AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
between AIR & WATER TECHNOLOGIES CORPORATION,
FALCON ACQUISITION CORP.,
FALCON ASSOCIATES, INC.
and JEFFREY J. CANTWELL
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated
October 27, 1989 (the "Agreement"), between AIR & WATER TECHNOLOGIES
CORPORATION, a Delaware corporation ("AWT'), FALCON ACQUISITION CORP., a
Pennsylvania corporation and a wholly-owned subsidiary of AWT ("FAC"), JEFFREY
J. CANTWELL (the "Stockholder"), and FALCON ASSOCIATES, INC., a Pennsylvania
corporation wholly-owned by the Stockholder (the "Company").
WHEREAS, the Stockholder and the Boards of Directors of AWT, FAC
and the Company have deemed it advisable and in their respective mutual
benefit that the Company be acquired by AWT through a merger of FAC with and
into the Company (the "Merger") in accordance with the terms and conditions of
this Agreement and the Plan of Merger attached hereto as Exhibit A (the
"Merger Agreement"); and
WHEREAS, in contemplation of the delivery of the merger
consideration set forth in Article III hereof and closing of the Transactions
contemplated by this Agreement, including the consummation of the Merger in
accordance with the Pennsylvania Business Corporation Law of 1988, the parties
agree, effective as of the date of this Agreement, to consummate the Merger
subject to the terms and conditions hereof.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
REPRESENTATIONS AS TO CAPITALIZATION
SECTION 1.1 Capitalization of AWT. AWT represents and warrants
that the authorized capital stock of AWT consists of (i) 30,000,000 shares of
Common Stock, $.001 par value per share, of which 13,577,000 shares of Class A
Common Stock ("AWT Common Stock"), and 1,010,000 shares of Class B Common Stock
are issued and outstanding, and (ii) 649,350 shares of Common Stock are
reserved for issuance pursuant to outstanding options. All such outstanding
shares of Common Stock have been duly authorized, validly issued and are fully
paid and nonassessable. All shares of AWT Common Stock which will be
delivered at the Closing (as defined herein) (a) are duly authorized by AWT's
Certificate of Incorporation, (b) will have been duly authorized by AWT's
Board of Directors to be issued and delivered in accordance with the terms of
this Agreement, (c) will at the Time of Merger (as hereinafter defined) be
validly issued, fully paid and nonassessable.
SECTION 1.2 Capitalization of FAC. AWT and FAC represent
and warrant that the authorized capital stock of FAC consists of 100 shares
of common stock, without par value ("FAC Common Stock"), all of which are
outstanding and are duly authorized, validly issued, fully paid and
nonassessable, and are owned of record and beneficially by AWT free and clear
of all liens, charges, pledges, security interests or other encumbrances.
There are no outstanding subscriptions, options, warrants, rights or
commitments of any character relating to or entitling any person to purchase
or otherwise acquire any stock of FAC. There are no preemptive rights or
similar rights to subscribe for or purchase any stock of FAC.
SECTION 1.3 Capitalization of The Stockholder and the
Company. AWT and FAC represent and warrant that the authorized capital
stock of the Company consists of 100 shares of Common Stock, without par
value ("Company Common Stock"), all of which are issued and outstanding. All
such outstanding shares have been, and at the Closing will be, duly authorized,
validly issued, fully paid and nonassessable, and are, and will be at the
Closing, owned of record and beneficially by the Stockholder. At the Closing,
all of such shares will be free and clear of all liens, charges, pledges,
security interests or other encumbrances, and not subject to any restrictions
on transfer or sale except as provided by applicable federal and state
securities laws. There are no shares authorized, issued or outstanding of any
other class of stock or equity interest in the Company. There are no
outstanding subscriptions, options, warrants, rights or commitments of any
character relating to or entitling any person to purchase or otherwise
acquire any stock of the Company. There are no preemptive rights or similar
rights to subscribe for or purchase any stock of the Company.
ARTICLE II
THE MERGER
SECTION 2.1 Constituent Corporations. The Company and FAC shall
be the constituent corporations to the Merger. The Merger shall be
consummated at such time (the "Time of Merger") as all documents necessary to
effect the Merger in accordance with the Pennsylvania Business Corporation Law
of 1988, including, but not limited to, the Merger Agreement, have been filed
with the Department of State of the Commonwealth of Pennsylvania. At the Time
of Merger, FAC shall be merged with and into the Company in accordance with
such law. The Company shall be the surviving corporation of the merger (herein
sometimes called the ("Surviving Corporation"). The name, identity,
existence, rights, privileges, powers, franchises, properties and assets of
the Company shall continue unaffected and unimpaired by the Merger. At the
Time of Merger, the identity and separate existence of FAC shall cease, and
all of the rights, privileges, powers, franchises, properties and assets of
FAC shall be vested in the Company.
SECTION 2.2 Conversion -- of FAC's Common Stock. At the
Time of Merger, the shares of FAC Common Stock outstanding immediately prior
to the Time of Merger shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into a number of shares of
Common Stock, without par value, of the Surviving Corporation equal to the
number of shares of Company Common Stock outstanding immediately prior to
the Time of Merger.
SECTION 2.3 Certificate of Incorporation and Bylaws of
Surviving Corporation. The Certificate of Incorporation and Bylaws of FAC, as
in effect immediately prior to the Time of Merger, shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until the same shall be
amended.
SECTION 2.4 Directors. At the Time of Merger, the directors
of the Company immediately prior to the Time of Merger shall cease to be
directors; each director of FAC immediately prior to the Time of Merger shall
become a director of the Surviving Corporation and, subject to the Bylaws of
the Surviving Corporation and the laws of the Commonwealth of Pennsylvania,
shall serve until his successor is elected and appointed or qualified or until
his earlier death, resignation or removal.
SECTION 2.5 Rights Prior to Exchange. From and after the
Time of Merger, until so surrendered, each certificate theretofore
representing shares of issued and outstanding Company Common Stock shall be
deemed for all corporate purposes to evidence the right to receive one
one-hundredth (1/100) of the merger Consideration into which such shares of
Company Common Stock are converted pursuant to Section 2.6.
SECTION 2.6 Conversion of Company Common Stock. At the Time
of Merger, each share of Company Common Stock issued and outstanding
immediately prior to the Time of Merger shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive one one-hundredth (1/100) of the Merger Consideration set
forth in Section 3.1 hereof.
ARTICLE III
DETERMINATION OF MERGER CONSIDERATION
SECTION 3.1 Merger Consideration. The Merger Consideration
shall consist of and be payable as set forth in this Article III:
(a) On the Closing Date, the Stockholder shall receive from AWT
the number of shares of AWT Common Stock equal to the quotient of (x)
25,000,000 divided by (y) the AWT Common Price (subject to Section 3.1(b)
below, the "Merger Consideration"). The "AWT Common Price" is the average of
the daily closing sale prices of AWT Common Stock on the American Stock
Exchange ("AMEX") for the business days of the AMEX during the Valuation
Period as reported in the The Wall Street Journal, being $17.575 per share.
The "Valuation Period" is the period of 10 AMEX trading days ending on the
fifth day prior to the Time of Merger, or, if such date shall not be an AMEX
trading day, the next preceding AMEX trading day.
(b) Notwithstanding the foregoing Section 3.1(a), in the event
the AWR Common Price is less than or equal to $16.00, the Merger Consideration
shall equal 1,562,500 shares of AWT Common Stock, and (ii) in the event the
AWT Common Price is $19.00 or more, the Merger Consideration shall equal
1,315,789 shares of AWT Common Stock.
(c) The Stockholder hereby agrees that at the Closing, and upon
receipt of the Merger Consideration, the Stockholder shall deposit with Howard
Lawson & Co., as escrow agent, ten percent (10%) of the shares of AWT Common
Stock so received (the "Escrow Shares"), which Escrow Shares shall be held in
escrow by such escrow agent in accordance with the Escrow Agreement attached
as Exhibit B hereto.
SECTION 3.2 No Fractional Shares. No fractional shares or scrip
representing fractional shares of AWT Common Stock will be issued to the
Stockholder as a part of the Merger Consideration. Instead, AWT will pay to
the Stockholder a cash adjustment equal to the product of (A) the AWT Common
Price multiplied by (B) the fraction of one share of AWT Common Stock which
would otherwise have been issued as part of the Merger Consideration.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDER AND THE COMPANY
In addition to the representations as to capitalization set forth
in Article I hereof, the Stockholder and the Company, jointly and severally,
hereby represent and warrant to AWT and FAC as follows:
SECTION 4.1 Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all requisite power and authority,
corporate and otherwise, to own, operate and lease its properties and to carry
on its business substantially as they are being owned, operated and conducted
on the date of this Agreement. The Company is duly qualified and in good
standing in each of the jurisdictions listed in Schedule 4.1, which are all of
the jurisdictions in which the nature of the property owned, leased or
operated by it or the nature of the business conducted by it requires such
qualification and in which its failure so to qualify and be in good standing
would materially and adversely affect the condition (financial or otherwise),
business, net worth, properties, operations or prospects of the Company.
SECTION 4.2 Subsidiaries. Except as set forth in Schedule 4.2,
the Company has no subsidiaries and does not own of record or beneficially any
capital stock or equity interest or investment in any corporation, partnership
association or business entity.
SECTION 4.3 Authority Relative to this Amendment. (a) The
Company has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been, or, at the time of execution or
consummation, will be, duly and validly authorized by the Board of Directors
of the Company and have or will have been approved by the Stockholder and no
other corporate proceedings on the part of the Company or the Stockholder are
or will be necessary to authorize, Agreement or to consummate the transactions
contemplated hereby. This Agreement has been, and each of the agreements to
be executed by the Company pursuant hereto will be, at the time of execution,
duly and validly executed and delivered by the Company and constitute or will
constitute a valid and binding obligation of the Company enforceable in
accordance with their respective terms except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect, or by legal or equitable principles, relating to or
limiting creditors' rights and that the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(b) The Stockholder has full legal capacity to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
This Agreement constitutes, and each of the agreements to be executed by the
Stockholder pursuant hereto will, upon execution and delivery thereof,
constitute a valid and binding obligation of the Stockholder enforceable in
accordance with their respective terms except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect, or by legal or equitable principles relating to or
limiting creditors rights and except that the remedy of specific performance
and injunctive and other forms of equitable relief are subject to certain
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
SECTION 4.4 Except as set forth in Second delivery of this
Agreement contemplated any violation of, or create a benefit under, or permit
the acceleration of (whether after the giving of notice or the lapse of time
or both) any obligation under, or result in the creation or imposition of any
Lien (as defined in Section 4.19) upon the Company or any of its properties
or the shares of Company Common Stock owned by the Stockholder, under any
provision of the Certificate of Incorporation or By-laws of the Company or
any Permit (as defined in Section 4.21), note, bond, mortgage, indenture,
bonding agreement, loan agreement, insurance policy or binder of insurance,
license, agreement or lease, or other instrument to which the Company or the
Stockholder is a party, or by which the Company or the Stockholder or any of
their respective properties is bound (including, with respect to the
Stockholder, the shares of Company Common Stock owned by the Stockholder),
other than any such conflicts, breaches, violations or defaults which
individually and in the aggregate (i) do not and will not have a material
adverse effect on the Company or (ii) will be cured (such cure not having a
material adverse effect on the Company) or waived by AWT in writing prior to
the Closing Date. Except as set forth in Schedule 4.4, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
federal, state, municipal, territorial or foreign governmental authority (or
any other public body or authority, domestic or foreign) is required by or
with respect to the Company or the Stockholder in connection with the
execution and delivery of this Agreement or the consummation by the Company
and the Stockholder of the transactions contemplated hereby, except in those
instances where the failure to obtain such consent or approval or the failure
to make such filing, declaration or registration would not in the aggregate
have a material adverse effect upon the Company.
SECTION 4.5 Financial Statements. The Company has heretofore
delivered to A (i) the audited balance sheets of the Company as at December
31, 1988, 1987, 1986 and 1985, respectively, and the related statements of
operations and changes in financial position or cash flows, as appropriate,
for the fiscal years ended December 31, 1988, 1987, 1986 and 1985,
respectively, together with the reports thereon of Karpac Baca & Co. or its
predecessor, the Company's independent certified accountants for those fiscal
years and (ii) an unaudited balance sheet of the Company as at August 31, 1989
(the "Interim Balance Sheet"), and unaudited statements of operations and
cash flows for the eight-month period then ended (all of the foregoing are
sometimes hereinafter referred to collectively as the "Financial
Statements"). The Financial Statements, together with the notes thereto,
present fairly the financial condition of the Company as at the respective
dates thereof, and such statements of operations and changes in financial
position or cash flows and the notices thereto fairly present the results of
operations for the periods therein referred to, all in accordance with
generally accepted accounting principles ("GAAP") consistently applied
throughout the periods involved, except as otherwise noted therein and except
that the Interim Balance Sheet and related statements of operations and cash
flows are subject to adjustments, including normal recurring accruals, which
are, in the opinion of management, necessary for a fair presentation, of the
results for the interim period.
SECTION 4.6 Absence of Undisclosed Liabilities. Except as
set forth in Schedule 4.6, at the date of this Agreement the Company has no
material liabilities or obligations, known or unknown, secured or unsecured
(whether absolute, accrued, fixed, contingent or otherwise, and whether due or
to become due), of a nature required by generally accepted accounting
principles to be reflected in a corporate balance sheet or disclosed in the
notes thereto, except such liabilities and obligations which are accrued or
reserved against in the Interim Balance Sheet and disclosed in the notes
thereto or which were incurred after the date of the interim Balance Sheet in
the ordinary course of business.
SECTION 4.7 Absence of Certain Changes or Events. Except as
set forth in Schedule 4.7 or in the notes to the Interim Balance Sheet and
related financial statements of the Company and except as otherwise
contemplated by this Agreement, between December 31, 1988 and the date of
this Agreement: (A) there has not occurred (i) any change which materially
and adversely affects, nor any event which, so far as the Company can
reasonably foresee, would result in any material adverse change in the
business, financial condition, operations or prospects of the Company, or
(ii) any event, circumstance or combination thereof, whether arising prior to
or after December 31, 1988, which might reasonably be expected to result in any
material adverse change in the business, financial condition, properties,
operations or prospects of the Company before or after the Closing Date; (B)
and the Company has not (i) purchased, redeemed, issued, sold or otherwise
acquired or disposed of, directly or indirectly, any shares of its capital
stock or any other of its securities, or granted any options, warrants or
other rights to purchase or convert any obligation into any shares of its
capital stock or into any of its securities, (ii) incurred any obligation or
liability, absolute or contingent, except normal trade or business obligations
or liabilities incurred in the ordinary course of business, or mortgaged,
pledged or subjected to any Lien any of its assets or properties, except in
the ordinary course of business, (iii) incurred, assumed or guaranteed any
indebtedness for borrowed money, (iv) suffered any damage, destruction or
loss, whether covered by insurance or not, materially and adversely affecting
the business, financial condition or operations of the Company, (v) made any
declaration, payment or setting aside for payment of any dividend (whether in
cash, stock or property) with respect to the capital stock of the Company,
(vi) made any acquisition or disposition of assets except in accordance with
past practice, in the ordinary course of business, (vii) transferred or
granted any concessions, leases, licenses or agreements with respect to any
Proprietary Rights as defined in Section 4.11 hereof, (viii) introduced any
material change with respect to the operation of its business, including,
without limitation, its method of accounting, (ix) entered into any material
commitment or transaction (including without limitation any borrowing or
capital expenditure) which is not, in accordance with past practice, in the
ordinary course of business, or (x) entered into or agreed to enter into any
agreement or other arrangement to take any action described in this Schedule
4.7, including, without limitation, any agreement or arrangement granting any
preferential right to purchase any of its assets, properties or rights or
requiring the consent of any party to the transfer and assignment of any such
assets, properties or rights.
SECTION 4.8 Management and Employees. Set forth in Schedule
4.8 is a true and complete list of (a) all directors and officers of the
Company, specifying their names, titles and compensation, and (b) all other
employees or consultants of the Company whose total compensation for the
fiscal year ended December 31, 1988 exceeded $50,000, specifying their names
and job designations, and the basis of such compensation, whether fixed or
commission or a combination thereof. Except as disclosed in Schedule 4.8,
since December 31,1988 there has been no material change, other than in the
ordinary and usual course of business, in the compensation payable, by means
of wages, salaries, bonuses, gratuities or otherwise, to any such director,
officer, employee or consultant of the Company, or any change in compensation,
either material in amount or other than in the ordinary and usual course of
business, to any other employee or consultant of the Company.
SECTION 4.9 Contracts. Schedule 4.9 constitutes a full and
complete list (identifying in each case the name of the document, the date
thereof and parties thereto and the name, date of and parties to any
amendment, supplement or other modification thereof), as of the date of this
Agreement, of each partially or totally executory contract, agreement,
commitment, option or understanding, whether written or oral, of the following
types, to which the Company is a party or by which any of its properties are
bound ("Contracts"):
(a) All loan agreements, trust agreements, indentures,
mortgages, promissory notes and other agreements or instruments creating
or evidencing indebtedness of the Company other than trade debt payable
in the ordinary course of business;
(b) All employment, commission, profit sharing, consulting,
management, advisory, non-competition and other similar agreements or
understandings;
(c) All collective bargaining agreements;
(d) All partnership or joint venture agreements of any kind;
(e) All real property or equipment leases which are material to
the conduct of the business operations of the Company;
(f) Each other contract or commitment involving the future
payment or receipt by the Company of more than $250,000 or which is
material to the business, operations or financial condition of the
Company; and
(g) All powers of attorney and similar authorizations (whether
revocable or irrevocable) to any person, or corporation that is or may
hereafter be in force for any purpose whatsoever. Correct and complete
copies of all those written Contracts described in Schedule 4.9 have
been delivered prior to or concurrently with the date hereof. Except as
set forth in Schedule 4.9, the Company is not a party to, nor is it
bound by, any Contract that the Company can reasonably foresee will
result in any loss upon the performance thereof (including any material
liability for penalties or damages, whether liquidated, direct,
indirect, incidental or consequential, or down-time charges), which loss
would be material to the financial condition of the Company. Except as
set forth in Schedule 4.9, no third party has raised any material
claim, dispute or controversy with respect to any Contract of the
Company nor has the Company received notice or warning of alleged
material non-performance, material claim, dispute or controversy with
respect to material obligations under any such Contract; nor are there
any facts which, to the best knowledge of the Company and the
Stockholder, exist indicating that any such Contract may be totally or
partially terminated or suspended by any party thereto, which
termination or suspension, individually or in the aggregate, would be
material to the condition (financial or otherwise), business, net worth,
assets, properties, operations or prospects of the Company. Except as
set forth in Schedule 4.9, the Company is not a party nor is it bound by
any Contract which in any manner limits or restricts the Company from
competing in any line of business or carrying on or expanding the
mature or geographical scope of its business anywhere in the world.
SECTION 4.10 No Default. Except as set forth in Schedule 4.10,
the Company has in all material respects performed, or is now performing, the
obligations of, and is not in default (and would not by the lapse of time
and/or the giving of, notice be in default) in respect of, any note, debt
instrument, security agreement, option to purchase, lease, deed of trust or
mortgage, or any other contract binding upon the Company, or the assets or
properties thereof, which failure of performance or default, individually or
in the aggregate, would be material to the condition (financial or otherwise),
business, net worth, assets, properties, operations or prospects of the
Company. Except as set forth in Schedule 4.10, to the Company's and the
Stockholder's knowledge, no party with which the Company has a contract that
is of material importance to the condition (Alimancial or otherwise),
business, net worth, assets, properties, operations or prospects of the
Company, is in default thereunder (or would by the lapse of time and/or the
giving of notice be in default) or has breached or indicated any intention to
breach any terms or provisions thereof.
SECTION 4.11 Proprietary Rights. Except as set forth in
Schedule 4.11, the Company does not own or license or have any other
proprietary interest in any United States or foreign registered trademark,
service marks or trade names; unregistered trademarks, service marks or trade
names; trademark, service mark or trade name applications; product
designations or model numbers; unexpired patents; pending or filed patent
applications; current or active invention disclosures; inventions on which
disclosures are to be prepared; trade secrets; registered copyrights; or
unregistered copyrights which are material to the business of the Company
(collectively, (the "Proprietary Rights"). Except as set forth in Schedule
4.11, Proprietary Rights are necessary or material to the conduct of the
business of the Company. To the best knowledge of the Stockholder and the
Company, the operations of the Company do not conflict with or infringe upon,
and no one has asserted to the Company that such operations conflict with or
infringe upon, any Proprietary Rights owned, possessed or used by any third
party.
SECTION 4.12 Litigation. Except as set forth in Schedule
4.12, there is no claim, dispute, investigation, action, proceeding, suit or
appeal (collectively "Actions"), at law or in equity, pending against the
Stockholder or the Company, or involving any of their respective assets or
properties, before any court, agency, authority, arbitration panel or other
tribunal, other than those, if any, with respect to which service of process
or similar notice has not yet been made on the Stockholder or the Company,
which would be likely to have a material adverse effect on the condition
(financial or other- wise), business, net worth, assets, properties,
operations or prospects of the Company or which would have an adverse effect
on the Company's or the Stockholder's ability to perform their respective
obligations hereunder to consummate the transactions contemplated hereby, and
no such Actions have been threatened against the Stockholder or the Company.
Except as set forth in Schedule 4.12, neither the Stockholder nor the Company
is subject to, in violation of, or in default under, and no event has occurred
which, with the lapse of time or the giving of notice or both, could result in
the violation of, or default under the terms of any judgment, decree, order,
writ or injunction of any court or any federal, state, local or other
governmental department, commission, board, bureau, agency, authority,
arbitration panel, tribunal or other instrumentality. Schedule 4.12 also
contains a true and complete list of all Actions (whether or not covered by
insurance) to which the Stockholder or the Company is a party in which the
amount in controversy exceeds $100,000.
SECTION 4.13 Compliance with Laws and Orders. Except as set
forth in Schedule 4.13 and excluding all matters otherwise covered by Section
4.26, the Company has controlled and [?."s] operations have been conducted in
accordance with, all laws, regulations and orders (including, without
limitation, securities, zoning ordinances, building codes, civil rights and
occupational health and safety laws and regulations) applicable thereto and to
the conduct of its business, except where the failure to so comply would not
have a material adverse effect on the transactions contemplated hereby or on
the condition (financial or otherwise), business, net worth, assets,
properties, operations or prospects of the Company.
SECTION 4.14 Tax Matters. For purposes of this Agreement
"Taxes" or "Tax" means all net income, capital gains, gross income, gross
receipts, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
or windfall profit taxes, customs duties, or other taxes, fees, assessments,
or charges of any kind whatsoever, together with any interest and any
penalties, additions to tax, or additional amounts imposed by any taxing
authority, ("Taxing Authority") upon the Company.
(i) Except as set forth on Schedule 4.14, the Company has filed
all federal, foreign, state and local tax returns, tax information
returns, reports, and estimates for all years and periods (and portions
thereof) ending on or before the Closing Date for which any such
returns, reports or estimates were due. All such returns, reports,
and estimates were prepared in the manner required by applicable law,
and all Taxes shown thereby to be payable and all tax payments which are
due, regardless of the making of any filing, have been paid.
(ii) Schedule 4.14 sets forth all jurisdictions in which the
Company has filed or will file income or franchise tax returns for each
taxable period, or portion thereof, ending on or before the Closing
Date.
(iii) Except as set forth on Schedule 4.14, the Company has
withheld or will withhold amounts from its respective employees and has
filed or will file all federal, foreign, state, and local returns and
reports with respect to employee income tax withholding and social
security and unemployment taxes for all periods (or portions thereof)
ending on or before the Closing Date, in compliance with the provisions
of the Internal Revenue Code of 1986, as amended and currently in
effect (the "Code"), and other applicable federal, foreign, state, and
local laws.
(iv) The Company has paid, or provided a sufficient reserve on
the Interim Balance Sheet or the Company's books, for the payment of,
all federal, state, local, and foreign Taxes with respect to all
periods, or portions thereof, up to and including the Closing Date.
(v) None of the federal, foreign, state and local tax returns of
the Company have been examined by the appropriate taxing authority and,
except as set forth in Schedule 4.14, there are no material claims or
investigations by any Taxing Authority or, to the best knowledge of the
Stockholder and the Company, threatened, against the Company for any
past due Taxes; and there has been no waiver of any applicable statute
of limitations or extension of the time for the assessment of any tax
against the Company except as set forth on Schedule 4.14.
(vi) The Company has not made, signed, or filed, nor will it
make, sign or file any consent under Section 341(f) of the Code with
respect to any taxable period ending on or before the Closing Date.
(vii) The Stockholder is not a foreign person within the meaning
of Section 1445(b)(2) of the Code.
(viii) The Company has never been, nor is it currently, a party to
any agreement relating to the sharing of any liability for, or payment
of, taxes with any other person or entity.
(ix) The Company has delivered to AWT before the date hereof,
correct and complete copies of all tax returns, tax information returns
and estimates filed with any federal, foreign, state or local tax
authority for the Company's fiscal years ending December 31, 1985 through
and inclusive of 1988.
SECTION 4.15 Corporation Status. The Company is a "small
business corporation" within the meaning of Section 1361(b) of the Code. The
Company, the Stockholder and all former stockholders of the Company have taken
all necessary corporate action to authorize the Company to elect under
Section 1362 of the Code to be an "S corporation" for federal income tax
purposes. The election to be an S corporation for federal income tax
purposes was validly made by timely filing in the appropriate office of the
Internal Revenue Service a properly executed Form 2553. All required
consents to such election by all former stockholders of the Company and the
Stockholder have been obtained and were filed with the Form 2553. Such
election has been in effect throughout the Company's current taxable year,
has not been revoked or terminated, and will not be revoked or terminated
prior to the Closing. Similar elections or consents have been executed and
filed in every state in which the Company does business if such state
recognizes S corporation status and requires similar consents or elections.
SECTION 4.16 Leased Real Property.
(i) Schedule 4.16 is a list, true and correct, of all leases and
subleases (collectively, the "Real Property Leases"), with respect to
real property leased by the Company (the "Leased Real Property"). The
Stockholder has delivered to AWT true and correct copies of each of the
Real Property Leases at least five (5) business days before the date
hereof.
(ii) Neither the Company nor the Stockholder owes any money to
any architect, contractor, subcontractor or materialman for labor
performed or materials supplied in connection with Leased Real Property.
SECTION 4.17 Real Property. (i) Schedule 4.17 is a list,
true and correct, of all property of which the Company is the record or
beneficial owner (the "Real Property"). Except for the Real Property and any
easements or rights-of-way for the benefit of the Company which are
appurtenant thereto and the Leased Real Property and any easements or
rights-of-way for the benefit of the Company which are appurtenant thereto,
there are no real property interests used in the business of the Company. The
Stockholder has delivered to AWT true and correct copies of all deeds or other
instruments of title conveying the Real Property to the Company.
(ii) Schedule 4.17 is a list, true and correct, of all easements,
and other instruments in the nature of easements, including, without
limitation, agreements, indentures, franchise agreements and license
agreements, in each case with respect to real property and to which the
Company is a party (all such easements and/or other agreements are
hereinafter collectively referred to as "Easements.") The Stockholder
has delivered to AWT true and correct copies of all Easements.
(iii) As to the Real Property, neither the Company nor the
Stockholder has received notice of, or has knowledge of, any pending or
threatened condemnation proceedings.
(iv) To the Stockholder's best knowledge, all components and
systems of all buildings, structures and other improvements included
within the Real Property are in good working order, adequate for the
Company to operate its business in accordance with good industry
standards and to enable the Real Property to be used and operated,
except to the extent construction is incomplete thereon, as it is
currently being used and operated.
(v) There are presently no mechanics or materialmen's liens
recorded against the Real Property.
SECTION 4.18 Tenancies. Except for the Real Property
Leases, and except as set forth in Schedule 4.18, there are no leases or
tenancies for any part of the Real Property or the Leased Real Property that
shall remain in effect after the Time of Merger, nor shall any third party have
any rights to the purchase, use or possession of all or any part of the Real
Property or the Leased Real Property at the Time of Merger.
SECTION 4.19 Title and Related Matters. (a) The Company
has, and, after giving effect to the transactions contemplated hereby, the
Surviving Corporation will have, (A) good and marketable title to, or a valid
leasehold interest in, as the case may be, all of the Real Property, Leased
Real Property, and Easements, with all rights under applicable state laws to
maintain ownership, leasehold status and/or Easement holder status, as
applicable, and to maintain the use and benefit of such property as it is
being used and enjoyed on the date hereof, and (B) good and marketable title
to, or a valid leasehold interest in, (i) all other properties and assets
(whether personal or fixed, tangible or intangible) reflected in the Company's
Interim Balance Sheet or acquired after August 31, 1989 by the Company, (ii)
all properties or assets held by the Company which are subject to operating
leases as defined in accordance with GAAP and are not reflected in the
Company's Balance Sheet, and (iii) all other properties and assets used by the
Company and material to the conduct of its business, except for, in each such
case, any of such properties or assets sold or otherwise disposed of for fair
value, as determined in the good faith judgment of the Board of Directors of
the Company, or with respect to which the lease has expired or has been
terminated since August 31, 1989, in the ordinary course of business. All
properties, Easements, and assets referred to in the preceding sentence are
presently owned, [he"d] under lease or held under easement by the Company,
and immediately after the Time of Merger, will be owned, held under lease or
held under easement by the Surviving Corporation, free and clear of all
mortgages, liens, pledges, charges, security interests, options to purchase
or other encumbrances of any kind or character except (i) liens for taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any of its property, real or personal, or upon any
part thereof if the same shall not at the time be due and payable, or are being
contested in good faith by appropriate proceedings and (ii) liens imposed by
law, such as those of carriers, warehousemen and mechanics, for sums not yet
due or being contested in good faith by appropriate proceedings
(collectively, "Liens" and individually, a "Lien") and with respect to the
Real Property, except Liens listed on Schedule 4.17. The Real Property Leases
and all other documents and agreements pursuant to which the Company has
obtained the right enforceable, except as enforceability thereof may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium, or
other similar laws now or hereafter in effect, or by legal or equitable
principles, relating to or limiting creditors' rights generally and except
that the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought;
all Easements, licenses, permits and authorizations in any manner related to
the operation of the business on the Real Property, the Leased Real Property
and the Easements are in good standing, valid and enforceable in accordance
with their respective terms; and there is not, under any of the foregoing
instruments, documents or agreements, any existing default or event which with
notice or lapse of time, or both, would constitute a default the effect of
which would have a material adverse effect on the Company. To the best
knowledge of the Stockholder and the Company, all improvements on the Real
Property and the Leased Real Property conform in all material respects to
applicable state and local zoning and other land use ordinances and building
codes.
(b) Title to Company and Common Stock. The Stockholder is now,
and shall at the Time of Merger be, the sole record and beneficial owner of
all of the issued and outstanding shares of the Company Common Stock, which
shall, at the Time of Merger, be free and clear of any and all Liens, and
subject to no options, proxies, contracts, calls, commitments or rights of
third parties of any kind whatsoever.
SECTION 4.20 Insurance. The Company's tangible real and personal
property and assets, whether owned or leased, are insured against and Schedule
4.20 is a true, correct and complete schedule of all casualty, property
damage, general liability and other policies or binders of insurance or
programs of self insurance which relate to the Company's business. The
coverage under each such policy and binder is in full force and effect, and no
notice of cancellation or nonrenewal with respect to, or disallowance of any
claim under, any such policy or binder has been received by the Company.
Neither the Stockholder nor the Company has knowledge of any facts or the
occurrence of any even, which reasonably might form the basis of any claim
against the Company relating to its business or operations or any of its
assets or properties covered by the policies or binders set forth in Schedule
4.20, which claim the Stockholder or the Company has reason to believe will
increase the insurance premiums payable under any such policy or binder.
Notwithstanding the foregoing, neither the Company nor the Stockholder is
making any representation or warranty regarding the capitalization or
condition (financial or otherwise) with respect to American Safety Risk
Retention Group or American Safety Insurance Group.
SECTION 4.21 Authorizations. The Company has complied with
and has made all filings required pursuant to all federal, state, municipal or
local constitutional provisions, laws, ordinances, rules, regulations and
orders in connection with the conduct of the business of the Company, except
where the failure to comply would not have a material adverse effect on the
Company. Except as set forth on Schedule 4.21, the Company has all
governmental licenses, permits and authorizations necessary for the conduct of
its business as currently conducted (the "Permits"), and all such Permits are
and, as of the Closing Date, will be, in full force and effect, and no
violations exist in respect of any such Permits, and no proceeding is pending
or, to the best knowledge of the Stockholder or the Company, threatened, to
revoke or limit any provision thereof. All such Permits are set forth on
Schedule 4.21. The Company has not violated nor has the Stockholder or the
Company any knowledge of any alleged or potential violation of any
constitutional provisions, laws, ordinances, rules, regulations or orders,
cured or not, or any injunction or governmental order or decree, except those
violations the existence of which would not have a material adverse effect on
the Company. There are no proceedings pending or threatened that may result in
the revocation, cancellation or suspension, or any adverse modification of,
any of such Permits.
SECTION 4.22 Pension and Other Benefit Plans.
(a) Schedule 4.22 contains a true and complete list and
description of, and the Stockholder has delivered to AWT true and complete
copies of, each pension, retirement, profit-sharing, stock purchase, stock
option, vacation, severance, deferred compensation, bonus or other incentive
plan, or other employee benefit program, arrangement, agreement or
understanding, or medical, vision, dental or other health plan, or life
insurance or disability plan, or any other employee benefit plans, including,
without limitation, any "employee benefit plan" as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), to
which the Company contributes or is a party or is bound or under which it may
have liability and under which employees or former employees of the Company
(or their beneficiaries) are eligible to participate or derive a benefit.
Except as described in Schedule 4.22, each employee benefit plan which is a
"group health plan" as such term is defined in Section 162(i)(2) of the Code
satisfies the applicable requirements of Section 4980B of the Code. Except as
described on Schedule 4.22, the Stockholder and the Company have no intention
or commitment, whether legally binding or not, to create any additional plan,
practice or agreement or modify or change any existing plan, practice or
agreement that would affect any employee or terminated employee of the Company
and the benefits under all employee benefit plans are as represented and have
not been and will not be increased subsequent to the date documents have been
provided.
(b) Except as disclosed on Schedule 4.22, the Company does not
sponsor, maintain or contribute to any employee benefit plans within the
meaning of Section 3(3) of ERISA, which are subject to Title I of ERISA (the
"ERISA Plans") for the benefit of employees or former employees of the
Company. Each pension plan within the meaning of Section 3(2) of ERISA
("Pension Plan") is identified on Schedule 4.22. The following
representations are made with regard to the ERISA Plans or the Pension Plans,
if so limited:
(1) except as set forth on Schedule 4.22, the Company does
not contribute to or have an obligation to contribute to or has at any
time contributed to or had an obligation to contribute to, sponsor or
maintain nor at any time has sponsored or maintained a multiemployer plan
within the meaning of Section 3(37) of ERISA and the Company has not
incurred any withdrawal liability, or suffered a "complete withdrawal"
or a "partial withdrawal" with respect to a multiemployer plan,
including any liability attributable to a current or former member of
the Company's "controlled group" (as defined in Section 4001(a)(14) of
ERISA);
(2) the Pension Plans and related trusts have been
determined by the Internal Revenue Service ("IRS") to be qualified under
the Code, the IRS has taken no action to revoke such determination or
qualification and the Company has not acted or has not failed to act in
such a way which would adversely affect the qualified status of the
Pension Plans;
(3) the Company has, in all material respects, performed
all obligations, whether arising by operation of law or contract,
required to be performed under or in connection with the ERISA Plans,
and the Stockholder has no knowledge of any default or violation by any
other party with respect to the ERISA Plans;
(4) the Company has complied in all material respects with
ERISA, and, where applicable, the Code, regarding the ERISA Plans;
(5) except as disclosed on Schedule 4.22, all resorts and
disclosures relating to the ERISA Plans required to be filed with or
furnished to governmental agencies, plan participants or plan
beneficiaries have been or will be filled or furnished in accordance with
applicable law in a timely manner;
(6) there are no actions, claims or proceedings pending
(other than routine claims for benefits) or, to the best knowledge of
the Stockholder, threatened, against any ERISA Plan or against the
assets funding any ERISA Plan;
(7) full payment has been or will be made, in accordance
with Section 404(a)(6) of the Code, of all amounts which the Company is
required to pay under the terms of the Pension Plans as contributions to
the Pension Plans as of the last day of the most recent plan year of the
Pension Plans ended prior to the date of this Agreement or with respect
to Section 412(m) of the Code, and neither the Pension Plans nor the
trusts established thereunder have incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, as of the last day of the most recent plan
year of the Pension Plans ended prior to the date of this Agreement and
the Company has fulfilled its obligations under minimum funding
standards of ERISA and the Code;
(8) the Company maintains adequate accruals on its books
to reflect accrued contributions to each of the Pension Plans for the
current plan year and to reflect accrued medical and dental claims
incurred, but not yet paid, under the terms of any ERISA Plan which is a
welfare plan within the meaning of Section 3(1) of ERISA (a "Welfare
Plan");
(9) no transactions have occurred with respect to the
Pension Plans or the assets thereof which could result in the imposition
on the Company or the administrators or trustees under the Pension
Plans, either directly or indirectly, of taxes or penalties imposed
under Section 4975 of the Code or Section 502(i) of ERISA;
(10) with respect to the Pension Plans, regardless of
whether such plans are subject to Title IV of ERISA, no termination or
reportable event, as defined in Section 4043(b) of ERISA, has occurred
or is anticipated to occur;
(11) other than applications for determination, no action
is pending with respect to the Pension Plans before the IRS, the
Department of Labor, the Pension Benefit Guaranty Company ("PBGC') or
before any state or local governmental agency;
(12) no act or omission constituting a breach of fiduciary
duties has occurred with respect to the ERISA Plans or the assets
thereof which could subject the Company or AWT, either directly or
indirectly, to any liability;
(13) no liability under Title IV of ERISA has been incurred
by the Company since the effective date of ERISA, other than liability
for premiums due to the PBGC which has been satisfied in full and
neither the Stockholder nor the Company knows of any facts or
circumstances which might give rise to any liability of the Company
under Title IV of ERISA which could reasonably be anticipated to result
in any claims being made against AWT by the PBGC, including any
liability attributable to a current or former member of the Company's
"controlled group" within the meaning of Section 414(b), (c), (m) or (o)
of the Code;
(14) except as set forth in Schedule 4.22, the fair market
value of the assets of each of the Pension Plans which is a "defined
benefit plan" as defined in Section 3(35) of ERISA equals or exceeds the
present value of accrued benefits under each such plan computed on a
projected benefit obligation basis, based upon actuarial assumptions set
forth in the plans and which are reasonable in the aggregate;
(15) the PBGC has not instituted any proceedings to
terminate any of the Pension Plans;
(16) no security is required to be provided pursuant to
Section 401(a)(29) of the Code with respect to any employee benefit
pension plan;
(17) any bonding required by applicable provisions of ERISA
with respect to any of the ERISA Plans has been obtained and is in full
force and effect;
(18) each Welfare Plan is intended to meet currently
applicable requirements for tax favored treatment under Subchapter B of
Chapter 1 of the Code, is in compliance with such requirements and, if
applicable, with the requirements of Sections 419 and 419A of the Code
and there is no disqualified benefit (as such term is defined in Section
4976(b) of the Code) which would subject the Stockholder, the Company or
AWT to a tax under Section 4976;
(19) the Company neither maintains nor contributes to any
Welfare Plan which provides any benefits to retirees;
(20) the transactions contemplated by this Agreement will
not result in liability for severance pay or any similar payment to the
employees of the Company;
(21) except as disclosed on Schedule 4.22, there are no
employment, consulting, severance or similar agreements in effect with
respect to the Company; and
(22) except as disclosed on Schedule 4.22, the terminations
of the Falcon Associates, Inc. Pension Plan, the Falcon Associates, Inc.
Deferred Benefit Pension Plan and the Falcon Associates, Inc. Money
Purchase Plan (the "Terminated Plans") do not affect their qualified
status.
(c) The Stockholder has delivered to AWT and its counsel true
and complete copies of (i) all documents governing the ERISA Plans, including
all amendments thereto which will become effective at a later date; (ii) the
latest IRS determination letter obtained with respect to each of the Pension
Plans; (iii) Form 5500 for the most recent completed plan year for each of the
ERISA Plans, together with all schedules forming a part thereof; (iv) the most
recent actuarial valuation for any Defined Benefit Plan; (v) any form, other
than Form 5500, required to be filed for the most recently completed plan year
for any Defined Benefit Plan with any governmental agency; (vi) all summary
plan descriptions, if any, and insurance policies or contracts relating to the
ERISA Plans; (vii) the annuity contracts funding obligations of any Defined
Benefit Plan; (viii) all employment manuals and (ix) all documentation
relating to the termination of the Terminated Plans.
SECTION 4.23 Finders or Brokers. Neither the Company nor the
Stockholder has employed any investment banker, broker, finder or intermediary
in connection with the transactions contemplated hereby who is entitled to a
fee or any commission in connection with the execution of this Agreement or
any transaction contemplated under this Agreement other than Howard, Lawson &
Co. ("Broker"). The Company has not and, at the Closing Date, will not have
incurred transaction costs or fees greater than $1,050,000, including but not
limited to the fees, expenses and costs of the Broker.
SECTION 4.24 Certain Interests. Except as set forth in Schedule
4.24 and except as set forth in the Interim Balance Sheet or the notes
thereto, to the best knowledge of the Stockholder and the Company, since
December 31, 1988 no officer or director of the Company or any relative (by
blood, marriage or adoption) of such officer or director, except in the
ordinary course of business, (a) has acquired any interest in any property of
the Company (except as a stockholder of the Company) or (b) has entered into
any business relationship with the Company (except as an officer, director or
stockholder thereof), in the case of either (a) or (b) of a nature which would
be required to be disclosed in a proxy statement relating to the election of
directors filed under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
SECTION 4.25 Employees. To Stockholder's and the Company's
knowledge, as of the date hereof no employee of the Company is, or is now
expected to be, in violation of any term of any employment contract, patent
disclosure agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant or any other common law obligation to a
former employer relating to the right of any such employee to be employed by
the Company because of the nature of the business conducted or to be conducted
by the Company or to the use of trade secrets or proprietary information of
others, and the employment by the Company of its employees does not subject
the Company to any such liability. There is neither pending nor threatened
any action, suit, proceeding or claim, or threat thereof with respect to any
contract, agreement, covenant or obligation referred to in the preceding
sentence.
SECTION 4.26 Compliance with Environmental Laws. Except as set
forth in Schedule 4.26, here are no present or past Environmental Conditions
in any way relating to the business of the Company. For purposes of this
Agreement, "Environmental Condition" means (i) any environmental pollution,
including without limitation any contaminant, irritant or pollutant, from any
spill, discharge, leak, emission, escape, injection, dumping or release of any
kind whatsoever in any work places or to any medium, including without
limitation air, land, surface waters or ground waters or from any generation,
transportation, treatment, discharge, storage or disposal of waste materials,
hazardous materials, toxic materials or from the storage, use or handling of
any waste, hazardous or toxic materials, except in all cases for any
environmental pollution occurring in the ordinary course of the business of
the Company and in accordance in all material respects with all applicable
laws and regulations relating thereto, or (ii) any violation of any foreign,
federal, state or local environmental law, rule, regulation or order as a
result of or in connection with any of the foregoing, except those violations
the existence of which would not have a material adverse effect on the
Company. Except as set forth on Schedule 4.26, the operation of the business
of the Company does not violate, and has not in the past violated, in any
material respect, any applicable law, rule, regulation or order, whether
foreign, state, federal or local, relating to air, water, or noise pollution,
employee health and safety, or the production, storage, labeling,
transportation or disposition of waste or hazardous or toxic substances.
Neither the Stockholder nor the Company, nor, to the best knowledge of the
Stockholder and the Company, any other person has stored any chemical
substances, including, without limitation, any waste materials, petroleum,
crude oil, PCB'S, asbestos or any "Hazardous Substances," "Pollutants" or
"Contaminants," (collectively, the "Contaminants") as such terms are defined in
the Comprehensive Environmental Response Compensation and Liability Act of
1980, as amended ("CERCLA"), on, beneath or about any of the respective
properties of the Company, except in compliance in all material respects with
all applicable laws, rules and regulations. The Company has not received any
notice advising the Company that it is potentially responsible for response
costs with respect to a release or threatened release of Contaminants.
Neither the Stockholder nor the Company nor, to the best knowledge of the
Stockholder and the Company, any other person, has transported, buried, dumped
or otherwise disposed of any Contaminants on, beneath or about any of the
respective properties of the Company, or on, beneath or about any other
property, except in compliance in all material respects with all applicable
laws, rules and regulations. Neither the Stockholder nor the Company has
violated any environmental, zoning or land use ordinance, law, rule,
regulation or order relating to the operation of the business of the Company,
or any of the processes followed or products made thereby, including, but not
limited to, CERCLA, the Toxic Substances Control Act of 1976, as amended, the
Clean Air Act, as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, or the
Asbestos Hazard Emergency Response Act of 1986, except those violations the
existence of which would not have a material adverse effect on the Company.
SECTION 4.27 Accounts Receivable. The Company's accounts
receivable constitute only legally enforceable obligations of third parties in
connection with the sale of goods and/or services, are good and collectible at
the aggregate recorded amounts thereof (subject to no defense, counterclaim or
setoff) in the ordinary course of business, subject to the allowance for
doubtful accounts (the "Accounts Allowance") of the Company with respect
thereto stated in the Interim Balance Sheet, represent the full invoice value
of all accounts included therein and have not been sold or encumbered.
SECTION 4.28 Inventories. The inventories of the Company are, in
the aggregate, of a quality usable or saleable in the ordinary course of
business, net of the aggregate reserves (the "Inventory Reserves") of the
Company with respect thereto stated in the Financial Statements. The Inventory
Reserves have been established, and through the Closing Date will be
maintained, in a manner consistent with accounting practices of the Company
followed at December 31, 1988.
SECTION 4.29 Banks. Schedule 4.29 contains a correct and
complete list of every bank, savings and loan, or other financial including,
but not limited to, cash contribution accounts, or safe deposit boxes or lock
boxes, and the corresponding account identification number, in any, and the
names of every person authorized to draw on such accounts or have access to
such boxes.
SECTION 4.30 Labor. Except as set forth in Schedule 4.30, there
are no agreements with, or pending petitions for recognition of, a labor union
or association as the exclusive bargaining agent for any or all of the
Company's employees; no such petitions have been pending at any time within
two (2) years of the date of this Agreement, and, to the best knowledge of the
Stockholder and the Company, there has been no organized effort by any union
or other group seeking to represent any employees of the Company as their
exclusive bargaining agent at any time within two (2) years of the date of
this Agreement. There are no labor strikes, work stoppages or other labor
troubles, other than routine grievance matters, now pending, or, to the best
knowledge of the Stockholder and the Company, threatened, against the Company,
nor have there been any such labor strikes, work stoppages or other labor
troubles, other than routine grievance matters, at any time within two (2)
years of the date of this Agreement.
SECTION 4.31 Transfer Taxes. No sales taxes, other property
transfer taxes, nor any other tax, including but not limited to corporation
income and franchise taxes, are required to be paid by the Company solely in
connection with or as a direct result of the transactions contemplated by this
Agreement except for corporate income taxes which will be payable as a result
of the termination of the Company's S-corporation election under the Code and
under applicable state laws.
SECTION 4.31 Customers. Schedule 4.32 sets forth a true and
correct list of the ten largest customers of the Company in terms of sales or
services during the fiscal year ended December 31, 1988 and during the eight
(8) months ended August 31, 1989. To the best knowledge of the Stockholder and
the Company, there has not been any material adverse change in the business
relationship of the Company with any customer named in Schedule 4.32. Except
for the customers named in Schedule 4.32, the Company did not have any
customer who accounted for more than 5% of its sales during the period from
January 1, 1988 to August 31, 1989.
SECTION 4.32 Distribution of Earnings. The Stockholder has not
received distributions from the Company during the period from January 1, 1988
through the Closing Date, which, when aggregated with the dividends described
in Section 6.3(c) hereof, would exceed the aggregate amount of the Company's
earnings for such period.
SECTION 4.33 Unlawful Payment. Neither the Stockholder nor the
Company nor any officer or director of the Company, or, to the best knowledge
of the Stockholder and the Company, any employee, agent or representative of
the Company has made, directly or indirectly, with respect to the business of
the Company, any illegal political, charitable or other contributions or
payments from corporate funds.
SECTION 4.34 Stock Held for Investment. All of the shares of AWT
Common Stock to be received by the Stockholder pursuant to the Merger are
being acquired for the purpose of investment and not with a view to the
distribution or resale thereof in violation of the Securities Act of 1933, as
amended (the "Securities Act").
SECTION 4.35 The Company has obtained all bonds necessary under
the terms of the Contracts to which it is a party or under applicable laws,
rules or regulations, and such bonds are adequate under the terms of such
Contracts and laws, rules and regulations.
SECTION 4.36 Full Disclosure. The statements contained in this
Agreement, the Schedules delivered concurrently herewith and in any other
certificates or documents executed and delivered by or on behalf of the Company
or the Stockholder pursuant to this Agreement are true and correct in all
material respects and do not omit any material fact necessary to make the
statements therein not misleading. All copies of documents furnished by or on
behalf of the Stockholder or the Company to AWT or its officers, attorneys,
accountants or other representatives under any provision of this Agreement are
true and correct copies of such documents, and there are no amendments or
modifications thereto except as set forth in such documents. The minute books
of the Company submitted for inspection by AWT contain full, complete and
accurate records of all meetings and other actions taken by its directors and
stockholders.
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF AWT AND FAC
SECTION 5. Representations and Warranties of AWT and FAC. In
addition to the representations as to capitalization set forth in Article I
hereof, AWT and FAC, jointly and severally, represent and warrant to the
Stockholder and the Company as follows:
SECTION 5.1 Organization. Each of AWT and FAC is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all requisite power and authority,
corporate and otherwise, to own, operate and lease its properties and to carry
on its business substantially as they are being owned, operated and conducted
on the date of this Agreement. Each of AWT and FAC is duly qualified and in
good standing in each of the jurisdictions listed in Schedule 5.1, which are
all of the jurisdictions in which the nature of the property owned, leased or
operated by or the nature of the business conducted by it requires such
qualification and in which its failure so to qualify and be in good standing
would materially and adversely affect the condition (financial or otherwise),
business, net worth, properties, operations or prospects of AWT or FAC, as the
case may be.
SECTION 5.2 Authority Relative to this Agreement. (a) Each of
AWT and FAC gas full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been, or, at the time of execution or
consummation, will be, duly and validly authorized by the Boards of Directors
of AWT and FAC and no other corporate proceedings on the part of either AWT or
FAC are or will be necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been, and each of the
agreements to be executed pursuant hereto, will be, at the time of execution,
duly and validly executed and delivered by AWT and/or FAC, as applicable, and
constitutes or will constitute a valid and binding obligation of AWT and/or
FAC, as applicable, enforceable in accordance with their respective terms
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect, or by legal or
equitable principles, relating to or limiting creditors' rights and except
that the remedy of specific performance and injunctive and other forms of
equitable relief are subject, to certain equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
SECTION 5.3 Consents and Approvals; No Violation. Except as set
forth in Schedule 5.3, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will conflict
with or result in any violation of, or create a default or loss of a material
benefit under, or permit the acceleration of (whether after the giving of
notice or the lapse of time or both) any obligation under, or result in the
creation or imposition of any Lien upon AWT or FAC or any of their properties
under any provision of the Certificate of Incorporation or By-Laws of AWT or
FAC or any note, bond, mortgage, indenture, bonding agreement, loan agreement,
insurance policy or binder of insurance, license, agreement or lease, or other
instrument to which AWT or FAC is a party, or by which it or any of their
properties is bound, other than any such conflicts, breaches, violations or
defaults which individually and in the aggregate (i) do not and will not have
a material adverse effect on AWT or FAC or (ii) will be cured (such cure not
having a material adverse effect on AWT or FAC) or waived by the Company in
writing prior to the Closing Date. Except as set forth in Schedule 5.3, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any federal, state, municipal, territorial or foreign
governmental authority (or any other public body or authority, domestic or
foreign) is required by or with respect to AWT or FAC in connection with the
execution and delivery of this Agreement or the consummation by AWT or FAC of
the transactions contemplated hereby, except in those instances where the
failure to obtain such consent or approval or the failure to make such filing,
declaration or registration would not in the aggregate have a material adverse
effect upon AWT or FAC.
SECTION 5.4 Business. FAC has not engaged in any activities
other than those incident to its organization or as contemplated by the terms
of this Agreement.
SECTION 5.5 Litigation. There is no Action pending, or, to the
best knowledge of AWT or FAC, threatened, against or related to the respective
properties or business of AWT or FAC which might adversely affect or restrict
the ability of any of them to consummate the transactions contemplated hereby.
SECTION 5.6 Financial Statements and Other Data. AWT has
delivered to the Stockholder copies of AWT's audited consolidated financial
statements as of and for the fiscal year ended October 31, 1988, and its
unaudited balance sheet and related statements of operations and cash flow for
the nine month period ended July 31, 1989. These financial statements,
including the notes thereto, present fairly the financial condition and
results of operations of AWT at the dates of and for the periods covered
thereby, in accordance with GAAP consistently applied throughout the periods
involved except as otherwise noted therein and except that the unaudited
financial statements do not contain all required footnote disclosure and are
subject to normal year end adjustments. AWT also has delivered to the
Stockholder copies of AWT's most recent annual report on Form 10-K and
quarterly report on Form 10-Q, proxy statements and other periodic reports
filed with the Securities and Exchange Commission (the "Commission"), pursuant
to the Securities Exchange Act of 1934 since January 31, 1989. Such reports
were filed in a timely manner and complied in all material respects with the
applicable requirements of the Exchange Act and the rules and regulations
promulgated thereunder. There are no material events relating to the business
of AWT required to be disclosed by AWT on a Form 8-K Report which have not
been disclosed to the Stockholder.
SECTION 5.7 Absence of Certain Changes, Events or Conditions.
Since the date of the last quarterly report on Form 10-Q filed by AWT with the
Commission, there has not been, nor (other than events due to changes in
general market or economic conditions) has any event occurred, which could
reasonably be expected to have any material adverse change in AWT's
consolidated financial position, results of operations or business or
prospects; and, except as disclosed in Schedule 5.7, AWT has not (i)
purchased, redeemed, issued, sold or otherwise acquired or disposed of,
directly or indirectly, any shares of its capital stock or any other of its
securities, or granted any options, warrants or other rights to purchase or
convert any obligation into any shares of its capital stock or into any of its
securities or (ii) incurred any obligation or liability, absolute or
contingent, except normal trade or business obligations or liabilities
incurred in the ordinary course of business, or mortgaged, pledged or
subjected to any Lien, any of its assets or properties, except in the ordinary
course of business.
SECTION 5.8 Accuracy of Information Furnished. No statement by
AWT or FAC contained in this Agreement, or in any Schedule hereto, and no
statement contained in any certificate or other instrument or document
furnished or to be furnished by or on behalf of any of them to the Stockholder
and the Company pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact which is
required to be stated herein or therein or which is necessary to make the
statements contained herein or therein in light of the circumstances under
which they were made, not misleading.
5.9 Brokers. Neither AWT or FAC has employed any investment
banker, broker, finder or intermediary in connection with the transactions
contemplated hereby who is entitled to a fee or any commission in connection
with the execution of this Agreement or any transaction contemplated under
this Agreement.
5.10 Compliance with Laws. AWT has complied in all material
respects with all laws, regulations and orders (including, without limitation,
securities, zoning ordinances, building codes, civil rights and occupational,
health and safety laws and regulations) applicable to its business except
where the failure to so comply would not have a material adverse effect on the
transactions contemplated hereby or on the consolidated financial position of
the Company or its results of operations.
5.11 Legal Proceedings. There are no (i) Actions pending against
AWT or (ii) disputes pending between AWT (including any of its subsidiaries)
with any Taxing Authority, which would, if the party adverse to AWT were
successful, in the judgment of management, have a material adverse effect on
AWT's consolidated financial position or results of operations, other than
those Actions which have previously been disclosed in a report or other
statement filed with the Securities and Exchange Commission.
ARTICLE II
COVENANTS OF THE STOCKHOLDER AND THE COMPANY
6.1 Notification. The Stockholder shall give prompt notice to
AWT of (i) any notice of, or other communication received by the Stockholder
or the Company subsequent to the date of this Agreement and prior to the
Closing Date, relating to a default or event which, with notice or lapse of
time or both, would become a default, or which would cause any warranty or
representation of the Stockholder or the Company to be untrue or misleading in
any material respect under this Agreement and (ii) any notice or other
communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated
by this Agreement.
6.2 Additional Summaries of Accounts Receivables. Prior to the
Closing Date, the Stockholder will deliver to AWT, as soon as practicable, for
each successive monthly period ending after August 31, 1989, a true and
correct summary of all accounts receivable of the Company as at the end of
each such monthly period.
6.3 Conduct of Business; Certain Covenants. From and after the
execution and delivery of this Agreement and until the Closing Date, the
Stockholder and the Company will conduct the business and operations of the
Company in the ordinary and usual course of business, and will use their
respective best efforts to preserve intact the business, organization,
licenses, Permits, relationships and employees, agents, customers and others
having business dealings with the Company. Except as contemplated by the
terms of this Agreement, prior to the Closing Date, the Company will not, nor
will the Stockholder, cause or permit the Company to, without the prior
written consent of AWT:
(a) amend its Articles of Incorporation or Bylaws;
(b) issue any stock options, warrants or other rights calling for or
permitting the issue, transfer, sale or delivery of its capital stock;
(c) pay or declare any cash dividend or other dividend or
distribution with respect to its capital stock except that the parties
acknowledge that the Board of Directors of the Company has declared a
dividend, payable to shareholders of record on October 20, 1989, which
dividend shall, subject to Section 4.33 hereof be equal to the
undistributed earnings of the Company from January 1, 1988 through the
Closing Date (the "Dividend Amount") and which dividend shall be payable
in three installments as follows: (i) the first installment in the
amount of $2,050,000, which was paid on October 20, 1989, (ii) the
second installment in the amount of $2,000,000, which will be paid prior
to the Closing Date and (iii) the third installment, which shall be
equal to the Dividend amount less $4,050,000, and which shall be payable
on December 31, 1989, provided, however, that notwithstanding the
foregoing, in no event shall the Dividend Amount exceed $4,750,000;
(d) issue, transfer, sell or deliver any shares of its capital
stock, or securities convertible into or exchangeable for, with or
without additional consideration, such capital stock;
(e) redeem, purchase or otherwise acquire for any consideration any
outstanding shares of its capital stock or securities carrying the right
to acquire, or which are, convertible into or exchangeable for, with or
without additional consideration, such capital stock;
(f) incur any indebtedness for borrowed money, except in the
ordinary course of business from third parties or make any loans or
advances to any parent, subsidiary or affiliate or other third person,
except that the Company may borrow such funds, as may be necessary to
facilitate the payment of the dividend referred to in subsection (c)
above, and the payment of all expenses incurred by it in connection with
this Agreement or the transactions contemplated hereby, all on such
terms and conditions as shall be reasonably satisfactory to AWT;
(g) permit the occurrence or continuance of any default under any
agreement for funded debt;
(h) make any acquisition of stock or all or substantially all of the
assets or any entity;
(i) merge or consolidate with any corporation;
(j) other than the Employment Agreement between the Company and the
Stockholder in the Form of Exhibit B hereto, enter into any employment
or similar contract with, or increase the compensation payable to, any
officer or employee, except in a manner consistent with past practices;
(k) adopt, amend in any material respect or terminate any Employee
Plan, severance plan or collective bargaining agreement or make awards
or distributions under any Employee Plan not consistent with past
practice or custom;
(l) sell, enter into any contract of sale with respect to, or grant
any option to purchase, any of its assets other than in the ordinary
course of business;
(m) create, assume or permit to exist any Lien;
(n) enter into any contract including but not limited to
assignments, licenses, transfers of exclusive rights, "work for hire"
agreements, special commissions, employment contracts, purchase orders,
sales orders, mortgages and security agreements which (A) contain a
grant or other transfer, whether present, retroactive, prospective, or
contingent, by the Company, of any rights in any patented or unpatented
invention, trade secret, proprietary information, technical assistance,
trademark, service mark, trade name, copyright, product designation or
model number, or other intellectual property by whatever name designated
or (B) contain a promise made by or to the Company, to pay any lump sum
or royalty or other payment or consideration in respect to the
acquisition, practice or use of any rights in any patented or unpatented
intention, trade secret, proprietary information, technical assistance
trademark, service mark, trade name, copyright, product designation or
model number, or other intellectual property by whatever name designated;
(o) initiate any legal proceedings, including suits and
administrative proceedings except normal collection proceedings;
(p) enter into any agreement, whether written or oral, agreeing to
do any of the things described in clauses (a) through (o) of this
Section; and
(q) make any plan termination distributions under the Terminated
Plans to plan participants until the IRS has issued favorable
determination letters in connection with the termination of the
Terminated Plans, and unless all distributions in connection therewith
are in compliance with applicable law, including Treasury Reg. 5
1.401-4(c).
Prior to the Closing Date, the Stockholder, with the cooperation
of AWT where appropriate, will, and will cause the Company to:
(r) promptly comply with all filing requirements which foreign,
federal or state law may impose on the Stockholder or the Company with
respect to the Merger and the transactions contemplated hereby,
including, but not limited to, those under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and
respond promptly to requests to file such additional information and
documentary materials as may be requested pursuant to the HSR Act
sufficiently in advance of the Closing to allow the period specified by
the HSR Act and rules, and any extensions thereof to expire prior to
Closing;
(s) use its best efforts to obtain any consent, authorization or
approval of, or exemption by, any governmental authority or agency, or
any customer, including without limitation, those necessary to transfer
all licenses or Permits of the Company to the Surviving Corporation, or
other third party, including without limitation, those persons (other
than the Stockholder or the Company) who are parties to the agreements
described on Schedule 4.4, required to be obtained or made by it in
connection with the Merger or the taking of any action in connection
with the consummation thereof, including without limitation, any
consent, authorization or approval necessary to waive any default under
any of the agreements described in Schedule 4.4 hereto;
(t) make full and timely payment of, or accrue, all amounts which
are required under the terms of the ERISA Plans that are employee
pension benefit plans and each multiemployer plan listed in Schedule
4.22 to be paid as a contribution to each such Plan with respect to the
period from the beginning of the 1989 plan year to the Closing Date,
calculated based on the data available as if the plan year ended on the
Closing Date and such contribution, when made with respect to each such
ERISA Plan that is an employee pension benefit plan, will be sufficient
to prevent an accumulated funding deficiency from occurring and will be
determined in accordance with the actuarial assumptions and cost methods
applicable to the 1989 plan year of the ERISA Plans that are employee
pension benefit plans; and
(u) use its best efforts to maintain and make full and timely
payment of all fees and annuities and take all other action appropriate
to maintain in force and effect all Permits, as well as all United
States and foreign patents, patent applications, trademark and service
mark registrations and applications for registration set forth in
Schedule 4.11 or otherwise owned or controlled by the Company and
subject to this Agreement.
6.4 Key Employees. Each of the Stockholder and the Company
agrees that from the date hereof through the Time of Merger it shall use its
best efforts to assure that the key employees of the Company remain in the
employ of the Company.
6.5 Proposals Regarding The Stockholder and the Company. Prior
to the Closing Date, each of the Stockholder and the Company (i) will not,
directly or indirectly, whether through any of its officers, employees,
representatives or otherwise, solicit, initiate or encourage any inquiries,
proposals or offers, or participate in any negotiations for discussions with
respect to or leading to any proposals or offers, for the acquisition of stock
of, or all or substantially all of the assets or the business of, or any
merger, consolidation or business combination with, the Company and (ii) will
promptly advise AWT orally and in writing of any inquiry or proposal for the
acquisition of any stock of, or all or substantially all of, the assets or
business of, or any merger, consolidation or business combination with the
Company.
6.6 Right to Investigate. Each of the Stockholder and the
Company shall afford to the officers and authorized representatives of AWT
free and full access, during normal business hours and upon reasonable prior
notice, to the offices, plants, properties, books and records of the Company
in order that AWT may have full opportunity to make such investigations as it
shall desire of the affairs of the Company, and each of the Stockholder and
the Company shall furnish AWT with such additional financial and operating data
and other information relating to the assets, property and business of the
Company as AWT shall from time to time reasonably request. Prior to the
Closing Date or at all times if this Agreement shall be terminated prior to
the consummation of the Merger, AWT shall, except as may be otherwise required
by applicable law, hold confidential all information obtained pursuant to this
Section 6.6 with respect to the Stockholder and the Company in accordance with
the Confidentiality Agreement, dated August 7, 1989. The representations,
warranties and agreements of each of the parties hereto shall be effective
regardless of any investigation that any party has undertaken or failed to
undertake.
6.7 Cooperation.
(a) The Stockholder and the Company shall cooperate with AWT in
taking any steps that may be reasonably required in order to ensure that the
transactions contemplated by this Agreement and the Plan of Merger may
properly be accounted for as a "pooling of interests" in accordance with GAAP.
(b) The Stockholder shall, from and after the Time of Merger,
cooperate with AWT and use his best efforts to provide AWT with such
information and other materials as AWT may reasonably request in the
preparation and filing, with the Securities and Exchange Commission, of any
reports or statements.
6.8 No Transfer. The Stockholder shall not sell, transfer, or
otherwise dispose, whether by sale, gift (other than to his spouse, his
children or any trust maintained for the benefit of his minor children), by
operation of law or otherwise, of the AWT Common Stock received by him
pursuant to the merger until March 19, 1990.
6.9 Payment of Loans. On or before November 30, 1989, the
Stockholder shall cause Joseph Connelly to repay, or shall, on behalf of Mr.
Connelly, repay to the Company the amount of any and all loans by the Company
to Mr. Connelly outstanding on the Closing Date, including accrued and unpaid
interest thereon.
ARTICLE III
COVENANTS OF AWT
7.1 Notification. AWT shall give prompt notice to the
Stockholder of (1) any notice of, or other communication received by AWT
subsequent to the date of this Agreement and prior to the Closing Date,
relating to a default or event which, with notice or lapse of time or both,
would become a default, or which would cause any warranty or representation of
AWT to be untrue or misleading, under this Agreement, and (ii) any notice or
other communication of any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated
by this Agreement.
7.2 Delivery of Financial Statements. AWT shall deliver promptly
to the Stockholder copies of any of its reports on Form 10-K or Form 10-Q that
are filed with the Securities and Exchange Commission.
7.3 Hart-Scott-Rodino Filing. AWT shall promptly comply with all
filing requirements under the HSR Act and respond promptly to requests to file
such additional information and documentary materials as may be requested
pursuant to the HSR Act sufficiently in advance of the Closing to allow the
period specified by the HSR Act and rules, and any extensions thereof to
expire prior to Closing.
7.4 Compliance with Securities Laws. AWT shall take all actions
necessary to comply with the Exchange Act and the Securities Act.
7.5 Stock Issuances. Except as expressly contemplated herein,
the Company shall not, prior to the Time of Merger, issue or sell, or
authorize, commit to or propose the issuance or sale of additional shares of
AWT Common Stock or any other securities convertible into or exchangeable for
any such shares, or any rights, warrants or options to acquire any such shares
or other convertible securities.
7.6 338 Election. AWT shall not make an election under Section
338 of the Code with respect to the transactions contemplated hereby.
ARTICLE VIII
JOINT COVENANT OF THE STOCKHOLDER, THE COMPANY AND AWT
8.1 Best Efforts. Subject to the terms and conditions herein
provided, each of the Stockholder, the Company and AWT will use its best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and cause the Time of Merger to occur and the
transactions contemplated by this Agreement to be consummated at the earliest
practicable date, and not to undertake any course of action inconsistent with
such intended result.
ARTICLE IX
CLOSING AND TERMINATION
9.1 Closing. The closing ("Closing") of the
transactions contemplated by this Agreement shall be held on October 26, 1989
or on the date (the "Closing Date") that follows as promptly as practicable
the satisfaction of the conditions set forth i.n Section 10.3(a). Unless
otherwise agreed by the parties hereto, the Closing shall take place at the
offices of Richards & O'Neil at 885 Third Avenue, New York, New York.
9.2 Time of the Merger. Subject to the further terms hereof, the
parties hereto agree to use their best efforts to take, on or prior to the
Closing, all such actions and to execute and deliver all such instruments and
documents, as may be necessary or advisable, on the advice of counsel, to
cause the Time of Merger to occur as soon as practicable.
9.3 Termination. This Agreement may be terminated, and the
Merger contemplated hereby may be abandoned prior to the Time of Merger:
(a) by mutual written consent of the Stockholder and the
Company, on the one hand, and AWT and FAC, on the other hand; or
(b) notwithstanding anything herein to the contrary, by AWT and
FAC, if the Closing shall not have taken place prior to or on October 31,
1989.
9.4 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 9.3 hereof, this Agreement
shall forthwith become void and have no effect, without any liability on the
part of any of the directors, officers or stockholders of any party, except
that termination pursuant to Section 9.3 shall not relieve any party from (a)
liability for any intentional breach of any representation, warranty or
covenant contained in this Agreement, and (b) any obligation under Section
6.7 and Article XI.
ARTICLE X
CONDITIONS TO CONSUMMATION OF THE MERGER
10.1 Conditions to Obligations of AWT and FAC. The
obligation of AWT and FAC to effect the Merger is subject to the satisfaction
at the Time of Merger of the following conditions unless waived in writing by
AWT:
(a) Representations and Warranties. The representations and
warranties of the Stockholder and the Company set forth in this Agreement
shall be true, accurate and complete in all material respects as of the date
hereof and as of the Time of merger, with the same force and effect as if such
representations and warranties were made anew at and as of the Time of merger
(except for the effect of transactions contemplated in this Agreement). AWT
shall have received on the Closing Date a certificate of the Stockholder and
the Chairman of the Board or President and Treasurer of the Company dated the
Closing Date to the foregoing effect.
(b) Performance of Obligations of the Stockholder and the
Company. Each of the Stockholder and the Company shall have performed in all
material respects all obligations required to be performed by him or it under
this Agreement at or prior to the Closing Date, and AWT shall have received
certificates of the Stockholder and of the Chairman of the Board or President
and Treasurer of the Company dated the Closing Date to the foregoing effect.
(c) Opinion of the Stockholder's Counsel. AWT shall have
received from Bolger, Picker & Weiner an opinion, dated the Closing Date, in
form and substance satisfactory to counsel for AWT, substantially to the
effect set forth in Exhibit D hereto.
(d) No Order, Etc. As of the Closing Date, no order, judgment
or decree by any court or governmental body shall have been entered
restraining, prohibiting or otherwise interfering with, or the effect of which
would be to restrain or prohibit or otherwise interfere with either the
transactions contemplated herein or the operation of the assets and businesses
of the Company after the Effective Date.
(e) Litigation. As of the Closing Date, there shall be no
actions pending or threatened against AWT or FAC, or any of their respective
directors or officers, or involving the assets or properties of either of
them, for the purpose of enjoining or preventing the consummation of the
Merger or otherwise claiming that such consummation is improper.
(f) Consents and Approvals. There shall have been received by
the Stockholder all consents, amendments, modifications and regulatory
approvals referred to in Sections 4.4 and 6.4(r) of this Agreement and there
shall be no agreement, contract, license, lease, franchise, permit or other
instrument of the Company, material to the business of the Company, as to
which the interest of the Company will be impaired by the Merger.
(g) No Material Adverse Change. Notwithstanding the disclosure
thereof pursuant to the provisions of this Agreement, between the date hereof
and the Closing Date, there shall have been no material adverse change, or
discovery of a condition or the occurrence of an event which has resulted or
can reasonably be expected to result in such change, in the financial
condition, business, property or prospects of the Company other than changes
expressly permitted under or contemplated by this Agreement.
(h) Employment Agreement. The Stockholder shall execute and
deliver to AWT an Employment Agreement, substantially in the form of Exhibit C
hereto.
(i) Permits. The Company shall have all Permits in the states
where it currently conducts or, as of the Closing Date, will conduct business.
(j) Connelly Shares. The Stockholder shall have delivered to AWT
evidence, satisfactory to AWT and its counsel, that all shares of Company
Common Stock transferred by Joseph Connelly to the Stockholder have been
released from escrow and are, at the Time of Merger, held beneficially and of
record by the Stockholder free and clear of all claims and restrictions on
transfer or otherwise.
(k) Repayment of Loans. Subject to Section 6.10 hereof, the
Stockholder shall have delivered to AWT evidence, satisfactory to AWT and its
counsel, that the outstanding amount of any loans by the Company to the
Stockholder or to any affiliate of the Stockholder (as such term is defined in
Rule 12b-2 of the Exchange Act), have been repaid in full, including all
accrued interest thereon, if any.
(l) The Stockholder shall have executed and delivered to AWT the
Escrow Agreement in the Form of Exhibit B hereto.
10.2 Conditions to Obligations of the Stockholder and the
Company. The obligation of the Stockholder and the Company to effect the
Merger is subject to the satisfaction at the time of merger of the following
conditions unless waived in writing by the Stockholder:
(a) Representations and warranties. The representations and
warranties of AWT and FAC set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of
the Time of Merger, with the same force and effect as if such representations
and warranties were made anew at and as of the Time of Merger (except for the
effect of transactions contemplated in this Agreement). The Stockholder
shall have received on the Closing Date a certificate signed by the Chairman
of the Board or the President and the Treasurer of AWT dated the Closing Date
to the foregoing effect.
(b) Performance and Obligations of AWT and FAC. Each of AWT and
FAC shall have performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the Closing Date, and
the Stockholder shall have received certificates signed by the Chairman of the
Board or the President and the Treasurer of AWT and FAC dated the Closing Date
to the foregoing effect.
(c) Opinion of Counsel for AWT. The Stockholder shall have
received from Richards & O'Neil an opinion, dated the Closing Date, in form
and substance satisfactory to counsel for the Stockholder, substantially to
the effect set forth in Exhibit E hereto.
(d) No Material Adverse Change. Notwithstanding the disclosure
thereof pursuant to the provisions of this Agreement, between the date hereof
and the Closing Date, there shall have been no material adverse change, or
discovery of a condition or the occurrence of an event which has resulted or
can reasonably be expected to result in such change, in the financial
condition, business, property or prospects of AWT or FAC, other than changes
expressly permitted under or contemplated by the Agreement.
(e) Registration Rights Agreement. AWT shall execute and
deliver to the Stockholder a Registration Rights Agreement, substantially in
the form of Exhibit F hereto.
(f) No order, Etc. As of the Closing Date, no order judgment or
decree by any court or governmental body shall have been entered restraining,
prohibiting or otherwise interfering with the consummation of the transactions
contemplated hereby.
(g) Employment Agreement. AWT shall execute and deliver to the
Stockholder an Employment Agreement substantially in the form attached hereto
as Exhibit C.
10.3 Conditions to Obligations of Both AWT and the Stockholder.
In addition to the provisions of Sections 10.1 and 10.2 hereof, the
obligations of the Stockholder and AWT to effect the Merger shall be subject
to the satisfaction of the following condition at or before the Time of Merger:
(a) Regulatory Approvals. The parties hereto shall have
received all necessary regulatory approvals of the transactions contemplated
by this Agreement, and each of such approvals shall be in full force and
effect at the Time of Merger, and not subject to any condition which, in the
judgment of either party reasonably exercised, requires the taking of or
refraining from taking any action which from an economic standpoint is
unreasonable or unduly burdensome. All applicable waiting periods under the
HSR Act shall have expired or been waived and there shall not be issued and in
effect any injunction restraining consummation of the transactions
contemplated herein, nor shall the Department of Justice of the Federal Trade
Commission have threatened or commenced a proceeding seeking such an
injunction or other relief or advised any party or its attorneys in writing of
its probable intention to do so.
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification by the Stockholder. From and
after the Closing Date, the Stockholder shall indemnify and save AWT and the
Surviving Corporation, and any director, officer, employee agent or
representative of any of the foregoing (for purposes of this Section 11.1, the
aforementioned persons and entities are referred to individually and
collectively as "AWT") harmless from and against any and all loss, cost,
damage (including consequential damages), punitive damages, civil and criminal
penalties or expense (including reasonable attorneys' fees) whatsoever
(collectively, "Damages") resulting from, arising out of or in connection with:
(i) any breach of this Agreement or of any representation or
warranty of the Stockholder or the Company (other than the representations and
warranties provided in Sections 4.14 (tax matters), 4.15 (S Corporation
Status), 4.22 (Pension and Other Benefit Plans) (other than 4.22(b)(7), (8)
or (14)), 4.26 (Compliance with Environmental Laws), 4.5 (Financial
Statements), 4.22(b)(7), (8) and (14) (Pension and other Benefit Plans), 4.27
(Accounts Receivable), 4.28 (Inventories) or 4.33 (Earnings) hereof or of any
covenant or obligation of the Stockholder or the Company (other than the
covenant contained in Section 6.10 (Repayment of Loans)) contained herein,
provided ,-hat no claim may be made under this subsection (i) more than
eighteen (18) months from the Time of Merger;
(ii) any breach of the representations and warranties set
forth in Sections 4.14 and 4.15 hereof, for which a claim may be made at any
time;
(iii) any breach of the representations and warranties contained
in Section 4.22 (other than Section 4.22(b)(7), (8) or (14)) or any of the
information disclosed on Schedule 4.22 hereto, including, without limitation,
Damages arising out of or in connection with the termination of the Terminated
Plans; provided no claim may be made under this subsection (iii) more than
three (3) years from the Time of Merger;
(iv) any breach of the representations and warranties set forth
in Section 4.26 hereof; provided no claim may be made under this subsection
(iv) more than five (5) years from the Time of Merger, and further provided
that if any liability or claim shall arise from Contaminants stored, disposed
of, transported, created, generated or, otherwise dealt with by the Company,
both before and after the Closing Date, liability shall be shared between the
Stockholder and AWT based on the Stockholder's and the Company's (prior to the
Closing) on the one hand, and the Surviving Corporation's, on the other hand,
relative culpability, taking into consideration such factors as their relative
knowledge or ability to investigate, time period during which such
Contaminants were subject to such party's control and such other factors which
may reasonably be related to such determination of relative culpability;
(v) any breach of the covenant of the Stockholder contained in
Section 6.10 hereof; provided that no claim may be made under this subsection
(v) until the date audited financial statements for the combined entity
resulting from the merger are first published;
(vi) any breach of any representations and warranties set forth
in sections 4.5, 4.22(b)(7), (8) or (14), 4.27 or 4.28; provided, however,
that no claim may be made under this subsection (vi) until the date audited
financial statements for the combined entity resulting from the Merger are
first published; and
(vii) any breach of the representations and warranties set forth
in Section 4.33; provided, however, that no claim may be made under this
subsection (vii) until the date audited financial statements for the combined
entity resulting from the Merger and first published.
The indemnification rights of AWT under this Section shall not be
affected in any way if the liability or claim for which indemnity is sought
arises by reason of strict liability.
11.2 Indemnification by AWT. From and after the Closing Date
AWT shall indemnify and save the Stockholder, in his capacity as such,
harmless from and against any and all loss, cost, damage or expense (including
reasonable attorneys' fees) whatsoever resulting from, arising out of or in
connection with (i) the operation by AWT of the Company subsequent to the
Closing, and (ii) any breach of any representation or warranty of AWT or FAC
or any breach of any covenant or obligation of AWT or FAC contained herein,
provided that no claim may be made under this Section 11.2(ii) more than
eighteen (18) months from the Time of Merger.
11.3 Claims. In the event AWT or the Stockholder (the
"Claimant") desires to make a claim against the other (the "Indemnitor") under
Section 11.1 or 11.2, the Claimant shall give prompt notice to the Indemnitor
of the institution of any actions, suits or proceedings and demands at any
time instituted against or made upon Claimant or any state of facts known to
Claimant in connection with which the Claimant would claim indemnification
under Section 11.1 or 11.2; provided, however, that failure of any Claimant
to give notice as provided herein shall not relieve the Indemnitor of its
obligations under Section 11.1 or 11.2. Indemnitor shall have the right, but
not the obligation, without prejudice to the Indemnitor's right to contest its
obligation to indemnify the Claimant in respect of such claim, to assume the
defense of any action, suit or proceeding for which there is a claim for
indemnification hereunder. If Indemnitor does not assume the defense of any
such action, suit or proceeding before the earlier to occur of (i) the
thirtieth (30) day after receipt of notice, or (ii) five (5) business days
before the date an answer or similar response to an initiation of judicial
proceedings is due, the Claimant shall, upon further notice to the Indemnitor,
have the right to undertake, at the expense of the Indemnitor, the defense,
compromise, or settlement of such claim on behalf of and for the account and
risk of the Indemnitor, subject to the right of the Indemnitor to assume the
defense of such claim at any time prior to settlement, compromise or final
determination thereof. Anything in this Article XI to the contrary
notwithstanding, (i) if there is a reasonable probability that such an action,
suit or proceeding may materially and adversely affect the Claimant despite the
indemnity of the Indemnitor, the Claimant shall have the right to defend, at
its own cost and expense, and to compromise or settle such action, suit or
proceeding; provided, however, that the Indemnitor shall have given written
consent for such compromise or settlement, which consent may not be
unreasonably withheld or delayed, and (ii) the Indemnitor shall not, without
the written consent of the Claimant, which consent may not be unreasonably
withheld or delayed, settle or compromise any such action, suit or proceeding
or consent to the entry of any judgment. The Indemnitor shall remain fully
liable for its obligation of indemnity despite any action by the Claimant
under the preceding sentence. With respect to liquidated claims, if within
thirty (30) days the Indemnitor has not contested said claim in writing, the
Indemnitor will pay the full amount hereof in cash within ten (10) days after
the expiration of such period. Each party shall be responsible for its own
expenses in any arbitration or litigation between the parties hereto, and any
expenses not attributable to either party, such as the cost of a third
arbitrator (in the event that the parties agree to arbitration) shall be
shared equally by the parties.
11.4 Limitation on Claims. Notwithstanding the provisions of
Section 11.1, the Indemnitor shall not be liable to the Claimant for any
breach of a representation or warranty pursuant to Sections ll.l(i), (ii),
(iii), (iv), (vi) or (vii), unless and until the aggregate amount of all
Damages shall exceed $500,000, at which time the Indemnitor shall be obligated
to indemnify the Claimant with respect to the aggregate amount of all such
liabilities. Notwithstanding anything herein to the contrary, the foregoing
limitations on claims shall not apply to any claim by AWT pursuant to
subsection (v) of Section 11.1 hereof.
11.5 Limitation on Pension Plan Indemnification.
Notwithstanding the foregoing, the Stockholder shall not be liable to AWT
under this Article XI for (i) Damages incurred by the Company to adequately
fund the Defined Benefit Pension Plan and (ii) expenses incurred by the
Company to terminate any of the Terminated Plans, but such limitation on
indemnification shall apply only to the extent of the Overfunded Amount. The
'Overfunded Amount" shall mean, for purposes of this Section 11.5, the amount
of funds that the Company receives as a result of the termination of the
Pension Plan due to any overfunding of such plan, less any excise or income
taxes payable in respect of such amount.
ARTICLE XII
MISCELLANEOUS
12.1 Survival of Representations and Warranties.
The representations and warranties contained in this Agreement, and in any
Schedule or Exhibit delivered pursuant hereto, shall survive the Merger to the
extent set forth in Article XI.
12.2 Entire Agreement; Assignment. This Agreement, including
the Schedules and Exhibits hereto, constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all other
prior agreements and understandings, both written and oral, among the parties
or any of them with respect to the subject matter hereof, and shall not be
assigned by operation of law or otherwise.
12.3 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
12.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by cable, telegram or telex, or the third
day following registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
To the Company or the Stockholder:
Falcon Associates, Inc.
416 Green Lane
Bristol, Pennsylvania 19007
Attention: Mr. Jeffrey J. Cantwell,
President
with a copy to:
Richard N. Weiner, Esq.
Bolger, Picker & Weiner
1800 Kennedy Boulevard
Philadelphia, Pennsylvania 19103
To AWT:
Air & Water Technologies Corporation
P.O. Box 1500
Somerville, New Jersey 08876
Attention: Eckardt C. Beck, Chairman
with a copy to:
Douglas A. Satzger, Esq.
Richards & O'Neil
885 Third Avenue
New York, New York 10022
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof.)
12.5 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of all the parties hereto.
12.6 Extension; Waiver. At any time prior to the Time of
Merger, the parties may (i) waive any inaccuracies in the representations and
warranties contained herein or in any document, certificate or writing
delivered pursuant hereto or (ii) waive compliance with any of the agreements
or conditions contained herein, provided, however, that no failure or delay
of any party hereto in exercising any right hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof. Any agreement on the part of any party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
12.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of New
York regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws.
12.8 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
12.9 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights, remedies, obligations or liabilities of any nature whatsoever under or
by reason of this Agreement.
12.10 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
12.11 Expenses. All costs and expenses incurred in connection
with the transactions contemplated by this Agreement shall be paid by the
party incurring such expenses except that it is agreed among the parties that
no expense was incurred by the Stockholder.
12.12 Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for breach of this Agreement and that
the obligations of the parties shall be specifically enforceable.
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be executed on its behalf by its officers thereunto duly authorized, all
as of the day and year first above written.
AIR & WATER TECHNOLOGIES CORPORATION
By: /s/ Joseph Feldstein
Joseph Feldstein,
Senior Vice President
FALCON ACQUISITION CORP.
By: /s/ Paul Alderdice
Paul Alderdice, President
FALCON ASSOCIATES, INC.
By: /s/ Jeffrey J. Cantwell
Jeffrey J. Cantwell, President
The Stockholder:
By: /s/ Jeffrey J. Cantwell
Jeffrey J. Cantwell
SCHEDULE 4.1
Qualification to Do Business
The Company is qualified as a foreign corporation and in good
standing in the following jurisdictions:
Connecticut*(1)
Kentucky*
Maryland*(2)
Massachusetts
New Jersey*
North Carolina
South Carolina*(3)
Texas*
Virginia*
(1) Company may be liable for approximately $4,000 for failure to qualify
previously.
(2) Company will pay $200 as fine for failure to qualify previously.
Qualification is being processed under the name "AWT/Falcon, Inc."
(3) Qualification is being made under name "Falcon Associates of
Pennsylvania, Inc." Company may be liable for fine for failure to
qualify previously.
* Filing has been made with the Secretary of State for qualification to do
business as a foreign corporation.
Company must organize a corporation in Delaware in lieu of qualifying
to do business as a foreign corporation because the name "Falcon Associates,
Inc." is not available and fictitious names are not permitted.
Notwithstanding the disclosures set forth in this Schedule 4.1 or
anything to the contrary contained in the Agreement, the Stockholder hereby
indemnifies AWT in accordance with the provisions of Article XI of the
Agreement, including, without limitation, Section 11.4 thereof, for any Damages
incurred by AWT arising out of or in connection with the matters disclosed in
Footnotes 1, 2 and 3 on the foregoing page.
SCHEDULE 4.2
Subsidiaries and Equity Interests
The Company owns one share of Class A Common Stock and twenty (20)
shares of Class B Common Stock, each having $2,000 par value, of American
Safety Risk Retention Group, Inc., a Vermont insurance company ("ASRRG").
The share of Class A Common Stock was acquired for a purchase price of
$10,000. The shares of Class B Common Stock were acquired in exchange for
agreeing to provide an irrevocable letter of credit to the Vermont Insurance
Commissioner in the amount of $200,000 for the benefit of ASRRG. ASRRG is a
captive insurer organized pursuant to the Federal Liability Risk Retention Act
of 1986.
SCHEDULE 4.4
Consents and Approvals
The consummation of the transactions contemplated by this Agreement
and Plan of Merger may constitute a breach or default or cause acceleration
under the following agreements (except as indicated all necessary consents or
waivers will be obtained prior to closing):
1. The following agreements between Company and First Fidelity
Bank, N.A., South Jersey ("Bank"):
-- Mortgage (collateral), dated December 16, 1988
-- Commercial Grid Note-Secured, dated December 16, 1988, in
principal amount of $2,000,000
-- Commercial Grid Note-Secured, dated December 16, 1988,
in principal amount of $500,000
-- Commercial Grid Note-Secured, dated August 16, 1989, in
principal amount of $2,000,000
-- General Security Agreement, dated December 16, 1988
-- Time or Demand Note - Secured, dated October 25, 1989, in
principal amount of $1,500,000.
In addition, the Subordinate Mortgages between Stockholder and
Bank, dated December 16, 1988, covering the following
properties:
14 Elder Lane, Willingboro, NJ
7900 Dune Drive, Avalon, NJ #120
803 Joshua Ct., Moorestown, NJ
7900 Dune Drive, Avalon, NJ #118
16 N. Maple Avenue, Marlton, NJ (Evesham)
In lieu of a consent, the Company has obtained and
provided to AWT a letter, dated October 26, 1989, from an
officer of the Bank with regard to its intention to
require the repayment of outstanding loans owing to it by
the Company. The Bank has not consented to or waived
its rights with respect to the transactions contemplated
by the Agreement and has stated that it does not intend
to do so.
The parties hereby acknowledge that the Company will not
obtain from First Fidelity Bank, N.A., South Jersey a
consent to, or waiver of default with respect to, the
transactions contemplated by the Agreement, and AWT
agrees that it shall not be entitled to recover any
Damages from the Stockholder incurred by AWT or Falcon
arising out of or in connection with such failure.
2. Lease for office space in Midtown Office Gallery,
Charlotte, North Carolina. In view of Company's plans to
terminate this lease, it will not seek the lessor's
approval of this transaction. See Schedule 4.16(1).
3. Pursuant to Section II, Subsection (a)(5) of the
Company's Commercial General Liability Policy (Occurrence
Form) issued by American Safety Risk Retention Group, the
Company must notify the insurer of its merger with Falcon
Acquisition Corp. and reaffirm its status as a named
insured "under such terms and conditions as the (insurer]
may, in its sole discretion, require." Pursuant to
Section IV, Subsection 22 of the same policy, if the
named insured (the Company) ceases to be under the same
ownership, the Company must notify the insurer "and the
coverage under the policy shall automatically terminate as
to the affected Named Insured." Coverage may be
reinstated upon term agreed upon by the Company and its
insurer.
A filing under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as-amended, was made with the Federal Trade Commission and the
Department of Justice. Early termination of the waiting period has been
received.
The Company may be required to notify one or more government
agencies in states where they have permits or licenses for asbestos removal of
the changes resulting from the transactions contemplated by this Agreement and
Plan of Merger. See Schedule 4.21. The Company will begin to prepare such
notifications, but will not complete or file such notifications until after
Closing. The Company does not believe that failure to make filings prior to
Closing or obtain consent or approval will in the aggregate have a material
adverse effect upon the Company.
SCHEDULE 4.6
Liabilities Not Reflected in
Interim Balance Sheet
1. The Company plans to terminate its current lease for
office space in North Carolina. See Schedule 4.16(1).
2. The Company is a party to a lease which permits another
company the use of space at the rear of the 416 Green Lane property. It is
possible the use of the property under this lease violates the local fire
code. See Schedule 4.18(2).
3. The Company is involved in litigation as set forth in
Schedule 4.12.
4. Certain vacation accruals, accrued bonuses, commissions
and accrued sick leave of employees of the Company are not reflected in the
Interim Balance Sheet.
5. Certain state income, franchise and capital stock taxes
which are owed or will be owed by the Company are not reflected in the Interim
Balance Sheet.
6. Unbilled amounts accrued which will be owing to
subcontractors when billed.
Notwithstanding the disclosures set forth in this Schedule 4.6
or anything to the contrary contained in the Agreement, the Stockholder hereby
indemnifies AWT in accordance with Article XI of the Agreement, including
without limitation, Section 11.4 thereof, for any Damages incurred by AWT
arising out of or in connection with the matters disclosed in Items 2 and 5 of
this Schedule 4.6.
SCHEDULE 4.7
Subsequent Changes and Events
The Company has reevaluated and significantly increased its
accounts receivable reserve since December 31, 1988. In addition, the Company
has written off approximately $192,000 in accounts receivable during that same
period.
SCHEDULE 4.8
Management, Employees, Compensation
Company Directors and Officers
Annual
Compensation
Name Title for 1988
---- ----- -------------
Jeffrey J. Cantwell Director, President $156,975.00(1)
and Secretary-Treasurer
Joseph E. Connelly Vice-President 78,187.50(2)
Susanne J. Crossman Assistant Secretary, 51,070.85
Bookkeeper & Office Manager
Other Employees or Consultants
Whose Total Fiscal Year
1988 Compensation Exceeded $50,000
Total Basis of
Name Designation Compensation Compensation
---- ----------- ------------ ------------
Ernest M. DeCaro Chief 170,750.00 combination(3)
Estimator
David R. Borranann Insulation 61,404.67 fixed
Foreman
David R. Bookholdt Field 130,600.00 combination
Operations
[Continued on next page)
- -------------
(1) Does not include compensation or benefits paid to Kimber Cantwell,
Mr. Cantwell's spouse. Does not include value of automobiles used by
Mr. and Mrs. Cantwell.
(2) Paid under an Employment Contract. Does not include payments under a
Restrictive Covenant Agreement or insurance benefits to which he is
entitled. See Schedule 4.9(b)(2) and (3).
(3) Combination of fixed salary and bonus.
Total Basis of
Name Designation Compensation Compensation
---- ----------- ------------ ------------
Thomas McCoog Outside 129,460.00 combination(3)
Operations
Thomas Richter Foreman 57,397.82 fixed
Michael David Foreman 54,499.56 fixed
Joseph Romano Foreman 63,014.75 fixed
Harry Kohlhaas Foreman 56,831.63 fixed
Julius Edwards Insulator 56,946.21 fixed
Scott Brown Foreman 71,852.48 fixed
Joseph McConnell Foreman 66,448.54 fixed
Wesley Johnson Foreman 50,250.56 fixed
Stephen Cantwell Insulator 50,383.51 fixed
Kenneth Juliano Worker 50,164.40 fixed
Frank Briggs Foreman 76,869.91 fixed
William Schmidt Estimator 104,276.00 combination(4)
Stacy Lagakos Worker/ 50,861.00 combination(4)
Sales Manager
Commission Program
Commission Arrangement
Name (% of Gross)
---- ----------------------
Estimator
- ---------
Ernest DeCaro 2% up to $3 million
William Schmidt 2% up to $3 million
1.5% in excess of $3
million
Gregory Obert 1.5% in excess of $3
million
Joseph Mannion 2% up to $3 million
1.5% in excess of $3
million
William Townsend 2% between $500,000
and $3 million 1.5% in
excess of $3 million
Thomas Bieri 2% between $1-3
million
James Arnott 2% between $500,000
and $3 million 1% in
excess of $3 million
Richard Ryniak 1.5% in excess of $3.5
million
James Wright 2% up to $3 million
1.5% in excess of $3
million
Sales
- -----
Stacy Lagakos 1%
William Shelby 1/2 of 1%
Operations
- ----------
David Bookholdt Discretionary
Thomas McCoog Discretionary
- -------
(3) Combination of fixed salary and bonus.
(4) Combination of fixed salary and commissions.
No Withholding
Prior to 1989, the Company issued a Form 1099 to each estimator
with respect to the payment of a bonus to him, rather than withholding and
reflecting the same on the Form W-2 issued to the estimator.
Automobiles
Employees have use of automobiles and other vehicles for
business purposes without having to account for other use. The Company leases
trucks from Michael David and Joseph Romano for $200/month. The trucks are
owned by Messrs. David and Romano and used for the Company's business.
Notwithstanding the disclosures set forth in this Schedule 4.8 or
anything to the contrary contained in the Agreement, the Stockholder hereby
indemnifies AWT in accordance with Article XI of the Agreement, including,
without limitation, Section 11.4 thereof, for any Damages incurred by AWT
arising out of or in connection with the matters disclosed under the caption
"No Withholding" in this Schedule 4.8.
SCHEDULE 4.9
Contracts
(a) 1. Agreements between Company and First Fidelity Bank,
N.A., South Jersey:
-- Mortgage (collateral) - $2,500,000 on 416
Green Lane property Mortgagor: Falcon
Associates, Inc.
Mortgagee: Fidelity Bank N.A.
South Jersey Date: 12/16/88
-- Commercial Grid Note-Secured, dated December
16, 1988, in principal amount of $2,000,000
-- Commercial Grid Note-Secured, dated December
16, 1988, in principal amount of $500,000
-- Commercial Grid Note-Secured, dated August
16, 1989, in principal amount of $2,000,000
-- Time or Demand Note - Secured, dated October
25, 1989, in principal amount of $1,500,000.
Stockholder is guarantor under this note. The
note is secured by a $1,500,000 Certificate
of Deposit which has been purchased from
First Fidelity Bank, N.A., South Jersey
2. Mortgage - $400,000 on 416 Green Lane property
Mortgagor: Falcon Associates, Inc.
Mortgagee: Robert U. Monti and Dorothy
I. Monti
Date: 12/31/86
3. Installment Sales Contract for 1988 Chevrolet
Corvette Convertible
Lender: Reedman Chevrolet Inc.
Borrower: Company
Date: 7/21/88
(b) 1. Consulting Agreement between Company and Howard,
Lawson & Co., dated May 26,1989.
2. Employment Agreement, dated September 30, 1987,
between Falcon Associates and Joseph Connelly.
3. Agreement for Restrictive Covenant and Covenant of
Non-competition, dated September 30, 1987, between
Falcon Associates, Inc. and Joseph E. Connelly.
4. Commission Agreements - See Schedule 4.8.
(c) 1. Agreement between Company and Local Union No. 42,
International Association of Heat and Frost
Insulators and Asbestos Workers, dated July 14, 1989
(d) None.
(e) 1. See Schedules 4.16 and 4.18 for real property leases
2. Lease for 1986 Mercury Grand Marquis
Lessor: Ford Motor Credit
Lessee: Company
Date: January 28, 1986
3. Lease for 1989 BMW 750IL
Lessor: GE Capital Auto Lease, Inc.
Lessee: Company
Date: November 11, 1988
(f) Contracts and commitments involving future payment or
receipt of more than $250,000:
1. Contract between Company and Rouse Management,
Inc. for asbestos removal and abatement, dated
June 28, 1988. Individual work sites are scheduled
on an ongoing basis by agreement of the parties.
2. Solicitation, Offer and Award, dated October 17,
1988, awarding Contract No. GS-03P-89- DXC-0297 for
asbestos removal and related work by Company for
U.S. General Services Administration, Region 3,
pursuant to Company's sealed bid in response to
Solicitation No. GS-03P-88-DXC-0097, issued June
13, 1988, as amended on June 23, 1988 and July 8,
1988.
3. Purchase Orders from James Craft & Son, Inc. for
work by Company for which $250,000 may be paid or
received in the aggregate in the future:
Purchase Order No. 6338, dated July 21,
1986, for asbestos removal, abatement,
reinsulation and related work at V.A. Medical
Center, Coatesville, PA;
Purchase Order No. 6847, dated June 6, 1988,
for insulation of Penn State University Wiley
Laboratory;
Purchase Order No. 6958, dated December 8,
1988, for equipment insulating at Penn State
University, Agriculture, Science & Industries
Building.
4. Various agreements with New Jersey Bell Telephone
Company for work by Company for which $250,000 may
be paid or received in the aggregate in the future:
Standard Form of Agreement between Owner and
Contractor (AIA Document A101, 1987 Edition),
dated October 11, 1989, for boiler room
asbestos removal at New Jersey Bell
Headquarters Building. Note: copy in Company
files has not been signed by New Jersey Bell;
New Jersey Bell Telephone Company Building
Construction Contract, dated September 14,
1989, for asbestos removal at Swedesboro
Central Office Building;
Purchase Order No. 570141, dated October 10,
1989, for asbestos repairs in Trenton, New
Jersey
New Jersey Bell Telephone Company Building
Construction Contract, dated September 25,
1989, for asbestos abatement in Atlantic
City, New Jersey.
5. Various agreements for work by Company at
Mobil Oil Corporation facilities for which
$250,000 may be paid or received individually
or in the aggregate in the future:
Standard Form of Agreement Between Contractor
and Subcontractor (AIA Document A401, 1987
Edition), dated September 8, 1989, between
Geppert Bros., Inc. and Company for asbestos
removal and demolition at Paulsboro Refinery,
Paulsboro, New Jersey
Two oral time and materials contracts between
Joule Maintenance and Company for asbestos
removal and maintenance at Paulsboro
Refinery, Paulsboro, New Jersey.
Asbestos Removal Term Contract, dated March
1, 1989, between Mobil Research and
Development Corporation and Company for
asbestos removal.
Purchase Order No. 20463, dated October,
1989, between Joule Maintenance and Company
for asbestos removal at Mobil Sulphur Unit.
Purchase Order No. 157054JHN9, dated August
4, 1989, for asbestos removal at Mobil
facility at Rt. 1 and Farber, Princeton, New
Jersey.
6. Asbestos Removal Disposal Agreement A-2022,
dated April 24, 1989, between Company and
E.I. du Pont de Nemours and Company, Inc. for
asbestos abatement, amended by Modifications
1 through 6, dated June 15, 1989, June 28,
1989, July 20, 1989, July 31, 1989, August
16, 1989 and September 15, 1989.
7. U.S. Postal Service Construction Contract,
359986-89-B-0029, between Company and U.S.
Postal Service (New York Facilities Service
Office), dated November 21, 1988, for
asbestos removal at New Jersey International
Bulk Mail Center, as amended by Request,
Proposal and Acceptances, dated April 10,
1989, April 13, 1989, April 15, 1989 and
August 18, 1989.
8. Standard Form of Agreement between Owner and
Contractor (AIA Document, A101 1987 Edition)
between Company and Board of Trustees of
Clemson University, dated May 15, 1989, for
asbestos removal.
9. Various agreements with Kohler Brothers, Inc.
for work by Company for which $250,000 may be
paid or received individually or in the
aggregate in the future:
Purchase Order No. 0279, dated
December 14, 1988, for insulation work
at Lionville Junior High School, as
amended.
Purchase Order No. 0280, dated
December 14, 1988, for insulation work
at Blue Bell Elementary School.
10. Letter, dated October 31, 1986, awarding to
Company Projects Nos. 81-109 and 659-021, to
remove asbestos and install sprinklers at the
Veterans Administration Medical Center,
Salisbury, North Carolina, pursuant to
Solicitation No. 659-17-86, issued 7/21/86,
as amended.
11. Solicitation, Offer and Award, dated November
1, 1988, for insulation work by Company,
awarded by the Naval Air Propulsion Center.
12. Agreement between Owner and Contractor, dated
September 28, 1988, between Interboro School
District and Company for asbestos removal.
In addition to the foregoing agreements which by
their terms and current status involve future
performance or payment of more than $250,000, the
following agreements involve future performance or
payment of significant amounts. In the aggregate,
they might be deemed material, and, based on
previous company experience with these types of
contracts, it is possible that one or more may be
modified or amended so that aggregate future
performance or payment would exceed $250,000.
13. Contract between the State of New Jersey and
the Company, dated March 3, 1988, for removal
of asbestos at Ancora Psychiatric Hospital.
14. Agreement, dated July 5, 1989, between
Company and Montclair State College for
asbestos removal.
Company uses the following subcontractors on a
regular basis but does not currently (and would not
ordinarily) have contract commitments outstanding
with any one of them involving more than $250,000:
Atlas Acoustical Ceiling (ceiling work)
Box 48A Route 77
Mullica Hill, New Jersey 08062
609-478-4000
AACE Associates (air monitoring)
Dept. Box #38
Hainesport, New Jersey 08036
609-265-1680
Marty Tillia (electrical)
#139 Junewood Drive
Levittown, PA 19055
215-949-1878
Dowell Corporation (electrical)
9647 James Street
Philadelphia, PA 19114
215-824-2580
Patton Insulation (insulation)
1489 Baltimore Pike
Springfield, PA 19064
215-543-4151
Probe Environmental (air monitoring)
P. 0. Box 764
Moorestown, New Jersey 08057
609-779-3333
Professional Insulators (insulation)
P. 0. Box 2773
West Lawn, PA 19609
215-678-2345
Asbestos Management Consulting (air monitoring)
531 York Street
Burlington, New Jersey 08016
609-386-1077
(g) The Company has no powers of attorney in effect.
For description of litigation involving West Shore School
District, see Schedule 4.12.
SCHEDULE 4.10
No Default
The Company plans to terminate its current lease for office
space in North Carolina. See Schedule 4.16.
SCHEDULE 4.11
Proprietary Rights
In 1987 and 1988 the Company licensed the use of a patented
negative air process under U.S. Patent No. 4,604,111. The License Agreement
between the Company and GPAC, Inc. is dated October 4, 1986 and grants a
non-exclusive, non-transferable, indivisible license in the United States,
its territories and possessions. The license is evidenced by Certificate
Number: GN-87010009, dated January 1, 1987. The agreement is terminable by
Company on six months' notice. The Company did not make a 1989 royalty payment
for the license. By letter, dated April 11, 1989, GPAC, Inc. has advised the
Company that the license is currently effective, that all unpaid royalties for
prior usage are waived and the Company is not required to make a royalty
payment until July 1990.
SCHEDULE 4.12
Litigation
1. Falcon Associates, Inc. v. West Shore School District, Civil
Action No. 429 (Common Pleas, Cumberland City., PA 1988).
2. Leon J. Lesniewski, Jr. vs. Falcon Associates, Inc. and
Professional Insulators, Inc., Civil Action No. 89-06479
(Common Pleas, Montgomery Co., PA 1989).
For environmental and occupational safety and health law and
regulation citations, all of which have been settled or resolved, see Section
4.26.
SCHEDULE 4.13
Laws and Orders
For prior violations of environmental and occupational health and
safety laws and regulations, all of which have been resolved, see Schedule
4.26.
SCHEDULE 4.14
Tax Matters
(i) Prior to 1985, the Company allocated all income to
Pennsylvania, regardless of where its services were performed.
(ii) The Company has filed or will file income or franchise tax
returns in the following jurisdictions: United States (all taxable periods
since inception)
Arkansas (1988)
Connecticut (1988)
Delaware (1988, 1987, 1986)
Georgia (1988)
Iowa (1988)
Kentucky (1988)
Maryland (1988)
Massachusetts (1988)
New Jersey (1988, 1987, 1986)
New York (1988)
North Carolina (1988, 1987)
Ohio (1988)
Pennsylvania (all taxable periods since inception)
Texas (1988, 1987)
Virginia (1988, 1987)
The Company expects to file income or franchise tax returns for
1989 in all of the above jurisdictions except Arkansas and Massachusetts, and
expects to file a 1989 income tax return in South Carolina.
(iii) Prior to 1989, the Company did not withhold from bonuses
paid to its estimators.
Notwithstanding the disclosures set forth in this Schedule, 4.14 or
anything to the contrary contained in the Agreement, the Stockholder hereby
indemnifies AWT in accordance with the provisions of Article XI of the
Agreement, including, without limitation, Section 11.4 thereof, for any
Damages incurred by AWT arising out of or in connection with the matters
disclosed in this Schedule 4.14, but only to the extent that such Damages
arise out of or in connection with the failure to properly or timely file any
return, pay any tax, penalty, interest or other assessment or withhold any
amount, including all interest, penalties and other assessments arising
therefrom.
SCHEDULE 4.16
Leased Real Property
1. Lease for 235 square feet of office space in Midtown Square office
Gallery, Midtown Square Shopping Center, Charlotte, North Carolina.
Lessor: Charlottetown, Inc.
Lessee: Company
Date: 7/5/89
Term: 6/1/89-5/31/90
Company plans to terminate this lease when new lease (see below) becomes
effective. North Carolina employee is handling negotiations. Assignment or
sublet requires written consent of lessor. Liquidated damages for breach of
lease are monthly rent ($.958 per square foot/month plus pro rata share of
operating costs and real estate taxes), less rent received by lessor in
reletting. There is no security deposit under the lease.
2. Lease for 2400 square feet (800 office, 1600 warehouse) at 1801 H
Cross Beam Drive, Charlotte, NC 28217.
Lessor: Chartwell Limited Partnership II
Lessee:
Company
Date: 10/89
Term: 3-1/2 years beginning 11/1/89.
Security Deposit: $1,040
SCHEDULE 4.17
Real Property
The Company owns property and an office and
warehouse building at 416 Green Lane, Bristol, Pennsylvania. The
property was acquired subject to conditions for a 20 foot wide macadam drive
extending through the property and a 50 foot wide easement to Green Lane for
ingress and egress, easements or rights-of-way granted to Philadelphia
Electric Company and certain other restrictions, all of which are referred to
in the Title Report. See Schedule 4.19.
The Company is currently constructing additional office space on the
property.
The Company has entered into a lease for use of the rear portion of
its property at 416 Green Lane. See Schedule 4.18(2).
The Company has indicated its willingness to permit an easement
through the 416 Green Lane property to Lumber Products property. The
requesting parties have not requested a formal agreement.
SCHEDULE 4.18
Tenancies
1. In addition to the Real Property Leases, the
Company's property at 416 Green Lane is subject to certain easements. See
Schedule 4.17.
2. The Company has entered into a lease for use of the rear
portion of the property at 416 Green Lane for parking and storing construction
equipment.
Lessor: Company
Lessee: Harrah, Inc.
Date: 5/6/89
Term: 1 year with option to renew one-half the
leased land for 1 year
Rental: $200/month
SCHEDULE 4.19
Title
See Title Report, effective October 5, 1989, a
copy of which has been delivered to AWT.
Howard Savings Bank liens have been satisfied. Some
termination statements must still be obtained.
Improvements to the Company's headquarters building at 416
Green Lane are being conducted pursuant to Permit No. 89-138, issued May 31,
1989, by the Borough of Bristol. See also Schedule 4.9 (a).
SCHEDULE 4.20
Insurance
(a) Insurance Coverage
American Safety Risk Retention Group, Inc., Policy No.
CGL89_101- 002, asbestos special liability
Commercial Inland Marine, Policy No. 3AT574342-02, business equipment at 416
Green Lane, and contractor's equipment
Excelsior Insurance, Policy No. CPP3130338, general liability covering
property at 416 Green Lane
Pennsylvania State Workers Compensation, Policy No. 00265578
Travelers Insurance Company, Policy No. 6UB-4975292-5-89, workers compensation
for Michigan
Continental Insurance Company, Policy No. 2BC871569089W, workers compensation
for New Jersey
Travelers Insurance Company, Policy No. 6UB-115J603-7-88, workers compensation
for North Carolina
Continental Assurance Company, Policy No. 2P46837AlAA, workers compensation
for New York
Excelsior Insurance Company, Policy No. BA3501323, automobile liability
The Company is in the process of obtaining tenant's insurance for leased
property in North Carolina.
(b) Surety Bonds
Bonding Company Open Bid Bonds
- --------------- --------------
National American Insurance Northampton County/Government Center
National American Insurance Northampton County/Gracedale
National American Insurance U.S. Coast Guard, Fort Macon
Indiana Lumbermens Mutual Chatham Hall Girls School
Insurance Company
National American Insurance Borough of Pottstown-City Hall
National American Insurance Council Rock School District
National American Insurance Council Rock School District
* Prudential Property Co.
* PA Dept. of General
Services/E. Stroudsburg
* PA Dept. of General Services/Muncy
Correctional Institute
* PA Turnpike Commission
* Federal Bureau of Prisons
* DE, Del. State Hospital
* MD, Maryland Dept. of Trans.
* Bonds requested, but not yet received.
Bonding Company Open Performance Bonds
- --------------- ----------------------
Universal Bonding Company NJ, Montclair St. College
Southeastern Casualty Indemnity NJ, Ancora Psychiatric and Hospital
Insurance Company
Indiana Lumbermens Mutual East Brunswick Board of Education
Insurnace Company
Southeastern Casualty Cape May County Board of
and Indemnity Insurance Chosen Freeholders
Company
Indiana Lumbermens Mutual Dept. of Admin.
Insurance Company
Indiana Lumbermens Mutual Watson V. Britton Training
Insurance Company Center
Indiana Lumbermens Mutual VA Medical Center, Salisbury, NC
Insurance Company
Indiana Lumbermens Mutual GSA, Various Federal Bldgs.
Insurance Company
National American Insurance Columbia Borough School District
Indiana Lumbermens Mutual Holy County School District
Insurance Company
Indiana Lumbermens Mutual NC, Broughton Hospital
Insurance Company
National American Insurance Budco Theaters/Andorra Co.
National American Insurance Farfield Company/Brookdale Comm.
College
Indiana Lumbermens Mutual Naval Air Propulsion Center
Insurance Company
SCHEDULE 4.21
Licenses and permits currently held:
State of New York, Asbestos Handling License No. AC-89-0044, expires 1/31/90
State of New Jersey, Asbestos License No. 00002 (expired 6/21/88) (Letter
from Supervisor of Licensing allowing asbestos license to continue in effect
while backlog of renewals is processed.)
State of Delaware, Asbestos Abatement Contractors Certification
No. C-0018, expires 5/02/90. City of Wilmington Business License No. 009965
State of Maryland, Asbestos Removal/Encapsulation License No. 39-00-019,
expires 11/20/89. City of Baltimore, Certificate of Prequalification No.
02287, expires 05/31/90. Commonwealth of Massachusetts, Contractors
License *AC 00018, for Asbestos Abatement Program, expires 10/17/89.
(Renewal application was filed 10/11/89.) Commonwealth of Massachusetts,
Certificate of Eligibility #88-0896, expires 12/02/89.
Commonwealth of Virginia, Asbestos License, and Contractors License No.
000068, expires 7/31/90
State of Washington, Construction Contractors Specialty License #CCEXBU
FALCOA1123NN, expires 2/15/90.
State of South Carolina Bidders License B13032, expires 12/31/89. State of
South Carolina General Contractors License #G23127, expires 12/31/89. South
Carolina Dept. Health and Environmental Control Asbestos Abatement License No.
255, expires 4/11/90.
North Carolina General Contracting Classification for Interior Construction
License No. 24599, expires 12/31/89.
State of Iowa License #326 to Remove/Encapsulate Asbestos, expires 10/20/89.
(Renewal application was filed 10/12/89.)
State of Ohio, Licensed as an Asbestos Contractor, License No. 1240, effective
until 11/14/89.
State of Georgia, Asbestos Licensing Board, License No. 8BL-264,
Beginning date 11/88, Expires 11/89. (Renewal application was filed 10/25/89).
State of Arkansas, Asbestos Abatement Contractor License No. 090, expires
12/31/89.
Texas Department of Health, Asbestos Abatement Contractor
Certification Number 80-0100, expires 10/31/89. (Renewal
application was filed 10/12/89).
Commonwealth of Kentucky, Asbestos Abatement Certificate No. C89-02-005M2,
expires 2/12/90.
Minnesota Department of Health, Asbestos Abatement Contractor License Number
279, 7/01/89 - 6/30/90.
Allegheny County Health Department, Asbestos Abatement Contractor License,
Certificate No. ACAL-89-4074, expires December, 1989.
State of Missouri letter certifying Asbestos Registration No. 90-08-0261,
expiration date 8/15/90.
States for which Company is preparing applications:
Florida License
Michigan License
Illinois License
Tennessee License
California License
See Schedule 4.4.
The Company is qualifying as "AWT/Falcon, Inc." in Maryland, and "Falcon
Associates of Pennsylvania, Inc." in South Carolina because the name "Falcon
Associates, Inc." was previously reserved or used by other companies. It will
have to change the name in which its licenses are issued in those states and
in Delaware where it will organize a new corporation.
SCHEDULE 4.22
Pension and Other Benefit Plans
(a) Retirement Plans
Falcon Associates, Inc. currently maintains four
retirement plans as follows:
1) Frozen Defined Benefit Pension Plan.
2) Deferred Salary Savings (401(k)) Plan.
3) Money Purchase Plan.
4) Defined Benefit Pension Plan
Benefit accruals under plans 1, 3, and 4 have ceased and such plans
have been terminated as of December 31, 1988. The Company must amend these
plans to comply with the Tax Reform Act of 1986. In addition, terminations of
these plans must be filed with the IRS, and, in the case of Plan 1, with the
PBGC. All are ERISA plans.
See also item (b)(1)
(b) (1) As of July, 1989, the Company contributes to Local Union No. 42,
International Association of Heat and Frost Insulators and Asbestos Worker
Pension Plan.
(3) and (4) See above.
(5) Some Form 5500's have been filed late, including Form
5500 for the Money Purchase Plan for the 1988 Plan Year, which was filed
several days late.
(6) The Money Purchase Plan contribution for the 1988 Plan
Year was made late, and Form 5330 will be filed with respect to the applicable
excise tax.
(7) See item (b)(14)
(14) Both defined benefit plans have been frozen and
participants are entitled to no further benefit accruals. The actuary has
advised that Pension Plan No. 1 is overfunded by approximately $85,000. The
underfunded amount for Defined Benefit Pension Plan No. 4 has been satisfied
prior to closing.
B. Other Plans
Agreement, dated October 1, 1983, between
Independence Blue Cross/Blue Shield and
Company, Group No. A-20593, including
hospitalization, major medical, dental and
prescription
UNUM, Policy No. LAD050201, disability coverage for the
Stockholder
Great West Life Assurance Company, disability
coverage for Susanne Crossman (Policy No.
H-529472), and Ernest DeCaro (Policy No.
H-529475)
Great Western Life & Annuity Insurance Co.,
Agreement, dated December 16, 1987, for an
annuity for Stockholder under Money Purchase
Pension Plan
Executive Life Insurance Company, Policy Nos.
C41599057B, C1158972GL and C11506147L, life
insurance for the Stockholder (one of these
policies has been pledged to First Fidelity
Bank, N.A. as security for outstanding Company
indebtedness)
CIGNA, Policy No. 1011216573, life insurance
for the Stockholder
Aetna, Policy No. G1122243, life insurance
for the Stockholder
Confederation Life, Policy Nos. 05711032 and
5120354, life insurance for the Stockholder
Confederation Life, Policy Nos. 05711031 and
5726753, life insurance for Joseph Connelly.
Executive Life Insurance Company, Policy No.
C41599056B, life insurance for Joseph Connelly
The rights under these life insurance policies may be
acquired by Mr. Connelly for $1.00 at the time of termination of his
employment agreement. (See Schedule 4.9(b)(2)).
CIGNA, Policy No. 1011216572, life insurance
for Joseph Connelly
Aetna, Policy No. R25553960, life insurance
for Joseph Connelly
Company is in the process of satisfying the applicable
requirements of Section 4980B of the Code with respect to each group health
plan.
The rights under these life insurance policies may be
acquired by Mr. Connelly for $1.00 at the time of termination of his
employment agreement. (See Schedule 4.9(b)(2)).
SCHEDULE 4.24
Certain Interests
1. Stockholder owns common stock of ASIG, which is
the reinsurer of ASRRG.
2. Stockholder transferred 1988 Chevrolet Astro Van
used by his spouse, Kimber, to himself, subject to
the outstanding balance owing thereon to First Fidelity
Bank, N.A. on account of a loan, dated April 6, 1988.
3. In 1989, the Company sold two vehicles to H. & M.
Insulation, Inc. ("H. & M.") for amounts less than
their respective fair market values. Mr. Cantwell
owns all of the outstanding capital stock of H. & M.
4. The employment by the Company of Kimber Cantwell,
the Stockholder's spouse, will continue until the
Closing, at which time it will be terminated. All
compensation to the date of termination will be
paid to her at current rates.
5. The Company has engaged in a series of transactions
with Gull Enterprises, Inc. ("Gull"), a
Pennsylvania corporation, which has been solely
owned by the Stockholder since December 31, 1987.
Gull has been engaged in insulation work. Falcon
has paid Gull for consulting services provided to
Falcon by certain employees of Gull. On October
24 and October 25, 1989, Falcon paid Gull $5,705
and $24,825, respectively, on account of such
services which satisfied all outstanding
obligtions owed by Falcon to Gull. $11,850 of the
latter amount is reflected on the Interim Balance
Sheet because it was accrued in September 1989.
None of the payments by Falcon to Gull involved a
profit to Gull or the Stockholder. On October 26,
1989, Gull paid Falcon $8,891 to satisfy indebtedness
owed by it to Falcon, as shown on the Interim
Balance Sheet.
SCHEDULE 4.26
Compliance with Environmental Laws
The Company has received the following citations.
All have been resolved.
1. Air Pollution Control District, Jefferson County,
Kentucky, Violation No. 890054, Violation of Reg. 5.13
Section 5 (and its state rule counterpart); Citation
dated May 1, 1989; $250.00 civil assessment for using
supervisor lacking Kentucky certification.
2. Air Pollution Control District, Jefferson County,
Kentucky, Order #006-88, dated July 20, 1988; Falcon
cited for violation of District Regulation 5.04 (re:
storage of asbestos); administrative settlement of
$3,500.00.
3. Philadelphia Dept. of Public Health, Air Management
Services, Violation of Health Code S 6-402-9(a);
Citation dated August 4, 1988; clean air filter was
stored in a bag labeled with asbestos warning labels.
4. New Jersey Office of Asbestos Control & Licensing;
$250.00 Citation for violation of New Jersey Asbestos
Control and Licensing Act, dated July 6, 1988, for
allowing employees to work without a permit.
5. New Jersey Office of Asbestos Control & Licensing;
$600.00 Citation, dated November 23, 1987, for
violation of New Jersey Asbestos Control & Licensing
Act, for failure to post sign and have license
available at work site.
6. OSHA Citation S9144#043, issued 10/4/82, for
failure to post OSHA Notice, maintain an on-site log of
injuries and illnesses and establish respirator program
at job site.
7. OSHA Citation J7434-162, issued 4/4/85, for
failure to make regulations readily available to
employees.
8. OSHA Citation B7421-050, issued 3/7/85, for failure to
establish respirator program at job site.
SCHEDULE 4.26 CONTINUOUS
9. OSHA Letter, dated 10/2/85, re Complaint No.
71419428 complaining that Company failed to
provide medical records at employee's
request.
10. Letter from State of New Jersey, Department of Labor,
dated January 24, 1986, re failure to disclose previous
OSHA citations.
11. Letter from State of New Jersey, Department of Labor,
dated March 10, 1986, for failure to display license and
provide supervision; $250.00 penalty.
12. OSHA Citations E9645-601 and E9645-598 in total amount of
$8,800.00; letter of contest dated September 8, 1987 from
Falcon; settled on February 5, 1988.
SCHEDULE 4.29
Banks
1. First Fidelity Bank Cash Management Account No.
006-000011-5
2. First Fidelity Bank, payroll account, Account No.
00050512-7
3. Howard Savings Bank Account No. 520-7019300-131
4. Philadelphia National Bank, Falcon Associates, Inc.
Deferred Salary Savings Plan, Account No. 0120-5200
5. Howard Savings Bank, Falcon Associates, Inc.
Defined Benefit Pension Trust, Account No. 716953-1
6. First Fidelity Bank, Falcon Associates, Inc. Money
Purchase Plan, Account No. 001-078372-0
There are no safe deposit or lock boxes.
The Stockholder and Susanne Crossman are authorized to draw on
each of these accounts, except for Howard Savings Bank Account No.
520-7019300-131, as to which the Stockholder is the sole signatory.
SCHEDULE 4.30
Labor
See Schedule 4.9 (c).
SCHEDULE 4.32
Customers
Ten largest customers (by sales or services) for fiscal
year ended December 31, 1988:
Rouse Management, Inc. and affiliates $3,445,000
Veterans Administration Medical Center -
Salisbury, North Carolina 1,748,000
School District of Philadelphia 1,647,000
Colonial School District 735,000
Marple Newtown School District 492,000
State of New Jersey/Ancora
Psychiatric Hospital 477,000
Wallingford/Swarthmore School District 471,000
James Craft & Son Inc./VA Medical Center -
Coatesville 376,000
Interboro School District 324,000
CPC International 314,000
Ten largest customers (by sales or services) for the eight (8)
month period ended August 31, 1989:
Rouse Management, Inc. and affiliates $1,650,532
Veterans Administration Medical Center -
Salisbury, North Carolina 1,021,050
Clemson University 988,818
Central Bucks School District 726,000
Department of the Army/Fort Dix 645,860
James Craft & Son Inc./VA Medical
Center - Coatesville 461,545
Mobil Oil and/or Joule Maintenance 396,510
E.I. Du Pont de Nemours & Co. 351,060
U.S. General Services Administration
(Region 3) 314,814
Toms River School District 313,200
There are no customers other than named above which account for
more than five (S%) percent of Company sales during the period January 1, 1988
through August 31, 1989.
Schedule 5.1
New Jersey
Massachussetts
Schedule 5.3
None, other than the filings required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, which filings have been completed.
Schedule 5.7
AWT redeemed, effective as of October 12, 1989, all shares of its Series A
Preferred Stock, par value $1.00 per share outstanding on such date.