject thereto.
SECTION 5.10. Intellectual Property. Schedule 5.10 contains a
correct and complete list of the Intellectual Property that is (a) owned by or
licensed to the Company or any Company Subsidiary and (b) that is material to
the business of the Company or any Company Subsidiary Group. The Company and
each Company Subsidiary either owns the entire right, title and interest to,
or holds an existing, valid and enforceable license to use, all the
Intellectual Property material to its business as currently conducted. There
are no Actions instituted, pending or, to the Knowledge of the Company,
proposed or threatened by any third party pertaining to, or challenging, the
Company's or any Company Subsidiary's use of, or right to use, any
Intellectual Property. Neither the Intellectual Property of the Company and
the Company Subsidiaries nor the conduct of the respective businesses of the
Company and the Company Subsidiaries infringes or violates in any material
respect any Intellectual Property or other right of any third party. To the
Knowledge of the Company, no third party is infringing upon any Intellectual
Property of the Company or any Company Subsidiary.
SECTION 5.11. Compliance with Law. Each of the Company and the
Company Subsidiaries (a) has obtained and holds all Permits applicable to it
or its properties or assets, except for such Permits the absence of which
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company or any Company Subsidiary Group; and (b) is in compliance with all
Laws, except for such failures to so comply as would not, individually or in
the aggregate, have a Material Adverse Effect on the Company or any Company
Subsidiary Group. Since December 31, 2000, neither the Company nor any Company
Subsidiary has received any notice from any Governmental Authority asserting
any failure to comply with any applicable Law, except for such failures to so
comply as would not, individually or in the aggregate, have a Material Adverse
Effect on the Company or any Company Subsidiary Group.
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SECTION 5.12. Contracts. Schedule 5.12 contains a correct and
complete list of the following contracts, agreements, or arrangements to which
the Company or any Company Subsidiary is a party or by which any of their
respective properties is bound:
(a) notes, mortgages, indentures, loan or credit agreements;
equipment lease agreements having a noncancellable term of more than one year
and annual rental payments of $50,000 or more; security agreements and other
agreements and instruments reflecting obligations for borrowed money or other
monetary indebtedness or otherwise relating to the borrowing of money by, or
the extension of credit to, the Company or any Company Subsidiary; and
commitments to enter into any such agreements;
(b) management, consulting, profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance and employment
agreements and other agreements or commitments to enter into such agreements,
other than Company Plans;
(c) option, purchase and sale or lease agreements that involve (i)
any real property, equipment, machinery, personal property or other assets,
tangible or intangible and (ii) amounts payable by or to the Company or any
Company Subsidiary of $50,000 or more, other than agreements providing for the
sale of equipment, machinery, personal property or other assets, tangible or
intangible, to customers in the ordinary course of business;
(d) joint venture or other agreements involving the sharing of
profits or losses;
(e) agreements with the Seller or any of its Affiliates, or any
director, officer or employee of the Seller or any of its Affiliates
(including the Company or any of the Company Subsidiaries), or any individual
who is an immediate relative of any such director, officer or employee, or any
combination of such Persons;
(f) outstanding powers of attorney empowering any Person to act on
behalf of the Company or any Company Subsidiary;
(g) outstanding guarantees, subordination agreements, indemnity
agreements, letters of credit, reimbursement agreements and other similar
types of agreements, whether or not entered into in the ordinary course of
business, under which the Company or any Company Subsidiary is or may become
liable for or obligated to discharge, or any asset of the Company or any
Company Subsidiary is or may become subject to the satisfaction of, any
indebtedness, obligation, performance or undertaking of any Person other than
the Company and the Company Subsidiaries, except for any such agreements
contained in any of the instruments listed in the schedules hereto and
excluding any agreements entered into in the ordinary course of business
consistent with past practice pursuant to which any party agreed to act as a
subcontractor to the Company or any Company Subsidiary;
(h) agreements, orders, decrees or judgments preventing or
restricting the Company or any Company Subsidiary's business activities in any
location;
(i) collective bargaining agreements, excluding agreements which
cover fewer than ten employees each of whom works less than 180 days in any
calendar year;
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(j) agreements relating to the acquisition by the Company or any
Company Subsidiary of the outstanding capital stock or equity interests or
assets of any business enterprise;
(k) agreements concerning Intellectual Property, excluding
non-material software licenses for off-the-shelf programs or customized
programs relating to internal business operations that are used by a Company
Subsidiary in the ordinary course of business;
(l) agreements under which the consequences of a default or
termination could have a Material Adverse Effect on the Company or any Company
Subsidiary Group; and
(m) agreements (or group of related agreements), other than Company
Plans, that either (i) have unexpired terms in excess of one year and require
aggregate future payments or receipts in excess of $50,000, other than
customer contracts entered into in the ordinary course of business, or (ii)
are otherwise material to the business or operations of the Company or any
Company Subsidiary Group.
The Seller has delivered to the Buyer true and complete copies of
all such agreements (other than collective bargaining agreements unless
specifically requested), including all amendments, modifications, waivers and
elections applicable thereto, and a written summary setting forth the terms
and conditions of each oral agreement referred to in Schedule 5.12.
The following representations and warranties are true and correct
with respect to each contract, agreement, or arrangement to which the Company
or any Company Subsidiary is a party or by which any of their respective
properties is bound, except for such exceptions as would not, individually or
in the aggregate, have a Material Adverse Effect on the Company or any Company
Subsidiary Group: (i) the agreement is (A) the legal, valid, and binding
obligation of the Company or the Company Subsidiary party thereto, (B)
enforceable against the Company or the Company Subsidiary party thereto and
(C) in full force and effect; (ii) the agreement will continue to be (A) the
legal, valid, and binding obligation of the Company or the Company Subsidiary
party thereto, (B) enforceable against the Company or the Company Subsidiary
party thereto and (C) in full force and effect, in each case, on identical
terms following the consummation of the transactions contemplated hereby;
(iii) to the Knowledge of the Company, no party is in breach or default, and
no event has occurred which, with notice or lapse of time or both, would
constitute a breach or default, or permit termination, modification or
acceleration, under the agreement; and (iv) to the Knowledge of the Company,
no party has a reasonable basis upon which to cancel or terminate any
provision of the agreement.
SECTION 5.13. Litigation; Indemnity Claims. Except as set forth on
Schedule 5.13, there is no claim, legal action, suit, litigation, arbitration,
material grievance, material dispute or investigation, judicial,
administrative or otherwise, or any order, decree or judgment, now pending or
in effect, or, to the Knowledge of the Company, threatened or contemplated
against the Company or any Company Subsidiary. There are no pending indemnity
claims concerning the Company or any Company Subsidiary between (a) the
Seller, the Company or any Company Subsidiary and (b) any other Person.
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SECTION 5.14. Insurance. Schedule 5.14 sets forth the following
information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage
and bond and surety arrangements) to which any of the Seller (with respect to
any Company Subsidiary), the Company or any Company Subsidiary has been a
party, a named insured, or otherwise the beneficiary of coverage at any time
since July 1, 1998:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(e) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
Except as set forth on Schedule 5.14, with respect to each such insurance
policy, (i) the policy is (A) (1) the legal, valid and binding obligation of
the Seller, the Company or the Company Subsidiary party thereto and (2) to the
Knowledge of the Company, the legal, valid and binding obligation of each
other party thereto, (B) (1) enforceable against the Seller, the Company or
the Company Subsidiary party thereto and (2) to the Knowledge of the Company,
enforceable against each other party thereto and (C) in full force and effect
with respect to matters occurring during periods prior to the Closing Date;
(ii) the policy will continue to be (A) (1) the legal, valid and binding
obligation of the Seller, the Company or the Company Subsidiary party thereto
and (2) to the Knowledge of the Company, the legal, valid and binding
obligation of each other party thereto, (B) (1) enforceable against the
Company or the Company Subsidiary party thereto and (2) to the Knowledge of
the Company, enforceable against each other party thereto and (C) in full
force and effect with respect to matters occurring during periods prior to the
Closing Date, in each case, on identical terms following the consummation of
the transactions contemplated hereby; (iii) neither the Seller, the Company
nor any Company Subsidiary nor, to the Knowledge of the Company, any other
party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred
which, with notice or the lapse of time or both, would constitute such a
breach or default, or permit termination, modification or acceleration, under
the policy; (iv) there are no letters relating to reservations of rights under
any such policy; and (v) to the Knowledge of the Company, no party to the
policy has a reasonable basis upon which to cancel or terminate any provision
thereof. Since July 1, 1998, each Company Subsidiary has been covered by
insurance in scope and amount customary and reasonable for the business in
which it has engaged since such date. Schedule 5.14 describes any
self-insurance arrangements affecting the Company or any Company Subsidiary.
The Seller has delivered to the Buyer copies of each insurance policy of the
Seller since the date of the Seller's incorporation that provides or has
provided coverage for any Company Subsidiary.
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SECTION 5.15. Employee Benefits.
(a) Schedule 5.15(a) contains a true and complete list of each
Company Plan and indicates whether such Company Plan is a Transferred Company
Plan.
(b) With respect to each Company Plan that is not a multiemployer
plan, the Seller has provided to the Buyer a current, accurate and complete
copy (or, to the extent no such copy exists, an accurate description) thereof
and, to the extent applicable, (i) any related trust agreement or other
funding instrument; (ii) the most recent determination letter, if applicable;
and (iii) any summary plan description. With respect to each Transferred
Company Plan that is not a multiemployer plan, the Seller has provided to the
Buyer a current, accurate and complete copy of (A) material written
descriptions of plan provisions provided to Company Employees and (B) for each
year commencing on or after January 1, 1999, (1) the Form 5500 and attached
schedules, (2) the audited financial statements and (3) the actuarial
valuation reports. With respect to any material employee benefit plan that is
not legally binding, and therefore does not constitute a Company Plan, the
Seller has provided copies of such plans, or if no written plans exist,
written descriptions thereof.
(c) Except as set forth on Schedule 5.15(c), (i) each Transferred
Company Plan that is not a multiemployer plan has been established and
administered in all material respects (A) in accordance with its terms and (B)
in compliance with the applicable provisions of ERISA, the Code and other
applicable laws, rules and regulations; (ii) each Transferred Company Plan
that is not a multiemployer plan which is intended to be qualified within the
meaning of section 401(a) of the Code is so qualified and has received a
favorable determination or opinion letter that the form of the plan has
satisfied the requirements of section 401(a) of the Code, and nothing has
occurred, whether by action or failure to act, that would reasonably be
expected to cause the loss of such qualification; (iii) no event has occurred
and no condition exists that would subject the Company or any Company
Subsidiary, either directly or by reason of their affiliation with any member
of their "Controlled Group" (defined as any organization which is a member of
a controlled group of organizations within the meaning of section 414(b), (c),
(m) or (o) of the Code), to any material tax, fine, lien, penalty or other
liability imposed by ERISA, the Code or other applicable laws, rules and
regulations; (iv) none of (A) a "reportable event" (as such term is defined in
section 4043 of ERISA) that would reasonably be expected to result in material
liability to the Company or any Company Subsidiary, (B) a non-exempt
"prohibited transaction" (as such term is defined in section 406 of ERISA and
section 4975 of the Code) that would reasonably be expected to result in a
material liability to the Company or any Company Subsidiary and (C) an
"accumulated funding deficiency" (as such term is defined in section 302 of
ERISA and section 412 of the Code (whether or not waived)) has occurred with
respect to any Company Plan that is not a multiemployer plan; and (v) no
Transferred Company Plan that is not a multiemployer plan provides retiree
welfare benefits and neither the Company nor any Company Subsidiary has any
obligations to provide any retiree welfare benefits other than as required
pursuant to section 4980B of the Code or other applicable law.
(d) With respect to each Company Plan that is not a multiemployer
plan within the meaning of section 4001(a)(3) of ERISA but is subject to Title
IV of ERISA, as of the Closing Date the assets of each such Company Plan are
at least equal in value to the present value
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of the accrued benefits (vested and unvested) of the participants in such
Company Plan on a termination and projected benefit obligation basis, based on
the actuarial methods and assumptions indicated in the most recent applicable
actuarial valuation reports.
(e) With respect to any multiemployer plan (within the meaning of
section 4001(a)(3) of ERISA) to which the Company, any Company Subsidiary or
any member of their Controlled Group has any liability or contributes (or
within the preceding six years has had liability or contributed), (i) no such
company has withdrawn, partially withdrawn in a manner that would result in
withdrawal liability or partial withdrawal liability, or received any notice
or any claim or demand for withdrawal liability or partial withdrawal
liability; (ii) no such company has received any notice that any plan is in
reorganization, that increased contributions may be required to avoid a
reduction in plan benefits or the imposition of any excise tax, or that any
such plan is or may become insolvent that may result in liability to the
Company or any Company Subsidiary; (iii) no such company has failed to make
any required contributions; (iv) neither the Seller nor any Company Subsidiary
has received any notice that such multiemployer plan is a party to any pending
merger or asset or liability transfer; and (v) neither the Seller nor any
Company Subsidiary has received any notice that there are proceedings of the
PBGC against or affecting any such multiemployer plan.
(f) Except as set forth on Schedule 5.15(f), (i) no actions, suits
or claims (other than routine claims for benefits in the ordinary course) are
pending or, to the Knowledge of the Company, threatened with respect to any
Transferred Company Plan, (ii) no notice has been received from the PBGC in
respect of any Company Plan that is not a multiemployer plan subject to Title
IV of ERISA concerning the funded status of any such Company Plan, and (iii)
no administrative investigation, audit or other administrative proceeding by
the Department of Labor, the PBGC, the Internal Revenue Service or other
governmental agencies are pending, in progress or, to the Knowledge of the
Company, threatened with respect to any Transferred Company Plan.
(g) Except as set forth in Schedule 5.15(g), no Transferred Company
Plan exists that, as a result of the execution of this Agreement or the
transactions contemplated by this Agreement (whether alone or in connection
with a subsequent event), could result in the payment to any Company Employee
of any money or other property or could result in the acceleration or
provision of any other material rights or benefits to any Company Employee,
whether or not such payment, right or benefit would constitute a parachute
payment within the meaning of section 280G of the Code.
(h) There are no funding mechanisms with respect to any Transferred
Company Plan that are required to be established in the future as a result of
the transactions contemplated by this Agreement.
(i) Schedule 5.15(i) contains a true and complete list of trustees
to each Transferred Company Plan that is not a multiemployer plan.
SECTION 5.16. Employment Matters. Except as set forth on Schedule
5.16, (a) neither the Company nor any Company Subsidiary is party to, bound
by, or negotiating in respect of, any collective bargaining agreement or any
other agreement with any labor union,
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association or other representative of any employees of the Company or any
Company Subsidiary, nor is any employee of the Company or any Company
Subsidiary represented by any labor union or other representative
organization; (b) since January 1, 2001, no labor union or other
representative organization has been newly certified or recognized as the
collective bargaining representative of any employees of the Company or any
Company Subsidiary; (c) there are no union organizing campaigns or
representation proceedings or campaigns in process or, to the Knowledge of the
Company or any Company Subsidiary, threatened, with respect to any employees
of the Company or any Company Subsidiary; (d) there are no existing or
threatened labor strikes, work stoppages, organized slowdowns, unfair labor
practice charges or complaints or labor arbitration proceedings involving any
employee of the Company or any Company Subsidiary, and neither the Company nor
any Company Subsidiary has experienced any such labor controversy since
January 1, 1999; (e) neither the Company nor any Company Subsidiary is party
to, or otherwise bound by, any consent decree with, or citation by, any
Governmental Authority relating to employees or employment practices; (f) each
of the Company and the Company Subsidiaries has paid in full to its respective
employees all wages, salaries, commissions, bonuses, benefits and other
compensation due to such employees or otherwise arising under any policy,
practice, agreement, plan, program, statute or other law; and (g) neither the
Company nor any Company Subsidiary has closed any plant or facility,
effectuated any layoffs of employees or implemented any early retirement,
separation or window program since January 1, 1999, nor has the Company or any
Company Subsidiary planned or announced any such action or program for the
future; and (h) each of the Company and the Company Subsidiaries is in
compliance with its obligations pursuant to the WARN Act and all other
notification and bargaining obligations arising under applicable Laws.
SECTION 5.17. Taxes. Except as otherwise disclosed on Schedule 5.17:
(a) All Tax Returns required to be filed by or with respect to the
Company and each of the Company Subsidiaries have been timely filed. All
material Taxes due and required to be paid by or with respect to the Company
and each Company Subsidiary (whether or not shown on any Tax Return) have been
paid. The Seller has filed all income Tax Returns that it was required to file
for each taxable period during which any of the Company and the Company
Subsidiaries was a member of the Seller's Affiliated Group, and all income
taxes owed by any Affiliated Group (whether or not shown on any Tax Return)
have been paid for each taxable period during which any of the Company and the
Company Subsidiaries was a member of such Affiliated Group, in each case
except for such exceptions as would not, either individually or in the
aggregate, have a Material Adverse Effect on the Company or any Company
Subsidiary Group. None of the Company or the Company Subsidiaries currently is
the beneficiary of any extension of time within which to file any Tax Return.
No unresolved claim has ever been made by an authority in a jurisdiction where
any of the Company and the Company Subsidiaries does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction.
(b) All Tax Returns filed by or with respect to the Company and each
of the Company Subsidiaries were correct and complete in all material
respects.
(c) Each of the Company and the Company Subsidiaries has duly and
timely withheld and paid over to the appropriate taxing authorities all
material Taxes required to have
-26-
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party
under all applicable laws and regulations.
(d) There is no unresolved dispute or claim concerning any Tax
Liability of any of the Company and the Company Subsidiaries either (i)
claimed or raised by any authority in writing or (ii) as to which any of the
Seller, the Company, any Company Subsidiary or any director, officer or member
(or employee responsible for Tax matters) of any of the Seller, the Company or
any Company Subsidiary has Knowledge based upon personal contact with any
agent of such authority. Schedule 5.17 lists all federal, state, local, and
foreign income Tax Returns filed with respect to any of the Company and the
Company Subsidiaries for taxable periods ended on or after December 31, 1998,
indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. The Seller has delivered to
the Buyer correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by any of the Company and the Company Subsidiaries for taxable periods
ended on or after December 31, 1998.
(e) There is no dispute or claim concerning any income Tax Liability
of any Affiliated Group for any taxable period during which any of the Company
or the Company Subsidiaries was a member of such Affiliated Group either (i)
claimed or raised by any authority in writing or (ii) as to which the Seller,
any of its Subsidiaries (including the Company or any Company Subsidiary) or
any director, officer or member (or employee responsible for Tax matters) of
any of the Seller or any of its Subsidiaries (including the Company or any
Company Subsidiary) has knowledge based upon personal contact with any agent
of such authority, in each case except for such exceptions as would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company or any Company Subsidiary Group. Except as disclosed on Schedule
5.17(e), no Affiliated Group has waived any statute of limitations in respect
of any material income taxes or agreed to any extension of time with respect
to a material income tax assessment or deficiency for any taxable period
during which any of the Company and the Company Subsidiaries was a member of
such Affiliated Group.
(f) Each of the Company and the Company Subsidiaries has collected
all sales and use Taxes required to be collected, and has remitted, or will
remit on a timely basis, such sales and use Taxes to the appropriate
governmental authorities, or has been furnished properly completed exemption
certificates and has maintained all such records and supporting documents in
the manner required by all applicable sales and use Tax statutes and
regulations.
(g) None of the Company and the Company Subsidiaries has waived any
statute of limitations in respect of material Taxes or agreed to any extension
of time with respect to a material Tax assessment or deficiency.
(h) As of the Closing, neither the Company nor any of the Company
Subsidiaries shall be a party to, be bound by, or have any obligation under,
any Tax sharing agreement or similar contract or arrangement or any agreement
that obligates it to make any payment computed by reference to the Taxes,
taxable income or taxable losses of any other Person. None of the Company or
the Company Subsidiaries has any Liability for the Taxes of any Person (other
than Taxes of the Seller and any member of its consolidated group) under
Treasury
-27-
Regulation ss. 1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise. The Seller is
not a "foreign person" within the meaning of section 1445 of the Code. None of
the assets owned by the Company or any of the Company Subsidiaries is (i)
subject to a tax benefit transfer lease executed in accordance with section
168(f)(8) of the Internal Revenue Code of 1954, as amended, or (ii)
"tax-exempt use property" within the meaning of section 168(h) of the Code.
Neither the Company nor any of the Company Subsidiaries has agreed to make any
adjustment under section 481 of the Code by reason of a change in accounting
method or otherwise.
(i) There are no Liens on any of the assets or properties of any
of the Company and the Company Subsidiaries that arose in connection with
any failure (or alleged failure) to pay any Tax.
(j) The Company has at all times since its formation properly been
characterized for federal income tax purposes as an entity that is disregarded
as an entity separate from its owner, and not as a corporation, under Treasury
Regulation ss. 301.7701-2 and ss. 301.7701-3.
SECTION 5.18. Transactions With Affiliates. (a) Except as set forth
in Schedule 5.18, (i) the Company and the Company Subsidiaries have not, in
the ordinary course of business or otherwise, purchased, leased or otherwise
acquired any property or assets or obtained any services (except with respect
to services rendered as a director, officer, manager, member, partner or
employee of the Company or the Company Subsidiaries) from, or sold, leased or
otherwise disposed of any property or assets or provided any services to, any
Affiliate or employee of the Company, any Company Subsidiary, the Seller or
any of their Affiliates that would result in any obligations or commitments on
the part of the Company or any Company Subsidiary outstanding as of the date
hereof or as of the Closing Date and (ii) to the Knowledge of the Company,
since January 1, 2001, the Company and the Company Subsidiaries have not, in
the ordinary course of business or otherwise, purchased, leased or otherwise
acquired any property or assets or obtained any services (except with respect
to services rendered as a director, officer, manager, member, partner or
employee of the Company or the Company Subsidiaries) from, or sold, leased or
otherwise disposed of any property or assets or provided any services to, any
Affiliate or employee of the Company, any Company Subsidiary, the Seller or
any of their Affiliates.
(b) Except as set forth in Schedule 5.18, (i) to the Knowledge of
the Company, neither the Seller nor any of its Affiliates (including the
Company or a Company Subsidiary) has been involved in any business arrangement
or relationship with the Company or any of the Company Subsidiaries since
January 1, 2001, (ii) neither the Seller nor any of its Affiliates (including
the Company or a Company Subsidiary) has been involved in any business
arrangement or relationship with the Company or any of the Company
Subsidiaries that would result in any obligations or commitments on the part
of the Company or any Company Subsidiary outstanding as of the date hereof or
as of the Closing Date, (iii) neither the Company nor any Company Subsidiary
has any obligation or commitment to or from the Seller or any of its
Affiliates (including the Company or any other Company Subsidiary) and (iv)
the assets and liabilities of the Company and the Company Subsidiaries do not
include any receivable or payable or any other
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amount owing to or from the Seller or any of its Affiliates (including the
Company or a Company Subsidiary).
SECTION 5.19. Accounts Receivable; Inventory.
(a) Except for the amounts set forth on Schedule 5.19(a), all notes,
accounts receivable and costs in excess of billings of the Company and the
Company Subsidiaries (collectively, the "Receivables") are reflected properly
on their books and records, are valid, arise from bona fide transactions
occurring in the ordinary course of business and subject to no setoffs or
counterclaims, are collectible, and, in the aggregate, will be collected in
full (net of the allowance for doubtful accounts set forth on the Most Recent
Balance Sheet) within 14 months after the Closing Date (provided that each
Company Subsidiary uses its commercially reasonable efforts to collect such
Receivables).
(b) The amounts set forth on Schedule 5.19(a) (the "Scheduled
Amounts") have not been accounted for as revenue by any Company Subsidiary in
any of the Financial Statements. To the extent the Scheduled Amounts have been
included in "Accounts Receivable" on the Most Recent Balance Sheet, an amount
no less than the Scheduled Amounts has been included in "Billings in Excess of
Costs" on the Most Recent Balance Sheet.
(c) The inventory of the Company and the Company Subsidiaries
consists of raw materials and supplies, manufactured and purchased parts,
goods in process, and finished goods, all of which is merchantable and fit for
the purpose for which it was procured or manufactured, and none of which is
slow-moving, obsolete, damaged, or defective, subject only to the reserve for
inventory writedown set forth on the face of the Most Recent Balance Sheet as
adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of the Company and the Company Subsidiaries. All
inventory reflected on the Most Recent Balance Sheet, and all inventory
acquired since that date (other than inventory disposed of in the ordinary
course of business) is usable and/or saleable in the ordinary course.
SECTION 5.20. Environmental Matters.
(a) Except as set forth in Schedule 5.20, and except for such of the
following as, individually or in the aggregate, would not result in material
liability for the Company or any Company Subsidiary Group under any
Environmental Laws, (i) the Company and each Company Subsidiary are, and at
all prior times have been, in compliance with all applicable Environmental
Laws; (ii) neither the Company nor any Company Subsidiary has received a
notice, report or information regarding any liability or alleged liability
(whether accrued, absolute, contingent, unliquidated or otherwise) that has
not been satisfied, or any actual or alleged corrective, investigatory or
remedial obligation that has not been satisfied, arising under any applicable
Environmental Laws with respect to its past or present operations or
properties or facilities; (iii) each of the Company and the Company
Subsidiaries has obtained, and has at all times been in compliance with all
terms and conditions of, all Permits required pursuant to Environmental Laws
for the conduct of their respective businesses; (iv) there are no wetlands or
endangered or threatened species currently present at any of the properties or
facilities currently owned, leased or otherwise used by the Company or any of
the Company Subsidiaries, that could reasonably be
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expected to give rise to liability to the Company or any of the Company
Subsidiaries under any Environmental Laws or materially restrict the future
use of such properties or facilities; (v) Hazardous Materials have not been
generated, transported, treated, stored, disposed of, arranged to be disposed
of, released or threatened to be released at, on, from or under any of the
properties or facilities currently or formerly owned, leased or otherwise used
by any of the Company or the Company Subsidiaries, in violation of, or in a
manner or to a location that could reasonably be expected to give rise to
liability to any of the Company or the Company Subsidiaries under any
Environmental Laws; and (vi) none of the Company or the Company Subsidiaries
has assumed, contractually or by operation of law, any liability or obligation
under any Environmental Laws.
(b) "Environmental Laws" shall mean all federal, state or local
Laws, Permits or requirements (including consent decrees, judicial decisions
and administrative orders), currently or formerly in force, as amended or
reauthorized, pertaining to the protection, preservation, conservation or
regulation of the environment, or imposing requirements relating to public or
employee health and safety, including the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C.ss.9601 et seq., the
Resource Conservation and Recovery Act of 1976, 42 U.S.C.ss.6901 et seq., the
Emergency Planning and Community Right to Know Act, 42 U.S.C.ss.11001 et seq.,
the Clean Air Act, 42 U.S.C.ss.7401 et seq., the Federal Water Pollution
Control Act, 33 U.S.C.ss.1251 et seq., the Toxic Substances Control Act, 15
U.S.C.ss.2601 et seq., the Safe Drinking Water Act, 42 U.S.C.ss.300f et seq.,
and the Occupational Safety and Health Act, 29 U.S.C.ss.651 et seq.
(c) "Hazardous Materials" shall mean all hazardous, dangerous or
toxic substances, including petroleum and petroleum products (including crude
oil or any fraction thereof), asbestos and asbestos-containing materials,
polychlorinated biphenyls, and any other material that is regulated pursuant
to any Environmental Laws or that could result in liability under any
Environmental Laws.
SECTION 5.21. No Broker. Neither the Seller nor the Company is
committed to any liability for any brokers' or finders' fees or any
similar fees in connection with the transactions contemplated by this
Agreement.
SECTION 5.22. Disclosure. No representation or warranty of the
Seller hereunder, including any statement that is contained in the schedules
or exhibits to this Agreement or in any certificate to be delivered by the
Seller pursuant hereto and relates to any such representation or warranty,
contains any untrue statement of a material fact or omits to state any
material fact necessary to make the statements in such representation or
warranty not misleading.
SECTION 5.23. Product or Service Warranty. Each product
manufactured, sold, leased, delivered or installed, and each service provided,
by the Company or any Company Subsidiary has been in conformity with all
applicable contractual commitments and all express and implied warranties, and
none of the Company or the Company Subsidiaries has any Liability (and there
is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) for replacement or repair thereof or other damages in
connection therewith, subject only to (a) warranty and
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completion work performed and expensed in the ordinary course of business
consistent with past practice and (b) the reserve for product or service
warranty claims set forth on the face of the Most Recent Balance Sheet as
adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of the Company and the Company Subsidiaries.
Schedule 5.23(A) sets forth the standard terms and conditions of the
applicable guaranty, warranty and indemnity for products manufactured, sold,
leased, delivered or installed, or services provided, by the Company and the
Company Subsidiaries and, except as described on Schedule 5.23(B), no product
manufactured, sold, leased, delivered or installed or service provided by any
of the Company or the Company Subsidiaries is subject to any guaranty,
warranty or other indemnity beyond a period of two years from the date of
commencement of such guarantee, warranty or indemnity.
SECTION 5.24. Product or Service Liability. None of the Company or
the Company Subsidiaries has any Liability (and there is no reasonable basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving rise to any
Liability) arising out of any injury to individuals or property as a result of
the ownership, possession, installation or use of the products of any of the
Company or the Company Subsidiaries, the services provided by any of the
Company or the Company Subsidiaries or the operation of any of their
respective businesses.
SECTION 5.25. WIP Schedule. Each of the Company Subsidiaries has
delivered to the Buyer a work in progress schedule for each of its contracts
as of September 30, 2001 (each, a "WIP Schedule"). The WIP Schedules, in the
aggregate, fairly represent, in all material respects, the total estimated
contract costs (taking into account man-hours required, project duration, cost
of labor and materials, including any escalation thereof, subcontractor costs
and other elements of contract costs), earned revenues to date, estimated
gross profits (in dollar and in percentage) and actual gross profit recognized
to date (in dollars). Each WIP Schedule also includes with respect to
contracts as of September 30, 2001, the following information: job number, job
name, the contract price, the dollar amount of pending change orders, total
estimated contract price, actual billings to date, costs to date, total
estimated contract costs. Except as set forth on any such WIP Schedule or as
provided on the Financial Statements, neither the Seller, the Company nor any
Company Subsidiary has been notified of or is aware of any dispute over
amounts billed by the Company or any Company Subsidiary or of any intention to
hold back amounts in excess of contractually permitted holdbacks.
SECTION 5.26. Customers and Suppliers.
(a) Schedule 5.26(a) contains a complete and accurate list, as of
the date of this Agreement, of the 15 largest contracts (the "Customer
Contracts") above $50,000 of each of the Company Subsidiaries in terms of the
contracts outstanding as of the date hereof and, in the event more than one
Customer Contract is attributable to the same customer or customers with
respect to such Company Subsidiary, the next largest customer contracts until
Schedule 5.26(a) lists at least 15 different customers (each, a "Material
Customer") of such Company Subsidiary (together with the Customer Contracts,
the "Material Customer Contracts"). Except as set forth on Schedule 5.26(a),
there has not, to the Knowledge of the Seller, the Company or the applicable
Company Subsidiary, been any change in the business relationship of such
Company Subsidiary
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with any of the Material Customers of such Company Subsidiary and neither the
Seller, the Company nor such Company Subsidiary has received notice from any
Material Customer that such Material Customer intends to terminate or
materially change its business relationship with such Company Subsidiary.
(b) Schedule 5.26(b) contains a complete and accurate list, as of
December 31, 2001, of each requirement contract and exclusive supply contract
with any supplier of a Company Subsidiary and sets forth the terms of each
such contract, agreement or arrangement. Except as set forth on Schedule
5.26(b), there has not, to the Knowledge of the Seller, the Company or the
applicable Company Subsidiary, been any change in the business relationship of
such Company Subsidiary with any material supplier of such Company Subsidiary
and neither the Seller, the Company nor such Company Subsidiary has received
notice from any material supplier of such Company Subsidiary that such
supplier intends to terminate or materially change its business relationship
with such Company Subsidiary.
(c) Neither the Company nor any Company Subsidiary has knowingly
breached, so as to provide a benefit to the Company or such Company Subsidiary
that was not intended by the parties, any agreement with, or engaged in any
fraudulent conduct with respect to, any customer or supplier of such Company
Subsidiary.
ARTICLE VI
PRE-CLOSING COVENANTS
SECTION 6.1. Further Assurances. Except as set forth in Section 6.4,
each of the parties hereto hereby agrees to use its reasonable best efforts to
take all action and to do all things as are necessary, proper or advisable in
order to consummate and make effective the transactions contemplated hereby.
SECTION 6.2. Conduct of Business. Except as provided in this
Agreement, until the earlier of Closing or the termination of this Agreement
in accordance with its terms, the Seller shall cause each of the Company and
the Company Subsidiaries (a) to conduct its businesses in the ordinary course
consistent with past practice, (b) to use its reasonable best efforts to
preserve its properties, business and relationships with its suppliers,
customers and others having business relationships with it and (c) to keep
available the services of its employees. The Seller will advise, and shall
cause the Company and the Company Subsidiaries to advise, the Buyer promptly
in writing of any development having a Material Adverse Effect on the Seller,
the Company or any Company Subsidiary Group. Without limiting the generality
of the foregoing, until the earlier of Closing or the termination of this
Agreement in accordance with its terms, except as provided in this Agreement,
without the written consent of the Buyer, the Seller will cause the Company
and the Company Subsidiaries not to:
(a) declare, set aside or pay any dividend or other distribution
with respect to its capital stock (whether in cash or in kind) or redeem,
purchase or otherwise acquire any of its
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capital stock, other than the upstream cash dividends paid to the Seller by
the Company and the Company Subsidiaries in the ordinary course of business
consistent with past practice;
(b) (i) create, incur or assume any additional indebtedness for
borrowed money; (ii) mortgage, pledge or otherwise encumber, incur or suffer
to exist any Lien on any of its properties or assets; (iii) create or assume
any other indebtedness, except accounts payable incurred in the ordinary
course of business consistent with past practice; (iv) guarantee any
indebtedness of another Person or enter into any "keep well" or other
agreement to maintain any financial condition of another Person; or (iv) make
any loans, advances or capital contributions to, or investments in, any other
Person;
(c) (i) issue, sell or otherwise dispose of any shares of capital
stock of any class or grant any warrants, options or rights to subscribe for
any shares of capital stock or any class of securities convertible into or
exchangeable for, or which otherwise confer on the holder any right to
acquire, any shares of capital stock of any class, or redeem, repurchase or
otherwise acquire any such securities; or (ii) split, combine or reclassify
any shares of its capital stock;
(d) fail to comply, in all material respects, with all applicable
Laws and with all orders of any Governmental Authority;
(e) amend its certificate of incorporation, bylaws or other
organizational documents, or merge or consolidate with or into any other
corporation;
(f) sell, lease, license, transfer, assign or otherwise dispose of
any assets or rights of the Company or any Company Subsidiary, other than the
disposition of inventory and fixed assets in the ordinary course of business
consistent with past practice;
(g) enter into any new line of business or acquire any business
organization or division thereof;
(h) acquire or invest in, or agree to acquire or to invest in, any
assets or businesses, whether by merger, consolidation or other business
combinations or asset or stock purchases, except purchases of materials,
equipment and supplies in the ordinary course of business consistent with past
practice;
(i) forgive, cancel or compromise any indebtedness that is material
to the applicable Company Subsidiary owing to it or any claims which it may
have possessed, in each case outside the ordinary course of business
consistent with past practice, or waive any right of substantial value or
discharge or satisfy any material noncurrent liability;
(j) make or agree to make any new capital expenditures that are
material with respect to the applicable Company Subsidiary and in any event in
an amount not to exceed $50,000 with respect to each such Company Subsidiary,
except in accordance with the capital expenditure budget for the applicable
fiscal year of the Seller (which budget reflects an aggregate budgeted capital
expenditure amount previously disclosed in writing to the Buyer) and in the
ordinary course of business consistent with practice;
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(k) make any change in its accounting methods or practices;
(l) delay or postpone the payment of accounts payable and other
Liabilities outside the ordinary course of business consistent with past
practice;
(m) (i) increase the compensation or fringe benefits of any Company
Employee, except for wage increases to employees who are not executive
officers in the ordinary course of business consistent with past practice,
(ii) grant any severance or termination pay to any Company Employee, (iii)
loan or advance any money or other property to, or enter into any other
transaction with, any Company Employee or any other Affiliate of the Company,
any Company Subsidiary or the Seller, except for immaterial loans, advances
and transactions in the ordinary course of business consistent with past
practice, or (iv) establish, adopt, enter into, amend or terminate any Company
Plan or any plan, agreement, program, policy, trust, fund or other arrangement
that would be a Company Plan if it were in existence as of the date of this
Agreement, except for changes required by Law;
(n) fail to maintain, renew or assist the Company or any Company
Subsidiary in obtaining all necessary Permits required for their respective
businesses or any consents required to consummate the transactions
contemplated by this Agreement;
(o) enter into, terminate or amend any agreement of a type required
to be disclosed pursuant to Section 5.12 or enter into any new agreement of a
type required to be disclosed pursuant to Section 5.12;
(p) make or pledge to make any charitable or other capital
contribution in an aggregate amount not to exceed $50,000;
(q) settle any litigation providing for injunctive or other
equitable relief for all such settlements following the date of this
Agreement;
(r) enter into any joint venture, partnership or similar arrangement
for the conduct of business; or
(s) authorize, or agree or commit to do, any of the foregoing
actions.
SECTION 6.3. Access to Information. Until the earlier of Closing or
the termination of this Agreement in accordance with its terms, the Seller
will permit, and will cause each of the Company and the Company Subsidiaries
to permit, the Buyer and its authorized agents, officers and representatives
to have reasonable access to the properties, personnel, books, records,
contracts, information and documents of the Company and each Company
Subsidiary to conduct such examinations and investigations of the Company and
the Company Subsidiaries as the Buyer deems reasonably necessary; provided,
however, that such examinations and investigations (a) shall be conducted
during the normal business hours of the Company and the Company Subsidiaries
and (b) shall not unreasonably interfere with the operations and activities of
the Company or the Company Subsidiaries. The Company shall cooperate, and
shall cause each of the Company Subsidiaries to cooperate, in all reasonable
respects with the Buyer's examinations and investigations.
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SECTION 6.4. Notices and Consents. The Seller, at its expense, will,
and will cause each of the Company and the Company Subsidiaries to, give any
notices to third parties, and to use its or their reasonable best efforts to
obtain any third-party consents, that the Buyer may reasonably request in
connection with the matters referred to in Section 3.3 and Section 5.4;
provided, however, that with respect to the third-party consents identified on
Schedule 3.3(B) and Schedule 5.4(B), the Seller will, and will cause each of
the Company and the Company Subsidiaries to, take any and all actions to
obtain such consents. Each of the parties will (and the Seller will cause each
of the Company and the Company Subsidiaries to) give any notices to, make any
filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of, Governmental Authorities in
connection with the consummation of the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, each of the
parties (a) will file (and the Seller will cause each of the Company and the
Company Subsidiaries to file) any notification, report forms and related
material that it may be required to file with the Federal Trade Commission and
the Antitrust Division of the United States Department of Justice under the
HSR Act, (b) will use its reasonable best efforts to obtain (and the Seller
will cause each of the Company and the Company Subsidiaries to use its
reasonable best efforts to obtain) an early termination of the applicable
waiting period, and (c) will make (and the Seller will cause each of the
Company and the Company Subsidiaries to make) any further filings pursuant
thereto that may be necessary, proper, or advisable in connection therewith;
provided, however, that neither the Buyer nor any of its Affiliates shall be
obligated to agree (i) to divest any of their respective assets or any of the
assets being acquired under this Agreement or (ii) to any condition imposed by
any Governmental Authority that would adversely impact the respective
businesses of the Buyer or any of its Affiliates or that would otherwise
reduce the benefits to the Buyer or any of its Affiliates resulting from the
consummation of the transactions contemplated by this Agreement. The parties
shall consult with each other and keep the other parties informed of the
status of the matters referred to in this Section 6.4 and, except to the
extent confidential treatment has been given to any document filed with a
Governmental Authority pursuant to this Section 6.4, shall provide the other
party with copies of all such documents prepared on its behalf and all
correspondence relating thereto. Each party will bear its own costs and
expenses in connection with filings under the HSR Act.
SECTION 6.5. Publicity. All general notices, releases, statements
and communications to employees, suppliers, distributors and customers of the
Company and each Company Subsidiary and to the general public and the press
relating to the transactions covered by this Agreement shall be made only at
such times and in such manner as may be agreed upon in advance between the
Buyer and the Seller; provided, however, that any party hereto shall be
entitled to make a public announcement of the foregoing if, in the opinion of
its legal counsel, such announcement is required to comply with Laws or any
listing agreement with any national securities exchange or inter-dealer
quotation system and if it first gives prior written notice to the other
parties hereto of its intention to make such public announcement and such
other parties are provided a reasonable opportunity for review prior to making
such public announcement.
SECTION 6.6. Confidentiality. Notwithstanding any other provision of
this Agreement to the contrary, each party agrees that, unless and until the
transactions contemplated herein are consummated, it shall remain subject to
all of the terms and conditions of the Mutual Nondisclosure Agreement, dated
as of September 5, 2001 (the "Confidentiality Agreement"),
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between the Seller and EMCOR Group, Inc., the terms of which Confidentiality
Agreement are incorporated herein by reference; provided, however, that
notwithstanding the provisions of the Confidentiality Agreement and the
foregoing provisions of this Section 6.6, (a) each party shall keep
confidential in accordance with the terms of the Confidentiality Agreement all
Confidential Information that relates to the other party until the second
anniversary of the Closing Date and (b) the provisions of the Confidentiality
Agreement shall be waived as and to the extent necessary to permit public
announcements to the extent provided in Section 6.5. In the event that a party
is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, such party will notify the other party promptly of the request or
requirement so that such other party may seek an appropriate protective order
or waive compliance with the provisions of this Section 6.6. If, in the
absence of a protective order or the receipt of a waiver hereunder, the
disclosing party is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt,
then such party may disclose the Confidential Information to the tribunal;
provided, however, that the disclosing party shall use its reasonable best
efforts to obtain, at the request of the non-disclosing party, an order or
other assurance that confidential treatment will be accorded to such portion
of the Confidential Information required to be disclosed as the non-disclosing
party shall designate. The foregoing provisions shall not apply to any
Confidential Information that is generally available to the public immediately
prior to the time of disclosure.
SECTION 6.7. Taxes. Except as provided in this Agreement or as
required by Law, and except with regard to federal income Taxes and the net
income-based Taxes of any state that recognizes elections made under section
338(h)(10) of the Code (or an analogous provision of state law), without the
written consent of the Buyer, neither the Seller, the Company nor any of the
Company Subsidiaries shall make or change any Tax election, change any annual
Tax accounting period, change any method of Tax accounting, file any amended
Tax Return, enter into any closing agreement relating to any Tax, waive or
extend the statute of limitations in respect of Taxes, settle any Tax claim or
assessment or surrender any right to claim for a Tax refund, or change regular
independent accountants to the extent such action would have a Material
Adverse Effect on the Company or any Company Subsidiary Group. In addition,
neither any Affiliated Group (the common parent of which is the Seller) nor
any member of any such Affiliated Group may, except as required by Law,
undertake any of the foregoing actions without the written consent of the
Buyer to the extent such action would have a Material Adverse Effect on the
Company or any Company Subsidiary Group.
SECTION 6.8. Exclusivity. The Seller will not, and will not cause or
permit any of the Company or the Company Subsidiaries to, (a) solicit,
initiate, or encourage the submission of any proposal or offer from any Person
relating to the acquisition of any capital stock or other voting securities,
or any substantial portion of the assets of, any of the Company and the
Company Subsidiaries (including any acquisition structured as a merger,
consolidation, or share exchange) or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner, any effort or attempt by
any Person to do or seek any of the foregoing. The Seller will not vote its
Interests in favor of any such acquisition structured as a merger,
consolidation, or share exchange. The Seller will
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notify the Buyer immediately if any Person makes any proposal, offer, inquiry,
or contact with respect to any of the foregoing.
SECTION 6.9. Update. Each party hereto will promptly disclose to the
other in writing (a) any material information contained in its representations
and warranties and on the related schedules that is incomplete or no longer
correct or that, if known prior to the date of this Agreement, would have been
required to have been disclosed in such party's schedules to this Agreement
and (b) any casualty or other losses that are, individually or in the
aggregate, material to a Company Subsidiary Group arising between the date
hereof and the Closing Date regardless of whether such losses would have
resulted in a breach of a representation or warranty. None of the disclosure
pursuant to this Section 6.9 will be deemed to modify, amend or supplement the
representations and warranties of any party hereto or to prevent or cure any
misrepresentation, breach of warranty or breach of covenant.
SECTION 6.10. Financial Statements. Prior to the Closing Date, the
Seller (a) shall use its best efforts to cause to be delivered to the Buyer
the audited consolidated balance sheets of the Company as of the years ended
December 31, 2000 and December 31, 2001, and the related audited statements of
income, shareholders' equity and cash flows of the Company for the years then
ended, together with the notes to such financial statements and the reports
thereon of the Seller's accountants (collectively, the "Audited Financial
Statements"), prepared in accordance with GAAP applied on a basis consistent
with the Seller's past practice and prepared on the same basis and using the
same accounting principles, policies and practices used in preparing the
Audited Financial Statements and (b) shall use its reasonable best efforts to
obtain all consents and authorizations from its accountants necessary to
permit the Buyer to incorporate the Audited Financial Statements in preparing
any of the Buyer's filings under the Exchange Act.
SECTION 6.11. Termination of Affiliate Transactions; Release of
Obligations. (a) Except as may be identified for preservation on Schedule
5.18, the Seller shall terminate, or cause its Affiliates (including the
Company and the Company Subsidiaries) to terminate, all transactions among the
Company or any Company Subsidiary on the one hand and the Seller or any of its
Affiliates (excluding the Company or the Company Subsidiaries) on the other,
including without limitation transactions identified and not noted for
preservation on Schedule 5.18.
(b) At or prior to the Closing Date, the Seller shall release, or
cause its Affiliates (including any of its Subsidiaries not being transferred
to the Buyer pursuant to this Agreement (the "Retained Subsidiaries"), but
excluding the Company and the Company Subsidiaries) to release, the Company
and each of the Company Subsidiaries from any and all amounts owing by the
Company or any Company Subsidiary on the one hand to the Seller or any of its
Affiliates (excluding the Company or the Company Subsidiaries) on the other,
including without limitation those amounts owing identified on Schedule 5.18,
except with respect to amounts owed pursuant to a transaction that has been
identified for preservation on Schedule 5.18. Immediately following the
Closing Date, the Buyer shall release, or cause the Company or any Company
Subsidiary to release, the Seller and any of its Affiliates (including
Retained Subsidiaries) from any and all amounts owing by the Seller or any of
its Affiliates (including Retained Subsidiaries) on the one hand to the
Company or any Company Subsidiary on the other, including without limitation
those amounts owing identified on Schedule 5.18, except with respect
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to amounts owed pursuant to a transaction that has been identified for
preservation on Schedule 5.18.
SECTION 6.12. Insurance Authorizations and Confirmations. The Seller
shall have (a) provided written irrevocable authorization to its insurance
carriers and insurance claim administrators that, upon the request of the
Buyer and at the Buyer's expense, such insurance carriers and insurance claim
administrators may provide the Buyer with data tape loads containing insurance
claims data for each of the Company Subsidiaries and (b) obtained written
confirmation from Zurich American Insurance Company ("Zurich") that Zurich and
its Affiliates will not seek reimbursement from any of the Company or the
Company Subsidiaries for any deductible amounts under the Seller's insurance
policies with Zurich.
SECTION 6.13. Bonuses. Prior to the Closing Date, the Seller shall
have paid any bonuses payable to the president of each Company Subsidiary
pursuant to the Comfort Systems USA 2001 President's Bonus Plan in respect of
the fiscal year ended December 31, 2001.
SECTION 6.14. Certain Real Property Matters. (a) Prior to the
Closing Date, the Seller shall have purchased for book value as of December
31, 2001, the property described on Schedule 5.9(a) hereto of Border
Electrical Co., L.P. ("Border Electric"), located at 10855 Pellicano, El Paso,
Texas without recourse to the Buyer, Border Electric or any of their
Affiliates.
(b) Prior to the Closing Date, the Seller shall, at its own expense,
use its best efforts to cause Maximum Refrigeration & Air Conditioning Corp.
(formerly known as CS24 Acquisition Corp.), a Company Subsidiary and the
tenant under that certain lease agreement, dated June 30, 1998, by James
Olympios, as landlord, for the space located at 1310 Central Avenue, Hillside,
New Jersey ("Hillside lease"), described on Schedule 5.9(b) hereto, (i) to
terminate the Hillside lease with the consent of the landlord and (ii) to be
released from any and all obligations thereunder. In the event the Seller has
not obtained such termination, landlord's consent and release prior to the
Closing Date, at the Buyer's option, the Seller shall assume the obligations
under the Hillside lease or shall reduce the Purchase Price by $100,000. In
the event the Buyer has not exercised such option to reduce the Purchase
Price, the Seller further agrees to indemnify and hold the Buyer and its
Affiliates harmless for any and all liabilities or obligations, now existing
or which may subsequently arise, in connection with the tenant's use,
occupancy, possession and/or operation of business under the Hillside lease
and in connection with the Seller's obligations under this Section 6.14(b).
ARTICLE VII
POST-CLOSING COVENANTS
SECTION 7.1. General. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each party will take such further action (including the execution
and delivery of such further instruments and documents) as the other party
reasonably may request, all at the sole cost and expense of the requesting
party
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(unless the requesting party is entitled to indemnification therefor under
Article X). On the Closing Date, the Seller will deliver to the Buyer all
documents, books, records (including Tax records), agreements (including all
Predecessor Acquisition Agreements), and financial data of any sort relating to
the Company and the Company Subsidiaries; provided, however, that the Seller
may retain a copy of any such documents, books, records, agreements and
financial data.
SECTION 7.2. Non-Solicitation. During the period from and including
the Closing Date to but excluding the second anniversary of the Closing Date,
the Seller shall not, and shall not permit its Subsidiaries to, solicit for
employment or hire any employee of the Company or the Company Subsidiaries to
work for the Seller or any of its Subsidiaries; provided that this Section 7.2
shall not prohibit the Seller or any of its Subsidiaries from hiring an
individual who responds to general media advertisements not directed at the
employees of the Company and the Company Subsidiaries.
SECTION 7.3. Employee Benefits. (a) As of the Closing Date, the
Seller shall cause the account balance of each Company Employee, who is not a
highly compensated employee as defined in section 414(q) of the Code, in each
defined contribution plan that is not a Transferred Company Plan to become
fully vested.
(b) As of the Closing Date, the Seller shall transfer to the Buyer
the individual health care reimbursement and dependent care reimbursement
account balances under the Seller's Health Care Reimbursement Account and
Dependent Care Reimbursement Account plans (the "Reimbursement Account Plans")
for each participant who is a Company Employee. Upon the transfer of such
account balances, the Buyer shall assume responsibility for such account
balances and shall indemnify the Seller against all Liability with respect to
such account balances, but only to the extent such Liability arises from
actions taken by the Buyer after the transfer of such account balances. The
Buyer shall waive any limitations with respect to participation requirements
applicable to such Company Employees under the applicable provisions of the
EMCOR Group, Inc. Welfare Plan other than limitations that are already in
effect with respect to such Company Employees and their covered dependents and
that have not been satisfied as of the Closing Date under the Reimbursement
Account Plans. Notwithstanding the foregoing, nothing herein shall require the
Buyer to continue or maintain the EMCOR Group, Inc. Welfare Plan.
SECTION 7.4. WARN Act. The Buyer shall be responsible for, and shall
indemnify the Seller against, all expenses and Liability, including attorneys'
fees, if applicable, incurred under the WARN Act or any other Law requiring
notice prior to termination of employment with respect to any employee who
experiences a layoff, employment termination, reduction in hours or other
employment related loss after the Closing, but only to the extent it arises
solely from actions taken by the Buyer after the Closing. The Seller shall be
responsible for, and shall indemnify the Buyer against, all expenses and
Liability, including attorneys' fees, if applicable, incurred under the WARN
Act or any other Law requiring notice prior to termination of employment with
respect to any employee who experiences a layoff, employment termination,
reduction in hours or other employment related loss prior to the Closing.
SECTION 7.5. Litigation Support. In the event and for so long as any
party actively is contesting or defending against any Action in connection
with (i) any transaction
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contemplated under this Agreement or (ii) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date
involving any of the Company or the Company Subsidiaries, the other party will
cooperate with it and its counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all
at the sole cost and expense (including reimbursement for any wages or other
out-of-pocket expenses relating to providing such support) of the contesting
or defending party (unless the contesting or defending party is entitled to
indemnification therefor under Article X). Notwithstanding the provisions of
the preceding sentence, to the extent a claim under any Action is within the
deductible amount covered by insurance, the other party shall provide such
reasonable cooperation as such party would be obliged to provide to an
insurance company if such claim exceeded the deductible without any
reimbursement obligations by the party contesting or defending such Action so
long as such cooperation does not interfere unreasonably with the conduct of
such other party's business.
SECTION 7.6. Transition. Neither the Buyer nor the Seller will take
any action that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business associate of any of
the Company and the Company Subsidiaries from maintaining the same business
relationships with the Company and the Company Subsidiaries after the Closing
as it maintained with the Company and the Company Subsidiaries prior to the
Closing. The Seller will refer all customer inquiries relating to the
businesses of the Company and the Company Subsidiaries to the Buyer from and
after the Closing.
SECTION 7.7. Third Party Indemnification. To the extent that any
Company Subsidiary does not have direct contractual indemnification rights
against a third party under the Predecessor Acquisition Agreements, the Seller
will pursue any and all such indemnification rights on behalf of the Buyer at
the request of the Buyer.
SECTION 7.8. Assumed Obligations. Effective as of the Closing Date,
the Buyer hereby assumes all the Assumed Obligations.
SECTION 7.9. Minute Books. Promptly after the Closing Date, the
Seller shall deliver to the Buyer all the minute books of the Company and the
Company Subsidiaries and their predecessors, including all stock registers,
corporate seals and related materials and all other books and records
pertaining to the respective businesses of the Company Subsidiaries.
SECTION 7.10. Use of Name. The Seller hereby grants to the Buyer and
its Subsidiaries a non-exclusive license to use the names "Comfort Systems
USA, Inc.", "Comfort Systems" and any derivative or other names currently used
by any of the Company Subsidiaries that are not owned by such Company
Subsidiaries (the "Comfort Names") until the first anniversary of the Closing
Date, as or as part of any trade name, corporate name, domain name, trademark,
service mark, logo, design or other source indicator appearing on the assets,
products or materials owned or used by the Company Subsidiaries prior to the
Closing Date. The Buyer agrees to use its reasonable best efforts to remove,
redact, strike through or cover the Comfort Names from any such assets,
products or materials before the first anniversary of the Closing Date;
provided that Buyer and its Subsidiaries may continue to use the Comfort Names
in a
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neutral, non-trademark sense to communicate the historical affiliation of the
Company Subsidiaries.
SECTION 7.11. Vehicle Leases. The Seller at its own expense shall
transfer leases for each vehicle currently used by a Company Subsidiary and
not leased directly by such Company Subsidiary to such respective Company
Subsidiary. The Buyer shall use its commercially reasonable efforts to obtain
all credit approvals that are necessary in connection with the assignment of
any vehicle leases. To the extent any such lease cannot be transferred by its
terms, the Seller at its own expense shall purchase such vehicle and lease
such vehicle to the applicable Company Subsidiary on terms that are identical
to the original lease.
SECTION 7.12. Audit. From and after the Closing Date, the Seller
agrees that (a) it shall cooperate with, and provide reasonable access to, the
Buyer in the planning and execution of any audit of the Company and the
Company Subsidiaries that may be required after the Closing under the Exchange
Act, and (b) shall use its reasonable best efforts to obtain all consents and
authorizations from its accountants necessary to permit the Buyer to
incorporate such financial statements in preparing any of the Buyer's filings
under the Exchange Act.
SECTION 7.13. Tax Treatment of the Company. The Buyer will not take
any action (including the filing of an IRS Form 8832 on which the Buyer elects
to have the Company treated as a corporation) that could cause the Company to
be characterized for federal or state income tax purposes as a corporation
during any period (or portion thereof) ending on or prior to the Closing Date.
SECTION 7.14. Surety Bonds. The Buyer shall use commercially
reasonable efforts to replace those surety bonds listed on Schedule 7.14 or
any replacement bonds thereof for which the Seller is the indemnitor.
SECTION 7.15. National Servicing Organization Transition Issues.
With respect to Comfort Systems USA National Service Organization, Inc., a
Delaware corporation ("NSO"), the parties agree as follows:
(a) For a period of one year from the Closing Date, the Seller shall
cause the NSO to offer work for its national service account clients
("Clients"), whether such national account clients are currently or hereafter
become clients of the NSO, to the Company Subsidiaries in the same manner as
such work is currently offered to Subsidiaries of the Seller whether or not
such Subsidiaries are Company Subsidiaries. In the case of work for existing
Clients, the rates payable by the NSO to the Company Subsidiaries shall be no
less favorable to the Company Subsidiaries than those presently offered by the
NSO to the Subsidiaries of the Seller for comparable work and the terms of
payment shall be commercially reasonable and no less favorable to the Company
Subsidiaries than those presently offered by the NSO to third parties for
comparable work. In the case of work for new Clients or for different types of
work for existing Clients, the rates offered to be paid by the NSO to the
Company Subsidiaries and the terms of payment shall be fair and reasonable
under the circumstances, and in no event no less favorable to the Company
Subsidiaries than those offered from time to time by the NSO to the
Subsidiaries of the Seller or to unrelated parties of the Seller.
Notwithstanding the foregoing,
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nothing contained herein shall require (i) any Company Subsidiary to accept
NSO work offered to it by the NSO, (ii) the NSO to accept work assignments
from Clients with respect to work assignments on which the NSO reasonably
expects to lose money or (iii) the NSO to accept work assignments from any
Client which, in the NSO's reasonable judgment, the NSO believes may be unable
or unwilling to pay for such work on reasonably commercial terms. The Buyer
shall cause each Company Subsidiary offered a work assignment by the NSO to
respond promptly to the NSO whether such Company Subsidiary is willing to
accept such work assignment. The NSO shall not be required to offer work to
any Company Subsidiary where the rate to be received by the NSO from the
Client is less than the acceptable hourly rate specified by the Company
Subsidiary from time to time.
(b) With respect to work that has been or may be undertaken pursuant
to contracts or other arrangements between the NSO and Bank One for
performance within one year of the Closing Date in the states of Ohio or
Indiana or in the greater Detroit, Michigan metropolitan area, the Seller
shall cause such work assignments to be offered to Shambaugh & Son L.P. or its
direct or indirect subsidiaries (collectively, "S&S") at the rates that have
been previously quoted in writing by S&S to the NSO (the "Rates") and on terms
of payment that are fair and reasonable under the circumstances. However, the
Buyer acknowledges that it has been advised by the Seller that the terms for
performing work for Bank One have not yet been agreed to between the NSO and
Bank One, and, accordingly, under the circumstances the NSO may request that
the Rates be reduced. The NSO shall consult with S&S on, and keep S&S advised
on the status of, negotiations between the NSO and Bank One as to rates and
related matters. In the case of rates negotiated between Bank One and S&S that
would result in a reduction of the Rates, the NSO shall negotiate such
proposed reduction in good faith with S&S, and the Buyer shall cause S&S to
negotiate such reduction in good faith with the NSO. Nothing herein contained
shall require S&S to perform work for Bank One at such reduced rates or
require S&S to perform any type of work assignments for Bank One. The Buyer
shall cause S&S to respond promptly to the NSO as to whether S&S is willing to
accept any work assignment for Bank One offered to it by the NSO.
(c) The Buyer and the Seller acknowledge that the Company
Subsidiary, American Mechanical, Inc. ("AMC"), and the Seller have, in the
past, shared two employees with respect to NSO work, and that from and after
the Closing Date such two employees shall be employed solely by AMC. For a
period of two years after the Closing Date, the Seller shall not solicit such
employees to work for the Seller or any of its Affiliates so long as such
employees remain employees of AMC or seek to influence them to leave the
employ of AMC. The NSO shall continue to offer work to AMC as provided in
subsection (a) hereof. The Seller will make available to AMC any data in the
Seller's possession with respect to any customers that originated with AMC and
for which AMC currently performs, or within the last three years has
performed, work. The Seller shall assign to the Buyer all right, title and
interest in the name of "American Mechanical Network" ("AMN") or any variation
thereof, the telephone numbers for AMN and the clients of AMN set forth on
Schedule 7.15(c) ("AMN Clients"). In the event any AMN Client contacts the
Seller or any of its Affiliates for services after the Closing Date, the
Seller shall, and shall cause any such Affiliate to, refer such AMN Client to
AMC for such requested services. For
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the period of six months after the Closing Date, the Seller shall not, and
shall cause each of its Affiliates not to, solicit the business of any AMN
Client.
(d) For a period of six months after the Closing Date, the Company
Subsidiary, Kuempel Service, Inc. ("Kuempel") shall sublet to the NSO the
premises in Cincinnati, Ohio presently sublet to the NSO by Kuempel. Such
premises shall be sublet at the rate of $10,213.00 per month, on terms and
conditions contained in a draft of sublease initialed by the parties on the
date hereof and to be executed on the Closing Date.
SECTION 7.16. Continuation of Insurance Coverage. The Seller shall
maintain insurance policies covering each of the Company Subsidiaries for a
period of three years after the Closing Date with respect to professional
liability (errors and omissions), contractors' pollution and employment
practices on terms and conditions, including coverage and exclusions,
substantially similar to those in effect prior to the Closing. Within 30 days
after the end of each fiscal year, the Seller shall provide evidence to the
Buyer that such policies are in full force and effect. Within 30 days prior to
the renewal date of each such insurance policy, the Seller shall provide
evidence to the Buyer that such policies have been renewed and shall provide
copies of such renewed policies to the Buyer. The Seller agrees to provide
copies of any written notices or correspondence that the Seller may receive
from each insurance provider, including but not limited to notices or
correspondence relating to a failure by the Seller to comply with the
applicable terms of the insurance policies or relating to any actual or
anticipated changes or modifications to coverage, limits, terms, conditions,
exclusions and insureds. In the event the Seller fails to comply with the
provisions of this Section 7.16, including but not limited to a failure to
renew any insurance policy on or prior to its applicable renewal date, the
Seller shall promptly provide written notice of such failure to the Buyer.
SECTION 7.17. Bonding Company Reports. The Buyer will cause each
Company Subsidiary (i) to prepare and forward to Federal Insurance Company
(Chubb) ("Chubb") job status reports, at such intervals as each Company
Subsidiary has previously submitted such reports, indicating, in the case of
completed contracts, the final contract price and, in the case of uncompleted
contracts, the then currently estimated completion date and the then
percentage of the contract completed and such other information as Chubb may
reasonably request concerning bonded jobs and (ii) with respect to each job as
to which a performance bond has been issued by Chubb prior to the Closing
Date, upon completion of each such job, to use its best efforts to obtain
evidence of substantial completion of each such job from the party with whom
such Company Subsidiary contracted and forward such evidence to Chubb.
SECTION 7.18. Pre-Closing Financial Reporting. Within 40 days after
the end of the quarter during which the Closing occurs, the Buyer will cause
each Company Subsidiary to prepare and send to the Seller the financial
statements of such Company Subsidiary, in substantially the form heretofore
prepared by the Company Subsidiaries for the Seller, for the period January 1,
2002 to the Closing Date.
SECTION 7.19. Transfer of Domain Names. As soon as practicable, but
in any event no later than 45 days after the Closing Date, the Seller shall
transfer to each Company Subsidiary all right, title and interest in the
domain names that are owned by the Seller relating to
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the business of each respective Company Subsidiary, including all
registrations, reservations and applications relating thereto (including any
of the foregoing at new gTLD registrars and registries), except domain names
that incorporate the words, "Comfort", "Comfort Systems" or "CSUSA" and domain
names that are applicable to all the Retained Subsidiaries. The Seller agrees
not to apply to register or reserve any additional domain names that are the
same as, or similar to, such domain names at any time. At the reasonable
request of the Buyer, the Company or any Company Subsidiary, the Seller shall
take all actions and execute all documents necessary or desirable to
facilitate the above transfer.
ARTICLE VIII
TAX MATTERS
SECTION 8.1. Tax Indemnification.
(a) The Seller shall be responsible for, shall pay or cause to be
paid, and shall indemnify and hold harmless the Buyer from and against any and
all Losses for or in respect of each of the following, without duplication:
(i) any and all liability for Taxes of the Company and each of the Company
Subsidiaries for all taxable periods (or portions thereof) ending on or before
the Closing Date (a "Pre-Closing Tax Period") and with respect to any taxable
period that begins on or before and ends after the Closing Date (a "Straddle
Period"), for the portion thereof ending on the Closing Date; (ii) all
liability (as a result of Treasury Regulation ss. 1.1502-6 or any similar
provision of state, local or foreign law or as a transferee or successor by
contract or otherwise) imposed on the Company or any of the Company
Subsidiaries for the Taxes of the Seller or any other person or entity (other
than the Company or any of the Company Subsidiaries) which is or has been an
Affiliate of the Company or any of the Company Subsidiaries prior to the
Closing Date; (iii) any and all liability for Taxes attributable to the making
of Elections (as described under Section 8.9(a)) and any Taxes arising out of
any failure by the Seller to pay such Tax; (iv) all Taxes arising out of a
breach of any representation or warranty set forth in Section 5.17 other than
Section 5.17(b), (v) any payment to be made after the Closing Date under any
Tax sharing, Tax indemnity, Tax allocation or similar contract (whether or not
written and in each case covering the sharing of income or income-based taxes
reported on a combined, unitary or consolidated Tax Return) to which the
Company or any of the Company Subsidiaries was obligated or was a party on or
prior to the Closing Date, and (vi) all liability for reasonable legal fees
and other third-party expenses for any item attributable to any item in clause
(i) through (v) above.
(b) The Buyer shall be liable for and shall indemnify the Seller for
(i) all liability for Taxes of the Company and each of the Company
Subsidiaries for any taxable period or portion thereof beginning after the
Closing Date and, with respect to a Straddle Period, the portion of such
Straddle Period beginning after the Closing Date (the "Post-Closing Tax
Period"), (ii) any Taxes to the extent that such Taxes were paid with respect
to periods after the Closing by the Seller and not reflected as an asset on
the Most Recent Balance Sheet (in which case the amount of such Taxes shall be
subject to indemnification when such Taxes would otherwise have become due and
payable), (iii) any Taxes attributable to any failure by the Buyer to make any
Election and
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(iv) all liability for reasonable legal fees and other third-party
expenses for any item attributable to any item in clause (i), (ii) or (iii).
(c) Payment of any amount due under this Section 8.1 shall be made
within thirty days following written notice by the other party that payment of
such amounts to the appropriate taxing authority is due. In the case of a Tax
that is contested in accordance with the provisions of Section 8.2, payment of
Tax to the appropriate taxing authority will not be considered to be due
earlier than the date a final determination to such effect is made by the
appropriate taxing authority or a court.
(d) For purposes of this Section 8.1, whenever it is necessary to
determine the liability for Taxes of the Company and the Company Subsidiaries
for a portion of a Straddle Period:
(i) in the case of any Taxes other than Taxes based upon or
related to income or receipts, such Tax shall be deemed to be the
amount of such Tax for the entire Taxable period multiplied by a
fraction the numerator of which is the number of days during the
Straddle Period that are in the Pre-Closing Tax Period or
Post-Closing Tax Period, as applicable, and the denominator of which
is the number of days in the entire Straddle Period; and
(ii) all other Taxes for the Pre-Closing Period or Post-Closing
Period, as the case may be, shall be determined by assuming that for
purposes of the Pre-Closing Period, the Company and the Company
Subsidiaries had a taxable year or period that ended at the close of
the Closing Date and for purposes of the Post-Closing Period, the
Company and the Company Subsidiaries had a taxable year or period
that began at the beginning of the day after the Closing Date.
SECTION 8.2. Procedures Relating to Indemnification of Tax Claims.
(a) If an audit, investigation or similar proceeding with respect to
Tax matters shall be commenced, or a claim shall be made, by any taxing
authority, which might result in an indemnity payment pursuant to Section 8.1,
the party receiving notice of such audit, investigation, similar proceeding or
claim shall promptly notify the other party in writing of such audit,
investigation, similar proceeding or claim (a "Tax Proceeding"); provided,
however, that failure to give such notice shall not affect the indemnification
obligations under Section 8.1 unless such failure materially prejudices the
indemnifying party.
(b) With respect to any Tax Proceeding which might result in an
indemnity payment pursuant to Section 8.1(a), the Seller shall have the right
to control all proceedings taken in connection with such Tax Proceeding
(including selection of counsel) and, without limiting the foregoing, may with
the consent of the other party (which consent shall not be unreasonably
withheld) pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with any taxing authority with respect thereto, and
may, in its reasonable discretion, either pay the Tax claimed and sue for a
refund where applicable Law permits such refund suits or contest the Tax
Proceeding in any permissible manner. The Buyer shall be entitled to
participate
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in all proceedings with respect to any such Tax Proceeding (at its expense)
and to employ counsel of its choice for such purpose.
(c) With respect to any Tax Proceeding which might result in an
indemnity payment pursuant to Section 8.1(b), the Buyer shall have the right
to control all proceedings taken in connection with such Tax Proceeding
(including selection of counsel) and, without limiting the foregoing, may with
the consent of the other party (which consent shall not be unreasonably
withheld) pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with any taxing authority with respect thereto, and
may, in its reasonable discretion, either pay the Tax claimed and sue for a
refund where applicable Law permits such refund suits or contest the Tax
Proceeding in any permissible manner. The Seller shall be entitled to
participate in all proceedings with respect to any such Tax Proceeding (at its
expense) and to employ counsel of its choice for such purpose.
(d) The Seller and the Buyer shall each provide the other (and, in
the case of the Buyer, shall cause the Company or Company Subsidiaries, as
appropriate, to provide the Seller) with copies of all material documents with
respect to the aforementioned Tax Proceedings. Notwithstanding the foregoing,
the Buyer and the Seller shall jointly control all proceedings taken in
connection with (i) any Tax Proceeding relating solely to Taxes for a Straddle
Period and (ii) any Tax Proceeding which might result in both an indemnity
payment pursuant to Section 8.1(a) and an indemnity payment pursuant to
Section 8.1(b). In no case shall any party settle or otherwise compromise any
Tax Proceeding without the other party's prior written consent (which consent
may not be unreasonably withheld).
(e) The Buyer, the Company and the Company Subsidiaries, on the one
hand, and the Seller, on the other hand, shall cooperate with each other in
contesting any Tax Proceeding, which cooperation shall include the retention
and (upon the other party's request) the provision of records and information
which are reasonably relevant to such Tax Proceeding, and making employees
available on a mutually convenient basis to provide additional information or
explanation of any material provided hereunder or to testify at proceedings
relating to such Tax Proceeding and, in the case of the Buyer, causing the
Company and the Company Subsidiaries to so cooperate.
SECTION 8.3. Adjustment to Purchase Price. The parties agree to
treat all payments made under this Article VIII and under any other indemnity
provisions contained in this Agreement as adjustments to the Purchase Price
for Tax purposes, unless otherwise required by Law.
SECTION 8.4. Filing of Tax Returns.
(a) Tax Periods Ending on or Before the Closing Date. The Seller
shall prepare or cause to be prepared, and the Buyer shall timely file or
cause to be timely filed, all Tax Returns (including all amended Tax Returns)
that are required to be filed for or with respect to the Company and each
Company Subsidiary for all taxable periods ending on or prior to the Closing
Date which are filed after the Closing Date other than income Tax Returns with
respect to periods for which a consolidated, unitary or combined income Tax
Return of the Seller will
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include the operations of the Company and the Company Subsidiaries. Such
Tax Returns shall be prepared in a manner consistent with prior practice,
except to the extent required by GAAP or applicable Law. The Seller will allow
the Buyer an opportunity to review and comment upon any such Tax Returns
(including any amended returns). The Seller shall reimburse within fifteen
days after payment by Buyer or the Company or the Company Subsidiaries of such
Taxes. Such Tax Returns shall be prepared in a manner consistent with prior
practice except to the extent required by GAAP or applicable Law.
(b) Returns for Periods through the Closing Date. The Seller will
include the income of the Company and the Company Subsidiaries (including any
deferred income triggered into income by Treasury Regulation ss. 1.1502-13 and
ss. 1.1502-14 and any income, gain, loss, deduction or other tax item
resulting from the Elections (as described in Section 8.9(a)) on the Seller's
consolidated unitary, combined or other income Tax Returns for all periods
through the Closing Date and pay any income tax attributable to such income.
The Buyer shall cause the Company and the Company Subsidiaries to furnish Tax
information to the Seller for inclusion in the Seller's consolidated unitary,
combined or other income Tax Return for the period which includes the Closing
Date in accordance with the past custom and practice of the Company and the
Company Subsidiaries. The Seller will allow the Buyer an opportunity to review
and comment upon such Tax Returns (including any amended returns) to the
extent that they relate to the Company and the Company Subsidiaries. The
Seller will take no position on such returns that relate to the Company and
the Company Subsidiaries that is inconsistent with prior practice and that
would adversely affect the Company and the Company Subsidiaries after the
Closing Date. The income of the Company and the Subsidiaries will be
apportioned to the period up to and including the Closing Date and the period
after the Closing Date by closing the books of the Company and the Company
Subsidiaries as of the end of the Closing Date.
(c) Tax Periods Beginning Before and Ending After the Closing Date.
The Buyer shall prepare or cause to be prepared and file or cause to be filed
any Tax Returns for or with respect to the Company and each Company Subsidiary
that are required to be filed for Taxable Periods which are Straddle Periods.
Such Tax Returns shall be prepared in a manner consistent with prior practice
except to the extent required by GAAP or by applicable Law. The Buyer will
allow the Seller an opportunity to review and comment upon any such Straddle
Period Tax Return (including any amended return). If the Seller objects to the
treatment of any item on any such Tax Return or to any amount owed to or by
the Seller with respect to any Straddle Period Taxes, the Seller shall, as
promptly as practicable, notify the Buyer in writing that it so objects,
specifying with particularity any such item and stating the specific factual
or legal basis for any such objection. If a notice of objection shall be duly
delivered, the Seller and the Buyer shall negotiate in good faith to resolve
their disagreement. If the Seller and the Buyer have not resolved their
disagreement within five Business Days after receipt by Buyer of such notice,
they shall refer the matter for resolution to a mutually acceptable nationally
recognized independent accounting firm, the decision of which shall be binding
on the Seller and the Buyer. The costs, fees and expenses of the accounting
firm shall be borne by (i) the Seller if the net resolution of the disputed
items favors the Buyer, (ii) the Buyer if the net resolution of the disputed
items favors the Seller and (iii) otherwise equally by the Buyer and the
Seller. The Seller shall pay to the Buyer within 15 days after the date on
which Taxes are paid with respect to such periods an amount equal to the
portion of such Taxes which relates to the Pre-Closing Tax Period, including
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any income or gain resulting from the Elections; provided, however, that if
the Seller has delivered a notice of objection in respect of any item on the
Tax Return or to any amount owed to or by the Seller with respect to any
Straddle Period Taxes, and such disagreement is not resolved prior to the
filing of the Tax Return, the Seller shall not be required to pay any amount
to the Buyer in respect of such disputed item until the dispute has been
resolved either by agreement of the parties or by the above-described
independent accounting firm. For purposes of this Section 8.4(c), the portion
of any such Tax that relates to the Pre-Closing Tax Period shall be determined
as prescribed in Section 8.1(d).
SECTION 8.5. Cooperation on Tax Matters. The Seller, the Company,
the Company Subsidiaries and the Buyer shall reasonably cooperate, and shall
cause their respective Affiliates, officers, employees, agents, auditors and
other representatives reasonably to cooperate, in preparing and filing all Tax
Returns, including providing powers of attorney, maintaining and making
available to each other all records necessary in connection with Taxes and in
resolving all disputes and audits with respect to all taxable periods relating
to Taxes. Such cooperation shall include the retention and (upon the other
party's request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The Buyer and
the Seller agree to retain (and, in the case of the Buyer, to cause the
Company and each Company Subsidiary to retain) all books and records with
respect to Tax matters pertinent to the Company and the Company Subsidiaries
relating to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by the
Buyer or the Seller, any extensions thereof) of the respective taxable
periods.
SECTION 8.6. Certain Taxes and Fees. All transfer, documentary,
sales, use, registration and other such Taxes (including all applicable real
estate transfer or gains Taxes) and related fees (including any penalties,
interest and additions to Tax) incurred in connection with the transactions
contemplated by this Agreement, shall be paid by the Seller when due, and the
Seller will, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such Taxes, fees and charges, and, if
required by applicable law, the Buyer will, and will cause its Affiliates to,
join in the execution of any such Tax Returns and other documentation.
SECTION 8.7. Carrybacks. The Seller will immediately pay to the
Buyer the value of any Tax refund (or reduction in Tax liability) resulting
from a carryback of a post-acquisition Tax attribute of any of the Company or
the Company Subsidiaries into the Seller's combined or unitary Tax Return,
when such refund or reduction is realized by the Seller's group. The Seller
will cooperate with the Company and the Company Subsidiaries in obtaining such
refunds (or reduction in Tax liability), including through the filing of
amended Tax Returns or refund claims. The Buyer agrees to indemnify the Seller
for any Taxes resulting from the disallowance of such post-acquisition Tax
attribute on audit or otherwise. In computing the value of any Tax refund (or
reduction in Tax liability) resulting from a carryback of a post-acquisition
Tax attribute of any of the Company or the Company Subsidiaries, the Seller
and its Subsidiaries shall be deemed to recognize all other items of gross
income, gain, loss, deduction and credit before recognizing any
post-acquisition Tax attribute carried back. Notwithstanding the foregoing,
the Buyer shall use its best efforts to waive all carryback periods.
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SECTION 8.8. Refunds and Credits. Any Tax refund and any amounts
credited against Tax that are actually realized by or with respect to the
Company or a Company Subsidiary that relate to Tax periods prior to Closing
shall be for the account of the Seller, and the Buyer shall pay over to the
Seller the net amount of any such refund or credit within thirty days after
receipt of such refund or utilization of such credit.
SECTION 8.9. Allocation of Purchase Price; Section 338(h)(10)
Elections.
(a) With respect to the Seller's sale of the Interests to the Buyer
and, indirectly, the sale of all of the outstanding equity interests (the
"Shares") of each of the Company Subsidiaries to the Buyer, the Seller and the
Buyer shall jointly make in respect of each Company Subsidiary a timely and
irrevocable election under section 338(h)(10) of the Code (and any
corresponding election under state and local Tax law) (collectively, the
"Elections"). The Seller shall reasonably cooperate with the Buyer to take all
actions necessary and appropriate (including, timely preparing and filing such
additional forms, Tax Returns, elections, schedules and other documents
separately or jointly with the Buyer) as may be required to effect and
preserve timely Elections in accordance with section 338(h)(10) of the Code,
and the regulations promulgated thereunder, and any corresponding provisions
of state, local or foreign Tax Law. The Seller, the Buyer, the Company and the
Company Subsidiaries shall report the purchase by the Buyer of the Shares in a
manner consistent with the Elections and shall take no position inconsistent
therewith in any Tax Return or Tax audit or otherwise.
(b) To the extent possible, the Buyer, the Seller, the Company and
the Company Subsidiaries shall execute at the Closing any and all forms
necessary to effectuate the Elections (including IRS Form 8023 and, as
applicable, appropriate forms required pursuant to state or local Tax Law)
with respect to the purchase and sale of the Shares. In the event, however,
any such form or forms are not executed at the Closing, the Buyer, the Seller,
the Company and the Company Subsidiaries shall prepare and complete each such
form no later than 15 days prior to the date such form is required to be
filed. The Buyer, the Seller, the Company and the Company Subsidiaries shall
each cause the forms to be duly executed by an authorized person for the
Buyer, the Seller, the Company and the Company Subsidiaries in each case, and
shall duly and timely file the forms in accordance with applicable tax laws
and the terms of this Agreement.
(c) As soon as practicable after the Closing Date, the Seller and
the Buyer shall agree upon (i) the allocation of the Purchase Price among the
assets of the Company (the "Purchase Price Allocation") and (ii) the fair
market value of the assets of each Company Subsidiary and the allocation of
the deemed sales price of the assets of each such Company Subsidiary resulting
from the Elections (as required pursuant to section 338(h)(10) of the Code and
the regulations promulgated thereunder and any comparable provisions of state
or local law, as appropriate) among such assets (the "Section 338 Allocation"
and, collectively with the Purchase Price Allocation, the "Allocations"). Such
Allocations shall be set forth on a schedule to be prepared jointly by the
Buyer and the Seller within 135 days of the Closing. If during such period the
Buyer and the Seller cannot agree on such Allocations, such dispute shall be
submitted to a mutually acceptable nationally recognized accounting firm. If
an Allocation is submitted to such accounting firm, it shall be adjusted to
reflect all agreed upon changes and the resolution of
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all disputed items by the accounting firm (such allocation as adjusted either
as a result of negotiation between the parties or as a result of the
accounting firm's decision). The Buyer, the Seller and the Company
Subsidiaries (A) shall be bound by, (B) shall file all Tax Returns on a basis
consistent with, and (C) shall take no position in any Tax Return or Tax audit
or otherwise which is inconsistent with the Allocations.
SECTION 8.10. Tax Sharing Agreements. Any tax sharing agreement
between the Seller and any of the Company and the Company Subsidiaries is
terminated as of the Closing Date and will have no further effect for any
taxable year (whether the current year, a future year, or a past year).
ARTICLE IX
CONDITIONS PRECEDENT TO CONSUMMATION OF THE CLOSING
SECTION 9.1. Conditions Precedent to Each Party's Obligations to
Close. The respective obligations of each party to consummate the transactions
contemplated by this Agreement on the Closing Date are subject to the
satisfaction or waiver at or prior to the Closing of the following conditions
precedent:
(a) no Action shall be pending or threatened by any United States or
state Governmental Authority, and no United States or state Governmental
Authority shall have issued any injunction, judgment or order, which shall
remain in effect, that would (i) prevent consummation of the sale of the
Interests, (ii) prohibit or limit in any material respect Buyer's ability to
exercise ownership of the Interests or (iii) materially adversely affect
Buyer's right to own the assets or operate the business of the Company and the
Company Subsidiaries; provided, however, that the parties hereto shall use
their reasonable best efforts to have any such injunction, judgment or order
vacated or reversed;
(b) all applicable waiting periods under the HSR Act shall have
expired or been terminated, and neither the Federal Trade Commission nor the
U.S. Department of Justice shall have instituted, or threatened to institute,
either before or after the expiration of such waiting period, a proceeding
concerning this Agreement or the consummation of the transactions contemplated
hereby; and
(c) the parties, the Company and the Company Subsidiaries shall have
received all other authorizations, consents and approvals of Governmental
Authorities referred to in Section 3.3, Section 4.3 and Section 5.4.
SECTION 9.2. Conditions Precedent to Obligations of the Buyer. The
obligation of the Buyer to consummate the transactions contemplated by this
Agreement on the Closing Date is subject to the satisfaction or waiver at or
prior to the Closing of the following conditions precedent:
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(a) there shall have occurred no Material Adverse Change with
respect to the Company or any Company Subsidiary Group;
(b) the representations and warranties of the Seller contained in
Article III and Article V that are qualified by materiality shall be true and
correct in all respects at and as of the Closing Date with the same force and
effect as if those representations and warranties had been made at and as of
such time (except to the extent such representations or warranties speak as of
an earlier date, in which case such representations and warranties shall be
true and correct in all respects as of such earlier date), and the
representations and warranties of the Seller contained in Article III and
Article V that are not qualified by materiality shall be true and correct in
all material respects at and as of the Closing Date with the same force and
effect as if those representations and warranties had been made at and as of
such time (except to the extent such representations or warranties speak as of
an earlier date, in which case such representations and warranties shall be
true and correct in all material respects as of such earlier date);
(c) the Seller shall have performed, in all material respects, all
obligations and complied with all covenants contained herein that are
necessary to be performed or complied with by it at or before Closing;
(d) the Buyer shall have received certificates from authorized
officers of the Seller certifying the satisfaction of all the conditions set
forth in Section 9.1 and of the conditions set forth in clauses (a), (b) and
(c) of this Section 9.2;
(e) the Buyer shall have received certificates from authorized
officers of the Seller certifying that the Seller, the Company and the Company
Subsidiaries have received all other authorizations, consents and approvals of
the third parties identified on Schedule 3.3(B) and Schedule 5.4(B);
(f) the Buyer shall have received the resignations (effective as of
the Closing Date) of all of the directors and all the officers of the Company
and the Company Subsidiaries who are also officers of the Seller or any of its
Subsidiaries (other than the Company or a Company Subsidiary);
(g) the Buyer shall have received true and correct copies of the
promissory notes listed on Schedule 2.2;
(h) the Buyer shall have received from Ropes & Gray, counsel to the
Seller, an opinion in form and substance reasonably satisfactory to the Buyer,
addressed to the Buyer, and dated as of the Closing Date;
(i) the Buyer shall have received from Richards, Layton & Finger,
special Delaware counsel to the Seller, an opinion in form and substance
reasonably satisfactory to the Buyer, addressed to the Buyer, and dated as of
the Closing Date;
(j) the Buyer shall have received from William George, general
counsel to the Seller, an opinion in form and substance reasonably
satisfactory to the Buyer, addressed to the Buyer, and dated as of the Closing
Date;
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(k) the Buyer shall have received from the Seller an executed
Transition Services Agreement dated as of the Closing Date;
(l) the Buyer shall have received from the Seller a certificate in
form and substance reasonably satisfactory to the Buyer, duly executed and
acknowledged, certifying that the transaction contemplated by this agreement
is exempt from withholding under section 1445 of the Code;
(m) the Buyer shall have received from the Seller evidence of (i)
the release of liens granted by the Seller and its Subsidiaries to the lenders
under the Seller's senior credit facility in respect of the capital stock or
other equity interests and assets of the Company and the Company Subsidiaries
and (ii) the termination of the security interests listed on Schedule 9.2(m);
(n) the Buyer shall have received from the Seller evidence of the
terminations and releases (effective as of the Closing Date) described in
Section 6.11;
(o) the Buyer shall have received evidence of the written
authorizations and confirmations described in Section 6.12; and
(p) all actions, corporate or other, to be taken by the Seller in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to the Buyer and the Buyer's counsel.
SECTION 9.3. Conditions Precedent to Obligations of the Seller. The
obligation of the Seller to consummate the transactions contemplated by this
Agreement on the Closing Date is subject to the satisfaction or waiver at or
prior to the Closing of the following conditions precedent:
(a) the representations and warranties of the Buyer contained in
Article IV that are qualified by materiality shall be true and correct in all
respects at and as of the Closing Date with the same force and effect as if
those representations and warranties had been made at and as of such time
(except to the extent such representations or warranties speak as of an
earlier date, in which case such representations and warranties shall be true
and correct in all respects as of such earlier date), and the representations
and warranties of the Buyer contained in Article IV that are not qualified by
materiality shall be true and correct in all respects at and as of the Closing
Date with the same force and effect as if those representations and warranties
had been made at and as of such time (except to the extent such
representations or warranties speak as of an earlier date, in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date);
(b) the Buyer shall have performed, in all material respects, all
obligations and complied with all covenants contemplated herein that are
necessary to be performed or complied with by it at or before Closing;
(c) the Seller shall have received a certificate from an authorized
officer of Buyer certifying the satisfaction of the conditions set forth in
Section 9.1 and of the conditions set forth in clauses (a) and (b) of this
Section 9.3; and
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(d) all actions, corporate or other, to be taken by the Buyer in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to the Seller and its counsel.
ARTICLE X
REMEDIES FOR BREACH
SECTION 10.1. Limitation on and Survival of Representations and
Warranties.
(a) All representations and warranties contained in this Agreement,
or in any agreements or instruments executed in connection herewith or
delivered pursuant hereto, shall survive the Closing for a period of two years
beginning on the Closing Date, but not longer; provided, however, that the
representations and warranties contained in Section 5.15 (Employee Benefits),
Section 5.17 (Taxes) and Section 5.20 (Environmental Matters) shall survive
until the expiration of the applicable statute of limitations for the matter
giving rise to a claim hereunder and the representation and warranties
contained in Section 3.1 (Organization of Seller; Ownership of the Interests),
Section 5.1 (Organization; Capitalization of the Company) and Section 5.3
(Subsidiaries) shall survive indefinitely. In order to seek a remedy pursuant
to this Article X, in respect of a breach of representation or warranty, the
Person seeking such remedy shall, within the prescribed period, give written
notice to the party against whom indemnification is sought, which notice shall
describe in reasonable detail such breach or claim. Any claim for
indemnification for which notice has been given within the prescribed period
may be prosecuted to conclusion notwithstanding the subsequent expiration of
such period.
(b) All covenants and agreements of the parties shall continue in
full force and effect in accordance with their respective terms and thereafter
until the expiration of the applicable statute of limitations.
SECTION 10.2. Indemnification by Seller.
(a) Subject to the provisions of Article VIII and the limitations
set forth in Section 10.1 and Section 10.4, the Seller hereby agrees to
indemnify and hold the Buyer and its directors, officers, employees,
stockholders and Affiliates (collectively, the "Buyer Indemnified Parties")
harmless from and against any and all Losses imposed upon or incurred by the
Buyer Indemnified Party (any of such Losses by Buyer Indemnified Parties, a
"Buyer Claim") as a result of or in connection with any of the following:
(i) any inaccuracy or breach of a representation or warranty as
of the date hereof or as of the Closing Date (except with respect to
Section 5.17 which is provided for pursuant to Section 8.1(a)) made
by the Seller in this Agreement or in any certificate delivered
pursuant hereto; provided, however, that for purposes of this
provision, with respect to any representation or warranty that is
qualified by materiality, Material Adverse Effect or knowledge, a
breach of such representation
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or warranty shall be deemed to occur if there would have been a
breach of such representation or warranty absent such qualification;
(ii) the breach, or default in the performance by the Seller,
of any covenant, agreement or obligation to be performed by the
Seller pursuant to this Agreement or the Transition Services
Agreement;
(iii) any Losses resulting from any third party claims or
Actions or any other conditions (including, but not limited to,
taxes, environmental conditions, litigation, product and service
warranty and liability matters and employment-related matters) to
the extent such Losses relate to an act, event or condition
occurring or existing at or prior to the Closing Date; provided,
however, that any Liability that is covered by the Purchase Price
adjustment provisions of Section 2.5 shall not give rise to any
indemnification obligation under this Section 10.2(a)(iii) to the
extent such Liability is covered by the adjustment provisions of
Section 2.5; provided, further, that indemnification rights under
this Section 10.2(a)(iii) shall survive the Closing for a period of
two years beginning on the Closing Date, but not longer, except with
respect to indemnification rights for any third party claims or
Actions or environmental conditions which shall survive
indefinitely;
(iv) any Losses resulting from violations of plumbing licensing
requirements;
(v) (A) any Losses in connection with any Company Plan that is
not a Transferred Company Plan, (B) any Losses in connection with a
Transferred Company Plan to the extent such Losses arise from an
act, event or condition occurring or existing at or prior to the
Closing Date, except for employment agreements with respect to which
Losses arise from an act, event or condition occurring after the
Closing Date (C) any Losses resulting from the failure to file GUST
amendments that were required to be filed on or before February 28,
2002 and (D) any Losses resulting from the participation in
employment benefit plans pursuant to a collective bargaining
agreement or any other agreement with any labor union or association
by employees who are not members of any labor union, association or
other representative of employees during periods at or prior to the
Closing Date;
(vi) any Losses (A) resulting from third party claims or
Actions that would have been covered by any type of insurance to the
extent such claim or Action is not covered as a result of denials of
coverage or inadequate insurance coverage, (B) resulting from
deductibles, retrospectively rated insurance policies, self-insured
retentions, risk-retention groups or other similar arrangements or
(C) resulting from claims incurred on or prior to the Closing Date
(whether or not reported) by Company Employees and not paid on or
prior to the Closing Date with respect to any life insurance,
health, medical, dental, disability or other similar welfare plan,
agreement, program, policy or other arrangement;
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(vii) any Losses resulting from the failure to hold a
sufficient, valid and enforceable license to use any Intellectual
Property used in the business of any Company Subsidiary as currently
conducted or that has been used in such business at any time prior
to the Closing, including but not limited to any remediation costs,
which, to the extent that is commercially reasonable, shall be the
cost of obtaining a license of the currently available version of
such Intellectual Property; and
(viii) any Losses relating to the failure to collect in the
aggregate the full amount of the Receivables outstanding as of the
Closing Date (other than the Scheduled Amounts) (net of the
allowance for doubtful accounts set forth on the Most Recent Balance
Sheet) within 14 months after the Closing Date (provided that each
Company Subsidiary has used its commercially reasonable efforts to
collect such Receivables). Notwithstanding the foregoing, the first
parenthetical to this subparagraph (viii) shall not apply to any
amount set forth on Schedule 5.19(a) to the extent (A) such amount
has been included as accounts receivable in the calculation of
assets for determining Closing Net Asset Value and (B) there has not
been included as billings in excess of costs in respect of such
amount an equal or greater number in the calculation of liabilities
for determining Closing Net Asset Value.
(b) Promptly after receipt by a Buyer Indemnified Party of
notice of the commencement of an Action or other event giving rise
to a Buyer Claim with respect to which such Buyer Indemnified Party
is entitled to indemnification under this Section 10.2, such Buyer
Indemnified Party shall notify (the "Buyer Claim Notice") the Seller
in writing of the commencement of such Action or the assertion of
such Buyer Claim; provided, however, that if such Buyer Claim Notice
is given within the period prescribed in Section 10.1, then the
failure to give such Buyer Claim Notice promptly shall not affect
the right to indemnification hereunder except to the extent of
actual prejudice to the Seller. The Seller shall have the option,
and shall notify such Buyer Indemnified Party in writing within 20
Business Days after the date of the Buyer Claim Notice of its
election, either (i) to participate (at the expense of the Seller)
in the defense of such Action or Buyer Claim (in which case the
defense of such Action or Buyer Claim shall be controlled by such
Buyer Indemnified Party) or (ii) to take charge of and control the
defense of such Action or Buyer Claim (at the expense of the Seller)
with counsel reasonably acceptable to such Buyer Indemnified Party;
provided, however, that the Seller shall not be entitled to control
any Buyer Claim already covered by insurance or relating to
construction, warranty or service disputes, except for a contractual
dispute with a customer with whom a Company Subsidiary does not have
a material ongoing relationship. Any such construction, warranty or
service disputes shall be handled by the Buyer and its counsel at
the expense of the Seller; provided, however, that the Buyer and its
counsel shall act in a manner consistent with a duty to protect the
Seller's interests as if they were the Buyer's own interests and
shall keep the Seller reasonably informed of the status of any such
disputes. If the Seller fails to notify such Buyer Indemnified Party
of its election within the applicable response period, then the
Seller shall be deemed to have elected not to control the defense of
such Action or Buyer Claim. If the Seller elects to assume the
defense of such Action or Buyer Claim, the Buyer Indemnified Party
shall have the right to employ separate counsel and participate in
the defense of such Action or Buyer Claim, but the fees and expenses
of such counsel shall be at the expense of such Buyer
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Indemnified Party unless (A) the named parties in such Action or
Buyer Claim (including any impleaded parties) include both such
Buyer Indemnified Party and the Seller, and such Buyer Indemnified
Party shall have been reasonably advised by such counsel that there
may be one or more legal defenses available to it that are different
from or additional to those available to the Seller, (B) such Buyer
Indemnified Party has been reasonably advised by counsel that
representation by the Seller is inappropriate in light of an actual
or potential conflict of interest between them, or (C) such Buyer
Indemnified Party has reasonably determined that Losses that may be
incurred may exceed either individually, or when aggregated with
other Buyer Claims, the Maximum Indemnity Amount (in which case, the
Seller shall not have the right to control the defense of such
Action or Buyer Claim on behalf of such Buyer Indemnified Party, it
being understood, however, that the Seller shall not, in connection
with such Action or Buyer Claim, be liable for the fees and expenses
of more than one such separate firm of attorneys (in addition to any
local counsel) and that all such fees and expenses shall be
reimbursed as they are incurred).
(c) If the Seller does not control the defense of any Action or
Buyer Claim, then the Buyer Indemnified Party may settle such Action or Buyer
Claim only with the written consent of the Seller (not to be unreasonably
withheld or delayed). If the Seller elects to control the defense of any
Action or Buyer Claim, then it will not consent to the entry of judgment or
compromise or settle such Action or Buyer Claim without the consent of the
Buyer Indemnified Party (not to be unreasonably withheld or delayed).
SECTION 10.3. Indemnification by Buyer.
(a) Subject to the limitations set forth in Sections 10.1 and 10.4,
the Buyer hereby agrees to indemnify and hold the Seller and its directors,
officers, employees, stockholders and Affiliates (collectively, the "Seller
Indemnified Parties") harmless from and against any and all Losses imposed
upon or incurred by the Seller Indemnified Parties (any of such Losses by
Seller Indemnified Parties, a "Seller Claim") as a result of or in connection
with any of the following:
(i) any inaccuracy or breach of a representation or warranty as
of the date hereof or as of the Closing Date made by the Buyer in
this Agreement or in any certificate delivered pursuant hereto;
provided that for purposes of this provision, with respect to any
representation or warranty that is qualified by materiality,
Material Adverse Effect or knowledge, a breach of such
representation or warranty shall be deemed to occur if there would
have been a breach of such representation or warranty absent such
qualification; and
(ii) the breach of, or default in the performance by the Buyer,
of any covenant, agreement or obligation to be performed by the
Buyer pursuant to this Agreement or the Transition Services
Agreement;
(iii) any Losses resulting from the Seller's obligations to
indemnify any surety company in respect of claims made by reason of
the acts or omissions of a Company Subsidiary to the extent such act
or omission solely relates to an act, event or condition occurring
after the Closing Date; and
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(iv) the guarantees of the Seller listed on Schedule
10.3(a)(iv) to the extent each such Loss relates to an act, event or
condition occurring after the Closing Date.
(b) Promptly after receipt by a Seller Indemnified Party of notice
of the commencement of an Action or other event giving rise to a Seller Claim
with respect to which the Seller Indemnified Party is entitled to
indemnification under this Section 10.3, such Seller Indemnified Party
receiving such notice shall notify (the "Seller Claim Notice") the Buyer in
writing of the commencement of such Action or the assertion of such Seller
Claim; provided, however, that if such Seller Claim Notice is given within the
period prescribed in Section 10.1, then the failure to give such Seller Claim
Notice promptly shall not affect the right to indemnification hereunder except
to the extent of actual prejudice to the Buyer. The Buyer shall have the
option, and shall notify such Seller Indemnified Party in writing within 20
Business Days after the date of the Seller Claim Notice of its election,
either (i) to participate (at the expense of the Buyer) in the defense of the
Action or Seller Claim (in which case the defense of such Action or Seller
Claim shall be controlled by such Seller Indemnified Party) or (ii) to take
charge of and control defense of such Action or Seller Claim (at the expense
of the Buyer) with counsel reasonably acceptable to such Seller Indemnified
Party. If the Buyer fails to notify such Seller Indemnified Party of its
election within the applicable response period, then the Buyer shall be deemed
to have elected not to control the defense of such Action or Seller Claim. If
the Buyer elects to assume the defense of such Action or Seller Claim, such
Seller Indemnified Party shall have the right to employ separate counsel and
participate in the defense of any such Action or Seller Claim, but the fees
and expenses of such counsel shall be at the expense of such Seller
Indemnified Party unless (A) the named parties in such Action or Seller Claim
(including any impleaded parties) include both such Seller Indemnified Party
and the Buyer, and such Seller Indemnified Party shall have been reasonably
advised by such counsel that there may be one or more legal defenses available
to it that are different from or additional to those available to the Buyer,
(B) the Seller Indemnified Party has been reasonably advised by counsel that
representation by the Buyer is inappropriate in light of an actual or
potential conflict of interest between them, or (C) such Seller Indemnified
Party has reasonably determined that Losses that may be incurred may exceed
either individually, or when aggregated with other Seller Claims, the Maximum
Indemnity Amount (in which case, the Buyer shall not have the right to assume
the defense of such Action or Seller Claim on behalf of such Seller
Indemnified Party, it being understood, however, that the Buyer shall not, in
connection with such Action or Seller Claim be liable for the fees and
expenses of more than one such separate firm of attorneys (in addition to any
local counsel) and that such fees and expenses shall be reimbursed as they are
incurred).
(c) If the Buyer does not control the defense of any Action or
Seller Claim, then the Seller Indemnified Party may settle such Action or
Seller Claim only with the written consent of Buyer (not to be unreasonably
withheld or delayed). If the Buyer elects to control the defense of any Action
or Seller Claim, then it will not consent to the entry of judgment or
compromise or settle such Action or Seller Claim without the consent of the
Seller Indemnified Party (not to be unreasonably withheld or delayed).
SECTION 10.4. Limitation of Liability. Notwithstanding the
foregoing, (a) the Seller shall not be obligated to indemnify the Buyer
Indemnified Parties pursuant to Section
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10.2(a)(i) or 10.2(a)(iii), and Buyer shall not be obligated to indemnify the
Seller Indemnified Parties pursuant to Section 10.3(a)(i), in each case,
unless and until (i) except as otherwise set forth in clause (ii) below, the
amount of all Losses incurred by the Buyer Indemnified Parties, or by the
Seller Indemnified Parties, as the case may be, exceeds $1,000,000 in the
aggregate (the "Basket"), in which event the party seeking indemnity may
recover all Losses incurred in excess of the Basket from the first dollar
above the Basket, and (ii) with respect only to Losses incurred by any Buyer
Indemnified Party in connection with a breach of the representations and
warranties set forth in Section 5.19(a) or the related indemnification set
forth in Section 10.3(a)(viii), the amount of such Losses exceeds $1,000,000
in the aggregate (the "Receivables Basket"), such Receivables Basket not to be
aggregated with the Basket, in which event the Buyer Indemnified Party may
recover all Losses incurred in excess of the Receivables Basket from the first
dollar above the Receivables Basket, subject to Section 10.5, and the Seller
acknowledges and agrees that any accounts receivable not collected within 14
months of its creation shall be deemed "uncollectible" for purposes of the
indemnification provisions of this Agreement; and (b) the Seller's maximum
liability for Losses under Sections 10.2(a)(i) and 10.2(a)(iii) and Buyer's
maximum liability for Losses under Section 10.3(a)(i) shall be, in each case,
an amount equal to the Purchase Price (the "Maximum Indemnity Amount"). The
parties hereto acknowledge and agree that this Section 10.4 shall not apply to
indemnification obligations of the Seller pursuant to Section 8.1(a),
10.2(a)(ii), 10.2(a)(iv), 10.2(a)(v), 10.2(a)(vi) or 10(a)(vii) hereof, or the
indemnification obligations of the Buyer pursuant to Section 8.1(b),
10.3(a)(ii), 10.3(a)(iii) or 10.3(a)(iv), each of which shall be without
deduction or limitation.
SECTION 10.5. Certain Indemnification Matters With Respect to
Receivables.
(a) The Buyer agrees to provide updates for the periods ended
September 30, 2002 and April 30, 2003, within 45 days after each such period,
as to (i) the aggregate amount of the Receivables which have not been
collected, (ii) the status of each unpaid Receivable in excess of $50,000 and
(iii) to the Buyer's best knowledge, the creditworthiness of any account
debtor owing any such unpaid Receivable in excess of $50,000; provided,
however, that any failure by the Buyer to deliver such updates in a timely
manner shall not affect the Buyer's right to indemnification for Receivables
under this Article X except to the extent of actual prejudice to the Seller.
(b) With respect to the indemnification provisions of Section
10.2(a)(viii) and Section 10.4(a)(ii), the parties agree as follows:
(i) to the extent a Buyer Indemnified Party collects Receivables
that had been written off by the Seller prior to the Closing Date, such
Buyer Indemnified Party shall credit such Receivables against any
indemnification amounts owed by the Seller to the Buyer Indemnified
Parties;
(ii) to the extent a Buyer Indemnified Party receives payment in
respect of indemnification for Receivables, such Buyer Indemnified Party
shall assign to the Seller all rights to such Receivables, as well as any
associated liens; and
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(iii) to the extent a Buyer Indemnified Party collects Receivables
for which the Seller has previously indemnified such Buyer Indemnified
Party, such Buyer Indemnified Party shall remit such proceeds to the
Seller.
SECTION 10.6. Exclusive Remedy. After the Closing, the parties' sole
and exclusive recourse against each other for any Loss or claim of Losses
arising out of or relating to any breach of any representation, warranty or
covenant in this Agreement, except for any claim of fraud, shall be expressly
limited to the provisions of this Article X and Sections 8.1(a) and 8.1(b).
The Seller shall not have any right of contribution from the Company or any
Company Subsidiary with respect to any Loss claimed by the Buyer. The Seller
hereby agrees that it will not make any claim for indemnification against any
of the Company or the Company Subsidiaries by reason of the fact that it was a
director, officer, employee, or agent of any such entity or was serving at the
request of any such entity as a partner, trustee, director, officer, employee,
or agent of another entity (whether such claim is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses, or
otherwise and whether such claim is pursuant to any statute, charter document,
bylaw, agreement, or otherwise) with respect to any action, suit, proceeding,
complaint, claim, or demand brought by the Buyer against the Seller (whether
such action, suit, proceeding, complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).
ARTICLE XI
TERMINATION
SECTION 11.1. Termination. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at any time,
prior to the Closing, only as follows:
(a) by mutual written consent of the Buyer and the Seller at any
time prior to the Closing;
(b) by the Buyer, upon written notice to the Seller at any time
prior to the Closing, in the event that the Seller has breached any
representation, warranty, or covenant contained in this Agreement that would
cause the provisions of Section 9.2 not to be satisfied, the Buyer has
notified the Seller of the breach, and the breach has continued without cure
for a period of 30 days after the notice of breach;
(c) by the Seller, upon written notice to the Buyer at any time
prior to the Closing, in the event that the Buyer has breached any
representation, warranty, or covenant contained in this Agreement that would
cause the provisions of Section 9.3 not to be satisfied, the Seller has
notified the Buyer of the breach, and the breach has continued without cure
for a period of 30 days after the notice of breach;
(d) by the Buyer or the Seller, upon written notice to the other
party at any time prior to the Closing, if the Closing Date shall not have
occurred on or before June 30, 2002;
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provided, however, that the right to terminate this Agreement under this
Section 11.1(d) shall not be available to any party whose breach of any
obligation under this Agreement has been the cause of, or has resulted in, the
failure of the Closing Date to occur on or before such date;
(e) by the Buyer or the Seller, upon written notice to the other
party at any time prior to the Closing, if any court of competent jurisdiction
in the United States or any other Governmental Authority in the United States
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and such order, decree, ruling or other action shall have become final
and nonappealable; provided, however, that the right to terminate this
Agreement under this Section 11.1(e) shall not be available to any party whose
breach of any obligation under this Agreement has been the cause of, or has
resulted in, such order, decree, ruling or other action; or
(f) by the Buyer, in the event that the Seller fails to satisfy the
requirements of Section 6.10 by April 1, 2002; provided that, in the event the
Seller fails to satisfy the requirements of Section 6.10 by April 1, 2002, and
this Agreement is not terminated under this Section 11.1(f), the parties agree
that the Target Net Asset Value shall be increased by an amount equal to the
consolidated earnings of the Company and the Company Subsidiaries for the
period from March 1, 2002 through the Closing Date.
SECTION 11.2. Effect of Termination. If this Agreement is terminated
pursuant to Section 11.1(a), (e) or (f) and the transactions contemplated by
this Agreement are not consummated, all rights and obligations of the parties
under or pursuant to this Agreement shall terminate without further liability
of either party to the other; provided, however, the obligations contained in
this Section 11.2, the publicity provisions contained in Section 6.5, the
confidentiality provisions contained in Section 6.6, and the expenses
provision contained in Section 12.2 of this Agreement shall survive any such
termination; provided, further, that no termination shall relieve any party
from liability for any breach of this Agreement.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. Entire Agreement. Except as set forth in Section 6.6
hereof, this Agreement and the schedules and exhibits hereto and the documents
referred to herein and to be delivered pursuant hereto constitute the entire
agreement between the parties pertaining to the subject matter hereof, and
supersede all prior and contemporaneous agreements, understandings,
negotiations and discussions of the parties, whether oral or written, with
respect to the subject matter hereof, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof, except as specifically set forth herein or therein;
provided, however, that the Confidentiality Agreement between the parties
shall survive execution and delivery of this Agreement. No waiver hereunder
shall be deemed to extend to any prior or subsequent default,
misrepresentation or breach or affect in any way any rights arising as a
result of such prior or subsequent occurrence.
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SECTION 12.2. Expenses. Whether or not the transactions contemplated
by this Agreement are consummated, each of the parties hereto shall pay the
fees and expenses of their respective counsel, investment bankers, financial
advisors, accountants and other experts and the other expenses incident to the
negotiation and preparation of this Agreement and the consummation of the
transactions contemplated hereby. The Seller agrees that none of the Company
or the Company Subsidiaries has borne or will bear the Seller's costs and
expenses (including any of its legal fees and expenses) in connection with
this Agreement or any of the transactions contemplated hereby, except in
connection with the conduct of due diligence investigations by the Buyer prior
to the date hereof.
SECTION 12.3. Governing Law; Submission to Jurisdiction.
(a) This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of New York.
(b) Each of the parties submits to the jurisdiction of any state or
federal court sitting in Delaware, in any action or proceeding arising out of
or relating to this Agreement and agrees that all claims in respect of the
action or proceeding may be heard and determined in any such court. Each party
also agrees not to bring any action or proceeding arising out of or relating
to this Agreement in any other court. Each of the parties waives any defense
of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required
of any other party with respect thereto. Each party appoints CT Corporation
(the "Process Agent") as its agent to receive on its behalf service of copies
of the summons and complaint and any other process that might be served in the
action or proceeding. Any party may make service on any other party by sending
or delivering a copy of the process (i) to the party to be served at the
address and in the manner provided for the giving of notices in Section 12.5
or (ii) to the party to be served in care of the Process Agent at the address
and in the manner provided for the giving of notices in Section 12.5. Nothing
in this Section 12.3, however, shall affect the right of any party to serve
legal process in any other manner permitted by law or at equity. Each party
agrees that a final judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.
SECTION 12.4. Assignment. This Agreement and each party's rights
hereunder may not be assigned without the prior written consent of the other
party, except that the Buyer may (a) assign any or all of its rights and
obligations hereunder to one or more Affiliates and (b) designate one or more
of its Affiliates to perform its obligations hereunder; provided, however,
that in any or all of such cases the Buyer nonetheless shall remain
responsible for the performance of all of its obligations hereunder. Subject
to the preceding sentence, this Agreement shall be binding upon the parties
hereto and their respective successors and assigns.
SECTION 12.5. Notices. All communications, notices and disclosures
required or permitted by this Agreement shall be in writing and shall be
deemed to have been given when delivered personally or by messenger or by
overnight delivery service, or when received via telecopy or other electronic
transmission, in all cases addressed to the Person for whom it is
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intended at his address set forth below or to such other address as a party
shall have designated by notice in writing to the other party in the manner
provided by this Section 12.5.
If to the Seller: Comfort Systems USA, Inc.
777 Post Oak Boulevard
Suite 500
Houston, Texas 77056
Attention: General Counsel
Facsimile: (713) 830-9659
with a copy to: Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Collin J. Beecroft, Esq.
Facsimile: (617) 951-7050
If to the Buyer: c/o EMCOR Group, Inc.
101 Merritt Seven, 7th Floor
Norwalk, Connecticut 06851
Attention: Sheldon I. Cammaker
Executive Vice President
and General Counsel
Facsimile: (203) 849-7830
with a copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Alan G. Schwartz, Esq.
Facsimile: (212) 455-2502
SECTION 12.6. Amendment and Waiver. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed
by the Buyer and the Seller. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
SECTION 12.7. Counterparts; Headings. This Agreement may be executed
in several counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same Agreement. The article and
section headings in this Agreement are inserted for convenience of reference
only and shall not affect in any way the meaning or interpretation of this
Agreement.
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SECTION 12.8. Specific Performance. Each party acknowledges and
agrees that the other party would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each party agrees that
the other party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
parties and the matter (subject to the provisions set forth in Section 12.3),
in addition to any other remedy to which they may be entitled, at law or in
equity.
SECTION 12.9. Interpretation. Unless the context requires otherwise,
all words used in this Agreement in the singular number shall extend to and
include the plural, all words in the plural number shall extend to and include
the singular and all words in any gender shall extend to and include all
genders. All references to contracts, agreements, leases, Employee Benefit
Plans or other understandings or arrangements shall refer to oral as well as
written matters. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean including without limitation. The parties intend that
each representation, warranty, and covenant contained herein shall have
independent significance. If any party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant.
SECTION 12.10. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
SECTION 12.11. No Third Parties; No Reliance. Except as specifically
set forth or referred to herein, nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any Person, other
than the parties hereto and their permitted successors or assigns, any rights
or remedies under or by reason of this Agreement. No third party is entitled
to rely on any of the representations, warranties and agreements contained in
this Agreement, and the Seller and the Buyer assume no liability to any third
party because of any reliance on the representations, warranties and
agreements of the Seller and the Buyer contained in this Agreement, other than
the rights of the Buyer Indemnified Parties and Seller Indemnified Parties set
forth in Article X (which are intended to be for the benefit of the Persons
covered thereby and may be enforced by such Persons).
SECTION 12.12. Incorporation of Exhibits, Annexes and Schedules. The
exhibits, annexes and schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
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IN WITNESS WHEREOF, the parties have caused this Purchase Agreement
to be duly executed as of the day and year first above written.
COMFORT SYSTEMS USA, INC.
By: /s/ William George
--------------------------------------
Name: William George
Title: Senior Vice President
EMCOR-CSI HOLDING CO.
By: /s/ Sheldon I. Cammaker
---------------------------------------
Name: Sheldon I. Cammaker
Title: Executive Vice President
EXHIBIT A
FORM OF
ESCROW AGREEMENT
This Escrow Agreement, dated as of March [__], 2002 (this
"Agreement"), is made and entered into by and among Comfort Systems USA, Inc.,
a Delaware corporation ("Seller"), EMCOR-CSI Holding Co., a Delaware
corporation ("Buyer"), and Bank One, National Association, as escrow agent
(the "Agent").
WITNESSETH:
WHEREAS, the Seller and the Buyer are parties to a Purchase
Agreement, dated as of February 11, 2002 (the "Purchase Agreement"); and
WHEREAS, pursuant to Sections 2.2 and 2.6 of the Purchase Agreement,
the Buyer and the Seller have agreed to deposit $2,500,000 (together with all
interest and profits thereon and proceeds therefrom, the "Adjustment Escrow
Amount") in an escrow account to be held in escrow during the period
commencing on the Closing Date (as defined below) and expiring on the date on
which payment of the Adjustment Amount (as defined below) is made in
accordance with Sections 2.4 and 2.5 of the Purchase Agreement (such period,
the "Adjustment Security Period"); and
WHEREAS, pursuant to Sections 2.2 and 2.6 of the Purchase Agreement,
the Buyer and the Seller have agreed to deposit $5,000,000 (together with all
interest and profits thereon and proceeds therefrom, the "Indemnification
Escrow Amount") in an escrow account to be held in escrow during the period
commencing on the Closing Date and expiring 18 months after the Closing Date
(such period, the "Indemnification Security Period"); and
WHEREAS, the Agent is willing to act as escrow agent hereunder;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall
have the meanings set forth in the Purchase Agreement.
2. Appointment of Agent. The Agent is hereby appointed by each of
the Seller and the Buyer to act as escrow agent hereunder. The Agent hereby
accepts such appointment and agrees to hold and administer the Escrow Account
(as defined below) in accordance with the terms and subject to the conditions
set forth herein.
3. Establishment of the Escrow Account. On the Closing Date, the
Adjustment Escrow Amount and the Indemnification Escrow Amount (collectively,
the "Escrow Funds") shall be deposited with the Agent in a separate escrow
account (the "Escrow Account") as set forth in the Purchase Agreement. The
parties hereto agree that the Agent is serving solely as escrow agent and does
not, and will not, own or have any interest in the Escrow Funds, having
only possession of the Escrow Funds. The parties hereto intend that the Escrow
Account be treated for tax purposes as a grantor trust to which the
[Seller/Buyer] has transferred the Escrow Funds. Accordingly, the parties
hereto agree that for tax purposes they will treat the [Seller/Buyer] as the
owner of the Escrow Funds.
4. Investment of Escrow Funds. During the term of this Agreement,
all or any portion of the Escrow Funds shall be invested and reinvested by the
Agent, as directed in writing by the [Seller/Buyer], in (a) obligations that
(i) are issued by the United States government or any agency or
instrumentality thereof and (ii) have a maturity of not more than three
months; (b) obligations that (i) are issued by any state or municipality of
the United States, (ii) have a maturity of not more than three months and
(iii) have one of the two highest rating grades by Moody's Investor Service,
Inc. ("Moody's") or Standard & Poor's, a division of The McGraw Hill
Companies, Inc. ("S&P"), (c) certificates of deposit that (i) are issued by
any bank or trust company that has (A) debt obligation ratings in one of the
two highest rating grades by Moody's or S&P and (B) a combined capital and
surplus and undivided profits of not less than $100,000,000 and (ii) have a
maturity of not more than three months; or (d) money market rate accounts with
the Agent. The Agent shall liquidate all or any portion of the investments
made with the Escrow Funds at such time and in such manner as the
[Seller/Buyer] may direct in writing or, in the absence of any such direction,
as the Agent, in its sole and absolute discretion, may elect, in each case in
order to convert such investments into cash for application and distribution
in accordance with this Agreement.
5. Duration; Release of Escrow.
(a) Release of Adjustment Escrow Amount
(i) Except as provided in clauses (ii) and (iii) of this
Section 5(a), the Agent shall hold the Adjustment Escrow Amount
until the termination of the Adjustment Security Period.
(ii) If the Agent shall be furnished with a copy of a
determination pursuant to Section 2.5(d) of the Purchase Agreement
(a "Determination") stating that the Independent Accountants have
determined that (A) the Buyer's calculation of the Closing Net Asset
Value or the Seller's calculation of the Closing Net Asset Value, as
the case may be, more closely approximates the Net Asset Value as of
the Closing Date and (B) such closer approximation of the Net Asset
Value as of the Closing Date shall be deemed to be the Closing Net
Asset Value for all purposes of the Purchase Agreement, shall be
final, binding and conclusive on the Seller and the Buyer and shall
be used in computing the Adjustment Amount, then the Agent shall
subtract such Closing Net Asset Value from [$65,900,000](1) to
determine the Adjustment Amount. If the Adjustment Amount is
positive, then the Agent shall promptly, but in no event more than
five Business Days after receipt by the Agent of the Determination,
reduce the Adjustment Escrow Amount by an amount equal to the lesser
of (1) the Adjustment Amount, together
_______________
(1) This number may be adjusted pursuant to Section 11.1(f) of the Purchase
Agreement prior to execution of this Escrow Agreement.
2
with interest thereon at the rate of 6% per annum from the Closing
Date until the date on which the Adjustment Amount is paid, and (2)
the Adjustment Escrow Amount, and pay such amount by wire transfer
of immediately available funds to an account designated in writing
by the Buyer. If the Adjustment Amount is negative, then the Agent
shall promptly, but in no event more than five Business Days after
receipt by the Agent of the Determination, release to the Seller the
Adjustment Escrow Amount by wire transfer of immediately available
funds to an account designated in writing by the Seller.
(iii) If the Agent receives a notice of agreement ("Notice of
Agreement") that is executed by the Buyer and the Seller with
respect to the Adjustment Amount and directing the Agent to pay an
amount stated therein to the Buyer or the Seller, as specified
therein, then the Agent shall promptly, but in no event more than
five Business Days after receipt by the Agent of such Notice of
Agreement, reduce the Adjustment Escrow Amount by an amount equal to
the lesser of (A) the amount stated in such Notice of Agreement and
(B) the Adjustment Escrow Amount, and pay such amount by wire
transfer of immediately available funds to an account designated in
writing by the Buyer or the Seller, as the case may be.
(iv) At the end of the Adjustment Security Period, the Agent
shall release to the Seller any remaining Adjustment Escrow Amount
by wire transfer of immediately available funds to an account
designated in writing by the Seller.
(b) Release of Indemnification Escrow Amount
(i) Except as provided in clauses (ii) through (iv) of this
Section 5(b), the Agent shall hold the Indemnification Escrow Amount
until the termination of the Indemnification Security Period.
(ii) If the Agent shall be furnished by the Buyer with a copy
of an award (an "Award") in an action against the Seller by the
Buyer made by any arbitrator, mediator or court of competent
jurisdiction resulting from a claim for indemnification by the Buyer
pursuant to Article X of the Purchase Agreement, then the Agent
shall promptly, but in no event more than five Business Days after
receipt by the Agent of such Award, reduce the Indemnification
Escrow Amount by an amount equal to the lesser of (A) the amount
stated in the Award and (B) the Indemnification Escrow Amount, and
pay such amount by wire transfer of immediately available funds to
an account designated in writing by the Buyer.
(iii) If the Agent receives a Notice of Agreement that is
executed by the Buyer and the Seller with respect to the payment of
a claim for indemnification by the Buyer pursuant to Article X of
the Purchase Agreement, then the Agent shall promptly, but in no
event more than five Business Days after receipt by the Agent of
such Notice of Agreement, reduce the Indemnification Escrow Amount
by an amount equal to the lesser of (A) the amount stated in such
Notice of Agreement and (B) the Indemnification Escrow Amount, and
pay such amount by wire transfer of immediately available funds to
an account designated in writing by the Buyer.
3
(iv) At the end of the Indemnification Security Period, the
Agent shall release to the Seller any remaining Indemnification
Escrow Amount that is not necessary to satisfy any amounts with
respect to any unresolved claim for indemnification under Article X
of the Purchase Agreement made by the Buyer prior to the end of the
Indemnification Security Period.
(c) The Agent shall distribute any assets held by it pursuant to
this Agreement in such manner and at such time or times as the Buyer and the
Seller may, in writing, jointly direct.
(d) The Buyer and the Seller agree to provide a termination notice
to the Agent within five Business Days after the expiration of the Adjustment
Security Period. The Buyer and the Seller agree to provide a termination
notice to the Agent within five Business Days after the expiration of the
Indemnification Security Period and, subject to any amount withheld pursuant
to Section 5(b)(iv) above, the Agent shall, upon receipt of such termination
notice, close the Escrow Account and release to the Seller any remaining
amounts held in the Escrow Account by wire transfer of immediately available
funds to an account designated in writing by the Seller.
6. Limitation of Agent's Duties and Liability.
(a) The duties and responsibilities of the Agent hereunder shall be
determined solely by the express provisions of this Agreement, and no other or
further duties or responsibilities shall be implied.
(b) The Agent may rely and shall be protected in acting or
refraining from acting upon any written notice, instruction or request
furnished to it hereunder and believed by it to be genuine and to have been
signed or presented by the proper party or parties. The Agent shall be under
no duty to inquire into or investigate the validity, accuracy or content of
any document. The Agent shall have no duty to solicit any item which may be
due it hereunder.
(c) The Agent shall not be liable for any action taken or omitted by
it in good faith unless a court of competent jurisdiction determines that the
Agent's willful misconduct or gross negligence was the primary cause of any
loss to the Buyer or the Seller. The Agent may consult with counsel of its own
choice and shall have full and complete authorization and protection for any
action taken or omitted by it hereunder in good faith and in accordance with
the opinion or advice of such counsel.
(d) The Buyer and the Seller hereby jointly and severally agree to
indemnify the Agent for and to hold it harmless against any loss, liability or
expense arising out of or in connection with this Agreement and the carrying
out its duties hereunder, including the costs and expenses of defending itself
against any claim of liability, except in those cases where the Agent has been
guilty of gross negligence or willful misconduct. Anything in this Agreement
to the contrary notwithstanding, in no event shall the Agent be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Agent has been
advised of the likelihood of such loss or damage and regardless of the form of
action.
4
(e) In the event the Agent is uncertain as to its duties or rights
hereunder or receives instructions, claims or demands from any party hereto
that, in its opinion, conflict with any of the provisions of this Agreement,
it shall be entitled to refrain from taking any action and its sole obligation
shall be to keep safely all property held in the Escrow Account until it is
directed otherwise by a final order or judgment of a court of competent
jurisdiction.
(f) This Agreement shall not be deemed to create a fiduciary
relationship between any of the parties hereto under state or federal law.
(g) The Agent shall not be responsible in any manner for the
validity or sufficiency of any property delivered hereunder, or for the value
or collectability of any note or other instrument so delivered, or for any
representations made or obligations assumed by any party other than the Agent.
(h) The agreements set forth in this Section 6 shall survive the
termination of this Agreement, a resignation of the Agent and the release of
all property and the payment of any and all amounts hereunder.
7. Agent Expenses. All fees and expenses (including reasonable
attorneys' fees) of the Agent incurred in the course of performing its
responsibilities hereunder shall be paid jointly and severally by the Buyer
and the Seller. The Agent's schedule of fees is set forth in Exhibit A
attached hereto.
8. Notices. Except as expressly provided to the contrary herein, all
notices and other communications to be given hereunder shall be in writing and
shall be deemed given upon receipt if delivered personally, sent by facsimile
transmission (provided written receipt of which is confirmed), by certified
mail, return receipt requested, or by an internationally recognized private
overnight or overseas courier to the parties hereto at the following addresses
or at such other address as may be specified by like notice by any of the
parties:
(a) If to the Buyer:
EMCOR-CSI Holding Co.
c/o EMCOR Group, Inc.
101 Merritt Seven, 7th Floor
Norwalk, Connecticut 06851
Attention: Sheldon I. Cammaker, Esq.
Facsimile: (203) 849-7830
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Alan G. Schwartz, Esq.
Facsimile: (212) 455-2502
5
(b) If to the Seller:
Comfort Systems USA, Inc.
777 Post Oak Boulevard
Suite 500
Houston, Texas 77056
Attention: General Counsel
Facsimile: (713) 830-9659
With a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Collin J. Beecroft, Esq.
Facsimile: (617) 951-7050
(c) if to the Agent:
Bank One, National Association
Attention: Global Corporate Trust Services
Amy C. Perkins
1717 Main Street, 4th Floor
Dallas, Texas 75201
Telephone: (214) 290-3615
Facsimile: (214) 290-3624
9. General.
(a) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York. Each of the parties
hereto agrees to submit to the jurisdiction of any state or federal court
sitting in Delaware in any action or proceeding arising out of or relating to
this Agreement and agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court.
(b) Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
(c) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(d) Entire Agreement. This Agreement with respect to the Agent, the
Buyer and the Seller and this Agreement and the Purchase Agreement with
respect to the Buyer and the Seller constitute the entire understanding and
agreement of the parties hereto with respect
6
to the subject matter hereof and supersede all prior agreements and
understandings, written or oral, between the parties hereto with respect to
the subject matter hereof.
(e) Waivers. No waiver by any party hereto of any condition or of
any breach of any provision of this Agreement shall be effective unless in
writing and signed by a duly authorized representative of the party granting
such waiver. No waiver by any party of any such condition or breach in any one
instance shall be deemed to be a further or continuing waiver of such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
(f) Amendment. This Agreement may be amended by the written
agreement of all the parties hereto.
(g) Merger of Agent. Any corporation into which the Agent in its
individual capacity may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Agent in its individual capacity shall be a party,
or any corporation to which substantially all the corporate trust business of
the Agent in its individual capacity may be transferred, shall be the Agent
under this Agreement without further act.
(h) Resignation of Agent. The Agent shall have the right to resign
upon 30 days written notice to the Buyer and the Seller. In the event of such
resignation, with the consent of the Buyer, which consent shall not
unreasonably be withheld, the Seller shall appoint a successor agent hereunder
by delivering to the Agent a written notice of such appointment. Upon receipt
of such notice, the Agent shall deliver to the designated successor agent all
property held hereunder and shall thereupon be released and discharged from
any and all further responsibilities whatsoever under this Agreement;
provided, however, that the Agent shall not be deprived of its compensation
earned prior to such time or the benefits of Section 6 hereof. If no successor
agent shall have been designated by the date specified in the Agent's notice,
all obligations of the Agent hereunder shall nevertheless cease and terminate.
Its sole responsibility thereafter shall be to keep safely all property then
held by it and to deliver the same to a person designated by the other parties
hereto or in accordance with the direction of a final order or judgment of a
court of competent jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
COMFORT SYSTEMS USA, INC.
By:__________________________
Name:
Title:
EMCOR-CSI HOLDING CO.
By:__________________________
Name:
Title:
BANK ONE, NATIONAL ASSOCIATION
By:__________________________
Name:
Title:
Exhibit A
SCHEDULE OF FEES
[ESCROW AGENT TO PROVIDE]
EXHIBIT B
TRANSITION SERVICES AGREEMENT
This Transition Services Agreement (this "Services Agreement") is
made as of March [__], 2002, by and between Comfort Systems USA, Inc., a
Delaware corporation ("Seller"), and EMCOR-CSI Holding Co., a Delaware
corporation ("Buyer"). Pursuant to a Purchase Agreement dated as of February
11, 2002 (the "Purchase Agreement") between Seller and Buyer, Buyer directly
acquired all the Interests (as defined below) in the Company (as defined
below) and indirectly acquired all the outstanding capital stock of and
ownership interests in the Company Subsidiaries (as defined below) on the
terms set forth therein. Prior to the Closing (as defined below), the Company
and the Company Subsidiaries received certain services from Seller, and Seller
received certain services from the Company and the Company Subsidiaries.
Seller and Buyer desire that these services continue to be provided to or by
the Company and the Company Subsidiaries after the Closing upon the terms and
conditions set forth in this Services Agreement.
In consideration of the mutual covenants and agreements contained in
this Services Agreement, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions Incorporated. All capitalized terms not otherwise
defined in this Services Agreement have the meaning ascribed to them in the
Purchase Agreement.
1.2 Additional Definitions. Unless the context otherwise requires,
the following terms, and their singular or plural, used in this Services
Agreement shall have the meanings set forth below:
(a) "Buyer" shall have the meaning set forth in the preamble hereto.
(b) "Buyer Provided Services" shall have the meaning set forth in
Section 2.2.
(c) "Confidentiality Agreement" shall have the meaning set forth in
Section 7.14.
(d) "Notice" shall have the meaning set forth in Section 7.3.
(e) "Provider" shall mean, with respect to any Services, the party
hereto that is providing such Services.
(f) "Purchase Agreement" shall have the meaning set forth in the
preamble hereto.
(g) "Recipient" shall mean, with respect to any Services, the party
hereto that is receiving such Services.
(h) "Related Parties" means, with respect to any party, the
Subsidiaries and Affiliates of such party and the respective directors,
officers, employees and agents of such party, its Subsidiaries and its
Affiliates.
(i) "Seller" shall have the meaning set forth in the preamble
hereto.
(j) "Seller Provided Services" shall have the meaning set forth in
Section 2.1.
(k) "Services" shall mean, collectively, the Buyer Provided Services
and the Seller Provided Services.
(l) "Services Agreement" shall have the meaning set forth in the
preamble hereto.
(m) "Term" shall have the meaning set forth in Section 4.1.
ARTICLE 2
SERVICES
2.1 Seller Provided Services. Pursuant to the terms of this Services
Agreement, Seller will provide, or cause to be provided, to Buyer for the
Company and the Company Subsidiaries the services described on Schedule 2.1(A)
hereto and Schedule 2.1(B) hereto (individually or in the aggregate, the
"Seller Provided Services").
2.2 Buyer Provided Services. Pursuant to the terms of this Services
Agreement, Buyer will provide, or cause to be provided, to Seller the services
described on Schedule 2.2 hereto (individually or in the aggregate, the "Buyer
Provided Services").
2.3 Other Services. If, after the execution of this Services
Agreement, (a) the parties determine that (i) a service provided by Seller to
the Company or any Company Subsidiary or (ii) a service provided by the
Company or any Company Subsidiary to Seller, in each case in accordance with
the practice of Seller, the Company or such Company Subsidiary, as applicable,
prior to the Closing, was inadvertently omitted from the Schedules hereto, and
(b) Buyer or Seller, as the case may be, desires to temporarily continue
receiving such service, then the parties shall negotiate in good faith to
attempt to agree to the terms and conditions upon which such service shall be
added to this Services Agreement, it being agreed that the charges for such
service should be determined on a basis consistent with the methodology for
determining the initial compensation for the Services described on the
Schedules hereto.
ARTICLE 3
COMPENSATION
3.1 Compensation for Services. Subject to Section 3.3, the
compensation for any Service for the duration of the Term shall be as
specified on the Schedules hereto.
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3.2 Cost of Consents. Unless otherwise specified on the Schedules
hereto, in the case of software applications and other intellectual property
that are provided by Seller to, are owned by, or are licensed to, the Company
or any Company Subsidiary,
(a) Seller shall bear all costs and expenses of obtaining any and
all consents, waivers and licenses which may be necessary in connection with
Seller's providing software Services to Buyer for the Company and the Company
Subsidiaries; and
(b) Buyer and Seller shall cooperate in good faith to minimize the
costs and expenses to be incurred by Seller pursuant to this Section 3.2.
3.3 Terms of Payment; Dispute Resolution.
(a) Except as otherwise expressly provided herein or on the
Schedules hereto, each Provider shall invoice the applicable Recipient monthly
(or, if mutually agreeable to such Provider and such Recipient, quarterly or
semi-annually) for the Services provided by such Provider under this Services
Agreement. Payment in United States dollars shall be made by the applicable
Recipient within 15 days after receipt of invoice. No Recipient shall withhold
or set-off any payments to any Provider under this Services Agreement, and no
Provider shall withhold the provision of any Services to any Recipient,
notwithstanding any dispute that may be pending between them, whether under
this Services Agreement or otherwise (any required adjustment being made on
subsequent invoices), unless such withholding is provided for in a judgment by
a court of competent jurisdiction in accordance with Section 7.7.
(b) If there is a dispute between any Recipient and any Provider
regarding the amounts shown as billed to such Recipient on any invoice from
such Provider, such Provider shall furnish to such Recipient reasonable
documentation to substantiate the amounts so billed including, but not limited
to, listings of the dates, times and amounts of the Services in question, if
applicable and practicable. Upon delivery of such documentation, such
Recipient and such Provider shall cooperate and each use its reasonable best
efforts to resolve such dispute between themselves. If (i) such Recipient and
such Provider are unable to resolve their dispute within 30 calendar days of
the initiation of such procedure, (ii) such Recipient believes in good faith
and with a reasonable basis that the amounts shown as billed to such Recipient
are inaccurate or are otherwise not in accordance with the terms of this
Services Agreement and (iii) such Recipient has previously paid such invoice
in accordance with Section 3.3(a), then such Recipient shall have the right,
at its own expense, to commence litigation in accordance with Section 7.7.
ARTICLE 4
TERM
4.1 Term. Except as expressly otherwise provided in this Services
Agreement, (a) the term with respect to any particular individual Service
shall be as indicated on the applicable Schedule hereto and (b) the term of
this Services Agreement (the "Term") shall end on the date on which the
respective separate terms for all Services as indicated on the Schedules
hereto shall have expired. The obligation of any Recipient to make a payment
for Services previously
3
rendered shall not be affected by the expiration of the Term and shall
continue until full payment is made.
4.2 Termination of Individual Services. Each individual Service has
a separate term as provided in Schedule 2.1(A), Schedule 2.1(B) or Schedule
2.2, as applicable, which term may, in the case of Services listed on Schedule
2.1(A) and Schedule 2.2, include a right of extension as described in such
Schedule. Unless earlier terminated pursuant to the immediately succeeding
sentence, the obligation of a Provider to provide any applicable Service will
terminate upon the expiration of the separate term for such Service as
provided in the applicable Schedule. At any time during the Term, a Recipient
may terminate any individual Service provided to such Recipient under this
Services Agreement on a Service-by-Service basis (and/or a
location-by-location basis, where an individual Service is provided to
multiple locations of a Recipient) upon written notice to the Provider
identifying (a) the particular Service (or location) to be terminated and (b)
the effective date of termination, which date shall not be less than three
Business Days after receipt of such notice unless the applicable Provider
otherwise agrees.
ARTICLE 5
CERTAIN COVENANTS
5.1 Points of Contact. Each Provider and Recipient shall name a
point of contact, which shall be added to the Schedules hereto, and which may
be amended from time to time upon prior written notice to the other party.
Such points of contact shall be responsible for the implementation of this
Services Agreement between such Provider and such Recipient, including
resolution of any issues that may arise during the performance of such
Provider and such Recipient hereunder on a day-to-day basis. Issues that
cannot be resolved by the respective points of contact will be escalated
through the respective parties' management.
5.2 Cooperation; Reasonable Care.
(a) The parties will cooperate (using reasonable best efforts) to
effect a smooth and orderly transition of each Service provided hereunder from
the applicable Provider to the applicable Recipient; provided, however, that
this Section 5.2 shall not require any party hereto to incur any out-of-pocket
expenses unless and except as expressly otherwise provided herein. The parties
will cooperate in good faith toward completing the transition of the Services
provided hereunder prior to the expiration of their respective terms.
(b) Each Provider shall (i) perform the Services that it is required
to provide to the applicable Recipient under this Services Agreement with
reasonable skill and care and (ii) use at least that degree of skill and care
that it would exercise in similar circumstances in carrying out its own
business. Each Provider shall take necessary measures to protect the
applicable Recipient's data that is processed by such Provider from
destruction, deletion or unauthorized change; provided, however, that a
Provider shall be deemed to have satisfied this obligation if the measures
taken to protect and recover the Recipient's data are equivalent to what it
uses in carrying out its own business.
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5.3 Migration Projects. Each Provider will provide the applicable
Recipient with reasonable support necessary to transition the Services that
such Provider is required to provide to such Recipient under this Services
Agreement, which may include providing reasonable access to data and other
information and to such Provider's employees; provided, however, that such
activities shall not unduly burden or interfere with such Provider's business
and operations. Illustrations of migration services are costs of transferring
documentation (including procedures and manuals), removing data from the
Provider's systems and records for access by the Recipient and responding to
inquiries associated with software mapping. Each party shall bear the costs
that it incurs in effecting the migration of such Services.
5.4 Further Assurances. From time to time after the date hereof,
without further consideration, each party shall, upon the reasonable written
request of the other party, execute and deliver such formal lease or license
agreements or any other documentation which may be required to further the
intents and purposes of this Services Agreement with respect to any lease or
license provided for herein or contemplated hereby.
ARTICLE 6
INDEMNITIES AND WARRANTIES
6.1 Indemnity.
(a) Each party will indemnify and hold harmless the other party and
the officers, directors, agents, employees and invitees of such other party,
against all liabilities, claims, losses, damages, death or personal injury of
whatever nature or kind, arising out of such party's performance of this
Services Agreement or the entry of such party's agents, employees or invitees
in the premises of the other party, to the extent occasioned by such party's
own willful misconduct or negligent actions or omissions or the willful
misconduct or negligent actions or omissions of the agents, employees or
invitees of such party.
(b) Seller shall indemnify and hold harmless Buyer and its Related
Parties from and against any and all liabilities, claims, losses or damages
arising from or relating to any intellectual property infringement, including,
but not limited to, such claims based upon Seller's infringement or misuse of
trademarks, copyrights, trade secrets, patents or other proprietary rights,
arising out of Seller's performance of the Seller Provided Services.
6.2 Warranties.
(a) Each Provider warrants that each Service provided hereunder by
such Provider or its Subsidiaries shall be performed at an equivalent level of
quality in respect of such Service to that provided by such Provider or its
Subsidiaries, as the case may be, prior to the execution date of this Services
Agreement. THERE ARE NO OTHER WARRANTIES OR REPRESENTATIONS WITH RESPECT TO
THE PROVISION OF SERVICES PROVIDED HEREUNDER, WHETHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
5
(b) Each Provider shall (i) pass through to the applicable Recipient
the benefits of any express warranties received from third parties relating to
any Service provided by such Provider to such Recipient and (ii) assist such
Recipient with any warranty claim related to such Service.
ARTICLE 7
MISCELLANEOUS
7.1 Resolution of Disputes; Continuation of Services Pending Outcome
of Dispute. In the event of any dispute between the parties, the parties agree
to be bound by the litigation procedures set forth in Section 7.7. Unless
otherwise specified in the Schedules hereto, notwithstanding the existence of
any dispute between the parties, no Provider shall withhold the provision of
any Service to any Recipient under this Services Agreement, unless so provided
in a judicial determination that such Recipient is in default of a material
obligation under this Services Agreement.
7.2 Independent Contractor. In providing Services hereunder, each
Provider and each of its Subsidiaries shall act solely as an independent
contractor. Nothing herein shall constitute or be construed to be or create a
partnership, joint venture or principal/agent relationship between Buyer or
any of its Related Parties, on the one hand, and Seller or any of its Related
Parties, on the other.
7.3 Notices. Other than the routine administrative actions in
furtherance of the Services to be provided hereunder, all notices, consents,
waivers, claims and other communications hereunder (each a "Notice") shall be
in writing and shall be (a) personally delivered, (b) deposited, prepaid in a
nationally established overnight delivery firm such as Federal Express, (c)
mailed by certified mail, return receipt requested, or (d) transmitted by
facsimile as follows:
If to Seller:
Comfort Systems USA, Inc.
777 Post Oak Boulevard
Suite 500
Houston, Texas 77056
Attn: General Counsel
Fax No.: (713) 830-9659
If to Buyer:
EMCOR-CSI Holding, Co.
c/o EMCOR Group, Inc.
101 Merritt Seven, 7th Floor
Norwalk, Connecticut 06851
Attn: Sheldon I. Cammaker, Esq.
Fax No.: (203) 849-7830
6
or to any other address which such party may have subsequently communicated to
the other party by a Notice given in accordance with the provisions of this
Section 7.3. Each Notice shall be deemed given and effective upon receipt (or
refusal of receipt).
7.4 Entire Agreement. Except for those matters provided for in the
Purchase Agreement, this Services Agreement and the Schedules attached hereto
contain every obligation and understanding between the parties relating to the
subject matter hereof and merge all prior discussions, negotiations and
agreement, if any, between the parties with respect to the subject matter
hereof, and none of the parties shall be bound by any representations,
warranties, covenants or other understandings with respect to the subject
matter hereof, except as expressly provided herein or in the Purchase
Agreement.
7.5 Waiver and Amendment. Any representation, warranty, covenant,
term or condition of this Services Agreement which may legally be waived, may
be waived, or the time of performance thereof extended, at any time by the
party hereto entitled to the benefit thereof, and any term, condition or
covenant hereto may be amended by the parties hereto at any time. Any such
waiver, extension or amendment shall be evidenced by an instrument in writing
executed on behalf of the appropriate party by a Person who has been
authorized by such party to execute waivers, extensions or amendments on its
behalf. No waiver by any party hereto, whether express or implied, of its
rights under any provision of this Services Agreement shall constitute a
waiver of such party's rights under such provisions at any other time or a
waiver of such party's rights under any other provision of this Services
Agreement. No failure by any party hereto to take any action against any
breach of this Services Agreement or default by the other party shall
constitute a waiver of such party's right to enforce any provision of this
Services Agreement or to take action against such breach or default or any
subsequent breach or default by such other party.
7.6 Severability. In the event that any one or more of the
provisions contained in this Services Agreement shall be declared invalid,
void or unenforceable, the remainder of the provisions of this Services
Agreement shall remain in full force and effect, and such invalid, void or
unenforceable provision shall be interpreted as closely as possible to the
manner in which it was written.
7.7 Governing Law, Jurisdiction. This Services Agreement shall be
interpreted and construed in accordance with the laws of the State of New
York. Except where equitable relief is sought, neither party shall commence
any proceeding against the other party under this Services Agreement unless
and until the parties shall have attempted in good faith to settle the
underlying dispute through negotiation or mediation for a period of not less
than 30 days. Subject to the preceding sentence, each party agrees that any
action, proceeding or claim it commences against the other party pursuant to
this Services Agreement shall be brought in any state or federal courts
sitting in Delaware. Each party irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in any such
court, any claim that any such suit, action or proceeding brought in such a
court has been sought in an inconvenient forum and the right to object, with
respect to any such suit, action or proceeding brought in any such court, that
such court does not have jurisdiction over such party. In any such suit,
action or proceeding, each party waives, to the fullest extent it may
effectively do so, personal service of any summons, complaint or other
7
process and agrees that the service thereof may be made by certified or
registered mail, addressed to such party at its address set forth in Section
7.3. Each party agrees that a final non-appealable judgment in any such suit,
action or proceeding brought in such a court shall be conclusive and binding.
7.8 Counterpart Execution. This Services Agreement may be executed
in counterparts with the same effect as if all of the parties had signed the
same document. Such counterparts shall be construed together and shall
constitute one and the same instrument, notwithstanding that all of the
parties are not signatories to the original or the same instrument, or that
signature pages from different counterparts are combined. The signature of any
party to one counterpart shall be deemed to be a signature to and may be
appended to any other counterpart.
7.9 Assignment. This Services Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Services Agreement may not be assigned
by either party to any Person without the prior written consent of the other
party, which consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, either party may assign any of its rights and
obligations under this Services Agreement, in whole or in part, to one or more
wholly owned Subsidiaries of such party. Any party so assigning this Services
Agreement shall remain fully liable to the other party for the performance by
any assignee of any obligation of such party so assigned. Any purported
assignment in violation of this Section 7.9 shall be void.
7.10 Disclaimer. Except as expressly set forth herein, no party
makes any representations or warranties in respect of the services provided
under this Services Agreement, express or implied.
7.11 No Third Party Beneficiary. Nothing expressed or implied in
this Services Agreement is intended, or shall be construed, to confer upon or
give any Person other than the parties hereto, their respective successors and
permitted assigns and the indemnitees, any rights or remedies under or by
reason of this Services Agreement.
7.12 Headings and Interpretation. Titles and headings to articles
and sections herein and titles to the Schedules are inserted for convenience
of reference only and are not intended to be a part of or to affect the
meaning or interpretation of this Services Agreement. The Schedules referred
to herein shall be construed with and as an integral part of this Services
Agreement to the same extent as if they were set forth verbatim herein.
7.13 Survival. Notwithstanding anything to the contrary herein, the
rights and obligations of the parties under this Service Agreement which by
their nature would continue beyond the termination of this Services Agreement,
including, but not limited to, the rights and obligations set forth in
Sections 3.3, 6.1, 7.1, 7.3, 7.7 and 7.14, shall survive termination of this
Services Agreement.
7.14 Confidentiality. (a) Notwithstanding any other provision of
this Services Agreement to the contrary, each party agrees that, throughout
the Term, such party shall remain subject to (i) all of the terms and
conditions of the Mutual Nondisclosure Agreement, dated as of
8
September 5, 2001 (the "Confidentiality Agreement"), between Seller and EMCOR
Group, Inc., which Confidentiality Agreement is incorporated herein by
reference; and (ii) the provisions of Section 6.6 of the Purchase Agreement,
which are incorporated herein by reference.
(b) All confidential or proprietary information obtained by Seller
in connection with the provision of the Seller Provided Services and relating
to the Buyer's business shall be treated by Seller as Confidential Information
pursuant to the terms of the Purchase Agreement and the Confidentiality
Agreement. In connection with the Seller Provided Services described on
Schedule 2.1(A), Seller shall not, and shall cause its Related Parties to not,
seek access to any financial or other data or information belonging to Buyer,
the Company or any Company Subsidiary without the written permission of the
Buyer.
(c) All confidential or proprietary information obtained by Buyer in
connection with the provision of the Buyer Provided Services and relating to
the Seller's business shall be treated by Buyer as Confidential Information
pursuant to the terms of the Purchase Agreement and the Confidentiality
Agreement.
9
IN WITNESS WHEREOF, the duly authorized officers or
representatives of the parties hereto have duly executed this Services
Agreement as of the date first written above.
BUYER: SELLER :
EMCOR-CSI HOLDING CO. COMFORT SYSTEMS USA, INC.
___________________________ _____________________________
Name: Name:
Title: Title:
SCHEDULE 2.1(A)
Seller Provided Services: Software and Intellectual Property
Seller shall provide the following Service upon the following terms:
o Full access to and use of existing COINS accounting services for
Mandell for 90 days. No charge shall be made for this transition
except that if Butch Lanphar travels to Mandell at its reasonable
request, CSUSA Hartford, his employer, shall receive his travel
costs plus $750 per day.
o Continued access to and use of the current wide-area network for a
period of 120 days, including data circuits, access to the AT&T
Frame Relay network, hubs, routers, switches, modem pools, and
firewalls and the continued support of any local area network that
is managed and supported by Seller with respect to Company
Subsidiaries. The charge for this service with respect to Shambaugh
& Son, Inc. ("S&S") will be $180 per day. The charge for this
service for the remaining Company Subsidiaries shall initially be
$420 per day payable monthly. When 10 or fewer Company Subsidiaries
other than S&S are using this service, the charge shall be $280 per
day. When 5 or fewer Company Subsidiaries other than S&S are using
this service, the charge shall be $140 per day.
o Each Company Subsidiary shall be deemed to be no longer using such
service upon the later of (i) the date that they have ceased
accessing the service entirely or (ii) the business day following
the day upon which Comfort has been notified in writing of each such
Company Subsidiary's removal.
o Access to the Hyperion Reporting System until financial reporting
through the Closing Date has been completed. This will be at the
expense of Seller.
o Long-distance access through AT&T Seller agreement after Closing.
Buyer will cause the Company Subsidiaries to pay their individual
bills promptly as received and to give Seller and AT&T at least 45
days notice before disconnecting any individual Company Subsidiary,
provided, however, the notice requirement shall be shortened to 5
days if Buyer agrees to pay to Seller any and all costs that Seller
incurs that results from such shorter notice period.
SELLER CONTACT:
Navid Gardooni or Gordon Beittenmiller
Comfort Systems USA, Inc.
777 Post Oak Blvd., Suite 500
Houston, TX 77056
Tel.: (713) 830-9600
BUYER CONTACT:
Joseph A. Puglisi
EMCOR Group, Inc.
101 Merritt Seven, 7th Floor
Norwalk, Connecticut 06851
Tel: (203) 849-7891
Or
Sheldon I. Cammaker, Esq.
EMCOR Group, Inc.
101 Merritt Seven, 7th Floor
Norwalk, Connecticut 06851
Tel.: (203) 849-7831
SCHEDULE 2.1(B)
Seller Provided Services: Company Subsidiary Checking Accounts
For a period of up to 30 days after the Closing Date, Seller shall
maintain existing Bank One N.A. controlled disbursement accounts for each
Company Subsidiary, excluding Shambaugh & Son, Inc., F&G Mechanical, Inc. and
The Fagan Company (after such exclusions, the "Maintained Accounts"), all as
in effect prior to the Closing Date. Buyer will use its best efforts to
replace each of the Maintained Accounts on the earliest date that is
reasonably possible. With respect to the Maintained Accounts, by not later
than 5:00 p.m. (Central Time) of each business day following the day that a
Company Subsidiary issues one or more checks against its checking account,
Buyer shall report to Seller, by way of e-mail, that such checks have been
issued. The report shall also include, with respect to each such check, the
account number, amount, check number and the issuer thereof. Before the close
of the next banking day thereafter, Buyer shall remit in immediately available
funds by wire transfer to the account designated by Seller the aggregate
amount represented by such checks. Seller shall not be required to maintain
any Maintained Account for any Company Subsidiary as to which it does not
receive either timely reports or timely reimbursement on more than two
occasions. Reimbursement shall not be subject to counterclaim or set-off, and
Buyer shall pay Seller interest at the rate of 1% per day for late
reimbursements, and interest at the rate of 1.5% per day for reimbursements
that are late for more than 10 business days.
Notwithstanding the preceding paragraph, Seller shall provide funds
to the existing Bank One N.A. controlled disbursement account with respect to
each Company Subsidiary that has issued a check on or prior to the Closing
Date in order to honor any such checks so issued against such account, until
all such checks issued on or prior to the Closing Date have been presented for
payment.
SELLER CONTACT:
Michael Sanchez or Gordon Beittenmiller
Comfort Systems USA, Inc.
777 Post Oak Blvd., Suite 500
Houston, TX 77056
Tel.: (713) 830-9600
E-mail address for Mr. Sanchez: msanchez@comfortsystemsusa.com
E-mail address for Mr. Beittenmiller: gbeittenmiller@comfortsystemsusa.com
BUYER CONTACT:
Joseph Serino
EMCOR Group, Inc.
101 Merritt Seven, 7th Floor
Norwalk, Connecticut 06851
Tel: (203) 849-7892
Or
R. Kevin Matz
EMCOR Group, Inc.
101 Merritt Seven, 7th Floor
Norwalk, Connecticut 06851
Tel.: (203) 849-7838
SCHEDULE 2.2
Buyer Provided Services: Purchasing
For a period of five months from the Closing Date, Buyer shall cause
Shambaugh & Son, Inc. ("S&S") to continue to manage, direct and administer the
existing national purchasing program of Seller to the extent required (a) to
obtain rebates for purchases made in 2001 by Seller and its Subsidiaries
(including Company Subsidiaries) and (b) to effect purchases in 2002 (through
the Closing Date), all in a manner consistent with Seller's and S&S's
practices prior to the Closing Date. Buyer shall also permit Seller to make
reasonable inquiries of Joe Jackson of S&S for the period from the Closing
Date through December 31, 2002 regarding the establishment and operation of a
national purchasing program, provided that such inquiries do not unduly
interfere with his duties to S&S and Buyer. In addition, Seller will pay to
Joe Jackson a bonus equal to the sum of (i) 1.5% of rebate cash collected with
respect to 2001 purchasing contracts in excess of $3 million and up to $4
million and (ii) 3% of rebate cash collected with respect to 2001 purchasing
contracts in excess of $4 million.
The fee for the foregoing services shall be $21,000 per month for the
period from the Closing Date to five months thereafter and, in the event such
services commence on a day other than the first day of a month and end on a
day other than the last day of a month, such monthly fees shall be prorated.
In addition, Seller shall reimburse Buyer for its out-of-pocket expenses in
connection herewith.
SELLER CONTACT:
Gordon Beittenmiller or William George
Comfort Systems USA, Inc.
777 Post Oak Blvd., Suite 500
Houston, TX 77056
Tel.: (713) 830-9600
BUYER CONTACT:
Adrian W. Jackman
EMCOR Group, Inc.
101 Merritt Seven, 7th Floor
Norwalk, Connecticut 06851
Tel: (203) 849-7838
Or
Sheldon I. Cammaker, Esq.
EMCOR Group, Inc.
101 Merritt Seven, 7th Floor
Norwalk, Connecticut 06851
Tel.: (203) 849-7831
Annex A
Company Subsidiaries
1. American Mechanical, Inc.
2. Border Electric Co., L.P.
3. Border Mechanical Co., L.P.
4. CS48 Acquisition Corp.
5. Central Mechanical Construction Co., Inc.
6. E.L. Pruitt Company
7. F & G Mechanical Corporation
8. Gotham Air Conditioning Service, Inc.
9. Hillcrest Sheet Metal, Inc.
10. Kilgust Mechanical, Inc.
11. Kuempel Service, Inc.
12. Lowrie Electric Company, Inc.
13. Mandell Mechanical Corporation
14. Maximum Refrigeration & Air Conditioning Corp.
15. Meadowlands Fire Protection Corp.
16. NJM Service Co.
17. Nogle & Black Mechanical, Inc.
18. North Jersey Mechanical Contractors, Inc.
19. Shambaugh & Son, L.P.
*20. Temprite Air Conditioning and Refrigeration, Inc.
21. The Fagan Company
22. Walker-J-Walker, Inc.
Annex B
Subsidiary Groups
Group A
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Border Electrical Co., L.P.
Border Mechanical Co., L.P.
Hillcrest Sheet Metal, Inc.
Lowrie Electric Company, Inc.
Walker-J-Walker, Inc.
Central Mechanical Construction, Inc.
The Fagan Company
Group B
- -------
Shambaugh & Son, L.P.
Kilgust Mechanical, Inc.
Kuempel Service, Inc.
American Mechanical, Inc.
Nogle & Black Mechanical, Inc.
E.L. Pruitt Company
CS48 Acquisition Corp.
Group C
- -------
Temprite Air Conditioning and Refrigeration, Inc.
F&G Mechanical Corporation
Meadowlands Fire Protection Corp.
Gotham Air Conditioning Service, Inc.
Mandell Mechanical Corporation
Maximum Air Conditioning and Heating Corp.
North Jersey Mechanical Contractors, Inc.
NJM Service Co.