SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, COMFORT SYSTEMS
USA, INC. HAS DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT THERETO TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY
OF HOUSTON, STATE OF TEXAS, ON MARCH 26, 1997.
COMFORT SYSTEMS USA, INC.
By /s/ FRED M. FERREIRA
FRED M. FERREIRA
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
each of Fred M. Ferreira and J. Gordon Beittenmiller with full power to act
without the other, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities (until revoked in writing) to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
to file the same, together with all exhibits thereto and other documents in
connection therewith, with the SEC, to sign any and all applications,
registration statements, notices and other documents necessary or advisable to
comply with the applicable state securities laws, and to file the same, together
with all other documents in connection therewith, with the appropriate state
securities authorities, granting unto said attorneys-in-fact and agents or any
of them or their or his substitutes or substitute, full power and authority to
perform and do each and every act and thing necessary and advisable as fully to
all intents and purposes as he might or could perform and do in person, thereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitutes or substitute, may lawfully do or cause to be
done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT THERETO HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE INDICATED CAPACITIES ON MARCH 26, 1997.
SIGNATURE TITLE
- --------------------------------------- --------------------------------------
/s/ FRED M. FERREIRA Chairman of the Board, Chief Executive
FRED M. FERREIRA Officer and President
/s/ J. GORDON BEITTENMILLER Senior Vice President, Chief Financial
J. GORDON BEITTENMILLER Officer and Director
/s/ STEVEN S. HARTER Director
STEVEN S. HARTER
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EXHIBIT 2.1
AGREEMENT AND PLAN OF ORGANIZATION
dated as of the 18th day of March, 1997
by and among
COMFORT SYSTEMS USA, INC.
ACCURATE ACQUISITION CORP.
(a subsidiary of Comfort Systems USA, Inc.)
ACCURATE AIR SYSTEMS, INC.
and
the STOCKHOLDER named herein
TABLE OF CONTENTS
Page
1. THE MERGER............................................................5
1.1 Delivery and Filing of Articles of Merger......................5
1.2 Effective Time of the Merger...................................5
1.3 Certificate of Incorporation, By-laws and Board of
Directors of Surviving Corporation.............................6
1.4 Certain Information With Respect to the Capital Stock
of the COMPANY, CSI and NEWCO..................................7
1.5 Effect of Merger...............................................7
2. CONVERSION OF STOCK...................................................8
2.1 Manner of Conversion...........................................8
3. DELIVERY OF MERGER CONSIDERATION......................................9
4. CLOSING..............................................................10
5. REPRESENTATIONS AND WARRANTIES OF COMPANY
AND STOCKHOLDER......................................................11
(A) Representations and Warranties of COMPANY and STOCKHOLDER.....11
5.1 Due Organization..............................................12
5.2 Authorization.................................................12
5.3 Capital Stock of the COMPANY..................................13
5.4 Transactions in Capital Stock, Organization Accounting........13
5.5 No Bonus Shares...............................................14
5.6 Subsidiaries..................................................14
5.7 Predecessor Status; etc.......................................14
5.8 Spin-off by the COMPANY.......................................14
5.9 Financial Statements..........................................14
5.10 Liabilities and Obligations...................................15
5.11 Accounts and Notes Receivable.................................16
5.12 Permits and Intangibles.......................................16
5.13 Environmental Matters.........................................17
5.14 Personal Property.............................................18
5.15 Significant Customers; Material Contracts and Commitments.....18
5.16 Real Property.................................................19
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5.17 Insurance.....................................................20
5.18 Compensation; Employment Agreements; Organized Labor Matters..20
5.19 Employee Plans................................................21
5.20 Compliance with ERISA.........................................22
5.21 Conformity with Law; Litigation...............................23
5.22 Taxes.........................................................24
5.23 No Violations.................................................25
5.24 Government Contracts..........................................25
5.25 Absence of Changes............................................25
5.26 Deposit Accounts; Powers of Attorney..........................27
5.27 Validity of Obligations.......................................27
5.28 Relations with Governments....................................28
5.29 Disclosure....................................................28
5.30 Prohibited Activities.........................................29
(B) Representations and Warranties of STOCKHOLDER.................29
5.31 Authority; Ownership..........................................30
5.32 Preemptive Rights.............................................30
5.33 No Intention to Dispose of CSI Stock..........................30
6. REPRESENTATIONS OF CSI and NEWCO.....................................30
6.1 Due Organization..............................................31
6.2 Authorization.................................................31
6.3 Capital Stock of CSI and NEWCO................................31
6.4 Transactions in Capital Stock, Organization Accounting........32
6.5 Subsidiaries..................................................32
6.6 Financial Statements..........................................32
6.7 Liabilities and Obligations...................................33
6.8 Conformity with Law; Litigation...............................33
6.9 No Violations.................................................33
6.10 Validity of Obligations.......................................34
6.11 CSI Stock.....................................................34
6.12 No Side Agreements............................................34
6.13 Business; Real Property; Material Agreements..................34
6.14 Taxes.........................................................35
6.15 Absence of Changes............................................35
6.16 Validity of Obligations.......................................36
6.17 Disclosure....................................................37
7. COVENANTS PRIOR TO CLOSING...........................................37
7.1 Access and Cooperation; Due Diligence.........................37
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7.2 Conduct of Business Pending Closing...........................38
7.3 Prohibited Activities.........................................39
7.4 No Shop.......................................................40
7.5 Notice to Bargaining Agents...................................41
7.6 Agreements....................................................41
7.7 Notification of Certain Matters...............................41
7.8 Amendment of Schedules........................................42
7.9 Cooperation in Preparation of Registration Statement..........43
7.10 Final Financial Statements....................................44
7.11 Further Assurances............................................44
7.12 Authorized Capital............................................44
7.13 Compliance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "Hart-Scott Act")...............45
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDER
AND COMPANY..........................................................45
8.1 Representations and Warranties; Performance of Obligations....46
8.2 Satisfaction..................................................46
8.3 No Litigation.................................................46
8.4 Opinion of Counsel............................................47
8.5 Registration Statement........................................47
8.6 Consents and Approvals........................................47
8.7 Good Standing Certificates....................................47
8.8 No Material Adverse Change....................................47
8.9 Closing of IPO................................................47
8.10 Secretary's Certificate.......................................48
8.11 Employment Agreements.........................................48
8.12 Tax Matters...................................................48
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF CSI AND NEWCO.................48
9.1 Representations and Warranties; Performance of Obligations....49
9.2 No Litigation.................................................49
9.3 Secretary's Certificate.......................................49
9.4 No Material Adverse Effect....................................49
9.5 STOCKHOLDER'S Release.........................................50
9.6 Satisfaction..................................................50
9.7 Termination of Related Party Agreements.......................50
9.8 Opinion of Counsel............................................50
9.9 Consents and Approvals........................................50
9.10 Good Standing Certificates....................................51
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9.11 Registration Statement........................................51
9.12 Employment Agreements.........................................51
9.13 Closing of IPO................................................51
9.14 FIRPTA Certificate............................................51
9.15 Real Property.................................................51
10. COVENANTS OF CSI AND THE STOCKHOLDER AFTER CLOSING...................51
10.1 Release From Guarantees; Repayment of Certain Obligations.....51
10.2 Preservation of Tax and Accounting Treatment..................52
10.3 Preparation and Filing of Tax Returns.........................52
10.4 Directors.....................................................53
10.5 Preservation of Employee Benefit Plans........................54
10.6 Dividends.....................................................54
11. INDEMNIFICATION......................................................55
11.1 General Indemnification by the STOCKHOLDER....................55
11.2 Indemnification by CSI........................................56
11.3 Third Person Claims...........................................56
11.4 Exclusive Remedy..............................................58
11.5 Limitations on Indemnification................................58
12. TERMINATION OF AGREEMENT.............................................59
12.1 Termination...................................................59
12.2 Liabilities in Event of Termination...........................60
13. NONCOMPETITION.......................................................60
13.1 Prohibited Activities.........................................60
13.2 Damages.......................................................62
13.3 Reasonable Restraint..........................................62
13.4 Severability; Reformation.....................................62
13.5 Independent Covenant..........................................62
13.6 Materiality...................................................63
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION............................63
14.1 STOCKHOLDER...................................................63
14.2 CSI AND NEWCO.................................................64
14.3 Damages.......................................................65
14.4 Survival......................................................65
15. TRANSFER RESTRICTIONS................................................65
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15.1 Transfer Restrictions.........................................65
16. FEDERAL SECURITIES ACT REPRESENTATIONS...............................66
16.1 Compliance with Law...........................................66
16.2 Economic Risk; Sophistication.................................66
17. REGISTRATION RIGHTS..................................................67
17.1 Piggyback Registration Rights.................................67
17.2 Demand Registration Rights....................................68
17.3 Registration Procedures.......................................69
17.4 Underwriting Agreement........................................70
17.5 Availability of Rule 144......................................70
17.6 Rule 144 Reporting............................................70
18. GENERAL..............................................................71
18.1 Cooperation...................................................71
18.2 Successors and Assigns........................................71
18.3 Entire Agreement..............................................71
18.4 Counterparts..................................................72
18.5 Brokers and Agents............................................72
18.6 Expenses......................................................72
18.7 Notices.......................................................73
18.8 Governing Law.................................................74
18.9 Survival of Representations and Warranties....................74
18.10 Exercise of Rights and Remedies...............................74
18.11 Time..........................................................74
18.12 Reformation and Severability..................................74
18.13 Remedies Cumulative...........................................75
18.14 Captions......................................................75
18.15 Amendments and Waivers........................................75
ANNEXES
ANNEX I - FORM OF ARTICLES OF MERGER
ANNEX II - CERTIFICATE OF INCORPORATION AND BY-LAWS OF CSI AND NEWCO
ANNEX III - CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV - STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
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ANNEX V - STOCKHOLDERS AND STOCK OWNERSHIP OF CSI
ANNEX VI - FORM OF OPINION OF COUNSEL TO CSI
ANNEX VII - FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS
ANNEX VIII - FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
the 18th day of March, 1997, by and among COMFORT SYSTEMS USA, Inc., a Delaware
corporation ("CSI"), ACCURATE ACQUISITION CORP., a Delaware corporation
("NEWCO"), ACCURATE AIR SYSTEMS, INC., a Texas corporation (the "COMPANY"), and
THOMAS J. BEATY (the "STOCKHOLDER"). The STOCKHOLDER is the only stockholder of
the COMPANY.
WHEREAS, NEWCO is a corporation duly organized and existing under
the laws of the State of Delaware, having been incorporated on March 4,
1997, solely for the purpose of completing the transactions set forth
herein, and is a wholly-owned subsidiary of CSI, a corporation organized
and existing under the laws of the State of Delaware;
WHEREAS, the respective Boards of Directors of NEWCO and the
COMPANY (which together are hereinafter collectively referred to as
"Constituent Corporations") deem it advisable and in the best interests
of the Constituent Corporations and their respective stockholders that
NEWCO merge with and into the COMPANY pursuant to this Agreement and the
applicable provisions of the laws of the States of Delaware and Texas;
WHEREAS, CSI is entering into other separate agreements
substantially similar to this Agreement (the "Other Agreements"), each
of which is entitled "Agreement and Plan of Organization," with each of
the other Founding Companies (as defined herein) and their respective
stockholders in order to acquire additional heating, ventilating, air
conditioning and related services companies;
WHEREAS, this Agreement, the Other Agreements and the IPO of CSI
Stock constitute the "CSI Plan of Organization;"
WHEREAS, the STOCKHOLDER and the Boards of Directors and the
stockholders of CSI, each of the Other Founding Companies and each of
the subsidiaries of CSI that are
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parties to the Other Agreements have approved and adopted the CSI Plan
of Organization as an integrated plan pursuant to which the STOCKHOLDER
and the stockholders of each of the other Founding Companies will
transfer the capital stock of each of the Founding Companies to CSI and
the STOCKHOLDER and the stockholders of each of the other Founding
Companies and the public will acquire the stock of CSI (but not cash or
other property) as a tax-free transfer of property under Section 351 of
the Internal Revenue Code of 1986, as amended;
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Board of Directors of
the COMPANY has approved this Agreement as part of the CSI Plan of
Organization in order to transfer the capital stock of the COMPANY to
CSI;
WHEREAS, unless the context otherwise requires, capitalized terms
used in this Agreement or in any schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of
this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the COMPANY, any subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean NEWCO and each of the other Delaware
companies wholly-owned by CSI prior to the Funding and Consummation Date.
"Affiliates" has the meaning set forth in Section 5.8.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger substantially in the forms attached as Annex I hereto
or with such other changes therein as may be required by applicable state laws.
"Balance Sheet Date" shall mean December 31, 1996.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
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"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second
recital of this Agreement.
"Effective Time of the Merger" shall mean the time as of which the
Merger becomes effective, which shall, in any case, occur on the Funding and
Consummation Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" means:
Accurate Air Systems, Inc., a Texas corporation,
Atlas Comfort Services USA, Inc., a Texas corporation (formerly
Atlas Interest, Inc.),
Contract Service, Inc., a Utah corporation,
Eastern Heating & Cooling, Inc., a New York corporation, and
Eastern Refrigeration Co., Inc., a New York corporation,
Freeway Heating & Air Conditioning, Inc., a Utah corporation,
Quality Air Heating & Cooling, Inc., a Michigan corporation,
Seasonair, Inc., a Maryland corporation,
Standard Heating & Air Conditioning Company, Inc., an Alabama
corporation,
S.M. Lawrence Company, Inc., a Tennessee corporation, and
Lawrence Service, Inc., a Tennessee corporation,
Tech Heating and Air Conditioning, Inc., an Ohio corporation,
and Tech Mechanical, Inc., an Ohio corporation,
Tri-City Mechanical, Inc., an Arizona corporation, and
Western Building Services, Inc., a Colorado corporation.
"Funding and Consummation Date" has the meaning set forth in Section 4.
"CSI" has the meaning set forth in the first paragraph of this
Agreement.
"CSI Charter Documents" has the meaning set forth in Section 6.1.
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"CSI Stock" means the common stock, par value $.01 per share, of CSI.
"IPO" means the initial public offering of CSI Stock pursuant to the
Registration Statement as referenced in Section 9.13.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.23.
"Merger" means the merger of NEWCO with and into the COMPANY pursuant to
this Agreement and the applicable provisions of the laws of the State of
Delaware and other applicable state laws.
"NEWCO" has the meaning set forth in the first paragraph of this
Agreement.
"NEWCO STOCK" means the common stock, par value $.01 per share, of
NEWCO.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Plans" has the meaning set forth in Section 5.19.
"Pricing" means the date of determination by CSI and the Underwriters of
the public offering price of the shares of CSI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Registration Statement" means that certain registration statement on
Form S-1 to be filed with the SEC covering the shares of CSI Stock to be issued
in the IPO.
"Relevant Group" means the COMPANY and any affiliated, combined,
consolidated, unitary or similar group of which the COMPANY is or was a member.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"STOCKHOLDER" has the meaning set forth in the first paragraph of this
Agreement.
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"Surviving Corporation" shall mean the COMPANY as the surviving party in
the Merger.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, or other taxes, assessments, duties,
fees, levies or other governmental charges of any nature whatever, whether
disputed or not, together with any interest, penalties, additions to tax or
additional amounts with respect thereto.
"Underwriters" means the prospective underwriters identified in the
Registration Statement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent
Corporations will cause the Articles of Merger to be signed, verified and filed
with the Secretary of State of the State of Delaware and the Secretary of State
of the State of Texas and stamped receipt copies of each such filing to be
delivered to CSI on or before the Funding and Consummation Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger,
NEWCO shall be merged with and into the COMPANY in accordance with the Articles
of Merger, the separate existence of NEWCO shall cease, the COMPANY shall be the
surviving party in the Merger and the COMPANY is sometimes hereinafter referred
to as the Surviving Corporation. The Merger will be effected in a single
transaction.
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of the COMPANY then in
effect shall be the Certificate of Incorporation of the Surviving
Corporation until changed as provided by law;
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(ii) the By-laws of NEWCO then in effect shall become the By-laws
of the Surviving Corporation; and subsequent to the Effective Time of
the Merger, such By-laws shall be the By-laws of the Surviving
Corporation until they shall thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of the persons who are on the Board of Directors of the COMPANY
immediately prior to the Effective Time of the Merger, provided that
Gordie Beittenmiller shall be elected as a director of the Surviving
Corporation effective as of the Effective Time of the Merger; the Board
of Directors of the Surviving Corporation shall hold office subject to
the provisions of the laws of the State of Texas and of the Certificate
of Incorporation and By-laws of the Surviving Corporation; and
(iv) the officers of the COMPANY immediately prior to the
Effective Time of the Merger shall continue as the officers of the
Surviving Corporation in the same capacity or capacities, and effective
upon the Effective Time of the Merger Gordie Beittenmiller shall be
appointed as a vice president of the Surviving Corporation and Milburn
E. Honeycutt shall be appointed as an Assistant Secretary of the
Surviving Corporation, each of such officers to serve, subject to the
provisions of the Certificate of Incorporation and By-laws of the
Surviving Corporation, until his or her successor is duly elected and
qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY, CSI AND NEWCO. The respective designations and numbers of outstanding
shares and voting rights of each class of outstanding capital stock of the
COMPANY, CSI and NEWCO as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
outstanding capital stock of the COMPANY is as set forth on Schedule 5.3
hereto;
(ii) immediately prior to the Funding and Consummation Date, the
authorized capital stock of CSI will consist of 50,000,000 shares of CSI
Stock, of which the number of issued and outstanding shares will be set
forth in the Registration Statement, and 5,000,000
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shares of preferred stock, $.01 par value, of which no shares will be
issued and outstanding and 2,969,912 shares of Restricted Voting Common
Stock, $.01 par value, all of which will be issued and outstanding
except as otherwise set forth in the Registration Statement; and
(iii) as of the date of this Agreement, the authorized capital
stock of NEWCO consists of 1,000 shares of NEWCO Stock, of which one
hundred (100) shares are issued and outstanding.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL") and the law of the
State of Texas. Except as herein specifically set forth, the identity,
existence, purposes, powers, objects, franchises, privileges, rights and
immunities of the COMPANY shall continue unaffected and unimpaired by the Merger
and the corporate franchises, existence and rights of NEWCO shall be merged with
and into the COMPANY, and the COMPANY, as the Surviving Corporation, shall be
fully vested therewith. At the Effective Time of the Merger, the separate
existence of NEWCO shall cease and, in accordance with the terms of this
Agreement, the Surviving Corporation shall possess all the rights, privileges,
immunities and franchises, of a public, as well as of a private, nature, and all
property, real, personal and mixed, and all debts due on whatever account,
including subscriptions to shares, and all taxes, including those due and owing
and those accrued, and all other choses in action, and all and every other
interest of or belonging to or due to the COMPANY and NEWCO shall be taken and
deemed to be transferred to, and vested in, the Surviving Corporation without
further act or deed; and all property, rights and privileges, powers and
franchises and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the COMPANY and NEWCO;
and the title to any real estate, or interest therein, whether by deed or
otherwise, under the laws of the state of incorporation vested in the COMPANY
and NEWCO, shall not revert or be in any way impaired by reason of the Merger.
Except as otherwise provided herein, the Surviving Corporation shall thenceforth
be responsible and liable for all the liabilities and obligations of the COMPANY
and NEWCO and any claim existing, or action or proceeding pending, by or against
the COMPANY or
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NEWCO may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of the COMPANY or NEWCO shall be impaired by the
Merger, and all debts, liabilities and duties of the COMPANY and NEWCO shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock,
issued and outstanding immediately prior to the Effective Time of the Merger,
respectively, into shares of (x) CSI Stock and (y) common stock of the Surviving
Corporation, respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the
Merger and without any action on the part of the holder thereof,
automatically shall be deemed to represent (1) the right to receive the
number of shares of CSI Stock set forth on Annex III hereto with respect
to such holder and (2) the right to receive the amount of cash set forth
on Annex III hereto with respect to such holder;
(ii) all shares of COMPANY Stock that are held by the COMPANY as
treasury stock shall be canceled and retired and no shares of CSI Stock
or other consideration shall be delivered or paid in exchange therefor;
and
(iii) each share of NEWCO Stock issued and outstanding
immediately prior to the Effective Time of the Merger, shall, by virtue
of the Merger and without any action on the part of CSI, automatically
be converted into one fully paid and non-assessable share of common
stock of the Surviving Corporation which shall constitute all of the
issued and
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outstanding shares of common stock of the Surviving Corporation
immediately after the Effective Time of the Merger.
All CSI Stock received by the STOCKHOLDER pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all the other shares of outstanding CSI
Stock by reason of the provisions of the Certificate of Incorporation of CSI or
as otherwise provided by the Delaware GCL. All voting rights of such CSI Stock
received by the STOCKHOLDER shall be fully exercisable by the STOCKHOLDER and
the STOCKHOLDER shall not be deprived nor restricted in exercising those rights.
At the Effective Time of the Merger, CSI shall have no class of capital stock
issued and outstanding other than the CSI Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 On the Funding and Consummation Date the STOCKHOLDER, who is the
holder of all outstanding certificates representing shares of COMPANY Stock,
shall, upon surrender of such certificates, receive the respective number of
shares of CSI Stock and the amount of cash set forth on Annex III hereto, said
cash to be payable by certified check.
3.2 The STOCKHOLDER shall deliver to CSI at the Closing the certificates
representing COMPANY Stock, duly endorsed in blank by the STOCKHOLDER, or
accompanied by blank stock powers, and with all necessary transfer tax and other
revenue stamps, acquired at the STOCKHOLDER'S expense, affixed and canceled. The
STOCKHOLDER agrees promptly to cure any deficiencies with respect to the
endorsement of the stock certificates or other documents of conveyance with
respect to such COMPANY Stock or with respect to the stock powers accompanying
any COMPANY Stock.
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4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary
to prepare to (i) effect the Merger (including, if permitted by applicable state
law, the filing with the appropriate state authorities of the Articles of Merger
which shall become effective at the Effective Time of the Merger) and (ii)
effect the conversion and delivery of shares referred to in Section 3 hereof;
provided, that such actions shall not include the actual completion of the
Merger or the conversion and delivery of the shares and certified check(s)
referred to in Section 3 hereof, each of which actions shall only be taken upon
the Funding and Consummation Date as herein provided. In the event that there is
no Funding and Consummation Date and this Agreement terminates, CSI hereby
covenants and agrees to do all things required by Delaware law and all things
which counsel for the COMPANY advise CSI are required by applicable laws of the
State of Texas in order to rescind the merger effected by the filing of the
Articles of Merger as described in this Section. The taking of the actions
described in clauses (i) and (ii) above (the "Closing") shall take place on the
closing date (the "Closing Date") at the offices of Bracewell & Patterson,
L.L.P., South Tower Pennzoil Place, 711 Louisiana, Suite 2900, Houston, Texas
77002. On the Funding and Consummation Date (x) the Articles of Merger shall be
or shall have been filed with the appropriate state authorities so that they
shall be or, as of 8:00 a.m. EASTERN STANDARD TIME on the Funding and
Consummation Date, shall become effective and the Merger shall thereby be
effected, (y) all transactions contemplated by this Agreement, including the
conversion and delivery of shares, the delivery of a certified check or checks
in an amount equal to the cash portion of the consideration which the
STOCKHOLDER shall be entitled to receive pursuant to the Merger referred to in
Section 3 hereof and (z) the closing with respect to the IPO shall occur and be
deemed to be completed. The date on which the actions described in the preceding
clauses (x), (y) and (z) occurs shall be referred to as the "Funding and
Consummation Date." Except as otherwise provided in Section 12 hereof, during
the period from the Closing Date to the Funding and Consummation Date, this
Agreement may only be terminated by the parties if the underwriting agreement in
respect of the IPO is terminated pursuant to the terms
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of such agreement. This Agreement shall in any event terminate if the Funding
and Consummation Date has not occurred within 15 business days of the Closing
Date. Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDER
(A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDER.
Each of the COMPANY and the STOCKHOLDER jointly and severally represent
and warrant that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Closing and the Funding and Consummation
Date, and that such representations and warranties shall survive the Funding and
Consummation Date for a period of twelve months (the last day of such period
being the "Expiration Date"), except that (i) the warranties and representations
set forth in Section 5.22 hereof shall survive until such time as the
limitations period has run for all tax periods ended on or prior to the Funding
and Consummation Date, which shall be deemed to be the Expiration Date for
Section 5.22 and (ii) solely for purposes of determining whether a claim for
indemnification under Section 11.1(iii) hereof has been made on a timely basis,
and solely to the extent that in connection with the IPO, CSI actually incurs
liability under the 1933 Act, the 1934 Act, or any other Federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes. For purposes of this
Section 5, the term COMPANY shall mean and refer to the COMPANY and all of its
subsidiaries, if any.
5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and has the requisite power and authority to carry on its
business as it is now being conducted. The COMPANY is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, except (i) as set forth on Schedule 5.1 or (ii) where the failure to
be so authorized or qualified would not have a material
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adverse effect on the business, operations, properties, assets or condition
(financial or otherwise), of the COMPANY taken as a whole (as used herein with
respect to the COMPANY, or with respect to any other person, a "Material Adverse
Effect"). Schedule 5.1 sets forth the jurisdiction in which the COMPANY is
incorporated and contains a list of all jurisdictions in which the COMPANY is
authorized or qualified to do business. True, complete and correct copies of the
Certificate of Incorporation and By-laws, each as amended, of the COMPANY (the
"Charter Documents") are all attached hereto as Schedule 5.1. The stock records
of the COMPANY, as heretofore made available to CSI, are correct and complete in
all material respects. There are no minutes in the possession of the COMPANY or
the STOCKHOLDER which have not been made available to CSI, and all of such
minutes are correct and complete in all respects. The most recent minutes of the
COMPANY, which are dated no earlier than ten business days prior to the date
hereof, affirm and ratify all prior acts of the COMPANY, and of its officers and
directors on behalf of the COMPANY.
5.2 AUTHORIZATION. (i) The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to the terms of
this Agreement and (ii) the COMPANY has the full legal right, power and
authority to enter into this Agreement and the Merger, subject to any required
approval of the shareholders and the Board of Directors of the Company described
on Schedule 5.2, executed copies of which are attached thereto.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
COMPANY is as set forth in Section 1.4(i). All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDER in the
amount set forth in Annex IV and further, except as set forth on Schedule 5.3,
are owned free and clear of all liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind. All of the
issued and outstanding shares of the capital stock of the COMPANY have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by the STOCKHOLDER and further, such shares were
offered, issued, sold and delivered by the COMPANY in compliance with all
applicable state and Federal laws concerning the issuance of
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securities. Further, none of such shares were issued in violation of any
preemptive rights of any past or present stockholder.
5.4 TRANSACTIONS IN CAPITAL STOCK, ORGANIZATION ACCOUNTING. Except as
set forth on Schedule 5.4, the COMPANY has not acquired any COMPANY Stock since
January 1, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant,
call, conversion right or commitment of any kind exists which obligates the
COMPANY to issue any of its authorized but unissued capital stock; (ii) the
COMPANY has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof; and (iii) neither
the voting stock structure of the COMPANY nor the relative ownership of shares
among any of its respective stockholders has been altered or changed in
contemplation of the Merger and/or the CSI Plan of Organization. Schedule 5.4
also includes complete and accurate copies of all stock option or stock purchase
plans, including a list of all outstanding options, warrants or other rights to
acquire shares of the COMPANY's stock.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses in
contemplation of the Merger or the CSI Plan of Organization.
5.6 SUBSIDIARIES. Except as set forth on Schedule 5.6, the COMPANY has
no subsidiaries. Except as set forth in Schedule 5.6 and except for any
corporations or entities with respect to which the COMPANY owns less than 1% of
the issued and outstanding stock, the COMPANY does not presently own, of record
or beneficially, or control, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity interest in any
corporation, association or business entity nor is the COMPANY, directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth in Schedule 5.7 is a listing of
all names of all predecessor companies of the COMPANY, including the names of
any entities acquired by the COMPANY (by stock purchase, merger or otherwise) or
owned by the COMPANY or from whom the COMPANY previously acquired material
assets, in any case, from the earliest date upon which
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any STOCKHOLDER acquired his or her stock in any COMPANY. Except as disclosed on
Schedule 5.7, the COMPANY has not been, within such period of time, a subsidiary
or division of another corporation or a part of an acquisition which was later
rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
COMPANY or any other person or entity that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the COMPANY ("Affiliates") since January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of
the following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's audited Balance Sheets as of December 31, 1996 and 1995
and June 30, 1995 and Statements of Operations, Shareholders' Equity and Cash
Flows for each of the years ended June 30, 1994 and 1995, the six months ended
December 31, 1995 and the year ended December 31, 1996 (December 31, 1996 being
hereinafter referred to as the "Balance Sheet Date"). Such Financial Statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
thereon or on Schedule 5.9). Except as set forth on Schedule 5.9, such Balance
Sheets present fairly in all material aspects the financial position of the
COMPANY as of the dates indicated thereon, and such Statements of Operations,
Shareholders' Equity and Cash Flows present fairly in all material aspects the
results of operations for the periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to CSI an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date
of (i) all material liabilities of the COMPANY which are not reflected on the
balance sheet of the COMPANY at the Balance Sheet Date or otherwise reflected in
the COMPANY Financial Statements at the Balance Sheet Date which by their nature
would be required in accordance with GAAP to be reflected in the balance sheet,
and (ii) all loan agreements, indemnity or guaranty agreements, bonds,
mortgages, liens, pledges or other security agreements. Except as set forth on
Schedule 5.10, since the Balance Sheet Date the COMPANY has not incurred any
material liabilities of any kind, character and description, whether
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accrued, absolute, secured or unsecured, contingent or otherwise, other than
liabilities incurred in the ordinary course of business. The COMPANY has also
delivered to CSI on Schedule 5.10, in the case of those contingent liabilities
related to pending or threatened litigation, or other liabilities which are not
fixed or otherwise accrued or reserved, a good faith and reasonable estimate of
the maximum amount which the COMPANY reasonably expects will be payable. For
each such contingent liability or liability for which the amount is not fixed or
is contested, the COMPANY has provided to CSI the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(ii) the name of each court or agency before which such claim, suit
or proceeding is pending; and
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such
liability. If no estimate is provided, the estimate shall for
purposes of this Agreement be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to CSI an
accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the COMPANY, as of the Balance Sheet Date, including any such
amounts which are not reflected in the balance sheet as of the Balance Sheet
Date, and including receivables from and advances to employees and the
STOCKHOLDER. Except to the extent reflected on Schedule 5.11, such accounts,
notes and other receivables are collectible in the amounts shown on Schedule
5.11, net of reserves reflected in the balance sheet as of the Balance Sheet
Date.
5.12 PERMITS AND INTANGIBLES. The COMPANY and its employees hold all
licenses, franchises, permits and other governmental authorizations the absence
of any of which could have a Material Adverse Effect on the Company's business
and the COMPANY has delivered to CSI an
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accurate list and summary description (which is set forth on Schedule 5.12) of
all such licenses, franchises, permits and other governmental authorizations,
including permits, titles (including motor vehicle titles and current
registrations), fuel permits, licenses, franchises, certificates, trademarks,
trade names, patents, patent applications and copyrights owned or held by the
COMPANY or any of its employees (including interests in software or other
technology systems, programs and intellectual property) (it being understood and
agreed that a list of all environmental permits and other environmental
approvals is set forth on Schedule 5.13). To the knowledge of the COMPANY, the
licenses, franchises, permits and other governmental authorizations listed on
Schedules 5.12 and 5.13 are valid, and the COMPANY has not received any notice
that any governmental authority intends to cancel, terminate or not renew any
such license, franchise, permit or other governmental authorization. The COMPANY
has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in the licenses,
franchises, permits and other governmental authorizations listed on Schedules
5.12 and 5.13 and is not in violation of any of the foregoing except where such
non-compliance or violation would not have a Material Adverse Effect on the
COMPANY. Except as specifically provided in Schedule 5.12, the transactions
contemplated by this Agreement will not result in a default under or a breach or
violation of, or adversely affect the rights and benefits afforded to the
COMPANY by, any such licenses, franchises, permits or government authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, and
except where any failure to comply or action would not have a Material Adverse
Effect, (i) the COMPANY has complied with and is in compliance with all Federal,
state, local and foreign statutes (civil and criminal), laws, ordinances,
regulations, rules, notices, permits, judgments, orders and decrees applicable
to any of them or any of their respective properties, assets, operations and
businesses relating to environmental protection (collectively "Environmental
Laws") including, without limitation, Environmental Laws relating to air, water,
land and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Wastes and Hazardous Substances including petroleum and
petroleum products (as such terms are defined in any applicable Environmental
Law);
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(ii) the COMPANY has obtained and adhered to all necessary permits and other
approvals necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes and Hazardous Substances, a list of all of which permits and
approvals is set forth on Schedule 5.13, and have reported to the appropriate
authorities, to the extent required by all Environmental Laws, all past and
present sites owned and operated by the COMPANY where Hazardous Wastes or
Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (iii) there have been no releases or threats of releases (as defined in
Environmental Laws) at, from, in or on any property owned or operated by the
COMPANY except as permitted by Environmental Laws; (iv) the COMPANY knows of no
on-site or off-site location to which the COMPANY has transported or disposed of
Hazardous Wastes and Hazardous Substances or arranged for the transportation of
Hazardous Wastes and Hazardous Substances, which site is the subject of any
Federal, state, local or foreign enforcement action or any other investigation
which is reasonably likely to lead to any claim against the COMPANY, CSI or
NEWCO for any clean-up cost, remedial work, damage to natural resources,
property damage or personal injury, including, but not limited to, any claim
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended; and (v) to the knowledge of the COMPANY, the COMPANY has no
contingent liability in connection with any release of any Hazardous Waste or
Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. The COMPANY has delivered to CSI an accurate
list (which is set forth on Schedule 5.14) of (x) all personal property included
(or that will be included) in "depreciable plant, property and equipment" on the
balance sheet of the COMPANY, (y) all other personal property owned by the
COMPANY with an individual value in excess of $50,000 (i) as of the Balance
Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all leases and
agreements in respect of personal property, including, in the case of each of
(x), (y) and (z), (1) true, complete and correct copies of all such leases and
(2) an indication as to which assets are currently owned, or were formerly
owned, by STOCKHOLDER, relatives of STOCKHOLDER, or Affiliates of the COMPANY.
Except as set forth on Schedule 5.14, (i) all material personal property used by
the COMPANY in its business is either owned by the COMPANY or leased by the
COMPANY
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pursuant to a lease included on Schedule 5.14, (ii) all of the personal property
listed on Schedule 5.14 is in good working order and condition, ordinary wear
and tear excepted and (iii) all leases and agreements included on Schedule 5.14
are in full force and effect and constitute valid and binding agreements of the
parties (and their successors) thereto in accordance with their respective
terms.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. The
COMPANY has delivered to CSI an accurate list (which is set forth on Schedule
5.15) of (i) all significant customers, it being understood and agreed that a
"significant customer," for purposes of this Section 5.15, means a customer (or
person or entity) representing 5% or more of the COMPANY's annual revenues as of
the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of
the COMPANY's significant customers have canceled or substantially reduced or,
to the knowledge of the COMPANY, are currently attempting or threatening to
cancel a contract or substantially reduce utilization of the services provided
by the COMPANY.
The COMPANY has listed on Schedule 5.15 all material contracts,
commitments and similar agreements to which the COMPANY is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with significant customers, joint venture or partnership agreements, contracts
with any labor organizations, strategic alliances and options to purchase land),
other than agreements listed on Schedule 5.10, 5.14 or 5.16, (a) in existence as
of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and
in each case has delivered true, complete and correct copies of such agreements
to CSI. The COMPANY has complied with all material commitments and obligations
pertaining to it, and is not in default under any contracts or agreements listed
on Schedule 5.15 and no notice of default under any such contract or agreement
has been received. The COMPANY has also indicated on Schedule 5.15 a summary
description of all plans or projects involving the opening of new operations,
expansion of existing operations, the acquisition of any personal property,
business or assets requiring, in any event, the payment of more than $50,000 by
the COMPANY.
5.16 REAL PROPERTY. Schedule 5.16 includes a list of all real property
owned or leased by the COMPANY at the date hereof and all other real property,
if any, used by the COMPANY in the
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conduct of its business. Any such real property owned by the COMPANY will be
sold by the COMPANY and leased back by the COMPANY on terms no less favorable to
the COMPANY than those available from an unaffiliated party and otherwise
reasonably acceptable to CSI at or prior to the Closing Date. True, complete and
correct copies of all leases and agreements in respect of such real property
leased by the COMPANY are attached to Schedule 5.16, and an indication as to
which such properties, if any, are currently owned, or were formerly owned, by
STOCKHOLDER or affiliates of the COMPANY or STOCKHOLDER is included in Schedule
5.16. Except as set forth on Schedule 5.16, all of such leases included on
Schedule 5.16 are in full force and effect and constitute valid and binding
agreements of the parties (and their successors) thereto in accordance with
their respective terms.
5.17 INSURANCE. The COMPANY has delivered to CSI (i) an accurate list as
of the Balance Sheet Date of all insurance policies carried by the COMPANY, (ii)
an accurate list of all insurance loss runs or workers compensation claims
received for the past three (3) policy years and (iii) true, complete and
correct copies of all insurance policies currently in effect. Such insurance
policies evidence all of the insurance that the COMPANY is required to carry
pursuant to all of its contracts and other agreements and pursuant to all
applicable laws. All of such insurance policies are currently in full force and
effect and shall remain in full force and effect through the Funding and
Consummation Date. Since January 1, 1994, no insurance carried by the COMPANY
has been canceled by the insurer and the COMPANY has not been denied coverage.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The
COMPANY has delivered to CSI an accurate list (which is set forth on Schedule
5.18) showing all officers, directors and key employees of the COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons as of (i) the
Balance Sheet Date and (ii) the date hereof. The COMPANY has provided to CSI
true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.18. Since the Balance Sheet Date, there have been no
increases in the compensation payable or any special
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bonuses to any officer, director, key employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.18, (i) the COMPANY is not
bound by or subject to (and none of its respective assets or properties is bound
by or subject to) any arrangement with any labor union, (ii) no employees of the
COMPANY are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the COMPANY, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the COMPANY's knowledge, threatened labor dispute involving the
COMPANY and any group of its employees nor has the COMPANY experienced any labor
interruptions over the past three years. The COMPANY believes its relationship
with employees to be good.
5.19 EMPLOYEE PLANS. The STOCKHOLDER have delivered to CSI an accurate
schedule (Schedule 5.19) showing all employee benefit plans of COMPANY
(including COMPANY's Subsidiaries), including all employment agreements and
other agreements or arrangements containing "golden parachute" or other similar
provisions, and deferred compensation agreements, together with true, complete
and correct copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.19,
COMPANY (including the COMPANY's Subsidiaries) does not sponsor, maintain or
contribute to any plan program, fund or arrangement that constitutes an
"employee pension benefit plan," nor has COMPANY or any Subsidiary any
obligation to contribute to or accrue or pay any benefits under any deferred
compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity, any "excess benefit plan" (within the meaning of
Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) or any non-qualified deferred compensation arrangement). For the
purposes of this Agreement, the term "employee pension benefit plan" shall have
the same meaning as is given that term in Section 3(2) of ERISA. Neither COMPANY
nor any Subsidiary has sponsored, maintained or contributed to any employee
pension benefit plan other than the plans set
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forth on Schedule 5.19, nor is COMPANY or any Subsidiary required to contribute
to any retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions or employment of any of
COMPANY's or any Subsidiary's employees.
Neither the COMPANY nor any Subsidiary is now, or can as a result of its
past activities become, liable to the Pension Benefit Guaranty Corporation or to
any multiemployer employee pension benefit plan under the provisions of Title IV
of ERISA.
All employee benefit plans listed on Schedule 5.19 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations.
All accrued contribution obligations of COMPANY or any Subsidiary with
respect to any plan listed on Schedule 5.19 have either been fulfilled in their
entirety or are fully reflected on the balance sheet of the COMPANY as of the
Balance Sheet Date.
5.20 COMPLIANCE WITH ERISA. All such plans listed on Schedule 5.19 that
are intended to qualify (the "Qualified Plans") under Section 401(a) of the Code
are, and have been so qualified and have been determined by the Internal Revenue
Service to be so qualified, and copies of such determination letters are
included as part of Schedule 5.19 hereof. Except as disclosed on Schedule 5.20,
all reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries (including, but not
limited to, actuarial reports, audits or tax returns) have been timely filed or
distributed, and copies thereof are included as part of Schedule 5.19 hereof.
Neither STOCKHOLDER, any such plan listed in Schedule 5.19, nor COMPANY
(including the COMPANY's Subsidiaries) has engaged in any transaction prohibited
under the provisions of Section 4975 of the Code or Section 406 of ERISA. No
such Plan listed in Schedule 5.19 has incurred an accumulated funding
deficiency, as defined in Section 412(a) of the Code and Section 302(1) of
ERISA; and COMPANY (including the COMPANY's Subsidiaries) has not incurred any
liability for excise tax or penalty due to the Internal Revenue Service nor any
liability to the Pension Benefit Guaranty Corporation. The STOCKHOLDER further
represent that:
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(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval
by the Internal Revenue Service;
(ii) no such plan listed in Schedule 5.19 subject to the
provisions of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed
in Schedule 5.19;
(iv) COMPANY (including the COMPANY's Subsidiaries) has not
incurred liability under Section 4062 of ERISA; and
(v) No circumstances exist pursuant to which the COMPANY could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to any multiemployer plan or the PBGC under
Title IV of ERISA or to the Internal Revenue Service for any excise tax
or penalty, or being subject to any statutory lien to secure payment of
any such liability) with respect to any plan now or heretofore
maintained or contributed to by any entity other than the COMPANY that
is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the COMPANY.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 5.21 or 5.13, the COMPANY is not in violation of any law or regulation
or any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over any of them which would have a Material Adverse Effect; and
except to the extent set forth on Schedule 5.10 or 5.13, there are no material
claims, actions, suits or proceedings, pending or, to the knowledge of the
COMPANY, threatened against or affecting, the COMPANY, at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
any of them and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. The COMPANY has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in
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applicable Federal, state and local statutes, ordinances, permits, licenses,
orders, approvals, vari ances, rules and regulations, including all such
permits, licenses, orders and other governmental approvals set forth on
Schedules 5.12 and 5.13, and is not in violation of any of the foregoing which
would have a Material Adverse Effect.
5.22 TAXES. COMPANY (including the COMPANY's Subsidiaries) has timely
filed all requisite federal, state and other tax returns or extension requests
for all fiscal periods ended on or before the Balance Sheet Date; and except as
set forth on Schedule 5.22, there are no examinations in progress or claims
against any of them for federal, state and other taxes (including penalties and
interest) for any period or periods prior to and including the Balance Sheet
Date and no notice of any claim for taxes, whether pending or threatened, has
been received. All tax, including interest and penalties (whether or not shown
on any tax return) owed by the COMPANY, any of the COMPANY's Subsidiaries, any
member of an affiliated or consolidated group which includes or included the
COMPANY or any of the COMPANY's Subsidiaries, or with respect to any payment
made or deemed made by the COMPANY or any of the COMPANY's Subsidiaries herein
been paid. The amounts shown as accruals for taxes on the COMPANY Financial
Statements are sufficient for the payment of all taxes of the kinds indicated
(including penalties and interest) for all fiscal periods ended on or before
that date. Copies of (i) any tax examinations, (ii) extensions of statutory
limitations and (iii) the federal and local income tax returns and franchise tax
returns of COMPANY (including the COMPANY Subsidiaries) for their last three (3)
fiscal years, or such shorter period of time as any of them shall have existed,
are attached hereto as Schedule 5.22. The STOCKHOLDER made a valid election
under the provisions of Subchapter S of the Code and the COMPANY has not, within
the past five years, been taxed under the provisions of Subchapter C of the
Code. The COMPANY has a taxable year ended December 31 and has not made an
election to retain a fiscal year other than December 31 under Section 444 of the
Code. The COMPANY's methods of accounting have not changed in the past five
years. The COMPANY is not an investment company as defined in Section 351(e)(1)
of the Code.
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5.23 NO VIOLATIONS. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other
party thereto, is in material default under any lease, instrument, agreement,
license, or permit set forth on Schedule 5.12, 5.13, 5.14, 5.15 or 5.16, or any
other material agreement to which it is a party or by which its properties are
bound (the "Material Documents"); and, except as set forth in Schedule 5.23, (a)
the rights and benefits of the COMPANY under the Material Documents will not be
materially adversely affected by the transactions contemplated hereby and (b)
the execution of this Agreement and the performance of the obligations hereunder
and the consummation of the transactions contemplated hereby will not result in
any material violation or breach or constitute a default under, any of the terms
or provisions of the Material Documents or the Charter Documents. Except as set
forth on Schedule 5.23, none of the Material Documents requires notice to, or
the consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. Except as set forth on Schedule 5.23, none of the
Material Documents prohibits the use or publication by the COMPANY, CSI or NEWCO
of the name of any other party to such Material Document, and none of the
Material Documents prohibits or restricts the COMPANY from freely providing
services to any other customer or potential customer of the COMPANY, CSI, NEWCO
or any Other Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24, the
COMPANY is not now a party to any governmental contracts subject to price
redetermination or renegotiation.
5.25 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set
forth on Schedule 5.25, there has not been:
(i) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of the
COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
the COMPANY;
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(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution
in respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the COMPANY
(except for dividends which COMPANY may declare and pay pursuant to
Section 10.6 hereof);
(v) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by the COMPANY to any of
its officers, directors, STOCKHOLDER, employees, consultants or agents,
except for ordinary and customary bonuses and salary increases for
employees in accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of COMPANY to any person,
including, without limitation, the STOCKHOLDER and their affiliates;
(viii) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to the COMPANY, including without limitation
any indebtedness or obligation of any STOCKHOLDER or any affiliate
thereof;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets,
property or rights of the COMPANY or requiring consent of any party to
the transfer and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the ordinary course of the COMPANY's business;
(xi) any waiver of any material rights or claims of the COMPANY;
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(xii) any amendment or termination of any material contract,
agreement, license, permit or other right to which the COMPANY is a
party;
(xiii) any transaction by the COMPANY outside the ordinary course
of its respective businesses;
(xiv) any cancellation or termination of a material contract with
a customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by the COMPANY
other than in the ordinary course of business.
5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to
CSI an accurate schedule (which is set forth on Schedule 5.26) as of the date of
the Agreement of:
(i) the name of each financial institution in which the COMPANY
has accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto. Schedule 5.26 also sets forth the name of each person,
corporation, firm or other entity holding a general or special power of
attorney from the COMPANY and a description of the terms of such power.
5.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the COMPANY and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
COMPANY and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of the COMPANY.
5.28 RELATIONS WITH GOVERNMENTS. Except for political contributions made
in a lawful manner which, in the aggregate, do not exceed $10,000 per year for
each year in which the STOCKHOLDER has been a stockholder of the COMPANY, the
COMPANY has not made, offered or agreed to offer anything of value to any
governmental official, political party or candidate for
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government office nor has it otherwise taken any action which would cause the
COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as
amended or any law of similar effect. If political contributions made by the
COMPANY have exceeded $10,000 per year for each year in which the STOCKHOLDER
has been a stockholder of the COMPANY, each contribution in the amount of $5,000
or more shall be described on Schedule 5.28.
5.29 DISCLOSURE. (a) This Agreement, including the Annexes and Schedules
hereto, together with the other information furnished to CSI by the COMPANY and
the STOCKHOLDERS in connection herewith, does not contain an untrue statement of
a material fact or omit to state a material fact necessary to make the
statements herein and therein, in light of the circumstances under which they
were made, not misleading; provided, however, that the foregoing does not apply
to statements contained in or omitted from any of such documents made or omitted
in reliance upon information furnished by CSI. If, prior to the 25th day after
the date of the final prospectus of CSI utilized in connection with the IPO, the
COMPANY or the STOCKHOLDER become aware of any fact or circumstance which would
affect the accuracy of a representation or warranty of COMPANY or STOCKHOLDER in
this Agreement, in any material respect, the COMPANY and the STOCKHOLDER shall
immediately give notice of such fact or circumstance to CSI. However, subject to
the provisions of Section 7.8, such notification shall not relieve either the
COMPANY or the STOCKHOLDER of their respective obligations under this Agreement,
and, subject to the provisions of Section 7.8, at the sole option of CSI, the
truth and accuracy of any and all warranties and representations of the COMPANY,
or on behalf of the COMPANY and of STOCKHOLDER at the date of this Agreement and
on the Closing Date and on the Funding and Consummation Date, shall be a
precondition to the consummation of this transaction.
(b) The COMPANY and the STOCKHOLDER acknowledge and agree
(i) that there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; (ii) that neither CSI or any of its officers, directors, agents or
representatives nor any
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Underwriter shall have any liability to the COMPANY, the STOCKHOLDER or any
other person affiliated or associated with the COMPANY for any failure of the
Registration Statement to become effective, the IPO to occur at a particular
price or within a particular range of prices or to occur at all; and (iii) that
the decision of STOCKHOLDER to enter into this Agreement, or to vote in favor of
or consent to the proposed Merger, has been or will be made independent of, and
without reliance upon, any statements, opinions or other communications, or due
diligence investigations which have been or will be made or performed by any
prospective Underwriter, relative to CSI or the prospective IPO.
5.30 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.30, the
COMPANY has not, between the Balance Sheet Date and the date hereof, taken any
of the actions (Prohibited Activities) set forth in Section 7.3.
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
The STOCKHOLDER represents and warrants that the representations
and warranties set forth below are true as of the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Closing and on the
Funding and Consummation Date, and that the representations and warranties set
forth in Sections 5.31 and 5.32 shall survive until the first anniversary of the
Funding and Consummation Date, which shall be the Expiration Date for purposes
of Sections 5.31 and 5.32.
5.31 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. Such STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY stock identified on
Annex IV as being owned by such STOCKHOLDER, and, except as set forth on
Schedule 5.31, such COMPANY Stock is owned free and clear of all liens,
encumbrances and claims of every kind.
5.32 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby
waives, any preemptive or other right to acquire shares of COMPANY Stock or CSI
Stock that such STOCKHOLDER has or may have had other than rights of any
STOCKHOLDER to acquire CSI
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Stock pursuant to (i) this Agreement or (ii) any option granted by CSI.
5.33 NO INTENTION TO DISPOSE OF CSI STOCK. The STOCKHOLDER is not under
any binding commitment or contract to sell, exchange or otherwise dispose of
shares of CSI Stock received as described in Section 3.1.
6. REPRESENTATIONS OF CSI AND NEWCO
CSI and NEWCO jointly and severally represent and warrant that
all of the following representations and warranties in this Section 6 are true
at the date of this Agreement and, subject to Section 7.8 hereof, shall be true
at the time of Closing and the Funding and Consummation Date, and that such
representations and warranties shall survive the Funding and Consummation Date
for a period of twelve months (the last day of such period being the "Expiration
Date"), except that (i) the warranties and representations set forth in Section
6.14 hereof shall survive until such time as the limitations period has run for
all tax periods ended on or prior to the Funding and Consummation Date, which
shall be deemed to be the Expiration Date for Section 6.14 and (ii) solely for
purposes of determining whether a claim for indemnification under Section
11.2(iv) hereof has been made on a timely basis, and solely to the extent that
in connection with the IPO, the STOCKHOLDER actually incurs liability under the
1933 Act, the 1934 Act, or any other Federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for such purposes.
6.1 DUE ORGANIZATION. CSI and NEWCO are each corporations duly
organized, validly existing and in good standing under the laws of the state of
Delaware, and each has the requisite power and authority to carry on its
business as it is now being conducted. CSI and NEWCO are each qualified to do
business and are each in good standing in each jurisdiction in which the nature
of its business makes such qualification necessary, except where the failure to
be so authorized or qualified would not have a Material Adverse Effect. True,
complete and correct copies of the Certificate of
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Incorporation and By-laws, each as amended, of CSI and NEWCO (the "CSI Charter
Documents") are all attached hereto as Annex II.
6.2 AUTHORIZATION. (i) The respective representatives of CSI and NEWCO
executing this Agreement have the authority to enter into and bind CSI and NEWCO
to the terms of this Agreement and (ii) CSI and NEWCO have the full legal right,
power and authority to enter into this Agreement and the Merger.
6.3 CAPITAL STOCK OF CSI AND NEWCO. The authorized capital stock of CSI
and NEWCO is as set forth in Sections 1.4(ii) and (iii), respectively. All of
the issued and outstanding shares of the capital stock of NEWCO are owned by CSI
and all of the issued and outstanding shares of the capital stock of CSI are
owned by the persons set forth on Annex V hereof, in each case, free and clear
of all liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. All of the issued and outstanding shares
of the capital stock of CSI and NEWCO have been duly authorized and validly
issued, are fully paid and nonassessable, are owned of record and beneficially
by CSI and the persons set forth on Annex V, respectively, and further, such
shares were offered, issued, sold and delivered by CSI and NEWCO in compliance
with all applicable state and Federal laws concerning the issuance of
securities. Further, none of such shares were issued in violation of the
preemptive rights of any past or present stockholder of CSI or NEWCO.
6.4 TRANSACTIONS IN CAPITAL STOCK, ORGANIZATION ACCOUNTING. Except for
the Other Agreements and except as set forth on Schedule 6.4, (i) no option,
warrant, call, conversion right or commitment of any kind exists which obligates
CSI or NEWCO to issue any of their respective authorized but unissued capital
stock; and (ii) neither CSI nor NEWCO has any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof. Schedule 6.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list,
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accurate as of the date hereof, of all outstanding options, warrants or other
rights to acquire shares of the stock of CSI.
6.5 SUBSIDIARIES. NEWCO has no subsidiaries. CSI has no subsidiaries
except for NEWCO and each of the companies identified as "NEWCO" in each of the
Other Agreements. Except as set forth in the preceding sentence, neither CSI nor
NEWCO presently owns, of record or beneficially, or controls, directly or
indirectly, any capital stock, securities convertible into capital stock or any
other equity interest in any corporation, association or business entity, and
neither CSI nor NEWCO, directly or indirectly, is a participant in any joint
venture, partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of
the following financial statements (the "CSI Financial Statements") of CSI,
which reflect the results of its operations from inception in December 1996:
CSI's audited Balance Sheet as of December 31, 1996 and Statements of Income,
Cash Flows and Retained Earnings for the period from December 12, 1996 through
December 31, 1996. Such CSI Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as noted thereon or on Schedule
6.6). Except as set forth on Schedule 6.6, such Balance Sheet as of December 31,
1996 presents fairly the financial position of CSI as of such date, and such
Statements of Income, Cash Flows and Retained Earnings present fairly the
results of operations for the period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7,
CSI and NEWCO have no material liabilities, contingent or otherwise, except as
set forth in or contemplated by this Agreement and the Other Agreements and
except for fees incurred in connection with the transactions contemplated hereby
and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither CSI nor NEWCO is in violation of any law or regulation or
any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or
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instrumentality having jurisdiction over either of them which would have a
Material Adverse Effect; and except to the extent set forth in Schedule 6.8,
there are no material claims, actions, suits or proceedings, pending or, to the
knowledge of CSI or NEWCO, threatened against or affecting, CSI or NEWCO, at law
or in equity, or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them and no notice of any claim, action, suit
or proceeding, whether pending or threatened, has been received. CSI and NEWCO
have conducted and are conducting their respective businesses in substantial
compliance with the requirements, standards, criteria and conditions set forth
in applicable Federal, state and local statutes, ordinances, permits, licenses,
orders, approvals, variances, rules and regulations and are not in violation of
any of the foregoing which would have a Material Adverse Effect.
6.9 NO VIOLATIONS. Neither CSI nor NEWCO is in violation of any CSI
Charter Document. None of CSI, NEWCO, or, to the knowledge of CSI and NEWCO, any
other party thereto, is in default under any lease, instrument, agreement,
license, or permit to which CSI or NEWCO is a party, or by which CSI or NEWCO,
or any of their respective properties, are bound (collectively, the "CSI
Documents"); and (a) the rights and benefits of CSI and NEWCO under the CSI
Documents will not be adversely affected by the transactions contemplated hereby
and (b) the execution of this Agreement and the performance of the obligations
hereunder and the consummation of the transactions contemplated hereby will not
result in any material violation or breach or constitute a default under, any of
the terms or provisions of the CSI Documents or the CSI Charter Documents.
Except as set forth on Schedule 6.9, none of the CSI Documents requires notice
to, or the consent or approval of, any governmental agency or other third party
with respect to any of the transactions contemplated hereby in order to remain
in full force and effect and consummation of the transactions contemplated
hereby will not give rise to any right to termination, cancellation or
acceleration or loss of any right or benefit.
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6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by CSI and NEWCO and the performance of the transactions contemplated
herein have been duly and validly authorized by the respective Boards of
Directors of CSI and NEWCO and this Agreement has been duly and validly
authorized by all necessary corporate action and is a legal, valid and binding
obligation of CSI and NEWCO.
6.11 CSI STOCK. At the time of issuance thereof, the CSI Stock to be
delivered to the STOCKHOLDER pursuant to this Agreement will constitute valid
and legally issued shares of CSI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all substantive respects (which do not include the form of
certificate upon which it is printed or the presence or absence of a CUSIP
number on any such certificate) to the CSI Stock issued and outstanding as of
the date hereof by reason of the provisions of the Delaware GCL. The shares of
CSI Stock to be issued to the STOCKHOLDER pursuant to this Agreement will not be
registered under the 1933 Act, except as provided in Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither CSI nor NEWCO has entered or will enter
into any agreement with any of the Founding Companies or any of the stockholders
of the Founding Companies or CSI other than the Other Agreements and the
agreements contemplated by each of the Other Agreements, including the
employment agreements and leases referred to therein.
6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. CSI was formed in
December 1996 and has conducted limited operations since that time. Neither CSI
nor NEWCO has conducted any material business since the date of its inception,
except in connection with this Agreement, the Other Agreements and the IPO.
Neither CSI nor NEWCO owns or has at any time owned any real property or any
material personal property or is a party to any other agreement, except as
listed on Schedule 6.13 and except that CSI is a party to the Other Agreements
and the agreements contemplated thereby and to such agreements as will be filed
as Exhibits to the Registration Statement.
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6.14 TAXES. CSI has timely filed all requisite federal, state and other
tax returns or extension requests for all fiscal periods ended on or before the
Balance Sheet Date; and except as set forth on Schedule 6.14, there are no
examinations in progress or claims against CSI for federal, state and other
taxes (including penalties and interest) for any period or periods prior to and
including the Balance Sheet Date and no notice of any claim for taxes, whether
pending or threatened, has been received. All tax, including interest and
penalties (whether or not shown on any tax return) owed by CSI, any member of an
affiliated or consolidated group which includes or included CSI, or with respect
to any payment made or deemed made by CSI herein has been paid. The amounts
shown as accruals for taxes on CSI Financial Statements are sufficient for the
payment of all taxes of the kinds indicated (including penalties and interest)
for all fiscal periods ended on or before that date. Copies of any (i) tax
examinations, (ii) extensions of statutory limitations and (iii) federal and
local income tax returns and franchise tax returns of CSI for the year ended
December 31, 1996, are attached hereto as Schedule 6.14. CSI is not an
investment company as defined in Section 351(e)(1) of the Code.
6.15 ABSENCE OF CHANGES. Since December 31, 1996, except as set forth in
the drafts of the Registration Statement delivered to the Stockholders, and
except as contemplated by this Agreement and the Other Agreements, there has not
been:
(i) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of
CSI;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
CSI;
(iii) any change in the authorized capital of CSI or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
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(iv) any declaration or payment of any dividend or distribution
in respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of CSI;
(v) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of CSI;
(vi) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of CSI to any person;
(vii) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to CSI;
(viii) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
assets, property or rights of CSI or requiring consent of any party to
the transfer and assignment of any such assets, property or rights;
(ix) any waiver of any material rights or claims of CSI;
(x) any amendment or termination of any material contract,
agreement, license, permit or other right to which CSI is a party;
(xi) any transaction by CSI outside the ordinary course of its
business; (xii) any other distribution of property or assets by CSI
other than in the ordinary course of business.
6.16 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by CSI and NEWCO and the performance of the transactions contemplated
herein have been duly and validly authorized by the Boards of Directors of CSI
and NEWCO and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of CSI
and NEWCO.
6.17 DISCLOSURE. The most recent draft of the Registration Statement
delivered to the COMPANY and the STOCKHOLDERS, together with this Agreement and
the information furnished to the COMPANY and the STOCKHOLDERS in connection
herewith, does not contain
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an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the foregoing does
not apply to statements contained in or omitted from any of such documents made
or omitted in reliance upon information furnished by the COMPANY or the
STOCKHOLDERS.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Funding and Consummation Date, the COMPANY will afford to the
officers and authorized representatives of CSI and the Other Founding Companies
access to all of the COMPANY's sites, properties, books and records and will
furnish CSI with such additional financial and operating data and other
information as to the business and properties of the COMPANY as CSI or the Other
Founding Companies may from time to time reasonably request. The COMPANY will
cooperate with CSI and the Other Founding Companies, its representatives,
auditors and counsel in the preparation of any documents or other material which
may be required in connection with any documents or materials required by this
Agreement. CSI, NEWCO, the STOCKHOLDER and the COMPANY will treat all
information obtained in connection with the negotiation and performance of this
Agreement or the due diligence investigations conducted with respect to the
Other Founding Companies as confidential in accordance with the provisions of
Section 14 hereof. In addition, CSI will cause each of the Other Founding
Companies to enter into a provision similar to this Section 7.1 requiring each
such Other Founding Company, its stockholders, directors, officers,
representatives, employees and agents to keep confidential any information
obtained by such Other Founding Company.
(b) Between the date of this Agreement and the Funding and Consummation
Date, CSI will afford to the officers and authorized representatives of the
COMPANY access to all of CSI's and NEWCO's sites, properties, books and records
and will furnish the COMPANY with such additional
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financial and operating data and other information as to the business and
properties of CSI and NEWCO as the COMPANY may from time to time reasonably
request. CSI and NEWCO will cooperate with the COMPANY, its representatives,
auditors and counsel in the preparation of any documents or other material which
may be required in connection with any documents or materials required by this
Agreement. The COMPANY will cause all information obtained in connection with
the negotiation and performance of this Agreement to be treated as confidential
in accordance with the provisions of Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Funding and Consummation Date, the COMPANY will, except as set
forth on Schedule 7.2:
(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under leases, in as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects all of its respective
obligations under agreements relating to or affecting its respective
assets, properties or rights;
(iv) use all reasonable efforts to keep in full force and effect
present insurance policies or other comparable insurance coverage;
(v) use its reasonable efforts to maintain and preserve its
business organization intact, retain its respective present key
employees and maintain its respective relationships with suppliers,
customers and others having business relations with the COMPANY;
(vi) maintain compliance with all material permits, laws, rules
and regulations, consent orders, and all other orders of applicable
courts, regulatory agencies and similar governmental authorities;
(vii) maintain present debt and lease instruments and not enter
into new or amended debt or lease instruments except as permitted by
Section 10.6, without the
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knowledge and consent of CSI (which consent shall not be unreasonably
withheld), provided that debt and/or lease instruments may be replaced
without the consent of CSI if such replacement instruments are on terms
at least as favorable to the COMPANY as the instruments being replaced;
and
(viii) maintain or reduce present salaries and commission levels
for all officers, directors, employees and agents except for ordinary
and customary bonus and salary increases for employees in accordance
with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between
the date hereof and the Funding and Consummation Date, the COMPANY will not,
without prior written consent of CSI:
(i) make any change in its Articles of Incorporation or By-laws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than
in connection with the exercise of options or warrants listed in
Schedule 5.4;
(iii) except as permitted by Section 10.6 declare or pay any
dividend, or make any distribution in respect of its stock whether now
or hereafter outstanding, or purchase, redeem or otherwise acquire or
retire for value any shares of its stock (provided that the COMPANY may
declare and pay dividends pursuant to Section 10.6 hereof);
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except if it is in
the normal course of business (consistent with past practice) or
involves an amount not in excess of $100,000;
(v) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired, except (1) with respect to purchase money
liens incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of $50,000 necessary or desirable for the
conduct of the businesses of the COMPANY, (2) (A) liens for taxes either
not yet due or
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being contested in good faith and by appropriate proceedings (and for
which contested taxes adequate reserves have been established and are
being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary
course of business (the liens set forth in clause (2) being referred to
herein as "Statutory Liens"), or (3) liens set forth on Schedule 5.10
and/or 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the
start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate with
or into any other corporation;
(ix) waive any material rights or claims of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be
included in Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of the COMPANY; or
(xi) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder.
7.4 NO SHOP. None of the STOCKHOLDER, the COMPANY, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Funding and Consummation Date or the termination of this
Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussions pertaining to, or
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(iii) furnish any information to any person other than CSI or its
authorized agents relating to, any acquisition or purchase of all or a
material amount of the assets of, or any equity interest in, the COMPANY
or a merger, consolidation or business combination of the COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide CSI on Schedule 7.5 with proof that any required notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDER and the COMPANY shall terminate (i) any
stockholders agreements, voting agreements, voting trusts, options, warrants and
employment agreements between the COMPANY and any employee listed on Schedule
9.12 hereto and (ii) any existing agreement between the COMPANY and any
STOCKHOLDER, on or prior to the Funding and Consummation Date. Such termination
agreements are listed on Schedule 7.6 and copies thereof shall be attached
thereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDER and the COMPANY
shall give prompt notice to CSI of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDER contained herein to
be untrue or inaccurate in any material respect at or prior to the Closing and
(ii) any material failure of the STOCKHOLDER or the COMPANY to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
such person hereunder. CSI and NEWCO shall give prompt notice to the COMPANY of
(i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
of CSI or NEWCO contained herein to be untrue or inaccurate in any material
respect at or prior to the Closing and (ii) any material failure of CSI or NEWCO
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder. The delivery of any notice pursuant to this
Section 7.7 shall not be deemed
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to (i) modify the representations or warranties hereunder of the party
delivering such notice, which modification may only be made pursuant to Section
7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until 24 hours prior to the
anticipated effectiveness of the Registration Statement to supplement or amend
promptly the Schedules hereto with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14 and 5.15 shall
only have to be delivered at the Closing Date, unless such Schedule is to be
amended to reflect an event occurring other than in the ordinary course of
business. Notwithstanding the foregoing sentence, no amendment or supplement to
a Schedule prepared by the COMPANY that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless CSI and
a majority of the Founding Companies other than the COMPANY consent to such
amendment or supplement; and provided further, that no amendment or supplement
to a Schedule prepared by CSI or NEWCO that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless a
majority of the Founding Companies consent to such amendment or supplement. For
all purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 8.1 and 9.1 have been
fulfilled, the Schedules hereto shall be deemed to be the Schedules as amended
or supplemented pursuant to this Section 7.8. In the event that one of the Other
Founding Companies seeks to amend or supplement a Schedule pursuant to Section
7.8 of one of the Other Agreements, and such amendment or supplement constitutes
or reflects an event or occurrence that would have a Material Adverse Effect on
such Other Founding Company, CSI shall give the COMPANY notice promptly after it
has knowledge thereof. If CSI and a majority of the
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Founding Companies consent to such amendment or supplement, which consent shall
have been deemed given by CSI or any Founding Company if no response is received
within 24 hours following receipt of notice of such amendment or supplement (or
sooner if required by the circumstances under which such consent is requested),
but the COMPANY does not give its consent, the COMPANY may terminate this
Agreement pursuant to Section 12.1(iv) hereof. In the event that the COMPANY
seeks to amend or supplement a Schedule pursuant to this Section 7.8, and CSI
and a majority of the Other Founding Companies do not consent to such amendment
or supplement, this Agreement shall be deemed terminated by mutual consent as
set forth in Section 12.1(i) hereof. In the event that CSI or NEWCO seeks to
amend or supplement a Schedule pursuant to this Section 7.8 and a majority of
the Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. No party to this Agreement shall be liable to any other party if
this Agreement shall be terminated pursuant to the provisions of this Section
7.8. No amendment of or supplement to a Schedule shall be made later than 24
hours prior to the anticipated effectiveness of the Registration Statement.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY
and STOCKHOLDER shall furnish or cause to be furnished to CSI and the
Underwriters all of the information concerning the COMPANY and the STOCKHOLDER
required for inclusion in, and will cooperate with CSI and the Underwriters in
the preparation of, the Registration Statement and the prospectus included
therein (including audited and unaudited financial statements, prepared in
accordance with generally accepted accounting principles, in form suitable for
inclusion in the Registration Statement). The COMPANY and the STOCKHOLDER agree
promptly to advise CSI if at any time during the period in which a prospectus
relating to the offering is required to be delivered under the Securities Act,
any information contained in the prospectus concerning the COMPANY or the
STOCKHOLDER becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy. Insofar as the
information relates solely to the COMPANY or the STOCKHOLDER, the COMPANY
represents and warrants as to
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such information with respect to itself, and each Stockholder represents and
warrants, as to such information with respect to the COMPANY and himself or
herself, that the Registration Statement will not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the
Funding and Consummation Date, and CSI shall have had sufficient time to review
the unaudited consolidated balance sheets of the COMPANY as of the end of all
fiscal quarters following the Balance Sheet Date, and the unaudited consolidated
statement of income, cash flows and retained earnings of the COMPANY for all
fiscal quarters ended after the Balance Sheet Date, disclosing no material
adverse change in the financial condition of the COMPANY or the results of its
operations from the financial statements as of the Balance Sheet Date. Such
financial statements shall have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as noted therein). Except as noted in such financial
statements, all of such financial statements will present fairly the results of
operations of the COMPANY for the periods indicated therein.
7.11 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or convenient
to carry out the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. CSI shall maintain its authorized capital stock
as set forth in the Registration Statement filed with the SEC except for such
changes in authorized capital stock as are made to respond to comments made by
the SEC or requirements of any exchange or automated trading system for which
application is made to register the CSI Stock.
7.13 COMPLIANCE WITH THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF
1976 (THE "HART-SCOTT ACT"). All parties to this Agreement hereby recognize that
one or more filings under the Hart-Scott Act may be required in connection with
the transactions contemplated herein.
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If it is determined by the parties to this Agreement that filings under the
Hart-Scott Act are required, then: (i) each of the parties hereto agrees to
cooperate and use its best efforts to comply with the Hart-Scott Act, (ii) such
compliance by the STOCKHOLDER and the COMPANY shall be deemed a condition
precedent in addition to the conditions precedent set forth in Section 9 of this
Agreement, and such compliance by CSI and NEWCO shall be deemed a condition
precedent in addition to the conditions precedent set forth in Section 8 of this
Agreement, and (iii) the parties agree to cooperate and use their best efforts
to cause all filings required under the Hart-Scott Act to be made. If filings
under the Hart-Scott Act are required, the costs and expenses thereof (including
filing fees) shall be borne by CSI.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDER AND COMPANY
The obligations of STOCKHOLDER and the COMPANY with respect to actions
to be taken on the Closing Date are subject to the satisfaction or waiver on or
prior to the Closing Date of all of the following conditions. The obligations of
the STOCKHOLDER and the COMPANY with respect to actions to be taken on the
Funding and Consummation Date are subject to the satisfaction or waiver on or
prior to the Funding and Consummation Date of the conditions set forth in
Sections 8.1, 8.5, 8.8, 8.9 and 8.12. As of the Closing Date or, with respect to
the conditions set forth in Sections 8.1, 8.5, 8.8, 8.9 and 8.12, as of the
Funding and Consummation Date, if any of such conditions has not been satisfied,
the STOCKHOLDER shall have the right to terminate this Agreement or, in the
alternative, waive any condition not so satisfied. Any act or action of the
STOCKHOLDER in consummating the Closing or delivering certificates representing
COMPANY Stock as of the Funding and Consummation Date shall constitute a waiver
of any conditions, not so satisfied. However, no such waiver shall be deemed to
affect the survival of the representations and warranties of CSI and NEWCO
contained in Section 6 hereof.
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8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of CSI and NEWCO contained in Section 6 shall be
true and correct in all material respects as of the Closing Date and the Funding
and Consummation Date as though such representations and warranties had been
made as of that time; all of the terms, covenants and conditions of this
Agreement to be complied with and performed by CSI and NEWCO on or before the
Closing Date and the Funding and Consummation Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Closing Date and the Funding and Consummation Date,
respectively, and signed by the President or any Vice President of CSI shall
have been delivered to the STOCKHOLDER.
8.2 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to the COMPANY and its counsel.
The STOCKHOLDER and the COMPANY shall be satisfied that the Registration
Statement and the prospectus forming a part thereof, including any amendments
thereof or supplements thereto, shall not contain any untrue statement of a
material fact, or omit to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, provided
that the condition contained in this sentence shall be deemed satisfied if the
COMPANY or STOCKHOLDER shall have failed to inform CSI in writing prior to the
effectiveness of the Registration Statement of the existence of an untrue
statement of a material fact or the omission of such a statement of a material
fact.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
8.4 OPINION OF COUNSEL. The COMPANY shall have received an opinion from
counsel for CSI, dated the Funding and Consummation Date, in the form annexed
hereto as Annex VI.
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8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the underwriters named therein shall have
agreed to acquire on a firm commitment basis, subject to the conditions set
forth in the underwriting agreement, on terms such that the aggregate value of
the cash and the number of shares of CSI Stock to be received by the STOCKHOLDER
is not less than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transaction contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
the Merger and no governmental agency or body shall have taken any other action
or made any request of COMPANY as a result of which COMPANY deems it inadvisable
to proceed with the transactions hereunder.
8.7 GOOD STANDING CERTIFICATES. CSI and NEWCO each shall have delivered
to the COMPANY a certificate, dated as of a date no later than ten days prior to
the Closing Date, duly issued by the Delaware Secretary of State and in each
state in which CSI or NEWCO is authorized to do business, showing that each of
CSI and NEWCO is in good standing and authorized to do business and that all
state franchise and/or income tax returns and taxes for CSI and NEWCO,
respectively, for all periods prior to the Closing have been filed and paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to CSI or NEWCO which would constitute a Material Adverse
Effect.
8.9 CLOSING OF IPO. The closing of the sale of the CSI Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of CSI and of NEWCO, certifying the truth and correctness of attached copies of
the CSI's and NEWCO's respective Certificates of Incorporation (including
amendments thereto), By-Laws (including amendments thereto), and resolutions of
the boards of directors and, if required, the stockholders of CSI and NEWCO
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approving CSI's and NEWCO's entering into this Agreement and the consummation of
the transactions contemplated hereby.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.12
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 TAX MATTERS. The STOCKHOLDER shall have received an opinion of
Arthur Andersen LLP or another tax advisor reasonably acceptable to the
STOCKHOLDER that the CSI Plan of Organization should qualify as a tax-free
transfer of property under Section 351 of the Code, and that the STOCKHOLDER
will not recognize gain to the extent the STOCKHOLDER exchanges stock of the
COMPANY for CSI Stock (but not cash or other property) pursuant to the CSI Plan
of Organization.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF CSI AND NEWCO
The obligations of CSI and NEWCO with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. The obligations of CSI and
NEWCO with respect to actions to be taken on the Funding and Consummation Date
are subject to the satisfaction or waiver on or prior to the Funding and
Consummation Date of the conditions set forth in Sections 9.1, 9.4 and 9.13. As
of the Closing Date or, with respect to the conditions set forth in Sections
9.1, 9.4 and 9.13, as of the Funding and Consummation Date, all conditions not
satisfied shall be deemed to have been waived, except that no such waiver shall
be deemed to affect the survival of the representations and warranties of the
COMPANY contained in Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All the
representations and warranties of the STOCKHOLDER and the COMPANY contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date and the Funding and Consummation Date with the same effect as
though such representations and warranties had
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been made on and as of such date; all of the terms, covenants and conditions of
this Agreement to be complied with or performed by the STOCKHOLDER and the
COMPANY on or before the Closing Date or the Funding and Consummation Date, as
the case may be, shall have been duly performed or complied with in all material
respects; and the STOCKHOLDER shall have delivered to CSI certificates dated the
Closing Date and the Funding and Consummation Date, respectively, and signed by
them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of CSI as a result of which the
management of CSI deems it inadvisable to proceed with the transactions
hereunder.
9.3 SECRETARY'S CERTIFICATE. CSI shall have received a certificate,
dated the Closing Date and signed by the secretary of the COMPANY, certifying
the truth and correctness of attached copies of the COMPANY's Certificate of
Incorporation (including amendments thereto), By-Laws (including amendments
thereto), and resolutions of the board of directors and the STOCKHOLDER
approving the COMPANY's entering into this Agreement and the consummation of the
transactions contemplated hereby.
9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect, and the COMPANY shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the COMPANY
to conduct its business.
9.5 STOCKHOLDER'S RELEASE. The STOCKHOLDER shall have delivered to CSI
an instrument dated the Closing Date releasing the COMPANY from (i) any and all
claims of the STOCKHOLDER against the COMPANY and CSI and (ii) obligations of
the COMPANY and CSI to the STOCKHOLDER, except for (x) items specifically
identified on Schedules 5.10 and 5.15 as
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being claims of or obligations to the STOCKHOLDER, (y) continuing obligations to
STOCKHOLDER relating to his employment by the COMPANY and (z) obligations
arising under this Agreement or the transactions contemplated hereby.
9.6 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to CSI.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDER
shall have been canceled effective prior to or as of the Funding and
Consummation Date.
9.8 OPINION OF COUNSEL. CSI shall have received an opinion from Counsel
to the COMPANY and the STOCKHOLDER, dated the Closing Date, substantially in the
form annexed hereto as Annex VII.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all consents
and approvals of third parties listed on Schedule 5.23 shall have been obtained;
and no action or proceeding shall have been instituted or threatened to restrain
or prohibit the Merger and no governmental agency or body shall have taken any
other action or made any request of CSI as a result of which CSI deems it
inadvisable to proceed with the transactions hereunder.
9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to CSI
a certificate, dated as of a date no earlier than ten days prior to the Closing
Date, duly issued by the appropriate governmental authority in the COMPANY's
state of incorporation and, unless waived by CSI, in each state in which the
COMPANY is authorized to do business, showing the COMPANY is in good standing
and authorized to do business and that all state franchise and/or income tax
returns and taxes for the COMPANY for all periods prior to the Closing have been
filed and paid.
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9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.12
shall enter into an employment agreement substantially in the form of Annex VIII
hereto.
9.13 CLOSING OF IPO. The closing of the sale of the CSI Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
9.14 FIRPTA CERTIFICATE. The STOCKHOLDER shall have delivered to CSI a
certificate to the effect that he is not a foreign person pursuant to Section
1.1445-2(b) of the Treasury regulations.
9.15 REAL PROPERTY. The COMPANY shall have sold all real property owned
by the COMPANY and shall have entered into a lease or leases of such property on
terms no less favorable to the COMPANY than those available from unaffiliated
third parties and reasonably acceptable to CSI.
10. COVENANTS OF CSI AND THE STOCKHOLDER AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. CSI
shall use its best efforts to have the STOCKHOLDER released from any and all
guarantees on any indebtedness that he personally guaranteed and from any and
all pledges of assets that he pledged to secure such indebtedness for the
benefit of the COMPANY, with all such guarantees on indebtedness being assumed
by CSI. In the event that CSI cannot obtain such releases from the lenders of
any such guaranteed indebtedness on or prior to 120 days subsequent to the
Funding and Consummation Date, CSI shall pay off or otherwise refinance or
retire such indebtedness. From and after the Funding and Consummation Date and
until such time as all of such indebtedness is paid off, refinanced or retired,
CSI shall maintain unencumbered funds in amounts sufficient to provide for such
pay off, refinancing or retirement, provided that CSI may use such funds for
other purposes, in its sole discretion, with the prior written consent of each
STOCKHOLDER who has not as of that time been
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released from his or her guarantee as described above and whose indebtedness as
described above has not as of that time been paid off, refinanced or retired.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement or the Registration Statement, after the Funding
and Consummation Date, CSI shall not and shall not permit any of its
subsidiaries to undertake any act that would jeopardize the tax-free status of
the organization, including without limitation:
(a) the retirement or reacquisition, directly or indirectly, of
all or part of the CSI Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit
of the STOCKHOLDER.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANY shall, if possible, file or cause to be filed all
separate Returns of any Acquired Party for all taxable periods that end
on or before the Funding and Consummation Date. Notwithstanding the
foregoing, the STOCKHOLDER shall file or cause to be filed all separate
federal income Tax Returns (and any State and local Tax Returns filed on
the basis similar to that of S corporations under federal income Tax
rules) of any Acquired Party for all taxable periods that end on or
before the Funding and Consummation Date. The STOCKHOLDER shall pay or
cause to be paid all Tax liabilities (in excess of all amounts already
paid with respect thereto or properly accrued or reserved with respect
thereto on the COMPANY Financial Statements) shown by such Returns to be
due.
(ii) CSI shall file or cause to be filed all separate Returns of,
or that include, any Acquired Party for all taxable periods ending after
the Funding and Consummation Date.
(iii) Each party hereto shall, and shall cause its subsidiaries
and affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request in
filing any Return, amended Return or claim for refund,
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determining a liability for Taxes or a right to refund of Taxes or in
conducting any audit or other proceeding in respect of Taxes. Such
cooperation and information shall include providing copies of all
relevant portions of relevant Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents
relating to rulings or other determinations by Taxing Authorities and
relevant records concerning the ownership and Tax basis of property,
which such party may possess. Each party shall make its employees
reasonably available on a mutually convenient basis at its cost to
provide explanation of any documents or information so provided. Subject
to the preceding sentence, each party required to file Returns pursuant
to this Agreement shall bear all costs of filing such Returns.
(iv) Each of the COMPANY, NEWCO, CSI and the STOCKHOLDER shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and treat the
transaction as a tax-free contribution under Section 351(a) of the Code
subject to gain, if any, recognized on the receipt of cash or other
property under Section 351(b) of the Code. 10.4 DIRECTORS. The persons
named in the draft of the Registration Statement shall be
appointed as directors and elected as officers of CSI, as and to the extent set
forth in the draft of the Registration Statement, promptly following the Funding
and Consummation Date. This provision shall not imply that the STOCKHOLDERS have
any power or duty to elect officers of CSI.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Funding and
Consummation Date, CSI shall not terminate any health insurance, life insurance
or 401(k) plan in effect at the COMPANY until such time as CSI is able to
replace such plan with a plan that is applicable to CSI and all of its then
existing subsidiaries, provided that CSI shall have no obligation to provide
replacement plans that have the same terms and provisions as the existing plans,
provided, further, that any new health insurance plan shall provide for coverage
for preexisting conditions. On the Funding and Consummation Date, the employees
of the COMPANY will be the employees of
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the Surviving Corporation (provided that this provision is for purposes of
clarifying that the Merger, in and of itself, will not have any impact on the
employment status of any employee and provided, further that this provision
shall not in any way limit the management rights of the Surviving Corporation or
CSI to assess workforce needs and make appropriate adjustments as necessary or
desirable within their discretion subject to applicable laws and collective
bargaining agreements).
10.6 DIVIDENDS. If the COMPANY is an S corporation, the COMPANY may pay
to each STOCKHOLDER as a dividend the full amount of his or her "accumulated
adjustments account" (as defined in Section 1368(e) of the Code) as of the
Balance Sheet Date, and may also pay to the STOCKHOLDER as a dividend the full
amount of the COMPANY's earnings taxable to such STOCKHOLDER for the period
after the Balance Sheet Date to the Funding and Consummation Date. If the
COMPANY is a C corporation, the COMPANY may pay to the STOCKHOLDER as a dividend
the full amount of the COMPANY's earnings for the period after the Balance Sheet
Date to the Funding and Consummation Date. The COMPANY may borrow funds to the
extent necessary to make the payments contemplated by this Section 10.6 and to
the extent necessary to ensure that the COMPANY has cash on hand to adequately
fund operations on the Funding and Consummation Date.
11. INDEMNIFICATION
The STOCKHOLDER, CSI and NEWCO each make the following covenants that
are applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDER. The STOCKHOLDER
covenants and agrees that he will indemnify, defend, protect and hold harmless
CSI, NEWCO, the COMPANY and the Surviving Corporation at all times, from and
after the date of this Agreement until the Expiration Date, from and against all
claims, damages, actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by CSI, NEWCO, the
COMPANY
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or the Surviving Corporation as a result of or arising from (i) any breach of
the representations and warranties of the STOCKHOLDER or the COMPANY set forth
herein or on the schedules or certificates delivered in connection herewith,
(ii) any breach of any agreement on the part of the STOCKHOLDER or the COMPANY
under this Agreement, or (iii) any liability under the 1933 Act, the 1934 Act or
other Federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to the COMPANY or the STOCKHOLDER, and provided to CSI or
its counsel by the COMPANY or the STOCKHOLDER (but in the case of the
STOCKHOLDER, only if such statement was provided in writing) contained in the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
COMPANY or the STOCKHOLDER required to be stated therein or necessary to make
the statements therein not misleading, provided, however, that such indemnity
shall not inure to the benefit of CSI, NEWCO, the COMPANY or the Surviving
Corporation to the extent that such untrue statement (or alleged untrue
statement) was made in, or omission (or alleged omission) occurred in, any
preliminary prospectus and the STOCKHOLDER provided, in writing, corrected
information to CSI counsel and to CSI for inclusion in the final prospectus, and
such information was not so included or properly delivered.
11.2 INDEMNIFICATION BY CSI. CSI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDER at all times from
and after the date of this Agreement until the Expiration Date, from and against
all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDER as a result of or arising from (i) any breach by CSI or NEWCO of
their representations and warranties set forth herein or on the schedules or
certificates attached hereto, (ii) any nonfulfillment of any agreement on the
part of CSI or NEWCO under this Agreement, (iii) any liabilities which the
STOCKHOLDER may incur due to CSI's or NEWCO's failure to be responsible
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for the liabilities and obligations of the COMPANY as provided in Section 1
hereof (except to the extent that CSI or NEWCO has claims against the
STOCKHOLDER by reason of such liabilities); or (iv) any liability under the 1933
Act, the 1934 Act or other Federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating to CSI, NEWCO or any of the Other Founding
Companies contained in any preliminary prospectus, the Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to CSI or NEWCO or any of the Other
Founding Companies required to be stated therein or necessary to make the
statements therein not misleading.
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the Indemnifying Party shall not settle any criminal proceeding
without the written consent of the Indemnified Party. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified Party
of its intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or
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control. All Indemnified Parties shall use the same counsel, which shall be the
counsel selected by Indemnifying Party, provided that if counsel to the
Indemnifying Party shall have a conflict of interest that prevents counsel for
the Indemnifying Party from representing Indemnified Party, Indemnified Party
shall have the right to participate in such matter through counsel of its own
choosing and Indemnifying Party will reimburse the Indemnified Party for the
reasonable expenses of its counsel. After the Indemnifying Party has notified
the Indemnified Party of its intention to undertake to defend or settle any such
asserted liability, and for so long as the Indemnifying Party diligently pursues
such defense, the Indemnifying Party shall not be liable for any additional
legal expenses incurred by the Indemnified Party in connection with any defense
or settlement of such asserted liability, except (i) as set forth in the
preceding sentence and (ii) to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person. Upon agreement as to
such settlement between said Third Person and the Indemnifying Party, the
Indemnifying Party shall, in exchange for a complete release from the
Indemnified Party, promptly pay to the Indemnified Party the amount agreed to in
such settlement and the Indemnified Party shall, from that moment on, bear full
responsibility for any additional costs of defense which it subsequently incurs
with respect to such claim and all additional costs of settlement or judgment.
If the Indemnifying Party does not undertake to defend such matter to which the
Indemnified Party is entitled to indemnification hereunder, or fails diligently
to pursue such defense, the Indemnified Party may undertake such defense through
counsel of its choice, at the cost and expense of the Indemnifying Party, and
the Indemnified Party may settle such matter, and the Indemnifying Party shall
reimburse the Indemnified Party for the amount paid in such settlement and any
other liabilities or expenses
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incurred by the Indemnified Party in connection therewith, provided, however,
that under no circumstances shall the Indemnified Party settle any Third Person
claim without the written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld or delayed. All settlements hereunder shall effect
a complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section
11 shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party, provided that, nothing herein shall be
construed to limit the right of a party, in a proper case, to seek injunctive
relief for a breach of this Agreement.
11.5 LIMITATIONS ON INDEMNIFICATION. CSI, NEWCO, the Surviving
Corporation and the other persons or entities indemnified pursuant to Section
11.1 or 11.2 shall not assert any claim for indemnification hereunder against
the STOCKHOLDER until such time as, and solely to the extent that, the aggregate
of all claims which such persons may have against such the STOCKHOLDER shall
exceed the greater of (a) 1.0% of the sum of the cash paid to STOCKHOLDER plus
the value of the CSI Stock delivered to STOCKHOLDER (calculated as provided in
this Section 11.5) or (b) $50,000 (the "Indemnification Threshold"). STOCKHOLDER
shall not assert any claim for indemnification hereunder against CSI or NEWCO
until such time as, and solely to the extent that, the aggregate of all claims
which STOCKHOLDER may have against CSI or NEWCO shall exceed $50,000.
No person shall be entitled to indemnification under this Section 11 if
and to the extent that such person's claim for indemnification is directly or
indirectly related to a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement.
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Notwithstanding any other term of this Agreement, no STOCKHOLDER shall
be liable under this Section 11 for an amount which exceeds the amount of
proceeds received by such STOCKHOLDER in connection with the Merger. For
purposes of calculating the value of the CSI Stock received by a STOCKHOLDER,
CSI Stock shall be valued at its initial public offering price as set forth in
the Registration Statement. It is hereby understood and agreed that a
STOCKHOLDER may satisfy an indemnification obligation through payment of a
combination of stock and cash in proportion equal to the proportion of stock and
cash received by such STOCKHOLDER in connection with the Merger, valued as
described immediately above.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Funding and Consummation Date solely:
(i) by mutual consent of the boards of directors of CSI and the COMPANY;
(ii) by the STOCKHOLDER or the COMPANY (acting through its board of
directors), on the one hand, or by CSI (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by September 30, 1997,
unless the failure of such transactions to be consummated is due to the willful
failure of the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by it
prior to or on the Funding and Consummation Date;
(iii) by the STOCKHOLDER or COMPANY, on the one hand, or by CSI, on the
other hand, if a material breach or default shall be made by the other party in
the observance or in the due and timely performance of any of the covenants or
agreements contained herein, and the curing of such default shall not have been
made on or before the Funding and Consummation Date or by the STOCKHOLDER, or
the COMPANY, if the conditions set forth in Section 8 hereof have not been
satisfied or waived as of the Closing Date or the Funding and Consummation Date,
as applicable,
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or by CSI, if the conditions set forth in Section 9 hereof have not been
satisfied or waived as of the Closing Date or the Funding and Consummation Date,
as applicable;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section
7.8 hereof, the termination of this Agreement will in no way limit any
obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement including, but not limited
to, legal and audit costs and out of pocket expenses.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The STOCKHOLDER will not, for a period of
five (5) years following the Funding and Consummation Date, for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any heating,
ventilating or air conditioning services business in direct competition with CSI
or any of the subsidiaries thereof, within 100 miles of where the COMPANY or any
of its subsidiaries conducted business prior to the effectiveness of the Merger
(the "Territory");
(ii) call upon any person who is, at that time, within the Territory, an
employee of CSI (including the subsidiaries thereof) in a sales representative
or managerial capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of CSI (including the subsidiaries
thereof), provided that the STOCKHOLDER shall be permitted to call upon and hire
any member of his immediate family;
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(iii) call upon any person or entity which is, at that time, or which
has been, within one (1) year prior to the Funding and Consummation Date, a
customer of CSI (including the subsidiaries thereof), of the COMPANY or of any
of the Other Founding Companies within the Territory for the purpose of
soliciting or selling products or services in direct competition with CSI within
the Territory;
(iv) call upon any prospective acquisition candidate, on the
STOCKHOLDER'S own behalf or on behalf of any competitor in the heating,
ventilation or air conditioning services business, which candidate, to the
actual knowledge of the STOCKHOLDER after due inquiry, was called upon by CSI
(including the subsidiaries thereof) or for which, to the actual knowledge of
such STOCKHOLDER after due inquiry, CSI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of the COMPANY
to any person, firm, partnership, corporation or business for any reason or
purpose whatsoever except to the extent that the COMPANY has in the past
disclosed such information to the public for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit the STOCKHOLDER from acquiring as an investment not more than one
percent (1%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to
CSI as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to CSI for which it would
have no other adequate remedy, the STOCKHOLDER agrees that the foregoing
covenant may be enforced by CSI in the event of breach by the STOCKHOLDER, by
injunctions and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDER in light of the activities and
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business of CSI (including the subsidiaries thereof) on the date of the
execution of this Agreement and the current plans of CSI.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of the STOCKHOLDER
against CSI (including the subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by CSI
of such covenants. It is specifically agreed that the period of five (5) years
stated at the beginning of this Section 13, during which the agreements and
covenants of the STOCKHOLDER made in this Section 13 shall be effective, shall
be computed by excluding from such computation any time during which the
STOCKHOLDER is in violation of any provision of this Section 13. The covenants
contained in Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
13.6 MATERIALITY. The COMPANY and the STOCKHOLDER hereby agree that this
covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDER. The STOCKHOLDER recognizes and acknowledges that he
had in the past, currently has, and in the future may possibly have, access to
certain confidential information of the COMPANY, the Other Founding Companies,
and/or CSI, such as operational
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