EXECUTION COPY
Exhibit 10.3
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AGREEMENT AND PLAN OF MERGER
among
DYCOM INDUSTRIES, INC.,
UTILIQUEST ACQUISITION CORP.,
UTILIQUEST HOLDINGS CORP.
and
OCM/GFI POWER OPPORTUNITIES FUND, L.P.
Dated as of November 17, 2003
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TABLE OF CONTENTS
PAGE
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ARTICLE I
THE MERGER
SECTION 1.01. The Merger................................................. 1
SECTION 1.02. Effective Time; Closing.................................... 1
SECTION 1.03. Effect of the Merger....................................... 2
SECTION 1.04. Certificate of Incorporation; By-Laws...................... 2
SECTION 1.05. Directors.................................................. 2
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.01 Conversion of Securities................................... 2
Section 2.02 Merger Consideration....................................... 3
Section 2.03 Stock Options.............................................. 4
Section 2.04 Exchange of Certificates................................... 4
Section 2.05 Calculation of the Merger Consideration and the Per Share
Merger Consideration....................................... 5
Section 2.06 Merger Consideration Adjustment............................ 5
Section 2.07 Stock Transfer Books....................................... 7
Section 2.08 Escrow..................................................... 8
Section 2.09 Withholding................................................ 8
Section 2.10 Dissenting Shares.......................................... 8
i
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01 Organization and Qualification of the Company.............. 9
Section 3.02 Subsidiaries............................................... 9
Section 3.03 Certificate of Incorporation and By-Laws................... 10
Section 3.04 Capitalization............................................. 10
Section 3.05 Authority Relative to This Agreement....................... 11
Section 3.06 No Conflict; Required Filings and Consents................. 12
Section 3.07 Licenses and Permits....................................... 12
Section 3.08 Compliance with Law and Notices of Violation............... 13
Section 3.09 Financial Information; Books and Records; Undisclosed
Liabilities................................................ 13
Section 3.10 Absence of Certain Changes or Events....................... 14
Section 3.11 Absence of Litigation...................................... 14
Section 3.12 Employee Benefit Plans..................................... 14
Section 3.13 Labor and Employment Matters............................... 16
Section 3.14 Key Employees.............................................. 17
Section 3.15 Real Property.............................................. 17
Section 3.16 Intellectual Property...................................... 18
Section 3.17 Taxes...................................................... 20
Section 3.18 Environmental Matters...................................... 22
Section 3.19 Accounts Receivable........................................ 22
Section 3.20 Inventories................................................ 22
Section 3.21 Material Contracts......................................... 23
Section 3.22 Insurance.................................................. 24
Section 3.23 Related Party Transactions................................. 24
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Section 3.24 Board Approval; Vote Required.............................. 24
Section 3.25 Title to Assets............................................ 25
Section 3.26 Customers.................................................. 25
Section 3.27 Brokers.................................................... 25
Section 3.28 No Other Representations or Warranties..................... 26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Section 4.01 Corporate Organization..................................... 26
Section 4.02 Authority Relative to This Agreement....................... 26
Section 4.03 No Conflict; Required Filings and Consents................. 26
Section 4.04 No Vote Required........................................... 27
Section 4.05 Operations of Merger Sub................................... 27
Section 4.06 Financing.................................................. 27
Section 4.07 Brokers.................................................... 27
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.01 Conduct of Business by the Company Pending the Merger...... 28
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01 Access to Information; Confidentiality..................... 30
Section 6.02 No Solicitation of Transactions............................ 31
Section 6.03 Further Action; Commercially Reasonable Efforts............ 31
Section 6.04 Obligations of Merger Sub.................................. 32
Section 6.05 Public Announcements....................................... 32
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Section 6.06 Closing Date Debt.......................................... 33
Section 6.07 UQ Acquisition Claims...................................... 33
Section 6.08 Termination of Enumerated Related Party Agreements
and Other Contracts........................................ 34
Section 6.09 Settlement Agreement and Mutual Release.................... 34
Section 6.10 Estoppel Certificates...................................... 35
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.01 Conditions to the Obligations of Parent and Merger Sub..... 35
Section 7.02 Conditions to the Obligations of GFI and the Company....... 36
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01 Termination................................................ 37
Section 8.02 Effect of Termination...................................... 38
Section 8.03 Expenses................................................... 38
ARTICLE IX
INDEMNIFICATION
Section 9.01 Survival of Representations, Warranties and Covenants...... 39
Section 9.02 Indemnification of Parent Indemnified Parties.............. 39
Section 9.03 Indemnification by Parent.................................. 40
Section 9.04 Limits on Indemnification.................................. 40
Section 9.05 Indemnification Procedures................................. 41
Section 9.06 Delivery and Release of Indemnity Escrow................... 42
Section 9.07 No Right of Contribution................................... 43
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Section 9.08 Exclusive Remedy........................................... 43
Section 9.09 Losses Net of Insurance, Tax Benefits...................... 43
Section 9.10 No Consequential Damages................................... 44
Section 9.11 Subrogation of Rights...................................... 44
Section 9.12 Tax Matters................................................ 45
Section 9.13 Stockholder Representative................................. 49
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01 Notices.................................................... 49
Section 10.02 Certain Definitions........................................ 50
Section 10.03 Severability............................................... 60
Section 10.04 Entire Agreement; Assignment............................... 61
Section 10.05 Parties in Interest........................................ 61
Section 10.06 Arbitration; Legal Proceedings............................. 61
Section 10.07 Specific Performance....................................... 62
Section 10.08 Amendment.................................................. 62
Section 10.09 Waiver..................................................... 62
Section 10.10 Headings................................................... 63
Section 10.11 Pronouns................................................... 63
Section 10.12 Counterparts............................................... 63
EXHIBITS
Exhibit 2.05 - Calculation of Closing Date Debt
Exhibit 2.06(a) - Form of Statement of Working Capital and Working Capital
Calculation Procedures
Exhibit 2.08 - Form of Escrow Agreement
Exhibit 6.06 - List of Capital Leases
Exhibit 6.08 - Enumerated Contracts for Termination
Exhibit 6.10 - List of Leased Properties Requiring Estoppel Certificates
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Exhibit 7.01(h) - Form of Non-Disclosure Agreement
SCHEDULES
Schedule I - List of Persons Deemed to Have Knowledge of the Company
vi
AGREEMENT AND PLAN OF MERGER, dated as of November 17, 2003
(this "Agreement"), among Dycom Industries, Inc., a Florida corporation
("Parent"), UtiliQuest Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), UtiliQuest Holdings Corp., a Delaware
corporation (the "Company"), and OCM/GFI Power Opportunities Fund, L.P., a
Delaware limited partnership ("GFI").
WHEREAS, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), Parent and the Company will enter into a business
combination transaction pursuant to which Merger Sub will merge with and into
the Company with the Company being the surviving corporation (the "Merger");
WHEREAS, this Agreement and the Merger have been adopted and
approved by the respective boards of directors of Parent, Merger Sub and the
Company;
WHEREAS, this Agreement and the Merger have been duly adopted
and approved by the holders of a majority of the outstanding shares of common
stock of the Company entitled to vote; and
WHEREAS, on or prior to the Closing, Parent, the
Representative and Wilmington Trust Company, or another mutually acceptable
escrow agent (the "Escrow Agent"), shall execute an escrow agreement (the
"Escrow Agreement") substantially in the form of Exhibit 2.08 hereof;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent, Merger Sub, GFI and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the DGCL, at the
Effective Time (as defined in Section 1.02), Merger Sub shall be merged with and
into the Company. As a result of the Merger, the separate corporate existence of
Merger Sub shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").
SECTION 1.02. Effective Time; Closing. As promptly as
practicable after the satisfaction or waiver of the conditions set forth in
Article VII (other than those conditions that by their nature are to be
performed at Closing), but in no event later than two (2) Business Days after
such satisfaction or waiver, the parties hereto shall cause the Merger to be
consummated by filing a certificate of merger (the "Certificate of Merger") with
the Secretary of State of the State of Delaware, in such form as is required by,
and executed in accordance with, the relevant provisions of the DGCL (the date
and time of such filing of the Certificate of Merger (or such later time as may
be agreed by each of the parties hereto and specified in the Certificate of
Merger) being the "Effective Time"). Contemporaneously with the filing of the
Certificate of Merger, a closing (the "Closing") shall be held at the offices of
Shearman & Sterling LLP, 599
Lexington Avenue, New York, New York 10022, or such other place as the parties
shall agree. The date the Closing occurs shall be referred to herein as the
"Closing Date".
SECTION 1.03. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in this Agreement, the Certificate of
Merger and the applicable provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of each of the Company and
Merger Sub shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
SECTION 1.04. Certificate of Incorporation; By-Laws.
(a) At the Effective Time, the Certificate of
Incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended as provided by Law and such Certificate of
Incorporation; provided, however, that, at the Effective Time, Article I of the
Certificate of Incorporation of the Surviving Corporation shall be amended to
read as follows: "The name of the corporation is UtiliQuest Holdings Corp.".
(b) At the Effective Time, the By-Laws of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the By-Laws of
the Surviving Corporation until thereafter amended as provided by Law, the
Certificate of Incorporation of the Surviving Corporation and such By-Laws.
SECTION 1.05. Directors. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified or until their earlier death resignation
or approval.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.01 Conversion of Securities. At the Effective Time,
by virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holders of any of the following securities:
(a) each share of common stock, par value $0.001 per
share, of the Company (the "Company Common Stock") issued and outstanding
immediately prior to the Effective Time (each a "Share" and collectively, the
"Shares" and each holder of Shares, a
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"Stockholder") (other than any Shares to be canceled pursuant to Section
2.01(b)) shall be canceled and shall be converted automatically into the right
to receive the Per Share Merger Consideration (as defined below). As of the
Effective Time, all such Shares shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except for the right to receive the Per Share Merger
Consideration payable upon surrender of the certificate (or delivery of a duly
executed affidavit of lost certificate) that formerly evidenced such Share in
the manner provided in Section 2.04;
(b) each share held in the treasury of the Company
immediately prior to the Effective Time shall be canceled without any conversion
thereof and no payment or distribution shall be made with respect thereto; and
(c) each share of common stock, par value $0.01 per
share, of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation.
Section 2.02 Merger Consideration.
(a) Subject to the adjustments set forth in Section
2.06, the "Merger Consideration" shall consist of (i) $120 million in cash, less
(ii) an amount equal to the Closing Date Debt (only to the extent not previously
paid or taken into account in determining Working Capital), all of which Parent
shall cause to be repaid as of the Closing, as set forth in Section 6.06 hereof,
less (iii) the Closing Expenses (only to the extent not previously paid or taken
into account in determining Working Capital) and less (iv) the Adjustment Escrow
Amount and the Indemnity Escrow Amount which amounts shall be deposited into the
Escrow Accounts by the Parent pursuant to Section 2.08 hereof, as adjusted in
accordance with the provisions of this Agreement.
(b) Subject to the adjustments set forth in Section
2.06 for purposes of this Agreement, the "Per Share Merger Consideration" shall
mean (i) the sum of (A) the Merger Consideration, plus (B) the Aggregate Option
Exercise Price (as defined below), divided by (ii) the Aggregate Fully-Diluted
Shares (as defined below). The "Aggregate Fully-Diluted Shares" shall be the sum
of the aggregate number of Shares outstanding immediately prior to the Effective
Time, plus the aggregate number of Shares issuable upon the exercise in full of
all Options (as defined below) outstanding immediately prior to the Effective
Time, and the "Aggregate Option Exercise Price" shall mean the sum of the cash
exercise prices payable upon exercise in full of all such outstanding Options.
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Section 2.03 Stock Options.
(a) Effective as of the Effective Time, the Company
shall take all necessary action, including obtaining the consent of the
individual holders of Options (the "Optionholders"), if necessary, and the
adoption of board of directors resolutions providing for the acceleration and
cash-out of the Options to (i) terminate the Company's Stock Option Plan, as
amended through the date of this Agreement, (ii) provide that each outstanding
option to purchase Shares granted under the Company Stock Option Plan (each, an
"Option") that is outstanding and unexercised immediately prior to the Effective
Time, whether or not vested or exercisable, shall become fully vested and
exercisable as of the Effective Time and (iii) cancel as of the Effective Time
each Option that is outstanding and unexercised at the Effective Time. Each
holder of an Option that is outstanding and unexercised at the Effective Time
and that has an exercise price per Share that is less than the Per Share Merger
Consideration shall be entitled (subject to the provisions of this Section 2.03)
to be paid by the Surviving Corporation immediately after the Effective Time, in
exchange for the cancellation of such Option, an amount in cash (subject to any
applicable withholding taxes) equal to the product of (i) the difference between
the Per Share Merger Consideration and the exercise price of such Option and
(ii) the aggregate number of Shares issuable upon exercise of such Option. Any
such payment shall be subject to all applicable federal, state and local tax
withholding requirements. At the Effective Time, Parent shall wire to an account
designated by the Company an amount sufficient to enable the Surviving
Corporation to make the payments required pursuant to this Section 2.03 and
shall cause the Surviving Corporations to make such payments.
Section 2.04 Exchange of Certificates.
(a) At the Effective Time of the Merger, each holder
of an outstanding certificate or certificates representing Shares
("Certificates"), upon surrender of the same to Parent (or delivery of a duly
executed affidavit of lost certificate), shall be entitled to receive from
Parent in exchange therefore an amount equal to the Per Share Merger
Consideration multiplied by the number of Shares represented by the Certificates
(the "Merger Payment"). Pending such surrender and exchange, a holder's
Certificates shall be deemed for all purposes (other than the exchange
contemplated by this Section 2.04) to evidence such holder's right to receive
the Merger Payment. At the Effective Time, Parent shall make payment to each
Stockholder by wire transfer to the account designated by such Stockholder not
later than three (3) Business Days prior to the Effective Time.
(b) Upon surrender of a Certificate, together with
such documents as may be reasonably requested by Parent, such Certificate shall
forthwith be cancelled.
(c) If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, providing an indemnity against any claim that may be
made against it with respect to such Certificate, the Parent will issue in
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exchange for such lost, stolen or destroyed Certificate the Merger Payment to
which the holders thereof are entitled pursuant to this Section 2.04.
Section 2.05 Calculation of the Merger Consideration and the
Per Share Merger Consideration. At least three (3) Business Days prior to the
Effective Time, the Company shall provide to Parent (i) a true and complete
schedule setting forth the name, address and tax identification number of each
holder of Shares or Options as well as the number and type of such securities
held by such holder as of immediately prior to the Effective Time, (ii) a true
and complete schedule of the Closing Date Debt and a calculation pursuant to
Exhibit 2.05 hereof showing how the Closing Date Debt was calculated, certified
by the Company's chief financial officer, (iii) a true and complete schedule
setting forth the exercise price of each Option, (iv) a true and complete
schedule setting forth the Company's best estimate of the Closing Expenses, (v)
a true and complete schedule setting forth the Per Share Merger Consideration
(the "Per Share Merger Consideration Certificate") to be paid to each
Stockholder and (vi) such additional information as is reasonably requested by
Parent in order to determine the Merger Consideration and the amount to be paid
to the Stockholders.
Section 2.06 Merger Consideration Adjustment.
(a) At least three (3) Business Days prior to the
Effective Time, the Company will deliver to Parent a statement indicating the
Company's good faith estimate of the consolidated balance sheet of the Company
and its Subsidiaries as of the Closing Date (the "Estimated Balance Sheet") and
a statement of Working Capital in the form of Exhibit 2.06(a), indicating the
Company's good faith estimate of Working Capital at the Closing Date based on
the Estimated Balance Sheet ("Estimated Working Capital"). The Estimated Balance
Sheet shall be prepared, and Estimated Working Capital shall be calculated, in
accordance with GAAP consistent with the Company's past practice and in
accordance with the policies and procedures set forth in Exhibit 2.06(a) hereto.
If the Estimated Working Capital exceeds Targeted Working Capital, then such
excess shall be added to the Merger Consideration (and shall be reflected in the
calculation of Per Share Merger Consideration payable at Closing) on a
dollar-for-dollar basis. If the Targeted Working Capital exceeds Estimated
Working Capital, then such excess shall be subtracted from the Merger
Consideration (and shall be reflected in the calculation of Per Share Merger
Consideration payable at Closing) on a dollar-for-dollar basis. As soon as
practicable, but in no event later than 75 days following the Closing Date, the
Surviving Corporation shall prepare a consolidated balance sheet of the Company
and its Subsidiaries as of the Closing Date (the "Closing Balance Sheet") and a
statement of Working Capital in the form of Exhibit 2.06, which shall set forth
a calculation of Working Capital at the Closing Date based on the Closing
Balance Sheet ("Closing Working Capital"). The Closing Balance Sheet shall be
prepared, and Closing Working Capital shall be calculated, in accordance with
GAAP consistent with the Company's past practice and in accordance with the
policies and procedures set forth in Exhibit 2.06(a) hereto. The Closing Balance
Sheet shall be audited by Deloitte & Touche, whose
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expenses shall be borne by the Surviving Corporation, and who shall also certify
as to the calculation of the Working Capital.
(b) During the preparation of the Closing Balance
Sheet and the calculation of Closing Working Capital (collectively, the "Closing
Financial Data"), and the period of any dispute within the contemplation of this
Section 2.06, the Representative shall reasonably cooperate with Parent and
Parent's authorized representatives, including by providing on a timely basis
all information in its possession necessary in preparing the Closing Financial
Data that is not in the possession of the Surviving Corporation.
(c) Parent shall deliver a copy of the Closing
Financial Data to the Representative promptly after it has been prepared
together with duly executed certificates from each of the Surviving Corporation
and Deloitte & Touche stating that such Closing Financial Data was prepared in
accordance with GAAP consistent with the Company's past practice and in
accordance with the policies and procedures set forth in Exhibit 2.06(a). After
receipt of the Closing Financial Data, the Representative shall have 45 days to
review the Closing Financial Data, together with the workpapers used in the
preparation thereof, and have its independent auditors, at its expense, audit
the Closing Balance Sheet in accordance with GAAP consistent with the Company's
past practice. From and after the Closing Date, Parent shall cooperate with the
Representative and its authorized representatives (including its auditors)
(including providing access to books, records, facilities and employees of the
Surviving Corporation and the workpapers of the Surviving Corporation and
Deloitte & Touche) so that the Representative and its auditors may review the
Closing Financial Data. The Representative may dispute items reflected in the
Closing Financial Data only on the basis that such amounts were not prepared in
conformity with GAAP consistent with the Company's past practice and the
accounting policies and procedures set forth on Exhibit 2.06(a) hereto or were
arrived at based on mathematical or clerical error. Unless the Representative
delivers written notice to Parent on or prior to the 45th day after the
Representative's receipt of the Closing Financial Data specifying in reasonable
detail the amount, nature and basis of all disputed items, the Representative
shall be deemed to have accepted and agreed to the calculation of Closing
Working Capital. If the Representative so notifies Parent of its objection to
the calculation of Closing Working Capital, the Representative and Parent shall,
within 30 days (or such longer period as the parties may agree) following such
notice (the "Resolution Period"), attempt to resolve their differences and any
resolution by them as to any disputed amounts shall be final, binding and
conclusive. All amounts that are not in dispute with respect to the calculation
of Closing Working Capital shall be released from the Adjustment Escrow Account
by the Escrow Agent pursuant to the Escrow Agreement, and paid to the
Stockholders and Optionholders in accordance with their Applicable Percentage.
(d) If, at the conclusion of the Resolution Period,
any amounts remain in dispute, then all amounts remaining in dispute shall be
submitted to KPMG (the "Neutral Auditor"). Each party agrees to execute, if
requested by the Neutral Auditor, a reasonable engagement letter, including
customary indemnities. Parent and the Company shall each pay the
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percentage of the amount of the fees and expenses of the Neutral Auditor equal
to (A) the aggregate amount of the disputed matters submitted to the Neutral
Auditor that are not settled in favor of such party (as finally determined by
the Neutral Auditor), divided by (B) the aggregate amount of all disputed
matters submitted to the Neutral Auditor; provided, that the amount (if any) the
Company would be required to pay pursuant to this sentence shall be paid to the
Neutral Auditor from the Adjustment Escrow. The Neutral Auditor shall act as an
arbitrator to determine, based solely on the provisions of this Section 2.06 and
the presentations by Parent and the Representative, and not by independent
review, only those issues still in dispute and only as to whether such amounts
were arrived at in conformity with this Section 2.06. The Neutral Auditor's
determination shall be made within 30 days of their engagement, shall be set
forth in a written statement delivered to Parent and the Representative and
shall be final, binding and conclusive. The term "Final Closing Working Capital"
shall mean the definitive Closing Working Capital agreed to (or deemed to be
agreed to) by Parent and the Representative in accordance with Section 2.06(c)
hereof or the definitive Closing Financial Data resulting from the
determinations made by the Neutral Auditor in accordance with this Section
2.06(d) (in addition to those items theretofore agreed to by Parent and the
Representative).
(e) (i) If the Final Closing Working Capital exceeds
the Estimated Working Capital then the Merger Consideration shall be increased
by the amount by which the Final Closing Working Capital exceeds the Estimated
Working Capital. In such case, Parent shall promptly pay the Stockholders and
the Optionholders such additional Merger Consideration (the "Additional Merger
Consideration") and each Stockholder and Optionholder shall be entitled to
receive their Applicable Percentage of the Additional Merger Consideration in
cash; provided, however, that in no event shall the amount of the Additional
Merger Consideration payable by Parent hereunder exceed the Adjustment Escrow
Amount.
(ii) If the Estimated Working Capital exceeds the
Final Closing Working Capital, then the Merger Consideration shall be decreased
by the amount by which the Estimated Working Capital exceeds the Final Closing
Working Capital. The amount of such decrease to the Merger Consideration made
pursuant to this Section 2.06(e)(ii) shall be released from the Adjustment
Escrow Account by the Escrow Agent, pursuant to the Escrow Agreement, and paid
to the Parent in cash; provided, however, that in no event shall such decrease
to the Merger Consideration payable hereunder exceed the Adjustment Escrow
Amount.
(f) Upon the completion of the Merger Consideration
adjustment process, the Escrow Agent shall release any amounts left in the
Adjustment Escrow Account to the Stockholders and Optionholders in accordance
with their Applicable Percentage.
Section 2.07 Stock Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and there shall be no
further registration of transfers of Shares thereafter on the records of the
Company. From and after the Effective Time, the holders
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of Certificates shall cease to have any rights with respect to Shares
represented by such Certificates, except as otherwise provided in this Agreement
or by Law.
Section 2.08 Escrow. On or prior to the Closing, the
Representative and Parent shall enter into the Escrow Agreement. In accordance
with the terms of the Escrow Agreement, at the Effective Time Parent shall
deposit by wire transfer the Adjustment Escrow Amount and the Indemnity Escrow
Amount in two separate accounts to be managed and paid out by the Escrow Agent
in accordance with the terms of the Escrow Agreement and this Agreement.
Section 2.09 Withholding. Parent and the Company shall each be
entitled at any time to deduct and withhold from the Per Share Merger
Consideration otherwise payable to the Stockholders pursuant to this Agreement
and from any payments made to the Optionholders pursuant to Section 2.03 such
amounts as Parent and the Company reasonably determine they are required to
deduct and withhold and pay over to the applicable taxing authorities with
respect to the making of such payment under the Code or any applicable provision
of state or local Tax Law. To the extent that amounts are so withheld by Parent
or the Company, Parent or the Company, as applicable, shall pay over such
amounts to the applicable taxing authorities. To the extent that amounts are so
withheld by Parent or the Company and paid over to the applicable Tax Authority,
such amounts shall be treated for all purposes as having been paid to the
Stockholder or holder of Options, as applicable, in respect of whose
consideration such deduction or withholding was made.
Section 2.10 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement
to the contrary and to the extent available under the DGCL, Shares that are
outstanding immediately prior to the Effective Time and that are held by
Stockholders who shall have neither voted in favor of the Merger nor consented
thereto in writing and who shall have demanded properly in writing appraisal for
such Shares in accordance with Section 262 of the DGCL (collectively, the
"Dissenting Shares") shall not be converted into, or represent the right to
receive, the Per Share Merger Consideration. Such Stockholders shall be entitled
to receive payment of the appraised value of such Shares held by them in
accordance with the provisions of such Section 262, except that all Dissenting
Shares held by Stockholders who shall have failed to perfect or who effectively
shall have withdrawn or lost their rights to appraisal of such Shares under such
Section 262 shall thereupon be deemed to have been converted into, and to have
become exchangeable for, as of the Effective Time, the right to receive the Per
Share Merger Consideration, without any interest thereon, upon surrender, in the
manner provided in Section 2.04, of the certificate or certificates that
formerly evidenced such Shares.
(b) The Company shall give Parent timely notice of
any demands for appraisal received by the Company, withdrawals of such demands,
and any other instruments served pursuant to the DGCL and received by the
Company.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Parent and Merger Sub to enter into this
Agreement, the Company hereby represents and warrants to Parent and Merger Sub
that, except as set forth in the company disclosure schedule which has been
prepared by the Company and delivered by the Company to Parent and Merger Sub
prior to the execution and delivery of this Agreement (the "Company Disclosure
Schedule"):
Section 3.01 Organization and Qualification of the Company.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. The Company is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing necessary
except such jurisdictions, if any, in which the failure to be in good standing
or be so qualified or licensed would not reasonably be expected to have a
Material Adverse Effect. Section 3.01 of the Company Disclosure Schedule sets
forth a true and complete list of all jurisdictions in which the Company is duly
qualified or licensed as a foreign corporation to do business.
Section 3.02 Subsidiaries.
(a) Section 3.02(a) of the Company Disclosure
Schedule sets forth a true and complete list of all Subsidiaries, listing for
each Subsidiary its name, type of entity, the jurisdiction and date of its
incorporation or organization, its authorized capital stock, partnership capital
or equivalent, the number and type of its issued and outstanding shares of
capital stock, partnership interests or similar ownership interests and the
current ownership of the Company and each other Person of such shares,
partnership interests or similar ownership interests. The Company does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any equity or similar
interest in, any Person other than the Subsidiaries.
(b) Each Subsidiary that is a corporation: (i) is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, (ii) has all necessary power and authority
to own, operate or lease the properties and assets owned, operated or leased by
such Subsidiary and to carry on its business as it is currently conducted by
such Subsidiary and (iii) is duly licensed or qualified to do business and is in
good standing in each jurisdiction in which the properties owned or leased by it
or the operation of its business makes such licensing or qualification
necessary, except such jurisdictions, if any, in which the failure to be in good
standing or be so qualified or licensed would not reasonably be expected to have
a Material Adverse Effect. Each Subsidiary that is not
9
a corporation: (i) is duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, (ii) has all necessary power
and authority to own, operate or lease the properties and assets owned, operated
or leased by such Subsidiary and to carry on its business as it has been and is
currently conducted by such Subsidiary and (iii) is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which the
properties owned or leased by it or the operation of its business makes such
licensing or qualification necessary, except such jurisdictions, if any, in
which the failure to be in good standing or be so qualified or licensed would
not reasonably be expected to have a Material Adverse Effect.
(c) True and complete copies of the certificate of
incorporation and bylaws (or similar organizational documents), in each case as
in effect on the date hereof, of each Subsidiary have been delivered by the
Company to Parent.
Section 3.03 Certificate of Incorporation and By-Laws. The
Company has heretofore furnished to Parent a complete and correct copy of the
Certificate of Incorporation and the By-Laws or equivalent organizational
documents, each as amended to date, of the Company (collectively, the
"Organizational Documents"). Such Organizational Documents are in full force and
effect.
Section 3.04 Capitalization.
(a) The authorized capital stock of the Company
consists of 50,000,000 shares of Company Common Stock. As of the date of this
Agreement, (i) 42,710,291 Shares are issued and outstanding, (ii) there are no
Shares held in the treasury of the Company and (iii) 4,200,000 Shares are
reserved for future issuance pursuant to Options granted pursuant to the Company
Stock Option Plan. Except as set forth in Section 3.04(a) of the Company
Disclosure Schedule or as provided in the Stockholders' Agreement, the Company
Stock Option Plan and any awards agreements thereunder, there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company or
obligating the Company to issue or sell any shares of capital stock of, or other
equity interests in, the Company.
(b) As of the date hereof, there are outstanding
Options exercisable for an aggregate of 2,725,000 Shares. All Shares subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable.
(c) Section 3.04(c) of the Company Disclosure
Schedule sets forth the following information with respect to each holder of
shares of capital stock of the Company outstanding as of the date of this
Agreement: (i) the name and address of such holder of record on the stock books
of the Company and (ii) the number of and type of shares held.
10
(d) Section 3.04(d) of the Company Disclosure
Schedule sets forth the following information with respect to each Option
outstanding as of the date of this Agreement: (i) the name and address of the
optionee of record on the stock books of the Company, (ii) the particular plan
pursuant to which such Option was granted, (iii) the number of shares of Company
Common Stock subject to such Option, (iv) the exercise price of such Option and
(v) the date on which such Option was granted. The Company has made available to
Parent accurate and complete copies of the Company Stock Option Plan pursuant to
which the Company has granted such Options that are currently outstanding and
the form of the stock option agreements evidencing such Options.
(e) Except as set forth on Section 3.04(e) of the
Company Disclosure Schedule, or as provided in the Stockholders' Agreement or
pursuant to the Company Stock Option Plan, there are no outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire any
capital stock of the Company or to provide funds to, or make any investment (in
the form of a loan, capital contribution or otherwise) in, any other Person.
Except for the Stockholders' Agreement, the Company Stock Option Plan and any
awards agreements thereunder, neither the Company nor GFI is a party to any
stockholders, voting or other agreement with respect to the Shares. All
outstanding shares of capital stock of the Company and all outstanding Options
have been issued and granted in compliance in all material respects with (i) all
applicable securities laws and other applicable material Laws (as defined below)
and (ii) all material requirements set forth in applicable contracts.
(f) Each Share and Option has been duly authorized
and validly issued. GFI is the record owner of 42,660,291 Shares, free and clear
of any and all Encumbrances other than Encumbrances under this Agreement and
restrictions on transfer under applicable Law.
Section 3.05 Authority Relative to This Agreement. Each of GFI
and the Company has all necessary power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by GFI and the Company and the consummation by GFI and the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary action, and no other proceedings on the part of GFI or the Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (other than, with respect to the Merger, the filing and
recordation of appropriate merger documents as required by the DGCL). The
requisite Stockholders have duly approved and adopted this Agreement in
accordance with the DGCL. This Agreement has been duly and validly executed and
delivered by GFI or the Company and, assuming the due authorization, execution
and delivery by Parent and Merger Sub, constitutes a legal, valid and binding
obligation of GFI and the Company, enforceable against GFI and the Company in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency, moratorium or other terms relating to or limiting
creditors rights generally or by general principles of equity, regardless of
whether such enforceability is considered in law or equity.
11
Section 3.06 No Conflict; Required Filings and Consents.
Except as set forth on Section 3.06(a) of the Company Disclosure Schedule,
(a) The execution and delivery of this Agreement by
GFI and the Company do not, and the performance of this Agreement by GFI and the
Company will not, (i) conflict with or violate the Organizational Documents of
GFI and the Company, (ii) assuming that all consents, approvals, authorizations
and other actions described in Section 3.06(b) have been obtained and all
filings and obligations described in Section 3.06(b) have been made, conflict
with or violate in any material respect any United States or non-United States
statute, law, ordinance, regulation, rule, code, executive order, injunction,
judgment, decree or other order ("Law") applicable to GFI and the Company or by
which any property or asset of the Company is bound or affected, or (iii) result
in any breach of or constitute a default (or an event which, with notice or
lapse of time or both, would become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of the
Company pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation, except, in
the case of clause (ii), such conflicts or violations, and in the case of clause
(iii), such breaches, defaults rights of termination, amendment, acceleration,
or cancellation or creations of liens or encumbrances as would not reasonably be
expected to have a Material Adverse Effect, or with respect to any Material
Contracts with customers of the Company, would not result in any material breach
of, or constitute a material default under, or give rise to a right to terminate
or materially amend, such Material Contracts.
(b) The execution and delivery of this Agreement by
GFI and the Company do not, and the performance of this Agreement by GFI and the
Company will not, require any material consent, approval, authorization or
permit of, or filing with or notification to, any United States federal, state,
county or local or non-United States government, governmental, regulatory or
administrative authority, agency, instrumentality or commission or any court,
tribunal, or judicial or arbitral body (a "Governmental Authority"), except
pursuant to applicable requirements, if any, of (i) the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act") and (ii) filing and recordation of appropriate merger
documents as required by the DGCL.
Section 3.07 Licenses and Permits. Except as set forth in
Section 3.07 of the Company Disclosure Schedule or as would not reasonably be
expected to have a Material Adverse Effect, (i) the Company and each of its
Subsidiaries owns, holds or possesses all licenses, consents, franchises,
permits, approvals and other orders or authorizations of, or registrations,
declarations, notices or filings with (collectively, "Permits"), any
Governmental Authority and any other Person necessary to own or lease, operate
and use its assets and properties and to carry on and conduct its business and
operations as presently conducted and (ii) neither the Company nor any of its
Subsidiaries is in violation of or default under any Permit or
12
any judgment, order, writ, injunction or decree of any court or administrative
agency issued against it or any law, ordinance, rule or regulation applicable to
it.
Section 3.08 Compliance with Law and Notices of Violation.
Except as set forth in Section 3.08 of the Company Disclosure Schedule, since
September 1, 2001, the Company and each of its Subsidiaries has complied in all
material respects with all applicable Laws of any Governmental Authority
material to them, and no material action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice ("Action") has been
filed or commenced against it or any of them alleging any failure so to comply.
Except as set forth in Section 3.08 of the Company Disclosure Schedule, since
September 1, 2001, neither the Company nor any of its Subsidiaries has received
written notice of a material violation of any Law of any Governmental Authority
material to them and, to the Knowledge of the Company, no investigation or
review by any Governmental Authority with respect to the Company or any of its
Subsidiaries, which would be material to the Company or any of its Subsidiaries,
is pending or threatened, nor, to the Knowledge of the Company, has any
Governmental Authority indicated in writing an intention to conduct any such
investigation or review.
Section 3.09 Financial Information; Books and Records;
Undisclosed Liabilities.
(a) True and complete copies of (i) the audited
consolidated balance sheet of the Company for the stub period ended as of
December 31, 2001 and the fiscal year ended as of December 31, 2002, and the
related audited consolidated statements of income and cashflows, together with
all related notes and schedules thereto, accompanied by the reports thereon of
the Company's Accountants (collectively referred to herein as the "Financial
Statements") and (ii) the unaudited consolidated balance sheet of the Company as
of September 30, 2003, and the related consolidated statements of income and
cashflows, of the Company (collectively referred to herein as the "Interim
Financial Statements") have been delivered by the Company to Parent. The
Financial Statements and the Interim Financial Statements: (i) were prepared in
accordance with the books of account and other financial records of the Company,
(ii) present fairly in all material respects the consolidated financial
condition of the Company as of the dates thereof and the income and cashflows
for the periods involved (subject, in the case of the Interim Financial
Statements, to normal and recurring year-end adjustments which, except as set
forth in Section 3.09(a) of the Company Disclosure Schedule, are not expected to
be material), and (iii) have been prepared in accordance with U.S. GAAP applied
on a basis consistent with the past practices of the Company (except, with
respect to the Interim Financial Statements, the absence of notes and normal and
recurring year-end adjustments which, except as set forth in Section 3.09(a) of
the Company Disclosure Schedule, are not expected to be material).
(b) There are no material Liabilities of the Company
and its Subsidiaries other than Liabilities (i) reflected or reserved against on
the unaudited consolidated balance sheet of the Company dated September 30,
2003, (ii) set forth in Section 3.09(b) of the Company Disclosure Schedule,
(iii) incurred since September 30, 2003 in the ordinary course of business,
13
consistent with past practice, or (iv) not required to be reflected in the
Financial Statements in accordance with GAAP.
Section 3.10 Absence of Certain Changes or Events. Since
September 30, 2003 through the date of this Agreement, except as set forth in
Section 3.10 of the Company Disclosure Schedule, or as expressly contemplated by
this Agreement (a) the Company and the Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and (b) there has not been any Material Adverse Effect and (c) the
Company has not taken any action that, if taken after the date of this
Agreement, would constitute a breach of the covenants set forth in Section
5.01(c), (e), (f), (h) and (i).
Section 3.11 Absence of Litigation. Except as set forth in
Section 3.11(i) of the Company Disclosure Schedule, there is no Action (i)
seeking monetary damages in excess of $150,000 or (ii) seeking equitable or
injunctive relief, in each case, pending or, to the Knowledge of the Company,
threatened against the Company or any Subsidiary, or any property or asset of
the Company or any Subsidiary, before any Governmental Authority. Except as set
forth in Section 3.11(ii) of the Company Disclosure Schedule, none of the
Company, the Subsidiaries or any property or asset of the Company or any
Subsidiary is subject to any material continuing order of, consent decree,
settlement agreement or other similar material written agreement with any
Governmental Authority. None of the items set forth on Section 3.11(ii) of the
Company Disclosure Schedule would prevent or materially delay consummation of
the Merger or otherwise prevent or materially delay GFI and the Company from
performing their respective obligations under this Agreement or would reasonably
be expected to have a Material Adverse Effect. To the Knowledge of the Company,
except as set forth in Section 3.11(iii) of the Company Disclosure Schedule and
except for claims asserted in amounts less than the deductible under the
applicable insurance policy, as of the date hereof, (i) no claim submitted by
the Company or any Subsidiary for insurance coverage with respect to any Action
listed in Section 3.11(i) of the Company Disclosure Schedule has been denied and
(ii) coverage has not been exhausted under any of the insurance policies listed
in Section 3.22 of the Company Disclosure Schedule.
Section 3.12 Employee Benefit Plans.
(a) Section 3.12(a)(i) of the Company Disclosure
Schedule lists all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all
bonus, stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all employment,
termination, severance or other contracts or agreements to which the Company is
a party, with respect to which the Company has any obligation or which are
maintained, contributed to or sponsored by the Company for the benefit of any
current or former employee, officer, consultant, or director of the Company
(collectively, the "Plans"). Except as set forth in Section 3.12(a)(ii) of the
Company Disclosure Schedule, each Plan is in writing and the Company has made
14
available to Parent a true and complete copy of each Plan and has delivered to
Parent, with respect to each Plan, a true and complete copy of (as applicable),
(i) each trust agreement or other funding arrangement, (ii) the most recent
summary plan description and any summary of material modifications issued with
respect to such summary plan description, (iii) the three most recently filed
annual reports on IRS Form 5500, (iv) the most recently received IRS
determination letter for each such Plan, and (v) the most recently prepared
actuarial report and financial statement in connection with each such Plan.
Except as provided for in this Agreement, the Company does not have any express
commitment (i) to create, incur liability with respect to or cause to exist any
other material Plan, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual for an amount greater than $50,000
per year, or (iii) to modify, change or terminate any Plan in a manner that
would materially increase the benefits provided under such Plan or the costs of
maintaining such Plan, other than with respect to a modification, change or
termination required by applicable Law.
(b) Except as disclosed in Section 3.12(b) of the
Company Disclosure Schedule, the Company has not at any time maintained,
sponsored or contributed to a plan that is (i) a multiemployer plan (within the
meaning of Section 3(37) or 4001(a)(3) of ERISA) or (ii) a single employer
pension plan (within the meaning of Section 4001(a)(15) of ERISA) that is
subject to Title IV of ERISA or Section 412 of the Code. No liability under
Title IV of ERISA has been incurred by the Company or any of its Subsidiaries
that has not been satisfied in full, and no condition exists that presents a
material risk to the Company or any of its Subsidiaries incurring any liability
under such Title.
(c) Except as disclosed in Section 3.12(c) of the
Company Disclosure Schedule, none of the Plans (i) provides for the payment of
separation, severance, termination or similar type benefits to any person or
(ii) obligates the Company to pay separation, severance, termination or similar
type benefits solely or partially as a result of any transaction contemplated by
this Agreement or as a result of a "change in control" within the meaning of
such term under Section 280G of the Code. None of the Plans provides for or
promises retiree medical, disability or life insurance benefits to any current
or former employee, officer or director of the Company. None of the Plans
provides benefits to persons other than residents of the United States.
(d) None of the Company, its parent, any of its
Subsidiaries, any of the Plans, any trust created thereunder, nor to the
Knowledge of the Company, any trustee or administrator thereof has engaged in a
transaction or has taken or failed to take any action in connection with which
the Company or any of its Subsidiaries would reasonably be subject to any
material liability for either a civil penalty assessed pursuant to Section 409
or 502(i) of ERISA or a tax imposed pursuant to Section 4975, 4976 or 4980B of
the Code.
(e) Each Plan has been operated in all material
respects in accordance with its terms and the requirements of all applicable
Laws including, without limitation, ERISA and the Code. No Action is pending or,
to the Knowledge of the Company, threatened with
15
respect to any Plan (other than claims for benefits in the ordinary course) and,
to the Knowledge of the Company, no fact or event exists that would reasonably
give rise to any such Action.
(f) All contributions, premiums or payments required
to be made with respect to any Plan have in all material respects been made (or
will be made) on or before their due dates. All such contributions have been
fully deducted for income tax purposes and no such deduction has been challenged
or disallowed by any Governmental Authority and no fact or event exists which
would reasonably be expected to give rise to any such challenge or disallowance.
(g) Each Plan that is intended to be qualified under
Section 401(a) of the Code or Section 401(k) of the Code has received a
favorable determination letter from the IRS that considers Plan provisions
required by the "GUST" Amendments, indicating that the Plan is so qualified and
that the associated trust established in connection with such Plan is exempt
from federal income taxation under Section 501(a) of the Code and no fact or
event has occurred since the date of such determination letter or letters from
the IRS that would reasonably be expected to have an adverse effect on the
qualified status of any such Plan or the exempt status of any such trust.
(h) Section 3.12(h) of the Company Disclosure
Schedule set forth all current consultants, officers and employees of the
Company and each Subsidiary who have entered into a written obligation with the
Company or a Subsidiary to maintain in confidence all confidential or
proprietary information (as defined in such agreements) acquired by them in the
course of their employment and to assign to the Company or a Subsidiary all
inventions made by them within the scope of their employment during such
employment.
(i) The Company and its Subsidiaries are in
compliance with the requirements of the Workers Adjustment and Retraining
Notification Act and any similar state or local law ("WARN") and, to the
Knowledge of the Company, have no liabilities pursuant to WARN.
Section 3.13 Labor and Employment Matters.
(a) Except as set forth in Section 3.13(a) of the
Company Disclosure Schedule, (i) there are no material controversies pending or,
to the Knowledge of the Company, threatened in writing between the Company or
the Subsidiaries, on the one hand, and any of their respective employees or
consultants, on the other hand, and the Company and the Subsidiaries have not
experienced any controversy, strike, slowdown or work stoppage within the past
three years, (ii) neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or any of its Subsidiaries, nor, to the
Knowledge of the Company, are there any activities or proceedings of any labor
union to organize any such employees (iii) there are no unfair labor practice
complaints pending against the Company or any of its Subsidiaries before the
National Labor
16
Relations Board or any other Governmental Authority or any current portion under
representations and questions involving employees of the Company or any of its
Subsidiaries.
(b) Except as set forth in Section 3.13(b) of the
Company Disclosure Schedule (i) the Company and each Subsidiary is in compliance
in all material respects with all applicable Laws relating to the employment of
labor, including those related to wages, hours, collective bargaining and the
payment and withholding of taxes and other sums as required by the appropriate
Governmental Authority and have withheld and paid in all material respects to
the appropriate Governmental Authority or are holding for payment not yet due to
such Governmental Authority all amounts required to be withheld from employees
of the Company and each Subsidiary and are not liable for any arrears of wages,
taxes, penalties or other sums for failure to comply with any of the foregoing,
(ii) the Company and each Subsidiary has paid in full to all employees or
adequately accrued for in accordance with GAAP consistently applied all wages,
salaries, commissions, bonuses, benefits and other compensation due to or on
behalf of such employees and there is no claim with respect to payment of wages,
salary or overtime pay that has been asserted or is now pending or, to the
Knowledge of the Company, threatened before any Governmental Authority with
respect to any persons currently or formerly employed by the Company and each
Subsidiary, (iii) neither the Company nor any Subsidiary is a party to, or
otherwise bound by, any consent decree with, or citation by, any Governmental
Authority relating to employees or employment practices, (iv) there is no charge
or proceeding with respect to a violation of any occupational safety or health
standards that has been asserted or is now pending or, to the Knowledge of the
Company, threatened in writing with respect to the Company or any Subsidiary and
(v) there is no charge of discrimination in employment or employment practices
respecting any current or former employee of the Company or any Subsidiary, for
any reason, including, without limitation, age, gender, race, religion or other
legally protected category, which has been asserted or is now pending or, to the
Knowledge of the Company, threatened before the United States Equal Employment
Opportunity Commission, or any other Governmental Authority in any jurisdiction
in which the Company or any Subsidiary has employed or employ any person.
Section 3.14 Key Employees. Section 3.14 of the Company
Disclosure Schedule lists as of October 31, 2003, the name, title, place of
employment, the current annual salary rates, bonuses earned, deferred
compensation (other than with respect to deferred salary or bonus or with
respect to Plans intended to be qualified under Section 401(a) of the Code),
accrued vacation, and the date of employment of each current salaried employee
of the Company and each Subsidiary whose salary in fiscal year 2003 is expected
to exceed $125,000.
Section 3.15 Real Property.
(a) Section 3.15(a) of the Company Disclosure
Schedule lists each parcel of real property currently owned by the Company or
any Subsidiary. Each parcel of real property owned by the Company or any
Subsidiary (i) is owned free and clear of all mortgages, pledges, liens,
security interests, conditional and installment sale agreements, encumbrances,
17
charges or other claims of third parties of any kind, including, without
limitation, any easement, right of way or other encumbrance to title, or any
option, right of first refusal, or right of first offer (collectively, "Liens"),
other than (A) Liens for current taxes and assessments not yet past due, (B)
inchoate mechanics' and materialmen's Liens for construction in progress, (C)
workmen's, repairmen's, warehousemen's and carriers' Liens arising in the
ordinary course of business of the Company or such Subsidiary consistent with
past practice, and (D) all matters of record, Liens and other imperfections of
title and encumbrances that would not reasonably be expected to have a Material
Adverse Effect (collectively, "Permitted Liens") and (ii) is neither subject to
any governmental decree or order to be sold nor is being condemned, expropriated
or otherwise taken by any public authority with or without payment of
compensation therefore, nor, to the Knowledge of the Company, has any such
condemnation, expropriation or taking been proposed.
(b) Section 3.15(b) of the Company Disclosure
Schedule sets forth a list of each parcel of real property currently leased or
subleased, with a remaining term of at least 24 months or a monthly rental rate
greater than $5,000, by the Company or any Subsidiary, with the name of the
lessor and the date of the lease, sublease, assignment of the lease, any
guaranty given by the Company or any Subsidiary in connection therewith and each
amendment to any of the foregoing (collectively, the "Lease Documents"). True,
correct and complete copies of all Lease Documents have been delivered or made
available to Parent. All such current leases and subleases are in full force and
effect, are valid and effective in accordance with their respective terms, and
there is not, under any of such leases, any existing material default or event
of default (or event which, with notice or lapse of time, or both, would
constitute a default) thereunder by the Company or any Subsidiary or, to the
Knowledge of the Company, by the other party to such lease or sublease, or
person in the chain of title to such leased premises, except as would not
reasonably be expected to have a Material Adverse Effect.
(c) To the Knowledge of the Company, (i) the use and
occupancy by the Company or any Subsidiary (and the conduct of its business
thereon) of any of its owned or leased real property does not violate any
applicable material contractual or legal restrictions affecting such real
property and (ii) the real property (including any improvements thereon) owned
or leased by the Company or any Subsidiary is in reasonably good operating
condition and repair.
Section 3.16 Intellectual Property.
(a) Section 3.16(a) of the Company Disclosure
Schedule sets forth a true and complete list of (other than off-the-shelf
commercial software) all Company IP Agreements.
(b) Except to the extent set forth in Section 3.16(b)
of the Company Disclosure Schedule, to the Knowledge of the Company, the
operation of the business as currently conducted by the Company or any
Subsidiary and the use of the Owned Intellectual Property and Licensed
Intellectual Property in connection therewith do not conflict with,
18
infringe, misappropriate or otherwise in any material respect violate the
Intellectual Property or other proprietary rights, including rights of privacy,
publicity and endorsement, of any third party.
(c) Except as disclosed in Section 3.16(c) of the
Company Disclosure Schedule, the Company or one of its Subsidiaries is the
exclusive owner of the Owned Intellectual Property free and clear of all liens,
claims or encumbrances of others. The Company or one of its Subsidiaries has a
valid right to use the Owned Intellectual Property and, to the Knowledge of the
Company, has a valid right and license to use the Licensed Intellectual Property
in the ordinary course of its business as presently conducted.
(d) Except as disclosed in Section 3.16(d) of the
Company Disclosure Schedule and with respect to any off-the-shelf commercial
software to which the Company or one of its Subsidiaries has a license, no Owned
Intellectual Property, to the Knowledge of the Company, or Licensed Intellectual
Property is subject to any outstanding decree, order, injunction, judgment or
ruling restricting the use of such Intellectual Property by the Company or its
Subsidiaries.
(e) Except for off-the-shelf commercial software, (i)
the Owned Intellectual Property and the Licensed Intellectual Property include
all of the Intellectual Property used in the ordinary day-to-day conduct of the
Company's business, and (ii) there are no other items of Intellectual Property
of the Company that are material to the ordinary day-to-day conduct of such
businesses. The Owned Intellectual Property, and to the Knowledge of the
Company, the Licensed Intellectual Property, have not been adjudged invalid or
unenforceable in whole or part by a court of competent jurisdiction.
(f) Except as disclosed on Section 3.16(f) of the
Company Disclosure Schedule, (i) no Actions or claims have been asserted or are
pending or, to the Knowledge of the Company, threatened against the Company or
one of its Subsidiaries (A) based upon or challenging or seeking to deny or
restrict the use by the Company or one of its Subsidiaries of any of the Owned
Intellectual Property other than any use restrictions set forth in the Company
IP Agreements, or (B) alleging that the Licensed Intellectual Property is being
licensed or sublicensed, by the Company or any Subsidiary, in conflict with the
terms of any license or other agreement.
(g) To the Knowledge of the Company, no person is
engaging in any activity that infringes the Owned Intellectual Property or
Licensed Intellectual Property. Except as set forth in Section 3.16(g) of the
Company Disclosure Schedule, neither the Company nor any Subsidiary has granted
any license or other right to any third party with respect to the Owned
Intellectual Property or Licensed Intellectual Property. The consummation of the
transactions contemplated by this Agreement will not result in the termination
or impairment of any of the material Owned Intellectual Property or of any
material Licensed Intellectual Property.
19
(h) The Company and each Subsidiary has taken
reasonable steps in accordance with normal industry practice to maintain the
confidentiality of the trade secrets and other confidential Intellectual
Property used in connection with their respective businesses. Except as
disclosed on Section 3.16(h) of the Company Disclosure Schedule, to the
Knowledge of the Company, (i) there has been no misappropriation of any material
trade secrets or other material confidential Intellectual Property used in
connection with the business of the Company or one of its Subsidiaries by any
person, (ii) no employee, independent contractor or agent of the Company or one
of its Subsidiaries has misappropriated any trade secrets of any other person in
the course of their performance as an employee, independent contractor or agent
of their respective businesses and (iii) no employee, independent contractor or
agent of the Company or one of its Subsidiaries is in default or breach of any
term of any employment agreement, nondisclosure agreement, assignment of
invention agreement or similar agreement or contract relating in any way to the
protection, ownership, development, use or transfer of Intellectual Property.
(i) Except with respect to the Company IP Agreements
set forth on Section 3.16(a) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries is obligated to pay any royalty payments or
licensing fees to a third party (except with respect to off-the-shelf commercial
software) or owes any past due royalty payments or licensing fees to a third
party.
Section 3.17 Taxes.
(a) Except as set forth in Section 3.17(a) of the
Company Disclosure Schedule, the Company and the Subsidiaries (i) have timely
filed or caused to be timely filed all material Tax Returns required to be filed
as of the date hereof, and all such filed Tax Returns are true, correct and
complete in all material respects; (ii) except for Taxes being contested in good
faith in appropriate proceedings and for which adequate reserves have been
maintained in accordance with U.S. GAAP, have paid all material amounts of Taxes
required to be paid (whether or not shown on such Tax Returns); and (iii) have
not waived any statute of limitations with respect to any Tax or agreed to an
extension of time with respect to a Tax assessment or deficiency. Except as set
forth in Section 3.17(a) of the Company Disclosure Schedule, all material
amounts of Taxes required to have been withheld by or with respect to the
Company and the Subsidiaries have been withheld and remitted to the applicable
Tax Authority.
(b) Except as set forth in Section 3.17(b) of the
Company Disclosure Schedule, neither the Company nor any Subsidiary has (i) at
any time, been a member of any affiliated, consolidated, combined or unitary
group of corporations other than the affiliated group (within the meaning of
Section 1504(a)(1) of the Code) for which the Company files a consolidated
return as the common parent or (ii) any liability for Taxes of any other Person
(A) under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local or foreign Tax Law), (B) as a transferee or successor, (C) by
contract or (D) otherwise. Neither the Company nor any Subsidiary is subject to
any agreement for the sharing of Taxes or is obligated
20
to indemnify any other Person for Taxes pursuant to any agreement, which
agreement will remain in effect after the Closing Date.
(c) Except as set forth in Section 3.17(c) of the
Company Disclosure Schedule, as of the date hereof, there are no pending or, to
the Knowledge of the Company, threatened in writing, audits, examinations,
investigations or other proceedings in respect of any Tax matter of the Company
or any Subsidiary. Except as set forth in Section 3.17(c) of the Company
Disclosure Schedule, no deficiency for any Tax has been asserted or assessed by
any taxing authority against the Company or any Subsidiary, which deficiency has
not been satisfied by payment or been withdrawn. No claim in writing has been
made by a taxing authority in a jurisdiction where the Company or any Subsidiary
does not file Tax Returns that the Company or such Subsidiary is or may be
subject to taxation by such jurisdiction. No power of attorney has been granted
with respect to any matter relating to Taxes that could affect the Company or
any Subsidiary in any taxable period ending after the Closing Date.
(d) Except as set forth in Section 3.17(d) of the
Company Disclosure Schedule, there are no Tax liens on any assets of the Company
or any Subsidiary (other than any liens for Taxes not yet due and payable or for
which adequate reserves have been maintained in accordance with U.S. GAAP).
Neither the Company nor any Subsidiary has been required to recognize income as
a result of any adjustment following a change in accounting method initiated by
the Company or such Subsidiary, and no taxing authority has in writing initiated
or proposed any such adjustment or change in accounting method. Neither the
Company nor any Subsidiary is required to include in a taxable period ending
after the Closing Date any amount of taxable income attributable to income that
economically accrued in a prior taxable period but was not recognized for Tax
purposes in any prior taxable period, including as a result of the installment
method of accounting, the long-term contract method of accounting, the cash
method of accounting or Section 481 of the Code (or any comparable provision of
state or local Tax Law) or for any other reason. The federal income Tax Returns
of the Company and the Subsidiaries have disclosed any Tax positions of the
Company and the Subsidiaries that, if not disclosed, could give rise to
penalties under Section 6662 of the Code.
(e) At all times prior to its acquisition by the
Company, UtiliQuest LLC was treated as a partnership for federal, state and
local Tax purposes, and at all times since its acquisition by the Company,
UtiliQuest LLC has been treated as a disregarded entity for federal, state and
local Tax purposes.
(f) Section 3.17(f) of the Company Disclosure
Schedule indicates for which jurisdictions Tax Returns that include the Company
and any Subsidiary have been filed on a consolidated, combined, affiliated or
unitary group basis and indicates the most recent income, franchise or similar
Tax Return for each relevant jurisdiction for which an audit has been completed.
21
Section 3.18 Environmental Matters.
(a) Except as described in Section 3.18(a) of the
Company Disclosure Schedule or as would not reasonably be expected to have a
Material Adverse Effect, (i) the Company and the Subsidiaries have not violated
or are not in violation of any Environmental Law, (ii) none of the properties
currently or, to the Knowledge of the Company, formerly owned, leased or
operated by the Company and the Subsidiaries (including, without limitation,
soils and surface and ground waters) are contaminated with any Hazardous
Substance in a manner requiring investigation, remediation or other action
pursuant to Environmental Law, (iii) there are no pending, or to the Knowledge
of the Company, threatened claims against the Company for actual, potential or
alleged liability for any off-site contamination by Hazardous Substances, (iv)
to the Knowledge of the Company, the Company and the Subsidiaries are not
actually, potentially or allegedly liable under any Environmental Law
(including, without limitation, pending or threatened liens), (v) the Company
has all permits, licenses and other authorizations required under any
Environmental Law ("Environmental Permits"), (vi) the Company and the
Subsidiaries are and have always been, in compliance with their Environmental
Permits and (vii) to the Knowledge of the Company, neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby will
require any investigation, remediation or other action with respect to Hazardous
Substances or any notice to or consent of Governmental Authorities or third
parties pursuant to any applicable Environmental Law or Environmental Permit.
(b) The Company has provided or made available to
Parent copies of any Phase I environmental site assessments, environmental
compliance audits, and other similar reports in the Company's possession
addressing the Company's or any of its Subsidiaries' business or operations, or
any Owned Real Property or Leased Real Property, that have been conducted in the
past two years.
Section 3.19 Accounts Receivable. Schedule 3.19 is an aged
list of the Accounts Receivable as of the date hereof showing separately those
Accounts Receivable that as of October 31, 2003 have been outstanding for (a) 30
days or less, (b) 31 to 60 days, (c) 61 to 90 days and more than 90 days. All
Accounts Receivable (a) are valid and genuine and (b) arose out of bona fide
sales and deliveries of goods, performance of services or other transactions in
the ordinary course of business consistent with past practices.
Section 3.20 Inventories. All Inventory used in the business
(a) was acquired and has been maintained in accordance with regular business
practices of the Company, (b) consists of items of a quality and quantity
useable or saleable in the ordinary course of business consistent with past
practice and (c) is valued at the lower of cost or market value taking into
account the Company's allowance for excess and obsolete inventory. The Inventory
is in good and merchantable condition in all material respects, is suitable and
useable for the purposes for which it is intended and is in a condition such
that it can be sold in the ordinary course of business consistent with past
practice.
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Section 3.21 Material Contracts.
(a) Subsections (i) through (vii) of Section 3.21 of
the Company Disclosure Schedule contain a list of the contracts and agreements
to which the Company or any Subsidiary is a party that meet the criteria
enumerated below (such contracts, agreements and arrangements (whether written
or oral) as are required to be set forth in Section 3.21(a) of the Company
Disclosure Schedule being the "Material Contracts"):
(i) each contract and agreement which
provides for annual aggregate payments to or by the Company or its
Subsidiaries of more than $1,000,000;
(ii) all management contracts (excluding
contracts for employment) and contracts with consultants including any
contracts involving the payment of royalties or other amounts
calculated based upon the revenues or income of the Company or the
Subsidiaries to which the Company or the Subsidiaries are a party that
are not terminable by the Company or the Subsidiaries on thirty (30)
days' or less notice and which involve an annual payment of more than
$125,000;
(iii) all contracts and agreements
evidencing Indebtedness except for capital leases for office equipment
in an amount less than $20,000;
(iv) all material contracts and agreements
with any Governmental Authority to which the Company or the
Subsidiaries is a party;
(v) all contracts and agreements that limit,
or purport to limit, the ability of the Company or the Subsidiaries to
compete in any line of business or with any Person or in any geographic
area or during any period of time;
(vi) all contracts or arrangements that
result in any Person holding a power of attorney from the Company that
relates to the Company or its business; and
(vii) the Lease Documents.
(b) (i) Each Material Contract is a legal, valid and
binding agreement of the Company and to the Knowledge of the Company, the other
parties thereto, (ii) to the Knowledge of the Company, no Material Contract has
been canceled by any other party thereto, (iii) neither the Company nor its
Subsidiaries are in material default under any Material Contract to which they
are a party, (iv) to the Knowledge of the Company, no other party is in material
23
breach or violation of, or material default under, any Material Contract, (v)
neither the Company nor its Subsidiaries are in receipt of any written claim of
a material default under any such Material Contract and (vi) neither the
execution of this Agreement nor the consummation of any transaction contemplated
by this Agreement shall constitute a material default or give rise to
cancellation rights under any Material Contract. The Company has furnished or
made available to Parent true and complete copies of all written Material
Contracts, including any amendments thereto.
Section 3.22 Insurance.
(a) Section 3.22(a) of the Company Disclosure
Schedule sets forth, with respect to each material insurance policy under which
the Company or any Subsidiary is an insured, a named insured or otherwise the
principal beneficiary of coverage, (i) the names of the insurer, the principal
insured and each named insured, (ii) the policy number, (iii) the period, scope
and amount of coverage and (iv) the premium charged.
(b) With respect to each current material insurance
policy: (i) such policy is in full force and effect, (ii) neither the Company
nor any Subsidiary is in material breach or default (including any such breach
or default with respect to the payment of premiums or the giving of notice) and
(iii) no event has occurred which, with notice or the lapse of time, would
constitute such a material breach or default, or permit termination or
modification, under the policy.
Section 3.23 Related Party Transactions. Except for the
Stockholders' Agreement or as set forth in Section 3.23 of the Company
Disclosure Schedule, there are no contracts, commitments, agreements,
arrangements or other transactions (other than employment agreements, consulting
agreements, option agreements, confidentiality agreements, noncompetition
agreements, severance agreements, release agreements, or any Plan set forth on
Section 3.12(a) of the Company Disclosure Schedule) between the Company and any
Subsidiary, on the one hand, and any (i) officer, director, employee or
consultant of the Company and any Subsidiary, (ii) holder of Shares or Options
or (iii) an Affiliate of any such officer, director, employee, consultant or
security holder, on the other hand (any of the foregoing, a "Related Party
Transaction"). Neither the Company nor any Subsidiary has made any loans to any
of its respective officers, directors, employees or consultants except for
advances of expenses in the ordinary course of business.
Section 3.24 Board Approval; Vote Required.
(a) The Company board of directors, by resolutions
duly adopted and not subsequently rescinded or modified, has duly (i) determined
that this Agreement and the Merger are in the best interests of the Company and
its Stockholders, (ii) approved this Agreement and the Merger and declared their
advisability, (iii) recommended that the stockholders of the Company approve and
adopt this Agreement and approve the Merger and (iv) directed that this
24
Agreement and the transactions contemplated hereby be submitted for
consideration by the Company's stockholders entitled to vote thereon.
(b) The only vote of the holders of any class or
series of capital stock of the Company necessary to approve this Agreement, the
Merger and the other transactions contemplated hereby is the affirmative vote of
the holders of at least a majority of the outstanding shares of Company Common
Stock. The Stockholders have approved and adopted the Merger, this Agreement,
and the other transactions contemplated hereby.
Section 3.25 Title to Assets.
(a) Except as set forth in Section 3.25 of the
Company Disclosure Schedule, each of the Company and its Subsidiaries has good
and marketable title to, or a valid leasehold interest in, the material
properties and assets used by it, or shown on the balance sheet of the Company
as of September 30, 2003 or acquired after the date thereof, free and clear of
all Encumbrances other than Permitted Liens and Encumbrances securing
Indebtedness that will not be prepaid as of the Closing Date, except for
properties and assets disposed of in the ordinary course of business since the
date of the balance sheet. Except as set forth in Section 3.25 of the Company
Disclosure Schedule and except as entered into in the ordinary course of
business, there are no outstanding options, warrants, commitments, agreements or
any other rights of any character, entitling any person other than as
contemplated in this Agreement to acquire any material interest in all, or any
substantial part of, such assets.
(b) The buildings, machinery, equipment and other
tangible assets constituting the assets that the Company and its Subsidiaries
own, lease and use in the conduct of their business, are, taken as a whole, in
good operating condition and repair (subject to normal wear and tear) and are
adequate for the uses to which they are being put. These assets constitute all
the material assets of the business and material rights necessary to operate the
business of the Company and its Subsidiaries as currently conducted.
Section 3.26 Customers. Section 3.26 of the Company Disclosure
Schedule sets forth a complete and accurate list of the top fourteen customers
of the Company and its Subsidiaries by revenue on a consolidated basis during
fiscal 2002 and for the nine months ended September 30, 2003 showing approximate
total revenue received in each such period from each such customer. Except as
set forth in Section 3.26 of the Company Disclosure Schedule, as of the date
hereof, to the Knowledge of the Company, none of such customers within the last
twelve months has cancelled, terminated or threatened in writing to cancel any
Material Contract.
Section 3.27 Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of the Company.
25
Section 3.28 No Other Representations or Warranties. EXCEPT AS
SPECIFICALLY SET FORTH IN THIS ARTICLE III, NEITHER THE COMPANY NOR ANY OF ITS
STOCKHOLDERS, OFFICERS OR DIRECTORS IS MAKING, AND EACH OF THEM HEREBY EXPRESSLY
DISCLAIMS, ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As an inducement to GFI and the Company to enter into this
Agreement, Parent and Merger Sub hereby, jointly and severally, represent and
warrant to GFI and the Company that:
Section 4.01 Corporate Organization. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of its respective jurisdiction of incorporation and has the requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted.
Section 4.02 Authority Relative to This Agreement. Each of
Parent and Merger Sub has all necessary corporate power and authority to execute
and deliver this Agreement and the Escrow Agreement, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Escrow
Agreement, as applicable, by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or the Escrow Agreement or to consummate the
transactions contemplated hereby or thereby (other than, with respect to the
Merger, the filing and recordation of appropriate merger documents as required
by the DGCL). This Agreement and the Escrow Agreement have been duly and validly
executed and delivered by Parent and Merger Sub, and, assuming due
authorization, execution and delivery by the other parties thereto, constitute
legal, valid and binding obligations of each of Parent and Merger Sub,
enforceable against each of Parent and Merger Sub in accordance with its terms.
Section 4.03 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement and
the Escrow Agreement by Parent and Merger Sub do not, and the performance of
this Agreement and the Escrow Agreement, by Parent and Merger Sub will not, (i)
conflict with or violate the Organizational Documents of either Parent or Merger
Sub, (ii) assuming that all consents, approvals, authorizations and other
actions described in Section 4.03(b) have been obtained and
26
all filings and obligations described in Section 4.03(b) have been made,
conflict with or violate any law, applicable to Parent or Merger Sub or by which
any property or asset of either of them is bound or affected, or (iii) result in
any breach of, or constitute a default (or an event which, with notice or lapse
of time or both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Parent or
Merger Sub pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or Merger Sub is a party or by which Parent or Merger Sub or any
property or asset of either of them is bound or affected, except, with respect
to clauses (ii) and (iii), for any such conflicts, violations, breaches,
defaults or other occurrences which would not prevent or materially delay
consummation of the transactions contemplated by this Agreement or the Escrow
Agreement or otherwise prevent or materially delay Parent or Merger Sub from
performing their obligations under this Agreement or the Escrow Agreement.
(b) The execution and delivery of this Agreement and
the Escrow Agreement by Parent and Merger Sub do not, and the performance of
this Agreement and the Escrow Agreement by Parent and Merger Sub will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except for applicable requirements,
if any, of (i) the HSR Act and (ii) filing and recordation of the appropriate
merger documents as required by the DGCL.
Section 4.04 No Vote Required. No vote of the stockholders of
Parent is required by Law, Parent's Organizational Documents or otherwise in
order for Parent and Merger Sub to consummate the transactions contemplated
hereby.
Section 4.05 Operations of Merger Sub. Merger Sub is a direct,
wholly owned subsidiary of Parent, was formed solely for the purpose of engaging
in the transactions contemplated by this Agreement, has engaged in no other
business activities and has conducted its operations only as contemplated by
this Agreement.
Section 4.06 Financing. As of the date hereof, Parent has
funds, or has access to committed bank funds, in amounts sufficient to pay the
Merger Consideration, and shall have at Closing, sufficient funds to cause the
Surviving Corporation to pay the Merger Consideration in connection with the
Merger Agreement and consummate the Merger.
Section 4.07 Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of Parent or Merger Sub.
27
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.01 Conduct of Business by the Company Pending the
Merger. The Company agrees that, between the date of this Agreement and the
Effective Time, except as set forth in Section 5.01 of the Company Disclosure
Schedule or as expressly contemplated by any other provision of this Agreement,
unless Parent shall otherwise consent in writing (which consent shall not be
unreasonably withheld or delayed):
(i) the business of the Company shall be
conducted only in, and the Company shall not take any action except in,
the ordinary course of business and in a manner consistent with past
practice; and
(ii) the Company shall use its commercially
reasonable efforts to preserve substantially intact the business
organization of the Company and each Subsidiary and to keep available
the current employees of the Company (taken as a whole) consistent with
past practice, and to preserve the current relationships of the Company
and each Subsidiary with customers, suppliers and other persons with
which the Company and each Subsidiary has significant business
relations consistent with past practice.
By way of amplification and not limitation, except as
expressly contemplated by any other provision of this Agreement or as set forth
in Section 5.01 of the Company Disclosure Schedule, the Company or any
Subsidiary shall not, between the date of this Agreement and the Effective Time,
directly or indirectly, do, any of the following without the prior written
consent of Parent (which shall not be unreasonably withheld or delayed):
(a) amend or otherwise change its Organizational
Documents;
(b) issue, sell, pledge, dispose of, grant or
encumber, or authorize the issuance, sale, pledge, disposition, grant or
encumbrance of, (i) any shares of any class of capital stock of the Company, or
any options, warrants, convertible securities or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest
(including, without limitation, any phantom interest), of the Company, except
for the issuance of options pursuant to the Company's Stock Option Plan and
shares issuable pursuant to the exercise of Options or (ii) except in the
ordinary course of business and in a manner consistent with past practice, sell
any material assets or property of the Company or any Subsidiary;
(c) authorize, declare, set aside, make or pay any
dividend or other distribution, payable in cash, stock, property or otherwise,
with respect to any of its capital stock, except for dividends paid to the
Company, or enter into any Agreement with respect to the voting of its Capital
Stock;
28
(d) reclassify, combine, split or subdivide, any of
its capital stock;
(e) (i) acquire (including, without limitation, by
merger, consolidation, or acquisition of stock or assets or any other business
combination) any corporation, partnership, other business organization or any
division thereof or, other than in the ordinary course of business, any material
amount of assets, (ii) other than in the ordinary course of business, incur any
Indebtedness or issue any debt securities or assume, guarantee or endorse, or,
otherwise become responsible for, the obligations of any Person (other than the
Company or any Subsidiary), or make any loans or advances or grant any security
interest in any of its assets except for any incurrence of Indebtedness under
the CapitalSource Credit Agreement, (iii) make or authorize any capital
expenditures other than capital expenditures reflected in the Company's budget
for the fiscal year ending December 31, 2003, previously delivered by the
Company to Parent or (iv) enter into or amend any contract, agreement,
commitment or arrangement with respect to any matter set forth in this Section
5.01(e);
(f) (i) increase the compensation payable or to
become payable or the benefits provided to its directors or officers generally,
or, except in the ordinary course of business and consistent with past practice,
employees, other than with respect to obligations incurred by the Company prior
to the date hereof, (ii) grant any severance or termination pay to or enter into
any employment, bonus, change of control or severance agreement or arrangement
with, any director, officer or other employee of the Company who receives annual
salary from the Company in excess of $125,000 per year, (iii) establish, adopt,
enter into, increase or promise to increase or amend any material bonus,
profit-sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee, except as required by Law and (iv) hire or retain
any person with an annual salary greater than $125,000; provided that the
foregoing shall not restrict the Company from taking any action to accelerate
the vesting of outstanding stock options;
(g) waive any stock repurchase or acceleration rights
or materially amend or change the terms of any capital stock;
(h) take any action, other than reasonable and usual
actions in the ordinary course of business and consistent with past practice or
as required by GAAP, with respect to accounting policies or procedures;
(i) unless otherwise required by applicable Law, (i)
adopt or change any accounting method used by it, including any accounting
method relating to Taxes, (ii) make, change or revoke any material election
relating to Taxes, or (iii) enter into any closing agreement relating to Taxes,
settle any material claim or assessment relating to Taxes or consent to any
material claim or assessment relating to Taxes or any waiver of the statute of
limitations for any such claim or assessment;
29
(j) enter into any contract or agreement providing
for aggregate payments to or by the Company or its Subsidiaries of more than $5
million per year, or amend, modify or consent to the termination of any Material
Contract;
(k) commence or settle (except a settlement in
connection with the Enron Claim) any Action other than any settlement which does
not subject the Company or any Subsidiary to injunctive or other equitable
relief;
(l) except as specifically contemplated by this
Agreement or entered into in connection herewith, enter into any Related Party
Transaction; or
(m) except as specifically contemplated by this
Agreement, enter into any agreement or otherwise make a commitment, to do any of
the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01 Access to Information; Confidentiality.
(a) Except as required pursuant to any
confidentiality agreement or similar agreement or arrangement to which the
Company or any Subsidiary is a party or pursuant to applicable Law, from the
date of this Agreement until the Effective Time, the Company and each Subsidiary
shall: (i) provide to Parent (and Parent's officers, directors, employees,
accountants, consultants, legal counsel, agents and other representatives,
collectively, "Parent's Representatives") reasonable access during normal
business hours to the officers, employees, agents, properties, offices and other
facilities of such party and its subsidiaries and to the books and records
thereof; and (ii) furnish to Parent such information concerning the business,
properties, contracts, assets, liabilities, personnel and other aspects of such
party and its subsidiaries as Parent or Parent's Representatives may reasonably
request.
(b) All information obtained by Parent pursuant to
this Section 6.01 shall be kept confidential in accordance with the
confidentiality agreement, dated July 18, 2003 (the "Confidentiality
Agreement"), between Parent and the Company.
(c) Notwithstanding anything herein to the contrary,
each party hereto (and its representatives, agents and employees) may consult
any tax advisor regarding the tax treatment and tax structure of the
transactions contemplated hereby and, from and after the date of execution of
this Agreement (or, if earlier, the date of public announcement of this
Agreement, or public announcement of discussions between the parties relating to
the transactions) may disclose to any Person, without limitation of any kind,
the tax treatment and tax structure of such transactions and all materials
(including opinions and other tax analyses) that are provided relating to such
treatment or structure provided, however, that neither party (nor
30
any employee, representative or other agent thereof) may disclose any other
information that is not relevant to understanding the tax treatment and tax
structure of the transaction (including the identity of any party), or any other
information to the extent that such disclosure could result in a violation of
any federal or state securities law.
(d) No investigation pursuant to Section 6.01 shall
affect any representation or warranty in this Agreement of any party hereto or
any condition to the obligations of the parties hereto.
Section 6.02 No Solicitation of Transactions. None of GFI, the
Company nor any of their Affiliates, or their Affiliates' respective officers,
employees, directors, agents or other representatives (collectively, the
"Representatives") will, and GFI and, the Company shall use their commercially
reasonable efforts to cause no Stockholders of the Company to, (i) solicit,
initiate, encourage or accept any other inquiries, proposals or offers from any
person (x) relating to any acquisition or purchase of all or any portion of the
capital stock of the Company or material portion of the assets of the Company
outside of the ordinary course of business consistent with past practice,
excluding the issuance of Shares upon the exercise of Options, (y) enter into
any merger, recapitalization, reorganization, joint venture or other business
combination with the Company or (z) enter into any other extraordinary business
transaction involving or otherwise relating to the Company (any of the
transactions described in clauses (x), (y) and (z) being referred to herein as a
"Business Combination") or (ii) other than to notify a person who has contacted
the Company or any of its Representatives in connection with a Business
Combination that the Company is unable to respond thereto, participate in any
discussions, conversations, negotiations or other communications with any other
person regarding, or furnish to any other person any information with respect to
a Business Combination. The Company shall notify Parent promptly if any proposal
or offer, or any inquiry or other contact with any other individual or entity
with respect to a Business Combination, is made or received by the Company or
any of its Representatives. The parties agree that irreparable harm would occur
in the event any obligation under this Section was not performed in accordance
with its terms and that Parent shall be entitled to specific performance of the
terms thereof, in addition to any other remedy available at law or in equity,
without the necessity of demonstrating the inadequacy of money damages.
Section 6.03 Further Action; Commercially Reasonable Efforts.
(a) Each of the parties hereto agrees to use its
commercially reasonable efforts to (i) take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable Law or otherwise to consummate and make effective
the transactions contemplated hereby, (ii) obtain from Governmental Authorities
and third parties any material consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained or made by Parent or the
Company or any of their subsidiaries in connection with the authorization,
execution and delivery of this Agreement, and (iii) make all necessary filings,
and thereafter make any other required submissions, with respect to this
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Agreement and the transactions contemplated hereby required under the HSR Act.
Subject to appropriate confidentiality protections, the parties hereto shall
cooperate with each other in connection with the making of all such filings,
will furnish to the other party such necessary information and assistance as
such other party may reasonably request with respect to the foregoing, will
provide the other party with copies of all filings made by such party with any
Governmental Authority and, upon request, any other information supplied by such
party to a Governmental Authority in connection with this Agreement and the
transactions contemplated hereby.
(b) Parent and the Company shall have filed prior to
the date of this Agreement, or shall file as soon as practicable after the date
of this Agreement, notifications under the HSR Act and shall respond as promptly
as practicable to all inquiries or requests received from the Federal Trade
Commission or the Antitrust Division of the Department of Justice for additional
information or documentation and shall respond as promptly as practicable to all
inquiries and requests received from any State Attorney General or other
Governmental Authority in connection with antitrust matters. The parties shall
cooperate with each other in connection with the making of all such filings or
responses, including providing copies of all such documents to the other party
and its advisors prior to filing or responding. Notwithstanding anything to the
contrary contained herein, Parent shall not be required to take any action,
including entering into any consent decree, hold separate orders or other
arrangements, that (i) requires the divestiture of any assets of any of Parent,
the Company or any subsidiary of Parent or Subsidiary or (ii) limits Parent's
freedom of action with respect to, or its ability to retain, the Company or
Subsidiaries or any portion thereof or any of Parent's, Parent subsidiaries' or
their respective affiliates assets or businesses.
(c) The Company and Parent shall use their respective
commercially reasonable efforts to obtain any material third party consents (A)
necessary, proper, or advisable to consummate the transaction contemplated by
this Agreement, (B) required to be disclosed in the Disclosure Schedule or (C)
required to prevent a company Material Adverse Effect from occurring prior to
the Effective Time.
Section 6.04 Obligations of Merger Sub. Parent shall take all
action necessary to cause Merger Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and subject to the
conditions set forth in this Agreement.
Section 6.05 Public Announcements. Promptly following the
execution of this Agreement, the parties shall issue a press release regarding
the transactions contemplated by this Agreement in the form agreed upon by the
parties (the "Press Release"). Subject to compliance with applicable Law or
stock exchange regulations, no party hereto shall make, or cause to be made, any
press release or public announcement in respect of this Agreement, the Merger or
the transactions contemplated hereby or otherwise communicate with news media in
a manner inconsistent with the Press Release without the prior written consent
of the other parties hereto, subject to applicable Law. The parties shall
cooperate as to the timing and content of any press
32
releases or public announcements made in connection with the Merger or the
transactions contemplated hereby, subject to applicable Law.
Section 6.06 Closing Date Debt. At the Effective Time, Parent
shall contribute to the capital of the Company an amount in cash equal to the
Closing Date Debt, less (i) any amounts included in the Closing Date Debt
attributable to the capital leases set forth on Exhibit 6.06 hereto, (ii) the
aggregate amount of Indebtedness of the Company under Promissory Note A and
(iii) the aggregate amount of Indebtedness of the Company under Promissory Note
B (including all accrued but unpaid interest), and the Company shall utilize
such contribution to repay the Closing Date Debt in full other than with respect
to the debt attributable to the capital leases set forth in Exhibit 6.06 hereto
and the Gerblick Notes.
Section 6.07 UQ Acquisition Claims. (a) In the event that all
UQ Acquisition Claims are not finally settled at least two (2) Business Days
prior to the Closing Date, the Company shall, prior to the Closing Date, assign
all of its right, title and interest in and to the UQ Acquisition Claims to GFI
(in its capacity as the Representative) pursuant to the terms of an Assignment
Agreement to be entered into among the Company, GFI in its capacity as
Representative, and Parent (the "Assignment Agreement"). The Assignment
Agreement (i) shall assign all of the Company's right, title and interest in and
to the UQ Acquisition Claims to GFI (in its capacity as the Representative),
(ii) shall contain further assurances consistent with the terms of this Section
6.07, (iii) shall provide for the distribution of any recovery from the UQ
Acquisition Claims (net of expenses) to the Stockholders and Optionholders in
accordance with their Applicable Percentage, and shall otherwise be in a form
reasonably satisfactory to GFI and Parent.
(b) In the event that any proceeds from the settlement of the
UQ Acquisition Claims are paid to the Company or the Surviving Corporation,
Parent shall cause the Surviving Corporation to, and the Surviving Corporation
shall, promptly remit such proceeds to GFI (in its capacity as the
Representative) to the extent such proceeds were not included in the calculation
of Working Capital, and GFI shall distribute such proceeds (net of expenses) to
the Stockholders and Optionholders in accordance with the terms of the
Assignment Agreement.
(c) In the event that GFI is prepared to enter into a
definitive written settlement agreement with respect to the UQ Acquisition
Claims subsequent to the Closing Date, the Parent shall cause the Surviving
Corporation to, and the Surviving Corporation shall, reasonably cooperate with
GFI to effect such settlement, including without limitation causing the
Surviving Corporation to provide general and unconditional releases to the
parties to the UPA of their obligations thereunder and a release to Byers of his
obligations pursuant to Section 1c. of the Seller Noncompetition Agreement,
dated as of August 31, 2001, by and between UtiliQuest, LLC and Byers.
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(d) The Parent shall cause the Surviving Corporation to, and
the Surviving Corporation shall, make reasonably available to GFI the employees
of the Surviving Corporation that GFI requires to pursue the UQ Acquisition
Claims; provided, however, that such availability shall not unreasonably
interfere with the duties of such employees at the Surviving Corporation.
(e) In the event that the UQ Acquisition Claims cannot be
assigned as contemplated by this Section 6.07, the Parent shall and shall cause
the Surviving Corporation to, cooperate with GFI in a mutually agreeable
arrangement under which GFI (in its capacity as the Representative) would
control the pursuit, prosecution and resolution of the UQ Acquisition Claims and
any recovery in respect thereof (net of expenses) would be for the account of
the Stockholders and the Optionholders in accordance with their Applicable
Percentages.
For purposes of this Section 6.07, "UQ Acquisition Claims"
means all claims of the Company against ECTMI Trutta Holdings LP, a Delaware
limited partnership ("Trutta"), Joint Energy Development Investments II, Limited
Partnership, a Delaware limited partnership ("JEDI"), Byers Engineering Company,
a Georgia corporation ("Byers"), Neal Allen Robertson, an individual
("Robertson"), and Enron North America Corp., a Delaware corporation ("Enron")
(collectively, Trutta, JEDI, Byers, Robertson and Enron are referred to as the
"Seller Parties"), pursuant to or in connection with (i) the Unit Purchase
Agreement (the "UPA") dated as of July 24, 2001, among Holdings, the Company,
the Seller Parties and OCM/GFI Power Opportunities Fund, L.P., a Delaware
limited partnership (the "Power Fund"), (ii) the Settlement Agreement and Mutual
General Release ("Settlement Agreement") entered into and effective April 9,
2002, among Holdings, the Company, the Seller Parties and the Power Fund, and
(iii) the Escrow Agreement ("UQ Escrow Agreement") entered into as of April 19,
2002, among Holdings, the Seller Parties (other than Enron) and JP Morgan Chase
Bank, a New York corporation, as escrow agent, including, without limiting the
generality of the foregoing, (A) all indemnification claims that may be asserted
against the Seller Parties pursuant to Article IX of the UPA (as modified by
Section 3(b) of the Settlement Agreement), and (B) all claims that may be
asserted against the escrow fund established pursuant to the UQ Escrow
Agreement.
Section 6.08 Termination of Enumerated Related Party
Agreements and Other Contracts. On or prior to the Effective Time, the Company
and each of the Subsidiaries shall have terminated the related party agreements
and the contracts, in each case, that are enumerated in Exhibit 6.08 hereto.
Section 6.09 Settlement Agreement and Mutual Release. In the
event that the Company and GFI do not enter into the Settlement Agreement and
Mutual Release by the Closing Date, the Parent shall and shall cause the
Surviving Corporation to, cooperate with GFI to enter into the Settlement
Agreement and Mutual Release. Any recoveries (inclusive of any reduction in the
amount of the Company's obligations) in connection with the Settlement Agreement
and Mutual Release (net of expenses) shall be for the account of the
Stockholders and the Optionholders in accordance with their Applicable
Percentages.
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Section 6.10 Estoppel Certificates. The Company agrees to use
its reasonable efforts to deliver to the Parent prior to the Closing Date an
estoppel certificate for each of the leased properties set forth in Exhibit 6.10
hereto.
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.01 Conditions to the Obligations of Parent and
Merger Sub. The obligations of Parent and Merger Sub to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment
or written waiver, at or prior to the Closing, of each of the following
conditions:
(a) Representations, Warranties and Covenants. (i)
The representations and warranties of the Company contained in this Agreement
shall be true and correct (without giving effect to any limitation as to
materiality or Material Adverse Effect set forth herein) as of the Effective
Time, as though made on and as of the Effective Time (except to the extent
expressly made as of an earlier date, in which case as of such earlier date),
except where the failure of such representations and warranties to be so true
and correct (without giving effect to any limitation as to materiality or
Material Adverse Effect set forth herein) would not have a Material Adverse
Effect and (ii) the covenants and agreements contained in this Agreement to be
complied with by GFI and the Company on or before the Closing shall have been
complied with in all material respects and Parent shall have received a
certificate from the Company with respect to the foregoing and from GFI with
respect to compliance with its covenants and agreements only;
(b) No Order. No Governmental Authority shall have
enacted, issued, promulgated, enforced or amended any Law, rule, regulation,
judgment, decree, executive order or demand (an "Order") which is then in effect
and has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger;
(c) HSR Act. Any waiting period (and any extension
thereof) under the HSR Act applicable to the Merger contemplated by this
Agreement shall have expired or shall have been terminated;
(d) No Proceeding or Litigation. No Action shall have
been commenced or threatened by or before any Governmental Authority against
either GFI or the Company, seeking to restrain or materially and adversely alter
the transactions contemplated by this Agreement which, in the reasonable, good
faith determination of Parent, has a reasonable likelihood of success and would
reasonably be expected to render it impossible or unlawful to consummate such
transactions or have a Material Adverse Effect;
35
(e) Consents and Approvals. The Company shall have
received, each in form and substance reasonably satisfactory to Parent, all
required material authorizations, consents, orders and approvals of all
Governmental Authorities and all such other third party consents as are set
forth in Section 3.06(b) of the Company Disclosure Schedule;
(f) Payoff Certificates/Letter. The Company shall
have delivered to Parent payoff certificates/letters for each repayment by the
Company of a portion of the Closing Date Debt.
(g) Resignations. Parent shall have received
resignations, in writing, of all the members of the Board of the Company
effective as of the Effective Time;
(h) Non-Disclosure Agreement. GFI shall have entered
into a confidentiality/non-disclosure agreement with Parent substantially in the
form of Exhibit 7.01(h) hereto.
(i) Dissenting Shares. The number of Dissenting
Shares shall be less than 1% of the issued and outstanding Company Common Stock.
(j) No Material Adverse Effect. Since the date of
this Agreement, no event or events shall have occurred, and none of GFI, the
Company or its Subsidiaries shall have received any notice or notices regarding
any event or events, which, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole; and
(k) FIRPTA Certificate. Parent shall have received
from GFI a certificate in compliance with Treasury Regulation Section
1.1445-2(b), certifying that it is not a "foreign person" under Section 1445 of
the Code.
Section 7.02 Conditions to the Obligations of GFI and the
Company. The obligations of GFI and the Company to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment or written
waiver, at or prior to the Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants. (i)
The representations and warranties of Parent and Merger Sub contained in this
Agreement shall be true and correct (without giving effect to any limitation as
to materiality or Material Adverse Effect set forth herein) in all material
respects as of the Effective Time, as though made on and as of the Effective
Time (except to the extent expressly made as of an earlier date, in which case
as of such earlier date), and (ii) the covenants and agreements contained in
this Agreement to be complied with by Parent and Merger Sub on or before the
Closing shall have been complied with in all material respects and GFI and the
Company shall have received a certificate from the Parent and Merger Sub with
respect to the foregoing;
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(b) No Order. No Governmental Authority shall have
enacted, issued, promulgated, enforced or amended any Law or Order which is then
in effect and has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger;
(c) HSR Act. Any waiting period (and any extension
thereof) under the HSR Act applicable to the Merger contemplated by this
Agreement shall have expired or shall have been terminated;
(d) No Proceeding or Litigation. No Action shall have
been commenced or threatened by or before any Governmental Authority against any
party hereto, seeking to restrain or materially and adversely alter the
transactions contemplated by this Agreement which, in the reasonable, good faith
determination of the Representative, has a reasonable likelihood of success and
would reasonably be expected to render it impossible or unlawful to consummate
such transactions or have a Material Adverse Effect.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01 Termination. This Agreement may be terminated and
the Merger and the other transactions contemplated hereby may be abandoned at
any time prior to the Effective Time, notwithstanding any requisite approval and
adoption of this Agreement and the transactions contemplated hereby by the
Stockholders, as follows:
(a) by mutual written consent of Parent and the
Company;
(b) by either Parent, on the one hand, or the
Company, on the other hand, if there shall be any Law that makes consummation of
the Merger illegal or otherwise prohibited or, notwithstanding the provisions of
Section 6.03(b), if consummation of the Merger would violate any nonappealable
final Order of any Governmental Entity having competent jurisdiction; provided,
however, that the right to terminate this Agreement under this Section 8.01(b)
shall not be available to any party who has not used its commercially reasonable
efforts to have such Order rescinded;
(c) by Parent, if (i) any of the conditions set forth
in Section 7.01 shall have become incapable of fulfillment and shall not have
been waived or (ii) GFI or the Company shall breach in any material respect any
of its obligations hereunder and such breach shall not have been cured in all
material respects or waived;
(d) by the Company or GFI, if (i) any of the
conditions set forth in Section 7.02 shall have become incapable of fulfillment
and shall not have been waived or (ii) either Parent or Merger Sub shall breach
in any material respect any of their representations, warranties
37
or obligations hereunder and such breach shall not have been cured in all
material respects or waived; or
(e) by either Parent, on the one hand, or the Company
and GFI on the other hand, if the Effective Time shall not have occurred on or
before December 5, 2003; provided, however, that the right to terminate this
Agreement under this Section 8.01(e) shall not be available to any party whose
failure to fulfill any obligation under this Agreement shall have been the cause
of, or shall have resulted in, the failure of the Effective Time to occur on or
prior to such date.
The party desiring to terminate this Agreement shall give
written notice of such termination to the other parties.
Section 8.02 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 8.01, this Agreement shall
forthwith become void, and there shall be no liability under this Agreement on
the part of any party hereto, except as set forth in Sections 6.01(b)
(Confidentiality), 6.05 (Public Announcements) and 8.03 (Expenses); provided,
however, that nothing herein shall relieve any party from liability for any
willful breach of this Agreement.
Section 8.03 Expenses.
(a) The Company shall be responsible for and bear all
of the Expenses of the Representative and the Company and of their respective
legal counsel, accountants or other advisors incurred at anytime in connection
with this Agreement and the transactions contemplated hereby (collectively, the
"Closing Expenses"). Parent shall be responsible for and bear all of its own and
Merger Sub's Expenses and any Expenses of their respective legal counsel,
accountants or other advisors, incurred at any time in connection with this
Agreement and the transactions contemplated hereby. All Expenses relating to the
filing fee for the Notification and Report Forms filed under the HSR Act shall
be borne solely by Parent.
(b) In the event that after the Effective Time the
Surviving Corporation or Parent receives an invoice for any Closing Expenses
that were not deducted from the Merger Consideration or reflected as liabilities
in the calculation of Working Capital, the Surviving Corporation shall
immediately forward such invoices directly to the Representative and Parent and
the Representative shall direct the Escrow Agent to reimburse Parent or the
Surviving Corporation for the full amount of such invoices (as and when they are
paid) out of the Indemnity Escrow Account. Prior to ordering any such payment,
the Parent shall send the Representative a copy of any such invoice and allow
the Representative 20 days to review and, if appropriate, seek to reduce the
amount of the invoice.
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ARTICLE IX
INDEMNIFICATION
Section 9.01 Survival of Representations, Warranties and
Covenants.
(a) The representations and warranties contained in
this Agreement shall survive after the Effective Time until the first
anniversary of the Closing Date (the "Expiration Date"). If written notice of a
claim in accordance with Section 9.05(b) has been given prior to the expiration
of the applicable representations and warranties by a party hereto to another
party hereto, then the relevant representations and warranties shall survive,
but only with respect to such specific claim, until such claim has been finally
resolved.
(b) The covenants contained in this Agreement shall
survive indefinitely; provided, that the covenants in Sections 9.02(ii) (as it
pertains to Excluded Taxes) and the covenants in Section 9.02(iii) shall
terminate on the Expiration Date. If written notice of a claim in accordance
with Section 9.05(b) has been given prior to the expiration of the applicable
covenants by a party hereto to another party hereto, then the relevant covenants
shall survive, but only with respect to such specific claim, until such claim
has been finally resolved.
Section 9.02 Indemnification of Parent Indemnified Parties.
After the Effective Time, Parent and its Affiliates (including, after the
Effective Time, the Surviving Corporation), officers, directors, employees,
agents, successors and assigns (collectively, the "Parent Indemnified Parties",
shall be indemnified and held harmless for any and all liabilities, losses,
damages, claims, incidental damages, interest, awards, judgments and penalties
(including reasonable attorneys' and consultants' fees and expenses) actually
suffered or incurred by them (including, without limitation, in connection with
any action brought or otherwise initiated by any of them) (hereinafter, a "Loss"
and collectively, "Losses"), arising out of or resulting from (without
duplication):
(i) excluding any matters related to Taxes,
the breach of any representation or warranty made by the Company in
this Agreement (provided that in calculating the amount of any Loss, as
opposed to whether there has been a breach, such Loss shall be
calculated without regard to qualifications as to "materiality"
including the word "material" or Material Adverse Effect) and any other
certificate delivered by GFI and the Company pursuant to this
Agreement;
(ii) the breach of any covenant or agreement
made by GFI, the Representative and the Company in this Agreement and
any other certificate delivered pursuant to this Agreement, which, in
the case of the Company, is to be performed on or prior to the Closing
Date;
39
(iii) the payment by Parent, the Surviving
Corporation, any Subsidiary or any Affiliate thereof of any Excluded
Taxes;
(iv) any action by any Stockholder in
respect of any Dissenting Shares, but only to the extent Losses in
respect thereof exceed the Per Share Merger Consideration otherwise
payable in respect of such Dissenting Shares;
(v) any Closing Expenses to the extent such
Closing Expenses were not (A) deducted from the Merger Consideration,
(B) paid or (C) reflected as liabilities in the calculation of Working
Capital; or
(vi) the inaccuracy of the Per Share Merger
Consideration Certificate to the extent it results in the payment of
excess Merger Consideration.
Recovery under this indemnity shall be solely as provided in
Section 9.04.
Section 9.03 Indemnification by Parent. After the Effective
Time, the Stockholders and the Optionholders and their respective affiliates,
officers, directors, employees, agents, successors and assigns (collectively,
the "Stockholder Indemnified Parties") shall be indemnified and held harmless by
Parent for any and all Losses, arising out of or resulting from:
(i) the breach of any representation or
warranty made by Parent or Merger Sub in this Agreement (provided that
in calculating the amount of any Loss, as opposed to whether there has
been a breach, such Loss shall be calculated without regard to
qualifications as to "materiality" including the word "material" or
Material Adverse Effect) and any other certificate or document
delivered by Parent or Merger Sub pursuant to this Agreement; or
(ii) the breach of any covenant or agreement
made by Parent or Merger Sub in this Agreement and any other
certificate or document delivered pursuant to this Agreement.
(iii) The inaccuracy of the Per Share Merger
Consideration Certificate to the extent it results in an underpayment
with respect to the Merger Consideration.
Section 9.04 Limits on Indemnification. Notwithstanding
anything to the contrary contained in this Agreement: (a) an Indemnifying Party
(as defined below) shall not be liable for any claim for indemnification and
Parent Indemnified Parties, or Shareholder Indemnified Parties, as the case may
be, shall not be entitled to indemnification under Section 9.02(i) or (iii)
(solely with respect to Non-Income Taxes other than any Non-Income Taxes
40
included in the 2003 Tax Liability) or 9.03(i), unless and until the aggregate
amount of indemnifiable Losses which may be recovered from the Indemnifying
Party or the Indemnity Escrow, as applicable, equals or exceeds $1,200,000,
after which the Indemnifying Party shall be liable only for, or there may only
be recovered from the Indemnity Escrow, as applicable, those Losses in excess of
$1,200,000, (b) the maximum amount of indemnifiable Losses which may be
recovered (i) arising out of or resulting from the causes set forth in Section
9.02 or Section 9.03, shall be an amount equal to the Indemnity Escrow Amount.
The provisions of Section 9.04(a) shall not apply with respect to
indemnification of the Parent Indemnified Parties for any Income Taxes and the
2003 Tax Liability pursuant to Section 9.02(iii) hereof. The sole recourse for
indemnification claims made by the Parent Indemnified Parties pursuant to this
Agreement shall be recovery of amounts from the Indemnity Escrow Account in
accordance with the terms of this Agreement.
Section 9.05 Indemnification Procedures.
(a) For purposes of this Section 9.05, a party
against which indemnification may be sought (or, in the case of a claim for
indemnification pursuant to Section 9.02, the Representative) is referred to as
the "Indemnifying Party" and the party which may be entitled to indemnification
is referred to as the "Indemnified Party".
(b) The obligations of Indemnifying Parties under
this Article IX with respect to Losses arising from claims of any third party
which are subject to the indemnification provided for in this Article IX ("Third
Party Claims") shall be governed by and contingent upon the following additional
terms and conditions: if an Indemnified Party shall receive notice of any Third
Party Claim, the Indemnified Party shall promptly give all Indemnifying Parties
notice of such Third Party Claim; provided, however, that the failure to provide
such notice shall not release an Indemnifying Party from any of its obligations
under this Article IX except to the extent that such Indemnifying Party is
materially prejudiced by such failure. The notice of claim shall describe in
reasonable detail the facts known to the Indemnified Party giving rise to such
indemnification claim, and the amount or good faith estimate of the amount
arising therefrom. The Indemnified Party shall deliver to the Indemnifying
Party, promptly after the Indemnified Party's receipt thereof, copies of all
notices and documents (including court papers) received by the Indemnified Party
relating to a Third Party Claim.
(c) The Indemnifying Party shall be entitled to
assume and control the defense of such Third Party Claim at its expense and
through counsel of its choice if it gives notice of its intention to do so to
the Indemnified Party within thirty (30) days of the receipt of such notice from
the Indemnified Party in which case the Indemnifying Party shall not be liable
to the Indemnified Person for any fees of counsel or any other expenses with
respect to the defense of such Third Party Claim; provided, however, that, if
the Indemnified Party reasonably determines based upon advice of counsel that a
conflict of interest exists that would make it inappropriate for the same
counsel to represent both the Indemnified Party and the Indemnifying Party, then
the Indemnified Party shall be entitled to retain its own counsel at the expense
of the
41
Indemnifying Party. In the event that the Indemnifying Party exercises the right
to undertake any such defense against such Third Party Claim as provided above,
the Indemnified Party shall cooperate with the Indemnifying Party in such
defense and make available to the Indemnifying Party, at the Indemnifying
Party's expense, all witnesses, pertinent records, materials and information in
the Indemnified Party's possession or under the Indemnified Party's control
relating thereto as is reasonably required by the Indemnifying Party. Similarly,
in the event the Indemnified Party is, directly or indirectly, conducting the
defense against any such Third Party Claim, the Indemnifying Party shall
cooperate with the Indemnified Party in such defense and make available to the
Indemnified Party, at the Indemnifying Party's expense, all such witnesses,
records, materials and information in the Indemnifying Party's possession or
under the Indemnifying Party's control relating thereto as is reasonably
required by the Indemnified Party. No compromise or settlement of such Third
Party Claim may be effected by either the Indemnified Party or the Indemnifying
Parties without the other party's consent (which shall not be unreasonably
withheld or delayed) unless (i) there is no finding or admission of any
violation of Law and no effect on any other claims that may be made against such
other party and (ii) each Indemnified Party that is party to such claim is
unconditionally released from liability with respect to such claim.
(d) A claim for indemnification for any matter not
including a Third-Party Claim shall be asserted by notice to the party from whom
indemnification is sought.
Section 9.06 Delivery and Release of Indemnity Escrow.
(a) The Indemnity Escrow Amount (including all
accrued interest thereon) shall be used to satisfy indemnification claims,
finally determined by (x) mutual written agreement of Parent and the
Representative or (y) a final award of an arbitral tribunal in accordance with
Section 10.06, of the Parent Indemnified Parties for which such Persons are
entitled to recovery pursuant to the terms of this Article IX and shall be
disbursed in accordance with the procedures set forth in the Escrow Agreement.
(b) If, as of the Expiration Date, a Parent
Indemnified Party has asserted in writing any claim (and its good faith estimate
of its Losses in respect of such claim) that is reasonably expected to give rise
to a right of indemnification pursuant to this Article IX that is pending and
unresolved, Parent and the Representative shall give joint written instructions
to the Escrow Agent to retain an amount equal to the lesser of (x) the Indemnity
Escrow Amount as such amount may have been previously reduced pursuant to this
Article IX or (y) the amounts asserted in writing by Parent to be claimed to be
owing to the Parent Indemnified Parties under this Article IX (subject to
adjustment in accordance with the last proviso to this sentence), and the
remaining balance shall be released to the Stockholders and the Optionholders in
accordance with their respective Applicable Percentage; provided, however, that
to the extent that the Indemnity Escrow Amount had been previously reduced, and
such remaining claims exceed the current Indemnity Escrow Amount, no amount
shall be released, pursuant to this provision at such time; and provided further
that any dispute as to the appropriate amount of such good faith
42
estimate shall be resolved in accordance with Section 10.06 hereof. Within one
(1) Business Day of the final resolution of each indemnity claim properly
brought and pending as of the Expiration Date by (x) mutual written agreement of
Parent and the Representative or (y) a final award of an arbitral tribunal in
accordance with Section 10.06, Parent and the Representative shall give joint
written instructions to the Escrow Agent to release to the Stockholders and the
Optionholders in accordance with their respective Applicable Percentage the
amount, if any, by which the estimated Losses in respect of such claim exceeded
the finally determined Losses in respect of such claim. Upon final resolution of
all indemnity claims properly brought and pending as of the Expiration Date by
(x) mutual written agreement of Parent and the Representative or (y) a final
award of an arbitral tribunal in accordance with Section 10.06, Parent and the
Representative shall give joint written instruction to the Escrow Agent to
release to the Stockholders and the Optionholders in accordance with their
respective Applicable Percentage the remaining balance, if any, of the Indemnity
Escrow Amount.
Section 9.07 No Right of Contribution. GFI acknowledges and
agrees that, upon and after the Closing, the Company shall not have any
liability or obligation to indemnify, save or hold harmless or otherwise pay,
reimburse or make GFI or any other Stockholder or Optionholder whole for or on
account of any claim for indemnification by Parent pursuant to this Article IX
or any untruth, inaccuracy or incorrectness of, or other breach of, any
representation or warranty or the nonfulfillment, nonperformance, nonobservance
or other breach or violation of, or default under, any covenant or agreement
made by GFI or the Company in this Agreement, and neither GFI nor any
Stockholder or Optionholder shall have any right of contribution against the
Company.
Section 9.08 Exclusive Remedy. Following the Closing the sole
and exclusive remedy for each of the Parent Indemnified Parties and Stockholder
Indemnified Parties with respect to any and all claims relating to a breach of
this Agreement (other than claims of, or causes of action, arising from, fraud)
shall be pursuant to the indemnification provisions set forth in this Article IX
which, in the case of the Parent Indemnified Parties, limit indemnification to
recovery of amounts from the Indemnity Escrow Account and which in the case of
the Shareholder Indemnified Parties, limit indemnification to an amount equal to
the Escrow Amount. In furtherance of the foregoing, each of the Parent
Indemnified Parties and the Stockholder Indemnified Parties hereby waives, to
the fullest extent permitted under applicable Law, any and all rights, claims
and causes of action (other than claims of, or causes of action arising from,
fraud) it may have against the other parties hereto, arising under or based upon
any Federal, state, local or foreign Law. Notwithstanding anything to the
contrary in this Agreement, this Section 9.08 shall not limit a party's right to
specific performance or injunctive relief in connection with the other party's
breach of its covenants in this Agreement.
Section 9.09 Losses Net of Insurance, Tax Benefits. The amount
of any Loss for which indemnification is provided to a Parent Indemnified Party
or a Stockholder Indemnified Party, as the case may be, under this Article IX
shall be (i) increased to take account
43
of any net Tax cost (except as provided below) actually incurred by such
Indemnified Party or any Consolidated Tax Group of which it is a member arising
from the receipt of indemnity payments hereunder, (ii) reduced to take account
of any net Tax benefit actually realized by such Indemnified Party or any
Consolidated Tax Group of which it is a member arising from the incurrence or
payment of any such Loss, and (iii) net of any amounts recovered by, the such
Indemnified Party with respect to such Loss under insurance policies. For the
avoidance of doubt, the parties acknowledge and agree that (i) a net Tax cost
shall not include any portion of the gain or decrease in the loss, as the case
may be, that would be recognized by Parent or any Affiliate of Parent upon a
disposition of any shares of stock of the Company, and (ii) an Indemnified
Party, in accordance with Section 9.12(k) below, shall not treat the receipt of
any indemnity payment hereunder as taxable income to such Indemnified Party
unless required to do so by applicable Tax Law. In computing the amount of any
such net Tax cost or net Tax benefit, the Indemnified Party shall be deemed to
realize all other items of income, gain, loss, deduction or credit before
realizing any item arising from the receipt of any indemnity payment hereunder
or the incurrence or payment of any indemnified Loss. An Indemnified Party shall
be deemed to have "actually realized" a net Tax cost or a net Tax benefit to the
extent that, and at such time as, the amount of Taxes payable (as determined on
a present value basis in the taxable year in which such indemnity payment is
made using a discount rate of 7%) by such Indemnified Party is increased above
or reduced below, as the case may be, the amount of Taxes that such Indemnified
Party would be required to pay but for the receipt or accrual of the indemnity
payment or the incurrence or payment of such indemnified amount, as the case may
be. An Indemnified Party shall submit claims under and diligently pursue
recovery under all insurance policies under which any Losses may be insured.
Section 9.10 No Consequential Damages. Notwithstanding
anything to the contrary contained in this agreement, no Person shall be liable
to or otherwise responsible for consequential damages, punitive damages or for
diminution in value or lost profits (except with respect to payment of any such
damages in respect of Third-Party Claims).
Section 9.11 Subrogation of Rights. The Indemnifying Party
shall be subrogated to all rights and remedies of the Indemnified Party. Each
Indemnified Party shall take all commercially reasonable action to perfect the
above subrogation rights and, prior to seeking any indemnification from any
Indemnifying Party, the Indemnified Party shall pursue all claims of the
Company, the Surviving Corporation and the Subsidiaries under all of its
agreements and instruments, including without limitation, those agreements and
instruments relating to prior acquisitions by the Company or the Subsidiaries.
Notwithstanding the foregoing, nothing herein shall prevent an Indemnified Party
from asserting a claim pursuant to Sections 9.02 and 9.05 hereof prior to or in
conjunction with pursuing such claims against other parties; provided, however,
that the Indemnified Party may not pursue such claim against the Indemnifying
Party until it has complied with its obligations under this Section 9.11.
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Section 9.12 Tax Matters. (a) The Representative shall be
responsible for causing to be filed all Tax Returns required or permitted by
applicable Law to be filed by the Company and its Subsidiaries with respect to
taxable periods that end on or before the Closing Date (such periods, the
"Pre-Closing Periods" and such Tax Returns, the "Pre-Closing Period Tax
Returns"). All such Pre-Closing Period Tax Returns shall be prepared and filed
in a manner that is consistent with the prior practice of the Company and its
Subsidiaries, except as required by applicable Law. If any such Pre-Closing
Period Tax Returns are due after the Closing, (i) the Representative shall
prepare and submit such Tax Returns to Parent if the Representative is not
authorized to file such Pre-Closing Tax Returns by applicable law, and (ii)
Parent shall file (or cause to be filed) such Pre-Closing Period Tax Returns
with the appropriate taxing authority and pay (except as set forth below) the
Taxes shown as due and payable on such Tax Return as prepared by the
Representative. The Escrow Agent shall disburse to the Representative or the
Parent, as applicable, from the Indemnity Escrow Amount, at least three (3)
Business Days before the due date of the applicable Pre-Closing Period Tax
Return, an amount equal to the portion of the Taxes shown as due and payable on
such Tax Return as prepared by the Representative (or, in the case of a dispute
(as described below) that is not resolved by the due date for the filing of such
Tax Return (including extensions), such Tax Return shall be filed in accordance
with Parent's determination and the amount disbursed from the Indemnity Escrow
Amount shall include the amount in dispute) but only to the extent such Taxes
were not (i) taken into account as a liability in the determination of Final
Closing Working Capital or (ii) paid prior to the Closing, including as a
payment of an estimated Tax. For the avoidance of doubt, Parent shall be
responsible for the payment of any Taxes taken into account as a Liability in
the determination of the Final Closing Working Capital and shall remit such
amount to the relevant taxing authority (or, if the Representative files the
applicable Pre-Closing Period Tax Return, Parent shall remit such amount to the
Representative).
(b) The Representative shall submit to Parent a draft
of each Pre-Closing Period Tax Return (regardless of whether Parent or the
Representative, as the case may be, must file such Tax Return under applicable
Law) at least forty-five (45) days prior to the due date for the filing of such
Tax Return (taking into account any extensions thereof), together with the
Representative's calculation of the Tax for the Pre-Closing Period and the
details supporting such calculation. Such draft Tax Return and calculation shall
be subject to Parent's review and approval. Parent may, after receipt of such
draft Tax Return and calculation (with supporting details), notify the
Representative, in writing, of any disagreement with such Tax Return and/or
calculation. If Parent notifies the Representative, in writing, of any such
disagreement, Parent and the Representative shall proceed in good faith to
attempt to resolve such disagreement. If they do not resolve such disagreement
by the due date for the filing of such Tax Return (including extensions), the
Representative or Parent, as applicable, shall cause the Tax Return to be filed,
and the Neutral Auditors shall be retained to resolve such disagreement. In
resolving any such disagreement, the Neutral Auditor shall apply principles
consistent with the Company's or, as applicable, its Subsidiary's past practice
(in the case of any Subsidiary of the Company during the period that the Company
owned such Subsidiary); provided, however, that the Neutral
45
Auditor shall not be required to follow past practice to the extent the Neutral
Auditor reasonably determines, in writing, that (i) the relevant past practice
is contrary to applicable Tax Law, or (ii) the applicable Tax Return could not
have been filed without being subject to penalties. The principles of Section
2.06(d) with respect to the scope and timing of determination, the effect of
such determination, and the payment of the fees and expenses of the Neutral
Auditor shall apply. If the Tax, as determined by the Neutral Auditors, for the
Pre-Closing Period is less than the amount of such Tax disbursed from the
Indemnity Escrow Amount, Parent shall pay to the Stockholders and Optionholders,
in accordance with their respective Applicable Percentages, the amount by which
the finally determined Tax for the Pre-Closing Period is less than the amount of
such Tax shown as payable on the applicable Pre-Closing Period Tax Return.
Parent shall make such payment on the later of the due date (taking into account
any extension thereof) of the Pre-Closing Period Tax Return or five (5) days
after the determination of the amount of the Tax by the Neutral Auditors for the
Pre-Closing Period, if such determination is made after such due date.
(c) Parent, the Company, or its Subsidiaries shall be
responsible for filing all Tax Returns required to be filed by the Company or
its Subsidiaries with respect to Straddle Periods and periods that begin after
the Closing Date. The Escrow Agent shall disburse to Parent from the Indemnity
Escrow Amount at least three (3) Business Days before the due date of the
applicable Tax Return for a Straddle Period an amount equal to the portion of
the Taxes shown as due and payable on such Tax Return that are allocable to the
Pre-Closing Straddle Period as determined under this Section 9.12(c) (including
any amounts remaining in dispute and for which resolution has not occurred (as
described below) prior to the due date for filing such Tax Return (including
extensions)) but only to the extent such Taxes were not (i) taken into account
as a liability in the determination of Final Closing Working Capital or (ii)
paid prior to the Closing, including as a payment of an estimated Tax. Parent
shall pay or cause to be paid all Taxes due and payable in respect of all such
Straddle Period Tax Returns. For the avoidance of doubt, Parent shall be
responsible for the payment of any Taxes taken into account as a liability in
the determination of the Final Closing Working Capital and shall remit such
amount to the relevant taxing authority. In order to apportion appropriately any
Taxes relating to a Straddle Period, the parties shall, to the extent permitted
under applicable Tax Law, elect with the relevant taxing authority to treat for
all Tax purposes the Closing Date as the last day of the taxable year or period
of the Company and its Subsidiaries. In any case where applicable Tax Law does
not permit the Company or its Subsidiaries to treat the Closing Date as the last
day of the taxable year or period, the portion of any Taxes that are allocable
to the portion of the Straddle Period ending on and including the Closing Date
(the "Pre-Closing Straddle Period") shall be: (A) in the case of Taxes that are
imposed on a periodic basis (and not based on invoices, receipts, sales or
payments), deemed to be the amount of such Taxes for the entire period
multiplied by a fraction the numerator of which is the number of calendar days
in the Straddle Period ending on (and including) the Closing Date and the
denominator of which is the number of calendar days in the entire relevant
Straddle Period, and (B) in the case of Taxes not described in (i) (such as
taxes that are either (x) based upon or related to income or receipts, or (y)
imposed in connection
46
with any sale or other transfer or assignment of property (real or personal,
tangible or intangible)), deemed equal to the amount that would be payable if
the taxable year or period ended and the books closed at the close of the
Closing Date.
(d) Parent shall submit to the Representative a draft
of each Straddle Period Tax Return prepared, except as otherwise required by Law
or to the extent that counsel for Parent reasonably determines, in writing, that
such a Tax Return could not be so prepared and filed without being subjected to
penalties, in a manner that is consistent with the Company's or, as applicable,
any of its Subsidiary's past practice (in the case of any Subsidiary of the
Company during the period that the Company owned such Subsidiary) at least
forty-five (45) days prior to the due date for the filing of such Tax Return
(taking into account any extensions thereof), together with Parent's calculation
of the Tax for the Pre-Closing Straddle Period and the details supporting such
calculation. Such draft Tax Return and calculation shall be subject to the
Representative's review and approval. The Representative may, after receipt of
such draft Tax Return and calculation (with supporting details), notify Parent,
in writing, of any disagreement with such Tax Return and/or calculation. If the
Representative notifies Parent, in writing, of any such disagreement, Parent and
the Representative shall proceed in good faith to attempt to resolve such
disagreement. If they do not resolve such disagreement by the due date
(including extensions) for the filing of such Tax Return, Parent shall cause the
Tax Return to be filed, and the Neutral Auditors shall be retained to resolve
such disagreement. The principles of Section 2.06(d) with respect to the scope
and timing of determination, the effect of such determination, and the payment
of the fees and expenses of the Neutral Auditors shall apply. If the Tax, as
determined by the Neutral Auditors, for the Pre-Closing Straddle Period is less
than the amount of such Tax disbursed from the Indemnity Escrow Amount, Parent
shall pay to the Stockholders and Optionholders, in accordance with their
respective Applicable Percentages, the amount by which the finally determined
Tax for the Pre-Closing Straddle Period is less than the amount of such Tax.
Parent shall make such payment on the later of the due date (taking into account
extension thereof) of the Straddle Period Tax Return or five (5) days after the
determination of the amount of the Tax by the Neutral Auditors for the
Pre-Closing Straddle Period, if such determination is made after such due date.
(e) Notwithstanding any other provision in this
Agreement, the Parent Indemnified Parties shall have no recourse against the
Indemnity Escrow Amount for any liability for Taxes attributable to any action
taken on the Closing Date after the Closing by Parent or any Affiliate thereof
(other than any such action expressly required by this Agreement).
(f) After the Closing Date, each of Parent, the
Company and its Subsidiaries, on the one hand, and the Representative, on the
other, shall (i) provide, or cause to be provided, to each other's respective
subsidiaries, officers, employees, representatives and affiliates, such
assistance as may reasonably be requested by any of them in connection with the
preparation of any Tax Return or any audit of the Company or its Subsidiaries in
respect of which Parent, the Company and its Subsidiaries, as the case may be,
is responsible pursuant to
47
this Article IX, (ii) retain, or cause to be retained, for so long as any such
Taxable years or Audits shall remain open for adjustments, any records or
information which may be relevant to any such Tax Returns or audits, and (iii)
compensate the other party for all reasonable out-of-pocket costs incurred by
such other party in connection with providing any assistance requested pursuant
to (i). The assistance provided for in this Section 9.12(f) shall include,
without limitation, each of the Parent, the Company and its Subsidiaries, and
the Representative (x) making their agents and employees and the agents and
employees of their respective subsidiaries and Affiliates available to each
other on a mutually convenient basis to provide such assistance as might
reasonably be expected to be of use in connection with any such Tax Returns or
audits and (y) providing, or causing to be provided, such information as might
reasonably be expected to be of use in connection with any such Tax Returns or
audits, including without limitation records, returns, schedules, documents,
work papers, opinions, letters or memoranda, or other relevant materials
relating thereto.
(g) Each of Parent, the Company or its Subsidiaries,
and the Representative, shall promptly inform, keep regularly apprised of the
progress with respect to, and notify the other party in writing after the
receipt of any notice of any audit in respect of any Tax Liability for which it
was responsible hereunder which could affect the Tax liability of such other
party for any taxable year; provided, however, that a failure by a party to
provide such notice will not affect such party's right to indemnification for
Taxes under this Article IX except to the extent that the Indemnifying Party was
materially prejudiced by such failure.
(h) Any Tax refund or equivalent benefit actually
realized through a reduction in any Tax Liability (including any interest with
respect thereto) relating to the Company or any Subsidiary for any taxable
period shall be the property of Parent.
(i) Any Conveyance Taxes payable in connection with
the transactions contemplated by this Agreement shall be borne by Parent;
provided that the Representative shall execute and deliver all instruments and
certificates necessary to enable Parent to comply with the foregoing.
(j) All payments payable under any Tax sharing
agreement (or other similar arrangement) between GFI (or any Affiliate thereof)
and the Company (or any Subsidiary) shall be calculated on a basis consistent
with past practice and shall be payable in full prior to the Closing Date. Any
such agreement or arrangement between GFI (or any Affiliate thereof) and the
Company (or any Subsidiary) shall be terminated prior to the Closing Date.
(k) GFI and Parent agree to treat all payments made
by either of them to or for the benefit of the other (including any payments to
the Company or any Subsidiary) under any indemnity provision of this Agreement
and for any misrepresentations or breaches of warranties or covenants as
adjustments to the Merger Consideration for Tax purposes and that such treatment
shall govern for purposes hereof except to the extent that any applicable Tax
Law
48
would not permit such treatment, in which case such payments shall be made in an
amount sufficient to indemnify the relevant party on an after-Tax basis to the
extent provided by Section 9.09 hereof.
(l) Except with respect to any action required to be
taken by the Parent or any Affiliate thereof under applicable Tax Law, neither
the Parent nor any Affiliate thereof shall take or allow to be taken any action
to contact a taxing authority regarding any Tax reporting position of the
Company or any Subsidiary of the Company in respect of a Pre-Closing Period or
Straddle Period the effect of which is to accelerate the making of any claim,
the commencement of any audit or other inquiry by a taxing authority or the
payment of (or increase in the amount of) any Excluded Tax. If Parent or any
Affiliate thereof takes or causes to be taken any such action, the indemnity
provided in this Article IX shall be void solely with respect to any associated
payment of (or increase in) Excluded Taxes; provided, that the participation by
(or the representation) of the Parent or any Affiliate thereof in a Tax audit,
examination or other proceeding shall have no effect on the Parent's right to
indemnification under this Section 9.12.
(m) Unless required by applicable Tax Law or after
receipt of the written consent of the Representative, neither the Parent nor any
Affiliate thereof shall amend any Pre-Closing Period Tax Return or Straddle
Period Tax Return of the Company or any Subsidiary, and, if the Parent or such
Affiliate amends any such Tax Return, the indemnity provided in this Article IX
shall be void solely with respect to any associated payment of (or increase in)
Excluded Taxes.
(n) With respect to Tax matters, nothing in this
Article IX or elsewhere in this Agreement shall require a party to reimburse
another party more than once for the same Tax benefit or to indemnify a party
more than once for the same Tax Liability.
Section 9.13 Stockholder Representative. In connection with
this Agreement, GFI, as stockholder representative (the "Representative"), shall
have exclusive power and authority with respect to any action taken pursuant to
this Agreement (including, without limitation, with respect to indemnification
claims, waivers and the Merger Consideration adjustment) and the Parent
Indemnified Parties shall be entitled to rely on such actions of GFI.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 10.01):
49
(a) If to Parent or Merger Sub:
Dycom Industries, Inc.
First Union Center
Suite 500
4440 PGA Boulevard
Palm Beach Gardens, FL 33410
Facsimile:
Attention: Mike Miller, Esq.
With a copy to:
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022
Facsimile: (212) 848-7179
Attention: Stephen M. Besen, Esq.
(b) If to GFI, the Representative or the Company:
GFI Energy Ventures LLC
11611 San Vicente Blvd.
Suite 710
Los Angeles, CA 90047
Facsimile: (310) 442-0540
Attention: Ian Schapiro
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
310 S. Grand Avenue
Suite 3400
Los Angeles, CA 90071
Facsimile: (213) 687-5600
Attention: Jeffrey H. Cohen, Esq.
Section 10.02 Certain Definitions.
(a) For purposes of this Agreement and the Company
Disclosure Schedule:
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"2003 Tax Liability" means the aggregate Tax Liabilities that
are unpaid as of the Closing Date and otherwise constitute Excluded Taxes of the
Company and its Subsidiaries for any tax period beginning on or after January 1,
2003 and ending on or before the Closing Date and for any Pre-Closing Straddle
Period.
"Accounts Receivable" means any and all accounts receivable,
notes and other amounts receivable from third parties, including, without
limitation, customers and employees, arising from the conduct of the business of
the Company and its Subsidiaries.
"Additional Merger Consideration" has the meaning set forth in
Section 2.06(e)(i).
"Adjustment Escrow Amount" equals $500,000.
"Affiliate(s)" of a specified person means a person who,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified person.
"Affiliated Group" means any consolidated, affiliated,
combined or unitary group of companies or corporations for federal, state, local
or foreign Tax purposes with respect to which the Company or any Subsidiary is
or has been a member.
"Aggregate Fully-Diluted Shares" shall have the meaning set
forth in Section 2.02 (b).
"Aggregate Option Exercise Price" shall have the meaning set
forth in Section 2.02(b).
"Applicable Percentage" of any Stockholder or Optionholder, as
the case may be, means the quotient (expressed as a percentage) of (i) the
amount such holder is entitled to receive pursuant to Section 2.04 or 2.03, as
the case may be, over (ii) the Merger Consideration.
"Business Day" means any day on which banks are not required
or authorized to close in the City of New York.
"Capital Source Credit Agreement" means the Revolving Credit,
Term Loan and Security Agreement, among the Company, UtiliQuest, LLC,
Underground Technology Incorporated and Capital Source Finance LLC, dated as of
December 6, 2002.
"Closing Date Debt" means (i) the aggregate amount of
Indebtedness of the Company and its Subsidiaries (including any current portion)
outstanding immediately prior to the Effective Time plus (ii) all accrued and
unpaid interest thereon plus (iii) the aggregate amount of premiums, prepayment
penalties, make-wholes or similar amounts payable in
51
connection with the payment or redemption of such Indebtedness, including any
fees and expenses incurred in connection therewith.
"Code" means the Internal Revenue Code of 1986, as amended
through the date hereof.
"Company Common Stock" means the shares of common stock,
$0.001 par value per share, of the Company.
"Company IP Agreements" means (a) licenses or assignments of
Intellectual Property by the Company to any third party, (b) licenses or
assignments of Intellectual Property by any third party to the Company, (c)
agreements between the Company and any third party relating to the development
or use of Intellectual Property, the development or transmission of data, or the
use, modification, framing, linking, advertisement or other practices with
respect to Internet web sites, and (d) consents, settlements, decrees, orders,
injunctions, judgments or rulings governing the use, validity or enforceability
of Owned Intellectual Property.
"Company Stock Option Plan" means the UtiliQuest Holdings
Corp. 2001 Omnibus Stock Incentive Plan.
"Consolidated Tax Group" shall mean any affiliated group
filing a consolidated federal income Tax Return within the meaning of Section
1504(a) of the Code or any similar state, local or foreign Tax Law.
"control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, or as
trustee or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, as trustee or executor, by contract or credit arrangement or
otherwise.
"Conveyance Taxes" means sales, use, value added, transfer,
stamp, share, stock transfer, real property transfer or gains and other similar
Taxes.
"Encumbrance" means any security interest, pledge,
hypothecation, mortgage, lien (including, without limitation, environmental and
Tax liens), charge, encumbrance, right of first refusal, option, servient
easement, adverse claim, reversion reverter, including, without limitation, any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership.
"Environmental Law" means any applicable United States
federal, state or local or non-United States laws relating to (i) releases or
threatened releases of Hazardous Substances or materials containing Hazardous
Substances; (ii) the manufacture, handling, transport, use, treatment, storage
or disposal of Hazardous Substances or materials containing Hazardous
Substances; or (iii) pollution or protection of the environment, human health or
natural resources.
52
"Escrow Accounts" means the Adjustment Escrow Account and the
Indemnity Escrow Account.
"Excluded Taxes" means after taking into account with respect
to Income Taxes the deemed utilization of any net operating loss carrybacks or
carryforwards of the Company or any Subsidiary, as the case may be, as of the
Closing Date and unreduced by the Parent's or any Affiliate of Parent's,
including the Company or any Subsidiary, use of such net operating losses, (i)
Taxes imposed on or payable by the Company or any Subsidiary for any Pre-Closing
Period Tax Return or Pre-Closing Straddle Period and (ii) Taxes imposed on
Parent or the Company as a result of any breach of warranty or representation
relating to Taxes, or breach by GFI of any covenant relating to Taxes; provided,
however, that Excluded Taxes shall not include Taxes relating to the absence or
loss, in each case in whole or in part, of any Tax attribute, including, but not
limited to, any net operating loss of the Company or any of its Subsidiaries.
Notwithstanding the foregoing, any such Taxes described in clause (i) or (ii) of
the preceding sentence shall be treated as Excluded Taxes only to the extent
that such Taxes exceed the amount, if any, specifically reserved for Taxes
(excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) on the face of the Final Closing
Working Capital.
"Expenses" shall include all reasonable out-of-pocket expenses
(including, without limitation, all fees and expenses of counsel, accountants,
investment bankers, experts and consultants to a party) incurred by a party or
on its behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement, the solicitation of
stockholder approvals, the filing of any required notices under the HSR Act or
other similar regulations and all other matters related to the closing of the
merger and the other transactions contemplated by this Agreement.
"Gerblick Notes" means Promissory Note A and Promissory Note
B.
"Hazardous Substances" means (i) those substances defined in
or regulated under the following United States federal statutes and their state
counterparts, as each may be amended from time to time, and all regulations
thereunder: the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide
Act and the Clean Air Act, (ii) petroleum and petroleum products, including
crude oil and any fractions thereof, (iii) natural gas, synthetic gas, and any
mixtures thereof, (iv) polychlorinated biphenyls, asbestos and radon, and (v)
any contaminant, substance, material or waste regulated by any Governmental
Authority pursuant to any Environmental Law.
"Income Taxes" means Excluded Taxes imposed on or measured by
income or capital gain.
53
"Indebtedness" means, with respect to any Person, (i) all
indebtedness for borrowed money or for the deferred purchase price of property
or services (other than current trade liabilities incurred in the ordinary
course of business and payable in accordance with customary practices), (ii) any
other indebtedness that is evidenced by a note, bond, debenture or similar
instrument, (iii) all liabilities secured by any Encumbrances on any property,
(iv) all obligations of such Person as lessee under leases that have been or
should be, in accordance with U.S. GAAP, recorded as capital leases, (v) all
obligations, contingent or otherwise, of such Person under acceptance, letter of
credit or similar facilities other than performance bonds or letters of credit
supporting insurance policies or programs and (vi) all guarantee obligations;
provided, that guarantee obligations entered into, or collateral posted in
connection with insurance policies or performance bonds, shall be deemed not to
constitute Indebtedness.
"Indemnity Escrow Account" means that account with the Escrow
Agent into which the Indemnity Escrow Amount is deposited in accordance with the
terms of this Agreement.
"Indemnity Escrow Amount" equals $10,000,000.
"Intellectual Property" means (i) United States, non-United
States and international patents, patent applications and statutory invention
registrations, (ii) trademarks, service marks, trade dress, logos, trade names,
corporate names and other identifiers of source or goodwill, and registrations
and applications for registration thereof, (iii) copyrightable works,
copyrights, and registrations and applications for registration thereof, and
(iv) confidential and proprietary information, including trade secrets, know-how
and invention rights.
"Inventory" means all stock in trade, merchandise, goods,
supplies and other products, raw materials, work-in-process and finished
products related primarily to the business, together with all rights against
suppliers of such inventories (including claims receivable for rejected
inventory), and all prepayments and amounts paid on deposit with respect to the
same (including any of the foregoing owned by the Company but at metered
customer locations or in the possession of manufacturers, suppliers or dealers
or in transit or returned goods).
"Knowledge of the Company" means the actual knowledge of the
persons listed on Schedule I hereto or the Knowledge such persons would have had
after reasonable inquiry of the persons responsible for the applicable area.
"Liabilities" means any and all debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured or determined or determinable, including, without limitation, those
arising under any Law, Action or Order and those arising under any contract,
agreement, arrangement, commitment or undertaking.
"Licensed Intellectual Property" means Intellectual Property
licensed to the Company pursuant to a Company IP Agreement.
54
"Material Adverse Effect" means any material adverse effect on
(i) the business, financial condition, assets, liabilities or results of
operations of the Company and its Subsidiaries taken as a whole or (ii) the
ability of the Company to consummate the transactions contemplated by this
Agreement; provided, however, that none of the following shall be considered a
Material Adverse Effect: (i) changes in general economic conditions,(ii) any
changes generally affecting the industries in which the Company and its
Subsidiaries operate, or (iii) the execution of this Agreement, the public
announcement of the transactions contemplated hereby or the consummation of the
transactions contemplated hereby.
"Merger Consideration" has the meaning set forth in Section
2.02(a).
"Non-Income Taxes" means any Excluded Taxes other than Income
Taxes.
"Owned Intellectual Property" means Intellectual Property
owned by the Company.
"Person" means an individual, corporation, partnership,
limited partnership, limited liability company, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the Exchange
Act), trust, association or entity or government, political subdivision, agency
or instrumentality of a government.
"Per Share Merger Consideration" shall have the meaning set
forth in Section 2.02(b).
"Promissory Note A" means the promissory note, dated September
27, 2002, in favor of the James G. Gerblick Trust in the original principal
amount of $3 million, together with interest in arrears on the unpaid principal
balance at an annual rate of 6%, which is due on the third anniversary of its
issuance, as such is amended (or the obligations thereunder are revised)
pursuant to the Settlement Agreement and Mutual Release.
"Promissory Note B" means the promissory note, dated September
27, 2002, in favor of the James G. Gerblick Trust in the amount of $3.6 million,
together with interest in arrears on the unpaid principal balance at an annual
rate of 6%, which is due on the fifth anniversary of its issuance.
"Settlement Agreement and Mutual Release" means the agreement
to be entered into among UtiliQuest Holdings Corp., James G. Gerblick, and The
James G. Gerblick Trust, amending the terms of (or revising the obligations
under) Promissory Note A and releasing certain claims against James G. Gerblick
and the James G. Gerblick Trust.
"Straddle Period" shall mean any taxable period beginning
before the Closing Date and ending after the Closing Date.
55
"Subsidiary" or "Subsidiaries" means any person controlled by
the Company, directly or indirectly, through one or more intermediaries.
"Targeted Working Capital" equals $800,000.
"Tax" or "Taxes" means (i) any and all taxes, fees, levies,
duties, tariffs, imposts, and other similar charges of any kind (together with
any and all interest, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any government or taxing authority, including
taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, share capital, capital
stock, payroll, employment, social security, workers' compensation, unemployment
compensation, or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value added, or gains taxes; (ii) any
liability for the payment of any Tax as a result of membership in any Affiliated
Group and (iii) any transferee or secondary liability in respect of any Tax
(whether imposed by Law or contractual arrangement).
"Tax Returns" means any return, declaration, report, election,
claim for refund or information return or other statement or form relating to,
filed or required to be filed with any taxing authority, including any schedule
or attachment thereto, and including any amendment thereof.
"U.S. GAAP" means United States generally accepted accounting
principles and practices in effect from time to time applied consistently
throughout the periods involved.
"Working Capital" means the consolidated net current assets
(including current assets relating to tax refunds and cash and deposits to the
extent not applied to reduce Indebtedness prior to the Closing) less the
consolidated net current liabilities of the Company and its Subsidiaries, plus
all cash used by the Company or any of its Subsidiaries to support insurance
programs or policies or performance bonds regardless of the GAAP
characterization of such cash, excluding (i) the current portion of any
Indebtedness to the extent included in Closing Date Debt, (ii) any accrued but
unpaid management fees, (iii) any interest accrued or fees payable on
Indebtedness to the extent included in Closing Date Debt and (iv) any deferred
taxes shown on the Closing Balance Sheet but including as a fixed amount (not
subject to adjustment) $7,764,000 of deferred taxes as a current asset, all,
except as otherwise provided above, as determined in accordance with GAAP and
applied in a manner consistent with the Company's past practice.
(c) The following terms have the meaning set forth in the
Sections set forth below:
56
Defined Term Location of Definition
------------ ----------------------
AAA........................................................... Section 10.06
Action........................................................ Section 3.08
Agreement..................................................... Preamble
Assignment Agreement.......................................... Section 6.07(a)
Business Combination.......................................... Section 6.02
Byers......................................................... Section 6.07
Certificates.................................................. Section 2.04(a)
Certificate of Merger......................................... Section 1.02
Closing....................................................... Section 1.02
Closing Balance Sheet......................................... Section 2.06(a)
Closing Date.................................................. Section 1.02
Closing Expenses.............................................. Section 8.03(a)
Closing Financial Data........................................ Section 2.06(b)
Closing Working Capital....................................... Section 2.06(a)
Company....................................................... Preamble
Company Disclosure Schedule................................... Article III
Confidentiality Agreement..................................... Section 6.01(b)
DGCL.......................................................... Recitals
Dispute....................................................... Section 10.06(a)
Dissenting Shares............................................. Section 2.10
Effective Time................................................ Section 1.02
57
Defined Term Location of Definition
------------ ----------------------
Enron......................................................... Section 6.07
Environmental Permits......................................... Section 3.18(a)
ERISA......................................................... Section 3.12(a)
Escrow Agent.................................................. Recitals
Escrow Agreement.............................................. Recitals
Estimated Balance Sheet....................................... Section 2.06(a)
Estimated Working Capital..................................... Section 2.06(a)
Expiration Date............................................... Section 9.01(a)
Financial Statements.......................................... Section 3.09(a)(i)
GFI........................................................... Preamble
Governmental Authority........................................ Section 3.06(b)
HSR Act....................................................... Section 3.06(b)
Indemnified Party............................................. Section 9.05
Indemnifying Party............................................ Section 9.05
Interim Financial Statements.................................. Section 3.09(a)(ii)
JEDI.......................................................... Section 6.07
Law........................................................... Section 3.06(a)
Lease Documents............................................... Section 3.15(b)
Liens......................................................... Section 3.15(a)
Loss.......................................................... Section 9.02
Losses........................................................ Section 9.02
58
Defined Term Location of Definition
------------ ----------------------
Material Contracts............................................ Section 3.21(a)
Merger........................................................ Recitals
Merger Payment................................................ Section 2.04(a)
Merger Sub.................................................... Preamble
Neutral Auditor............................................... Section 2.06(d)
New York Courts............................................... Section 10.06(e)
Optionholders................................................. Section 2.03
Option........................................................ Section 2.03
Order......................................................... Section 7.01(b)
Organizational Documents...................................... Section 3.03
Parent........................................................ Preamble
Parent Indemnified Parties.................................... Section 9.02
Parent's Representatives...................................... Section 6.01(a)(i)
Permits....................................................... Section 3.07
Permitted Liens............................................... Section 3.15(a)
Per Share Merger Consideration Certificate.................... Section 2.05
Plans......................................................... Section 3.12(a)
Power Fund.................................................... Section 6.07
Pre-Closing Periods........................................... Section 9.12(a)
Pre-Closing Period Tax Returns................................ Section 9.12(a)
Pre-Closing Straddle Period................................... Section 9.12(c)
59
Defined Term Location of Definition
------------ ----------------------
Press Release................................................. Section 6.05
Related Party Transaction..................................... Section 3.23
Representatives............................................... Section 6.02
Resolution Period............................................. Section 2.06(c)
Robertson..................................................... Section 6.07
Rules......................................................... Section 10.06(a)
Seller Parties................................................ Section 6.07
Settlement Agreement.......................................... Section 6.07
Shares........................................................ Section 2.01(a)
Stockholder................................................... Section 2.01(a)
Stockholder Indemnified Parties............................... Section 9.03
Surviving Corporation......................................... Section 1.01
Third Party Claims............................................ Section 9.05(b)
Trutta........................................................ Section 6.07
UPA........................................................... Section 6.07
UQ Acquisition Claims......................................... Section 6.07
UQ Escrow Agreement........................................... Section 6.07
WARN.......................................................... Section 3.12(h)(i)
Section 10.03 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other
60
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the fullest extent possible.
Section 10.04 Entire Agreement; Assignment. This Agreement,
the Escrow Agreement and the Confidentiality Agreement constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned, except that Parent and Merger Sub may assign
all or any of their rights and obligations hereunder to any Affiliate of Parent,
provided that no such assignment shall relieve Parent of its obligations
hereunder if such assignee does not perform such obligations.
Section 10.05 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 or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
Section 10.06 Arbitration; Legal Proceedings.
(a) Submission of Controversy to Arbitration. Except
as provided in Section 2.06 and 9.12, any dispute, claim or controversy arising
out of or relating to this Agreement, including the breach, termination or
validity thereof and the arbitrability of any claim thereunder (a "Dispute"),
shall be settled by final and binding arbitration in the Borough of Manhattan of
the City of New York, under the then-effective Commercial Arbitration Rules of
the American Arbitration Association ("AAA"), (the "Rules") as modified by this
Agreement. Judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction. The award rendered by the arbitrator shall be
final and binding on the parties. There shall be one arbitrator who shall be
appointed by the parties within twenty (20) days of receipt by the respondent(s)
of the demand for arbitration. If the parties are unable to timely agree on one
arbitrator, they shall ask the AAA to appoint one in accordance with the
listing, striking and ranking procedure in the Rules and such appointment shall
be binding on the parties. Parent and the Surviving Corporation shall act and be
treated as one party for all purposes in any arbitration, including selection of
the arbitrator. The arbitrator shall have the authority to award any remedy or
relief that a court in the State of New York could order or grant, including
specific performance of any obligation created under this Agreement, the
issuance of an injunction or other provisional relief, or the imposition of
sanctions for abuse or frustration of the arbitration process. The arbitral
tribunal shall apply the law of the state of New York in deciding the merits of
any Dispute. The arbitration award will be in writing.
(b) Arbitration to Be Expeditious. It is the intent
of the parties that any arbitration shall be concluded as quickly as reasonably
practicable. Unless the parties otherwise
61
agree, once commenced, the hearing on the disputed matters shall be held four
(4) days a week until concluded, with each hearing date to begin at 9:00 a.m.
and to conclude at 5:00 p.m. The arbitrator shall use all reasonable efforts to
issue the final award or awards within a period of five (5) Business Days after
closure of the proceedings. Failure of the arbitrator to meet the time limits of
this Section 10.6 shall not be a basis for challenging the award.
(c) Discovery and Certain Evidentiary Matters.
Consistent with the expedited nature of arbitration, each party will, upon the
timely written request of the other party, promptly provide the other with
copies of documents relevant to the issues raised by any claim or counterclaim.
Upon the timely request of a party, the arbitrator shall have the discretion to
order examination by deposition of witnesses to the extent the arbitrator deems
such discovery relevant and appropriate. In considering the relevancy,
materiality, and admissibility of evidence, the arbitrators shall take into
account, among other things, applicable principles of legal privilege, including
the attorney-client privilege, the work product doctrine, and the
self-evaluative privilege, and appropriate protection of confidential
information.
(d) Costs of Arbitration. The parties shall share
equally the fees and expenses of the arbitrator.
(e) Jurisdiction and Process. Each party hereto
hereby submits to the exclusive jurisdiction of any New York federal court in
the Borough of Manhattan, City of New York and if the court lacks jurisdiction
over such proceeding, to the exclusive jurisdiction of any New York state court
in the Borough of Manhattan, City of New York (collectively, the "New York
Courts"), for the purpose of an order to compel arbitration and for provisional
remedies or other relief in aid of arbitration, and to the non-exclusive
jurisdiction of the New York Courts for the enforcement of any award issued
hereunder. Each party hereby submits to personal jurisdiction in the New York
Courts and irrevocably waives any objection as to venue therein, and further
agrees not to plead or claim in any such court that any such proceeding has been
brought in an inconvenient forum.
Section 10.07 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
were not performed in accordance with the terms hereof and that the parties
shall be entitled to seek specific performance of the terms hereof, in addition
to any other remedy at law or equity.
Section 10.08 Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of,
Parent, the Company and GFI or (b) by a waiver in accordance with Section 10.08.
Section 10.09 Waiver. Any party hereto may (a) extend the time
for the performance of any obligations or other acts of any other party hereto,
(b) waive any inaccuracies in the representations and warranties of any other
party hereto contained herein or in any document delivered by such other party
pursuant hereto or (c) waive compliance with any of
62
the agreements of any other party hereto or conditions to such party's
obligations contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of any
such rights.
Section 10.10 Headings. The descriptive headings contained in
this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
Section 10.11 Pronouns. Whenever the context may require, any
pronouns used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of the nouns and pronouns shall
include the plural and vice versa.
Section 10.12 Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
63
IN WITNESS WHEREOF, Parent, Merger Sub, the Company and GFI
have caused this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
DYCOM INDUSTRIES, INC.
By: /s/ Steven Nielsen
-----------------------------------------
Name: Steven Nielsen
Title: President and Chief Executive Officer
UTILIQUEST ACQUISITION CORP.
By: /s/ Steven Nielsen
-----------------------------------------
Name: Steven Nielsen
Title: President
UTILIQUEST HOLDINGS CORP.
By: /s/ Rob Karam
-----------------------------------------
Name: Rob Karam
Title: Vice President
OCM/GFI POWER OPPORTUNITIES FUND, L.P.
(in its own capacity and as Representative)
By: GFI Energy Ventures LLC, its Co-General
Partner
64
By: /s/ Ian Schapiro
------------------------------
Name: Ian Schapiro
Title: Principal
65