Exhibit 2
Execution Copy
AGREEMENT AND PLAN OF MERGER
among
BRUCKMANN, ROSSER, SHERRILL & CO., L.P.,
PENHALL ACQUISITION CORP.,
PENHALL INTERNATIONAL, INC.,
PHOENIX CONCRETE CUTTING, INC.
and
THE STOCKHOLDERS OF
PENHALL INTERNATIONAL, INC.
Dated as of June 30, 1998
TABLE OF CONTENTS
ARTICLE I THE MERGER 3
1.1 Exchange of Penhall Shares; the PCC Merger.........................................................3
1.2. Transactions at Closing...........................................................................4
1.3. Terms of the Merger...............................................................................5
1.4. Closing Date, Time and Place......................................................................6
1.5. Waiver............................................................................................7
1.6. Payment of Seller Consideration and Merger Consideration; Surrender of Stock......................7
1.7. No Further Ownership Rights in Existing Company Stock.............................................9
1.8. Termination of Exchange Fund......................................................................9
1.9. Lost, Stolen or Destroyed Certificates............................................................9
1.10. Closing Balance Sheet; Closing Date Indebtedness Amount; Adjustment to Seller
Consideration...................................................................................9
1.11. Adjustment of Seller Consideration for Certain Company Acquisitions.............................12
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE COMPANY........................................13
2.1. Organization and Standing........................................................................13
2.2. Capitalization...................................................................................14
2.3. Authorization; Binding Agreement.................................................................15
2.4. Conflicts, Consents and Approvals................................................................15
2.5. Litigation.......................................................................................16
2.6. Financial Statements.............................................................................16
2.7. No Brokers or Finders............................................................................17
2.8. Taxes............................................................................................17
2.9. Absence of Undisclosed or Contingent Liabilities.................................................18
2.10. Property.........................................................................................19
2.11. Insurance........................................................................................21
2.12. Environmental Matters............................................................................22
2.13. Intellectual Property............................................................................23
2.14. Permits..........................................................................................24
2.15. Compliance with Laws.............................................................................24
2.16. Labor Matters....................................................................................25
2.17. Absence of Changes...............................................................................25
2.18. Transactions with Affiliates.....................................................................27
2.19. Contracts and Commitments........................................................................27
2.20. Benefit Plans....................................................................................28
2.21. Absence of Questionable Payments.................................................................32
2.22. Books and Records................................................................................32
2.23. Disclosure.......................................................................................32
2
ARTICLE III SEVERAL REPRESENTATIONS AND WARRANTIES OF THE SELLERS...............................................32
3.1. Ownership of Shares..............................................................................32
3.2. Authorization; Binding Agreement.................................................................33
3.3. Conflicts, Consents and Approvals................................................................33
3.4. No Brokers or Finders............................................................................33
3.5 Investment Intent.................................................................................34
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BRS AND NEWCO......................................................34
4.1. Organization.....................................................................................34
4.2. Authorization; Binding Agreement.................................................................34
4.3. Conflicts, Consents and Approvals................................................................35
4.4. Litigation.......................................................................................35
4.5. Financing........................................................................................36
4.6. No Brokers or Finders............................................................................36
4.7 Investment.......................................................................................36
ARTICLE V CERTAIN COVENANTS....................................................................................36
5.1. Conduct of the Company's Business................................................................36
5.2. Notices Prior to Closing.........................................................................36
5.3. Access and Information...........................................................................38
5.4. Public Announcements.............................................................................38
5.5. Hart-Scott-Rodino Act............................................................................38
5.6. Further Assurances...............................................................................38
5.7. Transfer of Certain Assets.......................................................................38
5.8. Voting, Shareholders Agreement and Other Matters.................................................39
5.9. Competition......................................................................................40
5.10. Consents.........................................................................................41
5.11. Best Efforts.....................................................................................41
5.12. Employees........................................................................................41
5.13. Financing........................................................................................41
5.14. Estoppel Certificates............................................................................41
5.15. Title Insurance..................................................................................42
5.16. Surveys..........................................................................................43
5.17. FIRPTA...........................................................................................43
5.18. Zoning Letters...................................................................................43
5.19. Exceptions That Will Not Exist At Closing........................................................43
5.20. Termination of Certain Promotional Activities....................................................43
ARTICLE VI CONDITIONS...........................................................................................44
6.1. Conditions Precedent to Each Party's Obligations.................................................44
6.2. Conditions Precedent to BRS' and Newco's Obligations............................................44
6.3. Conditions Precedent to the Sellers' Obligations.................................................46
6.4. Up-Dating of Disclosure Schedules................................................................47
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ARTICLE VII TERMINATION AND ABANDONMENT........................................................................48
7.1. Termination......................................................................................48
7.2. Effect of Termination............................................................................49
ARTICLE VIII INDEMNIFICATION....................................................................................49
8.1. The Sellers' Obligation to Indemnify.............................................................49
8.2. The Surviving Corporation's Obligations to Indemnify.............................................50
8.3. Notice and Opportunity to Defend.................................................................50
8.4. Procedure for Claims by Parties..................................................................52
8.5. Limitations on Indemnification...................................................................53
8.6. Insurance and Tax Effect.........................................................................56
8.7. Survival of Representations and Warranties.......................................................56
ARTICLE IX APPOINTMENT OF SELLER REPRESENTATIVE................................................................57
9.1 Appointment of the Seller Representative; Enforcement of Rights, Benefits and Remedies............57
ARTICLE X MISCELLANEOUS........................................................................................59
10.1. Amendment and Modification......................................................................59
10.2. Waiver of Compliance; Consents.................................................................59
10.3. Notices.........................................................................................59
10.4. Assignment; No Third Party Beneficiaries........................................................60
10.5. Expenses........................................................................................60
10.6. Governing Law...................................................................................61
10.7. Counterparts....................................................................................61
10.8. Entire Agreement................................................................................61
10.9. Arbitration.....................................................................................61
10.10. Severability....................................................................................63
10.11. Arm Length Contract.............................................................................63
10.12. Headings; Interpretative Provisions.............................................................63
10.13. Time is of the Essence..........................................................................64
10.14 Golden Parachute Approval Requirement...........................................................64
4
EXHIBITS
Exhibit A - Restated Charter of Penhall
Exhibit B - Restated Charter of PCC
Exhibit C - Intentionally Omitted
Exhibit D - Form of PCC Plan of PCC Merger
Exhibit E - Plan of Merger, together with Officer's Certificates
Exhibit F - Form of Securities Holders Agreement
Exhibit G - Form of Opinion of Counsel to the Seller and the Company
Exhibit H - Compensation, Tax Consistency and Indemnification Agreement
Exhibit I - Employment Agreement for John Sawyer
Exhibit J - Employment Agreement for Other Management
Exhibit K - Form of Mutual Release and Satisfaction of the Seller and
Affiliates
Exhibit L - Form of Opinion of Counsel to Newco
Exhibit M - Form of Mutual Release and Satisfaction of the Company and
Subsidiaries
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SCHEDULES
Schedule 1.10 Closing Balance Sheet; Closing Date Indebtedness Amount;
Adjustment to Seller Consideration
Schedule 1.11 Acquisition Candidates
Schedule 2.1(b) Articles of Incorporation and Bylaws of the Company
Schedule 2.2(b) Subsidiaries
Schedule 2.2(c) Agreements Relating to the Company Stock
Schedule 2.4 Conflicts, Consents and Approvals
Schedule 2.5 Litigation
Schedule 2.6(a) Financial Statements
Schedule 2.6(b) Exceptions to Financial Statements
Schedule 2.8 Tax Matters
Schedule 2.9 Undisclosed or Contingent Liabilities
Schedule 2.10(a) Personal Property
Schedule 2.10(c) Owned Real Property/Tenant Leases/Landlord Leases
Schedule 2.10(d) Title Exceptions - Owned Real Property
Schedule 2.10(e) Title Exceptions - Leasehold Estates (Subsidiaries)
Schedule 2.10(f) Title Exceptions - Leasehold Estates (The Company)
Schedule 2.10(h) Exceptions to Exclusive Possession, Rent Payments, and
Tenant Improvement Work
Schedule 2.10(i) Real Property Casualties and Defaults
Schedule 2.10(k) Matters Impairing Use of Property and Operations
Schedule 2.11(a) Insurance
Schedule 2.11(b) Bonding Arrangements
Schedule 2.12(a) Environmental Matters
Schedule 2.12(b) Hazardous Substances
Schedule 2.12(c) Underground Tanks
Schedule 2.13 Intellectual Property
Schedule 2.14 Permits
Schedule 2.15 Compliance with Laws
Schedule 2.16 Labor Matters
Schedule 2.17 Changes Since June 30, 1997
Schedule 2.18 Transactions with Affiliates
Schedule 2.19 Contracts and Commitments
Schedule 2.20(a) Benefit Plans
Schedule 2.20(c) Benefit Plan Exceptions
Schedule 3.1(a) Ownership of Shares
Schedule 3.1(b) Seller Stock Agreement
Schedule 3.3 Conflicts, Consents and Approvals of Sellers
Schedule 4.3 Conflicts, Consents and Approvals of Newco and BRS
Schedule 4.6 Brokers or Finders
Schedule 5.7 Transfer of Certain Assets
Schedule 5.8 Voting, Shareholders Agreement and Other Matters
Schedule 5.9 Competition
6
Schedule 6.2 (j) Employment Agreements
Schedule 6.2(l) Closing Approvals and Consents
- -
7
DEFINED TERMS
Page
A and B Stockholders..............................................................................................7
AAA..............................................................................................................61
ABCA..............................................................................................................5
Accounting Referee...............................................................................................11
Acquisition Candidates...........................................................................................12
Adjustment Amount................................................................................................10
affiliate........................................................................................................27
Agreement.........................................................................................................2
Applicable Accounting Principles.................................................................................10
Arbiter..........................................................................................................62
Asserted Liability...............................................................................................50
associate........................................................................................................26
Audited Financial Statements.....................................................................................16
Basket...........................................................................................................53
Benefit Plans....................................................................................................29
BRS...............................................................................................................2
BRS Purchase Shares...............................................................................................4
Cash Merger Consideration.........................................................................................6
CERCLA...........................................................................................................22
CGCL..............................................................................................................7
Claim Response...................................................................................................52
Claims Notice....................................................................................................51
Class A Common Stock..............................................................................................3
Class B Common Stock..............................................................................................3
Class B Merger Consideration......................................................................................6
Class B Purchase Price............................................................................................4
Class C Common Stock..............................................................................................3
Closing...........................................................................................................6
Closing Date......................................................................................................6
Closing Date Balance Sheet.......................................................................................10
Closing Date Indebtedness Amount.................................................................................10
Closing Price....................................................................................................55
Code..........................................................................................................3, 18
Common Stock......................................................................................................6
Company.......................................................................................................2, 17
Company Accountants..............................................................................................10
Company Indemnified Party........................................................................................49
Company's knowledge..............................................................................................63
Compensation Agreement...........................................................................................45
Competitive Business.............................................................................................40
Constituent Corporations..........................................................................................5
8
Contracts........................................................................................................27
Current Market Price.............................................................................................55
Defaulting Seller................................................................................................54
Disputing Parties................................................................................................61
DOJ..............................................................................................................38
EBITDA...........................................................................................................13
Effective Time....................................................................................................5
Eligible Assets..................................................................................................55
Employment Agreements............................................................................................45
Environmental Laws...............................................................................................22
Environmental Permits............................................................................................23
ERISA............................................................................................................31
ERISA Affiliate..................................................................................................31
Exceptions That Will Not Exist At Closing........................................................................19
Exchange..........................................................................................................4
Exchange Agent....................................................................................................7
Exchange Agent Agreement..........................................................................................7
Exchange Fund.....................................................................................................9
Existing Company Stock............................................................................................2
Final Adjustment Amount..........................................................................................11
Final Indebtedness Amount........................................................................................11
Financial Statements.............................................................................................17
Financing........................................................................................................41
FTC..............................................................................................................38
GAAP.............................................................................................................16
Hazardous Substance..............................................................................................23
Historical EBITDA................................................................................................13
HSI...............................................................................................................2
HSR Act..........................................................................................................38
Indemnified Parties..............................................................................................50
Indemnifying Party...............................................................................................51
Intellectual Property............................................................................................23
Interim Balance Sheet............................................................................................18
Interim Balance Sheet Date.......................................................................................18
Interim Financial Statements.....................................................................................17
IRS..............................................................................................................29
Labor Agreement..................................................................................................25
Landlord Leases..................................................................................................19
Leased Real Property.............................................................................................19
Leasehold Estates................................................................................................20
Leases...........................................................................................................19
Liens............................................................................................................14
Litigation Conditions............................................................................................51
Losses...........................................................................................................49
Management.......................................................................................................23
2
Management Stockholders...........................................................................................2
material.........................................................................................................27
Material Adverse Change..........................................................................................53
Material Adverse Effect......................................................................................14, 53
Measurement Date.................................................................................................13
Merger............................................................................................................2
Merger Consideration..............................................................................................6
Multiemployer Plan...............................................................................................28
NCCF.............................................................................................................54
Net Loss.........................................................................................................56
Newco.............................................................................................................2
Newco Breach.....................................................................................................48
Newco Common Stock................................................................................................2
Non-Defaulting Seller............................................................................................54
Non-Management Stockholders.......................................................................................2
Owned Real Property..............................................................................................19
PCC...............................................................................................................2
PCC Merger........................................................................................................4
PCC Merger Sub....................................................................................................4
PCC Plan of Merger................................................................................................4
PCC Restated Charter..............................................................................................3
Peerless L/C.....................................................................................................10
Penhall Class A Common Stock......................................................................................3
Penhall Class B Common Stock......................................................................................3
Penhall International Corp.....................................................................................5, 6
Pension Plan.....................................................................................................29
Permits..........................................................................................................24
Permitted Exceptions.............................................................................................20
Permitted Leasehold Property Exceptions..........................................................................20
person...........................................................................................................14
Personal Property................................................................................................19
Plan of Merger....................................................................................................5
Pro Rata Share...................................................................................................12
Proposed Acquisition.............................................................................................12
Real Property....................................................................................................19
Recapitalization..................................................................................................2
Release..........................................................................................................23
Remediation Costs................................................................................................50
Response Period..................................................................................................52
Restated Penhall Charter..........................................................................................3
Review Period....................................................................................................10
Rogers Fee.......................................................................................................61
Schedules B......................................................................................................20
Securities Act...................................................................................................14
Securities Holders Agreement......................................................................................5
3
Seller Breach....................................................................................................48
Seller Consideration..............................................................................................6
Seller Indemnified Party.........................................................................................50
Sellers...........................................................................................................2
Senior Management................................................................................................63
Series A Preferred Stock..........................................................................................6
Series B Preferred Stock..........................................................................................6
Shareholders Agreements..........................................................................................39
Shareholders' Valuation Benefit..................................................................................13
Stock Option Plan................................................................................................45
Stull Children...................................................................................................40
Subsidiaries.....................................................................................................14
Subsidiary...................................................................................................14, 17
Surveys..........................................................................................................43
Surviving Corporation.............................................................................................5
Tax..............................................................................................................17
Tax Returns......................................................................................................17
Taxes............................................................................................................17
Tenant Leases....................................................................................................19
Territory........................................................................................................40
Title Policies...................................................................................................42
Transfer.........................................................................................................39
Valuation Benefit................................................................................................13
Wooditch Shares..................................................................................................38
Zoning Letters...................................................................................................43
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AGREEMENT AND PLAN OF MERGER
THIS IS AN AGREEMENT AND PLAN OF MERGER, dated as of June 30, 1998 (the
"Agreement"), by and among Bruckmann, Rosser, Sherrill & Co., L.P., a Delaware
limited partnership ("BRS"), Penhall Acquisition Corp., an Arizona corporation
("Newco"), Penhall International, Inc., a California corporation (the
"Company"), Phoenix Concrete Cutting, Inc., an Arizona corporation ("PCC"), the
stockholders of the Company identified on the signature pages hereto as the
"Management Stockholders" (the "Management Stockholders") and the stockholders
of the Company identified on the signature pages hereto as the "Non-Management
Stockholders" (the "Non-Management Stockholders" and, together with the
Management Stockholders, the "Sellers").
Background
A. The Company has issued and outstanding 421,615 shares of Common
Stock, without par value ("Existing Company Stock"), all of which are owned
of record by the Sellers, including 13,750 shares of Existing Company Stock
issued upon exercise of options to acquire Existing Company Stock and 3,146
shares of Existing Company Stock issued to certain Management Stockholders
who are shareholders of Highway Services, Inc. ("HSI") in connection with the
Company's acquisition of substantially all of the assets of HSI.
B. Prior to the Closing referred to herein, all of the issued and
outstanding shares of Existing Company Stock will be exchanged for shares of
Penhall Class A Common Stock and Penhall Class B Common Stock (each as
hereafter defined) as provided herein.
C. Prior to the Closing, a newly formed subsidiary of PCC will have
merged with and into the Company, as a result of which (i) the Company will
become a wholly owned subsidiary of PCC and (ii) each holder of shares of
Penhall Class A Common Stock and Penhall Class B Common Stock will receive an
equal amount of shares of Class A Common Stock and Class B Common Stock (each
as hereafter defined), respectively, of PCC.
D. Newco's authorized stock consists solely of 100 shares of Common
Stock, par value $.01 per share ("Newco Common Stock"). BRS owns one (1)
share of Newco Common Stock, which presently comprises the sole issued and
outstanding share of capital stock of Newco.
E. The Boards of Directors of the Company and PCC deem it advisable
and in the best interests of the Company and PCC and their stockholders, and
the Board of Directors of Newco deems it advisable and in the best interests
of Newco and its stockholder, to adopt a plan of recapitalization of PCC (the
"Recapitalization") pursuant to which, among other things, (i) Newco will
merge with and into PCC (the "Merger") on the terms and conditions set forth
in this Agreement, with PCC continuing as the surviving corporation of such
Merger, and (ii) BRS will purchase certain securities of PCC as the surviving
corporation in the Merger, all on the terms and conditions set forth herein.
2
F. It is intended that these transactions be recorded as a
recapitalization for financial reporting purposes.
G. As to certain Management Stockholders and BRS, it is intended
that certain of these transactions constitute and be treated as transfers of
property to a corporation controlled by the transferors under Section 351 of
the Internal Revenue Code of 1986, as amended (the "Code"), and comparable
provisions of state tax law.
Terms
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, and agreements, and upon the terms and subject to the
conditions hereinafter set forth, and intending to be legally bound hereby, the
parties do hereby agree as follows:
ARTICLE I
THE MERGER
1.1. Exchange of Company Shares; the PCC Merger. Prior to the
Closing, the Company, PCC and the Sellers shall have taken the following
actions:
(a) the Articles of Incorporation of the Company shall have
been amended and restated substantially in the form attached hereto as Exhibit A
(the "Restated Penhall Charter") to authorize 2,000,000 shares of Existing
Company Stock, without par value, 2,000,000 shares of Class A Common Stock,
without par value (the "Penhall Class A Common Stock"), and 1,000,000 shares of
Class B Common Stock, without par value (the "Penhall Class B Common Stock") of
the Company;
(b) the Articles of Incorporation of PCC shall have been
amended and restated substantially in the form attached hereto as Exhibit B (the
"PCC Restated Charter") to authorize 2,000,000 shares of Class A Common Stock,
par value $.01 per share (the "Class A Common Stock"), 1,000,000 shares of Class
B Common Stock, par value $.01 per share (the "Class B Common Stock") and
1,000,000 shares of Class C Common Stock, par value $.01 per share (the "Class C
Common Stock");
(c) the Company shall have caused all of the Options to be
fully vested and the Sellers holding such Options shall have exercised all of
the Options for shares of Existing Company Stock;
(d) all of the outstanding shares of Existing Company Stock
shall have been exchanged for shares of Penhall Class A Common Stock and Penhall
Class B Common Stock. Accordingly, the Company and each Seller hereby agree
that, prior to the Closing, (i) the Company will issue to each Seller the number
of shares of Penhall Class A Common Stock and Penhall Class B Common Stock set
forth under such Seller's name on Schedule 3.1(a) hereto in exchange for all of
the shares of Existing Company Stock owned by such Seller and set forth under
such Seller's name on Schedule 3.1(a) hereto, and (ii) each Seller will accept
such Penhall Class A Common Stock and Penhall Class B Common Stock in full
redemption and discharge of
3
all of the shares of Existing Company Stock owned by such Seller (the
"Exchange"). Pursuant to the Exchange, each Seller shall forward certificate(s)
evidencing the Existing Company Stock to be exchanged, together with duly
executed stock powers therefor, and, upon filing the Penhall Restated Charter
with the Secretary of State of the State of California, the Company will forward
to such Seller either (x) the certificates representing the shares of Penhall
Class A Common Stock and Penhall Class B Common Stock to be issued to such
Seller or (y) if the Exchange fails to be consummated, a notification to that
effect together with the certificate(s) evidencing shares of Existing Company
Stock previously delivered to the Company by such Stockholder. Immediately
following the Exchange and giving effect thereto, the Company shall have issued
and outstanding 365,199 shares of Penhall Class A Common Stock and 56,416 shares
of Penhall Class B Common Stock, all of which shall be owned by the Sellers as
set forth in Schedule 3.1(a) hereto;
(e) PCC shall have declared and paid a dividend of $8,500,000
to the Company, which dividend may be in the form of one or more of assumptions
of liability, cash or other assets;
(f) PCC shall have formed a new subsidiary under the laws of
the State of California ("PCC Merger Sub"). PCC Merger Sub shall have been
merged with and into the Company (the "PCC Merger") pursuant to a Plan of Merger
substantially in the form of Exhibit D hereto (the "PCC Plan of Merger"), as a
result of which: (i) each share of common stock of PCC Merger Sub issued and
outstanding shall be converted into 1 share of Existing Company Common Stock,
which will represent all of the issued and outstanding shares of the Company,
(ii) each holder of shares of Penhall Class A Common Stock and Penhall Class B
Common Stock will receive an equal number of shares of Class A Common Stock and
Class B Common Stock, respectively, and (iii) the shares of PCC stock held by
the Company will be converted into 12,386 shares of Class C Common Stock;
(g) Immediately following the Exchange and the PCC Merger,
and giving effect thereto, PCC shall have issued and outstanding 365,199 shares
of Class A Common Stock and 56,416 shares of Class B Common Stock, all of which
shall be owned beneficially and of record by the Sellers in the amounts and as
set forth in Schedule 3.1(a) hereto, and 12,386 shares of Class C Common Stock,
all of which shall be owned beneficially by the Company.
1.2. Transactions at Closing. The following transactions, which
together shall constitute the Recapitalization, shall be consummated at the
Closing on the Closing Date in the following order and each transaction shall
be conditioned upon the occurrence of the other transactions:
(a) each Management Stockholder shall sell, and BRS shall
purchase, all of the outstanding shares of Class B Common Stock set forth
opposite such Management Stockholder's name and designated as "BRS Purchase
Shares" on Schedule 3.1(a) hereto at a purchase price of $322.94 per share (such
per share consideration multiplied by the total number of shares of Class B
Common Stock being referred to herein as the "Class B Purchase Price");
(b) Newco shall obtain the proceeds of the Financing
(as hereafter defined);
4
(c) upon the terms and subject to the conditions contained in
Section 1.3 hereof and elsewhere in this Agreement, at the Effective Time (as
defined below), Newco shall be merged with and into PCC in accordance with this
Agreement, the Agreement and Plan of Merger attached hereto as Exhibit E (the
"Plan of Merger") and the applicable provisions of the Arizona Business
Corporation Act (the "ABCA"), the separate existence of Newco shall cease, and
PCC shall continue as the surviving corporation (the "Surviving Corporation")
and continue its corporate existence under the laws of the State of Arizona.
Pursuant to the Plan of Merger, the Articles of Incorporation of PCC shall be
amended to change the corporate name of PCC to "Penhall International Corp.";
(d) the Surviving Corporation shall pay the Cash Merger
Consideration (as hereafter defined);
(e) BRS, the Management Stockholders and the Surviving
Corporation shall enter into a Securities Holders Agreement (the "Securities
Holders Agreement") substantially in the form attached hereto as Exhibit F; and
(f) the Surviving Corporation shall sell, and BRS shall
purchase, 327,612 shares of Common Stock of the Surviving Corporation at a
purchase price of $1.00 per share and 10,899.51 shares of Series A Preferred
Stock of the Surviving Corporation at a purchase price of $1,000 per share.
1.3. Terms of the Merger. (a) Effective Time. At the Closing, the
parties hereto shall cause the Merger to be consummated by the execution and
filing of the Plan of Merger (and any other appropriate documents, such as
Officer's Certificates) with the Secretary of State of the State of Arizona
containing or referencing a copy of this Agreement and shall make all other
filings or recordings required in accordance with the ABCA. The Plan of
Merger shall provide that the Merger shall become effective immediately upon
the filing of the Plan of Merger. The time when the Merger shall become
effective is hereinafter referred to as the "Effective Time."
(b) Effect of Merger. At the Effective Time, the effect of
the Merger will be as provided by the ABCA. Without limiting the foregoing, at
the Effective Time, the Surviving Corporation shall thereupon and thereafter
possess all the rights, privileges, immunities, powers and franchises, of a
public as well as of a private nature, of each of Newco and PCC (the
"Constituent Corporations"); and all property, real, personal and mixed, and all
debts due on whatever account, including subscriptions to shares, and all other
choses in action, and all and every other interest, of or belonging to or due to
each of the Constituent Corporations shall be taken and deemed to be transferred
to and vested in the Surviving Corporation without further act or deed; and the
title to any real estate, or any estate or interest therein, vested in either of
the Constituent Corporations shall not revert or be in any way impaired by
reason of the Merger.
(c) Articles of Incorporation, Bylaws, Directors and Officers
of Surviving Corporation. At the Effective Time, the Articles of Incorporation
of PCC in effect immediately prior to the Effective Time shall be the Articles
of Incorporation of the Surviving Corporation until thereafter amended as
provided therein and by law, except that such Articles of Incorporation shall be
amended and restated as provided in the Plan of Merger to, among other
5
things: (i) authorize 5,000,000 shares of Common Stock, par value $.01 per share
(the "Common Stock"), 25,000 shares of Series A Preferred Stock, par value $.01
per share (the "Series A Preferred Stock"), and 50,000 shares of Series B
Preferred Stock, par value $.01 per share (the "Series B Preferred Stock"), of
the Surviving Corporation and (ii) to change the corporate name of the Surviving
Corporation to "Penhall International Corp." At the Effective Time, the Bylaws
of Newco in effect immediately prior to the Effective Time shall be the Bylaws
of the Surviving Corporation until thereafter amended as provided therein and by
law. The directors of Newco immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, and the officers of PCC immediately
prior to the Effective Time shall be the officers of the Surviving Corporation,
in each case until their successors are duly elected or appointed and qualified
or as otherwise provided in the Bylaws of the Surviving Corporation or by law.
(d) Conversion of Shares.
(i) Conversion of Class A Common Stock. Each share
of Class A Common Stock issued and outstanding immediately prior to the
Effective Time shall be cancelled and extinguished and converted into the right
to receive an amount in cash, without interest, equal to the quotient of
$117,937,365 (the "Cash Merger Consideration" and, together with the Class B
Purchase Price, the "Seller Consideration") divided by the total number of
shares of Class A Common Stock issued and outstanding immediately prior to the
Effective Time.
(ii) Conversion of Class B Common Stock. Each share
of Class B Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into 12.00 shares of Common Stock and 0.385
shares of Series B Preferred Stock of the Surviving Corporation (the "Class B
Merger Consideration" and, together with the Cash Merger Consideration, the
"Merger Consideration").
(iii) Conversion of Class C Common Stock. Each share
of Class C Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into 0.323 shares of Series B Preferred Stock
of the Surviving Corporation.
(iv) Cancellation of Treasury Stock. Each share of
Class A Common Stock or Class B Common Stock then held in the treasury of PCC,
shall be cancelled and retired without any conversion thereof and no payment of
any consideration therefor and thereafter will cease to exist.
(v) Capital Stock of Newco. Each share of Newco
Common Stock issued and outstanding immediately prior to the Effective Time
shall be cancelled without any conversion thereof or payment of any
consideration therefor and thereafter will cease to exist.
1.4. Closing Date, Time and Place. Unless this Agreement has been
terminated pursuant to Section 7.1 hereof, the consummation of the Merger
(the "Closing") shall take place on the third business day after all of the
conditions to closing set forth in Article VI are fulfilled or waived, or
such other date and at such other time as the Company and Newco may agree in
writing (the "Closing Date"). The Closing shall take place at 10:00 a.m.
local time at the offices
6
of Dechert Price & Rhoads, 30 Rockefeller Plaza, New York, New York or at such
other location as the parties shall mutually agree.
1.5. Waiver. Each Seller (on behalf of itself and its affiliates)
hereby waives any and all rights held by it or its affiliates to demand
payment for fair value of any capital stock of the Company or PCC under
Chapter 13 of the California General Corporation Law ("CGCL"), Chapter 13 of
the ABCA, respectively, or similar provisions of applicable law in connection
with the Merger and the other transactions contemplated hereby in respect of
any capital stock of the Company or PCC now or hereafter owned by such Seller
or its affiliates.
1.6. Payment of Seller Consideration and Merger Consideration;
Surrender of Stock. (a) Upon delivery to BRS of certificates evidencing the
shares of Class B Common Stock representing the BRS Purchase Shares, BRS will
deliver to the holders of the BRS Purchase Shares the Class B Purchase Price
to be received by such holders pursuant to Section 1.2(a) at the Closing by
wire transfer of immediately available funds to a single account designated
in writing by the Seller Representative (as defined below) not less than five
(5) business days prior to Closing.
(b) Prior to the Effective Time, Newco shall designate one or
more reputable banks or trust companies (the "Exchange Agent") to act at the
Surviving Corporation's sole expense as agent for the holders of Class A Common
Stock and Class B Common Stock immediately prior to the Effective Time (the "A
and B Stockholders") pursuant to the terms of an exchange agent agreement in the
form and substance reasonably satisfactory to Newco and the Seller
Representative (the "Exchange Agent Agreement"), to receive the Cash Merger
Consideration or Class B Merger Consideration to be delivered to such A and B
Stockholders pursuant to Section 1.3(d). Alternatively, Newco may designate the
Surviving Corporation to act as the Exchange Agent in accordance with this
Section 1.6. At or immediately following the Effective Time, Newco shall deposit
or cause to be deposited with the Exchange Agent in trust for the benefit of the
A and B Stockholders, the Merger Consideration to which the A and B Stockholders
shall become entitled pursuant to Section 1.3(d).
(c) With respect to holders of record of the Class A Common
Stock and Class B Common Stock who shall have given written notice to Newco at
least one (1) Business Day prior to the Effective Time of, in the case of
holders of Class A Common Stock, wire instructions for payment of the Cash
Merger Consideration or, in the case of holders of the Class B Common Stock,
instructions for registration of shares constituting the Class B Merger
Consideration, the Exchange Agent shall deliver to such holders at the Closing,
upon surrender at the Closing to the Exchange Agent of such certificates that
evidenced the shares of Class A Common Stock or Class B Common Stock, the Merger
Consideration payable in respect of the shares of Class A Common Stock or Class
B Common Stock represented by such certificates in accordance with the
instructions for such payment or delivery provided by such holder, and such
certificates shall be cancelled forthwith.
(d) With respect to holders of record of the Class A Common
Stock and Class B Common Stock who shall not have given proper written notice
and received payment in accordance with subparagraph (c) above, promptly after
the Effective Time, the Exchange Agent
7
shall mail to each person who was, at the Effective Time, a holder of record of
Class A Common Stock or Class B Common Stock entitled to receive the Merger
Consideration pursuant to Section 1.3(d), a form (mutually agreed to prior to
the Effective Time by Newco and the Company) of letter of transmittal and
instructions for use in effecting the surrender of the certificates that, at the
Effective Time, shall have evidenced any of such shares of Class A Common Stock
or Class B Common Stock to be exchanged pursuant to the Merger. Upon surrender
to the Exchange Agent of such certificates that evidenced the shares of Class A
Common Stock or Class B Common Stock to be exchanged pursuant to the Merger,
together with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may be
requested, the Exchange Agent shall promptly deliver to the persons entitled
thereto the Merger Consideration payable in respect of such shares of Class A
Common Stock or Class B Common Stock represented by such certificates, and such
certificates shall forthwith be cancelled. Until so surrendered and exchanged,
each such certificate evidencing such shares of Class A Common Stock or Class B
Common Stock shall, after the Effective Time, be deemed to evidence only the
right to receive the Merger Consideration to which such holder is entitled
pursuant to Section 1.3(d).
(e) If payment of the Merger Consideration in respect of
cancelled shares of Class A Common Stock or Class B Common Stock is to be made
to a person other than the Seller in whose name a surrendered certificate or
instrument is registered, it shall be a condition to such delivery or payment
that (i) the certificate or instrument so surrendered shall be properly endorsed
or shall be otherwise in proper form for transfer, (ii) the Seller requesting
such delivery or payment shall have paid any transfer and other taxes required
by reason of such delivery or payment in a name other than that of the
registered holder of the certificate or instrument surrendered or shall have
established to the reasonable satisfaction of the Surviving Corporation or the
Exchange Agent that such tax either has been paid or is not payable, and (iii)
the Seller requesting such delivery or payment shall have provided security
reasonably satisfactory to BRS and the Seller Representative for such Seller's
indemnification obligations under this Agreement.
(f) 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 of Class A Common Stock, Class B Common Stock, Class C Common Stock,
Penhall Class A Common Stock, Penhall Class B Common Stock or any Existing
Company Stock thereafter on the records of the Company. From and after the
Effective Time, the holders of certificates evidencing ownership of shares of
Class A Common Stock, Class B Common Stock, Class C Common Stock, Penhall Class
A Common Stock, Penhall Class B Common Stock or any Existing Company Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares except as otherwise provided herein or by
law. If, after the Effective Time, shares of Class A Common Stock, Class B
Common Stock, Class C Common Stock, Penhall Class A Common Stock, Penhall Class
B Common Stock or Existing Company Stock are duly presented to the Surviving
Corporation for any reason, they will be cancelled and exchanged as provided in
this Article I. No interest shall be paid or accrue on any portion of the Merger
Consideration, except that dividends shall accrue with respect to Series A
Preferred Stock and Series B Preferred Stock in accordance with the terms of
such stock.
8
(g) Notwithstanding anything to the contrary in this Section
1.6, none of the Surviving Corporation or any party hereto shall be liable to a
holder of shares of Class A Common Stock, Class B Common Stock or any Existing
Company Stock for any amount properly paid to a public official pursuant to any
applicable property, escheat or similar law. If any certificates representing
shares of Class A Common Stock, Class B Common Stock or any Existing Company
Stock shall not have been surrendered prior to two years after the Effective
Time (or immediately prior to such earlier date on which any cash or other
property in respect of such certificate would otherwise escheat to or become the
property of any Authority (as defined in Section 2.14)), any such cash or other
distributions in respect of such certificates shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
1.7. No Further Ownership Rights in Existing Company Stock. The
issuance or payment of the Merger Consideration pursuant to this Article I
will be in full satisfaction of all rights pertaining to the Class A Common
Stock, Class B Common Stock, Penhall Class A Common Stock, Penhall Class B
Common Stock or any Existing Company Stock surrendered in exchange therefor.
1.8. Termination of Exchange Fund. Any portion of the Merger
Consideration deposited with the Exchange Agent pursuant to Section 1.6 (the
"Exchange Fund") which remains undistributed to the holders of the certificates
representing shares of Class A Common Stock, Class B Common Stock, Penhall Class
A Common Stock, Penhall Class B Common Stock or Existing Company Stock for six
months after the Effective Time shall be delivered to the Surviving Corporation,
upon demand, and any holders of shares of Class A Common Stock, Class B Common
Stock, Penhall Class A Common Stock, Penhall Class B Common Stock or Existing
Company Stock prior to the Merger who have not theretofore complied with this
Article I shall thereafter look only to the Surviving Corporation and only as
general creditors thereof for payment of their claim for cash or other property,
if any.
1.9. Lost, Stolen or Destroyed Certificates. In the event
certificates representing any shares of Class A Common Stock, Class B Common
Stock, Penhall Class A Common Stock, Penhall Class B Common Stock or Existing
Company Stock have been lost, stolen or destroyed and the holder thereof is
unable to obtain a new certificate by reason of the fact that there can be no
further registration of transfers of such certificates on the records of the
Surviving Corporation pursuant to Section 1.6, the Exchange Agent will issue
or pay in exchange therefor, upon receipt of an affidavit by the holder
thereof stating that such certificates have been lost, stolen or destroyed,
the portion of the Merger Consideration to which the holder is entitled under
Section 1.3; provided, however, that the Surviving Corporation may, in its
discretion and as a condition precedent to the issuance or payment thereof,
require the holder to agree to indemnify, or if such indemnity is deemed
inadequate in Surviving Corporation's reasonable discretion, to deliver a
bond in such sum as it may reasonably direct as indemnity, against any claim
that may be made against the Surviving Corporation, Newco or the Exchange
Agent with respect to such certificates alleged to have been lost, stolen or
destroyed.
1.10. Closing Balance Sheet; Closing Date Indebtedness Amount;
Adjustment to Seller Consideration. (a) As promptly as practicable, but not
later than one hundred twenty
9
(120) days after the Closing Date, the Surviving Corporation will cause to be
prepared and delivered to the Seller Representative (i) a balance sheet (the
"Closing Date Balance Sheet") of the Company and its Subsidiaries, together with
an unqualified report thereon by KPMG Peat Marwick LLP (the "Company
Accountants"), and (ii) a statement based on such Closing Date Balance Sheet
setting forth in detail a calculation of the Closing Date Indebtedness Amount
(as hereafter defined) and the Adjustment Amount (as hereinafter defined),
determined in accordance with the Applicable Accounting Principles (as hereafter
defined) and this Agreement. For this purpose, (i) "Closing Date Indebtedness
Amount" shall mean an amount equal to all indebtedness (including principal,
accrued interest and any applicable premiums) of the Company or its Subsidiaries
to any Seller or former stockholder of the Company and to Bank of America
(consisting in each case of short- and long-term notes payable), all similar
indebtedness of the Company or its Subsidiaries for borrowed money (excluding
borrowings under life insurance policies payable from the cash surrender value
of such policies), and all amounts drawn under the $2 million dollar letter of
credit posted in favor of Peerless Insurance Company (or any substitute letter
of credit) (the "Peerless L/C"), in each case as of immediately prior to the
Closing, whether or not such indebtedness shall have been repaid or refinanced
in connection with the Closing; (ii) "Adjustment Amount" means the amount, if
any, by which (i) the difference between (x) the Closing Date Indebtedness
Amount minus (y) the amount of the proceeds from the Closing Date Indebtedness
Amount used to fund additions to working capital of the Company and property,
plant and equipment of the Company necessary to support continued growth in the
Company's business (including without limitation all monies used to pay for
Proposed Acquisitions (as defined in Section 1.11(a) below) but excluding all
amounts drawn under the Peerless L/C) or to fund the employee bonuses, employee
loans, tax payments and other items set forth in Schedule 1.10 exceeds (ii)
$10,000,000; and (iii) "Applicable Accounting Principles" means GAAP (as defined
in Section 2.6) applied in a manner consistent with the Audited Financial
Statements (as defined in Section 2.6), except that all amounts, irrespective of
size, quantity or nature shall be considered material.
(b) After delivery of its calculation of the Closing Date
Indebtedness Amount, the Surviving Corporation shall make available to the
Seller Representative all books, records, work papers, personnel and other
materials and sources used by the Surviving Corporation and the Company's
Accountants to prepare the Surviving Corporation's calculation of the Closing
Date Indebtedness Amount and the Adjustment Amount. The Seller Representative
may dispute any items or amounts reflected on the Closing Date Balance Sheet or
in the Closing Date Indebtedness Amount and the Adjustment Amount calculations
on the basis that such items or amounts were not presented in accordance with
the Applicable Accounting Principles or this Agreement (or on the basis of math,
entry or other errors); provided, however, that the Seller Representative shall
notify the Surviving Corporation in writing of each disputed item or amount
within thirty (30) days of the Seller Representative's receipt of the Closing
Date Balance Sheet and statement of the Closing Date Indebtedness Amount and the
Adjustment Amount (such thirty (30) day period hereinafter referred to as the
"Review Period"). Any such notice of disagreement shall specify those items or
amounts as to which the Seller disagrees (and shall include the Seller
Representative's calculation of the Closing Date Indebtedness Amount and the
Adjustment Amount), and the Sellers and the Seller Representative shall be
deemed to have agreed with all
10
other items and amounts included in the calculation of the Closing Date
Indebtedness Amount and the Adjustment Amount delivered pursuant to Section
1.10(a).
(c) If a notice of disagreement shall be duly given pursuant
to Section 1.10(b), the Surviving Corporation and the Seller Representative
shall, during the fifteen (15) business days following receipt of such notice,
use their reasonable best efforts to reach agreement on the disputed items or
amounts in order to determine the Closing Date Indebtedness Amount and the
Adjustment Amount. If, during such period, the Surviving Corporation and the
Seller Representative are unable to reach such agreement, they shall promptly
thereafter cause a nationally recognized firm of independent accountants chosen
and mutually accepted by the parties, or, if no such agreement is reached within
five (5) business days after the end of such period, the firm of Arthur Andersen
LLP (the "Accounting Referee"), to review this Agreement and the disputed items
or amounts for the purpose of calculating the Closing Date Indebtedness Amount
and the Adjustment Amount. In making such calculation, the Accounting Referee
shall consider only those items or amounts in the Surviving Corporation's
calculation of the Closing Date Indebtedness Amount and the Adjustment Amount as
to which the Seller Representative has disagreed. The Accounting Referee shall
deliver to the Surviving Corporation and the Seller Representative, as promptly
as practicable but in no event later than thirty (30) days after retention of
the Accounting Referee by the Surviving Corporation and the Seller
Representative, a report setting forth such calculations. Such report shall be
final and binding upon the Surviving Corporation and the Sellers and shall
constitute an arbitral award upon which a judgment may be entered in any court
having jurisdiction thereof. The cost of such review and report shall be borne
equally by the Surviving Corporation and the Sellers. The "Final Indebtedness
Amount" and the "Final Adjustment Amount" shall mean the Closing Date
Indebtedness Amount and the Adjustment Amount, respectively, (A) as shown in the
Surviving Corporation's calculation delivered pursuant to Section 1.10(a) if no
notice of disagreement with respect thereto is duly delivered pursuant to
Section 1.10(b) or (B) if such a notice of disagreement is delivered, as agreed
by the Surviving Corporation and the Seller Representative pursuant to this
Section 1.10(c) or in the absence of such agreement, as shown in the Accounting
Referee's calculation delivered pursuant to this Section 1.10(c).
(d) The Sellers and Surviving Corporation agree that they
will, and will cause their (and their affiliates') agents and representatives
to, cooperate and assist in the preparation of the Closing Date Balance Sheet
and the calculation of the Closing Date Indebtedness Amount and the Adjustment
Amount and in the conduct of the audits and reviews referred to in this Section
1.10, including the making available to the extent necessary of books, records,
work papers, and personnel.
(e) The Surviving Corporation shall be solely responsible for
the fees, costs and expenses due to the Company's Accountants in respect of the
preparation of the Closing Date Balance Sheet and of the calculation of the
Closing Date Indebtedness Amount and the Adjustment Amount pursuant to this
Section 1.10.
(f) Each of the Sellers shall pay to the Surviving
Corporation such Seller's pro rata share, based on his or its ownership interest
in the Company specified in Schedule 3.1(a)
11
("Pro Rata Share"), of the Final Adjustment Amount, if any, with interest as
provided in paragraph (g) below.
(g) Any payments pursuant to paragraph (f) above shall be
made by wire transfer of immediately available funds within ten (10) days after
the Final Indebtedness Amount and the Final Adjustment Amount have been
determined to such account of the Surviving Corporation as may be designated by
the Surviving Corporation in writing (it being understood that if at the
conclusion of the Review Period, any portion of the Adjustment Amount is not in
dispute, such amount shall be paid within ten (10) business days after the
conclusion of the Review Period). The amount of any payment to be made pursuant
to this Section 1.10 shall bear interest from and including the Closing Date to
but excluding the date of payment at a rate per annum equal to the rate of
interest from time to time announced by Morgan Guaranty Trust Company of New
York as its Base Rate in New York City in effect from time to time during the
period from the Closing Date to the date of payment. Such interest shall be
payable at the same time as the payment to which it relates and shall be
calculated daily on the basis of a year of three hundred sixty-five (365) days
and the actual number of days elapsed.
1.11. Adjustment of Seller Consideration for Certain Company
Acquisitions. (a) With respect to any acquisition (a "Proposed Acquisition") of
any of the acquisition candidates identified on Schedule 1.11 hereto (the
"Acquisition Candidates") consummated by the Company or a Subsidiary of the
Company either prior to Closing or within one hundred twenty (120) days
following the Closing, the Sellers will be entitled to receive the Shareholders'
Valuation Benefit (as defined below) in accordance with the terms and conditions
of this Section 1.11.
(b) For each Proposed Acquisition consummated prior to
Closing (including the acquisition of HSI), the Merger Consideration and the
Class B Purchase Price shall be increased ratably by an amount equal to 50% of
the Shareholders' Valuation Benefit attributable to such Proposed Acquisition.
In the event that one or more Proposed Acquisitions are consummated on or before
the 120th day following the Closing, the Sellers shall be entitled to receive,
allocated among the Sellers according to each Seller's respective interest in
the total of the Merger Consideration and the Class B Purchase Price as set
forth in Schedule 3.1(a), an amount equal to 50% of the Shareholders' Valuation
Benefit attributable to each such Proposed Acquisition. Payments pursuant to
this paragraph (b) shall be made (i) at the Closing and in the manner provided
in the first sentence of this subparagraph (b) with respect to any Proposed
Acquisition consummated prior to the Closing (it being acknowledged that the
Class B Purchase Price and the Merger Consideration specified in Sections 1.2(a)
and 1.3(d) include such payments with respect to HSI), and (ii) with respect to
any Proposed Acquisition consummated following the Closing, by wire transfer of
immediately available funds within ten (10) business days after the consummation
of such Proposed Acquisition to a single account for the benefit of the Sellers
as may be designated by the Seller Representative in writing.
(c) In the event that the EBITDA of an Acquisition Candidate
(acquired pursuant to a Proposed Acquisition for which payment or adjustment
shall have been made under paragraph (b) above) for the period ending on the
first anniversary of the Measurement Date (as defined below) of such Proposed
Acquisition shall equal or exceed 90% of such Acquisition Candidate's Historical
EBITDA (as defined below), the Sellers shall be entitled to receive from
12
the Surviving Corporation, as an adjustment to the Seller Consideration, an
amount equal to the remaining 50% of the Shareholders' Valuation Benefit for
such Acquisition Candidate. EBITDA shall be calculated in a manner consistent
with the calculation of the Historical EBITDA of such Acquisition Candidate. Any
such payment pursuant to this paragraph (c) shall be made by the Surviving
Corporation by wire transfer of immediately available funds within ten (10)
business days after the first anniversary date of the consummation of such
Proposed Acquisition to a single account for the benefit of the Sellers as may
be designated by the Seller Representative in writing.
(d) For purposes of this Section 1.11:
(i) "Shareholders' Valuation Benefit" means an
amount equal to 50% of the Valuation Benefit (as defined below);
(ii) "Valuation Benefit" means an amount equal to
the positive difference, if any, of (x) the product of Historical EBITDA (as
defined below) of any Acquisition Candidate multiplied by six (6), less (y) the
actual purchase price (including the value of all assumed bank debt, purchase
money debt and other indebtedness for borrowed money and the estimated value of
any future payments and adjustments as the parties may agree) to be paid for
such Acquisition Candidate;
(iii) "Historical EBITDA" of any Acquisition
Candidate means normalized (i.e., after adjustments for non-recurring and
similar items) earnings before interest, taxes, depreciation and amortization
("EBITDA") for the twelve month period ending on the Measurement Date of such
Proposed Acquisition, it being understood that the Surviving Corporation (or BRS
in the case of any Proposed Acquisition consummated prior to Closing) and the
Seller Representative shall use their respective best efforts to agree upon the
Historical EBITDA of an Acquisition Candidate prior to the date of consummation
of such Proposed Acquisition; provided that the parties agree that Historical
EBITDA of HSI shall equal $3,271,000; and
(iv) "Measurement Date" means, with respect to any
Proposed Acquisition that is consummated, the date that is the last day of the
month immediately preceding the month during which the closing of such Proposed
Acquisition occurs, except that if the closing occurs on the last day of a
month, the Measurement Date shall be the closing date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS AND THE COMPANY
Each Seller and the Company hereby represent and warrant jointly and
severally to BRS and Newco as follows:
2.1. Organization and Standing. (a) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all
13
requisite corporate power and authority to own, lease and operate its property
and to conduct the business in which it is engaged as presently conducted. The
Company is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of the property owned, leased
or operated by it, or the conduct of its business, makes such qualification
necessary, except where the failure to be so duly qualified and in good standing
could not reasonably be expected to have a Material Adverse Effect. As used
herein, the term "Material Adverse Effect" means any change, effect or
circumstance that has or is reasonably likely to have, any material adverse
effect (i) on the assets, liabilities, operations, business, results of
operations or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole or (ii) on the ability of the Sellers or the
Company to consummate the transactions contemplated hereby or (iii) on the
ability of each of the Company and its Subsidiaries to continue to operate its
business immediately after the Closing in substantially the same manner as such
business is conducted prior to the Closing.
(b) Attached hereto as Schedule 2.1(b) are true and complete
copies of the current Articles of Incorporation and Bylaws of the Company, as in
effect on the date of this Agreement.
2.2. Capitalization. (a) The authorized capital stock of the Company
consists solely of 5,000,000 shares of Existing Company Stock, of which 421,615
shares are issued and outstanding and will be issued and outstanding immediately
prior to the filing of the Restated Penhall Charter. The Sellers are the sole
record owners of the Existing Company Stock. There are no other shares of
capital stock of the Company issued. All of the outstanding shares of the
Company's capital stock (i) are duly authorized, validly issued, fully paid and
nonassessable, (ii) have not been issued in violation of any preemptive rights
of stockholders and (iii) have been offered and sold pursuant to a valid
exemption from registration under the Securities Act of 1933, as amended (the
"Securities Act"), and otherwise in compliance with the Securities Act and the
rules and regulations thereunder.
(b) The Company has subsidiaries as set forth on Schedule
2.2(b) (each, a "Subsidiary" and collectively, the "Subsidiaries"). Except for
the Subsidiaries, the Company does not own, and, except as set forth on Schedule
2.2(b), has not owned, directly or indirectly, beneficially or of record, or
have or, except as set forth on Schedule 2.2(b), had any operational control
over, or have any obligation to acquire, any capital stock or other equity
securities of any corporation, nor does the Company have any direct or indirect
equity or ownership investment, or any obligation to incur such investment, in
any person. As used herein, the term "person" means any individual, corporation,
partnership, limited liability company, joint venture, association, trust or
other entity or organization. Each issued and outstanding share of capital stock
or other equity security of the Subsidiaries (i) has been duly authorized and
validly issued, (ii) is fully paid and non-assessable, (iii) has not been issued
in violation of any preemptive rights of equityholders, and (iv) except as set
forth on Schedule 2.2(b) hereto and for the transactions set forth in Article I,
is owned, beneficially and of record by the Company, free and clear of any
claim, lien, security interest, mortgage, deed of trust, pledge, charge,
conditional sale or other title retention agreement, lease, preemptive right,
right of first refusal, option, restriction, tenancy, easement, license,
encroachment (from or onto any other property) or other encumbrance of any kind
(collectively, "Liens"). Except as set forth on Schedule 2.2(b), each
14
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its respective state of incorporation set forth on
Schedule 2.2(b) hereto and has full corporate power and authority to carry on
its business as it is now being conducted and to own, operate and lease its
properties and assets; is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where the character of the property
owned, leased or operated by it, or the conduct of its business, makes such
qualification necessary, except where the failure to be so duly qualified and in
good standing could not reasonably be expected to have a Material Adverse
Effect. The copies of the Articles of Incorporation and By-Laws of each
Subsidiary heretofore delivered to Newco are complete and correct copies of such
instruments as presently in effect.
(c) Except as set forth on Schedule 2.2(c) hereto, there are
no outstanding (i) securities of the Company or any Subsidiary convertible into
or exchangeable for shares of capital stock or equity securities of the Company
or any Subsidiary or (ii) options, warrants, calls or other rights to acquire
from the Company or any Subsidiary, or other obligations or understandings or
arrangements of the Company or any Subsidiary to issue, any capital stock,
equity securities or securities convertible into or exchangeable for capital
stock or equity securities of the Company or any Subsidiary. Except as set forth
on Schedule 2.2(c) hereto and for the transactions set forth in Article I, there
are no outstanding obligations of the Company or any Subsidiary to repurchase,
redeem or otherwise acquire any capital stock or equity securities of the
Company or any Subsidiary (or any of the other securities set forth in the
previous sentence). Except pursuant to this Agreement or as set forth on
Schedule 2.2(c) hereto, neither the Company nor any Subsidiary is a party to, or
bound by, any arrangement, agreement, instrument or order (i) relating to the
transfer of any capital stock or equity securities of the Company or any
Subsidiary, (ii) relating to the dividend or voting rights of any capital stock
or equity securities of the Company or any Subsidiary, or (iii) relating to
rights to registration under the Securities Act of any capital stock or equity
securities of the Company or any Subsidiary.
2.3. Authorization; Binding Agreement. The Company has full
corporate power and authority to execute and deliver this Agreement and each
other document or instrument contemplated hereby, to perform its obligations
hereunder and thereunder, and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by the Company of this
Agreement and each other document or instrument executed or to be executed by
it in connection herewith, and the consummation by the Company of the
transactions contemplated hereby and thereby, have been, or, with respect to
the PCC Merger and the Merger, will have been prior to Closing, duly and
validly authorized by all necessary corporate and shareholder action. This
Agreement has been, and each other document or instrument to be executed by
the Company in connection herewith will be, duly executed and delivered by
the Company, and constitutes, or will constitute, a legal, valid and binding
obligation of the Company, enforceable against the Company, in accordance
with its terms.
2.4. Conflicts, Consents and Approvals. Except as set forth on
Schedule 2.4 hereto, the execution and delivery by the Company of this
Agreement and any other documents or instruments contemplated hereby, the
performance by the Company of its obligations hereunder and thereunder, and
the consummation of the transactions contemplated hereby and thereby, do not
and will not:
15
(a) violate or conflict with or result in a breach of any
provision of the Articles of Incorporation or Bylaws of the Company or any
Subsidiary, as such instruments are currently in effect;
(b) subject to obtaining the consents and approvals specified
in Schedule 2.4, require any consent, approval or notice under, or conflict
with, or result in a violation or breach of, or constitute (with or without the
giving of notice or the lapse of time or both) a default (or give rise to any
right of termination, modification, cancellation or acceleration or result in
the creation or imposition of any Lien upon the property of the Company or a
Subsidiary) under, any of the terms, conditions or provisions of any (i) note,
bond, mortgage, indenture, license, lease, agreement or other document or
instrument or obligation to which the Company or a Subsidiary is a party, under
or pursuant to which any of its properties or assets are held, or by which any
portion of its properties or assets may be bound, or (ii) any permit, license,
approval, franchise or other governmental or regulatory authorization held or
used by or binding on the Company or any of the Subsidiaries, except for
conflicts, violations, breaches, defaults or other events that could not be
reasonably expected to have a Material Adverse Effect;
(c) violate or contravene any law, statute, rule or
regulation, or any order, writ, judgment, injunction, decree, determination or
award currently in effect, the violation or contravention of which could
reasonably be expected to have a Material Adverse Effect; or
(d) other than in respect of the HSR Act (as defined in
Section 5.5), require any action, consent, approval or authorization of, or
review by, or declaration, registration or filing with, or notice to, any court,
arbitrator, governmental agency or other regulatory authority, or any stock
exchange or similar self-regulatory organization.
2.5. Litigation. Except as set forth on Schedule 2.5 hereto, (a)
there is no pending or, to the knowledge of the Company, threatened claim,
arbitration proceeding, action, suit, investigation or other proceeding
against or involving the Company or any Subsidiary, or any of the property or
rights of the Company or any Subsidiary, which has had or could reasonably be
expected to have a Material Adverse Effect and (b) neither the Company nor
any Subsidiary is in violation of or default under any order, judgment, writ,
injunction or decree of any court, arbitrator or Authority (as defined in
Section 2.14). Any such order, injunction or decree binding on the Company or
any Subsidiary is disclosed in Schedule 2.5.
2.6. Financial Statements. Attached hereto as Schedule 2.6(a) are
copies of the audited consolidated financial statements of the Company and
its Subsidiaries for the years ended, and as of, June 30, 1997, June 30, 1996
and June 30, 1995, together with, in each case, the audit reports thereon of,
for the year ended and as of June 30, 1997, KPMG Peat Marwick LLP or, for the
years ended and as of June 30, 1996 and 1995, Moss Adams LLP (the "Audited
Financial Statements"). Except as set forth on Schedule 2.6(b) hereto, the
Audited Financial Statements are in accordance with the books and records of
the Company and its Subsidiaries, and fairly present in accordance with
generally accepted accounting principles ("GAAP") consistently applied the
consolidated assets, liabilities and financial position of the Company and
its Subsidiaries, as at the respective dates thereof, and the consolidated
results of their operations for the periods covered thereby. Also attached
hereto as Schedule 2.6(a) is a copy of the
16
unaudited financial statements of the Company and its Subsidiaries for the nine
month period ended, and as of, March 31, 1998 (the "Interim Financial
Statements" and, together with the Audited Financial Statements, the "Financial
Statements"). Except as set forth on Schedule 2.6(b), the Interim Financial
Statements are in accordance with the books and records of the Company and its
Subsidiaries, and fairly present in accordance with GAAP (for interim reporting)
consistently applied the consolidated assets, liabilities and financial position
of the Company and its Subsidiaries, as at the date thereof, and the
consolidated results of their operations for the period covered thereby (except
in respect of normal and recurring year end adjustments, none of which is
material in amount). The contingency, tax and other reserves reflected on the
Financial Statements are adequate, appropriate and reasonable in accordance with
GAAP.
2.7. No Brokers or Finders. Except for William L. Rogers and his
affiliates, the fees related to which shall be borne as provided in Section
10.5, none of the Company, its Subsidiaries, affiliates, officers, directors
or employees, (a) has employed (or will employ) any broker or finder, or (b)
has incurred (or will incur) any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
by this Agreement.
2.8. Taxes. (a) For purposes of this Agreement:
(i) "Tax" or "Taxes" means all taxes, charges, fees,
levies or other assessments, including all net income, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
alternative minimum, license, withholding, employment, payroll, excise,
estimated, severance, stamp, occupation, real or personal property or other
taxes, customs duties, fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any federal, state, local or foreign tax authority;
(ii) "Tax Returns" means all returns, reports, forms
or other information required to be filed with, or supplied to, any tax
authority and all information forms required to be supplied to third parties
with respect to any Taxes; and
(iii) For purposes of this Section 2.8 and Section
2.17(m) hereof relating to Tax matters, "Company" and "Subsidiary" include any
predecessor entity to which the Company or a Subsidiary is a successor for Tax
purposes.
(b) Except as set forth in Schedule 2.8:
All Tax Returns (including consolidated, combined or
unitary federal and state Tax Returns which include or which should include the
Company or any Subsidiary) required to be filed by or on behalf of the Company
or any Subsidiary have been timely filed and each such Tax Return is materially
complete and accurate. All Taxes shown on such Tax Returns have been paid by or
on behalf of the Company and the Subsidiaries when due. The charges, accruals,
and reserves for unpaid Taxes that are reflected on the books of the Company and
each Subsidiary are adequate to cover such Taxes in accordance with GAAP.
Neither the Company nor any Subsidiary
17
has filed a consent, election or agreement under Section 341(f) of the Internal
Revenue Code of 1986, as amended, and the rules and regulations promulgated
thereunder (collectively, the "Code"). No Liens for Taxes have been filed with
respect to any property of the Company or any Subsidiary except for Taxes not
yet due, there is no unpaid assessment of Taxes against the Company or any
Subsidiary, no claims are being asserted with respect to any Taxes of the
Company or any Subsidiary and to the Company's knowledge no examination is being
conducted or is pending which could result in Taxes being owed by the Company or
any Subsidiary. Neither the Company nor any Subsidiary has been advised by any
tax authority that it has or may have an obligation to file Tax Returns in a
jurisdiction where the Company or Subsidiary has not filed or has ceased filing
Tax Returns. The Company and each Subsidiary have complied in all material
respects with applicable laws, rules and regulations relating to the payment and
withholding of Taxes and have withheld and properly remitted all Taxes required
to be withheld from the wages, salaries, payments or transfers of property to
employees and independent contractors. There are no effective waivers or
consents extending the statute of limitations with respect to Taxes for which
the Company or any Subsidiary could be liable. Neither the Company nor any
Subsidiary is a party to any agreement under which the Company or any Subsidiary
could be liable to indemnify another person for Taxes. Neither the Company nor
any Subsidiary is subject to any adjustment under Section 481 of the Code.
Neither the Company nor any Subsidiary is the subject of any private letter
ruling from, or closing agreement with any tax authority. Neither the Company
nor any Subsidiary owns an equity interest in any entity treated as a
partnership for federal income tax purposes. Neither the Company nor any
Subsidiary has ever been a member of an affiliated group that files or filed
consolidated federal income tax returns other than the affiliated group of which
the Company is the common parent.
(c) Neither the Company nor any Subsidiary has made, or is
obligated to make, any "excess parachute payment" within the meaning of Section
280G of the Code.
2.9. Absence of Undisclosed or Contingent Liabilities. Except as set
forth on Schedule 2.9 hereto and except as (and to the extent) accrued for in
the interim balance sheet, as of the date (the "Interim Balance Sheet Date") of
the balance sheet included in the Interim Financial Statements (the "Interim
Balance Sheet"), neither the Company nor any Subsidiary had any liability or
obligation, other than (i) executory obligations under contracts and other
contractual or employment arrangements not requiring disclosure in the Interim
Balance Sheet under GAAP and incurred in the ordinary course of business
consistent with past practice and (ii) liabilities and obligations arising from
normal year-end adjustments none of which, individually or in the aggregate,
would be material to the Company's financial position as reflected in the
Interim Financial Statements. Since the Interim Balance Sheet Date, neither the
Company nor any Subsidiary has become subject to any such liability or
obligation, other than (a) liabilities and obligations incurred in the ordinary
course of business consistent with past practice of a type reflected on the
Interim Balance Sheet which are not in an amount materially in excess of the
liabilities and obligations accrued for in the Interim Balance Sheet Date, (b)
executory obligations under contracts and other contractual or employment
arrangements not requiring disclosure in the Interim Balance Sheet under GAAP
and incurred in the ordinary course of business consistent with past practice
(c) liabilities and obligations arising from normal year-end adjustments none of
which, individually or in the aggregate, would be material to the Company's
financial position as reflected in the Interim Financial Statements and (d)
liabilities and
18
obligations set forth on Schedule 2.9 hereto. Notwithstanding the foregoing, no
representations or warranties are given in this Section 2.9 with respect to
liabilities or obligations arising from environmental matters or conditions,
employee benefit plans or pursuant to ERISA, and Sections 2.12 and 2.20 shall
contain the only representations and warranties with respect to such items.
2.10. Property. (a) Except as set forth on Schedule 2.10(a) hereto,
the Company, or if so designated in Schedule 2.10(a), a Subsidiary, has (and
will continue to have immediately after the Closing) good and valid title to
all assets and properties the Company and the Subsidiaries purport to own
(other than the Real Property, as hereinafter defined), tangible and
intangible, in each case free and clear of any Liens, except for inventories
and other assets disposed of by the Company or any Subsidiary prior to the
Closing in the ordinary course of business consistent with past practice and
except for Liens for taxes not yet due and payable (collectively, the
"Personal Property").
(b) Except as set forth in Schedule 2.10(a) hereto, all of
the assets, tangible and intangible, used in the operation of the business of
the Company and the Subsidiaries as of the Interim Balance Sheet Date were
owned, leased or licensed by the Company and the Subsidiaries or, with respect
to intellectual property, in the public domain.
(c) Attached hereto as Schedule 2.10(c) is a list of (i) all
of the owned real property of the Company and the Subsidiaries (collectively,
the "Owned Real Property"), (ii) all leases, assignments of leases, subleases,
licenses, rights of use or occupancy and other written agreements pursuant to
which the Company or the Subsidiaries lease, sublease, use or occupy real
property (other than Job Sites (as defined below) used or occupied)
(collectively, the "Tenant Leases"), and (iii) all leases, assignments of
leases, subleases, rights of occupancy and other written agreements pursuant to
which the Company or any of the Subsidiaries lease, have assigned leasehold
estates, subleased or otherwise let to any person any Real Property (as
hereinafter defined) or any portion of or interest therein (the "Landlord
Leases"). The interests of the Company and the Subsidiaries in the Real Property
constitute the only interests in real property required to be owned by the
Company or the Subsidiaries in order that the Company and the Subsidiaries may
conduct their business as presently conducted, except for job sites owned or
leased by customers of either the Company or any of its Subsidiaries ("Job
Sites").
As used in this Agreement, the following terms have the following
meanings:
(i) "Exceptions That Will Not Exist At Closing"
means those matters disclosed on Schedules B which are also separately listed on
Schedule 2.10(d) under the heading Exceptions That Will Not Exist At Closing.
(ii) "Leased Real Property" means, collectively, all
the leasehold estates demised under the Tenant Leases.
(iii) "Leases" means, collectively, the Tenant
Leases and the Landlord Leases.
19
(iv) "Real Property" means, collectively, the Owned
Real Property and the Leased Real Property.
(v) "Schedules B" means, collectively, Schedule B to
each of the title insurance policies listed on Schedule 2.10(d), copies of which
schedules are attached hereto as Exhibit A to Schedule 2.10(d).
(d) Except as set forth on Schedule 2.10(d) hereto, the
Company or, if so designated in Schedule 2.10(d), a Subsidiary, has (and will
continue to have immediately after the Closing) good and marketable,
indefeasible fee simple title to the Owned Real Property free and clear of any
and all Liens and title defects, except for (x) matters listed on Schedules B,
(y) minor imperfections of title, conditions, encroachments, easements,
covenants or restrictions, if any, none of which is substantial in amount and
none of which, individually or in the aggregate, materially detracts from the
value of the affected property or impairs the use of the affected property in
the manner such property is currently being used or impairs the conduct of the
Company's or any Subsidiary's business, and (z) Liens for real estate Taxes and
assessments not yet delinquent (all of the items described in (x), (y) and (z),
collectively, the "Permitted Fee Property Exceptions").
(e) On and as of the Closing Date, all of the Real Property
shall be free and clear of and none of the Real Property shall be subject to any
of the Exceptions That Will Not Exist At Closing.
(f) Except as set forth on Schedule 2.10(f) hereto, the
Company or, if so designated in Schedule 2.10(f), a Subsidiary, has (and will
continue to have immediately after the Closing) good and valid (i) title to the
leasehold estates conveyed under the Leases (the "Leasehold Estates"), and (ii)
leasehold title to the Leased Real Property free and clear of any Liens and
title defects, except for (x) matters set forth on Schedule 2.10(f), (y) minor
imperfections of title, conditions, encroachments, easements, covenants or
restrictions, if any, none of which is substantial in amount and none of which,
individually or in the aggregate, materially detracts from the value of the
affected property or impairs the use of the affected property in the manner such
property is currently being used or impairs the conduct of the Company's or any
Subsidiary's business, and (z) Liens for real estate Taxes and assessments not
yet delinquent (all of the items described in (x), (y) and (z), collectively,
the "Permitted Leasehold Property Exceptions," and together with the Permitted
Fee Property Exceptions, the "Permitted Exceptions"). Nothing in this
representation and warranty shall be deemed a representation or warranty with
respect to the fee interests encumbered by any of the Tenant Leases.
(g) The Company has delivered to Newco complete and correct
copies of all existing title insurance policies in the Company's or any
Subsidiary's possession and all surveys possessed by the Company or a Subsidiary
with respect to any of the Real Property.
(h) Except as set forth in Schedule 2.10(h), the Company is
in actual, exclusive possession of all of the Real Property, other than Real
Property that is the subject of a Landlord Lease, if any. Except as set forth in
Schedule 2.10(h), the basic rent and all additional
20
rent payable under the Leases have been paid to date and not more than one month
in advance. All tenant improvement work and all other work required to be
performed under any of the Leases by the landlords thereunder or by the Company
or any Subsidiary has been performed, and, to the extent that the Company or a
Subsidiary is responsible for payment of such work, has been fully paid for,
whether directly to the contractor performing such work or to such landlord as
reimbursement therefor, except for items which the Company or any Subsidiary is
disputing in good faith (which items are fully reserved for in the Interim
Balance Sheet. Except as set forth on Schedule 2.10(h), there are no brokerage
commissions or finder's fees due from any Seller or the Company or any
Subsidiary which are unpaid with regard to any of the Leases or which will
become due at any time in the future with regard to the Leases.
(i) Except as set forth on Schedule 2.10(i) hereto, there
have been no casualties which are reasonably likely to result in the termination
of any of the Leases or the exercise of any buy-out provision contained in any
of the Leases relative to damage by casualty.
(j) To the Company's knowledge, there is not currently (i)
any pending or threatened condemnation action, eminent domain proceeding or
other litigation, action or proceeding concerning any of the Real Property, or
(ii) any pending or threatened investigation by any governmental authority which
relates to the ownership, maintenance, use or operation of any of the Real
Property. The Sellers have caused the Company and the Subsidiaries to deliver to
Newco complete and correct copies of all written notices and other
correspondence received by the Company or any Subsidiary within the past two (2)
years with respect to any of the matters set forth in the immediately preceding
clauses (i) and (ii). All of the buildings and other improvements upon the Real
Property are operational and do not require material repair and are in a state
of repair suitable for the continued operation of the business conducted thereon
without material repair. The water, gas, electricity and other utilities serving
each parcel of the Real Property are currently adequate to service the normal
operation by the Company or its Subsidiary, as the case may be, of such parcel
as currently conducted. Each parcel of the Real Property has physical access to
public right of ways sufficient for the conduct of the business as presently
conducted on such parcel.
(k) None of the matters listed on Schedule 2.10(k),
individually or in the aggregate: (i) materially impairs, or grants rights which
if exercised would materially impair the use of the affected property,
including, without limitation, any improvements thereon, in the manner such
property is currently being used, or (2) materially adversely affects or grants
rights which if exercised would materially adversely affect the operations of
the Company and the Subsidiaries or the results thereof, in either case taken as
a whole.
2.11. Insurance. Attached hereto as Schedule 2.11(a) is a list of the
insurance with respect to the business carried on by the Company and its
Subsidiaries. Such insurance is in effect and will be kept in effect up to the
Closing. Except as set forth on Schedule 2.11(a), (i) all of the Company's
liability insurance policies are on an "occurrence," as opposed to "claims
made," basis, (ii) none of the premiums under such policies are subject to
retroactive adjustment as a result of loss experience under such policies, and
(iii) the coverage provided by the Company's liability insurance policies for
any injuries or offenses that have occurred prior to the Closing will not in any
way be affected by, or terminate or lapse by reason of, the transactions
21
contemplated hereby. Attached hereto as Schedule 2.11(b) are true and complete
lists of all open surety, bonding or similar arrangements for the Company or any
Subsidiary, prepared by the Company's brokers of surety and bonding
arrangements.
2.12. Environmental Matters. (a) Except as set forth in Schedule
2.12(a), neither the Company nor any of its Subsidiaries has received from
any governmental authority or other person any requests for information,
notices of claim, complaint, order, assessment, demand or other written
notification that the Company or any of its Subsidiaries are, may be or will
be potentially responsible with respect to any investigation, clean-up or
other liabilities or responsibilities arising from or related to the
presence, Release or threat of Release of Hazardous Substances at any sites,
and to the knowledge of the Company, the Sellers have received no such
notice, nor does the Company have knowledge of any legitimate basis upon
which such request, notice, demand or claim would be sent.
(b) Except as set forth in Schedule 2.12(b), to the knowledge
of the Company, no Hazardous Substances have been Managed or Released or
threatened to be Released at, on, about, under, from or onto any Real Property
now owned, operated or leased by the Company or any Subsidiary or in connection
with the conduct of the business of the Company and the Subsidiaries (as
presently conducted) at such Real Property, except for such Management or
Releases the consequences of which could not reasonably be expected to have a
Material Adverse Effect.
(c) Except as set forth in Schedule 2.12(c), no Real Property
owned or leased by the Company or any Subsidiary contains underground tanks,
active or abandoned. Except as set forth on Schedule 2.12(c), none of the
foregoing is required to be upgraded, retrofitted or replaced within the next
one (1) year pursuant to 40 CFR Part 280 or under any analogous state or local
Environmental Laws regulating underground storage tanks.
(d) The Company and each Subsidiary have obtained all
Environmental Permits, all such Environmental Permits are in full force and
effect and the Company and each Subsidiary are in compliance with all terms and
conditions of the Environmental Permits except where the failure to so obtain or
comply could not reasonably be expected to have a Material Adverse Effect. The
Company and each Subsidiary have made or will make before the Closing timely
application for renewals of all such Environmental Permits for which
Environmental Laws require that applications must be filed on or before the
Closing to maintain the Environmental Permits in full force and effect. If any
Environmental Permits are required to be transferred, or any notifications are
required to be made so that the Surviving Corporation can operate the Company
and its Subsidiaries after the Closing in the manner they were operated prior to
Closing, the Company and the Subsidiaries will prepare and file all required
applications therefor. BRS and Newco shall use their reasonable efforts to
cooperate with the Company and the Subsidiaries as to the foregoing.
(e) Each of the Company and its Subsidiaries and the
operations of its businesses are in compliance with all Environmental Laws
except where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect.
22
(f) As used herein, "CERCLA" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended.
"Environmental Laws" means the common law and all applicable federal, state and
local laws relating to pollution or protection of human health or the
environment including, laws, statutes, ordinances, rules, regulations, orders,
codes and notices as adopted or issued as of the date of this Agreement relating
to the Management or Release or threatened Release of Hazardous Substances into
the environment (including without limitation ambient air, surface water, ground
water, land surface or subsurface strata). "Environmental Permits" means all
permits, approvals, certificates, registrations, licenses and other
authorizations which are required under Environmental Laws. "Hazardous
Substance" means any hazardous or toxic substance or waste, pollutant or
contaminant including petroleum products, asbestos, PCBs and radioactive
materials. "Management" (and its correlative terms) means the generation,
possession, manufacture, processing, distribution, use, treatment, storage,
disposal, transport, recycling or handling of Hazardous Substances. "Release"
means any spill, leak, discharge, disposal, pumping, pouring, emitting,
emptying, injecting, leaching, dumping or allowing to escape or presence of any
Hazardous Substance.
2.13. Intellectual Property. (a) Attached hereto as Schedule 2.13
is a correct list of all material trademarks, service marks, and
registrations and applications for trademarks, service marks and trade names,
copyrights registrations, and patents and patent applications owned or used
by the Company or a Subsidiary, and all licenses pertaining thereto. The
items listed in Schedule 2.13, together with any material trade secrets
(including without limitation, proprietary inventions, technology, know-how,
customer or product information, designs, and technical information to the
extent they are trade secrets) owned or used by the Company or any Subsidiary
are referred to as the "Intellectual Property". All of the trademarks,
service marks and trade names listed in Schedule 2.13 are currently being
used by the Company or a Subsidiary in its business except as otherwise
explicitly indicated in such Schedule. Except as set forth on Schedule 2.13
hereto, to the Company's knowledge, the Company and the Subsidiaries have
adequate and sufficient rights, whether registered or unregistered, to use
such Intellectual Property as currently used in their respective businesses,
free and clear of any Lien or competing rights or interests of others which
would preclude or otherwise impair the use by the Company or any Subsidiary,
as the case may be.
(b) The Company or a Subsidiary solely and exclusively owns
all right, title and interest in and to the Intellectual Property, except as set
forth on Schedule 2.13. The operation of the Company's and its Subsidiaries'
business does not, to the Company's knowledge, infringe on the patents,
trademarks, service marks, trade names, trade dress, copyrights, trade secrets
or other intellectual property rights of any third party. Except as set forth on
Schedule 2.13, to the Company's knowledge, no claims have been asserted by any
person in respect of the use of any Intellectual Property by the Company or a
Subsidiary.
(c) Except as set forth on Schedule 2.13, all of the patents,
trademark and service mark registrations, and copyright registrations listed on
Schedule 2.13 are valid and in full force, are held of record in the name of the
Company or a Subsidiary, are not, to the Company's knowledge, the subject of any
cancellation, reexamination opposition, extension of time to oppose,
interference, rejection, refusal to register or any other proceeding challenging
their extent or validity. With respect to the Intellectual Property, the Company
or a Subsidiary is
23
the assignee in all patent applications, and the Company or a Subsidiary is the
applicant of record for all applications for trademark, service mark, and
copyright registration. No patents are held in the names of individual
inventors. No order, holding, decision or judgment has been rendered by any
governmental authority, and no agreement, consent or stipulation exists, which
would limit the Company's or any Subsidiary's use of any Intellectual Property
or any advertising or promotional claim or campaign. Except as set forth on
Schedule 2.13, to the Company's knowledge, neither the Company nor its
Subsidiaries have given any indemnification against infringement of patent,
trademark, copyright or other intellectual property rights as to any equipment,
materials, products, services or supplies.
(d) Other than as set forth on Schedule 2.13, neither the
Company nor any Subsidiary has asserted any claim of infringement, dilution,
unfair competition, misappropriation or misuse against any person with respect
to the Intellectual Property within the past three years. To the Company's
knowledge, no person is infringing, diluting, unfairly competing with or
misappropriating the rights of the Company or any Subsidiary with respect to the
Intellectual Property.
2.14. Permits. Except as set forth on Schedule 2.14 and except
where the Company's failure to own a Permit could not reasonably be expected
to have a Material Adverse Effect, the Company has obtained all certificates,
permits, franchises, licenses and authorizations ("Permits") required for the
operation of the Company's business as currently conducted by any
governmental or quasi-governmental authority having jurisdiction over the
Company, its properties or business or the Subsidiaries or their properties
or business. All such Permits are in full force and effect. The Company or
any Subsidiary is not in default (or non-compliance) under any Permit, except
where a default could not reasonably be expected to have a Material Adverse
Effect. No modification, suspension or cancellation of any Permit, or any
proceeding relating thereto, is pending or, to the knowledge of the Company,
threatened with respect to any Permit. No written notice has been received by
the Company or the Subsidiaries with respect to any failure by the Company or
any Subsidiary to have any Permit nor of any asserted present or past failure
by the Company or any Subsidiary to comply with any Permit or its terms, in
each case, where such failure could reasonably be expected to have a Material
Adverse Effect.
2.15. Compliance with Laws. Except as set forth in Schedule 2.15
hereto, the operations of the Company and each of its Subsidiaries have been
conducted in compliance in all material respects with applicable laws,
regulations and other requirements of all Authorities having jurisdiction
over the Company or any Subsidiary or any of their respective businesses or
operations, including without limitation such laws, regulations and
requirements relating to employment and employment practices, terms and
conditions of employment and wages and hours, rental of vehicles, machinery
and equipment, contracting and subcontracting, antitrust, consumer
protection, immigration, health, occupational safety and health, plant
closing, pension, building, zoning, subdivision matters, and securities,
except in each case where a failure to comply could not reasonably be
expected to have a Material Adverse Effect and except for laws, regulations
or requirements relating to Hazardous Substances. During the past three
years, neither the Company nor any Subsidiary has received any notification
of any asserted present or past failure by the Company or any Subsidiary to
comply with any laws, rules or regulations, except where an asserted present
or past failure to comply could not reasonably be expected to
24
have a Material Adverse Effect and except for laws, regulations or
requirements relating to Hazardous Substances.
2.16. Labor Matters. (a) Except as set forth in Schedule 2.16, (i)
neither the Company nor any Subsidiary is party to or bound by any agreement
with any labor organization, including any collective bargaining or similar
agreement ("Labor Agreement"), (ii) there is no labor strike, dispute,
slowdown or stoppage pending or, to the knowledge of the Company, threatened
against or affecting the Company or any Subsidiary, and (iii) neither the
Company nor any Subsidiary has experienced any material work stoppage,
strike, slowdown, or union organizational efforts since January 1, 1995. The
Company has delivered all Labor Agreements of the Company and its
Subsidiaries to BRS.
(b) Except as set forth in Schedule 2.16, neither the Company
nor any Subsidiary has had asserted against it any worker's compensation claim
which could reasonably be expected to have a Material Adverse Effect.
2.17. Absence of Changes. Except as and to the extent set forth on
Schedule 2.17, since June 30 1997, there has not been any Material Adverse
Effect or any change or occurrence which could reasonably be expected to have
a Material Adverse Effect. Without limiting the foregoing, except as and to
the extent set forth in Schedule 2.17 or pursuant to the transactions set
forth in Article I or the covenants set forth in Article V, since June 30,
1997 to the date of this Agreement, neither the Company nor any Subsidiary
has:
(a) Increased, or experienced any change in any assumptions
underlying or methods of calculating, any bad debt, contingency, tax or other
reserves or changed its accounting practices, methods or assumptions (including
changes in estimates or valuation methods);
(b) Changed the manner or timing of collecting accounts
receivable or satisfying accounts payable;
(c) Entered into any lease or sublease of real property or
assignment of any leasehold estate or exercised any purchase options or rights
of first refusal contained in any of the Leases, or terminated, surrendered,
cancelled or assigned any of its properties demised under the Leases, or any
part thereof;
(d) Permitted or allowed any of its Owned Real Property or
Leased Real Property, or assets (real, personal or mixed, tangible or
intangible) to be subjected to any Lien, except for Permitted Exceptions;
(e) Executed or consummated any contract or agreement for the
purchase or sale of any real property or otherwise purchased or conveyed any
real property or any interest therein;
(f) Written down the value of any assets except in accordance
with the Company's historical depreciation policy as reflected in the Audited
Financial Statements,
25
consistently applied in accordance with past practice (including write-downs by
reason of shrinkage or mark-down);
(g) Cancelled any debts or waived any claims or rights
involving more than $50,000;
(h) Sold, transferred, or otherwise disposed of any of its
Owned Real Property, or any interest therein, or its other properties or assets
(real, personal or mixed, tangible or intangible), except for (i) inventory (and
dispositions of used equipment previously held for rental or for use in the
Company's subcontracting businesses) in the ordinary course of business
consistent with past practice, (ii) dispositions of excess, unnecessary or
obsolete furniture, fixtures and equipment which are not material in the
aggregate, or (iii) asset dispositions for consideration of less than $100,000
in the aggregate;
(i) Granted any increase in the compensation of officers or
employees (including any such increase pursuant to any bonus, pension, profit
sharing or other plan or commitment) or any increases in the compensation
payable or to become payable to any officer or employee, except for normal
increases granted in the ordinary course of business consistent with past
practices, or entered into or amended any employment, consulting or similar
agreement or made any agreement or commitment to pay any severance or similar
compensation;
(j) Made any single capital expenditure or commitment in
excess of $50,000 for additions to property, plant, equipment or intangible
capital assets or made aggregate capital expenditures and commitments in excess
of $100,000 for additions to property, plant, equipment or intangible capital
assets;
(k) Made any distribution, in cash or otherwise, to any
Seller (except for payments of salaries and bonuses to officers and employees
consistent with the terms of existing employment agreements or arrangements and
past practice and loans or payments prior to June 30, 1998 in respect of vesting
of restricted stock in 1997 and the exercise of options), or declared, paid or
set aside for payment any dividend or other distribution in respect of its
capital stock or redeemed, purchased or otherwise acquired, or offered, sold or
issued, directly or indirectly, any shares of capital stock or other securities
of the Company (including options, warrants or rights to acquire securities), or
merged or consolidated with any person or effected any share exchange,
reclassification or subdivision of any of its capital stock or adopted any plan
of liquidation or dissolution or other reorganization, or acquired the stock,
assets or business of any other person;
(l) Paid, distributed, loaned or advanced any amount to, or
sold, transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement with
any Seller, any affiliate of a Seller, officers or directors of either the
Company or any Subsidiary, or any affiliate or "associate" (as defined in Rule
405 under the Securities Act) of any officers or directors of either the Company
or any Subsidiary (except in each case for payments of salaries and bonuses to
officers and employees consistent with the terms of existing employment
agreements or arrangements and past practice and loans or payments prior to June
30, 1998 in respect of vesting of restricted stock in 1997 and the exercise of
options);
26
(m) Made or revoked any election for Tax purposes (or had any
election made or revoked on its behalf) or changed a method of accounting for
Tax purposes; or
(n) Agreed, whether in writing or otherwise, to take any
action described in this Section.
2.18. Transactions with Affiliates. Except as set forth on
Schedule 2.18 hereto, neither any Seller nor (to the Company's knowledge) any
affiliate, as defined in Rule 405 under the Securities Act ("affiliate"), of
a Seller (other than the Company and the Subsidiaries) nor any of the
Company's officers, directors or employees or (to the Company's knowledge)
any of their associates, has any interest, directly or indirectly, in any
lease, Lien, contract, license, loan or other agreement or commitment to
which the Company or any Subsidiary is a party, or any property or asset used
or owned by, or any interest in any supplier or customer of, the Company or
any Subsidiary. Except as set forth on Schedule 2.18 hereto, neither the
Company nor any Subsidiary is indebted, directly or indirectly, to (a) any
Seller or (to the Company's knowledge) any affiliate of a Seller or (b) any
officer, director or employee of the Company or any Subsidiary for any
liability or obligation, whether arising by reason of stock ownership, oral
or written agreement or understanding or otherwise. Schedule 2.18 is a
complete and accurate list of all employees of the Company and each
Subsidiary owing more than $2,000 (except in respect of advances for business
expenses, none of which exceeds $5,000 or $50,000 in the aggregate) in
principal to the Company or any Subsidiary, setting forth the amounts owed,
the applicable interest rates, a description of the security and the maturity
dates of all such debts.
2.19. Contracts and Commitments. Schedule 2.19 hereto contains a
complete, current and correct list of all material contracts, commitments,
obligations or agreements of each of the Company and the Subsidiaries, and
all amendments thereto, whether written or oral, including the Leases (the
"Contracts"). For purposes of this Section 2.19 a contract which is
"material" shall include any single contract, whether written or oral:
(a) where any party thereto is obligated to make annual
payments aggregating more than $200,000;
(b) which constitutes a consulting or similar agreement
having a term greater than twelve (12) months or which constitutes an employment
agreement or an agreement which calls for severance payments;
(c) where any party thereto is obligated to make annual
payments aggregating more than $100,000 and either (i) the term of such contract
will not expire of its own accord within twelve (12) months of the date hereof,
or (ii) such contract is not subject to cancellation by the Company or a
Subsidiary, as the case may be, on not more than thirty (30) days notice without
material penalty;
(d) which constitutes an agreement by the Company or any
Subsidiary to pay a former employee compensation (including any bonus but
excluding any benefits made available to Company employees generally) at the
annual rate of more than $50,000;
27
(e) which constitutes an agreement that restricts the Company
or any Subsidiary from carrying out its business anywhere in the world or from
competing with any other person or which is a confidentiality or non-disclosure
agreement restrictive of the Company;
(f) which constitutes an agreement by the Company or any
Subsidiary with any affiliate (other than the Company or any Subsidiary);
(g) which constitutes a franchising, partnership, joint
venture or similar agreement;
(h) which is a lease, purchase and sale agreement,
subordination, nondisturbance and attornment agreement or other agreement
relating to real property, including the Leases and any and all subordination,
nondisturbance and attornment agreements or similar agreements relating to any
of the Leases or to any of the Real Property;
(i) which relates to indebtedness or indemnification or any
guarantee of the Company or a Subsidiary (including any letter of credit) or
which grants any Lien on any assets, rights or properties of the Company or a
Subsidiary, or which is a tax sharing or similar agreement;
(j) which deals with any environmental investigations,
remediations or similar matters;
(k) which deals with any bonding or surety agencies or
relates to bonding capacity;
(l) which is a license or similar agreement for Intellectual
Property, whether as licensee or licensor; and
(m) where the consequences of a breach or default thereunder,
or the termination, expiration or cancellation thereof, could reasonably be
expected to result in a Material Adverse Effect.
True, correct and complete copies of all written Contracts described in Schedule
2.19 have been delivered to Newco, together with a complete written description
of any oral Contract. Each of the Contracts is in full force and effect and
constitutes the legal, valid, binding and enforceable obligations of the Company
or Subsidiary, as applicable, and, to the Company's knowledge, the other parties
thereto in accordance with its terms. Except as set forth on Schedule 2.19 and
except for breaches or defaults that could not reasonably be expected to have a
Material Adverse Effect, neither the Company nor any Subsidiary is in default
under or has breached any of the Contracts and no act or omission has occurred
which, with notice or lapse of time or both, would constitute a breach or
default under any term or provision of any such Contract. To the knowledge of
the Company, no other party is in breach or default under any of such Contracts,
and no act or omission has occurred by any other party thereto which, with
notice or lapse of time or both, would constitute such a breach or default under
any term or provision thereof. Subject to receipt of the consents set forth in
Schedule 2.4, the Contracts will remain in full force and effect (without any
breach or
28
default or modification thereunder, or event which could give rise to breach,
default or modification) for the benefit of the Company, the Subsidiaries and
the Surviving Corporation following the Closing.
2.20. Benefit Plans. (a) Set forth on Schedule 2.20(a) is a true
and complete list of each (i) "employee benefit plan," as defined in Section
3(3) of ERISA (including any "multiemployer plan" as defined in Section 3(37)
of ERISA (a "Multiemployer Plan")), (ii) other pension, retirement,
supplemental retirement, deferred compensation, excess benefit, profit
sharing, bonus, incentive, stock purchase, stock ownership, stock option,
stock appreciation right, employment, severance, salary continuation,
termination, change-of-control, health, life, disability, group insurance,
vacation, holiday and fringe benefit plan, program, contract, or arrangement
maintained, contributed to, or required to be contributed to, by the Company
or any ERISA Affiliate for the benefit of any employee, former employee,
director, officer or independent contractor of the Company or a Subsidiary or
under which the Company or any ERISA Affiliate has any liability with respect
to any employee, former employee, director, officer or independent contractor
of the Company or Subsidiary (the "Benefit Plans").
(b) As applicable with respect to each Benefit Plan (other
than a Multiemployer Plan), the Company has made available to Newco true and
complete copies of (i) each Benefit Plan, including all amendments thereto, and
in the case of an unwritten Benefit Plan, a written description thereof, (ii)
all trust documents, investment management contracts, custodial agreements and
insurance contracts relating thereto, (iii) the current summary plan description
and each summary of material modifications thereto, (iv) the three most recent
annual reports (Form 5500 and all schedules thereto) filed with the Internal
Revenue Service ("IRS"), (v) the most recent IRS determination letter and each
currently pending application to the IRS for a determination letter, (vi) the
three most recent summary annual reports, actuarial reports, financial
statements and trustee reports and (vii) all records, notices and filings
concerning IRS or Department of Labor audits or investigations, "prohibited
transactions" within the meaning of Section 406 of ERISA or Section 4975 of the
Code and "reportable events" within the meaning of Section 4043 of ERISA. The
Company has made a written request to the sponsoring union of each Multiemployer
Plan for true and complete copies of the three most recent annual reports (Form
5500 and all schedules thereto) filed with the IRS, and statements or
computations regarding potential withdrawal liability, if any. The Company made
available to Newco true and complete copies of such information and
documentation outlined in the previous sentence with respect to such
Multiemployer Plans that the Company has in its possession on or prior to the
date hereof and the Closing Date, as applicable.
(c) Except as otherwise disclosed with particularity on
Schedule 2.20(c):
(i) There has been no failure by the Company or any
ERISA Affiliate to comply with the provisions of ERISA and the Code applicable
to the Benefit Plans (other than a Multiemployer Plan), which failure could
reasonably be expected to have a Material Adverse Effect. There has been no
failure by any Benefit Plan (other than a Multiemployer Plan) to be maintained,
operated and administered in compliance with its terms and any related documents
or agreements and the applicable provisions of ERISA and the Code, which failure
could reasonably be expected to have a Material Adverse Effect.
29
(ii) There has been no failure by any Benefit Plans
(other than a Multiemployer Plan) which are "employee pension benefit plans"
within the meaning of Section 3(2) of ERISA and which are intended to meet the
qualification requirements of Section 401(a) of the Code (each a "Pension Plan")
to meet the requirements for such qualification or by their related trusts to
meet the requirements for exemption from taxation under Section 501(a) of the
Code, which failure could reasonably be expected to have a Material Adverse
Effect.
(iii) All Pension Plans (other than a Multiemployer
Plan) have received determination letters from the IRS to the effect that such
Pension Plans are qualified and their related trusts are exempt from federal
income taxes and no determination letter with respect to any Pension Plan has
been revoked nor, to the knowledge of the Company is there any reason for such
revocation, nor has any Pension Plan been amended since the date of its most
recent determination letter in any respect which would adversely affect its
qualification.
(iv) No Benefit Plan (other than a Multiemployer
Plan) is now or at any time has been subject to Part 3, Subtitle B of Title I of
ERISA or Title IV of ERISA. All contributions to, and payments from, any Benefit
Plan which may have been required in accordance with the terms of such Benefit
Plan or any related document have been timely made. All such contributions to,
and payments from, any Benefit Plan, except those to be made from a trust,
qualified under Section 401(a) of the Code, for any period ending before the
Closing Date that are not yet, but will be, required, are properly accrued and
reflected on the Interim Balance Sheet.
(v) Neither the Company nor any ERISA Affiliate has
ever contributed to, or been required to contribute to any Multiemployer Plan .
Neither the Company nor any ERISA Affiliate has any liability (contingent or
otherwise) relating to the withdrawal or partial withdrawal from a Multiemployer
Plan. All required contributions, withdrawal liability payments or other
payments of any type that the Company or any ERISA Affiliate have been obligated
to make to any Multiemployer Plan have been duly and timely made. Any withdrawal
liability incurred with respect to any Multiemployer Plan has been fully paid as
of the date hereof. Neither the Company nor any ERISA affiliate has undertaken
any course of action that could reasonably be expected to lead to a complete or
partial withdrawal from any Multiemployer Plan. To the knowledge of the Company,
no Multiemployer Plan is in "reorganization" within the meaning of Section 4241
of ERISA nor has notice been received by the Company or any ERISA Affiliate that
any such Multiemployer Plan will be placed in "reorganization."
(vi) To the knowledge of the Company, there are no
pending audits or investigations by any governmental agency involving the
Benefit Plans, and no threatened or pending claims (except for individual claims
for benefits payable in the normal operation of the Benefit Plans), suits or
proceedings involving any Benefit Plan, any fiduciary thereof or service
provider thereto, nor to the knowledge of the Company is there any basis for any
such claim, suit or proceeding.
(vii) Neither the Company, any ERISA Affiliate, nor
to the knowledge of the Company, any fiduciary, trustee or administrator of any
Benefit Plan, has engaged in or, in
30
connection with the transactions contemplated by this Agreement, will engage in
any transaction with respect to any Benefit Plan which would subject any such
Benefit Plan, the Company, any ERISA Affiliate, Newco or the Surviving
Corporation to a tax, penalty or liability for a "prohibited transaction" under
Section 406 of ERISA or Section 4975 of the Code. None of the assets of any
Benefit Plan (other than a Multiemployer Plan) is invested in any property
constituting "employer real property" or an "employer security," within the
meaning of Section 407 of ERISA.
(viii) All insurance premiums with respect to any
insurance policy related to a Benefit Plan (other than a Multiemployer Plan) for
any period up to and including the Closing Date shall have been paid, or accrued
and booked on or before the Closing Date, and, with respect to any such
insurance policy or premium payment obligation, neither the Company nor any
ERISA Affiliate shall be subject to a retroactive rate adjustment, loss sharing
arrangement or other actual or contingent liability.
(ix) There has been no failure by any Benefit Plan
that is a "group health plan" within the meaning of Section 607 of ERISA and
that is subject to Section 4980B of the Code to comply with the continuation
coverage requirements of the Code and ERISA, which failure could reasonably be
expected to have a Material Adverse Effect.
(x) No Benefit Plan provides benefits, including,
without limitation, death or medical benefits, beyond termination of service or
retirement other than (A) coverage mandated by law, (B) death or retirement
benefits under a Benefit Plan qualified under Section 401(a) of the Code or (C)
coverage mandated by the terms of any collective bargaining agreement; provided,
however, that neither the Company nor any ERISA Affiliate will be required,
whether pursuant to the terms of any collective bargaining agreement or
otherwise, to make any contributions or payments to the applicable health or
welfare plan or fund with respect to any period after the termination of the
collective bargaining relationship between the applicable union and the Company
or any ERISA Affiliate. Neither the Company nor any ERISA Affiliate has made a
written or oral representation to any current or former employee promising or
guaranteeing any employer paid continuation of medical, dental, life or
disability coverage for any period of time beyond retirement or termination of
employment.
(xi) The Sellers' and the Company's execution of,
and performance of the transactions contemplated by, this Agreement will not
constitute an event under any Benefit Plan that will result in any payment
(whether as severance pay or otherwise), acceleration, vesting or increase in
benefits with respect to any employee.
(xii) All of the employees whose primary
responsibility relate to the business of the Company and the Subsidiaries are
employed by the Company and the Subsidiaries and no such individual is employed
by any other ERISA Affiliate.
(d) As used herein, the capitalized terms below have the
following meanings:
(i) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
31
(ii) "ERISA Affiliate" means (i) any corporation
included with the Company in a controlled group of corporations within the
meaning of Section 414(b) of the Code; (ii) any trade or business (whether or
not incorporated) which is under common control with the Company within the
meaning of Section 414(c) of the Code; (iii) any member of an affiliated service
group of which the Company is a member within the meaning of Section 414(m) of
the Code; or (iv) any other person or entity treated as an affiliate of the
Company under Section 414(o) of the Code.
2.21. Absence of Questionable Payments. Neither the Company nor
any Subsidiary, nor, to the knowledge of the Company, any of their respective
directors, officers, agents, employees or other person acting on their
behalf, has used any corporate or other funds for unlawful contributions,
payments, gifts, or entertainment, or made any unlawful expenditures relating
to political activity to government officials or others or established or
maintained any unlawful or unrecorded funds. Neither the Company nor any
Subsidiary, nor, to the knowledge of the Company, any of their respective
directors, officers, agents, employee or other persons acting on their
behalf, has accepted or received any unlawful contributions, payments, gifts,
or expenditures.
2.22. Books and Records. The Company has maintained complete,
current and correct copies of: (a) the Articles of Incorporation and Bylaws
and other organizational documents of the Company and each of its
Subsidiaries and all amendments thereto; (b) the stock records of the Company
and each Subsidiary; and (c) the minutes and other records of the meetings
and other proceedings of the stockholders and directors of the Company and
each Subsidiary.
2.23. Disclosure. No representation or warranty made by the
Sellers or the Company in this Agreement or any disclosure schedule or
certificate or other agreement delivered hereunder contains any untrue
statement of a material fact or omits any material fact necessary to make the
statements contained herein or therein not misleading.
ARTICLE III
SEVERAL REPRESENTATIONS AND
WARRANTIES OF THE SELLERS
Each Seller hereby represents and warrants severally to BRS and Newco
as follows:
3.1. Ownership of Shares. (a) Except as set forth on Schedule 3.1(a) hereto, (i)
such Seller is the sole record and beneficial owner of the shares of Existing
Company Stock set forth opposite such Seller's name on Schedule 3.1(a) hereto,
free and clear of any Liens, and (ii) at and as of the Closing, such Seller will
be the sole record and beneficial owner of the shares of Class A Common Stock or
Class B Common Stock set forth opposite such Seller's name on Schedule 3.1(a)
hereto, free and clear of any Lien. Subject to the conditions set forth herein,
at the Closing, such Seller will transfer and deliver to BRS good and valid
title to the BRS Purchase Shares (if any) set forth opposite such Seller's name
on Schedule 3.1(a) hereto, free and clear of any Lien.
32
(b) Except pursuant to this Agreement or as set forth on
Schedule 3.1(b) hereto, neither such Seller nor any of its affiliates is a party
to, or bound by, any arrangement, agreement, instrument or order (i) relating to
the transfer of any capital stock or equity securities of the Company or any
Subsidiary, (ii) relating to the dividend or voting rights of any capital stock
or equity securities of the Company or any Subsidiary, or (iii) relating to
rights to registration under the Securities Act of any capital stock or equity
securities of the Company or any Subsidiary.
3.2. A uthorization; Binding Agreement. Such Seller has full
corporate, trust, limited liability company or partnership power and
authority (or, if such Seller is a natural person, individual capacity) to
execute and deliver this Agreement and each other document or instrument
contemplated hereby, to perform its obligations hereunder and thereunder, and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery by such Seller (if such Seller is a corporation or other entity)
of this Agreement and each other document or instrument executed or to be
executed by it in connection herewith, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate, trust, partnership or other
organizational action. This Agreement has been, and each other document or
instrument to be executed by such Seller in connection herewith will be, duly
executed and delivered by such Seller, and constitutes, or will constitute, a
legal, valid and binding obligation of such Seller, enforceable against such
Seller, in accordance with its terms.
3.3. Conflicts, Consents and Approvals. Except as set forth on
Schedule 3.3 hereto, the execution and delivery by such Seller of this
Agreement and any other documents or instruments contemplated hereby, the
performance by such Seller of its obligations hereunder and thereunder, and
the consummation by such Seller of the transactions contemplated hereby and
thereby, do not and will not:
(a) if such Seller is a corporation or other entity, violate
or conflict with or result in a breach of any provision of the Articles of
Incorporation or Bylaws (or similar documents) of such Seller, as such
instruments are currently in effect;
(b) subject to obtaining the consents and approvals specified
in Schedule 3.3, require any consent, approval or notice under, or conflict
with, or result in a violation or breach of, or constitute (with or without the
giving of notice or the lapse of time or both) a default (or give rise to any
right of termination, modification, cancellation or acceleration or result in
the creation or imposition of any Lien upon the property of such Seller, the
Company or a Subsidiary) under, any of the terms, conditions or provisions of
any (i) note, bond, mortgage, indenture, license, lease, agreement or other
document or instrument or obligation to which such Seller is a party, under or
pursuant to which any of its properties or assets are held, or by which any
portion of its properties or assets may be bound, or (ii) any permit, license,
approval, franchise or other governmental or regulatory authorization held or
used by or binding on such Seller;
33
(c) violate or contravene any law, statute, rule or
regulation, or any order, writ, judgment, injunction, decree, determination or
award currently in effect and applicable to such Seller; or
(d) other than in respect of the HSR Act (as defined in
Section 5.5), require any action, consent, approval or authorization of, or
review by, or declaration, registration or filing with, or notice to, any court,
arbitrator, governmental agency or other regulatory authority, or any stock
exchange or similar self-regulatory organization.
3.4. No Brokers or Finders. Except as contemplated by Section 10.5
with respect to the fees of William L. Rogers and his affiliates, such Seller
and its affiliates (excluding the Company and the other Sellers) (a) have not
employed (and will not employ) any broker or finder, and (b) have not
incurred (and will not incur) any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
by this Agreement.
3.5. Investment Intent. The shares of Penhall Class A Common
Stock, Penhall Class B Common Stock, Class A Common Stock, Class B Common
Stock, Common Stock or Series B Preferred Stock to be acquired by such Seller
pursuant to this Agreement are being acquired for such Seller's own account
and (except for Seller's BRS Purchase Shares) not with a view to or for sale
in connection with any distribution thereof. Each Seller acknowledges that
none of the Penhall Class A Common Stock, Penhall Class B Common Stock, Class
A Common Stock, Class B Common Stock, Common Stock or Series B Preferred
Stock has been registered under the Securities Act of 1933, as amended, or
any state securities laws, and that each certificate representing the Penhall
Class A Common Stock, Penhall Class B Common Stock, Class A Common Stock,
Class B Common Stock, Common Stock or Series B Preferred Stock shall bear a
legend setting forth or referring to the restrictions contained in this
Agreement and to such other restrictions as may be required by applicable law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BRS AND NEWCO
BRS and Newco hereby represent and warrant, jointly and severally, to
the Sellers as follows:
4.1. Organization. (a) Newco is a corporation duly incorporated, validly
existing, and in good standing under the laws of the jurisdiction of its
formation, and has all requisite power and authority to carry on its business
as it is now being conducted.
(b) BRS is a limited partnership duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
formation, and has all requisite power and authority to carry on its business as
it is now being conducted.
34
4.2. Authorization; Binding Agreement. (a) Newco has full corporate
power and authority to execute and deliver this Agreement and each other
document or instrument contemplated hereby, to perform its obligations hereunder
and thereunder, and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by Newco of this Agreement and each other
document or instrument executed or to be executed by it in connection herewith,
and the consummation of the transactions contemplated hereby and thereby, have
been duly and validly authorized by all necessary corporate action. This
Agreement has been, and each other document or instrument to be executed by
Newco in connection herewith will be, duly executed and delivered by Newco, and
constitutes, or will constitute, legal, valid and binding obligations of Newco,
enforceable against Newco in accordance with their terms.
(b) BRS has full partnership power and partnership authority
to execute and deliver this Agreement and each other document or instrument
contemplated hereby and to which it is party, to perform its obligations
hereunder and thereunder, and to consummate the transactions contemplated hereby
and thereby. The execution and delivery by BRS of this Agreement and each other
document or instrument executed or to be executed by it in connection herewith,
and the consummation of the transactions contemplated hereby and thereby, have
been duly and validly authorized by all necessary corporate or partnership
action. This Agreement has been, and each other document or instrument to be
executed by BRS in connection herewith will be, duly executed and delivered by
BRS, and constitutes, or will constitute, legal, valid and binding obligations
of BRS, enforceable against BRS in accordance with their terms .
4.3. Conflicts, Consents and Approvals. Except as set forth in
Schedule 4.3, the execution and delivery by Newco and BRS of this Agreement
and any other documents or instruments contemplated hereby, the performance
by Newco and BRS of their respective obligations hereunder and thereunder,
and the consummation by Newco and BRS of the transactions contemplated hereby
and thereby, do not and will not:
(a) violate or conflict with or result in a breach of any
provision of the Articles of Incorporation or Bylaws of Newco or the partnership
agreement of BRS;
(b) require any consent, approval or notice under, or
conflict with, or result in a violation or breach of, or constitute (with or
without the giving of notice or the lapse of time or both) a default (or give
rise to any right of termination, modification, cancellation or acceleration or
result in the creation or imposition of any Lien upon the property of Newco or
BRS) under, any of the terms, conditions or provisions of any (i) note, bond,
mortgage, indenture, license, agreement or other instrument or obligation to
which Newco or BRS is a party, under or pursuant to which any of their
respective properties or assets are held or by which any portion of their
respective properties or assets may be bound, or (ii) any permit, license,
approval, franchise or other governmental or regulatory authorization held or
used by or binding on Newco or BRS, except for conflicts, violations, breaches,
defaults or other events that could not reasonably be expected to have a
material adverse effect on the assets, liabilities, operations, business,
results of operations or condition (financial or otherwise) of Newco or BRS or
on the ability of Newco or BRS to consummate the transactions contemplated
hereby;
35
(c) violate or contravene any law, statute, rule or
regulation, or any order, writ, judgment, injunction, decree, determination or
award currently in effect; or
(d) require any action, consent, approval or authorization
of, or review by, or declaration, registration or filing with, or notice to, any
court, arbitrator, governmental agency or other regulatory authority.
4.4. Litigation. There is no claim, action, suit, investigation or
proceeding pending or, to the knowledge of Newco or BRS, threatened against
or involving Newco or BRS, or any of their respective properties or rights,
which, if adversely determined, could reasonably be expected to have a
material adverse effect on the ability of Newco or BRS to perform their
respective obligations hereunder.
4.5. Financing. Newco has received and delivered to the Company
true and correct copies of (i) letter(s) from Bankers Trust Corporation and
CS First Boston Corporation regarding high yield debt financing in the amount
of $100,000,000 and (ii) a letter from Bank of America regarding senior bank
financing in the amount of $60,000,000. The letters referred to in clauses
(i) and (ii) above are collectively referred to as the "Financing Letters."
The Financing Letters have been accepted by Newco and BRS and are in full
force and effect.
4.6. No Brokers or Finders. Except as set forth in Schedule 4.6,
neither Newco nor BRS, nor any of their respective affiliates, nor any of
their respective officers, directors, or employees, (a) has employed (or will
employ) any broker or finder, or (b) has incurred (or will incur) any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement.
4.7. Investment. BRS is acquiring the BRS Purchase Shares for its
own account and not with a view to any resale or distribution of such stock
in violation of the Securities Act of 1933, as amended, or any other
applicable laws of the United States or any state therein. By reason of BRS's
business or financial experience, it has the capacity to protect its
interests in connection with the transactions contemplated by this Agreement.
ARTICLE V
CERTAIN COVENANTS
5.1. Conduct of the Company's Business. (a) Except as contemplated by this
Agreement, during the period from the date of this Agreement to the Closing
Date, the Company and its Subsidiaries shall, and the Sellers shall cause the
Company and the Subsidiaries to, conduct the operations of the Company and the
Subsidiaries in the ordinary course of business and consistent with past
practice, and shall use commercially reasonable efforts to preserve intact their
business organization, keep available the services of their officers and key
employees, and maintain satisfactory relationships with material customers,
suppliers, contractors, distributors, licensors, licensees and others having
business relationships with the Company. During the period from the date of this
Agreement to the Closing Date, neither the Company, any Subsidiary nor any
Seller will take any action reasonably within their control, or omit to take any
action reasonably
36
within their control, which would cause any of the representations and
warranties in Article II and Article III hereof to become untrue in any material
respect.
(b) Without limiting the foregoing, during the period from the
date of this Agreement to the Closing Date, neither the Company nor any
Subsidiary shall, and the Sellers shall cause the Company and the Subsidiaries
not to, take any of the actions specified in Section 2.17 without the prior
written consent of Newco, except the Company and the Subsidiaries may consummate
the acquisition of HSI.
5.2. Notices Prior to Closing. (a) Prior to the Closing, the
Company shall give prompt notice to Newco of:
(i) any breach or default by the Company of any of
its representations, warranties, covenants or agreements hereunder or under any
document or instrument contemplated hereby;
(ii) any notice or other communication to the
Company from any third party alleging that the consent of such third party is or
may be required in connection with the transactions contemplated by this
Agreement;
(iii) any notice or other communication to the
Company from any Authority in connection with the transactions contemplated by
this Agreement;
(iv) any materially adverse change in the assets,
liabilities, operations, business, results of operations or financial condition
of the Company and its Subsidiaries, taken as a whole; and
(v) any claim, action, or proceeding against the
Company or a Subsidiary which could reasonably be expected to have a Material
Adverse Effect.
(b) Prior to the Closing, each Seller shall give prompt
notice to Newco of:
(i) any breach or default by such Seller or any of
such Sellers' representations or warranties set forth in Article III, or such
Seller's covenants or agreements hereunder or under any document or instrument
contemplated hereby;
(ii) any notice or other communication to such
Seller from any third party alleging that the consent of such third party is or
may be required in connection with the transactions contemplated by this
Agreement.
(iii) any notice or other communication to such
Seller from any Authority in connection with the transactions contemplated by
this Agreement; and
(iv) any claim, action, or proceeding against such
Seller which could reasonably be expected to have a Material Adverse Effect.
37
(c) Prior to the Closing, BRS and Newco shall give prompt
notice to the Sellers of:
(i) any breach or default by BRS or Newco of any of
its representations, warranties, covenants or agreements hereunder or under any
document or instrument contemplated hereby;
(ii) any notice or other communication to BRS or
Newco from any third party alleging that the consent of such third party is or
may be required in connection with the transactions contemplated by this
Agreement;
(iii) any notice or other communication to BRS or
Newco from any Authority in connection with the transactions contemplated by
this Agreement; and
(iv) any claim, action, or proceeding which could
reasonably be expected to materially adversely affect the ability of BRS or
Newco to consummate the transactions contemplated hereby.
5.3. Access and Information. Prior to the Closing Date, the
Company and the Subsidiaries will give Newco (and any lender providing
financing in connection with the transactions contemplated hereby) and their
authorized representatives (including without limitation accountants,
environmental auditors, surveyors and legal counsel) access at all reasonable
times during business hours, upon reasonable notice, to all of the offices,
warehouses and other facilities of the Company and the Subsidiaries, to all
contracts, agreements, commitments, books and records of the Company and the
Subsidiaries and to the officers and key employees (including auditors) of
the Company and the Subsidiaries.
5.4. Public Announcements. From the date of this Agreement until
Closing, BRS and Newco, on the one hand, and the Sellers, the Company and the
Subsidiaries, on the other hand, shall not, and shall cause their affiliates
not to, issue or cause the publication of any press release or any other
public announcements with respect to this Agreement or the transactions
contemplated hereby without the prior written consent of the other party,
except (subject to the other party's right to review and consult in the
formulation of the published material) as required by applicable law and as
is customary in connection with the transactions contemplated by the
Financing. The provisions of this Section 5.4 shall survive any termination
of this Agreement pursuant to Section 7.1.
5.5. Hart-Scott-Rodino Act. As soon as practicable after the date
of this Agreement, Newco, the Sellers and the Company, in cooperation with
each other, shall file (or cause to be filed) with each of the United States
Department of Justice ("DOJ") and the Federal Trade Commission ("FTC") any
reports or notifications that may be required to be filed by them under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), in connection with the transactions contemplated by this Agreement,
and shall use their respective reasonable best efforts to obtain early
termination of all waiting periods under the HSR Act. All fees due from any
party to the FTC or DOJ under the HSR Act in connection with the filing of
38
any of those reports or notifications shall be shared equally by the Company and
BRS (subject to Section 10.5 hereof).
5.6. Further Assurances. The Sellers, the Company and the
Subsidiaries, on the one hand, and BRS and Newco, on the other hand, agree
that subsequent to the Closing Date, at the request of the other party, they
will execute and deliver, or cause to be executed and delivered, to the other
party such further instruments and take such other reasonable actions as may
be necessary to carry out the transactions contemplated by this Agreement
(which, except as otherwise provided herein, shall not include any obligation
of any party to make payments or incur financial obligations).
5.7. Transfer of Certain Assets. (a) Prior to or simultaneous with
the Closing, the Company will transfer and assign to Roger C. Stull, without
representation, warranty or recourse, all of its right, title and interest in
and to (i) all of the shares of capital stock of The Wooditch Group held by
the Company (the "Wooditch Shares"), and (ii) the six automobiles identified
on Schedule 5.7 hereto. Roger C. Stull shall indemnify, defend and hold
harmless the Company Indemnified Parties (as hereafter defined) from and
against any and all Losses (as hereafter defined) in respect of (i) Taxes
attributable to the transfer of the Wooditch Shares and the automobiles
identified on Schedule 5.7 and (ii) the ownership and use of the automobiles
identified on Schedule 5.7 following such transfer.
(b) It is acknowledged that Roger C. Stull and Ann R. Stull
own the following life insurance policies, which are subject to split dollar
understandings and Assignments of Life Insurance Policies as Collateral with the
Company: (i) Northwestern Mutual, Nos. 7228156, 7494474 and 9161473 (Roger C.
Stull, insured); and Northwestern, Mutual Nos. 7555323 and 9372584 (Ann R.
Stull, insured). As of the Closing, (A) the Company and the Stulls will
terminate their split dollar understandings and the Assignments of Life
Insurance Policy as Collateral, (B) the Company will relinquish any and all
claims against the Stulls for reimbursement of premiums paid by the Company on
the policies (C) the Stulls will relinquish any and all claims against the
Company arising out of borrowings by the Company against the policies, and (D)
the Stulls will own the policies free and clear of any claims by the Company.
5.8. Voting, Shareholders Agreement and Other Matters. (a) Each of
the Sellers hereby consents to the execution and delivery by the Sellers and
the Company of this Agreement and the performance of the transactions
contemplated hereby, including, without limitation, to the extent such
execution, delivery or performance conflict with the provisions of the
Shareholders Agreements (as defined below). On or prior to the Closing Date,
each of the Sellers and the Company shall terminate the agreements identified
under the heading "Stock Buy-Out Agreements" on Schedule 2.2(c) hereto (the
"Shareholders Agreements").
(b) Other than pursuant to the Exchange and in accordance
with Article I hereto, each Seller hereby agrees not to Transfer (as hereafter
defined) any shares of Existing Company Stock, Penhall Class A Common Stock,
Penhall Class B Common Stock, Class A Common Stock or Class B Common Stock from
the date of this Agreement. As used herein, "Transfer" means the making of any
sale, exchange, assignment, hypothecation, gift, security interest, pledge or
other encumbrance, or any contract therefor, any voting trust or other
39
agreement or arrangement with respect to the transfer of voting rights
(including any proxy or similar arrangement (whether or not revocable)) or any
other beneficial interest in any of the Existing Company Stock, Penhall Class A
Common Stock, Penhall Class B Common Stock, Class A Common Stock or Class B
Common Stock, the creation of any other claim thereto or any other transfer or
disposition whatsoever, whether voluntary or involuntary, affecting the right,
title, interest or possession in or to such Existing Company Stock, Penhall
Class A Common Stock, Penhall Class B Common Stock, Class A Common Stock or
Class B Common Stock.
(c) Each of the Management Stockholders agrees to execute and
deliver at the Closing a Securities Holders Agreement substantially in the form
attached hereto as Exhibit F.
(d) Each Seller, by executing and delivering this Agreement,
hereby authorizes, approves and consents to, as a stockholder of the Company and
PCC, and in the manner provided under Section 603 of the CGCL and Section 704 of
the ABCA, (i) the execution, delivery and performance by the Company and PCC and
their Subsidiaries of this Agreement and the transactions contemplated hereby
(including, without limitation, the transactions contemplated by the
Compensation Agreement (as defined in Section 6.2(i)), and (ii) officers of the
Company and PCC executing and delivering such agreements, documents,
assignments, certificates and other instruments and taking such other action as
they may deem necessary, advisable, convenient or proper in connection with this
Agreement and the transactions contemplated hereby. Each Seller will take all
additional required or appropriate actions, as directors and/or stockholders, to
vote for, consent to, approve, adopt and otherwise effect the Merger and the
other transactions contemplated hereby.
5.9. Competition. (a) Following the Closing, each Seller set forth
on Schedule 5.9 hereto, on behalf of itself and its affiliates, agrees that,
for the period specified opposite such Seller's name on Schedule 5.9 hereto,
neither it nor its affiliates shall, without the prior written consent of the
Surviving Corporation, directly or indirectly, as owner, partner, agent,
employee, consultant or otherwise, (i) engage in any business in the
Territory (as defined below) which provides services or sells or leases
products similar or equivalent to the products or services provided or sold
immediately after the Closing by the Company and the Subsidiaries (a
"Competitive Business") or (ii) solicit, attempt to solicit for employment or
otherwise engage the services of, or become associated in any Competitive
Business with, any person who was an employee, officer or director of the
Company or the Subsidiaries at any time during the twelve (12) months
preceding the date of this Agreement. Without limiting the generality of the
foregoing, following the Closing, Roger C. Stull, on behalf of himself and
his affiliates, agrees that, for the period specified opposite Mr. Stull's
name on Schedule 5.9 hereto, neither he nor his affiliates shall, without the
prior written consent of the Surviving Corporation, directly or indirectly,
as owner, partner, agent, employee, consultant or otherwise, assist or
promote in any manner Gregory J. Stull, Kimberlie R. McTavish, Christine
Marie Kiser or Nicole Lynn Stull (the "Stull Children") in engaging in any
activity prohibited by the foregoing sentence, it being understood and agreed
that if any of the Stull Children engages in any activity described in this
Section 5.9(a) during the period specified opposite Roger C. Stull's name on
Schedule 5.9 hereto, then there shall be a rebuttable presumption that Roger
C. Stull assisted or promoted such activity. For purposes of this Agreement,
"Territory" shall mean each and every county located in the states of
California,
40
Arizona, Nevada, Minnesota, Alabama, Arkansas, Colorado, Delaware, Florida,
Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana,
Maryland, Michigan, Mississippi, Missouri, Montana, Nebraska, New Jersey, New
Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania,
South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, West
Virginia, Wisconsin, Wyoming, and all other counties of other states of the
United States or foreign jurisdictions in which the Company has conducted
business, or during the period applicable to any Seller, shall have conducted
business. None of the foregoing shall (i) prevent any Seller from owning up to
5% of the outstanding equity of a publicly-traded company or from making
indirect investments through an investment partnership or other investment
entity in any corporation, partnership, limited liability company or other
person or entity, (ii) prevent Roger C. Stull from participating in charitable,
business or trade associations, or in the auto racing industry in any respect,
or (iii) be construed as being binding in any way on the Stull Children or on
William L. Rogers or his affiliates (other than an affiliate who is a Seller
listed in Schedule 5.9).
(b) The parties agree that to the extent any provision or
portion of Section 5.9(a) shall be held, found or deemed to be unreasonable,
unlawful or unenforceable by a court of competent jurisdiction, then any such
provision or portion thereof shall be deemed to be modified to the extent
necessary in order than any such provision or portion thereof shall be legally
enforceable to the fullest extent permitted by applicable law; and the parties
do further agree that any court of competent jurisdiction shall, and the parties
hereto do hereby expressly authorize, require and empower any court of competent
jurisdiction to, enforce any such provision or portion thereof in order that any
such provision or portion thereof shall be enforced to the fullest extent
permitted by applicable law.
(c) As the violation by a Seller or its affiliates of the
provisions of this Section 5.9 would cause irreparable injury to the Surviving
Corporation, and there is no adequate remedy at law for such violation, the
Surviving Corporation shall, notwithstanding anything to the contrary herein,
have the right in addition to any other remedies available, at law or in equity,
to seek to enjoin such Seller or its affiliates in a court of equity from
violating such provisions. Each Seller, on behalf of itself and its affiliates,
hereby waives any and all defenses it may have on the ground of lack of
jurisdiction or competence of the court to grant an injunction or other
equitable relief, or otherwise. The existence of this right shall not preclude
any other rights and remedies at law or in equity which the Surviving
Corporation may have. The prevailing party in any enforcement action or court
proceeding under this Section 5.9 shall be entitled to the extent permitted by
law to reimbursement from the other party for all of the prevailing party's
costs, expenses and attorneys' fees.
5.10. Consents. Following the execution and delivery of this
Agreement, the Company shall use commercially reasonable efforts to obtain
the consents required from the relevant parties pursuant to the contracts
(including the Leases) set forth on Schedule 2.4 (it being understood that
neither the Company nor any Seller shall be required to execute any guaranty,
incur any other obligation or pay any money to any third party or commence
any legal, administrative or other proceeding).
5.11. Best Efforts. Each of the parties hereto will use its
reasonable best efforts to cause the conditions to Closing set forth herein
to be satisfied as soon as reasonably practicable.
41
5.12. Employees. The Company, the Sellers, BRS and Newco shall use
their reasonable best efforts to cooperate with one another in making any
required communications with current or former employees regarding the
transactions contemplated by this Agreement and any employee benefit plans or
other benefit arrangements.
5.13. Financing. BRS and Newco will use their commercially
reasonable efforts to obtain for the Company the debt financing required to
effect the transactions contemplated by this Agreement and to pay related
fees and expenses on terms and conditions reasonably satisfactory to Newco
(the "Financing").
5.14. Estoppel Certificates. The Company and the Subsidiaries
shall use their commercially reasonable efforts to obtain on or prior to the
Closing Date, landlord's estoppel certificates in form and substance
reasonably acceptable to Newco and dated a date occurring not more than
twenty (30) days prior to the Closing Date from each of the lessors under all
of the Leases (collectively, the "Estoppel Certificates"). No Estoppel
Certificate shall be conditioned upon any increase in rental or other
payment, a reduced term or any other change in the terms and provisions of
the subject lease.
5.15. Title Insurance. The Company and the Subsidiaries shall use
their commercially reasonable efforts to obtain, at their sole expense, good
and valid, irrevocable ALTA or CLTA title insurance binders or commitments
(collectively, the "Title Commitments," and each a "Title Commitment"), in
final form, from one or more title insurance companies reasonably acceptable
to Newco (collectively, the "Title Company"), irrevocably committing the
Title Company (subject only to the satisfaction of any industry standard
requirements contained in the Title Commitment and reasonably acceptable to
Newco) to issuing: (i) date down endorsements to, in form and substance
acceptable to Newco or, at the Company's election, reissuances of, with
effective dates of the closing Date (collectively, the "Date Down
Endorsements"), existing policies held on the date hereof by the Company or
the Subsidiary owning the covered parcel of Real Property in amounts
substantially the same as those of the existing policies or in such higher
amounts as may be required by any lender providing financing in connection
with the transactions contemplated hereby and otherwise in form and substance
acceptable to Newco, or (ii) with respect to parcels of Owned Real Property
not covered by the preceding clause (i), ALTA or, with respect to all Owned
Real Property located in California, CLTA form of title insurance policies
insuring good, valid, indefeasible fee simple title to each parcel of the
Owned Real Property in the Company in the respective amounts listed on
Schedule 2.11(a), where applicable, or in amounts substantially the same as
those of the existing policies or in such higher amounts as may be required
by any lender providing financing in connection with the transactions
contemplated hereby, in any case subject to no Liens or exceptions to title
other than the following (collectively, the "Permitted Title Exceptions"):
(x) matters listed on Schedules B, except for the Exceptions That Will Not
Exist At Closing, (y) minor imperfections of title, conditions,
encroachments, easements, covenants or restrictions, if any, none of which is
substantial in amount and none of which, individually or in the aggregate,
materially detracts from the value of the affected property or impairs the
use of the affected property in the manner such property is currently being
used or impairs the conduct of the Company's or any Subsidiary's business,
and (z) Liens for real estate Taxes and assessments not yet due and payable,
(collectively the "Title Policies"). Newco agrees that the issuers of the
existing policies
42
are acceptable and that First American Title Insurance Company shall be an
acceptable issuer of any new title policy. Each of the Title Commitments shall
be effective as of a date occurring not earlier than the date of this Agreement
and the effective dates of each of them shall be brought down to the time of the
Closing. Each such Title Commitment shall include such endorsements thereto as
may reasonably be requested by Newco, provided that Newco shall bear the cost of
any such endorsements. On or prior to the Closing Date, the Company and the
Subsidiaries shall execute and deliver, or cause to be executed and delivered,
to the Title Company any affidavits reasonably requested by the Title Company in
connection with the issuance of the Title Commitments, the Title Policies or the
Date Down Endorsements in form and substance as required hereunder. The Company
shall pay at Closing all premiums and other fees, costs and expenses necessary
for the issuance of the Title Policies and Date Down Endorsements.
5.16. Surveys. If any lender providing financing in connection
with the transactions contemplated hereby requires surveys of any of the
Owned Real Property or requires title insurance upon such Owned Real Property
of a nature or extent that a survey thereof is, for practical purposes,
required, then, with respect to all of those parcels for which surveys are so
required, the Company and the Subsidiaries shall use their commercially
reasonable efforts to obtain, at their sole expense, no later than fifteen
(15) days prior to Closing, as-built surveys of each parcel of the Owned Real
Estate (the "Surveys") in accordance with the 1992 minimum standard detail
requirements for ALTA/ACSM Land Title Surveys, including, to the extent
required by such lender or for the issuance of such title insurance, Table A
items 2,3,4,6,7,8,9,10,11 and 13 and with the Accuracy Standards (as adopted
by ALTA and ACSM) of an Urban Survey, dated after April 20, 1998, and
showing, without limiting the foregoing, with respect to each parcel of the
Owned Real Estate, all easements and other appurtenances and all easements
and other encumbrances burdening such parcel. Each Survey shall be certified
to such lender, the Company, Newco, the Title Company and any other person
reasonably requested by Newco and shall comply with any requirements imposed
by the Title Company as a condition to the removal of any survey exception
from the general exceptions to the Title Policy covering the Owned Real
Property shown on the property surveyed.
5.17. FIRPTA. Either (a) on or before the Closing Date, the
Company and PCC shall issue to Newco and BRS a certificate in compliance with
U.S. Treasury Regulation Section 1.1445-2(c)(3) certifying that the shares of
Class A Common Stock and the BRS Purchase Shares are not a U.S. real property
interest or (b) each Seller shall issue to Newco and BRS a certificate in
compliance with U.S. Treasury Regulation Section 1.1445-2(b)(2) certifying
that such Seller is not a foreign person.
5.18. Zoning Letters. The Company and the Subsidiaries shall, at
the request of BRS or Newco, reasonably cooperate with Newco in obtaining
building code and zoning code compliance letters stating that each parcel of
Real Property complies with the building and zoning codes applicable thereto
and otherwise in form and substance satisfactory to Newco from the
governmental authorities having jurisdiction over such matters with respect
to such parcel of Real Property for which BRS or Newco requests such letters
(collectively, the "Zoning Letters").
5.19. Exceptions That Will Not Exist At Closing. Immediately upon
its execution of this Agreement, the Company and the Subsidiaries shall use
their commercially reasonable
43
efforts to have satisfied or discharged of record all of the Exceptions That
Will Not Exist At Closing.
5.20. Termination of Certain Promotional Activities. The parties
acknowledge that the Company and the Subsidiaries have received from the auto
racing teams managed by Roger C. Stull advertising and promotional benefits.
The parties agree that, immediately after the Closing, the Surviving
Corporation and its subsidiaries shall have no obligation to sponsor and make
any payments for such racing teams, shall cease to receive such advertising
and promotional benefits, and shall have no continuing rights to sponsor such
auto racing teams.
ARTICLE VI
CONDITIONS
6.1. Conditions Precedent to Each Party's Obligations. The respective
obligations of each party to consummate the transactions contemplated hereby
shall be subject to fulfillment (or written waiver) of each of the following
conditions:
(a) no order, statute, rule, regulation, executive order,
stay, decree, judgment or injunction shall have been enacted, entered,
promulgated or enforced by any court, governmental authority or regulatory body
which restrains, prohibits or prevents the consummation of the transactions
contemplated hereby; and
(b) any waiting period applicable to the transactions
contemplated hereby under the HSR Act shall have been terminated or expired.
6.2. Conditions Precedent to BRS' and Newco's Obligations. BRS'
and Newco's obligation to consummate the transactions contemplated hereby
shall be subject to the fulfillment of each of the following additional
conditions, any one or more of which may be waived in writing by BRS and
Newco:
(a) each of the Sellers and the Company shall have performed
in all material respects its obligations under this Agreement required to be
performed on or prior to the Closing Date pursuant to the terms hereof;
(b) the representations and warranties of the Sellers and the
Company contained in this Agreement that are not qualified by materiality shall
be true and correct in all material respects, and the representations and
warranties of the Sellers and the Company set forth in this Agreement that are
qualified by materiality shall be true and correct, as of the time immediately
prior to the consummation of the Exchange (irrespective of any notice delivered
to Newco after the date hereof), with the same force and effect as though such
representations and warranties had been made as of the time immediately prior to
the consummation of the Exchange;
(c) there shall not have occurred after the date hereof any
material adverse change in the assets, liabilities, operations, business,
results of operations or financial condition of the Company and its Subsidiaries
taken as a whole;
44
(d) Newco shall have received a certificate of the Seller
Representative on behalf of the Sellers, dated the Closing Date, certifying to
the fulfillment of the conditions set forth in clauses (a), (b) and (c) above;
(e) Newco shall have received a certificate, dated the
Closing Date, duly executed by the Secretary or an Assistant Secretary of the
Company certifying as to: (i) the attached copy of the resolutions of the Board
of Directors (or a duly authorized committee or officer) of the Company
authorizing and approving the execution, delivery and performance of, and the
consummation of the transactions contemplated by, this Agreement and any other
documents or instruments contemplated hereby, and stating that the resolutions
thereby certified have not been amended, modified, revoked or rescinded; and
(ii) the incumbency, authority and specimen signature of each officer of the
Company executing this Agreement or any other document or instrument
contemplated hereby;
(f) Newco shall have received a certificate of the Company's
organization, valid existence and good standing as a domestic corporation in the
state of its incorporation as of a date no more than five (5) days prior to the
Closing Date;
(g) Newco shall have received from counsel for the Company
and for the Sellers an opinion dated the Closing Date in the form attached
hereto as Exhibit G and from counsel for the Management Stockholders an opinion
in form and substance reasonably satisfactory to Newco;
(h) Each of Management Stockholders shall have validly
executed and delivered the Securities Holders Agreement referred to in Section
5.8;
(i) On or prior to June 30, 1998, each of the Management
Stockholders, Floyd E. Skor, the Charles D. Steichen and Martha L. Steichen
Trust and the Company shall have validly executed and delivered the
Compensation, Tax Consistency and Indemnification Agreement substantially in the
form attached hereto as Exhibit H (the "Compensation Agreement");
(j) Each of the persons designated on Schedule 6.2(j) shall
have validly executed and delivered the Employment Agreements substantially in
the forms attached hereto as Exhibits I and J (the "Employment Agreements");
(k) The Surviving Corporation shall have adopted a
stock-based management incentive plan covering 5% of the Surviving Corporation's
common equity (the "Stock Option Plan");
(l) The Company shall have received (and furnished to Newco
evidence thereof reasonably satisfactory to Newco) all of the approvals and
consents from third parties and Authorities designated on Schedule 6.2(l) (and
such approvals and consents shall not have expired or been withdrawn as of the
Closing Date);
(m) Newco shall have received the proceeds of the Financing
on terms reasonably acceptable to Newco;
45
(n) Each Seller, on behalf of itself and its affiliates
(other than the Company and the Subsidiaries) (i) shall have executed and
delivered to the Company and the Subsidiaries and the Surviving Corporation a
Mutual Release and Satisfaction in the form of Exhibit K hereto, and (ii) shall
have executed and delivered to the Company and the Subsidiaries and the
Surviving Corporation all documents necessary to release or terminate any Liens
in favor of such Seller or its affiliates (other than the Company and the
Subsidiaries) on the assets, properties or rights of the Company and the
Subsidiaries and the Surviving Corporation and (iii) shall have terminated the
Shareholders Agreements;
(o) Newco and the Company and any lender providing financing
to the transactions contemplated hereby, shall have received such Title
Commitments, Title Policies, Surveys and Estoppel Certificates as shall be
required by such lender in order to provide such financing;
(p) On or before the Closing Date, Newco shall have received
evidence reasonably satisfactory to it that the Exceptions That Will Not Exist
At Closing have been satisfied or discharged and no longer encumber or otherwise
affect any of the Real Property;
(q) The Company and the Sellers shall have delivered updated
disclosure Schedules, if any, pursuant to Section 6.4; and
(r) The Sellers shall have caused the shareholder approval to
be made in accordance with Section 10.14.
6.3. Conditions Precedent to the Sellers' Obligations. The
Sellers' and the Company's obligation to consummate the transactions
contemplated hereby shall be subject to the fulfillment of each of the
following additional conditions, any one or more of which may be waived in
writing by the Seller Representative and the Company:
(a) Each of BRS and Newco shall have performed in all
material respects its obligations under this Agreement required to be performed
on or prior to the Closing Date pursuant to the terms hereof;
(b) the representations and warranties of each of BRS and
Newco contained in this Agreement that are not qualified by materiality shall be
true and correct in all material respects, and the representations and
warranties of BRS and Newco set forth in this Agreement that are qualified by
materiality shall be true and correct, on and as of the Closing Date
(irrespective of any notice delivered to the Sellers or the Company after the
date hereof) with the same force and effect as though such representations and
warranties had been made on and as of the Closing Date;
(c) the Sellers and the Company shall have received a
certificate of an officer of BRS and Newco, dated the Closing Date, on behalf of
Newco, certifying to the fulfillment of the conditions set forth in clauses (a)
and (b) above;
(d) the Sellers and the Company shall have received a
certificate, dated the Closing Date, duly executed by an officer of Newco
certifying as to: (i) the attached copy of the
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resolutions of Newco authorizing and approving the execution, delivery and
performance of, and the consummation of the transactions contemplated by, this
Agreement and any other documents or instruments contemplated hereby, and
stating that the resolutions thereby certified have not been amended, modified,
revoked or rescinded; and (ii) the incumbency, authority and specimen signature
of each officer of Newco executing this Agreement or any other document or
instrument contemplated hereby;
(e) the Sellers and the Company shall have received a
certificate, dated the Closing Date, duly executed by an authorized person of
BRS certifying as to: (i) the attached copy of the resolutions of BRS
authorizing and approving the execution, delivery and performance of, and the
consummation of the transactions contemplated by, this Agreement and any other
documents or instruments contemplated hereby, and stating that the resolutions
thereby certified have not been amended, modified, revoked or rescinded; and
(ii) the incumbency, authority and specimen signature of each authorized person
of BRS executing this Agreement or any other document or instrument contemplated
hereby;
(f) the Sellers and the Company shall have received from
counsel for Newco an opinion dated the Closing Date in the form of Exhibit L;
(g) Roger C. Stull and Ann R. Stull shall have been released
from all obligations and liabilities under that certain Agreement of Indemnity,
dated January 7, 1991, between Roger C. Stull, Ann R. Stull and Fidelity and
Deposit Company of Maryland ("Fidelity"), and Fidelity shall have given its
consent, in form and substance reasonably satisfactory to Newco, to the payment
of the Cash Merger Consideration.
(h) BRS and the Surviving Corporation shall have validly
executed and delivered the Securities Holders Agreement referred to in Section
5.8;
(i) On or prior to June 30, 1998, the Company shall have
validly executed and delivered the Compensation Agreement;
(j) The Surviving Corporation shall have validly executed and
delivered the Employment Agreements;
(k) The Surviving Corporation shall have adopted the Stock
Option Plan;
(l) the Company and the Subsidiaries shall have executed and
delivered to the Sellers a Mutual Release and Satisfaction in the form of
Exhibit M hereto; and
(m) BRS and Newco shall have furnished to the Sellers and the
Company evidence reasonably satisfactory to the Seller Representative and the
Company that the purchasers of the senior subordinated notes in the Financing
and Newco's and the Surviving Corporation's other lenders (including all bank
lenders) have consented to the payment of the Cash Merger Consideration, it
being understood that incorporation of the language provided by Sellers prior to
the date hereof for inclusion in the indenture for the senior subordinated notes
and the loan agreements with bank lenders to Newco and the Surviving Corporation
shall constitute conclusively such satisfactory evidence.
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6.4. Up-Dating of Disclosure Schedules. Prior to the Closing, the
Company and the Sellers may deliver to Newco and BRS revised disclosure
Schedules modifying or qualifying the representations and warranties of the
Sellers and the Company under Articles II and III hereof with respect to any
matter or event that causes an inaccuracy or breach of a representation or
warranty and that first arises prior to the Closing Date (whether before or
after the date of this Agreement), except for matters or events of which any
Seller (solely with respect to such Seller's representations and warranties
in Article III) or the Company (solely with respect to the Company's and the
Sellers' representations and warranties in Article II) had knowledge as of
the date of this Agreement; provided, that the Company also may add matters
or events to the revised disclosure Schedules of which Floyd E. Skor, but no
other person listed in Section 10.12(c), had knowledge as of the date of this
Agreement. Such revised disclosure Schedules shall be deemed to have modified
the representations and warranties made by the Sellers and the Company on the
date hereof and to be made as of the time immediately prior to the
consummation of the Exchange and to have superseded any similarly numbered
Schedule delivered to Newco and BRS on the date hereof. The foregoing,
however, shall not affect the condition to the Closing obligations of BRS and
Newco contained in Section 6.2(b) as such condition relates to such
representations and warranties prior to giving effect to the delivery of such
revised Schedules. In the event that the condition to the Closing obligations
of BRS and Newco set forth in Section 6.2(b), as such condition relates to
representations and warranties, shall not have been satisfied, but would be
satisfied after giving effect to the delivery of revised disclosure Schedules
under this Section 6.4, then, subject to Section 8.5(j), the sole remedy of
Newco and BRS in respect of the failure of such condition shall be to elect
not to consummate the transactions contemplated by this Agreement.
ARTICLE VII
TERMINATION AND ABANDONMENT
7.1. Termination. Except with respect to provisions that expressly survive the
termination of this Agreement, this Agreement may be terminated:
(a) by mutual written agreement of BRS, Newco, the Company
and the Sellers;
(b) by BRS or Newco (provided BRS or Newco is not in material
breach of this Agreement), by written notice to the parties hereto, at any time
if (i) the representations and warranties of a Seller or the Company in this
Agreement were incorrect in any material respect when made or at any time
thereafter, or (ii) any of the Sellers or the Company is in breach in any
material respect of any of its covenants or agreements in this Agreement (each,
a "Seller Breach"), and, in either of such cases, such Seller Breach continues
uncured for ten (10) days after written notice thereof by BRS or Newco;
provided, however, if such Seller or the Company (as the case may be) commences
to effect a cure within the foregoing ten-day period, such person shall be
permitted such additional time as may be reasonable (based on the nature of the
Seller Breach, the possibility for cure, and the effect of delay on the party
seeking termination) to cure so long as such person diligently continues to seek
to effect a cure;
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(c) by the Sellers (provided no Seller is in material breach
of this Agreement), by written notice to the parties hereto, at any time if (i)
the representations and warranties of BRS or Newco in this Agreement were
incorrect in any material respect when made or at any time thereafter, or (ii)
BRS or Newco is in breach in any material respect of any of its covenants or
agreements in this Agreement (each, a "Newco Breach"), and, in either of such
cases, such Newco Breach continues uncured for ten (10) days after written
notice thereof by the Sellers; provided, however, if BRS or Newco (as the case
may be) commences to effect a cure within the foregoing ten-day period, such
entity shall be permitted such additional time as may be reasonable (based on
the nature of the Newco Breach, the possibility for cure, and the effect of
delay on the party seeking termination) to cure so long as such entity
diligently continues to seek to effect a cure;
(d) by BRS, Newco or the Sellers, if a court of competent
jurisdiction or governmental or regulatory body shall have issued an order,
decree or ruling, or taken any other action, restraining, enjoining or otherwise
prohibiting the Closing of the transactions contemplated hereby and such order,
decree, ruling or other action shall have become final and non-appealable; or
(e) by BRS, Newco, the Company or the Sellers, if the Closing
shall not have occurred by August 31, 1998; provided, however, that at the time
of any such termination, the terminating party is not in willful and material
breach of any of its representations, warranties, covenants or obligations
hereunder.
7.2. Effect of Termination. If this Agreement is terminated as
provided herein, no party shall have any liability or further obligation to
any other party under the terms of this Agreement or otherwise; provided that
if such termination shall result from the willful breach by the
non-terminating party of any representation or warranty, or the failure of
the non-terminating party to perform a covenant of this Agreement, such party
shall be fully liable for any and all damages incurred or suffered by the
other parties as a result of such failure. The provisions of Section 10.5
shall survive any termination of this Agreement pursuant to Section 7.1.
ARTICLE VIII
INDEMNIFICATION
8.1. The Sellers' Obligations to Indemnify. Subject to the limitations and
procedures contained in this Article VIII, from and after the Closing, the
Sellers, jointly and severally, shall indemnify, defend and hold harmless Newco,
BRS, the Surviving Corporation and each of their affiliates, and their
respective directors, officers, employees and representatives (each, a "Company
Indemnified Party"; provided that such term shall not include any Seller
regardless of their affiliation with the Surviving Corporation), from and
against any and all claims, losses, settlements, fines, liabilities, damages,
deficiencies, costs or expenses (including interest, penalties and reasonable
attorneys' fees and disbursements) (collectively, "Losses") suffered, sustained,
incurred or required to be paid by any such Company Indemnified Party due to,
based upon, arising out of or otherwise in respect of (i) any inaccuracy in, or
any breach of, any representation or warranty of the Sellers or of the Company
contained in this Agreement (or any
49
schedule hereto or any certificate or other agreement delivered on behalf of
Sellers hereunder), determined without regard to any materiality, Material
Adverse Effect, Material Adverse Change, substantial compliance or similar
exception or qualification contained in or otherwise applicable to such
representation or warranty; provided that, the indemnification obligation of the
Sellers with respect to the representations and warranties contained in Article
III hereof shall be several and not joint as to each Seller, (ii) any breach of
any covenant or agreement of the Sellers or the Company contained in this
Agreement, (iii) any Loss, whether disclosed or undisclosed and whether existing
prior to, on or after the Closing (other than on account of defaults, violations
or breaches arising from actions first occurring after the Closing by the
Surviving Corporation or any of its subsidiaries under any obligations assumed
by it or them in connection with the transactions contemplated hereby), arising
from or relating to any sold or discontinued business or operation of the
Company or any Subsidiary (or any respective predecessor) or any business or
activity conducted by the Company or any Subsidiary (or any respective
predecessor) other than the businesses and activities conducted by the Company
and its Subsidiaries on or after the date hereof, (iv) the enforcement by any
Company Indemnified Party of its rights under this Agreement, (v) any Loss,
whether disclosed or undisclosed, arising from or relating to (A) environmental
conditions first occurring, existing or arising prior to the Closing due to,
based upon, arising out of or otherwise in respect of a Release or threat of
Release of Hazardous Substances at any property owned or leased by the Company
or the Subsidiaries prior to the date of this Agreement (but not on the date
hereof) (whether into the air, soil, ground or surface waters on or off-site),
(B) the off-site transportation, storage, treatment, recycling, disposal or
spill of Hazardous Substances (but excluding crushed concrete, concrete slurry,
asphalt, rebar and associated materials that are generated in the ordinary
course of operations of the Company or the Subsidiaries) generated or caused by
the Company or the Subsidiaries, prior to the Closing, or (C) any investigation,
remediation or other response costs ("Remediation Costs") associated with any
environmental conditions identified in connection with the removal or upgrading
of any existing underground storage tanks identified on Schedule 2.12(c) (except
for the cost of removing, upgrading or installing such tanks) not meeting the
December 1998 RCRA technical requirements for such tanks except for conditions
resulting from Releases occurring after the Closing; provided, however, that
with respect to Sections 8.1(v)(A) and (B) above, Sellers shall only be
responsible for such Losses which, individually or in the aggregate but
collectively for such Sections, exceed $50,000, and provided further that with
respect to Section 8.1(v)(C) above, the Surviving Corporation shall be
responsible for the first $100,000 of such Remediation Costs, Sellers shall be
responsible for the next $100,000 of Remediation Costs, and the parties shall
share equally all such Remediation Costs in excess of $200,000.
8.2. The Surviving Corporation's Obligations to Indemnify. Subject
to the limitations and procedures contained in this Article VIII, from and
after the Closing, the Surviving Corporation shall indemnify, defend and hold
harmless each Seller and its affiliates, and their respective directors,
officers, employees and representatives (each, a "Seller Indemnified Party"
and, together with the Company Indemnified Parties, the "Indemnified
Parties"), from and against any and all Losses suffered, sustained, incurred
or required to be paid by any such Seller Indemnified Party due to, based
upon, arising out of or otherwise in respect of (i) any inaccuracy in, or
breach of, any representation or warranty of BRS or Newco contained in this
Agreement (or any certificate or other agreement delivered by Newco
hereunder), (ii) any
50
breach of any covenant or agreement of the Surviving Corporation, BRS or Newco
contained in this Agreement and (iii) the enforcement by any Seller Indemnified
Party of its rights under this Agreement.
8.3. Notice and Opportunity to Defend. The obligations and
liabilities of any party hereto against which indemnification is sought
hereunder with respect to claims resulting from the assertion of liability by
third parties shall be subject to this Section 8.3.
(a) Promptly after receipt by any Indemnified Party of notice
of any demand or claim or the commencement (or threatened commencement) of any
action, proceeding or investigation (an "Asserted Liability") that could
reasonably be expected to result in a Loss, the Indemnified Party shall give
notice thereof (a "Claims Notice") to any other party obligated to provide
indemnification pursuant to Section 8.1 or 8.2 (each, an "Indemnifying Party").
Each Claims Notice shall describe the Asserted Liability in reasonable detail,
and shall indicate the amount (estimated, if necessary) of the Loss that has
been or may be suffered by the Indemnified Party. The rights of any Indemnified
Party to be indemnified hereunder shall not be adversely affected by its failure
to give, or its failure to timely give, a Claims Notice with respect thereto
unless, and if so, only to the extent that, the Indemnifying Party is materially
prejudiced thereby.
(b) The Indemnifying Party may elect to compromise or defend,
at its own expense and by its own counsel, any Asserted Liability if (i) the
claim involves (and continues to involve) solely monetary damages and the
Indemnifying Party's assumption of the defense or settlement of such claim will
not have a material adverse effect on the Indemnified Party's business, (ii) the
Indemnifying Party states in writing to the Indemnified Party the Indemnifying
Party's good faith belief (based on the facts then known by the Indemnifying
Party) that, as between the two, the Indemnifying Party is solely obligated to
satisfy and discharge the claim, and (iii) the Indemnifying Party makes
reasonably adequate provision to satisfy the Indemnified Party of the
Indemnifying Party's ability to satisfy and discharge the claim (the foregoing
collectively, the "Litigation Conditions"); provided, however, that if the
parties in any action shall include both an Indemnifying Party and an
Indemnified Party, and the Indemnified Party shall have received written advice
of counsel that counsel selected by the Indemnifying Party has a conflict of
interest under applicable standards of professional responsibility because of
the availability of different or additional defenses to the Indemnified Party,
the Indemnified Party shall have the right to select one separate counsel to
participate in the defense of such action on its behalf, at the expense of the
Indemnifying Party; and provided further, however, that the Indemnifying Party
shall forfeit the right to control the defense or settlement of any such claim
if, at any time after assuming the defense or settlement thereof, the
Indemnifying Party no longer satisfies the Litigation Conditions. Subject to the
foregoing, if the Indemnifying Party elects to compromise or defend such
Asserted Liability, it shall within thirty (30) days (or sooner, if the nature
of the Asserted Liability so requires) notify the Indemnified Party of its
intent to do so, and the Indemnified Party shall cooperate, at the expense of
the Indemnifying Party, in the compromise of, or defense against, such Asserted
Liability. If the Indemnifying Party elects not to compromise or defend (or, as
provided below, discontinues its defense of) the Asserted Liability, fails to
notify the Indemnified Party of its election as herein provided, or fails to
satisfy the Litigation Conditions, the Indemnified Party may pay, compromise or
defend such Asserted Liability. Either of the Indemnified Party or the
Indemnifying Party may participate, at its own
51
expense (except as provided in the first sentence of this subparagraph (b)), in
the defense of an Asserted Liability being controlled by the other party.
Notwithstanding the foregoing, if, subsequent to the Indemnifying Party's
satisfaction of the Litigation Conditions and election to compromise or defend
an Asserted Liability, the Indemnifying Party can demonstrate to the reasonable
satisfaction of the Indemnified Party, based on facts not available to the
Indemnifying Party at the time of the original satisfaction of the Litigation
Conditions, that the Indemnifying Party is not obligated to satisfy or discharge
such claim, then Indemnifying Party may elect to discontinue the defense or
settlement of the Asserted Liability and the Indemnified Party may elect to
assume the defense or settlement of the Asserted Liability at the Indemnified
Party's expense. If the Indemnifying Party chooses to defend any claim, the
Indemnified Party shall, subject to receipt of a reasonable confidentiality
agreement, make available to the Indemnifying Party any books, records or other
documents within its control, and the reasonable assistance of its employees,
for which the Indemnifying Party shall be obliged to reimburse the Indemnified
Party the reasonable out-of-pocket expenses of making them available. If the
Indemnifying Party elects to discontinue the defense or settlement of an
Asserted Liability and the Indemnified Party elects to assume such defense or
settlement, the Indemnifying Party shall, subject to the receipt of a reasonable
confidentiality agreement, make available to the Indemnified Party any books,
records or other documents within its control, and shall provide to the
Indemnified Party the work product of the litigation or proceeding related to
such defense or settlement (except for books, records, documents and work
product (or portions thereof) relating solely to the Indemnifying Party's
liability for the relevant claim and the provision of which, based on opinion of
counsel, would prejudice the Indemnifying Party's defense of any action by the
Indemnified Party under this Article VIII).
(c) The Indemnifying Party and the Indemnified Party shall
use commercially reasonable efforts to cooperate in determining the validity of
any third party claim for any Loss for which a claim for indemnification may be
made hereunder. Each party shall use commercially reasonable efforts to minimize
all Losses.
8.4. Procedure for Claims by Parties. In the event that any party
incurs or suffers any Losses with respect to which indemnification may be
sought by such party pursuant to this Article VIII (other than in respect of
third party claims), the Indemnified Party must assert the claim by a Claims
Notice to the Indemnifying Party. The Claims Notice must state the nature and
basis of the claim in reasonable detail based on the information available to
the Indemnified Party. Each Indemnifying Party to whom a Claims Notice is
given shall respond to any Indemnified Party that has given a Claims Notice
(a "Claim Response") within thirty (30) days (the "Response Period") after
the date that the Claims Notice is given. Any Claim Response shall specify
whether or not the Indemnifying Party given the Claim Response disputes the
claim described in the Claims Notice. If any Indemnifying Party fails to give
a Claim Response within the Response Period, such Indemnifying Party shall be
deemed not to dispute the claim described in the related Claims Notice. If
any Indemnifying Party elects not to dispute a claim described in a Claims
Notice, whether by failing to give a timely Claim Response or otherwise, then
the amount of such claim shall be conclusively deemed to be an obligation of
such Indemnifying Party, unless the amount of the Loss actually suffered by
the Indemnified Party differs from the amount of the claim (whether by change
of circumstance, mistake or fraud of the Indemnified Party or otherwise). If
any Indemnifying Party shall be obligated to indemnify an Indemnified
52
Party hereunder, such Indemnifying Party shall pay to such Indemnified Party the
amount to which such Indemnified Party shall be entitled within thirty (30) days
after the last day of the applicable Response Period or, if the Claims Notice
relates to Losses that have not been liquidated as of the date of the Claims
Notice, the date on which all or any part of such Losses shall have become
liquidated and determined. If there shall be a dispute as to the amount or
manner of indemnification under this Agreement, the Indemnifying Party and the
Indemnified Party shall seek to resolve such dispute through negotiations and,
if such dispute is not resolved within twenty (20) days, the Indemnified Party
may submit such dispute to arbitration pursuant to Section 10.9. If any
Indemnifying Party fails to pay all or any part of any indemnification
obligation on or before the later to occur of (y) thirty (30) days after the
last day of the applicable Response Period, and (z) if the Claims Notice relates
to Losses that have not been liquidated as of the date of the Claims Notice, the
date on which all or any part of such Losses shall have become liquidated and
determined, then the Indemnifying Party shall also be obligated to pay to the
Indemnified Party interest on the unpaid amount for each day during which the
obligation remains unpaid at an annual rate established in the manner described
in Section 1.10(g).
8.5. Limitations on Indemnification. The indemnification provided
for in Sections 8.1 and 8.2 shall be subject to the following limitations:
(a) The Sellers shall not be obligated to pay any
indemnification amounts for Losses pursuant to Section 8.1(i) until the
aggregate amount of all Losses pursuant thereto exceeds an amount equal to
$3,000,000 (the "Basket"), whereupon the Company Indemnified Parties shall be
entitled to indemnification under Section 8.1(i) for all such Losses in excess
of such amount, up to a maximum amount equal to $50,000,000, subject to
paragraph (d) below. In addition, no claim shall be made for Losses with respect
to any breach of a representation or warranty under Section 8.1(i) unless the
claim for Losses with respect to such breach reasonably could be expected to
exceed $50,000; provided, however, that any breaches arising out of a series of
related events or the same set of operative facts shall be treated as a single
claim for purposes of this paragraph (a).
(b) No claims for indemnification in respect of Sections
8.1(i) or 8.2(a)(i) shall be made after the date on which the applicable
representation or warranty upon which such claim was based ceases to survive
pursuant to Section 8.7; provided that the expiration of any representation or
warranty under Section 8.7 shall not affect any claim made pursuant to a Claims
Notice delivered prior to the date of such expiration.
(c) The limitations on the indemnification obligations set
forth in this Section 8.5 shall not apply to any covenants of the Sellers (or
any other party) in this Agreement (including covenants in Article II and
Article III, except to the extent that any representations or warranties are
contained within such covenants). In addition, notwithstanding the provisions of
paragraph (a) above, the limitations on the indemnification obligations of
Sellers set forth in paragraph (a) above shall not apply to breaches of the
representations and warranties made in Sections 2.1 (other than the second
sentence of Section 2.1(a)), 2.2 (other than in Section 2.2(b) with respect to
the qualification or licensing of the Subsidiaries as foreign corporations),
2.3, 3.1 and 3.2.
53
(d) Notwithstanding anything to the contrary set forth
herein, no limitation or condition of liability or indemnity applicable to any
Seller shall apply to any breach of a representation or warranty if such
representation or warranty was made with actual knowledge by such Seller that it
(i) contained an untrue statement of a material fact or (ii) omitted to state a
material fact necessary to make the statements contained therein not misleading.
For purposes of calculating the amount of Losses incurred arising out of or
relating to any breach of a representation or warranty by any Seller, the
references to "Material Adverse Effect" or "Material Adverse Change" or other
materiality qualifications (or correlative terms), including as expressed in
accounting concepts such as GAAP, shall be disregarded.
(e) The Company Indemnified Parties may seek recovery against
any Seller for any Loss for which the Sellers are jointly and severally liable
hereunder, except that (i) in any action (including any arbitration pursuant to
Section 10.9) to recover such Loss, the appropriate Company Indemnified Parties
may not proceed against any Seller unless (subject to jurisdictional, venue or
other procedural limitations) it also proceeds against each of the Roger C.
Stull and Ann R. Stull Trust, the National Christian Charitable Foundation, Inc.
(the "NCCF"), John Sawyer, J&J Investments, LLC, the Repchinuck Revocable Trust,
C. George Bush and Bruce Varney; (ii) the Servants' Trust shall not be liable
for any portion of the Pro Rata Share of the Roger C. Stull and Ann R. Stull
Trust, the Gregory J. Stull Family Trust, the Kevin C. McTavish Family Trust,
the Christine Marie Stull Family Trust or Nicole Lynn Stull of such Loss, and
J&J Investments, LLC shall not be liable for any portion of the Pro Rata Share
of John Sawyer of such Loss; (iii) the Management Stockholders, Floyd E. Skor,
the Charles D. Steichen and Martha L. Steichen Trust, as a group shall not be
liable for more than their aggregate Pro Rata Share of such Loss; (iv) B-R
Investors/Penhall I, L.P. shall not be liable for more than its Pro Rata Share
of such Loss; (v) the liability of each Management Stockholder (other than John
Sawyer, J&J Investments, LLC, the Repchinuck Revocable Trust, C. George Bush and
Bruce Varney) shall be limited to his or its Eligible Assets (as defined in
Section 8.5(g)); and (vi) no Non-Defaulting Seller (as defined in Section 8.5
(f)) who is a Non-Management Stockholder, and none of John Sawyer, J&J
Investments, LLC, the Repchinuck Revocable Trust, C. George Bush or Bruce
Varney, shall be liable for any Management Stockholder's Pro Rata Share of such
Loss until the appropriate Company Indemnified Parties have attempted in good
faith, through appropriate judicial or other proceedings, to recover
indemnification payments from such Management Stockholder under Section 8.1 for
the full amount of such Management Stockholder's Eligible Assets.
(f) The Sellers agree among themselves that each Seller shall
pay such Seller's Pro Rata Share of any Loss, other than a Loss arising out of a
breach of a representation or warranty by another Seller under Article III or a
breach of a covenant by another Seller for which the breaching Seller is solely
liable hereunder; provided, however, subject to the limitations of Section
8.5(e), if any Seller (a "Defaulting Seller") fails to pay any or all of his or
its Pro Rata Share of such Loss, each remaining Seller (a "Non-Defaulting
Seller") shall also pay a fraction of the shortfall of such Loss equal to such
Non-Defaulting Seller's Pro Rata Share divided by the aggregate Pro Rata Share
of all Non-Defaulting Sellers. Each Defaulting Seller shall indemnify, defend
and hold harmless the Non-Defaulting Sellers from any Losses incurred by the
Non-Defaulting Sellers that are caused by the failure of such Defaulting Seller
to pay such Defaulting Seller's Pro Rata Share of any Losses to the extent
required herein. Each Seller acknowledges it
54
is his or its intent, as a material part of the consideration for the execution
of this Agreement, that each Seller shall be liable to pay such Seller's Pro
Rata Share of any Losses to the extent provided herein. At the Closing, each
Management Stockholder shall grant a security interest in the shares of the
Surviving Corporation stock received as Merger Consideration, and the proceeds
thereof, to the Surviving Corporation in respect of such Management
Stockholder's obligations under this Article VIII by executing a pledge
agreement containing terms and conditions reasonably satisfactory to the
Surviving Corporation (including without limitation the full subordination of
such pledge to the Surviving Corporation's rights under the Securities Holders
Agreement).
(g) Each Management Stockholder may, at his or its option,
satisfy any indemnification obligation under Section 8.1 by payment of cash or
by delivery to the Surviving Corporation of shares of stock of the Surviving
Corporation, which shares shall have a Current Market Value determined in
accordance with Section 8.5(h); provided, however, that if any Management
Stockholder elects to satisfy such indemnification obligation by payment of
cash, such Management Stockholder must make such election irrevocably by written
notice to the Surviving Corporation before the commencement of any determination
of Fair Market Value under Section 8.5(h), of which commencement the Surviving
Corporation will give ten (10) days prior notice. No cash shall be paid to a
Management Stockholder upon the occurrence of any event requiring the redemption
from such Management Stockholder of shares of Surviving Corporation stock
received as Merger Consideration, and no Management Stockholder shall otherwise
be permitted to transfer any shares of Surviving Corporation stock received as
Merger Consideration or receive cash or other property in respect of such
shares, unless such Management Stockholder first provides security reasonably
satisfactory to BRS and the Seller Representative for such Management
Stockholder's indemnification obligations under this Agreement in the full
amount of his or its Eligible Assets. For purposes of this Agreement, a
Management Stockholder's "Eligible Assets" shall include (i) all shares of stock
of the Surviving Corporation received by such Management Stockholder as Merger
Consideration, (ii) all cash and other property received by such Management
Stockholder in connection with any transfer or redemption of such shares, and
(iii) all cash and other property (including other securities of the Surviving
Corporation or any other entity) received by such Management Stockholder in
respect of such shares, whether by way of dividend, merger, reorganization,
recapitalization, or otherwise.
(h) For purposes of this Agreement, "Current Market Price" on
any date shall mean, with respect to any security, if such security is publicly
traded in the United States, the average of the daily Closing Prices for the ten
(10) consecutive trading days ending on the date immediately prior to the date
as of which the Current Market Price is to be determined, or, if such day is not
a trading date, the trading day immediately preceding such date. The "Closing
Price" for each day shall be the average of the closing bid and asked price for
such security on the NASDAQ National Market System, or, if not then traded
thereon, the last reported sale price regular way or, in case no such reported
sale takes place on such day, the average of the reported closing bid and asked
price regular way on the principal stock exchange on which such security is then
listed or traded, or, if not then listed or traded on any such exchange, the
mean of the closing bid and asked prices on an automated quotation system as
furnished by any New York Stock Exchange member firm selected from time to time
by the Surviving Corporation for that
55
purpose. Except as set forth in the preceding sentence, with respect to any
security that is not publicly traded in the United States, "Current Market
Price" on any date shall mean the fair market value of such security on such
date as determined by mutual agreement of BRS, John Sawyer and the Seller
Representative, or, if they are unable to agree, by an independent appraiser
selected by the Surviving Corporation and reasonably acceptable to John Sawyer
and the Seller Representative. The costs of any such appraiser shall be paid by
the Surviving Corporation.
(i) Each Seller agrees that neither it nor any of the other
Sellers is a necessary or indispensable party for any action (including an
arbitration pursuant to Section 10.9) for the purpose of determining whether the
Company Indemnified Parties are entitled to indemnification for any Losses
pursuant to this Agreement, hereby waives, to the fullest extent permitted by
law, any requirement that the Company Indemnified Parties join such Seller in,
or provide such Seller with notice of, any such action and hereby agrees not to
file a motion to dismiss, vacate, stay or transfer such action by reason of a
Company Indemnified Party's failure to join any Seller as a party to such
action. Notwithstanding the foregoing, the Company Indemnified Parties (i) shall
give notice of such action to the Seller Representative and the Sellers to the
extent required by the other provisions of this Agreement, (ii) shall name in
such action the persons specified in clause (i) of Section 8.5(e), and (iii)
shall not oppose the joinder of any of the Sellers, if not named as a party in
any such action brought by any Company Indemnified Party against one or more of
the Sellers pursuant to this Agreement, as a party to such action, upon any of
such Sellers' written request; provided, however, any failure of the Company
Indemnified Parties to give notice of any such action to any of the Sellers
(other than the Seller Representative) or of any of the Sellers to actually
receive such notice shall not affect the validity of the agreements and waivers
of each Seller set forth in the first sentence of this Section 8.5(i). Each
Seller also agrees that service of process or any other legal process for any
action brought by the Company Indemnified Parties pursuant to this Agreement may
be made as set forth in Section 9.1(b) of this Agreement. Each Seller agrees
that any of the other Sellers may join or be joined in any such action in which
such Seller has been named as an Indemnifying Party by the Company Indemnified
Parties, or in which such Seller has joined in the action.
(j) Notwithstanding anything in this Agreement to the
contrary, none of the Sellers shall have any liability on account of a breach or
inaccuracy in a representation or warranty pursuant to Section 8.1(i), to the
extent that (A) the matter or event which causes the inaccuracy or breach first
arose prior to the Closing Date (either before or after the date of this
Agreement), (B) neither any Seller nor the Company had knowledge of such matter
or event as of the date of this Agreement, (C) such matter or event is disclosed
to BRS and Newco in the revised disclosure Schedules delivered pursuant to
Section 6.4 and (D) BRS and Newco shall have elected to proceed with the
Closing.
8.6. Insurance and Tax Effect. (a) Any payments made pursuant to
the provisions of this Article VIII shall be treated as an adjustment to the
total consideration payable to the Sellers under this Agreement.
(b) The amount of any Loss for which indemnification is
provided under any of Sections 8.1 or 8.2 shall be net of any amounts (net of
the costs of recovery of such amounts)
56
recovered by the Indemnified Party under insurance policies with respect to such
Loss (collectively, a "Net Loss").
(c) The amount of any Loss shall be (i) increased to take
account of the net Tax cost (if any) actually incurred by the Indemnified Party
arising from the receipt of indemnity payments hereunder (grossed up for such
increase) and (ii) reduced to take account of any net Tax benefit (if any)
actually realized by the Indemnified Party arising from the incurrence or
payment of any such Net Loss.
8.7. Survival of Representations and Warranties. The provisions
set forth in Section 10.5 of this Agreement shall expressly survive the
termination or abandonment of this Agreement. All covenants and agreements
contained in this Agreement shall survive the Closing Date in perpetuity and
shall remain in full force and effect in accordance with their terms. The
representations and warranties set forth in Articles II, III and IV of this
Agreement (and any Schedule thereto) shall survive the Closing Date for a
period of eighteen (18) months, except (a) the representations in Section 2.8
(and any Schedules thereto) shall survive until the date which is 60 days
after the expiration of the statute of limitations applicable to such
matters, (b) the representations and warranties in Sections 2.12 and 2.20
(and any Schedules thereto) shall survive the Closing Date for a period of
five (5) years, (c) the representations and warranties in Sections 2.1 - 2.4,
Article III and Sections 4.1 and 4.2 (and any Schedules thereto) shall
survive the Closing Date in perpetuity, and (d) the foregoing time
limitations shall not apply to any claims which have been the subject of a
Claims Notice prior to expiration of the applicable time period. Subject to
Section 8.5(j), no right of indemnification hereunder shall be limited by
reason of any investigation or audit conducted before or after the Closing or
the knowledge of any party of any breach of a representation, warranty,
covenant or agreement by the other party at any time, or the decision of any
party to complete the Closing.
ARTICLE IX
APPOINTMENT OF SELLER REPRESENTATIVE
9.1. Appointment of the Seller Representative; Enforcement of
Rights, Benefits and Remedies. (a) Each Seller hereby irrevocably constitutes
and appoints Roger C. Stull as the Seller Representative for the purpose of
performing and consummating the transactions contemplated by this Agreement.
The appointment of Roger C. Stull as the Seller Representative is coupled
with an interest and all authority hereby conferred shall be irrevocable and
shall not be terminated by any or all of the Sellers without the consent of
Newco (or, after the Closing, the Surviving Corporation), which consent may
be withheld for any reason, and the Seller Representative is hereby
authorized and directed to perform and consummate all of the transactions
contemplated by this Agreement. Not by way of limiting the authority of the
Seller Representative, each and all of the Sellers, for themselves and their
respective heirs, executors, administrators, successors and assigns, hereby
authorize the Seller Representative to:
(i) waive any provision of this Agreement which the
Seller Representative deems necessary or desirable;
57
(ii) execute and deliver on their behalf all
documents and instruments which may be executed and delivered pursuant to this
Agreement, including without limitation the shares of Existing Company Stock,
Penhall Class A Common Stock, Penhall Class B Common Stock, Class A Common
Stock, Class B Common Stock or Class C Common Stock and the stock powers with
respect thereto;
(iii) make and receive notices and other
communications pursuant to this Agreement and service of process in any legal
action or other proceeding arising out of or related to this Agreement or any of
the transactions hereunder;
(iv) settle any dispute, claim, action, suit or
proceeding arising out of or related to this Agreement or any of the
transactions hereunder;
(v) receive and distribute the Seller Consideration
and adjustments thereto;
(vi) appoint or provide for successor agents; and
(vii) pay expenses incurred or which may be incurred
by or on behalf of the Sellers in connection with this Agreement.
In the event of the inability, failure or refusal of Roger C. Stull to act as
the Seller Representative, or in the event of the death of Roger C. Stull or any
successor, the Sellers promptly shall appoint one of the Sellers as their agent
for purposes of this Article IX by action of Sellers who held a majority in
interest of the shares of Existing Company Stock. Failing such an appointment
within thirty (30) days of such inability, failure, refusal or death, Newco (or,
after the Closing, the Surviving Corporation) may, by written notice to the
Sellers at the last address of the Sellers applicable for purposes of Section
10.3 hereof, designate one of the Sellers as the Seller Representative.
(b) Any claim, action, suit, or other proceeding, whether in
law or equity, to enforce any right, benefit or remedy granted to the Sellers
under this Agreement may be asserted, brought, prosecuted or maintained only by
the Seller Representative. Any claim, action, suit or other proceeding, whether
in law or equity, to enforce any right, benefit or remedy granted under this
Agreement, including without limitation any right of indemnification provided in
Article VIII hereof, may be asserted, brought, prosecuted or maintained by a
Company Indemnified Party against the Sellers or the Seller Representative by
service or process on the Seller Representative and without the necessity of
serving process on, or otherwise joining or naming as a defendant in such claim,
action, suit or other proceeding, any Seller. With respect to any matter
contemplated by this Article IX, the Sellers shall be bound by any determination
in favor of or against the Seller Representative or the terms of any settlement
or release to which the Seller Representative shall become a party.
(c) The Seller Representative shall not be liable to any
Seller for any acts or omissions of the Seller Representative in connection with
his duties and obligations hereunder, except in the case of the Seller
Representative's gross negligence or willful misconduct. The
58
Sellers (excluding the Seller Representative and his affiliates), jointly and
severally, agree to indemnify and hold the Seller Representative harmless as to
any liability (other than on account of his respective indemnification
obligations under Article VIII) incurred by him to any person by reason of his
having accepted the same or in carrying out any of the terms hereof, and to
reimburse the Seller Representative for all of his costs and expenses,
including, among other things, reasonable attorneys' fees and costs, incurred by
reason of any matter as to which an indemnity is paid under this Section 9.1(c);
provided, however, that no indemnity need be paid in the case of the Seller
Representative's gross negligence or willful misconduct.
ARTICLE X
MISCELLANEOUS
10.1. Amendment and Modification. This Agreement may be amended, modified
supplemented or altered only by a written agreement signed by the parties hereto
at any time prior to the Closing with respect to any of the terms contained
herein.
10.2. Waiver of Compliance; Consents. Any failure of a party to
comply with any obligation, covenant, agreement or condition herein may be
waived, but only if such waiver is in writing and is signed by the party
against whom the waiver is to be effective. Such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent
or other failure. Whenever this Agreement requires or permits consent by or
on behalf of any party hereto, such consent shall be given in writing in a
manner consistent with the requirements for a waiver of compliance as set
forth in this Section 10.2.
10.3. Notices. All notices and other communications hereunder
shall be in writing (including by telecopy) and shall be deemed to have been
duly given when delivered in person (including by overnight courier), when
telecopied (with confirmation of transmission having been received) or three
(3) days after being mailed by registered or certified mail (postage prepaid,
return receipt requested), in each case to the respective parties at the
following addresses (or at such other address for a party as shall be
specified by like notice).
(a) if to Newco:
Penhall Acquisition Corp.
c/o Bruckmann, Rosser, Sherrill & Co., Inc.
126 East 56th Street
New York, New York 10022
59
Attn: Mr. Harold O. Rosser II
Facsimile No.: (212) 521-3707
with a copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19102
Attn: G. Daniel O'Donnell, Esq.
Facsimile No.: (215) 994-2222
(b) if to the Sellers:
Roger C. Stull
1440 Vista Del Mar
Fullerton, California 92631
Facsimile No.: (714) 871-0490
with a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067
Attn: Milton B. Hyman, Esq.
Facsimile No.: (310) 203-7199
(c) If to the Company or PCC:
Penhall International, Inc.
1801 Penhall Way
Anaheim, California 92803
Attn: Roger C. Stull
Facsimile No.: (714) 999-2493
10.4. Assignment; No Third Party Beneficiaries. This Agreement and
all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns,
but neither this Agreement nor any of the rights, interests or obligations
hereunder may be assigned by any of the parties hereto without the prior
written consent of the other parties hereto; provided that the Company or the
Surviving Corporation may assign its rights and obligations to any lender
providing financing in connection with the transactions contemplated hereby
(or in connection with any sale by the Surviving Corporation of its business
or any part thereof); provided that no such assignment shall relieve BRS or
the Surviving Corporation of its obligations under this Agreement. The
affiliates, directors, officers, employees and representatives of BRS, Newco
and the Surviving Corporation
60
are intended third party beneficiaries of Section 8.1 of this Agreement. The
affiliates, directors, officers, employees and representatives of the Sellers
are intended third party beneficiaries of Section 8.2 of this Agreement. Nothing
else contained in this Agreement is intended to confer upon any person
(including, without limitation, any employees) other than the parties hereto and
their respective successors and permitted assigns, and rights or remedies
hereunder.
10.5. Expenses. Except as otherwise expressly provided herein,
each of the parties hereto will bear its own expenses in connection with the
negotiation, preparation, execution and delivery of this Agreement and the
documents and instruments contemplated hereby and in connection with the
transactions contemplated hereby and thereby, including all fees and
disbursements of counsel, accountants, appraisers and other advisors retained
by such party; provided, however, that if the transactions contemplated by
this Agreement are consummated, (i) Roger C. Stull will pay a portion of the
fees payable to William L. Rogers and his affiliates (the "Rogers Fee") in an
amount equal to the product of the Rogers Fees multiplied by the
Non-Management Stockolders' (excluding Floyd E. Skor, B-R Investors/Penhall
I, L.P. and the Charles D. Steichen and Martha L. Steichen Trust) pre-Closing
ownership percentage of Existing Company Stock (without giving effect to the
transactions under the Exchange) and (ii) except as provided in the
immediately preceding clause (i), the Surviving Corporation shall bear the
expenses of the Sellers, BRS and Newco in addition to its own expenses. In
addition, the financial cost to BRS of the dilution from certain of the
Surviving Corporation's post-Closing management stock arrangements, in the
aggregate amount of $995,922, shall be borne one-third by the Roger C. Stull
and Ann R. Stull Trust, one-third by BRS and one-third by the Management
Stockholders. The Roger C. Stull and Ann R. Stull Trust's share of such cost,
$331,974, shall be subtracted from the Cash Merger Consideration payable to
it at Closing in full satisfaction of its obligations under the preceding
sentence.
10.6. Governing Law. This agreement, and all agreements, documents
and instruments delivered pursuant to hereto incorporated herein, unless
otherwise expressly provided therein, shall be governed by, and construed in
accordance with, the substantive laws of the State of California applicable
to agreements made and to be performed entirely within such state, without
reference to the conflicts of laws rules of such state.
10.7. Counterparts. This Agreement may be executed by the parties
hereto individually or in any combination, in one or more counterparts, each
of which shall be deemed an original and all of which shall together
constitute one and the same instrument.
10.8. Entire Agreement. This Agreement, including the documents
and instruments referred to herein or contemplated hereby, embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter hereof. There are no restriction, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth
or referred to herein. Except for that certain Letter Agreement (regarding
confidentiality) dated March 13, 1998 between the Company and BRS, this
Agreement supersedes all prior agreements and understandings between the
parties with respect to the subject matter hereof.
10.9. Arbitration. (a) If any dispute or controversy shall arise
among the parties hereto as to any matter arising out of or in connection
with this Agreement, the parties shall
61
attempt in good faith to resolve such controversy by mutual agreement. If such
dispute or controversy cannot be so resolved, it shall be resolved solely in
accordance with the provisions of this Section 10.9.
(b) Any dispute, controversy or claim between or among the
parties to this Agreement (the "Disputing Parties") arising out of or related to
this Agreement, or the breach thereof, shall be settled by a single arbitrator
by arbitration, conducted in the State of California, in accordance with the
Commercial Rules of the American Arbitration Association (the "AAA"). Such
arbitration shall be administered by the AAA only if one (or more) of the
Disputing Parties requests such administration. Arbitration shall be the
exclusive remedy for determining any such dispute, regardless of its nature.
Unless mutually agreed by the parties otherwise, any arbitration shall take
place in the City of Los Angeles, California.
(c) The arbitrator shall be selected by the Disputing Parties
within fifteen (15) days after demand for arbitration is made by a Disputing
Party. If the Disputing Parties are unable to agree on an arbitrator within such
period, then each Disputing Party shall select one arbitrator, and each such
arbitrator shall select a third arbitrator and the dispute shall be settled by
the panel consisting of such three arbitrators (such panel, or the single
arbitrator agreed to by both parties, as the case may be, being hereinafter
referred to as the "Arbiter"). Each arbitrator shall be an attorney licensed in
the State of California and shall possess substantive legal experience with
respect to the principal issues on dispute.
(d) This agreement to resolve any disputes by binding
arbitration shall extend to claims against any parent, subsidiary or affiliate
of each party, and when acting within such capacity, any officer, director,
shareholder, employee or agent of each party, or of any of the above, and shall
apply as well to claims arising out of state and federal statutes and local
ordinances as well as to claims arising under the common law. In the event of a
dispute subject to this paragraph the Disputing Parties shall be entitled to
reasonable discovery subject to the discretion of the Arbiter. The remedial
authority of the Arbiter shall be the same as, but no greater than, would be the
remedial power of a court having jurisdiction over the parties and their
dispute. In the event of a conflict between the Commercial Rules of the AAA and
these procedures, the provisions of these procedures shall govern.
(e) Except as may otherwise be agreed to in writing by the
Disputing Parties or as ordered by the Arbiter upon substantial justification,
the hearings of the dispute shall be held and concluded within ninety (90) days
of submission of the dispute to arbitration. The Arbiter shall render its final
award within thirty (30) days following closing of the record. The Arbiter shall
state the factual and legal basis for the award. The decision of the Arbiter
shall be final and binding, and no appeal shall be permitted therefrom. Final
judgment may be entered upon such an award in any State or Federal court having
the arbitration jurisdiction thereof, but entry of such judgment shall not be
required to make such award effective.
(f) Any filing or administration fees shall be borne
initially by the Disputing Party requesting administration by the AAA. If more
than one Disputing Party requests such administration, the fees shall be borne
initially by the party incurring such fees as provided by the rules of the AAA.
The initial fees and costs of the Arbiter shall be borne equally between the
62
Disputing Parties. The prevailing party in such arbitration, as determined by
the Arbiter, and in any enforcement or other court proceedings, shall be
entitled to the extent permitted by law, to reimbursement from the other party
for all of the prevailing party's costs (including but not limited to the
Arbiter's compensation), expenses, and attorneys' fees.
(g) Nothing in this Section 10.9 shall limit any right that
any party may otherwise have to seek to obtain (i) preliminary injunctive relief
in order to preserve the status quo pending the disposition of any such
arbitration proceeding or (ii) temporary or permanent injunctive relief from any
breach of any provision of this Agreement.
10.10. Severability. If any provision or provisions of this
Agreement or of any of the documents or instruments delivered pursuant
hereto, or any portion of any provision hereof or thereof, shall be deemed
invalid or unenforceable pursuant to a final determination of any court of
competent jurisdiction or as a result of future legislative action, such
determination or action shall be construed so as not to affect the validity
or enforceability hereof or thereof and shall not affect the validity or
effect of any other portion hereof or thereof.
10.11. Arm Length Contract. This Agreement has been negotiated "at
arms length" by the parties, each represented by counsel of its choice and
each having an equal opportunity to participate in the drafting of the
provisions hereof. Accordingly, in construing the provisions of this
Agreement no party shall be presumed or deemed to be the "drafter" or
"preparer" of the same.
10.12. Headings; Interpretative Provisions. (a) The headings of the
various Articles and Sections of this Agreement have been inserted for the
purpose of convenience of reference only, and shall not be deemed in any manner
to modify, explain, enlarge or restrict any of the provisions of this Agreement.
(b) When reference is made in this Agreement to an Article or
Section or Schedule, such reference shall be to an Article, Section or Schedule
of this Agreement unless otherwise indicated. Whenever the words "included",
"includes" or "including" (or any other tense or variation of the word
"include") are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". As used in this Agreement, the auxiliary verbs
"will" and "shall" are mandatory, and the auxiliary verb "may" is permissive
(and, by extension, is prohibitive when used negatively, as a denial of
permission). All accounting terms used but not otherwise defined in this
Agreement shall have the meanings determined by GAAP. The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. The definitions contained in this Agreement are applicable to
the singular as well as to the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any document or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes.
63
(c) Whenever a representation or warranty is stated to be
based on the "knowledge of the Company", the "Company's knowledge" or a similar
qualification, such phrase refers to whether any of the Company's Senior
Management (as hereafter defined) has actual knowledge, after due inquiry, of
the matters involved. For purposes of this Agreement, the Company's "Senior
Management" consists of C. George Bush, Martin Houge, David S. Neal, Robert
Norling, Renee O'Brien, Bruce Repchinuck, John Sawyer, Floyd Skor, Charles D.
Steichen, Roger C. Stull and Bruce Varney.
(d) Any matter disclosed by the Company or the Sellers to BRS
and Newco in any disclosure Schedule shall be deemed to be disclosed with
respect to any other Schedule so long as the relevance of the matter to such
other Schedule is readily apparent from the disclosure of the matter that
appears in the Schedule where it is disclosed.
(e) Reasonable or Best Efforts. Whenever a covenant requires
a party to use its "best efforts," "reasonable efforts," "reasonable best
efforts" or "commercially reasonable efforts" to do something or cause something
to occur, such party shall be deemed to have performed such covenant if it used
the requisite efforts regardless of whether such efforts were successful.
10.13. Time is of the Essence. Time is of the essence in the
performance of this Agreement.
10.14. Golden Parachute Approval Requirement. Prior to execution
of the Compensation Agreement, the Sellers shall have caused the shareholder
approval requirements set forth in Section 280G(b)(5) of the Code to be
satisfied with respect to all payments incident to the transactions under the
Compensation Agreement to any "disqualified individual" as defined in Section
280G(c) of the Code.
64
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.
PENHALL ACQUISITION CORP.
By: /s/ Harold O. Rosser II
-----------------------------------------
Name: Harold O. Rosser II
Title:
BRUCKMANN, ROSSER, SHERRILL & CO., L.P.
By: BRS Partners, Limited Partnership,
the general partner
By: BRSE Associates, Inc., its general partner
By: /s/ Harold O. Rosser II
-----------------------------------------
Name: Harold O. Rosser II
Title:
PENHALL INTERNATIONAL, INC.
By: /s/ Roger C. Stull
-----------------------------------------
Name: Roger C. Stull
Title: President
PHOENIX CONCRETE CUTTING, INC.
By: /s/ C. George Bush
-----------------------------------------
Name: C. George Bush
Title: President
65
"MANAGEMENT STOCKHOLDERS"
/s/ Gary T. Bush
-----------------------------------------
Gary T. Bush
/s/ C. George Bush
-----------------------------------------
C. George Bush
/s/ Scott E. Campbell
-----------------------------------------
Scott E. Campbell
/s/ David A. Ellison
-----------------------------------------
David A. Ellison
/s/ Alfred R. Fenton
-----------------------------------------
Alfred R. Fenton
/s/ Vincent M. Gutierrez
-----------------------------------------
Vincent M. Gutierrez
/s/ Lawrence E. Henkels
-----------------------------------------
Lawrence E. Henkels
/s/ David P. Henning
-----------------------------------------
David P. Henning
/s/ Jack S. Hobbs
-----------------------------------------
Jack S. Hobbs
/s/ Richard M. Lawler
-----------------------------------------
Richard M. Lawler
/s/ Alan G. Lowry
-----------------------------------------
Alan G. Lowry
/s/ Randel E. Mathews
-----------------------------------------
Randel E. Mathews
/s/ Leif McAfee
-----------------------------------------
Leif McAfee
/s/ Joseph P. Morello
-----------------------------------------
Joseph P. Morello
/s/ David S. Neal
-----------------------------------------
David S. Neal
NORLING LIVING TRUST
DATED OCTOBER 5, 1995
By: /s/ Robert C. Norling
------------------------------------
Robert C. Norling
its: Trustee
By: /s/ Karen D. Norling
------------------------------------
Karen D. Norling
its: Trustee
/s/ Richard S. Reel
------------------------------------
Richard S. Reel
MICHAEL BRUCE REPCHINUCK
REVOCABLE TRUST
By: /s/ Michael Bruce Repchinuck
------------------------------------
Michael Bruce Repchinuck
its: Trustee
/s/ John T. Sawyer
------------------------------------
John T. Sawyer
J&J INVESTMENTS, LLC
A Nevada limited liability company
By: /s/ Brian Sweeney
------------------------------------
Brian Sweeney
its: General Manager
/s/ Kevin Sheridan
------------------------------------
Kevin Sheridan
/s/ Bruce F. Varney
------------------------------------
Bruce F. Varney
"NON-MANAGEMENT STOCKHOLDERS"
NATIONAL CHRISTIAN CHARITABLE FOUNDATION, INC.,
A 501(3) PUBLIC NONPROFIT GEORGIA CORPORATION
By: /s/ Terrill A. Parker
-----------------------------------------
Terrill A. Parker
General Counsel
THE SERVANTS' CHARITABLE TRUST,
A 501(3) Charitable Trust
By: /s/ Roger C. Stull
-----------------------------------------
Roger C. Stull
Trustee
ROGER C. STULL and ANN R. STULL, TRUSTEES UNDER
DECLARATION OF TRUST DATED JANUARY 19, 1984
By: /s/ Roger C. Stull
-----------------------------------------
Roger C. Stull
Trustee
66
B-R INVESTORS/PENHALL I, L.P., a California
limited partnership
By: B-R Investors, Inc., a California
corporation, its general partner
By: /s/ William L. Rogers
-----------------------------------------
William L. Rogers
President
/s/ Floyd E. Skor by Roger C. Stull,
attorney-in-fact
-----------------------------------------
Floyd E. Skor
CHARLES D. STEICHEN AND MARTHA L. STEICHEN TRUST
dated September 21, 1989
By: /s/ Charles Steichen
-----------------------------------------
Charles D. Steichen
Trustee
GREGORY J. STULL FAMILY TRUST
By: /s/ Gregory J. Stull
---------------------------------------
Gregory J. Stull
Trustee
KEVIN C. MCTAVISH FAMILY TRUST
By: /s/ Kimberlie R. McTavish
---------------------------------------
Kimberlie R. McTavish
Trustee
CHRISTINE MARIE STULL TRUST
By: /s/ Christine Marie (Stull) Kiser
---------------------------------------
Christine Marie (Stull) Kiser
Trustee
/s/ Nicole Lynn Stull
---------------------------------------
Nicole Lynn Stull
67